Investment Planning Corp

vs.
SSS
G.R. No. L-19124 November 18, 1967
By Richard Troy A. Colmenares
USA College of Law
Start: 6/27/14 12:05:33 AM
Finish: 6/27/14 12:48:29 AM
Nature of the Case
A petition for review to resolve whether agents who sell investment plans classified as registered representatives are employees within the
coverage of the Social Security Act.


Facts
Petitioner-appellant is engaged in the business of management and sale of securities, under which they have two classes of agents who sell
investment plans: (1) salaried employees with definite hours of work and under control and supervision of the company; (2) registered
representatives who work on commission basis. Petitioner sought exemption of its registered representatives from compulsory coverage of
the Social Security Act from the Social Security Commission, but the same was denied on application and a motion for reconsideration.
Thus, this petition for review.

Issue(s)
(1). Is there employer-employee (E2e) relationship between the registered representatives and the petitioner within the scope of the
Social Security Act?

Held
(1). No, for the following reasons: (1) status of registered representatives is that of an independent contractor; (2) control test does not
apply.

The registered representatives status approximates that of an independent contractor. Their rights for compensation is dependent
upon the tangible results they produce.

On the other hand, the economic reality test, which the US relied for some time, was applied in certain cases since their social
security law does not define what an employee is. However, this test was abandoned since it was contrary to the intention of
Congress, and was thus subsequently amended accordingly. The US court thus interpreted the act of congress ruling that in order
to test if such relationship exists is through identification of the common-law principles as to tests of independent contractors. Under
this principle, the controlling factor in identifying the relationship between the parties is the absence or presence of a supervisory
power to control the method and detail of the performance of ones service, the degree to which the principal may intervene to
exercise such control the presence of such power to control being indicative of an employment relationship and the absence
thereof indicative of a relationship of that of an independent contractor. Simply stated, the work of an independent contractor as
according to his own methods and the degree of control of employer is only as regards to the result of the work. These American
decisions have a persuasive force for the Philippine version of an employee is similar to that of the US version, the same being
patterned from the latter.

An examination of the contract between the parties disclose that the element of control is absent. The fact that on certain causes
the registered representatives may be terminated has no direct bearing to the means and methods employed by the
representatives.