G.R. No. 170734. May 14, 2008.
008.* three union members in amounts proportional to the service they actually rendered
ARCO METAL PRODUCTS CO., INC., and MRS. SALVADOR UY,
petitioners, vs. SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-
NAFLU (SAMARM-NAFLU), respondent.
Labor Law; Benefits; Any benefit and supplement being enjoyed by employees
cannot be reduced, diminished, discontinued or eliminated by the employer;
Jurisprudence is replete with cases which recognize the right of employees to
benefits which were voluntarily given by the employer and which ripened into
company practice.
Any benefit and supplement being enjoyed by employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-
diminution of benefits is founded on the Constitutional mandate to protect the rights
of workers and promote their welfare, and to afford labor full protection. Said
mandate in turn is the basis of Article 4 of the Labor Code which states that all
doubts in the implementation and interpretation of this Code, including its
implementing rules and regulations shall be rendered in favor of labor.
Jurisprudence is replete with cases which recognize the right of employees to
benefits which were voluntarily given by the employer and which ripened into
company practice.
Same; Same; Jurisprudence has not laid down any rule specifying a minimum
number of years within which a company practice must be exercised in order to
constitute voluntary company practice.In the years 1992, 1993, 1994, 1999, 2002
and 2003, petitioner had adopted a policy of freely, voluntarily and consistently
granting full benefits to its employees regardless of the length of service rendered.
True, there were only a total of seven employees who benefited from such a practice,
but it was an established practice nonetheless. Jurisprudence has not laid down any
rule specifying a minimum number of years within which a company practice must
be exercised in order to constitute voluntary company practice. Thus, it can be six (6)
years, three (3) years, or even as short as two (2) years.
TINGA, J.:
This treats of the Petition for Review[1] of the Resolution[2] and Decision[3] of the
Court of Appeals dated 9 December 2005 and 29 September 2005, respectively
in CA-G.R. SP No. 85089 entitled
Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v.
Arco Metal Products Co., Inc. and/or Mr. Salvador Uy/Accredited Voluntary
Arbitrator Apron M. Mangabat,[4] which ruled that the 13th month pay, vacation
leave and sick leave conversion to cash shall be paid in full to the employees of
petitioner regardless of the actual service they rendered within a year.
Petitioner is a company engaged in the manufacture of metal products, whereas
respondent is the labor union of petitioners rank and file employees. Sometime in
December 2003, petitioner paid the 13th month pay, bonus, and leave encashment of
1
in a year, which is less than a full twelve (12) months. The employees were:
1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004
2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003
3. Rodelio Collantes Sickness August 2003 to February 2004
Respondent protested the prorated scheme, claiming that on several occasions
petitioner did not prorate the payment of the same benefits to seven (7) employees
who had not served for the full 12 months. The payments were made in 1992, 1993,
1994, 1996, 1999, 2003, and 2004. According to respondent, the prorated payment
violates the rule against diminution of benefits under Article 100 of the Labor Code.
Thus, they filed a complaint before the National Conciliation and Mediation Board
(NCMB). The parties submitted the case for voluntary arbitration.
The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and
found that the giving of the contested benefits in full, irrespective of the actual
service rendered within one year has not ripened into a practice. He noted the
affidavit of Joselito Baingan, manufacturing group head of petitioner, which states
that the giving in full of the benefit was a mere error. He also interpreted the phrase
for each year of service found in the pertinent CBA provisions to mean that an
employee must have rendered one year of service in order to be entitled to the full
benefits provided in the CBA.[5]
Unsatisfied, respondent filed a Petition for Review[6] under Rule 43 before the
Court of Appeals, imputing serious error to Mangabats conclusion. The Court of
Appeals ruled that the CBA did not intend to foreclose the application of prorated
payments of leave benefits to covered employees. The appellate court found that
petitioner, however, had an existing voluntary practice of paying the aforesaid
benefits in full to its employees, thereby rejecting the claim that petitioner erred in
paying full benefits to its seven employees. The appellate court noted that aside
from the affidavit of petitioners officer, it has not presented any evidence in support
of its position that it has no voluntary practice of granting the contested benefits in
full and without regard to the service actually rendered within the year. It also
questioned why it took petitioner eleven (11) years before it was able to discover the
alleged error. The dispositive portion of the courts decision reads:
WHEREFORE, premises considered, the instant petition is hereby
GRANTED and the Decision of Accredited Voluntary Arbiter Apron M. Mangabat
in NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 is hereby AFFIRMED
WITH MODIFICATION in that the 13th month pay, bonus, vacation leave and sick
leave conversions to cash shall be paid to the employees in full, irrespective of the
actual service rendered within a year.[7]
Petitioner moved for the reconsideration of the decision but its motion was
denied, hence this petition.
Petitioner submits that the Court of Appeals erred when it ruled that the grant
of 13th month pay, bonus, and leave encashment in full regardless of actual service
rendered constitutes voluntary employer practice and, consequently, the prorated
payment of the said benefits does not constitute diminution of benefits under Article
100 of the Labor Code.[8]
 The petition ultimately fails.
First, we determine whether the intent of the CBA provisions is to grant full
benefits regardless of service actually rendered by an employee to the company.
According to petitioner, there is a one-year cutoff in the entitlement to the benefits
provided in the CBA which is evident from the wording of its pertinent provisions as
well as of the existing law.
We agree with petitioner on the first issue. The applicable CBA provisions read:
ARTICLE XIV-VACATION LEAVE
Section 1. Employees/workers covered by this agreement who have
rendered at least one (1) year of service shall be entitled to sixteen (16) days
vacation leave with pay for each year of service. Unused leaves shall not be
cumulative but shall be converted into its cash equivalent and shall become due and
payable every 1st Saturday of December of each year.
However, if the 1st Saturday of December falls in December 1, November
30 (Friday) being a holiday, the management will give the cash conversion of leaves
in November 29.
Section 2. In case of resignation or retirement of an employee, his vacation
leave shall be paid proportionately to his days of service rendered during the year.
ARTICLE XV-SICK LEAVE
Section 1. Employees/workers covered by this agreement who have
rendered at least one (1) year of service shall be entitled to sixteen (16) days of sick
leave with pay for each year of service. Unused sick leave shall not be cumulative
but shall be converted into its cash equivalent and shall become due and payable
every 1st Saturday of December of each year.
Section 2. Sick Leave will only be granted to actual sickness duly certified by
the Company physician or by a licensed physician.
Section 3. All commutable earned leaves will be paid proportionately upon
retirement or separation.
ARTICLE XVI EMERGENCY LEAVE, ETC.
Section 1. The Company shall grant six (6) days emergency leave to
employees covered by this agreement and if unused shall be converted into cash and
become due and payable on the 1st Saturday of December each year.
Section 2. Employees/workers covered by this agreement who have rendered
at least one (1) year of service shall be entitled to seven (7) days of Paternity Leave
with pay in case the married employees legitimate spouse gave birth. Said benefit
shall be non-cumulative and non-commutative and shall be deemed in compliance
with the law on the same.
Section 3. Maternity leaves for married female employees shall be in
accordance with the SSS Law plus a cash grant of P1,500.00 per month.
xxx
ARTICLE XVIII- 13TH MONTH PAY & BONUS
Section 1. The Company shall grant 13th Month Pay to all employees
covered by this agreement. The basis of computing such pay shall be the basic salary
2
per day of the employee multiplied by 30 and shall become due and payable every
1st Saturday of December.
Section 2. The Company shall grant a bonus to all employees as practiced
which shall be distributed on the 2nd Saturday of December.
Section 3. That the Company further grants the amount of Two Thousand
Five Hundred Pesos (P2,500.00) as signing bonus plus a free CBA Booklet.[9]
(Underscoring ours)
There is no doubt that in order to be entitled to the full monetization of sixteen (16)
days of vacation and sick leave, one must have rendered at least one year of service.
The clear wording of the provisions does not allow any other interpretation. Anent
the 13th month pay and bonus, we agree with the findings of Mangabat that the
CBA provisions did not give any meaning different from that given by the law, thus
it should be computed at 1/12 of the total compensation which an employee receives
for the whole calendar year. The bonus is also equivalent to the amount of the 13th
month pay given, or in proportion to the actual service rendered by an employee
within the year.
On the second issue, however, petitioner founders.
As a general rule, in petitions for review under Rule 45, the Court, not being a trier
of facts, does not normally embark on a re-examination of the evidence presented by
the contending parties during the trial of the case considering that the findings of
facts of the Court of Appeals are conclusive and binding on the Court.[10] The rule,
however, admits of several exceptions, one of which is when the findings of the
Court of Appeals are contrary to that of the lower tribunals. Such is the case here, as
the factual conclusions of the Court of Appeals differ from that of the voluntary
arbitrator.
Petitioner granted, in several instances, full benefits to employees who have not
served a full year, thus:
Name Reason Duration
1. Percival Bernas Sickness July 1992 to November 1992
2. Cezar Montero Sickness 21 Dec. 1992 to February 1993
3. Wilson Sayod Sickness May 1994 to July 1994
4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996
5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999
6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003
7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 2003[11]
Petitioner claims that its full payment of benefits regardless of the length of service
to the company does not constitute voluntary employer practice. It points out that
the payments had been erroneously made and they occurred in isolated cases in the
years 1992, 1993, 1994, 1999, 2002 and 2003. According to petitioner, it was only
in 2003 that the accounting department discovered the error when there were
already three (3) employees involved with prolonged absences and the error was
corrected by implementing the pro-rata payment of benefits pursuant to law and their
existing CBA.[12] It adds that the seven earlier cases of full payment of benefits
went unnoticed considering the proportion of one employee concerned (per year)
vis vis the 170 employees of the company. Petitioner describes the situation as a 5. 13th month pay, bonus, and cash conversion of unused/earned vacation leave, sick
clear oversight which should not be taken against it.[13] To further bolster its case, leave and emergency leave are computed and paid in full to employees who
petitioner argues that for a grant of a benefit to be considered a practice, it should rendered services to the company for the entire year and proportionately to those
have been practiced over a long period of time and must be shown to be consistent, employees who rendered service to the company for a period less than one (1) year
deliberate and intentional, which is not what happened in this case. Petitioner tries to or twelve (12) months in accordance with the CBA provision relative thereto.
make a case out of the fact that the CBA has not been modified to incorporate the 6. It was never the intention much less the policy of the management to grant the
giving of full benefits regardless of the length of service, proof that the grant has not aforesaid benefits to the employees in full regardless of whether or not the employee
ripened into company practice. has rendered services to the company for the entire year, otherwise, it would be
We disagree. unjust and inequitable not only to the company but to other employees as well.[24]
Any benefit and supplement being enjoyed by employees cannot be reduced, In cases involving money claims of employees, the employer has the burden
diminished, discontinued or eliminated by the employer.[14] The principle of non- of proving that the employees did receive the wages and benefits and that
diminution of benefits is founded on the Constitutional mandate to "protect the the same were paid in accordance with law.[25]
rights of workers and promote their welfare,[15] and to afford labor full
protection.[16] Said mandate in turn is the basis of Article 4 of the Labor Code Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it
which states that all doubts in the implementation and interpretation of this Code, could have easily presented other proofs, such as the names of other employees
including its implementing rules and regulations shall be rendered in favor of labor. who did not fully serve for one year and thus were given prorated benefits.
Jurisprudence is replete with cases which recognize the right of employees to Experientially, a perfect attendance in the workplace is always the goal but it is
benefits which were voluntarily given by the employer and which ripened into seldom achieved. There must have been other employees who had reported for work
company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, less than a full year and who, as a consequence received only prorated benefits.
et al.[17] where an employer had freely and continuously included in the This could have easily bolstered petitioners theory of mistake/error, but sadly, no
computation of the 13th month pay those items that were expressly excluded by the evidence to that effect was presented.
law, we held that the act which was favorable to the employees though not IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of
conforming to law had thus ripened into a practice and could not be withdrawn, Appeals in CA-G.R. SP No. 85089 dated 29 September 2005 is and its Resolution
reduced, diminished, discontinued or eliminated. In Sevilla Trading Company v. dated 9 December 2005 are hereby AFFIRMED.
Semana,[18] we ruled that the employers act of including non-basic benefits in the SO ORDERED.
computation of the 13th month pay was a voluntary act and had ripened into a
company practice which cannot be peremptorily withdrawn. Meanwhile in Davao
Integrated Port Stevedoring Services v. Abarquez,[19] the Court ordered the
payment of the cash equivalent of the unenjoyed sick leave benefits to its intermittent
workers after finding that said workers had received these benefits for almost four
years until the grant was stopped due to a different interpretation of the CBA
provisions. We held that the employer cannot unilaterally withdraw the existing
privilege of commutation or conversion to cash given to said workers, and as also
noted that the employer had in fact granted and paid said cash equivalent of the
unenjoyed portion of the sick leave benefits to some intermittent workers.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy
of freely, voluntarily and consistently granting full benefits to its employees
regardless of the length of service rendered. True, there were only a total of seven
employees who benefited from such a practice, but it was an established practice
nonetheless. Jurisprudence has not laid down any rule specifying a minimum number
of years within which a company practice must be exercised in order to constitute
voluntary company practice.[20] Thus, it can be six (6) years,[21] three (3)
years,[22] or even as short as two (2) years.[23] Petitioner cannot shirk away from its
responsibility by merely claiming that it was a mistake or an error, supported only
by an affidavit of its manufacturing group head portions of which read:
3
 G.R. No. 158255. July 8, 2004.*
MANILA WATER COMPANY, INC., petitioner, vs. HERMINIO D. PENA,
ESTEBAN B. BALDOZA, JORGE D. CANONIGO, JR., IKE S. DELFIN,
RIZALINO M. INTAL, REY T. MANLEGRO, JOHN L. MARTEJA,
MARLON B. MORADA, ALLAN D. ESPINA, EDUARDO ONG, AGNESIO D.
QUEBRAL, EDMUNDO B. VICTA, VICTOR C. ZAFARALLA, EDILBERTO
C. PINGUL and FEDERICO M. RIVERA, respondents.
Actions; Pleading and Practice; Certiorari; Factual findings of quasi-judicial bodies
like the NLRC, particularly when they coincide with those of the Labor Arbiter and
if supported by substantial evidence, are accorded respect and even finality by this
Court.The issue of whether or not an employer-employee relationship exists in a
given case is essentially a question of fact. As a rule, the Supreme Court is not a trier
of facts, and this applies with greater force in labor cases. Hence, factual findings of
quasi-judicial bodies like the NLRC, particularly when they coincide with those of
the Labor Arbiter and if supported by substantial evidence, are accorded respect and
even finality by this Court. However, a disharmony between the factual findings of
the Labor Arbiter and the National Labor Relations Commission opens the door to a
review thereof by this Court. Factual findings of administrative agencies are not
infallible and will be set aside when they fail the test of arbitrariness. Moreover,
when the findings of the National Labor Relations Commission contradict with those
of the labor arbiter, this Court, in the exercise of its equity jurisdiction, may look into
the records of the case and reexamine the questioned findings.
Labor Law; Employment; Job Contracting; Requisites; Job contracting is permissible
only if the following conditions are met.Job contracting is permissible only if the
following conditions are met: 1) 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 as to the results thereof; and 2) the 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 the business.
Same; Same; Labor-Only Contracting; Elements; The following elements must be
present.Labor-only contracting as defined in Section 5, Department Order No.
18-02, Rules Implementing Articles 106-109 of the Labor Code refers to an
arrangement where the contractor or subcontractor merely recruits, supplies or places
workers to perform job, work or service for a principal, and any of the following
elements 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;
4
or (ii) The contractor does not exercise the right to control over the performance of
the work of the contractual employee.
Same; Same; Employer-Employee Relationship; Four-Fold Test; The elements to
determine the existence of an employment relationship are as follows.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 employers power to control the employees conduct. The
most important element is the employers control of the employees conduct, not
only as to the result of the work to be done, but also as to the means and methods to
accomplish it.
YNARES-SANTIAGO, J.:
This petition assails the decision[1] of the Court of Appeals dated November 29,
2002, in CA-G.R. SP No. 67134, which reversed the decision of the National Labor
Relations Commission and reinstated the decision of the Labor Arbiter with
modification.
Petitioner Manila Water Company, Inc. is one of the two private concessionaires
contracted by the Metropolitan Waterworks and Sewerage System (MWSS) to
manage the water distribution system in the East Zone of Metro Manila, pursuant to
Republic Act No. 8041, otherwise known as the National Water Crisis Act of 1995.
Under the Concession Agreement, petitioner undertook to absorb former employees
of the MWSS whose names and positions were in the list furnished by the latter,
while the employment of those not in the list was terminated on the day petitioner
took over the operation of the East Zone, which was on August 1, 1997. Private
respondents, being contractual collectors of the MWSS, were among the 121
employees not included in the list; nevertheless, petitioner engaged their services
without written contract from August 1, 1997 to August 31, 1997. Thereafter, on
September 1, 1997, they signed a three-month contract to perform collection services
for eight branches of petitioner in the East Zone.[2]
Before the end of the three-month contract, the 121 collectors incorporated the
Association Collectors Group, Inc. (ACGI),[3] which was contracted by petitioner to
collect charges for the Balara Branch. Subsequently, most of the 121 collectors were
asked by the petitioner to transfer to the First Classic Courier Services, a newly
registered corporation. Only private respondents herein remained with ACGI.
Petitioner continued to transact with ACGI to do its collection needs until February
8, 1999, when petitioner terminated its contract with ACGI.[4]
Private respondents filed a complaint for illegal dismissal and money claims against
petitioner, contending that they were petitioners employees as all the methods and
procedures of their collections were controlled by the latter.
On the other hand, petitioner asserts that private respondents were employees of
ACGI, an independent contractor. It maintained that it had no control and
supervision over private respondents manner of performing their work except as to
the results. Thus, petitioner did not have an employer-employee relationship with the
private respondents, but only a service contractor-client relationship with ACGI.
On May 31, 2000, Labor Arbiter Eduardo J. Carpio rendered a decision finding the
dismissal of private respondents illegal. He held that private respondents were
regular employees of petitioner not only because the tasks performed by them were
controlled by it but, also, the tasks were obviously necessary and desirable to
petitioners principal business. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, finding that
complainants were employees of respondent [petitioner herein], that they were
illegally dismissed, and respondent [petitioner herein] is hereby ordered to pay their
separation pay based on the following computed amounts:
HERMINIO D. PENA P15,000.00
ESTEBAN BALDOZA P12,000.00
JORGE D. CANONIGO, JR. P16,000.00
IKE S. DELFIN P12,000.00
RIZALINO M. INTAL P16,000.00
REY T. MANLEGRO P16,000.00
JOHN L. MARTEJA P12,000.00
MARLON B. MORADA P16,000.00
ALLAN D. ESPINA P14,000.00
EDUARDO ONG P15,000.00
AGNESIO D. QUEBRAL P16,000.00
EDMUNDO B. VICTA P13,000.00
VICTOR P. ZAFARALLA P15,000.00
EDILBERTO C. PINGUL P19,500.00
FEDERICO M. RIVERA P15,000.00
-------------------------------
TOTAL P222,500.00
Respondent [petitioner herein] is further directed to pay ten (10%) percent of the
total award as attorneys fee or the sum of P22,250.00.
SO ORDERED.[5]
Both parties appealed to the NLRC, which reversed the decision of the Labor Arbiter
and ruled that the documentary evidence, e.g., letters and memoranda by the
petitioner to ACGI regarding the poor performance of the collectors, did not
constitute proof of control since these documents merely identified the erring
collectors; the appropriate disciplinary actions were left to the corporation to
5
impose.[6] Further, there was no evidence showing that the incorporation of ACGI
was irregular.
Private respondents filed a petition for certiorari with the Court of Appeals,
contending that the NLRC acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it reversed the decision of the Labor Arbiter.
The Court of Appeals reversed the decision of the NLRC and reinstated with
modification the decision of the Labor Arbiter.[7] It held that petitioner deliberately
prevented the creation of an employment relationship with the private respondents;
and that ACGI was not an independent contractor. It likewise denied petitioners
motion for reconsideration.[8]
Hence, this petition for review raising the following errors:
THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED
DECISION AND RESOLUTION COMMITTED GRAVE REVERSIBLE
ERRORS:
A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO GIVE
DUE COURSE TO RESPONDENTS PETITION FOR CERTIORARI UNDER
RULE 65 OF THE RULES OF COURT, NOTWITHSTANDING THE ABSENCE
OF ANY PROOF OF GRAVE ABUSE OF DISCRETION ON THE PART OF THE
NATIONAL LABOR RELATIONS COMMISSION WHEN IT RENDERED THE
DECISION ASSAILED BY HEREIN RESPONDENTS.
B. WHEN IT MANIFESTLY OVERLOOKED THE EVIDENCE PRESENTED BY
THE PETITIONER COMPANY AND RULING THAT THE PETITIONERS
DEFENSE OF LACK OF EMPLOYER-EMPLOYEE RELATIONS IS WITHOUT
MERIT.
C. IN CONCLUDING THAT PETITIONER COMPANY REQUIRED
RESPONDENTS TO INCORPORATE THE ASSOCIATED COLLECTORS
GROUP, INC. [ACGI] NOTWITHSTANDING ABSENCE OF ANY SPECIFIC
EVIDENCE IN SUPPORT OF THE SAME.
D. IN FINDING PETITIONER COMPANY GUILTY OF BAD FAITH
NOTWITHSTANDING ABSENCE OF ANY SPECIFIC EVIDENCE IN
SUPPORT OF THE SAME, AND AWARDING MORAL AND EXEMPLARY
DAMAGES TO HEREIN RESPONDENTS.[9]
The pivotal issue to be resolved in this petition is whether or not there exists an
employer-employee relationship between petitioner and private respondents.
Corollary thereto is the issue of whether or not private respondents were illegally
dismissed by petitioner.

The issue of whether or not an employer-employee relationship exists in a given case
is essentially a question of fact.[10] As a rule, the Supreme Court is not a trier of
facts, and this applies with greater force in labor cases. Hence, factual findings of
quasi-judicial bodies like the NLRC, particularly when they coincide with those of
the Labor Arbiter and if supported by substantial evidence, are accorded respect and
even finality by this Court.[11] However, a disharmony between the factual findings
of the Labor Arbiter and the National Labor Relations Commission opens the door to
a review thereof by this Court. Factual findings of administrative agencies are not
infallible and will be set aside when they fail the test of arbitrariness. Moreover,
when the findings of the National Labor Relations Commission contradict with those
of the labor arbiter, this Court, in the exercise of its equity jurisdiction, may look into
the records of the case and reexamine the questioned findings.[12]
The resolution of the foregoing issues initially boils down to a determination of the
true status of ACGI, i.e., whether it is an independent contractor or a labor-only
contractor.
Petitioner asserts that ACGI, a duly organized corporation primarily engaged in
collection services, is an independent contractor which entered into a service contract
for the collection of petitioners accounts starting November 30, 1997 until the early
part of February 1999. Thus, it has no employment relationship with private
respondents, being employees of ACGI.
The existence of an employment relationship between petitioner and private
respondents cannot be negated by simply alleging that the latter are employees of
ACGI as an independent contractor, it being crucial that ACGIs status, whether as
labor-only contractor or independent contractor, be measured in terms of and
determined by the criteria set by statute.
The case of De los Santos v. NLRC[13] succinctly enunciates this statutory criteria
Job contracting is permissible only if the following conditions are met: 1) 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 as to the results thereof; and 2)
the 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 the business.
Labor-only contracting as defined in Section 5, Department Order No. 18-02, Rules
Implementing Articles 106-109 of the Labor Code[14] refers to an arrangement
where the contractor or subcontractor merely recruits, supplies or places workers to
6
perform job, work or service for a principal, and any of the following elements 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 over the performance of the
work of the contractual employee.
Given the above criteria, we agree with the Labor Arbiter that ACGI was not an
independent contractor.
First, 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 paid-in, which cannot be considered substantial
capitalization. The 121 collectors subscribed to four shares each and paid only the
amount of P625.00 in order to comply with the incorporation requirements.[15]
Further, private respondents reported daily to the branch office of the petitioner
because ACGI has no office or work premises. In fact, the corporate address of
ACGI was the residence of its president, Mr. Herminio D. Pea.[16] Moreover, in
dealing with the consumers, private respondents used the receipts and identification
cards issued by petitioner.[17]
Second, the work of the private respondents was directly related to the principal
business or operation of the petitioner. Being in the business of providing water to
the consumers in the East Zone, the collection of the charges therefor by private
respondents for the petitioner can only be categorized as clearly related to, and in the
pursuit of the latters business.
Lastly, ACGI 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, petitioner. Prior to private respondents alleged
employment with ACGI, they were already working for petitioner, subject to its rules
and regulations in regard to the manner and method of performing their tasks. This
form of control and supervision never changed although they were already under the
seeming employ of ACGI. Petitioner issued memoranda regarding the billing
methods and distribution of books to the collectors;[18] it required private
respondents to report daily and to remit their collections on the same day to the
branch office or to deposit them with Bank of the Philippine Islands; it monitored
strictly their attendance as when a collector cannot perform his daily collection, he
must notify petitioner or the branch office in the morning of the day that he will be
absent; and although it was ACGI which ultimately disciplined private respondents,
the penalty to be imposed was dictated by petitioner as shown in the letters it sent to
ACGI specifying the penalties to be meted on the erring private respondents.[19]
These are indications that ACGI was not left alone in the supervision and control of
its alleged employees. Consequently, it can be concluded that ACGI was not an
independent contractor since it did not carry a distinct business free from the control
and supervision of petitioner.
Under this factual milieu, there is no doubt that ACGI was engaged in labor-only
contracting, and as such, is considered merely an agent of the petitioner. In labor-
only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: 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.[20] Since ACGI is only a labor-only contractor,
the workers it supplied should be considered as employees of the petitioner.
Even the four-fold test will show that petitioner is the employer of private
respondents. 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 employers power to control the employees
conduct. The most important element is the employers control of the employees
conduct, not only as to the result of the work to be done, but also as to the means and
methods to accomplish it.[21]
We agree with the Labor Arbiter that in the three stages of private respondents
services with the petitioner, i.e., (1) from August 1, 1997 to August 31, 1997; (2)
from September 1, 1997 to November 30, 1997; and (3) from December 1, 1997 to
February 8, 1999, the latter exercised control and supervision over the formers
conduct.
Petitioner contends that the employment of private respondents from August 1, 1997
to August 30, 1997 was only temporary and done to accommodate their request to be
absorbed since petitioner was still undergoing a transition period. It was only when
its business became settled that petitioner employed private respondents for a fixed
term of three months.
Although petitioner was not obliged to absorb the private respondents, by engaging
their services, paying their wages in the form of commission, subjecting them to its
rules and imposing punishment in case of breach thereof, and controlling not only
the end result but the manner of achieving the same as well, an employment
relationship existed between them.
Notably, private respondents performed activities which were necessary or desirable
to its principal trade or business. Thus, they were regular employees of petitioner,
7
regardless of whether the engagement was merely an accommodation of their
request, pursuant to Article 280 of the Labor Code which reads:
The provisions of written agreement to the contrary notwithstanding and regardless
of the oral agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where
the employment has been fixed for a specific project or undertaking the completion
or termination of which has been determined at the time of the engagement of the
employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.
As such regular employees, private respondents are entitled to security of tenure
which may not be circumvented by mere stipulation in a subsequent contract that
their employment is one with a fixed period. While this Court has upheld the legality
of fixed-term employment, where from the circumstances it is apparent that the
periods have been imposed to preclude acquisition of tenurial security by the
employee, they should be struck down or disregarded as contrary to public policy
and morals.[22]
In the case at bar, we find that the term fixed in the subsequent contract was used to
defeat the tenurial security which private respondents already enjoy. Thus, we concur
with the Labor Arbiter, as affirmed by the Court of Appeals, when it held that:
The next question if whether, with respect to the period, the individual contracts are
valid. Not all contracts of employment fixing a period are invalid. Under Article 280,
the evil sought to be prevented is singled out: agreements entered into precisely to
circumvent security of tenure. It has no application where a fixed period of
employment was agreed upon knowingly and voluntarily by the parties, without any
force, duress or improper pressure being brought upon the employee and absent any
circumstances vitiating his consent, or where it satisfactorily appears that the
employer and employee dealt with each other on more or less terms with no moral
dominance whatever being exercised by the former over the latter. That is the
doctrine in Brent School, Inc. v. Zamora, 181 SCRA 702. The individual contracts in
question were prepared by MWC in the form of the letter addressed to complainants.
