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Insular Life Assurance v.

NLRC and Melecio Basiao

G.R. No. 84484, November 15, 1989
Petitioner Insular Life entered into a contract with respondent Basiao where the latter is authorized to solicit for insurance
policies. Sometime later, the parties entered into another contract which caused Basiao to organize an agency in order to
fulfill its terms. The contract being subsequently terminated by petitioner, Basiao sued the latter which prompted also for
the termination of their engagement under the first contract. Basiao thus filed before the Ministry of Labor seeking to
recover alleged unpaid commissions. Petitioner contends that Basiao is not an employee but an independent contractor for
which they have no obligation to pay said commissions. The Labor Arbiter found for Basiao ruling that there exists
employer-employee relationship between him and petitioner. NLRC affirmed.
Whether or not there exists an employer-employee relationship between petitioner and Basiao.
Ruling: NO.
In determining the existence of employer-employee relationship, the following elements are generally considered, namely:
(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 employees' conduct although the latter is the most important element. It should, however, be
obvious that 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.
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.
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.
The Court, therefore, rules that under the contract invoked by him, Basiao was not an employee of the petitioner, but a
commission agent, an independent contractor whose claim for unpaid commissions should have been litigated in an
ordinary civil action.
Insular Life Assurance v. NLRC and Pantaleon De Los Reyes
G.R. No. 119930, March 12, 1998
Petitioner Insular Life entered into an agency contract with respondent Pantaleon de los Reyes authorizing the latter to
solicit applications for life insurance for which he would be paid compensation in the form of commissions. Sometime
after, the parties entered into another contract where Pantaleon was appointed as Acting Unit Manager responsible for
recruitment, training, organization, development and furtherance of the agencys goals. He was prohibited from working
for other life insurance companies or with the government. Pantaleon worked concurrently as agent and Acting Unit
Manager until he was notified of his termination. He thus filed a complaint for illegal dismissal before the Labor Arbiter.
The Labor Arbiter dismissed the complaint but on appeal was reversed by the NLRC tribunal ruling that Pantaleon was an
employee of petitioner. Petitioner contends that nature of the work has already been resolved by the Court in the earlier
case of Insular Life v. Basiao where Basiao is declared an independent contractor and not an employee of petitioner.
Whether or not there exists employer-employee relationship between petitioner and Pantaleon.
Ruling: YES.
As to the matter involving the power of dismissal and control by the employer, the latter of which is the most important of
the test, unlike Basiao, herein respondent De los Reyes was appointed Acting Unit Manager, not agency manager.
Petitioner in fact has admitted that it provided De los Reyes a place and a table at its office where he reported for and
worked whenever he was not out in the field.
Under the managership contract, De los Reyes was obliged to work exclusively for petitioner in life insurance solicitation
and was imposed premium production quotas. He was proscribed from accepting a managerial or supervisory position in
any other office including the government without the written consent of petitioner. De los Reyes could only be promoted
to permanent unit manager if he met certain requirements and his promotion was recommended by the petitioner's District
Manager and Regional Manager and approved by its Division Manager. As Acting Unit Manager, De los Reyes
performed functions beyond mere solicitation of insurance business for petitioner. As found by the NLRC, he exercised
administrative functions which were necessary and beneficial to the business of INSULAR LIFE.
Exclusivity of service, control of assignments and removal of agents under private respondent's unit, collection of
premiums, furnishing of company facilities and materials as well as capital described as Unit Development Fund are but
hallmarks of the management system in which herein private respondent worked. This obtaining, there is no escaping the
conclusion that private respondent Pantaleon de los Reyes was an employee of herein petitioner.

*Petitioner would have us apply our ruling in Insular Life Assurance Co., Ltd. v. NLRC and Basiao to the instant case
under the doctrine of stare decisis, postulating that both cases involve parties similarly situated and facts which are
almost identical. But we are not convinced that the cited case is on all fours with the case at bar. In Basiao, the agent was
appointed Agency Manager under an Agency Manager Contract. To implement his end of the agreement, Melecio Basiao
organized an agency office to which he gave the name M. Basiao and Associates. The Agency Manager Contract
practically contained the same terms and conditions as the Agency Contract earlier entered into, and the Court observed
that, "drawn from the terms of the contract they had entered into, (which) either expressly or by necessary implication,
Basiao (was) made the master of his own time and selling methods, left to his own judgment the time, place and means of
soliciting insurance, set no accomplishment quotas and compensated him on the bases 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." Upon these
premises, Basiao was considered as agent an independent contractor of petitioner INSULAR LIFE.
