Fernandez vs. Kalookan Slaughterhouse Incorporated

An employer-employee relationship exists where the four-fold test is satisfied—selection and engagement, payment of wages, power of dismissal, and power to control—regardless of whether the company claims the worker was engaged by an intermediate supervisor, when that supervisor lacks substantial capital for independent contracting and does not exercise control over the worker's means and methods.

Arnulfo Fernandez worked as a butcher at Kalookan Slaughterhouse, a single proprietorship owned by Ernesto Cunanan. The dispute centers on whether Fernandez was a regular employee of the slaughterhouse or an independent contractor engaged by its operations supervisor, Cirilo Tablit, who claimed authority from Cunanan to hire butchers on a per-piece basis when demand required. The case requires application of the four-fold test of employment relationship and the doctrine of independent job contracting under Philippine labor law.

Arnulfo M. Fernandez was hired in 1994 as a butcher by Kalookan Slaughterhouse, a single proprietorship owned by Ernesto Cunanan. According to petitioner, he worked from Monday to Sunday, from 6:30 P.M. to 7:30 A.M., with a daily wage of ₱700.00, which was later reduced to ₱500.00. In December 2013, he met an accident while driving the slaughterhouse's truck, and deductions were made from his wages. He questioned these deductions in July 2014 and was thereafter treated unreasonably. On July 21, 2014, he suffered from a headache and did not report for work. The next day, he received only ₱200.00 due to previous undertime and was informed that he could no longer report for work due to his old age.

Kalookan Slaughterhouse, for its part, asserted that petitioner was an independent butcher working under its operations supervisor, Cirilo Tablit. It claimed that petitioner received payment based on the number of hogs he butchered and was only required to be in the slaughterhouse when customers brought hogs to be slaughtered. Kalookan Slaughterhouse alleged that it imposed policies on entry to the premises, which applied to employees, dealers, independent butchers, hog and meat dealers, and trainees, and that petitioner violated these policies and misconstrued the disallowance to enter the slaughterhouse as an act of dismissal.

On August 5, 2014, petitioner filed a complaint for illegal dismissal before the Labor Arbiter. The Labor Arbiter found that the requisites of an employer-employee relationship were established: petitioner was hired by Kalookan Slaughterhouse through Tablit, paid his daily wage for butchering services, and subject to the company's control through its personnel De Guzman, who enforced strict policies requiring I.D.s, uniforms, and proper storage of butchering knives. The Labor Arbiter also found that Kalookan Slaughterhouse failed to prove that Tablit was an independent job contractor, and that petitioner was illegally dismissed when told on July 22, 2014 that he could no longer work due to old age. The NLRC reversed, finding petitioner was an independent contractor based on the absence of a regular payroll, pay slips, and Tablit's sworn statement. The CA affirmed the NLRC, ruling that petitioner failed to submit salary vouchers, pay slips, daily work schedules, and a certificate of withholding tax, and that the gate passes and log sheets submitted were insufficient.

• Existence of Employer-Employee Relationship: Petitioner argued that the CA committed reversible error in affirming the NLRC decision, which failed to recognize that an employer-employee relationship existed between him and Kalookan Slaughterhouse, as evidenced by his I.D., gate passes, log sheets, and a trip ticket, and as supported by the company's own admissions regarding uniforms and control exercised through De Guzman.
• Illegal Dismissal: Petitioner argued that the CA committed reversible error in affirming the NLRC, which failed to recognize that he was illegally dismissed when he was informed on July 22, 2014 that he could no longer report for work due to his old age.

• Independent Contractor Status: Respondent countered that petitioner was an independent butcher working under Tablit, who was given authority by Cunanan to hire butchers when the need arose, and that petitioner received payment based on the number of hogs he butchered and was only required at the slaughterhouse when customers brought hogs to be slaughtered.
• No Dismissal: Respondent argued that petitioner was not dismissed but was only barred from entering the slaughterhouse premises for his failure to comply with the "No I.D., No Entry" Policy and the "No Uniform, No Entry" Policy, and that petitioner misconstrued the disallowance as an act of dismissal.
• Just Cause: Respondent contended that there was just cause to dismiss petitioner, as he was found sleeping on duty.

• Employer-Employee Relationship: Whether the CA committed reversible error in affirming the NLRC decision and resolution which failed to recognize that there was an employer-employee relationship between petitioner and respondents.
• Illegal Dismissal: Whether the CA committed reversible error in affirming the NLRC decision and resolution which failed to recognize that there was an illegal dismissal in the instant case.

• Employer-Employee Relationship: Yes. The CA and NLRC committed reversible error; an employer-employee relationship existed under the four-fold test, as petitioner was engaged through Tablit, paid wages, subject to control through De Guzman, and could be dismissed by the company.
• Illegal Dismissal: Yes. Petitioner was illegally dismissed when told on July 22, 2014 that he could no longer work due to old age, which the company failed to specifically deny, thus deemed admitted under Section 11, Rule 8 of the Rules of Court.

• Employer-Employee Relationship: The four-fold test of employment requires: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) power to control the employee's conduct. Petitioner submitted an I.D., gate passes, log sheets, and a trip ticket showing his engagement by Kalookan Slaughterhouse. The CA erred in disregarding the gate passes, as the notation that the holder was not qualified as an employee appeared on only one pass, not the others. The company admitted through De Guzman that uniforms were given to all personnel including petitioner. Kalookan Slaughterhouse's defense that petitioner was Tablit's employee failed because Tablit was not shown to possess substantial capital and investment to have an independent business or serve as petitioner's employer; other than Tablit's sworn statement, no document showed he paid petitioner's salaries. By denying petitioner was its employee but admitting he rendered butchering services as Tablit's employee, Kalookan Slaughterhouse effectively admitted the substantial fact that petitioner had been rendering butchering services for 20 years — a negative pregnant amounting to an acknowledgment of employment. Critically, Tablit himself admitted he did not exercise control over the means and methods of the butchers; instead, De Guzman, another company employee, was the one who reprimanded petitioner for failing to properly store knives, wearing dirty clothes, reporting drunk, and not having an I.D. The totality of evidence established that Kalookan Slaughterhouse, through its employees Tablit and De Guzman, engaged petitioner, paid his salaries, exercised control over his conduct, and had the power to dismiss him.

• Illegal Dismissal: Kalookan Slaughterhouse failed to specifically deny that on July 22, 2014, petitioner was informed he could no longer report for work. De Guzman only alleged that he barred petitioner from entering in several instances due to failure to wear his I.D. and uniform, but did not state this was done on July 22, 2014. Under Section 11, Rule 8 of the Rules of Court, which supplements the NLRC Rules, an allegation not specifically denied is deemed admitted. The LA correctly ruled that petitioner was illegally dismissed, as being told he could no longer work due to old age was not a just or valid cause for termination. Petitioner was therefore entitled to backwages, separation pay, service incentive leave pay, 13th month pay, and night shift differential pay, the latter three limited to three years prior to the filing of the complaint on August 5, 2014 pursuant to Article 306 of the Labor Code. The Court noted petitioner's counsel's manifestation regarding petitioner's death but the absence of a death certificate; the LA was directed to confirm petitioner's death and, if confirmed, to compute backwages and separation pay only until his death.

• Four-Fold Test of Employment — To determine the existence of an employer-employee relationship, four elements must be considered: (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 Court applied this test and found all four elements present: petitioner was engaged through Tablit, paid wages, subject to dismissal by the company, and controlled through De Guzman's enforcement of company policies.

• Independent Job Contracting — A person claiming to be an independent contractor and employer of a worker must possess substantial capital and investment to have an independent business and must exercise control over the worker's means and methods. Tablit, who claimed to be petitioner's employer, was not shown to possess substantial capital, and he admitted he did not exercise control over the butchers' means and methods, defeating the claim of independent contracting.

• Negative Pregnants / Estoppel in Labor Cases — Denials pregnant with the admission of substantial facts in the pleading responded to amount to an acknowledgment of employment. By alleging petitioner rendered services as Tablit's employee rather than denying he worked for the company altogether, Kalookan Slaughterhouse effectively admitted that petitioner had been rendering butchering services for it for 20 years.

