Lu vs. Enopia

An employer-employee relationship exists where all four elements — selection and engagement, power of control, payment of wages, and power of dismissal — are present, even if compensation is paid as a percentage share of fish catch rather than fixed wages, and even if day-to-day fishing operations are delegated to a master fisherman, provided the employer retains the right to control through radio communication and designated supervisors. The crew members were regular employees entitled to security of tenure, and their dismissal for refusing to sign a joint venture agreement constituted illegal dismissal.

Joaquin Lu is the sole proprietor of Mommy Gina Tuna Resources (MGTR), a deep-sea fishing business based in General Santos City. The 36 respondents were hired as crew members of the fishing mother boat F/B MG-28 at various dates between January 20, 1994 and March 20, 1996. The parties operated under an income-sharing arrangement — 55% to Lu, 45% to the crew, plus an additional 4% as "backing incentive" — with expenses for maintenance, repair, nets, ropes, and payaos shared equally. This arrangement, and whether it constituted employment or a joint venture partnership, is the central dispute.

The 36 respondents were hired as crew members of the fishing mother boat F/B MG-28, owned by Joaquin Lu, sole proprietor of Mommy Gina Tuna Resources (MGTR), a deep-sea fishing business based in General Santos City. Their engagements began at various dates between January 20, 1994 and March 20, 1996. The parties operated under an income-sharing arrangement: 55% of proceeds went to Lu, 45% to the crew members, with an additional 4% as "backing incentive." They equally shared expenses for the maintenance and repair of the mother boat and for the purchase of nets, ropes, and payaos.

Sometime in August 1997, Lu proposed that the crew members sign a Joint Venture Fishing Agreement providing for a one-year term, subject to renewal upon mutual agreement, and allowing pre-termination by any party before expiration. The crew members refused to sign, opposing the one-year term. According to the crew members, during a dialogue on August 18, 1997, Lu terminated their services on the spot because of their refusal. Lu, for his part, alleged that the master fisherman (piado) Ruben Salili informed him that the crew members still refused to sign the agreement and had decided to return the vessel.

On August 25, 1997, the crew members filed a complaint for illegal dismissal, monetary claims, and damages before the Labor Arbiter. Despite efforts at amicable settlement by Labor Arbiter Arturo P. Aponesto, the case was not settled except for certain minor matters; LA Aponesto inhibited himself, and the case was raffled to LA Amado M. Solamo. In their Position Paper, the crew members argued that refusal to sign the Joint Venture Fishing Agreement was not a just cause for termination and sought a refund of ₱8,700,407.70 taken from their 50% income share for repair, maintenance, and purchase of fishing materials. Lu denied having dismissed them, contending that the relationship was a joint venture where he provided the vessel and paraphernalia while the crew members, as industrial partners, provided labor. He argued that no employer-employee relationship existed because the piado hired the crew members, they were paid shares rather than wages, they were not subject to his discipline, and he had no control over day-to-day fishing operations, though contact was maintained through his radio operator or checker.

The Labor Arbiter dismissed the complaint on June 30, 1998, finding a joint venture rather than an employer-employee relationship. The LA ruled that the crew members were hired by the piado, earned shares rather than wages, were never disciplined by Lu, and that the income-sharing and expense-splitting arrangement was in the nature of an industrial partnership. While Lu issued memos, orders, and directions, the LA found these related to management and supervision after the actual fishing work was done — for hauling and sorting — and not to control over the means and methods of fishing operations. The NLRC affirmed this decision on March 12, 1999. The crew members' petition for certiorari before the CA was initially dismissed for having been filed beyond the 60-day reglementary period and for a defective certification of non-forum shopping, but the Supreme Court granted their petition and remanded the case to the CA. On October 22, 2010, the CA reversed the NLRC, finding that Lu exercised control over the crew members through the piado and assistant piado, that SSS coverage confirmed the employment relationship, and that percentage-based compensation did not negate regular employment status. The CA ordered separation pay, full backwages, exemplary damages of ₱50,000.00 each, and attorney's fees of 10% of the total monetary award, with the decision deemed immediately executory pending appeal.