Jardin, et. al. v. NLRC and Goodman Taxi
G.R. No. 119268, February 23, 2000
Petitioners were drivers of private respondents taxicabs under the boundary system whose earnings were regularly
deducted by respondent washing fee for the taxi units. Petitioners decided to form a labor union to protect their rights and
interests on the belief that the deductions made were illegal. Upon learning, respondent refused to let petitioners drive
their taxicabs when they reported for work. Aggrieved, petitioners filed a complaint for illegal dismissal with the Labor
Arbiter but the latter dismissed said complaint. On appeal, the NLRC tribunal declared that petitioners are employees of
private respondent. On reconsideration however, the decision was reversed by the NLRC tribunal and held that no
employer-employee relationship between the parties exists.
Whether or not petitioner taxi drivers are employees of respondent company.
Ruling: YES.
In a number of cases decided by this Court, we ruled that the relationship between jeepney owners/operators on one hand
and jeepney drivers on the other under the boundary system is that of employer-employee and not of lessor-lessee. In the
case of jeepney owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The
management of the business is in the owner's hands. The owner as holder of the certificate of public convenience must see
to it that the driver follows the route prescribed by the franchising authority and the rules promulgated as regards its
operation. Now, the fact that the drivers do not receive fixed wages but get only that in excess of the so-called "boundary"
they pay to the owner/operator is not sufficient to withdraw the relationship between them from that of employer and
employee. We have applied by analogy the doctrine to the relationships between bus owner/operator and bus conductor,
auto-calesa owner/operator and driver, and recently between taxi owners/operators and taxi drivers. Hence, petitioners are
undoubtedly employees of private respondent because as taxi drivers they perform activities which are usually necessary
or desirable in the usual business or trade of their employer.
Manila Golf & Country Club v. IAC and Fermin Llamar
G.R. No. 64948, September 27, 1994
Respondent Fermin Llamar and his fellow caddies filed with the Social Security Commission for coverage and availment
of benefits under the Social Security Act. Subsequently, all but 2 of the original 17 petitioners withdrew their claim for
social security coverage. The case continued and was adjudicated by the SSC only as regards the 2 holdouts dismissing
their petition and stating that the caddies were never employees of petitioner. An appeal was taken to the IAC but the
other caddys appeal was dismissed at his instance, leaving respondent Llamar the lone appellant. The IAC found for
Llamar finding employer-employee relationship between him and petitioner.
Whether or not respondent caddy is an employee of petitioner.
Ruling: NO.
The various matters of conduct, dress, language, etc. covered by the petitioner's regulations, does not, in the mind of the
Court, so circumscribe the actions or judgment of the caddies concerned as to leave them little or no freedom of choice
whatsoever in the manner of carrying out their services.
The Court agrees with petitioner that the group rotation system so-called, is less a measure of employer control than an
assurance that the work is fairly distributed, a caddy who is absent when his turn number is called simply losing his turn to
serve and being assigned instead the last number for the day.
In the final analysis, petitioner has no way of compelling the presence of the caddies as they are not required to render a
definite number of hours of work on a single day. Even the group rotation of caddies is not absolute because a player is at
liberty to choose a caddy of his preference regardless of the caddy's order in the rotation. It can happen that a caddy who
has rendered services to a player on one day may still find sufficient time to work elsewhere. Under such circumstances,
he may then leave the premises of petitioner and go to such other place of work that he wishes. Or a caddy who is on call
for a particular day may deliberately absent himself if he has more profitable caddying, or another, engagement in some
other place. These are things beyond petitioner's control and for which it imposes no direct sanctions on the caddies.
AFP Mutual Benefit Association v. NLRC and Eutiquio Bustamante
G.R. No. 102199, January 28, 1997
Private respondent Eutiquio Bustamante was an insurance underwriter of petitioner AFP Mutual Benefit Association until
he was dismissed for misrepresentation and for simultaneously selling insurance for another life insurance company in
violation of their agreement. Respondent signed a quitclaim after receiving his commissions but later on discovered that
he was entitled to more than the received amount. Thus, he filed a complaint with the Office of the Insurance
Commissioner but was advised to file before the Department of Labor, which then ruled in his favor citing that employer-
employee relationship exists between him and petitioner. NLRC tribunal affirmed.
Whether or not employer-employee relationship existed between the parties.
Ruling: NO.
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. Such is exactly the nature of the relationship between petitioner and private respondent.
Private respondent was free to sell insurance at any time as he was not subject to definite hours or conditions of work and
in turn was compensated according to the result of his efforts. By the nature of the business of soliciting insurance, agents
are normally left free to devise ways and means of persuading people to take out insurance. There is no prohibition, as
contended by petitioner, for private respondent to work for as long as he does not violate the Insurance Code. 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.
Jose Y. Sonza v. ABS-CBN Broadcasting Corporation
G.R. No. 138051, June 10, 2004
Respondent ABS-CBN signed an Agreement with the Mel and Jay Management Development Corporation where the
latter agreed to provide petitioner Sonzas services exclusively to ABS-CBN as talent for radio and television. Later,
Sonza tendered a letter rescinding their agreement and filed a complaint before the DOLE for payment of his labor
standard benefits. ABS-CBN contends on the ground that no employer-employee relationship existed between the parties.
