MR. ALBERT TECSON/MRS. MARIPOL TECSON, OWNERS/MANAGERS, DERM CORNER HAIR AND BEAUTY SALON, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION (7TH DIVISION, CEBU CITY) AND MEL…

Tecson versus National Labor Relations Commission

The Case

This is a labor case in which the owners and managers of a beauty salon in Dumaguete City, the spouses Albert and Maripol Tecson, sought to annul the rulings of the National Labor Relations Commission, Seventh Division of Cebu City, which had affirmed the finding of the Labor Arbiter that their manicurist, Melanie Catiil, was a regular employee who had been illegally dismissed. The salon owners insisted that Catiil was not an employee at all but an independent contractor or business partner paid on commission, and that she had abandoned her work rather than being terminated. The case matters because it gathers in one decision the working rules every labor practitioner must carry: the four-fold test for the existence of an employer-employee relationship, the control test as its most important index, the irrelevance of commission payment to regular status, the requisites of abandonment, and the rule that the filing of a complaint for illegal dismissal negates abandonment.

Procedural History

Melanie Catiil filed a complaint for illegal dismissal, non-payment of overtime pay, holiday pay, premium pay for work done on holiday and rest day, thirteenth month pay, allowances, separation pay, damages, and attorney's fees. On May 30, 2012, the Labor Arbiter ruled that Catiil was a regular employee of the salon and had been illegally dismissed, ordering the spouses Tecson to pay her 181,000 pesos representing backwages and separation pay, plus ten percent attorney's fees. The spouses appealed, and on November 28, 2012, the National Labor Relations Commission, Seventh Division of Cebu City, affirmed the Labor Arbiter's decision in its entirety. The spouses moved for reconsideration, but the Commission denied the motion in a Resolution dated March 27, 2013. The spouses then filed with the Supreme Court a Petition for Certiorari under Rule 65 of the 1997 Rules of Court, alleging grave abuse of discretion on the part of the Commission. The Supreme Court, through Justice Lopez, denied the petition and affirmed the Commission with modification.

Facts

The spouses Albert and Maripol Tecson owned Derm Corner Hair and Beauty Salon at Perdices Street, corner San Juan Street, Dumaguete City. Melanie Catiil worked as the salon's manicurist from 2004 until she was allegedly dismissed on April 10, 2011. Her schedule ran from 9:30 in the morning to 7:00 in the evening, but she could leave only after the last customer had gone. She was barred from serving customers elsewhere, was required to wear the uniform issued by the salon, and was paid on a percentage-per-customer-served basis, earning up to nine thousand pesos a month. She was never paid thirteenth month pay or overtime pay.

On April 8, 2011, at around 9:00 in the morning, Maripol Tecson learned that Catiil had brought her own white hand towel to use in servicing customers. Maripol took this as a personal insult, and her anger worsened when she overheard Catiil tell a co-employee that she brought the towel because the salon's towels looked soiled and felt uncomfortable to use. Maripol pounded her index finger on Catiil's forehead while calling her stupid in front of the salon employees and some customers, refused to listen to any explanation, and told her never to come back. Catiil composed herself and finished her shift until closing time.

On April 11, 2011, Catiil returned to the salon. Albert Tecson summoned her, told her of the great insult she had caused him and his wife, and terminated her services. Catiil then filed her complaint. For their part, the spouses claimed that Catiil was not a regular employee but a manicurist paid on commission who was free to report for duty or not, and that she had voluntarily refused to return to the salon after the encounter.

Issues

• Whether or not the National Labor Relations Commission acted with grave abuse of discretion amounting to lack or excess of jurisdiction in affirming the Labor Arbiter's decision.
• Whether or not an employer-employee relationship existed between the spouses Tecson and Melanie Catiil under the four-fold test.
• Whether or not Catiil was a regular employee despite being paid on commission basis.
• Whether or not Catiil was illegally dismissed, or whether she abandoned her work.

Applicable Provisions

Article 280 of the Labor Code, as quoted in the decision, provides:

Article 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

This provision is the basis for holding that Catiil, who performed manicure and pedicure services necessary and desirable in the salon's business for seven years, is a regular employee.

