Case Summary (G.R. No. 91307)
Petitioner and Respondent Positions
Petitioner asserted the collectors were independent contractors under signed Collection Agency Agreements and thus not DOLE employees entitled to collective bargaining certification. Respondents (union and collectors) contended the agreements and factual relationship demonstrate employer-employee status, invoking Article 280 of the Labor Code and DOLE rules on job-contracting.
Key Dates
Union petition for direct certification filed: February 15, 1989.
Med-Arbiter Order: June 14, 1989 (granted petition for certification election).
Secretary of Labor resolutions: November 2, 1989 (affirmation on appeal) and December 14, 1989 (denial of motion for reconsideration).
Supreme Court decision reversing DOLE: January 24, 1991.
Applicable Law
Constitutional basis: 1987 Philippine Constitution (right to self-organization and collective bargaining).
Relevant statutory and regulatory provisions: Labor Code (Article 280 distinguishing types of employees; Article 106 on contractor/subcontractor liability); Civil Code (Article 1370 on contract interpretation); Omnibus Rules Implementing the Labor Code (Section 8, Rule 8, Book III on job-contracting).
Precedents addressed in the decision include Mafinco Trading Corp. v. Ople; Development Bank v. NLRC; Rosario Brothers v. Ople; Broadway Motors v. NLRC; Brotherhood Labor Unity Movement v. Zamora; La Suerte Cigar & Cigarette Factory v. Director, Bureau of Labor Relations; Investment Planning Corp. v. SSS; Sarra v. Agarrado; LVN Pictures v. Philippine Musicians Guild; Social Security System v. Court of Appeals.
Procedural Posture
The union sought direct certification as sole and exclusive bargaining agent of company collectors. The Med-Arbiter found an employer-employee relationship and ordered a certification election; Secretary Drilon affirmed on appeal; petitioner's motion for reconsideration was denied. Petitioner then filed a certiorari petition with the Supreme Court alleging excess of jurisdiction, denial of due process, and legal error in finding an employment relationship.
Factual Background and Contractual Terms
Respondent collectors had executed Collection Agency Agreements with the Company. Key stipulations relied upon by petitioner included: explicit designation of the collector as an independent "collecting agent"; compensation strictly by commission (6% of collections) plus bonuses; requirement to post a P3,000 cash bond; submission of reports and use of Company-issued receipt forms; one-year renewable agreements; termination for failure to meet minimum monthly collections, failure to post bond, or cancellation by either party. Respondents pointed to provisions on authorized receipt forms, reporting, and monthly collection quotas as indicia of control. The Company had terminated the agreements pending DOLE resolution.
Parties’ Main Contentions
Petitioner argued the contract language and the commission-based arrangement reflected independent contractor status and lack of employer control. Respondents argued collectors performed activities “desirable and necessary” to the company's business (Article 280) and relied on DOLE rules on job-contracting to assert the collectors should be considered employees for purposes of certification.
Legal Standard for Employer-Employee Relationship
The Court applied the control test, recognizing generally relevant elements: (1) selection and engagement of the worker; (2) payment of wages; (3) power of dismissal; and (4) power to control the worker’s conduct, with the latter being the most important factor. The decision relied on prior jurisprudence that distinguishes being paid for labor (employee) from being paid for results (independent contractor).
Analysis of Contract Language and Control
The Court emphasized the literal meaning of the contract (Civil Code, Article 1370) and found the agreement explicitly designates collectors as independent contractors. The agreement’s requirements—use of Company receipt and report forms, periodic submission of reports, and minimum quotas—were characterized as measures regulating results and administrative procedures, not means and methods of performance. The Court found these provisions intended to prevent co-mingling of funds and to facilitate orderly accounting rather than to exert daily operational control over collectors’ methods.
Consideration of Unrefuted Circumstances
The Court noted several unrefuted factual circumstances demonstrating lack of control: collectors were not bound by office hours or daily reporting (except for remitting collections); they were not required to devote time exclusively to Singer; they had discretion over methods of collection; they bore their own transportation costs; they were compensated strictly on a commission basis, receiving nothing absent actual collections; and commissions were deducted directly from collections remitted. Respondents failed to specifically rebut these factual assertions.
