FACTS:

Petitioner Jose Mel Bernarte and Renato Guevarra were invited to join the Philippine Basketball Association (PBA) as referees. They signed contracts on a year-to-year basis during the leadership of Commissioner Emilio Bernardino. However, changes were made to their employment terms during the term of Commissioner Jose Emmanuel M. Eala.

Bernarte signed a one and a half month contract for the second conference in 2003, while Guevarra, who previously signed as a trainee, became a Regular Class C referee in 2002. In 2004, Bernarte received a letter that his contract would not be renewed due to unsatisfactory performance. Guevarra, on the other hand, was not made to sign any contract in 2004.

Respondents argue that the complainants entered into two contracts of retainer with the PBA in 2003, but their contracts were not renewed after the second contract period.

The Labor Arbiter ruled that Bernarte is an employee and ordered his reinstatement and payment of backwages, damages, and attorney's fees. The NLRC affirmed the Labor Arbiter's decision, but the Court of Appeals overturned it, ruling that Bernarte is an independent contractor.

The petitioner raised the procedural issue of whether the Labor Arbiter's decision has become final and executory for failure of respondents to appeal with the NLRC within the prescribed period. The petitioner argues that the decision was constructively served on respondents through unclaimed registered mail. However, the petitioner failed to sufficiently prove that the notices were delivered to and received by the respondents.

ISSUES:

1. Whether the petitioner is an employee of the respondents, thereby determining if there was illegal dismissal.

2. Whether the Labor Arbiter's decision became final and executory due to the respondents' failure to appeal within the reglementary period.

RULING:

1. The petitioner is not an employee of the respondents; thus, there was no illegal dismissal.

2. The Labor Arbiter's decision did not become final and executory as there was no proof of completed constructive service. The NLRC addressed the appeal in the interest of substantial justice to resolve the substantive issue on the merits.

PRINCIPLES:

• Control Test: To determine the existence of an employer-employee relationship, the most crucial factor is the "control test," which examines whether the employer controls the means and methods of the employee's work.

• Constructive Service by Registered Mail: Service by registered mail is complete upon actual receipt by the addressee or after five (5) days from the date the addressee received the first notice of the postmaster, whichever date is earlier. Constructive service requires conclusive proof that the first notice was received by the addressee.

• Independent Contractor: An independent contractor exercises independent judgment in carrying out tasks without the hiring party controlling the means and methods of the work. Continuous hiring does not necessarily constitute an employer-employee relationship.