The Labor Arbiter found for respondent citing that Sonza as a talent cannot be considered an employee of petitioner.
Both NLRC and CA affirmed.
Whether or not employer-employee relationship existed between petitioner and ABS-CBN.
Ruling: NO.
Applying the control test to the present case, we find that SONZA is not an employee but an independent contractor. The
control test is the most important test our courts apply in distinguishing an employee from an independent Contractor.
This test is based on the extent of control the hirer exercises over a worker. The greater the supervision and control the
hirer exercises, the more likely the worker is deemed an employee. The converse holds true as well the less control the
hirer exercises, the more likely the worker is considered an independent contractor.
We find that ABS-CBN was not involved in the actual performance that produced the finished product of SONZAs work.
ABS-CBN did not instruct SONZA how to perform his job. ABS-CBN merely reserved the right to modify the program
format and airtime schedule "for more effective programming. ABS-CBNs sole concern was the quality of the shows
and their standing in the ratings. Clearly, ABS-CBN did not exercise control over the means and methods of performance
of SONZAs work.
In any event, not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the
former. In this case, SONZA failed to show that these rules controlled his performance. We find that these general rules
are merely guidelines towards the achievement of the mutually desired result, which are top-rating television and radio
programs that comply with standards of the industry.
Being an exclusive talent does not by itself mean that SONZA is an employee of ABS-CBN. Even an independent
contractor can validly provide his services exclusively to the hiring party. In the broadcast industry, exclusivity is not
necessarily the same as control.

*Not every performance of services for a fee creates an employer-employee relationship. To hold that every person who
renders services to another for a fee is an employee - to give meaning to the security of tenure clause - will lead to
absurd results.
Besa v. Trajano
G.R. No. 72409, December 29, 1986
Private respondent KAMPIL, a legitimate labor union, filed a petition for Certification Election to which herein petitioner
Besa opposed on the ground that no employer-employee relationship existed between him and the petitions signatories.
The Med-Arbiter and BLR Director both ruled in favor of the union which granted the holding of the certification
election. Meanwhile, petitioner Besa filed actions before the Court and with the Med-Arbiter contending that the 17
shoeshiners who are members of the union cannot be considered employees and thus has no standing to vote in the
certification election.
Whether or not there is employer-employee relationship between Besa and the 17 shoeshiners-union members.
Ruling: NO.
Respondent BESA does not exercise any degree of control or supervision over their person and their work. All these are
not obtaining in the case of a piece worker as he is in fact an employee in contemplation of law, distinct from the shoe
shiner in this instance who, in relation to respondent MAMERTO B. BESA, is a partner in the trade.
These shoe shiners are not employees of the company, but are partners instead. This is due to the fact that the
owner/manager does not exercise control and supervision over the shoe shiners. That the shiners have their own customers
from whom they charge the fee and divide the proceeds equally with the owner, which make the owner categorized them
as on purely commission basis. The attendant circumstances clearly show that there is no employer-employee relationship
Angelina Francisco v. NLRC
G.R. No. 170087, August 31, 2006
Petitioner Angelina Francisco was hired by respondent Kasei Corporation during its incorporation stage as Accountant
and Corporate Secretary and later as Liaison Officer. Subsequently she was also designated Acting Manager until
replaced, but was assured by the company that she was still connected as Technical Consultant. Thereafter, Kasei
Corporation reduced petitioners salary until it was later withheld despite repeated follow-ups. Petitioner once again asked
for her salary but was informed that she is no longer connected with the company. Petitioner thus filed an action for
constructive dismissal before the Labor Arbiter. Respondent Kasei Corporation averred that petitioner is not their
employee as she performed her work at her own discretion without their control and supervision. Both the Labor Arbiter
and NLRC tribunal found for petitioner. CA reversed the decision.
Whether or not there was employer-employee relationship between the parties.
Ruling: YES.
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 would
therefore be to adopt a two-tiered test involving: (1) the putative employers power to control the employee with respect to
the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity
or relationship.
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 corporations 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.
Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation
because she had served the company for six years before her dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security
contributions. Petitioners membership in the SSS as manifested by a copy of the SSS specimen signature card which was
signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSS
evinces the existence of an employer-employee relationship between petitioner and respondent corporation. It is therefore
apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latters
line of business.
Restituto Palomado v. NLRC
G.R. No. 96520, June 28, 1996
Petitioner Restituto Palomado was hired as a truck driver and paid on a per trip basis by respondent Marling Rice Mill
until its cessation upon the death of its owner. Petitioner alleges that he was illegally dismissed by respondent Rolando
Tan, whom he claims to be the manager of Marling Rice Mill, when the latter talked him into selling the old truck he
drives to buy a new unit and subsequently hired a new driver for it. Both the Labor Arbiter and NLRC found no employer-
employee relationship existed between petitioner and respondent Tan.
