G.R. No. L-73199 October 26, 1988
DR. RENATO SARA and/or ROMEO ARANA, petitioners, vs. CERILA AGARRADO and the NATIONAL LABOR RELATIONS COMMISSION, respondents.

FACTS

Private respondent Cerila Agarrado, a former clinic attendant for petitioner Dr. Renato Sara, entered into a verbal agreement with petitioners Dr. Sara and Romeo Arana in 1977. The petitioners, who owned a rice mill and engaged in buying and selling palay and rice, agreed that Agarrado would receive a commission of P2.00 per sack of milled rice sold and 10% per kilo of palay purchased. She was to use her own funds for these transactions and was authorized to borrow money from others, subject to reimbursement by the petitioners.
In 1982, Agarrado filed a complaint with the NLRC for unpaid commissions and reimbursement for borrowed and personal funds totaling P26,397.80. The petitioners contested the Labor Arbiter’s jurisdiction, arguing no employer-employee relationship existed and that the claim was a civil obligation arising from agency. The Labor Arbiter and the NLRC ruled in favor of Agarrado, prompting this certiorari petition. The Solicitor General supported the petitioners’ jurisdictional challenge.

ISSUE

Whether the Labor Arbiter had jurisdiction over the complaint, which hinges on the existence of an employer-employee relationship between the parties.

RULING

The Supreme Court granted the petition, dismissing the case for lack of jurisdiction. The Court applied the four-fold test to determine an employer-employee relationship: (1) selection and engagement; (2) payment of wages; (3) power of dismissal; and (4) the employer’s power to control the employee’s conduct, with control being the most significant element.
The Court found that while Agarrado was engaged by the petitioners, the other requisites were absent. Her compensation was purely commission-based, dependent on sales results without any guaranteed minimum or advance. The power to terminate the arrangement was mutual. Crucially, the element of control was missing. The petitioners did not control the means and methods of Agarrado’s work; she used her own resources, was not obliged to sell purchased palay exclusively to the petitioners, worked without set hours, and could even delegate the tasks. She was not subject to the petitioners’ control except as to the final result of her work.
Therefore, Agarrado was an independent contractor, not an employee. Since the Labor Tribunal’s jurisdiction is predicated on an employer-employee relationship, its absence removed the case from the NLRC’s authority. The claim, being a civil obligation from an independent contractor agreement, properly falls within the jurisdiction of the regular courts.