labor standards case digests compiled - 6.02

6.02.

Manila Electric Co. vs Quisumbing 302 SCRA 173

FACTS: Meralco Worker’s Association (MEWA) is a duly recognized labor organization of the rank-and-

file employees of MERALCO. On Sept. 7, 1995, it informed MERALCO of its intention to renegotiate the terms and conditions of their existing1992-97 CBA covering the remaining period of 2 years starting from December 1, 1995 to November 30, 1997.

MERALCO signified its willingness to re-negotiate through a letter and formed a CBA negotiating panel for the purpose.

Bargaining negotiations proceeded. However, despite the series of meetings bet. The negotiating panels, the parties failed to arrive at "terms and conditions acceptable to both of them.

On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region Branch of the National Conciliation and Mediation Board (NCMB) of the Department of Labor and Employment (DOLE) on the grounds of bargaining deadlock and unfair labor practices. The NCMB then conducted a series of conciliation meetings but the parties failed to reach an amicable settlement. Faced with the imminence of a strike, MERALCO filed an urgent petition with the DOLE praying the Secretary to assume jurisdiction over the labor dispute and to enjoin the striking employees to go back to work.

The Secretary did so and conducted conciliation conferences between the parties to bridge their differences. Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the Secretary resolved the labor dispute through an Order.

Dissatisfied, MERALCO filed this petition contending that the Sec. of Labor gravely abused its discretion in awarding wage increases and other economic benefits (like 2 months Christmas bonus, loan for the employee’s cooperative, signing hours, 40- day union leave, sick leave, etc.), in expanding the scope of the bargaining unit to all regular rank and file employees, in exercising discretion in determining the retroactivity of the CBA, etc.

ISSUE: Whether or not the Secretary of Labor gravely abuse his discretion in ordering that MERALCO should consult the union before any contracting out for more than 6 months.

HELD: YES.

We recognize that contracting out is not unlimited; rather, it is a prerogative that management enjoys subject to well-defined legal limitations.

As we have previously held, the company can determine in its best business judgment whether it should contract out the performance of some of its work for as long as the employer is motivated by good faith, and the contracting out must not have been resorted to circumvent the law or must not have been the result of malicious or arbitrary action.

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The Labor Code and its implementing rules also contain specific rules governing contracting out (Department of Labor Order No. 10, May 30, 1997, Sections. 1-25).

Given these realities, we recognize that a balance already exist in the parties’ relationship with respect to contracting out; MERALCO has its legally defined and protected management prerogatives while workers are guaranteed their own protection through specific labor provisions and the recognition of limits to the exercise of management prerogatives.

From these premises, we can only conclude that the Secretary’s added requirement only introduces an imbalance in the parties’ collective bargaining relationship on a matter that the law already sufficiently regulates.

Hence, we rule that the Secretary’s added requirement, being unreasonable, restrictive and potentially disruptive should be struck down.

Proceeding from our ruling in San Miguel Employees Union-PTGWO vs Bersamina, (where we recognized that contracting out of work is a proprietary right of the employer in the exercise of an inherent management prerogative)

We note that the Secretary himself has considered that management should not be hampered in the operations of its business when he said that:

‘We feel that the limitations imposed by the union advocates are too specific and may not be applicable to the situations that the company and the union may face in the future. To our mind, the greater risk with this type of limitation is that it will tend to curtail rather than allow the business growth that the company and the union must aspire for. Hence, we are for the general limitations we have stated above because they will allow a calibrated response to specific future situations the company and the union may face.”

PAL vs. LIGAN

FACTS:

Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered into an Agreement.

It expressly provided that Synergy was "an independent contractor and . . . that there would be no employer-employee relationship between CONTRACTOR and/or its employees on the one hand, and OWNER, on the other."

On the other hand, Respondents’ main job is to load and unload baggage and cargo of passengers – is directly related to the main business of petitioner.

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Respondents, who appear to have been assigned by Synergy to petitioner following the execution of the Agreement, filed complaints against petitioner, Synergy for underpayment, non-payment of premium pay for holidays, premium pay for rest days, service incentive leave pay, 13 th month pay and allowances , and for regularization of employment status with petitioner.

The LA ruled that PAL and Synergy jointly and severally to pay all the complainants. The NLRC set aside the decision of the LA and declared Synergy to be a 'labor-only' contractor and ordered PAL to accept, as its regular employees , all the complainants.The CA affirmed the Decision of the NLRC.

ISSUE: WON Synergy is a job-only contractor or a legitimate contractor.

HELD: Synergy is a labor-only contractor.

While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the workplace.

Likewise, petitioner failed to present evidences that synergy has a substantial capital to engage in legitimate contracting.

The importance of this decision is, If Synergy is found to be a mere job-only contractor, respondents could be considered as regular employees of petitioner as Synergy would then be a mere agent of petitioner; otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered employees of Synergy.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, AND the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer.

o In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers.

Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.

Labor-only contracting is hereby declared prohibited.

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One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employer's control except only as to the results.

The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship.

For it is the totality of the facts and surrounding circumstances of the case which is determinative of the parties' relationship.

PAL V. LIGAN 547 SCRA 181 (2008)

FACTS:

PAL and Synergy Services Corp entered into an agreement whereby Synergy undertook to provide loading, unloading, delivery of baggage and cargo and other related services from PAL’s aircraft at the Mactan station.

1. It was expressly stipulated in the contract that Synergy was an independent contractor and there would be no employer-employee relationship between the Contractor (Synergy) and/or its employees and PAL.

2. It was also specified that should PAL find the services provided by Synergy to be unsatisfactory, Synergy has 15 days to improve its services otherwise PAL has the right the terminate its agreement immediately and without notice

3. Respondents filed a complaint for underpayment, nonpayment of premium pay for holidays, service incentive leave pay, 13th month pay and allowances and for regularization of employment status with PAL

4. LA found Synergy an independent contractor and dismissed the respondents’ complaint for regularization against petitioner but granted their money claims

5. NLRC reversed LA decision and declared Synergy to be a labor-only contractor and ordered PAL to accept as regular employees, all complainants and give each of the salaries and benefits provided for in the CBA

6. PAL argued that the law does not prohibit an employer from engaging an independent contractor like Synergy, which has substantial capital in carrying on an independent business of contracting, to perform specific jobs. Petitioner also maintained that its contracting out to Synergy services like janitorial, baggage-handling etc, which are directly related to its business, does not make respodents its employees

7. PAL also averred that none of the 4 elements of an employer-employee relationship between petitioner and respondents, i.e., selection and engagement of an employee, payment of wages, power of dismissal, and the power to control employee’s conduct, were present in the case.

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ISSUE: WON SYNERGY IS A MERE “JOB-ONLY” CONTRACTOR OR A LEGITIMATE CONTRACTOR

HELD: Synergy is a mere “labor-only” There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, AND the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer.

In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employer's control except only as to the results.

While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the workplace.

Respondents having performed tasks which are usually necessary and desirable in the air transportation business of petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.

BIG AA MANUFACTURER vs. EUTIQUIO ANTONIO, JAY ANTONIO, FELICISIMO ANTONIO, and LEONARDO ANTONIO, SR.

FACTS:

Petitioner is a sole proprietorship registered in the name of its proprietor, Enrico E. Alejo. On 1/13/2000, respondents Eutiquio Antonio, Jay Antonio, Felicisimo Antonio, Leonardo Antonio, Sr. and Roberto Fabian filed a complaint for illegal lay-off and illegal deductions before the NLRC’s Regional Arbitration Branch No. III. They claimed that they were dismissed on 1/11/2000 and sought separation pay from petitioner.

The amicable settlement during the mandatory conference failed, the parties were required to file their position papers.

The Labor Arbiter did not dismiss the complaint with respect to Roberto Fabian, despite his failure to file a position paper.

Neither did the Labor Arbiter’s decision concern Roberto Fabian. Hence, this petition shall apply only to Eutiquio, Jay, Felicisimo, and Leonardo, Sr., all surnamed Antonio, the respondents herein.

Respondents alleged that as regular employees, they worked from 8:00 a.m. to 5:00 p.m. at petitioner’s premises using petitioner’s tools and equipment and they received P250 per day. According to respondents, they were dismissed without just cause and due process; hence, their prayer for reinstatement and full backwages.

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They also impleaded one Hermie Alejo, a relative of the petitioner’s owner, as co-respondent in their complaint.

Petitioner Big AA Manufacturer, affirmed it is a sole proprietorship registered in the name of Enrico Alejo and engaged in manufacturing office furniture.

Petioner claims that:o Respondents are not regular employees and Eutiquio Antonio was one of its

independent contractors who used the services of the other respondents. o There was no employer-employee relationship between petitioner and respondents. o However, petitioner stated it allowed respondents to use its facilities to meet job

orders.o Respondents were not laid-off, since they were project employees only. It added that

since Eutiquio Antonio had refused a job order of office tables, their contractual relationship ended.

o Petitioner surmised that Eutiquio resented the 1/10/2000 Implementing Guidelines it issued to improve efficiency and performance.

In Respondents’ reply to the allegations of Petition, it stated that Enrico Alejo should be impleaded as a proper or indispensable party as sole proprietor of Big AA.

o They also pointed out that petitioner’s payroll shows that Eutiquio Antonio was assigned in its carpentry section and obtained advances on salaries on various dates.

o The Implementing Guidelines and written warnings addressed to Eutiquio Antonio also prove that respondents were under petitioner’s control and supervision.

On 6/1/2000, the Labor Arbiter ruled that:

Respondents were regular employees because their work as carpenters was necessary and desirable in petitioner’s business.

Eutiquio worked in petitioner’s premises and was without substantial capital or investment in the form of tools, equipment, machinery or work premises. Thus, he could not qualify as an independent contractor.

Noting the absence of contracts providing the duration of respondents’ employment and of reports of project completion to the DOLE, Respondents cannot be considered as project employees. They were constructively dismissed when the Implementing Guidelines changed their status from regular employees to project employees.

Both parties appealed to the NLRC. Petitioner claimed that the Labor Arbiter committed errors in his findings of facts.

o It also prayed that (1) Eutiquio Antonio be declared a labor-only contractor; (2) Hermie Alejo be dropped from the case; (3) respondents be ordered to report back to work; and (4) the respondents’ claim for separation pay and backwages be dismissed.

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The NLRC modified the Labor Arbiter’s decision. o It ordered petitioner to reinstate respondents to their former positions or to pay them

separation pay in case reinstatement was no longer feasible, with full backwages in either case.

o The NLRC ruled that respondents were regular employees, not independent contractors. o It further held that petitioner failed to justify its reason for terminating respondents and

its failure to comply with the due process requirements.

Upon denial of the parties’ motions for reconsideration, petitioner filed a petition for certiorari before the CA, which dismissed the petition but affirmed the NLRC decision. Hence, this petition with prayer for TRO.

ISSUE: WON respondents are regular employees of petitioner.

HELD: YES.

Respondents were employed for more than one year and their work as carpenters was necessary or desirable in petitioner’s usual trade or business of manufacturing office furniture.

Under Article 280 of the Labor Code, the applicable test to determine whether an employment should be considered regular or non-regular is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer.

Certain forms of employment require the performance of usual or desirable functions and exceed one year but do not necessarily result to regular employment under Article 280 of the Labor Code.

However, specific exceptions include project or seasonal employment, but in this case, respondents cannot be considered project employees.

Petitioner had neither shown that respondents were hired for a specific project the duration of which was determined at the time of their hiring nor identified the specific project or phase thereof for which respondents were hired.

We also agree that Eutiquio was not an independent contractor for he does not carry a distinct and independent business, and he does not possess substantial capital or investment in tools, equipment, machinery or work premises.

He works within petitioner’s premises using the latter’s tools and materials, as admitted by petitioner.

Eutiquio is also under petitioner’s control and supervision. It is supported by the fact that petitioner allowed respondents to use its facilities for the "proper

implementation" of job orders. Moreover, the Implementing Guidelines regulating attendance, overtime, deadlines, penalties;

providing petitioner’s right to fire employees or "contractors"; requiring the carpentry division

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to join petitioner’s exercise program; and providing rules on machine maintenance, all reflect control and supervision over respondents.

DISPOSITION: Petition is DENIED for lack of merit.

Note: Other issues include – (1) Valid termination & (2) abandonment by the Respondents [Petitioner failed to establish valid cause of termination. Charge of abandonment was based only on Petitioner’s presumption that Respondents resented its issuance of the Implementing Guidelines. The Respondents’ filing the complaint for illegal dismissal within two days manifested intention against severing employment relationship with petitioner and abandoning their jobs.]

Lakas vs Burlingame Corp 524 SCRA 690

FACTS:

Petitioner in this case sought to represent all rank-and-file promo employees of respondent. It alleged that said group of employees is not represented by a Union.

So, they filed a petition for certification election before the Department of Labor and Employment. Respondent, however, opposed said petition on the ground that there exists no employer-employee relation between the parties.

Respondent here further claimed that the employees sought to be represented by petitioner are not their employees but the employees of F. Garil Manpower Services, a duly licensed local employment agency.

ISSUE: Whether or not F. Garil Manpower services is an independent contractor or a labor-only contractor.

HELD: F. Garil is not an independent contractor.

F. Garil does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises, and other materials, to qualify as an independent contractor.

No proof was adduced to show F. Garil’s capitalization.

The work of the promo-girls was directly related to the principal business or operation of Burlingame.

Marketing and selling of products is an essential activity to the main business of the principal.

F. Garil did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, Burlingame.

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F. Garil was engaged in labor-only contracting, and as such, is considered merely an agent of Burlingame.

In labor-only contracting, the law creates an employer-employee relationship to prevent a circumvention of labor laws.

The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.

Since F. Garil is a labor-only contractor, the workers it supplied should be considered as employees of Burlingame in the eyes of the law.

The "four-fold test" will show that respondent is the employer of petitioner’s members. The elements to determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct.

The most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.

The involvement of F. Garil in the hiring process was only with respect to the recruitment aspect, i.e. the screening, testing and pre-selection of the personnel it provided to Burlingame.

The actual hiring itself was done through the deployment of personnel to establishments by Burlingame.

The contract states that Burlingame would pay the workers through F. Garil, stipulating that Burlingame shall pay F. Garil a certain sum per worker on the basis of eight-hour work every 15 th

and 30th of each calendar month.

The contract states that Burlingame would pay the workers through F. Garil, stipulating that Burlingame shall pay F. Garil a certain sum per worker on the basis of eight-hour work every 15 th

and 30th of each calendar month.

The contract also provides that "any personnel found to be inefficient, troublesome, uncooperative and not observing the rules and regulations set forth by Burlingame shall be reported to F. Garil and may be replaced upon request."

Corollary to this circumstance would be the exercise of control and supervision by Burlingame over workers supplied by F. Garil in order to establish the inefficient, troublesome, and uncooperative nature of undesirable personnel.

Also implied in the provision on replacement of personnel carried upon request by Burlingame is the power to fire personnel.

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F. Garil was not left alone in the supervision and control of its alleged employees. Consequently, it can be concluded that F. Garil was not an independent contractor.

Manila Electric Co. vs Benamira

FACTS:

Benamira et al are security guards who worked for PSI. PSI was the security agency contracted by MERALCO.

The contract between PSI and MEC expired.

MERALCO subsequently contracted ASDAI as its new security agency. ASDAI absorbed Benamira et al upon MERALCO’s advice.

After two years, the contract between ASDAI and MERALCO expired. MERALCO subsequently contracted AFSISI.

AFSISI did not schedule any work for Benamira et al. It was interpreted as a constructive dismissal. Benamira sued MERALO, ASDAI, and AFSISI.

The Labor Arbiter ruled that ASDAI should reinstate Benamira et al and that MERALCO is solidarily liable. No liability for AFSISI.

NLRC affirmed LA.

The CA reversed the lower courts.

o The CA ruled that the employer is actually MERALCO.

ISSUE: Whether or not MERALCO is the employer of the fired security guards.

HELD: No.

Under the contract between ASDAI and MERALCO, it can be seen that ASDAI is indeed the employer of the guards. Applying the 4 Fold Test: ASDAI employed the guards when it absorbed them from PSI.

ASDAI provided the salaries of the guards (MERALCO merely pays ASDAI for providing the guards).

