G.R. No. 25375 - People vs. De Leon y Flora

Case Summary (G.R. No. 25375)

Nature of the Dispute and Employment Context

Supreme Packaging, Inc. is engaged in manufacturing cartons and packaging materials. Pedro Chavez was hired on October 25, 1984, as a truck driver responsible for delivering goods from the company's factory in Mariveles, Bataan, to various customers, primarily located in Metro Manila. Trips were generally made at night, with deliveries ordered by routing slips issued by the company. Initial payment to Chavez was on a per-trip basis, starting at ₱350 and increasing over time to ₱900 per trip.

Petitioner's Claims and Company’s Position

In 1992, Chavez requested benefits applicable to regular employees, including overtime pay and 13th month pay, which were promised but never provided. On February 20, 1995, Chavez filed a complaint for regularization with the NLRC. Before the complaint was heard, Supreme Packaging terminated Chavez’s services. Chavez consequently filed an amended complaint for illegal dismissal, unfair labor practice, and non-payment of benefits.

Respondents denied the existence of an employer-employee relationship, instead asserting that Chavez was an independent contractor pursuant to a "contract of service" duly signed in 1984 and renewed twice. This contract explicitly described Chavez as a contractor responsible for providing trucking services exclusively between Mariveles and Metro Manila, with control over his helpers and the method of performing his work. The contract also included indemnity provisions releasing Supreme Packaging from liabilities relating to labor laws and declared that Chavez's men were not employees of the company.

Tribunal Decisions Prior to the Supreme Court

Labor Arbiter: Found Chavez to be a regular employee, declaring the contract of service null and void as a sham to evade labor law protections. The dismissal was ruled illegal, with an award of backwages, separation pay, and other benefits.
NLRC (First Decision): Affirmed the Labor Arbiter’s ruling, confirming illegal dismissal and rejecting the contract’s validity as a scheme to deny labor rights.
NLRC (Reconsideration): Reversed the earlier decision, ruling no employer-employee relationship existed because control was only over the result of work, not the means. The contract of service was upheld as valid, and the complaint was dismissed.
Court of Appeals (First Decision): Reversed the NLRC’s July 1998 decision, reinstating the finding that Chavez was a regular employee under the control test, emphasizing the absence of substantial capital on the petitioner’s part; the ownership of the truck by Supreme Packaging; and control shown through routing slips dictating timing and sequence of deliveries. It condemned the contract of service as an attempt to circumvent labor laws.
Court of Appeals (Reconsideration): Reversed itself again, holding the contract valid and the relationship contractual rather than employer-employee, noting the absence of control over means and methods by Supreme Packaging and the petitioner’s freedom to hire and control his helpers.

Issues for Supreme Court Resolution

The issues presented are whether the employer-employee relationship existed and whether the dismissal was valid and lawful, considering the claimed contract of service and the circumstances surrounding Chavez’s termination.

Applicable Law

The 1987 Philippine Constitution, particularly provisions protecting labor rights and security of tenure, and the Labor Code of the Philippines, especially Articles 279 and 280 on illegitimate dismissal and employee regularization, were applied in the deliberations.

Critical Legal Tests Applied

The employer-employee relationship requires four elements:
1. Selection and engagement of the employee by the employer;
2. Payment of wages;
3. Power of dismissal by the employer; and
4. Employer’s control over the employee’s conduct, both in results and means/methods of work.

The control test is the most decisive criterion, emphasizing authority not only over ends but the means by which work is accomplished.

Supreme Court’s Findings on Employment Relationship

The Court found all four elements to be present:

Chavez was directly engaged by Supreme Packaging;
He received wages, albeit by per-trip payment, fulfilling the requirement of remuneration under the Labor Code;
The company exercised the power to dismiss him;
Control was proven by several evidentiary points:
- The truck was owned and supplied by Supreme Packaging;
- Instructions restricted use of the truck exclusively for company deliveries;
- Chavez was directed to park the truck in predetermined locations;
- Routing slips issued to Chavez dictated the sequence, timing, and urgency of deliveries.

These facts established that Chavez was subject to the company’s control over how he performed his duties, negating claims of independent contractor status or control limited only to the results of work.

