Lu v. Enopia
REITERATIONFacts
The Antecedents: Petitioners were hired as crew members of fishing mother boat F/B MG-28, owned by petitioner Joaquin Lu (proprietor of Mommy Gina Tuna Resources - MGTR), from January 20, 1994, to March 20, 1996. They had an income-sharing arrangement (55% to Lu, 45% to crew, plus 4% backing incentive) and shared expenses for maintenance, repair, and supplies. In August 1997, Lu proposed a Joint Venture Fishing Agreement with a one-year term, which petitioners refused to sign. Petitioners alleged Lu terminated their services immediately due to their refusal. Lu claimed the master fisherman informed him that petitioners refused to sign and decided to return the vessel. Procedural History: Petitioners filed a complaint for illegal dismissal and monetary claims. After failed settlement attempts and the inhibition of the initial Labor Arbiter (LA), the case was raffled to LA Amado M. Solamo. Petitioners sought refund of amounts deducted for repair and maintenance. Lu denied dismissal, asserting a joint venture relationship where he provided the vessel and petitioners provided labor as industrial partners, arguing the elements of employer-employee relationship were absent. On June 30, 1998, the LA dismissed the case, finding no employer-employee relationship but a joint venture, citing that the piado hired the crew, earnings were based on shares, no discipline was imposed, and income/expense splitting indicated partnership. The NLRC affirmed the LA's decision on March 12, 1999. Petitioners' motion for reconsideration was denied. Their subsequent petition for certiorari with the Court of Appeals (CA) was dismissed for being filed out of time and for lack of proper authorization for the certification of non-forum shopping. The Supreme Court (SC) granted their petition for certiorari in G.R. No. 147396, remanding the case to the CA for further proceedings. The Petition: On October 22, 2010, the CA reversed the NLRC, finding an employer-employee relationship and ordering MGTR (through Lu) to pay petitioners separation pay, full backwages, exemplary damages, and attorney's fees. The CA's decision was declared immediately executory. Lu's motion for reconsideration was denied on May 12, 2011. Aggrieved, Lu filed the instant petition for review on certiorari with the SC, assailing the CA's decision and resolution.
Issue(s)
Whether the Court of Appeals gravely abused its discretion in reversing the findings of the NLRC regarding the existence of an employer-employee relationship and illegal dismissal. Whether an employer-employee relationship existed between petitioner Joaquin Lu and the respondents, considering the elements of selection and engagement, power to control conduct, payment of wages, and power of dismissal. Whether the respondents were illegally dismissed, violating their security of tenure, and the propriety of the monetary awards granted by the CA.
Ruling
The petition is denied. The Decision dated October 22, 2010, and the Resolution dated May 12, 2011, of the Court of Appeals in CA-G.R. SP No. 55486-MIN are affirmed. The monetary awards shall earn legal interest at the rate of six percent (6%) per annum from the date of the finality of the Decision until fully paid.
Ratio Decidendi
On the Court of Appeals' discretion: The Court affirmed the CA's finding that an employer-employee relationship existed, applying the four-element test: (1) selection and engagement, (2) power to control conduct, (3) payment of wages, and (4) power of dismissal. The Court found that petitioner Lu's registration of respondents with the Social Security System (SSS) was proof of an employer-employee relationship, as SSS coverage is predicated on such a relationship. Furthermore, the 4% backing incentive fee, even if deducted with vale or cash advances, constituted 'wage' under the Labor Code, and the fact that fishermen obtained advances from petitioner Lu, not the piado, indicated Lu's role as employer. The Court also found that petitioner Lu exercised control over the respondents' fishing operations through the master fisherman and assistant master fisherman, and through communication via radio operator and checker, which demonstrated monitoring and supervision. On the existence of an employer-employee relationship: The Court reiterated that the control test requires the existence of the right to control, not necessarily the exercise thereof. Petitioner Lu's admission of contact via radio operator and checker, used for requisitions and reports of fish catch, was deemed sufficient to establish control and supervision over the respondents' activities. The CA's finding that Lu instructed the piado on how to conduct fishing operations based on checker reports further supported this. The Court clarified that payment of wages based on a percentage share of the fish catch does not negate an employer-employee relationship. Citing Ruga v. NLRC, the Court held that such compensation falls within the definition of 'wage' under Article 97(f) of the Labor Code, as it is remuneration capable of being expressed in money, calculated on a commission basis. The Court found that petitioner Lu wielded the power of dismissal when he terminated the respondents' services after they refused to sign the joint fishing venture agreement. This act, coupled with the other elements, solidified the existence of an employer-employee relationship. On illegal dismissal and monetary awards: The Court ruled that respondents were regular employees because their work as fishermen-crew members was necessary and desirable to petitioner Lu's deep-sea fishing business, and they had performed their jobs for more than one year. Their termination for refusing to sign the joint venture agreement, which violated their security of tenure, was deemed illegal as it was not a just cause for termination under Article 282 of the Labor Code. The Court affirmed the CA's award of separation pay (in lieu of reinstatement due to strained relations and respondents' subsequent employment), full backwages, exemplary damages (due to Lu's oppressive or malevolent manner), and attorney's fees (for being forced to litigate). The Court also imposed legal interest on the monetary awards.
Main Doctrine
The existence of an employer-employee relationship is determined by the presence of the four elements: selection and engagement, power to control conduct, payment of wages, and power of dismissal. Registration with the Social Security System (SSS) is proof of an employer-employee relationship. A percentage share in the catch constitutes 'wage' under the Labor Code.