ASDAI has control over the guards because they are being inspected (MERALCO has the right to conduct its own inspection as per contract with ASDAI only).

ASDAI has the power to terminate the guards, as when they did not provide any tours or schedules to them.

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The individual respondents cannot be considered as regular employees of the MERALCO for, although security services are necessary and desirable to the business of MERALCO, it is not directly related to its principal business and may even be considered unnecessary in the conduct of MERALCO’s principal business, which is the distribution of electricity.

The fact that the individual respondents filed their claim for unpaid monetary benefits against ASDAI is a clear indication that the individual respondents acknowledge that ASDAI is their employer.

AFSISI is not the employer of the guards as well (as claimed by the guards) because AFSISI never absorbed them nor was there any evidence showing otherwise.

ASDAI and AFSISI are not “labor-only” contractors.

There is “labor only” contract when the person acting as contractor is considered merely as an agent or intermediary of the principal who is responsible to the workers in the same manner and to the same extent as if they had been directly employed by him.

On the other hand, “job (independent) contracting” is present if the following conditions are met:

(a) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except to the result thereof; and

(b) the contractor has substantial capital or investments in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business.

Given the above distinction and the provisions of the security service agreements entered into by petitioner with ASDAI and AFSISI, we are convinced that ASDAI and AFSISI were engaged in job contracting.

COCA-COLA BOTTLERS PHIL INC V. NLRC 307 SCRA 131 (1999)

FACTS: On April 7, 1986 Coca-Cola entered into a contract of janitorial services with Bacolod Janitorial Services (BJS) as an independent contractor.

Private respondent Ramon Canonicato was hired as a janitor by the Bacolod Janitorial Services (BJS). He was assigned at the Coca Cola Bottlers, Inc. considering his familiarity with its premises, having been previous casual employee there.

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Goaded by information that COCA COLA employed previous BJS employees who filed a complaint against the company for regularization pursuant to a compromise agreement, Canonicato submitted a similar complaint against COCA COLA to the Labor Arbiter on 8 June 1993 and consequently did not report for work.

On September 28,1993, BJS sent him a letter advising him to report to work within 3 days from receipt, otherwise he would be terminated.

On July 23, 1993, respondent filed with LA a complaint for illegal dismissal and underpayment of wages. He included BJS therein as a co-respondent.

o The Labor Arbiter dismissed the complaint and ruled that a) there was no employer-employee relationship between Canonicato and Coca Cola

o BJS was a legitimate job contractor, hence, any liability of COCA COLA as to Canonicato's salary or wage differentials was solidary with BJS in accordance with pars. 1 and 2 of Art. 106, Labor Code;

o COCA COLA and BJS must jointly and severally pay Canonicato his wage differentials amounting toP2,776.80 and his 13th month salary of P1,068.00, including ten (10%) percent attorney's fees in the sum of P384.48.

The NLRC rejected the decision of LA on the ground that the janitorial services of Canonicato were found to be necessary in the usual trade of Coca Cola.

o In so holding, NLRC applied Art.280 Labor Code and declared that Canonito was a regular employee of Coca-Cola.

Its motion for reconsideration having been denied, Coca Cola filed this petition.

ISSUE: Whether Canonicato is a regular employee of petitioner company.

HELD: NO.

In Kimberly Independent Labor Union v. Drilon where the Court took judicial notice of the practice adopted in several government and private institutions and industries of hiring janitorial services on an "independent contractor basis."

In this respect, although janitorial services may be considered directly related to the principal business of an employer, as with every business, we deemed them unnecessary in the conduct of the employer's principal business.

This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate job contractor so that there can be no doubt as to the existence of an employer-employee relationship between contractor and the worker.

In this situation, the only pertinent question that may arise will no longer deal with whether there exists an employment bond but whether the employee may be considered regular or casual as to deserve the application of Art. 280 of the Labor Code.

It was error therefore for the NLRC to apply Art. 280 of the Labor Code in determining the existence of an employment relationship of the parties herein, especially in light of our explicit holding in Singer Sewing Machine Company v. Drilon that “The Court agrees with the petitioner's

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argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure.

Article 280 does not apply where the existence of an employment relationship is in dispute” In determining the existence of an employer-employee relationship it is necessary to determine

whether the following factors are present:

(a) the selection and engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and, (d) the power to control the employee's conduct. Notably, these are all found in

the relationship between BJS and Canonicato and not between Canonicato and petitioner COCA COLA.

BJS satisfied all the requirements of a job-contractor under the law, namely, (a) the ability to carry on an independent business and undertake the contract work on its own account under its own responsibility according to its manner and method, free from the control and direction of its principal or client in all matters connected with the performance of the work except as to the results thereof; and, (b) the substantial capital or investment in the form of tools, equipment, machinery, work premises, and other materials which are necessary in the conduct of its business.

All told, there being no employer-employee relationship between Canonicato and COCA COLA, the latter cannot be validly ordered to reinstate the former and pay him back wages.

ROMMEL C. OREGAS, DARWIN R. HILARIO AND SHERWIN A. ARBOLEDA vs. NLRC, DUSIT HOTEL NIKKO, PHILIPPINE HOTELIER'S INCORPORATED and FVA MANPOWER TRAINING CENTER & SERVICES

FACTS:

Petitioners Rommel C. Oregas, Darwin R. Hilario and Sherwin A. Arboleda worked as valet parking and door attendants in respondent Dusit Hotel Nikko.

They have employment contracts with respondent FVA. In 2000, FVA recalled petitioners from Dusit. Petitioners then instituted a complaint for illegal dismissal, regularization, premium pay for holiday and rest day, holiday pay, service incentive leave pay, 13th month pay and attorney's fees against respondents Dusit, Philippine Hotelier's, Inc. and FVA.

o Petitioners alleged that despite the length of their service, Dusit never granted them the status and benefits of a regular employee.

o Thus, when the rank and file employees' union of Dusit learned that petitioners were entitled to regularization, Dusit immediately terminated their services due to "end of contract."

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On 3/6/2001, Labor Arbiter Potenciano S. Canizares, Jr. dismissed the complaint for lack of merit. o Petitioners failed to prove that they were employees of Dusit. o Petitioners admitted that they transferred to FVA after their previous placement

agencies terminated their contracts of services with Dusit. o Labor Arbiter Canizares also noted that petitioners signed application and employment

contracts with FVA and were under its payrolls and accounts. o Thus, FVA was petitioners' employer. Finally, he ruled that petitioners were merely

recalled and not dismissed from the service by FVA. On appeal, the NLRC issued a Resolution dated August 25, 2003, modifying the decision of Labor

Arbiter. o The NLRC observed that the four-fold test in determining the existence of an employer-

employee relationship is present in petitioners' relationship with FVA. o On the matter of selection and engagement, records showed that petitioners applied

with and were employed by FVA. o Although they were required to test drive by Dusit, it was done only to verify if they had

the necessary skills and competence required by the job. o On the matter of control, it was established that petitioners maintained their daily time

records with FVA. o On the matter of dismissal, FVA exercised its power to dismiss when it recalled

petitioners from Dusit. o Finally, on the matter of payment of wages, it is undisputed that petitioners were under

the payrolls and accounts of FVA. o Nevertheless, the NLRC noted that after petitioners' recall, they were no longer given

new assignments. o Since more than six months have already lapsed, petitioners were deemed to have been

constructively dismissed and therefore entitled to separation pay of one-half month pay for every year of service.

Petitioners elevated the case to the CA which affirmed the NLRC resolution. Reconsideration having been denied, petitioners raises the instant petition.

ISSUES:WON Respondent FVA is an independent contractorWON there an EMPLOYER-EMPLOYEE RELATIONSHIP exists between Petitioners and Respondent Hotel

HELD1. YES. the Labor Arbiter, NLRC and the CA were unanimous in finding that FVA was a legitimate

job contractor. Among the circumstances that established the status of FVA as a legitimate job contractor are:

(1) FVA is registered with the DOLE and the DTI;

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(2) FVA has a Contract for Services with Dusit for the supply of valet parking and door attendant services;

(3) FVA has an independent business and provides valet parking and door attendant services to other clients like Mandarin Oriental, Manila Hotel, Peninsula Manila Hotel, Westin Philippine Plaza, Golden B Hotel, Pan Pacific Manila Hotel, and Strikezone Bowling Lane; and

(4) FVA's total assets from 1997 to 1999 amount to P1,502,597.70 to P9,021,335.13. In addition, it provides the uniforms and lockers of its employees.

