In Dr. Mary Jean P. Loreche-Amit v. Cagayan de Oro Medical Center, Inc., the Supreme Court clarified the criteria for determining employment status, particularly in cases of alleged illegal dismissal. The Court ruled that while appointment by a Board of Directors might suggest a corporate officer position, the critical factor is whether the position is explicitly defined in the corporation’s by-laws. Further, the court reiterated the importance of the control test in ascertaining the existence of an employer-employee relationship. This decision underscores the necessity for corporations to clearly define roles in their by-laws and highlights the significance of control as a key indicator of employment status.

From Pathologist to Plaintiff: When Does a Doctor Become an Employee?

The case began when Dr. Mary Jean P. Loreche-Amit filed a complaint for illegal dismissal against Cagayan De Oro Medical Center, Inc. (CDMC), Dr. Francisco Oh, and Dr. Hernando Emano, after her appointment as Chief Pathologist was recalled. Dr. Loreche-Amit contended that she was dismissed without just cause or due process, alleging that the recall was a consequence of her refusal to assist Dr. Emano’s daughter in qualifying as a pathologist. The respondents, however, argued that Dr. Loreche-Amit was not an employee but merely an associate pathologist assisting the late Dr. Jose N. Gaerlan, and that she was free to work in other hospitals.

The Labor Arbiter initially dismissed the complaint, citing a lack of jurisdiction. The arbiter reasoned that Dr. Loreche-Amit was a corporate officer due to her appointment by the Board of Directors, placing the case under the jurisdiction of the Regional Trial Court (RTC) as an intra-corporate dispute. The National Labor Relations Commission (NLRC) affirmed this decision, prompting Dr. Loreche-Amit to file a Petition for Certiorari before the Court of Appeals (CA), which was also dismissed. The central issue before the Supreme Court was whether the labor tribunals had jurisdiction over the illegal dismissal complaint, which hinged on determining Dr. Loreche-Amit’s employment status.

The Supreme Court approached the matter by first examining whether Dr. Loreche-Amit was a corporate officer. The Court referred to Section 25 of the Corporation Code, which defines corporate officers as the president, secretary, treasurer, and any other officers specified in the corporation’s by-laws. The Court emphasized that designation as a corporate officer must stem either from the Corporation Code itself or from the corporation’s by-laws. The Court underscored this point by quoting WPP Marketing Communications, Inc. v. Galera:

Corporate officers are given such character either by the Corporation Code or by the corporation’s by-laws. Under Section 25 of the Corporation Code, the corporate officers are the president, secretary, treasurer and such other officers as may be provided in the by-laws. Other officers are sometimes created by the charter or by-laws of a corporation, or the board of directors may be empowered under the by-laws of a corporation to create additional offices as may be necessary.

In the absence of CDMC’s by-laws in the records, the Court found no basis to conclude that Dr. Loreche-Amit, as a pathologist, was a corporate officer simply because she was appointed through a resolution by the Board of Directors. This ruling clarified that appointment alone does not automatically confer corporate officer status; the position must be explicitly provided for in the by-laws. This determination effectively removed the case from the jurisdiction of the RTC, which handles intra-corporate disputes, but it did not automatically qualify Dr. Loreche-Amit as an employee of CDMC.

Having established that Dr. Loreche-Amit was not a corporate officer, the Supreme Court then proceeded to determine whether an employer-employee relationship existed between her and CDMC. To ascertain this, the Court applied the **four-fold test**, a well-established standard in Philippine labor law. This test examines:

1. The selection and engagement of the employee;
2. The payment of wages;
3. The power of dismissal; and
4. The power to control the employee’s conduct.

The Court acknowledged that CDMC, through its Board of Directors, exercised the power to select and supervise Dr. Loreche-Amit as the Pathologist. She was appointed with a fixed term of five years and received compensation based on 4% of the gross receipts of the Clinical Section of the laboratory. However, the Court found that CDMC did not exercise sufficient control over Dr. Loreche-Amit’s work to establish an employer-employee relationship.

