After reading “How is Employer-Employee Relationship Determined?”, read also “What is wage distortion?“
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The four-fold test is the established standard for determining the existence of an employer-employee relationship.
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Under the two-tiered approach, the control test as well as the underlying economic realities within the activity or relationship must be established.
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The benchmark “reality” for the existence of an employer-employee relationship is economic dependence of the worker on his employer.
An employer is defined under R.A. No. 1161 as “any person natural or juridical, domestic or foreign, who carries on in the Philippines any trade, business industry, undertaking, or activity of any kind and uses the services of another person who is under his orders as regards the employment, except the Government and any of its political subdivisions, branches or instrumentalities, including corporations owned and controlled by the Government.
An employee refers to any individual employed by an employer (Art. 97(c) of the Labor Code). The term employee covers all employees, including officers and employees, whether elected or appointed, of the Government of the Philippines, or a political subdivision thereof or any agency or instrumentality. (Sec. 2.78.3 of Revenue Regulation No. 2-98)
The law says:
Under Article 224 of the Labor Code, as amended by R.A. No. 6715, the Labor Arbiter and the National Labor Relations Commission have jurisdiction to resolve cases involving claims arising from employer-employee relationship.
What are the tests to determine the existence of employer-employee relationship?
To determine the existence of an employer-employee relationship, four elements generally need to be considered, namely:
- The selection and engagement of the employee;
- The payment of wages;
- The power of dismissal; and
- The power to control the employee’s conduct.
The four-fold test is the established standard for determining the existence of an employer-employee relationship. (Leo Mago v. Sunpower Manufacturing Ltd., G.R. No. 210961, 24 January 2018)
In the case of Antonio Valeroso v. Sky Cable Corporation (G.R. No. 202015, 13 July 2016), the Supreme Court has adopted the two-tier approach in determining employer-employee relationship. Under the two-tiered approach, the control test as well as the underlying economic realities within the activity or relationship must be established. This is known as the Economic Dependence Test.
Under the Economic Dependence Test, in determining the existence of an employer-employee relationship, realities involving activities or relationship must be examined, taking into consideration the totality of circumstances surrounding the true nature of the parties’ relationship.
The benchmark “reality” for the existence of an employer-employee relationship is economic dependence of the worker on his employer. “Economic dependence” is whether the worker is dependent on the employer for his continued employment. (Wilhelmina Orozco v. Court of Appeals, G.R. No. 155207, 13 August 2008)
Jurisprudence says:
For payment of wages, the fact that a worker is not reported as an employee to SSS, or the fact that a worker’s name does not appear in the payroll and pay envelope records submitted by the employer, are not conclusive to disprove employer-employee relationship. For a payroll to be utilized to disprove employer-employee relationship, it must contain a true and complete list of employees. (South East International Rattan v Coming, G.R. No. 186621, 12 March 2014)
For the element of control, it must be noted that not every form of control will create an employer-employee relationship. No employer-employee relationship exists when control is in the form of rules that merely serve as guidelines towards the achievement of results without dictating the means or methods to attain them. Employer-employee relationship exists when control is in the form of rules that fix the methodology to attain a specified result and bind the worker to use such. (Insular Life Assurance Co, LTD v. NLRC, G.R. No. 84484, 15 November 1989). This is the most important element when determining the existence of an employer-employee relationship. It pertains not only to results, but also to the means and methods to attain those results. (Cesar Lirio v. Wilmer Genovia, G.R. No. 169757, 23 November 2011).
The “existence” of the right to control is sufficient for the element to be present. There need not be “actual exercise” of the right. (Zanotte Shoes v. NLRC, G.R. No. 100665, 13 February 1995)
Is there a particular form of evidence that is required to prove employer-employee relationship?
No, there is no particular form of evidence required to prove the employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. For, if only documentary evidence would be required to show that relationship, no scheming employer would ever be brought before the bar of justice, as no employer would wish to come out with any trace of the illegality he has authored, considering that it should take much weightier proof to invalidate a written instrument. (Bernard Tenazas, et al., v. R. Villegas Taxi Transport, G.R. No. 192998, 2 April 2014)
Who between the employer and the employee has the burden of proof in a case for illegal dismissal?
The onus probandi rests on the employer to prove that its dismissal was for a valid cause. However, before a case for illegal dismissal
can prosper, an employer-employee relationship must first be established. It is incumbent upon the employee to prove the employer-employee relationship by substantial evidence. (Bitoy Javier v. Fly Ace Corporation, G.R. No. 192558, 15 February 2012)
Does employer-employee relationship exist between independent contractors and their principals?
No, In view of the “distinct and independent business” of independent contractors, no employer-employee relationship exists between independent contractors and their principals. Independent contractors are recognized under Article 106 of the Labor Code. (Fuji Television Network v. Arlene Espiritu, G.R. 204944-45, 3 December 2014)
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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