EMPLOYER-EMPLOYEE RELATIONSHIP

By: Atty. Edwin E. Torres (MSU 2022)

The basis of the application of the laws and regulations concerning labor standards and labor relations is the
existence of “employer-employee relationship” (“EER” for short). Where such relationship does not obtain
between contending parties, there is no basis for the application of labor laws. The elements of the relationship
are the following:

(1) selection and engagement of the employee;

(2) payment of wages;
(3) power of dismissal; and
(4) power to control the employee's conduct – this being the most important element.

The application of these tests is difficult because there are myriads of relationships, some of which lie in the
penumbra between EER and non-EER. Some relationships are unique and cannot be fitted under standard
categories, i.e., they are sui generis or of their own kinds. The difficulty may also be on account of the
imaginativeness of lawyers in their zealous pursuit of the interests of their clients. The Supreme Court
observed:

“The question of whether an employer-employee relationship exists in a certain situation has

bedeviled the courts. Businessmen, with the aid of lawyers, have tried to avoid the bringing
about of an employer-employer relationship in some of their enterprises because that
juridical relation spawns obligations connected with workmen's compensation, social
security, medicare, minimum wage, termination pay and unionism.”1

The issue of whether or not an EER exists is essentially a question of fact. Usually, this question is
determined by an analysis of the written agreement between the parties. However, it may also be a question
of law – i.e., when it is a question as to what law is applicable to the undisputed facts. Where a written
agreement stipulates that a worker is a contractor for services and not an employee but facts outside the
contract shows otherwise, then the supposed principal could not find refuge behind the agreement entered
into with the worker. Indeed, the Supreme Court said that no particular form of evidence is required to prove
the existence of an EER. Any competent and relevant evidence to prove the relationship may be admitted.
For, if only documentary evidence would be required to show that relationship, no scheming employer would
ever be brought before the bar of justice, as no employer would wish to come out with any trace of the illegality
he has authored considering that it should take much weightier proof to invalidate a written instrument. 2

. ELEMENTS OF EMPLOYER-EMPLOYEE RELATIONSHIP

A. Selection and engagement of the employee

B. Payment of wages

Wages are defined as "remuneration or earnings, however designated, capable of being expressed in terms
of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for services rendered or to be rendered." [Labor Code, Art. 97 (f)].
That a person worked on a fixed piece-work basis is of no moment. Payment by result is a method of
compensation and does not define the essence of the relation. It is a method of computing compensation, not
a basis for determining the existence or absence of employer-employee relationship. One may be paid on the
basis of results or time expended on the work, and may or may not acquire an employment status, depending
on whether the elements of an employer-employee relationship are present or not. 3

C. Power of dismissal

D. Power to control the employee’s conduct

The fact that an insurance agent was required to solicit business exclusively for an insurance company could
not be considered as control in labor jurisprudence. Under Memo Circulars No. 2-81 and 2-85, dated December
17, 1981 and August 7, 1985, respectively, issued by the Insurance Commissioner, insurance agents are
barred from serving more than one insurance company, in order to protect the public and to enable insurance
companies to exercise exclusive supervision over their agents in their solicitation work. Thus, the exclusivity
restriction clearly springs from a regulation issued by the Insurance Commission, and not from an intention by
the insurance company to establish control over the method and manner by which the agent shall accomplish

1 Mafinco Trading Corporation vs. Ople, et al. (G.R. No. L-37790, 25 March 1976).
2 Opulencia Ice Plant and Storage, et al. vs. NLRC, et al. (G.R. No. L-98368, 15 December 1993).
3 Tan vs. Lagrama and CA (G.R. No. 151228, 15 August 2002).
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his work. This feature is not meant to change the nature of the relationship between the parties, nor does it
necessarily imbue such relationship with the quality of control envisioned by the law.

The significant factor in determining the relationship of the parties is the presence or absence of supervisory
authority to control the method and the details of performance of the service being rendered, and the degree
to which the principal may intervene to exercise such control. The presence of such power of control is
indicative of an employment relationship, while absence thereof is indicative of independent contractorship. In
other words, the test to determine the existence of independent contractorship is whether one claiming to be
an independent contractor has contracted to do the work according to his own methods and without being
subject to the control of the employer except only as to the result of the work. Such is exactly the nature of the
relationship between petitioner and private respondent.

