Rosario Brothers Inc. vs. Ople

The existence of an employer-employee relationship is determined by the four-fold test: (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 latter being the most important element. An independent contractor, by contrast, exercises independent employment and contracts to do a piece of work according to his own methods, without being subjected to the control of the employer except as to the result of the work.

The petitioner, Rosario Brothers Inc., operated a tailoring department known as Modes Suburbia, where the private respondents were engaged as tailors, pressers, stitchers, and similar workers. The private respondents filed a complaint for violation of Presidential Decree 851 (13th month pay) and Presidential Decree 525, as amended by Presidential Decree 1123 (Emergency Living Allowance), against the petitioner. The case was certified for compulsory arbitration to the Labor Arbiter, whose decision was subsequently appealed through the administrative labor law process, ultimately reaching the Minister of Labor.

The private respondents were tailors, pressers, stitchers, and similar workers hired by the petitioner in its tailoring department (Modes Suburbia). Some had worked there since 1969 until their separation on January 2, 1978. For their services, they were paid weekly wages on a piece-work basis, minus the withholding tax per Bureau of Internal Revenue (BIR) rules. They were registered with the Social Security System (SSS) as employees of the petitioner, with premiums deducted from their wages. They were also members of the Avenida-Cubao Manila COD Department Store Labor Union, which had a Collective Bargaining Agreement with the company. They were required to report for work from Monday through Saturday and to stay in the tailoring shop for no less than eight hours a day, unless no job order was given to them after waiting for two to three hours, in which case they could leave and return in the afternoon. Their attendance was recorded through a bundy clock, just like the other employees of the petitioner. A master cutter distributed job orders equally, supervised the work, and ensured that jobs were finished as soon as possible.

The petitioner, however, contended that once the job orders and corresponding materials were distributed to the private respondents, they were on their own. According to the petitioner, they were free to do their jobs either in the petitioner's shop or elsewhere at their option, without observing the regular working time of the company, provided that they finished their work on time and in accordance with specifications. The petitioner further claimed that the private respondents were allowed to contract other persons to do the job for them and to accept tailoring jobs from other establishments.

On September 7, 1977, the private respondents filed a complaint with the Regional Office of the Department (now Ministry) of Labor for violation of Presidential Decree 851 (13th month pay) and Presidential Decree 525, as amended by Presidential Decree 1123 (Emergency Living Allowance). After the petitioner filed its answer, the case was certified for compulsory arbitration to the Labor Arbiter, who rendered a decision on December 29, 1977, dismissing the claims for lack of merit upon finding that the complainants were not employees of the respondent within the meaning of Article 267(b) of the Labor Code. As a consequence, the private respondents were dismissed on January 2, 1978, prompting them to file a complaint for illegal dismissal with the Ministry of Labor.

The National Labor Relations Commission (NLRC) affirmed the Labor Arbiter's decision and dismissed the private respondents' appeal. However, upon appeal to the Minister of Labor, the latter reversed the NLRC resolution in a decision dated March 27, 1979, holding that the existence of the employment relationship could not be disputed. The Minister found that the complainants were employed as tailors, pressers, stitchers, and coatmakers in the tailoring department; they were hired through a master cutter and the department head, upon approval of the personnel department and management; they reported to the shop from Monday to Saturday and recorded their attendance with a bundy clock; they were required to stay in the shop premises for no less than eight hours a day unless no job was given after waiting for two or three hours; they were paid by piece per week according to rates established by the company; they were registered as employees with the SSS; taxes were withheld from their wages pursuant to BIR rules; and they enjoyed benefits under their collective agreement with the company. The Minister also noted that the tailors were given deadlines, required to work on job orders as soon as given, subject to the company code of discipline, and that outright dismissal was meted to anyone who brought out company patterns.

