er-ee rel; Employer- Employee Relationship

Employer-Employee Employer-Employee Relationship

First, as to the selection and engagement of the employee:

A basic concept in labor law is that of “employer-employee relationship”. When is an employer-employee relationship deemed to exist? The Supreme Court had once again occasion to answer this question in the case of TELEVISION AND PRODUCTION EXPONENTS, INC. and/or ANTONIO P. TUVIERA versus ROBERTO C. SERVAÑA, (G.R. No. 167648, January 28, 2008).

“Clearly, respondent was hired by TAPE.

Respondent presented his identification card to prove that he is indeed an employee of TAPE. It has been in held that in a business establishment, an identification card is usually provided not just as a security measure but to mainly identify the holder thereof as a bona fide employee of the firm who issues it.”

Second, as to the payment of wages: “Respondent claims to have been receiving

The case involves a complaint for illegal dismissal and nonpayment of benefits filed by Servana against TAPE. TAPE. Servana alleged alleged that he was first connected with Agro-Commercial Security Agency but was later on absorbed by TAPE as a regular company guard. guard. On its part TAPE contended that Servana was merely

a

“talent”

and/or

independent

contractor. In resolving the issue of employer-employee relationship the Supreme Court made use of the four-fold test: “Jurisprudence is abound *sic+ with cases that

recite the factors to be considered in determining the existence of employeremployee relationship, namely:

P5,444.44 as his monthly salary while TAPE prefers to designate such amount as talent fees. Wages, as defined defined in the Labor Code, Code, are 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. rendered. It is beyond dispute that respondent received a fixed amount as monthly compensation for the services he rendered to TAPE.”

Thirdly, as to the power of dismissal: “The Memorandum informing respondent of

(a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and

the discontinuance of his service proves that

(d) the employer’s power to control the

“Control is manifested in the bundy cards

employee with respect to the means and method by which the work is to be accomplished.

submitted by respondent respondent in evidence. evidence. He was required to report daily and observe definite

*The most important factor involves the control test. Under the control test, there is an employer-employee relationship when 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.”

The Court further observed that these factors were present in the case.

TAPE had the power to dismiss respondent.”

And finally, as to the power of control, which is the most important test:

work hours.”

What is significant are the concrete objects which for the Supreme Court served as evidences for the existence of an employeremployee relationship between the parties, namely: (1) The identification card; (2) The fixed amount as monthly compensation; (3) The Memorandum of discontinuance; discontinuance; and (4) The bundy cards.

Where these or similar evidences are present the conclusion is well-nigh inevitable that an employer-employee employer-employee relationship exists.

(c) seasonal  employees   employees or those who work or perform services which are seasonal in nature, and the employment is for the duration of the season;[8] season;[8] and

Kinds of employees

(d) casual employees or those who are not regular, project, or seasonal employees. Jurisprudence has added a fifth kind —  a fixedterm employee.[9] employee.[9]

ART. 280. Regular and Casual Employment .—  The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

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MANAGEMENTPREROGATIVES

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Management prerogative•

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- Par.4, Sec. 3, ART. XIII, Philippine Constitution: “The state shall regulate the relations between workers and employers, recognizing the x x x right of enterprises to reasonable returns of investments, and to expansion & growth.”

- ART. 428 of the Civil Code: “The owner has the right to enjoy and dispose of a thing, without other limitations than

(a) regular employees or those who have been

those established by law.”

“engaged to perform activities which are usually trade of the employer”;

(b)  project  employees or those “whose employment has been fixed for a specific project or undertaking[,] the completion or termination of which has been determined at the time of the engagement of the employee”;

An exclusive and special right, power or privilege granted to business owners. - Property right attributed to the owner of a business establishment establishment

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists.[7] exists.[7] The foregoing contemplates four (4) kinds of employees:

necessary or desirable in the usual business or

Definition: 

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Based on what we was stated…  The

owner of a business establishment has, among others, the right to control or direct its business, the right to its fruits and the right to dispose the same, subject to the regulations of the police power of the state.

