LABOR CASES

1.

G.R. No. 73887 December 21, 1989

GREAT PACIFIC LIFE ASSURANCE CORPORATION, petitioner,

vs.
HONORATO JUDICO and NATIONAL LABOR RELATIONS COMMISSION, respondents.
FACTS:
Honorato Judico filed a complaint for illegal dismissal against Grepalife. Judico entered into an
agreement of agency with petitioner Grepalife to become a debit agent attached to the industrial life
agency in Cebu City. Judico had definite work assignments including but not limited to collection of
premiums from policy holders and selling insurance to prospective clients. On June 28, 1982,
complainant was dismissed by way of termination of his agency contract.

ISSUE:
Whether the relationship between insurance agents and their principal, the insurance company, is that
of agent and principal to be governed by the Insurance Code and the Civil Code provisions on agency, or
one of employer-employee, to be governed by the Labor Code.

HELD:
We have held in Investment Planning Corp. vs. SSS, 21 SCRA 294, an insurance company may have two
classes of agents who sell its insurance policies: (1) salaried employees who keep definite hours and
work under the control and supervision of the company; and (2) registered representatives who work on
commission basis. The agents who belong to the second category are not required to report for work at
anytime, the time and the effort they spend in their work depend entirely upon their own will and
initiative; and they are paid their commission based on a certain percentage of their sales. One salient
point in the determination of employer-employee relationship which cannot be easily ignored is the fact
that the compensation that these agents on commission received is not paid by the insurance company
but by the investor (or the person insured). The test therefore is whether the "employer" controls or has
reserved the right to control the "employee" not only as to the result of the work to be done but also as
to the means and methods by which the same is to be accomplished.
Applying the aforementioned test to the case at bar, We can readily see that the element of control by
the petitioner on Judico was very much present. The undisputed facts show that he was controlled by
petitioner insurance company not only as to the kind of work; the amount of results, the kind of

performance but also the power of dismissal. Undoubtedly, private respondent, by nature of his position
and work, had been a regular employee of petitioner and is therefore entitled to the protection of the
law and could not just be terminated without valid and justifiable cause.

2.

INSULAR LIFE VS NLRC 179 SCRA 459

G.R. No. 84484 November 15, 1989

INSULAR LIFE ASSURANCE CO., LTD., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MELECIO BASIAO, respondents.
FACTS:
Melecio T. Basiao entered into a contract with Insular Life as a commission agent containing provision
of: the "rules in ... (the Company's) Rate Book and its Agent's Manual, as well as all its circulars ... and
those which may from time to time be promulgated by it, ..." were made part of said contract.
In May, 1979, the Company terminated the Agency Manager's Contract. Basiao sued the Company in a
civil action which prompted the latter to terminate also his engagement under the first contract and to
stop payment of his commissions starting April 1, 1980. Basiao thereafter filed with the then Ministry of
Labor a complaint against the Company and its president.

ISSUE: W/N every form of control that the hiring party reserves to himself over the conduct of the party
hired in relation to the services rendered may be accorded the effect of establishing an employeremployee relationship between them in the legal or technical sense of the term

HELD: Rules and regulations governing the conduct of the business are provided for in the Insurance
Code and enforced by the Insurance Commissioner. It is, therefore, usual and expected for an insurance
company to promulgate a set of rules to guide its commission agents in selling its policies that they may
not run afoul of the law and what it requires or prohibits. None of these really invades the agent's
contractual prerogative to adopt his own selling methods or to sell insurance at his own time and
convenience, hence cannot justifiably be said to establish an employer-employee relationship between
him and the company.
In Mafinco Trading Corporation vs. Ople,13 the Court ruled that a person engaged to sell soft drinks for
another, using a truck supplied by the latter, but with the right to employ his own workers, sell
according to his own methods subject only to prearranged routes, observing no working hours fixed by
the other party and obliged to secure his own licenses and defray his own selling expenses, all in

consideration of a peddler's discount given by the other party for at least 250 cases of soft drinks sold
daily, was not an employee but an independent contractor.

