CONVOY MARKETING CORPORATION AND/OR ARNOLD LAAB, PETITIONERS, VS. OLIVER B. ALBIA, RESPONDENT.

Convoy Marketing versus Albia

The Case

This is a labor case in which a delivery driver, Oliver Albia, claims he was illegally dismissed by Convoy Marketing Corporation and its logistics manager, Arnold Laab. The company insists that Albia was never its employee but an independent contractor under a series of fixed-term delivery agency agreements, and that he had signed quitclaims and releases. The case matters because it is a compact illustration of how the Supreme Court pierces the labels parties place on their relationship and applies the four-fold test of employment, the law on regular employment under Article 280 of the Labor Code, the strict requisites for valid fixed-term contracts, and the burden of proving a just cause for dismissal.

Procedural History

Albia filed a complaint for illegal dismissal and non-payment of wage benefits before the Labor Arbiter. The Labor Arbiter dismissed the complaint for lack of merit, holding that the quitclaim and release Albia signed were valid and binding. Albia appealed to the National Labor Relations Commission, which dismissed the appeal and affirmed the Labor Arbiter, adding that the quitclaim also contained his admission that he was an independent service contractor. The Commission denied his motion for reconsideration.

Albia then filed a petition for certiorari before the Court of Appeals. The Court of Appeals reversed and set aside the resolutions of the Commission. It ordered Convoy Marketing to reinstate Albia to his former position and to pay him full backwages from the date of his termination until payment, plus ten percent of the monetary award as attorney's fees, and remanded the case to the Commission for computation of the award. The Court of Appeals denied the company's motion for reconsideration.

The company and Laab then filed a petition for review on certiorari under Rule 45 of the Rules of Court, asking the Supreme Court to nullify and set aside the decision and resolution of the Court of Appeals.

Facts

Oliver Albia began working for Convoy Marketing, a distributor of bottled wines, liquor, and bottled water, in 2001 as a common laborer, loading and unloading cargo as a pahinante. A year later he was promoted to delivery van driver. As a driver he was paid a fixed salary of 290 pesos per trip regardless of route. The delivery van belonged to the company, which shouldered its maintenance and gasoline costs. He was on the road from Mondays to Saturdays, often working beyond the usual eight hours, and he received no holiday pay, vacation leave with pay, service incentive leave pay, or thirteenth month pay.

On July 22, 2004, upon returning from his delivery route, he smelled of liquor. He explained that after completing the delivery he and his two helpers rested in a store outside the company compound and drank several bottles of beer before returning to load for the next morning's delivery. It was reported to the logistics manager, Arnold Laab, that he was under the influence of liquor. The next day, July 23, 2004, he received a memo informing him that management had decided to terminate his delivery agency agreement effective that day.

Albia filed a complaint for illegal dismissal and non-payment of wage benefits on July 26, 2004. The company contended that he was not an employee but an independent contractor, and presented four delivery agency agreements covering successive periods from November 2002 to September 2004. These agreements provided that the company would furnish the vehicle and pay a fixed per trip fee, while Albia would post a cash bond of 3,000 pesos and be responsible for his own government contributions. Each agreement stated that under no circumstance shall the driver be deemed an employee of the principal. At the end of every service period, Albia signed a quitclaim and release, the largest amount being 5,172.28 pesos. He signed his last two quitclaims in April and August 2004, the second while his case was already pending, and during a conference before the Labor Arbiter he manifested that his claims for unpaid salaries and cash bond deposit were already settled.

Issues

• Whether or not Albia is a regular employee or a fixed-term employee of Convoy Marketing.
• Whether or not Albia was dismissed for a just cause.
• Whether or not the quitclaims and releases he executed are valid.

Applicable Provisions

Article 280 of the Labor Code, as amended, 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 the engagement of the employee or where the work or service 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 year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

This provision controls the first issue because it makes an employee regular by the nature of the activity performed and by the length of service, regardless of what the written agreement says.

Article 282 of the Labor Code, as amended, provides:

Article 282. Termination by employer. An employer may terminate an employment for any of the following causes: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work.

This provision controls the second issue because the company invoked serious misconduct as the ground for Albia's dismissal.

