Title
Parayday vs. Shogun Shipping Co., Inc.
Case
G.R. No. 204555
Decision Date
Jul 6, 2020
Two welders alleged illegal dismissal, underpayment, and lack of benefits after years of regular employment and workplace injury; Supreme Court ruled them regular employees, affirmed illegal dismissal, and granted reinstatement and backwages.

Case Summary (A.M. No. 3694)

Relevant Dates and Procedural Background

  • Petitioners were employed circa 1996/1997 by Oceanview/VRC Lighterage Co., Inc. (Oceanview), which petitioners asserted later became Shogun Ships in 2003.
  • Shogun Ships was incorporated in November 2002.
  • The incident causing injury to petitioners occurred on May 11, 2006.
  • Petitioners' dismissal date was allegedly May 1, 2008.
  • The Labor Arbiter’s decision was promulgated on April 27, 2009.
  • The National Labor Relations Commission (NLRC) affirmed the Labor Arbiter’s decision on August 28, 2009.
  • The Court of Appeals (CA) reversed the NLRC on May 11, 2012.
  • This Supreme Court decision reversing the CA was rendered on July 6, 2020.

Applicable Law and Legal Framework

The 1987 Philippine Constitution and the Labor Code of the Philippines govern the case. The Court applied established jurisprudence related to:

  • The four-fold test for employer-employee relationship.
  • The doctrine of piercing the corporate veil.
  • Proving regular employee status under Article 295 of the Labor Code.
  • Requisites for lawful dismissal: just cause and due process.
  • The standard of substantial evidence in labor cases.

Facts and Contentions of the Parties

Petitioners alleged employment first with Oceanview and continued regular employment with Shogun Ships after Oceanview purportedly changed its corporate name. Petitioners performed welding and fitting work on Shogun Ships’ barges and were allegedly paid daily salaries and issued handwritten payslips (Time Keeper’s Reports). They claimed they were illegally dismissed verbally and were not paid appropriate benefits, overtime, rest day pay, or other statutory entitlements.

Respondent Shogun Ships denied an employer-employee relationship. The corporation alleged it was a distinct entity from Oceanview and that petitioners were merely occasional helpers, called in temporarily by regular employees for specific repair jobs. Shogun Ships supported its claims with affidavits from employees who described petitioners as helpers with no regular engagement or control by the company. Respondent denied continuous employment and the existence of an employer-employee relationship.

Initial Rulings of Labor Arbiter and NLRC

The Labor Arbiter found petitioners to be regular employees of Shogun Ships, based on their performance of work necessary and desirable to the company’s business and their over one year service. Petitioners were deemed illegally dismissed, and reinstatement with full backwages was ordered; however, claims for underpayment and damages were denied.

The NLRC affirmed this ruling, underscoring petitioners’ continuous work and noting respondent failed to prove just cause or due process in dismissal. The NLRC discounted the respondent's affidavits as biased and held that petitioners’ function was indispensable and rendered for over a year.

Court of Appeals Decision

The CA reversed the NLRC, holding that petitioners failed to prove substantial evidence of an employer-employee relationship. It gave no credence to the Time Keeper’s Reports for lack of authenticity and execution evidence. The CA distinguished Shogun Ships and Oceanview as separate legal entities and declined to pierce the corporate veil, holding that such doctrine requires a full trial and proper jurisdiction over the entity. It ruled that absent proof of employment, no dismissal occurred; thus, no illegal dismissal could be established.

Issues on Appeal to the Supreme Court

The Supreme Court limited the issues to:

  1. Whether petitioners were regular employees of Shogun Ships under the four-fold test.
  2. Whether the dismissal was lawful.

Juridical Personality and Corporate Veil Doctrine

The Court affirmed separate juridical personalities of Shogun Ships and Oceanview. It rejected the claim that Oceanview changed its name to Shogun Ships because no articles of incorporation or similar evidence supported this assertion. Moreover, the Court declined to pierce the corporate veil in the absence of Oceanview’s being properly impleaded, represented, or served summons, emphasizing due process requirements. The Court cited precedent requiring full trial and jurisdiction over a corporation before the doctrine applies.

Employer-Employee Relationship and the Four-Fold Test

The Supreme Court emphasized the "four-fold test" as the controlling standard to establish an employer-employee relationship: selection and engagement, payment of wages, power of dismissal, and employer's control over the employee's work.

The Court found the Labor Arbiter and NLRC incorrectly based regular employment on Article 295 of the Labor Code's definition of regular and casual employment, noting that the provision relates to employee classification and benefits rather than establishing the existence of employment.

Substantial Evidence Supporting Employment Relationship

The Court considered all facts, noting that:

  • Respondent did not deny petitioners’ work on Shogun Ships’ barges from May 2006 to May 2008.
  • Shogun Ships compensated and provided medical assistance to petitioners.
  • Petitioners were verbally dismissed, supporting the employer’s power of dismissal.
  • Petitioners worked alongside regular employees and followed instructions from engineers, satisfying the control test.
  • The presumption of regular employment applies in the absence of clear contracts stating otherwise.

While documentation like the ID and COE concerned Oceanview and the Time Keeper’s Reports lacked sufficient evidence of genuineness, the uncontroverted admissions by the respondent of employment and compensation were accorded probative value.

Regular Employment Status

Despite respondent’s characterization of petitioners as occasional helpers, the Court ruled:

  • Petitioners performed work necessary and desirable to respondent’s business (maintenance and repair of barges essential to cargo shipping).
  • Petitioners rendered services for more than one year, which under the Labor Code presumption, granted them regular employee status.
  • No sufficient proof was presented to rebut the presumption of continuity.

Illegal Dismissal Finding

Since petitioners were regular employees, their dismissal required just or authorized cause and observance of due process. The Court observed:

  • Petitioners were verbally dismissed without notice or hearing.
  • Respondent failed to prove the dismissal was lawful. Accordingly, petitioners were illegally dismissed, entitled to reinstatement and payment of full backwages from dismissal date until reinstatement.

Non-Monetary Claims and Individual Liability

The Labor Arbiter, affirmed by the NLRC, denied petitioners’ claims for underpayment of wages, benef


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