CORPORAL SR. VS.

NLRC
341 SCRA 658
[G.R. No. 129315. October 2, 2000]
Facts: 5 male barbers and 2 female manicurists (Petitioners) worked at New Look Barbershop, a sole
proprietorship owned and managed by Vicente Lao which in 1982 was taken over by Lao Enteng Co.,
Inc., (respondent corporation) a corporation formed by Vicente Laos children. The petitioners were
allowed to work there until April 1985 when they were told that the barbershop building was sold and
their services are no longer needed.

Petitioners filed with the Arbitration branch of NLRC a complaint for illegal dismissal, illegal deduction,
separation pay, non-payment of 13
th
month pay and salary differential. Also they seek for refund of
P1.00 collected from each of them daily as salary of the barbershops sweeper.

Respondent Corporation alleged that petitioners were Joint Venture (JV) partners receiving 50%
commission (Petitioners admitted in receiving 50-60%), therefore no employer-employee relationship
existed. And assuming arguendo that employer-employee relationship existed, petitioners were not
entitled to separation pay since cessation of the business was due to serious business losses. Also, they
allege that the barbershop had always been a JV partnership with the operation and management left
entirely to petitioners and that the former had no control over the latter who could freely come and go
as they wish. Lastly, they allege that some of the petitioners were allowed to register in SSS only as an
act of accommodation.

The Labor Arbiter dismissed the complaint and found that there was a JV and no employer-employee
relationship. Also that the business was closed due to serious business losses or financial reverses and
the law does not compel the establishment to pay separation pay to whoever were its employees. On
appeal, NLRC affirmed the decision but held that petitioners were considered independent contractors
and not employees. The MR was also denied by NLRC, hence, this petition on certiorari.

Issue: WON there was an employer-employee relationship.

Held: YES. Petitioners are employees of Respondent Corporation and shall be accorded the benefits
given in Art. 283 of the Labor Code granting separation pay equivalent to 1 month pay for every year of
service and also to 13
th
month pay. The other claims of petitioners are found to be without basis.
No documentary evidence of the existence of JV other than the self-serving affidavit of the
company president.
The power of control in the 4-fold test (employer-employee relationship) refers to the EXISTENCE
and NOT THE EXERCISE of such power the following elements must be present for an
employer-employee relationship to exist: (1) the selection and engagement of the workers; (2)
power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control
the worker's conduct, with the latter assuming primacy in the overall consideration.

The records show that Vicente Lao engaged the petitioners to work for the barbershop and
retained them after it was taken over by the respondent corporation who continuously paid
their wages. Also, the fact that the petitioners worked in the barbershop owned and operated
by respondents, and that they were required to report daily, observing definite hours of work,
they were not free to accept employment elsewhere and devoted their full time working in the
barbershop proves the existence of the power of control.

The petitioners are not independent contractors. An independent contractor is one who
undertakes "job contracting", i.e., a person who (a) carries on an independent business and
undertakes the contract work on his own account under his own responsibility according to his
own manner and method, free from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to the results thereof, and (b)
has substantial capital or investment in the form of tools, equipment, machineries, work
premises, and other materials which are necessary in the conduct of the business. Petitioners
have neither of the above since the tools used such as scissors, razors, nail cutters, polishes, etc.
cannot be considered substantial capital or investment.

While it is no longer true that membership to SSS is predicated on the existence of an employee-
employer relationship since the policy is now to encourage even the self-employed
dressmakers, manicurists and jeepney drivers to become SSS members, we could not agree with
private respondents that petitioners were registered with the Social Security System as their
employees only as an accommodation. As we have earlier mentioned private respondent
showed no proof to their claim that petitioners were the ones who solely paid all SSS
contributions. It is unlikely that respondents would report certain persons as their workers, pay
their SSS premium as well as their wages if it were not true that they were indeed their
employee.