5

Encyclopaedia Britannica (Philippines), Inc.

versus
National Labor Relations Commission, Hon. Labor Arbiter Teodorico L. Rogelio
And Benjamin Limjoco
G.R. No. 87098 November 4, 1996

FACTS:
Benjamin Limjoco was a Sales Division Manager of Encyclopaedia Britannica(EB)
and was in charge of selling petitioners products through some sales representatives. As
compensation, he received commissions from the products sold by his agents. He was
also allowed to use petitioners name, goodwill and logo. Mr. Limjoco agreed to deduct
the office expenses from the commissions. At the time he was connected with EB, he was
also a director and later became the president of the Farmers Rural Bank.
Mr. Limjoco decided to resign from EB to pursue other interests which requires his
personal attention. Some time later, he filed a complaint against EB for non-payment of
separation pay and other benefits as well as illegal deductions.
EB alleged that Limjoco was an independent dealer authorized to promote and sell its
products and in return, and that he did not have any salary, only commissions which were
dependent on his sales accomplishment. He maintained a separate office, financed the
business expenses, and had his own workforce such as a secretary, a utility man, and sales
representatives whose salaries were paid through Limjoco’s commissions. EB held that
they did not exercise control over Limjoco as to the means and manner of conducting his
work. Limjoco was not required to report to EB’s office, and he did not observe fixed
office hours.
EB gave memoranda containing the guidelines on company policies which the sales
managers follow and impose on their respective agents, as well as other instructions. He
was also required to make periodic reports of sales activity to the company. The prices of
the products were fixed by EB. EB’s selling of encyclopaedias and books were done
through dealership agreements. Independent authorized agents primarily conducted the
sales operations. They are not given regular salary, only commissions based on sales
volume. These independent agents hire and maintain their own staff and finance their own
office expenses.
Limjoco posited that he was hired by EB and assigned to the sales department,
earning an average of 4,000Php monthly as sales commissions and was under the
supervision of the EB’s officials who issued to him and his other personnel, memoranda,
guidelines on company policies, instructions and other orders.
ISSUE: Whether or not an employee-employer relationship exists between Limjoco and
EB

SUPREME COURT RULING:

There is no employee-employer relationship.

The four-tiered test

 6

The court followed a four-step formula in determining the existence of an employer-

employee relationship. The following elements must be present:
1) selection and engagement of the employee;
2) payment of wages;
3) power of dismissal; and
4) the power to control the employees conduct.
Of the above, control of employees conduct is commonly regarded as the most
crucial and determinative indicator of the presence or absence of an employer-employee
relationship. Under the control test, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not only the end
to be achieved, but also the manner and means to be used in reaching that end.
Company has no control over the means and methods of Limjoco’s conduct
of work
The issuance of memoranda to Limjoco and to other division sales managers did
not prove that company had actual control over them. In accordance with business
practice in entering into dealership aggreements, the independent dealers kept their own
office and staffs. The different memoranda were merely guidelines to be imposed to the
sales representatives and other staffs. EB’s requirement of submitting periodic reports
was necessary to update the company of the dealer’s performance and business income.
EB fixed the prices of the products for uniformity, but nonetheless the dealers had free
rein in the means and methods of conducting the marketing operations. Also, Limjoco
was free to to conduct his work and he was free to engage in other means of livelihood. It
was found that he was not exclusively working for EB.