Expedition Construction Corp. vs. Africa

The four-fold test determines the existence of an employer-employee relationship: (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, or the so-called "control test." Payment on a per trip basis is merely a method of computing compensation and does not negate the existence of an employer-employee relationship. The power of control refers to the existence of the power, not its actual exercise. An employee who has rendered at least one year of service is presumed to be a regular employee with respect to the activity in which they are employed, and their employment continues while such activity exists.

Petitioner Expedition Construction Corporation (Expedition) is a domestic corporation engaged in garbage collection and hauling, with petitioners Simon Lee Paz and Jordan Jimenez serving as its Chief Executive Officer and Operations Manager, respectively. Expedition entered into separate contracts with the cities of Quezon, Mandaluyong, Caloocan, and Muntinlupa for the collection and transport of their garbage to designated dump sites. Respondents were engaged as garbage truck drivers to collect garbage from different cities and transport the same to the designated dumping site. The case involves the application of labor law principles on employer-employee relationship, regular employment, security of tenure, and illegal dismissal within the context of the garbage collection and hauling industry.

Petitioner Expedition Construction Corporation (Expedition), with petitioners Simon Lee Paz and Jordan Jimenez as its Chief Executive Officer and Operations Manager, respectively, is a domestic corporation engaged in garbage collection and hauling. It engaged the services of respondents as garbage truck drivers to collect garbage from different cities and transport the same to the designated dumping site. Expedition entered into separate contracts with the cities of Quezon, Mandaluyong, Caloocan, and Muntinlupa for the collection and transport of their garbage to the dump site, and respondents were oftentimes dispatched in Quezon City and Caloocan City.

Respondents filed separate cases (later consolidated) against Expedition for illegal dismissal; underpayment and non-payment of salaries/wages, holiday pay, holiday premium, rest day premium, service incentive leave pay, 13th month pay, separation pay, and Emergency Cost of Living Allowance (ECOLA); illegal deduction; moral and exemplary damages and attorney's fees. In their Position Paper, respondents alleged that in August 2013, they were illegally terminated from employment when they were prevented from entering the premises of Expedition without cause or due process. They claimed that they were regular employees of Expedition; were required to work a minimum of 12 hours a day, seven days a week, even on holidays, without rest or vacation; and were not paid the minimum wage, holiday or premium pay, overtime pay, service incentive leave pay and 13th month pay. They also averred that the costs of repair and maintenance of the garbage trucks were illegally deducted from their salaries.

Expedition, in its Position Paper, countered that respondents were not illegally dismissed. It averred that the need for respondents' services significantly decreased sometime in 2013 after its contracts with Quezon City and Caloocan City were not renewed, and that it nonetheless tried to accommodate respondents by giving them intermittent trips whenever the need arose. Expedition denied that respondents were its employees, claiming that respondents were not part of the company's payroll but were being paid on a per trip basis; that respondents were not under Expedition's direct control and supervision as they worked on their own, were not subjected to company rules nor were required to observe regular/fixed working hours; and that respondents hired and paid their respective garbage collectors.

In their Reply, respondents insisted that they worked under Expedition's control and supervision considering that: (1) Expedition owned the dump trucks; (2) Expedition expressly instructed that the trucks should be used exclusively to collect garbage in their assigned areas and transport the garbage to the dump site; (3) Expedition directed them to park the dump trucks in the garage located at Group 5 Area Payatas, Quezon City after completion of each delivery; and (4) Expedition determined how, where, and when they would perform their tasks. Respondents also adverted to petitioners' counsel's manifestation during the mandatory conciliation proceedings regarding Expedition's willingness to accept them back to work, as proof of their status as Expedition's regular employees. To further support their claim, respondents attached in their Rejoinder affidavits of Eric Rosales and Roger A. Godoy, both claiming to be former employees of Dodge Corporation/Expedition Construction Corporation and attesting that respondents were regular employees of Expedition.