Article 282 of the Labor Code, as quoted in the decision, provides:

Article 282. Termination by employer. An employer may terminate an employment for any of the following causes: Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; Gross and habitual neglect by the employee of his duties; Fraud or willful breach of the trust reposed in him by his employer or duly authorized representative; Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and Other causes analogous to the foregoing.

This provision supplies the just causes for termination, including abandonment as a form of neglect of duty, which the Court found absent in this case.

Ruling

On the first issue, the Court held that the petition failed to show grave abuse of discretion. A petitioner under Rule 65 must establish that the tribunal acted in a capricious, whimsical, arbitrary, or despotic manner in the exercise of its jurisdiction as to be equivalent to lack of jurisdiction. The spouses merely questioned the Commission's appreciation of the evidence and insisted on their own theory, which is not enough.

On the second issue, the Court applied the four-fold test and quoted its own jurisprudence:

Jurisprudence is firmly settled that whenever the existence of an employment relationship is in dispute, four elements constitute the reliable yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control the employee's conduct. It is the so-called "control test" which constitutes the most important index of the existence of the employer-employee relationship that is, whether the employer controls or has reserved the right to control the employee not only as to the result of the work to be done but also as to the means and methods by which the same is to be accomplished.

The Court found that the spouses selected Catiil, retained her for seven years, paid her forty percent commission, and controlled her attendance and work, including the wearing of uniform and job performance. She was therefore an employee, not an independent contractor, because she did not carry on an independent business, had no substantial capital or investment beyond nail cutters, polishes, and nippers, was not given any work assignment apart from the salon, and was bound by the salon's rules.

On the third issue, the Court held that payment on commission basis does not change the employee's status. The test for regular employment is the reasonable connection between the activity performed and the usual business or trade of the employer, and the employee's performance of the job for at least one year. Manicure and pedicure services are customary in salons, and Catiil's seven years of service made her a regular employee under Article 280.

On the fourth issue, the Court held that Catiil was illegally dismissed. Abandonment requires two elements: the failure to report for work without valid or justifiable reason, and a clear intent, manifested through overt acts, to sever the employer-employee relationship. The employer bears the burden of proving this. The Court gave little credence to the affidavit of Marivic Enjerto, an employee of the salon and thus a biased witness, who was not present when Albert Tecson terminated Catiil. More importantly, the filing of a complaint for illegal dismissal is inconsistent with abandonment, for an employee who protests his dismissal cannot logically be said to have abandoned his work. The Court also held that separation pay in lieu of reinstatement is proper under the doctrine of strained relations, and that backwages must run from the time of dismissal until the finality of the decision.

Doctrine

First, the existence of an employer-employee relationship is determined by the four-fold test: selection and engagement, payment of wages, power of dismissal, and the employer's power to control the employee's conduct. The control test is the most important index, and it is satisfied when the employer reserves the right to control not only the end to be achieved but also the means and methods used to reach it.

Second, payment on commission basis does not by itself make a worker an independent contractor. An independent contractor carries on an independent business, undertakes the work on his own account and responsibility, free from control as to the manner and method of performance, and has substantial capital or investment in tools, equipment, machineries, work premises, and other materials necessary in the conduct of the business.

Third, under Article 280 of the Labor Code, an employee is regular when engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, or when he has rendered at least one year of service with respect to the activity in which he is employed.

Fourth, abandonment requires the concurrence of failure to report for work without valid or justifiable reason and a clear intent, shown by overt acts, to sever the employer-employee relationship. The employer bears the burden of proof, and the filing of a complaint for illegal dismissal negates abandonment.

Disposition

The petition was denied, and the Commission's Decision and Resolution were affirmed with modification, awarding Melanie Catiil full backwages from April 10, 2011 until the finality of the Court's Decision, with the Labor Arbiter ordered to make another recomputation according to that directive.

Remember This

Remember that the control test is the most important index of an employer-employee relationship, and that payment on commission does not make a worker an independent contractor or strip him of regular status. Examiners like to use this case on the four-fold test, on commission-paid workers in salons and similar establishments, and on abandonment, where the filing of an illegal dismissal complaint is proof enough that the employee never intended to sever the relationship.