The element of control is considered the most crucial in determining the existence of an employer-employee relationship. It refers to the employer’s right to control not only the end result of the work but also the manner and means by which it is achieved. The Court noted that Dr. Loreche-Amit worked for other hospitals in addition to CDMC, which indicated that she controlled her working hours and methods. This independence from CDMC’s control was a significant factor in the Court’s determination. Moreover, the Court applied the **economic reality test**, which examines the economic dependence of the worker on the employer.

The economic reality test considers the totality of circumstances surrounding the true nature of the relationship between the parties. Because Dr. Loreche-Amit continued to work for other hospitals, the Court concluded that she was not wholly dependent on CDMC for her livelihood. Furthermore, she received her 4% share regardless of the number of hours she worked, suggesting that she managed her own work schedule and methods. The Court cited established jurisprudence on the matter:

The rule is that where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no employer-employee relationship exists.

The Supreme Court also addressed the inter-office memorandum issued by Dr. Oh regarding Dr. Loreche-Amit’s behavior, concluding that it did not sufficiently establish the element of control. The memorandum was administrative in nature and did not pertain to the manner and method of Dr. Loreche-Amit’s work. This distinction was crucial because the control test requires control over the *means* of performing the work, not merely administrative oversight.

Ultimately, the Supreme Court affirmed the findings of the Labor Arbiter, NLRC, and the CA that there was no illegal dismissal in this case, as it was not sufficiently proven that Dr. Loreche-Amit was indeed an employee of CDMC. The Court’s decision hinged on the absence of the element of control, despite the presence of other factors that might suggest an employer-employee relationship, such as appointment by the Board and compensation.

This case serves as a reminder of the importance of clearly defining roles and responsibilities within a corporation, particularly in the by-laws. It also highlights the significance of the control test in determining employment status. The absence of control, even with other indicators present, can negate the existence of an employer-employee relationship.

FAQs

What was the key issue in this case?	The key issue was whether Dr. Loreche-Amit was illegally dismissed, which depended on whether she was an employee or a corporate officer of CDMC. The court needed to determine if the labor tribunals had jurisdiction over the complaint.
What is the “four-fold test” for determining employment status?	The four-fold test examines: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct. All four elements must be present to establish an employer-employee relationship.
What is the significance of the “control test”?	The control test is the most crucial element in determining employment status. It focuses on whether the employer has the right to control not only the end result of the work but also the manner and means by which it is achieved.
What is the “economic reality test”?	The economic reality test examines the economic dependence of the worker on the employer. It considers the totality of circumstances surrounding the true nature of the relationship between the parties.
What makes someone a “corporate officer”?	A corporate officer is someone whose position is either defined in the Corporation Code or in the corporation’s by-laws. Appointment by the Board of Directors alone does not make someone a corporate officer.
Why did the Labor Arbiter initially dismiss the case?	The Labor Arbiter dismissed the case for lack of jurisdiction, believing Dr. Loreche-Amit was a corporate officer. This would have placed the case under the jurisdiction of the Regional Trial Court (RTC) as an intra-corporate dispute.
What was the Supreme Court’s final ruling?	The Supreme Court ruled that Dr. Loreche-Amit was not a corporate officer and affirmed the CA’s decision that there was no illegal dismissal. The Court based its ruling on the absence of employer-employee relationship because CDMC did not have the power to control her work conduct.
What is the practical implication of this ruling for corporations?	Corporations must clearly define roles and responsibilities in their by-laws to avoid confusion about employment status. The absence of control over an individual’s work can negate the existence of an employer-employee relationship, even if other factors are present.

This case reinforces the importance of a thorough assessment of employment relationships, considering both the formal designations and the actual dynamics of control and economic dependence. Businesses should review their organizational structures and by-laws to ensure clarity and compliance with labor laws.

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: DR. MARY JEAN P. LORECHE-AMIT V. CAGAYAN DE ORO MEDICAL CENTER, INC., G.R. No. 216635, June 03, 2019