Degamo vs. My Citihomes

A real estate sales agent engaged through a developer's licensed broker is an independent contractor, not an employee, where the developer does not control the means and methods by which the agent solicits sales, and the agent's claim for unpaid commissions must therefore be pursued in an ordinary civil action before the regular courts, not before labor tribunals.

Respondent My Citihomes (Citihomes) is a domestic corporation engaged in the development and construction of real properties, with Rosie Wang and John Wang as its owners. The marketing of Citihomes's real estate properties was conducted through real estate brokerage, with sales operations primarily carried out by independent authorized brokers such as Evelyn Abapo, who secured the services of their own sales representatives and financed their own office expenses. Petitioner Edita Santos Degamo was one such sales agent engaged under this brokerage arrangement.

Respondent My Citihomes is a domestic corporation engaged in the development and construction of real properties, with Rosie Wang and John Wang as its owners. The marketing of its real estate properties was conducted through real estate brokerage, with sales operations primarily carried out by independent authorized brokers who secured the services of their own sales representatives and financed their own office expenses.

Petitioner Edita Santos Degamo alleged that she was hired by Citihomes on March 1, 2015 as an agent to work in Citi Pro, a group of real estate agents sanctioned by Citihomes. She was eventually promoted to sales manager, with tasks that included soliciting potential clients, advising clients on prices and conditions, supervising property consultants, manning Citihomes or Citi Pro booths, and reporting to the Citihomes office. She claimed that Citihomes required her to maintain a monthly sales quota of ₱5,000,000.00 and closely monitored her work three times a week from 9:00 a.m. to 6:00 p.m. in accordance with its rules and regulations, from the initial processing of buyer documents through the turnover of the property.

Due to low sales, petitioner filed a resignation letter effective April 30, 2017, but it was not accepted by her direct superior, Ms. Evelyn Abapo. Citihomes also refused to pay her commission fees for the 18 real properties she claimed to have successfully sold. Petitioner thereafter filed a complaint for non-payment of commission fees against Citihomes, praying for payment of the unpaid commissions plus moral and exemplary damages.

Citihomes countered that petitioner was not its employee but a mere sales agent of Ms. Abapo, a licensed broker who possessed the power to hire and terminate petitioner. It did not pay petitioner's wages, as the fees of sales agents came from the commissions it paid to Ms. Abapo, who then allocated them among her sales agents. Citihomes also asserted that it did not exercise control over the means and methods by which petitioner performed her job, as she devised her own techniques and methods in soliciting buyers. Petitioner, in her reply, maintained that she was an employee of Citihomes hired through Ms. Abapo, regularly paid commission fees, and closely monitored in accordance with company rules, performing services usually necessary and desirable to Citihomes's main business.

The Labor Arbiter found Ms. Abapo to be a labor-only contractor and declared Citihomes the real employer, ordering payment of unpaid commission fees for 10 accounts amounting to ₱117,121.21. The NLRC reversed, holding that no employer-employee relationship existed, as petitioner was engaged by Ms. Abapo — not Citihomes — and was free to conduct her sales operations without definite hours or conditions, compensated according to the results of her efforts. The CA affirmed the NLRC, noting petitioner's own admissions that her services were engaged by Citihomes "through Abapo" and that she tendered her resignation to Ms. Abapo, bolstering the conclusion that Citihomes hires licensed brokers who manage their own sales agents.

• Four-Fold Test: Petitioner argued that the four elements of employer-employee relationship were present: (1) she was selected and engaged by Citihomes through their licensed real estate broker, Ms. Abapo; (2) Citihomes paid her commission fees on a per buyer basis; (3) Citihomes had the power to dismiss her; and (4) Citihomes exercised control over the means and methods of her job.
• Labor-Only Contracting: Petitioner contended that Ms. Abapo was a labor-only contractor who had no substantial capital or investment of her own, and that the law presumes a contractor to be a labor-only contractor, placing the burden on Citihomes to establish that Ms. Abapo was a legitimate job contractor.
• Employer by Operation of Law: Petitioner maintained that for failing to prove that Ms. Abapo was not a labor-only contractor, Citihomes was indubitably the actual employer of petitioner.

