LABOR STANDARDS – CASE DIGEST

DUMEZ COMPANY OF FRANCE vs.

NATIONAL LABOR RELATIONS COMMISSION and FLORANTE JOSE
G.R. No. 82340 - August 12, 1991

FACTS:
Dumez Company of France hired 4 Senior Draftsmen Filipino workers at a proposed wage of
US$600.00 per month for its Medical City project in Riyadh Saudi Arabia through Eastern
Construction Company, Inc. Upon approval by the POEA of its corresponding request, ECCOI
gave each of them copy of their respective Manpower Requisition Slip which indicated their
name, category and monthly basic salary of US$600.00. ECCOI and the draftsmen entered into
an overseas employment agreement. Since ECCOI has no personality in Saudi Arabia, the
draftsmen signed another set of overseas employment agreements with Dumez. Though the
employment agreements of the other 3 Senior Draftsmen reflected the amount of US$600.00 as
the monthly base salary and US$2.50 as the normal hourly rate, that of Florante Jose (private
respondent), however, showed the amount of US$680.00 monthly base salary but with the same
hourly rate of US$2.50. Upon discovery of the discrepancy, the petitioner requested Jose to sign
new contract papers, but Jose insisted on being paid US$680.00 a month. Later on Mr. Jose's
service was terminated on the ground of “surplus employee, excess of manpower and
retrenchment”, and was later on repatriated to the Philippines.

Private respondent filed a complaint for illegal dismissal before the POEA for breach of contract
of employment on the part of Dumez. The POEA ruled that there was no breach of contract but
on appeal, the NLRC reversed the said Decision.

ISSUE:
Whether or not there is an employer-employee relationship.

RULING:
The Supreme Court Resolved to GRANT the Petition, to SET ASIDE and NULLIFY the Decision of
the NLRC, and to REINSTATE the Decision of the POEA.

The Supreme Court held that the element of consent was not present. There was no concurrence
of the offer and acceptance upon the subject matter and the cause which are to constitute the
contract. Petitioner was willing to offer only the amount of US$600.00 for the kind of services
expected of private respondent, while private respondent would accept employment with
petitioner only at a monthly salary base of US$680.00. The correct monthly base salary figure
was an essential consideration as far as each was concerned. In a situation wherein one or both
parties consider that certain matters or specifics, in addition to the subject matter and
the causa should be stipulated and agreed upon, the area of agreement must extend to all
points that the parties deem material or there is no contract. However, it was due to Dumez’s
own error or negligence in the clerical processing of the employment papers that a mutual
mistake attended the execution of the contract. Negligence causing damage to another may
generate liability though both parties may be innocent of any deliberate fraud. Thus, it has been
held by the Court that as between two (2) innocent persons, he whose negligence has enabled a
third party to cause the damage shall bear the loss. Though petitioner in the case at bar was
clearly innocent of deliberate wrong doing, the failure of the petitioner created some basis for
private respondent's belief that he was accepting a US$680.00 monthly salary and thus
generated a mutual mistake which occasioned some damage or loss on the part of private
respondent. On general principles of equity, petitioner should compensate private respondent.

1 Rena, Rivera, San Juan, Sarmiento

COMMENT:
In re: Employer-Employee Relationship

(1)
Dumez Company contended that Mr. Jose's services were terminated on the ground of "surplus
employee, excess of manpower and retrenchment in accordance with Article 284 of the Labor
Code and that the requirement of notice was duly complied with. They further argued that there
was no illegal dismissal considering that the contract of employment was inexistent as there
was no meeting of the minds concerning the offer and acceptance. On the other hand, the
opponent rebutted such argument and said the element of consent was not present at all. There
was no concurrence of the offer and acceptance upon the subject matter and the cause which
are to constitute the contract.Petitioner was willing to offer only the amount of US$600.00 for
the kind of services expected of private respondent, while private respondent would accept
employment with petitioner only at a monthly salary base of US$680.00.

To determine the existence of Employer-Employee Relationship, the four fold test is usually
applied:
1. the selection and engagement of the employee;
2. the payment of wages;
3. the power of dismissal; and,
4. the employer’s power to control the employee on the means and methods by which the
work is accomplished.

All of these elements were present in the contract between the employer and the employee:
Dumez company selected four (4) Senior Draftsmen at a proposed wage of US$600.00 per
month for its Medical City project in Riyadh Saudi Arabia. The company offered the four
draftsmen.

2 Rena, Rivera, San Juan, Sarmiento

 (2)
There is no employer-employee relationship between Dumez Co. and Florante Jose because they
did not satisfy the four-fold test.

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably

adhered to the four-fold test, to wit: (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 employee's
conduct, or the so-called "control test." In resolving the issue of whether such relationship
exists in a given case, substantial evidence - that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion - is sufficient. Although no
particular form of evidence is required to prove the existence of the relationship, and any
competent and relevant evidence to prove the relationship may be admitted, a finding that the
relationship exists must nonetheless rest on substantial evidence.

In the given case, the presence of the first element is beyond dispute. Dumez Co. admitted that
they were the one who selected and engaged the workers, including Florante Jose for Saudi
Arabia as Senior Draftsmen, through Eastern Construction Company, Inc. It was significant that
Dumez Co. determined to which projects the respondents were to be assigned, which is the
Medical City in Saudi Arabia in this case. As it established Dumez Co.'s power to select and
engage, the circumstance likewise rendered concomitant the power of Dumez Co. to dismiss any
of the respondents. Notwithstanding the length of time that Florante Jose had been working for
their projects, they could opt to simply drop them off any assignment, effectively dismissing
them from employment, albeit with necessary consequences if the dismissal was proved to be
illegal.

But for the second element, Dumez Co.'s payment of the Jose’s wages was not established
because of the mistake in the monthly base salary figure as an essential consideration as far as
each was concerned. Hence, there was no concurrence of the offer and acceptance upon the
subject matter and the cause which are to constitute the contract.

For the "control test," this power to control is oft-repeated in jurisprudence as the most
important and crucial among the four tests. The Court held that "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." It should be remembered
that the control test merely calls for the existence of the right to control, and not necessarily the
exercise thereof. It is not essential that the employer actually supervises the performance of
duties by the employee. It is enough that the former has a right to wield the power.

From the records, it can be determined that Dumez Co. possessed this power to control when
they first acceded by paying Jose US$680.00 for services rendered in the first month of his
employment subject, however, to the condition that Mr. Jose would be transferred to a new job
classification that would match his desired salary scale. This assertions can proved that Dumez
Co. has the capacity to control the work assignment of Jose if it the circumstance had been
favorable to them, but as the case provided, there was no job with a higher classification at that
particular time available, hence the termination of Jose.

Therefore, there is no employer-employee relationship exists between Dumez Co. and Florante
Jose because they did not satisfy the four-fold test that the Supreme Court provides.

3 Rena, Rivera, San Juan, Sarmiento