Whether or not employer-employee relationship existed between the parties.
Ruling: NO.
As discussed earlier, and as found by the labor arbiter and affirmed by the public respondent NLRC, there never existed
an employer-employee relationship between petitioner and private respondent Rolando Tan.
With regards to complainant's claims against respondent Rolando O. Tan, the overwhelming documentary evidences
presented by said respondent strongly negated complainant's charges that he had been under the employ of Rolando O.
Tan who appeared to be the registered proprietor/owner of R.S. Rice Mill.
Respondent Rolando Tan, whom complainant alluded to as the manager/operator of Marling Rice Mill was nothing more
than a mere employee of Marling Rice Mill as shown by the payrolls submitted to the Social Security System by
respondent Marling Rice Mill.
Complainant's allegation that Rolando Tan managed, operated and transacted business for Marling Rice Mill is of no
moment and wanting in evidence since it is even clear from the said payrolls that it was one Guillermo Tan who was the
manager of Marling Rice Mill.
PAL v. Ligan, et. al.
G.R. No. 146408, February 29, 2008
Petitioner Philippine Airlines and Synergy Services Corporation as Contractor, entered into an Agreement whereby
Synergy undertook to provide loading and delivery services by furnishing all the necessary capital, workers, materials,
supplies and equipment for the performance and execution of said work. Herein respondents who appear to have been
assigned to work for petitioner filed complaints before the NLRC for the payment of their labor standard benefits and
regularization of employment status claiming that they are performing duties directly connected with petitioners business.
The Labor Arbiters decision found Synergy an independent contractor but was vacated on appeal. The NLRC tribunal
declared Synergy to be a labor-only contractor and was affirmed by the CA. Petitioner moved for reconsideration but was
Whether or not there is labor-only contracting.
Ruling: YES.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for
convenience, re-quoted:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main business of the principal, OR
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual
Even if only one of the two elements is present then, there is labor-only contracting.
From the records of the case, it is gathered that the work performed by almost all of the respondents - loading and
unloading of baggage and cargo of passengers - is directly related to the main business of petitioner. And the equipment
used by respondents as station loaders, such as trailers and conveyors, are owned by petitioner.
Petitioner PAL, and not Synergy, exercises control and supervision over the respondent workers methods of doing
the work, as reflected in their Agreement: (1) Contractor (Synergy) shall require all its workers, employees, suppliers and
visitors to comply with OWNER'S (PAL) rules, regulations, procedures and directives relative to the safety and
security of OWNER'S premises, properties and operations (2) xxx shall furnish its employees and workers
identification cards to be countersigned by OWNER and uniforms to be approved by OWNER. (3) OWNER may
require CONTRACTOR to dismiss immediately and prohibit entry into OWNER'S premises of any person
employed therein by CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not
comply with OWNER'S reasonable instructions xxx
Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of
plane arrivals. And as the NLRC found, petitioner's managers and supervisors approved respondents' weekly work
assignments and respondents and other regular PAL employees were all referred to as "station attendants" of the cargo
operation and airfreight services of petitioner.
Respondents having performed tasks which are usually necessary and desirable in the air transportation business of
petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.
Almeda, et. al. v. Asahi Glass Philippines
G.R. No. 177785, September 3, 2008
Respondent Asahi Glass Philippines entered into a service contract with San Sebastian Allied Services whereby the latter
undertook to provide the former with the necessary manpower for its glass manufacturing business. Pursuant to the
contract, SSASI hired herein petitioners as glass cutters and quality controllers all assigned to work for respondent.
Sometime after, respondent terminated its service contract with SSASI which in turn terminated the employment of
petitioners. Petitioners then filed complaints before the Labor Arbiter asserting they should be considered regular
employees of the respondent as they are performing functions which are directly related to its business. Respondent
contends that petitioners were employees of SSASI a legitimate job contractor. The Labor Arbiter dismissed the complaint
but on appeal was reversed by the NLRC tribunal declaring SSASI a labor-only contractor. CA reversed said decision and
denied reconsideration.
Whether or not SSASI is a labor-only contractor.
Ruling: YES.
An important element of legitimate job contracting is that the contractor has substantial capital or investment, which
respondent failed to prove. The Court did not find a single financial statement or record to attest to the economic status
and financial capacity of SSASI to venture into and sustain its own business independent from petitioner.
Furthermore, the Court is unconvinced by respondents argument that petitioners were performing jobs that were not
directly related to respondents main line of business. Respondent is engaged in glass manufacturing. One of the
petitioners served as a quality controller, while the rest were glass cutters. Petitioners supplemented the regular workforce
when the latter could not comply with the markets demand; necessarily, therefore, petitioners performed the same
functions as the regular workforce. The indispensability of petitioners services was fortified by the length and continuity
of their performance, lasting for periods ranging from three to 11 years.
