JOSE Y. SONZA vs.
ABS-CBN BROADCASTING CORPORATION findings of the Labor Arbiter and the Court of Appeals that SONZAs claims
[G.R. No. 138051. June 10, 2004] CARPIO, J.
FACTS
In May 1994, respondent ABS-CBN Broadcasting Corporation (ABS-CBN)
signed an Agreement (Agreement) with the Mel and Jay Management and
Development Corporation (MJMDC). ABS-CBN was represented by its
corporate officers while MJMDC was represented by SONZA, as President
and General Manager, and Carmela Tiangco (TIANGCO), as EVP and
Treasurer. Referred to in the Agreement as AGENT, MJMDC agreed to
provide SONZAs services exclusively to ABS-CBN as talent for radio and
television.
On 1 April 1996, SONZA wrote a letter to ABS-CBNs President, Eugenio
Lopez III, informing that Sonza is waiving and renouncing recovery of the
remaining amount stipulated in paragraph 7 of the Agreement but reserves
the right to seek recovery of the other benefits under said Agreement.
On 30 April 1996, SONZA filed a complaint against ABS-CBN before the
Department of Labor and Employment, National Capital Region in Quezon
City. SONZA complained that ABS-CBN did not pay his salaries, separation
pay, service incentive leave pay, 13th month pay, signing bonus, travel
allowance and amounts due under the Employees Stock Option Plan
(ESOP).
The Labor Arbiter rendered his Decision dated 8 July 1997 dismissing the
complaint for lack of jurisdiction because of lack of employer-employee
relationship between ABS-CBN and Sonza.
SONZA appealed to the NLRC. On 24 February 1998, the NLRC rendered a
Decision affirming the Labor Arbiters decision. SONZA filed a motion for
reconsideration, which the NLRC denied in its Resolution dated 3 July 1998.
On 6 October 1998, SONZA filed a special civil action for certiorari before the
Court of Appeals assailing the decision and resolution of the NLRC. On 26
March 1999, the Court of Appeals rendered a Decision dismissing the case.
Hence, this petition.
RULING
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.
Clearly, ABS-CBNs right not to broadcast SONZAs show, burdened as it was
by the obligation to continue paying in full SONZAs talent fees, did not
amount to control over the means and methods of the performance of
SONZAs work. ABS-CBN could not terminate or discipline SONZA even if
the means and methods of performance of his work - how he delivered his
lines and appeared on television - did not meet ABS-CBNs approval. This
proves that ABS-CBNs control was limited only to the result of SONZAs work,
whether to broadcast the final product or not. In either case, ABS-CBN must
still pay SONZAs talent fees in full until the expiry of the Agreement.
SONZA further contends that ABS-CBN exercised control over his work by
supplying all equipment and crew. No doubt, ABS-CBN supplied the
equipment, crew and airtime needed to broadcast the Mel & Jay
programs. However, the equipment, crew and airtime are not the tools and
instrumentalities SONZA needed to perform his job. What SONZA principally
needed were his talent or skills and the costumes necessary for his
appearance. Even though ABS-CBN provided SONZA with the place of work
and the necessary equipment, SONZA was still an independent contractor
since ABS-CBN did not supervise and control his work. ABS-CBNs sole
concern was for SONZA to display his talent during the airing of the
programs.
SONZA seeks the recovery of allegedly unpaid talent fees, 13th month pay,
separation pay, service incentive leave, signing bonus, travel allowance, and
amounts due under the Employee Stock Option Plan. We agree with the
are all based on the May 1994 Agreement and stock option plan, and not
on the Labor Code. Clearly, the present case does not call for an application
of the Labor Code provisions but an interpretation and implementation of the
May 1994 Agreement. In effect, SONZAs cause of action is for breach of
contract which is intrinsically a civil dispute cognizable by the regular courts.
NOTES
Elements of Employer-Employee Relationship
a) the selection and engagement of the employee;
b) the payment of wages;
c) the power of dismissal; and
d) the employers 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.
Labor-only contract
Three parties involved: (1) the labor-only contractor; (2) the employee who is
ostensibly under the employ of the labor-only contractor; and (3) the principal
who is deemed the real employer.
Under this scheme, the labor-only contractor is the agent of the
principal. The law makes the principal responsible to the employees of the
labor-only contractor as if the principal itself directly hired or employed the
employees.
Control
Vaughan, et al. v. Warner, et al.
 Vaudeville performers were independent contractors although the
management reserved the right to delete objectionable features in
their shows.
 Since the management did not have control over the manner of
performance of the skills of the artists, it could only control the
result of the work by deleting objectionable features.
 One could still be an independent contractor although the hirer
reserved certain supervision to insure the attainment of the
desired result.
 The hirer, however, must not deprive the one hired from
performing his services according to his own initiative.
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.
Insular Life Assurance Co., Ltd. vs. NLRC.
 Logically, the line should be drawn between rules that merely
serve as guidelines towards the achievement of the mutually
desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such
means.
 The first, which aim only to promote the result, create no
employer-employee relationship unlike the second, which address
both the result and the means used to achieve it.
