La Suerte v.

Director of BLR (123 SCRA 679) (Roxas)

Facts : on April 7, 1979, the La Suerte Cigar and Cigarette Factory Provincial (Luzon) and Metro
Manila Sales Force Association (local union) applied for and was granted chapter status by the
National Association of Trade Unions (as NATU). On April 16, 1979, some thirty-one (31) local
union members signed a joint letter withdrawing their membership from NATU the local union
and NATU filed a petition for direct certification or certification election which alleged among
others, that forty-eight of the sixty sales personnel of the Company were members of the local
union; that the petition is supported by no less than 75% of the sales force; that there is no
existing recognized labor union in the Company representing the said sales personnel; that
there is likewise no existing collecting bargaining agreement; and that there had been no
certification election in the last twelve months preceding the filing of the petition.
The Company then filed a motion to dismiss the petition on the ground that it is not supported by
at least 30% of the members of the proposed bargaining unit because (a) of the alleged
forty-eight (48) members of the local union, thirty-one (31) had withdrawn prior to the filing of the
petition; and (b) fourteen (14) of the alleged members of the union were not employees of the
Company but were independent contractors.
NATU and the local union opposed the Company's motion to dismiss alleging that the fourteen
dealers are actually employees of the Company because they are subject to its control and
supervision.
On August 1979, the Med-Arbiter issued an order dismissing the petition for lack of merit as the
fourteen dealers who joined the union should not be counted in determining the 30% consent
requirement because they are not employees but independent contractors and the withdrawal of
the 31 salesmen from the union prior to the filing of the petition for certification election was
uncontroverted by the parties.
Thereafter, the local union filed a motion for reconsideration and/or appeal from the order of
dismissal arguing that the finding that no employer-employee relationship exists between the
alleged dealers and respondent firm, the med-arbiter decided in a manner not in accord with the
factual circumstances attendant to the relationship.
The Director of the Bureau of Labor Relations reversed and set aside the order of dismissal.
The Company then filed a motion to set aside to Director of the Bureau of Labor Relations. On
November 1980, the Director of the Bureau of Labor Relations denied the Company's motion for
reconsideration and directing that the certification election be conducted immediately. Hence,
this petition.
Issue: Whether employer-employee relationship exists
Ruling: No, there is no employer-employee relationship. The Court found that the status
thereby created is one of independent contractorship, pursuant to the first rule in the
interpretation of contracts that the literal meaning of the stipulations shall control. ". Nothing in
the terms and conditions reveals that the dealers were engaged as employees. On the basis of
the clear terms of the dealership agreements, no mention is made of the wages of the
dealers. In fact, it specifies that the dealer shall not receive any commission from the
factory but the latter shall give the dealer a discount for all sales either on consignment
or in cash. Considering the foregoing, the dealer's discount lacks the foregoing
characteristics of the term "wage". Since it varies from month to month depending on the
volume of the sales, it lacks the characteristic of periodicity in the manner and procedure
contemplated in the Minimum Wage Law.
Jurisprudence states that the tests for determining the existence of employer-employee
relationship. — In determining the existence of employer-employee relationship, the following:
elements are generally considered, namely: (1) the selection and engagement of the employee;
(2) the payment of wages; (3) the power of dismissal; and (4) the power to control the
employees' conduct - although the latter is the most important element
From the plain language of the Dealership Agreement, The Court find that the same is premised
with the prefatory statement "the factory has accepted the application of (name of applicant) and
therefore has appointed him as one of its dealers." Its terms and conditions include the
following: that the dealer shall handle the products in accordance with existing laws and
regulations of the government; that the dealer shall send his orders to the factory plant in cash
in any amount or on credit up to the amount of not more than P10,000.00 only at any given time;
that the factory shall supply the dealer with a truck or a panel delivery and all expenses for
repairs shall be borne by the factory; and that the dealer shall not receive any commission but
shall be given a discount for all sales and said discount shall be decided by the factory from
time to time, It also provides that the dealer alone shall be responsible for any violation of any
law; that the dealer shall be assigned to a particular territory which the factory may decide from
time to time; that the dealer shall sell the products at the price to be agreed upon between the
parties; and that the dealer shall post a surety bond of not less than P10,000.00 to guarantee
and secure complete and faithful performance.
Either party may terminate the contract without cause by giving 15 days’ notice in writing;
however, in the event of breach or failure to comply with any of the conditions, the factory may
terminate or rescind the contract immediately (par. 9 and 10). The Dealership Supplementary
Agreement reiterates that the Company "hereby constitute and appoints the DEALER as its
authorized dealer for the sale and distribution of the COMPANY products" and "the DEALER
hereby accepts such appointment". It is likewise immediately noticeable that no such words as
"to hire and employ" are present. The Dealership Agreement uses the words "the factory has
accepted the application of (name of applicant) and therefore has appointed him as one of its
dealers"; whereas the Dealership Supplementary Agreement is prefaced with the statement:
"For and in consideration of the mutual covenants and agreements made herein, by one to the
other, the COMPANY and the DEALER by these presents, enter into this Supplementary
Agreement whereby the COMPANY will avail of the services of the DEALER to handle the sale
and distribution of the cigarette products". Nothing in the terms and conditions likewise reveals
that the dealers were engaged as employees. Again, on the basis of the clear terms of the
dealership agreements, no mention is made of the wages of the dealers. In fact, it
specifies that the dealer shall not receive any commission from the factory but the latter
shall give the dealer a discount for all sales either on consignment or in cash. The law
provides that such "wages" must be paid to them periodically at least once every two
weeks or twice a month. Considering the foregoing, the dealer's discount lacks the
foregoing characteristics of the term "wage". Since it varies from month to month
depending on the volume of the sales, it lacks the characteristic of periodicity in the
manner and procedure contemplated in the Minimum Wage Law.
On the issue — whether or not the withdrawal of 31 union members from NATU affected the
petition for certification election insofar as the 30% requirement is concerned, We reserve the
order of the respondent Director of the Bureau of Labor Relations, it appearing undisputably that
the 31 union members had withdrawn their support to the petition before the filing of said
petition. It would be otherwise if the withdrawal was made after the filing of the petition for it
would then be presumed that the withdrawal was not free and voluntary. The presumption would
arise that the withdrawal was procured through duress, coercion or for valuable consideration.
In other words, the distinction must be that withdrawals made before the filing of the petition are
presumed voluntary unless there is convincing proof to the contrary, whereas withdrawals made
after the filing of the petition are deemed involuntary.
The reason for such distinction is that if the withdrawal or retraction is made before the filing of
the petition, the names of employees supporting the petition are supposed to be held secret to
the opposite party. When the withdrawal or retraction is made after the petition is filed, the
employees who are supporting the petition become known to the opposite party since their
names are attached to the petition at the time of 􀀀ling. Therefore, it would not be unexpected
that the opposite party would use foul means for the subject employees to withdrawal their
support.
In recapitulation, the hold and rule that the 14 members of respondent local union are dealers or
independent contractors. They are not employees of petitioner company. With the withdrawal by
31 members of their support to the petition prior to or before the filing thereof, making a total of
45, the remainder of 3 out of the 48 alleged to have supported the petition can hardly be said to
represent the union. Hence, the dismissal of the petition by the Med-Arbiter was correct and
justified.