PHILIPPINE GLOBAL COMMUNICATIONS, INC., PETITIONER, VS. RICARDO DE VERA, RESPONDENT.

Philippine Global Communications versus De Vera

The Case

This is a labor case about the true status of a company physician. Philippine Global Communications, Incorporated, which everyone calls PhilCom, engaged Doctor Ricardo De Vera to attend to the medical needs of its employees under a yearly retainership contract. When PhilCom discontinued the arrangement at the end of 1996, De Vera sued for illegal dismissal, insisting that he had been a regular employee since 1981. The Supreme Court had to decide whether an employer-employee relationship ever existed, and it held that it did not. The case matters because it draws the line between a retained professional and a regular employee, and because it teaches that the regular and casual classification in the Labor Code does not even come into play until employment is first established.

Procedural History

De Vera filed a complaint for illegal dismissal before the National Labor Relations Commission. The Labor Arbiter dismissed the complaint for lack of merit, ruling that De Vera was an independent contractor under a valid retainership contract, and that he was not dismissed but simply was not renewed after the thirty first of December 1996. On appeal, the National Labor Relations Commission reversed, finding De Vera a regular employee, and ordered his reinstatement with full backwages, thirteenth month pay, and traveling allowance. PhilCom moved for reconsideration, which was denied, so PhilCom went to the Court of Appeals on a petition for certiorari, imputing grave abuse of discretion. The Court of Appeals affirmed the finding of illegal dismissal, deleted the traveling allowance, and ordered separation pay in lieu of reinstatement. PhilCom's motion for reconsideration was denied, so PhilCom came to the Supreme Court by petition for review on certiorari.

Facts

On the fifteenth of May 1981, De Vera wrote PhilCom offering his services as company physician. In that letter he himself set out his plan of work: preventive medicine and periodic check-ups, five hours of daily clinic consultation, management of hospitalized employees, pre-employment physical examinations at no extra fee, home visits when necessary, and medical administrative tasks. The parties formalized the arrangement in a document called a Retainership Contract, for one year subject to renewal, with a retainer fee of four thousand pesos a month. The contract was renewed yearly, and the arrangement ran from 1981 to 1994, with changes in the fee. For 1995 and 1996, the renewal was only verbal.

In December 1996, PhilCom sent De Vera a letter boldly captioned termination of retainership contract, informing him that his retainer's contract would end at the close of business hours of the thirty first of December 1996, because management found it more practical to provide medical services through accredited hospitals near the company premises.

On the twenty second of January 1997, De Vera filed his complaint for illegal dismissal. He claimed he had actually been employed as company physician since 1981, that he worked full time, and that he received a basic monthly salary plus fringe benefits like any regular employee. He added that, not being conversant with labor laws, he had paid little attention to the retainer designation. The records, however, showed that he was never in PhilCom's payroll, no Social Security System contributions were deducted from him, he was subjected to ten percent withholding tax on his professional fee, and he had to bill PhilCom for his monthly professional fees.

Issues

• Whether or not an employer-employee relationship existed between PhilCom and De Vera under the four-fold test.
• Whether or not Article 280 of the Labor Code, on regular and casual employment, determines the existence of an employment relationship.
• Whether or not Article 157 of the Labor Code, requiring medical services, compels PhilCom to hire its physician as an employee.

Applicable Provisions

Article 157 of the Labor Code, as quoted in the decision, provides:

ART. 157. Emergency medical and dental services. – It shall be the duty of every employer to furnish his employees in any locality with free medical and dental attendance and facilities consisting of: (a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more than two hundred (200) except when the employer does not maintain hazardous workplaces, in which case the services of a graduate first-aider shall be provided for the protection of the workers, where no registered nurse is available. The Secretary of Labor shall provide by appropriate regulations the services that shall be required where the number of employees does not exceed fifty (50) and shall determine by appropriate order hazardous workplaces for purposes of this Article; (b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when the number of employees exceeds two hundred (200) but not more than three hundred (300); and (c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the number of employees exceeds three hundred (300). In cases of hazardous workplaces, no employer shall engage the services of a physician or dentist who cannot stay in the premises of the establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less than eight (8) hours in the case of those employed on full-time basis. Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case of emergency.

This provision is decisive because its last paragraph expressly allows a non-hazardous employer to engage a physician on a retained basis, which is exactly what PhilCom did.

Article 280 of the Labor Code, as quoted by the Court of Appeals, provides:

The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform 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. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one (1) year of service, whether such is continuous or broken, shall be considered a regular with respect to the activity in which he is employed and his employment shall continue while such activity exists.

The Court rejected its use here, because the provision merely classifies employees as regular or casual and presupposes that an employment relationship already exists.

Ruling

On the first issue, the Court applied 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 control test being the most important. All four elements were wanting. De Vera himself set the parameters of his duties in his own letter. He billed PhilCom for his fees, was never on the payroll, had no Social Security System deductions, and suffered ten percent withholding tax on his professional fee. The power to terminate was mutual, either party could end the arrangement at will. And control was absent, because PhilCom did not control the means and methods of his work, he could maintain a private practice, and his work hours and additional compensation were negotiated between the parties.

On the second issue, the Court held that Article 280 is not the yardstick for determining the existence of an employment relationship. The Court said:

As it is, the provision merely distinguishes between two (2) kinds of employees, i.e., regular and casual. It does not apply where, as here, the very existence of an employment relationship is in dispute.

On the third issue, the Court read Article 157 carefully and found that in non-hazardous workplaces the employer may engage a physician on a retained basis, and nothing in the law says such a physician becomes a regular employee. The Court stressed that where the law is clear and unambiguous, it must be taken to mean exactly what it says, and that the very phrase on retained basis revolts against the idea that the engagement gives rise to an employer-employee relationship.

Doctrine

First, the existence of an employer-employee relationship is determined by the four-fold test, and the control test is the most important element: the employer must reserve the right to control not only the result of the work but also the means and methods by which it is accomplished. Second, Article 280 of the Labor Code does not establish employment; it only classifies those already employed as regular or casual, and cannot be invoked while the very existence of employment is in dispute. Third, Article 157 of the Labor Code permits a non-hazardous employer to engage a physician or dentist on a retained basis, and such engagement does not create an employer-employee relationship. Fourth, a retained professional who sets his own duties, bills for his fees, is outside the payroll, and is not subject to control is an independent contractor, not a regular employee.

Disposition

The Supreme Court granted PhilCom's petition, set aside the rulings of the Court of Appeals and the National Labor Relations Commission, and dismissed De Vera's complaint for illegal dismissal.

Remember This

Memorize this line: Article 280 classifies employees, it does not create them, and Article 157 allows a physician to be retained, not employed. Examiners use this case to test the four-fold test and the control test, and to trap candidates into applying the regular employment rule before employment itself has been proven.