2. NO. By applying the four-fold test used in determining an employer-employee relationship, the status of FVA as the employer of petitioners is indubitably established.

a. Petitioners applied and signed employment contracts with FVA. They were merely assigned to Dusit conformably with the Contract for Services between FVA and Dusit.

b. FVA assigned a supervisor in Dusit to monitor petitioners' attendance, leaves of absence, performance and conduct. Petitioners also maintained their daily time records with FVA.

c. Petitioners were duly notified by FVA that they would be assigned to Dusit for five months only. Thereafter, they may either be recalled for transfer to other clients or be reassigned to Dusit depending on the result of FVA's evaluation of their performance. In this case, FVA opted to recall petitioners from Dusit.

d. While FVA billed Dusit for the services rendered, it was actually FVA which paid petitioners' salaries. Worthy of note, FVA registered petitioners with the Bureau of Internal Revenue and the Social Security System as its employees.

In summary, this Court accepts as established the fact that FVA is a legitimate job contractor and, in contemplation of law, the employer of petitioners.

DISPOSITION: The instant petition is DENIED for lack of merit. CA’s decision is AFFIRMED.

Mercury Drug Corp. vs Libunao 463 SCRA 331

FACTS: According to the plaintiff…. Libunao and his friend bought some items at Mercury. He paid for his purchase and placed his receipt in his pocket. As they exited, they were accosted by Sido, the security guard. Sido was armed with a service gun,

and was 20 pounds heavier than Libunao. He held Libunao’s upper right arm and demanded to see the receipt. Libunao searched but it took time because Sido was holding his right arm. Sido then said “Wala yatang resibo yan!” Libunao finally found it, and asked Sido, “Satisfied ka na?” Sido reacted by lunging at him and saying “Putang ina mo!” Sido was able to hit Libunao on the face,

nose, chin, and mouth.

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He then pointed his revolver at Libunao and said “Putang ina mo, pag hindi kayo lumabas dito papuputukin ko to sa iyo!”

Libunao eventually filed a criminal complaint against Sido. He was traumatized by the event, he had to consult a psychiatrist, and was found to be suffering

from post-traumatic depression syndrome.

According to the defendants… Sido, the security guard at Mercury, noticed Libunao exiting the store with a plastic bag, and that no

receipt was stapled to it. He asked for the receipt, but was given the plastic bag. He found no receipt, and when Libunao finally found the receipt and shoved it in his face, he just

explained he was doing hisduty. Libunao said “Baka hindi mo ako kilala, security guard ka lang! Ano ba talaga ang problema mo?” A violent argument ensued. The court rendered judgment in favor of the plaintiff, that the defendants Sido, Mercurly Drug

Corporation, and Store Manager Vilma Santos, pay the plaintiff moral and exemplary damages to discourage disrespect of the public by such acts as were committed by defendants.

ISSUE: Whether or not the remedy of the petitioner is proper that Mercury Drug be liable for Sido’s actions.

HELD: No. The petitioner was not Sido’s employer; hence, Article 2180 of the Civil Code should not be applied against petitioner.

The respondent was burdened to prove that the petitioner was the employer of Sido but failed to discharge this burden. The respondent’s counsel admitted Sido was not employed by the petitioner. Store manager Santos testified that Sido was not an employee of the petitioner, but of BSSC, Black Shield Agency.

The petitioner adduced in evidence its contract with the BSSC, which contained the following provisions:

1. THE AGENCY shall provide the CLIENT with the necessary number of armed, uniformed and qualified security guards properly licensed by the Chief of Philippine Constabulary; who shall provide security services to the CLIENT at its establishment at – These security guards during the life of the Agreement shall be assigned in accordance with arrangements to be made between the CLIENT and the AGENCY....6. The AGENCY assumes full responsibility for any claim or cause of action which may accrue in favor of any security guard by reason of employment with the AGENCY, it being understood that security guards are employees of the AGENCY and not of the CLIENT.

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Therefore, the respondent had no cause of action against the petitioner for damages for Sido’s illegal and harmful acts. The respondent should have sued Sido and the BSSC for damages, conformable to Article 2180.

In Soliman, Jr. v. Tuazon the court held that where the security agency recruits, hires and assigns the works of its watchmen or security guards to a client, the employer of such guards or watchmen is such agency, and not the client, since the latter has no hand in selecting the security guards. Thus, the duty to observe the diligence of a good father of a family cannot be demanded from the said client.

The petitioner had assigned Sido to help the management open and close the door of the drug store; inspect the bags of customers as they enter the store; and, check the receipts issued by the cashier to said customers for their purchases. Such circumstances do not automatically make the security guard the employee of the petitioner, and, as such, liable for the guard's tortious acts.

The fact that a client company may give instructions or directions to the security guards assigned to it, does not, by itself, render the client responsible as an employer of the security guards concerned and liable for their wrongful acts or omissions.

PHILIPPINE AIRLINES, INC., v. NLRC

FACTS: PAL entered into a service agreement with STELLAR, a corporation engaged in the business of

job contracting janitorial services. Pursuant to their service agreement, STELLAR hired workers to perform janitorial and

maintenance services for PAL. The workers were under the supervision of STELLAR’s supervisors/foremen and timekeepers and

it also furnished with janitorial supplies, such as vacuum cleaner and polisher. In1990, the service agreement between PAL and STELLAR expired. PAL then called for the bidding of its janitorial requirements. STELLAR exerted efforts to maintain its janitorial contract with PAL which allowed complainants

to work at the PAL’s premises. In a letter, PAL formally informed STELLAR that the service agreement between them would no

longer be renewed. Respondents filed complaints against PAL and STELLAR for Illegal Dismissal. The LA ordered PAL to pay the complainants separation pay. NLRC declared that separation pay

is sole liability of PAL.

ISSUE/s:

(1) Whether petitioner was a labor-only contractor; and (2) Whether the individual private respondents became regular employees of PAL because they were

allowed to continue working for petitioner after the expiration of the service contract.

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HELD:

First Issue: Janitorial Service Agreement Is Not Labor-Only Contracting

The Court finds no basis for holding that PAL engaged in labor-only contracting. The true nature of the individual private respondents’ employment is evident from the service

agreement between petitioner and STELLAR. Aside from these stipulations in the service agreement, other pieces of evidence support the

conclusion that STELLAR, not PAL, was the employer of the individual private respondents:

1. A contract of employment existed between STELLAR and the individual private respondents.

2. It was also STELLAR which dismissed them, as evidenced by Complainant termination letter, which was signed by the VP for operations and comptroller of STELLAR.

3. Likewise, they worked under STELLAR’s own supervisors. STELLAR even had its own collective bargaining agreement with its employees, including the individual private respondents.

4. Moreover, PAL had no power of control and dismissal over them.

In fact, STELLAR claims that it has sufficient capital in the form of tools and equipment, like vacuum cleaners and polishers, and substantial capitalization as proven by its financial statements.

Further, STELLAR has clients other than petitioner. The janitorial service agreement between petitioner and STELLAR is definitely a case of permissible job contracting.

Extension of Service Contract is Not a Source of Employer-Employee Relation

Petitioner did not become the successor-employer of the individual private respondents when the service contract expired.

There was no transfer of the business of STELLAR in this particular case. The separate undertakings of petitioner and STELLAR continued even after the expiration of the

service contract and the dismissal of individual private respondents.

Second Issue: STELLAR Is Liable for Separation Pay. No Employer-Employee Relation Between Complainants and PAL.

In the case at bar, the service agreement was not a project because its duration was not determined or determinable.

While the service agreement may have had a specific term, STELLAR disregarded it, repeatedly renewed the service agreement, and continued hiring the individual private respondents for thirteen consecutive years.

Had STELLAR won the bidding, the alleged “project” would have never ended.

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Again, we must emphasize that the main business of STELLAR is the supply manpower to perform janitorial services for its clients, and the individual private respondents were janitors engaged to perform activities that were necessary and desirable to STELLAR’s enterprise.