 Example. When an owner of a business enterprise, after operating a profitable business for several years and decides to close the same for he is already tired of doing business and wants to travel abroad for vacation, absolutely, he CAN CLOSE the business. However, he is obliged to pay separation pay to workers as mandated by law. (Art. 283, Labor Code.) 

Most ManagementPrerogatives

establishment. (San Felipe Neri School of Mandaluyong vs NLRC, et al., GR NO. 78350, 9/11/91)

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- The company has the right to dismiss employees in accordance with the causes and procedures established by law. This particular right must be exercised with CAUTION and without abuse of discretion because termination affects the right of the worker to Security of Tenure.

common

The Right to Hire The Right to Dismiss (Fire/Terminate) (Fire/Terminate)

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• The Right to Transfer • The Right to Promote and Demote • The Right to Discipline • The Right to Lay Down Policies • The Right to Establish Working Hours • The right to Organize and Reo rganize • The Right to Reasonable return o n investment • The Right to Expansion and Growth

The Right to DISMISS-

- Art. 279  –  in cases of Regular Employment, termination on the grounds of just and authorized causes, subject to the requirements of due process.

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The Right to DISMISS (continued)• End

of 

the exclusive right to purchase labor from any person whom it chooses. Thus, the transferee in good faith of a business establishment has no obligation to absorb employees of the transferor and to continue on employing them. (MDII Employees Association vs Presidential Assistant on law which requires the purchaser to absorb the employees of the selling corporation. As there is no such law, the most that the purchasing company may do, for purposes of public policy and social justice, is to give preference to the qualified separated employees of the selling company, who in their  judgment are necessary in the continued operation of the business

Completion

of

contract/phase? • No prior notice is required.• Termination of probationary employment? • Notice served on employee within a reasonable time•

The Right to HIRE• The   company has

Legal Affairs, 79 SCRA 40)• There is no

contract?

Any decision of termination shall be without prejudice to the right of the worker to contest the same by filing a complaint with the RAB of the NLRC.•

Validity of suspensions. 

30

day

preventive

The Right to Transfer• The company has

the right to transfer an employee from one office to another within the business establishment provided that there is no demotion in rank, salary, benefits and other privileges.• This is a privilege inherent in the employer’s

right to control and conduct its business enterprise and conduct of its business operations to achieve its purpose. It cannot be denied to the employer.

SCRA 954; PT&T Corp. vs NLRC, Gr No. 152057, 9/29/03) 

The Right to Transfer (continued)• IT is the employer’s prerogative, based on

its

assessment

on

the

following

employee attributes: • Qualifications •

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The Right to DISCIPLINE

Aptitudes - The right of the employer to subject his employees to disciplinary measures and the need for discipline have been  judicially noticed. noticed.

• CompetenceAn employee’s security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful.

-When the EE’s transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or diminution in salaries, benefits and privileges, the employee may not complain that it amounts to constructive dismissal. (PT&T vs NLRC, GR NO. 76645, July 23, 1991; Allied Bank vs CA, GR No. 144412, 11/18/03) 

The Right to PROMOTE and DEMOTE• The company has the right to promote employees.

• Success in industries and public services is

the foundation in which just wages may be paid. There can be no success without efficiency. There can be no efficiency without discipline. Thus, when they violate the rules of discipline, employees and laborers jeopardize the interest not only of the employer but also of their own. In violating the rules of discipline, they aim at killing the hen that lays golden eggs. Laborers who trample down the rules set for an efficient service are, in effect, parties to a conspiracy against not only to capital but also to labor.The employer has the right to instill disciplinein his employees and to impose reasonable penalties on erring employees pursuant to company rules and regulations. (SMC vs NLRC, GR No. 87277, May 12, 1989)IF the undesirable one remains in service, it will demoralize the other employees (Shoemart vs NLRC Gr No. 74229, 8/11/1989)

• Promotion: scalar ascent of an

employee to another position higher in rank or salary. The right to promote carries with it the right to demote.•

