In a landmark ruling with significant implications for labor classification, the Supreme Court held in Escauriaga v. Fitness First Philippines, Inc. (2024) that workers classified by their employer as “freelance personal trainers” were, in truth, regular employees under the Labor Code. The Court emphasized that the substance of the work relationship—not the contractual label—determines employee status.
The petitioners—fitness trainers at Fitness First—initially worked under traditional employment terms with fixed salaries and benefits. On various dates, they were reclassified as freelance personal trainers, supposedly independent contractors. Under this new setup, they were compensated on commission, deprived of statutory benefits, and required to:
- Meet minimum quotas (e.g., 90 hours of training, ₱80,000 in monthly sales),
- Work exclusively in Fitness First gyms,
- Attend mandatory training, and
- Abide by strict rules regarding scheduling, conduct, and performance.
Despite the freelance label, the company exercised substantial control over the manner of work. The petitioners filed suit for illegal dismissal, seeking recognition as regular employees.
The Supreme Court granted the petition, reversed the rulings of the NLRC and Court of Appeals, and declared the petitioners as regular employees, entitled to reinstatement and backwages.
1. Labels Do Not Define Employment Status
“The employment status of a person is not defined by what the parties say it should be. Rather, the employment relationship of parties is prescribed by law.”
The Court reiterated that employers cannot unilaterally change an employee’s classification to evade labor obligations.
2. The Four-Fold Test & Control Test
Applying the four-fold test, the Court emphasized the “control test” as the most determinative:
“Under the control test, an employer-employee relationship exists where the person for whom the services are performed reserves the right to control not only the end to be achieved, but also the manner and means to be used in reaching that end.”
Here, Fitness First dictated:
- Where trainers could work,
- The number of hours required,
- The pricing and marketing of training packages,
- Mandatory attendance in internal events and training sessions.
These indicated employer control inconsistent with independent contractor status.
3. Economic Dependence Test
The Court also applied the economic realities test, focusing on whether the trainers were economically dependent on Fitness First:
“Too, petitioners were wholly dependent upon respondent for their continued employment in this line of business. Per the Freelance Personal Trainer Agreement, they were required to sell only the company products per its price schedule and were prohibited from providing training outside of the club.”
The trainers had no capital investment, worked within company premises, and could not market services independently.
Key Takeaways for Employers
- Substance over form: Courts will look at actual work conditions—not contractual language—to determine employment status.
- Control is key: Imposing quotas, mandatory hours, exclusivity, and training undermines claims of independent contracting.
- Misclassification is costly: Employers risk liabilities for backwages, benefits, and legal fees.
- Adhesion contracts are suspect: Freelance agreements that appear non-negotiable or aimed at denying security of tenure will be scrutinized.
This write up provides a general overview of the above transactions at the time of writing only and is not intended to be a comprehensive legal advice. This should also not be taken as an opinion on the topic. For more details and information, you may coordinate with any GVES Law Partner regarding the matter.
Atty. John Carlo T. Pajo is an Associate of GVES Law.