Employee-Employer Relationship Who Is An Employee?

EMPLOYEE-EMPLOYER RELATIONSHIP
Who is an employee?
An employee refers to a person who works for an

employer. He is a person who is compensated for his labor or
services by wages rather than by profits.
He works for salary or wages and is compensated for his

labor or services by wages rather than by profits.
Who is an employer?
The term employer refers to a person who employs the

services of others called workers or employees and who pays
their wages or salaries. It includes the principal employer or any
person acting in his interest, directly or indirectly but does not
include any labor organization or any of its officers or agents,
except, when said labor organization or its officers and agents
act as employer.
Test of Employment Relationship
a. Absence of uniform test
There is no uniform test prescribed by law or

jurisprudence. There is no particular form of proof required to
prove its existence. However, it is a basic tenet that technical
rules should not be strictly applied to determine the existence
of the relationship but rather, the actualities of industrial or
busines practice.
b. Four-fold test to determine employment relationship
Elements to determine the existence of employer-

employee relationship:
1. Selection and engagement of the employee;

2. Payment of wages or salaries;
3. Exercise of the power of dismissal; and
4. Exercise of the power to control the employees
conduct.
Selection and engagement of employee, payment of

wages and power of dismissal are the first three tests to
determine the existence of the employment relationship.
However, these tests are not fool-proof as they admit of
exceptions.
Control test as the controlling test in determining

employer-employee relationship.
it is the so-called “control test” that is, whether the

employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but
also as to the means and methods by which the same is to be
accomplished, which constitutes the most important index of
the existence of the employer-employee relationship.
The Supreme Court relies on this fourth element which
assumes primacy in the overall consideration and the most
crucial and determinative indicator of the presence or absence
of an employer-employee relationship.
EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS WHERE THE

PERSON FOR WHOM THE SERVICES ARE PERFORMED
RESERVED THE RIGHT TO CONTROL NOT ONLY THE END TO BE
ACHIEVED BUT ALSO THE MEANS TO BE USED IN REACHING
SUCH END.
Absent the power to control the employee with respect to

the means and methods by which his work was to be
accomplished, there is no employer-employee relationship
between the parties.
In deciding the question of control, the language of the

contract is not determinative of the parties’ relationship,
rather, it is the totality of the facts and the surrounding
circumstances of each case.
c. Two-tiered test of employment relationship
In certain cases, the control test is not sufficient to give a

complete picture of the relationship between the parties owing
to the complexity of such a relationship. There are instances
when economic realities of the employment relations help
provide a comprehensive analysis of the true classification of
the individual – as an employee, independent contractor,
corporate officers or some other capacity.
The two-tiered tests:
1. Control Test – the putative employer’s power to control

the employee with respect to the means and methods
by which the work is to be accomplished; and
2. Economic Reality Test – the underlying economic

realities of the activity or relationship.
The need to consider the existing economic conditions

prevailing between the parties, in addition to the standard of
right-of-control like the inclusion of the employee in the
payrolls, to give a clearer picture in determining the existence
of an employer-employee relations based on an analysis of the
totality of economic circumstances of the worker.
The determination of the relationship between the

employer and the employee depends upon the circumstances
of the whole economic activity, such as:
1. The extent to which the services performed are an

integral part of the employer’s business;
2. The extent of the worker’s investment in equipment and
facilities;
3. The nature and degree of control exercised by the
employer;
4. The worker’s opportunity for profit and loss;
5. The amount of initiative, skill, judgement or foresight
required for the success of the claimed independent
enterprise;
6. The permanency and duration of the relationship
between the worker and the employer; and
7. Degree of dependency of the worker upon the employer
for his continued employment in that line of business.
Under the economic reality test, the proper standard of

economic dependence is whether the worker is dependent on
the alleged employer for his continued employment in that line
of business. The touchstone of economic reality in analyzing
possible employment relationships is dependency.
Applicability of Labor Code to Employees of GOCC’s
a. General Rule:
The labor code applies only to private sector employees

but not to public sector employees.
Private Sector Employees – Labor Code

Public Sector Employees – Civil Service Law
b. Exceptions:
Express provision of the Labor Code on Employees

Compensation and State Insurance Fund under Title II of Book
IV are made applicable to public sector employees.
APPLICABILITY OF LABOR CODE TO EMPLOYEES OF

GOVERNMENT-OWNED AND/OR CONTROLLED
CORPORATIONS
The applicability of the Labor Code depends on whether a

particular corporation has been organized with original charter
of under the Corporation Code.
If organized with original charter, the governing law is the

Civil Service Law.
If organized under the Corporation Code, the applicable

law is the Labor Code.
Employees of the government-owned and/or controlled

corporations without original charters are covered by Labor
Code while those with original charters are basically governed
by the Civil Service Law, rules and regulations.

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EMPLOYEE-EMPLOYER RELATIONSHIP

An employee refers to a person who works for an

He works for salary or wages and is compensated for his

The term employer refers to a person who employs the

Test of Employment Relationship

a. Absence of uniform test

There is no uniform test prescribed by law or

b. Four-fold test to determine employment relationship

Elements to determine the existence of employer-

1. Selection and engagement of the employee;

Selection and engagement of employee, payment of

Control test as the controlling test in determining

it is the so-called “control test” that is, whether the

EMPLOYER-EMPLOYEE RELATIONSHIP EXISTS WHERE THE

Absent the power to control the employee with respect to

In deciding the question of control, the language of the

c. Two-tiered test of employment relationship

In certain cases, the control test is not sufficient to give a

The two-tiered tests:

1. Control Test – the putative employer’s power to control

2. Economic Reality Test – the underlying economic

The need to consider the existing economic conditions

The determination of the relationship between the

1. The extent to which the services performed are an

Under the economic reality test, the proper standard of

Applicability of Labor Code to Employees of GOCC’s

The labor code applies only to private sector employees

Private Sector Employees – Labor Code

Express provision of the Labor Code on Employees

APPLICABILITY OF LABOR CODE TO EMPLOYEES OF

The applicability of the Labor Code depends on whether a

If organized with original charter, the governing law is the

If organized under the Corporation Code, the applicable

Employees of the government-owned and/or controlled

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