Francisco vs. National Labor Relations Commission

690 SUPREMECOURTREPORTSANNOTATED

Franciscovs.NationalLaborRelationsCommission

G.R.No.170087.August31,2006.*

ANGELINA FRANCISCO, petitioner, vs. NATIONAL LABORRELATIONS COMMISSION, KASEI CORPORATION,SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA,IRENE BALLESTEROS, TRINIDAD LIZA and RAMONESCUETA,respondents.

Labor Law Employment Control Test The better approach wouldtherefore be to adopt a twotiered test.The better approach wouldthereforebetoadoptatwotieredtestinvolving:(1)theputativeemployerspower to control the employee with respect to the means and methods bywhich the work is to be accomplished and (2) the underlying economicrealitiesoftheactivityorrelationship.Thistwotieredtestwouldprovideuswith a framework of analysis, which would take into consideration thetotality of circumstances surrounding the true nature of the relationshipbetweentheparties.Thisisespeciallyappropriateinthiscasewherethereisnowritten agreementor termsof reference tobase the relationshipon andduetothecomplexityoftherelationshipbasedonthevariouspositionsandresponsibilities given to the worker over the period of the lattersemployment.

Same Same Same Economic Activity The determination of therelationship between employer and employee depends upon thecircumstances of the whole economic activity.The determination of therelationship between employer and employee depends upon thecircumstances of the whole economic activity, such as: (1) the extent towhichtheservicesperformedareanintegralpartoftheemployersbusiness(2)theextentoftheworkersinvestmentinequipmentandfacilities(3)thenature and degree of control exercised by the employer (4) the workersopportunity forprofitand loss (5) theamountof initiative, skill, judgmentor foresight required for the success of the claimed independent enterprise(6) thepermanencyanddurationof therelationshipbetweentheworkerandthe employer and (7) the degree of dependency of the worker upon theemployerforhiscontinuedemploymentinthatlineofbusiness.

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*FIRSTDIVISION.

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Dismissals Constructive Dismissals A diminution of pay isprejudicial to the employee and amounts to constructive dismissal.Adiminutionofpayisprejudicialtotheemployeeandamountstoconstructivedismissal.Constructive dismissal is an involuntary resignation resulting incessation of work resorted to when continued employment becomesimpossible,unreasonableorunlikelywhenthere isademotioninrankoradiminutioninpayorwhenacleardiscrimination,insensibilityordisdainbyanemployerbecomesunbearable toanemployee. InGlobeTelecom,Inc.v.FlorendoFlores, 390SCRA201 (2002),we ruled thatwhere anemployeeceases to work due to a demotion of rank or a diminution of pay, anunreasonablesituationariseswhichcreatesanadverseworkingenvironmentrendering it impossible for such employee to continue working for heremployer. Hence, her severance from the company was not of her ownmakingandthereforeamountedtoanillegalterminationofemployment.

Labor Law EqualWork Opportunity In affording full protection tolabor, thisCourtmust ensure equalwork opportunities regardless of sex,raceorcreed.Inaffordingfullprotectiontolabor,thisCourtmustensureequal work opportunities regardless of sex, race or creed. Even as we, inevery case, attempt to carefully balance the fragile relationship betweenemployees andemployers,wearemindfulof the fact that thepolicyof thelaw is to apply the Labor Code to a greater number of employees. Thiswouldenableemployeestoavailofthebenefitsaccordedtothembylaw,inlinewith the constitutionalmandate givingmaximum aid and protection tolabor, promoting their welfare and reaffirming it as a primary socialeconomicforceinfurtheranceofsocialjusticeandnationaldevelopment.

PETITIONforreviewoncertiorariofthedecisionandresolutionoftheCourtofAppeals.

ThefactsarestatedintheopinionoftheCourt.ConradoS.DarSantosforpetitioner.RamonP.Gutierrezforprivaterespondents.

