III. EMPLOYER-EMPLOYEE RELATIONSHIP Flashcards
III. EMPLOYER-EMPLOYEE RELATIONSHIP
A. Employer-Employee Relationship
- Tests to Determine Employer-Employee Relationship
– DOLE D.O. No. 147-15, Rule I-A, sec. 3
Key Points of the Four-Fold Test for Employer-Employee Relationship:
1. Selection and Engagement: The employer actively chooses the employee and initiates the employment relationship.
- Payment of Wages: The employer financially compensates the individual for their work.
- Power of Dismissal: The employer holds the authority to terminate the employee’s employment.
- Power of Control (Most Crucial):
- Focus: This element determines if the employer dictates how the work is done, not just the outcome.
- Employer’s Right: The employer has the right to control:
Work Methods: Specifying the procedures and techniques used to perform the tasks.
Work Schedule: Dictating working hours, breaks, and leave periods.
Workplace Rules: Enforcing regulations related to conduct, dress code, and behavior.
Challenges and Examples:
* Independent Contractors vs. Employees: The key challenge lies in distinguishing between employees and independent contractors.
Example: A company hires a plumber to fix a leak. The plumber uses their own tools and sets their schedule. This might not constitute an employer-employee relationship due to the lack of control over the methods used.
* False Independence: Some companies misclassify employees as independent contractors to avoid providing benefits and social security contributions.
Example: A delivery company hires drivers who own their vehicles and are paid per delivery. However, the company dictates routes, schedules, and uniforms. This could be considered an employer-employee relationship due to the significant control exerted.
Case Examples:
- Atok Big Wedge Company, Inc. vs. Gison (G.R. No. 169510, 2011): A security guard company exercised significant control over the guards’ work schedules, uniforms, and conduct. The Supreme Court ruled them as employees entitled to benefits.
- Playing for Wages: Defining the Legal Relationship Between Professional Athlete and Team (Philippine Law Journal): While professional athletes have some control over their performance, the team dictates training methods, playing time, and overall conduct. This suggests an employer-employee relationship for contractual purposes.
Importance of the Control Test:
- It prevents companies from exploiting loopholes by misclassifying employees to avoid legal obligations.
- It ensures workers receive the benefits and protections they deserve under Philippine labor laws.
Conclusion:
The four-fold test, particularly the control element, serves as a crucial tool in determining the nature of a working relationship. By examining the extent of an employer’s control over the manner and means of performing the work, a clearer distinction can be made between genuine independent contractors and true employees deserving of legal safeguards.
III. EMPLOYER-EMPLOYEE RELATIONSHIP
A. Employer-Employee Relationship
- Kinds of Employment – Labor Code, arts. 295-296
a. Regular
b. Casual
c. Probationary
d. Project
e. Seasonal
f. Fixed-Term
a. Regular Employment:
Regular employment refers to a type of employment where an employee is engaged to perform work that is usually necessary or desirable to the employer’s business operations. This type of employment is continuous and not limited to a specific project or period.
Example: A company hires a sales associate to work full-time in its retail store. The sales associate has regular hours and is expected to perform duties essential to the store’s operation, such as assisting customers, restocking shelves, and processing transactions.
b. Casual Employment:
Casual employment involves irregular or intermittent work arrangements, often on a per-day or per-task basis. Employees engaged in casual employment do not have fixed schedules and may be called upon as needed by the employer.
Example: A catering company hires waitstaff on a per-event basis to serve at weddings, corporate functions, and other events. The waitstaff members are not guaranteed work regularly but are called in as necessary based on the company’s event bookings.
c. Probationary Employment:
Probationary employment is a trial period during which an employee’s performance and suitability for a permanent position are evaluated. This type of employment typically has a predetermined duration, after which the employer decides whether to retain the employee as a regular employee or terminate the employment.
Example: A software development company hires a programmer on a six-month probationary period. During this time, the programmer’s work quality and performance are closely monitored to assess their fit for a permanent position within the company.
d. Project Employment:
Project employment involves engagement for a specific project or undertaking with a defined scope, duration, and objective. Once the project is completed, the employment relationship ends unless there are provisions for subsequent projects or renewal.
Example: A construction company hires engineers and laborers for a bridge construction project. The employment contracts specify the project’s duration and scope of work, and once the bridge is completed, the employment ends unless there are new projects requiring their services.
e. Seasonal Employment:
Seasonal employment pertains to work that is tied to certain seasons or periods of the year when demand for goods or services is high. Employees in seasonal employment typically work during peak seasons and may be temporarily laid off during off-peak periods.
