Province of Rizal vs Executive Secretary

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LEGEND HOTEL (MANILA) vs.HERNANI S. REALUYOJuly 18, 2012Ponente: Bersamin, J.Digest Maker: John Michael Gabriel VidaSUMMARY: Realuyo/Roa was a pianist in the employ of Legend, with the restaurant manager of Legend providing control over the manner of work of Realuyo. Eventually, Realuyo was dismissed, which prompted him to file an illegal dismissal complaint. The Court ruled that an ER-EE relationship exists and enumerated the factors involved in the Four-Fold test, which is the yardstick used to determine the existence of an ER-EE relationship used by the Court.DOCTRINE:The Court enumerated the Four-Fold doctrine used to determine whether or not an ER-EE relationship exists. The factors to consider are [SWeDE]:a. Selection powers of the employer

b. Wage payment of the employerc. Dismissal powers of the employer

d. Employee control or the control test

FACTS:

This is a labor case involving Realuyo, with stage name Joey Roa, a pianist employed by Legend Hotel. Realuyo filed a complaint for alleged ULP, constructive illegal dismissal, and underpayment of premium pay for holidays, separation pay, service incentive leave pay, and 13th month pay, with further prayer for attorneys fees and moral and exemplary damages. Realuyo averred that he had worked as a pianist for the Legend Hotels Tanglaw Restaurant from September 1992, starting with an initial rate of P400/night, eventually increasing to P750/night. He could not choose the time of his performance, as it was fixed from 7:00 pm to 10:00 pm for 3-6 times per week. He also stated that the Legend Hotels restaurant manager required him to follow the hotel motif, and that he had been subjected to the rules on employees representation checks and chits (which was a privilege given to employees).

On July 9, 1999, however, hotel management informed Realuyo that, due to cost-cutting measures undertaken by the hotel, his services would no longer be required effective July 30, 1999 (only 21 days after informing him of his dismissal). Realuyo insisted, however, that the hotel was lucratively operating at the time of filing of the complaint.In its defense, Legend denied the existence of any employer-employee (ER-EE) relationship with Realuyo, and that he was only a talent engaged to provide live music at Legends Madison Coffee Shop for 3 hours/day on 2 days/week. Legend also averred that, due to the economic crisis, management was constrained to dispense with his services.

The Labor Arbiter (LA) dismissed the complaint for lack of merit upon the finding that there was no ER-EE relationship between Realuyo and Legend. This finding was based on the admission of Realuyo on a letter stating that what he received from Legend in exchange for his services was a talent fee and not a salary. This was reinforced by the fact that Realuyo received his salary nightly, unlike the other employees who received their salaries monthly. Upon appeal, the NLRC affirmed the same.

The CA, however, reversed the LA and NLRC, stating that the four elements of ER-EE relationship exists, most importantly the element of employee control in the form of the supervision and control exercised by the restaurant manager of Legend.ISSUES/HELD: 1. WON Realuyo was an employee of Legend Hotel. YES, ER-EE relationship existed between the parties.2. WON Realuyo was validly terminated. RATIO:1. The Court found for Realuyo in stating that an ER-EE relationship indeed existed between the parties. The Court enumerated the four-fold test factors, namely:

Power to select the employee

Payment of employees wages

Power to dismiss the employee

Exercise of control over the methods and results by which the work of the employee is accomplished (employee control)

Applying these factors to the case at hand, the Court found that Realuyo was indeed Legend Hotels employee. He was employed as a pianist in the Madison Coffee Shop and Tanglaw Restaurant from September 1992 until July 1999.

Legend was found to have wielded the power of selection when it entered into the service contract with Realuyo, as well as express written recommendations by the restaurant manager for increase of remuneration.Further to this, the Court pointed out that, despite the denomination of the received remuneration as talent fees, these remunerations were considered as included in the term wage in the sense and context of the Labor Code, regardless of the designation. As stated in Article 97(f) of the Labor Code:

Wage paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered, and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee.

From the case, it was clear that Realuyo indeed received compensation for services rendered as the hotels pianist.

Also, the fact that Realuyo worked for less than 8 hours/day was of no consequence and did not detract from finding for the existence of the ER-EE relationship. In providing that the "normal hours of work of any employee shall not exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of number of hours as "normal hours of work" but did not prohibit work of less than eight hours.Thirdly, the power of control over the work of Realuyo, considered as the most significant determinant of the existence of an ER-EE relationship, was seen on the following facts:

He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00 pm, three to six times a week; He could not choose the place of his performance; The restaurants manager required him at certain times to perform only Tagalog songs or music, or to wear barong Tagalog to conform to the Filipiniana motif; and He was subjected to the rules on employees representation check and chits, a privilege granted to other employees.It must be noted that the employer need not actually supervise the performance of duties by the employee, for it sufficed that the employer has the right to wield that power.

Finally, the Court pointed out that Legend possessed the power to dismiss Realuyo in that the memorandum informing Realuyo of the discontinuance of his service because of the present business or financial condition of Legend showed that the latter had the power to dismiss him from employment.2. It must be noted that retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a management prerogative resorted to by employers to avoid or to minimize business losses. Article 283 of the Labor Code states:

Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. xxx. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.

The Court has provided the standards that an employer should meet to justify retrenchment, namely:

(a) The expected losses should be substantial and not merely de minimis in extent;

(b) The substantial losses apprehended must be reasonably imminent;

(c) The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and

(d) The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled must be proved by sufficient and convincing evidence.

From the case itself, the Court concluded that the burden of proof of Legend to prove that the dismissal was for a valid or authorized cause was not given by Legend, as it did not submit evidence of the losses to its business operations and the economic chaos it would imminently suffer. The statements regarding Realuyos termination due to present business/financial condition were considered as insufficient to show a valid retrenchment. As a result, the Court cannot allow the termination of Realuyo due to retrenchment.

However, the lapse of time since the retrenchment may have made a return to the job as unfeasible, therefore the Court ordered Legend to pay separation pay at the rate of 1 month pay for every year of service rendered, as well as full backwages.