Tesoro et al., vs. Metro Manila Retreaders Inc., et al.

GR No. 171482, March 12, 2014

Facts:
Tesoro, Ang, and Sharp, salesmen at Bandag, entered into a franchising scheme (Service
Franchise Agreement) with the company which would enable them to operate their own tire and
retreading business using the Bandag's trade name and service system. Under the franchise,
Bandag would provide funding subject to a regular or periodic liquidation of their operational
expense. This would be deducted from petitioners' sales to determine their incomes.
After some time, the three began to default on their liquidation submissions. Consequently,
Bandag terminated their franchise.
Tesoro, Ang and Shar filed a complaint for constructive dismissal, non-payment of wages,
incentive pay, 13th month pay and damages against Bandag. They contend that they remained
to be Bandag's employees. For its part, Bandag asserts that there was no employer-employee
relationship, pointing out that the petitioners freely resigned and decided to avail themselves of
the franchise scheme.
Labor Arbiter dismissed the complaint on the ground of no employer-employee relationship.
NLRC affirmed. Petitioners filed a petition for certiorari before the SC
Issue:
WON petitioners remained to be Bandag's employees under the franchise scheme.
Ruling:
Applying the four-fold rule, the SC held that there is no employer-employee relationship
between Bandag and the petitioner.
First, the most important element, the "control test", is absent. Although as franchisor he
maintains some control such as retaining the right to adjust the prices rates, imposing a
minimum process tier requirement, reviewing regulating credit applications, and retaining the
power to suspend petitioner's franchise for failure to meet service standards, such in not the
control contemplated in the control test. Control in such relationships concerns the details of day
to day work.
Uniformity in prices, quality of services, and good business practices are the essence of all
franchise as it involves the use of an established business expertise, trademark, knowledge and
training. Accordingly, franchisors may impose guidelines that somehow restrict the franchisee's
conduct. However, this does not necessarily indicate control under the control test as these
restrictions control the end result rather than the work itself.
Second, petitioners cannot likewise use the revolving funds feature of the franchise as evidence
of their employer-employee relationship with Bandag. These funds do not represent wages.
They are more in the nature of capital advances for operations. Petitioners' incomes depended
on the profits they make, controlled by their individual abilities to increase sales and reduce
operating costs.
Petition is denied.