Further, not every form of control that a party reserves to himself over the conduct of the other party in relation
to the services being rendered may be accorded the effect of establishing an employer-employee relationship.
The Supreme Court said in a case:

“Logically, the line should be drawn between rules that merely serve as guidelines towards
the achievement of the mutually desired result without dictating the means or methods to be
employed in attaining it, and those that control or fix the methodology and bind or restrict the
party hired to the use of such means. The first, which aim only to promote the result, create
no employer-employee relationship unlike the second, which address both the result and the
means used to achieve it. The distinction acquires particular relevance in the case of an
enterprise affected with public interest, as is the business of insurance, and is on that account
subject to regulation by the State with respect, not only to the relations between insurer and
insured but also to the internal affairs of the insurance company. Rules and regulations
governing the conduct of the business are provided for in the Insurance Code and enforced
by the Insurance Commissioner. It is, therefore, usual and expected for an insurance
company to promulgate a set of rules to guide its commission agents in selling its policies
that they may not run afoul of the law and what it requires or prohibits. . . . None of these
really invades the agent's contractual prerogative to adopt his own selling methods or to sell
insurance at his own time and convenience, hence cannot justifiably be said to establish an
employer-employee relationship between him and the company.”

By the nature of the business of soliciting insurance, agents are normally left free to devise ways and means
of persuading people to take out insurance. There is no prohibition for the insurance agent to work for as long
as he does not violate the Insurance Code. 4

A person who performs work for another and is subjected to its rules, regulations, and code of ethics does not
necessarily become an employee. As long as the level of control does not interfere with the means and
methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired party do not
amount to the labor law concept of control that is indicative of employer-employee relationship. The line should
be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result
without dictating the means or methods to be employed in attaining it, and those that control or fix the
methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote
the result, create no employer-employee relationship unlike the second, which address both the result and the
means used to achieve it. 5

I. PRINCIPAL AND CONTRACTOR

An “independent contractor” is not an employee and his workers are not the employees of his principal. An
independent contractor is “one who exercises independent employment and contracts to do a piece of work
according to his own methods and without being subject to control of his employer except as to the result of
the work."6 He carries on an independent business. The work performed in his business is extensive and
requires skill. He has his own premises, tools, appliances, and materials. He controls and supervises the
work. He assigns the performance of the work. His relationship with his principal is governed by a contract
which has a term and duration. Under the contract, the contractor has the power to terminate the relationship.

Whether a contractor is an independent contractor or an employee will, first of all, entail an analysis of his
contract with his principal. The leading case of Mafinco, which was decided in 1976, involved a peddlers
contract to sell and buy Cosmos products from Mafinco, the latter furnishing the delivery truck with the peddlers
selling the Cosmos products according to their own methods, subject to the pre-arranged routes, areas and
zones, and going back to the company compound to return the delivery truck and to make accounting of the
day’s sales collection. Below are the features of the peddlers contract with Mafinco:

4 AFP Mutual Benefit Association, Inc. vs. National Labor Relations Commission and Bustamante (G.R. No. 102199,
28 January 1997).
5 Royal Homes Marketing Corporation vs. Alcantara (G.R. No. 195190, 28 July 2014).
6 Op cit., Mafinco case.
 3

“Under the peddling contract, Mafinco would provide the peddler with a delivery truck to be
used in the distribution of Cosmos soft drinks (Par. 1). Should the peddler employ a driver
and helpers, he would be responsible for their compensation and social security
contributions and he should comply with applicable labor laws ‘in relation to his employees’
(Par. 2).

The peddler would be responsible for any damage to persons or property or to the truck
caused by his own acts or omissions or those of his driver and helpers (Par. 3). Mafinco
would bear the cost of gasoline and maintenance of the truck (Par. 4). The peddler would
secure at his own expense the necessary licenses and permits and bear the expenses to
be incurred in the sale of Cosmos products (Par. 5).

The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-
warehouse. Should he purchase at least 250 cases a day, he would be entitled to a peddler's
discount of eleven pesos (Par. 6). The peddler would post a cash bond in the sum of P1,500
to answer for his obligations to Mafinco (Par. 7) and another cash bond of P1,000 to answer
for his obligations to his employees (Par. 11). He should liquidate his accounts at the end of
each day (Par. 8). The contract would be effective up to May 31, 1973. Either party might
terminate it upon five days' prior notice to the other (Par. 9).”

