Felicilda vs. Uy

A truck driver paid on a per-trip or commission basis is a regular employee where the four-fold test is satisfied, and payment on commission is merely a method of computing compensation that does not negate the existence of an employer-employee relationship. The control test requires only the existence of the employer's right to control the means and methods of work, not the actual exercise of such control.

Respondent Manchesteve H. Uy operated a trucking service under the business name "Gold Pillars Trucking" (GPT), with branches in Manila. Petitioner Mario N. Felicilda was hired as a truck driver for GPT, issued a company identification card, assigned to one of GPT's Manila branches, and compensated on a percentage or per-trip basis. The dispute centers on whether this arrangement constituted an employer-employee relationship and whether petitioner's termination was lawful.

On October 29, 2010, respondent Manchesteve H. Uy hired petitioner Mario N. Felicilda as a truck driver for the latter's trucking service under the business name "Gold Pillars Trucking" (GPT). In connection with his engagement, petitioner was issued a company identification card, assigned to one of GPT's branches in Manila, and paid on a percentage basis.

On December 9, 2011, petitioner took a nap at the work station while waiting for his truck to be loaded with cargoes, all of which were delivered to respondent's clients on schedule. The following day, December 10, 2011, respondent's helper informed petitioner that his employment had been terminated due to his act of sleeping while on the job. Petitioner maintained that his act of taking a nap did not prejudice respondent's business.

Claiming that he was dismissed without just cause and due process, petitioner filed a complaint for illegal dismissal with money claims against respondent before the NLRC, docketed as NLRC NCR Case No. 12-18409-11. In his defense, respondent denied the existence of an employer-employee relationship, asserting that petitioner was paid merely on a per-trip percentage basis, was not required to regularly report for work, was free to offer his services to other companies, and was not under respondent's control with respect to the means and methods by which he performed his job. Respondent added that the company ID merely served to inform GPT's clients that petitioner was an authorized driver, and that petitioner's services were no longer engaged due to the latter's "serious transgressions and misconduct."

The Labor Arbiter found petitioner to be a regular employee and ordered respondent to pay P80,145.52 in backwages and separation pay. The NLRC affirmed this ruling, finding all elements of an employer-employee relationship present. The Court of Appeals, however, reversed the NLRC, holding that the elements of payment of wages and control were absent and dismissing the complaint. The Supreme Court thereafter took up the case on certiorari.

• Employer-Employee Relationship: Petitioner maintained that he was respondent's regular employee, having been hired as a truck driver, issued a company ID, assigned to a GPT branch, and paid on a percentage basis for his services.
• Illegal Dismissal: Petitioner argued that he was dismissed without just cause and due process, and that his act of taking a nap while waiting for his truck to be loaded did not prejudice respondent's business.
• Grave Abuse of Discretion: Petitioner contended that the Court of Appeals committed grave abuse of discretion in setting aside the NLRC ruling, which was supported by substantial evidence.

• No Employer-Employee Relationship: Respondent argued that no employer-employee relationship existed because petitioner was paid merely on a per-trip percentage basis, was not required to regularly report for work, was free to offer his services to other companies, and was not under respondent's control as to the means and methods of performing his job.
• Company ID Purpose: Respondent maintained that the company ID did not indicate petitioner was an employee but merely served to inform GPT's clients that petitioner was an authorized driver.
• Just Cause for Termination: Respondent averred that petitioner's services were no longer engaged due to the latter's "serious transgressions and misconduct."

• Employer-Employee Relationship: Whether the Court of Appeals correctly ascribed grave abuse of discretion on the part of the NLRC in ruling that an employer-employee relationship existed between petitioner and respondent.
• Validity of Dismissal: Whether petitioner was illegally dismissed by respondent.

• Employer-Employee Relationship: No, the CA erred. The NLRC did not gravely abuse its discretion in finding that all four elements of the four-fold test were present, establishing an employer-employee relationship between the parties.
• Validity of Dismissal: Yes, petitioner was illegally dismissed. Respondent failed to substantiate the alleged "serious transgressions and misconduct" and did not afford petitioner procedural due process, entitling him to backwages and separation pay in lieu of reinstatement.

• Employer-Employee Relationship: The Court applied the four-fold test: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) power to control the employee's conduct. All four elements were found present. It was undisputed that respondent hired petitioner as a truck driver for GPT. Petitioner received compensation for services rendered; while paid on a "per trip" or commission basis, Article 97(f) of the Labor Code broadly defines "wage" as remuneration capable of being expressed in money, whether fixed or ascertained on a time, task, piece, or commission basis. Payment on commission is merely a method of computing compensation and does not negate employment. Respondent's power to dismiss was inherent in his selection and engagement of petitioner. The element of control was deduced from the facts that respondent owned the trucks, the cargoes were exclusively for respondent's clients, and the schedule and route were exclusively determined by respondent. The control test requires only the existence of the right to control, not its actual exercise. Respondent's claim that petitioner was permitted to render service to other companies was unsubstantiated. The CA therefore committed reversible error in finding grave abuse of discretion on the part of the NLRC.

