EMPLOYER-EMPLOYEE

RELATIONSHIP

Atty. Stephanie Joy A. Rolusta-Valdez

Learning Outcomes:

Enumerate the four (4) tests in determining employer-employee relationship;

Correctly identify when an employer-employee relationship exists;

1. Definition: Employer & Employee.

Arts. 97 (a), (b), (c) of the LABOR CODE.

Art. 97. Definitions. As used in this Title:

(a) “Person” means an individual, partnership, association, corporation,

business trust, legal representatives, or any organized group of persons.

(b) “Employer” includes any person acting directly or indirectly in the interest
of an employer in relation to an employee and shall include the government and
all its branches, subdivisions and instrumentalities, all government-owned or
controlled corporations and institutions, as well as non-profit private institutions,
or organizations.

(c) “Employee” includes any individual employed by an employer.

1. Definition: Employer & Employee.

Art. 167 (f), (g) & (h) of the LABOR CODE.

Art. 167. Definition of Terms. As used in this Title, unless the context
indicates otherwise:

(f) "Employer" means any person, natural or juridical, employing the services
of the employee.

(g) "Employee" means any person compulsorily covered by the GSIS under
Commonwealth Act Numbered One Hundred Eighty-Six, as amended, including
the members of the Armed Forces of the Philippines, and any person employed
as casual, emergency, temporary, substitute or contractual, or any person
compulsorily covered by the SSS under Republic Act Numbered Eleven Hundred
Sixty-One, as amended.

(h) "Person" means any individual, partnership, firm, association, trust,

corporation or legal representative thereof.
1. Definition: Employer & Employee.

212 (e) & (f) of the LABOR CODE.

Art. 212. Definitions:

f. “Employee” includes any person in the employ of an employer. The term

shall not be limited to the employees of a particular employer, unless the Code
so explicitly states. It shall include any individual whose work has ceased as a
result of or in connection with any current labor dispute or because of any unfair
labor practice if he has not obtained any other substantially equivalent and
regular employment.

g. “Labor organization” means any union or association of employees which

exists in whole or in part for the purpose of collective bargaining or of dealing
with employers concerning terms and conditions of employment..
1. Definition: Employer & Employee.

Orlando Farms Growers Association v. NLRC, 299 SCRA 364, November

25, 1998
 The contention that petitioner, being an unregistered association and having been formed
solely to serve as an effective medium for dealing collectively with Stanfilco, does not exist in
law and, therefore, cannot be considered an employer, is misleading. This assertion can easily
be dismissed by reference to Article 212(e) of the Labor Code, as amended, which defines an
employer as any person acting in the interest of an employer, directly or indirectly. Following a
careful scrutiny of the said provision, the Court concludes that the law does not require an
employer to be registered before he may come within the purview of the Labor Code,
consistent with the established rule in statutory construction that when the law does not
distinguish, we should not distinguish. To do otherwise would bring about a situation whereby
employees are denied, not only redress of their grievances, but, more importantly, the
protection and benefits accorded to them by law if their employer happens to be an
unregistered association. (Orlando Farms Growers Association v. NLRC, 299 SCRA 364,
November 25, 1998)
2. Employer-Employee Relationship Tests

Sonza v. ABS-CBN Broadcasting Corp., 431 SCRA 381(2004)

 The present controversy is one of first impression. Although Philippine labor laws and
jurisprudence define clearly the elements of an employer-employee relationship, this is the first
time that the Court will resolve the nature of the relationship between a television and radio
station and one of its "talents." There is no case law stating that a radio and television program
host is an employee of the broadcast station. x x x

SONZA maintains that all essential elements of an employer-employee relationship are

present in this case. Case law has consistently held that the elements of an employer-
employee 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 on the means and methods by which the work is accomplished.
The last element, the so-called "control test", is the most important element. (Sonza v. ABS-
CBN Broadcasting Corp., 431 SCRA 381(2004)
Employment relationship is determined by law and not by contract. (Insular Life
Assurance Co. Ltd. v. NLRC, G.R. No. 119930, March 12,1998)

NOTE: Taxi or jeepney drivers under the "boundary" system are Ee's of the taxi or
jeepney owners/operators; also the passenger bus drivers and conductors. (Jardin v.
NLRC and Goodman Taxi, G.R. No. 119268, February 23, 2000
Employer-Employee Relation as a Question of Law.(Stipulation whether or not Er-EE
Relationship Exists)
• It is axiomatic that the existence of an Er-Ee relationship cannot be negated by
expressly repudiating it in the management contract and providing therein that the Ee
is an independent contractor when the terms of the agreement clearly show otherwise.
For the employment status of a person is defined and prescribed by law and
relationship depends upon the facts of each case.
(Social Security System v. CA, G.R. No. 100388, December 14, 2000)
QUESTION:

Romel is working as a pianist to in the restaurant of a hotel for almost 7 years.