With the above features of the contract, the Supreme Court ruled that the peddlers were not employees of
Mafinco but were independent contractors. They were distributors of Cosmos soft drinks with their own capital
and employees. Ordinarily, an employee or a mere peddler does not execute a formal contract of employment.
He is simply hired and he works under the direction and control of the employer. But in this case, the peddlers
voluntarily executed with Mafinco formal peddling contracts which indicate the manner in which they would sell
Cosmos soft drinks. That circumstance signifies that they were acting as independent businessmen. They
were free to sign or not to sign that contract. But having signed it, they were bound by its stipulations and the
consequences thereof under existing labor laws. One such stipulation is the right of the parties to terminate
the contract upon five days' prior notice (Par. 9).

In contrast to the ruling in the Mafinco case, the Supreme Court, in the Social Security System case, ruled
that a peddler of cigarettes of the Quality Tobacco Corporations is an employee of the latter on the basis of
the “control” test. The Court provided the following basis of its ruling:

“Thus, after a study of the records and applying the "control tests," there appears to be no
question that the existence of an employer-employee relationship between Romeo Carreon
and QTC has been established, based on the following "undisputed" facts as pointed out by
the Solicitor General, to wit: (a) QTC assigned a definite sales territory for Romeo Carreon;
(b) QTC provided Romeo Carreon with a delivery truck for the exclusive use of the latter in
his sales activities; (c) QTC dictated the price of the cigarettes sold by Romeo Carreon; (d)
QTC prescribed what brand of cigarettes Romeo Carreon could sell; (e) QTC determined
the persons to whom Romeo Carreon could sell, (f) QTC issued circulars and memoranda
relative to Romeo Carreon's sales activities; (g) QTC required Romeo Carreon to submit to
it daily, weekly and monthly reports; (h) QTC grounded Romeo Carreon for six months in
1966; (i) Romeo Carreon was supervised by sales coordinators of QTC; (j) Romeo Carreon
was subject to payment of damages and loss even of accrued rights for any violation of
instructions made by QTC in relation to his sales activities; and (k) Romeo Carreon was paid
an allowance by QTC. All these indicate control and supervision over Carreon's work.” 7

II. JOB CONTRACTING AND LABOR-ONLY CONTRACTING

The Labor Code makes a distinction between “job” contracting and “labor-only” contracting. Sections 8 and 9,
Rule VIII, Book III of the Omnibus Rules implementing the Labor Code set forth the distinctions between “job”
contracting and “labor-only” contracting –

Sec. 8. Job contracting - There is job contracting permissible under the Code if the following
conditions are met:

(1) The contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own manner
and method, free from control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results thereof, and

7 Social Security System vs. Court of Appeal, et al. (G.R. No. L-46058, 14 December 1987).
 4

(2) The contractor has substantial capital or investment in the form of tools,
equipments, machineries, work premises, and other materials which are necessary in
the conduct of his business.

Sec. 9. Labor-only contracting - (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipments,
machineries, work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are
directly related to the principal business or operations of the employer in which workers are
habitually employed.

In some decisions, directly related work was described by the Supreme Court as work that is an
integral part of the operations. The work of sorting out the lumber materials whether wet or fresh
kiln as to sizes and to carry them from the stockpile to the dryer where they are loaded for drying
after which they are unloaded is an integral part of the operation of the sawmill of a timber company
“without which production and company sales will suffer.”8

The importance of the distinction is that in “labor-only” contracting, the workers of the contractor are considered
the direct employees of the principal with the contractor being deemed merely as its agent. In contrast, the
workers of a “job” contractor are considered to be the employees of the contractor, not of the principal. The
employer is made by the statute responsible to the employees of the "labor only" contractor as if such employee
had been directly employed by the employer. Thus, where "labor-only" contracting exists in a given case, the
statute itself implies or establishes an employer-employee relationship between the employer (the owner of
the project) and the employees of the "labor-only" contractor, this time for a comprehensive purpose: "employer
for purposes of this Code, to prevent any violation or circumvention of any provision of this Code." The law in
effect holds both the employer and the “labor-only” contractor are responsible to the latter's employees for the
more effective safeguarding of the employees' rights under the Labor Code.

III. COLLECTING AGENTS

The nature of the relationship between a company and its collecting agents depends on the circumstances of
each particular relationship. Not all collecting agents are employees and neither are all collecting agents
independent contractors. The collectors could fall under either category depending on the facts of each case.
In the Singer Sewing Machine case, the Supreme Court found the collecting agents of Singer Sewing
Machine Company to be independent contractors rather than employees on the basis of the following facts:

“1. The collection agents are not required to observe office hours or report to Singer's
office everyday except, naturally and necessarily, for the purpose of remitting their
collections.