More importantly, the Court finds that the crucial element of control over petitioners rested in respondent. In the instant
case, petitioners worked at the respondents premises, and nowhere else. Petitioners followed the work schedule prepared
by respondent. They were required to observe all rules and regulations of the respondent pertaining to, among other
things, the quality of job performance, regularity of job output, and the manner and method of accomplishing the jobs.
SSASI is a labor-only contractor; hence, it is considered as the agent of respondent. Respondent is deemed by law as the
employer of petitioners.
South East International Rattan Inc v. Jesus J. Coming
G.R. No. 186621, March 12, 2014
Petitioner South East International Rattan is a domestic corporation engaged in the business of manufacturing and
exporting furniture to various countries. Respondent Coming was hired by petitioner as Sizing Machine Operator whose
work is initially compensated on pakiao basis but sometime was fixed per day and a work schedule of 8:00am to
5:00pm. Without any apparent reason, his employment was interrupted as he was told by petitioners to resume work in 2
months time but was never called back. Respondent thus filed a complaint before the regional arbitration branch. The
Labor Arbiter ruled respondent as a regular employee of petitioner SEIRI but on appeal, was reversed by the NLRC. CA
then reversed the NLRC decision and ruled that there existed an employer-employee relationship between petitioners and
Whether or not there is employer-employee relationship between petitioner and respondent.
Ruling: YES.
We affirm the CA.
To ascertain the existence of employer-employee relationship jurisprudence has invariably adhered to 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
power to control the employees conduct, or the so-called "control test."
x x x As to the "control test", the following facts indubitably reveal that respondents wielded control over the work
performance of petitioner, to wit: (1) they required him to work within the company premises; (2) they obliged petitioner
to report every day of the week and tasked him to usually perform the same job; (3) they enforced the observance of
definite hours of work from 8 oclock in the morning to 5 oclock in the afternoon; (4) the mode of payment of
petitioners salary was under their discretion, at first paying him on pakiao basis and thereafter, on daily basis; (5) they
implemented company rules and regulations; (6) [Estanislao] Agbay directly paid petitioners salaries and controlled all
aspects of his employment and (7) petitioner rendered work necessary and desirable in the business of the respondent
Pioneer Concrete Philippines Inc. v. Antonio D. Todaro
G.R. No. 154830, June 8, 2007
Pioneer International Limited (PIL), an Australian company engaged in the ready-mix concrete business, established
herein petitioner PCPI to undertake its business in the Philippines. PIL contacted respondent Todaro and asked if the latter
is available to join them in their intention to establish plant operations in the country to which the latter agreed.
Subsequently, PIL and Todaro came to an agreement wherein the former consented to engage the services of the latter as
consultant for 2-3 months, after which he would be employed as manager of concrete operations should PIL decide to
invest in the Philippines. PIL started its operation however it refused to comply with its undertaking to employ Todaro on
a permanent basis. Respondent thus filed a complaint for sum of money and damages against petitioner. Petitioner
meanwhile contends that the case should fall with the NLRC as the damages arose from an alleged breach of employment
contract. Both the trial court and CA ruled in favor of respondent.
Whether or not there is employer-employee relationship between PIL and respondent.
Ruling: NO.
In the present case, no employer-employee relationship exists between petitioners and respondent. In fact, in his
complaint, private respondent is not seeking any relief under the Labor Code, but seeks payment of damages on account
of petitioners' alleged breach of their obligation under their agreement to employ him. It is settled that an action for breach
of contractual obligation is intrinsically a civil dispute. In the alternative, respondent seeks redress on the basis of the
provisions of Articles 19 and 21 of the Civil Code. Hence, it is clear that the present action is within the realm of civil law,
and jurisdiction over it belongs to the regular courts.
This Court has consistently held that where no employer-employee relationship exists between the parties and no issue is
involved which may be resolved by reference to the Labor Code, other labor statutes or any collective bargaining
agreement, it is the Regional Trial Court that has jurisdiction.
Moises De Leon v. NLRC and La Tondea
G.R. No. 70705, August 21, 1989
Petitioner De Leon was employed by respondent company La Tondea as maintenance man whose work consisted mainly
of painting company building and equipment, and other odd jobs relating to maintenance. After having worked for
respondent for more than a year, petitioner requested that he be included in the payroll of regular employees, to which the
former responded by dismissing petitioner from his employment. Petitioner having been refused reinstatement filed a
complaint before the Labor Arbiter. Petitioner asserts that he is a regular employee performing similar functions as of a
regular maintenance and was rehired by respondent companys labor agency to perform the same tasks. Respondent
company meanwhile claims petitioner was a casual worker hired only to paint a certain building in the premises and that
his work as painter terminated upon completion of the job. The Labor Arbiter ruled in favor of petitioner but was reversed
on appeal by the NLRC tribunal.
Whether or not petitioner De Leon is a regular employee of respondent.
Ruling: YES.
The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular
activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the
former is usually necessary or desirable in the usual business or trade of the employer.
It is not tenable to argue that the painting and maintenance work of petitioner are not necessary in respondent's business of
manufacturing liquors and wines, just as it cannot be said that only those who are directly involved in the process of
producing wines and liquors may be considered as necessary employees. Otherwise, there would have been no need for
the regular Maintenance Section of respondent company's Engineering Department, manned by regular employees whom
petitioner often worked with.
The law demands that the nature and entirety of the activities performed by the employee be considered. In the case of
petitioner, the painting and maintenance work given him manifest a treatment consistent with a maintenance man and not
just a painter, for if his job was truly only to paint a building there would have been no basis for giving him other work
assignments in between painting activities.
Furthermore, the petitioner performed his work of painting and maintenance activities during his employment in
respondent's business which lasted for more than one year. Certainly, by this fact alone he is entitled by law to be
considered a regular employee. And considering further that weeks after his dismissal, petitioner was rehired by the
company through a labor agency and was returned to his post in the Maintenance Section and made to perform the same
activities that he used to do, it cannot be denied that as activities as a regular painter and maintenance man still exist.
Escasinas v. Shangri-las Mactan Island Resort
G.R. No. 178827, March 4, 2009
Petitioners were registered nurses engaged by respondent Dr. Pepito to work in her clinic at respondent Shangri-la Resort
in Cebu of which she was a retained physician. Later, petitioners filed for payment of their labor standard benefits and
regularization claiming they are regular employees of Shangri-la. Respondent contends that petitioners were not its
employees but of Dr. Pepito, while the latter claims that petitioners were already working for the previous retained
physicians of Shangri-la. The Labor Arbiter found for petitioners but was reversed on appeal by the NLRC tribunal stating
no employer-employee relationship existed between petitioners and Shangri-la. CA affirmed. Petitioner further contends
that Dr. Pepito cannot be a legitimate job contractor but a mere agent of Shangri-la.
Whether or not petitioner nurses are employees of Shangri-la.
Ruling: NO.
The existence of an independent and permissible contractor relationship is generally established by considering the
following determinants: whether the contractor is carrying on an independent business; the nature and extent of the work;
the skill required; the term and duration of the relationship; the right to assign the performance of a specified piece of
work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and
payment of the contractor's workers; the control of the premises; the duty to supply the premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment. On the other hand, existence of an employer- employee
relationship is established by the presence of the following determinants: (1) the selection and engagement of the workers;
(2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct,
with the latter assuming primacy in the overall consideration.
Against the above-listed determinants, the Court holds that respondent doctor is a legitimate independent contractor. That
Shangri-la provides the clinic premises and medical supplies for use of its employees and guests does not necessarily
prove that respondent doctor lacks substantial capital and investment. As to payment of wages, respondent doctor is the
one who underwrites the salaries, SSS contributions and other benefits of the staff as well as value added taxes and
withholding taxes. It is unlikely that respondent doctor would report petitioners as workers, pay their SSS premium as
well as their wages if they were not indeed her employees. With respect to the supervision and control of the nurses and
clinic staff, it is not disputed that manual prepared by respondent doctor and not the employee manual being followed by
Shangri-las regular workers, governs how they perform their respective tasks and responsibilities.
In fine, as Shangri-la does not control how the work should be performed by petitioners, it is not petitionersemployer.
Coca-Cola Bottlers Phils. v. Climaco
G.R. No. 146881, February 5, 2007
Respondent Dr. Climaco is a medical doctor who was hired by petitioner Coca-Cola by virtue of a Retainer Agreement.
Despite the non-renewal of the agreement, respondent continued to perform his functions as company doctor. He inquired
from petitioner if it was agreeable recognizing him as a regular employee but the management refused to do so. This
prompted respondent to file a complaint seeking recognition as a regular employee. While the case was pending,
respondent received a letter from petitioner concluding their retainer agreement which then prompted him to file a
complaint for illegal dismissal. The Labor Arbiters in the 2 complaints both found for petitioner finding no employer-
employee relationship existed between the parties. NLRC tribunal affirmed. CA reversed the decision.
Whether or not employer-employee relationship exists between the parties.
Ruling: NO.
The Court, in determining the existence of an employer-employee relationship, has invariably adhered to the four-fold
test: (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 employees conduct, or the so-called "control test," considered to be the most important element.
