Issue:
1. Whether or not there was an employer-employee relationship.
Ruling:
Yes, there was an employer-employee relationship between the petitioner
and the corporation.
The court adopted the 2-tiered test in this case.
2 Tiered test (combination of Control & Economic Reality Test):
1. The putative employer’s power to control the employee with
respect to the means and methodsby which the work is to be
accomplished (Control); and (2) the underlying economic realities of
the activity or relationship.
To determine the economic dependence of the employee - whether
the employee is dependent to the employer for his continued
employment in that business.
• Generally, courts have relied on control test where the person for
whom the services are performed reserves a right to control not only
the end to be achieved but also the means to be used in reaching such
end. In addition to the standard of right-of-control, the existing
economic conditions prevailing between the parties can help in
determining the existence of an employer-employee relationship.
• In certain cases the control test is not sufficient to give a complete
picture of the relationship between the parties. There are instances
when, aside from the employer’s power to control the employee with
respect to the means and methods by which the work is to be
accomplished, economic realities of the employment relations help
provide a comprehensive analysis of the true classification of the
individual.
• The court adopted the two-tiered test involving: (1) the putative
employer’s power to control the employee with respect to the means
and methods by which the work is to be accomplished; and (2) the
underlying economic realities of the activity or relationship.
• Under the control test, it was held that the petitioner is an
employee of Kasei Corporation because she was under the
direct control and supervision of Seiji Kamura, the
Corporation’s Technical Consultant. She reported for work
regularly and served in various capacities as Accountant, Liaison
Officer, Technical Consultant, Acting Manager and Corporate
Secretary, with substantially the same job functions, that is, LP
accounting and tax services to the company and performing
functions necessary and desirable for the proper operation of
the corporation such as securing business permits and other
licenses over an indefinite period of engagement. Respondent
corporation had the power to control petitioner with the
means and methods by which the work is to be accomplished.
•
• Under the broader economic reality test, the court also held that the
petitioner can be said to be an employee of respondent corporation
because she had served the company for six years before her
dismissal, receiving check vouchers indicating her
salaries/wages, benefits, 13 th
month pay, bonuses and
allowances, as well as deductions and Social Security
contributions from August 1, 1999 to December 18, 2000.
Petitioner’s membership in the SSS as manifested by a copy of the
SSS specimen signature card which was signed by the President of
Kasei Corporation and the Inclusion of her name in the on-line inquiry
system of the SSS evinces the existence of an employer-employee
relationship between petitioner and respondent corporation. It is
therefore apparent that petitioner is economically dependent
on respondent corporation for her continued employment in
the latter’s line of business.
• Respondent corporation hired and engaged petitioner for
compensation, with the power to dismiss her for cause. More
importantly, respondent corporation had the power to control
petitioner with the means and methods by which the work is to be
accomplished.
Issue:
2. Whether or not the petitioner was illegally dismissed.
Ruling:
Yes, the petitioner was illegally dismissed by the corporation.
The corporation also constructively dismissed petitioner when it
reduced her salary by P2,500 a month from January to
September 2001. This amounts to an illegal termination of
employment, where the petitioner is entitled to full backwages.
Since the position of petitioner as accountant is one of trust
and confidence, petitioner is further entitled to separation pay,
in lieu of reinstatement.
A diminution (reduction) of pay is prejudicial to the employee and
amounts to constructive dismissal. Constructive dismissal is an
involuntary resignation resulting in cessation of work resorted to when
continued employment becomes impossible, unreasonable or unlikely;
when there is a demotion in rank or a diminution in pay; or when a
clear discrimination, insensibility by an employer becomes unbearable
to an employee.
The court granted the petition, the decision of the Court of Appeals
was annuled and set aside, the decision of NLRC was reinstated, and
the case was remanded to the Labor Arbiter for the recomputation of
petitioner’s full backwages from the time she was illegally terminated
until the date of finality of this decision, and separation pay
representing one-half month pay for every year of service, where a
fraction of at least six months shall be considered as one whole year.