The Labor Arbiter dismissed respondents' complaints, holding that there was no employer-employee relationship between Expedition and respondents, ruling that respondents were independent contractors. The NLRC dismissed respondents' appeal and affirmed the ruling of the LA, opining that respondents were project employees hired for a specific undertaking of driving garbage trucks, the completion and termination of which was conterminous with Expedition's contracts with the LGUs. Upon respondents' Motion for Reconsideration, the NLRC modified its earlier Resolution, ruling that respondents were employees of Expedition in view of Expedition's admission that it hired and paid respondents for their services, and that Expedition exercised control on when and how respondents would collect garbage. The NLRC, however, sustained its earlier finding that there was no illegal dismissal, ratiocinating that respondents were merely placed on a floating status when the contracts with Quezon City and Caloocan City expired. As there was no dismissal to speak of, the NLRC ordered respondents' reinstatement but without the payment of back wages; however, due to lack of clients where respondents could be re-assigned, the NLRC opted to award separation pay in lieu of reinstatement.

The Court of Appeals rendered a Decision dismissing Expedition's Petition for Certiorari and ruling in favor of respondents. The CA affirmed the NLRC Resolution insofar as the existence of an employer-employee relationship, noting that respondents were hired and paid by Expedition, that Expedition exercised the power to provide and withhold work from respondents, and that the power of control was evident since Expedition determined how, where and when respondents would perform their tasks. The CA ruled that respondents were regular employees entitled to security of tenure because they continuously worked for several years for the company. The CA, however, did not agree with the NLRC that respondents were on floating status since petitioners did not adduce proof of any dire exigency justifying failure to give respondents any further assignments, and ruled that respondents were illegally dismissed when Expedition prevented them from working, ordering their reinstatement with full back wages.

• Lack of Employer-Employee Relationship: Expedition maintained that it did not exercise the power of selection or engagement, payment of wages, dismissal, and control over respondents, and that the CA had no legal basis in finding that respondents were its employees.
• No Regular Employment: Expedition argued that respondents were never hired but were merely engaged as drivers; that they worked on their own and were not subjected to its control and supervision; that they were compensated based on output or number of trips made in a day; that they selected their own garbage collectors, chose their own route and determined the manner by which they would collect the garbage; and that they performed their work at their own pleasure without fear of being sanctioned if they chose not to report for work.
• No Illegal Dismissal: Expedition insisted that there was no illegal dismissal, as respondents were merely placed on floating status when the contracts with Quezon City and Caloocan City expired.
• Separation Pay Instead of Reinstatement: Expedition argued that the CA erred in awarding reinstatement and back wages instead of separation pay, which was prayed for by respondents, and manifested its willingness to offer financial assistance to respondents in amounts equivalent to the separation pay awarded in the April 30, 2015 NLRC Resolution.

• Existence of Employer-Employee Relationship: Respondents insisted that they worked under Expedition's control and supervision considering that: (1) Expedition owned the dump trucks; (2) Expedition expressly instructed that the trucks should be used exclusively to collect garbage in their assigned areas and transport the garbage to the dump site; (3) Expedition directed them to park the dump trucks in the garage after completion of each delivery; and (4) Expedition determined how, where, and when they would perform their tasks.
• Regular Employment: Respondents argued that they were not project employees because the nature of their work was necessary and desirable to Expedition's line of business and that their continuous and uninterrupted employment reaffirmed their status as regular employees; there was no written contract evidencing project employment nor were they informed of their status as project employees.
• Illegal Dismissal: Respondents alleged that in August 2013, they were illegally terminated from employment when they were prevented from entering the premises of Expedition without cause or due process.

• Employer-Employee Relationship: Whether the Court of Appeals gravely erred in upholding the NLRC's finding that there was an employer-employee relationship between petitioner corporation and respondents.
• Regular Employment: Whether, assuming there was an employer-employee relationship, the Court of Appeals gravely erred in ruling that respondents were regular employees.
• Illegal Dismissal: Whether the Court of Appeals gravely erred in ruling that respondents were illegally dismissed.
• Award of Reinstatement and Back Wages: Whether, assuming respondents were regular employees and had been illegally dismissed, the Court of Appeals gravely erred when it awarded reinstatement with full back wages instead of separation pay only.

