Labor Law Assigned Digests In a long line of decisions, the Court, in determining the

existence of an employer- employee relationship, has

Module 2 – Basic Principles invariably adhered to the four-fold test, to wit:
[1] the selection and engagement of the employee; [2] the
Philippine Global Communications, Inc. vs. Ricardo De payment of wages;
Vera, GR No 157214, June 7, 2005 [3] the power of dismissal; and
[4] the power to control the employee's conduct, or the so-
Facts: called "control test", considered to be the most important
element.
Petitioner, PhilCom, is a corporation engaged in the business
of communication services while respondent, De Vera, is a Applying the Four-fold test, there was no employer-employee
physician by profession. relationship.

De Vera offered his services to PhilCom and proposed his [1] Selection and engagement of the employee – It was De
plan of works required of a practitioner in industrial medicine Vera himself who set the parameters of his duties when he
which included, consultation services, physical check-ups, offered his services to PhilCom.
and homo visits for the employees. [2] Payment of Wages – De Vera was never included in the
company payroll, he had to bill PhilCom for his monthly
The parties agreed and formalized De Vera’s proposal professional fees.
through a RETAINERSHIP CONTRACT, which was for a [3] Power of dismissal – The power to terminate the parties’
period of 1 year, subject to renewal. The arrangement went relationship was mutually vested on both. Either may
on from 1981 to 1994. However, for the years 1995 and terminate the arrangement at will, with or without cause.
1996, the renewal of the contract was only made verbally.
LA’s decision was reinstated.
On December 1996, PhilCom informed De Vera of its
decision to discontinue the latter’s “retainer’s contract” due to Cesar C. Lirio vs Wilmer D. Genovia, GR No 169757,
practical considerations (it would be cheaper to send its November 23, 2011
employees to hospitals near the company than hiring De
Vera). Facts:

On January 1997, De Vera filed for illegal dismissal against Respondent, Genovia, filed for illegal dismissal, non-payment
PhilCom before the NLRC , alleging that he had been actually of commission, and award of moral and exemplary damages
employed by PhilCom as its company physician since 1981 against Cesar Lirio (doing business under the name Celkor
and was dismissed without due process. Ad Sonicmix Recording Studio).

Labor Arbiter: Genovia alleged that he was hired as studio manager by

Lirio. He received a monthly salary and was entitled to an
The Labor Arbiter (LA) dismissed Vera’s complaint for lack of additional commission when he worked as a recording
merit, on the rationale that as a “retained physician” under a technician.
valid contract, De Vera was an “independent contractor” and
that he was not dismissed but rather his contract with All the employees of Lirio, including Genovia, rendered
PhilCom was no longer renewed. overtime work almost every day, but Lirio never kept a daily
time record to avoid paying the employees overtime pay.
NLRC:
De Vera appealed to the NLRC. It reversed the LA’s ruling; it Lirio then approached Genovia about his project to produce
found that De Vera was PhilCom’s regular employee and an album for his, Celine Lirio, who was a former talent of
directed the company to reinstate him to his former position. ABS-CBN Star Records.
PhilCom’s Motion for Recon was denied by the NLRC.
They agreed that Genovia would compose and arrange
CA: songs for Celine, for an agreed compensation, while the
It modified NLRC’s award by deleting the award of travelling technical aspect in producing the album, such as digital
allowance, and ordered the payment of separation pay to De editing, mixing, and sound engineering would be performed
Vera in lieu of reinstatement. PhilCom’s Motion for Recon by Genovia in his capacity as studio manager for which he
was denied by the CA. was paid on a monthly basis.

