ALEXDAN ADSD, INCORPORATED, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND WILMOR BERCHES, RESPONDENTS.

Alexdan ADSD versus National Labor Relations Commission

The Case

This is a petition for certiorari brought by Alexdan ADSD, Incorporated, a domestic corporation engaged in the trucking business, against the National Labor Relations Commission and its former driver, Wilmor Berches. The company asks the Supreme Court to annul the Commission's ruling that Berches was its employee and was illegally dismissed, and that he must be reinstated with full backwages. The case matters because it is a clean teaching vehicle for the four-fold test of employment, the control test, the distinction between an employee and an independent contractor, and the burden an employer bears when it terminates a regular worker.

Procedural History

Berches filed a complaint for illegal dismissal and money claims before the Arbitration Branch of the National Labor Relations Commission, naming the company and its board director, Alfonso Dacumos. He later amended the complaint to pray for reinstatement instead of separation pay. The Labor Arbiter ruled in his favor, declaring him illegally dismissed and ordering the company and Dacumos to pay backwages based on the minimum wage and separation pay. The company and Dacumos appealed to the National Labor Relations Commission, which affirmed the finding of employment and illegal dismissal but modified the award: only the company was held liable, separation pay was deleted, and reinstatement was ordered. The company's motion for reconsideration was denied. The company then went up to the Supreme Court by petition for certiorari under Rule 65, alleging grave abuse of discretion amounting to lack or excess of jurisdiction.

Facts

In March 2008, the company engaged Berches as a trailer truck driver, paid at 1,200 pesos per trip. He drove the company's truck in hauling goods for the company's lone client, D and L Industries, Incorporated, and rendered service in this manner for about four years.

Effective January 2012, the company reduced the per-trip pay: Manila to Batangas trips from 1,200 pesos to 800 pesos, and Manila to Laguna trips from 800 pesos to 650 pesos. Berches protested the reduction, invoking the prohibition against diminishing existing benefits. Instead of addressing his grievance, the company's representatives took the keys of his assigned truck and terminated his services; Dacumos told him to go home since he did not want to make the trip anyway.

The company's defense was that Berches was an independent contractor engaged on a non-regular basis, that it was interested only in the result of his work, and that in any event its client had banned him from its premises, making it impossible to engage him again. Berches replied that he had no capital, investment, or workers of his own, that the truck was supplied by the company, and that he was paid per trip. He also presented his company identification card.

Issues

• Whether or not the National Labor Relations Commission committed grave abuse of discretion in ruling that Berches was an employee of the company and not an independent contractor.
• Whether or not the National Labor Relations Commission committed grave abuse of discretion in ruling that Berches was illegally dismissed and entitled to reinstatement and full backwages.

Applicable Provisions

Article 280 of the Labor Code, on regular and casual employment, 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 engagement of the employee or where the work or services to be performed is seasonal in nature and employment is for the duration of the season.

This is the provision under which Berches, having driven the company's delivery trucks for about four years, became a regular employee.

Article 279 of the Labor Code, on security of tenure, provides:

Article 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld up to the time of his actual reinstatement.

This is the source of the twin reliefs of reinstatement and full backwages granted to Berches.

Ruling

On the first issue, the Court held that the petition lacked merit and that the Commission did not gravely abuse its discretion. Factual findings of labor officials, supported by substantial evidence, are accorded respect and even finality. Whenever the existence of an employment relationship is in dispute, four elements are the reliable yardstick: the selection and engagement of the employee, the payment of wages, the power of dismissal, and the employer's power to control the employee's conduct. The control test is the most important index: whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which it is accomplished.

All four elements were present. The company selected and engaged Berches; it paid him for his services, and payment on a per-trip basis is merely a method of computing compensation, not a test of employment; the power to dismiss was lodged in the company, which in fact exercised it; and control attended the relationship. The company supplied the truck, chose which vehicle to assign, set the trip schedules and delivery points, and Berches exercised no discretion over priorities or the means of hauling. He had no distinct and independent business, no substantial capitalization or investment in tools, machinery, or work premises, and did not even own the truck he drove. Neither his driving skill and experience nor the company's deduction of contractor's tax made him an independent contractor.

On the second issue, the Court held that the dismissal was illegal. As a regular employee, Berches could be dismissed only for a just or authorized cause, and the employer bears the burden of proving the lawfulness of the dismissal. The company cited no just or authorized cause; it merely relayed its client's ban. That ground falls under none of the causes in the Labor Code, and Berches was not given the opportunity to explain his side. Being illegally dismissed, he is entitled to the twin reliefs of reinstatement and full backwages, computed on the minimum wage in the absence of conclusive evidence of his actual compensation.

Doctrine

• The four-fold test governs the existence of an employer-employee relationship: 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: the employer must control not only the result of the work but also the means and methods by which it is accomplished.
• An independent contractor carries on a distinct and independent business, with substantial capital or investment, performing the work according to his own manner and method, free from the principal's control except as to results.
• Payment on a per-trip basis is merely a method of computing compensation and does not negate employment.
• Under Article 280, work usually necessary or desirable in the employer's usual business makes the worker a regular employee, entitled under Article 279 to reinstatement and full backwages if illegally dismissed.
• The employer bears the burden of proving that a dismissal rests on a just or authorized cause and complied with due process.

Disposition

The petition for certiorari was dismissed, and the Commission's decision was upheld: the company was ordered to reinstate Berches without loss of seniority rights and to pay him backwages, with Dacumos absolved from liability.

Remember This

Memorize the line that the control test is the most important index of employment, and that per-trip pay is only a method of computing compensation. Examiners use this case to test the four-fold test, the employee versus independent contractor distinction, and the employer's burden of proving a lawful dismissal.