9 FRANCISCO v NLRC (Lahoz) 1.
In 1995, Francisco was hired by Kasei during its incorporation stage as
August 31, 2006 | Ynares-Santiago | Employer-Employee Relationship
Petitioner: Angelina Francisco
Respondents: National Labor Relations Commission, Kasei Corporation,
Seiichiro Takahashi, Timoteo Acedo, Delfin Liza, Irene Ballesteros, Trinidad Liza
and Ramon Escueta
SUMMARY: In 1995, Francisco was hired by Kasei as Accountant and Corporate
Secretary. From 1996 to 2000, she was designated as Acting Manager. As of
December 2000, her salary was 27,500 with 3,000 housing allowance and 10%
share in the profit of Kasei. In January 2001, she was replaced as Manager. She
alleges that she was made to sign a prepared resolution for her replacement but
was assured that she would remain connected to the company. It was announced
to the employees that Francisco would serve as Technical Assistant to Seiji
Kamura. Thereafter, her salary was reduced by P2,500 per month. The company
failed to pay her for several months and after repeated demands, she was
informed by the Treasurer that she was no longer connected with the company.
This led her to file an illegal dismissal case with the Labor Arbiter who ruled in her
favor. The NLRC affirmed the decision but the CA reversed. Kasei claims that
Francisco was never an employee since performed her work at her discretion and
without the control and supervision of the company. (see other arguments in #5)
W/N there was an employer-employee relationship – YES. The two-tiered test was
applied in this case (see doctrine). Applying the control test, the SC ruled that
Francisco is no doubt an employee of Kasei because she was under the direct
control and supervision of Seiji Kamura. Under the economic reality test,
Francisco can also be said to be an employee because she served the company
for six years and received her salaries as well as other benefits. SSS contributions
were also deducted from her salaries. When Francisco was designated as
Manager, Kasei made a report to the SSS showing that Francisco was an SSS
member. The coverage of the Social Security Law is predicated on the existence
of an employer-employee relationship. The Court also held that the reduction of
P2,500 a month from Francisco’s salary amounted to constructive dismissal.
DOCTRINE: In order to determine whether there exists an employer-employee
relationship, a two-tiered test must be used:
a. Employer’s power to control the employee with respect to the means and
methods by which the work is to be accomplished; and
b. Underlying economic realities of the activity or relationship.
FACTS:
Accountant, Corporate Secretary and Liaison Officer. Despite being
designated as Corporate Secretary, she was not entrusted with the
corporate documents; did not attend any board meeting; never prepared
any legal document and never represented the company as its corporate
secretary. She was only asked to sign documentation for the company
on some occasions.
2. From 1996 to 2000, she was designated as Acting Manager so Gerry
Nino was to replace her as accountant. As of December 2000, her salary
was P27,500 plus P3,000 housing allowance and a 10% share in the
profit of Kasei.
3. In January 2001, Francisco was replaced as Manager. She 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. The
Treasurer of Kasei also convened a meeting of all employees and
announced that nothing had changed and that Francisco was still
connected with Kasei as Technical Assistant to Seiji Kamura.
4. After this, Kasei reduced her salary by P2,500 a month. Francisco was
also not paid her mid-year bonus. Despite repeated follow-ups with the
cashier, she was still not paid her salary. When she asked for her salary
from the Treasurer, she was informed that she is no longer connected
with the company. This led her to file an action for constructive dismissal
before the labor arbiter.
5. Kaiser averred the following:
a. Francisco is not an employee. When she was hired in 1995 as
technical consultant and Corporate Secretary. As a technical
consultant, she performed her work at her own discretion
without the control and supervision of Kasei. She had no daily
time record and she came to the office at any time she wanted.
b. Kasei never interfered with her work except when she was
asked her opinion on matters relating to her profession.
c. Francisco did not go through the usual selection process of
employees, but her services were engaged through a Board
Resolution.
d. The money received by Francisco was her professional fee and
she was not one of those reported to the BIR or SSS as one of
the company’s employees.
e. Francisco’s designation as technical consultant depended
solely upon the will of the management; therefore, her
consultancy may be terminated at any time.
f. Kasei also presented a list of employees duly received by BIR
where Francisco was not among the employees of Kasei. SSS
records were also submitted showing that her last employer
was Seiji Corporation.
