Case Summary (G.R. No. 129315)
Petition and Initial Proceedings
On April 28, 1995, petitioners filed with the NLRC Arbitration Branch claims for illegal dismissal, illegal deductions, separation pay, non-payment of 13th month pay, salary differentials (by Nas), and refund of P1 per day collected for a sweeper’s salary. The Labor Arbiter dismissed the complaint for lack of an employer-employee relationship and absence of separation pay entitlement.
Respondents’ Position
Private respondent contended that petitioners were joint-venture partners or independent contractors sharing 50–60% of gross receipts. It asserted no employer-employee relationship existed, and, even if it did, separation pay was unwarranted because closure resulted from serious business losses. Trinidad Ong’s affidavit maintained that the Lao family contributed premises and utilities while petitioners supplied labor; petitioners allegedly paid their own Social Security System (SSS) contributions, and the arrangement lacked employer control.
Labor Arbiter Decision
Labor Arbiter Potenciano S. Caalizares, Jr. (September 28, 1996) held petitioners and respondent were in a joint venture rather than employer-employee relationship. He found business closure due to financial reverses, absolving respondent from separation pay obligations.
NLRC Resolution
The NLRC (October 17, 1996) affirmed the Labor Arbiter, applying the four-fold test. It concluded petitioners were independent contractors: they supplied tools, shared earnings, and worked under limited owner control—typical industry practice in barber shops.
Petition to the Supreme Court
Petitioners alleged grave abuse of discretion by the NLRC for (1) arbitrarily classifying them as independent contractors despite substantial evidence of employment; (2) ignoring SSS records showing regular employee registration; and (3) denying illegal dismissal and money claims.
Examination of Joint Venture Claim
The Supreme Court found no documentary proof of a partnership agreement or joint venture. Apart from Trinidad Ong’s self-serving affidavit, no evidence supported a joint venture structure. Shared proceeds alone do not negate an employer-employee relationship.
Independent Contractor Test
Under Rule VIII, Section 8, Book III of the Omnibus Rules Implementing the Labor Code, an independent contractor must (a) conduct an independent business, performing work under one’s own responsibility and method, free from employer control except as to results; and (b) possess substantial capital or investment (e.g., tools, equipment, premises). Petitioners failed both criteria: they did not operate independently and only owned minor implements (combs, scissors, nail cutters).
Employer-Employee Relationship Analysis
The presence of four elements was established:
- Selection and engagement by respondent (Vicente Lao and later the corporation).
- Power of dismissal (respondent had authority to terminate services).
- Payment of wages (respondent continuously paid petitioners).
- Power to control work performance (defined work premises, fixed hours, exclusivity, rules, and directives).
Social Security System Registration
SSS records showed several petitioners registered as employees under respondent’s employer ID. Respondent offered no documentation to prove petitioners paid all contributions. The right to control and reporting of employees to SSS supported the existence of an employer-employee relationship.
Business Closure and Separation Pay
Closure resulted from sale of premises and sustained losses—a legitimate exercise of management prerogative. Under Article 283 of the Labor Code (1987 Constitution basis), employees dismissed due to cessation of operat
...continue readingCase Syllabus (G.R. No. 129315)
Background
- Special civil action for certiorari under Rule 65 of the Rules of Court, challenging NLRC resolutions dated October 17, 1996 and March 5, 1997
- Petitioners: seven workers (five barbers and two manicurists) formerly employed at New Look Barber Shop
- Private respondents: Lao Enteng Company, Inc. (incorporated January 1982) and its President, Trinidad Lao Ong
- Public respondent: National Labor Relations Commission (First Division)
Factual Setting
- New Look Barber Shop originally a sole proprietorship owned by Vicente Lao at Quiapo, Manila
- January 1982: children of Vicente Lao formed Lao Enteng Co., Inc.; took over all assets and continued shop operations
- Petitioners continued in service until April 15, 1995, when respondents announced sale of building and cessation of business
- Petitioners alleged continuous employment from 1960s or early 1980s to 1995
Claims of Petitioners
- Illegal dismissal
- Illegal deductions (P1.00 per day for sweeper’s salary)
- Non-payment of 13th month pay
- Separation pay under Article 283, Labor Code
- Salary differentials (petitioner Nas claimed constant P25/day wage)
Private Respondents’ Defense
- Characterized petitioners as joint-venture partners or independent contractors, sharing 50–60% of gross receipts
- Alleged no employer-employee relationship; closure due to serious business losses
- Contended any SSS registration was a mere accommodation and all contributions were paid by petitioners themselves
Labor Arbiter’s Decision (Sept. 28, 1995)
- Petitioners and private respondents formed a joint venture; no employer-employee relationship
- Closure caused by serious business losses; thus, no separation pay obligation
- Complaint dismissed for lack of merit
NLRC Ruling (Oct. 17, 1996; Motion Denied Mar. 5, 1997)
- Affirmed Labor Arbiter: petitioners were independent contractors under the “four-fold test”
- Barbers supply own tools, split earnings, and control manner of work—hallmarks of independent contracting
- Motion for reconsideration denied; resol