• No Employer-Employee Relationship: Citihomes averred that petitioner was not its employee but a mere sales agent of Ms. Abapo, a licensed broker who possessed the power to hire and terminate petitioner.
• No Payment of Wages: Citihomes argued that it did not pay petitioner's wages, as the fees of sales agents came from the commissions it paid to Ms. Abapo, who then made allocations among her own sales agents.
• No Control Over Means and Methods: Citihomes maintained that it did not exercise control over the means and methods by which petitioner performed her job, as she devised her own techniques and methods in soliciting buyers of real properties.
• Lack of Jurisdiction: Citihomes contended that there being no employer-employee relationship between the parties, the Labor Arbiter had no jurisdiction over petitioner's complaint.
• Legitimate Contracting Arrangement: Citihomes argued that the Labor Arbiter's conclusion that it was engaged in labor-only contracting was misleading because it only hires registered licensed brokers, such as Ms. Abapo, who select, gather, guide, and control their own pool of sales agents like petitioner.

• Employer-Employee Relationship: Whether there was an employer-employee relationship between Citihomes and petitioner.

• Employer-Employee Relationship: No. The four elements of the employer-employee relationship — selection and engagement, payment of wages, power of dismissal, and power of control — were not present, petitioner having failed to adduce substantial evidence that Citihomes engaged her services, paid her salary, possessed the power to dismiss her, or controlled the means and methods of her work.

• Employer-Employee Relationship: The four-fold test — comprising (1) the selection and engagement of the employee, (2) the payment of wages, (3) the power of dismissal, and (4) the power to control the employee's conduct — is the controlling framework for ascertaining the existence of an employer-employee relationship, with the control test being the most significant determinant. The power of control refers to whether the person for whom services are performed reserves the right to control both the end achieved and the manner and means used to achieve that end. The burden of proof rests upon the party asserting the affirmative of the issue; petitioner, claiming to be an employee, bore the duty to prove the relationship by substantial evidence. Other than her bare allegations, petitioner adduced no relevant proof that Citihomes engaged her services, paid her salary, or had the power to dismiss her. Her only evidence pertained to alleged unpaid commission fees. Her own admissions undermined her claim: she stated that Ms. Abapo was the one who engaged her services and that she tendered her resignation letter to Ms. Abapo, supporting Citihomes's position that Ms. Abapo, as an independent contractor, selected, gathered, and controlled her own pool of sales agents. Regarding the control test, petitioner alleged that Citihomes required a monthly sales quota of ₱5,000,000.00 and monitored her work three times a week. However, setting a sales quota and monitoring performance are not the kind of control contemplated by law; they are merely imposed to achieve a certain production level and do not pertain to the means and methods of accomplishing the assigned tasks. By the nature of the business of soliciting sales, agents are normally left free to devise ways and means of persuading people to buy properties. Furthermore, petitioner never complained about being denied statutorily mandated benefits during her two-year engagement, nor about non-membership in SSS, PhilHealth, or Pag-Ibig — omissions signifying that she understood herself not to be entitled to employee benefits because she was an independent contractor. Applying the framework from Royale Homes Marketing Corp. vs. Alcantara, the Court found the indicia of independent contractorship present: petitioner was not subject to rules interfering with the means and methods of her work, was not required to observe definite working hours, was paid commissions rather than a fixed salary, and was not entitled to statutorily mandated benefits. As an independent contractor, petitioner's claim for unpaid commissions must be litigated in an ordinary civil action, the jurisdiction of the Labor Arbiter and the NLRC being confined to disputes arising out of or in connection with an employer-employee relationship.

• Four-Fold Test — The existence of an employer-employee relationship is determined by four elements: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct, known as the "control test." The control test is the most significant determinant, premised on whether the person for whom the services are performed reserves the right to control both the end achieved and the manner and means used to achieve that end. In this case, petitioner failed to prove any of the four elements, particularly the power of control, as the sales quota and monitoring imposed by Citihomes pertained only to results, not to the means and methods of accomplishing the work.