The Minister of Labor ordered the petitioner to pay the emergency allowances under PD 525 and 1123 and the 13th month pay under PD 851 from the date of effectivity of said decrees but not earlier than September 7, 1974, to specified complainants, and to other complainants from the date of effectivity of the decrees but not earlier than the start of their employment. The Socio-Economic Analyst of the NLRC was directed to compute the amount of the awards. Thereafter, private respondents filed a motion for issuance of a writ of execution, which was granted and partially implemented. On February 28, 1980, the Labor Arbiter issued an order directing the computation of the balance of private respondents' claims, and a report dated March 4, 1980 computed the balance at P71,131.14. A writ of execution was issued for the satisfaction of said amount, prompting the filing of the instant petition for certiorari.

• Lack of Employer-Employee Relationship: Petitioner argued that no employer-employee relationship existed or was created because the "series of memoranda" it issued to the private respondents from 1973 to 1977 revealed that it had no control and/or supervision over their work.
• Nature of Employment: Petitioner contended that the employees were excluded from the coverage of PD 525, 851, and 1123 because of the nature of their employment, there being no fixed number with regard to entry and exit and no fixed number of days of work with respect to said employees.
• Timeliness and Finality: Petitioner prayed to annul and set aside the decision of the Minister of Labor and to dismiss the claims of private respondents, though the Court noted the petition was filed too late, as the Minister's decision had already become final and partially implemented.

• Existence of Employment Relationship: The Solicitor General, in his comment, detailed the control exercised by the petitioner over the private respondents, including the requirement to report for work from Monday through Saturday, the recording of attendance through a bundy clock, and the supervision of work by a master cutter.
• Coverage of the Decrees: The Minister of Labor held that the rules implementing PD 525 and PD 851 provided that the decrees apply to all employees of covered employers regardless of their position, designation, or employment status, and irrespective of the method by which their wages are paid, including workers paid on a piece-rate basis.

• Employer-Employee Relationship: Whether an employer-employee relationship exists between the petitioner and the private respondents.
• Timeliness of the Petition: Whether the petition for certiorari was filed within the reglementary period, given that the Minister of Labor's decision had already become final and partially implemented.

• Employer-Employee Relationship: Yes. An employer-employee relationship existed between the petitioner and the private respondents, as all four elements of the four-fold test were satisfied: selection and engagement of the employee, payment of wages, power of dismissal, and power to control the employee's conduct.
• Timeliness of the Petition: No. The petition was filed on April 1, 1980, which was too late because the Labor Minister's decision of March 27, 1979, subject of judicial review, had already become final and had been partially implemented by the sheriff.

• Employer-Employee Relationship: The Court applied the four-fold test from Mafinco Trading Corporation vs. Ople, 70 SCRA 139, which determines the existence of an employer-employee relationship through: (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 latter being the most important element. The Court found that all four elements were present. First, the selection and hiring of private respondents were done by the petitioner through the master cutter of its tailoring department, a regular employee, with the procedure later modified to require approval by a committee of four and the Personnel Department. Second, private respondents received weekly wages from the petitioner on a piece-work basis, which falls within the scope and meaning of "wage" as defined under Article 97(f) of the New Labor Code (PD 442). Third, the petitioner had the power to dismiss private respondents, as shown by the various memoranda issued for strict compliance, violations of which, in extreme cases, were grounds for outright dismissal; indeed, they were dismissed on January 2, 1978. Fourth, private respondents' conduct in the performance of their work was controlled by the petitioner, as they were required to work from Monday through Saturday, work on job orders without waiting for the deadline, observe cleanliness in their place of work, were not allowed to bring out tailoring shop patterns, and were subject to quality control. The Court also noted that private respondents were registered with the SSS as employees and that withholding taxes were deducted from their wages for transmittal to the BIR. The Court further held that findings of administrative agencies which have acquired expertise are generally accorded not only respect but even finality, and judicial review of labor cases is limited to issues of jurisdiction or grave abuse of discretion. The questioned decision and order of execution were not tainted with unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction.

