Francisco v. NLRC

Kasei Corporation hired Angelina Francisco in 1995 as Accountant and Corporate Secretary. She handled the company's accounting and acted as its liaison officer with the City of Makati. Although she was designated Corporate Secretary, she was never entrusted with corporate documents and never attended board meetings. From 1996 she served five years as Acting Manager. In January 2001 Liza R. Fuentes replaced her as Manager, but Francisco was assured that she remained with the company as Technical Assistant, in charge of BIR matters. Kasei then cut her salary by P2,500 a month from January to September 2001, did not pay her mid-year bonus, and stopped paying her salary in October 2001. On October 15, 2001, she was told that she was no longer connected with the company, and she filed a complaint for constructive dismissal. Kasei claimed that she was a technical consultant who worked at her own discretion without a time record. It said she was paid professional fees subject to expanded withholding tax and was not reported to the BIR or the SSS as its employee. The Labor Arbiter found her illegally dismissed. The NLRC affirmed with modification, but the Court of Appeals reversed and dismissed her complaint.

1. 1Whether an employer-employee relationship existed between Francisco and Kasei Corporation.
2. 2Whether Francisco was illegally (constructively) dismissed.

Yes to both. There is no uniform test of employment. Where the worker held several positions, the control test may not give a complete picture, so the Court adopted a two-tiered test: (1) 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 (2) the underlying economic realities of the activity or relationship. Economic dependence is the benchmark. Under the control test, Francisco was under Seiji Kamura's direct control and supervision and regularly performed functions necessary to the business. Under the economic-reality test, she served six years and received salary vouchers, 13th month pay, bonuses and allowances with SSS deductions, and she was reported to the SSS. She was therefore economically dependent on Kasei. Kamura's first affidavit showed that her Corporate Secretary designation was only for convenience, and his later retraction deserved little weight. Cutting her pay amounted to constructive dismissal: a diminution in pay makes continued work unreasonable, so her leaving was not of her own making. Because her accountant position involved trust and confidence and relations had become strained, she was awarded separation pay instead of reinstatement. The petition was granted, the Court of Appeals' decision annulled, and the NLRC decision (which had awarded separation pay of one month per year of service) reinstated. Yet the same fallo remanded the case to recompute full backwages until finality and "separation pay representing one-half month pay for every year of service, where a fraction of at least six months shall be considered as one whole year."