Dynamiq Multi-Resources, Inc. vs. Genon

An employee paid on a commission basis may still be a regular employee entitled to 13th month pay, because the method of computing compensation does not determine the existence or absence of an employer-employee relationship; regular employment status is based on whether the employee's activities are usually necessary or desirable in the usual business or trade of the employer, not on how the salary is paid.

Dynamiq Multi-Resources, Inc. is a hauling business, and Orlando D. Genon worked as a truck driver for the company from September 10, 2009 until his resignation on June 3, 2014. The parties executed an "Agreement" dated July 4, 2013, which Dynamiq characterized as an independent contractor arrangement. The dispute arose from Genon's claim for unpaid 13th month pay, refund of cash bond and other deductions, and attorney's fees, all of which turned on whether an employer-employee relationship existed between the parties.

Orlando D. Genon was hired as a truck driver by Dynamiq Multi-Resources, Inc., a hauling business, on September 10, 2009. During his employment, he worked from Monday to Saturday and received his salary every 15th day of the month. Cash bond, insurance, and phone bills were deducted from his salary. The parties executed an "Agreement" dated July 4, 2013, which Dynamiq characterized as establishing an independent contractor relationship, with Genon purportedly paid on a commission basis. Genon maintained that he was a regular employee, not an independent contractor, and submitted his driver's itinerary from January 2011 until May 2014 and pay slips to support his claim.

On June 3, 2014, Genon resigned from his employment. Upon resignation, Dynamiq refused to return his cash bond and other deductions. Genon also claimed he was not given his 13th month pay during his entire period of employment. Dynamiq countered that the cash bond had already been returned, less all cash advances or vales Genon had made, and that the deductions were effected in accordance with the terms of the Agreement, which Genon had explicitly agreed upon signing.

Genon filed an Amended Complaint for non-payment of 13th month pay, illegal deductions, moral and exemplary damages, and attorney's fees before the NLRC-National Capital Region. Conciliation and mediation proceedings proved futile. The Labor Arbiter found Genon to be a regular employee and awarded monetary benefits, but the NLRC reversed and dismissed the complaint. The Court of Appeals reversed the NLRC, reinstated the Labor Arbiter's decision with modification, and found that Genon was a regular employee entitled to 13th month pay and cash bond refund. The factual findings of the Labor Arbiter and the Court of Appeals—both of which found an employer-employee relationship—conflicted with the NLRC's contrary finding, prompting the Supreme Court to exercise its equity jurisdiction to review the factual issues.

• Independent Contractor Status: Dynamiq maintained that the Agreement dated July 4, 2013 showed no employer-employee relationship, as Genon was merely an independent contractor paid on commission basis and therefore not entitled to 13th month pay.
• Validity of Deductions: Dynamiq argued that the deductions were effected in accordance with the terms and conditions of Genon's engagement, which he explicitly agreed upon signing the Agreement.
• Cash Bond Already Returned: Dynamiq claimed that Genon's cash bond was already returned to him, less all the cash advances or vales that he made during his employment.
• Quitclaim and Waiver: Dynamiq emphasized that Genon freely and voluntarily signed and executed a quitclaim and waiver.
• Commission Basis Excludes 13th Month Pay: Dynamiq asserted that employees paid on commission basis are not entitled to 13th month pay.

• Regular Employment Status: Genon argued that he is a regular employee of Dynamiq and thus entitled to 13th month pay, contending that an employer-employee relationship exists.
• Selection and Engagement: Genon claimed the record is bereft of evidence showing it was not Dynamiq that engaged him, leading to the logical conclusion that Dynamiq hired him.
• Payment of Wages: Genon alleged that it is undisputed that Dynamiq paid him his wage every 15 days.
• Power of Dismissal: Genon contended that Dynamiq already had the power to dismiss him, which is inherent in its power of selection and engagement.
• Power of Control: Genon claimed that Dynamiq had power of control over him.

• Employer-Employee Relationship: Whether an employer-employee relationship existed between Dynamiq and Genon despite the latter being paid on a commission basis.
• Regular Employment Status: Whether Genon was a regular employee of Dynamiq.
• Entitlement to 13th Month Pay: Whether an employee paid on commission basis is entitled to 13th month pay regardless of employment status.

