The determination of whether employer-employee relation exists between the parties is very important.

For one,
entitlement to labor standards benefits such as minimum wages, hours of work, overtime pay, etc., or to social
benefits under laws such as social security law, workmen’s compensation law, etc., or to termination pay, or to
unionism and other labor relations provisions under the Labor Code, are largely dependent on the existence of
employer-employee relationship between the parties.

Another thing is that the existence of employer-employee relationship between the parties will determine
whether the controversy should fall within the exclusive jurisdiction of labor agencies or not. If for example the
parties are not employer-employee of each other, respectively, but perhaps partners or associates, then any
dispute between them will be not be covered by the jurisdiction of labor agencies but by regular courts.

Three test to determine employer-employee relationship

There are three test commonly used to determine the existence of employer-employee relationship, viz.:

1. Four-fold test
2. Economic reality test
3. Two-tiered test (or Multi-factor test)
Four-fold test elements

The usual test used to determine the existence of employer-employer relationship is the so-called four-fold test.
In applying this test, the following elements are generally considered:

1. Right to hire or to the selection and engagement of the employee.

2. Payment of wages and salaries for services.
3. Power of dismissal or the power to impose disciplinary actions.
4. Power to control the employee with respect to the means and methods by which the work is to be
accomplished. This is known as the right-of-control test.

Right of control test is considered as the most important element in determining the existence of
employment relation.

Of the above-mentioned elements, the right of control test is considered as the most important element in
determining the existence of employment relation. The control test initially found application in the case of
Viaña vs. Al-Lagadan and Piga, where the court held that there is an employer-employee relationship when the
person for whom the services are performed reserves the right to control not only the end achieved but also the
manner and means used to achieve that end.

Control test thus refers to the employer’s power to control the employee’s conduct not only as to the result of the
work to be done but also with respect to the means and methods by which the work is to be accomplished.

In applying this test, it is the existence of the right, and not the actual exercise thereof, that is important.

Economic reality test

In view of today’s highly specialized workforce, the court are often faced with situations where the
right-of-control-test alone can no longer adequately determine the existence of employer-employer relationship.
Subsequently, another test has been devised to fill the gap, known as the economic reality test.
In Sevilla v. Court of Appeals, the Court observed the need to consider the existing economic conditions prevailing
between the parties, in addition to the standard of right-of-control, to give a clearer picture in determining the
existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of
the worker.

Economic realities of the employment relations help provide a comprehensive analysis of the true classification of
the individual, whether as employee, independent contractor, corporate officer or some other capacity.

Under economic reality test, the benchmark in analyzing whether employment relation exists between the
parties is the economic dependence of the worker on his employer. That is, whether the worker is dependent on
the alleged employer for his continued employment in the latter’s line of business.

Applying this test, if the putative employee is economically dependent on putative employer for his continued
employment in the latter’s line of business, there is employer-employee relationship between them. Otherwise,
there is none.

Two-tiered test (or Multi-factor test)

The economic reality test is not meant to replace the right of control test. Rather, these two test are often use in
conjunction with each other to determine the existence of employment relation between the parties. This is
known as the two-tiered test, or multi-factor test. This two-tiered test involves the following tests:

 The putative employer’s power to control the employee with respect to the means and methods by which the
work is to be accomplished; and
 The underlying economic realities of the activity or relationship.

Contrary to popular belief, the employment contract is not the sole indicator of an employer
employee relationship. So how do you establish an employer employee relationship?

 Employer Employee Relationship

 4 Elements of Employer Employee Relationship
 Control Test Labor Law
 Employment Contract Philippines
 Labor Disputes in the Philippines

Employer Employee Relationship

The agreement binding both the employer and the employee is known as an employment contract.
However, the absence of an employment contract does not indicate an absence of an
employer employee relationship. When the existence of the employer employee relationship is
in question, the court has generally applied the four fold test.

If the employer employee relationship can be established, the employer may not terminate the
service of the employee without a just or authorized cause.

4 Elements Of Employer Employee Relationship

Therefore, to determine the existence of an employer-employee relationship, the four fold test is
usually applied:

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 on the means and methods by which the
work is accomplished.

And in the case of Victor Meteoro et. al. vs Creative Creatures, Inc., the court stated that to
establish the 4 elements of employer employee relationship, any competent and relevant evidence
may be considered including but not limited to:

 Identification Cards;
 Cash Vouchers;
 Social Security Registration;
 Appointment Letters;
 Employment Contracts;
 Payrolls;
 Organization Charts; and
 Personnel List.

Control Test Labor Law

Of the 4 elements of employer employee relationship, the control test is generally regarded as the
most crucial and determinative indicator of the presence or absence of an employer-employee
relationship. Under this test, an employer-employee relationship is said to exist where the person
for whom the services are performed reserves the right to control not only the end result but also
the manner and means utilized to achieve the same.

However, as seen in the case of Royale Homes Marketing Corporation vs. Fidel P. Alcantara, not
every form of control is indicative of an employer-employee relationship. The subjection
of the service provider to the client’s rules, regulations, and code of ethics does not make the
service provider an employee when the level of control does not dictate the methodology in
performing the tasks. The client has the right to establish guidelines towards the achievement of
a mutually desired result.

Employment Contract Philippines

An employment contract is not just a legally binding agreement between the employer and
employee. It is also one that is imbued with public interest and therefore is subject to the police
power of the state.

It is the employer’s duty to ensure that terms and conditions of employment are in compliance with
the Labor Code of the Philippines. Employment terms and conditions that are in violation of the
Labor Code shall be unlawful and deemed null and void even when both the employer and
employee mutually consented to it. Moreover, any doubts, uncertainties, ambiguities and
insufficiencies shall be resolved in favor of labor.