692



YNARESSANTIAGO,J.:

ThispetitionforreviewoncertiorariunderRule45oftheRulesofCourt seeks to annul and set aside theDecision andResolutionoftheCourtofAppealsdatedOctober29,2004

1

andOctober7,2005,2

respectively,inCAG.R.SPNo.78515dismissingthecomplaintforconstructivedismissalfiledbyhereinpetitionerAngelinaFrancisco.The appellate court reversed and set aside the Decision of theNational Labor Relations Commission (NLRC) dated April 15,2003,

3

in NLRC NCR CA No. 03276602 which affirmed withmodificationthedecisionoftheLaborArbiterdatedJuly31,2002,

4

in NLRCNCR Case No. 3010048901, finding that privaterespondentswereliableforconstructivedismissal.

In 1995, petitioner was hired by Kasei Corporation during itsincorporation stage. She was designated as Accountant andCorporateSecretary andwasassigned tohandle all the accountingneedsofthecompany.ShewasalsodesignatedasLiaisonOfficertotheCityofMakati tosecurebusinesspermits,constructionpermitsandotherlicensesfortheinitialoperationofthecompany.

5

AlthoughshewasdesignatedasCorporateSecretary,shewasnotentrustedwith thecorporatedocumentsneitherdid sheattendanyboardmeetingnor required todoso.Sheneverpreparedany legaldocument and never represented the company as its CorporateSecretary.However,onsomeoccasions,

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1Rollo,pp.922.PennedbyAssociateJusticeEloyR.Bello,Jr.andconcurredinbyAssociateJusticesRegaladoE.MaambongandLucenitoN.Tagle.

2Id.,atpp.2425.3 Id., at pp. 193198. Penned by Presiding Commissioner Lourdes C. Javier and

concurredinbyCommissionerTitoF.Genilo.4Id.,atpp.164173.PennedbyLaborArbiterEduardoJ.Carpio.5Id.,atp.89.

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shewasprevailedupontosigndocumentationforthecompany.6

In 1996, petitioner was designated Acting Manager. ThecorporationalsohiredGerryNinoasaccountantinlieuofpetitioner.AsActingManager,petitionerwasassignedtohandlerecruitmentofall employees and perform management administration functionsrepresent the company in all dealings with government agencies,especially with the Bureau of Internal Revenue (BIR), SocialSecuritySystem(SSS)andinthecitygovernmentofMakatiandtoadminister all other matters pertaining to the operation of KaseiRestaurantwhichisownedandoperatedbyKaseiCorporation.

7

For five years, petitioner performed the duties of ActingManager.AsofDecember31,2000hersalarywasP27,500.00plusP3,000.00housingallowanceanda10%shareintheprofitofKaseiCorporation.

8

In January2001,petitionerwas replacedbyLizaR.Fuentes asManager.Petitionerallegedthatshewasrequiredtosignapreparedresolution for her replacement but shewas assured that shewouldstill be connected with Kasei Corporation. Timoteo Acedo, thedesignatedTreasurer,convenedameetingofallemployeesofKaseiCorporation and announced that nothing had changed and thatpetitionerwas still connectedwithKaseiCorporation asTechnicalAssistanttoSeijiKamuraandinchargeofallBIRmatters.

9

Thereafter,KaseiCorporationreducedhersalarybyP2,500.00amonthbeginningJanuaryuptoSeptember2001foratotalreductionof P22,500.00 as of September 2001. Petitioner was not paid hermidyear bonus allegedly because the company was not earningwell.OnOctober2001,petitionerdidnotreceivehersalaryfromthecompany.Shemade

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6Id.,atpp.8990.7Id.,atp.90.8Id.9Id.,atp.91.

694



repeated followupswith thecompanycashierbutshewasadvisedthatthecompanywasnotearningwell.

10

OnOctober15,2001,petitioneraskedforhersalaryfromAcedoandtherestoftheofficersbutshewasinformedthatsheisnolongerconnectedwiththecompany.

11

Sinceshewasnolongerpaidhersalary,petitionerdidnotreportfor work and filed an action for constructive dismissal before thelaborarbiter.

PrivaterespondentsaverredthatpetitionerisnotanemployeeofKaseiCorporation.Theyallegedthatpetitionerwashiredin1995asone of its technical consultants on accounting matters and actconcurrently as Corporate Secretary. As technical consultant,petitionerperformedherworkatherowndiscretionwithoutcontrolandsupervisionofKaseiCorporation.Petitionerhadnodaily timerecord and she came to the office any time she wanted. Thecompany never interfered with her work except that from time totime,themanagementwouldaskheropiniononmattersrelatingtoherprofession.Petitionerdidnotgothroughtheusualprocedureofselection of employees, but her services were engaged through aBoard Resolution designating her as technical consultant. Themoney received by petitioner from the corporation was herprofessional fee subject to the 10% expanded withholding tax onprofessionals,andthatshewasnotoneofthosereportedtotheBIRorSSSasoneofthecompanysemployees.