The letter-contract is dated September 1, 1997, when complainants were already
working for MWC as collectors. With their employment as their means of survival,
there was no room then for complainants to disagree with the presented letter-
contracts. Their choice then was not to negotiate for the terms of the contract but to
lose or not to lose their employment employment which they already had at that
time. The choice is obvious, as what they did, to sign the ready made letter-contract
to retain their employment, and survive. It is a defiance of the teaching in Brent
School, Inc. v. Zamora if this Office rules that the individual contracts in question
are valid, so, in deference to Brent School ruling, this Office rules they are null and
void.[23]
In view of the foregoing, we hold that an employment relationship exists between
petitioner and private respondents. We now proceed to ascertain whether private
respondents were dismissed in accordance with law.
As private respondents employer, petitioner has the burden of proving that the
dismissal was for a cause allowed under the law and that they were afforded
procedural due process.[24] Petitioner failed to discharge this burden by substantial
evidence as it maintained the defense that it was not the employer of private
respondents. Having established that the schemes employed by petitioner were
devious attempts to defeat the tenurial rights of private respondents and that it failed
to comply with the requirements of termination under the Labor Code, the dismissal
of the private respondent is tainted with illegality.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed from
work 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 from
him up to the time of his actual reinstatement. However, if reinstatement is no longer
possible, the employer has the alternative of paying the employee his separation pay
in lieu of reinstatement.[25]
This Court however cannot sustain the award of moral and exemplary damages in
favor of private respondents. Such an award cannot be justified solely upon the
premise that the employer dismissed his employee without just cause or due process.
Additional facts must be pleaded and proved to warrant the grant of moral damages
under the Civil Code. The act of dismissal must be attended with bad faith, or fraud,
or was oppressive to labor or done in a manner contrary to morals, good customs or
public policy and, of course, that social humiliation, wounded feelings, or grave
anxiety resulted therefrom. Similarly, exemplary damages are recoverable only when
the dismissal was effected in a wanton, oppressive or malevolent manner.[26] Those
circumstances have not been adequately established.
However, private respondents are entitled to attorneys fees as they were compelled to
litigate with petitioners and incur expenses to enforce and protect their interests.[27]
The award by the Labor Arbiter of P22,250.00 as attorneys fees to private
respondents, being reasonable, is sustained.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated
November 29, 2002, in CA-G.R. SP No. 67134, reversing the decision of the
National Labor Relations Commission and reinstating the 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.
8
G.R. No. 149011. June 28, 2005.*
SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA, BONNY J.
ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE, CELANIO D. ARROLLADO,
EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA, JOEL D.
BALATERIA, JOSEPH D. BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B.
BASAS, EDWIN E. BEATINGO, SONNY V. BERONDO, CHRISTOPHER D. BRIONES,
MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE CABALIDA, DIOSCORO R.
CAHINOD, ERNESTO P. CAHINOD, RENANTE S. CAHINOD, RUDERICK R.
CALIXTON, RONILO C. CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S.
CELESTE, ROMEO CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEY R.
DELA CRUZ, JOHN D. DELFIN, RENELITO P. DEON, ARNEL C. DE PEDRO,
ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR A. DESPI,
ROLANDO L. DINGLE, ANTONIO D. DOLORFINO, LARRY DUMA-OP, NOEL
DUMOL, CHITO L. DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC
E. GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO J. JIMENEZ,
ROBERTLY Y. HOFILEA, ROBERTO HOFILEA, VICENTE INDENCIO, JONATHAN
T. INVENTOR, PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO, RENATO
LAMINA, ALVIN LAS POBRES, ALBERT LAS POBRES, LEONARD LEMONCHITO,
JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDO
MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA, WILLIAM P.
NAVARRO, WILSON P. NAVARRO, LEO A. OLVIDO, ROBERTO G. OTERO,
BIENVENIDO C. PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY PALANOG,
BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA, EDWIN G. RIBON,
RAUL A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO, ROLAND B.
SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON, RENE SUARNABA,
ELMAR TABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDO TALITE,
CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA, TRISTAN A.
TINGSON, ROGELIO TOMESA, DIONISE A. TORMIS, ADELINO C. UNTAL, FELIX T.
UNTAL, RONILO E. VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the COURT
OF APPEALS, respondents.
Actions; Pleadings and Practice; Certificate of Non-Forum Shopping; Procedural
Rules and Technicalities; The general rule is that the certificate of non-forum
shopping must be signed by all the plaintiffs or petitioners in a case and the signature
of only one of them is insufficient; Strict compliance with the provisions regarding
the certificate of non-forum shopping merely underscores its mandatory nature in
that the certification cannot be altogether dispensed with or its requirements
completely disregarded but it does not thereby interdict substantial compliance with
its provisions under justifiable circumstances.While the general rule is that the
certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in
a case and the signature of only one of them is insufficient, this Court has stressed
that the rules on forum shopping, which were designed to promote and facilitate the
orderly administration of justice, should not be interpreted with such absolute
literalness as to subvert its own ultimate and legitimate objective. Strict compliance
with the provisions regarding the certificate of non-forum shopping merely
underscores its mandatory nature in that the certification cannot be altogether
dispensed with or its requirements completely disregarded. It does not, however,
thereby interdict substantial compliance with its provisions under justifiable
circumstances.
Same; Same; Same; Same; Given the collective nature of the petition filed before the
appellate court by ninety-seven persons, raising one common cause of action against
a corporation, the execution by only three of them in behalf of the others of the
certificate of non-forum shopping constitutes substantial compliance with the Rules;
The merits of the substantive aspects of the case may also be deemed as special
circumstance or compelling reason to take cognizance of a petition although the
certification against forum shopping was not executed and signed by all of the
petitioners.Given the collective nature of the petition filed before the appellate
court by herein private respondents, raising one common cause of action against
SMC, the execution by private respondents Winifredo Talite, Renelito Deon and Jose
Temporosa in behalf of all the other private respondents of the certificate of non-
forum shopping constitutes substantial compliance with the Rules. That the three
indeed represented their co-petitioners before the appellate court is, as it correctly
found, subsequently proven to be true as shown by the signatures of the majority of
the petitioners appearing in their memorandum filed before Us. Additionally, the
merits of the substantive aspects of the case may also be deemed as special
circumstance or compelling reason to take cognizance of a petition although the
certification against forum shopping was not executed and signed by all of the
petitioners.
Same; Same; Same; Same; It is the appellate court which ultimately determines if the
supporting documents are sufficient to make out a prima facie case.SMC goes on
to argue that the petition filed before the CA is fatally defective as it was not
accompanied by copies of all pleadings and documents relevant and pertinent
thereto in contravention of Section 1, Rule 65 of the Rules of Court. This Court is
not persuaded. The records show that private respondents appended the following
documents to their petition before the appellate court: the September 23, 1997
Decision of the Labor Arbiter, their Notice of Appeal with Appeal Memorandum
dated October 16, 1997 filed before the NLRC, the December 29, 1998 NLRC
Decision, their Motion for Reconsideration dated March 26, 1999 filed with the
NLRC and the September 10, 1999 NLRC Resolution. It bears stressing at any rate
that it is the appellate court which ultimately determines if the supporting documents
are sufficient to make out a prima facie case. It discerns whether on the basis of what
have been submitted it could already judiciously determine the merits of the petition.
In the case at bar, the CA found that the petition was adequately supported by
relevant and pertinent documents.
Same; Same; Same; Same; Instances Where a Liberal Construction of the Rule on
the Accomplishment of a Certificate of Non-Forum Shopping Allowed; Rules of
procedure should indeed be viewed as mere tools designed to facilitate the
attainment of justicetheir strict and rigid application, which would result in
9
technicalities that tend to frustrate rather than promote substantial justice, must
always be eschewed.At all events, this Court has allowed a liberal construction of
the rule on the accomplishment of a certificate of non-forum shopping in the
following cases: (1) where a rigid application will result in manifest failure or
miscarriage of justice; (2) where the interest of substantial justice will be served; (3)
where the resolution of the motion is addressed solely to the sound and judicious
discretion of the court; and (4) where the injustice to the adverse party is not
commensurate with the degree of his thoughtlessness in not complying with the
procedure prescribed. Rules of procedure should indeed be viewed as mere tools
designed to facilitate the attainment of justice. Their strict and rigid application,
which would result in technicalities that tend to frustrate rather than promote
substantial justice, must always be eschewed.
Administrative Law; When the findings of fact of the labor arbiter and the NLRC are
not supported by substantial evidence or their judgment was based on a
misapprehension of facts, the appellate court may make an independent evaluation of
the facts of the case.The general rule, no doubt, is that findings of facts of an
administrative agency which has acquired expertise in the particular field of its
endeavor are accorded great weight on appeal. The rule is not absolute and admits of
certain well-recognized exceptions, however. Thus, when the findings of fact of the
labor arbiter and the NLRC are not supported by substantial evidence or their
judgment was based on a misapprehension of facts, the appellate court may make an
independent evaluation of the facts of the case.
Labor Law; Pleadings and Practice; Verification; That the verification where it is
manifested that the one signing is one of the complainants and was causing the
preparation of the complaint with the authority of my co-complainants indubitably
shows that he was representing the rest of his co-complainants in signing the
verification in accordance with Section 7, Rule III of the 1990 NRLC Rules, now
Section 8, Rule 3 of the 1997 NLRC Rules.A perusal of the complaint shows that
the ninety seven complainants were being represented by their counsel of choice.
Thus the first sentence of their complaint alleges: x x x complainants, by counsel
and unto this Honorable Office respectfully state x x x. And the complaint was
signed by Atty. Jose Max S. Ortiz as counsel for the complainants. Following
Section 6, Rule III of the 1990 Rules of Procedure of the NLRC, now Section 7, Rule
III of the 1999 NLRC Rules, Atty. Ortiz is presumed to be properly authorized by
private respondents in filing the complaint. That the verification wherein it is
manifested that private respondent Talite was one of the complainants and was
causing the preparation of the complaint with the authority of my co-complainants
indubitably shows that Talite was representing the rest of his co-complainants in
signing the verification in accordance with Section 7, Rule III of the 1990 NLRC
Rules, now Section 8, Rule 3 of the 1999 NLRC Rules, which states: Section 7.
Authority to bind party.Attorneys and other representatives of parties shall have
authority to bind their clients in all matters of procedure; but they cannot, without a
special power of attorney or express consent, enter into a compromise agreement
with the opposing party in full or partial discharge of a clients claim.
Same; Labor Only Contracting; Independent Contractors; The test to determine the
existence 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; In labor-only contracting, the statute creates an employer-employee
relationship for a comprehensive purposeto prevent a circumvention of labor
laws.The test to determine the existence 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. In legitimate labor contracting,
the law creates an employer-employee relationship for a limited purpose, i.e., to
ensure that the employees are paid their wages. The principal 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
principal employer is not responsible for any claim made by the employees. In labor-
only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: 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.
Same; Same; Same; The language of a contract is not determinative of the parties
relationshipit is the totality of the facts and surrounding circumstances of the
case.The Contract of Services between SMC and Sunflower shows that the parties
clearly disavowed the existence of an employer-employee relationship between SMC
and private respondents. The language of a contract is not, however, determinative of
the parties relationship; rather it is the totality of the facts and surrounding
circumstances of the case. A party cannot dictate, by the mere expedient of a
unilateral declaration in a contract, the character of its business, i.e., whether as
labor-only contractor or job contractor, it being crucial that its character be measured
in terms of and determined by the criteria set by statute.
Same; Same; Same; Where it is shown that the workers daily time records were
signed by the principal and control of the premises in which they worked was by the
principal, these tend to disprove the independence of the contractor who engaged the
services of the work-ers.Sunflower 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, SMC, its apparent role
having been merely to recruit persons to work for SMC. Thus, it is gathered from the
evidence adduced by private respondents before the labor arbiter that their daily time
records were signed by SMC supervisors Ike Puentebella, Joemel Haro, Joemari
Raca, Erwin Tumonong, Edison Arguello, and Stephen Palabrica, which fact shows
10
that SMC exercised the power of control and supervision over its employees. And
control of the premises in which private respondents worked was by SMC. These
tend to disprove the independence of the contractor.
Same; Same; Same; The circumstance that the contractors workers had been
working alongside regular employees of the principal, performing identical jobs
under the same supervisors, is another indicium of the existence of labor-only
contractorship.Private respondents had been working in the aqua processing plant
inside the SMC compound alongside regular SMC shrimp processing workers
performing identical jobs under the same SMC supervisors. This circumstance is
another indicium of the existence of a labor-only contractorship.
Same; Two Kinds of Regular Employees; Workers who were engaged in janitorial
and messengerial tasks fall under the category of regular employees who have
rendered at least one year of service, whether continuous or broken, with respect to
the activity in which they are employed, and are entitled to differential pay and
benefits extended to other regular employees from the day immediately following
their first year of service.The law of course provides for two kinds of regular
employees, namely: (1) those who are engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer; and (2)
those who have rendered at least one year of service, whether continuous or broken,
with respect to the activity in which they are employed. As for those of private
respondents who were engaged in janitorial and messengerial tasks, they fall under
the second category and are thus entitled to differential pay and benefits extended to
other SMC regular employees from the day immediately following their first year of
service.
Same; Retrenchment; Words and Phrases; Where a particular department under a
corporate group of companies was closed allegedly due to serious business reverses,
this constitutes retrenchment by, and not closure of, the enterprise or the company.
In the case at bar, a particular department under the SMC group of companies was
closed allegedly due to serious business reverses. This constitutes retrenchment by,
and not closure of, the enterprise or the company itself as SMC has not totally ceased
operations but is still very much an on-going and highly viable business concern.
Same; Same; Requisites.Retrenchment is a management prerogative consistently
recognized and affirmed by this Court. It is, however, subject to faithful compliance
with the substantive and procedural requirements laid down by law and
jurisprudence. For retrenchment to be considered valid the following substantial
requirements must be met: (a) the losses expected should be substantial and not
merely de minimis in extent; (b) the substantial losses apprehended must be
reasonably imminent such as can be perceived objectively and in good faith by the
employer; (c) the retrenchment must be reasonably necessary and likely to
effectively prevent the expected losses; and (d) the alleged losses, if already
incurred, and the expected imminent losses sought to be forestalled, must be proved
by sufficient and convincing evidence.
Same; Same; The financial statements must be prepared and signed by independent
auditors failing which they can be assailed as self-serving documents.In the
discharge of these requirements, it is the employer who has the onus, being in the
nature of an affirmative defense. Normally, the condition of business losses is shown
by audited financial documents like yearly balance sheets, profit and loss statements
and annual income tax returns. The financial statements must be prepared and signed
by independent auditors failing which they can be assailed as self-serving
documents.
Same; Same; Damages; Where the dismissal is based on an authorized cause under
Article 283 of the Labor Code but the employer failed to comply with the notice
requirement, the sanction should be stiff as the dismissal process was initiated by the
employers exercise of his management prerogative, as opposed to dismissal based
on a just cause under Article 282.Where the dismissal is based on an authorized
cause under Article 283 of the Labor Code but the employer failed to comply with
the notice requirement, the sanction should be stiff as the dismissal process was
initiated by the employers exercise of his management prerogative, as opposed to a
dismissal based on a just cause under Article 282 with the same procedural infirmity
where the sanction to be imposed upon the employer should be tempered as the
dismissal process was, in effect, initiated by an act imputable to the employee. In
light of the factual circumstances of the case at bar, this Court awards P50,000.00 to
each private respondent as nominal damages.
Same; Attorneys Fees; Although an express finding of facts and law is still
necessary to prove the merit of the award of attorneys fees, there need not be any
showing that the employer acted maliciously or in bad faith when it withheld the
wagesthere need only be a showing that the lawful wages were not paid
accordingly.With respect to attorneys fees, in actions for recovery of wages or
where an employee was forced to litigate and thus incurred expenses to protect his
rights and interests, a maximum of ten percent (10%) of the total monetary award by
way of attorneys fees is justifiable under Article 111 of the Labor Code, Section 8,
Rule VIII, Book III of its Implementing Rules, and paragraph 7, Article 2208 of the
Civil Code. Although an express finding of facts and law is still necessary to prove
the merit of the award, there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages. There need only be a
showing that the lawful wages were not paid accordingly, as in this case.
CARPIO-MORALES, J.:
Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice
President and Visayas Area Manager for Aquaculture Operations Leopoldo S.
Titular, and Sunflower Multi-Purpose Cooperative (Sunflower), represented by the
Chairman of its Board of Directors Roy G. Asong, entered into a one-year Contract
of Services[1] commencing on January 1, 1993, to be renewed on a month to month
basis until terminated by either party. The pertinent provisions of the contract read:
11
1. The cooperative agrees and undertakes to perform and/or provide for the
company, on a non-exclusive basis for a period of one year the following services for
the Bacolod Shrimp Processing Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage[2]
2. To carry out the undertaking specified in the immediately preceding paragraph,
the cooperative shall employ the necessary personnel and provide adequate
equipment, materials, tools and apparatus, to efficiently, fully and speedily
accomplish the work and services undertaken by the cooperative. xxx
3. In consideration of the above undertaking the company expressly agrees to pay the
cooperative the following rates per activity:
A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand
Five Hundred Pesos Only (P19,500.00)
B. Harvesting/Shrimp Receiving. Piece rate of P0.34/kg. Or P100.00 minimum per
person/activity whichever is higher, with provisions as follows:
P25.00 Fixed Fee per person
Additional meal allowance P15.00 every meal time in case harvest duration exceeds
one meal.
This will be pre-set every harvest based on harvest plan approved by the Senior
Buyer.
C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.
One-half of the payment for all services rendered shall be payable on the fifteenth
and the other half, on the end of each month. The cooperative shall pay taxes, fees,
dues and other impositions that shall become due as a result of this contract.
The cooperative shall have the entire charge, control and supervision of the work and
services herein agreed upon. xxx
4. There is no employer-employee relationship between the company and the
cooperative, or the cooperative and any of its members, or the company and any
members of the cooperative. The cooperative is an association of self-employed
members, an independent contractor, and an entrepreneur. It is subject to the control
and direction of the company only as to the result to be accomplished by the work or
services herein specified, and not as to the work herein contracted. The cooperative
and its members recognize that it is taking a business risk in accepting a fixed service
fee to provide the services contracted for and its realization of profit or loss from its
undertaking, in relation to all its other undertakings, will depend on how efficiently it
deploys and fields its members and how they perform the work and manage its
operations.
5. The cooperative shall, whenever possible, maintain and keep under its control the
premises where the work under this contract shall be performed.
6. The cooperative shall have exclusive discretion in the selection, engagement and
discharge of its member-workers or otherwise in the direction and control thereof.
The determination of the wages, salaries and compensation of the member-workers
of the cooperative shall be within its full control. It is further understood that the
cooperative is an independent contractor, and as such, the cooperative agrees to
comply with all the requirements of all pertinent laws and ordinances, rules and
regulations. Although it is understood and agreed between the parties hereto that the
cooperative, in the performance of its obligations, is subject to the control or
direction of the company merely as a (sic) result to be accomplished by the work or
services herein specified, and not as to the means and methods of accomplishing
such result, the cooperative hereby warrants that it will perform such work or
services in such manner as will be consistent with the achievement of the result
herein contracted for.
xxx
8. The cooperative undertakes to pay the wages or salaries of its member-workers, as
well as all benefits, premiums and protection in accordance with the provisions of
the labor code, cooperative code and other applicable laws and decrees and the rules
and regulations promulgated by competent authorities, assuming all responsibility
therefor.
The cooperative further undertakes to submit to the company within the first ten (10)
days of every month, a statement made, signed and sworn to by its duly authorized
representative before a notary public or other officer authorized by law to administer
oaths, to the effect that the cooperative has paid all wages or salaries due to its
employees or personnel for services rendered by them during the month immediately
preceding, including overtime, if any, and that such payments were all in accordance
with the requirements of law.
xxx
12. Unless sooner terminated for the reasons stated in paragraph 9 this contract shall
be for a period of one (1) year commencing on January 1, 1993. Thereafter, this
Contract will be deemed renewed on a month-to-month basis until terminated by
either party by sending a written notice to the other at least thirty (30) days prior to
the intended date of termination.
xxx[3] (Underscoring supplied)
Pursuant to the contract, Sunflower engaged private respondents to, as they did,
render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City.
The contract was deemed renewed by the parties every month after its expiration on
January 1, 1994 and private respondents continued to perform their tasks until
September 11, 1995.
In July 1995, private respondents filed a complaint before the NLRC, Regional
Arbitration Branch No. VI, Bacolod City, praying to be declared as regular
employees of SMC, with claims for recovery of all benefits and privileges enjoyed
by SMC rank and file employees.
Private respondents subsequently filed on September 25, 1995 an Amended
Complaint[4] to include illegal dismissal as additional cause of action following
12
SMCs closure of its Bacolod Shrimp Processing Plant on September 15, 1995[5]
which resulted in the termination of their services.
SMC filed a Motion for Leave to File Attached Third Party Complaint[6] dated
November 27, 1995 to implead Sunflower as Third Party Defendant which was, by
Order[7] of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.
In the meantime, on September 30, 1996, SMC filed before the Regional Office at
Iloilo City of the Department of Labor and Employment (DOLE) a Notice of
Closure[8] of its aquaculture operations effective on even date, citing serious
business losses.
By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private
respondents complaint for lack of merit, ratiocinating as follows:
We sustain the stand of the respondent SMC that it could properly exercise its
management prerogative to contract out the preparation and processing aspects of its
aquaculture operations. Judicial notice has already been taken regarding the general
practice adopted in government and private institutions and industries of hiring
independent contractors to perform special services. xxx
xxx
Indeed, the law allows job contracting. Job contracting is permissible under the
Labor Code under specific conditions and we do not see how this activity could not
be legally undertaken by an independent service cooperative like the third-party
respondent herein.
There is no basis to the demand for regularization simply on the theory that
complainants performed activities which are necessary and desirable in the business
of respondent. It has been held that the definition of regular employees as those who
perform activities which are necessary and desirable for the business of the employer
is not always determinative because any agreement may provide for one (1) party to
render services for and in behalf of another for a consideration even without being
hired as an employee.
The charge of the complainants that third-party respondent is a mere labor-only
contractor is a sweeping generalization and completely unsubstantiated. xxx In the
absence of clear and convincing evidence showing that third-party respondent acted
merely as a labor only contractor, we are firmly convinced of the legitimacy and the
integrity of its service contract with respondent SMC.
In the same vein, the closure of the Bacolod Shrimp Processing Plant was a
management decision purely dictated by economic factors which was (sic) mainly
serious business losses. The law recognizes the right of the employer to close his
business or cease his operations for bonafide reasons, as much as it recognizes the
right of the employer to terminate the employment of any employee due to closure or
cessation of business operations, unless the closing is for the purpose of
circumventing the provisions of the law on security of tenure. The decision of
respondent SMC to close its Bacolod Shrimp Processing Plant, due to serious
business losses which has (sic) clearly been established, is a management prerogative
which could hardly be interfered with.
xxx The closure did affect the regular employees and workers of the Bacolod
Processing Plant, who were accordingly terminated following the legal requisites
prescribed by law. The closure, however, in so far as the complainants are
concerned, resulted in the termination of SMCs service contract with their
cooperative xxx[9] (Underscoring supplied)
Private respondents appealed to the NLRC.
By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of
merit, it finding that third party respondent Sunflower was an independent contractor
in light of its observation that [i]n all the activities of private respondents, they were
under the actual direction, control and supervision of third party respondent
Sunflower, as well as the payment of wages, and power of dismissal.[10]
Private respondents Motion for Reconsideration[11] having been denied by the
NLRC for lack of merit by Resolution of September 10, 1999, they filed a petition
for certiorari[12] before the Court of Appeals (CA).
Before the CA, SMC filed a Motion to Dismiss[13] private respondents petition for
non-compliance with the Rules on Civil Procedure and failure to show grave abuse
of discretion on the part of the NLRC.
SMC subsequently filed its Comment[14] to the petition on March 30, 2000.
By Decision of February 7, 2001, the appellate court reversed the NLRC decision
and accordingly found for private respondents, disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby
RENDERED: (1) REVERSING and SETTING ASIDE both the 29 December 1998
decision and 10 September 1999 resolution of the National Labor Relations
Commission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as
well as the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-07-
10316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT
petitioners: (a) separation pay in accordance with the computation given to the
regular SMC employees working at its Bacolod Shrimp Processing Plant with full
backwages, inclusive of allowances and other benefits or their monetary equivalent,
from 11 September 1995, the time their actual compensation was withheld from
them, up to the time of the finality of this decision; (b) differentials pays (sic)
effective as of and from the time petitioners acquired regular employment status
pursuant to the disquisition mentioned above, and all such other and further benefits
as provided by applicable collective bargaining agreement(s) or other relations, or by
law, beginning such time up to their termination from employment on 11 September
1995; and ORDERING private respondent SMC to PAY unto the petitioners
attorneys fees equivalent to ten (10%) percent of the total award.
No pronouncement as to costs.
SO ORDERED.[15] (Underscoring supplied)
13
Justifying its reversal of the findings of the labor arbiter and the NLRC, the appellate
court reasoned:
Although the terms of the non-exclusive contract of service between SMC and
[Sunflower] showed a clear intent to abstain from establishing an employer-
employee relationship between SMC and [Sunflower] or the latters members, the
extent to which the parties successfully realized this intent in the light of the
applicable law is the controlling factor in determining the real and actual relationship
between or among the parties.
xxx
With respect to the power to control petitioners conduct, it appears that petitioners
were under the direct control and supervision of SMC supervisors both as to the
manner they performed their functions and as to the end results thereof. It was only
after petitioners lodged a complaint to have their status declared as regular
employees of SMC that certain members of [Sunflower] began to countersign
petitioners daily time records to make it appear that they (petitioners) were under the
control and supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx
Even without these instances indicative of control by SMC over the petitioners, it is
safe to assume that SMC would never have allowed the petitioners to work within its
premises, using its own facilities, equipment and tools, alongside SMC employees
discharging similar or identical activities unless it exercised a substantial degree of
control and supervision over the petitioners not only as to the manner they performed
their functions but also as to the end results of such functions.
xxx
xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as
independent contractors. [Sunflower] and the petitioners did not have substantial
capital or investment in the form of tools, equipment, implements, work premises, et
cetera necessary to actually perform the service under their own account,
responsibility, and method. The only work premises maintained by [Sunflower] was
a small office within the confines of a small carinderia or refreshment parlor owned
by the mother of its chair, Roy Asong; the only equipment it owned was a typewriter
(rollo, pp. 525-525) and, the only assets it provided SMC were the bare bodies of its
members, the petitioners herein (rollo, p. 523).
In addition, as shown earlier, petitioners, who worked inside the premises of SMC,
were under the control and supervision of SMC both as to the manner and method in
discharging their functions and as to the results thereof.
Besides, it should be taken into account that the activities undertaken by the
petitioners as cleaners, janitors, messengers and shrimp harvesters, packers and
handlers were directly related to the aquaculture business of SMC (See Guarin vs.
NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service
contract from January 1993 to September 1995, a period of close to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by itself, is a
considerable workforce and raises the suspicion that the non-exclusive service
contract between SMC and [Sunflower] was designed to evade the obligations
inherent in an employer-employee relationship (See Rhone-Poulenc Agrochemicals
Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).
Equally suspicious is the fact that the notary public who signed the by-laws of
[Sunflower] and its [Sunflower] retained counsel are both partners of the local
counsel of SMC (rollo, p. 9).
xxx
With these observations, no other logical conclusion can be reached except that
[Sunflower] acted as an agent of SMC, facilitating the manpower requirements of the
latter, the real employer of the petitioners. We simply cannot allow these two entities
through the convenience of a non-exclusive service contract to stipulate on the
existence of employer-employee relation. Such existence is a question of law which
cannot be made the subject of agreement to the detriment of the petitioners (Tabas
vs. California Manufacturing, Inc., 169 SCRA 497, 500).
xxx
There being a finding of labor-only contracting, liability must be shouldered either
by SMC or [Sunflower] or shared by both (See Tabas vs. California Manufacturing,
Inc., supra, p. 502). SMC however should be held solely liable for [Sunflower]
became non-existent with the closure of the aquaculture business of SMC.
Furthermore, since the closure of the aquaculture operations of SMC appears to be
valid, reinstatement is no longer feasible. Consistent with the pronouncement in
Bustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners are
thus entitled to separation pay (in the computation similar to those given to regular
SMC employees at its Bacolod Shrimp Processing Plant) with full backwages,
inclusive of allowances and other benefits or their monetary equivalent, from the
time their actual compensation was withheld from them up to the time of the finality
of this decision. This is without prejudice to differentials pays (sic) effective as of
and from the time petitioners acquired regular employment status pursuant to the
discussion mentioned above, and all such other and further benefits as provided by
applicable collective bargaining agreement(s) or other relations, or by law, beginning
such time up to their termination from employment on 11 September 1995.[16]
(Emphasis and underscoring supplied)
SMCs Motion for Reconsideration[17] having been denied for lack of merit by
Resolution of July 11, 2001, it comes before this Court via the present petition for
review on certiorari assigning to the CA the following errors
I Samaon M. Buat could validly sign the certificate of non-forum shopping in behalf
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE
AND GRANTING RESPONDENTS PATENTLY DEFECTIVE PETITION FOR
CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM
THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE
RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE THE LABOR
ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE
14
IN A MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE SUPREME COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
RESPONDENTS ARE EMPLOYEES OF SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT
RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE CLOSURE OF
THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS
BUSINESS LOSSES.[18] (Underscoring supplied)
SMC bewails the failure of the appellate court to outrightly dismiss the petition for
certiorari as only three out of the ninety seven named petitioners signed the
verification and certification against forum-shopping.
While the general rule is that the certificate of non-forum shopping must be signed
by all the plaintiffs or petitioners in a case and the signature of only one of them is
insufficient,[19] this Court has stressed that the rules on forum shopping, which were
designed to promote and facilitate the orderly administration of justice, should not be
interpreted with such absolute literalness as to subvert its own ultimate and
legitimate objective.[20] Strict compliance with the provisions regarding the
certificate of non-forum shopping merely underscores its mandatory nature in that
the certification cannot be altogether dispensed with or its requirements completely
disregarded.[21] It does not, however, thereby interdict substantial compliance with
its provisions under justifiable circumstances.[22]
Thus in the recent case of HLC Construction and Development Corporation v. Emily
Homes Subdivision Homeowners Association,[23] this Court held:
Respondents (who were plaintiffs in the trial court) filed the complaint against
petitioners as a group, represented by their homeowners association president who
was likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents raised one
cause of action which was the breach of contractual obligations and payment of
damages. They shared a common interest in the subject matter of the case, being the
aggrieved residents of the poorly constructed and developed Emily Homes
Subdivision. Due to the collective nature of the case, there was no doubt that Mr.
of all his co-plaintiffs. In cases therefore where it is highly impractical to require all
the plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order
not to defeat the ends of justice, for one of the plaintiffs, acting as representative, to
sign the certificate provided that xxx the plaintiffs share a common interest in the
subject matter of the case or filed the case as a collective, raising only one common
cause of action or defense.[24] (Emphasis and underscoring supplied)
Given the collective nature of the petition filed before the appellate court by herein
private respondents, raising one common cause of action against SMC, the execution
by private respondents Winifredo Talite, Renelito Deon and Jose Temporosa in
behalf of all the other private respondents of the certificate of non-forum shopping
constitutes substantial compliance with the Rules.[25] That the three indeed
represented their co-petitioners before the appellate court is, as it correctly found,
subsequently proven to be true as shown by the signatures of the majority of the
petitioners appearing in their memorandum filed before Us.[26]
Additionally, the merits of the substantive aspects of the case may also be deemed as
special circumstance or compelling reason to take cognizance of a petition although
the certification against forum shopping was not executed and signed by all of the
petitioners.[27]
SMC goes on to argue that the petition filed before the CA is fatally defective as it
was not accompanied by copies of all pleadings and documents relevant and
pertinent thereto in contravention of Section 1, Rule 65 of the Rules of Court.[28]
This Court is not persuaded. The records show that private respondents appended the
following documents to their petition before the appellate court: the September 23,
1997 Decision of the Labor Arbiter,[29] their Notice of Appeal with Appeal
Memorandum dated October 16, 1997 filed before the NLRC,[30] the December 29,
1998 NLRC Decision,[31] their Motion for Reconsideration dated March 26, 1999
filed with the NLRC[32] and the September 10, 1999 NLRC Resolution.[33]
It bears stressing at any rate that it is the appellate court which ultimately determines
if the supporting documents are sufficient to make out a prima facie case.[34] It
discerns whether on the basis of what have been submitted it could already
judiciously determine the merits of the petition.[35] In the case at bar, the CA found
that the petition was adequately supported by relevant and pertinent documents.
At all events, this Court has allowed a liberal construction of the rule on the
accomplishment of a certificate of non-forum shopping in the following cases: (1)
where a rigid application will result in manifest failure or miscarriage of justice; (2)
where the interest of substantial justice will be served; (3) where the resolution of the
motion is addressed solely to the sound and judicious discretion of the court; and (4)
where the injustice to the adverse party is not commensurate with the degree of his
thoughtlessness in not complying with the procedure prescribed.[36]
Rules of procedure should indeed be viewed as mere tools designed to facilitate the
attainment of justice. Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must
always be eschewed.[37]
15
SMC further argues that the appellate court exceeded its jurisdiction in reversing the
decisions of the labor arbiter and the NLRC as findings of facts of quasi-judicial
bodies like the NLRC are accorded great respect and finality, and that this principle
acquires greater weight and application in the case at bar as the labor arbiter and the
NLRC have the same factual findings.
The general rule, no doubt, is that findings of facts of an administrative agency
which has acquired expertise in the particular field of its endeavor are accorded great
weight on appeal.[38] The rule is not absolute and admits of certain well-recognized
exceptions, however. Thus, when the findings of fact of the labor arbiter and the
NLRC are not supported by substantial evidence or their judgment was based on a
misapprehension of facts, the appellate court may make an independent evaluation of
the facts of the case.[39]
SMC further faults the appellate court in giving due course to private respondents
petition despite the fact that the complaint filed before the labor arbiter was signed
and verified only by private respondent Winifredo Talite; that private respondents
position paper[40] was verified by only six[41] out of the ninety seven complainants;
and that their Joint-Affidavit[42] was executed only by twelve[43] of the
complainants.
Specifically with respect to the Joint-Affidavit of private respondents, SMC asserts
that it should not have been considered by the appellate court in establishing the
claims of those who did not sign the same, citing this Courts ruling in Southern
Cotabato Development and Construction, Inc. v. NLRC.[44]
SMCs position does not lie.
A perusal of the complaint shows that the ninety seven complainants were being
represented by their counsel of choice. Thus the first sentence of their complaint
alleges: xxx complainants, by counsel and unto this Honorable Office respectfully
state xxx. And the complaint was signed by Atty. Jose Max S. Ortiz as counsel for
the complainants. Following Section 6, Rule III of the 1990 Rules of Procedure of
the NLRC, now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is presumed
to be properly authorized by private respondents in filing the complaint.
That the verification wherein it is manifested that private respondent Talite was one
of the complainants and was causing the preparation of the complaint with the
authority of my co-complainants indubitably shows that Talite was representing the
rest of his co-complainants in signing the verification in accordance with Section 7,
Rule III of the 1990 NLRC Rules, now Section 8, Rule 3 of the 1999 NLRC Rules,
which states:
Section 7. Authority to bind party. Attorneys and other representatives of parties
shall have authority to bind their clients in all matters of procedure; but they cannot,
without a special power of attorney or express consent, enter into a compromise
agreement with the opposing party in full or partial discharge of a clients claim.
(Underscoring supplied)
As regards private respondents position paper which bore the signatures of only six
of them, appended to it was an Authority/Confirmation of Authority[45] signed by
the ninety one others conferring authority to their counsel to file RAB Case No. 06-
07-10316-95, entitled Winifredo Talite et al. v. San Miguel Corporation presently
pending before the sala of Labor Arbiter Ray Alan Drilon at the NLRC Regional
Arbitration Branch No. VI in Bacolod City and appointing him as their retained
counsel to represent them in the said case.
That there has been substantial compliance with the requirement on verification of
position papers under Section 3, Rule V of the 1990 NLRC Rules of Procedure[46] is
not difficult to appreciate in light of the provision of Section 7, Rule V of the 1990
NLRC Rules, now Section 9, Rule V of the 1999 NLRC Rules which reads:
Section 7. Nature of Proceedings. The proceedings before a Labor Arbiter shall be
non-litigious in nature. Subject to the requirements of due process, the technicalities
of law and procedure and the rules obtaining in the courts of law shall not strictly
apply thereto. The Labor Arbiter may avail himself of all reasonable means to
ascertain the facts of the controversy speedily, including ocular inspection and
examination of well-informed persons. (underscoring supplied)
As regards private respondents Joint-Affidavit which is being assailed in view of the
failure of some complainants to affix their signatures thereon, this Court quotes with
approval the appellate courts ratiocinations:
A perusal of the Southern Cotabato Development Case would reveal that movant did
not quote the whole text of paragraph 5 on page 865 of 280 SCRA. The whole
paragraph reads:
Clearly then, as to those who opted to move for the dismissal of their complaints, or
did not submit their affidavits nor appear during trial and in whose favor no other
independent evidence was adduced, no award for back wages could have been
validly and properly made for want of factual basis. There is no showing at all that
any of the affidavits of the thirty-four (34) complainants were offered as evidence for
those who did not submit their affidavits, or that such affidavits had any bearing at
all on the rights and interest of the latter. In the same vein, private respondents
position paper was not of any help to these delinquent complainants.
The implication is that as long as the affidavits of the complainants were offered as
evidence for those who did not submit theirs, or the affidavits were material and
relevant to the rights and interest of the latter, such affidavits may be sufficient to
establish the claims of those who did not give their affidavits.
16
Here, a reading of the joint affidavit signed by twelve (12) of the ninety-seven (97)
complainants (petitioners herein) would readily reveal that the affidavit was offered
as evidence not only for the signatories therein but for all of the complainants.
(These ninety-seven (97) individuals were previously identified during the
mandatory conference as the only complainants in the proceedings before the labor
arbiter) Moreover, the affidavit touched on the common interest of all of the
complainants as it supported their claim of the existence of an employer-employee
relationship between them and respondent SMC. Thus, the said affidavit was enough
to prove the claims of the rest of the complainants.[47] (Emphasis supplied,
underscoring in the original)
In any event, SMC is reminded that the rules of evidence prevailing in courts of law
or equity do not control proceedings before the Labor Arbiter. So Article 221 of the
Labor Code enjoins:
ART. 221. Technical rules not binding and prior resort to amicable settlement. In any
proceeding before the Commission or any of the Labor Arbiters, the rules of
evidence prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in each case
speedily and objectively and without regard to technicalities of law or procedure, all
in the interest of due process. xxx
As such, their application may be relaxed to serve the demands of substantial
justice.[48]
On the merits, the petition just the same fails.
SMC insists that private respondents are the employees of Sunflower, an
independent contractor. On the other hand, private respondents assert that Sunflower
is a labor-only contractor.
Article 106 of the Labor Code provides:
ART. 106. Contractor or subcontracting. 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 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.
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as
amended by Department Order No. 18, distinguishes between legitimate and labor-
only contracting:
Section 3. 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.
Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis
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 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 over the performance of the
work of the contractual employee.
17
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 reserved 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.
The test to determine the existence 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.[49]
In legitimate labor contracting, the law creates an employer-employee relationship
for a limited purpose, i.e., to ensure that the employees are paid their wages. The
principal 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 principal employer is not responsible for any claim made
by the employees.[50]
In labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: 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.[51]
The Contract of Services between SMC and Sunflower shows that the parties clearly
disavowed the existence of an employer-employee relationship between SMC and
private respondents. The language of a contract is not, however, determinative of the
parties relationship; rather it is the totality of the facts and surrounding circumstances
of the case.[52] A party cannot dictate, by the mere expedient of a unilateral
declaration in a contract, the character of its business, i.e., whether as labor-only
contractor or job contractor, it being crucial that its character be measured in terms of
and determined by the criteria set by statute.[53]
SMC argues that Sunflower could not have been issued a certificate of registration as
a cooperative if it had no substantial capital.[54]
While indeed Sunflower was issued Certificate of Registration No. IL0-875[55] on
February 10, 1992 by the Cooperative Development Authority, this merely shows
that it had at least P2,000.00 in paid-up share capital as mandated by Section 5 of
Article 14[56] of Republic Act No. 6938, otherwise known as the Cooperative Code,
which amount cannot be considered substantial capitalization.
What appears is that Sunflower does not have substantial capitalization or investment
in the form of tools, equipment, machineries, work premises and other materials to
qualify it as an independent contractor.
On the other hand, it is gathered that the lot, building, machineries and all other
working tools utilized by private respondents in carrying out their tasks were owned
and provided by SMC. Consider the following uncontroverted allegations of private
respondents in the Joint Affidavit:
[Sunflower], during the existence of its service contract with respondent SMC, did
not own a single machinery, equipment, or working tool used in the processing plant.
Everything was owned and provided by respondent SMC. The lot, the building, and
working facilities are owned by respondent SMC. The machineries and equipments
(sic) like washer machine, oven or cooking machine, sizer machine, freezer, storage,
and chilling tanks, push carts, hydrolic (sic) jack, tables, and chairs were all owned
by respondent SMC. All the boxes, trays, molding pan used in the processing are
also owned by respondent SMC. The gloves and boots used by the complainants
were also owned by respondent SMC. Even the mops, electric floor cleaners, brush,
hoose (sic), soaps, floor waxes, chlorine, liquid stain removers, lysol and the like
used by the complainants assigned as cleaners were all owned and provided by
respondent SMC.
Simply stated, third-party respondent did not own even a small capital in the form of
tools, machineries, or facilities used in said prawn processing
xxx
The alleged office of [Sunflower] is found within the confines of a small carinderia
or refreshment (sic) owned by the mother of the Cooperative Chairman Roy Asong.
xxx In said . . . office, the only equipment used and owned by [Sunflower] was a
typewriter. [57]
And from the job description provided by SMC itself, the work assigned to private
respondents was directly related to the aquaculture operations of SMC. Undoubtedly,
the nature of the work performed by private respondents in shrimp harvesting,
receiving and packing formed an integral part of the shrimp processing operations of
SMC. As for janitorial and messengerial services, that they are considered directly
related to the principal business of the employer[58] has been jurisprudentially
recognized.
18
Furthermore, Sunflower 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, SMC, its apparent role having been
merely to recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private respondents before the
labor arbiter that their daily time records were signed by SMC supervisors Ike
Puentebella, Joemel Haro, Joemari Raca, Erwin Tumonong, Edison Arguello, and
Stephen Palabrica, which fact shows that SMC exercised the power of control and
supervision over its employees.[59] And control of the premises in which private
respondents worked was by SMC. These tend to disprove the independence of the
contractor.[60]
More. Private respondents had been working in the aqua processing plant inside the
SMC compound alongside regular SMC shrimp processing workers performing
identical jobs under the same SMC supervisors.[61] This circumstance is another
indicium of the existence of a labor-only contractorship.[62]
And as private respondents alleged in their Joint Affidavit which did not escape the
observation of the CA, no showing to the contrary having been proffered by SMC,
Sunflower did not cater to clients other than SMC,[63] and with the closure of SMCs
Bacolod Shrimp Processing Plant, Sunflower likewise ceased to exist. This Courts
ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.[64] is thus
instructive.
xxx Nor do we believe MAERC to have an independent business. Not only was it set
up to specifically meet the pressing needs of SMC which was then having labor
problems in its segregation division, none of its workers was also ever assigned to
any other establishment, thus convincing us that it was created solely to service the
needs of SMC. Naturally, with the severance of relationship between MAERC and
SMC followed MAERCs cessation of operations, the loss of jobs for the whole
MAERC workforce and the resulting actions instituted by the workers.[65]
(Underscoring supplied)
All the foregoing considerations affirm by more than substantial evidence the
existence of an employer-employee relationship between SMC and private
respondents.
Since private respondents who were engaged in shrimp processing performed tasks
usually necessary or desirable in the aquaculture business of SMC, they should be
deemed regular employees of the latter[66] and as such are entitled to all the benefits
and rights appurtenant to regular employment.[67] They should thus be awarded
differential pay corresponding to the difference between the wages and benefits
given them and those accorded SMCs other regular employees.
Respecting the private respondents who were tasked with janitorial and messengerial
duties, this Court quotes with approval the appellate courts ruling thereon:
Those performing janitorial and messengerial services however acquired regular
status only after rendering one-year service pursuant to Article 280 of the Labor
Code. Although janitorial and messengerial services are considered directly related
to the aquaculture business of SMC, they are deemed unnecessary in the conduct of
its principal business; hence, the distinction (See Coca Cola Bottlers Phils., Inc. v.
NLRC, 307 SCRA 131, 136-137 and Philippine Bank of Communications v. NLRC,
supra, p. 359).[68]
The law of course provides for two kinds of regular employees, namely: (1) those
who are engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer; and (2) those who have rendered at least one
year of service, whether continuous or broken, with respect to the activity in which
they are employed.[69]
As for those of private respondents who were engaged in janitorial and messengerial
tasks, they fall under the second category and are thus entitled to differential pay and
benefits extended to other SMC regular employees from the day immediately
following their first year of service.[70]
Regarding the closure of SMCs aquaculture operations and the consequent
termination of private respondents, Article 283 of the Labor Code provides:
ART. 283. Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Department of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the installation of
labor saving devices or redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation
pay shall be equivalent to one (1) month pay or to at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year. (Underscoring supplied)
In the case at bar, a particular department under the SMC group of companies was
closed allegedly due to serious business reverses. This constitutes retrenchment by,
and not closure of, the enterprise or the company itself as SMC has not totally ceased
operations but is still very much an on-going and highly viable business concern.[71]
19
Retrenchment is a management prerogative consistently recognized and affirmed by
this Court. It is, however, subject to faithful compliance with the substantive and
procedural requirements laid down by law and jurisprudence.[72]
For retrenchment to be considered valid the following substantial requirements must
be met: (a) the losses expected should be substantial and not merely de minimis in
extent; (b) the substantial losses apprehended must be reasonably imminent such as
can be perceived objectively and in good faith by the employer; (c) the retrenchment
must be reasonably necessary and likely to effectively prevent the expected losses;
and (d) the alleged losses, if already incurred, and the expected imminent losses
sought to be forestalled, must be proved by sufficient and convincing evidence.[73]
In the discharge of these requirements, it is the employer who has the onus, being in
the nature of an affirmative defense.[74]
Normally, the condition of business losses is shown by audited financial documents
like yearly balance sheets, profit and loss statements and annual income tax returns.
The financial statements must be prepared and signed by independent auditors failing
which they can be assailed as self-serving documents.[75]
In the case at bar, company losses were duly established by financial documents
audited by Joaquin Cunanan & Co. showing that the aquaculture operations of SMCs
Agribusiness Division accumulated losses amounting to P145,848,172.00 in 1992
resulting in the closure of its Calatrava Aquaculture Center in Negros Occidental,
P11,393,071.00 in 1993 and P80,325,608.00 in 1994 which led to the closure of its
San Fernando Shrimp Processing Plant in Pampanga and the Bacolod Shrimp
Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying retrenchment of its
employees.
For termination due to retrenchment to be valid, however, the law requires that
written notices of the intended retrenchment be served by the employer on the
worker and on the DOLE at least one (1) month before the actual date of the
retrenchment,[76] in order to give employees some time to prepare for the eventual
loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of
the alleged cause of termination.[77]
Private respondents, however, were merely verbally informed on September 10,
1995 by SMC Prawn Manager Ponciano Capay that effective the following day or on
September 11, 1995, they were no longer to report for work as SMC would be
closing its operations.[78]
Where the dismissal is based on an authorized cause under Article 283 of the Labor
Code but the employer failed to comply with the notice requirement, the sanction
should be stiff as the dismissal process was initiated by the employers exercise of his
management prerogative, as opposed to a dismissal based on a just cause under
Article 282 with the same procedural infirmity where the sanction to be imposed
upon the employer should be tempered as the dismissal process was, in effect,
initiated by an act imputable to the employee.[79]
In light of the factual circumstances of the case at bar, this Court awards P50,000.00
to each private respondent as nominal damages.
The grant of separation pay as an incidence of termination of employment due to
retrenchment to prevent losses is a statutory obligation on the part of the employer
and a demandable right on the part of the employee. Private respondents should thus
be awarded separation pay equivalent to at least one (1) month pay or to at least one-
half month pay for every year of service, whichever is higher, as mandated by
Article 283 of the Labor Code or the separation pay awarded by SMC to other
regular SMC employees that were terminated as a result of the retrenchment,
depending on which is most beneficial to private respondents.
Petitioner San Miguel Corporation and Sunflower Multi-Purpose Cooperative are
hereby ORDERED to jointly and severally pay each private respondent differential
pay from the time they became regular employees up to the date of their termination;
separation pay equivalent to at least one (1) month pay or to at least one-half month
pay for every year of service, whichever is higher, as mandated by Article 283 of the
Labor Code or the separation pay awarded by SMC to other regular SMC employees
that were terminated as a result of the retrenchment, depending on which is most
beneficial to private respondents; and ten percent (10%) attorneys fees based on the
herein modified award.
Petitioner San Miguel Corporation is further ORDERED to pay each private
respondent the amount of P50,000.00, representing nominal damages for non-
compliance with statutory due process.
The award of backwages is DELETED.
SO ORDERED.

Considering that private respondents were not illegally dismissed, however, no

backwages need be awarded. It is well settled that backwages may be granted only
when there is a finding of illegal dismissal.[80] The appellate court thus erred in
awarding backwages to private respondents upon the authority of Bustamante v.
NLRC,[81] what was involved in that case being one of illegal dismissal.

With respect to attorneys fees, in actions for recovery of wages or where an

employee was forced to litigate and thus incurred expenses to protect his rights and
interests,[82] a maximum of ten percent (10%) of the total monetary award[83] by
way of attorneys fees is justifiable under Article 111 of the Labor Code,[84] Section
8, Rule VIII, Book III of its Implementing Rules,[85] and paragraph 7, Article 2208
of the Civil Code.[86] Although an express finding of facts and law is still necessary
to prove the merit of the award, there need not be any showing that the employer
acted maliciously or in bad faith when it withheld the wages. There need only be a
showing that the lawful wages were not paid accordingly, as in this case.[87]

Absent any evidence showing that Sunflower has been dissolved in accordance with
law, pursuant to Rule VIII-A, Section 19[88] of the Omnibus Rules Implementing
the Labor Code, Sunflower is held solidarily liable with SMC for all the rightful
claims of private respondents.

WHEREFORE, the petition is DENIED. The assailed Decision dated February 7,

2001 and Resolution dated July 11, 2001 of the Court of Appeals are AFFIRMED
with MODIFICATION.

20
 G.R. No. 161115. November 30, 2006.*
DOLE PHILIPPINES, INC., petitioner, vs. MEDEL ESTEVA, HENRY SILVA,
GILBERT CABILAO, LORENZO GAQUIT, DANIEL PABLO, EDWIN CAMILO,
BENJAMIN SAKILAN, RICHARD PENUELA, ARMANDO PORRAS, EDUARDO
FALDAS, NILO DONDOYANO, MIGUEL DIAZ, ROMEL BAJO, ARTEMIO
TENERIFE, EDDIE LINAO, JERRY LIGTAS, SAMUEL RAVAL, WILFREDO
BLANDO, LORENZO MONTERO, JR., JAIME TESIPAO, GEORGE DERAL,
ERNESTO ISRAEL, JR., AGAPITO ESTOLOGA, JOVITO DAGUIO, ARSENIO
LEONCIO, MARLON BLANDO, JOSE OTELO CASPILLO, ARNOLD LIZADA,
JERRY DEYPALUBOS, STEVEN MADULA, ROGELIO CABULAO, JR., ALVIN
COMPOC, EUGENIO BRITANA, RONNIE GUELOS, EMMANUEL JIMENA,
GERMAN JAVA, JESUS MEJICA, JOEL INVENTADO, DOMINGO JABULGO,
RAMIL ENAD, RAYMUNDO YAMON, RITCHIE MELENDRES, JACQUEL ORGE,
RAMON BARCELONA, ERWIN ESPIA, NESTOR DELIDELI, JR., ALLAN GANE,
ROMEO PORRAS, RITCHIE BOCOG, JOSELITO ACEBES, DANNY TORRES,
JIMMY NAVARRO, RALPH PEREZ, SONNY SESE, RONALD RODRIQUES,
ROBERTO ALLANEC, ERNIE GIGANTANA, NELSON SAMSON, REDANTE
DAVILA, EDDIE BUSLIG, ALLAN PINEDA, JESUS BELGERA, VICENTE
LABISTE, CARMENCITA FELISILDA, GEORGE DERLA, RUBEN TORMON, NEIL
TAJALE, ORLANDO ESPENILLA, RITCHEL MANEJAR, JOEL QUINTANA,
ERWIN ALDE, JOEL CATALAN, ELMER TIZON, ALLAN ESPADA, EUGENE
BRETANA, RAMIL ENAD, RENE INGALLA, STEVEN MADULLA, RANDY
REBUTAZO, NEIL BAGATILLA, ARSENIO LEONCIO, ROLANDO VILLEGAS and
JUSLIUS TESIPAO, herein represented by MEDEL ESTEVA, Authorized
Representative, respondents.
Remedial Law; Appeals; The mode for judicial review over decisions of the NLRC
is by a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure;
A petition for certiorari of a decision or resolution of the NLRC should first be filed
with the Court of Appeals.It has long been settled in the landmark case of St.
Martin Funeral Home v. NLRC, that the mode for judicial review over decisions of
the NLRC is by a petition for certiorari under Rule 65 of the revised Rules of Civil
Procedure. The different modes of appeal, namely, writ of error (Rule 41), petition
for review (Rules 42 and 43), and petition for review on certiorari (Rule 45), cannot
be availed of because there is no provision on appellate review of NLRC decisions in
the Labor Code, as amended. Although the same case recognizes that both the Court
of Appeals and the Supreme Court have original jurisdiction over such petitions, it
has chosen to impose the strict observance of the hierarchy of courts. Hence, a
petition for certiorari of a decision or resolution of the NLRC should first be filed
with the Court of Appeals; direct resort to the Supreme Court shall not be allowed
unless the redress desired cannot be obtained in the appropriate courts or where
exceptional and compelling circumstances justify an availment of a remedy within
and calling for the exercise by the Supreme Court of its primary jurisdiction.
Same; Same; Res Judicata; The decisions and orders of administrative agencies,
rendered pursuant to their quasi-judicial authority, have upon their finality, the force
21
and binding effect of a final judgment within the purview of the doctrine of res
judicata.The Orders of DOLE Regional Director Parel, dated 19 September 1993,
and of DOLE Undersecretary Trajano, dated 15 September 1994, consistently found
that CAMPCO was engaging in labor-only contracting. Such finding constitutes res
judicata in the case filed by the respondents with the NLRC. It is well-established in
this jurisdiction that the decisions and orders of administrative agencies, rendered
pursuant to their quasi-judicial authority, have upon their finality, the force and
binding effect of a final judgment within the purview of the doctrine of res judicata.
The rule of res judicata, which forbids the reopening of a matter once judicially
determined by competent authority, applies as well to the judicial and quasi-judicial
acts of public, executive or administrative officers and boards acting within their
jurisdiction as to the judgments of courts having general judicial powers. The orderly
administration of justice requires that the judgments or resolutions of a court or
quasi-judicial body must reach a point of finality set by the law, rules and
regulations, so as to write finis to disputes once and for all. This is a fundamental
principle in the Philippine justice system, without which there would be no end to
litigations.
Labor Law; Labor-only Contracting; Criteria to determine the existence of an
independent and permissible contractor relationship.The existence of an
independent and permissible contractor relationship is generally established by the
following criteria: whether 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.
Same; Same; Court concludes that respondents are regular employees of
petitioner.The declaration that CAMPCO is indeed engaged in the prohibited
activities of labor-only contracting, then consequently, an employer-employee
relationship is deemed to exist between petitioner and respondents, since CAMPCO
shall be considered as a mere agent or intermediary of petitioner. Since respondents
are now recognized as employees of petitioner, this Court is tasked to determine the
nature of their employment. In consideration of all the attendant circumstances in
this case, this Court concludes that respondents are regular employees of petitioner.
Same; Same; The activities performed by respondents are necessary or desirable to
the usual business of petitioner.In the instant Petition, petitioner is engaged in the
manufacture and production of pineapple products for export. Respondents rendered
services as processing attendant, feeder of canned pineapple and pineapple
processing, nata de coco processing attendant, fruit cocktail processing attendant,
and etc., functions they performed alongside regular employees of the petitioner.
There is no doubt that the activities performed by respondents are necessary or
desirable to the usual business of petitioner.
Same; Same; Security of Tenure; Respondents, as regular employees of petitioner,
are entitled to security of tenure; Petitioners acts of placing some of the respondents
on stay home status and not giving them work assignments for more than six
months were already tantamount to constructive and illegal dismissal.
Respondents, as regular employees of petitioner, are entitled to security of tenure.
They could only be removed based on just and authorized causes as provided for in
the Labor Code, as amended, and after they are accorded procedural due process.
Therefore, petitioners acts of placing some of the respondents on stay home status
and not giving them work assignments for more than six months were already
tantamount to constructive and illegal dismissal.
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the revised
Rules of Civil Procedure seeking the reversal of the Decision,[1] dated 20 May 2002,
and the Amended Decision,[2] dated 27 November 2003, both rendered by the Court
of Appeals in CA-G.R. SP No. 63405, which declared herein petitioner Dole
Philippines, Inc. as the employer of herein respondents, Medel Esteva and 86 others;
found petitioner guilty of illegal dismissal; and ordered petitioner to reinstate
respondents to their former positions and to pay the latter backwages.
The antecedent facts of the case are recounted as follows:
Petitioner is a corporation duly organized and existing in accordance with Philippine
laws, engaged principally in the production and processing of pineapple for the
export market.[3] Its plantation is located in Polomolok, South Cotabato.[4]
Respondents are members of the Cannery Multi-Purpose Cooperative (CAMPCO).
CAMPCO was organized in accordance with Republic Act No. 6938, otherwise
known as the Cooperative Code of the Philippines, and duly-registered with the
Cooperative Development Authority (CDA) on 6 January 1993.[5] Members of
CAMPCO live in communities surrounding petitioners plantation and are relatives of
petitioners employees.
On 17 August 1993, petitioner and CAMPCO entered into a Service Contract.[6]
The Service Contract referred to petitioner as the Company, while CAMPCO was the
Contractor. Relevant portions thereof read as follows
1. That the amount of this contract shall be or shall not exceed TWO HUNDRED
TWENTY THOUSAND ONLY (P220,000.00) PESOS, terms and conditions of
payment shall be on a per job basis as specified in the attached schedule of rates; the
CONTRACTOR shall perform the following services for the COMPANY;
1.1 Assist the COMPANY in its daily operations;
22
1.2 Perform odd jobs as may be assigned.
2. That both parties shall observe the following terms and conditions as stipulated, to
wit:
2.1 CONTRACTOR must carry on an independent legitimate business, and must
comply with all the pertinent laws of the government both local and national;
2.2 CONTRACTOR must provide all hand tools and equipment necessary in the
performance of their work.
However, the COMPANY may allow the use of its fixed equipment as a casual
facility in the performance of the contract;
2.3 CONTRACTOR must comply with the attached scope of work,
specifications, and GMP and safety practices of the company;
2.4 CONTRACTOR must undertake the contract work under the following
manner:
a. on his own account;
b. under his own responsibility;
c. according to his manner and method, free from the control and direction of the
company in all matters connected with the performance of the work except as to the
result thereof;
3. CONTRACTOR must pay the prescribed minimum wage, remit SSS/MEDICARE
premiums to proper government agencies, and submit copies of payroll and proof of
SSS/MEDICARE remittances to the COMPANY;
4. This contract shall be for a specific period of Six (6) months from July 1 to
December 31, 1993; x x x.
Pursuant to the foregoing Service Contract, CAMPCO members rendered services to
petitioner. The number of CAMPCO members that report for work and the type of
service they performed depended on the needs of petitioner at any given time.
Although the Service Contract specifically stated that it shall only be for a period of
six months, i.e., from 1 July to 31 December 1993, the parties had apparently
extended or renewed the same for the succeeding years without executing another
written contract. It was under these circumstances that respondents came to work for
petitioner.
Investigation by DOLE
Concomitantly, the Sangguniang Bayan of Polomolok, South Cotabato, passed
Resolution No. 64, on 5 May 1993, addressed to then Secretary Ma. Nieves R.
Confessor of the Department of Labor and Employment (DOLE), calling her
attention to the worsening working conditions of the petitioners workers and the
organization of contractual workers into several cooperatives to replace the
individual labor-only contractors that used to supply workers to the petitioner.
Acting on the said Resolution, the DOLE Regional Office No. XI in Davao City
organized a Task Force that conducted an investigation into the alleged labor-only
contracting activities of the cooperatives in Polomolok.[7]
On 24 May 1993, the Senior Legal Officer of petitioner wrote a letter addressed to
Director Henry M. Parel of DOLE Regional Office No. XI, supposedly to correct the
misinformation that petitioner was involved in labor-only contracting, whether with a
cooperative or any private contractor. He further stated in the letter that petitioner
was not hiring cooperative members to replace the regular workers who were
separated from service due to redundancy; that the cooperatives were formed by the
immediate dependents and relatives of the permanent workers of petitioner; that
these cooperatives were registered with the CDA; and that these cooperatives were
authorized by their respective constitutions and by-laws to engage in the job
contracting business.[8]
The Task Force submitted a report on 3 June 1993 identifying six cooperatives that
were engaged in labor-only contracting, one of which was CAMPCO. The DOLE
Regional Office No. XI held a conference on 18 August 1993 wherein the
representatives of the cooperatives named by the Task Force were given the
opportunity to explain the nature of their activities in relation to petitioner.
Subsequently, the cooperatives were required to submit their position papers and
other supporting documents, which they did on 30 August 1993. Petitioner likewise
submitted its position paper on 15 September 1993.[9]
On 19 October 1993, Director Parel of DOLE Regional Office No. XI issued an
Order[10] in which he made the following findings
Records submitted to this Office show that the six (6) aforementioned cooperatives
are all duly registered with the Cooperative Development Authority (CDA). These
cooperatives were also found engaging in different activities with DOLE
PHILIPPINES, INC. a company engaged in the production of pineapple and export
of pineapple products. Incidentally, some of these cooperatives were also found
engaging in activities which are directly related to the principal business or
operations of the company. This is true in the case of the THREE (3) Cooperatives,
namely; Adventurers Multi Purpose Cooperative, Human Resource Multi Purpose
Cooperative and Cannery Multi Purpose Cooperative.
23
From the foregoing findings and evaluation of the activities of Adventurers Multi
Purpose Cooperative, Human Resource Multi Purpose Cooperative and Cannery
Multi Purpose Cooperative, this Office finds and so holds that they are engaging in
Labor Only Contracting Activities as defined under Section 9, Rule VIII, Book III of
the rules implementing the Labor Code of the Philippines, as amended which we
quote:
Section 9 Labor Only Contracting a) Any person who undertakes to supply workers
to an employer shall be deemed to be engaged in labor-only contracting where such
person:
1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
2) The workers recruited and placed by such person are performing activities which
are directly related to the principal business or operation of the employer to which
workers are habitually employed.
b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary 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.
WHEREFORE, premises considered, ADVENTURERS MULTI PURPOSE
COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE COOPERATIVE and
CANNERY MULTI PURPOSE COOPERATIVE are hereby declared to be engaged
in labor only contracting which is a prohibited activity. The same cooperatives are
therefore ordered to cease and desist from further engaging in such activities.
The three (3) other cooperatives, namely Polomolok Skilled Workers Multi Purpose
Cooperative, Unified Engineering and Manpower Service Multi Purpose Cooperative
and Tibud sa Katibawasan Multi Purpose Cooperative whose activities may not be
directly related to the principal business of DOLE Philippines, Inc. are also advised
not to engage in labor only contracting with the company.
All the six cooperatives involved appealed the afore-quoted Order to the Office of
the DOLE Secretary, raising the sole issue that DOLE Regional Director Director
Parel committed serious error of law in directing the cooperatives to cease and desist
from engaging in labor-only contracting. On 15 September 1994, DOLE
Undersecretary Cresencio B. Trajano, by the authority of the DOLE Secretary,
issued an Order[11] dismissing the appeal on the basis of the following ratiocination
The appeal is devoid of merit.
The Regional Director has jurisdiction to issue a cease and desist order as provided
by Art. 106 of the Labor Code, as amended, to wit:
Art. 106. Contractor or subcontractor. x x x
xxxx
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 (Emphasis supplied)
There is labor-only contracting where the person supplying workers to an employer
does not have substantial capital or investment in the forms 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 the employer. In such cases, the person or the 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 relation to Article 128(b) of the Labor Code, as amended by Republic Act No.
7730, which reads:
Art. 128. Visitorial and Enforcement Power.
b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the
Secretary of Labor and Employment or his duly authorized representatives shall have
the power to issue compliance orders to give effect to the labor standards provisions
of this Code and other labor legislation based on the findings of labor employment
and enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their orders, except in
cases where the employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary proof which were
not considered in the course of inspection.
An order issued by the duly authorized representative of the Secretary of Labor and
Employment under this article may be appealed to the latter. In case said order
involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash bond issued by a reputable bonding company duly accredited
24
by the Secretary of Labor and Employment in the amount equivalent to the monetary
award in the order appealed from.
The records reveal that in the course of the inspection of the premises of Dolefil, it
was found out that the activities of the members of the [cooperatives] are necessary
and desirable in the principal business of the former; and that they do not have the
necessary investment in the form of tools and equipments. It is worthy to note that
the cooperatives did not deny that they do not have enough capital in the form of
tools and equipment. Under the circumstances, it could not be denied that the
[cooperatives] are considered as labor-only contractors in relation to the business
operation of DOLEFIL, INC.
Thus, Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor
Code, provides that:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to
an employer shall be deemed to be engaged in labor-only contracting where such
person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which
are directly related to the principal business or operations of the employer in which
workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as a contractor shall be considered merely as an agent or intermediary 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.
xxxx
Violation of the afore-quoted provision is considered a labor standards violation and
thus, within the visitorial and enforcement powers of the Secretary of Labor and
Employment (Art. 128).
The Regional Directors authority to issue a cease and desist order emanates from
Rule I, Section 3 of the Rules on Disposition of Labor Standard Cases in the
Regional Offices, to wit:
Section 3. Authorized representative of the Secretary of Labor and Employment. The
Regional Directors shall be the duly authorized representatives of the Secretary of
Labor and Employment in the administration and enforcement of the labor standards
within their respective territorial jurisdiction.
The power granted under Article 106 of the Labor Code to the Secretary of Labor
and Employment to restrict or prohibit the contracting out of labor to protect the
rights of workers established under the Code is delegated to the Regional Directors
by virtue of the above-quoted provision.
The reason why labor-only contracting is prohibited under the Labor Code is that it
encourages circumvention of the provisions of the Labor Code on the workers right
to security of tenure and to self-organization.
WHEREFORE, the respondents Appeal is hereby DISMISSED for lack of merit.
The Order of the Regional Director, Regional Office No. XI, Davao City, is
AFFIRMED.
After the motion for reconsideration of the foregoing Order was denied, no further
motion was filed by the parties, and the Order, dated 15 September 1994, of DOLE
Undersecretary Trajano became final and executory. A Writ of Execution[12] was
issued by DOLE Regional Office No. XI only on 27 July 1999, years after the
issuance of the order subject of the writ. The DOLE Regional Office No. XI was
informed that CAMPCO and two other cooperatives continued to operate at DOLE
Philippines, Inc. despite the cease and desist Order it had issued. It therefore
commanded the Sheriff to proceed to the premises of CAMPCO and the two other
cooperatives and implement its Order dated 19 October 1993.
Respondents Complaint before the NLRC
Respondents started working for petitioner at various times in the years 1993 and
1994, by virtue of the Service Contract executed between CAMPCO and petitioner.
All of the respondents had already rendered more than one year of service to
petitioner. While some of the respondents were still working for petitioner, others
were put on stay home status on varying dates in the years 1994, 1995, and 1996 and
were no longer furnished with work thereafter. Together, respondents filed a
Complaint,[13] on 19 December 1996, with the National Labor Relations
Commission (NLRC), for illegal dismissal, regularization, wage differentials,
damages and attorneys fees.
In their Position Paper,[14] respondents reiterated and expounded on the allegations
they previously made in their Complaint
Sometime in 1993 and 1994, [herein petitioner] Dolefil engaged the services of the
[herein respondents] through Cannery Multi-purpose Cooperative. A cooperative
which was organized through the initiative of Dolefil in order to fill in the vacuum
created as a result of the dismissal of the regular employees of Dolefil sometime in
1990 to 1993.
25
The [respondents] were assigned at the Industrial Department of respondent Dolefil.
All tools, implements and machineries used in performing their task such as: can
processing attendant, feeder of canned pineapple at pineapple processing, nata de
coco processing attendant, fruit cocktail processing attendant, and etc. were provided
by Dolefil. The cooperative does not have substantial capital and does not provide
the [respondents] with the necessary tools to effectively perform their assigned task
as the same are being provided by Dolefil.
The training and instructions received by the [respondents] were provided by Dolefil.
Before any of the [respondents] will be allowed to work, he has to undergo and pass
the training prescribed by Dolefil. As a matter of fact, the trainers are employees of
Dolefil.
The [respondents] perform their assigned task inside the premises of Dolefil. At the
job site, they were given specific task and assignment by Dolefils supervisors
assigned to supervise the works and efficiency of the complainants. Just like the
regular employees of Dolefil, [respondents] were subjected to the same rules and
regulations observe [sic] inside company premises and to some extent the rules
applied to the [respondents] by the company through its officers are even stricter.
The functions performed by the [respondents] are the same functions discharged by
the regular employees of Dolefil. In fact, at the job site, the [respondents] were
mixed with the regular workers of Dolefil. There is no difference in so far as the job
performed by the regular workers of Dolefil and that of the [respondents].
Some of the [respondents] were deprived of their employment under the scheme of
stay home status where they were advised to literally stay home and wait for further
instruction to report anew for work. However, they remained in this condition for
more than six months. Hence, they were constructively or illegally dismissed.
Respondents thus argued that they should be considered regular employees of
petitioner given that: (1) they were performing jobs that were usually necessary and
desirable in the usual business of petitioner; (2) petitioner exercised control over
respondents, not only as to the results, but also as to the manner by which they
performed their assigned tasks; and (3) CAMPCO, a labor-only contractor, was
merely a conduit of petitioner. As regular employees of petitioner, respondents
asserted that they were entitled to security of tenure and those placed on stay home
status for more than six months had been constructively and illegally dismissed.
Respondents further claimed entitlement to wage differential, moral damages, and
attorneys fees.
In their Supplemental Position Paper,[15] respondents presented, in support of their
Complaint, the Orders of DOLE Regional Director Parel, dated 19 October 1993,
and DOLE Undersecretary Trajano, dated 15 September 1994, finding that
CAMPCO was a labor-only contractor and directing CAMPCO to cease and desist
from any further labor-only contracting activities.
Petitioner, in its Position Paper[16] filed before the NLRC, denied that respondents
were its employees.
Petitioner explained that it found the need to engage external services to augment its
regular workforce, which was affected by peaks in operation, work backlogs,
absenteeism, and excessive leaves. It used to engage the services of individual
workers for definite periods specified in their employment contracts and never
exceeding one year. However, such an arrangement became the subject of a labor
case,[17] in which petitioner was accused of preventing the regularization of such
workers. The Labor Arbiter who heard the case, rendered his Decision[18] on 24
June 1994 declaring that these workers fell squarely within the concept of seasonal
workers as envisaged by Article 280 of the Labor Code, as amended, who were hired
by petitioner in good faith and in consonance with sound business practice; and
consequently, dismissing the complaint against petitioner. The NLRC, in its
Resolution,[19] dated 14 March 1995, affirmed in toto the Labor Arbiters Decision
and further found that the workers were validly and legally engaged by petitioner for
term employment, wherein the parties agreed to a fixed period of employment,
knowingly and voluntarily, without any force, duress or improper pressure being
brought to bear upon the employees and absent any other circumstance vitiating their
consent. The said NLRC Resolution became final and executory on 18 June 1996.
Despite the favorable ruling of both the Labor Arbiter and the NLRC, petitioner
decided to discontinue such employment arrangement. Yet, the problem of petitioner
as to shortage of workforce due to the peaks in operation, work backlogs,
absenteeism, and excessive leaves, persisted. Petitioner then found a solution in the
engagement of cooperatives such as CAMPCO to provide the necessary additional
services.
Petitioner contended that respondents were owners-members of CAMPCO; that
CAMPCO was a duly-organized and registered cooperative which had already
grown into a multi-million enterprise; that CAMPCO was engaged in legitimate job-
contracting with its own owners-members rendering the contract work; that under the
express terms and conditions of the Service Contract executed between petitioner
(the principal) and CAMPCO (the contractor), the latter shall undertake the contract
work on its own account, under its own responsibility, and according to its own
manner and method free from the control and direction of the petitioner in all matters
connected with the performance of the work, except as to the result thereof; and
since CAMPCO held itself out to petitioner as a legitimate job contractor,
respondents, as owners-members of CAMPCO, were estopped from denying or
refuting the same.
26
Petitioner further averred that Department Order No. 10, amending the rules
implementing Books III and VI of the Labor Code, as amended, promulgated by the
DOLE on 30 May 1997, explicitly recognized the arrangement between petitioner
and CAMPCO as permissible contracting and subcontracting, to wit
Section 6. Permissible contracting and subcontracting. Subject to the conditions set
forth in Section 3(d) and (e) and Section 5 hereof, the principal may engage the
services of a contractor or subcontractor for the performance of any of the following;
(a) Works or services temporarily or occasionally needed to meet abnormal increase
in the demand of products or services, provided that the normal production capacity
or regular workforce of the principal cannot reasonably cope with such demands;
(b) Works or services temporarily or occasionally needed by the principal for
undertakings requiring expert or highly technical personnel to improve the
management or operations of an enterprise;
(c) Services temporarily needed for the introduction or promotion of new products,
only for the duration of the introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or
operation of the principal, including casual work, janitorial, security, landscaping,
and messengerial services, and work not related to manufacturing processes in
manufacturing establishments;
(e) Services involving the public display of manufacturers products which does not
involve the act of selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual, or peculiar
skills, expertise, tools or equipment the performance of which is beyond the
competence of the regular workforce or production capacity of the principal; and
(g) Unless a reliever system is in place among the regular workforce, substitute
services for absent regular employees, provided that the period of service shall be
coextensive with the period of absence and the same is made clear to the substitute
employee at the time of engagement. The phrase absent regular employees includes
those who are serving suspensions or other disciplinary measures not amounting to
termination of employment meted out by the principal, but excludes those on strike
where all the formal requisites for the legality of the strike have been prima facie
complied with based on the records filed with the National Conciliation and
Mediation Board.
According to petitioner, the services rendered by CAMPCO constituted permissible
job contracting under the afore-quoted paragraphs (a), (c), and (g), Section 6 of
DOLE Department Order No. 10, series of 1997.

After the parties had submitted their respective Position Papers, the Labor Arbiter
promulgated its Decision[20] on 11 June 1999, ruling entirely in favor of petitioner,
ratiocinating thus
After judicious review of the facts, narrated and supporting documents adduced by
both parties, the undersigned finds [and] holds that CAMPCO is not engaged in
labor-only contracting.
Had it not been for the issuance of Department Order No. 10 that took effect on June
22, 1997 which in the contemplation of Law is much later compared to the Order
promulgated by the Undersecretary Cresencio Trajano of Department of [L]abor and
Employment, the undersigned could safely declared [sic] otherwise. However, owing
to the principle observed and followed in legal practice that the later law or
jurisprudence controls, the reliance to Secretary Trajanos order is overturned.
Labor-only contracting as amended by Department [O]rder No. 10 is defined in this
wise:
Labor-only contracting is prohibited under this Rule is an arrangement where the
contractor or subcontractor merely recruits, supplied [sic] or places workers to
perform a job, work or service for a principal, and the following elements are
present:
i) The contractor or sub-contractor does not have substantial capital or investment to
actually perform the job, work, or service under its own account & responsibility,
and
ii) 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.
Verification of the records reveals that per Annexes J and K of [herein petitioner
DolePhils] position paper, which are the yearly audited Financial Statement and
Balance Sheet of CAMPCO shows [sic] that it has more than substantial capital or
investment in order to qualify as a legitimate job contractor.
We likewise recognize the validity of the contract entered into and between
CAMPCO and [petitioner] for the former to assists [sic] the latter in its operations
and in the performance of odd jobs such as the augmentation of regular manning
particularly during peaks in operation, work back logs, absenteeism and excessive
leave availment of respondents regular employees. The rule is well-settled that labor
laws discourage interference with an employers judgment in the conduct of his
business. Even as the law is solicitors [sic] of the welfare of the employees, it must
also protect the right of an employer to exercise what are clearly management
27
prerogatives. The free will of management to conduct its own business affairs to
achieve its purpose cannot be denied (Yuco Chemical Industries vs. Ministry of
[L]abor, GR No. 75656, May 28, 1990).
CAMPCO being engaged in legitimate contracting, cannot therefore declared [sic] as
guilty of labor-only contracting which [herein respondents] want us to believe.
The second issue is likewise answered in the negative. The reason is plain and
simple[,] section 12 of Department [O]rder No. 10 states:
Section 12. Employee-employer relationship. Except in cases provided for in Section
13, 14, 15 & 17, the contractor or subcontractor shall be considered the employer of
the contractual employee for purposes of enforcing the provisions of the Code.
The Resolution of NLRC 5th division, promulgated on March 14, 1 1995 [sic]
categorically declares:
Judging from the very nature of the terms and conditions of their hiring, the
Commission finds the complainants to have been engaged to perform work, although
necessary or desirable to the business of respondent company, for a definite period or
what is community called TERM EMPLOYMENT. It is clear from the evidence and
record that the nature of the business and operation of respondent company has its
peaks and valleys and therefore, it is not difficult to discern, inclement weather, or
high availment by regular workers of earned leave credits, additional workers
categorized as casuals, or temporary, are needed to meet the exigencies. (Underlining
in the original)
The validity of fixed-period employment has been consistently upheld by the
Supreme [C]ourt in a long line of cases, the leading case of which is Brent School,
Inc. vs. Zamora & Alegre, GR No. 48494, February 5, 1990. Thus at the end of the
contract the employer-employee relationship is terminated. It behooves upon us to
rule that herein complainants cannot be declared regular rank and file employees of
the [petitioner] company.
Anent the third issue, [respondents] dismally failed to provide us the exact figures
needed for the computation of their wage differentials. To simply alleged [sic] that
one is underpaid of his wages is not enough. No bill of particulars was submitted.
Moreover, the Order of RTWPB Region XI, Davao City dated February 21, 1996
exempts [petitioner] company from complying Wage Order No. 04 [sic] in so far as
such exemption applies only to workers who are not covered by the Collective
Bargaining Agreement, for the period January 1 to December 31, 1995,. [sic] In so
far as [respondents] were not privies to the CBA, they were the workers referred to
by RTWPBs Order. [H]ence, [respondents] claims for wage differentials are hereby
dismissed for lack of factual basis.
We find no further necessity in delving into the issues raised by [respondents]
regarding moral damages and attorneys fees for being moot and academic because of
the findings that CAMPCO does not engaged [sic] in labor-only contracting and that
[respondents] cannot be declared as regular employees of [petitioner].
WHEREFORE, premises considered, judgment is hereby rendered in the above-
entitled case, dismissing the complaint for lack of merit.
Respondents appealed the Labor Arbiters Decision to the NLRC, reiterating their
position that they should be recognized as regular employees of the petitioner since
CAMPCO was a mere labor-only contractor, as already declared in the previous
Orders of DOLE Regional Director Parel, dated 19 October 1993, and DOLE
Undersecretary Trajano, dated 15 September 1994, which already became final and
executory. The NLRC, in its Resolution,[21] dated 29 February 2000, dismissed the
appeal and affirmed the Labor Arbiters Decision, reasoning as follows
We find no merit in the appeal.
The concept of conclusiveness of judgment under the principle of res judicata means
that where between the first case wherein judgment is rendered and the second case
wherein such judgment is invoked, there is identity of parties, but there is no identity
of cause of action, the judgment is conclusive in the second case, only as to those
matters actually and directly controverted and determined and not as to matters
merely involved therein (Viray, etc. vs. Marinas, et al., 49 SCRA 44). There is no
denying that the order of the Department of Labor and Employment, Regional Office
No. XI in case No. RI100-9310-RI-355, which the complainants perceive to have
sealed the status of CAMPCO as labor-only contractor, proceeded from the visitorial
and enforcement power of the Department Secretary under Article 128 of the Labor
Code. Acting on reports that the cooperatives, including CAMPCO, that operated
and offered services at [herein petitioner] company were engaging in labor-only
contracting activities, that Office conducted a routinary inspection over the records
of said cooperatives and consequently, found the latter to be engaging in labor-only
contracting activities. This being so, [petitioner] company was not a real party-in-
interest in said case, but the cooperatives concerned. Therefore, there is no identity
of parties between said case and the present case which means that the afore-said
ruling of the DOLE is not binding and conclusive upon [petitioner] company.
It is not correct, however, to say, as the Labor Arbiter did, that the afore-said ruling
of the Department of Labor and Employment has been overturned by Department
Order No. 10. It is a basic principle that once a judgment becomes final it cannot be
disturbed, except for clerical errors or when supervening events render its execution
impossible or unjust (Sampaguita Garmens [sic] Corp. vs. NLRC, G. R. No. 102406,
June 7, 1994). Verily, the subsequent issuance of Department Order No. 10 cannot
be construed as supervening event that would render the execution of said judgment
28
impossible or unjust. Department Order No. 10 refers to the ramification of some
provisions of the Rules Implementing Articles 106 and 109 of the Labor Code,
without substantially changing the definition of labor-only or job contracting.
Well-settled is the rule that to qualify as an independent job contractor, one has
either substantial capital or investment in the form of tools, equipment and
machineries necessary to carry out his business (see Virginia Neri, et al. vs. NLRC,
et al., G.R. Nos. 97008-89, July 23, 1993). CAMPCO has admittedly a paid-up
capital of P4,562,470.25 and this is more than enough to qualify it as an independent
job contractor, as aptly held by the Labor Arbiter.
WHEREFORE, the appeal is DISMISSED for lack of merit and the appealed
decision is AFFIRMED.
Petition for Certiorari with the Court of Appeals
Refusing to concede defeat, respondents filed with the Court of Appeals a Petition
for Certiorari under Rule 65 of the revised Rules of Civil Procedure, asserting that
the NLRC acted without or in excess of its jurisdiction and with grave abuse of
discretion amounting to lack of jurisdiction when, in its Resolution, dated 29
February 2000, it (1) ruled that CAMPCO was a bona fide independent job
contractor with substantial capital, notwithstanding the fact that at the time of its
organization and registration with CDA, it only had a paid-up capital of P6,600.00;
and (2) refused to apply the doctrine of res judicata against petitioner. The Court of
Appeals, in its Decision,[22] dated 20 May 2002, granted due course to respondents
Petition, and set aside the assailed NLRC Decision. Pertinent portions of the Court of
Appeals Decision are reproduced below
In the case at bench, it was established during the proceedings before the [NLRC]
that CAMPCO has a substantial capital. However, having a substantial capital does
not per se qualify CAMPCO as a job contractor. In order to be considered an
independent contractor it is not enough to show substantial capitalization or
investment in the form of tools, equipment, machinery and work premises. The
conjunction and, in defining what a job contractor is, means that aside from having a
substantial capital or investment in the form of tools, equipment, machineries, work
premise, and other materials which are necessary in the conduct of his business, the
contractor must be able to prove that it also 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 as to the results thereof. [Herein petitioner DolePhil] has failed to prove,
except for the substantial capital requirement, that CAMPCO has met the other
requirements. It was not established that CAMPCO is engaged or carries on an
independent business. In the performance of the respective tasks of workers
deployed by CAMPCO with [petitioner], it was not established that CAMPCO
undertook the contract of work it entered with [petitioner] under its own account and
its own responsibility. It is [petitioner] who provides the procedures to be followed
by the workers in the performance of their assigned work. The workers deployed by
CAMPCO to [petitioner] performed activities which are directly related to the
principal business or operations of the employer in which workers are habitually
employed since [petitioner] admitted that these workers were engaged to perform the
job of other regular employees who cannot report for work.
Moreover, [NLRC] likewise gravely erred in not giving weight to the Order dated 19
October 1993 issued by the Office of the Secretary of the Department of Labor and
Employment, through Undersecretary Cresencio Trajano, which affirmed the
findings of the Department of Labor and Employment Regional Office, Region XI,
Davao City that Cannery Multi-Purpose Cooperative is one of the cooperatives
engaged in labor-only contracting activities.
In the exercise of the visitorial and enforcement power of the Department of Labor
and Employment, an investigation was conducted among the cooperatives organized
and existing in Polomolok, South Cotabato, relative to labor-only contracting
activities. One of the cooperatives investigated was Cannery Multi-Purpose
Cooperative. After the investigation, the Department of Labor and Employment,
Regional Office No. XI, Davao City, through its Regional Director, issued the Order
dated 19 October 1993, stating:
WHEREFORE, premises considered, ADVENTURERS MULTI PURPOSE
COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE SKILLED
COOPERATIVE and CANNERY MULTI PURPOSE COOPERATIVE are hereby
declared to be engaged in labor only contracting which is a prohibited activity. The
same cooperatives are therefore ordered to cease and desist from further engaging in
such activities.
xxxx
SO ORDERED.
Cannery Multi Purpose Cooperative, together with the other cooperatives declared as
engaged in labor-only contracting activity, appeal the above-findings to the Secretary
of the Department of Labor and Employment. Their appeal was dismissed for lack of
merit as follows:: [sic]
xxxx
[NLRC] held that CAMPCO, being not a real party-in interest in the above-case, the
said ruling is not binding and conclusive upon [petitioner]. This Court, however,
finds the contrary.
29
CAMPCO was one of the cooperatives investigated by the Department of Labor and
Employment, Regional Office No. XI, Davao City, pursuant to Article 128 of the
Labor Code. It was one of the appellants before the Secretary of the Department of
Labor questioning the decision of the Regional Director of DOLE, Regional Office
No. XI, Davao City. This Court noted that in the proceedings therein, and as
mentioned in the decision rendered by Undersecretary Cresencio B. Trajano of the
Department of Labor and Employment, Manila, regarding the cooperatives appeal
thereto, the parties therein, including Cannery Multi-Purpose Cooperative, submitted
to the said office their position papers and Articles of Cooperatives and Certification
of Registrations [sic] on 30 August 1993. This is a clear indicia that CAMPCO
participated in the proceedings therein. [NLRC], therefore, committed grave abuse of
discretion amounting to lack or excess of jurisdiction when it held that CAMPCO
was never a party to the said case.
[Petitioner] invokes Section 6 of Department Order No. 10, series of 1997, issued by
the Department of Labor and Employment which took effect on 22 June 1997. The
said section identified the circumstances which are permissible job contracting, to
wit:
xxxx
[Petitioners] main contention is based on the decisions rendered by the labor arbiter
and [NLRC] which are both anchored on Department Order No. 10 issued by the
Department of Labor and Employment. The said department order provided for
several flexible working relations between a principal, a contractor or subcontractor
and the workers recruited by the latter and deployed to the former. In the case at
bench, [petitioner] posits that the engagement of [petitioner] of the workers deployed
by CAMPCO was pursuant to D.O. No. 10, Series of 1997.
However, on 8 May 2001, the Department of Labor and Employment issued
Department Order No. 3, series of 2001, revoking Department Order No. 10, series
of 1997. The said department order took effect on 29 May 2001.
xxxx
Under Department Order No. 3, series of 2001, some contracting and outsourcing
arrangements are no longer legitimate modes of employment relation. Having
revoked Department Order No. 10, series of 1997, [petitioner] can no longer support
its argument by relying on the revoked department order.
Considering that [CAMPCO] is not a job contractor, but one engaged in labor-only
contracting, CAMPCO serves only as an agent of [petitioner] pursuant to par. (b) of
Sec. 9, Rule VIII, Book III of the Implementing Rules and Regulations of the Labor
Code, stating,

xxxx
However, the Court cannot declare that [herein respondents] are regular employees
of [petitioner]. x x x
xxxx
In the case at bench, although [respondents] were engaged to perform activities
which are usually necessary or desirable in the usual business or trade of private
respondent, it is apparent, however, that their services were engaged by [petitioner]
only for a definite period. [Petitioners] nature of business and operation has its peaks.
In order to meet the demands during peak seasons they necessarily have to engage
the services of workers to work only for a particular season. In the case of
[respondents], when they were deployed by CAMPCO with [petitioner] and were
assigned by the latter at its cannery department, they were aware that they will be
working only for a certain duration, and this was made known to them at the time
they were employed, and they agreed to the same.
xxxx
The non-rehiring of some of the petitioners who were allegedly put on a floating
status is an indication that their services were no longer needed. They attained their
floating status only after they have finished their contract of employment, or after the
duration of the season that they were employed. The decision of [petitioner] in not
rehiring them means that their services were no longer needed due to the end of the
season for which they were hired. And this Court reiterates that at the time they were
deployed to [petitioners] cannery division, they knew that the services they have to
render or the work they will perform are seasonal in nature and consequently their
employment is only for the duration of the season.
ACCORDINGLY, in view of the foregoing, the instant petition for certiorari is
hereby GRANTED DUE COURSE. The decision dated 29 February 2000 and
Resolution dated 19 December 2000 rendered by [NLRC] are hereby SET ASIDE. In
place thereof, it is hereby rendered that:
1. Cannery Multi-Purpose Cooperative is a labor-only contractor as defined under
the Labor Code of the Philippines and its implementing rules and regulations; and
that
2. DOLE Philippines Incorporated is merely an agent or intermediary of Cannery
Multi-Purpose Cooperative.
All other claims of [respondents] are hereby DENIED for lack of basis.
30
Both petitioner and respondents filed their respective Motions for Reconsideration of
the foregoing Decision, dated 20 May 2002, prompting the Court of Appeals to
promulgate an Amended Decision on 27 November 2003, in which it ruled in this
wise:
This court examined again the documentary evidence submitted by the [herein
petitioner] and we rule not to disturb our findings in our Decision dated May 20,
2002. It is our opinion that there was no competent evidence submitted that would
show that CAMPCO is engaged to perform a specific and special job or service
which is one of the strong indicators that an entity is an independent contractor. The
articles of cooperation and by-laws of CAMPCO do not show that it is engaged in
performing a specific and special job or service. What is clear is that it is a multi-
purpose cooperative organized under RA No. 6938, nothing more, nothing less.
As can be gleaned from the contract that CAMPCO entered into with the [petitioner],
the undertaking of CAMPCO is to provide [petitioner] with workforce by assisting
the company in its daily operations and perform odd jobs as may be assigned. It is
our opinion that CAMPCO merely acted as recruitment agency for [petitioner].
CAMPCO by supplying manpower only, clearly conducted itself as labor-only
contractor. As can be gleaned from the service contract, the work performed by the
[herein respondents] are directly related to the main business of the [petitioner].
Clearly, the requisites of labor-only contracting are present in the case at bench.
In view of the above ruling, we find it unnecessary to discuss whether the Order of
Undersecretary Trajano finding that CAMPCO is a labor-only contractor is a
determining factor or constitutes res judicata in the case at bench. Our findings that
CAMPCO is a labor-only contractor is based on the evidence presented vis--vis the
rulings of the Supreme Court on the matter.
Since, the argument that the [petitioner] is the real employer of the [respondents], the
next question that must be answered is what is the nature of the employment of the
petitioners?
xxxx
The afore-quoted [Article 280 of the Labor Code, as amended] provides for two
kinds of employment, namely: (1) regular (2) casual. In our Decision, we ruled that
the [respondents] while performing work necessary and desirable to the business of
the [petitioner] are seasonal employees as their services were engaged by the
[petitioner] for a definite period or only during peak season.
In the most recent case of Hacienda Fatima v. National Federation of Sugarcane
Workers Food and General Trade, the Supreme Court ruled that for employees to be
excluded from those classified as regular employees, it is not enough that they
perform work or services that are seasonal in nature. They must have also been
employed only for the duration of one season. It is undisputed that the [respondents]
services were engaged by the [petitioner] since 1993 and 1994. The instant complaint
was filed in 1996 when the [respondents] were placed on floating status. Evidently,
[petitioner] employed the [respondents] for more than one season. Therefore, the
general rule on regular employment is applicable. The herein petitioners who
performed their jobs in the workplace of the [petitioner] every season for several
years, are considered the latters regular employees for having performed works
necessary and desirable to the business of the [petitioner]. The [petitioners] eventual
refusal to use their serviceseven if they were ready, able and willing to perform their
usual duties whenever these were availableand hiring other workers to perform the
tasks originally assigned to [respondents] amounted to illegal dismissal of the latter.
We thus, correct our earlier ruling that the herein petitioners are seasonal workers.
They are regular employees within the contemplation of Article 280 of the Labor
Code and thus cannot be dismissed except for just or authorized cause. The Labor
Code provides that when there is a finding of illegal dismissal, the effect is that the
employee dismissed shall be reinstated to his former position without loss of
seniority rights with backwages from the date of his dismissal up to his actual
reinstatement.
This court however, finds no basis for the award of damages and attorneys fees in
favor of the petitioners.
WHEREFORE, the Decision dated May 20, 2002 rendered by this Court is hereby
AMENDED as follows:
1) [Petitioner] DOLE PHILIPPINES is hereby declared the employer of the
[respondents].
2) [Petitioner] DOLE PHILIPPINES is hereby declared guilty of illegal dismissal
and ordered to immediately reinstate the [respondents] to their former position
without loss of seniority rights and other benefits, and to pay each of the
[respondents] backwages from the date of the filing of illegal dismissal on December
19, 1996 up to actual reinstatement, the same to be computed by the labor arbiter.
3) The claims for damages and attorneys fees are hereby denied for lack of merit.
No costs.[23]
The Petition at Bar
Aggrieved by the Decision, dated 20 May 2002, and the Amended Decision, dated
27 November 2003, of the Court of Appeals, petitioner filed the instant Petition for
31
Review on Certiorari under Rule 45 of the revised Rules of Civil Procedure, in which
it made the following assignment of errors
I.
THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE OF
JUDCIAL PROCEEDINGS WHEN IT MADE ITS OWN FACTUAL FINDINGS AND
DISREGARDED THE UNIFORM AND CONSISTENT FACTUAL FINDINGS OF THE
LABOR ARBITER AND THE NLRC, WHICH MUST BE ACCORDED GREAT WEIGHT,
RESPECT AND EVEN FINALITY. IN SO DOING, THE COURT OF APPEALS
EXCEEDED ITS AUTHORITY ON CERTIORARI UNDER RULE 65 OF THE RULES OF
COURT.
II.
THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY
NOT IN ACCORD WITH THE CONSTITUTION, LAW, APPLICABLE RULES AND
REGULATIONS AND DECISIONS OF THE SUPREME COURT IN NOT HOLDING
THAT DEPARTMENT ORDER NO. 10, SERIES OF 1997 IS THE APPLICABLE
REGULATION IN THIS CASE. IN GIVING RETROACTIVE APPLICATION TO
DEPARTMENT ORDER NO. 3, SERIES OF 2001, THE COURT OF APPEALS
VIOLATED THE CONSTITUTIONAL PROVISION AGAINST IMPAIRMENT OF
CONTRACTS AND DEPRIVED PETITIONER OF THE DUE PROCESS OF THE LAW.
III.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT
IN ACCORD WITH LAW AND JURISPRUDENCE IN GIVING WEIGHT TO THE
ORDER DATED 19 OCTOBER 1993 ISSUED BY THE OFFICE OF SECRETARY OF
LABOR, WHICH AFFIRMED THE FINDINGS OF THE DOLE REGIONAL OFFICE
(REGION XI, DAVAO CITY) THAT CAMPCO IS ONE OF THE COOPERATIVES
ENGAGED IN LABOR-ONLY CONTRACTING ACTIVITIES.
IV.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT
IN ACCORD WITH LAW AND JURISPRUDENCE IN NOT RULING THAT
RESPONDENTS, BY ACTIVELY REPRESENTING THEMSELVES AND
WARRANTING THAT THEY ARE ENGAGED IN LEGITIMATE JOB CONTRACTING,
ARE BARRED BY THE EQUITABLE PRINCIPLE OF ESTOPPEL FROM ASSERTING
THAT THEY ARE REGULAR EMPLOYEES OF PETITIONER.
V.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT
IN ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT CAMPCO IS
ENGAGED IN THE PROHIBITED ACT OF LABOR-ONLY CONTRACTING DESPITE
THERE BEING SUBSTANTIAL EVIDENCE TO THE CONTRARY.
VI.
THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT
IN ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT PETITIONER IS
THE EMPLOYER OF RESPONDENTS AND THAT PETITIONER IS GUILTY OF
ILLEGAL DISMISSAL.[24]
This Courts Ruling
I certiorari, which is merely confined to issues of jurisdiction or grave abuse of
Anent the first assignment of error, petitioner argues that judicial review under Rule
65 of the revised Rules of Civil Procedure is limited only to issues concerning want
or excess or jurisdiction or grave abuse of discretion. The special civil action for
certiorari is a remedy designed to correct errors of jurisdiction and not mere errors of
judgment. It is the contention of petitioner that the NLRC properly assumed
jurisdiction over the parties and subject matter of the instant case. The errors
assigned by the respondents in their Petition for Certiorari before the Court of
Appeals do not pertain to the jurisdiction of the NLRC; they are rather errors of
judgment supposedly committed by the the NLRC, in its Resolution, dated 29
February 2000, and are thus not the proper subject of a petition for certiorari.
Petitioner also posits that the Petition for Certiorari filed by respondents with the
Court of Appeals raised questions of fact that would necessitate a review by the
appellate court of the evidence presented by the parties before the Labor Arbiter and
the NLRC, and that questions of fact are not a fit subject for a special civil action for
certiorari.
It has long been settled in the landmark case of St. Martin Funeral Home v.
NLRC,[25] that the mode for judicial review over decisions of the NLRC is by a
petition for certiorari under Rule 65 of the revised Rules of Civil Procedure. The
different modes of appeal, namely, writ of error (Rule 41), petition for review (Rules
42 and 43), and petition for review on certiorari (Rule 45), cannot be availed of
because there is no provision on appellate review of NLRC decisions in the Labor
Code, as amended.[26] Although the same case recognizes that both the Court of
Appeals and the Supreme Court have original jurisdiction over such petitions, it has
chosen to impose the strict observance of the hierarchy of courts. Hence, a petition
for certiorari of a decision or resolution of the NLRC should first be filed with the
Court of Appeals; direct resort to the Supreme Court shall not be allowed unless the
redress desired cannot be obtained in the appropriate courts or where exceptional and
compelling circumstances justify an availment of a remedy within and calling for the
exercise by the Supreme Court of its primary jurisdiction.
32
The extent of judicial review by certiorari of decisions or resolutions of the NLRC,
as exercised previously by the Supreme Court and, now, by the Court of Appeals, is
described in Zarate v. Olegario,[27] thus
The rule is settled that the original and exclusive jurisdiction of this Court to review
a decision of respondent NLRC (or Executive Labor Arbiter as in this case) in a
petition for certiorari under Rule 65 does not normally include an inquiry into the
correctness of its evaluation of the evidence. Errors of judgment, as distinguished
from errors of jurisdiction, are not within the province of a special civil action for
discretion. It is thus incumbent upon petitioner to satisfactorily establish that
respondent Commission or executive labor arbiter acted capriciously and
whimsically in total disregard of evidence material to or even decisive of the
controversy, in order that the extraordinary writ of certiorari will lie. By grave abuse
of discretion is meant such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, and it must be shown that the discretion was
exercised arbitrarily or despotically. For certiorari to lie, there must be capricious,
arbitrary and whimsical exercise of power, the very antithesis of the judicial
prerogative in accordance with centuries of both civil law and common law
traditions.
The Court of Appeals, therefore, can grant the Petition for Certiorari if it finds that
the NLRC, in its assailed decision or resolution, committed grave abuse of discretion
by capriciously, whimsically, or arbitrarily disregarding evidence which is material
or decisive of the controversy; and the Court of Appeals can not make this
determination without looking into the evidence presented by the parties.
Necessarily, the appellate court can only evaluate the materiality or significance of
the evidence, which is alleged to have been capriciously, whimsically, or arbitrarily
disregarded by the NLRC, in relation to all other evidence on record.
As this Court elucidated in Garcia v. National Labor Relations Commission[28]--
[I]n Ong v. People, we ruled that certiorari can be properly resorted to where the
factual findings complained of are not supported by the evidence on record. Earlier,
in Gutib v. Court of Appeals, we emphasized thus:
[I]t has been said that a wide breadth of discretion is granted a court of justice in
certiorari proceedings. The cases in which certiorari will issue cannot be defined,
because to do so would be to destroy its comprehensiveness and usefulness. So wide
is the discretion of the court that authority is not wanting to show that certiorari is
more discretionary than either prohibition or mandamus. In the exercise of our
superintending control over inferior courts, we are to be guided by all the
circumstances of each particular case as the ends of justice may require. So it is that
the writ will be granted where necessary to prevent a substantial wrong or to do
substantial justice.
And in another case of recent vintage, we further held:
In the review of an NLRC decision through a special civil action for certiorari,
resolution is confined only to issues of jurisdiction and grave abuse of discretion on
the part of the labor tribunal. Hence, the Court refrains from reviewing factual
assessments of lower courts and agencies exercising adjudicative functions, such as
the NLRC. Occasionally, however, the Court is constrained to delve into factual
matters where, as in the instant case, the findings of the NLRC contradict those of
the Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look
into the records of the case and re-examine the questioned findings. As a corollary,
this Court is clothed with ample authority to review matters, even if they are not
assigned as errors in their appeal, if it finds that their consideration is necessary to
arrive at a just decision of the case. The same principles are now necessarily adhered
to and are applied by the Court of Appeals in its expanded jurisdiction over labor
cases elevated through a petition for certiorari; thus, we see no error on its part when
it made anew a factual determination of the matters and on that basis reversed the
ruling of the NLRC.
II
The second assignment of error delves into the significance and application to the
case at bar of the two department orders issued by DOLE. Department Order No. 10,
series of 1997, amended the implementing rules of Books III and VI of the Labor
Code, as amended. Under this particular DOLE department order, the arrangement
between petitioner and CAMPCO would qualify as permissible contracting.
Department Order No. 3, series of 2001, revoked Department Order No. 10, series of
1997, and reiterated the prohibition on labor-only contracting.
Attention is called to the fact that the acts complained of by the respondents occurred
well before the issuance of the two DOLE department orders in 1997 and 2001. The
Service Contract between DOLE and CAMPCO was executed on 17 August 1993.
Respondents started working for petitioner sometime in 1993 and 1994. While some
of them continued to work for petitioner, at least until the filing of the Complaint,
others were put on stay home status at various times in 1994, 1995, and 1996.
Respondents filed their Complaint with the NLRC on 19 December 1996.
A basic rule observed in this jurisdiction is that no statute, decree, ordinance, rule or
regulation shall be given retrospective effect unless explicitly stated.[29] Since there
is no provision at all in the DOLE department orders that expressly allowed their
33
retroactive application, then the general rule should be followed, and the said orders
should be applied only prospectively.
Which now brings this Court to the question as to what was the prevailing rule on
labor-only contracting from 1993 to 1996, the period when the occurrences subject
of the Complaint before the NLRC took place.
Article 106 of the Labor Code, as amended, permits legitimate job contracting, but
prohibits labor-only contracting. The said provision reads
ART. 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 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 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.
To implement the foregoing provision of the Labor Code, as amended, Sections 8
and 9, Rule VIII, Book III of the implementing rules, in force since 1976 and prior to
their amendment by DOLE Department Order No. 10, series of 1997, provided as
follows
Sec. 8. Job contracting. There is job contracting permissible under the Code if the
following conditions are met;
(1) 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 as to the results thereof;
and
(2) The 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.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to
an employer shall be deemed to be engaged in labor-only contracting where such
person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities
which are directly related to the principal business or operations of the employer in
which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary 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.
(c) For cases not falling under this Article, the Secretary of Labor shall determine
through appropriate orders whether or not the contracting out of labor is permissible
in the light of the circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the
workers.
Since these statutory and regulatory provisions were the ones in force during the
years in question, then it was in consideration of the same that DOLE Regional
Director Parel and DOLE Undesrsecretary Trajano issued their Orders on 19
September 1993 and 15 September 1994, respectively, both finding that CAMPCO
was engaged in labor-only contracting. Petitioner, in its third assignment of error,
questions the weight that the Court of Appeals gave these orders in its Decision,
dated 20 May 2002, and Amended Decision, dated 27 November 2003.
III
34
The Orders of DOLE Regional Director Parel, dated 19 September 1993, and of
DOLE Undersecretary Trajano, dated 15 September 1994, were issued pursuant to
the visitorial and enforcement power conferred by the Labor Code, as amended, on
the DOLE Secretary and his duly authorized representatives, to wit
ART. 128. Visitorial and enforcement power. (a) The Secretary of Labor or his duly
authorized representatives, including labor regulation officers, shall have access to
employers records and premises at any time of the day or night whenever work is
being undertaken therein, and the right to copy therefrom, to question any employee
and investigate any fact, condition or matter which may be necessary to determine
violations or which may aid in the enforcement of this Code and of any labor law,
wage order or rules and regulations pursuant thereto.
(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still exists, the
Secretary of Labor and Employment or his duly authorized representatives shall have
the power to issue compliance orders to give effect to the labor standards provisions
of this Code and other labor legislation based on the findings of labor employment
and enforcement officers or industrial safety engineers made in the course of
inspection. The Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their orders, except in
cases where the employer contests the findings of the labor employment and
enforcement officer and raises issues supported by documentary proofs which were
not considered in the course of inspection.
An order issued by the duly authorized representative of the Secretary of Labor and
Employment under this article may be appealed to the latter. In case said order
involves a monetary award, an appeal by the employer may be perfected only upon
the posting of a cash or surety bond issued by a reputable bonding company duly
accredited by the Secretary of Labor and Employment in the amount equivalent to
the monetary award in the order appealed from. (Emphasis supplied.)
Before Regional Director Parel issued his Order, dated 19 September 1993, a Task
Force investigated the operations of cooperatives in Polomolok, South Cotabato, and
submitted a report identifying six cooperatives that were engaged in labor-only
contracting, one of which was CAMPCO. In a conference before the DOLE
Regional Office, the cooperatives named by the Task Force were given the
opportunity to explain the nature of their activities in relation to petitioner; and, the
cooperatives, as well as petitioner, submitted to the DOLE Regional Office their
position papers and other supporting documents to refute the findings of the Task
Force. It was only after these procedural steps did Regional Director Parel issued his
Order finding that three cooperatives, including CAMPCO, were indeed engaged in
labor-only contracting and were directed to cease and desist from further engaging in
such activities. On appeal, DOLE Undersecretary Trajano, by authority of the DOLE
Secretary, affirmed Regional Director Parels Order. Upon denial of the Motion for
Reconsideration filed by the cooperatives, and no further appeal taken therefrom, the
Order of DOLE Undersecretary Trajano, dated 15 September 1994, became final and
executory.
Petitioner avers that the foregoing Orders of the authorized representatives of the
DOLE Secretary do not constitute res judicata in the case filed before the NLRC.
This Court, however, believes otherwise and finds that the final and executory
Orders of the DOLE Secretary or his authorized representatives should bind the
NLRC.
It is obvious that the visitorial and enforcement power granted to the DOLE
Secretary is in the nature of a quasi-judicial power. Quasi-judicial power has been
described by this Court in the following manner
Quasi-judicial or administrative adjudicatory power on the other hand is the power of
the administrative agency to adjudicate the rights of persons before it. It is the power
to hear and determine questions of fact to which the legislative policy is to apply and
to decide in accordance with the standards laid down by the law itself in enforcing
and administering the same law. The administrative body exercises its quasi-judicial
power when it performs in a judicial manner an act which is essentially of an
executive or administrative nature, where the power to act in such manner is
incidental to or reasonably necessary for the performance of the executive or
administrative duty entrusted to it. In carrying out their quasi-judicial functions the
administrative officers or bodies are required to investigate facts or ascertain the
existence of facts, hold hearings, weigh evidence, and draw conclusions from them
as basis for their official action and exercise of discretion in a judicial nature. Since
rights of specific persons are affected it is elementary that in the proper exercise of
quasi-judicial power due process must be observed in the conduct of the
proceedings.[30] (Emphasis supplied.)
The DOLE Secretary, under Article 106 of the Labor Code, as amended, exercise
quasi-judicial power, at least, to the extent necessary to determine violations of labor
standards provisions of the Code and other labor legislation. He can issue
compliance orders and writs of execution for the enforcement of his orders. As
evidence of the importance and binding effect of the compliance orders of the DOLE
Secretary, Article 128 of the Labor Code, as amended, further provides
ART. 128. Visitorial and enforcement power.
xxxx
(d) It shall be unlawful for any person or entity to obstruct, impede, delay or
otherwise render ineffective the orders of the Secretary of Labor or his duly
35
authorized representatives issued pursuant to the authority granted under this article,
and no inferior court or entity shall issue temporary or permanent injunction or
restraining order or otherwise assume jurisdiction over any case involving the
enforcement orders issued in accordance with this article.
The Orders of DOLE Regional Director Parel, dated 19 September 1993, and of
DOLE Undersecretary Trajano, dated 15 September 1994, consistently found that
CAMPCO was engaging in labor-only contracting. Such finding constitutes res
judicata in the case filed by the respondents with the NLRC.
It is well-established in this jurisdiction that the decisions and orders of
administrative agencies, rendered pursuant to their quasi-judicial authority, have
upon their finality, the force and binding effect of a final judgment within the
purview of the doctrine of res judicata. The rule of res judicata, which forbids the
reopening of a matter once judicially determined by competent authority, applies as
well to the judicial and quasi-judicial acts of public, executive or administrative
officers and boards acting within their jurisdiction as to the judgments of courts
having general judicial powers. The orderly administration of justice requires that the
judgments or resolutions of a court or quasi-judicial body must reach a point of
finality set by the law, rules and regulations, so as to write finis to disputes once and
for all. This is a fundamental principle in the Philippine justice system, without
which there would be no end to litigations.[31]
Res judicata has dual aspects, bar by prior judgment and conclusiveness of judgment.
This Court has previously clarified the difference between the two
Section 49, Rule 39 of the Revised Rules of Court lays down the dual aspects of res
judicata in actions in personam. to wit:
"Effect of judgment. - The effect of a judgment or final order rendered by a court or
judge of the Philippines, having jurisdiction to pronounce the judgment or order,
may be as follows:
xxxx
(b) In other cases the judgment or order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation thereto,
conclusive between the parties and their successors in interest by title subsequent to
the commencement of the action or special proceeding, litigating for the same thing
and under the same title and in the same capacity;
(c) In any other litigation between the same parties or their successors in interest, that
only is deemed to have been adjudged in a former judgment which appears upon its
face to have been so adjudged, or which was actually and necessarily included
therein or necessary thereto."
Section 49(b) enunciates the first concept of res judicata known as "bar by prior
judgment," whereas, Section 49(c) is referred to as "conclusiveness of judgment."
There is "bar by former judgment" when, between the first case where the judgment
was rendered, and the second case where such judgment is invoked, there is identity
of parties, subject matter and cause of action. When the three identities are present,
the judgment on the merits rendered in the first constitutes an absolute bar to the
subsequent action. But where between the first case wherein Judgment is rendered
and the second case wherein such judgment is invoked, there is only identity of
parties but there is no identity of cause of action, the judgment is conclusive in the
second case, only as to those matters actually and directly controverted and
determined, and not as to matters merely involved therein. This is what is termed
"conclusiveness of judgment."
The second concept of res judicata, conclusiveness of judgment, is the one applicable
to the case at bar.
The same parties who participated in the proceedings before the DOLE Regional
Office are the same parties involved in the case filed before the NLRC. CAMPCO,
on behalf of its members, attended the conference before the DOLE Regional Office;
submitted its position paper; filed an appeal with the DOLE Secretary of the Order of
DOLE Regional Director Parel; and moved for reconsideration of the subsequent
Order of DOLE Undersecretary Trajano. Petitioner, although not expressly named as
a respondent in the DOLE investigation, was a necessary party thereto, considering
that CAMPCO was rendering services to petitioner solely. Moreover, petitioner
participated in the proceedings before the DOLE Regional Office, intervening in the
matter through a letter sent by its Senior Legal Officer, dated 24 May 1993, and
submitting its own position paper.
While the causes of action in the proceedings before the DOLE and the NLRC differ,
they are, in fact, very closely related. The DOLE Regional Office conducted an
investigation to determine whether CAMPCO was violating labor laws, particularly,
those on labor-only contracting. Subsequently, it ruled that CAMPCO was indeed
engaging in labor-only contracting activities, and thereafter ordered to cease and
desist from doing so. Respondents came before the NLRC alleging illegal dismissal
by the petitioner of those respondents who were put on stay home status, and seeking
regularization of respondents who were still working for petitioner. The basis of their
claims against petitioner rests on the argument that CAMPCO was a labor-only
contractor and, thus, merely an agent or intermediary of petitioner, who should be
considered as respondents real employer. The matter of whether CAMPCO was a
labor-only contractor was already settled and determined in the DOLE proceedings,
which should be conclusive and binding upon the NLRC. What were left for the
36
determination of the NLRC were the issues on whether there was illegal dismissal
and whether respondents should be regularized.
This Court also notes that CAMPCO and DOLE still continued with their Service
Contract despite the explicit cease and desist orders rendered by authorized DOLE
officials. There is no other way to look at it except that CAMPCO and DOLE acted
in complete defiance and disregard of the visitorial and enforcement power of the
DOLE Secretary and his authorized representatives under Article 128 of the Labor
Code, as amended. For the NLRC to ignore the findings of DOLE Regional Director
Parel and DOLE Undersecretary Trajano is an unmistakable and serious
undermining of the DOLE officials authority.
IV
In petitioners fourth assignment of error, it points out that the Court of Appeals erred
in not holding respondents estopped from asserting that they were regular employees
of petitioner since respondents, as owners-members of CAMPCO, actively
represented themselves and warranted that they were engaged in legitimate job
contracting.
This Court cannot sustain petitioners argument.
It is true that CAMPCO is a cooperative composed of its members, including
respondents. Nonetheless, it cannot be denied that a cooperative, as soon as it is
registered with the CDA, attains a juridical personality of its own,[32] separate and
distinct from its members; much in the same way that a corporation has a juridical
personality separate and distinct from its stockholders, known as the doctrine of
corporate fiction. The protection afforded by this doctrine is not absolute, but the
exception thereto which necessitates the piercing of the corporate veil can only be
made under specified circumstances. In Traders Royal Bank v. Court of Appeals,[33]
this Court ruled that
Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this is
merely an equitable remedy, and maybe awarded only in cases when the corporate
fiction is used to defeat public convenience, justify wrong, protect fraud or defend
crime or where a corporation is a mere alter ego or business conduit of a person.
Piercing the veil of corporate entity requires the court to see through the protective
shroud which exempts its stockholders from liabilities that ordinarily, they could be
subject to, or distinguishes one corporation from a seemingly separate one, were it
not for the existing corporate fiction. But to do this, the court must be sure that the
corporate fiction was misused, to such an extent that injustice, fraud, or crime was
committed upon another, disregarding, thus, his, her, or its rights. It is the corporate
entity which the law aims to protect by this doctrine.
Using the above-mentioned guidelines, is petitioner entitled to a piercing of the
cooperative identity of CAMPCO? This Court thinks not.
It bears to emphasize that the piercing of the corporate veil is an equitable remedy,
and among the maxims of equity are: (1) he who seeks equity must do equity, and (2)
he who comes into equity must come with clean hands. Hence, a litigant may be
denied relief by a court of equity on the ground that his conduct has been inequitable,
unfair, dishonest, fraudulent, or deceitful as to the controversy in issue.[34]
Petitioner does not come before this Court with clean hands. It is not an innocent
party in this controversy.
Petitioner itself admitted that it encouraged and even helped the establishment of
CAMPCO and the other cooperatives in Polomolok, South Cotabato. These
cooperatives were established precisely to render services to petitioner. It is highly
implausible that the petitioner was lured into entering into the Service Contract with
CAMPCO in 1993 on the latters misrepresentation and false warranty that it was an
independent job contractor. Even if it is conceded that petitioner was indeed
defrauded into believing that CAMPCO was an independent contractor, then the
DOLE proceedings should have placed it on guard. Remember that petitioner
participated in the proceedings before the DOLE Regional Office, it cannot now
claim ignorance thereof. Furthermore, even after the issuance of the cease and desist
order on CAMPCO, petitioner still continued with its prohibited service arrangement
with the said cooperative. If petitioner was truly defrauded by CAMPCO and its
members into believing that the cooperative was an independent job contractor, the
more logical recourse of petitioner was to have the Service Contract voided in the
light of the explicit findings of the DOLE officials that CAMPCO was engaging in
labor-only contracting. Instead, petitioner still carried on its Service Contract with
CAMPCO for several more years thereafter.
V respondents. Petitioner attempts to refute control by alleging the presence of a
As previously discussed, the finding of the duly authorized representatives of the
DOLE Secretary that CAMPCO was a labor-only contractor is already conclusive.
This Court cannot deviate from said finding.
This Court, though, still notes that even an independent review of the evidence on
record, in consideration of the proper labor statutes and regulations, would result in
the same conclusion: that CAMPCO was engaged in prohibited activities of labor-
only contracting.
The existence of an independent and permissible contractor relationship is generally
established by the following criteria: whether 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
37
piece of work; the control and supervision of the work to another; the employer's
power with respect to the hiring, firing and payment of the contractor's 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.[35]
While there is present in the relationship of petitioner and CAMPCO some factors
suggestive of an independent contractor relationship (i.e., CAMPCO chose who
among its members should be sent to work for petitioner; petitioner paid CAMPCO
the wages of the members, plus a percentage thereof as administrative charge;
CAMPCO paid the wages of the members who rendered service to petitioner), many
other factors are present which would indicate a labor-only contracting arrangement
between petitioner and CAMPCO.[36]
First, although petitioner touts the multi-million pesos assets of CAMPCO, it does
well to remember that such were amassed in the years following its establishment. In
1993, when CAMPCO was established and the Service Contract between petitioner
and CAMPCO was entered into, CAMPCO only had P6,600.00 paid-up capital,
which could hardly be considered substantial.[37] It only managed to increase its
capitalization and assets in the succeeding years by continually and defiantly
engaging in what had been declared by authorized DOLE officials as labor-only
contracting.
Second, CAMPCO did not carry out an independent business from petitioner. It was
precisely established to render services to petitioner to augment its workforce during
peak seasons. Petitioner was its only client. Even as CAMPCO had its own office
and office equipment, these were mainly used for administrative purposes; the tools,
machineries, and equipment actually used by CAMPCO members when rendering
services to the petitioner belonged to the latter.
Third, petitioner exercised control over the CAMPCO members, including
CAMPCO supervisor in the work premises. Yet, the mere presence within the
premises of a supervisor from the cooperative did not necessarily mean that
CAMPCO had control over its members. Section 8(1), Rule VIII, Book III of the
implementing rules of the Labor Code, as amended, required for permissible job
contracting that the contractor undertakes the contract work on his 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 as to the results thereof. As alleged by the
respondents, and unrebutted by petitioner, CAMPCO members, before working for
the petitioner, had to undergo instructions and pass the training provided by
petitioners personnel. It was petitioner who determined and prepared the work
assignments of the CAMPCO members. CAMPCO members worked within
petitioners plantation and processing plants alongside regular employees performing
identical jobs, a circumstance recognized as an indicium of a labor-only
contractorship.[38]
Fourth, CAMPCO was not engaged to perform a specific and special job or service.
In the Service Contract of 1993, CAMPCO agreed to assist petitioner in its daily
operations, and perform odd jobs as may be assigned. CAMPCO complied with this
venture by assigning members to petitioner. Apart from that, no other particular job,
work or service was required from CAMPCO, and it is apparent, with such an
arrangement, that CAMPCO merely acted as a recruitment agency for petitioner.
Since the undertaking of CAMPCO did not involve the performance of a specific
job, but rather the supply of manpower only, CAMPCO clearly conducted itself as a
labor-only contractor.[39]
Lastly, CAMPCO members, including respondents, performed activities directly
related to the principal business of petitioner. They worked as can processing
attendant, feeder of canned pineapple and pineapple processing, nata de coco
processing attendant, fruit cocktail processing attendant, and etc., functions which
were, not only directly related, but were very vital to petitioners business of
production and processing of pineapple products for export.
The findings enumerated in the preceding paragraphs only support what DOLE
Regional Director Parel and DOLE Undersecretary Trajano had long before
conclusively established, that CAMPCO was a mere labor-only contractor.
VI
The declaration that CAMPCO is indeed engaged in the prohibited activities of
labor-only contracting, then consequently, an employer-employee relationship is
deemed to exist between petitioner and respondents, since CAMPCO shall be
considered as a mere agent or intermediary of petitioner.
Since respondents are now recognized as employees of petitioner, this Court is
tasked to determine the nature of their employment. In consideration of all the
attendant circumstances in this case, this Court concludes that respondents are
regular employees of petitioner.
Article 280 of the Labor Code, as amended, reads
ART. 280. Regular and Casual Employment. The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary and desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined
38
at the time of engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if its is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists.
This Court expounded on the afore-quoted provision, thus
The primary standard, therefore, of determining a regular employment is the
reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The test is whether the former
is usually necessary or desirable in the usual business or trade of the employer. The
connection can be determined by considering the nature of the work performed and
its relation to the scheme of the particular business or trade in its entirety. Also, if the
employee has been performing the job for at least one year, even if her performance
is not continuous or merely intermittent, the law deems the repeated and continuing
need for its performance as sufficient evidence of the necessity if not indispensability
of the activity to the business. Hence, the employment is also considered regular, but
only with respect to such activity and while such activity exists.[40]
In the instant Petition, petitioner is engaged in the manufacture and production of
pineapple products for export. Respondents rendered services as processing
attendant, feeder of canned pineapple and pineapple processing, nata de coco
processing attendant, fruit cocktail processing attendant, and etc., functions they
performed alongside regular employees of the petitioner. There is no doubt that the
activities performed by respondents are necessary or desirable to the usual business
of petitioner.
Petitioner likewise want this Court to believe that respondents employment was
dependent on the peaks in operation, work backlogs, absenteeism, and excessive
leaves. However, bearing in mind that respondents all claimed to have worked for
petitioner for over a year, a claim which petitioner failed to rebut, then respondents
continued employment clearly demonstrates the continuing necessity and
indispensability of respondents employment to the business of petitioner.
Neither can this Court apply herein the ruling of the NLRC in the previous case
involving petitioner and the individual workers they used to hire before the advent of
the cooperatives, to the effect that the employment of these individual workers were
not regular, but rather, were valid term employments, wherein the employer and
employee knowingly and voluntarily agreed to employment for only a limited or
specified period of time. The difference between that case and the one presently
before this Court is that the members of CAMPCO, including respondents, were not
informed, at the time of their engagement, that their employment shall only be for a
limited or specified period of time. There is absence of proof that the respondents
were aware and had knowingly and voluntarily agreed to such term employment.
Petitioner did not enter into individual contracts with the CAMPCO members, but
executed a Service Contract with CAMPCO alone. Although the Service Contract of
1993 stated that it shall be for a specific period, from 1 July to 31 December 1993,
petitioner and CAMPCO continued the service arrangement beyond 1993. Since
there was no written renewal of the Service Contract,[41] there was no further
indication that the engagement by petitioner of the services of CAMPCO members
was for another definite or specified period only.
Respondents, as regular employees of petitioner, are entitled to security of tenure.
They could only be removed based on just and authorized causes as provided for in
the Labor Code, as amended, and after they are accorded procedural due process.
Therefore, petitioners acts of placing some of the respondents on stay home status
and not giving them work assignments for more than six months were already
tantamount to constructive and illegal dismissal.[42]
In summary, this Court finds that CAMPCO was a labor-only contractor and, thus,
petitioner is the real employer of the respondents, with CAMPCO acting only as the
agent or intermediary of petitioner. Due to the nature of their work and length of
their service, respondents should be considered as regular employees of petitioner.
Petitioner constructively dismissed a number of the respondents by placing them on
stay home status for over six months, and was therefore guilty of illegal dismissal.
Petitioner must accord respondents the status of regular employees, and reinstate the
respondents who it constructively and illegally dismissed, to their previous positions,
without loss of seniority rights and other benefits, and pay these respondents
backwages from the date of filing of the Complaint with the NLRC on 19 December
1996 up to actual reinstatement.
WHEREFORE, in view of the foregoing, the instant Petition is DENIED and the
Amended Decision, dated 27 November 2003, rendered by the Court of Appeals in
CA-G.R. SP No. 63405 is AFFIRMED.
Costs against the petitioner.
SO ORDERED.
39
G.R. No. 172101. November 23, 2007.*
REPUBLIC OF THE PHILIPPINES, represented by the SOCIAL SECURITY
COMMISSION and SOCIAL SECURITY SYSTEM, petitioners, vs. ASIAPRO
COOPERATIVE, respondent.
Jurisdictions; Appeals; Power of Review of the Supreme Court; Although as a rule,
in the exercise of the Supreme Courts power of review, the Court is not a trier of
facts and the findings of fact of the Court of Appeals are conclusive and binding on
the Court, said rule is not without exceptions.Although as a rule, in the exercise of
the Supreme Courts power of review, the Court is not a trier of facts and the
findings of fact of the Court of Appeals are conclusive and binding on the Court, said
rule is not without exceptions. There are several recognized exceptions in which
factual issues may be resolved by this Court. One of these exceptions finds
application in this present case which is, when the findings of fact are conflicting.
There are, indeed, conflicting findings espoused by the petitioner SSC and the
appellate court relative to the existence of employer-employee relationship between
the respondent cooperative and its ownersmembers, which necessitates a departure
from the oft-repeated rule that factual issues may not be the subject of appeals to this
Court.
Labor Law; Labor Relations; Employer-Employee Relationship; Elements; In
determining the existence of an employer-employee relationship, the following
elements are considered: (1) the selection and engagement of the workers; (2) the
payment of wages by whatever means; (3) the power of dismissal; and (4) the power
to control the workers conduct, with the latter assuming primacy in the overall
consideration. The most important element is the employers control of the
employees conduct, not only as to the result of the work to be done, but also as to
the means and methods to accomplish.In determining the existence of an
employer-employee relationship, the following elements are considered: (1) the
selection and engagement of the workers; (2) the payment of wages by whatever
means; (3) the power of dismissal; and (4) the power to control the workers conduct,
with the latter assuming primacy in the overall consideration. The most important
element is the employers control of the employees conduct, not only as to the result
of the work to be done, but also as to the means and methods to accomplish. The
power of control refers to the existence of the power and not necessarily to the actual
exercise thereof. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is enough that the employer has the right to
wield that power. All the aforesaid elements are present in this case.
Same; Same; Same; The existence of an employer-employee relationship cannot be
negated by expressly repudiating it in a contract, when the terms and surrounding
circumstances show otherwise. The employment status of a person is defined and
prescribed by law and not by what the parties say it should be.As previously
pointed out by this Court, an employee-employer relationship actually exists between
the respondent cooperative and its owners-members. The four elements in the four-
fold test for the existence of an employment relationship have been complied with.
The respondent cooperative must not be allowed to deny its employment relationship
with its owners-members by invoking the questionable Service Contracts provision,
when in actuality, it does exist. The existence of an employer-employee relationship
cannot be negated by expressly repudiating it in a contract, when the terms and
surrounding circumstances show otherwise. The employment status of a person is
defined and prescribed by law and not by what the parties say it should be.
Cooperatives; A cooperative acquires juridical personality upon its registration with
the Cooperative Development Authority. It has its Board of Directors, which directs
and supervises its business; meaning, its Board of Directors is the one in charge in
the conduct and management of its affairs. With that, a cooperative can be likened to
a corporation with a personality separate and distinct from its owners-members.It
bears stressing, too, that a cooperative acquires juridical personality upon its
registration with the Cooperative Development Authority. It has its Board of
Directors, which directs and supervises its business; meaning, its Board of Directors
is the one in charge in the conduct and management of its affairs. With that, a
cooperative can be likened to a corporation with a personality separate and distinct
from its owners-members. Consequently, an owner-member of a cooperative can be
an employee of the latter and an employer-employee relationship can exist between
them.
Same; The management of the affairs of the respondent cooperative is vested in its
Board of Directors and not in its ownersmembers as a whole. Therefore, it is
completely logical that the respondent cooperative, as a juridical person represented
by its Board of Directors, can enter into an employment with its ownersmembers.
In the present case, it is not disputed that the respondent cooperative had registered
itself with the Cooperative Development Authority, as evidenced by its Certificate of
Registration No. 0-623-2460. In its by-laws, its Board of Directors directs, controls,
and supervises the business and manages the property of the respondent cooperative.
Clearly then, the management of the affairs of the respondent cooperative is vested
in its Board of Directors and not in its owners-members as a whole. Therefore, it is
completely logical that the respondent cooperative, as a juridical person represented
by its Board of Directors, can enter into an employment with its owners-members.
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure seeking to annul and set aside the Decision[1] and
Resolution[2] of the Court of Appeals in CA-G.R. SP No. 87236, dated 5 January
2006 and 20 March 2006, respectively, which annulled and set aside the Orders of
the Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17
February 2004[3] and 16 September 2004,[4] respectively, thereby dismissing the
40
petition-complaint dated 12 June 2003 filed by herein petitioner Social Security
System (SSS) against herein respondent.
Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-
judicial body authorized by law to resolve disputes arising under Republic Act No.
1161, as amended by Republic Act No. 8282.[5] Petitioner SSS is a government
corporation created by virtue of Republic Act No. 1161, as amended. On the other
hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose
cooperative created pursuant to Republic Act No. 6938[6] and duly registered with
the Cooperative Development Authority (CDA) on 23 November 1999 with
Registration Certificate No. 0-623-2460.[7]
The antecedents of this case are as follows:
Respondent Asiapro, as a cooperative, is composed of owners-members. Under its
by-laws, owners-members are of two categories, to wit: (1) regular member, who is
entitled to all the rights and privileges of membership; and (2) associate member,
who has no right to vote and be voted upon and shall be entitled only to such rights
and privileges provided in its by-laws.[8] Its primary objectives are to provide
savings and credit facilities and to develop other livelihood services for its owners-
members. In the discharge of the aforesaid primary objectives, respondent
cooperative entered into several Service Contracts[9] with Stanfilco - a division of
DOLE Philippines, Inc. and a company based in Bukidnon. The owners-members do
not receive compensation or wages from the respondent cooperative. Instead, they
receive a share in the service surplus[10] which the respondent cooperative earns
from different areas of trade it engages in, such as the income derived from the said
Service Contracts with Stanfilco. The owners-members get their income from the
service surplus generated by the quality and amount of services they rendered, which
is determined by the Board of Directors of the respondent cooperative.
In order to enjoy the benefits under the Social Security Law of 1997, the owners-
members of the respondent cooperative, who were assigned to Stanfilco requested
the services of the latter to register them with petitioner SSS as self-employed and to
remit their contributions as such. Also, to comply with Section 19-A of Republic Act
No. 1161, as amended by Republic Act No. 8282, the SSS contributions of the said
owners-members were equal to the share of both the employer and the employee.
On 26 September 2002, however, petitioner SSS through its Vice-President for
Mindanao Division, Atty. Eddie A. Jara, sent a letter[11] to the respondent
cooperative, addressed to its Chief Executive Officer (CEO) and General Manager
Leo G. Parma, informing the latter that based on the Service Contracts it executed
with Stanfilco, respondent cooperative is actually a manpower contractor supplying
employees to Stanfilco and for that reason, it is an employer of its owners-members
working with Stanfilco. Thus, respondent cooperative should register itself with
petitioner SSS as an employer and make the corresponding report and remittance of
premium contributions in accordance with the Social Security Law of 1997. On 9
October 2002,[12] respondent cooperative, through its counsel, sent a reply to
petitioner SSSs letter asserting that it is not an employer because its owners-
members are the cooperative itself; hence, it cannot be its own employer. Again, on
21 October 2002,[13] petitioner SSS sent a letter to respondent cooperative ordering
the latter to register as an employer and report its owners-members as employees for
compulsory coverage with the petitioner SSS. Respondent cooperative continuously
ignored the demand of petitioner SSS.
Accordingly, petitioner SSS, on 12 June 2003, filed a Petition[14] before petitioner
SSC against the respondent cooperative and Stanfilco praying that the respondent
cooperative or, in the alternative, Stanfilco be directed to register as an employer and
to report respondent cooperatives owners-members as covered employees under the
compulsory coverage of SSS and to remit the necessary contributions in accordance
with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-
15507-03. Respondent cooperative filed its Answer with Motion to Dismiss alleging
that no employer-employee relationship exists between it and its owners-members,
thus, petitioner SSC has no jurisdiction over the respondent cooperative. Stanfilco,
on the other hand, filed an Answer with Cross-claim against the respondent
cooperative.
On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss
filed by the respondent cooperative. The respondent cooperative moved for the
reconsideration of the said Order, but it was likewise denied in another Order issued
by the SSC dated 16 September 2004.
Intending to appeal the above Orders, respondent cooperative filed a Motion for
Extension of Time to File a Petition for Review before the Court of Appeals.
Subsequently, respondent cooperative filed a Manifestation stating that it was no
longer filing a Petition for Review. In its place, respondent cooperative filed a
Petition for Certiorari before the Court of Appeals, docketed as CA-G.R. SP No.
87236, with the following assignment of errors:
I. The Orders dated 17 February 2004 and 16 September
2004 of [herein petitioner] SSC were issued with grave abuse of discretion
amounting to a (sic) lack or excess of jurisdiction in that:
A. [Petitioner] SSC arbitrarily proceeded with the case as if it has
jurisdiction over the petition a quo, considering that it failed to first resolve the issue
of the existence of an employer-employee relationship between [respondent]
cooperative and its owners-members.
B. While indeed, the [petitioner] SSC has jurisdiction over all disputes
arising under the SSS Law with respect to coverage, benefits, contributions, and
related matters, it is respectfully submitted that [petitioner] SSC may only assume
jurisdiction in cases where there is no dispute as to the existence of an employer-
employee relationship.
41
C. Contrary to the holding of the [petitioner] SSC, the legal issue of
employer-employee relationship raised in [respondents] Motion to Dismiss can be
preliminarily resolved through summary hearings prior to the hearing on the merits.
However, any inquiry beyond a preliminary determination, as what [petitioner SSC]
wants to accomplish, would be to encroach on the jurisdiction of the National Labor
Relations Commission [NLRC], which is the more competent body clothed with
power to resolve issues relating to the existence of an employment relationship.
II. At any rate, the [petitioner] SSC has no jurisdiction to
take cognizance of the petition a quo.
A. [Respondent] is not an employer within the contemplation of the Labor
Law but is a multi-purpose cooperative created pursuant to Republic Act No. 6938
and composed of owners-members, not employees.
B. The rights and obligations of the owners-members of [respondent]
cooperative are derived from their Membership Agreements, the Cooperatives By-
Laws, and Republic Act No. 6938, and not from any contract of employment or from
the Labor Laws. Moreover, said owners-members enjoy rights that are not consistent
with being mere employees of a company, such as the right to participate and vote in
decision-making for the cooperative.
C. As found by the Bureau of Internal Revenue [BIR], the owners-
members of [respondent] cooperative are not paid any compensation income.[15]
(Emphasis supplied.)
On 5 January 2006, the Court of Appeals rendered a Decision granting the petition
filed by the respondent cooperative. The decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February
2004] and [16 September 2004], are ANNULLED and SET ASIDE and a new one is
entered DISMISSING the petition-complaint dated [12 June 2003] of [herein
petitioner] Social Security System.[16]
Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but
it was denied by the appellate court in its Resolution dated 20 March 2006.
Hence, this Petition.
In its Memorandum, petitioners raise the issue of whether or not the Court of
Appeals erred in not finding that the SSC has jurisdiction over the subject matter and
it has a valid basis in denying respondents Motion to Dismiss. The said issue is
supported by the following arguments:
I. The [petitioner SSC] has jurisdiction over the petition-
complaint filed before it by the [petitioner SSS] under R.A. No. 8282.
 II. Respondent [cooperative] is estopped from questioning
the jurisdiction of petitioner SSC after invoking its jurisdiction by filing an [A]nswer
with [M]otion to [D]ismiss before it.
III. The [petitioner SSC] did not act with grave abuse of
discretion in denying respondent [cooperatives] [M]otion to [D]ismiss.
IV. The existence of an employer-employee relationship is a
question of fact where presentation of evidence is necessary.
V. There is an employer-employee relationship between
[respondent cooperative] and its [owners-members].
Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it
by petitioner SSS as it involved an issue of whether or not a worker is entitled to
compulsory coverage under the SSS Law. Petitioners avow that Section 5 of
Republic Act No. 1161, as amended by Republic Act No. 8282, expressly confers
upon petitioner SSC the power to settle disputes on compulsory coverage, benefits,
contributions and penalties thereon or any other matter related thereto. Likewise,
Section 9 of the same law clearly provides that SSS coverage is compulsory upon all
employees. Thus, when petitioner SSS filed a petition-complaint against the
respondent cooperative and Stanfilco before the petitioner SSC for the compulsory
coverage of respondent cooperatives owners-members as well as for collection of
unpaid SSS contributions, it was very obvious that the subject matter of the aforesaid
petition-complaint was within the expertise and jurisdiction of the SSC.
Petitioners similarly assert that granting arguendo that there is a prior need to
determine the existence of an employer-employee relationship between the
respondent cooperative and its owners-members, said issue does not preclude
petitioner SSC from taking cognizance of the aforesaid petition-complaint.
Considering that the principal relief sought in the said petition-complaint has to be
resolved by reference to the Social Security Law and not to the Labor Code or other
labor relations statutes, therefore, jurisdiction over the same solely belongs to
petitioner SSC.
Petitioners further claim that the denial of the respondent cooperatives Motion to
Dismiss grounded on the alleged lack of employer-employee relationship does not
constitute grave abuse of discretion on the part of petitioner SSC because the latter
has the authority and power to deny the same. Moreover, the existence of an
employer-employee relationship is a question of fact where presentation of evidence
is necessary. Petitioners also maintain that the respondent cooperative is already
estopped from assailing the jurisdiction of the petitioner SSC because it has already
filed its Answer before it, thus, respondent cooperative has already submitted itself
to the jurisdiction of the petitioner SSC.
42
Finally, petitioners contend that there is an employer-employee relationship between
the respondent cooperative and its owners-members. The respondent cooperative is
the employer of its owners-members considering that it undertook to provide
services to Stanfilco, the performance of which is under the full and sole control of
the respondent cooperative.
On the other hand, respondent cooperative alleges that its owners-members own the
cooperative, thus, no employer-employee relationship can arise between them. The
persons of the employer and the employee are merged in the owners-members
themselves. Likewise, respondent cooperatives owners-members even requested the
respondent cooperative to register them with the petitioner SSS as self-employed
individuals. Hence, petitioner SSC has no jurisdiction over the petition-complaint
filed before it by petitioner SSS.
Respondent cooperative further avers that the Court of Appeals correctly ruled that
petitioner SSC acted with grave abuse of discretion when it assumed jurisdiction
over the petition-complaint without determining first if there was an employer-
employee relationship between the respondent cooperative and its owners-members.
Respondent cooperative claims that the question of whether an employer-employee
relationship exists between it and its owners-members is a legal and not a factual
issue as the facts are undisputed and need only to be interpreted by the applicable
law and jurisprudence.
Lastly, respondent cooperative asserts that it cannot be considered estopped from
assailing the jurisdiction of petitioner SSC simply because it filed an Answer with
Motion to Dismiss, especially where the issue of jurisdiction is raised at the very first
instance and where the only relief being sought is the dismissal of the petition-
complaint for lack of jurisdiction.
From the foregoing arguments of the parties, the issues may be summarized into:
I. Whether the petitioner SSC has jurisdiction over the
petition-complaint filed before it by petitioner SSS against the respondent
cooperative.
II. Whether the respondent cooperative is estopped from
assailing the jurisdiction of petitioner SSC since it had already filed an Answer with
Motion to Dismiss before the said body.
Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act No. 8282
as well as in Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.
Section 5 of Republic Act No. 8282 provides:

SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to
coverage, benefits, contributions and penalties thereon or any other matter related
thereto, shall be cognizable by the Commission, x x x. (Emphasis supplied.)
Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:
Section 1. Jurisdiction. Any dispute arising under the Social Security Act with
respect to coverage, entitlement of benefits, collection and settlement of
contributions and penalties thereon, or any other matter related thereto, shall be
cognizable by the Commission after the SSS through its President, Manager or
Officer-in-charge of the Department/Branch/Representative Office concerned had
first taken action thereon in writing. (Emphasis supplied.)
It is clear then from the aforesaid provisions that any issue regarding the compulsory
coverage of the SSS is well within the exclusive domain of the petitioner SSC. It is
important to note, though, that the mandatory coverage under the SSS Law is
premised on the existence of an employer-employee relationship[17] except in cases
of compulsory coverage of the self-employed.
It is axiomatic that the allegations in the complaint, not the defenses set up in the
Answer or in the Motion to Dismiss, determine which court has jurisdiction over an
action; otherwise, the question of jurisdiction would depend almost entirely upon the
defendant.[18] Moreover, it is well-settled that once jurisdiction is acquired by the
court, it remains with it until the full termination of the case.[19] The said principle
may be applied even to quasi-judicial bodies.
In this case, the petition-complaint filed by the petitioner SSS before the petitioner
SSC against the respondent cooperative and Stanfilco alleges that the owners-
members of the respondent cooperative are subject to the compulsory coverage of
the SSS because they are employees of the respondent cooperative. Consequently,
the respondent cooperative being the employer of its owners-members must register
as employer and report its owners-members as covered members of the SSS and
remit the necessary premium contributions in accordance with the Social Security
Law of 1997. Accordingly, based on the aforesaid allegations in the petition-
complaint filed before the petitioner SSC, the case clearly falls within its jurisdiction.
Although the Answer with Motion to Dismiss filed by the respondent cooperative
challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-
employee relationship between itself and its owners-members, the same is not
enough to deprive the petitioner SSC of its jurisdiction over the petition-complaint
filed before it. Thus, the petitioner SSC cannot be faulted for initially assuming
jurisdiction over the petition-complaint of the petitioner SSS.
43
Nonetheless, since the existence of an employer-employee relationship between the
respondent cooperative and its owners-members was put in issue and considering
that the compulsory coverage of the SSS Law is predicated on the existence of such
relationship, it behooves the petitioner SSC to determine if there is really an
employer-employee relationship that exists between the respondent cooperative and
its owners-members.
The question on the existence of an employer-employee relationship is not within the
exclusive jurisdiction of the National Labor Relations Commission (NLRC). Article
217 of the Labor Code enumerating the jurisdiction of the Labor Arbiters and the
NLRC provides that:
ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. -
(a) x x x.
xxxx
6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with
a claim for reinstatement.[20]
Although the aforesaid provision speaks merely of claims for Social Security, it
would necessarily include issues on the coverage thereof, because claims are
undeniably rooted in the coverage by the system. Hence, the question on the
existence of an employer-employee relationship for the purpose of determining the
coverage of the Social Security System is explicitly excluded from the jurisdiction of
the NLRC and falls within the jurisdiction of the SSC which is primarily charged
with the duty of settling disputes arising under the Social Security Law of 1997.
On the basis thereof, considering that the petition-complaint of the petitioner SSS
involved the issue of compulsory coverage of the owners-members of the respondent
cooperative, this Court agrees with the petitioner SSC when it declared in its Order
dated 17 February 2004 that as an incident to the issue of compulsory coverage, it
may inquire into the presence or absence of an employer-employee relationship
without need of waiting for a prior pronouncement or submitting the issue to the
NLRC for prior determination. Since both the petitioner SSC and the NLRC are
independent bodies and their jurisdiction are well-defined by the separate statutes
creating them, petitioner SSC has the authority to inquire into the relationship
existing between the worker and the person or entity to whom he renders service to
determine if the employment, indeed, is one that is excepted by the Social Security
Law of 1997 from compulsory coverage.[21]
Even before the petitioner SSC could make a determination of the existence of an
employer-employee relationship, however, the respondent cooperative already
elevated the Order of the petitioner SSC, denying its Motion to Dismiss, to the Court
of Appeals by filing a Petition for Certiorari. As a consequence thereof, the petitioner
SSC became a party to the said Petition for Certiorari pursuant to Section 5(b)[22] of
Republic Act No. 8282. The appellate court ruled in favor of the respondent
cooperative by declaring that the petitioner SSC has no jurisdiction over the petition-
complaint filed before it because there was no employer-employee relationship
between the respondent cooperative and its owners-members. Resultantly, the
petitioners SSS and SSC, representing the Republic of the Philippines, filed a
Petition for Review before this Court.
Although as a rule, in the exercise of the Supreme Courts power of review, the Court
is not a trier of facts and the findings of fact of the Court of Appeals are conclusive
and binding on the Court,[23] said rule is not without exceptions. There are several
recognized exceptions[24] in which factual issues may be resolved by this Court.
One of these exceptions finds application in this present case which is, when the
findings of fact are conflicting. There are, indeed, conflicting findings espoused by
the petitioner SSC and the appellate court relative to the existence of employer-
employee relationship between the respondent cooperative and its owners-members,
which necessitates a departure from the oft-repeated rule that factual issues may not
be the subject of appeals to this Court.
In determining the existence of an employer-employee relationship, the following
elements are considered: (1) the selection and engagement of the workers; (2) the
payment of wages by whatever means; (3) the power of dismissal; and (4) the power
to control the workers conduct, with the latter assuming primacy in the overall
consideration.[25] The most important element is the employers control of the
employees conduct, not only as to the result of the work to be done, but also as to the
means and methods to accomplish.[26] The power of control refers to the existence
of the power and not necessarily to the actual exercise thereof. It is not essential for
the employer to actually supervise the performance of duties of the employee; it is
enough that the employer has the right to wield that power.[27] All the aforesaid
elements are present in this case.
First. It is expressly provided in the Service Contracts that it is the respondent
cooperative which has the exclusive discretion in the selection and engagement of
the owners-members as well as its team leaders who will be assigned at
Stanfilco.[28] Second. Wages are defined as remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained, on a time, task, piece or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
service rendered or to be rendered.[29] In this case, the weekly stipends or the so-
called shares in the service surplus given by the respondent cooperative to its
owners-members were in reality wages, as the same were equivalent to an amount
not lower than that prescribed by existing labor laws, rules and regulations, including
the wage order applicable to the area and industry; or the same shall not be lower
than the prevailing rates of wages.[30] It cannot be doubted then that those stipends
44
or shares in the service surplus are indeed wages, because these are given to the
owners-members as compensation in rendering services to respondent cooperatives
client, Stanfilco. Third. It is also stated in the above-mentioned Service Contracts
that it is the respondent cooperative which has the power to investigate, discipline
and remove the owners-members and its team leaders who were rendering services at
Stanfilco.[31] Fourth. As earlier opined, of the four elements of the employer-
employee relationship, the control test is the most important. In the case at bar, it is
the respondent cooperative which has the sole control over the manner and means of
performing the services under the Service Contracts with Stanfilco as well as the
means and methods of work.[32] Also, the respondent cooperative is solely and
entirely responsible for its owners-members, team leaders and other representatives
at Stanfilco.[33] All these clearly prove that, indeed, there is an employer-employee
relationship between the respondent cooperative and its owners-members.
It is true that the Service Contracts executed between the respondent cooperative and
Stanfilco expressly provide that there shall be no employer-employee relationship
between the respondent cooperative and its owners-members.[34] This Court,
however, cannot give the said provision force and effect.
As previously pointed out by this Court, an employee-employer relationship actually
exists between the respondent cooperative and its owners-members. The four
elements in the four-fold test for the existence of an employment relationship have
been complied with. The respondent cooperative must not be allowed to deny its
employment relationship with its owners-members by invoking the questionable
Service Contracts provision, when in actuality, it does exist. The existence of an
employer-employee relationship cannot be negated by expressly repudiating it in a
contract, when the terms and surrounding circumstances show otherwise. The
employment status of a person is defined and prescribed by law and not by what the
parties say it should be.[35]
It is settled that the contracting parties may establish such stipulations, clauses, terms
and conditions as they want, and their agreement would have the force of law
between them. However, the agreed terms and conditions must not be contrary to
law, morals, customs, public policy or public order.[36] The Service Contract
provision in question must be struck down for being contrary to law and public
policy since it is apparently being used by the respondent cooperative merely to
circumvent the compulsory coverage of its employees, who are also its owners-
members, by the Social Security Law.
This Court is not unmindful of the pronouncement it made in Cooperative Rural
Bank of Davao City, Inc. v. Ferrer-Calleja[37] wherein it held that:
A cooperative, therefore, is by its nature different from an ordinary business concern,
being run either by persons, partnerships, or corporations. Its owners and/or
members are the ones who run and operate the business while the others are its
employees x x x.
An employee therefore of such a cooperative who is a member and co-owner thereof
cannot invoke the right to collective bargaining for certainly an owner cannot
bargain with himself or his co-owners. In the opinion of August 14, 1981 of the
Solicitor General he correctly opined that employees of cooperatives who are
themselves members of the cooperative have no right to form or join labor
organizations for purposes of collective bargaining for being themselves co-owners
of the cooperative.
whole. Therefore, it is completely logical that the respondent cooperative, as a
juridical person represented by its Board of Directors, can enter into an employment
with its owners-members.
In sum, having declared that there is an employer-employee relationship between the
respondent cooperative and its owners-member, we conclude that the petitioner SSC
has jurisdiction over the petition-complaint filed before it by the petitioner SSS. This
being our conclusion, it is no longer necessary to discuss the issue of whether the
respondent cooperative was estopped from assailing the jurisdiction of the petitioner
SSC when it filed its Answer with Motion to Dismiss.

However, in so far as it involves cooperatives with employees who are not members WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The
or co-owners thereof, certainly such employees are entitled to exercise the rights of Decision and the Resolution of the Court of Appeals in CA-G.R. SP No. 87236,
all workers to organization, collective bargaining, negotiations and others as are dated 5 January 2006 and 20 March 2006, respectively, are hereby REVERSED and
enshrined in the Constitution and existing laws of the country. SET ASIDE. The Orders of the petitioner SSC dated 17 February 2004 and 16
September 2004 are hereby REINSTATED. The petitioner SSC is hereby
DIRECTED to continue hearing the petition-complaint filed before it by the
The situation in the aforesaid case is very much different from the present case. The petitioner SSS as regards the compulsory coverage of the respondent cooperative and
declaration made by the Court in the aforesaid case was made in the context of its owners-members. No costs.
whether an employee who is also an owner-member of a cooperative can exercise the
right to bargain collectively with the employer who is the cooperative wherein he is
an owner-member. Obviously, an owner-member cannot bargain collectively with SO ORDERED.
the cooperative of which he is also the owner because an owner cannot bargain with
himself. In the instant case, there is no issue regarding an owner-members right to
bargain collectively with the cooperative. The question involved here is whether an
employer-employee relationship can exist between the cooperative and an owner-
member. In fact, a closer look at Cooperative Rural Bank of Davao City, Inc. will
show that it actually recognized that an owner-member of a cooperative can be its
own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its
registration with the Cooperative Development Authority.[38] It has its Board of
Directors, which directs and supervises its business; meaning, its Board of Directors
is the one in charge in the conduct and management of its affairs.[39] With that, a
cooperative can be likened to a corporation with a personality separate and distinct
from its owners-members. Consequently, an owner-member of a cooperative can be
an employee of the latter and an employer-employee relationship can exist between
them.

In the present case, it is not disputed that the respondent cooperative had registered
itself with the Cooperative Development Authority, as evidenced by its Certificate of
Registration No. 0-623-2460.[40] In its by-laws,[41] its Board of Directors directs,
controls, and supervises the business and manages the property of the respondent
cooperative. Clearly then, the management of the affairs of the respondent
cooperative is vested in its Board of Directors and not in its owners-members as a
45
 G.R. No. 80680. January 26, 1989.*
DANILO B. TABAS, EDUARDO A. BONDOC, RAMON M. BRIONES,
EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO
BONA, FERDINAND CRUZ, FEDERICO A BELITA, ROBERTO P. ISLES,
ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA
QUIAMBOA, NOMER MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA,
petitioners, vs. CALIFORNIA MANUFACTURING COMPANY, INC., LILY-
VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS
COMMISSION, and HON. EMERSON C. TUMANON, respondents.
Labor Law; Labor Relations; Employer-Employee Relationship; The existence of an
employer-employee relation cannot be made the subject of an agreement.The
existence of an employer-employee relation is a question of law and being such, it
cannot be made the subject of agreement. Hence, the fact that the manpower supply
agreement between Livi and California had specifically designated the former as the
petitioners employer and had absolved the latter from any liability as an employer,
will not erase either partys obligations as an employer, if an employer-employee
relation otherwise exists between the workers and either firm. At any rate, since the
agreement was between Livi and California, they alone are bound by it, and the
petitioners cannot be made to suffer from its adverse consequences.
Same; Same; Same; Labor Only Contracting; The labor only contractor is
considered merely an agent of the employer, liability therefore must be shouldered
by either one or shared by both.On the other hand, we have likewise held, based
on Article 106 of the Labor Code. xxx that notwithstanding the absence of a direct
employeremployee relationship between the employer in whose favor work had been
contracted out by a labor-only contractor, and the employees, the former has the
responsibility, together with the labor-only contractor for any valid labor claims,
by operation of law. The reason, so we held, is that the labor-only contractor is
considered merely an agent of the employer, and liability must be shouldered by
either one or shared by both.
Same; Same; Same; Casual Employees; A temporary or casual employee becomes
regular after service of one year, unless he has been contracted for a specific
project.The fact that the petitioners have been hired on a temporary or seasonal
basis merely is no argument either. As we held in Philippine Bank of
Communications v. NLRC, a temporary or casual employee, under Article 281 of the
Labor Code, becomes regular after service of one year, unless he has been contracted
for a specific project. And we cannot say that merchandising is a specific project for
the obvious reason that it is an activity related to the day-to-day operations of
California.
SARMIENTO, J.:
46
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the
National Labor Relations Commission for reinstatement and payment of various
benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay,
and emergency cost of living allowance pay, against the respondent, the California
Manufacturing Company. 1
On October 7, 1986, after the cases had been consolidated, the California
Manufacturing Company (California) filed a motion to dismiss as well as a position
paper denying the existence of an employer-employee relation between the
petitioners and the company and, consequently, any liability for payment of money
claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded
as a party-respondent.
It appears that the petitioners were, prior to their stint with California, employees of
Livi Manpower Services, Inc. (Livi), which subsequently assigned them to work as
"promotional merchandisers" 3 for the former firm pursuant to a manpower supply
agreement. Among other things, the agreement provided that California "has no
control or supervisions whatsoever over [Livi's] workers with respect to how they
accomplish their work or perform [Californias] obligation"; 4 the Livi "is an
independent contractor and nothing herein contained shall be construed as creating
between [California] and [Livi] . . . the relationship of principal[-]agent or
employer[-]employee'; 5 that "it is hereby agreed that it is the sole responsibility of
[Livi] to comply with all existing as well as future laws, rules and regulations
pertinent to employment of labor" 6 and that "[California] is free and harmless from
any liability arising from such laws or from any accident that may befall workers and
employees of [Livi] while in the performance of their duties for [California]. 7
It was further expressly stipulated that the assignment of workers to California shall
be on a "seasonal and contractual basis"; that "[c]ost of living allowance and the 10
legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for
the preceeding [sic] week [shall] be delivered by [Livi] at [California's] premises." 8
The petitioners were then made to sign employment contracts with durations of six
months, upon the expiration of which they signed new agreements with the same
period, and so on. Unlike regular California employees, who received not less than
P2,823.00 a month in addition to a host of fringe benefits and bonuses, they received
P38.56 plus P15.00 in allowance daily.
The petitioners now allege that they had become regular California employees and
demand, as a consequence whereof, similar benefits. They likewise claim that
pending further proceedings below, they were notified by California that they would
not be rehired. As a result, they filed an amended complaint charging California with
illegal dismissal.
California admits having refused to accept the petitioners back to work but deny
liability therefor for the reason that it is not, to begin with, the petitioners' employer
and that the "retrenchment" had been forced by business losses as well as expiration
of contracts. 9 It appears that thereafter, Livi re-absorbed them into its labor pool on
a "wait-in or standby" status. 10
Amid these factual antecedents, the Court finds the single most important issue to be:
Whether the petitioners are California's or Livi's employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the
existence of any employer-employee relation between the petitioners and California
ostensibly in the light of the manpower supply contract, supra, and consequently,
against the latter's liability as and for the money claims demanded. In the same
breath, however, the labor arbiter absolved Livi from any obligation because the
"retrenchment" in question was allegedly "beyond its control ." 13 He assessed
against the firm, nevertheless, separation pay and attorney's fees.
We reverse.
The existence of an employer-employees relation is a question of law and being
such, it cannot be made the subject of agreement. Hence, the fact that the manpower
supply agreement between Livi and California had specifically designated the former
as the petitioners' employer and had absolved the latter from any liability as an
employer, will not erase either party's obligations as an employer, if an employer-
employee relation otherwise exists between the workers and either firm. At any rate,
since the agreement was between Livi and California, they alone are bound by it, and
the petitioners cannot be made to suffer from its adverse consequences.
This Court has consistently ruled that the determination of whether or not there is an
employer-employee relation depends upon four standards: (1) the manner of
selection and engagement of the putative employee; (2) the mode of payment of
wages; (3) the presence or absence of a power of dismissal; and (4) the presence or
absence of a power to control the putative employee's conduct. 14 Of the four, the
right-of-control test has been held to be the decisive factor. 15
On the other hand, we have likewise held, based on Article 106 of the Labor Code,
hereinbelow reproduced:
ART. 106. Contractor or sub-contractor. Whenever an employee 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 sub-contractor, if any, shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or sub-contractor fails to pay wages of his employees
in accordance with this Code, the employer shall be jointly and severally liable with
47
his contractor or sub-contractor 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 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
provisions 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.
that notwithstanding the absence of a direct employer-employee relationship between
the employer in whose favor work had been contracted out by a "labor-only"
contractor, and the employees, the former has the responsibility, together with the
"labor-only" contractor, for any valid labor claims, 16 by operation of law. The
reason, so we held, is that the "labor-only" contractor is considered "merely an agent
of the employer," 17 and liability must be shouldered by either one or shared by
both. 18
There is no doubt that in the case at bar, Livi performs "manpower services", 19
meaning to say, it contracts out labor in favor of clients. We hold that it is one
notwithstanding its vehement claims to the contrary, and notwithstanding the
provision of the contract that it is "an independent contractor." 20 The nature of one's
business is not determined by self-serving appellations one attaches thereto but by
the tests provided by statute and prevailing case law. 21 The bare fact that Livi
maintains a separate line of business does not extinguish the equal fact that it has
provided California with workers to pursue the latter's own business. In this
connection, we do not agree that the petitioners had been made to perform activities
'which are not directly related to the general business of manufacturing," 22
California's purported "principal operation activity. " 23 The petitioner's had been
charged with "merchandizing [sic] promotion or sale of the products of [California]
in the different sales outlets in Metro Manila including task and occational [sic] price
tagging," 24 an activity that is doubtless, an integral part of the manufacturing
business. It is not, then, as if Livi had served as its (California's) promotions or sales
arm or agent, or otherwise, rendered a piece of work it (California) could not have
itself done; Livi, as a placement agency, had simply supplied it with the manpower
necessary to carry out its (California's) merchandising activities, using its
(California's) premises and equipment. 25
Neither Livi nor California can therefore escape liability, that is, assuming one
exists.
The fact that the petitioners have allegedly admitted being Livi's "direct employees"
26 in their complaints is nothing conclusive. For one thing, the fact that the
petitioners were (are), will not absolve California since liability has been imposed by
legal operation. For another, and as we indicated, the relations of parties must be
judged from case to case and the decree of law, and not by declarations of parties.
The fact that the petitioners have been hired on a "temporary or seasonal" basis
merely is no argument either. As we held in Philippine Bank of Communications v.
NLRC, 27 a temporary or casual employee, under Article 218 of the Labor Code,
becomes regular after service of one year, unless he has been contracted for a
specific project. And we cannot say that merchandising is a specific project for the
obvious reason that it is an activity related to the day-to-day operations of California.
It would have been different, we believe, had Livi been discretely a promotions firm,
and that California had hired it to perform the latter's merchandising activities. For
then, Livi would have been truly the employer of its employees, and California, its
client. The client, in that case, would have been a mere patron, and not an employer.
The employees would not in that event be unlike waiters, who, although at the
service of customers, are not the latter's employees, but of the restaurant. As we
pointed out in the Philippine Bank of Communications case:
xxx xxx xxx
... The undertaking given by CESI in favor of the bank was not the performance of a
specific job for instance, the carriage and delivery of documents and parcels to the
addresses thereof. There appear to be many companies today which perform this
discrete service, companies with their own personnel who pick up documents and
packages from the offices of a client or customer, and who deliver such materials
utilizing their own delivery vans or motorcycles to the addressees. In the present
case, the undertaking of CESI was to provide its client the bank with a certain
number of persons able to carry out the work of messengers. Such undertaking of
CESI was complied with when the requisite number of persons were assigned or
seconded to the petitioner bank. Orpiada utilized the premises and office equipment
of the bank and not those of CESI. Messengerial work the delivery of documents to
designated persons whether within or without the bank premises-is of course directly
related to the day-to-day operations of the bank. Section 9(2) quoted above does not
require for its applicability that the petitioner must be engaged in the delivery of
items as a distinct and separate line of business.
48
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a
recruitment and placement corporation placing bodies, as it were, in different client
companies for longer or shorter periods of time, ... 28
In the case at bar, Livi is admittedly an "independent contractor providing temporary
services of manpower to its client. " 29 When it thus provided California with
manpower, it supplied California with personnel, as if such personnel had been
directly hired by California. Hence, Article 106 of the Code applies.
The Court need not therefore consider whether it is Livi or California which
exercises control over the petitioner vis-a-vis the four barometers referred to earlier,
since by fiction of law, either or both shoulder responsibility.
It is not that by dismissing the terms and conditions of the manpower supply
agreement, we have, hence, considered it illegal. Under the Labor Code, genuine job
contracts are permissible, provided they are genuine job contracts. But, as we held in
Philippine Bank of Communications, supra, when such arrangements are resorted to
"in anticipation of, and for the very purpose of making possible, the secondment" 30
of the employees from the true employer, the Court will be justified in expressing its
concern. For then that would compromise the rights of the workers, especially their
right to security of tenure.
This brings us to the question: What is the liability of either Livi or California?
The records show that the petitioners bad been given an initial six-month contract,
renewed for another six months. Accordingly, under Article 281 of the Code, they
had become regular employees-of-California-and had acquired a secure tenure.
Hence, they cannot be separated without due process of law.
California resists reinstatement on the ground, first, and as we Id, that the petitioners
are not its employees, and second, by reason of financial distress brought about by
"unfavorable political and economic atmosphere" 31 "coupled by the February
Revolution." 32 As to the first objection, we reiterate that the petitioners are its
employees and who, by virtue of the required one-year length-of-service, have
acquired a regular status. As to the second, we are not convinced that California has
shown enough evidence, other than its bare say so, that it had in fact suffered serious
business reverses as a result alone of the prevailing political and economic climate.
We further find the attribution to the February Revolution as a cause for its alleged
losses to be gratuitous and without basis in fact.
California should be warned that retrenchment of workers, unless clearly warranted,
has serious consequences not only on the State's initiatives to maintain a stable
employment record for the country, but more so, on the workingman himself, amid
an environment that is desperately scarce in jobs. And, the National Labor Relations
Commission should have known better than to fall for such unwarranted excuses and
nebulous claims.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1):
SETTING ASIDE the decision, dated March 20, 1987, and the resolution, dated
August 19, 1987; (2) ORDERING the respondent, the California Manufacturing
Company, to REINSTATE the petitioners with full status and rights of regular
employees; and (3) ORDERING the respondent, the California Manufacturing
Company, and the respondents, Livi Manpower Service, Inc. and/or Lily-Victoria
Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and
differential pays effective as and from the time they had acquired a regular status
under the second paragraph, of Section 281, of the Labor Code, but not to exceed
three (3) years, and (b) all such other and further benefits as may be provided by
existing collective bargaining agreement(s) or other relations, or by law, beginning
such time; and (4) ORDERING the private respondents to PAY unto the petitioners
attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded,
in addition to those money claims. The private respondents are likewise ORDERED
to PAY the costs of this suit.
IT IS SO ORDERED.
49
No. L-78382. December 14, 1987.*
BROADWAY MOTORS, INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION and VICENTE APOLINARIO, respondents.
Labor Relations; Factors considered in determining the existence of employer-
employee relationship.Four factors are generally considered in determining the
existence of an employer-employee relationship, namely: (a) the manner of selection
and engagement of the putative employee; (b) the mode of payment of wages; (c) the
presence or absence of a power of dismissal; and (d) the presence or absence of a
power to control the putative employee's conduct. It is this latter factor, the so-called
"control test," which is the most important criterion in such determination. The
record shows that Apolinario was hired directly by petitioner Corporation to work in
the latter's auto repair shop as an auto painter, which fact is evidenced by the undated
Work Contract executed between Apolinario and petitioner Corporation through its
authorized representative. That petitioner corporation reserved unto itself the power
of dismissal is evident from the fact that petitioner Corporation unilaterally
undertook to terminate Apolinario's relationships with itself.
Same; Indices of an owner-independent contractor relationship.The indices of an
owner-independent contractor relationship are set out in Section 8 of Rule VIII,
Book III of the Omnibus Rules Implementing the Labor Code. Section 8 provides:
"Job contracting.There is job contracting permissible under the Code if the
following conditions are met: (1) 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 as to the results thereof; and (2) The 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."
Same; Same; "Job contracting" distinguished from "labor-only contracting.""Job
contracting" must be distinguished from "labor-only" contracting. "Labor-only"
contracting is defined in Section 9 of Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code, in the following terms: "Sec. 9. Labor-only
contracting.(a) Any person who undertakes to supply workers to an employer shall
be deemed to be engaged in labor-only contracting where such person: (1) Does not
have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and (2) The workers recruited and placed by such
person are performing activities which are directly related to the principal business
or operations of the employer in which workers are habitually employed. (b) Labor-
only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary 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. x x x x x x x x x."
Same; Same; Finding that a contractor was a "labor-only" contractor is equivalent to
a finding that an employer-employee relationship existed between the owner and the
"labor-only" contractor including the latter's "contract workers."Thus, a finding
that a contractor was a "labor-only" contractor is equivalent to a finding that an
employer-employee relationship existed between the owner and the "labor-only"
contractor including the latter's "Contract Workers," that relationship being attributed
by the law itself. Petitioner Corporation's defense thus compels us to examine still
further the relationship between itself and private respondent Apolinario in terms of
the above indices of contracting"job" or "labor-only."
FELICIANO, J.:
By virtue of a written undated "Work Contract," 1 private respondent Vicente
Apolinario, sometime in March 1967, began work as an auto painter in the premises
of petitioner Broadway Motors, Inc. located at 1232 United Nations Avenue, Metro
Manila. The contract was signed by Vicente Apolinario as "Contractor"and Mr.
Johnny L. Chieng, Parts and Service Operations Manager of petitioner Corporation.
Apolinario worked as an auto painter for a period of eighteen (18) years, until 23
January 1985 when he was barred from entering the premises of the petitioner
Corporation, and his alleged involvement in a fist-fight with the shop superintendent
of Broadway Motors the day before.
On 21 February 1985, Apolinario commenced an action for illegal dismissal with the
National Capital Region Arbitration Branch of the National Labor Relations
Commission (NLRC). In his Complaint, which was docketed as NLRC Case No.
2587-85, Apolinario sought recovery from petitioner Corporation of (1) separation
pay in the amount of P66,676.95, on the basis of an alleged monthly income of
P7,408.55, (2) moral damages of P50,000.00, and (3) attorney's fees of P10,000.00.
In a Decision dated 2 January 1986, the Labor Arbiter dismissed the complaint upon
the ground that under the Work Contract and an "Addendum to Work Contract"
dated 28 April 1984, 3 Apolinario, having supplied the workers himself included
who performed the auto painting jobs for petitioner Corporation, was a mere
contractor and could not, therefore, be considered as the latter's employee. From this
decision, Apolinario interposed an appeal to the NLRC.
On 4 February 1987, public respondent NLRC rendered a Decision, 4 the dispositive
portion of which reads:
WHEREFORE, the Decision appealed from is reversed and a new judgment entered
ordering the respondent to pay complainant separation pay in the sum of FORTY
FIVE THOUSAND (P45,000-00) PESOS plus 10% thereof as and for attorney's
fees.
SO ORDERED.
50
In reversing the decision of the Labor Arbiter, public respondent NLRC found that a
valid and binding employer-employee relationship had existed between petitioner
Corporation and Apolinario. Since Apolinario was dismissed without any
investigation having been previously conducted by petitioner Corporation to
ascertain his participation in the fistfight within company premises, his dismissal
was, accordingly, declared illegal by public respondent NLRC for non-compliance
with the requirements of procedural due process.