• Validity of Dismissal: For a dismissal to be valid, the employer must comply with both substantive and procedural due process requirements. Substantive due process requires a just or authorized cause under Articles 297, 298, and 299 of the Labor Code. Procedural due process requires the twin requirements of notice and hearing. Respondent's averment that petitioner committed "serious transgressions and misconduct" was a self-serving assertion unsupported by evidence. Neither was petitioner accorded procedural due process, as he was merely informed by respondent's helper of his termination. The dismissal was therefore illegal, and petitioner was entitled to backwages and separation pay in lieu of reinstatement, as correctly ruled by the labor tribunals.

• Four-Fold Test for Employer-Employee Relationship — 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 to control is the most significant determinant. In this case, all four elements were found present, establishing petitioner as a regular employee of respondent.

• Control Test — Existence of the Right, Not Exercise — The control test calls for the existence of the right to control both the end achieved and the manner and means used to achieve that end, not necessarily the actual exercise of such control. The employer need not actually supervise the employee's performance; it is sufficient that the employer has the right to wield the power. The Court found that respondent reserved the right to control petitioner's work through ownership of the trucks, exclusive determination of delivery schedules and routes, and exclusive servicing of respondent's clients.

• Commission-Based Compensation Does Not Negate Employment — Payment of wages on a per-trip or commission basis is merely a method of computing compensation and does not determine the existence or absence of an employer-employee relationship. An employee paid purely on commission may still be considered a regular employee. The Court relied on Article 97(f) of the Labor Code, which defines "wage" broadly to include remuneration ascertained on a commission basis.

• Grave Abuse of Discretion in Labor Cases — Grave abuse of discretion may be ascribed to the NLRC when its findings and conclusions are not supported by substantial evidence, defined as that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. The Court found that the NLRC's ruling was supported by substantial evidence and that the CA erred in setting it aside.

• "It must, however, be stressed that the 'control test' merely calls for the existence of the right to control, and not necessarily the exercise thereof. To be clear, the test does not require that the employer actually supervises the performance of duties by the employee." — This passage articulates the canonical formulation of the control test as applied in Philippine labor jurisprudence, clarifying that the right to control suffices even without actual supervision.

• "That petitioner was paid on a 'per trip' or commission basis is insignificant as this is merely a method of computing compensation and not a basis for determining the existence or absence of an employer-employee relationship." — This statement establishes the principle that commission-based payment does not preclude a finding of regular employment, a key proposition for labor law analysis.

• "To reiterate, the power of control refers merely to the existence of the power. It is not essential for the employer to actually supervise the performance of duties of the employee, as it is sufficient that the former has a right to wield the power, as in this case." — This reinforces the distinction between the existence and exercise of the control power, applying it to the specific facts of the case.

• AGG Trucking vs. Yuag, 675 Phil. 108 (2011) — Cited for the proposition that a regular status of employment is not based on how salary is paid; an employee paid purely on commission may still be a regular employee. Directly analogous to the present case involving a trucking business.
• Legend Hotel (Manila) vs. Realuyo, 691 Phil. 226 (2012) — Cited for the definition of the control test as premised on whether the employer reserves the right to control both the end achieved and the manner and means used to achieve that end.
• Tongko vs. The Manufacturers Life Insurance Co. (Phils.), Inc., 655 Phil. 384 (2011) — Cited for the principle that the control test requires only the existence of the right to control, not its actual exercise.
• Chavez vs. NLRC, 489 Phil. 444 (2005) — Cited for the rule that commission-based payment is merely a method of computing compensation and does not determine the existence of an employer-employee relationship.
• South East International Rattan, Inc. vs. Coming, G.R. No. 186621, March 12, 2014 — Cited for the four-fold test framework for determining employer-employee relationship.

• Article 97(f), Labor Code of the Philippines — Defines "wage" as "the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered." Applied to establish that petitioner's commission-based compensation constituted wages.
• Articles 297, 298, and 299 (formerly Articles 282, 283, and 284), Labor Code of the Philippines — Enumerate the just and authorized causes for termination of employment. Applied to determine whether respondent had a valid substantive basis for dismissing petitioner; no just or authorized cause was substantiated.

Sereno, C. J., Leonardo-De Castro, J., and Caguioa, J., concurred. Bersamin, J., was on official leave.