Case Summary (G.R. No. 170087)
Petition and Procedural History
Francisco filed for constructive dismissal before the Labor Arbiter. The Arbiter found an employer‐employee relationship, declared dismissal illegal, and ordered reinstatement or separation pay plus back wages, allowances, bonuses, profit share, moral damages and attorney’s fees. The NLRC affirmed with modification: granted full back wages to July 31, 2002, separation pay at one month per year of service, but deleted moral damages and profit share, and recalculated attorney’s fees. The Court of Appeals reversed and dismissed the complaint. Petitioner sought certiorari relief before the Supreme Court.
Parties’ Contentions
Petitioner argued she was an employee under direct control of the corporation’s Technical Consultant, served in various capacities over six years, appeared on payroll and in SSS records, and was constructively dismissed by salary reductions and nonpayment. Private respondents contended she was an independent technical consultant paid professional fees subject to withholding tax, worked at her own discretion without time records or supervision, and lacked formal employment reporting to BIR or SSS.
Legal Issues
- Does an employer‐employee relationship exist between Francisco and Kasei Corporation?
- If so, was Francisco constructively dismissed?
Legal Framework for Employment Relationship
Under 1987 Constitution and Labor Code policies favoring labor protection, courts apply a two‐tiered test:
- Right‐of‐control: employer’s authority over means and methods of work
- Economic reality: worker’s dependency on alleged employer, payroll inclusion, benefit contributions, duration of service, integration into the business
Relevant factors include whether services are integral to business, permanency of relationship, opportunity for profit or loss, investment in facilities, and degree of dependency.
Application of Control and Economic Reality Tests
Control Test:
• Petitioner reported regularly and performed core accounting, administration and liaison functions under technical supervision of Seiji Kamura.
• Corporation directed her duties, salary schedule and office attendance.
Economic Reality Test:
• Six‐year continuous engagement with check vouchers reflecting salary, housing allowance, bonuses, 13th-month pay, and SSS deductions (1999–2000).
• Inclusion in SSS records and corporate payroll demonstrated economic dependence.
• Absence of independent investment or profit-loss risk typical of true consultants.
These factors overwhelmingly demonstrate employer control and economic dependence, establishing an employment relationship.
Constructive Dismissal Analysis
A diminution in pay without justification constitutes constructive dismissal when it renders continued employment impossible or unreasonable. The unauthorized salary reductions from January to September 2001 and eventu
...continue readingCase Syllabus (G.R. No. 170087)
Procedural Background
- Petition for review on certiorari under Rule 45 seeking annulment of the Court of Appeals Decision (Oct. 29, 2004) and Resolution (Oct. 7, 2005) in CA-G.R. SP No. 78515
- Court of Appeals had reversed the NLRC Decision (Apr. 15, 2003) affirming with modification the Labor Arbiter’s July 31, 2002 Decision in NLRC-NCR Case No. 30-10-0-489-01
- Labor Arbiter found private respondents liable for constructive dismissal; NLRC modified award; CA dismissed complaint for lack of employer-employee relationship
Facts
- 1995: Petitioner hired by Kasei Corporation as Accountant and Corporate Secretary; also Liaison Officer to City of Makati
- 1996: Petitioner designated Acting Manager; Gerry Nino hired as Accountant
- Duties over five years included recruitment, management administration, government dealings (BIR, SSS, Makati), operation of Kasei Restaurant
- As of Dec. 31, 2000: Salary ₱27,500, ₱3,000 housing allowance, 10% share in profits
- Jan. 2001: Replaced as Manager; assured of new role as Technical Assistant for BIR matters
- Jan.–Sept. 2001: Salary reduced by ₱2,500 monthly (total ₱22,500)
- Mid-year bonus withheld; Oct. 2001: No salary paid; advised company not earning well
- Oct. 15, 2001: Informed she was no longer connected with the company
Petitioner’s Claim
- Contends she was an employee and was constructively dismissed due to salary reduction, non-payment of wages and bonuses
- Sought reinstatement without loss of seniority and payment of backwages, allowances, benefits, profit share, moral and exemplary damages, attorney’s fees
Respondents’ Claim
- Asserted petitioner was a “technical consultant,” not an employee
- Work performed at