MANUEL BELO, JR., PETITIONER, VS. SPS. ROLAND AND AURORA SALEM/ JOVITO SALEM, PRIVATE RESPONDENTS,

Belo versus Salem

The Case

This is a labor case that becomes, in the end, a case about jurisdiction. Manuel Belo, Junior, who for years ran the fishpond business of the Spouses Roland and Aurora Salem in Ilog, Negros Occidental, filed a complaint for illegal dismissal with claims for backwages or separation pay and damages. He says he was a caretaker and therefore an employee. The respondents say he was an industrial partner in a joint venture, sharing twenty percent of the net proceeds of every harvest. The Supreme Court's decision matters to a reviewee for two reasons: it is a clean application of the four-fold test for employer-employee relationship, and it draws a firm line between the labor tribunals and the ordinary courts when the real dispute is whether a partnership existed.

Procedural History

Belo filed his complaint for illegal dismissal in May 2012 before the Labor Arbiter of the National Labor Relations Commission, Regional Arbitration Branch Six. The Labor Arbiter dismissed the case for lack of merit, holding that Belo was an industrial partner in a fishpond joint venture and that no employer-employee relationship existed. Belo appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter in its entirety. The Commission held that the twenty percent share was taken from income after expenses were deducted, that it was never booked as salary, and that the arrangement was a joint venture in which the respondent supplied the capital and Belo supplied his labor and expertise. Belo's motion for reconsideration was denied. He then went up to the Supreme Court by a special civil action for certiorari under Rule 65, with a prayer for a preliminary injunction to stop immediate execution of the Commission's decision.

Facts

Belo was hired as caretaker of a five-hectare fishpond leased by the Salems, who were staying in Canada. In April 2006 the spouses acquired an eleven-hectare fishpond in the same barangay, and Belo's services as caretaker were retained. His work was to clean the ponds, supply sea water, stock good quality fry, and tend them for about three months until harvest and sale, then begin again for the next batch. He says he was paid a commission equivalent to twenty percent of the net proceeds after every harvest, averaging fifteen thousand to thirty thousand pesos every three months, and that he received no thirteenth month pay, service incentive leave, holiday pay, rest day pay, or social security, Philhealth, and Pag-ibig coverage.

On April 29, 2012, Roland Salem called from Canada and told Belo that after getting his share from the last harvest, his services would no longer be retained. Belo also recalls that in April 2012, when he last entered the eleven-hectare pond, Jovito Salem, the present manager and caretaker, confronted him with a bolo at his waist and challenged him to a fight to the death, so that he feared for his life and avoided the premises.

The respondents tell a different story. They say the venture began in the year 2000 as a business proposal of Belo's father, Manuel Belo, Senior, a relative of Roland Salem: Roland would finance the lease and the father would manage and run the fishpond, receiving twenty percent of the income for every harvest after operating expenses, in short a joint venture. After two years the father delegated the work to his son, the petitioner. Later, father and son persuaded Roland to buy the ten-hectare fishpond on the same profit-sharing arrangement. The respondents say Belo ran the operation himself, hired and paid the workers, dealt with the buyers, and was entrusted with funds for fry, fertilizers, and materials. They say the harvests deteriorated, and that toward the middle of April 2012 Belo himself called Canada to say that effective July 2012, after the coming harvest, he would no longer handle the venture because Jovito Salem was speaking ill of him.

Issues

• Whether or not an employer-employee relationship existed between Belo and the Spouses Salem, such that Belo would be entitled to his monetary claims.
• Whether or not the National Labor Relations Commission erred in holding that a partnership, rather than an employment relationship, existed between the parties.

Applicable Provisions

Article 1771 of the Civil Code provides:

A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary.

The Commission invoked this provision when Belo argued that no written partnership existed, and held that Roland Salem never ceded ownership of the fishpond to any partnership but merely allowed its use.

Article 1772 of the Civil Code provides:

Every contract of partnership having a capital of Three thousand pesos or more, in money or property shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission. Failure to comply with the requirements of the preceding paragraph shall not affect the liability of the partnership and the members thereof to third persons.

The Commission held that this writing and registration requirement is not a condition of the validity of the partnership but is meant to protect third persons, the partners remaining bound by their agreement whether or not it is reduced to writing.

Ruling

On the first issue, the Court held that no employer-employee relationship existed, applying the four-fold test: the selection and engagement of the employee, the payment of wages, the power of dismissal, and the power to control the employee's conduct, the last being the most important. On selection and engagement, the business arose from a mutual agreement that the respondent would fund the venture while Belo would manage it, so there was no hiring by the respondent. On payment of wages, the twenty percent share of income after operating expenses is a profit-sharing arrangement, not wages; if operating expenses exceeded income, Belo would receive nothing at all, which negates the concept of a wage paid regularly. The Court noted that the share was never booked as salary in the financial reports, and that Belo's bare claim of twelve years of service was unsupported by pay slips, contracts, or social security and withholding records. On the power of dismissal, neither party proved its version of how the engagement ended, and since it is the complainant who must first establish the employment relationship by substantial evidence before an illegal dismissal case can prosper, Belo failed to discharge that burden. On control, Belo cited not a single instance showing that the respondent controlled the manner and means of his work; he even admitted there was no way for the respondent to control him.

On the second issue, the Court held that having found no employer-employee relationship, there was no need to decide whether Belo was an industrial partner or whether the agreement was a partnership. Even assuming a partnership existed, the Court said it had no jurisdiction to rule on issues regarding the partnership relation in a petition for certiorari from the decision of the National Labor Relations Commission.

Doctrine

First, the existence of an employer-employee relationship is essentially a question of fact, resolved by the four-fold test of selection and engagement, payment of wages, power of dismissal, and power to control, with the control test the most crucial and determinative indicator. Second, a share in net profits after operating expenses is a profit-sharing arrangement and not wages, because it is contingent on there being profits at all. Third, in an illegal dismissal case the burden of proving a valid cause of dismissal rests on the employer, but the complainant must first establish the employment relationship by substantial evidence. Fourth, a partnership may be constituted in any form, and the public instrument and registration required by Article 1772 are for the protection of third persons, not a condition of validity as between the partners. Fifth, labor tribunals have no jurisdiction to adjudicate the existence and incidents of a partnership relation.

Disposition

The petition was denied, and the decision and resolution of the National Labor Relations Commission were affirmed; the respondents prevailed.

Remember This

Memorize this line: a twenty percent share of net proceeds after expenses is profit-sharing, not wages, so it cannot by itself make a caretaker an employee. Examiners use this case to test the four-fold test, the burden of proof in illegal dismissal, and the jurisdictional boundary between labor tribunals and courts over partnership questions.