Case Summary (G.R. No. 246892)
Key Dates and Procedural Posture
Events: Riders removed from routes and denied further assignments in January 2017, prompting the filing of a labor complaint.
Tribunals: Labor Arbiter dismissed the complaint (Nov. 3, 2017); NLRC affirmed (Apr. 30, 2018; Sept. 10, 2018 denial of reconsideration); Court of Appeals dismissed petition for certiorari as improperly filed (Jan. 14, 2019; Mar. 15, 2019 resolutions).
Supreme Court review: Petition for Review under Rule 45; decision reversing the Court of Appeals and NLRC and remanding for computation of monetary awards.
Applicable Law and Constitutional Basis
Governing constitution: 1987 Philippine Constitution (Article XIII, Section 3 — full protection to labor and security of tenure).
Statutes and principles: Labor Code provisions on classifications of employment (Article 295), Article 106 (contracting/subcontracting), Civil Code Article 1700 (labor contracts imbued with public interest), DOLE Department Order No. 174‑2017 (conditions for permissible contracting), and controlling jurisprudence (four‑fold test and economic dependence test).
Factual Summary
Riders were engaged in February 2016, signed Independent Contractor Agreements with Lazada, used their own motorcycles, and were paid P1,200 per day. In January 2017 they were informed by a dispatcher they would no longer receive schedules; they reported for three days without assignments and later learned their routes were given to others. They filed a complaint alleging illegal dismissal and unpaid statutory benefits and sought damages and attorney’s fees.
Procedural Contentions and Positions of the Parties
Petitioners: Argued they were regular employees despite contractual labels, relying on the constitutional policy of protection of labor, Article 295 of the Labor Code, the four‑fold test and economic dependence; sought backwages, separation pay or reinstatement, statutory benefits, refund of cash bonds and deductions, moral/exemplary damages, and attorney’s fees.
Respondents (Lazada): Contended riders were independent contractors; delivery was ancillary to Lazada’s online platform business not its main business; the written Contracts and daily fee reflected independent contractor status; rules and equipment were safeguards and billing mechanisms rather than indicia of control; cash bond and deductions were contractual and consensual.
Procedural Review Issue: Proper Remedy and Standard of Review
The Court held the Court of Appeals erred in dismissing the Rule 65 petition outright; a Rule 65 certiorari is an available remedy to challenge NLRC decisions for grave abuse of discretion. On review under Rule 45, only questions of law are ordinarily considered, but exceptions permit reassessment of facts where NLRC and CA findings are contradictory, based on gross misapprehension of facts, or devoid of evidentiary support. The Court found such errors present and proceeded to reassess the factual findings.
Burden of Proof and Legal Presumptions
When the employment status is disputed, the employer bears the burden of proving that the worker is an independent contractor rather than a regular employee. Labor protection principles and labor‑specific statutory provisions prevail over contractual nomenclature; parties cannot relieve themselves of application of labor laws by labeling.
Tests for Employer‑Employee Relationship Applied
The Court applied both the traditional four‑fold test (selection/engagement; payment of wages; power to dismiss; power to control conduct — with control as the pivotal factor) and the economic dependence test which examines the totality of the economic relationship (integrality of services to employer’s business; worker’s investment; employer control; opportunity for profit/loss; initiative/skill required; permanency/duration; and dependency on the employer).
Court’s Analysis: Independent Contractor Claim Rejected
The Court found respondents failed to meet their burden to prove independent contractor status. The riders were not hired through a legitimate contractor/subcontractor trilateral arrangement; they were directly engaged by Lazada and paid directly by Lazada. The riders did not possess unique skills or talents that would characterize a bilateral independent contractor relationship. The Contract clause stating the method of performance “shall be as instructed by, and within the discretion and control of the Company” and operational practices (route sheets tracking arrival/departure/unloading times; trip tickets; penalties for lost parcels; issuance of company scanners/phones; monitoring of service periods for billing) evidenced control over means and methods and integration of delivery into Lazada’s business model.
Court’s Analysis: Economic Dependence and Integration of Services
Delivery services were found integral to Lazada’s business model as implemented (Lazada offered delivery as part of its service), and Lazada admitted supervising delivery via route managers. Riders bore insufficient capital or independent opportunity for profit or loss: they used personal motorcycles but received set daily pay, had limited control over time and availability, and were economically dependent on Lazada for continued employment in that line of business. The Court concluded the four‑fold test and economic dependence factors favored classification as regular employees.
Fixed‑Term Employment and Contractual Stipulations
Th
...continue readingCase Syllabus (G.R. No. 246892)
Procedural Posture and Relief Sought
- Petition for Review under Rule 45 to the Supreme Court assailing the January 14, 2019 and March 15, 2019 Resolutions of the Court of Appeals in CA-G.R. SP No. 158529, which affirmed the National Labor Relations Commission (NLRC) ruling.
