Existence of an employer-employee relationship is determined by law

Dear PAO,

May I be enlightened on how the existence of employer-employee relationships is determined or established? As between an alleged contract that says «You are not an employee» and the nature of work being rendered, which carries more weight?

Michelle

Dear Michelle,

For brevity, permit me to jointly discuss the answers to your questions for being interrelated. Having said that, please be advised that the existence of an employment relationship is determined by law and not by contract. Stated otherwise, the existence of an employer and employee relationship cannot be negated by simply repudiating the same in an employment contract.

In one case with a similar factual milieu as in your query, the Supreme Court was confronted with the question of whether a contract stipulation would be controlling in determining the existence of an employment relationship. To be concise, the pertinent terms of the aforementioned contract read:

«You are not an employee of the xxx Corporation nor does the company have any obligations toward anyone you may employ, nor any responsibility for your operating expenses or for any liability you may incur. The only rights and obligations between us are those set forth in this agreement. This agreement cannot be amended or modified in any way except with the duly authorized consent in writing of both parties' x x x.»

Ruling in the negative, the Supreme Court, in the case of Paguio v. National Labor Relations Commission (GR 147816, May 9, 2003) penned by Justice Jose Vitug, held:

«Respondent company cannot seek refuge under the terms of the agreement it has entered into with the petitioner. The law, in defining their contractual relationship, does so, not necessarily or exclusively upon the terms of their written or oral contract, but also on the basis of the nature of the work petitioner has been called upon to perform. The law affords protection to an employee, and it will not countenance any attempt to subvert its spirit and intent. A stipulation in an agreement can be ignored as and when it is utilized to deprive the employee of his security of tenure.»

In line with the foregoing case law, what dictates the presence of an