• Grave Abuse of Discretion: Petitioner contended that no grave abuse of discretion could be attributed to the NLRC's finding, affirming that of the LA, that the arrangement between petitioner and respondents was a joint venture partnership.
• CA Exceeded Jurisdiction: Petitioner argued that the CA, in assuming the role of an appellate body, re-examined the facts and re-evaluated the evidence, thereby treating the case as an appeal instead of an original action for certiorari under Rule 65.
• Decision Contrary to Law and Evidence: Petitioner maintained that the CA rendered its October 22, 2010 decision contrary to law and the evidence on record.
• Improvident Immediate Execution: Petitioner argued that the CA departed from the accepted and usual course of judicial proceedings by making its decision immediately executory pending appeal, notwithstanding that respondents did not ask for immediate payment of separation pay and other claims, and despite the claim that most respondents were currently employed in other deep-sea fishing companies.

• Control Over Operations: Respondents alleged that petitioner controlled the entire fishing operations by assigning a master fisherman (piado) and assistant master fisherman for each mother boat, and a checker and assistant checker who monitored and contacted the crew at sea through radio, advising petitioner of conditions and enabling petitioner to instruct the piado how to conduct fishing operations.
• Refusal to Sign Not Just Cause: Respondents argued that their refusal to sign the Joint Venture Fishing Agreement was not a just cause for termination.
• Refund of Deductions: Respondents sought a refund of ₱8,700,407.70 taken from their income share for repair, maintenance, and purchase of fishing materials, contending that Lu should not benefit from such deductions.
• General Prayer for Relief: Respondents' petition before the CA contained a general prayer for such other relief and remedies just and equitable, which respondents argued was broad enough to justify the immediate execution pending appeal.

• Employer-Employee Relationship: Whether an employer-employee relationship existed between petitioner and respondents.
• CA Jurisdiction and Fact-Review: Whether the Court of Appeals exceeded its jurisdiction by treating respondents' petition for certiorari under Rule 65 as an ordinary appeal and by conducting its own evaluation of the evidence.
• Immediate Execution: Whether the CA properly ordered the immediate execution of its decision pending appeal.

• Employer-Employee Relationship: Yes. All four elements — selection and engagement, power of control, payment of wages, and power of dismissal — were present, notwithstanding the percentage-based income-sharing arrangement and delegation of day-to-day operations to the piado.
• CA Jurisdiction and Fact-Review: No, the CA did not exceed its jurisdiction. Under Section 9 of Batas Pambansa Blg. 129, as amended, the CA has the power to pass upon the evidence to resolve factual issues in the exercise of its certiorari jurisdiction, and it may revise NLRC factual findings not supported by substantial evidence.
• Immediate Execution: Yes. The general prayer in respondents' petition was broad enough to justify the remedy of immediate execution, and a court may grant relief even if the party awarded did not specifically pray for it.

• Employer-Employee Relationship: The Court applied the four-element test: (1) selection and engagement — although petitioner contended the piado hired respondents, SSS online inquiry printouts showed MGTR as the employer, with contribution dates coinciding with respondents' employment dates, which petitioner failed to rebut; SSS coverage is predicated on the existence of an employer-employee relationship. The 4% backing incentive fee, approved by petitioner and paid to respondents after deducting their respective vale or cash advances, further confirmed engagement, since if a joint venture existed, the fishermen would obtain cash advances from the piado, not from petitioner. (2) Power of control — the control test requires only the existence of the right to control, not its actual exercise. Petitioner admitted contact with respondents at sea via his radio operator and checker; such communication established constant monitoring of fishing operations. Respondents' allegations that petitioner assigned piado and assistant piado to supervise operations, and checkers to monitor and report conditions, enabling petitioner to instruct the piado on conducting fishing operations, demonstrated control. This was consistent with the CA's finding that MGTR had invested millions in its fishing industry. (3) Payment of wages — percentage-based compensation from the fish catch falls within the definition of "wage" under Article 97(f) of the Labor Code, which includes remuneration "ascertained on a time, task, piece or commission basis, or other method of calculating the same." (4) Power of dismissal — petitioner wielded this power when he dismissed respondents after they refused to sign the joint venture agreement. Respondents' work as fishermen-crew members was directly related and necessary to petitioner's deep-sea fishing business, and they had performed it for more than one year, qualifying them as regular employees under Article 280 of the Labor Code. As regular employees, they were entitled to security of tenure under Section 3, Article XIII of the 1987 Constitution and Article 279 of the Labor Code. Their dismissal for refusing to sign the joint venture agreement was not shown to be a just cause under Article 282, and was therefore illegal.