2. The collection agents do not have to devote their time exclusively for SINGER. There
is no prohibition on the part of the collection agents from working elsewhere. Nor are
these agents required to account for their time and submit a record of their activity.

3. The manner and method of effecting collections are left solely to the discretion of the
collection agents without any interference on the part of Singer.

4. The collection agents shoulder their transportation expenses incurred in the

collections of the accounts assigned to them.

5. The collection agents are paid strictly on commission basis. The amounts paid to them
are based solely on the amounts of collection each of them make. They do not receive
any commission if they do not effect any collection even if they put a lot of effort in
collecting. They are paid commission on the basis of actual collections.

6. The commissions earned by the collection agents are directly deducted by them from
the amount of collections they are able to effect. The net amount is what is then
remitted to Singer."

The Court observed that the agreement between the parties refers to the collecting agents as independent
contractors; that it did not fix an amount for wages nor the required working hours as compensation is earned

8 Ecal, et al. vs. NLRC, et al. (G.R. Nos. 92777-78, 13 March 1991).
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only on the basis of the tangible results produced, i.e., total collections made; and that the collecting agents
do their work "more or less at his own pleasure" without a regular daily time frame imposed on them. In other
words, the control of the work by Singer is only as to the result, not as to the means and methods of work. 9

IV. PERFORMER’S WORK

A pianist at a hotel restaurant performed in September 1992 with an initial rate of P400.00/night that was given
to him after each night’s performance. His rate had increased to P750.00/night. His performance was fixed
from 7:00 pm to 10:00 pm for three to six times/week. In June 1999, as a cost-cutting measure, he was notified
that his service as pianist was not anymore required. The Supreme Court ruled that the pianist was an
employee on the basis of the following observations: First, the hotel actually wielded the power of selection at
the time it entered into the service contract with respondent. The power of selection was firmly evidenced by,
among others, the express written recommendation dated January 12, 1998 by the manager for the increase
of his remuneration. Second, the pianist was paid P400.00 per three hours of performance from 7:00 pm to
10:00 pm, three to six nights a week. Such rate of remuneration was later increased to P750.00 upon
restaurant manager Velazco’s recommendation. Although denominated as “talent fee,” his remuneration is still
considered as “wage” in the sense and context Article 97(f) of the Labor Code which states:

“xxx wage paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or ascertained on
a time, task, piece, or commission basis, or other method of calculating the same, which is
payable by an employer to an employee under a written or unwritten contract of employment
for work done or to be done, or for services rendered or to be rendered, and includes the
fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or
other facilities customarily furnished by the employer to the employee.”

Third, the hotel had the power to control the pianist’s work both with respect to the end to be achieved and the
manner and means used to achieve the end as demonstrated by the following:

a. He could not choose the time of his performance, which petitioners had fixed from
7:00 pm to 10:00 pm, three to six times a week;

b. He could not choose the place of his performance;

c. The restaurant’s manager required him at certain times to perform only Tagalog songs
or music, or to wear barong Tagalog to conform to the Filipiniana motif; and

d. He was subjected to the rules on employees’ representation check and chits, a

privilege granted to other employees.

Relevantly, it is worth remembering that the employer need not actually supervise the performance of duties
by the employee, for it sufficed that the employer has the right to wield that power. Fourth, the memorandum
informing the pianist of the discontinuance of his service because of the present business or financial condition
of the hotel showed that the latter had the power to dismiss him from employment. 10

V. CONCESSIONAIRE AGREEMENT:

Bodega City (Video-Disco Kitchen of the Philippines) terminated the concessionaire agreement with an
individual as a “lady keeper” who acted in a hostile manner against a lady customer. Filing a case of illegal
dismissal, the Court ruled that the “lady keeper” was not an employee. The Court observed that the
concessionaire agreement merely stated that keeper shall maintain the cleanliness of the ladies' comfort room
and observe courtesy guidelines that would help her obtain the results they wanted to achieve. There is nothing
in the agreement which specifies the methods by which keeper should achieve these results. Bodega City did
not indicate the manner in which she should go about in maintaining the cleanliness of the ladies' comfort
room. Neither did it determine the means and methods by which keeper could ensure the satisfaction of the
company's customers. In other words, the keeper was given a free hand as to how she would perform her job
as a "lady keeper." In fact, the last paragraph of the concessionaire agreement even allowed the keeper to
engage persons to work with or assist her in the discharge of her functions. Moreover, the keeper was not
subjected to definite hours or conditions of work. The fact that she was expected to maintain the cleanliness
of respondent company's ladies' comfort room during Bodega City's operating hours does not indicate that her
performance of her job was subject to the control of the company as to make her an employee of the latter.
Instead, the requirement that she had to render her services while Bodega City was open for business was