Issue: When the album was finished and finally aired over the radio,
Genovia reminded Lirio about his compensation as composer
Was there an employer-employee relationship between and arranger of the album.
PhilCom and De Vera? (This is a question of fact)
However, Lirio told Genovia that ‘he was practically a nobody
SC is not a trier of facts, however, given the difference in and had proven nothing yet in the music industry’ and thus
findings between the LA and NLRC, the Court is constrained did not deserve a high compensation. Lirio alleged that
to look deeper into the attending circumstances. Genovia was only entitled to 20% of the net profit, and not of
the gross album sales, and that the salaries he received as
SC Ruling: studio manager would be deducted from the said 20%.
Genovia was then terminated and instructed not to return to
work.
Genovia alleged that he was illegally dismissed since he had employer-employee relationship existed between Concepcion
worked for 6 months, and already a regular employee. and Century Properties.
Athough he was called a “studio manager”, he had no
managerial powers, but was merely an ordinary employee. After receiving reports that Babiano provided a competitor
with information regarding Century Properties’ marketing
In defense, Lirio alleged that Genovia was not hired as a strategies, he was sent a notice by the company to explain.
studio manager, composer, technician, or as an employee in However, Babiano tendered his resignation and revealed that
any other capacity of Celkor. Further, Genovia verbally he had been accepted as VP of First Global BYO Corporation
agreed with Lirio to produce the album with an agreed (First Global), a competitor of Century Properties. On the
sharing of profits based on agreed set of terms and other hand, Concepcion resigned as Project Director through
conditions. Lirio asserts his relationship with Genovia was of a letter.
an informal relationship under Art 1767 of the New Civil
Code. Both respondents filed a complaint for non-payment of
commissions and damages against Century Properties.
LA:
LA:
LA held that an employer-employee relationship existed
between Lirio and Genovia, and that the latter was illegally LA ruled in Century Properties’ favor and dismissed the
dismiseed. Lirio appealed the decision to the NLRC. complaint for lack of merit. It found that (1) Babiano’s act of
providing marketing strategies to a competitor were blatant
NLRC: violations of his Confidentiality and Non-Compete clause of
his employment contract while (2) Concepcion was not an
NLRC reversed the LA’s decision and held that Genovia employee but merely a mere agent the company, as stated in
failed to prove with substantial evidence that selected and her engagement contract with Century Properties.
engaged by petitioner, that petitioner had the power to
dismiss him, and that they had the power to control him. NLRC:
Genovia’s Motion for Recon was denied.
NLRC reversed and set aside the LA ruling. In the case of
CA: Babiano, though his acts warranted termination, the forfeiture
of all earned commissions of Babiano under the
CA reversed NLRC ruling and reinstated LA ruling. Hence, Confidentialtity and Non-Compete clause is confiscatory and
this petition. unreasonable and hence, contrary to law and public policy. In
the case of Concepcion, NLRC ruled that she was an
Issue: employee of Century Properties since the company
repeatedly hired, promoted, and exercised the power of
Was there an employer-employee relationship between Lirio dismissal, and control over her.
and Genovia?
CA:
SC Ruling:
CA affirmed the NLRC ruling with modification increasing the
Yes. Between the documentary evidence presented by award of unpaid commissions to Babiano and Concepcion.
Genovia and the mere allegation of Lirio without any proof by
way of any document evincing their alleged partnership Issue:
agreement, Lirio failed to substantiate that he had a
partnership with the respondent. Whether the CA erred in denying Century Properties’ petition
for certiorari, thereby holding it liable for the unpaid
Hence, based on the finding above and the doctrine that if commissions of respondents.
doubt exists between the evidence presented by the
employer and the employee, the scales of justice must be SC Ruling:
titled in favor of the latter.
The petition is partly meritorious.
Century Properties, Inc. vs Edwin Babiano and Emma
Concepcion, GR No 220978, July 5, 2016 Art 1370 of the NCC provides that if the terms of a contract
are clear and leave no doubt upon the intention of the
Facts: contracting parties, the literal meaning of the stipulations shall
take control.
On October 2002, Babiano was hired by Century Properties
as Director of Sales and was eventually appointed as VP for In the case at bar, Century Properties’ “Confidentiality of
Sales. His employment contract contained a Confidentiality of Documents and Non-Compete Clause” found in Babiano’s
Documents and Non-Compete Clause. employment contract provided in clear and certain terms that
should Babiano breach said clause, all forms of
During the same period, Concepcion was initially hired as compensation including commissions and incentives will be
Sales Agent by Century Properties and was eventually forfeited. Indubitably, obligations arising from contracts,
promoted as Project Director. As such, she signed an including employment contracts, have the force of law
employment agreement, denominated as “Contract of Agency between the contracting parties and should be complied with
for Project Director.” However, her contract stipulated that no in good faith.
Meanwhile, the Court found that Concepcion was an
employee of Century Properties considering that: (1) the
company continuously hired and promoted her; (2) her
monthly subsidies from the company were actually
renumeration in the concept of wages; (3) the company had
the power to discipline or even dismiss her; (4) and Century
Properties possessed the power of control over her in the
performance of her duties.