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Ma. Angelica R. de Guzman Labor Standards- Atty. Natividad Roma Parties and Case No.

Is there job-only contracting or labor-only contracting? There is Laboronly contracting in this case. Reason

September 3, 2011

Resolution of the Supreme Court

Petitioner: Lakas sa Industriya ng kapatirang haligi ng Alyansa-pinagbuklod ng manggagawang promo ng Burlingame Respondent (Principal): Burlingame Corp. Contractor: F. Garil GR No.162833

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. Garils 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.

Under this circumstance, there is no doubt that 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.21 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. WHEREFORE, the challenged Decision of the Court of Appeals dated August 29, 2003 and the Resolution dated March 15, 2004 denying the motion for reconsideration are REVERSED and SET ASIDE. The decision of the Secretary of Labor and Employment ordering the holding of a certification election among the rank-and-file promo employees of Burlingame is reinstated.

Petitioner (Principal): Philippine Airlines Inc. Respondent: Manuel Asuncion et al. Contractor: Stellar GR No. 125792

There is job-only contracting in this case.

The agreement clearly indicates that an employeeemployer relation existed between the individual private respondents and STELLAR, not PAL. The provisions of the agreement demonstrate that STELLAR possessed these earmarks of an employer: (1) the power of selection and engagement of employees, (2) the payment of wages, (3) the power of dismissal, and (4) the power to control the employee's conduct. 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. A contract of employment existed between STELLAR and the individual private respondents, proving that it was said corporation which hired them. It was also STELLAR which dismissed them. They worked under STELLAR's own supervisors. STELLAR even had its own collective bargaining agreement with its employees, including the individual private respondents. Moreover, PAL had no power of control and dismissal over them. STELLAR claims that it falls under the definition of an independent job contractor. Thus, it alleges 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, like San Miguel Corporation, Hongkong and Shanghai Bank, Eveready, Benguet Management Corporation and Japan Airlines.

The main business of STELLAR is the supply of 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. WHEREFORE, the petition is hereby GRANTED. The assailed Decision and Resolution are SET ASIDE insofar as they held PAL liable for separation pay. The July 13, 1994 Decision is however reinstated insofar as it ORDERED STELLAR liable for such award.

Petitioner: Jang Lim et al. Respondent (Principal): Timex Sawmill and/or Cotabato Timberland Company Inc. Contractor: Teddy Arabi GR No. 124630

There is Laboronly contracting in this case.

Teddy Arabi has no capital of his own in the form of equipment, tools, machineries and materials in undertaking sawing, milling, piling, bundling and clearing work for CTCI. Activities rendered by employees are necessary to CTCI's plywood manufacturing and wood processing business operations. Teddy Arabi's work premises are also the sawmill premises operated by CTCI and the equipment and tools utilized in Teddy Arabi's undertaking actually belonged to CTCI which allegedly "lent" the same to him. Teddy Arabi is only a "labor-only" contractor. It clearly appears that Arabi is a mere agent of CTCI. His only job is to recruit and hire manpower as needed. Arabi is definitely not an independent contractor. Therefore, it is not Arabi but CTCI which is responsible to petitioners who must be deemed employed not by Arabi but by the company.

The scourge of exploitation of labor, as shown by numerous petitions before us, remains pervasive. It is imperative for all government agencies concerned to exert all-out efforts to prevent any further violation or circumvention of the provisions of the Labor Code through deceptive devices and malpractices. Unscrupulous employers could not be allowed to hide behind labor-only contracting in order to escape the just claims of their workers and other employees. WHEREFORE, the challenged resolutions dated October 23, 1995 and January 16, 1996, rendered by the NLRC in NLRC CA No. M-002543-95 are hereby SET ASIDE, and the decision of the Labor Arbiter of the NLRC Regional Arbitration Branch No. 09, Zamboanga City, promulgated on May 17, 1995, in NLRC Case No. RAB09-1-0-00284-94 is hereby REINSTATED.

Petitioner (Principal): Rosewood Processing Inc. Respondent: Napoleon Mamon et al. Contractor: Veterans Philippine Scout Security Agency GR No. 116476-84

There is job-only contracting in this case.

In this case, the relationship between Rosewood Processing Inc. and Veterans Philippine Scout Security Agency was governed by a Contract of Guard Services. Veterans provided Rosewood Processing Inc. with employees whose job is different from the main business of Rosewood, since they are merely security guards of the latter. Employees get their salaries from Veterans and they were under control and supervision of Veterans which is evident by the fact that some of the respondents were transferred to Veterans other clients. Nothwithstanding the service contract between Rosewood

In all these cases, however, the liability of the security agency is without question, as it did not appeal from the Decisions of the labor arbiter and Respondent Commission. WHEREFORE, the petition is partially GRANTED. The assailed Decision is hereby MODIFIED, such that petitioner, with the Security agency, is solidarily liable to PAY the complainants only wage differentials during the period that the complainants were actually under its employ, as above detailed. Petitioner is EXONERATED

and the security agency, the former is still solidarily liable to the employees, who were not privy to the said contract pursuant to Art. 106, 107 and 108 of the Labor Code. However, the indirect employers liability to the contractors employees extends only to the period during which they were working for the petitioner.

