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“No Employer-Employee Relationship” as Defense in Labor Cases

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Source: https://www.alburolaw.com/no-employer-employee-relationship-defense-labor-cases

The relations between employer and employee are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects [Art. 1700, Civil Code].

Though many employers have been consciously complying with the requirements of the law, many of them still fall victims of disgruntled employees who file various complaints before the labor tribunals. However, if such employers will be able to show that the complainants are not their employees, then the labor authorities will have no other alternative but to dismiss the case filed before it because they do not have jurisdiction to hear and decide the dispute.

It is therefore practical to determine first whether there is an employer-employee relationship. From the time of engagement of a person’s services, business owners should already be aware if the relationship they are creating is already one of employer-employee, or purely contractual in nature.

The four-fold test

In determining whether there is an employer-employee relationship between the parties, the following questions must be considered:

  1. Who has the power of selection and engagement of the employee?
  2. Who pays the wages of employee?
  3. Who has the power of dismissal? and;
  4. Who has the power to control the employees conduct?

The power of control

Of the powers mentioned above, the power of control over the employee’s conduct is generally regarded as determinative of the existence of the employer-employee relationship [See: G.R. No. 95845]. Under the control test, such a relationship exist where 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 [See: D.O. No. 147-15]. Thus, if the power of control can be exercised only on the end result of the job, and not on the means as to how the job will be done, then the relationship is not that of an employer and employee. The relationship between them is merely contractual. For an employer-employee relationship to arise, there must be control on not just one, but on both the end result and the means to achieve such end.

Take note, however, that a 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 to achieve it [See: G.R. No. 84484].

Evidence to prove the existence of the relationship

In labor cases, while respondent companies would normally try to prove the absence of employer-employee relationship, the opposite is true for the complainants who would try to prove the existence of employer-employee relationship.

In these instances, just bear in mind that there is no particular form of evidence required to prove the existence of such relationship. It may be documentary evidence, testimonial evidence, or any competent and relevant evidence available [See: G.R. No. 117495].

Are drivers paid on boundary system considered as employees?

The relationship between jeepney owners/operators on one hand and jeepney drivers on the other under the boundary system is that of employer-employee, as the operators exercise supervision and control over the drivers. 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. Also, the drivers have been engaged to perform activities which were usually necessary or desirable in the usual business or trade of the employer [Ibid].

Is the resident agent of a foreign corporation an employee?

Where the company selected and engaged the services of a person as its resident agent in the Philippines, paid the latter’s salary, held the power of dismissal as can be shown by various memorandum that it may issue, have the power of control over the means and methods of the agent in accomplishing his work, then employer-employee relationship exists between them. Exercise of the power of control by the company may consist of various directives that it may issue to the agent [See: G.R. No. 159333].

Can lawyers and other professionals be employed?

Lawyers or any other professionals may very well be an employee of a private corporation. It is not unusual for big corporations to have a staff of lawyers as its in-house counsel, pay them regular salaries, rank them in its table of organization, and otherwise treat them like other officers and employees. At the same time, it may also contract a law firm to act as outside counsel on a retainer basis, where no employer-employee relationship is created [See: G.R. No. 111870].

Since labor arbiters and other labor tribunals have no jurisdiction over claims not arising from employer-employee relationship, then it would be best for business owners to be aware as to who their employees are, and who are not, based on the tests discussed above. Though such disputes may still be heard and decided by the regular courts, the absence of an employer-employee relationship is still a potent defense that would spell instant dismissal of the case if one such dispute is brought before the labor authorities.


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