• Employer-Employee Relationship: Yes, an employer-employee relationship existed. All elements of the four-fold test were present: Expedition hired respondents as dump truck drivers, paid them ₱620.00 per trip, wielded the power to dismiss, and exercised the power of control over respondents' performance of their work.
• Regular Employment: Yes, respondents were regular employees. There was no showing that respondents had substantial capital or investment to be qualified as independent contractors, and there was no written contract proving project employment; thus, respondents were accorded the presumption of regular employment pursuant to Article 230 of the Labor Code.
• Illegal Dismissal: No, there was no illegal dismissal. Respondents failed to establish by substantial evidence the fact of dismissal through positive and overt acts of the employer indicating an intention to dismiss; mere allegation is not proof or evidence.
• Award of Reinstatement and Back Wages: No, the award of reinstatement and back wages was improper. Since there was no dismissal, the status quo should be maintained; however, given the ruptured relationship and respondents' long years of service, the grant of separation pay as a form of financial assistance was deemed equitable.

• Employer-Employee Relationship: The question of whether respondents were employees of Expedition is a factual issue, and only questions of law may be raised in a petition for review on certiorari under Rule 45. However, an exception exists when the factual findings of the labor tribunals are contradictory to each other, as in this case. Jurisprudence has adhered to the four-fold test in determining the existence of an employer-employee relationship: (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, or the so-called "control test." The Court found all elements present. Expedition admitted that respondents were engaged/hired as garbage truck drivers and that they received compensation for their services. The fact that respondents were paid on a per trip basis is irrelevant because this was merely the method of computing the proper compensation due to respondents. Expedition's power to dismiss was apparent when work was withheld from respondents as a result of the termination of the contracts with Quezon City and Caloocan City. Finally, Expedition had the power of control over respondents in the performance of their work, as "the power of control refers merely to the existence of the power and not to the actual exercise thereof." The trucks driven by respondents were owned by Expedition; there was an express instruction that these trucks were to be exclusively used to collect and transport garbage; respondents were mandated to return the trucks to the premises of Expedition after the collection of garbage; and Expedition determined the clients to be served, the location where the garbage is to be collected and when it is to be collected.

• Regular Employment: Respondents were neither independent contractors nor project employees. There was no showing that respondents had substantial capital or investment and that they were performing activities which were not directly related to Expedition's business to be qualified as independent contractors. There was likewise no written contract that can prove that respondents were project employees and that the duration and scope of such employment were specified at the time respondents were engaged. Therefore, respondents should be accorded the presumption of regular employment pursuant to Article 230 of the Labor Code, which provides that "employees who have rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employees with respect to the activity in which they are employed and their employment shall continue while such activity exists." Furthermore, the fact that respondents were performing activities which were directly related to the business of Expedition confirms the conclusion that respondents were indeed regular employees. Having gained regular status, respondents were entitled to security of tenure and could only be dismissed for just or authorized cause after they had been accorded due process.

• Illegal Dismissal: In illegal dismissal cases, the employer has the burden of proving that the termination was for a valid or authorized cause. However, it is likewise incumbent upon an employee to first establish by substantial evidence the fact of his dismissal from employment by positive and overt acts of an employer indicating the intention to dismiss. The evidence must be clear, positive and convincing; mere allegation is not proof or evidence. In this case, there was no positive or direct evidence to substantiate respondents' claim that they were dismissed from employment. Aside from mere assertions, the record is bereft of any indication that respondents were barred from Expedition's premises. If at all, the evidence on record showed that Expedition intended to give respondents new assignments as a result of the termination of the garbage hauling contracts with Quezon City and Caloocan City where respondents were regularly dispatched. Despite the loss of some clients, Expedition tried to accommodate respondents and offered to engage them in other garbage hauling projects with other LGUs, a fact which respondents did not refute. However, instead of returning and waiting for their next assignments, respondents instituted an illegal dismissal case against Expedition. Even during the mandatory conciliation and mediation conference, Expedition manifested its willingness to accept respondents back to work, but it was respondents who no longer wanted to return to work, as they prayed for the payment of separation pay instead of reinstatement. Thus, the CA had no basis in ruling that respondents' employment was illegally terminated since the fact of dismissal was not adequately supported by substantial evidence.

