FACTS:

Petitioners Ashmor M. Tesoro, Pedro Ang, and Gregorio Sharp used to work as salesmen for respondents Metro Manila Retreaders, Inc., Northern Luzon Retreaders, Inc., or Power Tire and Rubber Corporation, collectively called "Bandag." Bandag offered repair and retread services for used tires. In 1998, Bandag developed a franchising scheme, and petitioners quit their jobs as salesmen and entered into separate Service Franchise Agreements (SFAs) with Bandag. Under the SFAs, Bandag provided funding support to petitioners, and petitioners' incomes were determined by deducting expenses from their sales. Petitioners defaulted on their obligations, and Bandag terminated their SFAs. Petitioners then filed a complaint for constructive dismissal and non-payment of wages. The lower courts dismissed the complaint, finding that no employer-employee relationship existed between the parties.

ISSUES:

1. The only issue presented in this case is whether or not petitioners remained Bandag's salesmen under the franchise scheme they entered into.

RULING:

1. The Supreme Court held that petitioners did not remain Bandag's employees after they began operating their franchises. The tests for determining employer-employee relationship are: (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) control over the employee's work. In this case, petitioners voluntarily resigned from their employment and entered into SFAs to become independent entrepreneurs. They no longer received salaries or commissions and their incomes depended on the profits they made. Even if Bandag imposed certain guidelines and retained some control over their work, it did not amount to an employer-employee relationship. Franchising involves following an established system and guidelines, and the important factor is control over how the work is done, not just the end result. Petitioners' commitment to abide by Bandag's policy decisions and implementing rules as franchisees does not make them employees. The revolving funds under the SFAs do not represent wages but are capital advances for operations. The findings of the lower courts, which found no employer-employee relationship, were accorded respect and finality as supported by substantial evidence.

PRINCIPLES:

• Franchising is a business method that allows individuals to market a product or service and use the trademark, trade name, and systems prescribed by the owner.

• Tests for determining employer-employee relationship include selection and engagement of the employee, payment of wages, power of dismissal, and control over the employee's work.

• Control in franchising involves following an established system and guidelines, not detailed control over the employee's daily work.

• The revolving funds under a franchise agreement do not represent wages but are capital advances for operations.

• The findings of fact of quasi-judicial bodies, supported by substantial evidence, are accorded respect and finality.