How to determine employer-employee relationship?

In Legaspi v. NLRC (G.R. No. 155710, January 20, 2014), both the NLRC and the CA rejected this holding of the Labor Arbiter, and instead ruled that Valle's true employer was LBC Systems, Inc. They thus called for Valle's complaint to be "remanded to the Labor Arbiter a quo for further hearing insofar as LBC Systems, Inc. is concerned." Although it does not review errors that raise factual questions, the Supreme Court deems it proper then to exercise its equity jurisdiction in order to review and re-evaluate the factual issues and to look into the records and re-examine the questioned findings in light of the conflict in the factual findings of the Labor Arbiter, on one hand, and the NLRC and the CA, on the other.

The well-settled tests to determine the existence of an employer-employee relationship are fourfold, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the power to control the employee's conduct. Of these, the most important is whether the employer controls or has reserved the right to control the employee not only as to the result of the work but also as to the means and methods by which the result is to be accomplished.In determining the existence of an employer-employee relationship, the rule of thumb remains to be that the onus probandi falls on the claiming employee to establish or substantiate his claim by the requisite quantum of evidence. There is no particular form of evidence required to prove the existence of the employer-employee relationship, for any competent and relevant evidence may be admitted for that purpose. Yet, any finding that the relationship exists must rest on substantial evidence - that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.

Alas, Valle did not adduce substantial evidence as basis for claiming employer-employee relationship between LBC Express, Inc. and himself. He failed to do so although it was against LBC Express, Inc. that he had filed the complaint for illegal dismissal. All he presented was the acknowledgment receipt of his separation pay bearing the name of LBC Express, Inc., and his bare assertion that "in the middle part of 1995, however, the functions of LBC Systems, Inc. was realigned and reintegrated in the functions of LBC Express, Inc." Nor did he adduce competent proof showing that LBC Express, Inc. engaged his services again after he had been named Vice-President for Operations of LBC Systems, Inc.; or that LBC Express, Inc. paid his salaries, except that appearing on the acknowledgment receipt of his separation pay; or that he reported to LBC Express, Inc.; or that LBC Express, Inc. could dictate what his conduct should be while at work. Clearly, he did not establish his employment with LBC Express, Inc. based on the above-cited four-fold test. That such a crucial and important circumstance would end up with a dearth of supporting evidence was puzzling, considering that the determination of which company was ultimately liable to Valle is the lone issue submitted to us.

The significance of the determination of which between LBC Express, Inc. and LBC Systems, Inc. was Valle's employer could not be denied. Although included in the claim of Valle, the former was not his employer.

The latter was inarguably his employer, except that it was not impleaded as to the claim of illegal dismissal.

In contrast, both the NLRC and the CA concluded that Valle was employed by LBC Systems, Inc. The Supreme Court agrees. Valle's own statement that he was initially hired by LBC Express, Inc. in 1976 but was made the Vice-President for Operations of LBC Systems when "[t]he Distribution Department of LBC Express, Inc. was spun-off and became LBC Systems, Inc. in October 1, 1993" rendered it evident that LBC Express, Inc. was separate and distinct from LBC Systems, Inc. His pleadings did not allege or state that LBC Express, Inc. absorbed LBC Systems, Inc., or that the two entities merged. Although the Labor Arbiter did not indicate that LBC Systems, Inc. was no longer Valle's employer, or that LBC Systems, Inc. was the alter ego of LBC Express, Inc., it became perplexing why the Labor Arbiter still held LBC Express, Inc. liable as Valle's employer when the records indicated that LBC Express, Inc. had ceased to be his employer since 1993, the time when its Distribution Department was spun-off to become LBC Systems, Inc.

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