G.R. No. L-43825 May 9, 1988
CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE T. COLLADO and RODITO NASAYAO, respondents.

FACTS

Private respondent Rodito Nasayao filed a complaint with the NLRC for recovery of unpaid salaries, claiming he was appointed plant manager of petitioner Continental Marble Corporation in May 1974 with a compensation of P3,000.00 monthly or 25% of the company’s monthly net income, whichever was greater. He alleged non-payment for May to July 1974. Petitioners denied the existence of an employer-employee relationship, contending the agreement was a joint venture or partnership wherein Nasayao would maintain machinery and secure contracts, receiving 25% of net profits only if any were realized. They asserted there were no profits during the period in question.
The case was submitted to voluntary arbitrator Jose T. Collado, whom petitioners later challenged for alleged bias, requesting he desist from hearing the case. The arbitrator proceeded and rendered a decision ordering petitioners to pay Nasayao P9,000.00. Petitioners appealed to the NLRC, which dismissed the appeal, ruling that a voluntary arbitrator’s decision is final, unappealable, and immediately executory under the Labor Code. This prompted the petitioners to elevate the case to the Supreme Court via a petition for certiorari.

ISSUE

The primary issue is whether an employer-employee relationship existed between petitioners and Nasayao, which would determine his entitlement to the claimed fixed monthly salary.

RULING

The Supreme Court reversed the decisions of the arbitrator and the NLRC, dismissing Nasayao’s complaint. The legal logic centered on the application of the “control test” to determine the existence of an employer-employee relationship. The Court enumerated the four generally considered elements: (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) the employer’s power to control the employee with respect to the means and methods of work. Among these, the control test is the most important.
The Court found that petitioners lacked control over Nasayao’s conduct and performance. He worked at his own pleasure, was not subject to definite hours or conditions, and was to be compensated based on the results of his efforts. He had a free hand in running the business, exemplified by his unilateral collection of old accounts receivables for personal use without petitioners’ knowledge. This absence of control negated an employer-employee relationship. Consequently, there was no basis for an award of unpaid salaries under labor laws. The arrangement was more akin to a profit-sharing joint venture. The Court also clarified that while voluntary arbitrator awards are generally final, they are still subject to judicial review for grave abuse of discretion or errors of law, as established in prior jurisprudence.