• Award of Reinstatement and Back Wages: There being no dismissal, the status quo between respondents and Expedition should be maintained. However, it cannot be denied that their relationship has already been ruptured in that respondents are no longer willing to be reinstated anymore. Under the circumstances, the Court found that the grant of separation pay as a form of financial assistance is deemed equitable. As a measure of social justice, the award of separation pay/financial assistance has been upheld in some cases even if there is no finding of illegal dismissal. Citing Eastern Shipping Lines, Inc. vs. Sedan, the Court noted that financial assistance may be allowed as a measure of social justice under exceptional circumstances, and as an equitable concession, balancing the interests of the employer with those of the worker. In view of Expedition's manifested willingness to extend gratuitous assistance to respondents and to pay them the amounts equivalent to the separation pay awarded in the April 30, 2015 NLRC Resolution, and taking into account respondents' long years of service ranging from four to 15 years, the Court found that the grant of separation pay at the rate of one-half month's salary for every year of service, as adjudged in the April 30, 2015 Resolution of the NLRC, is proper.

• Four-Fold Test of Employer-Employee Relationship — The existence of an employer-employee 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 power to control the employee's conduct, or the so-called "control test." The Court applied this test and found all elements present, particularly emphasizing that the power of control refers merely to the existence of the power and not to the actual exercise thereof.
• Control Test — The power of control refers merely to the existence of the power and not to the actual exercise thereof. Expedition determined how, where, and when respondents would perform their tasks, including the clients to be served, the location where the garbage is to be collected, and when it is to be collected, thus establishing the power of control.
• Presumption of Regular Employment — Under Article 230 of the Labor Code, employees who have rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employees with respect to the activity in which they are employed and their employment shall continue while such activity exists. The Court applied this presumption because there was no written contract proving project employment and respondents performed activities directly related to Expedition's business.
• Burden of Proof in Illegal Dismissal Cases — While the employer has the burden of proving that the termination was for a valid or authorized cause, it is incumbent upon the employee to first establish by substantial evidence the fact of dismissal from employment by positive and overt acts of the employer indicating the intention to dismiss. The evidence must be clear, positive and convincing; mere allegation is not proof or evidence.
• Separation Pay as Financial Assistance — As a measure of social justice, the award of separation pay/financial assistance has been upheld in some cases even if there is no finding of illegal dismissal. Financial assistance may be allowed as a measure of social justice under exceptional circumstances, and as an equitable concession, balancing the interests of the employer with those of the worker.

• "The power of control refers merely to the existence of the power and not to the actual exercise thereof." — This passage defines the scope of the control test in determining employer-employee relationships, establishing that actual exercise of control is not required; the mere existence of the power suffices.
• "employees who have rendered at least one year of service, whether such service is continuous or broken x x x shall be considered [as] regular employees with respect to the activity in which they are employed and their employment shall continue while such activity exists." — This quotation from Article 230 of the Labor Code articulates the presumption of regular employment applied by the Court to respondents who rendered continuous service without written project employment contracts.
• "In illegal dismissal cases, the employer has the burden of proving that the termination was for a valid or authorized cause. However, it is likewise incumbent upon an employee to first establish by substantial evidence the fact of his dismissal from employment by positive and overt acts of an employer indicating the intention to dismiss." — This passage establishes the allocation of evidentiary burdens in illegal dismissal cases, requiring the employee to first prove the fact of dismissal before the employer's burden to justify the termination attaches.
• "financial assistance may be allowed as a measure of social justice [under] exceptional circumstances, and as an equitable concession." — This quotation from Eastern Shipping Lines, Inc. vs. Sedan supports the Court's award of separation pay as financial assistance despite the absence of illegal dismissal, balancing the interests of employer and worker.