During his employment, he was given a time for his performance fixed at 7-10pm for 3-
6x a week, the manager requires him to conform with the venue's motif and is
subjected to the rules and regulations of the employees of the hotel. His salary was
given every night. His services were terminated as a cost-cutting measure.. He filed for
illegal dismissal. As a defense, the hotel management alleged that there can be no illegal
dismissal as er-ee relationship is absent. Is the defense of the hotel tenable?
ANSWER:

NO. Romel is an employee of the hotel. The issue of whether or not

an employer-employee relationship existed between petitioner and
respondent is essentially a question of fact. The factors that determine the
issue include who has the power to select the employee, who pays the
employee's wages, who has the power to dismiss the employee, and who
exercises control of the methods and results by which the work of the
employee is accomplished. (Legend Hotel v. Realuyo G.R. No. 153511 July
18,2012)
NOTE:

Security guards on FLOATING STATUS:(Philips Semiconductors, Inc. vs. Fadriquela, G.R. No. 141717, April
14, 2004; Philippine Geothermal, Inc. vs. NLRC, 189 SCRA 211 [1990])

• If the security guards are placed on a "floating status" for

more than 6 months, the security guards may consider
themselves as having been dismissed.
 II. Employer-Employee Relationship Tests

Semblante v. CA, G.R. No. 196426, August 15, 2011

 In its Decision dated May 29, 2009, the appellate court found for respondents, noting that
referees and bet-takers in a cockfight need to have the kind of expertise that is characteristic
of the game to interpret messages conveyed by mere gestures. Hence, petitioners are akin to
independent contractors who possess unique skills, expertise, and talent to distinguish them
from ordinary employees. Further, respondents did not supply petitioners with the tools and
instrumentalities they needed to perform work. Petitioners only needed their unique skills and
talents to perform their job as masiador and sentenciador. ( Semblante v. CA, G.R. No. 196426, August 15,
2011)
 TESTS OF EMPLOYMENT RELATIONSHIP

FOUR-FOLD TEST
The four-fold test (indicia of determination):
1. Selection and engagement of the employee;
2. Payment of wages;
3. Power of dismissal; and
4. Power of control. (1 Azucena, 2016 p. 189)

• It is the so-called "control test" that is the most important element-

Absent the power to control, there is no employer­employee
relationship. (Continental Marble,Corp., et.al v. NLRC, G.R. No. 43825, May 9,1988)
 Control test

There is an Er-EE relationship when the person for whom the services are performed
reserves the right to control not only the end achieved but also the manner and means
used to achieve that end. (Television and Production Exponents Inc. v. Servana, 542 SCRA 578)

The power of control refers to the existence of power and not necessarily to the
actual exercise thereof, dt is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the employer has the right to
wield that power. (Republic v. Asiapro Cooperative, G.R. No. 172,101, November 23, 2007)
 Kinds of control exercised by an Employer

Not every form of control will have the effect of establishing an employer-employee
relationship. Thus, a line should be drawn between:

a. Rules that merely serve as guidelines, which aims ONLY to promote

the result. In such case, no employer-employee relationship exists.

b. Rules that fix the methodology and bind or restrict the party hired
to the use of such means or methods. These address both the result
AND the means employed to achieve it and hence, employer-employee
relationship exists. (Insular Life Assurance Co. v. NLRC, G.R. 84484,179 SCRA 459,
November 15,1989)
 The main determinant therefore is whether the rules set by the
employer are meant to control not just the results but also the means and
methods. (Orozco vs CA, G.R. 155207, August 13,2008)

NOTE:
In certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties, owing to the complexity
of such a relationship where several positions have been held by the worker.
The better approach is to adopt the two-tiered test. (Francisco v. NLRC, G.R. No. 170087,
August 31, 2006)
QUESTION:

Geneliefe entered into a Career's Agent Agreement with Sunshine Insurance Company, a domestic
corporation engaged in insurance business. In the Agreement, it provides that the agent is an
independent contractor and nothing therein shall be construed or interpreted as creating an Er-Ee
relationship. It further provides that the agent must comply with three requirements: (1) compliance
with the regulations and requirements of the company; (2) maintenance of a level of knowledge of the
company's products that is satisfactory to the company; and (3) compliance with a quota of new
businesses. However, EmoLife insurance company terminated Genesis’ services. Genesis filed an
illegal dismissal complaint alleging therein that an Er-EE relationship exists and that he was illegally
dismissed. Is he an employee of the Insurance Company?
ANSWER:

NO. GeneLiefe is not an EE of Sunshine Insurance Company. Generally, the determinative element is
the control exercised over the one rendering the service. The concept of "control” in LC has to be
compared and distinguished with "control" that must necessarily exist in a principal-agent relationship.
The Er controls the EE both in the results and in the means and manner of achieving this result. The
principal in an agency relationship.

the Agreement fully serves as grant of authority to Geneliefe as Sunshine’s insurance agent. This
agreement is supplemented by the company’s agency practices and usages, duly accepted by the agent in
carrying out the agency.