3.

ENCYCLOPEDIA BRITTANICA VS NLRC 264 SCRA 7

FACTS:
Benjamin Limjoco was a Sales Division Manager of petitioner Encyclopaedia Britannica and was in
charge of selling petitioners products through some sales representatives. As compensation, Limjoco
received commissions from the products sold by his agents. He was also allowed to use Brittanicas
name, goodwill and logo. It was, however, agreed upon that office expenses would be deducted from
Limjocos commissions. Brittanica would also be informed about appointments, promotions, and
transfers of employees in private respondents district. Limjoco receives memoranda from Brittanica and
has been required to submit regular reports.
On June 14, 1974, Limjoco resigned from office to pursue his private business. Then on October 30,
1975, he filed a complaint against petitioner Encyclopaedia Britannica with the Department of Labor and
Employment, claiming for non-payment of separation pay and other benefits, and also illegal deduction
from his sales commissions

ISSUE: W/N an employer-employee relationship exists despite the memoranda and report
submissions?
HELD:
In determining the existence of an employer-employee relationship the following elements must be
present: 1) selection and engagement of the employee; 2) payment of wages; 3) power of dismissal; and
4) the power to control the employees conduct.
Of the above, control of employees conduct is
commonly regarded as the most crucial and determinative indicator of the presence or absence of an
employer-employee relationship.[3] Under the control test, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not only the end to
be achieved, but also the manner and means to be used in reaching that end.
The fact that petitioner issued memoranda to private respondents and to other division sales managers
did not prove that petitioner had actual control over them. The different memoranda were merely
guidelines on company policies which the sales managers follow and impose on their respective agents.
It should be noted that in petitioners business of selling encyclopedias and books, the marketing of
these products was done through dealership agreements. The sales operations were primarily
conducted by independent authorized agents who did not receive regular compensations but only

commissions based on the sales of the products. These independent agents hired their own sales
representatives, financed their own office expenses, and maintained their own staff. Thus, there was a
need for the petitioner to issue memoranda to private respondent so that the latter would be apprised
of the company policies and procedures. Nevertheless, private respondent Limjoco and the other agents
were free to conduct and promote their sales operations. The periodic reports to the petitioner by the
agents were but necessary to update the company of the latters performance and business income. As
stated earlier, the element of control is absent; where a person who works for another does so more or
less at his own pleasure and is not subject to definite hours or conditions of work, and in turn is
compensated according to the result of his efforts and not the amount thereof, we should not find that
the relationship of employer and employee exists.n

4.

RUGA VS NLRC 181 SCRA 266

G.R. No. L-72654-61 January 22, 1990

ALIPIO R. RUGA, JOSE PARMA, ELADIO CALDERON, LAURENTE BAUTU, JAIME BARBIN, NICANOR
FRANCISCO, PHILIP CERVANTES and ELEUTERIO BARBIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and DE GUZMAN FISHING ENTERPRISES and/or ARSENIO DE
GUZMAN, respondents.

FACTS:
The petitioners were the fishermen-crew members of 7/B Sandyman II. For services rendered in the
conduct of private respondent's regular business of "trawl" fishing, petitioners were paid on percentage
commission basis - thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total
proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise, they received ten
percent (10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master fisherman
received a minimum income of P350.00 per week while the assistant engineer, second fisherman, and
fisherman-winchman received a minimum income of P260.00 per week. On September 11, 1983 upon
arrival at the fishing port, petitioners were told by the president of private respondent, to proceed to
the police station at Camaligan, Camarines Sur, for investigation on the report that they sold some of
their fish-catch at midsea to the prejudice of private respondent. Private respondent refused to allow
petitioners to return to the fishing vessel to resume their work on the same day, September 11, 1983.
On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and nonpayment of 13th month pay, emergency cost of living allowance and service incentive pay, with the then
Ministry (now Department) of Labor and Employment

