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Royal Homes Marketing Corporation v. Alcantara, G. R. No. 195190, July 28, 2014
Royal Homes Marketing Corporation v. Alcantara, G. R. No. 195190, July 28, 2014
195190
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SECOND DIVISION
DECISION
Not every form of control that a hiring party imposes on the hired party is indicative of employee-employer
relationship. Rules and regulations that merely serve as guidelines towards the achievement of a mutually desired
result without dictating the means and methods of accomplishing it do not establish employer-employee
relationship.1
This Petition for Review on Certiorari2 assails the June 23, 2010 Decision3 of the Court of Appeals (CA) in CA-G.R.
SP No. 109998 which (i) reversed and set aside the February 23, 2009 Decision4 of the National Labor Relations
Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing Corporation (Royale Homes) to pay
respondent Fidel P. Alcantara (Alcantara) backwages and separation pay, and (iii) remanded the case to the Labor
Arbiter for the proper determination and computation of said monetary awards.
Also assailed in this Petition isthe January 18, 2011 Resolution5 of the CA denying Royale Homes’ Motion for
Reconsideration,6 as well as its Supplemental7 thereto.
Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara asits Marketing
Director for a fixed period of one year. His work consisted mainly of marketing Royale Homes’ realestate inventories
on an exclusive basis. Royale Homes reappointed him for several consecutive years, the last of which covered the
period January 1 to December 31, 2003 where he held the position of Division 5 Vice-President-Sales.8
On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal9 against Royale Homes and its President
Matilde Robles, Executive Vice-President for Administration and Finance Ma. Melinda Bernardino, and Executive
Vice- President for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of Royale Homes since he
is performing tasks that are necessary and desirable to its business; that in 2003 the company gave him ₱1.2 million
for the services he rendered to it; that in the first week of November 2003, however, the executive officers of Royale
Homes told him that they were wondering why he still had the gall to come to office and sit at his table;10 and that
the actsof the executive officers of Royale Homes amounted to his dismissal from work without any valid or just
cause and in gross disregard of the proper procedure for dismissing employees. Thus, he alsoimpleaded the
corporate officers who, he averred, effected his dismissal in bad faith and in an oppressive manner.
Alcantara prayed to be reinstated tohis former position without loss of seniority rights and other privileges, as well as
to be paid backwages, moral and exemplary damages, and attorney’s fees. He further sought that the ownership of
the Mitsubishi Adventure with Plate No. WHD-945 be transferred to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that the appointment
paper of Alcantara isclear that it engaged his services as an independent sales contractorfor a fixed term of one
year only. He never received any salary, 13th month pay, overtime pay or holiday pay from Royale Homes as hewas
paid purely on commission basis. In addition, Royale Homes had no control on how Alcantara would accomplish his
tasks and responsibilities as he was free to solicit sales at any time and by any manner which he may deem
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appropriateand necessary. He is even free to recruit his own sales personnel to assist him in pursuance of his sales
target.
According to Royale Homes, Alcantara decided to leave the company after his wife, who was once connectedwith it
as a sales agent, had formed a brokerage company that directly competed with its business, and even recruited
some of its sales agents. Although this was against the exclusivity clause of the contract, Royale Homes still offered
to accept Alcantara’s wife back so she could continue to engage in real estate brokerage, albeit exclusively for
Royale Homes. In a special management committee meeting on October 8,2003, however, Alcantara announced
publicly and openly that he would leave the company by the end of October 2003 and that he would no longer finish
the unexpired term of his contract. He has decided to join his wifeand pursue their own brokerage business. Royale
Homes accepted Alcantara’s decision. It then threw a despedidaparty in his honor and, subsequently, appointed a
new independent contractor. Two months after herelinquished his post, however, Alcantara appeared in Royale
Homes and submitted a letter claiming that he was illegally dismissed.
On September 7, 2005,the Labor Arbiter rendered a Decision11 holding that Alcantara is an employee of Royale
Homes with a fixed-term employment period from January 1 to December 31, 2003 and that the pre-termination of
his contract was against the law.Hence, Alcantara is entitled to an amount which he may have earned on the
average for the unexpired portion of the contract. With regard to the impleaded corporate officers, the Labor Arbiter
absolved them from any liability.
WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale Homes
Marketing Corp. to pay the complainant the total amount of TWO HUNDRED SEVENTY SEVEN THOUSAND
PESOS (₱277,000.00) representing his compensation/commission for the unexpired term of his contract.
SO ORDERED.12
Both parties appealed the Labor Arbiter’s Decision to the NLRC. Royale Homes claimed that the Labor Arbiter
grievously erred inruling that there exists an employer-employee relationship between the parties. It insisted that the
contract between them expressly statesthat Alcantara is an independent contractor and not an ordinary employee.
