Chavez v.
NLRC (Vi) DOCTRINE: The elements to determine the existence of an employment
January 17, 2005| Callejo, Sr., J. | Elements of Relationship
PETITIONER: PEDRO CHAVEZ
RESPONDENTS: NATIONAL LABOR RELATIONS COMMISSION,
SUPREME PACKAGING, INC. and ALVIN LEE, Plant Manager
SUMMARY: Supreme Packaging, Inc. (Supreme), is in the business of
manufacturing cartons and other packaging materials for export and
distribution. It engaged the services of Pedro Chavez as a truck driver to
deliver from Mariveles to customers, usually in Metro Manila. Supreme
gave him a truck to use. Initially, Chavez was paid P350.00 per trip. This
was later adjusted to P480.00 per trip and, at the time of his alleged
dismissal, he was receiving P900.00 per trip. Chavez told Alvin Lee, the
Plant Manager, that he wanted to avail of the same benefits regular
employees have such as overtime pay, nightshift differential pay, 13 th
month pay, etc. Lee promised but was not actually able to give him the
benefits. So, Chavez filed a complaint with the Labor Arbiter about
regularization and when he was dismissed, he filed an amended complaint
for illegal dismissal. Supreme claimed that Chavez was an independent
contractor and not an employee so he is not entitled to the benefits and he
was not illegally dismissed. The decision went back and forth from holding
Supreme guilty of illegal dismissal to not being guilty until it reached the
SC.
ISSUE: Whether there existed an employer-employee relationship
between Supreme Packaging and Pedro Chavez – YES
The elements of an employer-employee relationship are: (1) the
selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the employer's power to control the
employee's conduct. The Court held that all the elements are present. He
was hired, he was paid, and he was dismissed. The 4 th element is the most
important and control of Supreme in the means of the work can be shown
by it owning the truck he drove, requiring it to be used only for the delivery
of its goods, allowing it to be parked only in 2 spaces, and issuing gate
passes and routing slips. Therefore, there was an employer-employee
relationship. Gross negligence is needed to be able to dismiss an employee
for valid reason and it needs to be gross and habitual. The negligence in the
proper maintenance of the truck does not classify as gross and habitual. So,
the Court held that Chavez was illegally dismissed.
relationship are:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the employer's power to control the employee's conduct
The most important element is the employer's control of the employee's
conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish it.
FACTS:
1. Supreme Packaging, Inc. (Supreme), is in the business of
manufacturing cartons and other packaging materials for export and
distribution. It engaged the services of Pedro Chavez as a truck
driver. He is supposed to deliver the company's products from its
factory in Mariveles, Bataan, to its various customers, mostly in
Metro Manila. Supreme gave Chavez a truck to use. Most of the
delivery trips were made at nighttime, starting at 6:00 p.m. from
Mariveles, and returning in the afternoon 2 or 3 days after. The
deliveries were made in accordance with the routing slips issued by
Supreme indicating the order, time and urgency of delivery.
Initially, Chavez was paid P350.00 per trip. This was later adjusted
to P480.00 per trip and, at the time of his alleged dismissal, he was
receiving P900.00 per trip.
2. Sometime in 1992, Chavez told the Plant Manager, Alvin Lee, that
he wanted to receive the benefits that the regular employees were
receiving such as overtime pay, nightshift differential pay, and
13th month pay, among others. Although Lee promised to give it
to Chavez, Lee failed to actually do so.
3. Chavez filed a regularization complaint with the Regional
Arbitration Branch with NLRC before he was terminated. When he
was dismissed, he filed an amended complaint for illegal dismissal,
unfair labor practice and non-payment of overtime pay, nightshift
differential pay, 13th month pay, etc.
4. Supreme denied the existence of an employer-employee relationship
and said that Chavez was an independent contractor evidenced by
the contract of service. The contract of service states that he will be
paid on a per trip basis and that the contractor has control over
people who work for him and is responsible if there is damage to the
 goods. The contract was renewed twice and except for the rates
RATIO:
which became higher, was substantially the same. Supreme claimed
that he was not entitled to regularization because he was not an
employee. Supreme said it did not dismiss the petitioner. Rather, the
contract was ended because he violated the terms and conditions of
their contract. Chavez allegedly failed to observe the minimum
degree of diligence in the proper maintenance of the truck he was
using, which led to Supreme paying unnecessary significant
expenses for overhauling the truck.
5. Labor Arbiter - found Supreme Packaging guilty of illegal
dismissal. He was a regular employee performing functions that
were necessary for the business and worked for more than 10 years.