Application of Jurisprudence on Commission Agents and Control
Citing Investment Planning and related decisions, the Court reiterated that agents paid based on results approximate independent contractors rather than employees. The Court held that contractual termination clauses and the presence of quotas or reporting requirements do not, by themselves, equate to control over the means and methods of work. Because there was no evidence of Company con
...continue readingCase Syllabus (G.R. No. 91307)
Procedural Posture
- Petition for certiorari filed by Singer Sewing Machine Company (the Company) assails:
- The order of Med-Arbiter Designate Felix B. Chaguile, Jr.;
- The resolution of then Labor Secretary Franklin M. Drilon affirming said order on appeal; and
- The order denying the motion for reconsideration.
- Underlying matter captioned "In Re: Petition for Direct Certification as the Sole and Exclusive Collective Bargaining Agent of Collectors of Singer Sewing Machine Company-Singer Machine Collectors Union-Baguio (SIMACUB)", docketed as OS-MA-A-7-119-89 (IRD CASE NO. 02-89 MED).
- Relief sought by petitioner: reversal of DOLE decisions that granted petition for certification election and affirmation by the Secretary of Labor; dismissal of the petition for certification election.
- Court action: Supreme Court reviewed the DOLE proceedings and issued a decision reversing and setting aside the DOLE orders, dismissing the petition for certification election, and making permanent the temporary restraining order previously issued by the Court.
Factual Background
- On February 15, 1989, respondent union (SIMACUB) filed a petition for direct certification as the sole and exclusive bargaining agent of all collectors of Singer Sewing Machine Company, Baguio City branch (the Company).
- The Company opposed, asserting union members are not employees but independent contractors, as evidenced by a Collection Agency Agreement signed by each collector/agent.
- Med-Arbiter found an employer-employee relationship and granted the petition for certification election.
- Secretary of Labor Franklin M. Drilon affirmed the Med-Arbiter's order on appeal and denied a motion for reconsideration.
- The Company then filed this petition for certiorari before the Supreme Court.
Contractual Provisions (Collection Agency Agreement relied on by Petitioner)
- The Agreement designates a collector as a "collecting agent" and expressly states the agent is to be considered at all times an independent contractor, not an employee of the Company.
- Collection of payments on installment accounts to be made monthly or oftener.
- Compensation: agent paid commission of 6% of all collections made and turned over, plus a bonus on said collections.
- Agent required to post a cash bond of P3,000.00 as assurance for faithful performance and observance of agreement terms.
- Agent is subject to all terms and conditions in the Agreement.
- Agreement effective for one year from date of execution and renewable annually.
- Grounds for termination: failure to satisfy minimum monthly collection performance, failure to post cash bond, or cancellation by either party unless the agent has pending obligation or indebtedness in favor of the Company.
Additional Contractual and Operational Features Quoted by Respondents
- Paragraph 2: agent shall utilize only receipt forms authorized and issued by the Company.
- Paragraph 3: agent to submit and deliver at least once a week or as often as required a report of all collections made using report forms furnished by the Company.
- Paragraph 4: monthly collection quota required by the Company.
- Respondents argued these provisions indicate control supportive of an employer-employee relationship.
Petitioner's Main Allegations Against DOLE Rulings
- Public respondents acted in excess of jurisdiction and/or committed grave abuse of discretion by:
- Asserting DOLE had no jurisdiction since the existence of an employer-employee relationship was at issue (DOLE jurisdiction contested);
- Denying the Company due process by disregarding evidence that union members are commission agents;
- Erroneously finding an employer-employee relationship; and
- Whimsically disregarding the rule that commission agents are independent contractors, not employees.
Respondents' Primary Arguments (Union and DOLE)
- The Collection Agency Agreement's provisions, respondents claim, belie the Company's characterization of collectors as independent contractors.
- To prove employeeship, respondents assert collectors "perform the most desirable and necessary activities for the continuous and effective operations of the business of the petitioner Company" (citing Article 280, Labor Code).
- The Company’s termination of the Agreement pending DOLE resolution argued by respondents to indicate weakness of petitioner's position and alleged attempt to frustrate union rights to self-organization and collective bargaining.
- Respondents invoked Section 8, Rule 8, Book No. III of the Omnibus Rules Implementing the Labor Code to argue collectors cannot legally qualify as independent contractors because independent contractors must be free from control, must carry independent businesses, and must have substantial capital or investment in equipment, tools, etc.
Legal Issue(s) Presented
- Primary legal question: Whether the collectors (members of SIMACUB) are employees of the Company or independent contractors under the Collection Agency Agreement and pertinent law, thereby qualifying them for direct certification as a collective bargaining agent.
- Subsidiary questions:
- Whether DOLE had jurisdiction to entertain and decide the certification petition given the dispute over existence of employer-employee relationship.
- Whether Article 280 of the Labor Code or Section 8, Rule 8, Book III of the