G.R. No. 159890 - Abante, Jr. vs. Lamadrid Bearing and Parts Corp.

Petitioner, Empermaco B. Abante, Jr., was hired by Lamadrid Bearing and Parts Corporation in June 1985 as a commission salesman.
He earned a commission of 3% of his total gross sales covering the entire Mindanao area, with his monthly income initially at about P16,000.00 and later increasing to approximately P20,269.50.
Apart from selling merchandise, his duties included collecting payments from his customers.
The respondent exercised significant control over his work by directing his reporting areas and occasionally requiring him to travel to Manila for conferences on marketing strategies and competitive issues.

In 1998, petitioner encountered five customers with bad accounts amounting to a total of approximately P687,166.62.
Confronted by the respondent regarding these bad accounts, petitioner was warned that failure to issue personal checks to cover them would result in withheld commissions and potential job loss.
Despite his misgivings, petitioner issued personal checks on the condition that they would not be deposited for clearing but used merely to offset his commissions.
Subsequently, petitioner was induced to sign two documents—a Promissory Note and a Deed of Real Estate Mortgage—apparently as further security for the bad accounts.

Petitioner learned that he was not enrolled with the Social Security System (SSS), thereby disqualifying him from claimed salary loan benefits.
When he raised the issue with his employer, he was berated, and contrary to the prior agreement, the remaining checks were deposited and returned due to a closed account.

On March 22, 2001, respondent’s counsel sent a demand letter requiring petitioner to cover the dishonored checks or pay the equivalent cash amount.
Petitioner responded on March 30, 2001, offering to deduct his earned commissions (with a detailed account of amounts as of February 28 and March 31, 2001) to cover the disputed sum while affirming his willingness to continue his work.
On April 2, 2001, petitioner sent a further letter contesting the imposition of responsibility on him for uncollected accounts and the forced signing of a mortgage related to his residence, noting that he had never agreed to such terms during his 16 years of service.

Petitioner’s status was further complicated when customers were warned not to deal with him, and he subsequently received a subpoena from the Office of the City Prosecutor for alleged violations of Batas Pambansa Blg. 22.
In response, petitioner filed a complaint for illegal dismissal and money claims (including separation pay, back wages, unpaid commissions, refunds, and damages) with the NLRC Regional Arbitration Branch in Davao City.
Respondents contended that petitioner was merely a freelance, commission-based salesman and not an employee, supporting their position with several indicators:

He admitted being a commission-based salesman.
He did not receive a fixed monthly salary nor statutory employment benefits.
He was not required to report daily and often worked independently.
He received no pay-slips or regular documentation of his earnings.
Taxes were not withheld, and he was not enrolled in SSS or Philhealth.
He concurrently provided sales services for other companies in the same industry.

The Labor Arbiter issued a decision in November 2001 awarding petitioner a sum of P1,336,729.62 for separation pay, back wages, refund of deductions, damages, and attorney’s fees.
On appeal, the NLRC reversed the Labor Arbiter’s decision on April 5, 2002, dismissing the case for lack of a cause of action.
The Court of Appeals, in its decision dated March 7, 2003, affirmed the NLRC ruling, denying petitioner’s claims.
Petitioner then sought review under Rule 45 of the 1997 Revised Rules of Civil Procedure, challenging:

The alleged grave abuse of discretion by the Court of Appeals in relying on antecedent findings.
The misapplication of the control test as a determinant of an employer-employee relationship.
The overall appraisal of evidence and established legal doctrines by the lower courts.

Whether the petitioner, as a commission salesman receiving a 3% commission, qualifies as a regular employee or merely as an independent/freelance contractor.
Whether the arrangements and practices imposed by the respondent, including the collection of payments and periodic attendance at conferences, indicate an employer-employee relationship.

Whether the element of control—a decisive factor in establishing an employer-employee relationship—is present, given that petitioner was allowed substantial freedom in his sales operations across Mindanao.
Whether the respondent’s occasional direction and supervision sufficiently amount to control over both the outcome and the manner in which petitioner performed his work.

Whether petitioner’s coercion into issuing personal checks, a Promissory Note, and signing a Deed of Real Estate Mortgage constitutes proof of an inherent employment relationship or merely evidences a separate financial arrangement.
Whether the measures imposed by the respondent regarding bad accounts were legally justified or amounted to intimidation and exploitation.

Whether the Court of Appeals committed reversible error by basing its decision on an erroneous interpretation of the facts related to control and employment.
Whether the conclusions reached by the NLRC and the Labor Arbiter regarding the nature of petitioner’s engagement were supported by substantial evidence.