Borromeo and Parcia vs. Lazada E-Services Philippines, Inc., et al.

A worker engaged to perform tasks usually necessary or desirable in the principal's business, and over whose means and methods the principal exercises control, is a regular employee entitled to security of tenure, regardless of a contractual stipulation labeling the relationship as independent contracting.

Petitioners Walter L. Borromeo and Jimmy N. Parcia worked as pick-up riders for Lazada, initially through third-party contractors (RGServe and Dynamic). After their contracts with these agencies ended, they signed "Independent Contractor Agreements" directly with Lazada to provide logistics and delivery services using their own motorcycles. They were paid a fixed daily service fee of PHP 1,200.00. In August 2017, they were informed their services would be terminated, prompting them to file a complaint for illegal dismissal and money claims before the National Labor Relations Commission (NLRC).

• Nature of Engagement: Petitioners Borromeo and Parcia were engaged as pick-up riders for Lazada, tasked with collecting products from merchants and delivering them to Lazada's warehouse. They initially worked through third-party contractors before signing "Independent Contractor Agreements" directly with Lazada.
• Terms of the Agreement: The contracts stipulated a PHP 1,200.00 daily service fee, required the use of their own motorcycles, and explicitly stated no employer-employee relationship existed. Borromeo's contract was for one year; Parcia's for six months.
• Alleged Control and Supervision: Petitioners claimed they were required to follow route sheets provided by Lazada's dispatcher, report their arrival and activities to monitoring supervisors in real-time, and use company-provided scanners. They also alleged they were forced to perform additional tasks, like retrieving defective items, for fear of losing future work assignments.
• Termination: In August 2017, petitioners were informed their services would be terminated due to a departmental reduction in force. They filed a complaint for illegal dismissal.
• Lazada's Defense: Lazada argued petitioners were independent contractors, evidenced by their own business registrations (DTI, BIR), the use of their own vehicles, the contractual stipulations, and the lack of mandatory SSS, PhilHealth, and Pag-IBIG deductions.
• Lower Court Findings: The Labor Arbiter, NLRC, and CA all found no employer-employee relationship, emphasizing the contractual stipulations, the petitioners' business registrations, and the lack of sufficient proof of Lazada's control over the means and methods of work.

• Existence of Employer-Employee Relationship: Petitioners argued they were regular employees, not independent contractors, as their work (delivery) was necessary and desirable to Lazada's online retail business. They contended the "Independent Contractor Agreement" was a scheme to circumvent labor laws.
• Application of the Four-Fold Test: They maintained all four elements were present: Lazada selected and engaged them, paid their wages (service fees), held the power of dismissal, and exercised control over their work through route sheets, real-time monitoring, and mandated procedures.
• Economic Dependence: Petitioners asserted they were economically dependent on Lazada, having worked for the company through contractors and then directly for years. Their DTI and BIR registrations were allegedly imposed by Lazada as a condition for continued work.
• Illegal Dismissal: As regular employees, their termination without just or authorized cause and without due process (twin notices and hearing) was illegal, entitling them to reinstatement, backwages, and other monetary claims.
• Personal Liability of Corporate Officers: They argued Lazada's corporate officers should be held solidarily liable for their illegal dismissal.

• Independent Contractor Status: Respondents countered that petitioners were independent contractors based on the express terms of their contracts, their use of own vehicles, and their separate DTI and BIR registrations, which indicated they were engaged in their own business.
• Lack of Control: They argued Lazada did not control the means and methods of the work; route sheets were mere guidelines for achieving the desired result (delivery), not directives on how to perform the task.
• Distinguishing Ditiangkin: Respondents contended the Ditiangkin case was inapplicable due to factual differences, such as petitioners here having business registrations and not alleging lack of substantial capital.
• No Illegal Dismissal: Since no employer-employee relationship existed, the termination of the contract (non-renewal for Borromeo, pre-termination for Parcia) did not constitute illegal dismissal. Monetary claims under labor law were therefore not applicable.
• No Personal Liability: The corporate officers were mere employees of Lazada and acted without malice or bad faith, so they could not be held personally liable.

• Procedural Issue: Whether the petition should be dismissed for being filed out of time.
• Substantive Issue: Whether an employer-employee relationship existed between the petitioners and Lazada.
• Consequential Issue: Whether the petitioners were illegally dismissed and entitled to the reliefs prayed for.