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.
Talents as Independent Contractor
The right of labor to security of tenure as guaranteed in the
Constitution arises only if there is an employer-employee relationship under
labor laws. 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.
Individuals with special skills, expertise or talent enjoy the freedom to offer
their services as independent contractors. The right to life and livelihood
guarantees this freedom to contract as independent contractors. The right of
labor to security of tenure cannot operate to deprive an individual, possessed
with special skills, expertise and talent, of his right to contract as an
independent contractor. An individual like an artist or talent has a right to
render his services without any one controlling the means and methods by
which he performs his art or craft. This Court will not interpret the right of labor
to security of tenure to compel artists and talents to render their services only
as employees.
MAKATI HABERDASHERY, INC., vs. NLRC
[G.R. Nos. 83380-81 November 15, 1989] FERNAN, C.J.
FACTS
Individual complainants have been working for petitioner Makati
Haberdashery, Inc. as tailors, seamstress, sewers, basters (manlililip) and
"plantsadoras". They are paid on a piece-rate basis except Maria Angeles
and Leonila Serafina who are paid on a monthly basis. In addition to their
piece-rate, they are given a daily allowance of three (P 3.00) pesos provided
they report for work before 9:30 a.m. everyday. Private respondents are
required to work from or before 9:30 a.m. up to 6:00 or 7:00 p.m. from Monday
to Saturday and during peak periods even on Sundays and holidays.
On July 20, 1984, the Sandigan ng Manggagawang Pilipino, a labor
organization of the respondent workers, filed a complaint for (a)
underpayment of the basic wage; (b) underpayment of living allowance; (c)
non-payment of overtime work; (d) non-payment of holiday pay; (e) non-
payment of service incentive pay; (f) 13th month pay; and (g) benefits
provided for under Wage Orders Nos. 1, 2, 3, 4 and 5.
During the pendency of NLRC NCR Case No. 7-2603-84, private respondent
Dioscoro Pelobello left with Salvador Rivera, a salesman of petitioner
Haberdashery, an open package which was discovered to contain a "jusi"
barong tagalog. When confronted, Pelobello replied that the same was
ordered by respondent Casimiro Zapata for his customer. Zapata allegedly
admitted that he copied the design of petitioner Haberdashery. But in the
afternoon, when again questioned about said barong, Pelobello and Zapata
denied ownership of the same. Consequently a memorandum was issued to
each of them to explain on or before February 4, 1985 why no action should
be taken against them for accepting a job order which is prejudicial and in
direct competition with the business of the company. Both respondents
allegedly did not submit their explanation and did not report for work. Hence,
they were dismissed by petitioners on February 4, 1985. They countered by
filing a complaint for illegal dismissal.
On June 10, 1986, Labor Arbiter Ceferina J. Diosana rendered judgment: (a)
finding petitioners guilty of illegal dismissal and ordering them to reinstate
Dioscoro Pelobello and Casimiro Zapata to their respective or similar
positions without loss of seniority rights, with full backwages from July 4, 1985
up to actual reinstatement; (b) finding petitioners to have violated the decrees
on the cost of living allowance, service incentive leave pay and the 13th
Month Pay; and (c) dismissing the other complaints.
Since private respondents are regular employees, necessarily the
argument that they are independent contractors must fail. As established
in the preceding paragraphs, private respondents did not exercise
independence in their own methods, but on the contrary were subject to the
control of petitioners from the beginning of their tasks to their completion.
Unlike independent contractors who generally rely on their own
resources, the equipment, tools, accessories, and paraphernalia used
by private respondents are supplied and owned by petitioners. Private
respondents are totally dependent on petitioners in all these aspects.
COLA
As a consequence of their status as regular employees of the petitioners,
they can claim cost of living allowance. This is apparent from the provision
defining the employees entitled to said allowance, thus: "... All workers in the
private sector, regardless of their position, designation or status, and
irrespective of the method by which their wages are paid. "
13th Month Pay
Private respondents are also entitled to claim their 13th Month Pay under
Section 3(e) of the Rules and Regulations Implementing P.D. No. 851 which
provides:
Section 3. Employers covered. — The Decree shall apply to all employers
except to:
(e) Employers of those who are paid on purely commission, boundary, or task
basis, and those who are paid a fixed amount for performing a specific work,
irrespective of the time consumed in the performance thereof, except where
the workers are paid on piece-rate basis in which case the employer shall be
covered by this issuance insofar as such workers are concerned.
Service Incentive Leave
Private respondents are not entitled to service incentive leave pay because
as piece-rate workers being paid at a fixed amount for performing work
irrespective of time consumed in the performance thereof, they fall under one
of the exceptions stated in Section 1(d), Rule V, Implementing Regulations,
Book III, Labor Code. For the same reason private respondents cannot also
claim holiday pay (Section 1(e), Rule IV, Implementing Regulations, Book III,
Labor Code).

