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Cosmopolitan Funeral v.


Cosmopolitan Funeral Homes, Inc. engaged the services of private

respondent Noli Maalat as a "supervisor" to handle the solicitation of
mortuary arrangements, sales and collections. He was paid on a commission
basis of 3.5% of the amounts actually collected and remitted.
Private respondent was dismissed by the petitioner for violation of the
Company R&Rs.
- Misappropriation of funds.
- Charging the customers with additional amounts, then pocketing the
With this, private respondent filed a complaint for illegal dismissal and nonpayment of commissions.
Labor arbiter rendered a decision declaring the illegal dismissal of the private
respondent, and ordered the petitioner to pay separation pay, commission,
interests and attorney's fee.
On appeal, NLRC modified the decision declaring that:
- The dismissal of the private respondent is justified and with lawful cause;
he will however be entitled to receive his separation pay.
- Commissions shall be paid as well.


Whether or not there existed an employee-employer relationship between the

petitioner and respondent.
Whether or not there was equitable basis for the award of 1/2 month
separation pay for every year of service.

1. Yes
In determining whether a person who performs work for another is the latter's
employee or an independent contractor, the prevailing test is the "right of
control" test.
The petitioner argues that Maalat was never its employee for he was only a
commission agent whose work was not subject to its control.
Looking on the facts of the case, it can be inferred that there existed an
employee-employer relationship due to presence of control by the petitioner
over the private respondent:
- Private respondent worked exclusively for the petitioner and was not
allowed to rendered any service with other company.
- One of the cause of the dismissal of the petitioner was due to engaging in
a part-time embalming business outside the company.

Petitioner further argued that private respondent worked as supervisor, thus,

he is free to accomplish his work on his own terms and may engage in other
means of livelihood. And that the private respondent is paid by commission
and was hired as a commission agent / independent sales man.
It shall be noted however that commission agents are regularly employed
elsewhere, where as the private respondent, he was required to be most of
the time present in his job.
Neither does the private respondent issue his own receipt, and deduct his
commission from there, like most of the independent sales agents do.
The payment of compensation by way of commission does not militate
against the conclusion that private respondent was an employee. Wage is
defined as remuneration of earning that is capable of being expressed in the
terms of money, whether fixed or ascertained on time, task pace or
commission basis.
2. No grant of separation pay
We hold that henceforth separation pay shall be allowed as a measure of
social justice only in those instances where the employee is validly dismissed
for causes other than serious misconduct or those reflecting on his moral

Where the reason for the valid dismissal is, for example, habitual intoxication
or an offense involving moral turpitude, like theft or illicit sexual relations with
a fellow worker, the employer may not be required to give the dismissed
employee separation pay, or financial assistance, or whatever other name it
is called, on the ground of social justice.

This Court pronounces that the grant of separation pay to private respondent
Maalat, who was validly terminated for dishonesty, is not justified.