There is no law that compels an employee to accept a promotion, as a promotion is in the nature of a gift or reward, which a person has a right to refuse. He who uses his won right, injures no one. (Milares vs Subido, 20

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The Right to Lay Down Policies, EstablishWorking Hours, and to Organize andReorganizeIn general terms, an employer is free to regulate, accordingto his own discretion and  judgment, all aspects ofemployment, including work assignments, workingmethods, time, place and the manner or work, tools to beused, processes to be followed, supervision of workers andworking regulations. (SMC

Sales vs Ople, GR No. 53515,Feb. 8, 1989)

1. Four-fold test 2. Economic reality test 3. Two-tiered test (or Multi-factor test) Four-fold test elements

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The Right to Reasonable Return ofInvestment and the Right to Expansionand Growth -Every business enterprise endeavours to increase its profit and in the process it may adopt or devise means designed towards expansion and growth.

The determination of whether employeremployee relation exists between the parties is very important. For one, entitlement to labor standards benefits such as minimum wages, hours of work, overtime work, overtime pay, etc., pay, etc., or to social benefits under laws such as social security law, workmen’s compensation law, etc., or to termination pay, or to unionism and other labor relations provisions under the Labor Code, are largely dependent on the existence of employer-employee relationship between the parties. Another thing is that the existence of employer-employee relationship between the parties will determine whether the controversy should fall within the exclusive  jurisdiction of labor agencies or not. If for example the parties are not employeremployee of each other, respectively, but  perhaps partners or associates, then any dispute between them will be not be covered  by the jurisdiction of labor agencies but by regular courts. Three test to determine employer-employee relationship

There are three test commonly used to determine the existence of employeremployee relationship, viz.:

The usual test used to determine the existence of employer-employer relationship is the so-called four-fold test. In applying this test, the following elements are generally considered: 1. Right to hire or to the selection and engagement of the employee. 2. Payment of wages and salaries for services. 3. Power of dismissal or the power to impose disciplinary actions. 4. Power to control the employee with respect to the means and methods by which the work is to be accomplished. This is known as the right-of-control test. Right of control test is considered as the most important element in determining the existence of employment relation. Of the above-mentioned elements, the right of control test is considered as the most important element in determining the existence of employment relation. The control test initially found application in the case of Viaña vs. AlLagadan and Piga, where the court held that there is an employer-employee relationship when 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.

Control test thus refers to the employer’s  power to control the employee’s emp loyee’s conduct not only as to the result of the work to be done  but also with respect to the means and

methods by which the work is to be accomplished. In applying this test, it is the existence of the right, and not the actual exercise thereof, that is important. Economic reality test

In view of today’s highly specialized workforce, the court are often faced with situations where the right-of-control-test alone can no longer adequately determine the existence of employer-employer relationship. Subsequently, another test has  been devised to fill the gap, known as the economic reality test. In Sevilla v. Court of Appeals, the Court observed the need to consider the existing economic conditions prevailing between the  parties, in addition to the standard of rightof-control, to give a clearer picture in determining the existence of an employeremployee relationship based on an analysis of the totality of economic circumstances of the worker. Economic realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity. Under economic reality test, the benchmark in analyzing whether employment relation exists between the parties is the economic dependence of the worker on his employer. That is, whether the worker is dependent on the alleged employer for his continued employment in the latter’s line of business. Applying this test, if the putative employee is economically dependent on putative

employer for his continued employment in the latter’s line of business,  business,   there is employer-employee relationship between them. Otherwise, there is none. Two-tiered test (or Multi-factor test)

The economic reality test is not meant to replace the right of control test. Rather, these two test are often use in conjunction with each other to determine the existence of employment relation between the parties. This is known as the two-tiered test, or multi-factor test. This two-tiered test involves the following tests: 

The putative employer’s power to control the

employee with respect to the means and methods by which the work is to be accomplished; and The underlying underlying economic realities of the activity or relationship. 