• CA Jurisdiction and Fact-Review: The CA's power to review NLRC decisions via certiorari under Rule 65 is settled, following St. Martin Funeral Homes vs. NLRC. Under Section 9 of BP 129, as amended by RA 7902, the CA is specifically empowered to pass upon evidence to resolve factual issues. While factual findings of labor officials are generally accorded respect and finality when supported by substantial evidence, they are not infallible and may be examined when arrived at arbitrarily or in disregard of the evidence. The CA found that the NLRC did not critically examine the facts and rationally assess the evidence, and thus committed grave abuse of discretion. The CA's judicial function in certiorari extends to careful review of the NLRC's evaluation of the evidence, because the NLRC's findings are accorded finality only when they rest on substantial evidence. To deny the CA this power would diminish its corrective jurisdiction. Furthermore, where there is a conflict among the factual findings of the LA, NLRC, and CA, the Supreme Court may properly review and re-evaluate the factual issues in the exercise of its equity jurisdiction.

• Immediate Execution: The petition for certiorari filed with the CA contained a general prayer for such other relief and remedies just and equitable under the premises, which was broad enough to justify extension of a remedy different from or together with the specific remedy sought. A court may grant relief to a party even if the party did not pray for it in its pleadings.

• Four-Element Test for Employer-Employee Relationship — The existence of an employer-employee relationship is determined by four elements: (1) the selection and engagement of the workers; (2) the power to control the worker's conduct; (3) the payment of wages by whatever means; and (4) the power of dismissal. All four must be present. In this case, SSS registration confirmed selection and engagement; radio communication and designated supervisors established the right to control; percentage-based compensation qualified as wages under Article 97(f); and dismissal upon refusal to sign the joint venture agreement demonstrated the power of dismissal.

• Control Test (Right to Control) — The control test merely calls for the existence of the right to control, and not necessarily the exercise thereof. It is not essential that the employer actually supervises the performance of duties; it is enough that the employer has the right to wield the power. In this case, petitioner's radio contact with the crew at sea, his assignment of piado and checkers to monitor and report, and his instructions to the piado on conducting fishing operations demonstrated the right to control, even though day-to-day fishing was delegated to the master fisherman.

• Percentage-Based Compensation as Wages — Compensation received as a percentage share or commission from the proceeds of fish catch falls within the scope and meaning of "wage" as defined under Article 97(f) of the Labor Code, which covers remuneration "ascertained on a time, task, piece or commission basis, or other method of calculating the same." Such a compensation scheme does not negate the existence of an employer-employee relationship.

• 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 trade or business of the employer. Employees engaged to perform activities usually necessary or desirable in the usual business of the employer are regular employees under Article 280 of the Labor Code, particularly where they have rendered at least one year of service.

• Remedies for Illegal Dismissal — An employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and to full backwages, inclusive of allowances and other benefits, computed from the time compensation was withheld until actual reinstatement. Where reinstatement is no longer viable due to strained relations or current employment elsewhere, separation pay equivalent to one month for every year of service may be awarded in lieu of reinstatement. Exemplary damages may be granted where the employer acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Attorney's fees of 10% of the total monetary award are justified where the employee was forced to litigate to protect his rights and interests.

• CA's Power to Review NLRC Factual Findings in Certiorari — Under Section 9 of BP 129, as amended by RA 7902, the CA has the power to try cases, conduct hearings, receive evidence, and perform acts necessary to resolve factual issues in its original and appellate jurisdiction. While factual findings of labor officials are generally accorded respect and finality when supported by substantial evidence, the CA may revise or correct such findings when they are not supported by substantial evidence or were arrived at arbitrarily. Where the LA, NLRC, and CA have conflicting factual findings, the Supreme Court may review and re-evaluate the factual issues in the exercise of its equity jurisdiction.

• "The control test merely calls for the existence of the right to control, and not necessarily the exercise thereof. It is not essential that the employer actually supervises the performance of duties by the employee. It is enough that the former has a right to wield the power." — This passage articulates the canonical formulation of the control test as applied in Philippine labor jurisprudence, clarifying that actual supervision is not required — only the right to control.

• "The payment of respondents' wages based on the percentage share of the fish catch would not be sufficient to negate the employer-employee relationship existing between them." — This statement establishes that commission-based or percentage-based compensation does not preclude a finding of employment, a principle frequently invoked in fishing industry and similar cases.

• "The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer." — This passage restates the governing standard for regular employment under Article 280 of the Labor Code, linking the nature of the work to the employer's business.

• "Indeed, a court may grant relief to a party, even if the party awarded did not pray for it in his pleadings." — This principle supports the CA's authority to order immediate execution pending appeal based on a general prayer for relief, illustrating the broad scope of equitable remedies available to courts.

• Prince Transport, Inc. vs. Garcia, 654 Phil. 296 (2011) — Controlling precedent on the CA's power to review NLRC decisions via certiorari under Rule 65 and to pass upon evidence to resolve factual issues pursuant to Section 9 of BP 129, as amended. Also cited for the proposition that a general prayer in a petition justifies relief beyond the specific remedies sought.

• Ruga vs. NLRC, 260 Phil. 280 (1990) — Directly applied on all fours. Held that fishermen hired to perform work necessary or desirable in the usual fishing business of the employer are regular employees under Article 280 of the Labor Code, and that percentage-based commission compensation falls within the definition of "wage" under Article 97(f).

• Jo vs. NLRC, 381 Phil. 428 (2000) — Cited for the four-element test for determining the existence of an employer-employee relationship and for the formulation of the control test requiring only the right to control, not its exercise.

• St. Martin Funeral Homes vs. NLRC — Cited (through Prince Transport) as the foundational case establishing that the proper vehicle for review of NLRC decisions is a special civil action for certiorari under Rule 65 filed with the CA, in strict observance of the doctrine of hierarchy of courts.

• Tan vs. Lagrama, 436 Phil. 190 (2002) — Cited for the primary standard for determining regular employment: the reasonable connection between the particular activity performed by the employee and the usual trade or business of the employer.

• Article 97(f), Labor Code — Defines "wage" as remuneration or earnings 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. Applied to hold that percentage-based compensation from fish catch constitutes wages, negating petitioner's argument that shares are not wages.

• Article 280, Labor Code — Defines regular and casual employment, providing that an employment is deemed regular where the employee is engaged to perform activities usually necessary or desirable in the usual business or trade of the employer. Applied to classify respondents as regular employees, as their fishing work was indispensable to petitioner's deep-sea fishing business and they had served for more than one year.

• Article 279, Labor Code — Guarantees the right to security of tenure and provides that an employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and to full backwages, inclusive of allowances and other benefits. Applied to award backwages and, in lieu of reinstatement (no longer viable), separation pay.

• Article 282, Labor Code — Enumerates the just causes for termination by employer (serious misconduct, gross neglect, fraud, commission of a crime, and analogous causes). Applied to determine that respondents' refusal to sign the joint venture agreement did not constitute any just cause, rendering the dismissal illegal.

• Section 3, Article XIII, 1987 Constitution — The State shall afford full protection to labor and guarantee the rights of all workers to security of tenure, humane conditions of work, and a living wage. Applied as the constitutional basis for respondents' security of tenure as regular employees.

• Section 9, Batas Pambansa Blg. 129, as amended by Republic Act No. 7902 — Grants the CA the power to try cases, conduct hearings, receive evidence, and perform acts necessary to resolve factual issues in its original and appellate jurisdiction. Applied to uphold the CA's authority to review and revise the NLRC's factual findings when not supported by substantial evidence.

Antonio T. Carpio (Chairperson), Jose Catral Mendoza, Marvic M.V.F. Leonen, and Francis H. Jardeleza.