In Jesus G. Reyes v. Glaucoma Research Foundation, Inc., the Supreme Court addressed whether an employer-employee relationship existed between a company and an individual hired as a consultant who later claimed to be an illegally dismissed employee. The Court sided with the company, reiterating that the key determinant is the employer’s control over the means and methods by which the work is accomplished, not just the end result. This decision underscores the importance of clearly defining the nature of working relationships to avoid future labor disputes, particularly differentiating between independent contractors and employees.

Navigating the Murky Waters: Consultant or Employee Under the Control Test?

The case began when Jesus G. Reyes filed a complaint for illegal dismissal against Glaucoma Research Foundation, Inc. and its officers, alleging that he was hired as an administrator but was later terminated without cause. The Foundation countered that Reyes was engaged as a consultant, not an employee, and that no employer-employee relationship existed. This case highlights the crucial distinction between these types of working arrangements, particularly regarding the application of labor laws and employee protections.

At the heart of the dispute was the nature of the relationship between Reyes and the Foundation. Reyes claimed that he was hired as an administrator of the Eye Referral Center (ERC) with a fixed monthly salary. He argued that the Foundation’s control over his work, evidenced by the requirement that his organizational plans be approved by the Board of Trustees, established an employer-employee relationship. On the other hand, the Foundation maintained that Reyes was engaged as a consultant due to his expertise in corporate organizational structure and that he designated himself as the administrator on a trial basis. They asserted that they lacked control over his working hours and the manner in which he performed his duties.

The Labor Arbiter (LA) initially dismissed Reyes’ complaint, finding that he failed to establish the existence of an employer-employee relationship. The LA noted that Reyes simultaneously worked as a consultant for various government agencies, his actions were not supervised by the Foundation, and he did not observe fixed working hours. However, on appeal, the National Labor Relations Commission (NLRC) reversed the LA’s decision, declaring Reyes an employee, finding him illegally dismissed, and ordering his reinstatement with backwages. The NLRC emphasized that the Foundation failed to prove that Reyes’ dismissal was for a valid cause and effected with due process.

The Foundation then filed a Petition for Certiorari with the Court of Appeals (CA), which sided with the LA, annulling the NLRC’s decision and reinstating the LA’s ruling. The CA applied the control test and the economic reality test, concluding that no employer-employee relationship existed. Reyes then appealed to the Supreme Court, arguing that the CA erred in its assessment and that the verification attached to the Foundation’s petition before the CA was defective.

The Supreme Court addressed Reyes’ procedural argument regarding the verification attached to the Foundation’s petition before the CA. Reyes contended that the verification was improper because it only stated the affiant’s community tax certificate number as evidence of identity, which he argued was not compliant with the 2004 Rules on Notarial Practice. The Court rejected this argument, citing established jurisprudence that competent evidence of identity is not required if the affiant is personally known to the notary public.

As the Court noted in Jandoquile v. Revilla, Jr.:

If the notary public knows the affiants personally, he need not require them to show their valid identification cards. This rule is supported by the definition of a “jurat” under Section 6, Rule II of the 2004 Rules on Notarial Practice.

The Court found that the attorney-in-fact of the Foundation, who executed the verification, was personally known to the notary public, who was also the legal counsel of the Foundation. Therefore, the requirement for competent evidence of identity was deemed unnecessary. The Court also cited Heirs of Amada Zaulda v. Isaac Zaulda, underscoring that procedural rules should not be strictly applied if they impair the proper administration of justice, especially when substantive rights of parties are at stake.

Turning to the substantive issue of whether an employer-employee relationship existed, the Supreme Court reiterated the established standards for determining such a relationship: (a) the manner of selection and engagement of the putative employee; (b) the mode of payment of wages; (c) the presence or absence of power of dismissal; and (d) the presence or absence of control of the putative employee’s conduct. The Court emphasized that the “control test” is the most determinative factor. The Court referenced its prior ruling in Sasan, Sr. v. NLRC, which emphasized the importance of control.