Ithad no control over the means and methods by which he performed his work. RoyaleHomes likewise assailed the
award of ₱277,000.00 for lack of basis as it did not pre-terminate the contract. It was Alcantara who chose not to
finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a fixed-term and that
he is not entitled to backwages, reinstatement, unpaid commissions, and damages.
On February 23, 2009, the NLRC rendered its Decision,13 ruling that Alcantara is not an employee but a mere
independent contractor of Royale Homes. It based its ruling mainly on the contract which does not require Alcantara
to observe regular working hours. He was also free to adopt the selling methods he deemed most effective and can
even recruit sales agents to assist him in marketing the inventories of Royale Homes. The NLRC also considered
the fact that Alcantara was not receiving monthly salary, but was being paid on commission basis as stipulated in
the contract. Being an independent contractor, the NLRC concluded that Alcantara’s Complaint iscognizable by the
regular courts.
WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated September 5, 2005
is REVERSED and SET ASIDE and a NEW ONE rendered dismissing the complaint for lack of jurisdiction.
SO ORDERED.14
Alcantara moved for reconsideration.15 In a Resolution16 dated May 29, 2009, however, the NLRC denied his
motion.
Alcantara thus filed a Petition for Certiorari17 with the CA imputing grave abuse of discretion on the partof the NLRC
in ruling that he is not an employee of Royale Homes and that it is the regular courts which have jurisdiction over the
issue of whether the pre-termination of the contract is valid.
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18
On June 23, 2010, the CA promulgated its Decision granting Alcantara’s Petition and reversing the NLRC’s
Decision. Applying the four-fold and economic reality tests, it held thatAlcantara is an employee of Royale Homes.
Royale Homes exercised some degree of control over Alcantara since his job, as observed by the CA, is subject to
company rules, regulations, and periodic evaluations. He was also bound by the company code of ethics. Moreover,
the exclusivity clause of the contract has made Alcantara economically dependent on Royale Homes, supporting the
theory that he is anemployee of said company.
The CA further held that Alcantara’s termination from employment was without any valid or just cause, and it was
carried out in violation of his right to procedural due process. Thus, the CA ruled that he isentitled to backwages and
separation pay, in lieu of reinstatement. Considering,however, that the CA was not satisfied with the proofadduced
to establish the amount of Alcantara’s annual salary, it remanded the caseto the Labor Arbiter to determine the
same and the monetary award he is entitled to. With regard to the corporate officers, the CA absolved them from
any liability for want of clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith
orgross negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA NO. 046104-05 dated February
23, 2009 as well as the Resolution dated May 29, 2009 are hereby SET ASIDE and a new one is entered ordering
the respondent company to pay petitioner backwages which shall be computed from the time of his illegal
termination in October 2003 up to the finality of this decision, plus separation pay equivalent to one month salary for
every year of service. This case is REMANDED to the Labor Arbiter for the proper determination and computation of
back wages, separation pay and other monetary benefits that petitioner is entitled to.
SO ORDERED.19
Royale Homes filed a Motion for Reconsideration20 and a Supplemental Motion for Reconsideration.21 In a
Resolution22 dated January 18, 2011, however, the CA denied said motions.
Issues
Hence, this Petition where Royale Homes submits before this Court the following issues for resolution:
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN ACCORD WITH LAW
AND APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT REVERSED THE RULING OF THE
NLRC DISMISSING THE COMPLAINT OF RESPONDENT FOR LACK OF JURISDICTION AND
CONSEQUENTLY, IN FINDING THAT RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN DENYING THE
MOTION FOR RECONSIDERATION OF PETITIONER AND IN REFUSING TO CORRECT ITSELF[.]23
Royale Homes contends that its contract with Alcantara is clear and unambiguous −it engaged his services as an
independent contractor. This can be readily seen from the contract stating that no employer-employee relationship
exists between the parties; that Alcantara was free to solicit sales at any time and by any manner he may deem
appropriate; that he may recruit sales personnel to assist him in marketing Royale Homes’ inventories; and, thathis
remunerations are dependent on his sales performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over Alcantara based
on a shallow ground that his performance is subject to company rules and regulations, code of ethics, periodic
evaluation, and exclusivity clause of contract. RoyaleHomes maintains that it is expected to exercise some degree
of control over its independent contractors,but that does not automatically result in the existence ofemployer-
employee relationship. For control to be consideredas a proof tending to establish employer-employee relationship,
the same mustpertain to the means and method of performing the work; not on the relationship of the independent
contractors among themselves or their persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was Alcantara who
openly and publicly declared that he was pre-terminating his fixed-term contract.
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The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or anemployee of
Royale Homes.