Example: A resort in a tourist destination hires additional staff, such as lifeguards and housekeeping personnel, during the summer months when tourist arrivals are at their highest. These employees work for the duration of the peak season and may be laid off or placed on standby during the offseason.
f. Fixed-Term Employment:
Fixed-term employment involves an employment contract with a specified duration, agreed upon by both the employer and the employee. The employment relationship automatically ends upon the expiration of the fixed term, without the need for termination notice.
Example: A publishing company hires a graphic designer on a one-year fixed-term contract to work on a specific project, such as designing a series of book covers. Once the project is completed or the contract term expires, the employment relationship ends unless renewed or extended by mutual agreement.
III. EMPLOYER-EMPLOYEE RELATIONSHIP
A. Employer-Employee Relationship
- Related Concepts
a. Floating Status – Labor Code, art. 301; DOLE D.O. No. 215-20
In the Philippines, the concept of “Floating status” refers to the situation where an employee is not assigned to any specific job or project but remains employed by the company. This status typically occurs when there is a lack of available work or when the employee’s current project or assignment has been completed.
The concept of Floating status is recognized under Philippine labor law, jurisprudence, and Department Order No. 215-20 issued by the Department of Labor and Employment (DOLE). Here’s an explanation of how it’s understood within these contexts:
1) Labor Law: Under Philippine labor law, specifically under the Labor Code, Article 286, it is recognized that employers may temporarily suspend the employment of employees due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses, or the closing or cessation of operation of the establishment or undertaking. During such periods, affected employees may be placed in a state of temporary unemployment, often referred to as “Floating status,” until such time that they can be assigned to new tasks or projects.
2) Jurisprudence: Philippine jurisprudence has established principles regarding Floating status through various court decisions. Courts have recognized that employers have the right to temporarily assign employees to Floating status when there is a legitimate reason, such as lack of available work or economic reasons. However, it is also emphasized that employees placed in Floating status must still be provided with certain benefits and protections, including the payment of salaries and the preservation of their employment status. Additionally, courts have ruled that Floating status should not be used as a means to circumvent the security of tenure of employees.
3) Department Order No. 215-20: DOLE Department Order No. 215-20 provides guidelines on the implementation of flexible work arrangements (FWAs) amid the COVID-19 pandemic. While the concept of Floating status is not explicitly defined in this order, it provides provisions for the implementation of FWAs, such as reduction of work hours and rotation of employees. Employers may utilize FWAs, including placing employees in Floating status, as a means to manage their workforce during periods of economic downturn or business disruptions caused by the pandemic, provided that the rights and benefits of employees are protected.
Overall, Floating status is a recognized concept in Philippine labor law and jurisprudence, allowing employers to temporarily suspend the employment of employees due to various reasons. However, the implementation of Floating status must adhere to legal requirements and principles to ensure the protection of employees’ rights and benefits.
Case Problem: The Disputed Overtime Pay
Facts:
Company X is a manufacturing firm based in Metro Manila, Philippines.
Employee A, a skilled machine operator, has been working at Company X for five years.
Company X operates on a six-day workweek, with regular working hours from 8:00 AM to 5:00 PM.
Employee A claims that they have consistently worked overtime beyond their regular hours due to increased production demands.
Employee A alleges that Company X has not compensated them for the overtime work.
Company X contends that Employee A did not follow proper procedures for claiming overtime pay and that their records show no evidence of overtime work.
Issue:
The central issue in this case is whether Employee A is entitled to receive overtime pay for the extra hours worked beyond the regular schedule.
Application of Law:
Let’s apply relevant provisions of Philippine labor law to resolve this dispute:
Overtime Pay (Article 87, Labor Code of the Philippines):
Employees who work beyond the regular eight-hour workday are entitled to overtime pay.
The rate for overtime work is at least 125% of the regular hourly rate.
Overtime work on regular working days (Monday to Saturday) qualifies for overtime pay.
Proper Documentation and Notification (Article 88, Labor Code of the Philippines):
Employees must submit a written request for overtime work, specifying the reason and duration.
Employers should maintain accurate records of overtime hours worked by each employee.
Resolution:
Employee A’s Claim:
Employee A must provide evidence of the extra hours worked beyond the regular schedule.
If Employee A can demonstrate consistent overtime work, they are entitled to receive overtime pay.
Company X’s Defense:
Company X should verify their records to determine if Employee A indeed worked overtime.
If no records exist, Company X may be liable for unpaid overtime.
Recommendation:
Employee A should submit a formal written request for overtime pay, detailing the specific dates and hours worked.
Company X should review their records and, if necessary, compensate Employee A for the overtime hours.
Conclusion:
Both parties should engage in open communication and follow proper procedures. If Employee A can substantiate their claim, Company X should honor their right to overtime pay under Philippine labor law.
Facts:
Company Y operates a food delivery platform in Cebu City, Philippines.
Rider B works for Company Y as a motorcycle courier.
Rider B is classified as an independent contractor rather than a regular employee.
Rider B argues that they perform tasks similar to regular employees, including fixed working hours and using Company Y’s equipment.
Company Y insists that Rider B is an independent contractor due to the flexibility in work hours and the lack of direct supervision.
Issue:
Is Rider B truly an independent contractor, or should they be considered a regular employee under Philippine labor law?
Application of Law:
Control Test:
The control test examines the degree of control exercised by the employer over the worker.
Factors include supervision, work hours, tools/equipment, and integration into the company’s operations.
Regular Employee Rights:
Regular employees are entitled to benefits such as minimum wage, overtime pay, and social security contributions.
Resolution:
Control Assessment:
If Company Y exerts significant control over Rider B (e.g., dictating work hours, providing equipment), Rider B may be considered an employee.
If Rider B has substantial independence (e.g., choosing delivery routes, flexible hours), the independent contractor classification may be valid.
Evidence Review:
Investigate records related to Rider B’s work arrangements, supervision, and contractual terms.
Consider whether Rider B is integrated into Company Y’s core business operations.
Recommendation:
If evidence favors employee status, Rider B should be reclassified as a regular employee.
Otherwise, Company Y should ensure transparency in contracts and clarify the nature of the working relationship.
Facts:
Company Z is an IT services provider based in Makati, Philippines.
Programmer C works remotely from their home in Davao City.
Programmer C follows a fixed schedule, uses Company Z’s software, and communicates with colleagues via company email.
Company Z classifies Programmer C as a telecommuting employee.
Programmer C claims they should be treated as a regular employee due to the substantial integration into Company Z’s operations.
Issue:
Is Programmer C correctly classified as a telecommuting employee, or should they be considered a regular employee?
Application of Law:
Integration Test:
The integration test assesses whether the worker is integral to the employer’s business.
Factors include the nature of work, reliance on company tools, and communication channels.
Telecommuting Guidelines:
The Department of Labor and Employment (DOLE) provides guidelines for telecommuting arrangements.
Resolution:
Integration Assessment:
Evaluate Programmer C’s role in Company Z’s core business functions.
Consider whether their work contributes directly to the company’s success.
Telecommuting Compliance:
Ensure that Programmer C adheres to DOLE guidelines for telecommuting.
Clarify rights and responsibilities in the telecommuting agreement.
Facts:
Company GigFlex is a popular gig economy platform operating in Metro Manila, Philippines.
Driver D, an independent contractor, provides ride-hailing services using the GigFlex app.
Driver D works irregular hours, using their own vehicle.
GigFlex classifies Driver D as an independent contractor, emphasizing flexibility and entrepreneurial freedom.
Driver D argues that they face substantial control from GigFlex, including pricing restrictions and performance metrics.
Driver D seeks employee status for benefits and job security.
Issue:
Is Driver D genuinely an independent contractor, or should they be considered an employee under Philippine labor law, given the gig economy context?
Application of Law:
Economic Reality Test:
The economic reality test assesses the true nature of the working relationship.
Factors include control, integration, and economic dependence.
Gig Economy Challenges:
The gig economy blurs traditional employment boundaries, leading to debates over worker classification.
Resolution:
Economic Dependence Assessment:
Examine whether Driver D relies significantly on GigFlex for income.
Consider whether GigFlex’s control over pricing and performance metrics affects Driver D’s economic well-being.
Industry Context:
Recognize the unique gig economy dynamics, where flexibility often coexists with employer-like control.
Balance the need for worker protection with the gig model’s inherent flexibility.
Recommendation:
If evidence favors employee status, Driver D should be reclassified as an employee.
GigFlex should ensure transparency in contracts and address worker concerns.
III. EMPLOYER-EMPLOYEE RELATIONSHIP
B. Legitimate Contracting vs. Labor-Only Contracting
(Labor Code, arts. 106-109;
DOLE D.O. No. 174-17;
DOLE D.C. No. 01-17;
E.O. No. 51, Series of 2018)
Legitimate Contracting vs. Labor-Only Contracting: Key Differences and Similarities (Philippines)
Basis:
Philippine Labor Code (Articles 106-109)
DOLE D.O. No. 174-17 (Guidelines on the Contracting Out of Labor)
DOLE D.C. No. 01-17 (Clarification on the Application of Labor-Only Contracting)
E.O. No. 51, Series of 2018 (Strengthening the Enforcement of Labor Standards)
Key Differences:
1) Nature of Service Provided:
- Legitimate Contracting:
Contractor provides specialized services or expertise beyond the principal’s core business.
Contractor assumes significant investment in equipment, tools, and manpower.
Example: Hiring a construction company to build a new department store. The construction company has its own crew, equipment, and expertise in building. - Labor-Only Contracting:
Contractor primarily supplies labor for the principal’s business operations.
Contractor has minimal investment in tools and equipment, relying heavily on the principal’s resources.
Example: A company hires a labor-only contractor to provide janitorial staff. The contractor has minimal equipment and simply supplies the workers.
2) Control over Employees:
- Legitimate Contracting:
Contractor has direct control over its employees.
Responsibilities include:
* Wage payment and benefits.
* Training and supervision.
* Provision of necessary tools and equipment.
- Labor-Only Contracting:
Principal exercises significant control over the workers.
May dictate work schedules, methods, and even provide essential tools and equipment.
3) Employer-Employee Relationship:
- Legitimate Contracting:
Employment relationship exists between the contractor and the workers.
Contractor is responsible for complying with labor laws and social security contributions for its employees. - Labor-Only Contracting:
Principal-employer relationship is indirectly established due to the lack of genuine control and investment by the contractor.
The principal may be held liable for labor code violations and ensuring the welfare of the workers.
Similarities:
1) Both involve contractual agreements:
A principal company outsources specific tasks or manpower to another entity (contractor).
The terms and conditions of the agreement are outlined in a contract.
2) Potential for abuse:
Some companies might misuse labor-only contracting to avoid responsibilities towards their workers.
Examples:
Legitimate Contracting: A clothing company contracts a professional embroidery service to add logos to their garments. The embroidery service has its own skilled workers, equipment, and expertise in the specific task.
Labor-Only Contracting (Illegal): A factory hires a contractor to provide workers for its assembly line. The contractor has minimal investment, and the factory dictates working conditions, provides tools, and might even withhold wages through the contractor.
Conclusion:
Understanding these key differences is crucial to distinguish between legitimate outsourcing and illegal labor-only contracting practices. Labor-only contracting bypasses employee benefits and protections, making the principal company potentially liable for violations.
III. EMPLOYER-EMPLOYEE RELATIONSHIP
A. Employer-Employee Relationship
- Related Concepts
b. Employment Subject to a Suspensive Condition
Employment Subject to a Suspensive Condition in Philippine Law
Concept:
In Philippine labor law, an employment contract can be subject to a suspensive condition. This means the obligations and rights outlined in the contract do not take effect immediately.
The contract becomes binding and enforceable only upon the fulfillment of the specified condition.
Legal Basis:
a) Article 1159 of the Civil Code: Contracts with a suspensive condition “shall not be effective until the condition happens.”
b) Jurisprudence: Supreme Court decisions have upheld the validity of employment contracts with suspensive conditions as long as they are clear, lawful, and do not violate the rights of the employee.
Key Points:
- The condition must be specific, clear, and achievable.
- The fulfillment of the condition triggers the commencement of the employment relationship.
- The employer cannot demand work or expect the employee to fulfill their duties until the condition is met.
- Unreasonable or unlawful conditions would render the contract void.
Examples from Supreme Court Decisions:
1) GR No. L-42124 (Republic vs. National Federation of Labor Unions): A government employee’s appointment was subject to the condition of passing a civil service exam. The Supreme Court ruled that the appointment was not effective until the exam was passed.
2) GR No. 127930 (Philippine National Construction Workers’ Union vs. National Labor Relations Commission): A company’s offer of employment was conditional upon the issuance of a working visa. The Court held that the employment contract did not create an employer-employee relationship until the visa was obtained.
Important to Note:
1) Employee Protection: While the employer can set a suspensive condition, they cannot prejudice the rights of the employee during the waiting period.
2) Good Faith: Both parties must act in good faith during the pendency of the condition.
Conclusion:
Suspensive conditions in employment contracts can be a legitimate tool for both employers and employees. However, it’s crucial to ensure:
a) The condition is reasonable and lawful.
b) The rights of both parties are protected during the waiting period.
c) The contract clearly outlines the consequences of not fulfilling the condition.
Additional Points:
- Employers should consult legal counsel when drafting contracts with suspensive conditions to ensure they comply with Philippine labor laws.
- Employees should carefully review the terms and conditions of their employment contracts, paying close attention to any suspensive clauses.
By understanding the concept and adhering to legal principles, both employers and employees can navigate the use of suspensive conditions in employment contracts effectively.
Facts:
Company RemoteTech is an IT consulting firm with offices in various cities across the Philippines.
Due to the COVID-19 pandemic, Employee E transitioned to full-time remote work from their home in Baguio City.
Employee E performs software development tasks, attends virtual meetings, and communicates via company-provided tools.
Company RemoteTech classifies Employee E as a regular employee.
Employee E claims that remote work has blurred work-life boundaries, leading to burnout.
Employee E seeks adjustments to workload and better work-life balance.
Issue:
How should Company Remote Tech address the challenges of remote work while ensuring employee well-being?
Application of Law:
Work-Life Balance (Labor Code of the Philippines):
Employers must promote a healthy work environment and prevent excessive work hours.
Remote work arrangements should not compromise employees’ well-being.
Flexible Work Policies:
Companies can adopt flexible policies to accommodate remote work challenges.
Resolution:
Employee Well-Being Assessment:
Acknowledge the impact of remote work on mental health and work-life balance.
Consider adjusting workloads, promoting breaks, and encouraging self-care.
Communication and Support:
Regularly check in with remote employees to address concerns.
Provide resources for stress management and work-life integration.
Policy Adaptation:
Revise remote work policies to address burnout prevention.
Encourage employees to set boundaries and prioritize self-care.
Question: In a legitimate contracting arrangement, the contractor provides specialized services beyond the principal’s core business. Which of the following scenarios best exemplifies legitimate contracting? A) A company hires a cleaning service to maintain its office premises. B) A construction firm builds a new shopping mall for a real estate developer. C) An IT consulting company provides software development services to a tech startup. D) A security agency supplies guards for a manufacturing plant.
Answer: B) A construction firm builds a new shopping mall for a real estate developer. Legal Basis: Legitimate contracting involves specialized services beyond the principal’s core business. Constructing a new department store (shopping mall) falls under specialized services provided by a construction company.
Question: Which type of contracting primarily supplies labor for the principal’s business operations without significant investment in tools and equipment? A) Labor-Only Contracting B) Legitimate Contracting C) Subcontracting D) Outsourcing
Answer: A) Labor-Only Contracting Legal Basis: Labor-only contracting involves providing labor services without substantial investment in tools or equipment. It relies heavily on the principal’s resources.
Question: In a labor-only contracting arrangement, who exercises significant control over the workers? A) The contractor B) The principal C) Both the contractor and the principal D) The Department of Labor and Employment (DOLE)
Answer: B) The principal Legal Basis: In labor-only contracting, the principal exercises substantial control over the workers, including dictating work schedules and methods.
Question: Which type of contracting establishes a direct employment relationship between the contractor and the workers? A) Labor-Only Contracting B) Legitimate Contracting C) Subcontracting D) Independent contracting
Answer: B) Legitimate Contracting Legal Basis: Legitimate contracting involves a direct employment relationship between the contractor and the workers. The contractor is responsible for complying with labor laws and social security contributions.
Question: What is the primary purpose of E.O. No. 51, Series of 2018, in the context of labor contracting? A) To promote outsourcing practices B) To strengthen labor unions C) To regulate subcontracting arrangements D) To enhance labor standards enforcement
Answer: D) To enhance labor standards enforcement Legal Basis: E.O. No. 51 aims to strengthen the enforcement of labor standards, including regulations related to contracting and subcontracting.
