24. Legend Hotel v.
Realuyo
Facts: Respondent averred that he had worked as a pianist at the Legend Hotel’s Tanglaw
Restaurant from September 1992 with an initial rate of P400.00/night that was given to him after
each night’s performance; that his rate had increased to P750.00/night; and that during his
employment, he could not choose the time of performance, which had been fixed from 7:00 pm
to 10:00 pm for three to six times/week. He added that the Legend Hotel’s restaurant manager
had required him to conform with the venue’s motif; that he had been subjected to the rules on
employees’ representation checks and chits, a privilege granted to other employees; that on
July 9, 1999, the management had notified him that as a cost-cutting measure his services as a
pianist would no longer be required effective July 30, 1999; that he disputed the excuse,
insisting that Legend Hotel had been lucratively operating as of the filing of his complaint; and
that the loss of his employment made him bring his complaint.
Issues: 1. Whether or not there is ER-EE relationship.
2. Whether or not retrenchment as a ground for respondent’s dismissal is valid.
RULING 1: YES. Petitioner actually wielded the power of selection at the time it entered into the
service contract dated September 1, 1992 with respondent. This is true, notwithstanding
petitioner’s insistence that respondent had only offered his services to provide live music at
petitioner’s Tanglaw Restaurant, and despite petitioner’s position that what had really transpired
was a negotiation of his rate and time of availability. The power of selection was firmly
evidenced by, among others, the express written recommendation dated January 12, 1998 by
Christine Velazco, petitioner’s restaurant manager, for the increase of his remuneration.
Respondent’s remuneration, albeit denominated as talent fees, was still considered as included
in the term wage in the sense and context of the Labor Code, regardless of how petitioner
chose to designate the remuneration. Anent this, Article 97(f) of the Labor Code clearly 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.
That respondent worked for less than eight hours/day was of no consequence and did not
detract from the CA’s finding on the existence of the employer-employee relationship. In
providing that the “normal hours of work of any employee shall not exceed eight (8) hours a
day,” Article 83 of the Labor Code only set a maximum of number of hours as “normal hours of
work” but did not prohibit work of less than eight hours.
The power of the employer to control the work of the employee is considered the most
significant determinant of the existence of an employer-employee relationship. This is the so-
called control test, and is premised on whether the person for whom the services are performed
reserves the right to control both the end achieved and the manner and means used to achieve
that end.
A review of the records shows, however, that respondent performed his work as a pianist under
petitioner’s supervision and control. Specifically, petitioner’s control of both the end achieved
and the manner and means used to achieve that end was demonstrated by the following, to wit:
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.
RULING 2: NO. Retrenchment is one of the authorized causes for the dismissal of employees
recognized by the Labor Code. It is a management prerogative resorted to by employers to
avoid or to minimize business losses. The Court has laid down the following standards that an
employer should meet to justify retrenchment and to foil abuse, namely: (a) The expected
losses should be substantial and not merely de minimis in extent; (b) The substantial losses
apprehended must be reasonably imminent; (c) The retrenchment must be reasonably
necessary and likely to effectively prevent the expected losses; and (d) The alleged losses, if
already incurred, and the expected imminent losses sought to be forestalled must be proved by
sufficient and convincing evidence. Anent the last standard of sufficient and convincing
evidence, it ought to be pointed out that a less exacting standard of proof would render too easy
the abuse of retrenchment as a ground for termination of services of employees. In termination
cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon
the employer. Here, petitioner did not submit evidence of the losses to its business operations
and the economic havoc it would thereby imminently sustain. It only claimed that respondent’s
termination was due to its “present business/financial condition.” This bare statement fell short
of the norm to show a valid retrenchment. Hence, we hold that there was no valid cause for the
retrenchment of respondent.
