ENCYCLOPEDIA BRITANNICA (Philippines), INC. vs.

NLRC
[264 SCRA 4]

Facts:

Limjoco was a Sales Divison of Encyclopaedia Britannica and was in charge of

selling the products through some sales representatives. As compensation, he would
receive commissions from the products sold by his agents. He was also allowed to use
the petitioner’s name, goodwill and logo. It was agreed that office expenses would be
deducted from Limjoco’s commissions.

In 1974, Limjoco resigned to pursue his private business and filed a complaint
against petitioner for alleged non-payment of separation pay and other benefits and also
illegal deduction from sales commissions. Petitioner alleged that Limjoco was not an
employee of the company but an independent dealer authorized to promote and sell its
products and in return, received commissions therein. Petitioner also claims that it had
no control and supervision over the complainant as to the manners and means he
conducted his business operations. Limjoco maintained otherwise. He alleged he was
hired by the petitioner and was assigned in the sales department.

The Labor Arbiter ruled that Limjoco was an employee of the company. NLRC
also affirmed the decision and opined that there was no evidence supporting allegation
that Limjoco was an independent contractor or dealer.

Issue:

Whether or not there was an employee-employer relationship between the

parties.

SC Ruling:

There was no employee-employer relationship. In determining the relationship,

the following elements must be present: selection and engagement of the employee,
payment of wages, power of dismissal and power to control the employee’s conduct.
The power of control is commonly regarded as the most crucial and determinative
indicator of the presence or absence of an employee-employer relationship. Under the
control test, an employee-employer relationship exists where the person for whom the
services are performed reserves a right to control not only the end to be achieved, but
also the manner and means to be employed in reaching that end.

The issuance of guidelines by the petitioner was merely guidelines on company

policies which sales managers follow and impose on their respective agents. Limjoco
was not an employee of the company since he had the free rein in the means and
methods for conducting the marketing operations. He was merely an agent or an
independent dealer of the petitioner. He was free to conduct his work and he was free to
engage in other means of livelihood.

In ascertaining the employee-employer relationship, the factual circumstances

must be considered. The element of control is absent where a person who works for
another does so more or less at his own pleasure and is not subject to definite hours or
conditions of work, and in turn is compensated in according to the result of his efforts
and not the amount thereof. Hence, there was no employee-employer relationship.