Four-Fold Test Economic Reality Test Two-Tiered Test (Or Multi-Factor Test)
Four-Fold Test Economic Reality Test Two-Tiered Test (Or Multi-Factor Test)
Four-Fold Test Economic Reality Test Two-Tiered Test (Or Multi-Factor Test)
1. Four-fold test
2. Economic reality test
3. Two-tiered test (or Multi-factor test)
In applying this test, it is the existence of the right, and not the actual
exercise thereof, that is important.
The economic reality test is not meant to replace the right of control
test. Rather, these two test are often use in conjunction with each
other to determine the existence of employment relation between the
parties. This is known as the two-tiered test, or multi-factor test. This
two-tiered test involves the following tests:
References
The core issues to be resolved in this case are (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.
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This two-tiered test would provide us with a framework of
analysis, which would take into consideration the totality of
circumstances surrounding the true nature of the relationship between
the parties. This is especially appropriate in this case where there is no
written agreement or terms of reference to base the relationship on;
and due to the complexity of the relationship based on the various
positions and responsibilities given to the worker over the period of the
latters employment.
The control test initially found application in the case of Viaa v. Al-
Lagadan and Piga,3[19] 99 Phil. 408 (1956). and lately in Leonardo v. Court
of Appeals,4[20] G.R. No. 152459, June 15, 2006. where we held that there is an
employer-employee relationship when the person for whom the
services are performed reserves the right to control not only the end
achieved but also the manner and means used to achieve that end.
In Sevilla v. Court of Appeals,5[21] we observed the need to
consider the existing economic conditions prevailing between the
parties, in addition to the standard of right-of-control like the inclusion
of the employee in the payrolls, to give a clearer picture in determining
the existence of an employer-employee relationship based on an
analysis of the totality of economic circumstances of the worker.
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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.7[23]
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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. 10[26]
When petitioner was designated General Manager, respondent
corporation made a report to the SSS signed by Irene Ballesteros.
Petitioners 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.11[27]
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formers employees. The coverage of Social Security Law is predicated
on the existence of an employer-employee relationship.
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witnesses.16[32] A recantation does not necessarily cancel an earlier
declaration, but like any other testimony the same is subject to the test
of credibility and should be received with caution.17[33]
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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.19[35] In Globe Telecom, Inc. v. Florendo-
Flores,20[36] we ruled that where an employee ceases to work due to a
demotion of rank or a diminution of pay, an unreasonable situation
arises which creates an adverse working environment rendering it
impossible for such employee to continue working for her employer.
Hence, her severance from the company was not of her own making
and therefore amounted to an illegal termination of employment.
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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.
SO ORDERED.
Hence, based on the finding above and the doctrine that if doubt exists
between the evidence presented by the employer and the employee, the scales of
justice must be tilted in favor of the latter, 21[24] the Court of Appeals reversed the
resolution of the NLRC and reinstated the decision of the Labor Arbiter with
modification. Even if the Court of Appeals was remiss in not stating it in definite
terms, it is implied that the Court of Appeals found that the NLRC gravely abused
its discretion in finding that no employer-employee relationship existed between
petitioner and respondent based on the evidence on record
Petitioner, Present:
VELASCO, JR., J., Chairperson,
PERALTA,
ABAD,
PEREZ,* and
MENDOZA, JJ.
- versus -
Promulgated:
21
* and
November 23, 2011
WILMER D. GENOVIA,
Respondent.
x----------------------------------------------------------------------------------------x
We now proceed to the main issue raised before this Court: Whether or not
the decision of the Court of Appeals is in accordance with law, or whether or not
the Court of Appeals erred in reversing and setting aside the decision of the NLRC,
and reinstating the decision of the Labor Arbiter with modification.
In petitions for review, only errors of law are generally reviewed by this
Court. This rule, however, is not ironclad.22[25] Where the issue is shrouded by a
conflict of factual perceptions by the lower court or the lower administrative body,
in this case, the NLRC, this Court is constrained to review the factual findings of
the Court of Appeals.23[26]
Before a case for illegal dismissal can prosper, it must first be established
that an employer-employee relationship existed between petitioner and
respondent.24[27]
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respondent; and (2) copies of petty cash vouchers,29[32] showing the amounts he
received and signed for in the payrolls.
On the other hand, petitioner failed to prove that his relationship with
respondent was one of partnership. Such claim was not supported by any written
agreement. The Court notes that in the payroll dated July 31, 2001 to March 15,
2002,32[35] there were deductions from the wages of respondent for his absence
from work, which negates petitioners claim that the wages paid were advances for
respondents work in the partnership. In Nicario v. National Labor Relations
Commission,33[36] the Court held:
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32
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if doubts exist between the evidence
presented by the employer and the employee
It is a well-settled doctrine, that if doubts exist between the
evidence presented by the employer and the employee, the scales of
justice must be tilted in favor of the latter. It is a time-honored rule that
in controversies between a laborer and his master, doubts reasonably
arising from the evidence, or in the interpretation of agreements and
writing should be resolved in the formers favor. The policy is to extend
the doctrine to a greater number of employees who can avail of the
benefits under the law, which is in consonance with the avowed policy
of the State to give maximum aid and protection of labor. This rule
should be applied in the case at bar, especially since the evidence
presented by the private respondent company is not convincing. x x
x34[37] Nicario v. National Labor Relations Commission, [G.R. No. 125340. September
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17, 1998] [36] the Court held:
Based on the foregoing, the Court agrees with the Court of Appeals that the
evidence presented by the parties showed that an employer-employee relationship
existed between petitioner and respondent.
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employee was for a valid or authorized cause on the employer, without distinction
whether the employer admits or does not admit the dismissal. 38[40] For an
employees dismissal to be valid, (a) the dismissal must be for a valid cause, and (b)
the employee must be afforded due process.39[41] Procedural due process requires
the employer to furnish an employee with two written notices before the latter is
dismissed: (1) the notice to apprise the employee of the particular acts or omissions
for which his dismissal is sought, which is the equivalent of a charge; and (2) the
notice informing the employee of his dismissal, to be issued after the employee has
been given reasonable opportunity to answer and to be heard on his defense. 40[42]
Petitioner failed to comply with these legal requirements; hence, the Court of
Appeals correctly affirmed the Labor Arbiters finding that respondent was illegally
dismissed, and entitled to the payment of backwages, and separation pay in lieu of
reinstatement.
No costs.
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CONSUELO YNARES-SANTIAGO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson