CASE DIGESTS

Permissible job contracting vis--vis labor-only contracting

The test of independent contractorship: totality of facts and
circumstances
One who claims to be an independent contractor has the burden of
proving substantial capital and/or investment
Independent contractor carries on an independent business
A finding of labor-only contracting creates an employer-employee
relationship between the "principal" and the employee
Abandonment of work must be inferred from the actuations of the
employee
Polyfoam-RGC International Corporation and Precilla A. Gramaje vs.
Edgardo Concepcion
G.R. No. 172349, June 13, 2012
FACTS

Concepcion was hired by Polyfoam as an all-around factory worker and

served as such for almost six years. One day, when Concepcion reported for
work, he discovered that his time card was not in the rack and he was later
informed by the security guard that he could no longer punch his time card.
He was informed by his supervisor that the management decided to dismiss
him due to an infraction of a company rule.
Hence, the filing of a complaint for illegal dismissal.
Gramaje later intervened, claiming to be the real employer of Concepcion.
Gramaje claimed that P.A. Gramaje Employment Services (PAGES) is a
legitimate job contractor who provided some manpower needs of Polyfoam
and that Concepcion was hired as a packer and assigned to Polyfoam. She
claimed no dismissal but that Concepcion simply stopped reporting for
work.
LA found that Concepcion was illegally dismissed and holding Polyfoam and
Gramaje solidarily liable for money claims.
On appeal, NLRC modified the decision by exonerating Polyfoam from
liability and deleting the awards of backwages, 13 th month pay, damages
and attorney's fees. NLRC found Gramaje to be an independent contractor
who had its own office equipment, tools, and substantial capital, and in fact
supplied the plastic containers and carton boxes used by her employees in
performing their duties. NLRC also found that Gramaje paid respondents
wages and benefits and reported the latter to the SSS as a covered
employee.
CA agreed with LA's conclusion that Gramaje is a labor-only contractor
because of the following: (1) Gramaje failed to present its Audited Financial
Statement that would have show its financial standing and ownership of
equipment, machineries, and tools necessary to run her own business; (2)
Gramaje failed to present a single copy of the purported contract with
Polyfoam as to the packaging aspect of the latter's business; (3) Gramaje's
licenses supposedly issued by the DOLE appeared to be spurious; (4)
Gramaje was not registered with DOLE as a private recruitment agency;

and (5) Gramaje presented only one SSS Quarterly Collection List whose
authenticity is doubtful. The CA noted that petitioners are represented by
only one law firm though they made it appear that they were represented by
different lawyers.
ISSUES:
1. Whether or not Gramaje is an independent job contractor
2. Whether or not an employer-employee relationship exists between
Polyfoam and respondent; and
3. Whether or not respondent was illegally dismissed from employment
HELD:
Contracting or subcontracting
Article 106 of the Labor Code explains the relations which may arise
between an employer, a contractor, and the contractor's employees, thus:
Art. 106. Contracting or subcontracting. 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.
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.
The Secretary of Labor and Employment may, by appropriate
regulations, restrict or prohibit the contracting out of labor to protect
the rights of workers established under the 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 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.
In Sasan, Sr. v. National Labor Relations Commission 4th Division,
[41]
the Court distinguished permissible job contracting or subcontracting
from labor-only contracting, to wit:

Permissible job contracting or subcontracting refers to an

arrangement whereby a principal agrees to put out or farm out
to a contractor or subcontractor the performance or completion
of a specific job, work or service within a definite or
predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the
premises of the principal. A person is considered engaged in
legitimate job contracting or subcontracting if the following
conditions concur:
(a) The contractor or subcontractor carries on a
distinct and independent business and undertakes to
perform the job, work or service on its own account
and under its own responsibility according to its own
manner and method, and free from the control and
direction of the principal in all matters connected with
the performance of the work except as to the results
thereof;
(b) The contractor or subcontractor has substantial
capital
or
investment;
and
(c) The agreement between the principal and
contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational
safety and health standards, free exercise of the right
to self-organization, security of tenure, and social and
welfare benefits.
Labor-only Contracting
In contrast, labor-only contracting, a prohibited act, is an
arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or
service for a principal. In labor-only contracting, the following
elements are present:
(a) The contractor or subcontractor does not have
substantial capital or investment to actually perform
the job, work or service under its own account and
responsibility;
and
(b) The employees recruited, supplied or placed by
such contractor or subcontractor are performing
activities which are directly related to the main
business of the principal.[42]
The test of independent contractorship
The test of independent contractorship is whether one claiming to be
an independent contractor has contracted to do the work according to his
own methods and without being subject to the control of the employer,
except only as to the results of the work. [43] In San Miguel Corporation v.
Semillano,[44] the Court laid down the criteria in determining the existence
of an independent and permissible contractor relationship, to wit:

