AN INDIVIDUAL APPOINTED BY THE BOARD BUT WHOSE POSITION IS NOT PROVIDED IN THE BY-LAWS IS NOT A CORPORATE OFFICER

An individual is not a corporate officer because neither the Corporation Code nor the by-laws of the respective corporations provided so. Thus, the SC held in the following case:

Dr. Loreche-Amit vs. Cagayan De Oro Medical Center, Inc. (CDMC)
G.R. No. 216635, June 3, 2019

Corporate officer; Position in the By-Laws; Appointment by the Boar; A position appointed by the Board but is not found in the By-Laws does not make the holder a corporate officer; Employer-employee relationship; Power of control; Economic reality test; A person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no employer-employee relationship exists.

Facts:

Petitioner Dr. Mary Jean P. Loreche-Amit (Dr. Loreche-Amit) started working with Respondent Cagayan De Oro Medical Center, Inc. (CDMC), sometime in May 1996, when she was engaged by the late Dr. Jose N. Gaerlan (Dr. Gaerlan) as Associate Pathologist in the Department of Laboratories. Upon the demise of Dr. Gaerlan, CDMC’s Board of Directors formally appointed Dr. Loreche-Amit as Chief Pathologist for five years or until May 15, 2011.

On June 13, 2007, (CDMC’s) Board of Directors passed a resolution, recalling Dr. Loreche-Amit’s appointment as Chief Pathologist. This prompted Dr. Loreche-Amit to file a complaint for illegal dismissal, contending that she was dismissed by CDMC from her work without just cause and due process.

For their part, Dr. Emano, Dr. Oh, and CDMC (CDMC, et al.) averred that Dr. Loreche-Amit was not hired by them as she merely assisted Dr. Gaerlan in operating the hospital’s laboratory. Respondents maintained that Dr. Loreche-Amit worked at the same time as pathologist in Capitol College Hospital and J .R. Borja Memorial Hospital as she was not prohibited to do so.

LA Ruling:

The LA dismissed the complaint.

The Labor Arbiter found that Dr. Loreche-Amit is a corporate officer of the hospital because of her appointment by the Board of Directors through a resolution; thus, matters relating to the propriety of her dismissal is under the jurisdiction of the Regional Trial Court (RTC) under Section 5.2 of Republic Act (R.A.) No. 8799 (The Securities Regulation Code of the Philippines).

Dr. Loreche-Ami appealed to the NLRC.

NLRC Ruling:

The NLRC affirmed the ruling of the Labor Arbiter and reiterated that Dr. Loreche-Amit is a corporate officer and that there was no employer-employee relationship between CDMC and her.

The NLRC held that as it is, the issue is an intra-corporate matter, the jurisdiction of which belongs to the regular courts. Dr. Loreche-Amit filed a Petition for Certiorari before the CA.

CA Ruling:

The CA dismissed the petition and echoed the rulings of the Labor Arbiter and NLRC. The motion for reconsideration filed by Dr. Loreche-Amit was likewise dismissed.

Issue/s:

Whether or not an appointment made the company’s Board of Directors renders the appointee a corporate officer and not employee even if the position is not provided in the By-Laws

Whether or not there is an employer-employee relationship when an individual works for another and performs his job at his own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof

Whether or not a memorandum, administrative character, on the intolerable behavior in the establishment amounts to control

SC Ruling:

The SC partly granted the petition.

The SC held that to be considered as a corporate officer, the designation must be either provided by the Corporation Code or the by-laws of the corporation. In this case, nowhere in the records could the by-laws of CDMC be found.

An appointment through the issuance of a resolution by the Board of Directors does not make the appointee a corporate officer. It is necessary that the position is provided in the Corporation Code or in the by-laws. In the absence of the by-laws of CDMC, there is no reason to conclude that Dr. Loreche-Amit, as Pathologist, is considered as a corporate officer.

In the cases of WPP Marketing Communications, Inc. vs. Galera and Marc II Marketing, Inc. vs. Jason, the SC declared that the individuals are not corporate officers because neither the Corporation Code nor the by-laws of the respective corporations provided so. In the latter case, this Court treated as employee the individual whose position was not expressly mentioned in the Corporation Code or the by-laws.

Thus, the RTC does not have jurisdiction over the case as there was no intra-corporate controversy, the latter being operative in vesting jurisdiction upon Regional Trial Courts over all controversies in the election or appointment of directors, trustees, officers or managers of corporations, partnerships or associations. However, this is not an automatic declaration that Dr. Loreche-Amit is an employee of CDMC.

The four-fold test, to wit: 1) the selection and engagement of the employees; 2) the payment of wages; 3) the power of dismissal; and 4) the power to control the employee’s conduct, must be applied to determine the existence of an employer-employee relationship. In this case, it is apparent that CDMC, through the Board of Directors, exercised the power to select and supervise Dr. Loreche-Amit as the Pathologist. It must be emphasized that Dr. Loreche-Amit was appointed as Pathologist with a term of five years from May 2006 to May 2011. She was likewise paid compensation which is at 4% of the gross receipts of the Clinical Section of the laboratory.

However, based on the records, CDMC does not exercise the power of control over Dr. Loreche-Amit. The power to control the work of the employee is considered the most significant determinant of the existence of an employer-employee relationship. This test 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.

Dr. Loreche-Amit was working for two other hospitals aside from CDMC, not to mention those other hospitals which she caters to when her services are needed. Such fact evinces that Dr. Loreche-Amit controls her working hours. On this note, relevant is the economic reality test which this Court has adopted in determining the existence of employer-employee relationship. Under this test, the economic realities prevailing within the activity or between the parties are examined, taking into consideration the totality of circumstances surrounding the true nature of the relationship between the parties.

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In our jurisdiction, the benchmark of economic reality in analyzing possible employment relationships for purposes of applying the Labor Code ought to be the economic dependence of the worker on his employer. Thus, the fact that Dr. Loreche-Amit continued to work for other hospitals strengthens the proposition that Dr. Loreche-Amit was not wholly dependent on CDMC. Dr. Loreche-Amit likewise admitted that she receives in full her 4% share in the Clinical Section of the hospital regardless of the number of hours she worked therein. Alternatively put, Dr. Loreche-Amit manages her method and hours of work.

The rule is that where a person who works for another performs his job more or less at his own pleasure, in the manner he sees fit, not subject to definite hours or conditions of work, and is compensated according to the result of his efforts and not the amount thereof, no employer-employee relationship exists.

Moreover, the Memorandum, pertaining to Dr. Loreche-Amit’s behavior, issued by Dr. Oh does not sufficiently establish the element of control. The Memorandum merely states that intolerable behavior in the hospital cannot be countenanced. It is administrative in character which does not, in any way, pertains to the manner and method of Dr. Loreche-Amit’s work.