The dismissal was founded on him asking to be regularized,
therefore, there is a lack of valid and just cause for dismissal. The
contract of service was null and void because it was a circumvention
of the constitutional provision affording full protection to labor and
security of tenure.
6. NLRC – Supreme appealed and NLRC dismissed the appeal at first
and affirmed the LA’s decision. After a motion for reconsideration,
NLRC reversed its first decision and said that there was a valid
contract of service because there was no specified time for the
deliveries and Chavez could hire his own helpers to be paid by his
own account so that means he was an independent contractor.
7. CA – at first, it reversed the second decision of the NLRC and
reinstated the decision of the LA saying that Chavez was a regular
employee because as a truck driver, he did a service that was
necessary for the business and that he worked for 10 years. The
routing slips were also evidence of control of Supreme over Chavez.
But after a motion for reconsideration, the CA reversed and upheld
the contract of service saying that the extent of the control of
Supreme was only regarding the result and not the means/method.
The CA cited the following circumstances: (1) the respondents had
no say on how the goods were to be delivered to the customers; (2)
the petitioner had the right to employ workers who would be under
his direct control; and (3) the petitioner had no working time. This
contract, not being contrary to morals, good customs, public order
or public policy, should be given the force and effect of law.
ISSUE:
1. Whether there existed an employer-employee relationship
between Supreme Packaging and Pedro Chavez – YES
1. The elements to determine the existence of an employment
relationship are:
(1) the selection and engagement of the employee;
(2) the payment of wages;
(3) the power of dismissal; and
(4) the employer's power to control the employee's conduct.
The most important element is the employer's control of the
employee's conduct, not only as to the result of the work to be done,
but also as to the means and methods to accomplish it. All the four
elements are present in this case.
2. First - Undeniably, it was the respondents who engaged the services
of the petitioner without the intervention of a third party.
3. Second – Wages are defined as "remuneration or earnings,
however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece or commission
basis, or other method of calculating the same, which is payable by
an employer to an employee under a written or unwritten
contract of employment for work done or to be done, or for
service rendered or to be rendered."
4. It doesn’t matter that Chavez was paid on a per trip basis. This is
merely a method of computing compensation and not a basis for
determining the existence or absence of employer-employee
relationship. In this case, Chavez definitely received compensation
for the services that he rendered to Supreme. Moreover, under the
Rules Implementing the Labor Code, every employer is required to
pay his employees by means of payroll. The payroll should show,
among other things, the employee's rate of pay, deductions made,
and the amount actually paid to the employee. Supreme did not
present the payroll to support their claim that Chavez was not their
employee, which made the Court think that presenting such would
be against their stand.
5. Third – Supreme’s power to dismiss Chavez was inherent in the maintenance of the truck is not enough. Therefore, Supreme is guilty
fact that they engaged his services as truck driver. They exercised of illegal dismissal and should give backwages and damages.
this power by terminating Chavez even if it was due allegedly to his 9. WHEREFORE, the instant petition is GRANTED. The Resolution
breach of his contractual obligation. of the Court of Appeals reversing its Decision is REVERSED and
6. Fourth – The “control test” is the most important. An independent SET ASIDE. The Decision of the Labor Arbiter finding the
contractor is “one who carries on a distinct and independent respondents guilty of illegally terminating the employment of
business and undertakes to perform the job, work, or service on petitioner Pedro Chavez, is REINSTATED.
its own account and under its own responsibility according to its
own manner and method, free from the control and direction of
the principal in all matters connected with the performance of the
work except as to the results thereof.” So, while an independent
contractor enjoys independence and freedom from the control and
supervision of his principal, an employee is subject to the
employer's power to control the means and methods by which
the employee's work is to be performed and accomplished.
7. Even if Supreme says that Chavez was an independent contractor,
Supreme actually had control over the means of his deliveries.
Supreme owned the truck he used, there was an express order
that it should be used exclusively to deliver the company’s
goods, the truck was only to be parked in 2 specific places, and
Supreme determined how, where and when Chavez would perform
his task by issuing to him gate passes and routing slips. Chavez
also worked for Supreme continuously for 10 years.
8. Supreme said that the dismissal was for valid and just cause because
Chavez failed to report for work without a valid reason and he
intended to sever the relationship. The fact that Chavez filed a
complaint shows that he didn’t intend to sever the relationship.
Neither was there gross negligence. Gross negligence implies a
want or absence of or failure to exercise slight care or diligence,
or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them. The
negligence, to warrant removal from service, should not merely
be gross but also habitual. The single and isolated act in the proper