x x x [W]hether or not the contractor is carrying on an

independent business; the nature and extent of the work; the
skill required; the term and duration of the relationship; the
right to assign the performance of a specified piece of work; the
control and supervision of the work to another; the employers
power with respect to the hiring, firing and payment of the
contractors workers; the control of the premises; the duty to
supply the premises, tools, appliances, materials, and labor; and
the mode, manner and terms of payment.[45]
Simply put, the totality of the facts and the surrounding circumstances of
the case are to be considered. Each case must be determined by its own
facts and all the features of the relationship are to be considered.[46]
Gramaje is a labor-only contractor
Applying the foregoing tests, we agree with the CAs conclusion that
Gramaje is not an independent job contractor, but a labor-only contractor.
First, Gramaje has no substantial capital or investment. The
presumption is that a contractor is a labor-only contractor unless he
overcomes the burden of proving that it has substantial capital, investment,
tools, and the like. The employee should not be expected to prove the
negative fact that the contractor does not have substantial capital,
investment and tools to engage in job-contracting.[47]
Gramaje claimed that it has substantial capital of its own as well as
investment in its office, equipment and tools. She pointed out that she
furnished the plastic containers and carton boxes used in carrying out the
function of packing the mattresses of Polyfoam. She added that she had
placed in Polyfoams workplace ten (10) sealing machines, twenty (20) hand
trucks, and two (2) forklifts to enable respondent and the other employees
of Gramaje assigned at Polyfoam to perform their job.Finally, she explained
that she had her own office with her own staff. [48] However, aside from her
own bare statement, neither Gramaje nor Polyfoam presented evidence
showing Gramajes ownership of the equipment and machineries used in the
performance of the alleged contracted job.Considering that these
machineries are found in Polyfoams premises, there can be no other logical
conclusion but that the tools and equipment utilized by Gramaje and her
employees are owned by Polyfoam. Neither did Polyfoam nor Gramaje show
that the latter had clients other than the former. Since petitioners failed to
adduce evidence that Gramaje had any substantial capital, investment or
assets to perform the work contracted for, the presumption that Gramaje is
a labor-only contractor stands.[49]
Second, Gramaje 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,
Polyfoam, its apparent role having been merely to recruit persons to work
for Polyfoam.[50] It is undisputed that respondent had performed his task of
packing Polyfoams foam products in Polyfoams premises. As to the
recruitment of respondent, petitioners were able to establish only that
respondents application was referred to Gramaje, but that is all. Prior to his
termination, respondent had been performing the same job in Polyfoams
business for almost six (6) years. He was even furnished a copy of
Polyfoams Mga Alituntunin at Karampatang Parusa,[51]which embodied

Polyfoams rules on attendance, the manner of performing the employees

duties, ethical standards, cleanliness, health, safety, peace and order. These
rules carried with them the corresponding penalties in case of violation.
While it is true that petitioners submitted the Affidavit of Polyfoams
supervisor Victor Abadia, claiming that the latter did not exercise
supervision over respondent because the latter was not Polyfoams but
Gramajes employee, said Affidavit is insufficient to prove such
claim. Petitioners should have presented the person who they claim to have
exercised supervision over respondent and their alleged other employees
assigned to Polyfoam. It was never established that Gramaje took entire
charge, control and supervision of the work and service agreed upon. And
as aptly observed by the CA, it is likewise highly unusual and suspect as to
the absence of a written contract specifying the performance of a specified
service, the nature and extent of the service or work to be done and the
term and duration of the relationship.[52]
An Employer-Employee Relationship Exists
Between Respondent and Polyfoam
A finding that a contractor is a labor-only contractor, as opposed to
permissible job contracting, is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of
the supposed contractor, and the labor-only contractor is considered as a
mere agent of the principal, the real employer. [53] In this case, Polyfoam is
the principal employer and Gramaje is the labor-only contractor. Polyfoam
and Gramaje are, therefore, solidarily liable for the rightful claims of
respondent.[54]
Respondent was Illegally Dismissed
From Employment
Respondent stated that on January 14, 2000, his time card was suddenly
taken off the rack. His supervisor later informed him that Polyfoams
management decided to dismiss him due to infraction of company rule. In
short, respondent insisted that he was dismissed from employment without
just or lawful cause and without due process. Polyfoam did not offer any
explanation of such dismissal.It, instead, explained that respondents real
employer is Gramaje. Gramaje, on the other hand, denied the claim of illegal
dismissal. She shifted the blame on respondent claiming that the latter in
fact abandoned his work.
The LA gave credence to respondents narration of the circumstances of the
case. Said conclusion was affirmed by the CA. We find no reason to depart
from such findings.
Abandonment cannot be inferred from the actuations of respondent.
When he discovered that his time card was off the rack, he immediately
inquired from his supervisor. He later sought the assistance of his counsel,
who wrote a letter addressed to Polyfoam requesting that he be re-admitted
to work. When said request was not acted upon, he filed the instant illegal
dismissal case. These circumstances clearly negate the intention to abandon
his work.

Petitioners failed to show any valid or authorized cause under the

Labor Code which allowed it to terminate the services of respondent.
Neither was it shown that respondent was given ample opportunity to
contest the legality of his dismissal. No notice of termination was given to
him. Clearly, respondent was not afforded due process. Having failed to
establish compliance with the requirements of termination of employment
under the Labor Code, the dismissal of respondent was tainted with
illegality.[55] Consequently, respondent is entitled to reinstatement without
loss of seniority rights, and other privileges and to his full backwages
inclusive of allowances and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld up to the
time of his actual reinstatement. However, if reinstatement is no longer
feasible as in this case, separation pay equivalent to one month salary for
every year of service shall be awarded as an alternative. [56] Thus, the CA is
correct in affirming the LAs award of separation pay with full backwages
and other monetary benefits.

Legitimate Contracting vs. Labor-only Contracting

When there is labor-only contracting, an employer-employee exists
between the contractual employee and the principal
Even if employees are not performing activities indispensable to the
business of the principal, labor-only contracting may still exist if the
contractor does not demonstrate substantial capital or investment
To determine whether or not there is substantial capital for purposes
of legitimate contracting, one must examine the specific job, work or
service provided in the Service Agreement
The burden of proof that the contractor is a legitimate contractor
rests with the contractor, or in its absence, the principal
Certification from DOLE is not sufficient to prove independent
contractorship
Coca-Cola Bottlers Phils., Inc. vs. Alan M. Agito, et al.
G.R. No. 179546, February 13, 2009
FACTS:
Agito, et al. are salesmen assigned at the Lagro Sales Office of Coca-Cola
for a number of years but were not regularized. Their employment was
terminated without just cause and due process. They filed complaints
against Coca-Cola, Interserve, Peerless Integrated Services, Inc. Better
Builders, Inc., and Excellent Partners, Inc. However, they failed to state a
reason for filing complaints against Interserve, Peerless, Better Builders
and Excellent Partners.
Coca-Cola averred that Agito, et al. were employees of Interserve who were
tasked to perform contracted services in accordance with the provision of
the Contract of Services. The contract covering the period of April 1, 2002
to September 30, 2002 constituted legitimate job contracting.
To prove that Interserve is an independent contractor, Coca-Cola presented
the following: (1) AOI of Interserve; (2) Certificate of Registration of
Interserve with BIR; (3) ITR with Audited Financial Statements of Interserve
for 2001; and (4) Certificate of Registration of Interserve as an independent
contractor issued by DOLE.