Ruling

On the first issue, the Court held that Albia is a regular employee. The existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract and providing that the employee is an independent contractor when the facts clearly show otherwise, because the employment status of a person is defined and prescribed by law and not by what the parties say it should be. The fact that Convoy already had fifteen regular drivers only underscored that Albia, hired as a driver, performed an activity necessary or desirable in the company's usual business of marketing and distributing bottled wines, liquor, and bottled water. The daily trip summary breakdowns contradicted the claim that he was merely an on-call driver. He had rendered at least one year of broken service in the same activity from the time he was hired as a driver until he was terminated.

The Court also rejected the claim of independent contractorship. The test is whether the contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results. Applying the criteria, the Court found that Convoy engaged Albia without the intervention of a third party, paid his wages on a per trip basis, and abruptly terminated his services the day after the incident. Convoy controlled or reserved the right to control his conduct, not only as to the result of his work but also as to the means and methods by which the result was to be accomplished, as shown by the agreements: the truck belonged to Convoy; fuel, maintenance, and spare parts were for Convoy's account; the truck was to be used exclusively for Convoy's products; and violation of the agreement gave the company the right to unilaterally terminate him.

Neither was Albia a valid fixed-term employee. Fixed-term employment contracts are legitimate and terminate by their own terms at the end of a definite period, and the fact that the service is usually necessary and desirable in the business does not impair their validity. But where it is apparent that the periods were imposed to preclude acquisition of tenurial security, they are struck down as contrary to public policy or morals. The Court laid down two indications: the fixed period was knowingly and voluntarily agreed upon without force, duress, or improper pressure, and absent any circumstance vitiating consent; or the employer and employee dealt with each other on more or less equal terms with no moral dominance exercised by either. Neither indication was proven. Albia was a plain wage earner with low educational attainment, having reached only grade four in the elementary level, and cannot be presumed to be fully aware of the effects of the pro forma and English-written agreements.

On the second issue, the Court held that Albia was dismissed without a just cause. In termination cases, the burden of proof rests upon the employer to show that the dismissal is for a just and valid cause, and failure to do so means the dismissal was illegal. For a dismissal to be valid it must comply with both procedural and substantive due process. Substantive due process requires that the dismissal be made under a just or authorized cause under Articles 282 to 284 of the Labor Code. Misconduct, to justify dismissal, must be serious, must relate to the performance of the employee's duties, and must show that the employee has become unfit to continue working for the employer. The company failed to establish these requisites. Albia's termination came from a lone incident, and he had already finished his driving duty when he was reported at about 6:20 in the evening to have admitted drinking beer. While the company's code on employee discipline prescribed suspension to dismissal depending upon the gravity of the offense, nothing in the records supported the imposition of the supreme penalty of dismissal.

Doctrine

First, the existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract and providing that the employee is an independent contractor when the facts clearly show otherwise, because employment status is defined and prescribed by law and not by what the parties say it should be. Second, under Article 280 of the Labor Code, an employee is regular where he has been engaged to perform activities usually necessary or desirable in the usual business or trade of the employer, and any employee who has rendered at least one year of service, whether continuous or broken, is a regular employee with respect to the activity in which he is employed. Third, fixed-term employment contracts are valid only where the fixed period was knowingly and voluntarily agreed upon without force, duress, or improper pressure, or where the parties dealt on more or less equal terms with no moral dominance exercised by the employer; where the periods were imposed to preclude acquisition of tenurial security, they are struck down as contrary to public policy or morals. Fourth, in termination cases the burden of proof rests upon the employer to show a just and valid cause, and serious misconduct under Article 282 requires that it be serious, relate to the performance of the employee's duties, and show that the employee has become unfit to continue working for the employer.

Disposition

The Supreme Court denied the petition and affirmed the decision and resolution of the Court of Appeals, holding that Albia was a regular employee who was illegally dismissed and entitled to reinstatement and full backwages.

Remember This

The single line worth memorizing is that employment status is defined and prescribed by law and not by what the parties say it should be, so a contract labeling a worker an independent contractor cannot defeat regular employment when the facts show control and necessity of the work. Examiners like to use this case on the four-fold test of employment, the validity of fixed-term contracts under the Brent doctrine, and the employer's burden of proving a just cause for dismissal.