From Gig to Job: Supreme Court Classifies "Riders" as Regular Employees

Lazada, a leading e-commerce platform in the Philippines, engaged riders to deliver goods purchased through its platform. The riders, including Rogelio Garalde Mendaros and others, were engaged under contracts labeled as “Independent Contractor Agreements.” Lazada maintained that these riders were not its employees but independent contractors, free to determine their own methods and schedules.

The riders, however, argued that despite the contract’s label, the nature of their work and the actual circumstances of their engagement made them regular employees entitled to the protection of Philippine labor laws.

The Legal Issue

The central issue before the Supreme Court was whether the riders were employees of Lazada or independent contractors. This determination would decide whether they were entitled to security of tenure, minimum wage, and other statutory benefits.

The Four-Fold Test

The Supreme Court reaffirmed that the existence of an employer-employee relationship is determined by the so-called “four-fold test,” which examines:

1. Selection and Engagement of the Employee

2. Payment of Wages

3. Power of Dismissal

4. Power to Control the Employee’s Conduct

The “control test” is the most crucial, focusing on whether the employer controls not just the result but also the means and methods by which the work is accomplished.

Application of the Four-Fold Test

The Court meticulously applied the four-fold test to the facts of the case:

1. Selection and Engagement

The riders were directly engaged by Lazada through contracts, even if these were labeled as “Independent Contractor Agreements.” The Court emphasized that the nomenclature of the contract is not controlling; what matters is the actual nature of the relationship.

2. Payment of Wages

Lazada paid the riders a fixed daily wage of PHP 1,200.00 for each day of service. This regular, predetermined compensation is characteristic of an employment relationship, rather than a fee-for-service arrangement typical of independent contracting.

3. Power of Dismissal

Lazada reserved the right to terminate the riders’ engagement for breach of contract or failure to meet performance standards. The Court noted that the power to dismiss is a hallmark of employment.

4. Power to Control

This is the most significant element. The Court found that Lazada exercised substantial control over the means and methods of the riders’ work. Riders were required to log their arrival, loading, and departure times, and to report at every seller or store to scan parcels using gadgets and software provided by Lazada. The company also set performance standards and evaluated the riders’ services on a monthly and quarterly basis, with the right to terminate for failure to meet these standards.

“Similar to Borromeo, the element of control in the case is shown by the fact that Lazada required petitioners to log the time of their arrival, the loading of items, and their departure in the route sheets. This allowed Lazada to monitor their movement as well as the manner they conducted their tasks. Moreover, Lazada compelled petitioners to report their arrival at every seller or store so they could scan the parcels they would pick-up. Notably, petitioners' means of recording information of the items they picked-up was likewise controlled by Lazada, because it provided the gadgets and equipment used to scan the items, i.e., the application software, mobile phone scanner, power bank, and postpaid.”
— Mendaros v. Lazada (2024)

Economic Dependence Test

The Court also considered the “economic dependence test,” which asks whether the workers are economically dependent on the company for their livelihood. The riders, the Court found, were dependent on Lazada for their continued employment and income. They could not freely offer their services to other companies, and their work was integral to Lazada’s business model.

“More importantly, petitioners are dependent on respondents for their continued employment in this line of business. As the facts reveal, petitioners have been previously engaged by a third-party contractor to provide services for respondents. This time, petitioners were directly hired by respondents. This demonstrates that petitioners have been economically dependent on respondents for their livelihood.”
— Mendaros v. Lazada (2024)

The Nature of the Work

A key factor in the Court’s analysis was that the riders’ work—delivering goods—was not peripheral but central to Lazada’s business. The company was not merely a digital platform; it facilitated the entire transaction, including delivery. The riders’ services were “necessary and desirable” to the usual business of Lazada.

“In carrying out their business, they are not merely a platform where parties can transact; they also offer the delivery of the items from the sellers to the buyers. The delivery eases the transaction between the sellers and buyers and is an integral part of respondent Lazada's business. Further, respondent Lazada admitted that it has different route managers to supervise the delivery of the products from the sellers to the buyers. Thus, it has taken steps to facilitate not only the transaction of the seller and buyer in the online platform but also the delivery of the items.”
— Mendaros v. Lazada (2024)

The Effect of Contractual Language

Lazada argued that the contracts explicitly stated there was no employer-employee relationship. The Supreme Court categorically rejected this argument, holding that the law looks at the substance, not the form, of the relationship.

“That the Agreements between Lazada and petitioners specifically stated that no employer-employee relationship existed between them was of no moment, as the nature of their arrangement was one of employment, i.e., a contractual relationship which the law affords protection regardless of its nomenclature or the terms of the contract.”
— Mendaros v. Lazada (2024)

Precedent and Stare Decisis

The Court noted that the arguments raised by Lazada had already been addressed in previous cases, such as Ditiangkin v. Lazada and Borromeo v. Lazada, where the riders were likewise found to be employees. The principle of stare decisis required the Court to follow these precedents, given the similarity of facts and issues.

Implications for the Gig Economy

The Mendaros ruling has far-reaching implications for platform-based work in the Philippines. It sends a clear message that companies cannot evade labor protections by simply labeling workers as independent contractors. The actual circumstances of the engagement—control, economic dependence, and the nature of the work—will determine the existence of an employer-employee relationship.

For companies, this means a need to carefully review their engagement models and ensure compliance with labor standards. For workers, especially those in the gig economy, the decision affirms their right to security of tenure, minimum wage, and other statutory benefits if the four-fold and economic dependence tests are satisfied.

Conclusion

The Supreme Court’s decision in Mendaros v. Lazada is a landmark in Philippine labor law, providing clarity on the status of platform-based workers. By focusing on the realities of work rather than contractual labels, the Court has reinforced the protective mantle of labor law in the digital age.

As the gig economy continues to grow, both companies and workers must be guided by the principles laid down in this case. The four-fold test, the economic dependence test, and the actual circumstances of engagement—not the labels in a contract—will determine the rights and obligations of parties in the world of work.

Disclaimer: This article was prepared with the assistance of artificial intelligence and may contain errors. It is intended solely for educational and informational purposes. It does not constitute legal advice, nor does it create an attorney-client relationship. Readers should note that the applicable laws and jurisprudence may vary depending on the specific facts of each case.

For advice regarding your particular circumstances, please consult our qualified legal professionals at Sun Law Office.