from the payment of back wages and separation pay. The temporary restraining order issued earlier is LIFTED, but the petitioner is deemed liable only for the aforementioned wage differentials, which Respondent Commission is required to RECOMPUTE within fifteen days from the finality of this Decision. Skillpower, Inc. is, therefore, a "labor-only" contractor and Garado is not its employee. No grave abuse of discretion can thus be imputed to the NLRC for declaring petitioner Fuji Xerox guilty of illegal dismissal of private respondent. ACCORDINGLY, the petition for certiorari is DISMISSED for lack of merit.

Petitioner (Principal): Philippine Fuji Xerox Corp. Respondent: Pedro Garado, Pambansang kilusan ng paggawa, (KilusanTUCP) et.al Contractor: Skillpower Inc. GR No. 111501

There is Laboronly contracting in this case.

From 1980 to 1984 Garado worked exclusively for Fuji Xerox. By 1984, he was already a member of the union which petitioned the company for his regularization. Indeed, he was recruited by Skillpower, Inc. solely for assignment to Fuji Xerox to work in the latter's Xerox Copier Project. Garado was never assigned to any other client of Skillpower, Inc. In fact, although under the agreement Skillpower, Inc. was supposed to provide only "temporary" services, Skillpower, Inc. actually supplied Fuji Xerox the labor which the latter needed for its Xerox Copier Project for seven (7) years, from 1977 to 1984. The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to supply manpower to Fuji Xerox. The phrase "substantial capital and investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business," in the Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the service it is being contracted to render. One who does not have an independent business for undertaking the job contracted for is just an agent of the employer.

Petitioner (Principal): Manila Water Co. Inc. Respondent: Herminio Pena et.al. Contractor: Association Collectors Group Inc. (ACGI) GR No. 158255

There is Laboronly contracting in this case.

ACGI 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. While it has an authorized capital stock of P1,000,000.00, only P62,500.00 is actually paidin, which cannot be considered substantial capitalization.

Notably, private respondents performed activities which were necessary or desirable to its principal trade or business. Thus, they were regular employees of petitioner, regardless of whether the engagement was merely an accommodation of their request. As such regular employees, private respondents are entitled to security of tenure which may not be circumvented by Herminio Pena et al.reported daily to the branch office of mere stipulation in a subsequent contract that their Manila Water Co. Inc. because ACGI has no office or work employment is one with a fixed period. premises. In fact, the corporate address of ACGI was the residence of its president, Mr. Herminio D. Pea. Under Article 279 of the Labor Code, an employee who Moreover, in dealing with the consumers, private is unjustly dismissed from work is entitled to respondents used the receipts and identification cards reinstatement without loss of seniority rights and other issued by Manila Water Co. privileges, and to his full backwages, inclusive of allowances, and to his other benefits or their monetary The work of the private respondents was directly related equivalent computed from the time his compensation to the principal business or operation of the petitioner. was withheld from him up to the time of his actual Being in the business of providing water to the consumers reinstatement. However, if reinstatement is no longer in the East Zone, the collection of the charges therefore possible, the employer has the alternative of paying the by private respondents for the petitioner can only be employee his separation pay in lieu of reinstatement.25 categorized as clearly related to, and in the pursuit of the latters business. However, private respondents are entitled to attorneys fees as they were compelled to litigate with petitioners ACGI did not carry on an independent business or and incur expenses to enforce and protect their undertake the performance of its service contract interests.27 The award by the Labor Arbiter of according to its own manner and method, free from the P22,250.00 as attorneys fees to private respondents, control and supervision of its principal. Prior to private being reasonable, is sustained. respondents alleged employment with ACGI, they were already working for Manila Water, subject to its rules and WHEREFORE, in view of the foregoing, the decision of regulations in regard to the manner and method of the Court of Appeals dated November 29, 2002, in CAperforming their tasks. e pursuit of the latters business. G.R. SP No. 67134, reversing the decision of the It can be concluded that ACGI was not an independent National Labor Relations Commission and reinstating the

contractor since it did not carry a distinct business free from the control and supervision of Manila Water.

decision of the Labor Arbiter is AFFIRMED with the MODIFICATION that the awards of P10,000.00 as moral damages and P5,000.00 as exemplary damages are DELETED for lack of evidentiary basis. Under circumstances, the Supreme court held that Promm the -Gem has substantial investment which relates to the work to be performed. These factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. 18-02. Under the circumstances prevailing in the instant case, the court cannot consider SAPS as an independent contractor. WHEREFORE, the petition is GRANTED. Procter & Gamble Phils., Inc. and Promm-Gem, Inc. are ORDERED to reinstate their respective employees immediately without loss of seniority rights and with full backwages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of those petitioners considered as its employees, namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F.

Petitioner: Joeb Aliviado et al.

As to PrommGem, there is Job-only Respondent (Principal): contracting. Procter & Gamble As to SAPS, there Contractors: is Labor-only Promm-Gem and SAPS contracting in this case. GR No. 160506

As regards to Promm-Gem, it has authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990. It also has long term assets worth P432,895.28 and current assets of P719,042.32. It maintained its own warehouse and office space with a floor area of 870 square meters. It also had under its name three registered vehicles which were used for its promotional/merchandising business. Promm-Gem also has other clients aside from P&G. The records also show that Promm-Gem supplied its complainant-workers with the relevant materials, such as markers, tapes, liners and cutters, necessary for them to perform their work. Promm-Gem also issued uniforms to them. It already considered the complainants working under it as its regular, not merely contractual or project, employees. This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates on the part of Promm-Gem bad faith and intent to circumvent labor laws which factors have often been tipping points that lead the Court

to strike down the employment practice or agreement concerned as contrary to public policy, morals, good customs or public order.

Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, With SAPS on the other hand, It is clear that SAPS Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz having a paid-in capital of only P31,250 - has no Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, substantial capital. SAPS lack of substantial capital is Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, 36 underlined by the records which show that its payroll for Melencio Casapao, Romeo Vasquez, Renato dela Cruz, its merchandisers alone for one month would already Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, total P44,561.00. P25,000.00 as moral damages plus ten percent of the total sum as and for attorneys fees. It had 6-month contracts with P&G. Yet SAPS failed to show that it could complete the 6-month contracts using its own capital and investment. Its capital is not even sufficient for one months payroll. SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for the period required for it to generate its needed revenue to sustain its operations independently. In the present case, SAPS has failed to show substantial capital. Considering that SAPS has no substantial capital or investment and the workers it recruited are performing activities which are directly related to the principal business of P&G, we find that the former is engaged in "labor-only contracting". SAPS dismissed its employees upon the initiation of P&G. It is evident that SAPS does not carry on its own business because the termination of its contract with P&G automatically meant for it also the termination of its employees services.

SAPS had no other clients and had no intention of seeking other clients in order to further its merchandising business. From all indications SAPS, existed to cater solely to the need of P&G for the supply of employees in the latters merchandising concerns only. Petitioner: Alexander Vinoya Respondent (Principal): Regent Food Corporation Contractor: Peninsula Manpower Company Inc. GR No. 126586 There is laboronly contracting in this case. PMCI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises, among others, to qualify as an independent contractor. While it has an authorized capital stock of P1,000,000.00, only P75,000.00 is actually paidin, which, cannot be considered as substantial capitalization. It did not carry a distinct business free from the control and supervision of RFC. The workers assigned by PMCI to RFC were under the control and supervision of the latter. The work of petitioner as sales representative is directly related to the business of RFC. Being in the business of food manufacturing and sales, it is necessary for RFC to hire a sales representative like petitioner to take charge of booking its sales orders and collecting payments for such. Thus, the work of petitioner as sales representative in RFC can only be categorized as clearly related to, and in the pursuit of the latter's business.The enumeration of the workers as provided into the Contract of Service entered into by RFC and PMCI do not include sales representative to be assigned in RFC. This only shows that petitioner was never intended to be a part of those to be contracted out. The undertaking of PMCI did not involve the performance of a specific job, but rather the supply of manpower only, PMCI clearly conducted itself as laboronly contractor. WHEREFORE, the petition is GRANTED. The decision of the NLRC, dated 21 June 1996, as well as its resolution, promulgated on 20 August 1996, are ANNULLED and SET ASIDE. The decision of the Labor Arbiter, rendered on 15 June 1994, is hereby REINSTATED and AFFIRMED.

Petitioner (Principal): Mariveles shipyard Corp. Respondent: Luis Regondola et.al Contractor: Longest Force Investigation and Security Agency GR No. 144134

There is job-only contracting in this case.

In this case, when petitioner contracted for security services with Longest Force as the security agency that hired private respondents to work as guards for the shipyard corporation, petitioner became an indirect employer of private respondents pursuant to Article 107. Following Article 106, when the agency as contractor failed to pay the guards, the corporation as principal becomes jointly and severally liable for the guards wages. This is mandated by the Labor Code to ensure compliance with its provisions, including payment of statutory minimum wage. The security agency is held liable by virtue of its status as direct employer, while the corporation is deemed the indirect employer of the guards for the purpose of paying their wages in the event of failure of the agency to pay them.

WHEREFORE, the Resolution of the Court of Appeals in CA-G.R. SP No. 55416 is AFFIRMED with MODIFICATION. Petitioner and Longest Force are held liable jointly and severally for underpayment of wages and overtime pay of the security guards, without prejudice to petitioners right of reimbursement from Longest Force Investigation and Security Agency, Inc. The amounts payable to complaining security guards, herein private respondents, by way of total backwages and attorneys fees are hereby set at P3,926,100.40 and P392,610.04, respectively.

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