SC: Dismissed Lazada riders not independent contractors but regular employees

The Supreme Court (SC) has ruled that the riders who were hired as “independent contractors” in 2016 by e-commerce firm Lazada were illegally dismissed from their status as regular employees.

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The SC made the ruling in a decision penned by senior associate justice Marvic M.V.F. Leonen, granting the petition of Chrisden Cabrera Ditiangkin, Hendrix Masamayor Molines, Harvey Mosquito Juanio, Joselito Castro Verde, and Brian Anthony Cubacub Nabong.

The petition challenged the rulings of the National Labor Relations Commission (NLRC) and the Court of Appeals (CA) which found that there was no employer-employee relationship between the petitioners and Lazada.

The court ordered Lazada to reinstate the petitioners to their former positions as Lazada riders, with full backwages computed from the time of dismissal up to the time of actual reinstatement. The case was also ordered remanded to the Labor Arbiter for the computation of the total monetary benefits due the petitioners.

In 2016, the petitioners were hired by Lazada as riders primarily tasked to pick up items from sellers and deliver them to Lazada’s warehouse with P1,200 each per day as service fee, for one year. These were embodied in a contract titled “Independent Contractor Agreement”.

In 2017, the petitioners found they were removed from their usual routes and would no longer be given any schedules. This prompted them to file a complaint against Lazada before the NLRC for illegal dismissal.

The Labor Arbiter dismissed their complaint on the ground that the petitioners were not regular employees of Lazada. This was upheld by the NLRC and the CA.

In ruling in favor of the petitioners, the SC found that Lazada failed to discharge its burden of proving that the former were independent contractors rather than regular employees.

The High Court applied a two-tiered test to determine whether an employer-employee relationship existed between Lazada and the petitioners: the four-fold test and the economic-dependence test.

Under the four-fold test, four factors must be proven: (a) the employer’s selection and engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and (d) the power to control the employee’s conduct, the most important factor.

When the control test is insufficient, the economic realities of the employment are considered to get a comprehensive assessment of the classification of the worker and determine if the employee is dependent on the employer for his continued employment in that line of business.

In the case of the petitioners, the court found that all four factors in the four-fold test were present.

First, petitioners were directly employed by Lazada as evidenced by the contracts they signed.

Second, as indicated in the contract, they received their salaries from Lazada which paid each of them the amount of P1,200.00 for each day of service.

Third, Lazada had the power to dismiss the petitioners. In their contract, Lazada could immediately terminate the agreement if there was a breach of material provisions of the contract.

Finally, Lazada had control over the means and methods of the performance of the work of the petitioners, as reflected in the way they carried out their work.

Lazada required the accomplishment of a route sheet which kept track of the arrival, departure, and unloading time of the items. The petitioners also risked a penalty of P500.00 if an item was lost, on top of its actual value. They were also required to submit trip tickets and incident reports to Lazada.

In addition, the court held that the services performed by the petitioners were integral to Lazada’s business, with the delivery of items clearly integrated in the services offered by Lazada.

The court also found that the petitioners were dependent on Lazada for their continued employment in this line of business since they were hired by Lazada directly after being previously engaged by a third-party contractor to provide services for Lazada. This, the court said, showed that the petitioners were economically dependent on Lazada for their livelihood.

As to the provision in the contract which expressly stated that there is no employer-employee relationship, the SC ruled that “protection of the law afforded to labor precedes over the nomenclature and stipulations of the Contract…Thus, it is patently erroneous for the labor tribunals to reject an employer-employee relationship simply because the Contract stipulates that this relationship does not exist.”

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