G.R. No. 129315 ; October 2, 2000
Osias I. Corporal, Sr., et al., petitioners, vs. National Labor Relations Commission, Lao Enteng Company, Inc. and/or Trinidad Lao Ong, respondents.

FACTS

Petitioners, five barbers and two manicurists, worked at the New Look Barber Shop owned by private respondent Lao Enteng Co. Inc. They were informed on April 15, 1995, that the building housing the shop had been sold and their services were no longer needed. Consequently, they filed a complaint for illegal dismissal, separation pay, 13th month pay, and other monetary claims. They argued they were regular employees, having worked continuously for the company, which had taken over the business from a prior single proprietorship.
Private respondents contended no employer-employee relationship existed, asserting petitioners were joint venture partners who received a 50-60% commission from customer payments and operated with significant autonomy. They claimed the barber shop was closed due to serious business losses. The Labor Arbiter and the NLRC dismissed the complaint, finding petitioners were independent contractors, not employees, as the owner’s control was limited to profit-sharing based on customer count, and petitioners provided their own tools and skills.

ISSUE

Whether the NLRC committed grave abuse of discretion in ruling that no employer-employee relationship existed between petitioners and private respondents.

RULING

Yes. The Supreme Court granted the petition, finding the NLRC’s ruling constituted grave abuse of discretion. The Court applied the four-fold test for employment: selection and engagement of employees, payment of wages, power of dismissal, and power of control. The critical element of control was present. Private respondents owned the workplace, provided utilities, and imposed specific rules such as operating hours, service rates, and a mandatory daily fee for a sweeper. The fact that petitioners received a percentage of the gross receipts is a method of wage payment and does not negate employment. The arrangement where the owner provides the workplace and the workers provide labor is characteristic of the barber shop industry but does not automatically create a joint venture.
The Court held petitioners were regular employees entitled to security of tenure. Their dismissal due to the sale of the building constituted an unauthorized closure, making it illegal. Consequently, they are entitled to separation pay equivalent to one month’s pay for every year of service, computed based on the prevailing minimum wage at the time of termination, and to 13th month pay. However, other claims for damages and attorney’s fees were denied for lack of basis. The NLRC resolutions were set aside.