12

Petitioners designation as technical consultant depended solelyupon the will of management. As such, her consultancy may beterminated any time considering that her services were onlytemporaryinnatureanddependentontheneedsofthecorporation.

Toprovethatpetitionerwasnotanemployeeofthecorporation,privaterespondentssubmittedalistofemployeesfor

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10Id.11Id.,atpp.9192.12Id.,atpp.9293.

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the years 1999 and 2000 duly received by the BIR showing thatpetitionerwasnotamongtheemployeesreportedtotheBIR,aswellas a list of payees subject to expanded withholding tax whichincluded petitioner. SSS recordswere also submitted showing thatpetitionerslatestemployerwasSeijiCorporation.

13

TheLaborArbiterfoundthatpetitionerwas illegallydismissed,thus:

1.

2.

3.

WHEREFORE, premises considered, judgment is hereby rendered asfollows:

findingcomplainantanemployeeofrespondentcorporation

declaringcomplainantsdismissalasillegal

orderingrespondentstoreinstatecomplainanttoherformerpositionwithout loss of seniority rights and jointly and severally paycomplainant her money claims in accordance with the followingcomputation:

a. Backwages10/200107/2002(27,500x10mos.)

275,000.00

b. SalaryDifferentials(01/200109/2001) 22,500.00

c. HousingAllowance(01/200107/2002) 57,000.00

d. MidyearBonus2001 27,500.00

e. 13thMonthPay 27,500.00

f. 10%shareintheprofitsofKaseiCorp.from19962001

361,175.00

g. Moralandexemplarydamages 100,000.00

h. 0%Attorneysfees 87,076.50

P957,742.50

If reinstatement is no longer feasible, respondents are ordered to paycomplainant separationpaywithadditionalbackwages thatwouldaccrueuptoactualpaymentofseparationpay.

SOORDERED.14

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13Id.,atp.94.14Id.,atpp.172173.

696



On April 15, 2003, the NLRC affirmed with modification theDecision of the Labor Arbiter, the dispositive portion of whichreads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is herebyMODIFIEDasfollows:

1)

2)

3)

4)

Respondents are directed to pay complainant separation paycomputed at one month per year of service in addition to fullbackwagesfromOctober2001toJuly31,2002

The awards representing moral and exemplary damages and 10%share in profit in the respective accounts of P100,000.00 andP361,175.00aredeletedThe award of 10% attorneys fees shall be based on salarydifferentialawardonly

The awards representing salary differentials, housing allowance,midyearbonusand13thmonthpayareAFFIRMED.

SOORDERED.15

Onappeal,theCourtofAppealsreversedtheNLRCdecision,thus:

WHEREFORE,theinstantpetitionisherebyGRANTED.ThedecisionoftheNational LaborRelationsCommissions datedApril 15, 2003 is herebyREVERSEDandSETASIDEandanewoneisherebyrendereddismissingthe complaint filed by private respondent againstKasei Corporation, et al.forconstructivedismissal.

SOORDERED.16

The appellate court denied petitionersmotion for reconsideration,hence,thepresentrecourse.

Thecoreissuestoberesolvedinthiscaseare(1)whethertherewas an employeremployee relationship between petitioner andprivaterespondentKaseiCorporationand if in theaffirmative, (2)whetherpetitionerwasillegallydismissed.

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15Id.,atpp.197198.16Id.,atp.100.

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Considering the conflicting findings by the Labor Arbiter and theNationalLaborRelationsCommissionononehand,andtheCourtofAppeals on the other, there is a need to reexamine the records todetermine which of the propositions espoused by the contendingpartiesissupportedbysubstantialevidence.