• Century Iron Works, Inc. vs. Banas, 711 Phil. 576 (2013) — Cited for the rule that only questions of law may be raised in a petition for review on certiorari under Rule 45.
• Protective Maximum Security Agency, Inc. vs. Fuentes, 753 Phil. 482 (2015) — Cited for the recognized exception to the rule that only questions of law may be raised, applicable when the factual findings of the labor tribunals are contradictory to each other.
• South East International Rattan, Inc. vs. Coming, 729 Phil. 298 (2014) — Cited for the four-fold test in determining the existence of an employer-employee relationship.
• Chavez vs. National Labor Relations Commission, 489 Phil. 444 (2005) — Cited for the principle that the method of computing compensation, such as payment on a per trip basis, is irrelevant in determining the existence of an employer-employee relationship.
• Almeda vs. Asahi Glass Philippines, Inc., 586 Phil. 103 (2008) — Cited for the principle that the power of control refers merely to the existence of the power and not to the actual exercise thereof.
• Petron Corporation vs. Caherte, 759 Phil. 353 (2015) — Cited for the requisites for qualification as an independent contractor, including substantial capital or investment and performance of activities not directly related to the employer's business.
• Omni Hauling Services, Inc. vs. Bon, 742 Phil. 335 (2014) — Cited for the presumption of regular employment under Article 230 of the Labor Code and for the principle that employees performing activities directly related to the employer's business are regular employees.
• Carique vs. Philippine Scout Veterans Secretary and Investigation Agency, Inc., 769 Phil. 754 (2015) — Cited for the rule that the employee must first establish by substantial evidence the fact of dismissal from employment.
• Noblejas vs. Italian Maritime Academy Phils., Inc., 735 Phil. 713 (2014) — Cited for the requirement that the fact of dismissal must be established by positive and overt acts of the employer indicating the intention to dismiss.
• Tri-C General Services vs. Matuto, 770 Phil. 251 (2015) — Cited for the requirement that evidence of dismissal must be clear, positive and convincing.
• Villanueva vs. Philippine Daily Inquirer, Inc., 605 Phil. 926 (2009) — Cited for the principle that mere allegation is not proof or evidence.
• Eastern Shipping Lines, Inc. vs. Sedan, 521 Phil. 61 (2006) — Cited for the principle that financial assistance may be allowed as a measure of social justice under exceptional circumstances and as an equitable concession, even without a finding of illegal dismissal.
• Luna vs. Allado Construction Co., Inc., 664 Phil. 509 (2011) — Cited as one of the cases where the Court upheld the award of separation pay/financial assistance even without a finding of illegal dismissal.
• Pinero vs. National Labor Relations Commission, 480 Phil. 534 (2004) — Cited as one of the cases where the Court upheld the award of separation pay/financial assistance even without a finding of illegal dismissal.
• Indophil Acrylic Mfg. Corporation vs. National Labor Relations Commission, 297 Phil. 803 (1993) — Cited as one of the cases where the Court upheld the award of separation pay/financial assistance even without a finding of illegal dismissal.

• Article 230, Labor Code — Provides the presumption of regular employment: employees who have rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employees with respect to the activity in which they are employed and their employment shall continue while such activity exists. The Court applied this provision to respondents who rendered continuous service without written project employment contracts.
• Rule 45, Rules of Court — Governs petitions for review on certiorari, which may raise only questions of law. The Court noted this rule but applied the recognized exception when the factual findings of the labor tribunals are contradictory to each other.
• Section 13, Article VIII, Constitution — Cited in the Certification, stating that the conclusions in the decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

Sereno, C.J. (Chairperson), Leonardo-De Castro, J., Jardeleza, J., and Tijam, J., concurred in the decision.

N/A — The text does not provide the content of any dissenting opinion. The NLRC Resolution dated April 30, 2015 noted that Presiding Commissioner Joseph Gerard E. Mabilog partly concurred with a Dissenting Opinion, but the substance of that dissent is not provided in the case text.