The Court agrees with the finding of the Labor Arbiter and the NLRC that the circumstances of this case show that no
employer-employee relationship exists between the parties. Petitioner company lacked the power of control over the
performance by respondent of his duties. The Comprehensive Medical Plan which contains the respondents objectives,
duties and obligations, does not tell respondent "how to conduct his physical examination, how to immunize, or how to
diagnose and treat his patients, employees of petitioner company, in each case." It provided guidelines merely to ensure
that the end result was achieved, but did not control the means and methods by which respondent performed his assigned
The Court finds that the schedule of work and the requirement to be on call for emergency cases do not amount to such
control, but are necessary incidents to the Retainership Agreement. The provision that respondent was on call during
emergency cases did not make him a regular employee.
The Court also notes that the Retainership Agreement granted to both parties the power to terminate their relationship
upon giving a 30-day notice. Hence, petitioner company did not wield the sole power of dismissal or termination.
Philippine Airlines v. NLRC
G.R. No. 125792, November 9, 1998

Petitioner PAL, a local air carrier, entered into a Service Agreement with respondent Stellar, a domestic corporation
engaged in the business of job contracting janitorial services. Pursuant to the agreement, Stellar hired workers to perform
janitorial and maintenance services for PAL. Sometime later, PAL informed Stellar that the service agreement between
them would no longer be renewed since the janitorial requirements were bidded to other job contractors. Herein private
respondents-workers filed complaints against PAL and Stellar alleging they were illegally dismissed. The NLRC tribunal
affirming the Labor Arbiter held both PAL and Stellar liable to the workers. On reconsideration, the NLRC tribunal held
PAL solely liable stating it was the employer of the workers for it engaged in labor-only contracting with Stellar.
(1) Whether or not there is labor-only contracting;
(2) Whether or not there is employer-employee relationship between PAL and the respondent workers.
Ruling: NO.
(1) Prohibited labor-only contracting is defined in Article 106 of the Labor Code as follows: xxx where the person
supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities
which are directly related to the principal business of such employer. xxx
Applying the foregoing provision to the present case, the Court finds no basis for holding that PAL engaged in labor-only
contracting. In fact, STELLAR claims that it falls under the definition of an independent job contractor. Thus, it alleges
that it has sufficient capital in the form of tools and equipment and substantial capitalization as proven by its financial
statements. Further, STELLAR has clients other than petitioner.
STELLAR undertook said contract on its account, under its own responsibility, according to its own manner and method,
and free from the control and direction of the petitioner. Where the control of the principal is limited only to the result of
the work, independent job contracting exists. The janitorial service agreement between petitioner and STELLAR is
definitely a case of permissible job contracting.
(2) STELLAR, not PAL, was the employer of the individual private respondents. A contract of employment existed
between STELLAR and the individual private respondents, proving that it was said corporation which hired them. It was
also STELLAR which dismissed them, as evidenced by termination letter, which was signed by the vice president for
operations and comptroller of STELLAR. Likewise, they worked under STELLAR's own supervisors. STELLAR even
had its own collective bargaining agreement with its employees, including the individual private respondents. Moreover,
PAL had no power of control and dismissal over them.
In legitimate job contracting, no employer-employee relation exists between the principal and the job contractor's
employees. The principal is responsible to the job contractor's employees only for the proper payment of wages.
Jang Lim, et. al. v. NLRC
G.R. No. 124630, February 19, 1999
Respondent Cotabato Timberland Company Inc is a company engaged in the production and manufacture of plywood and
veneer. Respondent tapped and hired Teddy Arabi whose main task is simply to recruit herein petitioners to perform
milling and pilling works. Being exploited and underpaid, a group of disgruntled workers filed a complaint for unpaid
labor standards benefits against CTCI. The parties settled but CTCI made it appear that Arabi was petitioners employer
and the one who paid their claims. Subsequently, after being warned that management was dissatisfied with their work
performance, CTCI terminated petitioners without due process. Thus, petitioners filed a complaint for illegal dismissal
and payment of monetary claims against CTCI. The Labor Arbiter found in favor of petitioners. NLRC tribunal reversed
the decision stating that no employer-employee relationship existed between petitioners and CTCI, and that Teddy Arabi
being an independent contractor was the real employer of petitioners.
(1) Whether or not petitioners are employees of CTCI.
(2) Whether or not Teddy Arabi is an independent contractor.
(1) YES. CTCI exercised the power of control over the employees. The work activities and schedules of petitioners were
set by CTCI. Evidence of CTCI's absolute control and supervision over the manner and conduct of work of the petitioners
can be established from the following: (1) the manning/shifting schedules of the petitioners were entirely prepared and
approved by CTCI; and (2) photocopies of the company identification cards bearing the name of the CTCI and likewise
countersigned by CTCI's Personnel Officer. Also, the fact that petitioners herein were advised that "the management of
CTCI has been dissatisfied with their work performance and production output results" undoubtedly indicate CTCI's
power to regulate and direct the means and methods to be utilized in petitioners' work. We find that the petitioners
performed usual, regular and necessary services for petitioner's production of goods. In Zanotte Shoes v. NLRC, it was
held that there is an employer-employee relationship where the work performed is clearly related to, and in the pursuit of,
the principal business activity of the employer.
