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Labor Code

Basic Policy (Art III)


protection to labor,
promote full employment,
ensure equal work opportunities regardless of sex, race or creed,
and regulate the relations between workers and employers.

Employer-Employee Relationship

Conditions of Employment set by this Code is to be applied to all

employees of the establishment, whether for profit / not.
Such standard shall be applied only if there is employee-employer
relationship that exists. (which is being avoided by some businessmen
because it creates obligations related to social security, workmens
compensation, security of tenure, and unionization, and, of course, the
benefits under Title I of this Book III)

4-fold Test

It is court decisions that give some guides in determining the existence of

employer-employee relationship and the status of the employee by
applying the four-fold test:
(a) the selection and engagement of the employee;
(b) the payment of wages;
(c) the power of dismissal; and
(d) the employers power to control the employee with respect to the
means and methods by which the work is to be accomplished. The socalled
control test is the most important element (Brotherhood Labor Unity,
January 7, 1987.)

EMPLOYEE - as a natural person who is hired, directly or indirectly, by a

natural or juridical person to perform activities related to the business of the
hirer who, directly or through an agent, supervises or controls the work
performance and pays the salary or wage of the hiree.

is a person who works for another for a wage computed on time or

nontime basis.

*Note: In the absence of the power to control the employee with respect to the
means and methods by which his work was to be accomplished, there is no
employer-employee relationship between the parties. (Continental Marble
Corporation, May 9, 1988.)
Not every form of control has the effect of establishing employer-employee
relationship. A line should be drawn between:
(1) rules that merely serve as guidelines, which only promote the result,

(2) rules that fix the methodology and bind or restrict the party hired to
the use of such means or methods. These address both the result and the
means employed to achieve the desired result
The second kind creates employer-employee relationship; the first does not
(Insular Life Assurance Co., November 15, 1989.)
e.g - A labor union or even an unregistered association may be considered an
employer of the persons working for it. (Bautista, March 16, 1988; Orlando Farm
Growers, November 25, 1998.)
e.g. - Appointment letters or employment contracts, payrolls, organization
charts, SSS registration, personnel lists, as well as testimony of co-employees,
may serve as evidence of employee status. If there is no employer-employee
relationship, there can be no compulsory coverage under the Social ver is an
employee; his mode of accomplishing his task is under the control of the owner.
Security law.
Employee Contract cannot repudiate the employer-employee relation; it
cannot state that the employee is an independent contractor when its terms and
conditions show otherwise; due to employment status of an employee is defined
by law, and not stipulated by both parties to the employment contract.
e.g. - Drivers under the boundary system are employees of the operators /
owners; as the latter have full control over means and method of how the former
accomplish their tasks.
e.g. While caddies are not employees of the golf club.
Compensation Agreement is not a test to determine the existence of
employer-employee relationship.
e.g. even if the driver is being paid in a per trip basis (contract service), this
does not negate the fact that a dri
Contractor when the hirer does not control the work performance of the hiree,
then the hiree is not an employee, but a contractor.

He is a businessman, with capital of his own, who operates independently

from his client or principal, i.e., the person with whom he enters into a
contract, to accomplish a job, work, or service.
A contractor may be a corporation, a partner, or an individual; in
comparison with employees, the contractors mode of accomplishing his
tasks as per contracted is not under the control or supervision of the hirer,
he is free to carry out his services in accordance with his own preference.
But if the so-called contractor is not bona fide because he merely recruits
and supplies workers to do a job, work or service for and under the control
of the principal, then he is not a job contractor.

Note: The difference between the employee and the contractor is that,
the employee is covered by the labor code, while the contractor is not.

labor-only contractor he merely recruits and supplies workers to do the

job, the work and services is under the control of the principal and not the laborcontractor; by merely supplying labor his commitment with the principal is not to
accomplish a certain task. Thus, he is not considered as a contractor, as he does
not accomplish a job, work, or service within a definite / predetermined period.
While the labor force he hires does not work under him, but with the principal. On
this case, the principal is the employer, while the labor contractor acts as an
agent of the principal.
Commission Agent not employees if the agents are not required to report
(for work) at any time; the time and the effort they spend in their work depend
entirely upon their own will and initiative.
Excluded Employees As specifically provided by the law. Among the
employees excluded from coverage are managers and members of the
managerial staff.

Field Employees
Workers paid by result, where the pay is dependent on the service that has
been accomplished / the finish product hhj;p
Government employees - must refer only to employees of government
agencies, instrumentalities or political subdivisions and of government
corporations that are not incorporated under the Corporation Code. But
even as regards the excluded government employees, it must be noted
that, as a whole, GSIS-covered employees are not excluded from the
employees compensation program.