ISSUE: whether or not the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are
employees of its owner-operator, De Guzman Fishing Enterprises, and if so, whether or not they were
illegally dismissed from their employment

HELD:
<Requirements>
Even on the assumption that petitioners indeed sold the fish-catch at midsea the act of private
respondent virtually resulting in their dismissal evidently contradicts private respondent's theory of
"joint fishing venture" between the parties herein. A joint venture, including partnership, presupposes
generally a parity of standing between the joint co-venturers or partners, in which each party has an
equal proprietary interest in the capital or property contributed 16 and where each party exercises
equal lights in the conduct of the business.
In Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations, 112 SCRA 159
(1982), we held that the employer-employee relationship between the crew members and the owners
of the fishing vessels engaged in deep sea fishing is merely suspended during the time the vessels are
drydocked or undergoing repairs or being loaded with the necessary provisions for the next fishing trip.
The said ruling is premised on the principle that all these activities i.e., drydock, repairs, loading of
necessary provisions, form part of the regular operation of the company fishing business.

5.

PAGUIO VS NLRC 294 SCRA 657

FACTS
Wilfredo Melchor was hired by respondent company as a taxi driver on 25 December 1992 under the
*b+oundary *s+ystem. On 24 *sic+ November 1993, complainant allegedly met a vehicular accident along
Quirino Avenue near the PNR Station and Plaza Dilao when he accidentally bumped a car which stopped
at the intersection even when the traffic light was green and go. After he submitted the traffic accident
report to the office of respondents, he was allegedly advised to stop working and have a rest. After
several days[,] he allegedly reported for work only to be told that his service was no longer needed.
Hence, the complaint for illegal dismissal, among others.

ISSUE:
HELD:
In dismissing the petition, this Court reiterates the following doctrines: (1) the boundary system used
in taxi (and jeepney) operations presupposes an employer-employee relation; (2) the employer must
prove just (or authorized) cause and due process to justify dismissal of an employee; (3) strained
relations must be demonstrated as a fact; and (4) back wages and reinstatement are necessary
consequences of illegal dismissal.

Petitioners contention is not novel. In Martinez v. National Labor Relations Commission,*11+ this Court
already ruled that the relationship of taxi owners and taxi drivers is the same as that between jeepney
owners and jeepney drivers under the boundary system. In both cases, the employer-employee
relationship was deemed to exist, viz.:
The relationship between jeepney owners/operators on one hand and jeepney drivers on the other
under the boundary system is that of employer-employee and not of lessor-lessee. x x x In the lease of
chattels[,] the lessor loses complete control over the chattel leased x x x. In the case of jeepney
owners/operators and jeepney drivers, the former exercise supervision and control over the latter. The
fact that the drivers do not receive fixed wages but get only the excess of that so-called boundary they
pay to the owner/operator is not sufficient to withdraw the relationship between them from that of
employer and employee. The doctrine is applicable in the present case. Thus, private respondents were
employees x x x because they had been engaged to perform activities which were usually necessary or
desirable in the usual trade or business of the employer.
As the Court held in Capili vs. NLRC:[24]
xxx *T+he doctrine on strained relations cannot be applied indiscriminately since every labor dispute
almost invariably results in strained relations; otherwise, reinstatement can never be possible simply
because some hostility is engendered between the parties as a result of their disagreement. That is
human nature.
In Martinez vs NLRC, The management of the business is in the respondents hands. For even if the
drivers of the jeeps take material possession of the jeeps, still the respondent as owner thereof and
holder of a certificate of public convenience is entitled to exercise, as he does and under the law he
must, supervision over the drivers by seeing to it that they follow the route prescribed by the Public
Service Commission and the rules and regulations promulgated by it as regards their operation. And
when they pass by the gasoline station of the respondent checking by his employees on the water tank,
oil and tire pressure is done. The only features that would make the relationship of lessor and lessee
between the respondent and the drivers, members of the union, as contended by the respondent, are
the fact that he does not pay them any fixed wage but their compensation is the excess of the total
amount of fares earned or collected by them over and above the amount of P7.50 which they agreed to

pay to the respondent, the owner of the jeeps, and the fact that the gasoline burned by the jeeps is for
the account of the drivers. These two features are not, however, sufficient to withdraw the relationship
between them from that of employer-employee, because the estimated earnings for fares must be over
and above the amount they agreed to pay to the respondent for a ten-hour shift or ten-hour a day
operation of the jeeps. Not having any interest in the business because they did not invest anything in
the acquisition of the jeeps and did not participate in the management thereof, their service as drivers
of the jeeps being their only contribution to the business, the relationship of lessor and lessee cannot be
sustained.[2] In the lease of chattels the lessor loses complete control over the chattel leased although
the lessee cannot make bad use thereof, for he would be responsible for damages to the lessor should
he do so. In this case there is a supervision and a sort of control that the owner of the jeeps exercises
over the drivers. It is an attempt by ingenious scheme to withdraw the relationship between the owner
of the jeeps and the drivers thereof from the operation of the labor laws enacted to promote industrial
peace.

6.

JO VS NLRC 324 SCRA 437

[G.R. No. 121605. February 2, 2000]

PAZ MARTIN JO and CESAR JO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and PETER
MEJILA, respondents.

FACTS:
Peter Mejila worked as barber on a piece rate basis at Dinas Barber Shop. In 1970, the owner, Dina Tan,
sold the barbershop to petitioners Paz Martin Jo and Cesar Jo. All the employees, Mejila, were absorbed
by the new owners. The name of the barbershop was changed to Windfield Barber Shop. The owners
and the barbers shared in the earnings of the barber shop. The barbers got two-thirds (2/3) of the fee
paid for every haircut or shaving job done, while one-third (1/3) went to the owners of the shop. In
1977, petitioners designated private respondent as caretaker of the shop because the former caretaker
became physically unfit. Private respondents duties as caretaker, in addition to his being a barber

ISSUE: W/N an employee-employer relationship exists between a barber and the owner of the
barbershop

HELD:
In determining the existence of an employer-employee relationship, the following elements are
considered: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of

wages by whatever means; and (4) the power to control the workers conduct, with the latter assuming
primacy in the overall consideration. The power of control refers to the existence of the power and not
necessarily to the actual exercise thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the employer has the right to wield that
power.
Absent a clear showing that petitioners and private respondent had intended to pursue a relationship of
industrial partnership, we entertain no doubt that private respondent was employed by petitioners as
caretaker-barber. Initially, petitioners, as new owners of the barbershop, hired private respondent as
barber by absorbing the latter in their employ. Undoubtedly, the services performed by private
respondent as barber is related to, and in the pursuit of the principal business activity of petitioners.
Later on, petitioners tapped private respondent to serve concurrently as caretaker of the shop.
Certainly, petitioners had the power to dismiss private respondent being the ones who engaged the
services of the latter. In fact, private respondent sued petitioners for illegal dismissal, albeit contested
by the latter. As a caretaker, private respondent was paid by petitioners wages in the form of
honorarium, originally, at the rate of one-third (1/3) of the shops net income but subsequently pegged
at a fixed amount per month. As a barber, private respondent earned two-thirds (2/3) of the fee paid
per haircut or shaving job done. Furthermore, the following facts indubitably reveal that petitioners
controlled private respondents work performance, in that: (1) private respondent had to inform
petitioners of the things needed in the shop; (2) he could only recommend the hiring of barbers and
masseuses, with petitioners having the final decision; (3) he had to be at the shop at 9:00 a.m. and could
leave only at 9:00 p.m. because he was the one who opened and closed it, being the one entrusted with
the key.7 [Id. at 56-58.] These duties were complied with by private respondent upon instructions of
petitioners. Moreover, such task was far from being negligible as claimed by petitioners. On the
contrary, it was crucial to the business operation of petitioners as shown in the preceding discussion.
Hence, there was enough basis to declare private respondent an employee of petitioners