Pedro and Maricel Dusol v.

Emmarck
The existence of an employer-employee relationship is determined by the four-
fold test, with control as the most crucial element. Mere receipt of
commissions or allowances from business proceeds does not establish a
partnership, especially in the absence of documentary evidence, contribution
to capital, or intent to divide net profits.
FACTS
 Pedro Dusol began working as caretaker of Ralco Beach in 1993, performing
daily duties such as cleaning, securing the resort, and entertaining guests. He
worked long hours (5 a.m. to 9 p.m., daily) and received a weekly
allowance starting at ₱100, later increased to ₱239.
 In 1995, Pedro also worked in a fishpond business owned by Emmarck
Lazo’s parents, with compensation based on harvest income. This
arrangement lasted around seven months.
 Despite the fishpond venture ending, Pedro continued working as caretaker
of the beach resort.
 In 2001, Pedro married Maricel Dusol, who was later hired in 2007 to
manage the resort’s store. She worked the same long hours and was
paid ₱1,000/month plus 15% commission on cottage and rest house
rentals.
 In July 2008, Emmarck informed the Dusols that he would lease out the
resort due to poor profitability, and their services were no longer needed.
They stopped working on July 31, 2008.
 Pedro and Maricel filed a complaint for illegal dismissal, underpayment of
benefits, and damages, asserting they were employees deprived of due
process.
 They submitted accounting records showing their compensation was
deducted from resort income, implying an employer-employee relationship.
 Emmarck denied employment, claiming Pedro and Maricel were industrial
partners who received profit shares, not wages. He argued he had no
control over their work and merely allowed them to operate the resort for
livelihood.

Petitioners' Arguments (Pedro and Maricel)

 Emmarck hired and paid them; later terminated their employment.

 Submitted regular reports—indicative of control.
 No evidence of personal business activities or profit sharing.
 Ralco Beach was small; control was informal but present.
 Claim of partnership is absurd given minimal compensation.

Respondent's Defense (Emmarck)

 Pedro admitted being a partner in the fishpond business.

 Claimed profit sharing and lack of control over petitioners.
  Echoed CA’s findings of autonomy and absence of employer control.

Labor Arbiter Decision

 Ruling: Complaint dismissed for lack of jurisdiction.

 Reasoning:
o Pedro and Maricel failed to prove employer-employee relationship.
o No evidence of control by Emmarck over the manner of work.
o Absence of supervision, time records, or company regulations.
o Income records submitted did not prove wages—possibly commissions or
profit shares.
o Burden of proof lies with claimants; Emmarck need not prove a negative.

NLRC Resolution

 Ruling: Reversed LA decision; declared Pedro and Maricel as employees.

 Key Findings:
o Applied four-fold test: selection, payment, power of dismissal, and
control.
o Emmarck exercised control; Pedro and Maricel worked exclusively for him.
o Compensation included salaries, allowances, and commissions
(considered wages).
o No evidence of partnership: no profit sharing or consultation.
 Award:
o Declared illegal dismissal for lack of due process.
o Granted separation pay, nominal damages, wage differentials, 13th month
pay, and attorney’s fees.

Court of Appeals Decision

 Ruling: Reversed NLRC; reinstated LA decision.

 Key Findings:
o Control test not satisfied:
 Pedro and Maricel had autonomy in running the resort.
 No operational guidelines or restrictions.
 Freedom to pursue other livelihoods.
 Maricel sold items for personal gain.
o Absence of control negates employer-employee relationship.

Issues
1. Whether Pedro and Maricel are employees or partners of Emmarck.
 2. In the event that Pedro and Maricel are employees, whether they were validly
dismissed.

RULING:

1. Pedro and Maricel are employees of Emmarck, not industrial partners.

Employment: Determined by the four-fold test:
 Selection and engagement
 Payment of wages
 Power of dismissal
 Power to control conduct
 Include commissions and allowances if paid for services rendered. (Art. 1767,
Civil Code): Requires contribution to a common fund and intent to divide
profits.Receipt of profit share is prima facie evidence of partnership, unless
received as wages.

Pedro and Maricel were engaged as caretaker and storekeeper at Ralco Beach.
Emmarck paid them allowances and commissions—qualifying as wages.He
terminated their services upon leasing the resort.

Control was present:

o Emmarck admitted entrusting operations to them.

o Imposed a 20% markup on store items.
o No evidence they engaged in other livelihoods.
o Long working hours and holiday labor showed structured work conditions.

No documentary evidence of partnership was presented.Commissions were from gross

sales, not net profits—no intent to divide profits.

Pedro and Maricel were employees of Emmarck. The partnership claim was
unsupported and contradicted by the nature of their work and compensation.

2. Pedro and Maricel were illegally dismissed due to lack of procedural due process.

Under Article 298, Labor Code: Closure of business is an authorized cause for
dismissal.If not due to serious losses, separation pay is required. Procedural due
process requires notice to employees and DOLE. Nominal Damages: Awarded
for violation of procedural due process.

Here, Closure of Ralco Beach was not disputed. No proof of serious business
losses—separation pay is due. Emmarck failed to provide required notices. NLRC’s
award of wage differentials and 13th month pay sustained no proof of payment.
Attorney’s fees (10%) and 6% interest from finality of decision until full payment
affirmed.
 Pedro and Maricel were illegally dismissed. They are entitled to separation pay,
nominal damages, wage differentials, 13th month pay, attorney’s fees, and legal
interest.

Lopez v. MWSS
The existence of an employer-employee relationship is determined by law—not
by the label or stipulations in a contract. The Four-Fold Test remains the controlling
standard: selection and engagement, payment of wages, power of dismissal, and
control over the means and methods of work. Among these, the control test is the most
crucial. Even if a contract expressly denies employment status, such denial cannot
prevail over the actual nature of the relationship and the conduct of the parties. When
workers perform essential, continuous, and integrated functions under the supervision
and control of an entity, they are deemed employees regardless of formal designations.
Moreover, government agencies cannot invoke CSC circulars to circumvent labor
protections or deny benefits due to their own failure to comply with reporting and
accreditation requirements.
Facts
Petitioners, including Alexander R. Lopez, were engaged by the Metropolitan
Waterworks and Sewerage System (MWSS) as bill collector-contractors under
individual contracts of service. Their primary duty was to collect fees and charges from
MWSS concessionaires for water, sewer, and plumbing services. Although their
contracts explicitly stated that they were not MWSS employees, petitioners worked
exclusively for MWSS, received commissions and various employee-like benefits such
as bonuses, allowances, hazard pay, and were issued identification cards and service
certifications. In 1997, MWSS entered into a Concession Agreement with Manila Water
and Benpress-Lyonnaise, transferring its billing and collection functions to these private
concessionaires. This led to the termination of petitioners’ contracts, while regular
MWSS employees were absorbed by the concessionaires and granted retirement
benefits. Petitioners, however, were denied severance, retirement, and terminal leave
pay based on a Civil Service Commission (CSC) resolution stating they were not
government employees. They filed a complaint with the CSC, which was denied on the
grounds that their contracts were not submitted for CSC approval and they were not
GSIS members. The Court of Appeals affirmed the CSC’s ruling. Petitioners then
elevated the case to the Supreme Court, arguing that MWSS exercised control over
their work, that their services were essential and continuous, and that they were entitled
to the same benefits as regular employees.
Issue:

Whether the petitioners, who were engaged by MWSS as bill collector-contractors

under individual contracts of service, were in fact employees of MWSS, and therefore
entitled to receive severance pay, terminal leave pay, and retirement benefits upon
the termination of their engagement.

Ruling:

Yes, the petitioners were employees of MWSS and therefore entitled to

severance pay and terminal leave pay Because the petitioners performed work that
was essential to MWSS’s operations, were individually selected and hired, received
regular commissions and employee-like benefits, were subject to disciplinary rules, and
operated under MWSS’s control and supervision—including adherence to a Manual of
Procedures and authorized overtime—their engagement bore all the hallmarks of an
employer-employee relationship.
Four-Fold Test under Philippine labor law, which determines employment through
selection, payment of wages, power of dismissal, and most importantly the employer’s
control over the means and methods of work. The 1987 Constitution also mandates
protection to labor, and jurisprudence such as Peña v. Manila Water affirms that formal
labels or contractual disclaimers cannot override the substantive reality of employment.
In this case, the petitioners were individually hired by MWSS to perform the vital
function of bill collection, a task directly related to MWSS’s core operations. Despite
being labeled as contract-collectors, they were subject to MWSS’s control through
mandatory procedures, training, reassignment, and performance monitoring. They
received regular commissions, bonuses, and allowances, and were issued IDs and
certifications identifying them as MWSS personnel. These indicators satisfied all
elements of the Four-Fold Test, especially the control test, which is the most decisive.
The Court found that MWSS’s denial of employment status was contradicted by its own
conduct and that the nature of petitioners’ work was continuous, necessary, and
integrated into MWSS’s business.
Thus, petitioners were regular employees of MWSS based on the substantive
nature of their engagement and the control exercised by MWSS over their work. As
such, they are entitled to severance pay and terminal leave pay. However, they are not
entitled to retirement benefits due to the absence of GSIS contributions and lack of
CSC-accredited service.

Felicilda v. Uy
The existence of an employer-employee relationship is determined by the four-
fold test: (1) selection and engagement of the employee, (2) payment of wages, (3)
power of dismissal, and (4) power of control. Among these, the control test is the most
crucial focusing on whether the employer has the right to control not just the result, but
also the means and methods of the work. The mode of compensation, such as
commission-based pay, does not negate employment status. Moreover, dismissal
must comply with both substantive and procedural due process, and failure to do
so renders the termination illegal
Facts:

 Petitioner Mario N. Felicilda alleged that he was hired on October 29, 2010 as a truck
driver by Manchesteve H. Uy, operating under "Gold Pillars Trucking" (GPT).

 Work Details:

 Issued a company ID.

 Assigned to GPT’s Manila branch.
 Paid on a percentage basis per trip.

 On December 9, 2011, Felicilda took a nap while waiting for cargo loading. The next
day, he was informed by a helper that he was terminated for sleeping on the job.

 Felicilda filed a complaint for illegal dismissal and money claims before the NLRC

LA- In favor of Felicilda

 Found him to be a regular employee.<br>- Dismissal lacked just cause and

due process
NLRC - Affirmed LA ruling

 Employer-employee relationship existed.

 Control test satisfied: Uy determined delivery areas and schedules.
 Dismissal was illegal

Court of Appeals - reversed NLRC & LA

 No employer-employee relationship.
 Felicilda was paid commissions, not wages.
 No control over means/methods of work.
 ID was for client identification, not employment proof.

CA Resolution- Denied reconsideration

 Upheld dismissal of complaint for lack of merit.

Issue:

Whether the Court of Appeals (CA) correctly found grave abuse of discretion on the part
of the National Labor Relations Commission (NLRC) when it ruled that an employer-
employee relationship existed between petitioner Mario N. Felicilda and respondent
Manchesteve H. Uy, thereby making the dismissal illegal.

Ruling :

Yes, the Court of Appeals erred in finding grave abuse of discretion on the part of
the NLRC. The Supreme Court held that the NLRC correctly found the existence of an
employer-employee relationship and that petitioner Mario N. Felicilda was illegally
dismissed by respondent Manchesteve H. Uy.

Under Rule 45, the Supreme Court reviews errors of law but may reassess
facts when rulings conflict. Grave abuse of discretion occurs when findings lack
substantial evidence. The four-fold test determines employment: hiring, wages,
dismissal power, and control. Article 97(f) includes commissions as wages. Valid
dismissal requires just cause and due process both notice and hearing.

Respondent directly hired petitioner as a truck driver, paid him on a commission

basis which qualifies as wages under the Labor Code—and retained the power to
dismiss him. Control was evident through ownership of trucks, assignment of routes,
and exclusive service to respondent’s clients. The dismissal lacked valid cause and
procedural due process, having been done informally through a helper. The NLRC’s
findings were supported by substantial evidence and consistent with jurisprudence; no
grave abuse of discretion was committed.
 The Supreme Court granted the petition, reversed the CA’s decision,
and reinstated the NLRC’s ruling. Petitioner was a regular employee who was illegally
dismissed, and is entitled to backwages and separation pay.

Note:

For a dismissal to be valid, the rule is that the employer must comply with both the
substantive and procedural due process requirements. Substantive due process
requires that the dismissal must be pursuant to either a just or an authorized cause
under Articles 297, 298, and 299 (formerly Articles 282, 283 or 284)38 of the Labor
Code, as amended.1aшphi139

Procedural due process, on the other hand, mandates that the employer must
observe the twin requirements of notice and hearing before a dismissal can be effected.

Atienza v. Saluta

The Supreme Court ruled that Noel Sacramento Saluta was not a company
driver but a personal/family driver, and therefore not covered by the Labor Code or
the Kasambahay Law. The Court emphasized that Saluta failed to present
substantial evidence—such as a written employment contract, company ID, or payroll
records—to prove an employer-employee relationship with CRV Corporation. As a
result, his claims for illegal dismissal and labor benefits could not prosper under labor
law. The Court held that, due to the repeal of Article 141 of the Labor Code and the
exclusion of family drivers under Section 4(d) of R.A. 10361 (Kasambahay Law),
disputes involving family drivers are governed by general contract principles under
the Civil Code, not by labor standards.

Facts:

Noel Sacramento Saluta filed a complaint for illegal dismissal and monetary claims,
alleging he was employed as a company driver by CRV Corporation starting May 2012,
earning ₱9,000 monthly and assigned to drive for petitioner Celia Atienza. On
December 11, 2014, Saluta figured in a vehicular accident, prompting CRV to advance
₱15,000 for damages, which was to be deducted from his salary. When Saluta
requested leave on December 23–24 to retrieve his confiscated license, Atienza refused
and allegedly told him, “kung hindi ka makakapag-drive ngayon, mabuti pa maghiwalay
na tayo,” which Saluta interpreted as verbal termination. He was later informed by
CRV’s general manager that he had been dismissed. Atienza denied the employment
relationship, claiming Saluta was her personal driver and had abandoned his post.

Labor
Found Saluta to be a personal driver, thus governed by the Civil
Arbiter
Code, not the Labor Code. Dismissed the complaint
Ruling
 NLRC Reversed the Arbiter. Ruled Saluta was a company driver and
Ruling was illegally dismissed. Ordered payment of monetary claims
Court of
Affirmed NLRC’s decision with modifications
Appeals
Reversed CA and NLRC. Held that Saluta failed to prove he was a
Supreme
company driver. No employment contract, company ID, or payroll
Court
evidence. Upheld Labor Arbiter’s ruling that he was a personal/family
Decision
driver, thus not covered by regular labor protections

Issue :

1. whether Noel Sacramento Saluta was a company driver entitled to

protection under the Labor Code, or merely a personal/family driver governed by
the Civil Code

2. whether his dismissal constituted illegal termination under labor law.

Ruling :

1. he is a Personal driver because Saluta failed to establish that he was a

company driver entitled to protection under the Labor Code.

Under labor law, the existence of an employer-employee relationship is determined

by the four-fold test(selection and engagement, payment of wages, power of dismissal,
and control of conduct). Additionally, Article 141 of the Labor Code excludes
personal/family drivers from its coverage, placing them under the Civil Code.

Saluta did not present substantial evidence such as a written contract, company
ID, payroll records, or proof of company control over his work. His assignment to drive
exclusively for Atienza, coupled with the absence of documentation linking him to CRV
Corporation, supports the finding that he was a personal driver. The alleged verbal
dismissal also lacked corroboration under labor standards.

2. Saluta’s dismissal did not constitute illegal termination under labor law.

For a claim of illegal dismissal to prosper, the complainant must first establish an
employer-employee relationship. Under labor jurisprudence, personal/family drivers are
excluded from Labor Code protection (Article 141) and governed by the Civil Code.
Without proof of employment, labor standards on dismissal do not apply.

Saluta failed to present substantial evidence—such as a contract, company ID, or

payroll records—to prove he was a company driver. The Supreme Court found that he
was a personal driver and not covered by labor law protections. Thus, his alleged verbal
dismissal did not trigger the procedural and substantive requirements of legal
termination under the Labor Code.
 Since Saluta was not a covered employee under the Labor Code, his dismissal
was not illegal in the context of labor law.

Note:

With the repeal of Labor Code provisions and the exclusion from the Kasambahay
Law, the Supreme Court in Atienza v. Saluta (G.R. No. 233413, June 17, 2019) held
that:

“Due to the express repeal of the Labor Code provisions pertaining to house
helpers, which includes family drivers, and the non-applicability of the Kasambahay Law
to family drivers, there is need to revert back to the pertinent provisions of the Civil
Code.”

Thus, the employment of family drivers is governed by general contract

principles under the Civil Code, particularly on voluntary service
contracts and obligations arising from agreements

Protections like security of tenure, minimum wage, and benefits do not

automatically apply unless expressly agreed upon.

Article 141, Chapter III, Book III of the Labor Code (before it was repealed by R.A.
10361 or the Kasambahay Law) defined domestic or household service to include:

“Service in the employer’s home which is usually necessary or desirable for the
maintenance and enjoyment thereof and includes ministering to the personal comfort
and convenience of the members of the employer’s household, including services
of family drivers.”

However, Section 44 of R.A. 10361 expressly repealed Chapter III, including Article
141. The Kasambahay Law excluded family drivers from its coverage under Section
4(d) and its Implementing Rules, which clarified that:

“The following are not covered: (a) Service providers; (b) Family drivers; (c) Children
under foster family arrangement; and (d) Any other person who performs work
occasionally or sporadically and not on an occupational basis.”
 Romeo Alba, Petitioner, v. Conrado G. Espinosa, et al., Respondents

Workers continuously rehired for tasks necessary and indispensable to the usual
business of the employer are deemed regular employees, regardless of project-
based arrangements or time-bound contracts.

It also affirms that mere labels or contractual terms cannot override the actual nature
of the working relationship, especially when the employer exercises control and the
work performed is essential to the business.

Facts:

two consolidated complaints for illegal dismissal and monetary claims filed by over 30
construction workers against Alba Construction and its owner, Romeo Alba, before the
NLRC. The workers alleged that they were hired by Alba on various dates to work on
residential construction projects across Metro Manila and nearby provinces. They
claimed to be regular employees receiving daily wages ranging from ₱350 to ₱500, but
were denied statutory benefits such as overtime pay, 13th month pay, holiday pay, and
service incentive leave. In 2013, some workers confronted Alba about these issues and
were subsequently dismissed. In 2014, others raised similar concerns and were met
with verbal abuse and extended working hours. Seeking redress, they turned to media
personality Raffy Tulfo, who contacted Alba during his radio program and urged him to
pay the workers their due. However, this intervention allegedly led to further dismissals
the following day. Alba denied the allegations, asserting that he was merely a
mamamakyaw—a small-scale subcontractor who assembled teams of skilled workers
for short-term projects lasting one to two weeks. He argued that the workers were not
regular employees, were paid ₱600 to ₱1,000 daily depending on skill, and were free to
take on other jobs after each project. Alba also presented client certifications showing
direct payment to workers, claimed they used their own tools, and followed instructions
from architects or foremen hired by the project owners. In response, the workers
submitted gate passes from the residential villages identifying Alba as a “contractor,”
challenging his claim of being a mere intermediary.

No employer-employee
relationship. Wages paid by
project owners. Workers
Labor Arbiter July 31, ❌ Complaints dismissed for
used own tools and followed
(LA) 2015 lack of merit.
instructions from clients'
personnel. Gate passes not
substantial evidence.
Employer-employee
✅ Appeal partly granted.
relationship established via
Reinstatement or
four-fold test. Alba selected,
separation pay,
National Labor paid, and controlled workers.
backwages, ₱200,000
Relations November Continuous rehiring and
moral and exemplary
Commission 27, 2015 indispensable tasks proved
damages, 13th month pay,
(NLRC) regular employment. Gate
SIL pay (except Nilo), 10%
passes supported Alba’s role
attorney’s fees. Total
as employer. Certifications
Award: ₱16,125,574.61
from Alba were defective.
Affirmed NLRC’s findings.
❌ Petition for Certiorari
Four-fold test satisfied.
dismissed.
Court of July 14, Nature of work aligned with
❌ Motion for
Appeals (CA) 2016 Alba’s business. Workers
reconsideration denied (Oct
were regular employees
17, 2016)
illegally dismissed.

Issue:

1. Whether an employer-employee relationship existed between Alba and the

construction workers,
2. whether their dismissal constituted illegal termination under labor laws.

Ruling :

Yes, an employer-employee relationship existed between Alba and the

respondents, and their dismissal was illegal.

The Court applied the four-fold test to determine employment status: (1)
selection and engagement, (2) payment of wages, (3) power of dismissal, and (4)
control over work. It also cited jurisprudence such as South East International Rattan v.
Coming, Legend Hotel v. Realuyo, and DM Consunji v. Jamin to affirm regular
employment and illegal dismissal.

Alba admitted selecting, assigning, and paying the workers. He exercised control
over their work schedules and methods, disproving his claim that they were
independent contractors. The workers performed tasks vital to Alba’s business and
were continuously rehired over many years, some dating back to the 1980s. Alba failed
to justify their termination or prove due process was observed.

The Court affirmed the NLRC and CA rulings. The respondents were regular
employees illegally dismissed and entitled to reinstatement or separation pay,
backwages, and other monetary claims including 13th month pay, SIL pay, damages,
and attorney’s fees.
The existence of an employer-employee relationship is determined by the "control test,"
which looks at whether the employer has the right to control not just the end result but
also the means and methods by which the work is performed.

Naredo v. Nozomi Fortune Services, Inc.