17

WeheldinSevillav.CourtofAppeals18

that in this jurisdiction,

there has been no uniform test to determine the existence of anemployeremployeerelation.Generally,courtshavereliedonthesocalledrightofcontrol testwhere thepersonforwhomtheservicesare performed reserves a right to control not only the end to beachieved but also the means to be used in reaching such end. Inaddition to the standard of rightofcontrol, the existing economicconditions prevailing between the parties, like the inclusion of theemployeeinthepayrolls,canhelpindeterminingtheexistenceofanemployeremployeerelationship.

However,incertaincasesthecontroltestisnotsufficienttogiveacompletepictureoftherelationshipbetweentheparties,owingtothecomplexityof sucha relationshipwhere severalpositionshavebeenheldby theworker.Thereare instanceswhen,asidefromtheemployerspowertocontroltheemployeewithrespecttothemeansandmethods bywhich thework is to be accomplished, economicrealitiesoftheemploymentrelationshelpprovideacomprehensiveanalysis of the true classification of the individual, whether asemployee, independent contractor, corporate officer or some othercapacity.

Thebetterapproachwouldthereforebetoadoptatwotieredtestinvolving:(1)theputativeemployerspowerto

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17Abante,Jr.v.LamadridBearing&PartsCorporation,G.R.No.159890,May28,2004,430SCRA368,379.

18G.R.Nos. L411823,April 15, 1988, 160 SCRA171, 179180, citingVisayanStevedore Transportation Company v. Court of Industrial Relations, 125 Phil. 817,82019SCRA426,429(1967).

698



control the employee with respect to the means and methods bywhich the work is to be accomplished and (2) the underlyingeconomicrealitiesoftheactivityorrelationship.

This twotiered test would provide us with a framework ofanalysis, which would take into consideration the totality ofcircumstances surrounding the true nature of the relationshipbetweentheparties.Thisisespeciallyappropriateinthiscasewherethere is no written agreement or terms of reference to base therelationshiponandduetothecomplexityoftherelationshipbasedonthevariouspositionsandresponsibilitiesgiventotheworkerover

theperiodofthelattersemployment.ThecontroltestinitiallyfoundapplicationinthecaseofViaav.

AlLagadanandPiga,19

andlatelyinLeonardov.CourtofAppeals,20

whereweheldthatthereisanemployeremployeerelationshipwhenthepersonforwhomtheservicesareperformedreservestherighttocontrol not only the end achieved but also themanner andmeansusedtoachievethatend.

InSevillav.CourtofAppeals,21

weobservedtheneedtoconsidertheexistingeconomicconditionsprevailingbetween theparties, inadditionto thestandardofrightofcontrol like the inclusionof theemployeeinthepayrolls,togiveaclearerpictureindeterminingtheexistence of an employeremployee relationship based on ananalysisofthetotalityofeconomiccircumstancesoftheworker.

Thus, the determination of the relationship between employerand employee depends upon the circumstances of the wholeeconomic activity,

22

such as: (1) the extent to which the servicesperformedareanintegralpartoftheemployers

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1999Phil.408(1956).20G.R.No.152459,June15,2006,490SCRA691.21Supranote18.22RutherfordFoodCorporation v.McComb, 331U.S. 722, 727 (1947) 91L.Ed.

1772,1777(1946).

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business(2)theextentoftheworkersinvestmentinequipmentandfacilities (3) the nature and degree of control exercised by theemployer (4) theworkers opportunity for profit and loss (5) theamount of initiative, skill, judgment or foresight required for thesuccess of the claimed independent enterprise (6) thepermanencyand duration of the relationship between the worker and theemployerand(7)thedegreeofdependencyoftheworkerupontheemployerforhiscontinuedemploymentinthatlineofbusiness.

23

The proper standard of economic dependence is whether theworker is dependent on the alleged employer for his continuedemployment in that line of business.

24

In the United States, thetouchstone of economic reality in analyzing possible employmentrelationships for purposes of the Federal Labor Standards Act isdependency.

25

By analogy, the benchmark of economic reality in

analyzing possible employment relationships for purposes of theLaborCodeoughttobetheeconomicdependenceoftheworkeronhisemployer.

Byapplyingthecontroltest,thereisnodoubtthatpetitionerisanemployee of Kasei Corporation because she was under the directcontrolandsupervisionofSeijiKamura,thecorporationsTechnicalConsultant. She reported forwork regularly and served in variouscapacities as Accountant, Liaison Officer, Technical Consultant,Acting Manager and Corporate Secretary, with substantially thesamejobfunctions,thatis,renderingaccountingandtaxservicestothecompanyandperformingfunctionsnecessaryanddesirable

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23 SeeBrock v. Lauritzen, 624 F.Supp. 966 (E.D.Wisc. 1985)Real v. DriscollStrawberryAssociates,Inc.,603F.2d748(9thCir.1979)Goldbergv.WhitakerHouseCooperative, Inc., 366 U.S. 28, 81 S.Ct. 933, 6 L.Ed.2d 100 (1961) Bartels v.Birmingham,332U.S.126,67S.Ct.1547,91L.Ed.1947(1947).

24Halfertyv.PulseDrugCompany,821F.2d261(5thCir.1987).25Weiselv.SingaporeJointVenture,Inc.,602F.2d.1185(5thCir.1979).

700



fortheproperoperationofthecorporationsuchassecuringbusinesspermitsandotherlicensesoveranindefiniteperiodofengagement.

Under the broader economic reality test, the petitioner canlikewise be said to be an employee of respondent corporationbecause she had served the company for six years before herdismissal, receiving check vouchers indicating her salaries/wages,benefits, 13th month pay, bonuses and allowances, as well asdeductionsandSocialSecuritycontributionsfromAugust1,1999toDecember 18, 2000.

26

When petitioner was designated GeneralManager,respondentcorporationmadeareporttotheSSSsignedbyIreneBallesteros.PetitionersmembershipintheSSSasmanifestedbyacopyoftheSSSspecimensignaturecardwhichwassignedbythePresidentofKaseiCorporationandtheinclusionofhernameinthe online inquiry system of the SSS evinces the existence of anemployeremployee relationshipbetweenpetitioner and respondentcorporation.

27

Itisthereforeapparentthatpetitioneriseconomicallydependenton respondent corporation for her continued employment in thelatterslineofbusiness.

InDomasigv.NationalLaborRelationsCommission,28

weheldthat in a business establishment, an identification card is providednot only as a security measure but mainly to identify the holderthereofasabonafideemployeeofthefirmthatissuesit.Togetherwiththecashvoucherscoveringpetitionerssalariesforthemonthsstatedtherein,thesemattersconstitutesubstantialevidenceadequateto support a conclusion thatpetitionerwas anemployeeofprivaterespondent.

WelikewiseruledinFloresv.Nuestro29

thatacorporationwhoregistersitsworkerswiththeSSSisproofthatthelatter

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26Rollo,pp.305321.27Id.,atpp.264265.28330Phil.518,524261SCRA779,785(1996).29G.R.No.66890,April15,1988,160SCRA568,571.

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weretheformersemployees.ThecoverageofSocialSecurityLawispredicatedontheexistenceofanemployeremployeerelationship.

Furthermore, the affidavit of Seiji Kamura dated December 5,2001hasclearlyestablishedthatpetitionerneveractedasCorporateSecretaryandthatherdesignationassuchwasonlyforconvenience.TheactualnatureofpetitionersjobwasasKamurasdirectassistantwith the duty of acting as Liaison Officer in representing thecompanytosecureconstructionpermits,licensetooperateandotherrequirementsimposedbygovernmentagencies.Petitionerwasneverentrustedwithcorporatedocumentsofthecompany,norrequiredtoattend themeeting of the corporation. Shewas never privy to thepreparationofanydocumentforthecorporation,althoughonceinawhile she was required to sign prepared documentation for thecompany.

30

The second affidavit of Kamura dated March 7, 2002 whichrepudiated the December 5, 2001 affidavit has been allegedlywithdrawn by Kamura himself from the records of the case.

31

Regardlessofthisfact,weareconvincedthattheallegationsinthefirstaffidavitaresufficienttoestablishthatpetitionerisanemployeeofKaseiCorporation.

Grantingarguendo, that the second affidavit validly repudiated

the first one, courts do not generally look with favor on anyretractionor recanted testimony, for itcouldhavebeensecuredbyconsiderations other than to tell the truth andwouldmake solemntrialsamockeryandplacetheinvestigationofthetruthatthemercyof unscrupulous witnesses.

32

A recantation does not necessarilycancelanearlierdeclaration,

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30Rollo,pp.120121.31Id.,atp.57.32Peoplev.Joya,G.R.No.79090,October1,1993,227SCRA9,2627.

702



but like any other testimony the same is subject to the test ofcredibilityandshouldbereceivedwithcaution.

33

Based on the foregoing, there can be no other conclusion thatpetitionerisanemployeeofrespondentKaseiCorporation.Shewasselected and engaged by the company for compensation, and iseconomically dependent upon respondent for her continuedemploymentinthatlineofbusiness.Hermainjobfunctioninvolvedaccountingandtaxservicesrenderedtorespondentcorporationonaregular basis over an indefinite periodof engagement.Respondentcorporationhiredandengagedpetitionerforcompensation,withthepower to dismiss her for cause. More importantly, respondentcorporationhadthepowertocontrolpetitionerwiththemeansandmethodsbywhichtheworkistobeaccomplished.

The corporation constructively dismissed petitioner when itreduced her salary by P2,500 amonth from January to September2001.Thisamountstoanillegalterminationofemployment,wherethe petitioner is entitled to full backwages. Since the position ofpetitionerasaccountantisoneoftrustandconfidence,andundertheprinciple of strained relations, petitioner is further entitled toseparationpay,inlieuofreinstatement.

34

Adiminutionofpayisprejudicialtotheemployeeandamountsto constructive dismissal. Constructive dismissal is an involuntaryresignation resulting in cessation of work resorted to whencontinued employment becomes impossible, unreasonable orunlikelywhenthereisademotioninrankoradiminutioninpayorwhenacleardiscrimination,insensibilityordisdainbyanemployerbecomesunbearabletoan

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33Peoplev.Davatos,G.R.No.93322,February4,1994,229SCRA647,651.34 GlobeMackay Cable and Radio Corporation v. National Labor Relations

Commission,G.R.No.82511,March3,1992,206SCRA701,711712.

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employee.35

InGlobe Telecom, Inc. v. FlorendoFlores,36

we ruledthatwhereanemployeeceasestoworkduetoademotionofrankoradiminutionofpay,anunreasonablesituationariseswhichcreatesan adverse working environment rendering it impossible for suchemployee to continue working for her employer. Hence, herseverance from the company was not of her own making andthereforeamountedtoanillegalterminationofemployment.

Inaffordingfullprotectiontolabor,thisCourtmustensureequalworkopportunitiesregardlessofsex, raceorcreed.Evenaswe, inevery case, attempt to carefully balance the fragile relationshipbetweenemployeesandemployers,wearemindfulof thefact thatthepolicyofthelawistoapplytheLaborCodetoagreaternumberofemployees.Thiswouldenableemployeestoavailofthebenefitsaccorded to them by law, in line with the constitutional mandategiving maximum aid and protection to labor, promoting theirwelfare and reaffirming it as a primary social economic force infurtheranceofsocialjusticeandnationaldevelopment.

WHEREFORE, the petition is GRANTED. The Decision andResolution of the Court of Appeals dated October 29, 2004 andOctober 7, 2005, respectively, in CAG.R. SP No. 78515 areANNULLEDandSETASIDE.TheDecisionoftheNationalLaborRelationsCommissiondatedApril15,2003inNLRCNCRCANo.03276602, is REINSTATED. The case is REMANDED to theLabor Arbiter for the recomputation of petitioner AngelinaFranciscos full backwages from the time she was illegallyterminateduntil thedateoffinalityof thisdecision,andseparationpay representing onehalf month pay for every year of service,where a fraction of at least sixmonths shall be considered as onewholeyear.

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35 Leonardo v. National Labor Relations Commission, 389 Phil. 118, 126 333SCRA589,598(2000).

36438Phil.756390SCRA201(2002).

704


Peoplevs.Quiachon

SOORDERED.

Panganiban(C.J.,Chairperson),AustriaMartinez,Callejo,Sr.andChicoNazario,JJ.,concur.

Petitiongranted,judgmentandresolutionannulledandsetaside.

Note.Factors to be considered in ascertaining an employeremployee relationship. (San Miguel Corporation vs. MAERCIntegratedServices,Inc.,405SCRA579[2003])

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Francisco vs. National Labor Relations Commission