3. Employee vs. Independent Contractor

Test to determine the existence of an independent contractor

Whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work. (SMC v. Aballa, G.R. No. 149011, 2005)

An individual can be an independent contractor for himself. (Sonza v. ABS-CBN, G.R. No. 138051, 2004)

Factors to consider in determining whether Contractor is carrying on an Independent Business:

It is not enough to show substantial capitalization or investment in the form of tools, equipment, machineries, and work premises, among others, to be considered as an independent contractor. In determining the existence of an independent contractor relationship, several factors might be considered:

• Nature and extent of work
• Skill required
• Term and duration of the relationship
• Right to assign the performance of specified pieces of work
• Control and supervision of the workers
• Power of the employer with respect to the hiring, firing, and payment of workers of the contractor
• Control of the premises
• Duty to supply premises, tools, appliances, materials, and labor
• Mode, manner, and terms of payment. (Vinoya v. NLRC, GR No. 126586, 2000)

Physicians

Under the control test, an employment relationship existed between the physicians and the hospital because the hospital controlled the means and the details of the process by which the resident doctors accomplished their task. (Calamba Medical Center, Inc. v. NLRC, et al., G.R. No. 176484, 25 Nov. 2008)

Q: Dr. Crisostomo entered into a retainer agreement with AB Hotel and Resort whereby he would provide medical services to the guests and employees of AB Hotel and Resort, which, in turn, would provide the clinic premises and medical supplies. He received a monthly retainer fee of ₱60,000.00, plus a 70% share in the service charges from AB Hotel and Resort's guests availing themselves of the clinic's services. The clinic employed nurses and allied staff, whose salaries, SSS contributions and other benefits he undertook to pay. AB Hotel and Resort issued directives giving instructions to him on the replenishment of emergency kits and forbidding the clinic staff from receiving cash payments from the guests. In time, the nurses and the clinic staff claimed entitlement to rights as regular employees of AB Hotel and Resort, but the latter refused on the ground that Dr. Crisostomo, who was their employer, was an independent contractor. Rule, with reasons. (2017 BAR)

A: I will rule in favor of AB Hotel and Resort. Dr. Crisostomo was an independent contractor and the nurses and clinic staff are his employees. Dr. Crisostomo had the power of selection and engagement of the nurses and clinic staff; he also paid their wages and SSS contributions. Most importantly, he exercises control over the nurses and clinical staffs’ conduct in dispensing medical services to the guests and personnel of the resort. The fact that AB Hotel and Resort gave instructions to Dr. Crisostomo regarding replenishment of emergency kits and forbidding his staff from receiving cash payments from guests is of no consequence. They are nothing more but guidelines which will not create an employer-employee relationship (Insular Life Co., Ltd. v. NLRC, G.R. No. 84484, 15 Nov. 1989)

Q: Genesis entered into a Career’s Agent Agreement with Emolife Insurance Company, a domestic corporation engaged in insurance business. The Agreement provides that the agent is an independent contractor and nothing therein shall be construed or interpreted as creating an Er-Ee relationship. It further provides that the agent must comply with three requirements: (1) compliance with the regulations and requirements of the company; (2) maintenance of a level of knowledge of the company's products that is satisfactory to the company; and (3) compliance with a quota of new businesses. However, EmoLife insurance company terminated Genesis’ services. Genesis filed an illegal dismissal complaint alleging that an employer–employee relationship existed and that he was illegally dismissed.

A: NO. Genesis is not an Ee of EmoLife Insurance Company. Generally, the determinative element is the control exercised over the one rendering the service. The concept of “control” in LC has to be compared and distinguished with “control” that must necessarily exist in a principal-agent relationship. The Er controls the Ee both in the results and in the means and manner of achieving this result. The principal in an agency relationship, e.g., insurance agent, on the other hand, also has the prerogative to exercise control over the agent in undertaking the assigned task based on the parameters outlined in the pertinent laws.

In the present case, the Agreement fully serves as grant of authority to Genesis as EmoLife’s insurance agent. This agreement is supplemented by the company’s agency practices and usages, duly accepted by the agent in carrying out the agency. Foremost among these are the directives that the principal may impose on the agent to complete the assigned tasks, to the extent that they do not involve the means and manner of undertaking these tasks.

The law likewise obligates the agent to render an account; in this sense, the principal may impose on the agent specific instructions on how an account shall be made, particularly on the matter of expenses and reimbursements. To these extents, control can be imposed through rules and regulations without intruding into the labor law concept of control for purposes of employment. (Gregorio Tongko v. ManuLife Insurance Company, G.R. No. 167622, 29 June 2010)

Q: Petitioners alleged that they were employed in 1996 as fitters/welders by Oceanview, a corporation engaged in the business of ship building. Their duties and responsibilities included repairing Oceanview barges. They presented a copy of their IDs and Certificates of Employment. In 2003, Oceanview changed its corporate name to “Shogun Ships, Inc.”

In May 2006, they were assigned to do a welding job on one of the barges of Shogun Ships. An explosion occurred where petitioners sustained injuries. They were hospitalized and medical expenses were borne by respondent. After being discharged, respondent resumed payment of their salaries. Subsequently, Shogun Ships verbally dismissed them from service effective 01 May 2008 due to lack of work.

Shogun Ships denied that petitioners were its regular Ees. It pointed out that Oceanview was separate and distinct from it, and that petitioners were mere helpers brought in by its regular Ees of Shogun Ships when repairs were needed. In 2008, their regular Ees ceased calling helpers.

Were petitioners regular Ees of Shogun Ships?

A: YES. In determining the existence of an Er-Ee relationship, this Court has time and again applied the "four-fold test" which has the following elements, to wit: (a) the selection and engagement of the Ee; (b) the payment of wages; (c) the power to discipline and dismiss; and (d) the Er's power to control the Ee with respect to the means and methods by which the work is to be accomplished.

Shogun did not categorically deny the following: that in May 2006, petitioners were engaged by Shogun to work on repairs on one of its barges; that petitioners worked for Shogun until they were verbally dismissed on 01 May 2008; that petitioners were duly compensated for any work done; that Shogun provided petitioners’ financial assistance while confined; that Shogun continued to pay their salaries after they were discharged from the hospital; and that petitioners were verbally dismissed on 01 May 2008.

As regards Shogun’s power of control, the control test calls merely for the existence of the right to control the manner of doing the work and not the actual exercise of the right. Considering that petitioners were working on the barges alongside regular Ees and that they were taking orders from its engineers as to how the barges of Shogun should be repaired, it may be logically inferred that Shogun had the right to control the work of petitioners (Pedrito Parayday and Jaime Reboso v. Shogun Shipping Co., G.R. No. 204555, 06 July 2020, as penned by J. Hernando).

Full-time Teacher

One whose total working day is devoted to school, no other regular remunerative employment, and is paid on a regular monthly basis regardless of the number of teaching hours.

In college, the normal teaching load of a full-time instructor shall be 18 hours a week.

Professors and instructors are not independent contractors. They are compensated for their services by wages and salaries, rather than share of profits; they cannot substitute others to do their work without the consent of the university and can be laid off if their work is unsatisfactory. All these indicate that the university has control over their work and that they are, therefore, Ees and not independent contractors. (Feati University v. Hon. Jose S. Bautista, and Feati University Faculty Club- PAFLU, G.R. No. L-21278, 27 Dec. 1966)