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ESC!ETA, Res"onents#, G#R# No# $%&&'%, (&&) Au* +$#
1995, Petitioner was hired by Kasei Corporation during its incorporation stage. She was
designated as Accountant and Corporate Secretary and was assigned to handle all the accounting
needs of the company. She was also designated as iaison !fficer to the City of "a#ati to
secure business permits, construction permits and other licenses for the initial operation of the
Although she was designated as Corporate Secretary, she was not entrusted with the
corporate documents$ neither did she attend any board meeting nor re%uired to do so. She ne&er
prepared any legal document and ne&er represented the company as its Corporate Secretary.
199', petitioner was designated Acting "anager. Petitioner was assigned to handle
recruitment of all employees and perform management administration functions$ represent the
company in all dealings with go&ernment agencies, especially with the ()*, SSS and in the city
go&ernment of "a#ati$ and to administer all other matters pertaining to the operation of Kasei
*estaurant which is owned and operated by Kasei Corporation.
+anuary ,--1, petitioner was replaced by a certain i.a *. /uentes as "anager. Kasei
Corporation reduced her salary, she was not paid her mid0year bonus allegedly because the
company was not earning well. !n !ctober ,--1, petitioner did not recei&e her salary from the
company. She made repeated follow0ups with the company cashier but she was ad&ised that the
company was not earning well. 1&entually she was informed that she is no longer connected with
the company.
Since she was no longer paid her salary, petitioner did not report for wor# and filed an
action for constructi&e dismissal before the labor arbiter. Pri&ate respondents a&erred that
petitioner is not an employee of Kasei Corporation. 2hey alleged that petitioner was hired in
1995 as one of its technical consultants on accounting matters and act concurrently as Corporate
Secretary. As technical consultant, petitioner performed her wor# at her own discretion without
control and super&ision of Kasei Corporation. Petitioner had no daily time record and she came
to the office any time she wanted and that her ser&ices were only temporary in nature and
dependent on the needs of the corporation.
2he abor Arbiter found that petitioner was illegally dismissed, 3*C affirmed with
modification the 4ecision of the abor Arbiter. !n appeal, CA re&ersed the 3*C decision. CA
denied petitioner5s "*, hence, the present recourse.

1. 6!3 there was an employer0employee relationship between petitioner and pri&ate
respondent$ and if in the affirmati&e,
,. 6hether petitioner was illegally dismissed.

1. 7enerally, courts ha&e relied on the so0called right of control test where the person for
whom the ser&ices are performed reser&es a right to control not only the end to be achie&ed but
also the means to be used in reaching such end. )n addition to the standard of right0of0control, the
e8isting economic conditions pre&ailing between the parties, li#e the inclusion of the employee
in the payrolls, can help in determining the e8istence of an employer0employee relationship.
2here are instances when, aside from the employer5s power to control the employee,
economic realities of the employment relations help pro&ide a comprehensi&e analysis of the true
classification of the indi&idual, whether as employee, independent contractor, corporate officer
or some other capacity.
)t is better, therefore, to adopt a two0tiered test in&ol&ing9 :1; the employer5s power to
control$ and :,; the economic realities of the acti&ity or relationship.
2he control test means that there is an employer0employee relationship when the person
for whom the ser&ices are performed reser&es the right to control not only the end achie&ed but
also the manner and means used to achie&e that end.
2here has to be analysis of the totality of economic circumstances of the wor#er. 2hus,
the determination of the relationship between employer and employee depends upon the
circumstances of the whole economic acti&ity, such as9 :1; the e8tent to which the ser&ices
performed are an integral part of the employer5s business$ :,; the e8tent of the wor#er5s
in&estment in e%uipment and facilities$ :<; the nature and degree of control e8ercised by the
employer$ :=; the wor#er5s opportunity for profit and loss$ :5; the amount of initiati&e, s#ill,
>udgment or foresight re%uired for the success of the claimed independent enterprise$ :'; the
permanency and duration of the relationship between the wor#er and the employer$ and :?; the
degree of dependency of the wor#er upon the employer for his continued employment in that line
of business. 2he proper standard of economic dependence is whether the wor#er is dependent on
the alleged employer for his continued employment in that line of business
(y applying the control test, it can be said that petitioner is an employee of Kasei
Corporation because she was under the direct control and super&ision of Sei>i Kamura, the
corporation5s 2echnical Consultant. She reported for wor# regularly and ser&ed in &arious
capacities as Accountant, iaison !fficer, 2echnical Consultant, Acting "anager and Corporate
Secretary, with substantially the same >ob functions, that is, rendering accounting and ta8
ser&ices to the company and performing functions necessary and desirable for the proper
operation of the corporation such as securing business permits and other licenses o&er an
indefinite period of engagement. *espondent corporation had the power to control petitioner
with the means and methods by which the wor# is to be accomplished.
@nder the economic reality test, the petitioner can also be said to be an employee of
respondent corporation because she had ser&ed the company for ' yrs. before her dismissal,
recei&ing chec# &ouchers indicating her salariesAwages, benefits, 1<th month pay, bonuses and
allowances, as well as deductions and Social Security contributions from. 6hen petitioner was
designated 7eneral "anager, respondent corporation made a report to the SSS. Petitioner5s
membership in the SSS e&inces the e8istence of an employer0employee relationship between
petitioner and respondent corporation. 2he co&erage of Social Security aw is predicated on the
e8istence of an employer0employee relationship.
,. 2he corporation constructi&ely dismissed petitioner when it reduced her. 2his amounts
to an illegal termination of employment, where the petitioner is entitled to full bac#wages
A diminution of pay is pre>udicial to the employee and amounts to constructi&e dismissal.
Constructi&e dismissal is an in&oluntary resignation resulting in cessation of wor# resorted to
when continued employment becomes impossible, unreasonable or unli#ely$ when there is a
demotion in ran# or a diminution in pay$ or when a clear discrimination, insensibility or disdain
by an employer becomes unbearable to an employee. Petition is 7*A3214.