• Employer-Employee Relationship: Yes. All four elements of the four-fold test were present: Dynamiq hired Genon as a truck driver, paid him compensation for services rendered, possessed the power to dismiss inherent in its selection and engagement, and exercised control over his work through its ownership of the trucks, exclusive client base, and monitoring of schedule and route.
• Regular Employment Status: Yes. Genon performed activities—truck driving—usually necessary or desirable in Dynamiq's hauling business, and his nearly five years of continuous service evidenced the repeated and continuing need for his activity.
• Entitlement to 13th Month Pay: Yes. Payment on a commission basis is merely a method of computing compensation and does not negate employment status; as a regular employee, Genon is entitled to 13th month pay under Presidential Decree No. 851.

• Employer-Employee Relationship: The Court applied the four-fold test from Felicilda vs. Uy, examining (1) selection and engagement, (2) payment of wages, (3) power of dismissal, and (4) power to control the employee's conduct. It was undisputed that Dynamiq hired Genon as a truck driver for its hauling business. Genon received compensation evidenced by payslips; while wages were determined on a "per trip" or commission basis, the Court held—relying on Article 97(f) of the Labor Code—that wages may be ascertained on a commission basis, and this is merely a method of computing compensation, not a basis for determining the existence of an employer-employee relationship. Dynamiq's power to dismiss was inherent in its selection and engagement of Genon. The control test, the most significant element, was satisfied because Dynamiq owned the trucks Genon used, the hauling trips were exclusively for Dynamiq's clients, and Dynamiq determined and strictly monitored Genon's schedule and route. The Court emphasized that the control test requires only the existence of the right to control, not necessarily its exercise. Dynamiq's unsubstantiated claim that Genon rendered service to other companies was rejected for lack of evidence.

• Regular Employment Status: Under Article 295 of the Labor Code (formerly Article 280), an employment is deemed regular where the employee performs activities usually necessary or desirable in the usual course of the employer's business. Applying the standard from Espina vs. Highlands Camp/Rawlings Foundation, Inc., citing Abaloso vs. NLRC, the Court found that truck driving is necessarily connected with Dynamiq's hauling business. Genon's nearly five years of service from 2009 demonstrated the repeated and continuing need for his services, sufficient evidence of the necessity of his activity to the business.

• Entitlement to 13th Month Pay: The governing law is Presidential Decree No. 851, as modified by the Revised Guidelines and Labor Advisory No. 28, Series of 2020, which entitles all rank-and-file employees to 13th month pay regardless of their position, designation, or employment status, and irrespective of the method by which their wages are paid, provided they worked at least one month during the calendar year. The Court rejected Dynamiq's assertion that commission-based employees are excluded, holding that regular employment status is not based on how salary is paid; an employee may be paid purely on commission and still be a regular employee. An employee who has resigned is entitled to 13th month pay in proportion to the length of time worked during the year. The Court sustained the amounts awarded by the Labor Arbiter as affirmed by the CA, plus legal interest at 6% per annum from finality of the decision until full payment.

• Four-Fold Test / Control 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. The power of control is the most significant determinant. The test requires only the existence of the right to control, not necessarily the exercise thereof; it is sufficient that the employer has the ability to wield the power, without need to actually supervise the employee's performance. The Court applied this test and found all four elements present, with control established through Dynamiq's ownership of trucks, exclusive client base, and monitoring of schedule and route.

• Commission-Based Wages Do Not Negate Employment — Wages may be ascertained on a time, task, piece, or commission basis under Article 97(f) of the Labor Code. Payment on a commission or per-trip basis is merely a method of computing compensation and does not determine the existence or absence of an employer-employee relationship. The Court applied this principle to reject Dynamiq's argument that commission-based payment made Genon an independent contractor.

• Regular Employment Standard — The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee and the usual business or trade of the employer. The test is whether the activity is usually necessary or desirable in the usual business or trade. If the employee has performed the job for at least one year, even if intermittent, the repeated and continuing need for its performance is sufficient evidence of the necessity or indispensability of that activity. The Court found truck driving necessary to Dynamiq's hauling business and Genon's five years of service sufficient to establish regular employment.