Moreover, Chavez lacked substantial capital investment as he did not own the truck or possess tools indicating independent business operations. His decade-long uninterrupted service further reinforced his status as a regular employee notwithstanding the contract purportedly labeling him otherwise.

Significantly, the Court held that the employment status cannot be overridden by contract language when factual circumstances establish an employment relationship, as provided by law and public policy favoring labor protection.

Supreme Court’s Analysis of the Dismissal

The burden lies with the employer to justify dismissal, which Supreme Packaging failed to discharge. Respondents alleged abandonment and gross negligence in truck maintenance as grounds for termination.

Regarding abandonment, the Court emphasized the legal requirement of both failure to report to work and a clear intent to sever relations, neither of which was evident because Chavez promptly filed a complaint for regularization and illegal dismissal after termination.

Regarding gross negligence, dismissal for this cause must be predicated on habitual and serious neglect, not a single isolated incident. The respondents' allegations were unsubstantiated and insufficient to justify termination.

The Court accepte

Case Syllabus (G.R. No. 25375)

Procedural History and Nature of the Case

The case originates from a complaint for illegal dismissal filed by Pedro Chavez against Supreme Packaging, Inc. and its plant manager, Alvin Lee.
Initial rulings by the Labor Arbiter (February 3, 1997) and the National Labor Relations Commission (NLRC) (January 27, 1998) declared Chavez a regular employee and found his dismissal illegal.
The NLRC later reversed itself in a July 10, 1998 decision, ruling no employer-employee relationship existed due to an alleged valid contract of service characterizing Chavez as an independent contractor.
The Court of Appeals (CA) initially reinstated the Labor Arbiter’s and earlier NLRC decisions on April 28, 2000, affirming Chavez’s status as a regular employee and illegal dismissal.
On motion for reconsideration, the CA reversed its ruling in a Resolution dated December 15, 2000, upholding the respondents’ contract of service and dismissing the illegal dismissal complaint.
Petition for review on certiorari was filed before the Supreme Court, which reversed the CA’s December 15, 2000 Resolution and reinstated the Labor Arbiter’s decision.

Factual Background

Pedro Chavez was engaged as a truck driver by Supreme Packaging, Inc. on October 25, 1984.
Chavez was tasked primarily to deliver goods at nighttime from the company’s factory in Mariveles, Bataan to various customers mostly in Metro Manila.
He was furnished a company truck and compensated on a per trip basis, starting from P350.00 per trip, eventually increasing to P900.00 per trip.
Chavez served continuously for over ten years.
In 1992, Chavez requested benefits afforded to regular employees, including overtime pay, night shift differential, and 13th month pay, which were promised but never given.
Chavez filed a complaint for regularization in February 1995. The respondent company terminated his services before it was heard, leading to an amended complaint for illegal dismissal and nonpayment of benefits.

Content and Terms of the Contract of Service

The respondents claimed Chavez was not an employee but an independent contractor, governed by a contract of service dated December 12, 1984, renewed twice thereafter.
The contract stipulated Chavez, as “Contractor,” to provide hauling/delivery services for Supreme Packaging (“Principal”) on a per trip payment basis.
Chavez was responsible for providing at least two helpers whom he directly controlled and paid.
The contract exempted Supreme Packaging from liability for employee benefits and compliance with labor laws concerning Chavez and his helpers.
The company allegedly lacked control over Chavez’s methods, with focus only on the final result of delivery services.

Labor Arbiter’s Findings and Decision

The Labor Arbiter found an employer-employee relationship, emphasizing that Chavez performed indispensable services continuously for over ten years.
The contract of service was declared null and void for being a device circumventing the constitutional protection of tenure.
Chavez’s dismissal was found to be in retaliation for his demand for regularization, lacking valid cause or due process.
Award included full backwages, separation pay, 13th month pay, night shift differential pay, service incentive leave pay, and attorney’s fees.
Reinstatement was denied due to strained relationships; separation pay was awarded instead.

NLRC’s Reversal and Reasoning (July 10, 1998)

The NLRC reversed its earlier decision, ruling no employer-employee relationship existed.
The basis was the lack of control exercised by the company over Chavez’s work methods, the validity of the contract, and the contractor’s right to hire helpers.
The contract was viewed as valid and not a scheme to avoid labor protections.
The NL