The law likewise obligates the agent to render an account; in this sense, the principal may impose on
the agent specific instructions on how an account shall be made, particularly on the matter of expenses
and reimbursements. To these extents, control can be imposed through rules and regulations without
intruding into the labor law concept of control for purposes of employment. (Gregorio Tongko v. ManuLife
Insurance Company, G.R. No. 167622, June 29, 2010
 ECONOMIC DEPENDENCY
(TWO-TIERED TEST)

• This test provides us with a framework of analysis, which

would take into consideration the totality of circumstances
surrounding the true nature of the relationship between the
parties.

• It is especially appropriate in this case where there is no

written agreement or terms of reference to base the
relationship on. (Francisco v. NLRC, G.R. No. 170087, August 31,2006)
Elements:

1. The putative Er's power to control the EE with respect to the means and
methods by which the work is to be accomplished (Four-fold test);

2. The underlying economic Realities of the activity or relationship

(economic reality test).
 Proper standard for economic dependence

• The proper standard is whether the worker is dependent on the

alleged Er for his continued employment in that line of business
 The determination of the relationship between Er and EE depends upon the circumstances of the
whole economic activity, such as:

1. The extent to which the services performed are an integral part of the
Er's business

2. The extent of the worker’s investment in equipment and facilities;

3. The nature and degree of control exercised by the Er;

4. The worker’s opportunity for profit and loss;

5. The amount of initiative, skill, judgment, or
foresight required for the success of the claimed
independent enterprise;

6. The permanency and duration of the

relationship between the worker and Er; and

7. The degree of dependency of the worker upon the Er for his

continued employment in that line of business. (Francisco v. NLRC, G.R.
No. 170087, August 31, 2006)
 When is mode Of Compensation not Determinative of Er-EE Relationship?

Piece-rate, boundary, and pakyaw are merely methods of pay computation

and do not prove whether the payee is an employee or not. (1 Azucena, 2016,
p. 197)
Boundary-Hulog System

Defined as a dual juridical relationship was created: that of employer­

employee and vendor-vendee. The boundary system is a scheme by an
owner/operator engaged in transporting passengers as a common carrier to
primarily govern the compensation of the driver, that is, the latter’s daily
earnings are remitted to the owner/operator less the excess of the boundary
which represents the drivers compensation. Under this system, the
owner/operator exercises control and supervision over the driver. (Villamaria v. CA
and Bustamante, G.R. No. 165881, April 19,2006)
QUESTION:

Africa, et al. are engaged as garbage truck drivers to collect garbage

from different cities and transport the same to the designated dumping
site. They filed separate cases against Expedition for illegal dismissal for
having been prevented from entering the premises of Expedition without
cause or due process. They claimed that they were regular employees;
were required to work a minimum of 12 hours a day, seven days a week,
even on holidays, and were not paid the minimum wage, holiday or
premium pay, overtime pay, SIL pay and 13th month pay. Expedition
denied that respondents were its employees claiming that respondents
were not part of the company's payroll but were being paid on a per trip
basis. They claimed that respondents were not under their direct control
and supervision as they worked on their own. Are the respondents
employees of Expedition?
A: YES. Applying the four-fold test, Africa, et al. were engaged/hired by Expedition as garbage truck drivers. It
is undeniable that they receive compensation from Expedition for the services that they rendered to the latter.
The fact that they were paid on a per trip basis is irrelevant because this was merely the method of computing
the proper compensation due to them. Also, Expedition’s power to dismiss was apparent when work was
withheld from respondent. Finally, Expedition has the power of control' over respondents in the performance
of their work. (Expedition Construction Corp., et. al v. Africa, G.R. No. 228671, December 14,2017)
 Labor union and unregistered association as employer

The mere fact that the respondent is a labor union does

not mean that it cannot be considered an employer of
the persons who work for il. Much less should it be
exempted from the very labor laws which it espouses as
labor organization. (Bautista v. Inciong G.R. No. £-52824,
March 16,1988)
 Application of The four fold text and the two tiered test

Present Philippine law recognizes a two-tiered test, The first tier of the test is the four-
fold test The second tier is the economics of the relationship test. But the latter test is
used if and only if there is going to be harshness in the results because of the strict
application of the four-fold test (Francisco v. NLRCr G.R. No. 170087, AUS 312006)
Art. 295 Presupposes Employment Relationship
Art 295 applies where the existence of Employer-Employee relationship is not the issue of the dispute. If the Issue
is whether or not the claimant is an employee, he tests of employment relationship shall be resorted to.

Art 295 limits itself in differentiating four kinds of employment arrangement: regular, project seasonal, and
casual. The article presupposes that employment relationship exists between the parties. (Azucena Vol 2 2016, p. 755)