G.R. No. 266552 , January 22, 2024
RICO B. ESCAURIAGA, CRISTINE DELA CRUZ, RENE B. SEVERINO, RALPH ERROL MERCADO, AND GERALDINE GUEVARRA, PETITIONERS, VS. FITNESS FIRST, PHIL., INC., AND LIBERTY CRUZ, RESPONDENTS.

FACTS

Petitioners were initially hired by respondent Fitness First as fitness instructors. On different dates, they were reclassified as “freelance personal trainers” under successive agreements. Under this new arrangement, they were paid on a commission basis with a guaranteed minimum monthly salary, were not required to observe fixed working hours, but were mandated to meet a monthly sales quota and conduct a minimum of 90 training hours. Failure to meet these targets could result in salary deductions or disciplinary action. In 2017, Fitness First required them to register as independent professionals with the BIR pursuant to Revenue Regulation No. 4-2014, offering a 3% commission increase for compliance and threatening termination for non-compliance. Petitioners refused, believing they were regular employees, and were subsequently not renewed. They filed a complaint for illegal dismissal and regularization.
Respondents contended that petitioners were independent contractors. They argued that the freelance arrangement, which petitioners voluntarily entered and renewed for years, allowed for flexible hours and higher commissions based on performance. Respondents distinguished them from regular fitness instructors who had fixed schedules and duties. They also emphasized that petitioners were responsible for their own tax remittances and SSS contributions.

ISSUE

Whether an employer-employee relationship existed between petitioners and Fitness First, making petitioners regular employees who were illegally dismissed.

RULING

No. The Supreme Court affirmed the findings of the Court of Appeals and the NLRC that petitioners were independent contractors, not employees. The Court applied the four-fold test for employment: (1) selection and engagement; (2) payment of wages; (3) power of dismissal; and (4) power of control, with control being the most determinative factor.
The Court found that the element of control was lacking. The agreements and actual practice showed that petitioners were not under the direct control and supervision of Fitness First regarding the means and methods of their work. As freelance trainers, they enjoyed considerable independence: they controlled their own time, scheduled their own training sessions with clients, and were not required to report at a specific time or place daily. Their primary obligation was to meet the output quotas (sales and training hours), not to follow a rigid work schedule. While Fitness First set house rules for client interaction and facility use, these were merely general guidelines to ensure order and did not constitute the control over performance details indicative of an employment relationship. Their compensation, heavily based on commissions with a guaranteed minimum, was tied to output, not to time rendered. The successive renewals of their freelance contracts and their responsibility for their own tax obligations further supported their status as independent contractors. Consequently, there was no illegal dismissal as there was no employer-employee relationship to terminate.