9 Singer Sewing Machine Company vs. Drilon, et al. (G.R. No. 91307, 24 January 1991).
10 Legend Hotel (Manila) vs. Realuyo (G.R. No. 153511, 18 July 2012).
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dictated simply by the very nature of her undertaking, which was to give assistance to the users of the ladies'
comfort room.11

VI. BUY-AND-SELL ON COMMISSION BASIS

A complainant filed a money claim before the NLRC against owners of a rice mill for earned commissions. The
Court ruled that there is no EER between the parties. While there was a selection and engagement of
complainant in 1977, the verbal agreement between the parties negated the existence of the other requisites.
As to the payment of wages, the verbal agreement entered into by the parties stipulated that complainant
would be paid a commission of P2.00 per sack of milled rice sold as well as a 10% commission on palay
purchased. The arrangement thus was explicitly on a commission basis dependent on the volume of sale or
purchase. Complainant was not guaranteed any minimum compensation nor was she allowed any drawing
account or advance of any kind against unearned commissions. Her right to compensation depended upon
and was measured by the tangible results she produced the quantity of rice sold and the quantity of palay
purchased. The power to terminate the relationship was mutually vested upon the parties. Either may
terminate the business arrangement at will, with or without cause. Finally, noticeably absent from the
agreement between the parties is the element of control. Among the four (4) requisites, control is deemed the
most important that the other requisites may even be disregarded. The means and methods of purchasing
and selling rice or palay by private respondent were totally independent of petitioners' control. Complainant
was never given capital by her supposed employer but relied on her own resources and if insufficient, she
borrowed money from others. The owners did not supply complainant with tools and appliances needed to
enable her to carry her undertaking, except to authorize her to borrow money from others, subject to
reimbursement.12

VII. PARTNER IN TRADE

17 shoe shiners of an establishment (BESA) organized a union which filed a petition for certification election.
The Court ruled that EER does not exist as basis for a certification election. The Court observed that a shoe
shiner is distinct from a piece worker because while the latter is paid for work accomplished, he does not,
however, contribute anything to the capital of the employer other than his service. It is the employer of the
piece worker who pays his wages, while the shoe shiner in this instance is paid directly by his customer. The
piece worker is paid for work accomplished without regard or concern to the profit as derived by his employer,
but in the case of the shoe shiners, the proceeds derived from the trade are always divided share and share
alike with BESA. The shoe shiner can take his share of the proceeds everyday if he wanted to or weekly as is
the practice. The employer of the piece worker supervises and controls his work, but in the case of the shoe
shiner, BESA does not exercise any degree of control or supervision over their person and their work. All
these are not obtaining in the case of a piece worker as he is in fact an employee in contemplation of law,
distinct from the shoe shiner in this instance who, in relation to BESA, is a partner in the trade. 13

VIII. COMMISSION SALES AGENTS

Shriro, a distributor of sewing machines, has contracted the services of a great number of commission sales
agents, was informed by SSS examiners that these agents were regarded by the System as falling in the
category of "employees," and, therefore, premium contributions, both employer's and employees', were due
on them. Shriro took issue that its commission sales agents are not employees. The SSS ruled that the agents
are employees under the “control” test. It considered that the power of Shriro to terminate its contract with its
commission agents and its reserved right to approve or reject a sales order are manifestations of control over
the conduct of these agents. It considered that while this form of control does not go directly into the details of
the methods utilized by each agent in pursuance of his work, the same is nevertheless potentially present and
can be exercised in every instance where Shriro is not satisfied with the performance of its commission agents.
However, the Supreme Court ruled that there is no EER. There is a distinction between control over the means
and methods used by a person in his work, on the one hand, and control over the result of that work, on the
other. The commission agents contracted by Shriro are admittedly at full liberty to devise means and ways of
persuading people to make out sales orders for Shriro's products. A signed sales order is the result of an
agent's sales efforts. When Shriro approves or rejects this sales order, what is approved or rejected is the
result of the agent's work, not the means and methods employed by him. And because Shriro does not
supervise the details of how a sale should be made, it cannot be said that when it terminates the contract of
an agent it is on account of discipline imposed to check the means and methods employed by that agent in his
work.14

