LOLITA LOPEZ, PETITIONER, VS. BODEGA CITY (VIDEO-DISCO KITCHEN OF THE PHILIPPINES) AND/OR ANDRES C. TORRES-YAP, RESPONDENTS.

Lopez versus Bodega City

The Case

This is a petition for review on certiorari brought by Lolita Lopez against Bodega City and its owner and manager, Andres C. Torres-Yap. Lopez had worked as the lady keeper of the ladies' comfort room of Bodega City, and she filed a complaint for illegal dismissal after the management ended their arrangement. The case matters because it is the Supreme Court's clean statement of how the four-fold test for an employer-employee relationship is applied to a worker who claims to be an employee but who performed her work under what the establishment called a concessionaire agreement. It teaches the bar candidate where the line falls between an employee and an independent contractor, and why the power of control is the decisive element.

Procedural History

Lopez filed her complaint for illegal dismissal before the Arbitration Branch of the National Labor Relations Commission in Quezon City. The Labor Arbiter first dismissed the complaint for lack of merit, but on appeal the National Labor Relations Commission set that dismissal aside and remanded the case for further proceedings. On remand the case was assigned to a different Labor Arbiter, who after hearings rendered judgment finding that Lopez was an employee of the respondents and that they had illegally dismissed her.

The respondents appealed to the National Labor Relations Commission, which set aside and vacated the Labor Arbiter's decision and entered a new one dismissing the case for lack of merit. Lopez moved for reconsideration, and the Commission denied it. She then filed a petition for certiorari with the Court of Appeals, which dismissed the petition and affirmed the Commission. Her motion for reconsideration was likewise denied. She came to the Supreme Court by petition for review on certiorari under Rule 45, raising as grounds that the Court of Appeals gravely abused its discretion in ruling that the Commission did not gravely abuse its discretion, and in ruling that she was not an employee of the respondents.

Facts

Bodega City is a corporation, and Andres C. Torres-Yap is its owner and manager. Lopez served as the lady keeper of its ladies' comfort room, tasked with manning that facility. In a letter dated January 6, 1992, Yap, on behalf of the new owners, offered Lopez a concessionaire contract to provide customer comfort services for the users of the ladies' comfort room. Under its terms she would supply at her own expense the toilet supplies, maintain the cleanliness of the comfort room during operating hours, and observe utmost courtesy toward its users. Her remuneration would come from tips and donations given by users, with a share remitted to Bodega City as royalty or concession fees when those exceeded a stated level. The letter expressly stated that no employer-employee relationship existed, that Lopez was an independent contractor, and that any person she engaged to assist her would be her own employee. Lopez never signed the document.

On February 3, 1995, a lady customer reported to management that she had seen Lopez sleeping while on duty, and that Lopez had acted in a hostile manner toward her. By a letter dated February 10, 1995, Yap required Lopez to explain why the concessionaire agreement should not be terminated or suspended because of that incident. In a subsequent letter dated February 25, 1995, Yap informed her that the respondents had decided to terminate the concessionaire agreement.

On March 1, 1995, Lopez filed her complaint for illegal dismissal, insisting that she had been dismissed from employment without cause and without due process. The respondents answered that no employer-employee relationship had ever existed, and that her services within the premises were rendered by virtue of the concessionaire agreement. At the hearings Lopez presented her identification card, on which the words employee's name appeared below her name, and a single petty cash voucher showing an allowance for five days. The respondents presented the testimony of Felimon Habitan, the concessionaire of the men's comfort room, who said that he knew Lopez to be the concessionaire of the ladies' comfort room, and that he and other contractors such as the singers and band performers were issued the same identification cards merely to enable them to enter the premises.

Issues

• Whether or not an employer-employee relationship existed between Lolita Lopez and Bodega City and Andres C. Torres-Yap.
• Whether or not Lopez was illegally dismissed by the respondents.

Applicable Provisions

The decision applies the rule on burden of proof in labor cases, which places the onus probandi on the employer to prove a valid cause of dismissal, but only after the employee has first established the employment relationship by substantial evidence.

The decision also applies the civil law rule on perfection of contracts by consent, which governs whether Lopez accepted the concessionaire agreement even without signing it. The Civil Code provides:

The acceptance of the thing and the cause, which are to constitute a contract, may be express or implied as can be inferred from the contemporaneous and subsequent acts of the contracting parties.

This provision bears on the case because the Court used it to hold that Lopez's continued performance of the tasks in the agreement amounted to implied acceptance.

Ruling

On the first issue, the Court held that no employer-employee relationship existed. It applied the four-fold test: the manner of selection and engagement, the payment of wages, the presence or absence of the power of dismissal, and the presence or absence of the power of control, with control the most important. On payment of wages, a solitary petty cash voucher for a five-day allowance did not prove that Lopez received salary or had been an employee for ten years; she could have shown salary vouchers, pay slips, a contract of employment, social security or Medicare forms, or withholding tax certificates, and she showed none. On control, the Court held that requiring her to observe rules of appropriate conduct within the premises did not make her an employee, because those rules merely promoted the result and did not dictate the means. The concessionaire agreement specified no methods for maintaining cleanliness, and it even allowed her to engage persons to assist her. The Court quoted with approval its ruling in Consulta versus Court of Appeals:

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it.

On the unsigned agreement, the Court held that contracts are perfected by mere consent, and that Lopez's performance of the tasks for three years without complaint showed implied acceptance. She was also estopped from denying the agreement after enjoying its benefits. Her identification card was not proof of employment, since non-employees such as concessionaires, musicians, and singers were issued the same cards as a passport for access to the premises.

On the second issue, the Court held that Lopez was not dismissed, because there was no employment to dismiss. Their relationship was governed by the concessionaire agreement, and it was terminated in accordance with its terms upon her violation of its conditions.

Doctrine

An employer-employee relationship is established by the four-fold test: the manner of selection and engagement, the payment of wages, the presence or absence of the power of dismissal, and the presence or absence of the power of control, with the control test the most crucial and determinative indicator. The control that counts is the right to control not only the end achieved but also the manner and means used to reach it; rules that merely guide the achievement of a result, without fixing the methodology, create no employment relationship. The worker who claims employment must first prove the relationship by substantial evidence before a claim for illegal dismissal can prosper, and a single petty cash voucher and an identification card shared with non-employees will not suffice. A contract is perfected by mere consent, and acceptance may be implied from the contemporaneous and subsequent acts of the parties, so that performing the tasks of an unsigned concessionaire agreement for a considerable period binds the performer, who is then estopped from denying it.

Disposition

The petition was denied, the decision and resolution of the Court of Appeals were affirmed, and costs were assessed against Lopez.

Remember This

Memorize the line that the control test draws the boundary between rules that merely promote a result and rules that dictate the means, for only the second creates an employer-employee relationship. Examiners use this case to test the four-fold test, the burden of proof in illegal dismissal, and implied acceptance of an unsigned concessionaire agreement.