• Control Test Distinguished from Result-Oriented Supervision — The presence of supervisory authority to control the method and details of the performance of the service being rendered indicates an employment relationship, while the absence thereof indicates independent contractorship. Setting sales quotas and monitoring working hours do not constitute the kind of control contemplated by law, as they are merely imposed to achieve a certain production level and do not pertain to the means and methods of accomplishing the assigned task. In this case, Citihomes's imposition of a ₱5,000,000.00 monthly quota and thrice-weekly monitoring did not establish control over how petitioner solicited sales.

• Indicia of Independent Contractorship for Real Estate Sales Agents — Pursuant to Royale Homes Marketing Corp. vs. Alcantara, there is no employer-employee relationship between a real estate corporation and a sales broker when the latter: (a) is subject to rules and regulations which do not interfere with the means and methods of accomplishing the assigned tasks; (b) is not required to observe definite working hours; (c) can engage in selling other products or engage in unrelated business; (d) is paid compensation consisting of commission override, budget allocation, sales incentive and other forms of company support but not fixed monthly salary; and (e) is not entitled to statutorily mandated benefits. Petitioner's circumstances satisfied these indicia.

• Jurisdiction of Labor Tribunals — The jurisdiction of the Labor Arbiter and the NLRC pertains to cases or disputes arising out of or in connection with an employer-employee relationship. Without this critical element of employment, labor tribunals cannot acquire jurisdiction over a dispute. An independent contractor's claim for unpaid commissions must be litigated in an ordinary civil action before the regular courts.

• "The significant factor in determining the relationship of the parties is the presence or absence of supervisory authority to control the method and the details of the performance of the service being rendered and the degree to which the alleged employer may intervene to exercise such control. The presence of such power of control is indicative of an employment relationship, while the absence thereof is indicative of independent contractorship." — This passage articulates the canonical formulation of the control test as the distinguishing factor between employment and independent contractorship, serving as the ratio decidendi for the Court's conclusion.

• "By the nature of the business of soliciting sales on behalf of a real estate corporation, sales agents are normally left free to devise ways and means of persuading people to buy properties. Besides, even assuming that Citihomes monitored petitioner's working hours and set a certain sales quota on her, it is not the kind of control which the law contemplates that would result in an employer-employee relationship. It is merely imposed to achieve a certain production level wherein incentives are given when a particular performance is reached." — This passage distinguishes result-oriented supervision from the control test, explaining why sales quotas and performance monitoring do not establish an employer-employee relationship for real estate sales agents.

• "Without this critical element of employment relationship, the labor tribunals can never acquire jurisdiction over a dispute as in the case at bar." — This passage states the jurisdictional consequence of the absence of an employer-employee relationship, foreclosing labor tribunal jurisdiction over independent contractors' money claims.

• Royale Homes Marketing Corp. vs. Alcantara, 739 Phil. 744 (2014) — Controlling precedent followed. The Court applied the five indicia of independent contractorship for real estate sales brokers articulated in this case — non-interfering rules, no definite working hours, freedom to engage in other business, commission-based compensation, and no entitlement to statutory benefits — and found them satisfied by petitioner's circumstances.

• AFP Mutual Benefit Asso., Inc. vs. NLRC, 334 Phil. 712 (1997) — Followed for the proposition that the test for independent contractorship is whether one has contracted to do the work according to his own methods and without being subject to the control of the employer except only as to the result of the work, and for the jurisdictional principle that without an employer-employee relationship, labor tribunals cannot acquire jurisdiction over a dispute.

• Felicilda vs. Uy, 795 Phil. 408 (2016) — Followed for the four-fold test framework for determining the existence of an employer-employee relationship.

• Microsoft Corporation, et al. vs. Farajallah, et al., 742 Phil. 744 (2014) — Cited for the exception allowing the Court to resolve factual questions in a petition for review on certiorari when the factual findings of the labor tribunals are conflicting.

• Labor Code provisions on jurisdiction of Labor Arbiters and the NLRC — Applied to determine that the jurisdiction of the Labor Arbiter and the NLRC is confined to cases or disputes arising out of or in connection with an employer-employee relationship. Absent such relationship, petitioner's claim for unpaid commissions must be litigated in an ordinary civil action before the regular courts.

Perlas-Bernabe, S.A.J. (Chairperson), Hernando, Gaerlan, and Rosario, JJ., concurred.