• "That Genon was paid on a 'per trip' or commission basis is insignificant as 'this is merely a method of computing compensation, not a basis for determining the existence or absence of an employer-employee relationship.'" — This passage articulates the ratio decidendi that commission-based payment does not negate employment status, directly resolving the central issue of the case.

• "It should be remembered that a regular status of employment is not based on how the salary is paid to an employee. An employee may be paid purely on commission and still be considered a regular employee." — This formulation establishes the principle that employment status is determined by the nature of the work performed, not the method of wage computation, and is the key holding on entitlement to 13th month pay.

• "The supremacy of the law over the nomenclature of the contract and its pacts and conditions is to bring life to the policy enshrined in the Constitution to afford full protection to labor. Thus, labor contracts are placed on a higher plane than ordinary contracts since these are imbued with public interest and, therefore, subject to the police power of the State." — This passage underscores the constitutional policy of full protection to labor and the principle that the substance of the relationship, not the contract's label, governs employment status.

• Felicilda vs. Uy, 795 Phil. 408 (2016) — Controlling precedent for the four-fold test and control test in determining the existence of an employer-employee relationship. The Court relied on this case to establish that the power of control is the most significant element and that only the existence of the right to control, not its exercise, is required.

• Chavez vs. NLRC, 489 Phil. 444 (2005) — Cited for the proposition that payment on a commission or per-trip basis is merely a method of computing compensation, not a basis for determining the existence or absence of an employer-employee relationship.

• Espina vs. Highlands Camp/Rawlings Foundation, Inc., G.R. Nos. 220935 & 219868, July 28, 2020 — Cited for the standard of determining regular employment status, specifically the reasonable connection between the employee's activity and the employer's usual business or trade.

• Abaloso vs. NLRC, 400 Phil. 86 (2000) — Cited through Espina as the origin of the regular employment standard, establishing that the primary test is whether the employee's work is usually necessary or desirable in the employer's business.

• AGG Trucking vs. Yuag, 675 Phil. 108 (2011) — Cited for the principle that an employee paid purely on commission may still be considered a regular employee.

• Alaska Milk Corp. vs. Paez, G.R. Nos. 237277 & 237317, November 27, 2019 — Cited for the principle that the control test requires only the existence of the power to control, not its actual exercise.

• Mariano vs. G. V. Florida Transport, G.R. No. 240882, September 16, 2020 — Cited for the rule that an employee who has resigned is entitled to 13th month pay in proportion to the length of time worked during the calendar year.

• Innodata Knowledge Services, Inc. vs. Inting, 822 Phil. 314 (2017) — Cited for the principle of the supremacy of labor law over the nomenclature of contracts and the constitutional policy of full protection to labor.

• Dusol vs. Lazo, G.R. No. 200555, January 20, 2021 — Cited for the exception allowing the Court to review factual issues when there is a conflict among the factual findings of the Labor Arbiter and the CA versus the NLRC.

• Article 97(f), Labor Code — Defines wages as remuneration or earnings capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, payable by an employer to an employee. Applied to show that commission-based payment falls within the statutory definition of wages and does not negate employment.

• Article 295, Labor Code (formerly Article 280) — Provides that an employment shall be deemed regular where the employee performs activities usually necessary or desirable in the usual course of business or trade of the employer. Applied to classify Genon as a regular employee because truck driving is necessary to Dynamiq's hauling business.

• Presidential Decree No. 851 (13th Month Pay Law) — As modified by the Revised Guidelines on the Implementation of the 13th Month Pay Law, requires all employers to pay rank-and-file employees a 13th month pay not later than December 24 of every year. Applied to entitle Genon, as a regular rank-and-file employee, to 13th month pay.

• Labor Advisory No. 28, Series of 2020 — Provides that rank-and-file employees in the private sector are entitled to 13th month pay regardless of position, designation, or employment status, and irrespective of the method by which wages are paid, provided they worked at least one month during the calendar year. Applied to confirm Genon's entitlement to 13th month pay despite commission-based compensation.

Leonen (Chairperson), Hernando, Inting, and J. Lopez, JJ., concurred. No separate concurring opinions were noted.