What factors should be considered in determining whether a person is an employee or an independent contractor?
At the outset, it is important to note that the existence of an employer- employee relationship cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an independent contractor when the facts clearly show otherwise. [Chavez v. NLRC, 489 Phil. 444, 459 (2005)]
Article 295 of the Labor Code provides:
“The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.” (Emphasis supplied)
Based on the foregoing, regular employees are (i) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, and (ii) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed (in case of casual employees).
To ascertain the existence of an employer-employee relationship, jurisprudence has invariably adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee’s conduct, or the so-called “control test.”
Relative thereto, Article 294 of the Labor Code provides for the right of regular employees to a security of tenure. The employer cannot terminate their services except for a just or authorized cause. (Alba v. Espinosa, G.R. No. 227734, 9 August 2017)
On the other hand, independent contractors refers to individuals with unique skills and talents that set them apart from ordinary employees. The test of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work. (Polyfoam-RGC International Corp. v. Concepcion, G.R. No. 172349, June 13, 2012)
Applying the foregoing criteria, a person possessing unique skills or talents that differentiate them from other employees and those that enjoy independence or freedom from employer’s control in the performance of their work are to be classified as an independent contractor. Meanwhile a person whose functions are necessary and desirable to the business of the employer, and whose circumstances pass the four-fold test above, are to be considered as employees.