In this case, we hold that the individual private respondents were STELLAR’s regular employees, and there was no valid cause for their dismissal.

JAGUAR V. SALES 552 SCRA 295 (2008)

FACTS:

Petitioner Jaguar Security and Investigation Agency is a private corporation engaged in the business of providing security services to its clients, one of whom is Delta Milling Industries Inc.

Respondents Sales et al were hired as security guards by Jaguar. They were assigned at the premises of Delta, Libis. Sales et al alleged that they were terminated

by Jaguar and that their dismissals were arbitrary and illegal. All guard-employees claim monetary benefits LA held in favor of Sales et al and ordered Jaguar to pay Sales et al, wage differentials, overtime

pay differentials, rest day pay, holiday pay, premium holiday pay, 13th month pay etc. Jaguar averred that Delta was solidarily liable with petitioner. NLRC dismissed the appeal since

Jaguar was the direct employer of the security guards, it is the one principally liable to the employees.

ISSUE: Whether Delta is solidarily liable to pay with Jaguar the monetary benefits claimed by respondents.

HELD: YES.

There is no question as regards the respective liabilities of petitioner and Delta Milling. Under Articles 106, 107 and 109 Labor Code, the joint and several liability of the contractor and

the principal is mandated to assure compliance of the provisions therein including the statutory minimum wage.

The contractor, petitioner in this case, is made liable by virtue of his status as direct employer. On the other hand, Delta Milling, as principal, is made the indirect employer of the contractor's employees for purposes of paying the employees their wages should the contractor be unable to pay them.

This joint and several liability facilitates, if not guarantees, payment of the workers' performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution.

In the event that petitioner pays his obligation to the guard employees pursuant to the Decision of the Labor Arbiter, as affirmed by the NLRC and CA, petitioner has the right of reimbursement from Delta Milling under Article 1217 Civil Code, which provides:

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Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made the payment may claim from his co-debtors only the share which corresponds to each, with the interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded.

The action is within the realm of civil law hence jurisdiction over the case belongs to the regular courts. While the resolution of the issue involves the application of labor laws, reference to the labor code was only for the determination of the solidary liability of the petitioner to the respondent where no employer-employee relation exists.

In the present case, there exists no employer-employee relationship between petitioner and Delta Milling.

The liability of Delta Milling to reimburse petitioner will only arise if and when petitioner actually pays its employees the adjudged liabilities.

Meralco Industrial Engineering Services Corporation (MIESCOR) vs NLRC and OPLGS

FACTS:

On 11/7/1984, MIESCOR and OPLGS executed a contract wherein OPLGS would supply the MIESCOR janitorial services at its Rockwell Thermal Plant in Makati City.

o Pursuant thereto, 49 employees were assigned as janitors to petitioners Rockwell Thermal Plant.

On 9/20/1989, the 49 employees (complainants) lodged a Complaint for illegal deduction, underpayment, non-payment of overtime pay, legal holiday pay, premium pay for holiday and rest day and night differentials against the private respondents before the Labor Arbiter.

In view of the enactment of Republic Act No. 6727, the contract between the petitioner and the private respondents was amended for the 10th time on 11/3/1989 to increase the minimum daily wage per employee from P63.55 to P89.00 or P2,670.00 per month.

On 1/2/1990, MIESCOR sent a letter to OPLGS informing them that MIESCO was terminating the contract, effective at the close of business hours on 1/31/1990.

Accordingly, the complainants were pulled out from their work. Thus, on 2/27/1990, complainants amended their Complaint to include the charge of illegal

dismissal and to implead the petitioner as a party respondent therein.

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Thereafter, a Decision was rendered by the Labor Arbiter on 3/26/1991, dismissing the Complaint against the petitioner for lack of merit, but ordering the private respondents to pay the complainants the total amount of P487,287.07.

All other claims of the complainants against the private respondents were dismissed.

Private respondents appealed the aforesaid Decision to the NLRC.

o Private respondents alleged, among other things, that: the petitioner, being the principal, was solidarily liable with the private respondents for failure to make an adjustment on the wages of the complainants.

On 5/28/1993, NLRC affirmed the Labor Arbiter’s Decision with the modification that the petitioner was solidarily liable with the private respondents.

MIESCOR and OPLGS separately moved for reconsideration. The NLRC issued an Order noting that based on the records of the case, the judgment award in

the amount of P487,287.07 was secured by a surety bond posted by the private respondents. Resultantly, the NLRC denied OPLGS Motion for Reconsideration. The NLRC likewise directed the Labor Arbiter to enforce the monetary award against the OPLGS

surety bond and to determine who should finally shoulder the liability therefor. On 1/30/1996, the NLRC issued an Order which declared the solidarily liability of OPLGS and

MIESCOR on the underpayment and on the non-payment of the overtime pay and the sole liability of OPLGS on the payment of separation pay.

Thus, an alias writ of execution was issued pursuant thereto. On appeal to CA, the Court rendered the assailed Decision which modified the Decision of the

NLRC and holding the petitioner solidarily liable with the private respondents for the satisfaction of the laborers separation pay.

Hence, this petition.

ISSUE: Whether or not MIESCOR should be held solidarily liable with OPLGS for the satisfaction of the laborers separation pay.

Held: NO.

The Court of Appeals erred when it ruled that the MIESCOR was jointly and solidarily liable with the OPLGS as regards the payment of separation pay.

The appellate court used as basis Article 109 of the Labor Code, as amended, in holding the petitioner solidarily liable with the private respondents for the payment of separation pay:

ART. 109. Solidary Liability. - The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers. However, the afore-

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quoted provision must be read in conjunction with Articles 106 and 107 of the Labor Code, as amended.

Article 107 of the Labor Code, as amended, defines an indirect employer as any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.

To ensure that the contractors employees are paid their appropriate wages, Article 106 of the Labor Code, as amended, provides:

ART. 106. CONTRACTOR OR SUBCONTRACTOR.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

Taken together, an indirect employer can only be held solidarily liable with the independent contractor or subcontractor in the event that the latter fails to pay the wages of its employees. While it is true that the petitioner was the indirect employer of the complainants, it cannot be held liable in the same way as the employer in every respect.

The petitioner may be considered an indirect employer only for purposes of unpaid wages.

There is no question that private respondents are operating as an independent contractor and that the complainants were their employees.

There was no employer-employee relationship that existed between the petitioner and the complainants.

Thus, the former could not have dismissed the latter from employment. Only private respondents, as the employer, can terminate their services and should be held liable.

The only instance when the principal can also be held liable with the independent contractor or subcontractor for the backwages and separation pay of the latters employees is when there is proof that the principal conspired with the independent contractor or subcontractor in the illegal dismissal of the employees.

It is the established fact of conspiracy that will tie the principal or indirect employer to the illegal dismissal of the contractor or subcontractors employees.

In the present case, there is no allegation and proof presented, that the petitioner conspired with private respondents in the illegal dismissal of the latters employees.

Hence, it cannot be held liable for the same.

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Neither can the liability for the separation pay of the complainants be extended to the petitioner based on contract. Contract executed between the MIESCOR and OPLGS contains no provision for separation pay upon termination of contract.

A contract is the law between the parties and the stipulations therein shall be binding as between the parties.

Hence, if the contract does not provide for such a liability, the Court cannot just read the same into the contract without possibly violating the intention of the parties.

Although MIESCOR is not liable for separation pay, the Court conforms to the consistent findings that the petitioner is solidarily liable with OPLGS for the judgment awards for underpayment of wages and non-payment of overtime pay.

In this case, however, OPLGS had already posted a surety bond sufficient to cover all the judgment awards due the complainants, including those for underpayment of wages and non-payment of overtime pay.

The joint and several liability of the principal with the contractor and subcontractor were enacted to ensure compliance with the provisions of the Labor Code.

This liability facilitates, if not guarantees, payment of the workers compensation.

With OPLGS surety bond, the interests of the complainants are already adequately protected.

Consequently, it will be futile to continuously hold the petitioner jointly and solidarily liable with the private respondents for the judgment awards for underpayment of wages and non-payment of overtime pay.

But while this Court had previously ruled that the indirect employer can recover whatever amount it had paid to the employees in accordance with the terms of the service contract between itself and the contractor, the said ruling cannot be applied in reverse to this case as to allow the OPLGS (the independent contractor), who paid for the judgment awards in full, to recover from the MIESCOR (the indirect employer).

MIESCOR had already handed over to OPLGS the wages and other benefits of the complainants. Records reveal that it had complied with complainants salary increases in accordance with the minimum wage set by Republic Act No. 6727 by faithfully adjusting the contract price for the janitorial services.

Having already received from petitioner the correct amount of wages and benefits, but having failed to turn them over to the complainants, OPLGS should now solely bear the liability for the underpayment of wages and non-payment of the overtime pay.

DISPOSITION: The petition is GRANTED. The Decision and Resolution of the Court of Appeals are REVERSED AND SET ASIDE.

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Eparwa Security vs Liceo de Cagayan University (LDCU) 508 SCRA 370 [2007]

Facts:

On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a Contract for Security Services. On 21 December 1998, 11 security guards whom Eparwa assigned to LDCU filed a complaint before the NLRC, against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day, service incentive leave, night shift differential, overtime pay, and payment for attorney’s fees.

The Labor Arbiter found that the security guards are entitled to wage differentials and premium for holiday and rest day work.

o The Labor Arbiter held Eparwa and LDCU solidarily liable pursuant to Article 109 of the Labor Code.

LDCU filed an appeal before the NLRC. The NLRC found that the security guards are entitled to wage differentials and premium for

holiday and rest day work. o Although the NLRC held Eparwa and LDCU solidarily liable for the wage differentials and

premium for holiday and rest day work, the NLRC did not require Eparwa to reimburse LDCU for its payments to the security guards.

Eparwa and LDCU again filed separate motions for partial reconsideration, LDCU questioned the NLRC’s deletion of LDCU’s entitlement to reimbursement by Eparwa. Eparwa, on the other hand, prayed that LDCU be made to reimburse Eparwa for whatever amount it may pay to the security guards.

The NLRC declared that although Eparwa and LDCU are solidarily liable to the security guards for the monetary award, LDCU alone is ultimately liable.

LDCU filed a petition for certiorari before the CA, LDCU stated that this would free Eparwa from any liability for payment of the security guards’ money claims.

CA also allowed LDCU to claim reimbursement from Eparwa.

ISSUE: Is LDCU alone ultimately liable to the security guards for the wage differentials and premium for holiday and rest day pay?

HELD: YES.

LDCU’s ultimate liability comes into play because of the expiration of the Contract for Security Services.

There is no privity of contract between the security guards and LDCU, but LDCU’s liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code.

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Eparwa is already precluded from asking LDCU for an adjustment in the contract price because of the expiration of the contract, but Eparwa’s liability to the security guards remains because of their employer-employee relationship.

In lieu of an adjustment in the contract price, Eparwa may claim reimbursement from LDCU for any payment it may make to the security guards.

However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to the security guards.

For the security guards, the actual source of the payment of their wage differentials and premium for holiday and rest day work does not matter as long as they are paid.

This is the import of Eparwa and LDCU’s solidary liability. Creditors, such as the security guards, may collect from anyone of the solidary debtors.

Solidary liability does not mean that, as between themselves, two solidary debtors are liable for only half of the payment.

Articles 106, 107 and 109 of the Labor Code read:

Art. 106. Contractor or subcontractor. — Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.


The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of the employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

Article 107. Indirect employer. — The provisions of the immediately preceding Article shall likewise apply to any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project.

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Article 109. Solidary liability. — The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.

This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance of the provisions therein including the statutory minimum wage [Article 99, Labor Code]. The contractor is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractor’s employees for purposes of paying the employees their wages should the contractor be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the workers’ performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution [See Article II Sec. 18 and Article XIII Sec. 3].

MANDAUE etc. v. ANDALES

FACTS:

Petitioners Mandaue Galleon Trade, Inc. (MGTI) and Gamallosons Traders, Inc. (GTI) are business entities engaged in rattan furniture manufacturing for export.

Respondent Andales filed a complaint with LA against both petitioners for illegal dismissal and non-payment of 13th month pay and service incentive leave pay.

His other co-workers numbering 260 filed a similar complaint against petitioner MGTI only. MGTI denied the existence of employer-employee relationship with complainants, claiming that

they are workers of independent contractors whose services were engaged temporarily and seasonally when the demands for its products are high and could not be met by its regular workforce; the independent contractors recruited and hired the complainants, prepared the payroll and paid their wages, supervised and directed their work, and had authority to dismiss them.

LA rendered a Decision holding that 183 complainants are regular employees of MGTI since they were made to perform functions which are necessary to MGTI's rattan furniture manufacturing business and such independent contractors were not properly identified.

NLRC affirmed the LA's decision. It held that labor-only contracting and not job-contracting was present since the alleged

contractors did not have substantial capital in the form of equipment, machineries and work premises.

The CA affirmed the findings of the NLRC. ISSUE: WON the CA committed grave abuse and irreversible error in considering the respondents as

employees of the petitioner.

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HELD: The Court sees no reason to disturb the findings of fact of the NLRC and the CA.

Based on Article 106 of the Labor Code and Sections 5 and 7 of the Implementing Rules, "labor-only" contracting exists when the following criteria are present:

(1) where the contractor or subcontractor supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among other things; and the workers recruited and placed by the contractor or subcontractor are performing activities which are directly related to the principal business of such employer; or

(2) where the contractor does not exercise the right to control the performance of the work of the contractual employee.

In the present case, petitioners' claim that their contractors are independent contractors, and, therefore, this case is one of permissible job contracting, is without basis.

First, respondents' work as weavers, grinders, sanders and finishers is directly related to MGTI's principal business of rattan furniture manufacturing. Where the employees are tasked to undertake activities usually desirable or necessary in the usual business of the employer, the contractor is considered as a "labor-only" contractor and such employees are considered as regular employees of the employer.

Second, MGTI was unable to present any proof that its contractors had substantial capital. There was no evidence pertaining to the contractors' capitalization; nor to their investment in tools, equipment or implements actually used in the performance or completion of the job, work, or service that they were contracted to render. The law casts the burden on the contractor to prove that it has substantial capital, investment, tools, etc. Employees, on the other hand, need not prove that the contractor does not have substantial capital, investment, and tools to engage in job-contracting.

Thus, the contractors are "labor-only" contractors since they do not have substantial capital or investment which relates to the service performed and respondents performed activities which were directly related to MGTI's main business.

MGTI, the principal employer, is solidarily liable with the labor-only contractors, for the rightful claims of the employees.

Under this set-up, "labor-only" contractors are deemed agents of the principal, MGTI, and the law makes the principal responsible to the employees of the "labor-only" contractor as if the principal itself directly hired or employed the employees.

In prohibiting "labor-only" contracting and creating an employer-employee relationship between the principal and the supposed contractor's employees, the law intends to prevent employers from circumventing labor laws intended to protect employees.

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ABOITIZ HAULERS INC V. DIMAPATOI 502 SCRA 271 (2006)REQUISITES AND PROHIBITION OF LABOR CONTRACTOR ONLY

FACTS:

Petitioner Aboitiz Haulers Inc is a domestic corporation principally engaged in nationwide and overseas forwarding and distribution of cargo. Private respondents Dimapatoi, Agawin et al worked as checkers in the Mega Warehouse, owned by Aboitiz Haulers.

Petitioner claimed respondents are not its employees but the employees of Grigio Security Agency, a manpower agency that supplies security guards, checkers, and stuffers. It allegedly entered into a contract of service with Grigio March 1994 where Grigio was to supply the petitioner with security guards, checkers and stuffers.

Among the checkers assigned to the petitioner’s warehouse were the private respondents

Aboitiz averred that Grigio retained control over the respondents by providing their own supervisors to oversee Grigio’s personnel, as well as time cards to monitor the attendance of its personnel.

Petitioner also alleged that on May 9, 1996, the respondents left the warehouse and did not report to work thereafter.

As a result of the respondents’ sudden abandonment of work, there was no orderly turnover of papers and other company property in connection with the termination of the contract for services.

Whereas the respondents claimed that they have been employed by Aboitiz Haulers even before March 1994.