As a result, Coca-Cola asserted that Agito, et al. were employees of

Interserve since it was the latter which hired them, paid their wages and
supervised their work, as proven by: (1) PDFs are in the records of
Interserve; (2) Contracts of Temporary Employment with Interserve; and (3)
payroll records of Interserve.
LA found for Coca-Cola and held that Interserve was a legitimate job
contractor. The complaints against Peerless, Better Building and Excellent
Partners was dismissed for failure to pursue the case.
On appeal, NLRC affirmed LA's decision.
CA reversed the NLRC decision and ruled that Interserve was a labor-only
contractor with insufficient capital and investments for the services which it
was contracted to perform. Additionally, CA determined that Coca-Cola had
effective control over the means and method of Agito, et al.'s work as
evidenced by the Daily Sales Monitoring Report, the Conventional Route
System Proposed Set-Up, and the memoranda issued by the supervisor of
petitioner addressed to workers. Respondents' tasks were directly related
and necessary to the main business of Coca-Cola. Finally, certain provisions
of the Contract of Service between Coca-Cola and Interserve suggested that
the latter's undertaking did not involve a specific job but rather the supply
of manpower.
ISSUE: Whether or not Interserve is a legitimate job contractor
HELD:
Legitimate Contracting vs. Labor-Only Contracting
The relations which may arise in a situation, where there is an
employer, a contractor, and employees of the contractor, are identified and
distinguished under Article 106 of the Labor Code:
Article 106. Contractor or subcontractor. - Whenever an
employer enters into a contract with another person for the
performance of the formers work, the employees of the contractor
and of the latters subcontractor, if any, shall be paid in
accordance with the provisions of this Code.
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.
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
restriction, he may make appropriate distinctions between laboronly 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 employee 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.
The afore-quoted provision recognizes two possible relations among
the parties: (1) the permitted legitimate job contract, or (2) the prohibited
labor-only contracting.
A legitimate job contract, wherein an employer enters into a contract
with a job contractor for the performance of the formers work, is permitted
by law. Thus, the employer-employee relationship between the job
contractor and his employees is maintained. In legitimate job contracting,
the law creates an employer-employee relationship between the employer
and the contractors employees only for a limited purpose, i.e., to ensure
that the employees are paid their wages. The employer becomes jointly and
severally liable with the job contractor only for the payment of the
employees wages whenever the contractor fails to pay the same. Other than
that, the employer is not responsible for any claim made by the contractors
employees.[30]
On the other hand, labor-only contracting is an arrangement wherein
the contractor merely acts as an agent in recruiting and supplying the
principal employer with workers for the purpose of circumventing labor law
provisions setting down the rights of employees. It is not condoned by law.A
finding by the appropriate authorities that a contractor is a labor-only
contractor establishes an employer-employee relationship between the
principal employer and the contractors employees and the former becomes
solidarily liable for all the rightful claims of the employees. [31]
Section 5 of the Rules Implementing Articles 106-109 of the Labor
Code, as amended, provides the guidelines in determining whether laboronly contracting exists:
Section 5. Prohibition against labor-only contracting. Laboronly contracting is hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies, or places
workers to perform a job, work or service for a principal, and any
of the following elements are [is] present:
i)
The contractor or subcontractor does not
have substantial capital or investment which relates to the job,
work, or service to be performed and the employees recruited,
supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main
business of the principal; or

ii)
The contractor does not exercise the right to
control the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the
application of Article 248(C) of the Labor Code, as amended.
Substantial capital or investment refers to capital stocks
and subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the
performance or completion of the job, work, or service contracted
out.
The right to control shall refer to the right reversed to the
person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also
the manner and means to be used in reaching that end.
(Emphasis supplied.)
When there is labor-only contracting, there is employeremployee relationship between the principal and the contractual
employee
When there is labor-only contracting, Section 7 of the same
implementing rules, describes the consequences thereof:
Section 7. Existence of an employer-employee relationship.
The contractor or subcontractor shall be considered the employer
of the contractual employee for purposes of enforcing the
provisions of the Labor Code and other social legislation. The
principal, however, shall be solidarily liable with the contractor in
the event of any violation of any provision of the Labor Code,
including the failure to pay wages.
The principal shall be deemed the employer of the
contractual employee in any of the following case, as declared by
a competent authority:
a.
where there is labor-only contracting; or
b.
where the contracting arrangement falls
within the prohibitions provided in Section 6 (Prohibitions)
hereof.
According to the foregoing provision, labor-only contracting would
give rise to: (1) the creation of an employer-employee relationship between
the principal and the employees of the contractor or sub-contractor; and (2)
the solidary liability of the principal and the contractor to the employees in
the event of any violation of the Labor Code.
Even if employees are not performing activities indispensable to the
business of the principal, labor-contracting may still exist if the
contractor does not demonstrate substantial capital or investment
The law clearly establishes an employer-employee relationship between the
principal employer and the contractors employee upon a finding that the