• Deemed Admission (Section 11, Rule 8, Rules of Court) — An allegation not specifically denied is deemed admitted. The Court applied this rule to hold that Kalookan Slaughterhouse's failure to specifically deny the July 22, 2014 dismissal constituted an admission that petitioner was indeed dismissed on that date.

• Conflicting Factual Findings as Exception to Rule 45 — While the Supreme Court in Rule 45 petitions generally reviews only errors of law, it may delve into factual issues in exceptional cases where the LA and NLRC come up with conflicting findings, as occurred here.

• "It is settled that '[t]o determine the existence of an employer-employee relationship, four elements generally need to be considered, namely: (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. These elements or indicators comprise the so-called "four-fold" test of employment relationship.'" — This passage states the canonical formulation of the four-fold test, the controlling doctrine for determining employment status in Philippine labor law.

• "By their silence, petitioners are deemed to have admitted the same. Section 11 of Rule 8 of the Rules of Court, which supplements the NLRC Rules, provides that an allegation not specifically denied is deemed admitted." — This passage articulates the application of the deemed-admission doctrine in labor proceedings, establishing that a party's failure to specifically deny a material allegation constitutes admission.

• "It is common practice for companies to provide identification cards to individuals not only as a security measure, but more importantly to identify the bearers thereof as bona fide employees of the firm or institution that issued them." — This passage, quoted from Masonic Contractor, Inc. vs. Madjos, establishes the evidentiary weight of company-issued I.D.s and uniforms in proving employer-employee relationship.

• "Such allegations are negative pregnants — denials pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied, and amounts to an acknowledgement that respondents were indeed employed by petitioner." — This passage, quoted from Pamplona Plantation Company vs. Acosta, defines the doctrine of negative pregnants as applied in labor cases to estop employers from denying employment relationships.

• David vs. Macasio, 738 Phil. 293 (2014) — Cited as the source of the four-fold test formulation of employer-employee relationship, the controlling doctrinal framework applied in this case.
• Masonic Contractor, Inc. vs. Madjos, 620 Phil. 737 (2009) — Followed as controlling precedent; the Court found the facts analogous — company-issued I.D.s, uniforms, and a vague affidavit of the purported employer were sufficient to prove employment. Also cited for the deemed-admission doctrine under Section 11, Rule 8.
• Pamplona Plantation Company vs. Acosta, 539 Phil. 305 (2006) — Followed for the doctrine of negative pregnants; the Court applied the principle that an employer's denial of the nature of employment while admitting the worker rendered services constitutes an admission of the employment relationship.
• Cariño vs. Maine Marine Phils., Inc., G.R. No. 231111, October 17, 2018 — Cited for the proposition that conflicting factual findings of the LA and NLRC warrant Supreme Court review of factual issues in Rule 45 petitions.
• Scanmar Maritime Services, Inc. vs. Conag — Cited for the exception allowing the Court to delve into factual issues where the LA and NLRC come up with conflicting findings.
• Domasig vs. National Labor Relations Commission, 330 Phil. 518 (1996) — Cited in support of the sufficiency of petitioner's evidence to prove engagement by the company.
• Divine Word College of Laoag vs. Mina, 784 Phil. 546 (2016) — Cited for the rule that backwages and separation pay should be computed only until the employee's death if death is confirmed.

• Article 306 [291], Labor Code — Money Claims — Provides that all money claims arising from employer-employee relations shall be filed within three (3) years from the time the cause of action accrued; otherwise they shall be forever barred. The Court applied this provision to limit the award of service incentive leave pay, 13th month pay, and night shift differential pay to three years prior to the filing of the complaint on August 5, 2014.
• Section 11, Rule 8, Rules of Court — Provides that an allegation not specifically denied is deemed admitted. The Court applied this rule, which supplements the NLRC Rules, to hold that Kalookan Slaughterhouse's failure to specifically deny the July 22, 2014 dismissal constituted an admission of the dismissal.

Carpio (Chairperson), Perlas-Bernabe, J. Reyes, Jr., and Lazaro-Javier, JJ., concurred.