Dear PAO,
My husband and I have been serving as storekeeper and caretaker, respectively, at a private beach resort. For our services, we are paid certain amounts plus commissions on the harvest of the fishpond, rentals of the cottages, and sales of the store. A few years later, the owner said the business was losing money, so he intended to have the property leased and that our services were no longer required. Because of this, we filed a case for illegal dismissal. The owner insists that we are not employees but industrial partners in the businesses because we are receiving profits from the business and that he does not exercise control over us in how we perform our respective jobs. Is he right in asserting that we are industrial partners and not employees?
Emily
Dear Emily,
Please be informed of the Supreme Court’s ruling in the case of Pedro D. Dusol and Maricel M. Dusol vs. Emmarck A. Lazo, as owner of Ralco Beach (GR 200555, Jan. 20, 2021, Ponente: Associate Justice Mario Lopez), where it was provided that the sharing in the income per se does not prove the existence of a partnership. According to the Supreme Court:
“On one hand, there is a partnership if two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. A particular partnership may have for its object a particular undertaking. The existence of a partnership is established when it is shown that: (1) two or more persons bind themselves to contribute money, property, or industry to a common fund; and (2) they intend to divide the profits among themselves. Generally, it is not required that the agreement be in writing or in a public instrument. However, when immovable properties or real rights are contributed to the partnership, it is required that an inventory of the real properties or rights contributed be prepared and signed by the parties, and attached to the public instrument, otherwise, the agreement is void.
“Undoubtedly, the best evidence to prove the existence of a partnership is the contract or articles of partnership. Nevertheless, in its absence, its existence can be established by circumstantial evidence. Under Article 1769 of the Civil Code, ‘the receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner in the business, [but] no such inference shall be drawn if such profits were received in payment as wages of an employee [or rent to a landlord].’ In addition, ‘the sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.” (Emphasis Ours)
As stated above, the receipt of certain “shares” in the profit, does not, by itself, prove the existence of a partnership. Again, citing the “four-fold test,” the Supreme Court clarified that if the receipt of shares or profits in the business is as a form of wage or salary, then the person is still considered an employee and not a partner:
“On the other hand, an employee is any person in the service of another under a contract for hire, express, or implied, oral or written. To determine whether an employment relationship exists, the following elements are considered: (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’s conduct. The most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it. However, the power of control refers merely to the existence of the power, and not to the actual exercise thereof. No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant evidence to prove the relationship may be admitted. However, a finding that such relationship exists must still rest on some substantial evidence.xxx
“Based on record, there is no proof that a partnership existed between Pedro or Maricel, and Emmarck in relation to the beach resort. No documentary evidence was submitted by Emmarck to even suggest a partnership. Emmarck relied solely on his own statements that Pedro and Maricel did not receive wages, but merely allowances and commission from the profits of their partnership. However, it is beyond dispute that receipt by a person of share in the profits of a business does not by itself establish the existence of a partnership, if the amounts are received as wages of an employee. Neither does the sharing of gross returns establish partnership, most especially, in light of the absence of the any other evidence to establish the existence of the partnership.” (Emphasis Ours)
Considering the foregoing discussion, you and your wife may not be considered industrial partners merely because the amounts you are receiving are in the form of wages for services you have rendered for the resort. Without any other proof clearly establishing a partnership, the claim of the resort owner must fail. On the contrary, the fact that you and your husband receive a share of the earnings of the private beach resort as a wage for the services you rendered raises the inference that you are indeed employees of the resort owner.
We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated on.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected]