1
 6. The Labor Arbiter ruled that Francisco was illegally dismissed. The LA’s
decision was affirmed by the NLRC with modification.
7. On appeal with the CA, the NLRC decision was reversed.
ISSUE/S:
1. W/N there was an employer-employee relationship between Kasei and
Francisco - YES
RATIO:
On whether there was an employer-employee relationship between Kasei and
Francisco - YES
2. In order to determine whether there exists an employer-employee
relationship, a two-tiered test must be used:
a. Employer’s power to control the employee with respect to the
means and methods by which the work is to be accomplished;
and
b. Underlying economic realities of the activity or relationship.
3. The two-tiered test would take into consideration the totality of the
circumstances surrounding the true nature of the relationship. It is
especially appropriate where there is no written agreement or terms of
reference to base the relationship on.
4. The second level depends upon the circumstances of the whole economic
activity such as:
a. Extent to which the services performed are an integral part of the
employer’s business
b. Extent of the worker’s investment in equipment and facilities;
c. Nature and degree of control exercised by the employer;
d. Worker’s opportunity for profit and loss;
e. Amount of initiative, skill, judgment or foresight required;
f. Permanency and duration of the relationship;
g. Degree of dependency of the worker upon the employer for his
continued employment in that line of business.
5. Applying the control test, the SC ruled that Francisco is no doubt an
employee of Kasei because she was under the direct control and
supervision of Seiji Kamura. She reported for work regularly and served in
various capacities, performing functions necessary for the proper operation
of the corporation.
6. Under the economic reality test, Francisco can also be said to be an
employee because:
a. She served the company for six years, receiving check vouchers
indicating her salaries, benefits, 13th month pay, bonuses and
allowances, as well as deductions and SSS contributions
b. When Francisco was designated as Manager, Kasei made a report
to the SSS showing that Francisco was an SSS member
7. The above show that Francisco is economically dependent on Kasei for
her continued employment in the company’s line of business. In
Domasig v NLRC, it was held that an identification card is provided not
only as a security measure but mainly to identify someone as a bona fide
employee of the issuing firm. Furthermore, in Flores v Nuestro, it was
held that a corporation who registers its workers with the SSS is proof
that the workers are employees of the corporation. The coverage of the
Social Security Law is predicated on the existence of an employer-
employee relationship.
8. The Court also looked into the affidavit of Seiji Kamura where he
admitted that even though Francisco was designated as Corporate
Secretary, she never performed functions relating to such position. The
Court found this sufficient to establish that Franciso is an employee of
Kasei. (Note: A second affidavit was executed by Kamura repudiating
the first affidavit. However, it was held that courts do not generally look
with favor on any retraction or recanted testimony.)
9. In conclusion, the Court held that:
a. Francisco was selected and engaged by the company for
compensation and is economically dependent upon Kasei.
b. Her main job function involved accounting and tax services to
Kasei over an indefinite period.
c. Kasei hired and engaged her for compensation, with the power
to dismiss her for cause.
d. Kasei had the power to control her with the means and
methods by which the work is to be accomplished.
10. Francisco was held to have been constructively dismissed when Kasei
reduced her salary by P2,500 a month. A diminution of pay is prejudicial
to the employee and amounts to constructive dismissal which is an
involuntary resignation resulting in cessation of work resorted to when
continued employment becomes impossible, unreasonable or unlikely.
DISPOSITION:
WHEREFORE, the petition is GRANTED. The Decision and Resolution of the
Court of Appeals dated October 29, 2004 and October 7, 2005, respectively,
in CA-G.R. SP No. 78515 are ANNULLED and SET ASIDE. The Decision of
the National Labor Relations Commission dated April 15, 2003 in NLRC NCR
CA No. 032766-02, is REINSTATED. The case is REMANDED to the Labor
Arbiter for the recomputation of petitioner Angelina Francisco's full
backwages from the time she was illegally terminated until the date of 􏰀nality
of this decision, and separation pay representing one-half month pay for
every year of service, where a fraction of at least six months shall be
considered as one whole year.