In labor-only contracting, the contractor is deemed a mere agent of the principal,
and the principal becomes the direct employer of the workers. Even if the
contractor is registered with the DOLE, such registration does not conclusively establish
legitimacy. The true nature of the contracting arrangement must be determined by
examining the totality of facts particularly whether the contractor has substantial capital
or investment, exercises control over the workers, and operates an independent
business. If the contractor merely supplies labor for tasks directly related to the
principal’s core business, without tools, equipment, or managerial control, it is
considered labor-only contracting. In such cases, the principal is liable for labor
standards violations and illegal dismissal.
Facts:
On June 28, 2013, Oscar S. Ortiz filed a complaint for illegal dismissal and monetary
claims against Forever Richsons Trading Corporation (now Charverson Wood Industry
Corporation) and Adan Co, alleging that he was a regular employee who had worked
continuously for two years beyond his initial 5-month contract with Workpool Manpower
Services. He claimed he was dismissed for refusing to sign a new short-term contract
and blank documents, and that he was paid below minimum wage without receiving
statutory benefits. The respondents countered that Oscar was employed by Workpool
Manpower a DOLE-certified legitimate job contractor and presented documents
showing that Workpool paid his wages and government contributions.
Failure to implead Workpool Manpower,
Labor
Dismissed complaint deemed indispensable to resolve illegal
Arbiter
dismissal and claims
Workpool Manpower was Oscar’s direct
Affirmed LA decision; denied
NLRC employer; indispensable party not
appeal and reconsideration
impleaded
Dismissed petition for Oscar admitted signing contract with
Court of
certiorari; affirmed NLRC Workpool; refusal to implead Workpool was
Appeals
ruling fatal

Issue:
Whether Oscar S. Ortiz was illegally dismissed by Forever Richsons Trading
Corporation (now Charverson Wood Industry Corporation), considering his claim of
being a regular employee, or whether he was merely a project-based employee of
Workpool Manpower Services, a legitimate job contractor, thereby making Workpool the
proper party liable.

Ruling:
Oscar was illegally dismissed because Workpool Manpower was a labor-only
contractor, making the respondents his actual employer.
Under Article 106 of the Labor Code and DOLE Department Order No. 18-A,
s. 2011, labor-only contracting is prohibited. It exists when the contractor lacks
substantial capital or investment, does not exercise control over the workers, and
merely supplies labor for tasks directly related to the principal’s business. As held
in Coca-Cola Bottlers v. Dela Cruz, labor-only contractors are mere agents of the
principal, who assumes the role of direct employer.
Workpool Manpower failed to show proof of substantial capital or independent
equipment. Oscar used machines owned by the respondents, performed core
production tasks such as operating the Dahul 1 and spreader machines, and was
trained by the respondents’ own leadmen. His wages were paid by the respondents’
paymaster, not Workpool. The agreement between Workpool and the respondents only
obligated Workpool to supply labor, with no operational control. These facts show that
Oscar was fully integrated into the respondents’ business operations, and Workpool
merely acted as a manpower conduit. Hence, the respondents exercised direct control
and supervision over Oscar, establishing an employer-employee relationship.
 Oscar was a regular employee of the respondents and was dismissed without just
cause or due process. His dismissal was illegal, entitling him to reinstatement and full
backwages.

Note:

Article 106 of the Labor Code, defines labor-only contracting as an arrangement where a person,
who does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others, supplies workers to an employer to perform activities which are
directly related to the principal business of the employer.

Labor-only contracting was further defined as an arrangement where the contractor merely recruits,
supplies or places workers to perform a job, work or service for a principal;35 and (a) the contractor
does not have substantial capital or investments in the form of tools, equipment, machineries, work
premises, among others, and the employees recruited and placed are performing activities which are
usually necessary, or desirable to the operation of the company, or directly related to the main
business of the principal within a definite or predetermined period, regardless of whether such job,
work or service is to be performed, or completed within, or outside the premises of the principal; or
(b) the contractor does not exercise the right to control over the performance of the work of the
employee.36

Contracting or subcontracting shall be legitimate if all the following circumstances concur:

(a) The contractor must be registered in accordance with the rule and carries a distinct and
independent business and undertakes to perform the job, work or service on its own
responsibility, according to its own manner and method, and free from control and direction
of the principal in all matters connected with the performance of the work except as to the
results thereof;

The contractor has substantial capital and/or investment; and

(b) The Service Agreement ensure compliance with all the rights and benefits under Labor
Laws.38

(c)

While the existence of registration in favor of a contractor is a strong badge of legitimacy, the
elements of substantial capital, or investment and control over the workers may be examined to
rebut the presumption of regularity to prove that a contractor is not a legitimate
one.39 In Consolidated Building Maintenance, Inc. v. Asprec, Jr.,40 this Court held that there was
legitimate job contracting since the contractor was able to prove that it had sufficient capital and
investment to sustain its manpower business, and that it ran a trade independent from the principal.
Likewise, the contractor retained the right of control over its employees and exercised the right in the
selection and engagement, payment of wages, dismissal, and control over the employees' conduct.4
 Flordivina M. Gaspar v. M.I.Y. Real Estate Corp. and Melissa Ilagan Yu ,

The Supreme Court held that Flordivina Gaspar was not an employee of M.I.Y. Real
Estate Corp., but rather a domestic worker of Melissa Ilagan Yu. The Court ruled that:

 No employer-employee relationship existed between Gaspar and M.I.Y., as

she failed to establish the elements of the four-fold test:
o Selection and engagement by M.I.Y. was not proven.
o Payment of wages by M.I.Y. was not substantiated.
o Power of dismissal was exercised by Yu, not M.I.Y.
o Control over work performance was exercised by Yu in a domestic
setting.
 Gaspar’s tasks—cleaning rooms, changing linens, maintaining spa items, and
monitoring household staff—were domestic in nature, performed within Yu’s
residence.
 Under Republic Act No. 10361 (Batas Kasambahay), Gaspar was properly
classified as a domestic worker, and thus excluded from the coverage of
Book III, Title I of the Labor Code under Article 82.

Facts:
Petitioner alleged that she was hired on April 10, 2013 as a Facilities Maintenance and
Services (FM&S) personnel by M.I.Y., a company operating at Goldrich Mansion, where
she performed regular cleaning and monitoring duties across various commercial
establishments and Yu’s penthouse office. She claimed that her employment lasted for
15 months and was necessary and desirable to the company’s business, but that M.I.Y.
and Yu implemented a scheme of forced resignations every six months to prevent her
regularization. After suffering a workplace injury and being denied medical assistance,
she was barred from reporting to work on July 2, 2014 and pressured to sign an end-of-
contract notice. Respondents countered that she was not an employee of M.I.Y. but a
domestic worker hired by Yu’s mother for household tasks, later transferred to Yu’s
Makati residence due to interpersonal conflicts.
 No employer-employee relationship with
Nov 12, Complaint
Labor Arbiter (LA) M.I.Y.; petitioner was a domestic worker
2014 dismissed
under Yu’s control
National Labor Petitioner failed to prove employment with
Mar 31,
Relations Commission Appeal dismissed M.I.Y.; did not deny Yu’s domestic worker
2015
(NLRC) claim
May 29,
NLRC (MR Resolution) MR denied No merit; affirmed earlier findings
2015
Petition for
Apr 26, NLRC did not commit grave abuse;
Court of Appeals (CA) Certiorari
2017 findings supported by substantial evidence
dismissed
Oct 11, Contentions already considered and
CA (MR Resolution) MR denied
2017 resolved

Issue:

Whether the Court of Appeals committed grave abuse of discretion amounting to

lack or excess of jurisdiction when it affirmed the findings of the NLRC and the
Labor Arbiter that petitioner was not an employee of M.I.Y., thereby upholding the
dismissal of her illegal dismissal complaint for lack of jurisdiction.

Ruling :

The Supreme Court ruled that the Court of Appeals did not commit grave abuse
of discretion in affirming that petitioner was not an employee of M.I.Y., but a domestic
worker of Yu.

Under Rule 65 of the Rules of Court, grave abuse of discretion arises when a
tribunal acts in a capricious, arbitrary, or despotic manner equivalent to lack or excess
of jurisdiction. In labor cases, the existence of an employer-employee relationship is
determined using the four-fold test selection and engagement, payment of wages,
power of dismissal, and control over the employee’s conduct with control being the most
crucial factor. If the control test is insufficient, courts may apply the economic
dependence test, which considers the worker’s integration into the business and
reliance on the employer. Additionally, Article 82 of the Labor Code excludes domestic
workers from coverage under standard labor benefits, while Republic Act No. 10361
(Batas Kasambahay) governs domestic employment, defining domestic workers as
those performing household tasks under an employment relationship.

Petitioner claimed she was hired by M.I.Y. to perform cleaning and maintenance
tasks across various commercial establishments in Goldrich Mansion. However, she
failed to present authenticated employment records, payroll documents, or signed
contracts linking her to M.I.Y. The petty cash vouchers she submitted were unsigned
and generic, and the termination notice lacked any verified connection to M.I.Y.'s
personnel. Crucially, she did not prove that M.I.Y. exercised control over how she
performed her duties — such as scheduling, supervision, or operational directives. On
the other hand, Yu admitted hiring petitioner initially for household work in Pasig and
later transferring her to the Makati residence, where she continued domestic tasks like
cleaning and monitoring provisions. These facts align with the definition of a domestic
worker under RA 10361, not a company employee under the Labor Code.

No employer-employee relationship existed between petitioner and M.I.Y.; hence,

no illegal dismissal occurred. The CA correctly affirmed the labor tribunals, and
petitioner is not entitled to labor claims under the Labor Code.

Note:

Grave abuse of discretion is defined in jurisprudence as such capricious and arbitrary exercise of
judgment as equivalent, in the eyes of the law, to lack of jurisdiction. 66 There is grave abuse of
discretion where the power is exercised in an arbitrary or despotic manner by reason of passion,
prejudice, or personal hostility amounting to an evasion of a positive duty, or a virtual refusal to
perform the duty enjoined, or to act at all in contemplation of law. 67Through time, the meaning of
grave abuse of discretion has been expanded to include any action done contrary to the
Constitution, the law, or jurisprudence

We agree with the appellate court's application of the four-fold test in the case at bar and
its finding that there is an absence of an employer-employee relationship between petitioner
and M.I.Y.85

First, there is no evidence to prove that M.I.Y. selected petitioner and engaged her to
work as FM&S staff in the company. She merely presented clearances from a ce11ain "Asian
Group of Companies," which do not prove that she was hired by M.I.Y.86

Second, there is no evidence to prove that M.I.Y. paid her wages. Although petitioner
presented petty cash vouchers and an unauthenticated and unverified copy of an ATM Card, these
pieces of evidence cannot be considered as evidence of an employment relationship between the
parties.87 Based on the records, the petty cash vouchers were signed only by petitioner88 while the
portion for "approved for payment" was unsigned.89 The petty cash vouchers were also the
standard petty cash vouchers available at bookstores and other shops, which can easily be
manufactured by any person.90 On the other hand, it cannot be identified that M.I.Y. is the payor of
the ATM Card.91

Third, M.I.Y. does not have the power to dismiss petitioner. The Notice of Termination
presented by petitioner was not signed by an employee of M.I.Y.92 Based on the records, the Notice
of Termination designated a certain Jerickson Anonuevo as the HR & T Supervisor but the Notice of
Termination remained unsigned.93 It was not proven that Jerickson Anonuevo is in any way
connected to M.I.Y.94

Finally, M.I.Y. does not have the power to control petitioner's conduct. M.I.Y. did not control
the means and methods by which petitioner performed her tasks as FM&S staff.95 The clear
absence of the power of control leads to the conclusion that petitioner is not an employee of M.I.Y.

Here, the control test is sufficient to determine the absence of an employer-employee

relationship between petitioner and M.I.Y. Thus, the economic realities of the employment
under the economic dependence test will not be discussed.
 Moreover, We agree with the CA that petitioner's employment with Yu is undisputed under the
records and that this fact strengthens M.I.Y.'s argument that petitioner is not its regular employee:

Under Republic Act No. 10361, known as the "Domestic Workers Act" or "Batas
Kasambahay,"101 "domestic work" is defined as work performed in or for a household or
households.102 The same law defines a "domestic worker" or "kasambahay" as any person
engaged in domestic work within an employment relationship such as, but not limited to, the
following: general house help (sic), nursemaid or "yaya", cook, gardener, or laundry person, but shall
exclude any person who performs domestic work only occasionally or sporadically and not on an
occupational basis.103

In her Petition, petitioner argues that she is an employee of M.I.Y. because her workplace was at
the Goldrich Mansion in Makati City, which is a commercial establishment where Yu's businesses
were located and operating.104Petitioner cites and applies the cases of Apex Mining Company, Inc.
v. National Labor Relations Commission105 and Remington Industrial Sales Corporation v.
Castaneda,106 where the Court ruled that a house helper in the staff houses of an industrial
company was a regular employee of said firm.107 To petitioner, she is a regular employee and not a
domestic worker because she did not serve for the personal comfort and enjoyment of the family of
Yu, and instead worked in all the businesses of Yu and/or business of M.I.Y., which were housed in
the same workplace at Makati City.
 Anselmo P. Bulanon v. Mendco Development Corporation, et al

Failure to comply with procedural requirements in labor proceedings

—specifically, the verification and certification of non-forum
shopping—renders the employer’s position paper a mere scrap of
paper. As a result, the allegations in the complaint are deemed
admitted, and the Labor Arbiter’s findings stand.

Facts:

Anselmo Bulanon filed a complaint on January 6, 2006 before the Department of Labor and
Employment (DOLE), alleging that he was hired as a Welder/Fabricator in the furniture business
of Eric Ng Mendoza, who owns several companies including Mendco Development Corporation,
Pinnacle Casting Corporation, Mastercraft Philippines Inc., and Jacquer International. Bulanon
claimed non-payment of labor benefits such as overtime pay, legal holiday pay, 13th month pay,
holiday and rest day premiums, and non-coverage under SSS, PhilHealth, and PAG-IBIG.
Following an inspection of Pinnacle’s premises on January 13, 2006, the DOLE found that
Bulanon had indeed not been paid his 13th month pay, legal holiday pay, service incentive leave,
and overtime pay. The next day, January 14, Bulanon was allegedly given his salary by a Human
Resources representative named Raquel and told not to report for work anymore. When he
returned on January 16, the security guard barred him from entering the premises.

This prompted Bulanon to file a complaint before the National Labor Relations Commission,
Regional Arbitration Branch VII (NLRC-RAB), for illegal suspension and illegal dismissal,
along with claims for backwages, separation pay, attorney’s fees, and moral and exemplary
damages. The respondents denied the allegations, asserting that Bulanon was not their employee
but a neighborhood handyman engaged by Eric and his family to perform masonry work in their
residences located in the same compound in Mandaue City. They argued that his services were
irregular and task-based, not indicative of an employer-employee relationship.

- Found illegal dismissal- Respondents’

Position Paper invalid due to lack of
Labor Arbiter June 17, ✅ In favor of
Certification of Non-Forum Shopping and
(NLRC-RAB) 2008 Petitioner
proper verification Awarded ₱375,375.00 in
total
NLRC October ❌ Reversed LA - No employer-employee relationship-
(Appeal) 30, 2009 Decision Petitioner was a freelance task-based worker
 Impossible to be employed by five entities
simultaneously
- NLRC did not commit grave abuse of
Court of April 30, ❌ Dismissed Petition discretion Surety bond furnishing not
Appeals (CA) 2014 for Certiorari mandatory Petitioner failed to prove
employment relationship
CA (MR July 2, ❌ Denied Motion for
- Reaffirmed earlier dismissal
Resolution) 2015 Reconsideration
Supreme - Petitioner insists DTRs and Affidavit prove
📌 Petition for
Court — employment Argues respondents’ Position
Review on Certiorari
(Pending) Paper was invalid and unrebutted

Issue

In a nutshell, the main issue in this case is whether petitioner was able to prove by
substantial evidence his employment with respondents.

Ruling :
The petition fails because petitioner did not establish an employer-employee
relationship, which is a legal prerequisite for claiming illegal dismissal. Under the four-
fold test in labor law selection, wage payment, power to dismiss, and control over work
such a relationship must be proven by substantial evidence. In this case, petitioner
merely presented unsigned and unauthenticated DTRs and admitted receiving payment
from a personal assistant, not from any company payroll. He also performed varied
tasks like installing gates and fabricating railings across multiple locations, which
reflects project-based or handyman work rather than regular employment. Without clear
proof of control and engagement by the respondents as employers, the claim for illegal
dismissal must fail
Note:
it is incumbent upon the petitioner to prove the employer-employee relationship by substantial
evidence or such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.
his bolsters the CA's finding that petitioner is a skilled worker who offered diverse services to
respondents when the need arose. To be sure, if petitioner was indeed a regular employee of the
respondents, there would have been no need to describe the varying works that he rendered on a
weekly basis in order to justify his receipt of compensation, for the nature and scope work of an
employee is usually discussed the moment of his or her engagement. As it is, the DTRs adduced by
petitioner do not conclusively establish the existence of an employer-employee relationship between
him and respondents.

Daguinod v. Southgate Foods, Inc. and Generation One

A cooperative acting merely as a supplier of labor, without substantial capital or
control over the work performed, and whose workers perform tasks directly
related to the principal’s business, is deemed a labor-only contractor.
Consequently, the principal is considered the direct employer of the workers.

This ruling reinforces the principle that labor-only contracting is prohibited under
Philippine labor law, and that mere cooperative membership or capital build-up
schemes do not shield principals from employer obligations when the contractor
fails to meet the legal standards of legitimacy.

Facts
Marvin O. Daguinod was initially employed directly by Southgate Foods, Inc. as a
counter crew at Jollibee Alphaland, but was later reassigned under a Service
Agreement between Southgate and Generation One Resource Service and Multi-
Purpose Cooperative, which provided non-core services. As a member of Generation
One, Daguinod signed a Service Contract and paid membership fees. On April 10,
2011, he was accused of a “pass out” transaction and theft after a receipt discrepancy
and a cash register overage of ₱106.00. He was detained, coerced into writing
confession letters, and jailed until released by the Makati City Prosecutor due to
insufficient evidence. His sister corroborated the coercion and confirmed that legal
counsel from Southgate demanded a confession for his release. Daguinod was later
informed of his termination effective May 13, 2011. Generation One admitted he was
their employee but claimed the complaint was premature. Southgate denied any
employment relationship and alleged the complaint was retaliatory. Both respondents
maintained that Generation One was a legitimate contractor and denied labor-only
contracting and coercion.

- Generation One is a legitimate labor

contractor - Daguinod is a regular
Labor Dismissed
June 28, 2012 employee of Generation One No
Arbiter (LA) complaint
illegal dismissal proven- No formal
notice of termination received
- Generation One has substantial
capital and its own office No illegal
December 12, Affirmed LA
NLRC dismissal; Daguinod assumed he was
2012 Decision
dismissed Denied Daguinod’s Motion
for Reconsideration on Jan 25, 2013
- No clear evidence of dismissal
Date not Dismissal must be proven by
Court of specified employer’s overt acts- Generation
Dismissed petition
Appeals (Decision One is a legitimate labor contractor
for certiorari
(CA) before March per DOLE registration Service
18, 2016) Agreement covered non-core
functions
CA (MR March 18, Denied Motion for - Upheld previous findings and
Resolution) 2016 Reconsideration dismissal of petition
 - Daguinod challenged CA
Filed
Supreme Decision and Resolution-
after
Court Pending Southgate filed a comment
March
Petition Generation One did not file a
2016
comment despite extension
Issue:
Ruling:

Generation One is not a legitimate labor contractor because: It failed to prove

substantial capital or investment and did not exercise control over the workers,
indicating labor-only contracting.

Under Article 106 of the Labor Code and DOLE Department Order No. 18-A,
Series of 2011, a contractor must have substantial capital or investment and control
over the performance of work. Jurisprudence in San Miguel Corporation v. MAERC
Integrated Services, Inc. and Naredo v. Nozomi Fortune Services, Inc. affirms that
failure to meet these criteria renders a contractor labor-only, making the principal the
direct employer.

In this case, Generation One’s Service Contract with Daguinod left his specific
duties blank and deferred work instructions to Southgate, indicating that Southgate
controlled both the work and its execution. Daguinod was previously employed directly
by Southgate, and his reassignment through Generation One did not alter the nature of
his work as counter crew/cashier at Jollibee Alphaland. The cooperative’s capital build-
up scheme and membership fees did not amount to substantial investment, and its role
was limited to recruitment and payroll, which are hallmarks of labor-only contracting

Generation One is a labor-only contractor; thus, the principal is deemed the

employer of the workers.

Note:

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared

prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies, or places workers to perform a job,
work or service for a principal, and any of the following elements [is] present:

i) The contractor or subcontractor does not have substantial capital or investment

which relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal; or
ii The contractor does not exercise the right to control over the performance of the
) work of the contractual employee

Section 7. Existence of an employer-employee relationship. The contractor or

subcontractor shall be considered the employer of the contractual employee for purposes
of enforcing the provisions of the Labor Code and other social legislation. The principal,
however, shall be solidarity liable with the contractor in the event of any violation of any
provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of
the following case, as declared by a competent authority:

where there is labor-only contracting; or

(a)
(b) where the contracting arrangement falls within the prohibitions provided in Section 6
(Prohibitions) hereof. (Emphasis supplied)

here is labor-only contracting where: (a) the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others; and (b) the workers recruited and
placed by such person are performing activities which are directly related to the
principal business of the employer.

legitimate labor contracting or subcontracting refers to an arrangement whereby a principal

agrees to put out or farm out with a contractor or subcontractor the performance or
completion of a specific job, work or service within a definite or predetermined period,
regardless of whether such job, work or service is to be performed or completed within or
outside the premises of the principal. The "principal" refers to any employer who puts out or
farms out a job, service or work to a contractor or subcontractor. 39
 Aspect Legitimate Contracting Labor-Only Contracting
Independent business with substantial No substantial capital or
Nature of
capital (≥ ₱5M), tools, and control investment; merely supplies
Contractor
over work methods workers
Contractor controls work
Control Over Principal exercises control over
performance; principal controls only
Workers workers’ performance
results
Employment Principal is deemed the direct
Contractor is the employer
Relationship employer
Registration does not cure labor-
DOLE Required for legitimacy; subject to
only status if substantive criteria
Registration renewal and compliance
are unmet
Principal is directly liable for
Effect of Contractor handles dismissal;
illegal dismissal, backwages,
Termination principal may be subsidiarily liable
reinstatement
Solidary Principal and contractor jointly liable Principal solely liable if
Liability for labor standard violations contractor is a mere agent