• Procedural Issue: The Court excused the late filing, invoking its discretion to relax procedural rules in the interest of substantial justice, given the petition's merit.
• Substantive Issue: An employer-employee relationship existed. The four-fold test was satisfied: (1) Lazada directly engaged petitioners; (2) paid them a fixed daily fee; (3) had the power to dismiss them; and (4) exercised control over their work through mandatory route sheets, real-time reporting requirements, performance evaluations, and the provision of scanning equipment. The economic reality test also confirmed their status as employees, as their services were integral to Lazada's business, they had no opportunity for profit or loss, and were economically dependent on Lazada.
• Consequential Issue: The petitioners were illegally dismissed. As regular employees, they enjoyed security of tenure. Their termination was without just or authorized cause and violated procedural due process (lack of twin notices and hearing). They are entitled to reinstatement, full backwages, and other benefits.

• Four-Fold Test for Employer-Employee Relationship — The existence of an employment relationship is determined by: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer's power to control the employee's work. The control test, concerning the means and methods of work, is the most important factor. The Court applied this test and found all elements present, with Lazada exercising control through operational directives.
• Economic Reality Test — This test supplements the control test by examining the totality of economic circumstances to determine dependency. Factors include: the integral nature of the worker's service to the business, the worker's investment, the control exercised, the opportunity for profit/loss, the skill required, the permanency of the relationship, and the worker's economic dependence. The Court used this to affirm that the riders were economically dependent on Lazada.
• Distinction Between Labor-Only Contracting and Legitimate Job Contracting — Labor-only contracting exists where the contractor lacks substantial capital and the workers perform activities directly related to the principal's business; in such cases, the principal is the true employer. Legitimate job contracting requires the contractor to have substantial capital, be free from the principal's control, and perform a specific job. The Court found no trilateral relationship here, as Lazada directly engaged the riders.

• "The element of control is shown by the fact that petitioners are required to log in the route sheet their arrival time, loading time, and departure time to allow Lazada to monitor their movement as well as how they conduct their services." — This illustrates the Court's finding of control over means and methods.
• "The services performed by petitioners are integral to respondents' business... The delivery eases the transaction between the sellers and buyers and is an integral part of respondent Lazada's business." — This supports the application of the economic reality test and the finding that the work was necessary and desirable to Lazada's business.
• "As regular employees of Lazada, petitioners having been engaged to perform tasks usually necessary, desirable or integral to the usual trade and business of Lazada... petitioners have a right to security of tenure." — This is the core holding linking the finding of regular employment to the right against illegal dismissal.

• Ditiangkin v. Lazada, G.R. No. 246892, September 21, 2022 — This case, with substantially identical facts involving Lazada riders, was heavily relied upon as controlling precedent. The Court reiterated its ruling that such riders are employees, not independent contractors, and applied its reasoning on the four-fold and economic reality tests.
• Royale Homes Marketing Corp. v. Alcantara, 739 Phil. 744 (2014) — Cited for the principle that not all control indicates an employment relationship; rules that merely serve as guidelines towards a result do not constitute the labor law concept of control.
• Francisco v. National Labor Relations Commission, 532 Phil. 399 (2006) — Cited to explain the economic reality test and its factors for determining employment status.

• Article 106, Labor Code — Defines contractor/subcontractor arrangements and "labor-only" contracting. The Court used this to frame the discussion on legitimate independent contracting and found the petitioners did not fall under its definitions.
• Article 295 (formerly 280), Labor Code — Defines regular employment. The Court applied this to rule that petitioners were regular employees because their work (delivery) was usually necessary or desirable in Lazada's online retail business.
• Articles 297-299, Labor Code — Provide the just and authorized causes for termination. The Court found Lazada failed to prove any of these causes existed.
• Section 8, DOLE Department Order No. 174-2017 — Lays out the conditions for permissible contracting/subcontracting. The Court cited this to show that legitimate contracting requires, among others, that the contractor is free from the principal's control and has substantial capital, conditions not met here.

• Associate Justice Marvic M.V.F. Leonen (Chairperson)
• Associate Justice Henri Jean Paul B. Inting
• Associate Justice Jhosep Y. Lopez
• Associate Justice Antonio T. Kho, Jr.