Javier vs. Fly Ace Corporation

A claim for illegal dismissal cannot prosper unless the complainant first establishes the existence of an employer-employee relationship by substantial evidence. The onus probandi falls on the party claiming entitlement to benefits provided by law to establish his or her right thereto, and the liberality of the NLRC rules of procedure does not dispense with the requirement of substantial evidence.

Fly Ace Corporation is engaged in the business of importation and sales of groceries. Javier claimed to be an employee of Fly Ace since September 2007, performing various tasks at the company's warehouse. The case involves the application of labor law principles on employer-employee relationship, particularly the four-fold test, in the context of a worker contracted on a pakyaw (piece-rate) basis.

Bitoy Javier filed a complaint before the NLRC on May 23, 2008, alleging that he was an employee of Fly Ace Corporation since September 2007, performing various tasks at the respondent's warehouse such as cleaning and arranging canned items before their delivery, and occasionally accompanying delivery vehicles as pahinante. He claimed he reported for work from Monday to Saturday, from 7:00 in the morning to 5:00 in the afternoon, but was not issued an identification card or payslips. On May 6, 2008, Javier reported for work but was barred from entering the company premises by the security guard upon the instruction of Ruben Ong, his superior. When Javier approached Ong to ask why he was being barred, Ong replied, "Tanungin mo anak mo." Javier later discovered that Ong had been courting his daughter Annalyn. Javier was thereafter terminated without notice and without opportunity to refute the cause of his dismissal. To support his allegations, Javier presented an affidavit of Bengie Valenzuela, who alleged that Javier was a stevedore or pahinante of Fly Ace from September 2007 to January 2008.

Fly Ace, for its part, averred that it was engaged in the business of importation and sales of groceries. Sometime in December 2007, Javier was contracted by its employee, Mr. Ong, as an extra helper on a pakyaw basis at an agreed rate of ₱300.00 per trip, later increased to ₱325.00 in January 2008. Ong contracted Javier roughly 5 to 6 times a month whenever the vehicle of its contracted hauler, Milmar Hauling Services, was not available. On April 30, 2008, Fly Ace no longer needed Javier's services. Fly Ace denied that Javier was its employee and insisted there was no illegal dismissal. It submitted a copy of its agreement with Milmar Hauling Services and copies of acknowledgment receipts evidencing payment to Javier for his contracted services bearing the words "daily manpower (pakyaw/piece rate pay)" and Javier's signatures or initials.

The Labor Arbiter dismissed the complaint for lack of merit, ruling that Javier failed to present proof that he was a regular employee. The NLRC reversed, holding that a pakyaw-basis arrangement did not preclude the existence of an employer-employee relationship, and found Javier to be a regular employee entitled to security of tenure. The Court of Appeals annulled the NLRC findings and reinstated the LA's dismissal, holding that Javier failed to discharge his burden of proving employer-employee relationship by substantial evidence. The CA found that Javier's work was not necessary and desirable to the business of the company, and that the facts alleged by Javier did not pass the "control test."

• Regular Employment: Petitioner contended that other than its bare allegations and self-serving affidavits, Fly Ace had nothing to substantiate its claim that Javier was engaged on a pakyaw basis, and that even assuming he was hired on such basis, it did not preclude his regular employment with the company.
• Nature of Work: Petitioner argued that his tasks as pahinante were related, necessary, and desirable to the line of business of Fly Ace, which was engaged in the importation and sale of grocery items, and that on days when there were no scheduled deliveries, he worked in the warehouse arranging and cleaning stored cans.
• Control Test: Petitioner maintained that he was subject to the control and supervision of the company, as he was made to report to the office from Monday to Saturday, from 7:00 in the morning until 5:00 in the afternoon, and was subjected to compliance with company rules and regulations as regards working hours, delivery schedule, and output.
• Burden of Proof: Petitioner invoked the rule that in controversies between a laborer and his master, doubts reasonably arising from the evidence should be resolved in the former's favor, citing Chavez vs. NLRC for the proposition that payment on a per trip basis is merely a method of computing compensation and not a basis for determining the existence of employer-employee relationship.

• Lack of Substantial Evidence: Respondent insisted that there was no substantial evidence to prove employer-employee relationship, as Javier was contracted as an extra helper or pahinante on a mere per trip basis, and presented nothing to substantiate his status as an employee.
• Control Test: Respondent argued that it had no right to control the result, means, manner, and methods by which Javier would perform his work, as Javier and the company driver were given a free hand as to how they would perform their contracted services, and were not subjected to definite hours or conditions of work.
• Nature of Work: Respondent claimed that Javier's function as a pahinante was not directly related or necessary to its principal business of importation and sales of groceries, as the business could operate its usual course without him.
• Evidence of Payment: Respondent pointed to the acknowledgment receipts bearing Javier's signature and the words "pakiao rate" as having evidentiary weight, which the LA correctly considered in concluding that Javier was not an employee of the company.

• Employer-Employee Relationship: Whether the Court of Appeals erred in holding that the petitioner was not a regular employee of Fly Ace.
• Monetary Claims: Whether the Court of Appeals erred in holding that the petitioner is not entitled to his monetary claims.

• Employer-Employee Relationship: No. Javier failed to establish the existence of an employer-employee relationship by substantial evidence, as required by the four-fold test, particularly the element of control over the means and methods of work.
• Monetary Claims: No. Since no employer-employee relationship was established, the claim for illegal dismissal and the consequent monetary claims could not prosper.