• Timeliness of the Petition: The Court held that the petition was filed on April 1, 1980, which was too late because the Labor Minister's decision of March 27, 1979, subject of judicial review, had already become final. Moreover, the questioned decision had already been partially implemented by the sheriff, as shown by his return dated July 17, 1979. What was left for execution was only the balance of private respondents' claims.

• Four-Fold Test for Employer-Employee Relationship — The existence of an employer-employee relationship is determined by the following 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, although the latter is the most important element. The Court applied this test to find that the tailoring department workers were employees of the petitioner, not independent contractors, because all four elements were present.

• Independent Contractor Distinguished — An independent contractor is one who exercises independent employment and contracts to do a piece of work according to his own methods and without being subjected to the control of his employer except as to the result of his work. The Court distinguished this from the situation of the private respondents, who were subject to the petitioner's control in the performance of their work.

• Finality of Administrative Decisions — Findings of administrative agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality. Judicial review by the Supreme Court of labor cases does not go so far as to evaluate the sufficiency of the evidence upon which the Deputy Minister and the Regional Director based their determinations, but is limited to issues of jurisdiction or grave abuse of discretion.

• "As held in Mafinco Trading Corporation vs. Ople, 70 SCRA 139, the existence of employer-employee relationship is determined by the following elements, 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 employees' conduct although the latter is the most important element. On the other hand, an independent contractor is one who exercises independent employment and contracts to do a piece of work according to his own methods and without being subjected to control of his employer except as to the result of his work." — This passage states the controlling four-fold test for determining the existence of an employer-employee relationship, which is the ratio decidendi of the case.

• "Well-established is the principle that 'findings of administrative agencies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality. Judicial review by this Court on labor cases do not go so far as to evaluate the sufficiency of the evidence upon which the Deputy Minister and the Regional Director based their determinations but are limited to issues of jurisdiction or grave abuse of discretion.'" — This passage articulates the principle of finality of administrative findings in labor cases, which the Court applied to decline to disturb the Minister of Labor's decision.

• "We cannot sustain the petition. It was filed on April 1, 1980 which was too late because the Labor Minister's decision of March 27, 1979, subject of this judicial review, had already become final. And, not only that. The questioned decision has already been partially implemented by the sheriff as shown by his return, dated July 17, 1979." — This passage states the procedural ground for dismissing the petition, emphasizing the finality of the administrative decision and its partial implementation.

• Mafinco Trading Corporation vs. Ople, 70 SCRA 139 — Controlling precedent cited for the four-fold test determining the existence of an employer-employee relationship. The Court applied this test to the facts of the case and found that all four elements were present.

• Special Events & Central Shipping Office Workers Union vs. San Miguel Corporation, 122 SCRA 557 — Cited for the principle that findings of administrative agencies which have acquired expertise are generally accorded not only respect but even finality, and that judicial review of labor cases is limited to issues of jurisdiction or grave abuse of discretion.

• Article 267(b), Labor Code — The Labor Arbiter initially found that the private respondents were not employees of the petitioner within the meaning of this provision, a finding that was reversed by the Minister of Labor and ultimately rejected by the Supreme Court.

• Article 97(f), New Labor Code (PD 442) — Defines "wage" as 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, payable by an employer to an employee under a written or unwritten contract of employment. The Court applied this definition to find that the piece-work basis of payment to the private respondents constituted wages.

• Presidential Decree 851 (13th Month Pay) — The decree requiring payment of 13th month pay, which the private respondents sought to enforce. The Court upheld the Minister of Labor's order for payment of 13th month pay under this decree.

• Presidential Decree 525, as amended by Presidential Decree 1123 (Emergency Living Allowance) — The decrees requiring payment of emergency living allowance, which the private respondents sought to enforce. The Court upheld the Minister of Labor's order for payment of emergency allowances under these decrees.

• Justice Melencio-Herrera
• Justice Plana
• Justice Gutierrez, Jr.
• Justice De la Fuente

• Justice Teehankee (Chairman) — Took no part in the case. No dissenting opinion was rendered.