The Employer-Employee Relationship

Monday, June 13, 2011 in Labor, Law

More Sharing ServicesShare|Share on facebookShare on myspaceShare on googleShare on twitter The employer-employee relationship forms the basis of a valid legal dispute. Without it, a labor dispute will be dismissed. The following elements must be present in order to determine the existence of an employeremployee relationship: 1.) 2.) 3.) 4.) Power to Power to Payment Power of hire fire of salaries/wages control

Of the above four powers, the fourth one is the most important because it can negate the other three. There is no employer-employee relationship if the following are present: 1.) 2.) 3.) 4.) The person works at his own pleasure He has no set time for work He decides for himself what is to be done He is paid according to the results of his work

There is no employer-employee relationship if the above are present because there is no power of control.

The determination of whether employer-employee relation exists between the parties is very important. For one, entitlement to labor standards benefits such as minimum wages, hours of work, overtime pay, etc., or to social benefits under laws such as social security law, workmens compe nsation law, etc., or to termination pay, or to unionism and other labor relations provisions under the Labor Code, are largely dependent on the existence of employer-employee relationship between the parties. Another thing is that the existence of employer-employee relationship between the parties will determine whether the controversy should fall within the exclusive jurisdiction of labor agencies or not. If for example the parties are not employer-employee of each other, respectively, but perhaps partners or associates, then any dispute between them will be not be covered by the jurisdiction of labor agencies but by regular courts. Three test to determine employer-employee relationship There are three test commonly used to determine the existence of employer-employee relationship, viz.: 1. 2. 3. Four-fold test Economic reality test Two-tiered test (or Multi-factor test) Four-fold test elements The usual test used to determine the existence of employer-employer relationship is the so-called four-fold test. In applying this test, the following elements are generally considered: 1. 2. 3. 4. Right to hire or to the selection and engagement of the employee. Payment of wages and salaries for services. Power of dismissal or the power to impose disciplinary actions. Power to control the employee with respect to the means and methods by which the work is to be accomplished. This is known as the right-of-control test.

Of the above-mentioned elements, the right of control test is considered as the most important element in determining the existence of employment relation. The control test initially found application in the case of Viaa vs. Al-Lagadan and Piga, where the court held that there is an employeremployee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end. Control test thus refers to the employers power to control the employees conduct not only as to the result of the work to be done but also with respect to the means and methods by which the work is to be accomplished. In applying this test, it is the existence of the right, and not the actual exercise thereof, that is important. Economic reality test In view of todays highly specialized workforce, the court are often faced with situations where the right -of-control-test alone can no longer adequately determine the existence of employer-employer relationship. Subsequently, another test has been devised to fill the gap, known as the economic reality test.

In Sevilla v. Court of Appeals, the Court observed the need to consider the existing economic conditions prevailing between the parties, in addition to the standard of right-of-control, to give a clearer picture in determining the existence of an employer-employee relationship based on an analysis of the totality of economic circumstances of the worker. Economic realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity. Under economic reality test, the benchmark in analyzing whether employment relation exists between the parties is the economic dependence of the worker on his employer. That is, whether the worker is dependent on the alleged employer for his continued employment in the latters line of business. Applying this test, if the putative employee is economically dependent on putative employer for his continued employment in the latters line of business, there is employer-employee relationship between them. Otherwise, there is none. Two-tiered test (or Multi-factor test) The economic reality test is not meant to replace the right of control test. Rather, these two test are often use in conjunction with each other to determine the existence of employment relation between the parties. This is known as the two-tiered test, or multi-factor test. This two-tiered test involves the following tests:

The putative employers power to control the employee with respect to the means and methods by which the work is to be accomplished; and The underlying economic realities of the activity or relationship.