IX. JOINT FISHING VENTURE

In the Pajarillo case, the pilots of a fishing boat are not under the orders of the boat-owners as regards their
employment. They go out to sea not upon direction of the boat-owners, but upon their own volition as to when,

11 Lopez vs. Bodega City (G.R. No. 155731, 3 September 2007).

12 Sara and Arana vs. Agarrado and NLRC (G.R. No. 73199, 26 October 1988).
13 Besa vs. Trajano, et al. (G.R. No. 72409, 29 December 1986).
14 Social Security System vs. Court of Appeals and Shriro (G.R. No. L-23483, 24 February 1971).
 7

how long and where to go fishing. Much less do the boat-owners in any way control the crew-members with
whom the former have no relationship whatsoever. These crew-members simply join every trip for which the
pilots allow them, without any reference to the owners of the vessel. Neither the pilots nor the crew-members
receive compensation from the boat-owners. They only share in their own catch produced by their own efforts.
There is no showing that outside of their one-third share, the boat-owners have anything to do with the
distribution of the rest of the catch among the pilots and the crew-members. The latter perform no service for
the boat-owners, but mainly for their own benefit. The boat-owners obviously are not responsible for the wage,
salary, or fee of the pilot and crew-members. Their sole participation in the venture is the furnishing or delivery
of the equipment used for fishing, after which, they merely wait for the boat's return and receive their share in
the catch, if there is any. For this part, a person who joins the outfit is entitled to a share or participation in the
fruit of the fishing trip. If it gives no return, the men get nothing. The undertaking then is in the nature of a joint
venture, with the boat-owner supplying the boat and its equipments, and the pilot and crew-members
contributing the necessary labor, and the parties getting specific shares for their respective contributions. 15

However, in the Ruga case, the conduct of the fishing operations was under the control and supervision of the
company’s operations manager. Matters dealing on the fixing of the schedule of the fishing trip and the time
to return to the fishing port were shown to be the prerogative of the company. While performing the fishing
operations, the fishermen received instructions via a single-side band radio from the operations manager who
called the patron/pilot in the morning. They are told to report their activities, their position, and the number of
tubes of fish-catch in one day. The fishermen were directly hired by the company. They received
compensation on a percentage commission based on the gross sale of the fish-catch, i.e. 13% of the proceeds
of the sale if the total proceeds exceeded the cost of the crude oil consumed during the fishing trip, otherwise
only 10% of the proceeds of the sale. Such compensation falls within the scope and meaning of the term
"wage" as defined under Article 97(f) of the Labor Code. When the company did not allow them to board their
boats on mere suspicion that they sold their fish catch at sea unmistakably reveals the disciplinary power
exercised by it over them and the corresponding sanction imposed in case of violation of any of its rules and
regulations. Hence, there is EER existing between the parties. A joint-venture, including partnership,
presupposes generally a parity of standing between the joint co-venturers or partners, in which each party has
an equal proprietary interest in the capital or property contributed and where each party exercises equal lights
in the conduct of the business. It would be inconsistent with the principle of parity of standing between the
joint co-venturers as regards the conduct of business, if the company would outrightly exclude petitioners from
the conduct of the business without first resorting to other measures consistent with the nature of a joint-
venture undertaking, Instead of arbitrary unilateral action, the company should have discussed with an open
mind the advantages and disadvantages of petitioners' action with its joint co-venturers if indeed there is a
"joint fishing venture" between the parties.16

X. BOUNDARY SYSTEM

The relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of
employer-employee and not of lessor-lessee because in the lease of chattels the lessor loses complete control
over the chattel leased although the lessee cannot be reckless in the use thereof, otherwise he would be
responsible for the damages to the lessor. In the case of jeepney owners/operators and jeepney drivers, the
former exercises supervision and control over the latter. The fact that the drivers do not receive fixed wages
but get only that in excess of the so-called “boundary” they pay to the owner/operator is not sufficient to
withdraw the relationship between them from that of employer and employee. 17

15 Pajarillo, et al. vs. Social Security System (G.R. No. L-21930, 31 August 1966).
16 Ruga, et al. vs. NLRC, et al. (G.R. L-72654, 22 January 1990).
17 Ibid.