Our Ruling
The determination of whether a party who renders services to another is an employee or an independent contractor
involves an evaluation of factual matters which, ordinarily, is not within the province of this Court. In view of the
conflicting findings of the tribunals below, however, this Court is constrained to go over the factual matters involved
in this case.24
The primary evidence of the nature of the parties’ relationship in this case is the written contract that they signed
and executed in pursuanceof their mutual agreement. While the existence of employer-employee relationship is a
matter of law, the characterization made by the parties in their contract as to the nature of their juridical relationship
cannot be simply ignored, particularly in this case where the parties’ written contractunequivocally states their
intention at the time they entered into it. In Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc.,25 it was
held that:
To be sure, the Agreement’s legal characterization of the nature of the relationship cannot be conclusive and binding
on the courts; x x x the characterization of the juridical relationship the Agreement embodied is a matter of law that
is for the courts to determine. At the same time, though, the characterization the parties gave to their relationship in
the Agreement cannot simply be brushed aside because it embodiestheir intent at the time they entered the
Agreement, and they were governed by this understanding throughout their relationship. At the very least, the
provision on the absence of employer- employee relationship between the parties can be an aid in considering the
Agreement and its implementation, and in appreciating the other evidence on record.26
In this case, the contract,27 duly signed and not disputed by the parties, conspicuously provides that "no employer-
employee relationship exists between" Royale Homes and Alcantara, as well as his sales agents. It is clear that they
did not want to be bound by employer-employee relationship atthe time ofthe signing of the contract. Thus:
13 Rancho I
Marikina City
Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such
price, terms and condition to be provided to you from time to time.
As such, you can solicit sales at any time and by any manner which you deem appropriate and
necessary to market our real estate inventories subject to rules, regulations and code of ethics
promulgated by the company. Further, you are free to recruit sales personnel/agents to assist you in
marketing of our inventories provided that your personnel/agents shall first attend the required
seminars and briefing to be conducted by us from time to time for the purpose of familiarizing them of
terms and conditionsof sale, the natureof property sold, etc., attendance of which shall be a condition
precedent for their accreditation by us.
1. Commission override of 0.5% for all option sales beginning January 1, 2003 booked by your
sales agents.
2. Budget allocation depending on your division’s sale performance as per our budget guidelines.
3. Sales incentive and other forms of company support which may be granted from time to time.
It is understood, however, that no employer-employee relationship exists between us, that of
your sales personnel/agents, and that you shall hold our company x x x, its officers and directors,
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free and harmless from any and all claims of liability and damages arising from and/or incident to
the marketing of our real estate inventories.
We reserve, however, our right to terminate this agreement in case of violation of any company rules
and regulations, policies and code of ethics upon notice for justifiable reason.
Your performance shall be subject toperiodic evaluation based on factors which shall be determined by
the management.
If you are amenable to the foregoing terms and conditions, please indicate your conformity by signing
on the space provided below and return [to] us a duplicate copy of this letter, duly accomplished, to
constitute as our agreement on the matter.(Emphasis ours)
Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of itsstipulations should control."28 No construction is even needed asthey already expressly state their
intention. Also, this Court adopts the observation of the NLRC that it is rather strange on the part of Alcantara, an
educated man and a veteran sales broker who claimed to be receiving ₱1.2 million as his annual salary, not to have
contested the portion of the contract expressly indicating that he is not an employee of Royale Homes if their true
intention were otherwise.
In determining the existence of an employer-employee relationship, this Court has generally relied on the four-fold
test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the employer’s power to control the employee with respect to the means and methods by which the work is
to be accomplished.29 Among the four, the most determinative factor in ascertaining the existence of
employeremployee relationship is the "right of control test".30 "It is deemed to be such an important factor that the
other requisites may even be disregarded."31 This holds true where the issues to be resolved iswhether a person
who performs work for another is the latter’s employee or is an independent contractor,32 as in this case. For where
the person for whom the services are performed reserves the right to control not only the end to beachieved, but
also the means by which such end is reached, employer-employee relationship is deemed to exist.33
In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated that since the performance of his
tasks is subject to company rules, regulations, code of ethics, and periodic evaluation, the element of control is
present.
Not every form of control is indicative of employer-employee relationship. A person who performs work for another
1âwphi1
and is subjected to its rules, regulations, and code of ethics does not necessarily become an employee.34 As long as
the level of control does not interfere with the means and methods of accomplishing the assigned tasks, the rules
imposed by the hiring party on the hired party do not amount to the labor law concept of control that is indicative of
employer-employee relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission35 it was
pronounced that:
Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employeremployee relationship unlike the second, which address both the result and
the means used to achieve it. x x x36
In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and periodic evaluation
alluded to byAlcantara do not involve control over the means and methods by which he was to performhis job.
