JESUS G. REYES, PETITIONER, VS. GLAUCOMA RESEARCH FOUNDATION, INC., EYE REFERRAL CENTER AND MANUEL B. AGULTO, RESPONDENTS.

Reyes versus Glaucoma Research Foundation

The Case

This is Reyes versus Glaucoma Research Foundation, a labor case about the existence of an employer-employee relationship. Jesus Reyes sued the Glaucoma Research Foundation, its Eye Referral Center, and its Executive Director Manuel Agulto for illegal dismissal, claiming he was hired as administrator and then locked out without cause. The respondents answered that he was never an employee at all, but a consultant engaged to draw up an organizational set-up and employees' manual. The case matters because it gathers in one decision the four standards for employment, the primacy of the control test, the economic reality test, and the rule that the burden of proving employment rests first on the complainant, not the employer.

Procedural History

Reyes filed a complaint for illegal dismissal with the National Labor Relations Commission in Quezon City. The Labor Arbiter dismissed the complaint on January 20, 2006, finding that Reyes failed to establish the elements of an employer-employee relationship. On appeal, the National Labor Relations Commission reversed, declared Reyes an employee who was illegally dismissed, and ordered his reinstatement with full backwages. The respondents' motion for reconsideration was denied, so they went to the Court of Appeals on certiorari. The Court of Appeals annulled the Commission's ruling and reinstated the Labor Arbiter's decision, holding that under the control test and the economic reality test no employment relationship existed. Reyes's motion for reconsideration was denied, so he filed the present petition for review on certiorari before the Supreme Court.

Facts

Reyes alleged that on August 1, 2003 the corporation hired him as administrator of its Eye Referral Center, and that he received a monthly salary of 20,000 pesos until the end of January 2005. Beginning February 2005, the respondents withheld his salary without notice, yet he continued to report for work. On April 11, 2005 he wrote to Agulto complaining that he had not been paid since February 2005 and had not received his 14th month pay for 2004. He received no reply. On April 21, 2005 he was told he was no longer the administrator, his office was padlocked, and on April 29, 2005 the security guard refused him entry.

The respondents told a different story. They said they engaged his services as a consultant or adviser because he represented himself as an expert in corporate organizational structure and management affairs. On his own claim that an administrator was needed, he later designated himself as such on a trial basis. They insisted they exercised no control over his working hours, as he reported at any time and left as he pleased, and no control over the manner of his work. They added that he became overbearing, that three complaints were filed against him, and that he was never dismissed but voluntarily severed his relations with them.

The records showed that during his stint with the Eye Referral Center he concurrently held consultancy positions with the Manila International Airport Authority and the Anti-Terrorist Task Force for Aviation and Air Transportation Sector. His compensation carried no deductions for Social Security System contributions or withholding tax. A cash voucher for December 2004 described the 20,000 pesos as an allowance, although the pay slip called it salary. He also went on leave for the whole of December 2004 without seeking approval, merely informing the respondents and advising them they could appoint a replacement.

Issues

• Whether or not the Court of Appeals should have dismissed the respondents' petition for certiorari because the verification attached to it stated only the affiant's community tax certificate number as evidence of identity.
• Whether or not an employer-employee relationship existed between Reyes and the respondents, such that his dismissal could be adjudged illegal.

Applicable Provisions

Section 2, paragraph b, of Rule IV of the 2004 Rules on Notarial Practice provides:

A person shall not perform a notarial act if the person involved as signatory to the instrument or document is not in the notary's presence personally at the time of the notarization; and is not personally known to the notary public or otherwise identified by the notary public through competent evidence of identity as defined by these Rules.

This fixes when a notary may act, and the disjunctive wording lets personal knowledge of the affiant substitute for identification papers.

Section 6, Rule II of the same Rules defines the jurat:

Jurat refers to an act in which an individual on a single occasion appears in person before the notary public and presents an instrument or document; is personally known to the notary public or identified by the notary public through competent evidence of identity as defined by these Rules; signs the instrument or document in the presence of the notary; and takes an oath or affirmation before the notary public as to such instrument or document.

This confirms that personal knowledge of the affiant is an accepted alternative to competent evidence of identity.

Ruling

On the first issue, the Court held that the verification was not fatally defective. Competent evidence of identity is not required where the affiant is personally known to the notary public. Here the attorney-in-fact who executed the verification and certificate against forum shopping was personally known to the notary, as both held office at the respondents' place of business and the notary was the corporation's legal counsel. The Court stressed that procedural rules are tools of justice, and that litigations should be decided on the merits rather than on technicalities.

On the second issue, the Court held that no employer-employee relationship existed. The existence of the relationship is a question of fact, and it was Reyes who bore the burden of proving it by substantial evidence, because before a case for illegal dismissal can prosper the employment must first be established. The Court applied the four standards: the manner of selection and engagement, the mode of payment of wages, the power of dismissal, and the power of control, with the control test the most determinative. The power to approve or reject the organizational plans he drew was not the control contemplated by law, for one who commissions work may always accept or reject the product; what matters is control over how the work is done. Reyes was never subject to definite working hours and went on leave without approval. Under the economic reality test, he was not wholly dependent on the corporation, given his concurrent consultancies. The absence of deductions, the cash voucher calling the amount an allowance, and the affidavits of company officers all supported the finding that he was a consultant. Mere title as administrator, an identification card, or the label salary did not create employment. The Court closed by reminding that social justice does not mean every labor dispute is automatically decided in favor of labor, for management also has rights entitled to respect.

Doctrine

First, in an illegal dismissal case the employer bears the burden of proving a valid cause of dismissal, but the complainant must first establish the employer-employee relationship by substantial evidence. Second, the four standards are the manner of selection and engagement, the mode of payment of wages, the power of dismissal, and the power of control, and the control test is the most determinative. Third, the control test asks whether the employer reserves the right to control both the end achieved and the manner and means used to achieve it; the right to approve or reject the finished product is not such control. Fourth, under the economic reality test, the totality of circumstances is examined, and the benchmark is the economic dependence of the worker on the employer. Fifth, a person who works at his own pleasure, free of definite hours, and paid according to results is not an employee. Sixth, a jurat is valid where the affiant is personally known to the notary public, and technical lapses in verification are excused in the interest of substantial justice.

Disposition

The petition was denied and the decision and resolution of the Court of Appeals were affirmed, so the respondents prevailed and the complaint for illegal dismissal remained dismissed.

Remember This

Memorize this line: the power to approve or reject the product is not the control that creates employment, for the control test reaches how the work is done, not just the end result. Examiners use this case to test the control test and the economic reality test, and to remind that the worker must first prove the employment relationship before the employer is made to answer for the dismissal.