contractor is engaged in labor-only contracting. Article 106 of the Labor

Code categorically states: There is labor-only contracting where the person
supplying workers to an employee 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. Thus, performing activities directly related to the principal
business of the employer is only one of the two indicators that labor-only
contracting exists; the other is lack of substantial capital or investment. The
Court finds that both indicators exist in the case at bar.
Interserve has no substantial capital; it is impossible to measure
whether or not there is substantial capital because the Contract
between Coca-Cola and Interserve does not specify the work or the
project that needs to be performed or completed.
At the outset, the Court clarifies that although Interserve has an authorized
capital stock amounting toP2,000,000.00, only P625,000.00 thereof was
paid up as of 31 December 2001. The Court does not set an absolute figure
for what it considers substantial capital for an independent job contractor,
but it measures the same against the type of work which the contractor is
obligated to perform for the principal. However, this is rendered impossible
in this case since the Contract between petitioner and Interserve does not
even specify the work or the project that needs to be performed or
completed by the latters employees, and uses the dubious phrase tasks and
activities that are considered contractible under existing laws and
regulations. Even in its pleadings, petitioner carefully sidesteps identifying
or describing the exact nature of the services that Interserve was obligated
to render to petitioner. The importance of identifying with particularity the
work or task which Interserve was supposed to accomplish for petitioner
becomes even more evident, considering that the Articles of Incorporation
of Interserve states that its primary purpose is to operate, conduct, and
maintain the business of janitorial and allied services. [39] But respondents
were hired as salesmen and leadman for petitioner. The Court cannot, under
such ambiguous circumstances, make a reasonable determination if
Interserve had substantial capital or investment to undertake the job it was
contracting with petitioner.
Burden of proof of substantial capital rests in the contractor, or in
its absence, the principal claiming it to be an independent
contractor
The contractor, not the employee, has the burden of proof that it has the
substantial capital, investment, and tool to engage in job contracting.
[43]
Although not the contractor itself (since Interserve no longer appealed
the judgment against it by the Labor Arbiter), said burden of proof herein
falls upon petitioner who is invoking the supposed status of Interserve as an
independent job contractor. Noticeably, petitioner failed to submit evidence
to establish that the service vehicles and equipment of Interserve, valued
at P510,000.00 and P200,000.00, respectively, were sufficient to carry out
its service contract with petitioner. Certainly, petitioner could have simply
provided the courts with records showing the deliveries that were
undertaken by Interserve for the Lagro area, the type and number of
equipment necessary for such task, and the valuation of such
equipment. Absent evidence which a legally compliant company could have
easily provided, the Court will not presume that Interserve had sufficient

investment in service vehicles and equipment, especially since respondents

allegation that they were using equipment, such as forklifts and pallets
belonging to petitioner, to carry out their jobs was uncontroverted.
Interserve did not exercise the right to control the performance of
the work of the respondents
The lack of control of Interserve over the respondents can be gleaned from
the Contract of Services between Interserve (as the CONTRACTOR) and
petitioner (as the CLIENT).
Paragraph 3 of the Contract specified that the personnel of contractor
Interserve, which included the respondents, would comply with CLIENT as
well as CLIENTs policies, rules and regulations. It even required Interserve
personnel to subject themselves to on-the-spot searches by petitioner or its
duly authorized guards or security men on duty every time the said
personnel entered and left the premises of petitioner. Said paragraph
explicitly established the control of petitioner over the conduct of
respondents. Although under paragraph 4 of the same Contract, Interserve
warranted that it would exercise the necessary and due supervision of the
work of its personnel, there is a dearth of evidence to demonstrate the
extent or degree of supervision exercised by Interserve over respondents or
the manner in which it was actually exercised. There is even no showing
that Interserve had representatives who supervised respondents work while
they were in the premises of petitioner.
Also significant was the right of petitioner under paragraph 2 of the
Contract
to
request
the
replacement
of
the
CONTRACTORS
personnel. True, this right was conveniently qualified by the phrase if from
its judgment, the jobs or the projects being done could not be completed
within the time specified or that the quality of the desired result is not being
achieved, but such qualification was rendered meaningless by the fact that
the Contract did not stipulate what work or job the personnel needed to
complete, the time for its completion, or the results desired. The said
provision left a gap which could enable petitioner to demand the removal or
replacement of any employee in the guise of his or her inability to complete
a project in time or to deliver the desired result. The power to recommend
penalties or dismiss workers is the strongest indication of a companys right
of control as direct employer.[46]
Paragraph 4 of the same Contract, in which Interserve warranted to
petitioner that the former would provide relievers and replacements in case
of absences of its personnel, raises another red flag. An independent job
contractor, who is answerable to the principal only for the results of a
certain work, job, or service need not guarantee to said principal the daily
attendance of the workers assigned to the latter. An independent job
contractor would surely have the discretion over the pace at which the work
is performed, the number of employees required to complete the same, and
the work schedule which its employees need to follow.
As the Court previously observed, the Contract of Services between
Interserve and petitioner did not identify the work needed to be performed
and the final result required to be accomplished. Instead, the Contract
specified the type of workers Interserve must provide petitioner (Route
Helpers, Salesmen, Drivers, Clericals, Encoders & PD) and their
qualifications (technical/vocational course graduates, physically fit, of good