Understandably, Royale Homes has to fix the price, impose requirements on prospective buyers, and lay down the
terms and conditionsof the sale, including the mode of payment, which the independent contractors must follow. It is
also necessary for Royale Homes to allocateits inventories among its independent contractors, determine who has
priority in selling the same, grant commission or allowance based on predetermined criteria, and regularly monitor
the result of their marketing and sales efforts. But tothe mind of this Court, these do not pertain to the means and
methods of how Alcantara was to perform and accomplish his task of soliciting sales. They do not dictate upon him
the details of how he would solicit sales or the manner as to how he would transact business with prospective
clients. In Tongko, this Court held that guidelines or rules and regulations that do notpertain to the means or
methodsto be employed in attaining the result are not indicative of control as understood inlabor law. Thus:
From jurisprudence, an important lesson that the first Insular Lifecase teaches us is that a commitment to abide by
the rules and regulations of an insurance company does not ipso factomake the insurance agent an employee.
Neither do guidelines somehow restrictive of the insurance agent’s conduct necessarily indicate "control" as this
term is defined in jurisprudence. Guidelines indicative of labor law "control," as the first Insular Lifecase tells us,
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should not merely relate to the mutually desirable result intended by the contractual relationship; they must have the
nature of dictating the means or methods to beemployed in attaining the result, or of fixing the methodology and of
binding or restricting the party hired to the use of these means.In fact, results-wise, the principal can impose
production quotas and can determine how many agents, with specific territories, ought to be employed to achieve
the company’s objectives. These are management policy decisions that the labor law element of control cannot
reach. Our ruling in these respects in the first Insular Lifecase was practically reiterated in Carungcong. Thus, as will
be shown more fully below, Manulife’s codes of conduct, all of which do not intrude into the insurance agents’
means and manner of conducting their sales and only control them as to the desired results and Insurance Code
norms, cannot be used as basis for a finding that the labor law concept of control existed between Manulife and
Tongko.37 (Emphases in the original)
As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to prove the
elements thereof, particularly Royale Homes’ power of control over the means and methods of accomplishing the
work.38 He, however, failed to cite specificrules, regulations or codes of ethics that supposedly imposed control on
his means and methods of soliciting sales and dealing with prospective clients. On the other hand, this case is
replete with instances that negate the element of control and the existence of employer-employee relationship.
Notably, Alcantara was not required to observe definite working hours.39 Except for soliciting sales, RoyaleHomes
did not assign other tasks to him. He had full control over the means and methods of accomplishing his tasks as he
can "solicit sales at any time and by any manner which [he may] deem appropriate and necessary." He performed
his tasks on his own account free from the control and direction of Royale Homes in all matters connected therewith,
except as to the results thereof.40
Neither does the repeated hiring of Alcantara prove the existence of employer-employee relationship.41 As
discussed above, the absence of control over the means and methodsdisproves employer-employee relationship.
The continuous rehiring of Alcantara simply signifies the renewal of his contract with Royale Homes, and highlights
his satisfactory services warranting the renewal of such contract. Nor does the exclusivity clause of contract
establish the existence of the labor law concept of control. In Consulta v. Court of Appeals,42 it was held that
exclusivity of contract does not necessarily result in employer-employee relationship, viz:
x x x However, the fact that the appointment required Consulta to solicit business exclusively for Pamana did not
mean that Pamana exercised control over the means and methods of Consulta’s work as the term control is
understood in labor jurisprudence. Neither did it make Consulta an employee of Pamana. Pamana did not prohibit
Consulta from engaging in any other business, or from being connected with any other company, for aslong as the
business [of the] company did not compete with Pamana’s business.43
The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other business as long
as he does not sell projects of Royale Homes’ competitors. He can engage in selling various other products or
engage in unrelated businesses.
Payment of Wages
The element of payment of wages is also absent in thiscase. As provided in the contract, Alcantara’s remunerations
consist only of commission override of 0.5%, budget allocation, sales incentive and other forms of company support.
There is no proof that he received fixed monthly salary. No payslip or payroll was ever presented and there is no
proof that Royale Homes deducted from his supposed salary withholding tax or that it registered him with the Social
Security System, Philippine Health Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a
ballpark figure of his alleged salary of ₱100,000.00, more or less. All of these indicate an independent contractual
relationship.44 Besides, if Alcantara indeed consideredhimself an employee of Royale Homes, then he, an
experienced and professional broker, would have complained that he was being denied statutorily mandated
benefits. But for nine consecutive years, he kept mum about it, signifying that he has agreed, consented, and
accepted the fact that he is not entitled tothose employee benefits because he is an independent contractor.
This Court is, therefore,convinced that Alcantara is not an employee of Royale Homes, but a mere independent
contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no jurisdiction over the case and
that the same is cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of Appeals in CA-
G.R. SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009 Decision of the National Labor
Relations Commission is REINSTATED and AFFIRMED. SO ORDERED.
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
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