- Underlying action filed by the riders before the NLRC for illegal dismissal and various monetary and remedial claims: non-payment of salary, overtime pay, holiday pay, service incentive leave pay, thirteenth month pay, separation pay, illegal deduction, moral and exemplary damages, and attorney’s fees.
- Procedural history: Labor Arbiter dismissed complaint for lack of jurisdiction (no employer-employee relationship); NLRC affirmed; Court of Appeals dismissed the Rule 65 petition outright, holding the proper remedy was Rule 43 and that petitioners failed to show grave abuse of discretion; petitioners elevated the matter to the Supreme Court by Rule 45 petition.
Facts as Found and Alleged by Petitioners
- In February 2016 petitioners (collectively “riders”) were hired as riders by Lazada E-Services Philippines, Inc. (Lazada) to pick up items from sellers and deliver them to Lazada’s warehouse.
- Each rider signed an Independent Contractor Agreement specifying a P1,200.00 per day service fee and an engagement for a period of one year.
- Riders used privately-owned motorcycles in the performance of their tasks.
- In January 2017 a dispatcher informed the riders that they were removed from their usual routes and would no longer be given schedules; petitioners nevertheless reported to work for three days and waited for assignments to no avail.
- Petitioners later learned their routes had been given to other employees.
- Petitioners claim they were regular employees because the means and methods by which they performed their work were subject to Lazada’s discretion and control; they assert economic dependence on Lazada, daily required hours, company-issued devices and tools, contractual clauses indicating company control, penalties for lost parcels, deductions and cash bonds, and that they were paid directly by Lazada.
Contracts and Specific Contractual Terms
- Each rider executed an Independent Contractor Agreement with Lazada that:
- Stated expressly that there is no employer-employee relationship between Lazada and the riders.
- Provided payment of P1,200.00 per day as a service fee.
- Stated engagement for one year (fixed term).
- Contained an express clause: “The method by which Contractor is to perform such Services shall be as instructed by, and within the discretion and control of the Company,” and other provisions permitting immediate termination for breach of material provisions.
Events Leading to the Complaint and Claims for Relief
- Petitioners alleged constructive/illegal dismissal when they were taken off routes and not scheduled, and claimed related monetary entitlements and return of deductions (including cash bonds).
- Petitioners claimed non-payment of thirteenth month pay, holiday pay, service incentive leave pay, separation pay and other benefits; alleged deductions (cash bonds, value added and withholding tax) were improper and should be refunded.
- Petitioners sought moral and exemplary damages and attorney’s fees, asserting bad faith, oppression, or dismissal contrary to public policy.
Respondents’ Defenses and Position
- Lazada maintained petitioners are independent contractors, not regular employees.
- Lazada argued its main business is as an online marketplace/platform facilitating transactions between sellers and buyers; delivery is ancillary, coordinated with independent transportation services; it is not a common carrier.
- Lazada explained reduction of schedules in January was due to post-holiday decrease in demand and reorganization to ensure trips for all riders; contended petitioners misunderstood temporary reassignment as termination.
- Lazada argued the Contracts were explicit (no employer-employee relationship), petitioners represented they had sufficient capital, that deductions and cash bonds were agreed contractual terms governed by Civil Code principles (art. 1306), and that the remedy for contract disputes is arbitration or civil suit, not labor remedies.
- Respondents denied exerting the level of control necessary for employer-employee relationship and argued petitioners failed the four-fold and economic dependence tests.
Labor Arbiter and NLRC Rulings
- Labor Arbiter (November 3, 2017) dismissed the complaint for lack of jurisdiction, finding no employer-employee relationship:
- Emphasized the clear and explicit Contract clause stating no employer-employee relationship; held literal terms should control.
- Found riders controlled their means and methods: they provided own vehicles, chose means of transport, delivery routes and working hours; Lazada’s rules were limited to ensuring timely and proper delivery and did not amount to sufficient control.
- NLRC (April 30, 2018) affirmed the Labor Arbiter:
- Reiterated the Contract’s explicit stipulation and applied the four-fold test, finding Lazada had no control over the means and methods the riders employed.
Court of Appeals Ruling on Procedural Remedy
- Court of Appeals dismissed petitioners’ Rule 65 certiorari petition outright:
- Held the correct remedy against the NLRC decision was a Rule 43 petition, not Rule 65.
- Explained Rule 65 corrects jurisdictional errors including grave abuse of discretion; petitioners did not support their allegation of grave abuse by the NLRC.
- Noted NLRC evaluated evidence and made findings; absent prima facie showing of grave abuse, certiorari could not be granted.
Issues Presented to the Supreme Court
- Whether the Court of Appeals erred in dismissing the certiorari petition outright.
- Whether petitioners are regular employees of Lazada, specifically:
- Whether petitioners are independent contractors.
- Whether petitioners satisfied the four-fold test.
- Whether there is economic dependence of petitioners on respondents.