Dimapatoi et al maintain that during their employment with petitioner, they were not paid their regular holiday pay, nightshift differential, 5 day service incentive leave and OT premium.

They also averred that illegal deductions were being made on their wages, particularly for a mutual assistance fund, a cash bond and claims for damaged and misrouted cargo incurred by petitioner.

Respondents alleged that on May 15, 1996, Aboitiz Haulers dismissed them on the pretext that the written contract of service between Grigio and petitioner had been terminated.

Respondents filed a complaint for non-payment of wages and other benefits and illegal deductions.

LA held in favor of Aboitiz Haulers since respondents were unable to offer any evidence to show that Grigio had no substantial capital (Grigio was held to be a legitimate independent job contractor).

NLRC affirmed the same. CA reversed the decision citing that Grigio was not an independent job contractor, despite its

claim that it has sufficient capital.

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o Grigio does not carry on an independent business, since the respondents’ work as warehouse checkers is necessary and desirable to the petitioner’s business of forwarding and distribution of cargo.

ISSUE: WON GRIGIO IS A “LABOR ONLY” CONTRACTOR.

HELD: No, Grigio is not a “labor only” contractor.

In determining whether or not a "labor-only" contracting exists, Art. 106 of the Labor Code and Section 5 of the Rules Implementing Articles 106 to 109 of the Labor Code, as amended, provides the following criteria:

(1) where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among other things;

(2) the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer; and

(3) the contractor does not exercise the right to control the performance of the work of the contractual employee.

In order that one is considered by law as a "labor-only" contractor, all three aforementioned criteria need not be present. If the contractor enters into an arrangement characterized by any one of the criteria provided, this would be a clear case of "labor-only contracting."

The clear phrasing of Section 5 of the Rules Implementing Articles 106 to 109 of the Labor Code, as amended, support this interpretation.

The allegation of the petitioner that Grigio is an independent job contractor, and, therefore, this case is one of permissible job contracting, is without basis.

In this case, the respondents’ work, as warehouse checkers, is directly related to the principal business of the petitioner.

Petitioner also exercises the right to control and determines not only the end to be achieved, but also the manner and means to be used in reaching that end.

Lastly, petitioner failed to sufficiently prove that Grigio had "substantial capital or investment." The respondents, as checkers, were employed to check and inspect these cargoes,28 a task which

is clearly necessary for the petitioner’s business of forwarding and distributing of cargoes. The petitioner did not dispute the fact that the respondents were hired as checkers as early as

1992. The fact that they were employed before the Written Contract of Services took effect on 24

February 1994, and continued with their jobs until 1996, after the said contract had already expired on 24 February 1995, indicates that the respondents’ work was indeed necessary for the petitioner’s business.

In a similar case, Guarin v. National Labor Relations Commission, the workers’ contracts were repeatedly renewed to perform services necessary for the employer’s business.

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http://www.lawphil.net/judjuris/juri2006/sep2006/gr_148619_2006.html#fnt28

Thus, Grigio is obviously a "labor-only’ contractor since it did not have substantial capital or investment which relates to the service performed; the respondents performed activities which were directly related to the main business of the petitioner; and Grigio did not exercise control over the performance of the work of the respondents.

Consequently, the petitioner is considered as the employer of the respondents.

ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO vs. NLRC, VIC DEL ROSARIO and VIVA FILMS

FACTS:

Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents as part of the filming crew a salary of P375.00 per week.

About 4 months later, he was designated Asst. Electrician and later, he was then promoted to the rank of Electrician.

On the other hand, Petitioner Paulino Enero claims that private respondents employed him as a member of the shooting crew. The tasks of Petitioners include the loading, unloading and arranging movie equipment in the shooting area as instructed by the cameraman, returning the equipment to Viva Films’ warehouse, assisting in the “fixing” of the lighting system, and performing other tasks that the cameraman and/or director may assign.

In May 1992, Petitioners sought the assistance of their supervisor, Mrs. Alejandria Cesario, to facilitate their request that private respondents adjust their salary in accordance with the minimum wage law.

They were then informed that Mr. Vic del Rosario would agree to increase their salary only if they signed a blank employment contract.

Petitioners refused to sign, private respondents forced Enero to go on leave then refused to take him back when he reported for work.

Meanwhile, Maraguinot was dropped from the company payroll but was returned and again asked to sign a blank employment contract, and when he still refused, private respondents terminated his services.

Petitioners thus sued for illegal dismissal before the Labor Arbiter.o Private Respondents assert that they contract persons called “producers” -- also

referred to as “associate producers” -- to “produce” or make movies for private respondents; and contend that petitioners are project employees of the associate producers who, in turn, act as independent contractors.

o As such, there is no employer-employee relationship between petitioners and private respondents; that it was the associate producer of a film who hired Maraguinot and he was released upon payment of his last salary, as his services were no longer needed; that Enero was hired for a movie, went on vacation and by the time he reported back to work the move had been completed.

The Labor Arbiter ruled that Complainants are the employees of the respondents.

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The producer cannot be considered as an independent contractor but should be considered only as a labor-only contractor and acts as a mere agent of the real employer.

Also, it is an admitted fact that the complainants received their salaries from the respondents for activities which are necessary and essential to the business of the respondents, that of moviemaking.

Complainant Maraguinot worked as an electrician, while complainant Enero worked as a crew member. Hence, the complainants were illegally dismissed.

Private Respondents appealed to the NLRC and the latter reversed the Labor Arbiter’s decision, concluding that upon circumstances, taken together, indicated that complainants were “project employees.”

Mainly, Complainants were hired for specific movie projects and their employment was co-terminus with each movie project the completion/termination of which are pre-determined, such fact being made known to complainants at the time of their engagement.

Petitioners’ alleged that, in supporting their claim that they were regular (and not project) employees of private respondents, petitioners cited their performance of activities that were necessary or desirable in the usual trade or business of private respondents and added that their work was continuous.

Petitioners thus considered themselves part of a work pool from which private respondents drew workers for assignment to different projects.

Petitioners lamented that there was no basis for the NLRC’s conclusion that they were project employees.

Private respondents reiterate their version of the facts and stress that their evidence supports the view that petitioners are project employees; point to petitioners’ irregular work load and work schedule; emphasize the NLRC’s finding that petitioners never controverted the allegation that they were not prohibited from working with other movie companies; and ask that the facts be viewed in the context of the peculiar characteristics of the movie industry.

The OSG is convinced that this petition is improper since petitioners raise questions of fact; and submits that petitioners’ reliance on Article 280 of the Labor Code to support their contention that they should be deemed regular employees is misplaced, as said section “merely distinguishes between two types of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits.”

The OSG likewise rejects petitioners’ contention that since they were hired not for one project, but for a series of projects, they should be deemed regular employees.

In closing, the OSG disagrees with petitioners’ claim that the NLRC’s classification of the movie producers as independent contractors had no basis in fact and in law, since, on the contrary, the NLRC “took pains in explaining its basis” for its decision.

ISSUES1. WON this is a proper action2. WON an employer-employee relationship existed between the petitioners and private respondents

or any one of them

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HELD1. YES. A special civil action for certiorari under Rule 65 of the Rules of Court is the proper remedy for

one who complains that the NLRC acted in total disregard of evidence material to or decisive of the controversy. In the instant case, petitioners allege that the NLRC’s conclusions have no basis in fact and in law, hence the petition may not be dismissed on procedural or jurisdictional grounds.

2. YES. The relationship between VIVA and its producers or associate producers seems to be that of agency, as the latter make movies on behalf of VIVA, whose business is to “make” movies. As such, the employment relationship between petitioners and producers is actually one between petitioners and VIVA, with the latter being the direct employer.

Job Contractingo It is settled that the contracting out of labor is allowed only in case of job contracting

and if contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of his business

o Assuming that the associate producers are job contractors, they must then be engaged in the business of making motion pictures. As such, and to be a job contractor under the preceding description, associate producers must have tools, equipment, machinery, work premises, and other materials necessary to make motion pictures. However, the associate producers here have none of these. Private respondents’ evidence reveals that the movie-making equipment are supplied to the producers and owned by VIVA. If private respondents insist that their associate producers are labor contractors, then these producers can only be “labor-only” contractors.