(2) NO. The allegations that Arabi has sufficient capitalization or that he has investments in the form of tools, equipment,
machineries, and work premises, are entirely unsubstantiated. In our view what clearly appears here is that Arabi is a mere
agent of CTCI. His only job is to recruit and hire manpower as needed. Arabi is definitely not an independent contractor.
Therefore, it is not Arabi but CTCI which is responsible to petitioners who must be deemed employed not by Arabi but by
the company.
LIKHA-PMPB v. Burlingame Corporation
G.R. No. 162833, June 15, 2007
Petitioner LIKHA-PMPB filed a petition for certification election before the DOLE as it sought to represent all 70 rank-
and-file promo employees of respondent Burlingame Corporation. Respondent opposed arguing that there exists no
employer-employee relationship between them since petitioners members are actually employees of F. Garil Manpower
Services, a duly licensed local employment agency. The Med-Arbiter found for respondent finding no employer-employee
relationship existed, but was reversed on appeal to the DOLE. CA reversed the decision holding F. Garil to be an
independent contractor.
(1) Whether or not F. Garil is an independent contractor; and
(2) Whether or not petitioner are employees of Burlingame Corporation.
(1) NO. We agree with the Secretary that F. Garil is not an independent contractor. First, F. Garil does not have
substantial capitalization or investment in the form of tools, equipment, machineries, work premises, and other materials,
to qualify as an independent contractor. No proof was adduced to show F. Garils capitalization. Second, the work of the
promo-girls was directly related to the principal business or operation of Burlingame. Marketing and selling of products is
an essential activity to the main business of the principal. Lastly, F. Garil did not carry on an independent business or
undertake the performance of its service contract according to its own manner and method, free from the control and
supervision of its principal, Burlingame.
(2) YES. The "four-fold test" will show that respondent is the employer of petitioners members. The involvement of F.
Garil in the hiring process was only with respect to the recruitment aspect because the actual hiring itself was done
through the deployment of personnel to establishments by Burlingame. Burlingame would pay the workers through F.
Garil a certain sum per worker on the basis of eight-hour work every 15th and 30th of each calendar month which evinces
the fact that F. Garil merely served as conduit in the payment of wages to the deployed personnel. Burlingame upon
request to F. Garil may replace any personnel found to be inefficient, troublesome, uncooperative and not observing the
rules and regulations set forth by it.
There is no doubt that F. Garil was engaged in labor-only contracting, and as such, is considered merely an agent of
Burlingame. Since F. Garil is a labor-only contractor, the workers it supplied should be considered as employees of
Burlingame in the eyes of the law.
Republic v. Asiapro Cooperative
G.R. No. 172101, November 23, 2007
Respondent Asiapro Cooperative is composed of owners-members with primary objectives of providing them savings and
credit facilities and livelihood services. In discharge of said objectives, Asiapro entered into several service contracts with
Stanfilco. Sometime later, the cooperative owners-members requested Stanfilcos help in registering them with SSS and
remitting their contributions. Petitioner SSS informed Asiapro that being actually a manpower contractor supplying
employees to Stanfilco, it must be the one to register itself with SSS as an employer and remit the contributions.
Respondent continuously ignoring the demand of SSS the latter filed before the SSC. Asiapro alleges that there exists no
employer-employee relationship between it and its owners-members. SSC ruled in favor of SSS. On appeal, CA reversed
the decision.
Whether or not there is employer-employee relationship between Asiapro and its owners-members.
Ruling: YES.
In determining the existence of an employer-employee relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the power of dismissal; and
(4) the power to control the workers conduct, with the latter assuming primacy in the overall consideration. All the
aforesaid elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive
discretion in the selection and engagement of the owners-members as well as its team leaders who will be assigned at
Second. It cannot be doubted then that those stipends or shares in the service surplus are indeed wages, because these are
given to the owners-members as compensation in rendering services to respondent cooperatives client, Stanfilco.
Third. It is also stated in the above-mentioned Service Contracts that it is the respondent cooperative which has the power
to investigate, discipline and remove the owners-members and its team leaders who were rendering services at Stanfilco.
Fourth. In the case at bar, it is the respondent cooperative which has the sole control over the manner and means of
performing the services under the Service Contracts with Stanfilco as well as the means and methods of work. Also, the
respondent cooperative is solely and entirely responsible for its owners-members, team leaders and other representatives
at Stanfilco. All these clearly prove that, indeed, there is an employer-employee relationship between the respondent
cooperative and its owners-members.