• Employer-Employee Relationship: The Court noted that the issue of Javier's alleged illegal dismissal was anchored on the existence of an employer-employee relationship, which is essentially a question of fact. Although the Court generally does not review factual questions, it may do so when there is a conflict among the factual findings of the LA, NLRC, and CA. The Court applied the substantial evidence standard — that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. The Court held that although Section 10, Rule VII of the New Rules of Procedure of the NLRC allows a relaxation of the rules of procedure and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof. The quantum of proof required must still be satisfied. The Court applied the four-fold test for 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. Of these elements, the most important criterion is whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which the result is to be accomplished. Javier failed to persuade the Court that these elements existed in his case. He could not submit competent proof that Fly Ace engaged his services as a regular employee, that Fly Ace paid his wages as an employee, or that Fly Ace could dictate what his conduct should be while at work. The lone affidavit of Bengie Valenzuela was unsuccessful in strengthening Javier's cause, as Valenzuela only attested that he would frequently see Javier at the workplace, which falls short of proving employment. The Court also noted that Javier failed to refute Fly Ace's assertion that it had an agreement with a hauling company to undertake the delivery of its goods, and did not dispute Fly Ace's denial of his services' exclusivity to the company. The acknowledgment receipts presented by Fly Ace were admitted as competent evidence, and Javier's mere denial of the signatures could not automatically sway the Court to ignore the documents, as forgery cannot be presumed and must be proved by clear, positive, and convincing evidence.
• Monetary Claims: The Court did not see the necessity to resolve the second issue, as the failure to establish an employer-employee relationship was fatal to Javier's claim for monetary benefits arising from illegal dismissal.

• Four-Fold Test for 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. The most important criterion is whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which the result is to be accomplished. In this case, Javier failed to establish these elements, particularly the element of control.
• Substantial Evidence in Labor Cases — Substantial evidence is that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Although the NLRC rules allow a relaxation of the rules of procedure and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof. The quantum of proof required must still be satisfied. Javier's self-serving statements and the lone affidavit of a witness who had no personal knowledge of his employment status failed to meet this standard.
• Payment by Piece-Rate Does Not Negate Regular Employment — Payment by the piece is just a method of compensation and does not define the essence of the relation. The term "wage" is broadly defined in Article 97 of the Labor Code as remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece, or commission basis. However, in determining whether the relationship is that of employer and employee or one of an independent contractor, each case must be determined on its own facts and all the features of the relationship are to be considered. The Court acknowledged this doctrine but found that the attendant facts and circumstances of the instant case did not provide sufficient reason to uphold Javier's claimed status as an employee.
• Onus Probandi in Illegal Dismissal Cases — The burden of proof falls on the party claiming entitlement to the benefits provided by law to establish his or her right thereto. While in an illegal dismissal case the onus probandi rests on the employer to prove that its dismissal was for a valid cause, before a case for illegal dismissal can prosper, an employer-employee relationship must first be established by the complainant through substantial evidence.

• "Although Section 10, Rule VII of the New Rules of Procedure of the NLRC allows a relaxation of the rules of procedure and evidence in labor cases, this rule of liberality does not mean a complete dispensation of proof." — This passage articulates the Court's holding that the liberality of labor rules does not excuse a complainant from satisfying the quantum of proof required to establish employer-employee relationship.
• "The Court is of the considerable view that on Javier lies the burden to pass the well-settled tests to determine the existence of an employer-employee relationship, viz: (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. Of these elements, the most important criterion is whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which the result is to be accomplished." — This passage states the canonical formulation of the four-fold test for determining employer-employee relationship, which is the controlling doctrine in this case.
• "While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor." — This passage clarifies that the policy of social justice does not mean automatic favor for workers in every labor dispute, and that justice must be dispensed in light of established facts and applicable law.

• Chavez vs. NLRC, 489 Phil. 44 (2005) — Cited by petitioner for the proposition that payment to a worker on a per trip basis is not significant because it is merely a method of computing compensation and not a basis for determining the existence of employer-employee relationship.
• Avelino Lambo and Vicente Belocura vs. NLRC and J.C. Tailor Shop and/or Johnny Co., 375 Phil. 855 (1999) — Cited as the source of the four-fold test for determining employer-employee relationship, and for the doctrine that payment by the piece is just a method of compensation and does not define the essence of the relation.
• Elias Villuga vs. NLRC, G.R. No. L-75038, August 23, 1993, 225 SCRA 537 — Cited for the doctrine that payment by the piece is just a method of compensation and does not define the essence of the relation, and that each case must be determined on its own facts.
• Lopez vs. Bodega City, G.R. No. 155731, September 3, 2007, 532 SCRA 56 — Cited by respondent for the proposition that in an illegal dismissal case, the burden of proof is upon the complainant who claims to be an employee, and that an employer-employee relationship must first be established.
• Dionisio C. Ladignon vs. Court of Appeals and Luzviminda C. Dimaun, 390 Phil. 1161 (2000) — Cited for the rule that forgery cannot be presumed and must be proved by clear, positive, and convincing evidence, and the burden of proof lies on the party alleging forgery.

• Article 97, Labor Code — Defines "wage" broadly as remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece, or commission basis. The Court cited this provision to acknowledge that payment by the piece is just a method of compensation and does not define the essence of the employer-employee relation.
• Section 10, Rule VII, New Rules of Procedure of the NLRC — Provides that the rules of procedure and evidence prevailing in courts of law and equity shall not be controlling and the Commission shall use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure. The Court held that this rule of liberality does not mean a complete dispensation of proof.

Carpio, J.; Peralta, J. (Acting Chairperson); Abad, J.; Perez, J.