Employer-Employee Relationship

The employer-employee relationship is a fundamental principle in Philippine labor law. It determines the rights and obligations of both the employer and the employee, particularly concerning wages, working conditions, termination, and benefits. The nature of this relationship is crucial in determining the applicability of labor laws and protection for workers.

Legal Basis for Employer-Employee Relationship

Under Article 280 of the Labor Code, a worker who performs tasks that are necessary and desirable to the business of the employer is considered a regular employee. However, the one-year period refers to employees who have been performing tasks continuously for a company. If they work for a continuous period of at least one year (with the same employer) under an arrangement that involves regular duties, they are presumed to be regular employees and entitled to the benefits and protections of regular employment.

Key Clarification:

For probationary employees, the law specifically sets a 6-month probationary period to assess if the worker is fit for regularization. If the employer does not regularize the employee at the end of the probation period, the employee becomes a regular employee by default if the work continues.

For regular employees under Article 280, the one-year period applies in the context of workers who are hired for specific, non-project-based tasks. If an employee has been working continuously and regularly for a period of at least one year, they may be considered a regular employee, even if the employer did not explicitly label them as such.

Here's the breakdown:

Probationary Employee: A worker is on probation for 6 months. At the end of this period, if they meet the employer's standards, they can be regularized.

Regular Employee: If a worker performs regular tasks essential to the business for at least one year (without interruption), they are presumed to be a regular employee, and they are entitled to all the benefits of regular employment, regardless of whether they were initially hired as a casual or probationary worker.

The Key Difference:

Six months is for probationary employees, and this is the period within which the employer can evaluate the worker's performance before deciding to regularize them.

One year is the general rule for regularization in the case of casual or contractual employees performing regular work. If such workers are continuously employed for more than a year, they are presumed to be regular employees, subject to the same protections under the law.

 

Article 106-109 of the Labor Code – Contractual and Outsourced Workers
These provisions address the concept of contractual labor or outsourcing in the employer-employee relationship. Employers may outsource certain work functions, but the labor of outsourced employees must still comply with labor standards, ensuring that such workers are not deprived of their legal rights and benefits.

Provision:
If the outsourced worker is performing regular tasks for the company, they can be considered an employee under the company and entitled to labor protections.

 

Key Characteristics of the Employer-Employee Relationship

1. Control Test (Principal Test of Employment)
   The most important test in determining the existence of an employer-employee relationship is the control test. This test focuses on whether the employer has control over what the worker does, how they do it, and when they do it. If an employer has the authority to control the work process and manner of completion, an employer-employee relationship exists.

   • The employer exercises control over the means and methods of the employee's work, including the hours of work, the manner of performing the job, and the tools used, indicating an employer-employee relationship.

   Sky Cable Corporation v. National Labor Relations Commission (G.R. No. 192788, November 13, 2013)
   Facts: The issue in this case was whether a service agent, hired by a third-party contractor, was a regular employee of Sky Cable Corporation. The employee was not directly hired by Sky Cable but performed the same functions as a direct employee.
   Ratio Decidendi: The Supreme Court ruled that the employee was considered a regular employee of Sky Cable, emphasizing that the control exercised by the company over the agent's work, despite being contracted through a third party, indicated an employer-employee relationship. The Court used the control test to determine that Sky Cable had the right to control not just the result, but also the manner of the work.

 

2. Economic Dependence
In certain cases, the employee’s economic dependence on the employer is another factor in determining the existence of an employer-employee relationship. This concept emphasizes that workers who rely on the employer for their livelihood—rather than working independently—are considered employees under the law.
Limpag v. NLRC (G.R. No. 108643, November 30, 1995)
Facts: In this case, a security guard claimed that he was an employee of a private security agency, even though he worked under the supervision of the principal company. The issue was whether the worker’s relationship with the company was one of employment or contractual.
Ratio Decidendi: The Court ruled that the worker was an employee of the principal company, noting that the security guard was economically dependent on the principal company for his work and remuneration. The Court underscored that economic dependence is a strong indicator of an employer-employee relationship.

• Provision:
  An individual who works regularly for an employer, under the employer’s supervision, and is dependent on the employer for financial support, is presumed to be an employee.

 

Test of Mutuality of Obligations

The employer-employee relationship also involves a mutual obligation. The employer has the duty to provide work and pay wages, while the employee is obligated to perform work and obey reasonable directives from the employer. The relationship is characterized by this mutual expectation.
Philippine Airlines, Inc. v. NLRC (G.R. No. 101467, September 16, 1993)
Facts: Philippine Airlines (PAL) sought to classify its employees as independent contractors, thereby avoiding certain responsibilities under the Labor Code.
Ratio Decidendi: The Supreme Court ruled that the employees were indeed employees of PAL, not independent contractors, based on the mutual obligations test. The Court highlighted that PAL's control over the workers' tasks, schedules, and the expectation of long-term service established the employer-employee relationship.

• Provision:
  There is a mutuality of obligations between the employer and the employee, where both parties have a duty to fulfill their respective roles under the employment contract. If the employer does not fulfill their obligation (such as by refusing to provide work), the employee may seek remedies under the Labor Code.

 

Contractual and Casual Workers
Casual workers are those who are hired for specific tasks or on a temporary basis. They are generally not considered regular employees. However, workers who perform regular tasks continuously for a period of one year are entitled to be regularized, even if hired on a casual basis.
Nestle Philippines, Inc. v. National Labor Relations Commission (G.R. No. 159508, April 28, 2008)
Facts: A worker was hired as a casual employee, but had worked continuously for more than a year. The issue was whether the worker could be classified as a regular employee after the lapse of one year.
Ratio Decidendi: The Supreme Court ruled that after one year, the worker became a regular employee under Article 280 of the Labor Code. The Court highlighted that a worker continuously engaged in the same work as regular employees for over a year could not be considered casual anymore and was entitled to the benefits of regularization.

• Provision:
  If a worker has been employed for more than one year in a continuous and regular capacity, they may be considered a regular employee, regardless of their initial classification as casual or probationary workers.