Motion for Reconsideration: A Key Step in Philippine Labor Disputes

G.R. No. 169704, November 17, 2010

Imagine a scenario where a company classifies its workers as independent contractors, avoiding standard employee benefits. But what happens when these workers are suddenly terminated without due process? This case sheds light on the crucial distinctions between employees and independent contractors, emphasizing the importance of due process in termination and the permissibility of motions for reconsideration in labor disputes.

In Albert Teng Fish Trading v. Alfredo S. Pahagac, the Supreme Court tackled the issue of employer-employee relationships in the context of deep-sea fishing, specifically focusing on the right to file a motion for reconsideration on a Voluntary Arbitrator’s decision. The central legal question was whether workers hired through a ‘maestro’ (master fisherman) were employees of the fishing business owner, and whether their dismissal was illegal.

Understanding the Legal Landscape: Employee vs. Independent Contractor in the Philippines

Philippine labor law meticulously defines the rights and obligations of employers and employees. At the heart of many labor disputes lies the determination of whether an employer-employee relationship exists. This relationship triggers a cascade of legal protections for workers, including security of tenure, minimum wage, and social security benefits.

Key to this determination is the “four-fold test,” established in numerous Supreme Court decisions. This test examines: (1) the employer’s selection and engagement of the employee; (2) the payment of wages; (3) the employer’s power of dismissal; and (4) the employer’s control over the employee’s conduct. The most crucial element is the employer’s right to control the employee, not only as to the result of the work but also as to the means and methods by which it is accomplished.

Article 106 of the Labor Code prohibits “labor-only contracting,” where a person merely supplies workers to an employer without substantial capital or investment. In such cases, the supplier is considered an agent of the employer, who is responsible to the workers as if they were directly employed.

The Labor Code states:

ART. 106. Contractor or Subcontractor – x x x The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of labor.

There is ‘labor-only’ contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

Case Breakdown: The Fishermen vs. Albert Teng Fish Trading

The case began when Alfredo Pahagac, Eddie Nipa, Orlando Layese, Hernan Badilles, and Roger Pahagac, collectively known as the respondent workers, filed a complaint for illegal dismissal against Albert Teng Fish Trading, its owner Albert Teng, and its manager Emilia Teng-Chua. They claimed they were hired as “checkers” to monitor fish catches, reporting directly to Teng and receiving regular salaries and benefits.

Teng countered that the workers were hired by independent maestros (master fishermen) under a joint venture agreement. He argued that his role was limited to providing capital and equipment, and he had no direct control over the workers.

The Voluntary Arbitrator (VA) initially ruled in favor of Teng, stating that no employer-employee relationship existed. The respondent workers then filed a motion for reconsideration, which was denied by the VA, claiming that the remedy was not available in voluntary arbitration proceedings.

Here’s a breakdown of the procedural journey:

• February 20, 2003: Respondent workers file a complaint for illegal dismissal with the NCMB.
• May 30, 2003: The VA renders a decision in favor of Teng, dismissing the complaint.
• June 12, 2003: Respondent workers receive the VA’s decision.
• June 27, 2003: Respondent workers file a motion for reconsideration, which is denied.
• July 21, 2003: Respondent workers elevate the case to the Court of Appeals (CA).
• September 21, 2004: The CA reverses the VA’s decision, finding an employer-employee relationship.

The Court of Appeals reversed the VA’s decision, finding sufficient evidence of an employer-employee relationship. Teng then elevated the case to the Supreme Court.

The Supreme Court, in denying Teng’s petition, highlighted the importance of the right to file a motion for reconsideration, stating: “Presumably, the decision may still be reconsidered by the Voluntary Arbitrator on the basis of a motion for reconsideration duly filed during that period.“

Furthermore, the Court emphasized the element of control exerted by Teng over the workers: “Teng not only owned the tools and equipment, he directed how the respondent workers were to perform their job as checkers; they, in fact, acted as Teng’s eyes and ears in every fishing expedition.“

Practical Implications: Protecting Workers’ Rights

This case reaffirms the importance of substance over form in determining employer-employee relationships. Businesses cannot simply label workers as independent contractors to evade labor laws. The four-fold test, especially the element of control, remains the cornerstone of this determination.

The Supreme Court also clarified that motions for reconsideration are permissible in voluntary arbitration proceedings, despite the lack of explicit prohibition in the Labor Code. This ensures that arbitrators have the opportunity to correct any errors before a case is elevated to the courts.

Key Lessons:

• Substance over Form: Courts will look beyond labels to determine the true nature of a working relationship.
• The Power of Control: If an employer controls not just the result but also the means of achieving it, an employer-employee relationship likely exists.
• Motion for Reconsideration: This is a crucial remedy in labor disputes, allowing arbitrators to correct potential errors.

Hypothetical: A tech company hires developers, classifying them as independent contractors. The company dictates their working hours, assigns them specific tasks, and provides all the necessary equipment. Applying the lessons from this case, it is highly likely that these developers would be considered employees, regardless of the label.

Frequently Asked Questions (FAQs)

Q: What is the four-fold test in determining employer-employee relationship?

A: The four-fold test examines: (1) the employer’s selection and engagement of the employee; (2) the payment of wages; (3) the employer’s power of dismissal; and (4) the employer’s control over the employee’s conduct.

Q: What is labor-only contracting?

A: Labor-only contracting occurs when a person merely supplies workers to an employer without substantial capital or investment, making the supplier an agent of the employer.

Q: Can a motion for reconsideration be filed in voluntary arbitration proceedings?

A: Yes, the Supreme Court has clarified that motions for reconsideration are permissible, allowing arbitrators to correct potential errors.

Q: What is the most important factor in determining if an employer-employee relationship exists?

A: The employer’s right to control the employee, not only as to the result of the work but also as to the means and methods by which it is accomplished.

Q: What happens if an employee is illegally dismissed?

A: An illegally dismissed employee is entitled to reinstatement, back wages, and other monetary benefits.

ASG Law specializes in labor law and illegal dismissal cases. Contact us or email hello@asglawpartners.com to schedule a consultation.