G.R. No. 146989. February 7, 2007.
MELENCIO GABRIEL, represented by surviving spouse, FLORDELIZA V. GABRIEL, Petitioner, vs. NELSON BILON, ANGEL BRAZIL AND ERNESTO PAGAYGAY, Respondents.

FACTS

Petitioner Melencio Gabriel was the owner-operator of “Gabriel Jeepney,” with a fleet of 54 jeepneys. Respondents Nelson Bilon, Angel Brazil, and Ernesto Pagaygay were drivers in his pool, operating under a “boundary system” where they remitted ₱400 daily. They alleged they were regular employees, having driven for petitioner for several years. They claimed that on April 30, 1995, petitioner told them not to drive anymore, and they were subsequently not given units, constituting illegal dismissal. They also complained of illegal daily deductions for police protection, washing, deposit, and garage fees.
Petitioner denied dismissing the respondents, contending they merely stopped reporting for work. He argued that drivers under the boundary system were not employees but lessees of the vehicles. He also claimed any deductions were for the repayment of cash advances made to the drivers. The Labor Arbiter ruled in favor of the respondents, finding illegal dismissal and awarding backwages and separation pay. The National Labor Relations Commission (NLRC) reversed, dismissing the complaint. The Court of Appeals then reinstated the Labor Arbiter’s finding of illegal dismissal but modified the remedy to reinstatement without loss of seniority rights.

ISSUE

The core issue is whether an employer-employee relationship existed between petitioner and the respondents, making the latter entitled to security of tenure and protection against illegal dismissal.

RULING

The Supreme Court affirmed the Court of Appeals, ruling that an employer-employee relationship existed and that respondents were illegally dismissed. The Court applied the four-fold test: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s conduct, which is the most important element. The “boundary system” is not indicative of an independent lease arrangement. The fact that petitioner prescribed the route, the manner of driving, and the remittance of a fixed daily boundary demonstrated his control over the means and methods of the respondents’ work. The system was merely a method of wage computation.
Since an employer-employee relationship was established, respondents were regular employees entitled to security of tenure. Petitioner failed to prove any valid or authorized cause for termination under the Labor Code. His mere denial that respondents were dismissed, without substantiation, did not overcome the presumption that the dismissal was illegal. The burden of proof rests on the employer to show just cause and observance of due process, which petitioner failed to discharge. Consequently, the dismissal was illegal. The Court upheld the appellate court’s order of reinstatement with full backwages.