moral character, and have not been convicted of any crime). The Contract
also states that, to carry out the undertakings specified in the immediately
preceding paragraph, the CONTRACTOR shall employ the necessary
personnel, thus, acknowledging that Interserve did not yet have in its
employ the personnel needed by petitioner and would still pick out such
personnel based on the criteria provided by petitioner. In other words,
Interserve did not obligate itself to perform an identifiable job, work, or
service for petitioner, but merely bound itself to provide the latter with
specific types of employees. These contractual provisions strongly indicated
that Interserve was merely a recruiting and manpower agency providing
petitioner with workers performing tasks directly related to the latters
principal business.
Certification issued by DOLE is not sufficient to prove independent
contractorship
The certification issued by the DOLE stating that Interserve is an
independent job contractor does not sway this Court to take it at face value,
since the primary purpose stated in the Articles of Incorporation [47] of
Interserve is misleading. According to its Articles of Incorporation, the
principal business of Interserve is to provide janitorial and allied
services. The delivery and distribution of Coca-Cola products, the work for
which respondents were employed and assigned to petitioner, were in no
way allied to janitorial services. While the DOLE may have found that the
capital and/or investments in tools and equipment of Interserve were
sufficient for an independent contractor for janitorial services, this does not
mean that such capital and/or investments were likewise sufficient to
maintain an independent contracting business for the delivery and
distribution of Coca-Cola products.

Avelino S. Alilin, et al. vs. Petron Corporation

G.R. No. 177592, June 9, 2014
FACTS:
Alilin, et al. are laborers hired by Romualdo D. Gindang Contractor and
RDG to work in the premises of Petron's bulk plant. Their dates of hiring
range from 1968 to 1993. In 2000, Petron and RDG entered into a Contract
of Services for the period June 1, 2000 to May 31, 2002 whereby RDG
undertook to provide Petron with janitorial, maintenance, tanker receiving,
packaging and other utility services in its Mandaue Bulk Plant. This
contract was extended on July 31, 2002 and further extended until
September 30, 2002. Upon expiration, no further extension was made. Thus,
on October 16, 2002, Alilin, et al. were barred from continuing their
services with Petron.
Hence, the filing of a complaint for illegal dismissal, etc. against Petron,
claiming to be the latter's regular employees. Petron, on the other hand,
alleges that they are employees of RDG, an independent contractor. It
presented the following pieces of evidence: (1) RDG's Certificate of
Registration of Business Name issued by DTI; (2) RDG's Certificate of
Registration issued by DOLE; (3) Contractor's Pre-Qualification Statement;
(4) Conflict of Interest Statement signed by Romeo Gindang as manager of
RDG; (5) RDG's Audited Financial Statements for the years 1998, 1999 and

2000; (6) RDG's Mayor's Permit for the years 2000 and 2001; (7) RDG's
Certificate of Accreditation issued by DTI; (8) performance bond and
insurance policy; (9) SSS Online Inquiry System Employee Contributions
and Employee Static Information; and (10) Romeo's affidavit stating that he
had paid the salaries of his employees assigned to Petron.
LA found against Petron and ruled that Alilin, et al. are its regular
employees because their jobs were directly related to Petron's business
operations; they worked under the supervision of Petron's foreman; they
were using Petron's tools and equipment in the performance of their works.
NLRC affirmed the ruling. However, CA reversed the ruling and found RDG
to be a legitimate contractor.
ISSUE: Whether or not RDG is a legitimate contractor
HELD: