Francisco vs. NLRC G.R. No. 170087 August 31, 2006 Facts

Francisco vs.
NLRC
G.R. No. 170087 August 31, 2006
Facts:
Angelina Francisco was hired by Kasei Corporation and was designated as Accountant and
Corporate Secretary, as well as Liaison Officer. In 1996, the company designated her as Acting
Manager, hiring another person as accountant in lieu of Francisco. As Acting Manager,
petitioner was assigned to handle recruitment of all employees and perform management
administration functions; represent the company in all dealings with government agencies and
to administer all other matters pertaining to the operation of Kasei Restaurant.
She stayed in that position for 5 year, her salary reaching P27,500 plus P3,000 housing
allowance and a 10% share in profit. However, in Jan. 2001, Francisco was replaced as
manager. Thereafter, he was assigned as Technical Assistant and her salary was reduced to
P2,500. Finally, on October 2001, she was informed that she is no longer connected with the
company. Francisco filed an action for constructive dismissal before the labor arbiter.
The company averred that Francisco is not an employee of Kasei Corporation. Allegedly, she
was hired as a technical consultant, performing her work at her own discretion without control
and supervision of Kasei Corporation. She had no daily time record and came to the office any
time she wanted. The company never interfered with her work except when the management
would ask her opinion on matters relating to her profession.
The Labor Arbiter found that petitioner was illegally dismissed. NLRC affirmed. However, CA
reversed the NLRC decision
Issue:
WON Francisco and Kasei Corporation had an employer-employee relationship.
Ruling:
Yes, because Kasei had control on the means and methods by which her work is to be
accomplished and she was dependent on the alleged employer for his continued employment in
that line of business
In this jurisdiction, there has been no uniform test to determine the existence of an employer-
employee relation. Generally, courts have relied on the so-called right of control test where the
person for whom the services are performed reserves a right to control not only the end to be
achieved but also the means to be used in reaching such end. However, in certain cases the
control test is not sufficient to give a complete picture of the relationship between the parties,
owing to the complexity of such a relationship where several positions have been held by the
worker. These are instances when economic realities of the employment relations should also
be considered to help provide a comprehensive analysis of the true classification of the
individual.
The better approach would be to adopt a two-tiered test involving: (1) 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 (2) the underlying economic realities of the activity or relationship. This
two-tiered test would provide us with a framework of analysis, which would take into
consideration the totality of circumstances surrounding the true nature of the relationship
between the parties.
The determination of the relationship between employer and employee depends upon the
circumstances of the whole economic activity, such as: (1) the extent to which the services
performed are an integral part of the employer's business; (2) the extent of the worker's
investment in equipment and facilities; (3) the nature and degree of control exercised by the
employer; (4) the worker's opportunity for profit and loss; (5) the amount of initiative, skill,
judgment or foresight required for the success of the claimed independent enterprise; (6) the
permanency and duration of the relationship between the worker and the employer; and (7) the
degree of dependency of the worker upon the employer for his continued employment in that
line of business. The proper standard of economic dependence is whether the worker is
dependent on the alleged employer for his continued employment in that line of business.
By applying the control test, there is no doubt that petitioner is an employee of Kasei
Corporation because she was under the direct control and supervision of Seiji Kamura, the
corporation's Technical Consultant. She reported for work regularly and served in various
capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions.
Under the broader economic reality test, the petitioner can likewise be said to be an employee
because she had served the company for six years before her dismissal, receiving check
vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as
well as deductions and Social Security contributions from August 1, 1999 to December 18,
2000. When petitioner was designated General Manager, respondent corporation made a report
to the SSS. Petitioner's membership in the SSS as manifested by a copy of the SSS specimen
signature card and the inclusion of her name in the on-line inquiry system of the SSS evinces
the existence of an employer-employee relationship between petitioner and respondent
corporation. It is therefore apparent that petitioner is economically dependent on
respondent corporation for her continued employment in the latter's line of business.
Based on the foregoing, there can be no other conclusion that petitioner is an employee of
respondent Kasei Corporation. She was selected and engaged by the company for
compensation, and is economically dependent upon respondent for her continued employment
in that line of business. Her main job function involved accounting and tax services rendered to
respondent corporation on a regular basis over an indefinite period of engagement. Respondent
corporation hired and engaged petitioner for compensation, with the power to dismiss her for
cause. More importantly, respondent corporation had the power to control petitioner with the
means and methods by which the work is to be accomplished.
Thus, the corporation constructively dismissed petitioner when it drastically reduced her salary.
This amounts to an illegal termination, where the petitioner is entitled to full backwages. Since
Francisco's position as an accountant is one of trust and confidence, Kasei is further entitled to
separation pay, in lieu of reinstatement.
CA decision is annulled and set aside. NLRC's decision in reinstated. Case is remanded to the
labor arbiter for the recomputation of backwages.

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