LABOR STANDARDS

EMPLOYER-EMPLOYEE RELATIONSHIP

I. Tests of employer-employee relationship

1. Traditional Four-Fold Test

2. Two-Tiered Test
3. Economic Dependency Test

A. Analysis of the jurisprudential doctrines:

1. Existence of employer-employee relationship cannot be repudiated in the

employment contract

Century Properties, Inc. v. Babiano, G.R. No. 220978, July 05, 2016

Anent the nature of Concepcion's engagement, based on case law, the presence of the
following elements evince the existence of an employer-employee relationship: (a) the
power to hire, i.e., the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the
employee's conduct, or the so called "control test." The control test is commonly
regarded as the most important indicator of the presence or absence of an employer-
employee relationship. Under this test, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not
only the end achieved, but also the manner and means to be used in reaching that
end.

Guided by these parameters, the Court finds that Concepcion was an employee of CPI
considering that: (a) CPI continuously hired and promoted Concepcion from October
2002 until her resignation on February 23, 2009, thus, showing that CPI exercised the
power of selection and engagement over her person and that she performed functions
that were necessary and desirable to the business of CPI; (b) the monthly "subsidy"
and cash incentives that Concepcion was receiving from CPI are actually remuneration
in the concept of wages as it was regularly given to her on a monthly basis without
any qualification, save for the "complete submission of documents on what is a sale
policy"; (c) CPI had the power to discipline or even dismiss Concepcion as her
engagement contract with CPI expressly conferred upon the latter "the right to
discontinue [her] service anytime during the period of engagement should [she] fail to
meet the performance standards,"among others, and that CPI actually exercised such
power to dismiss when it accepted and approved Concepcion's resignation letter; and
most importantly, (d) as aptly pointed out by the CA, CPI possessed the power of
control over Concepcion because in the performance of her duties as Project Director -
particularly in the conduct of recruitment activities, training sessions, and skills
development of Sales Directors - she did not exercise independent discretion thereon,
but was still subject to the direct supervision of CPI, acting through Babiano.

2. Distinguishing radio and television talent as independent contractor from a news

caster and co-anchor as an employee

Sonza v. ABS-CBN Broadcasting Corp Thelma-Dumpit Murillo v. Court of

Appeals
Selection and Engagement of Employee. The elements to determine the existence
Independent contractors often present of an employment relationship are: a.)
themselves to possess unique skills, The selection and engagement of the
employee; b.) The payment of wages; c.)
expertise or talent to distinguish them
The power of dismissal; and d.) The
from ordinary employees. The specific employer’s control of the employee’s
selection and hiring of SONZA, because of conduct, not only as to the result of the
his unique skills, talent and celebrity work to be done, but also as to the
status not possessed by ordinary means and methods to accomplish it.
employees, is a circumstance indicative,
but not conclusive, of an independent The duties of petitioner as enumerated in
contractual relationship. If SONZA did not her employment contract indicate that
ABC had control over the work or
possess such unique skills, talent and
petitioner. Aside from control, ABC also
celebrity status, ABS-CBN would not have dictated the work assignments and
entered into the Agreement with SONZA payment of petitioner’s wages. ABC also
but would have hired him through its had power to dismiss her. All these being
personnel department just like any other present, clearly there existed an
employee. employment relationship between
petitioner and ABC. 
In any event, the method of selecting and
engaging SONZA does not conclusively
determine his status. We must consider all
the circumstances of the relationship, with
the control test being the most important
element.

Comparison of Murillo case from Sonza case

Fuji Television Network Inc. v. Espiritu, G. R. No. 204944-45, December 3, 2014

The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo
and affirmed the ruling of the National Labor Relations Commission finding that
Arlene was a regular employee. Arlene was hired by Fuji as a news producer, but there
was no showing that she was hired because of unique skills that would distinguish
her from ordinary employees. Neither was there any showing that she had a celebrity
status.

Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her
professional employment contract. Her contract also indicated that Fuji had control
over her work because she was required to work for eight (8) hours from Monday to
Friday, although on flexible time. Sonza was not required to work for eight (8) hours,
while Dumpit-Murillo had to be in ABC to do both on-air and off-air tasks.

ANALYSIS:

In Fuji case, the former has the power to dismiss her, dictate the way arlene
must do her work and her salary is relatively low to be independent contractor. In
Dumpit-Murillo case, the employer has control over its employee because it was
included in the contract the duties of the latter. In Sonza case, Sonza’s salary is high,
there is no control however he wants to do his job and the ABS had no power to
dismiss him

Radio and television talent as independent contractor

Sonza v. ABS-CBN Broadcasting Corp., G. R. No. 138051, June 10, 2004

A radio broadcast specialist who works under minimal supervision is an

independent contractor. SONZA’s work as television and radio program host
required special skills and talent, which SONZA admittedly possesses. The records
do not show that ABS-CBN exercised any supervision and control over how SONZA
utilized his skills and talent in his shows.

Newspaper columnist

Orozco v. Court of Appeals, G. R. No. 155207, August 13, 2008

The Court has constantly adhered to the "four-fold test" to determine whether there
exists an employer-employee relationship between parties. The four elements of an
employment relationship are: (a) the selection and engagement of the employee; (b) the
payment of wages; (c) the power of dismissal; and (d) the employer’s power to control
the employee’s conduct. Of these four elements, it is the power of control which is the
most crucial and most determinative factor, so important, in fact, that the other
elements may even be disregarded.

In this case, Orozco has misconstrued the "control test," as did the Labor
Arbiter and the NLRC. Not all rules imposed by the hiring party on the hired party
indicate that the latter is an employee of the former. Rules which serve as general
guidelines towards the achievement of the mutually desired result are not indicative of
the power of control. Petitioner believes that respondents’ acts are meant to control
how she executes her work. We do not agree. A careful examination reveals that the
factors enumerated by the petitioner are inherent conditions in running a newspaper.
In other words, the so-called control as to time, space, and discipline are dictated by
the very nature of the newspaper business itself.

The newspaper’s power to approve or reject publication of any specific article

she wrote for her column cannot be the control contemplated in the "control test," as it
is but logical that one who commissions another to do a piece of work should have the
right to accept or reject the product. The important factor to consider in the "control
test" is still the element of control over how the work itself is done, not just the end
result thereof.

Where a person who works for another performs his job more or less at his own
pleasure, in the manner he sees fit, not subject to definite hours or conditions of work,
and is compensated according to the result of his efforts and not the amount thereof,
no employer-employee relationship exists.

Semblante v. Court of Appeals, G. R. No. 196426, August 15, 2011

The Court ruled that petitioners are NOT employees of respondents, since their
relationship fails to pass muster the four-fold test of employment We have repeatedly
mentioned in countless decisions: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employee’s conduct, which is the most important element.

As found by both the NLRC and the CA, respondents had no part in petitioners’
selection and management; petitioners’ compensation was paid out of the arriba
(which is a percentage deducted from the total bets), not by petitioners; and
petitioners performed their functions as masiador and sentenciador free from the
direction and control of respondents. In the conduct of their work, petitioners relied
mainly on their "expertise that is characteristic of the cockfight gambling," and were
never given by respondents any tool needed for the performance of their work.

Respondents, not being petitioners’ employers, could never have dismissed,

legally or illegally, petitioners, since respondents were without power or prerogative to
do so in the first place.

Basketball referee

Bernate v. Philippine Basketball Association, G. R. No. 192084,

September 14, 2011
 The SC agree with respondents that once in the playing court, the referees
exercise their own independent judgment, based on the rules of the game, as to when
and how a call or decision is to be made. The referees decide whether an infraction
was committed, and the PBA cannot overrule them once the decision is made on the
playing court. The referees are the only, absolute, and final authority on the playing
court. Respondents or any of the PBA officers cannot and do not determine which calls
to make or not to make and cannot control the referee when he blows the whistle
because such authority exclusively belongs to the referees. The very nature of
petitioner’s job of officiating a professional basketball game undoubtedly calls for
freedom of control by respondents.

Moreover, the following circumstances indicate that petitioner is an

independent contractor: (1) the referees are required to report for work only when PBA
games are scheduled, which is three times a week spread over an average of only 105
playing days a year, and they officiate games at an average of two hours per game; and
(2) the only deductions from the fees received by the referees are withholding taxes.

3. Insurance agents

Relationship transformed to employer-employer relations

Great Pacific Life Assurance Corporation v. NLRC, Ruiz, G.R. No. 80750-51
July 23, 1990

Article 280 of the Labor Code provides that "[the provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreements of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer. ..." Furthermore, in determining who is
considered an "employee', the Court has time and again applied the "four-fold" test,*
with control being the most crucial and determinative indicator of an employer-
employee relationship. The 'employer" must have control (or must have reserved the
right to control) not only over the result of the "employee's" work but also the means
and methods by which it is to be accomplished.

First, their work at the time of their dismissal as zone supervisor and district
manager are necessary and desirable to the usual business of the insurance company.
They were entrusted with supervisory, sales and other functions to guard Grepalife's
business interests and to bring in more clients to the company, and even with
administrative functions to ensure that all collections, reports and data are faithfully
brought to the company.
 Moreover, it is well-settled that the existence of an employer-employee
relationship is ultimately a question of fact, and such findings of fact of the labor arbiter
and the NLRC shall be accorded not only respect but even finality when supported by
substantial evidence

Carungcung v. NLRC, Sun Life Assurance Co. of Canada, G.R. No. 118086.
December 15, 1997
Insular Life Assurance Co., Ltd. v. NLRC, De Los Reyes, G.R. No. 119930 March
12, 1998

Carungcong was an independent contractor and not an employee of Sun Life.

Prescinding therefrom, the contracts she had willingly and knowingly signed with Sun
Life41 repeatedly and clearly provided that said agreements were terminable by either
party by written notice with or without cause. Her "Career Agent's (or Unit Manager's)
Agreement" inter alia provided for termination of the agreement by death, or by written
notice "with or without cause,"42 Her "MANAGER'S Supplementary Agreement."
effective July 1, 1979, contained provisions regarding termination of the agreement
inter alia by written notice "without cause."43 A subsequent agreement by which she
was named Manager for New Business, dated January 1, 1986, similarly provided for
termination of relation, by among others, notice in writing with or without cause.

Distinguished the 1989 Insular Life case from the 1989 Insular Life

Insurance agent as independent contractor and not an employee

Insular Life Assurance Co., Ltd. v. NLRC, Basiao, G.R. No. 84484 November
15, 1989

Yes. There is no dearth of authority holding persons similarly placed as respondent

Basiao to be independent contractors, instead of employees of the parties for whom
they worked .

The Company's thesis, that no employer-employee relation in the legal and generally
accepted sense existed between it and Basiao, is drawn from the terms of the contract
they had entered into, which, either expressly or by necessary implication, made
Basiao the master of his own time and selling methods, left to his judgment the time,
place and means of soliciting insurance, set no accomplishment quotas and
compensated him on the basis of results obtained. He was not bound to observe any
schedule of working hours or report to any regular station; he could seek and work on
his prospects anywhere and at anytime he chose to, and was free to adopt the selling
methods he deemed most effective.

AFP Mutual Benefit Association, Inc. v. National Labor Relations Commission,

G.R. No. 102199, January 28, 1997
The significant factor in determining the relationship of the parties is the presence or
absence of supervisory authority to control the method and the details of performance
of the service being rendered, and the degree to which the principal may intervene to
exercise such control. The presence of such power of control is indicative of an
employment relationship, while absence thereof is indicative of independent
contractorship. In other words, the test to determine the existence of independent
contractorship is whether one claiming to be an independent contractor has
contracted to do the work according to his own methods and without being subject to
the control of the employer except only as to the result of the work. 14 Such is exactly
the nature of the relationship between petitioner and private respondent.

Further, not every form of control that a party reserves to himself over the conduct of
the other party in relation to the services being rendered may be accorded the effect of
establishing an employer-employee relationship.

Tongko v. The Manufacturers Life Insurance Company, De Dios, G.R. No.

167622, June 29, 2010

The primary evidence in the present case is the July 1, 1977 Agreement that governed
and defined the parties’ relations until the Agreement’s termination in 2001. This
Agreement stood for more than two decades and, based on the records of the case, was
never modified or novated. It assumes primacy because it directly dealt with the
nature of the parties’ relationship up to the very end; moreover, both parties never
disputed its authenticity or the accuracy of its terms.

Comparing the Labor Code concept of "control" with the "control" that must
necessarily exist in a principal-agent relationship

Tongko v. The Manufacturers Life Insurance Company, De Dios, G.R. No.

167622, June 29, 2010

Distinguishing Carungcong, the Grepalife, and the 1998 Insular Life cases with
Tongko case

4. Not every form of control may established employer employee relationship

Insular Life Assurance Co., Ltd. v. NLRC, Basiao, G.R. No. 84484 November
15, 1989

No, employer employee relationship does not exist. Not every form of control that the
hiring party reserves to himself over the conduct of the party hired in relation to the
services rendered may be accorded the effect of establishing an employer-employee
relationship between them in the legal or technical sense of the term. A line must be
drawn somewhere, if the recognized distinction between an employee and an
individual contractor is not to vanish altogether.

 Rules and regulations governing the conduct of the business are provided for in the
Insurance Code and enforced by the Insurance Commissioner. It is, therefore, usual
and expected for an insurance company to promulgate a set of rules to guide its
commission agents in selling its policies that they may not run afoul of the law and
what it requires or prohibits. Of such a character are the rules which prescribe the
qualifications of persons who may be insured, subject insurance applications to
processing and approval by the Company, and also reserve to the Company the
determination of the premiums to be paid and the schedules of payment. None of
these really invades the agent's contractual prerogative to adopt his own selling
methods or to sell insurance at his own time and convenience, hence cannot
justifiably be said to establish an employer-employee relationship between him and
the company.

AFP VS. NLRC

Although petitioner could have, theoretically, disapproved any of private respondent's

transactions, what could be disapproved was only the result of the work, and not the
means by which it was accomplished. The "control" which the above factors indicate
did not sum up to the power to control private respondent's conduct in and mode of
soliciting insurance. On the contrary, they clearly indicate that the juridical element of
control had been absent in this situation. Thus, the Court is constrained to rule that
no employment relationship had ever existed between the parties.

Royal Homes Marketing Corporation v. Alcantara, G. R. No. 195190, July

28, 2014

The primary evidence of the nature of the parties’ relationship in this case is the
written contract that they signed and executed in pursuance of their mutual
agreement which provides that "no employer-employee relationship exists between"
Royale Homes and Alcantara, as well as his sales agents. It is clear that they did not
want to be bound by employer-employee relationship at the time of the signing of the
contract.

In determining the existence of an employer-employee relationship, this Court has

generally relied on the four-fold test, to wit: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s
power to control the employee with respect to the means and methods by which the
work is to be accomplished.

5. Application of the Two-Tiered Test

Francisco v. NLRC, G.R. No. 170087 August 31, 2006

By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji
Kamura, the corporation’s Technical Consultant. She reported for work regularly and
served in various capacities as Accountant, Liaison Officer, Technical Consultant,
Acting Manager and Corporate Secretary, with substantially the same job functions,
that is, rendering accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of the corporation such as
securing business permits and other licenses over an indefinite period of engagement.

6. Economic dependency test

Sevilla v. Court of Appeals, G.R. Nos. L-41182-3, April 15, 1988

In this jurisdiction, there has been no uniform test to determine the existence of an
employer-employee relation. In general, we have relied on the so-called right of control
test, "where the person for whom the services are performed reserves a right to control
not only the end... to be achieved but also the means to be used in reaching such
end."

The records will show that the petitioner, Lina Sevilla, was not subject to control by
the private respondent Tourist World Service, Inc.

In the first place, under the contract of lease... covering the Tourist World's Ermita
office, she had bound herself in solidum as and for rental payments, an arrangement
that would belie claims of a master-servant relationship. A true employee cannot be
made to part with his own money in pursuance of his employer's business, or
otherwise, assume any liability thereof. The fact that Sevilla had been designated
"branch manager" does not make her, ergo, Tourist World's employee. As we said,
employment is determined by the right-of-control test and certain economic
parameters.

7. Employer-employee relationship in job contracting v. labor-only contracting

Vigilia v. Philippine College of Criminology, Inc. G. R. No. 200094, June 10,

2013

The NLRC and the CA correctly ruled that the releases, waivers and quitclaims
executed by petitioners in favor of MBMSI redounded to the benefit of PCCr pursuant
to Article 1217 of the New Civil Code. The reason is that MBMSI is solidarily liable
with the respondents for the valid claims of petitioners pursuant to Article 109 of the
Labor Code.

As correctly pointed out by the respondents, the basis of the solidary liability of the
principal with those engaged in labor-only contracting is the last paragraph of Article
106 of the Labor Code, which in part provides: "In such cases labor-only contracting,
the person or intermediary shall be considered merely as an agent of the employer who
shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him."

Independent contracting under D.O. 174-17 (D.O. 18-A) v. independent contractor

recognized by jurisprudence

Fuji Television Network Inc. v. Espiritu, G. R. No. 204944-45, December

3, 2014

In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines,
how he appeared on television, or how he sounded on radio.195 All that Sonza needed
was his talent. Further, "ABS-CBN could not terminate or discipline SONZA even if the
means and methods of performance of his work . . . did not meet ABS-CBN’s
approval." In Dumpit-Murillo, the duties and responsibilities enumerated in her
contract was a clear indication that ABC had control over her work.
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and
affirmed the ruling of the National Labor Relations Commission finding that Arlene
was a regular employee. Arlene was hired by Fuji as a news producer, but there was
no showing that she was hired because of unique skills that would distinguish her
from ordinary employees.

Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her
professional employment contract.200 Her contract also indicated that Fuji had
control over her work because she was required to work for eight (8) hours from
Monday to Friday, although on flexible time. Sonza was not required to work for eight
(8) hours, while Dumpit-Murillo had to be in ABC to do both on-air and off-air tasks.

On the power to control, Arlene alleged that Fuji gave her instructions on what to
report.202 Even the mode of transportation in carrying out her functions was
controlled by Fuji.

8. Kind of relationship in boundary system arrangement

Villarama v. Court of Appeals, GR NO. 165881, Apr 19, 2006

 We agree with the ruling of the CA that, under the boundary-hulog scheme
incorporated in the Kasunduan, a dual juridical relationship was created between
petitioner and respondent: that of employer-employee and vendor-vendee. The
Kasunduan did not extinguish the employer-employee relationship of the parties
extant before the execution of said deed.

9. Working scholar

Section 14, Rule X Book III, IRR

Filamer Christian Institute v. Court of Appeals, G.R. No. 75112 October

16, 1990

The wording of Section 14 is clear and explicit and leaves no room for equivocation. To
dismiss the implementing rule as one which governs only the "personal relationship"
between the school and its students and not where there is already a third person
involved, as espoused by private respondents, is to read into the law something that
was not legislated there in the first place.

But even if we were to concede the status of an employee on Funtecha, still the
primary responsibility for his wrongdoing cannot be imputed to petitioner Filamer for
the plain reason that at the time of the accident, it has been satisfactorily shown that
Funtecha was not acting within the scope of his supposed employment.

Funtecha was not engaged in the execution of the janitorial services for which he was
employed, but for some purpose of his own. It is but fair therefore that Funtecha
should bear the full brunt of his tortious negligence. Petitioner Filamer cannot be
made liable for the damages he had caused.