Labor-only contractingo There is “labor-only” contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

o As labor-only contracting is prohibited , the law considers the person or entity engaged in the same a mere agent or intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an “available group of free-lance workers which includes the complainants Maraguinot and Enero.”

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The employer-employee relationship between petitioners and VIVA can be further established by the “control test.”

While four elements are usually considered in determining the existence of an employment relationship, namely:

(a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee’s conduct, the most important element is the employer’s control of the employee’s conduct, not only as to the result of the work to be done but also as to the means and methods to accomplish the same.

Control Testo VIVA’s control is evident in its mandate that the end result must be a “quality film

acceptable to the company.” The means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be finished within schedule without exceeding the budget, and additional expenses must be justified; certain scenes are subject to change to suit the taste of the company; and the Supervising Producer, the “eyes and ears” of VIVA and del Rosario, intervenes in the movie-making process by assisting the associate producer in solving problems encountered in making the film.

o It may not be validly argued then that petitioners are actually subject to the movie director’s control, and not VIVA’s direction. The director merely instructs petitioners on how to better comply with VIVA’s requirements to ensure that a quality film is completed within schedule and without exceeding the budget. At bottom, the director is akin to a supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on the employer.

o Appointment Slips issued to all crew members state : “During the term of this appointment you shall comply with the duties and responsibilities of your position as well as observe the rules and regulations promulgated by your superiors and by Top Management.”

o The words “superiors” and “Top Management” can only refer to the “superiors” and “Top Management” of VIVA. By commanding crew members to observe the rules and regulations promulgated by VIVA, the appointment slips only emphasize VIVA’s control over petitioners.

o Aside from control, the element of selection and engagement is present. A sample appointment slip was offered by private respondents to prove that members of the shooting crew except the driver are project employees of the Independent Producers. Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired the crew members . It is VIVA’s corporate name which appears on the heading of the appointment slip. What likewise tells against VIVA is that

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it paid petitioners’ salaries as evidenced by vouchers, containing VIVA’s letterhead, for that purpose.

DISPOSITION: Petition is GRANTED.

Mandaue etc. vs Andales 548 SCRA 17 [2008]

Facts:

Petitioners Mandaue Galleon Trade, Inc. (MGTI) and Gamallosons Traders, Inc. (GTI) are business entities engaged in rattan furniture manufacturing for export, with principal place of business at Cabangcalan, Mandaue City.

Respondent Vicente Andales (Andales) filed a complaint with (LA) against both petitioners for illegal dismissal and non-payment of 13th month pay and service incentive leave pay.

His other co-workers numbering 260 filed a similar complaint against petitioner MGTI only. The complainants alleged that MGTI hired them on various dates as weavers, grinders, sanders

and finishers; these workers were told that they could no longer work because there’s no work for them; thus they were dismissed without just notice and just cause.

MGTI denied the existence of employer-employee relationship with complainants, claiming that they are workers of independent contractors whose services were engaged temporarily and seasonally when the demands for its products are high and could not be met by its regular workforce.

The LA rendered a Decision holding that 183 complainants are regular piece-rate employees of MGTI since they were made to perform functions which are necessary to MGTI's rattan furniture manufacturing business.

The NLRC affirmed the LA's finding of employer-employee relationship. It held that labor-only contracting and not job-contracting was present since the alleged contractors did not have substantial capital in the form of equipment, machineries and work premises.

The CA affirmed the findings of the NLRC. o It held that MGTI is liable to the respondents because the alleged contractors are not

independent contractors but labor-only contractors; that respondents were constructively dismissed when they were unilaterally transferred to another contractor; and that the allegation of retrenchment was not proven.

ISSUE: What is the effect of the finding that the contractor was a labor-only contractor?

HELD: AUTOMATIC DECLARATION OF EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP

A finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-employee relationship between the principal and the employees of the supposed

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contractor and the "labor-only" contractor is considered as a mere agent of the principal, the real employer.

The effect of this is the immediate application of Labor Standards, Security of Tenure, etc. between the employees and the principal.

ART. 106. Contractor or subcontractor. – Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.


The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

SAN MIGUEL CORP. V. MAERC Integrated Services, Inc.

FACTS:

291workers filed their complaints against San Miguel Corporation (SMC) and Maerc Integrated Services, Inc., for illegal dismissal, underpayment of wages etc.

The complainants alleged that they were hired by SMC through its agent MAERC to work inside the SMC premises and in the Philphos Warehouse owned by MAERC.

They washed and segregated various kinds of empty bottles used by SMC to sell and distribute its beer beverages to the consuming public.

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They were paid on a per piece or pakiao basis except for a few who worked as checkers and were paid on daily wage basis.

SMC cited its plans to phase out its segregation activities due to the installation of labor and cost saving devices.

When the service contract was terminated, respondents filed a complaint for illegal dismissal. . The LA rendered a decision holding that MAERC was an independent contractor. On appeal, the NLRC ruled that MAERC was a labor-only contractor and that complainants were

employees of SMC. o The NLRC also held that whether MAERC was a job contractor or a labor-only contractor,

SMC was still solidarily liable with MAERC for the latter's unpaid obligations. The CA affirmed the decision of the NLRC.

ISSUE : WON the complainants are employees of petitioner SMC or of respondent MAERC.

HELD: We find no basis to overturn the Court of Appeals and the NLRC.

Well-established is the principle that findings of fact of quasi-judicial bodies, like the NLRC, are accorded with respect, even finality, if supported by substantial evidence.

Particularly when passed upon and upheld by the Court of Appeals, they are binding and conclusive upon the Supreme Court and will not normally be disturbed.

Evidence discloses that petitioner played a large and indispensable part in the hiring of MAERC's workers.

It also appears that majority of the complainants had already been working for SMC long before the signing of the service contract between SMC and MAERC.

The NLRC found that when MAERC was organized into a corporation, SMC gave instructions through its supervisors to make it appear that complainants were hired by MAERC.

This was testified to by two (2) of the workers who were segregator and forklift operator who had been working with SMC under a purported contractor since March 1979 and March 1981, respectively.

Both witnesses also testified that together with other complainants they continued working for SMC without break from Jopard Services to MAERC.

As for the payment of workers' wages, the memoranda of the labor rates reveals that SMC assumed the responsibility of paying for the mandated overtime, holiday and rest day pays of the MAERC workers.

SMC also paid the employer's share of the SSS and Medicare contributions, the 13th month pay, incentive leave pay and maternity benefits.

In the lump sum received, MAERC earned a marginal amount representing the contractor’s share. These lend credence that MAERC merely acted as an agent of SMC.

In deciding the question of control , viewed alongside the findings of the Labor Arbiter the responsibility of watching over the MAERC workers by MAERC personnel became superfluous with the presence of additional checkers from SMC.

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Another are letters by SMC to the MAERC management, the letters named three (3) workers who were responsible for the rejection of several bottles then recommended the penalty to be imposed.

Evidently, these workers were reported by the SMC checkers to the SMC inspector. These showed the right of petitioner to recommend disciplinary measures over MAERC employees.

Also, the minutes of the meeting held by the SMC officers which discussed to pass the eye examination to be done by SMC EENT company doctor and a review of compensation/incentive system for segregators to improve the segregation activities.

But the most telling evidence is a letter by Vice-President of MAERC addressed to SMC President and Chief Executive Officer, asking the latter to reconsider the phasing out of SMC’s segregation activities in Mandaue City.

In comparison, MAERC, as earlier discussed, displayed the characteristics of a labor-only contractor.

ABOITIZ HAULERS INC V. DIMAPATOI 502 SCRA 271 (2006)

ISSUE: WHAT IS THE EFFECT OF DETERMINING IF A COMPANY IS A LABOR ONLY CONTRACTOR.

HELD:

Generally, the findings of fact made by the labor arbiter and the NLRC, as the specialized agencies presumed to have the expertise on matters within their respective fields, are accorded much respect and even finality, when supported by ample evidence. However, when the findings of the labor arbiter and the NLRC are contrary to the evidence on record, this Court shall lay aside such erroneous findings.

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labor standards case digests compiled - 6.02

Documents

secretary of labor

labor dispute

labor code

department of labor

file employees of meralco

informed meralco

specific labor provisions

recognized labor organization