GILBERT A. DY, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, MARLITO V. LAPUZ, RESPONDENTS.

Dy versus National Labor Relations Commission

The Case

This is a labor case in which Gilbert Dy, the owner of a small buy-and-sell business in scrap materials, asks the Supreme Court to overturn the rulings of the National Labor Relations Commission. The private respondent, Marlito Lapuz, had worked for him as a driver and buyer of broken glass, was arrested on a complaint of estafa, and then filed a complaint for illegal dismissal. The case matters because it shows how the Supreme Court applies the four-fold test for the existence of an employer-employee relationship, and how the burden of proving a just cause for dismissal rests on the employer.

Procedural History

Marlito Lapuz filed a complaint for illegal dismissal before the Labor Arbiter. The Labor Arbiter ruled in his favor, ordering Gilbert Dy to pay backwages, separation pay, unpaid holiday pay, unpaid thirteenth month pay, and attorney's fees. Gilbert Dy appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter's decision in full and dismissed the appeal for lack of merit. His motion for reconsideration was denied. Gilbert Dy then filed a petition for certiorari before the Supreme Court, asking it to reverse the Commission's decision and resolution.

Facts

Gilbert Dy operated a small business as a dealer of scrap materials, particularly broken glass, which he sold to bottling and packaging companies. To cover a wider area, he enlisted the help of several persons, among them Marlito Lapuz, on the agreement that in exchange for every purchase or load of broken glass they would receive a percentage. Gilbert Dy provided a vehicle for loading and transporting the glass and gave money to purchase the materials. Marlito Lapuz claimed that he began working as a driver in August 2005 at a salary of 12,000 pesos a month.

On October 14, 2010, Marlito Lapuz did not return from his itinerary. Gilbert Dy claimed that he did not report what transpired and did not fully account for the 10,000 pesos given for the purchase of materials, and that he still owed 94,000 pesos in unremitted and unliquidated cash. Gilbert Dy reported the matter to the police and filed a criminal complaint for estafa. On October 16, 2010, Marlito Lapuz was arrested by policemen on Gilbert Dy's complaint. Marlito Lapuz, in turn, filed a complaint for illegal dismissal, claiming that the criminal charge was merely a ploy to dismiss him.

Gilbert Dy argued that Marlito Lapuz was not an employee but a person who shared in the profits, working at his own pleasure without definite hours. He also pointed to an inconsistency, that Marlito Lapuz claimed to be a driver but whose customary duty was to buy scrap materials. The Labor Arbiter and the Commission both found that an employer-employee relationship existed and that Marlito Lapuz had been illegally dismissed.

Issues

• Whether or not there existed an employer-employee relationship between Gilbert Dy and Marlito Lapuz.
• Whether or not Marlito Lapuz was illegally dismissed from employment.
• Whether or not the monetary awards of backwages, separation pay, holiday pay, thirteenth month pay, and attorney's fees were proper.

Applicable Provisions

The decision applies the four-fold test as formulated in jurisprudence. The Court states it thus:

In determining whether there is an employer-employee relationship, the Supreme Court has applied a four-fold test, to wit: (1) whether the alleged employer has the power of selection and engagement of employees; (2) whether he has control of the employee with respect to the means and methods by which work is to be accomplished; (3) whether he has the power to dismiss; and (4) whether the employee was paid wages.

This test is the framework for deciding the first issue, whether Marlito Lapuz was an employee at all.

The decision also relies on the standard of proof in labor cases, defining substantial evidence as follows:

Substantial evidence is an amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.

This standard governs the review of the factual findings of the Labor Arbiter and the Commission.

On the burden of proof in dismissal cases, the Court states:

It is settled that in illegal dismissal cases, the employer has the burden of proving just cause for terminating the employment of its employee with clear and convincing evidence.

This rule decides the second issue, since Gilbert Dy failed to prove any just cause.

Ruling

On the first issue, the Court held that an employer-employee relationship existed. Before classifying a person as a regular employee, it is necessary first to ascertain if the person is indeed an employee, especially when the alleged employer disputes the relationship. The Court found several factors: the truck used belonged to Gilbert Dy; he provided the money for the purchase of materials; in his complaint for estafa and in the booking and arrest report he referred to Marlito Lapuz as a stay-in driver or truck driver; and Marlito Lapuz was required to report to him regarding his transactions. The Court also found that Gilbert Dy agreed to be paid through salary deduction of 2,000 pesos every month, as evidenced by a promissory note. On the claimed inconsistency, the Court held that there was none, since the work of a driver and that of a buyer of scrap materials can be done by one person, the two jobs having complementary functions.

On the second issue, the Court held that Marlito Lapuz was illegally dismissed. While he had a previous infraction, misappropriating 94,599 pesos and executing a promissory note, Gilbert Dy opted to retain him until his arrest more than a year later. Since the previous charge had been novated to a civil claim for collection, and there was no resolution yet on the estafa charge, Marlito Lapuz must be presumed innocent, and the charge could not be used as a ground for dismissal. The Court also noted that Gilbert Dy was less than forthcoming, since the arrest report stated that Marlito Lapuz was arrested at the office of Gilbert Dy, which was also his address of record. The employer having failed to prove a just cause with clear and convincing evidence, the dismissal was illegal.

On the third issue, the Court held that an illegally dismissed employee is entitled to full backwages and reinstatement, but that reinstatement was no longer viable because the relations between the parties had been so severely strained, so separation pay was proper. The Court affirmed the awards of holiday pay and thirteenth month pay in the absence of proof of correct payment, and upheld the attorney's fees since legal services had been rendered.

Doctrine

First, before a person may be classified as a regular employee, it must first be established that he is an employee, and the four-fold test governs: the power of selection and engagement, control over the means and methods of work, the power to dismiss, and the payment of wages. Second, the existence of an employer-employee relationship is a question of fact, and substantial evidence, that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion, is sufficient. Third, in illegal dismissal cases the employer bears the burden of proving a just cause with clear and convincing evidence; a pending criminal charge does not supply that cause, since the employee is presumed innocent. Fourth, factual findings of labor officials supported by substantial evidence are accorded respect and even finality, and may be disturbed only on a showing of grave abuse of discretion.

Disposition

The petition was dismissed, and the decision and resolution of the National Labor Relations Commission were affirmed, with Marlito Lapuz entitled to backwages computed up to the finality of the decision, separation pay in lieu of reinstatement, holiday pay, thirteenth month pay, and attorney's fees.

Remember This

Memorize the four-fold test and the rule that the employer must prove a just cause with clear and convincing evidence. Examiners like to use this case to test the four-fold test, the substantial evidence standard in labor cases, and the rule that a pending criminal charge cannot justify dismissal while the employee is presumed innocent.