When the status of the employment is in dispute, the employer bears the burden to prove that the person whose service it pays for is an independent contractor and not a regular employee
This was reiterated by the Supreme Court’s Second Division during its session on January 22, 2024, as it granted the petition for review filed by Rico B. Escauriaga, Cristine Dela Cruz, Rene B. Severino, Ralph Errol Mercado, and Geraldine Guevarra (collectively, petitioners). The petition challenged the rulings of the Court of Appeals (CA) which had upheld the National Labor Relations Commission’s (NLRC) findings that the petitioners were independent contractors, and not employees of Fitness First Phil, Inc. (Fitness First).
In granting the petition, the Court, through Associate Justice Amy C. Lazaro-Javier, applied the four-fold test governing employer-employee relationship to determine if Fitness First sufficiently proved that petitioners were independent contractors.
Under the four-fold test, to establish an employer-employee relationship, four factors must be proven: (a) the employer’s selection and engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and (d) the power to control the employee’s conduct, which, stressed the Court, is the most significant factor.
The Court found that all four factors were present in the case of the petitioners.
Fitness First engaged petitioners initially as fitness consultants, and on different dates, they transitioned to become freelance personal trainers. The corresponding Freelance Personal Trainer Agreement specifically mentioned that petitioners were paid on commission basis. Fitness First also held the power to dismiss petitioners when it became manifest that the latter were unqualified or unfit to discharge their duties or failed to comply with the monthly Minimum Performance Standards under the Agreement.
Finally, petitioners performed tasks necessary and desirable to Fitness First’s principal business of providing health programs/packages and physical training to its clients. To ensure the quality of services that Fitness First provides, petitioners were required to attend all educational training sessions and other relevant events. The Court further noted that Fitness First even kept track of petitioners’ performance such that some of them were lauded for their exemplary performance.
The Court also held that even applying the economic dependence test, where the circumstances of the whole economic activity are considered in the determination of the relationship between employer and employee, the conclusion would still be the same.
Petitioners were made to act as personal trainers in accordance with specifications on the physical health availed of by Fitness First members/customers as marketed by petitioners. Further, under the Freelance Personal Trainer Agreement, petitioners were required to sell only the company products per its price schedule and were prohibited from providing training outside of the club. Petitioners were also wholly dependent upon Fitness First for their continued employment in their line of business. Finally, the exclusivity clause in their Agreement only strengthened the conclusion that petitioners are regular employees of Fitness First.
Thus, the Court ordered that petitioners be reinstated to their former positions and paid full backwages, separation pay, pro-rata 13th month pay, and attorney’s fees.
The Supreme Court Public Information Office will upload a copy of the Decision once it receives the same from the Second Division Clerk of Court.
(G.R. No. 266552, Escauriaga v. Fitness First, Phil., Inc.)