The control test examines whether the employer has the power to control the means and methods by which the work is accomplished, not just the end result. In this case, Reyes argued that the Foundation’s approval of his organizational plans demonstrated control. However, the Court agreed with the CA that the power to approve or reject plans does not constitute the control contemplated in the control test. The Court highlighted that Reyes was never subject to definite working hours and that he went on leave without seeking approval from the Foundation. The Supreme Court, citing Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, held that there is no employer-employee relationship where the supposed employee is not subject to a set of rules governing the performance of duties.

Moreover, the Court also applied the economic reality test, examining the economic realities prevailing between the parties. This test considers the economic dependence of the worker on the employer. The Court noted that Reyes concurrently held consultancy positions with other entities during his engagement with the Foundation, indicating that he was not wholly dependent on the Foundation. The Court further emphasized that Reyes’ compensation lacked the usual deductions for SSS and withholding tax, which are standard for employees’ salaries.

Furthermore, the Court addressed the evidence presented by Reyes, such as pay slips and intra-company correspondence designating him as an administrator. While the pay slips indicated payments as “salaries,” the Court noted the absence of standard employee deductions. As the Court stated in Almirez v. Infinite Loop Technology Corporation, salary is a general term, and its designation does not automatically determine the existence of an employer-employee relationship. The Court also considered affidavits from the Foundation’s Medical Records Custodian and Administrative Officer, attesting that Reyes was hired as a consultant, not an employee. Despite Reyes’ objections to the affidavits as hearsay, the Court found them admissible and corroborative of other evidence indicating a consultancy arrangement.

Ultimately, the Supreme Court concluded that Reyes failed to prove the existence of an employer-employee relationship with the Foundation. The Court emphasized that while it is committed to the policy of social justice and the protection of the working class, not every labor dispute will automatically be decided in favor of labor. Management also has rights entitled to respect and enforcement. The Court cited Javier v. Fly Ace Corporation, underscoring that justice should be dispensed based on established facts and applicable law.

FAQs

What was the central issue in this case?	The key issue was whether an employer-employee relationship existed between Jesus Reyes and Glaucoma Research Foundation, Inc., or if Reyes was merely an independent consultant. This determination was crucial for deciding if Reyes was illegally dismissed and entitled to labor law protections.
What is the ‘control test’ and why is it important?	The ‘control test’ is a primary method used by courts to determine the existence of an employer-employee relationship. It focuses on whether the employer controls not just the end result of the work, but also the means and methods by which it is achieved, which is a hallmark of employment.
What is the ‘economic reality test’?	The ‘economic reality test’ examines the economic circumstances of the worker to determine their dependence on the employer. If the worker is economically dependent on the employer, it suggests an employment relationship rather than an independent contractor arrangement.
Why was the procedural issue regarding the verification important?	The procedural issue concerned whether the verification attached to the Foundation’s petition was proper under the Rules on Notarial Practice. This was important because an improperly verified petition could be dismissed, regardless of the merits of the case.
How did the court address the issue of the verification?	The Court ruled that because the affiant was personally known to the notary public, the requirement for presenting competent evidence of identity was not necessary. This exception to the rule ensured that the case could be decided on its merits rather than on a technicality.
What evidence did Reyes present to support his claim of employment?	Reyes presented pay slips, intra-company correspondence designating him as an administrator, and his claim that the Foundation’s Board had to approve his organizational plans as evidence. However, the Court found this evidence insufficient to outweigh the lack of control and economic independence.
Why did the court find that Reyes was not an employee?	The court determined that Reyes was not an employee because the Foundation did not exercise sufficient control over the manner in which he performed his work, he was not subject to fixed working hours, and he held concurrent consultancy positions, indicating economic independence.
What is the significance of this case for employers and consultants?	This case highlights the importance of clearly defining the nature of working relationships to avoid potential labor disputes. Employers should ensure that contracts accurately reflect the level of control they exercise over workers and that consultants maintain a degree of economic independence.

In conclusion, the Supreme Court’s decision underscores the necessity of a clear delineation between employment and consultancy arrangements. The ruling serves as a reminder that the substance of the relationship, particularly the element of control, prevails over form or nomenclature. This decision offers guidance for employers and workers alike, reinforcing the importance of establishing well-defined agreements that accurately reflect the true nature of the working relationship.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Jesus G. Reyes v. Glaucoma Research Foundation, Inc., G.R. No. 189255, June 17, 2015