**Facts:**
1. **Employment and Income-Sharing Arrangement:** From January 20, 1994 to March 20, 1996, respondents were employed as crew members on the fishing mother boat F/B MG-28, owned by petitioner Joaquin Lu, under an income-sharing scheme with 55% of the catch going to Lu and 45% to the crew members, plus an additional 4% as a “backing incentive”. They also shared expenses for maintenance and purchase of fishing materials.
2. **Proposed Agreement and Termination:** In August 1997, Lu proposed a Joint Venture Fishing Agreement which the respondents refused to sign due to disagreement on the one-year term. Respondents claimed Lu terminated their services immediately after their refusal during a dialogue on August 18, 1997.
3. **Complaint Filing:** On August 25, 1997, the respondents filed a complaint for illegal dismissal and monetary claims.
4. **Labor Arbiter’s Decisions:** Labor Arbiter Arturo P. Aponesto attempted but failed to amicably settle the case except for minor refunds and then inhibited himself. The case was reassigned to Labor Arbiter Amado M. Solamo, who dismissed the complaint for lack of merit, finding no employer-employee relationship but a joint venture.
5. **NLRC and Court of Appeals Proceedings:** The National Labor Relations Commission (NLRC) affirmed the dismissal. The respondents’ certiorari to the CA was initially dismissed for being out of the reglementary period and defective verification. However, the Supreme Court ordered a remand to CA for further proceedings. The CA subsequently reversed the NLRC ruling, finding an employer-employee relationship and illegal dismissal, and ordered compensation and backwages among others.
**Issues:**
1. Whether the Court of Appeals correctly found an employer-employee relationship between Lu and the respondents.
2. Whether the Court of Appeals erred in treating the respondents’ certiorari petition as an appeal.
3. Whether the dismissal of respondents was illegal.
4. Whether the CA’s decision to make its ruling immediately executory pending appeal was correct.
**Court’s Decision:**
– **Existence of Employer-Employee Relationship:** The Supreme Court upheld the CA’s finding of an employer-employee relationship, considering factors such as SSS registration, control over the respondents’ activities via communication and a radio operator, and the system of payment which included advances and deductions reflecting typical employer-employee dynamics.
– **Certiorari as an Appeal:** The Court ruled that the CA’s approach was permissible given that the factual findings by the NLRC lacked substantial evidence and exhibited grave abuse of discretion.
– **Illegal Dismissal:** It was found that the respondents’ refusal to sign the joint venture agreement, which imposed conditions inconsistent with their right to security of tenure, was not just cause for dismissal. Hence, their termination was illegal.
– **Immediate Execution Pending Appeal:** The SC found this appropriate under the broad general prayer clause and the circumstances, including strained relations between the parties that rendered reinstatement impractical.
**Doctrine:**
1. **Employer-Employee Relationship Criteria:** The determination of such a relationship involves examining the selection, engagement, payment of wages, power of control, and dismissal rights.
2. **Control Test:** The right to exercise control suffices and actual exercise of control is not necessary.
3. **Security of Tenure:** Employees cannot be dismissed without just or authorized cause, and agreements that undermine this are invalid.
**Class Notes:**
– **Employer-Employee Test:** Selection, control, payment of wages, and power to dismiss (Art. 280, Labor Code).
– **Control Test:** Right to control the manner and means of work.
– **Illegal Dismissal:** Termination without just cause is illegal.
– **Compensation for Illegal Dismissal:** Entitled to reinstatement or separation pay, backwages, and other benefits (Art. 279, Labor Code).
– **Certiorari Review by CA:** Can involve scrutiny of factual findings if there’s grave abuse of discretion.
**Historical Background:**
This case context reflects the nuances within Philippine labor law concerning contractual arrangements in industries like fishing, where informal or semi-formal employment arrangements are prevalent. It underscores the judiciary’s role in protecting labor rights against frameworks that disguise formal employment relationships thereby depriving workers of lawful claims. The historical backdrop includes evolving labor protections post the Marcos era and significant judicial interpretations intended to reinforce these protections aligned with constitutional guarantees under the 1987 Constitution.
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