Petitioners appealed to the NLRC. The latter on March 30, 1988 affirmed said The law is protecting the rights of the laborer authorizes neither oppression
decision but limited the backwages awarded the Dioscoro Pelobello and nor self-destruction of the employer. More importantly, while the Constitution
Casimiro Zapata to only one (1) year. is committed to the policy of social justice and the protection of the working
class, it should not be supposed that every labor dispute will automatically be
After their motion for reconsideration was denied, petitioners filed the instant decided in favor of labor.
petition.
Finally, it has been established that the right to dismiss or otherwise impose
RULING disciplinary sanctions upon an employee for just and valid cause, pertains in
the first place to the employer, as well as the authority to determine the
The first issue which is the pivotal issue in this case is resolved in favor of existence of said cause in accordance with the norms of due process.
private respondents. We have repeatedly held in countless decisions that the
test of employer-employee relationship is four-fold: (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. It is the so
called "control test" that is the most important element. This simply means
the determination of whether the employer controls or has reserved the right
to control the employee not only as to the result of the work but also as to the
means and method by which the same is to be accomplished.

The facts at bar indubitably reveal that the most important requisite of control
is present. As gleaned from the operations of petitioner, when a customer
enters into a contract with the haberdashery or its proprietor, the latter directs
an employee who may be a tailor, pattern maker, sewer or "plantsadora" to
take the customer's measurements, and to sew the pants, coat or shirt as
specified by the customer. Supervision is actively manifested in all these
aspects — the manner and quality of cutting, sewing and ironing.

Furthermore, the presence of control is immediately evident in this

memorandum issued by Assistant Manager Cecilio B. Inocencio, Jr. dated
May 30, 1981 addressed to Topper's Makati Tailors. From this memorandum
alone, it is evident that petitioner has reserved the right to control its
employees not only as to the result but also the means and methods by
which the same are to be accomplished. That private respondents are
regular employees is further proven by the fact that they have to report for
work regularly from 9:30 a.m. to 6:00 or 7:00 p.m. and are paid an additional
allowance of P 3.00 daily if they report for work before 9:30 a.m. and which
is forfeited when they arrive at or after 9:30 a.m.
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO vs. NLRC
[G.R. No. 120969. January 22, 1998] DAVIDE, JR., J.
FACTS
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by
private respondents as part of the filming crew. About four months later, he
was designated Assistant Electrician. In June 1991, he was promoted to the
rank of Electrician. Petitioner Paulino Enero, on his part, claims that private
respondents employed him in June 1990 as a member of the shooting crew.
Petitioners tasks consisted of loading, unloading and arranging movie
equipment in the shooting area as instructed by the cameraman, returning
the equipment to Viva Films warehouse, assisting in the fixing of the lighting
system, and performing other tasks that the cameraman and/or director may
assign.
Sometime in May 1992, petitioners sought the assistance of their supervisor,
Mrs. Alejandria Cesario, to facilitate their request that private respondents
adjust their salary in accordance with the minimum wage law. In June 1992,
Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to
increase their salary only if they signed a blank employment contract. As
petitioners refused to sign, private respondents forced Enero to go on leave
in June 1992, then refused to take him back when he reported for work on 20
July 1992. Meanwhile, Maraguinot was dropped from the company payroll
from 8 to 21 June 1992, but was returned on 22 June 1992. He was again
asked to sign a blank employment contract, and when he still refused, private
respondents terminated his services on 20 July 1992. Petitioners thus sued
for illegal dismissal before the Labor Arbiter.
The Labor Arbiter rendered judgment declaring that complainants were
illegally dismissed. Private respondents appealed to the NLRC.
The NLRC, in reversing the Labor Arbiter, then concluded that these
circumstances, taken together, indicated that complainants (herein
petitioners) were project employees.
After their motion for reconsideration was denied by the NLRC in its
Resolution of 6 April 1995, petitioners filed the instant petition, claiming that
the NLRC committed grave abuse of discretion amounting to lack or excess
of jurisdiction.
RULING
Private respondents insist that petitioners are project employees of associate
producers who, in turn, act as independent contractors. It is settled that the
contracting out of labor is allowed only in case of job
contracting. Section 8, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code describes permissible job contracting in this
wise:
Sec. 8. Job contracting. -- There is job contracting permissible under the
Code if the following conditions are met:
(1) The contractor carries on an independent business and
undertakes the contract work on his own account under his
own responsibility according to his own manner and method,
free from the control and direction of his employer or principal in
all matters connected with the performance of the work except as
to the results thereof; and
(2) The contractor has substantial capital or investment in the form
of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.
Private respondents further narrated that VIVAs generators broke down
during petitioners last movie project, which forced the associate producer
concerned to rent generators, equipment and crew from another
company. This only shows that the associate producer did not have
substantial capital nor investment in the form of tools, equipment and other
materials necessary for making a movie. Private respondents in effect admit
that their producers, especially petitioners last producer, are not engaged in
permissible job contracting.
If private respondents insist that their associate producers are labor
contractors, then these producers can only be labor-only contractors,
defined by the Labor Code as follows:
Art. 106. Contractor or subcontractor.-- x x x There is labor-only contracting
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. In such cases, 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.
A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:
Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
The workers recruited and placed by such person are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the
person acting as contractor shall be considered merely as an agent or
intermediary 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.
(c) For cases not falling under this Article, the Secretary of Labor shall
determine through appropriate orders whether or not the contracting out of
labor is permissible in the light of the circumstances of each case and after
considering the operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and restrictions to insure
the protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity
engaged in the same a mere agent or intermediary of the direct employer. But
even by the preceding standards, the associate producers of VIVA cannot be
considered labor-only contractors as they did not supply, recruit nor hire the
workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor
and an employee of VIVA, who recruited crew members from an available
group of free-lance workers which includes the complainants Maraguinot and
Enero. And in their Memorandum, private respondents declared that the
associate producer hires the services of... 6) camera crew which includes (a)
cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and
electrician; (e) clapper; etc.... This clearly showed that the associate
producers did not supply the workers required by the movie project.
The relationship between VIVA and its producers or associate producers
seems to be that of agency, as the latter make movies on behalf of VIVA,
whose business is to make movies. As such, the employment relationship
between petitioners and producers is actually one between petitioners and
VIVA, with the latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can
further be established by the control test. While four elements are usually
considered in determining the existence of an employment relationship,
namely: (a) the selection and engagement of the employee; (b) the payment
of wages; (c) the power of dismissal; and (d) the employers power to control
the employees conduct, the most important element is the employers control
of the employees conduct, not only as to the result of the work to be done but
also as to the means and methods to accomplish the same. These four
elements are present here.
VIVAs control is evident in its mandate that the end result must be a quality
film acceptable to the company. The means and methods to accomplish the
result are likewise controlled by VIVA, viz., the movie project must be finished
within schedule without exceeding the budget, and additional expenses must
be justified; certain scenes are subject to change to suit the taste of the
company; and the Supervising Producer, the eyes and ears of VIVA and del
Rosario, intervenes in the movie-making process by assisting the associate
producer in solving problems encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the
movie directors control, and not VIVAs direction. The director merely instructs
petitioners on how to better comply with VIVAs requirements to ensure that
a quality film is completed within schedule and without exceeding the
budget. At bottom, the director is akin to a supervisor who merely oversees
the activities of rank-and-file employees with control ultimately resting on the
employer.
Aside from control, the element of selection and engagement is likewise
present in the instant case and exercised by VIVA. A sample appointment
slip offered by private respondents to prove that members of the shooting
crew except the driver are project employees of the Independent Producers.
All the circumstances indicate an employment relationship between
petitioners and VIVA alone, thus the inevitable conclusion is that petitioners
are employees only of VIVA.
ANGELINA FRANCISCO vs. NLRC
[G.R. No. 170087 August 31, 2006] YNARES-SANTIAGO, J.
FACTS
In 1995, petitioner was hired by Kasei Corporation during its incorporation
stage. She was designated as Accountant and Corporate Secretary and was
assigned to handle all the accounting needs of the company. She was also
designated as Liaison Officer to the City of Makati to secure business permits,
construction permits and other licenses for the initial operation of the
company.
In 1996, petitioner was designated Acting Manager. The corporation also
hired Gerry Nino as accountant in lieu of petitioner. As Acting Manager,
petitioner was assigned to handle recruitment of all employees and perform
management administration functions; represent the company in all dealings
with government agencies, especially with the Bureau of Internal Revenue
(BIR), Social Security System (SSS) and in the city government of Makati;
and to administer all other matters pertaining to the operation of Kasei
Restaurant which is owned and operated by Kasei Corporation.
In January 2001, petitioner was replaced by Liza R. Fuentes as
Manager. Petitioner alleged that she was required to sign a prepared
resolution for her replacement but she was assured that she would still be
connected with Kasei Corporation. Thereafter, Kasei Corporation reduced
her salary by P2,500.00 a month beginning January up to September 2001
for a total reduction of P22,500.00 as of September 2001. Petitioner was not
paid her mid-year bonus allegedly because the company was not earning
well. On October 2001, petitioner did not receive her salary from the
company. She made repeated follow-ups with the company cashier but she
was advised that the company was not earning well.
On October 15, 2001, petitioner asked for her salary from Acedo and the rest
of the officers but she was informed that she is no longer connected with the
company. Since she was no longer paid her salary, petitioner did not report
for work and filed an action for constructive dismissal before the labor arbiter.
The Labor Arbiter found that petitioner was illegally dismissed.
On April 15, 2003, the NLRC affirmed with modification the Decision of the
Labor Arbiter.
On appeal, the Court of Appeals reversed the NLRC decision.
The appellate court denied petitioners motion for reconsideration, hence, the
present recourse.
RULING
We held in Sevilla v. Court of Appeals that in this jurisdiction, there has been
no uniform test to determine the existence of an employer-employee
relation. Generally, courts 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. In addition to the standard of right-of-control, the existing
economic conditions prevailing between the parties, like the inclusion of
the employee in the payrolls, can help in determining the existence of an
employer-employee relationship.
However, 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. There are instances when, aside from the employers power to
control the employee with respect to the means and methods by which the
work is to be accomplished, economic realities of the employment relations
help provide a comprehensive analysis of the true classification of the
individual, whether as employee, independent contractor, corporate officer or
some other capacity.
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.
This two-tiered test would provide 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. This is especially
appropriate in this case where there is no written agreement or terms of
reference to base the relationship on; and due to the complexity of the
relationship based on the various positions and responsibilities given to the
worker over the period of the latter’s employment.
The control test initially found application in the case of Viaa v. Al-Lagadan
and Piga, and lately in Leonardo v. Court of Appeals, where we held that
there is an employer-employee 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.
In Sevilla v. Court of Appeals, we observed the need to consider the existing
economic conditions prevailing between the parties, in addition to the
standard of right-of-control like the inclusion of the employee in the
payrolls, to give a clearer picture in determining the existence of an employer-
employee relationship based on an analysis of the totality of economic
circumstances of the worker.
Thus, the determination of the relationship between employer and employee
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
employers business; (2) the extent of the workers investment in equipment
and facilities; (3) the nature and degree of control exercised by the employer;
(4) the workers 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 the employer; and (7) the degree of dependency of the worker
upon the employer for his continued employment in that line of business.
The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in
that line of business. In the United States, the touchstone of economic
reality in analyzing possible employment relationships for purposes of the
Federal Labor Standards Act is dependency. By analogy, the benchmark of
economic reality in analyzing possible employment relationships for purposes
of the Labor Code ought to be the economic dependence of the worker on
his employer.
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 from
August 1, 1999 to December 18, 2000.[26] When petitioner was designated
General Manager, respondent corporation made a report to the SSS signed
by Irene Ballesteros. 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.
Based on the foregoing, there can be no other conclusion that petitioner is
an employee of respondent Kasei Corporation. She was selected and
engaged by the company for compensation, and is economically dependent
upon respondent for her continued employment in that line of business. Her
main job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite period of
engagement. Respondent corporation hired and engaged petitioner for
compensation, with the power to dismiss her for cause. More importantly,
respondent corporation had the power to control petitioner with the means
and methods by which the work is to be accomplished.
SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO) vs. HON.
BLAS F. OPLE
[G.R. No. L-53515 February 8, 1989] GRIÑO-AQUINO, J.:

FACTS

On April 17, 1978, a collective bargaining agreement (effective on May 1,

1978 until January 31, 1981) was entered into by petitioner San Miguel
Corporation Sales Force Union (PTGWO), and the private respondent, San
Miguel Corporation, Section 1, of Article IV of which provided as follows:
Art. IV, Section 1. Employees within the appropriate bargaining
unit shall be entitled to a basic monthly compensation plus
commission based on their respective sales.

In September 1979, the company introduced a marketing scheme known as

the "Complementary Distribution System" (CDS) whereby its beer products
were offered for sale directly to wholesalers through San Miguel's sales
offices.

The labor union filed a complaint for unfair labor practice in the Ministry of
Labor, with a notice of strike on the ground that the CDS was contrary to the
existing marketing scheme whereby the Route Salesmen were assigned
specific territories within which to sell their stocks of beer, and wholesalers
had to buy beer products from them, not from the company. It was alleged
that the new marketing scheme violates Section 1, Article IV of the collective
bargaining agreement because the introduction of the CDS would reduce the
take-home pay of the salesmen and their truck helpers for the company would
be unfairly competing with them.

In its order of February 28, 1980, the Minister of Labor: found that the action
of the management is devoid of any anti-union hues; dismissed the notice of
strike; and ordered Management to pay an additional three (3) months back
adjustment commissions over and above the adjusted commission under the
complementary distribution system.

RULING

The petition has no merit.

Public respondent was correct in holding that the CDS is a valid exercise of
management prerogatives:

Except as limited by special laws, an employer is free to

regulate, according to his own discretion and judgment, all
aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of
workers and the discipline, dismissal and recall of work

Every business enterprise endeavors to increase its profits. In the process, it

may adopt or devise means designed towards that goal. In Abbott
Laboratories vs. NLRC, 154 SCRA 713, We ruled:

Even as the law is solicitous of the welfare of the employees, it

must also protect the right of an employer to exercise what are
clearly management prerogatives. The free will of management to
conduct its own business affairs to achieve its purpose cannot be
denied.

So long as a company's management prerogatives are exercised in

good faith for the advancement of the employer's interest and not for
the purpose of defeating or circumventing the rights of the employees
under special laws or under valid agreements, this Court will uphold
them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil. American
Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil.
Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offer to
compensate the members of its sales force who will be adversely affected by
the implementation of the CDS by paying them a so-called "back adjustment
commission" to make up for the commissions they might lose as a result of
the CDS proves the company's good faith and lack of intention to bust their
union.