Case #6

Subject:

2-tiered Employee-employer Relationship Test

Constructive Dismissal

G.R. No. 170087 August 31, 2006

ANGELINA FRANCISCO v NLRC, Kasei Corp

Facts:

Angelina Francisco was initially hired as an accountant for Kasei Corp. Later then appointed as Acting manager with monthly basis salary of 27,500 plus 3,000 Housing allowance and with 10% share in the profits of Kasei. As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager. Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation. The designated treasurer called for a meeting to announce that nothing had changed and Ms. Francisco was still connected with Kasei as Technical Assistant to Mr. Kamura and in-charge of BIR Matters. Thereafter, Kasei reduced her salary to 2,500 per month and wasn't paid of mid-year bonus. She made follow ups and was informed that the company was not earning well.

She filed complaint for Constructive dismissal.

Employer contended that she was not an employee because:

- She was initially hired as technical consultant on accounting matters and concurrently assigned as Corp Sec; her services may be terminated anytime

- Ms. Francisco performed her work at her own discretion and Kasei never interfered with her work except for matters relating to her profession; she did not have a time card and went to office at will

- Selection did not go through usual procedure, but by board resolution designating her as Technical Consultant

- Money received were professional fees subject to expanded withholding tax and was not among those reported as employees for BIR and SSS purposes

Issues:

(1) whether there was an employer-employee relationship between petitioner and private respondent Kasei Corporation;

and if in the affirmative, (2) whether petitioner was illegally dismissed

Ruling:

Ms. Francisco is an employee of Kasei Corp

The court used the 2-tiered approach which is broader and applicable to cases where there are no written agreement or terms of reference; we take into consideration the totality of circumstances surrounding the true nature of the relationship

(1) Control over the means and methods - the putative employers power to control the employee with respect to the means and methods by which the work is to be accomplished; and

(2) Dependence of employee to the employer for salaries and benefits - the underlying economic realities of the activity or relationship i.e. inclusion of the employee in the payrolls, analysis of the totality of economic circumstances of the worker

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity,

such as:

(1) the extent to which the services performed are an integral part of the employers business;

(2) the extent of the workers investment in equipment and facilities;

(3) the nature and degree of control exercised by the employer;

(4) the workers opportunity for profit and loss;

(5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise;

(6) the permanency and duration of the relationship between the worker and the employer; and

(7) the degree of dependency of the worker upon the employer for his continued employment in that line of business.

Ms. Francisco reported for work regularly and served in various capacities, for 6 continuous years, and was reported for SSS purposes as an employee.

"She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement. 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."

Employer is guilty of Constructive Dismissal

- when employer reduced her salary

"A diminution 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 or disdain by an employer becomes unbearable to an employee"

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Determining Employee-Employer Relationship