After a careful scrutiny of the records of this case, the Court considers that petitioner
Corporation has not sufficiently shown that respondent NLRC had acted with grave
abuse of discretion, or without or in excess of jurisdiction in rendering its decision
dated 4 February 1987.
Four factors are generally considered in determining the existence of an employer-
employee relationship, namely: (a) the manner of selection and engagement of the
putative employee; (b) the mode of payment of wages; (c) the presence or absence of
a power of dismissal; and (d) the presence or absence of a power to control the
putative employee's conduct. It is this latter factor, the so-called "control test," which
is the most important criterion in such determination. 5 The record shows that
Apolinario was hired directly by petitioner Corporation to work in the latter's auto
repair shop as an auto painter, which fact is evidenced by the undated Work Contract
executed between Apolinario and petitioner Corporation through its authorized
representative. That petitioner corporation reserved unto itself the power of dismissal
is evident from the fact that petitioner Corporation unilaterally undertook to
terminate Apolinario's relationships with itself.
Upon the other hand, it appears that Apolinario and his men (designated in the Work
Contract as "Contract Workers") were compensated for the jobs they performed in
lump sum payments described as "payment for sub-contract painting" or other repair
job, from which amounts an unexplained "three percent (3 %) of fifteen percent (I 5
%) withholding tax " was deducted. It further appears that Apolinario invoiced,
under the designation of "VM Automotive Repair Service, " to petitioner
Corporation the salaries of his "Contract Workers" on which amounts, a three
percent (3%) "sales tax" was added. The "Work Contract" also provided that
Broadway Motors would negotiate only with Apolinario on any work order, and
would refrain from dealing with any member of Apolinario's group of "Contract
Workers. 6
Turning to the power to control Apolinario's conduct appears from the stipulations of
the Work Contract that Apolinario and his "Contract Workers" were required not
only to keep regular working hours, but to render overtime service as well, when
such as necessitated either by the volume or immediacy of the work. 7 They were not
allowed to negotiate with customers regarding the performance of any additional
work beyond that which had been authorized by petitioner Corporation. 8 Any defect
in the workmanship of their jobs was subject to correction by petitioner
Corporation's designated supervisors and inspectors even as the work was still in
progress, and not just after the same had already been completed. 9 Furthermore,
Apolinario and his men were expressly required to abide by petitioner Corporation's
regulations and policies, "particularly on the wearing of uniforms and Identification
cards, " which Id cards had to be worn at all times while within the work premises.
Apolinario's "casual workers" were additionally required to deposit their Id cards
with petitioner Corporation's security guard at the end of the working day. 10 In
other words, Apolinario and his "Contract Workers" were under the direct control
and supervision of the supervisors and managers of petitioner Corporation from the
very moment they entered the work premises at the beginning of the working day, all
throughout the performance of their duties for the day, until shop closing time.
Petitioner Corporation urges that Apolinario was not its own employee but, rather, an
independent contractor who conducted his own separate business under the trade
name of "VM Automotive Repair Service" and had his own "Contract Workers."
The indices of an owner-independent contractor relationship are set out in Section 8
of Rule VIII, Book Ill of the Omnibus Rules Implementing the Labor Code. Section
8 provides:
Job contracting. There is job contracting permissible under the Code if the
following conditions are met:
(1) 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 as to the results
thereof; and
(2) The 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. (Emphasis supplied.)
"Job contracting" must be distinguished from "labor-only" contracting. "Labor-only"
contracting is defined in Section 9 of Rule VIII, Book Ill of the Omnibus Rules
Implementing the Labor Code, in the following terms:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only contracting
where such person:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
51
(2) The workers recruited and Placed by such person are performing activities
which are directly related to the principal business or operations of the employer in
which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent as
if the latter were
xxx xxx xxx (Emphasis supplied.)
The legal effect of a finding that a contractor was not a true independent contractor
or "job contractor" but, rather, merely a "labor-only" contractor was explained in
Philippine Bank of Communications v. National Labor Relations Commission et al.
11
... The "labor-only" contractor i.e., "the person or intermediary is considered "merely
as an agent of the employer." The employer is made by the statute responsible to the
employees of the "labor only" contractor as if such employee had been directly
employed by the employer. Thus, where "labor only contracting exists in a given
case, the statute itself implies or establishes an employer-employee relationship
between the employer (the owner of the project) and the employees of the "labor
only contractor, this time for a comprehensive purpose: "employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.
The law in effect holds both the employer and the "labor-only" contractor
responsible to the latter's employees for the more effective safeguarding of the
employees' rights under the labor Code. (Emphasis supplied.)
Thus, a finding that a contractor was a "labor-only" contractor is equivalent to a
finding that an employer-employee relationship existed between the owner and the
"labor-only" contractor including the latter"s "Contract Workers," that relationship
being attributed by the law itself. Petitioner Corporation"s defense thus compels us
to examine still further the relationship between itself and private respondent
Apolinario in terms of the above indices of contracting "job" or "labor-only. "
We note firstly that, under the Work Contract, Apolinario supplied only "labor and
supervision (over his "Contract Workers") in the performance of automotive body
painting work which the company (i.e., Broadway Motors) may from time to time,
award to him under (the) contract." 12 Apolinario also undertook to "hire and bring
in additional workers as may be required by the company, to handle additional work
load or to accelerate or facilitate completion of work in process. 13 Petitioner
Corporation supplied all the tools, equipment, machinery and materials necessary for
Apolinario to carry out his assigned painting jobs, which painting jobs were executed
by Apolinario and his men within the premises owned and maintained by petitioner
Corporation. The control and direction exercised by petitioner Corporation over the
work done by Apolinario and his "Contract Workers" was well- nigh complete, as
indicated earlier. There was, furthermore, no evidence adduced by petitioner
Corporation to show that Apolinario had substantial capital investment in "VM
Automotive Repair Service" or that "VM Automotive Repair Service" carried on, in
its own premises, a car repair business operation separate and distinct from that
engaged in by petitioner Corporation, an operation the tools or equipment of which
were owned by Apolinario and the customers of which were not customers of
Broadway Motors. What the evidence of record reveals is that the alleged "Contract
Work" carried out by Apolinario and his "Contract Workers," excepting overtime
work, was performed during regular working hours six (6) days in a week, which
circumstance must have made it virtually impossible for them to carry on any
additional and independent auto painting business outside the premises of Broadway
Motors. Finally, Apolinario and his men were engaged in the performance of a line
of work automobile painting which was directly related to, if not an integral
part altogether of the regular business operations of petitioner Corporation i.e., that
of an automotive repair shop.
We conclude that while there is present in the relationship between petitioner
Corporation and private respondent some factors suggestive of an owner-
independent contractor relationship (e.g., the manner of payment of compensation to
Apolinario and his "Contract Workers"), many other factors are present which
demonstrate that that relationship is properly characterized as one of employer-
employee. We conclude, further, that the same factors indicate the existence of a
"labor-only" contracting arrangement between petitioner Corporation on the one
hand as owner, and upon the other hand, Apolinario as "labor-only" contractor and
his "Contract Workers." Thus, an employer-employee relationship must be held to
have existed between petitioner Corporation and private respondent, whether
considered as a result of the contractual arrangements between them or as a result of
the operation of the Labor Code (at least from 1974 onwards) and its Implementing
Rules. It follows, finally, that the ruling of public respondent NLRC that petitioner
Corporation and private respondent were employer and employee, respectively,
cannot be regarded as constituting a grave abuse of discretion or as rendered without
or in excess of jurisdiction.
In respect of public respondent NLRC"s finding that Apolinario was dismissed
without any opportunity to present his side on the charge against him of participating
in the fistfight with petitioner Corporation"s shop superintendent, no compelling
reason has been shown by the petitioner Corporation why we should overturn such
finding of fact.
WHEREFORE, the Petition for certiorari is DISMISSED. The decision of the public
respondent National Labor Relations Commission dated 4 February 1987 is hereby
AFFIRMED. Costs against the petitioner.
SO ORDERED.
52
G.R. Nos. 97008-09. July 23, 1993.*
VIRGINIA G. NERI and JOSE CABELIN, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION FAR EAST BANK & TRUST
COMPANY (FEBTC) and BUILDING CARE CORPORATION, respondents.
Labor Law; Building Care Corporation is a highly capitalized venture and cannot be
deemed engaged in labor-only contracting.Respondent BCC need not prove that
it made investments in the form of tools, equipment, machineries, work premises,
among others, because it has established that it has sufficient capitalization. The
Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1
million fully subscribed and paid for. BCC is therefore a highly capitalized venture
and cannot be deemed engaged in labor-only contracting.
Same; Same; Factors to be considered in labor-only contracting.It is well-settled
that there is labor-only contracting where: (a) 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, (b) the workers
recruited and placed by such person are performing activities which are directly
related to the principal business of the employer.
Same; Same; Same; BCC cannot be considered a labor-only contractor because it
has substantial capital.Based on the foregoing, BCC cannot be considered a
labor-only contractor because it has substantial capital. While there may be no
evidence that it has investment in the form of tools, equipment, machineries, work
premises, among others, it is enough that it has substantial capital, as was established
before the Labor Arbiter as well as the NLRC. In other words, the law does not
require both substantial capital and investment in the form of tools, equipment,
machineries, etc. This is clear from the use of the conjunction or.
Same; Same; Same; While the services may be considered directly related to the principal
business of the employer, nevertheless, they are not necessary in the conduct of the
principal business of the employer.Be that as it may, the Court has already taken
judicial notice of the general practice adopted in several government and private
institutions and industries of hiring independent contractors to perform special services.
These services range from janitorial, security and even technical or other specific services
such as those performed by petitioners Neri and Cabelin. While these services may be
considered directly related to the principal business of the employer, nevertheless, they
are not necessary in the conduct of the principal business of the employer.
Same; Same; Same; The status of BCC as an independent contractor previously
confirmed by the Court in Associated Labor Unions-TUCP v. National Labor Relations
Commission.In fact, the status of BCC as an independent contractor was previously
confirmed by this Court in Associated Labor Unions-TUCP v. National Labor Relations
Commission.
Same; Same; Same; Same; Under the right of control test, petitioners must still be
considered employees of BCC.Even assuming ex argumenti that petitioners were
performing activities directly related to the principal business of the bank, under the
right of control test they must still be considered employees of BCC.
BELLOSILLO, J.:
Respondents are sued by two employees of Building Care Corporation, which
provides janitorial and other specific services to various firms, to compel Far Bast
Bank and Trust Company to recognize them as its regular employees and be paid the
same wages which its employees receive.
Building Care Corporation (BCC, for brevity), in the proceedings below, established
that it had substantial capitalization of P1 Million or a stockholders equity of P1.5
Million. Thus the Labor Arbiter ruled that BCC was only job contracting and that
consequently its employees were not employees of Far East Bank and Trust
Company (FEBTC, for brevity). on appeal, this factual finding was affirmed by
respondent National Labor Relations Commission (NLRC, for brevity).
Nevertheless, petitioners insist before us that BCC is engaged in "labor-only"
contracting hence, they conclude, they are employees of respondent FEBTC.
Petitioners Virginia G. Neri and Jose Cabelin applied for positions with, and were
hired by, respondent BCC, a corporation engaged in providing technical,
maintenance, engineering, housekeeping, security and other specific services to its
clientele. They were assigned to work in the Cagayan de Oro City Branch of
respondent FEBTC on 1 May 1979 and 1 August 1980, respectively, Neri an
radio/telex operator and Cabelin as janitor, before being promoted to messenger on 1
April 1989.
On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before
Regional Arbitration Branch No. 10 of the Department of Labor and Employment to
compel the bank to accept them as regular employees and for it to pay the differential
between the wages being paid them by BCC and those received by FEBTC
employees with similar length of service.
On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit.
1 Respondent BCC was considered an independent contractor because it proved it
had substantial capital. Thus, petitioners were held to be regular employees of BCC,
not FEBTC. The dismissal was appealed to NLRC which on 28 September 1990
affirmed the decision on appeal. 2 On 22 October 1990, NLRC denied
reconsideration of its affirmance, 3 prompting petitioners to seek redress from this
Court.
Petitioners vehemently contend that BCC in engaged in "labor-only" contracting
because it failed to adduce evidence purporting to show that it invested in the form of
53
tools, equipment, machineries, work premises and other materials which are
necessary in the conduct of its business. Moreover, petitioners argue that they
perform duties which are directly related to the principal business or operation of
FEBTC. If the definition of "labor-only" contracting 4 is to be read in conjunction
with job contracting, 5 then the only logical conclusion is that BCC is a "labor only"
contractor. Consequently, they must be deemed employees of respondent bank by
operation of law since BCC is merely an agent of FEBTC following the doctrine laid
down in Philippine Bank of Communications v. National Labor Relations
Commission 6 where we ruled that where "labor-only" contracting exists, the Labor
Code itself establishes an employer-employee relationship between the employer and
the employees of the "labor-only" contractor; hence, FEBTC should be considered
the employer of petitioners who are deemed its employees through its agent, "labor-
only" contractor BCC.
We cannot sustain the petition.
Respondent BCC need not prove that it made investments in the form of tools,
equipment, machineries, work premises, among others, because it has established
that it has sufficient capitalization. The Labor Arbiter and the NLRC both
determined that BCC had a capital stock of P1 million fully subscribed and paid for.
7 BCC is therefore a highly capitalized venture and cannot be deemed engaged in
"labor-only" contracting.
It is well-settled that there is "labor-only" contracting where: (a) 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, (b) the
workers recruited and placed by such person are performing activities which are
directly related to the principal business of the employer. 8
Article 106 of the Labor Code defines "labor-only" contracting thus
Art. 106. Contractor or subcontractor. . . . . 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 by such persons are performing activities which are directly related to
the principal business of such employer . . . . (emphasis supplied).
Based on the foregoing, BCC cannot be considered a "labor-only" contractor because
it has substantial capital. While there may be no evidence that it has investment in
the form of tools, equipment, machineries, work premises, among others, it is enough
that it has substantial capital, as was established before the Labor Arbiter as well as
the NLRC. In other words, the law does not require both substantial capital and
investment in the form of tools, equipment, machineries, etc. This is clear from the
use of the conjunction "or". If the intention was to require the contractor to prove that
he has both capital and the requisite investment, then the conjunction "and" should
have been used. But, having established that it has substantial capital, it was no
longer necessary for BCC to further adduce evidence to prove that it does not fall
within the purview of "labor-only" contracting. There is even no need for it to refute
petitioners' contention that the activities they perform are directly related to the
principal business of respondent bank.
Be that as it may, the Court has already taken judicial notice of the general practice
adopted in several government and private institutions and industries of hiring
independent contractors to perform special services. 9 These services range from
janitorial, 10 security 11 and even technical or other specific services such as those
performed by petitioners Neri and Cabelin. While these services may be considered
directly related to the principal business of the employer, 12 nevertheless, they are
not necessary in the conduct of the principal business of the employer.
In fact, the status of BCC as an independent contractor was previously confirmed by
this Court in Associated Labor Unions-TUCP v. National Labor Relations
Commission, 13 where we held thus
The public respondent ruled that the complainants are not employees of the bank but
of the company contracted to serve the bank. Building Care Corporation is a big firm
which services, among others, a university, an international bank, a big local bank, a
hospital center, government agencies, etc. It is a qualified independent contractor.
The public respondent correctly ruled against petitioner's contentions . . . . (Emphasis
supplied).
Even assuming ex argumenti that petitioners were performing activities directly
related to the principal business of the bank, under the "right of control" test they
must still be considered employees of BCC. In the case of petitioner Neri, it is
admitted that FEBTC issued a job description which detailed her functions as a
radio/telex operator. However, a cursory reading of the job description shows that
what was sought to be controlled by FEBTC was actually the end-result of the task,
e.g., that the daily incoming and outgoing telegraphic transfer of funds received and
relayed by her, respectively, tallies with that of the register. The guidelines were laid
down merely to ensure that the desired end-result was achieved. It did not, however,
tell Neri how the radio/telex machine should be operated. In the Shipside case, 14 we
ruled
. . . . If in the course of private respondents' work (referring to the workers),
SHIPSIDE occasionally issued instructions to them, that alone does not in the least
detract from the fact that only STEVEDORES is the employer of the private
respondents, for in legal contemplation, such instructions carry no more weight than
mere requests, the privity of contract being between SHIPSIDE and STEVEDORES.
Besides, petitioners do not deny that they were selected and hired by BCC before
being assigned to work in the Cagayan de Oro Branch of FFBTC. BCC likewise
acknowledges that petitioners are its employees. The record is replete with evidence
disclosing that BCC maintained supervision and control over petitioners through its
Housekeeping and Special Services Division: petitioners reported for work wearing
54
the prescribed uniform of BCC; leaves of absence were filed directly with BCC;
and, salaries were drawn only from BCC.
As a matter of fact, Neri even secured a certification from BCC on 16 May 1986 that
she was employed by the latter. On the other hand, on 24 May 1988, Cabelin filed a
complaint for underpayment of wages, non-integration of salary adjustments
mandated by Wage Orders Nos. 5 & 6 and R.A. 6640 as well as for illegal deduction
16 against BCC alone which was provisionally dismissed on 19 August 1988 upon
Cabelin's manifestation that his money claim was negligible. 17
More importantly, under the terms and conditions of the contract, it was BCC alone
which had the power to reassign petitioners. Their deployment to FEBTC was not
subject to the bank's acceptance. Cabelin was promoted to messenger because the
FEBTC branch manager promised BCC that two (2) additional janitors would be
hired from the company if the promotion was to be effected. 18 Furthermore, BCC
was to be paid in lump sum unlike in the situation in Philippine Bank of
Communications 19 where the contractor, CESI, was to be paid at a daily rate on a
per person basis. And, the contract therein stipulated that the CESI was merely to
provide manpower that would render temporary services. In the case at bar, Neri and
Cabelin were to perform specific special services. Consequently, petitioners cannot
be held to be employees of FEBTC as BCC "carries an independent business" and
undertaken the performance of its contract with various clients according to its "own
manner and method, free from the control and supervision" of its principals in all
matters "except as to the results thereof."
Indeed, the facts in Philippine Bank of Communications do not square with those of
the instant case. Therein, the Court ruled that CESI was a "labor-only" contractor
because upholding the contract between the contractor and the bank would in effect
permit employers to avoid the necessity of hiring regular or permanent employees
and would enable them to keep their employees indefinitely on a temporary or casual
basis, thus denying them security of tenure in their jobs. This of course violates the
Labor Code. BCC has not committed any violation. Also, the former case was for
illegal dismissal; this case, on the other hand, is for conversion of employment status
so that petitioners can receive the same salary being given to regular employees of
FEBTC. But, as herein determined, petitioners are not regular employees of FEBTC
but of BCC. At any rate, the finding that BCC in a qualified independent contractor
precludes us from applying the Philippine Bank of Communications doctrine to the
instant petition.
The determination of employer-employee relationship involves factual findings. 21
Absent any grave abuse of discretion, and we find none in the case before us, we are
bound by the findings of the Labor Arbiter as affirmed by respondent NLRC.
IN VIEW OF THE FOREGOING, the Petition for Certiorari is DISMISSED.
SO ORDERED.
 No. L-37790. March 25, 1976.*
MAFINCO TRADING CORPORATION, petitioner, vs. THE HON. BLAS F.
OPLE, in his capacity as Secretary of Labor, The NATIONAL LABOR
RELATIONS COMMISSION, RODRIGO REPOMANTA and REY
MORALDE, respondents.
Labor law; Cases pending before the old National Labor Relations Commission
should be transferred to, and processed by, the new NLRC; such cases were not
rendered moot by the Labor Code, P.D. No. 626.This case was not rendered moot
by the Labor Code. Although the Code abolished the old NLRC (Art. 289), it created
a new NLRC (Art. 213) and provided that cases pending before the old NLRC
should be transferred to, and processed by, the corresponding labor relations division
or the new NLRC and should be decided in accordance with Presidential Decree No.
21 and the rules and regulations adopted thereunder (Art. 290. See Sec. 5, P.D. No.
626).
Jurisdiction; Certiorari; Prohibition; In a certiorari and prohibition case, only legal
issues affecting jurisdiction based on undisputed facts may be resolved.In a
certiorari and prohibition case, like the instant case, only legal issues affecting the
jurisdiction of the tribunal, board or officer involved may be resolved on the basis of
undisputed facts.
Same; Same; Same; In a petition for certiorari, the issue of whether respondents are
employees or independent contractors should be resolved mainly in the light of their
peddling contracts.Pro hoc vice the issue of whether Repomanta and Moralde
were employees of Mafinco or were independent contractors should be resolved
mainly in the light of their peddling contracts. A different approach would lead this
Court astray into the field of factual controversy where its legal pronouncements
would not rest on solid grounds.
Labor law; Contracts; A contract whereby one engages to purchase and sell soft
drinks on trucks supplied by the manufacturer but providing that other party
(peddler) shall have the right to employ his own workers, shall post a bond to protect
the manufacturer against losses, shall be responsible for damages caused to third
persons, shall obtain the necessary licenses and permits and bear the expenses
incurred in the sale of the soft drinks is not a contract of employment.We hold that
under their peddling contracts Repomanta and Moralde were not employees of
Mafinco but were independent contractors as found by the NLRC and its factfinder
and by the committee appointed by the Secretary of Labor to look into the status of
Cosmos and Mafinco peddlers. They were distributors of Cosmos soft drinks with
their own capital and employees. Ordinarily, an employee or a mere peddler does not
execute a formal contract of employment. He is simply hired and he works under the
direction and control of the employer. Repomanta and Moralde voluntarily executed
with Mafinco formal peddling contracts which indicate the manner in which they
would sell Cosmos soft drinks. That circumstance signifies that they were acting as
55
independent businessmen. They were free to sign or not to sign that contract. If they
did not want to sell Cosmos products under the conditions defined in that contract,
they were free to reject it. But having signed it, they were bound by its stipulations
and the consequences thereof under existing labor laws. One such stipulation is the
right of the parties to terminate the contract upon 5 days prior notice. Whether the
termination in this case was an unwarranted dismissal of an employee, as contended
Repomanta and Moralde, is a point that cannot be resolved without submission of
evidence. Using the contract itself as the sole criterion, the termination should
perforce be characterized as simply the exercise of a right freely stipulated upon by
the parties.
Labor law; Tests for determining the existence of employer-employee
relationship.In determining the existence of employer-employee relationship, the
following elements are generally considered, namely: (1) the selection and
engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power to control the employees conductalthough the latter is the most
important element.
Same; Factors to determine existence of independent contract relationship.An
independent contractor is one who exercises independent employment and contracts
to do a piece of work according to his own methods and without being subject to
control of his employer except as to the result of the work. Among the factors to be
considered are whether the contractor is carrying on an independent business;
whether the work is part of the employers general 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 the work to another; tne power to terminate the
relationship; the existence of a contract for the performance of a specified piece of
work; the control and supervision of the work; the employers powers and duties
with respect to the hiring, firing, and payment of the contractors servants; the
control of the premises; the duty to supply the premises, tools appliances, material
and labor; and the mode, manner, and terms of payment.
Same; Although peddling contract between contending parties was resolved as one
establishing independent contractor relationship, one of the parties therein may still
petition the proper court to reform the instrument, annul the same or secure a
declaration of the actual relationship between the parties, sans the peddling
contract.We are convinced that on the basis of the peddling contract, no employer-
employee relationship was created. x x x However, this ruling is without prejudice to
the right of Repomanta and Moralde and the other peddlers to sue in the proper Court
of First Instance and to ask for a reformation of the instrument evidencing the
contract or for its annulment or to secure a declaration that, disregarding the peddling
contract, the actual juridical relationship between them and Mafinco or Cosmos is
that of employer and employee.
AQUINO, J.:
Mafinco Trading Corporation (Mafinco for short) filed these special civil actions of
certiorari and prohibition in order to annul the decision of the Secretary of Labor
dated April 16, 1973. In that decision the Secretary reversed an order of the old
National Labor Relations Commission (NLRC) and held that the NLRC had
jurisdiction over the complaint lodged by the Federacion Obrera de la Industria
Tabaquera y Otros Trabajadores de Filipinas (FOITAF) against Mafinco for having
dismissed Rodrigo Repomanta and Rey Moralde (NLRC Case No. LR-086). The
voluminous record reveals the following facts:
Peddling contracts and their termination. On April 30, 1968 Cosmos Aerated
Water Factory, Inc., hereinafter called Cosmos, a firm based at Malabon, Rizal,
appointed Mafinco as its sole distributor of Cosmos soft drinks in Manila. On May
31, 1972 Rodrigo Repomanta and Mafinco executed a peddling contract whereby
Repomanta agreed to "buy and sell" Cosmos soft drinks. Rey Moralde entered into a
similar contract. The contracts were to remain in force for one year unless sooner
terminated by either party upon five days notice to the other. 1 The contract with
Repomanta reads as follows:
PEDDLING CONTRACT
KNOW ALL MEN BY THESE PRESENTS:
This CONTRACT, entered into by and between:
The MAFINCO TRADING CORPORATION, a domestic corporation duly
organized and existing under the laws of the Philippines, doing business at Rm. 715
Equitable Bank Bldg., Juan Luna St., Manila, under the style MAFINCO represented
in this act by its General Manager, SALVADOR C. PICA, duly authorized for the
purpose and hereinafter referred to as MAFINCO, and RODRIGO REPOMANTA,
married/single, of legal age, and a resident of 70-D Bo. Potrero, MacArthur
Highway, Malabon, Rizal hereinafter referred to as PEDDLER, WITNESSETH:
WHEREAS, MAFINCO has been appointed as the exclusive distributor of
'COSMOS' Soft Drink Products for and within the City of Manila;
WHEREAS, the PEDDLER is desirous of buying and selling in Manila the
'COSMOS' Soft Drink Products handled by MAFINCO;
NOW THEREFORE, for and in consideration of the foregoing premises and the
covenants and conditions hereinafter set forth, the parties hereto has agreed as
follows:
56
1. That in consideration of the competence of the PEDDLER and his ability to
promote mutual benefits for the parties hereto, MAFINCO shall provide the
PEDDLER with a delivery truck with which the latter shall exclusively peddle the
soft drinks of the former, under the terms set forth herein;
2. The PEDDLER himself shall, carefully and in strict observance to traffic
regulations, drive the truck furnished him by MAFINCO or should he employ a
driver or helpers such driver or helpers shall be his employees under his direction
and responsibility and not that of MAFINCO, and their compensation including
salaries, wages, overtime pay, separation pay, bonus or other remuneration and
privileges shall be for the PEDDLER'S own account; The PEDDLER shall likewise
bind himself to comply with the provisions of the Social Security Act and all the
applicable labor laws in relation to his employees;
3. The PEDDLER shall be responsible for any damage to property, death or
injuries to persons or damage to the truck used by him caused by his own acts or
omission or that of his driver and helpers;
4. MAFINCO shall furnish the gasoline and oil to run the said truck in
business trips, bear the cost of maintenance and repairs of the said truck arising from
ordinary wear and tear;
5. The PEDDLER shall secure at his own expense all necessary licenses and
permits required by law or ordinance and shall bear any and all expenses which may
be incurred by him in the sales of the soft drink products covered by the contract;
6. All purchases by the PEDDLER shall be charged to him at a price of P2.52
per case of 24 bottles, ex-warehouse; PROVIDED, However, that if the PEDDLER
purchases a total of not less than 250 cases a day, he shall be entitled further to a
Peddler's Discount of P11.00;
7. Upon the execution of this contract, the PEDDLER shall give a cash bond
in the amount of P1,500.00 against which MAFINCO shall charge the PEDDLER
with any unpaid account at the end of each day or with any damage to the truck of
other account which is properly chargeable to the PEDDLER; within 30 days after
the termination of this contract, the cash bond, after deducting proper charges, shall
be returned to the PEDDLER;
8. The PEDDLER shall liquidate and pay all his accounts to MAFINCO'S
authorized representative at the end of each day, and his failure to do so shall subject
his cash bond at once to answer for any unliquidated accounts;
9. This contract shall be effective up to May 31, 1973 and supersedes any or
all other previous contracts, if any, that may have been entered into between the
parties; However, either of the parties may terminate the same upon five (5) days
prior notice to the other;
10. Upon the. termination of this contract, unless the same is renewed, the
delivery truck and such other equipment furnished by MAFINCO to the PEDDLER
shall be returned by the latter in good order and workable condition, ordinary wear
and tear excepted, und shall promptly settle his outstanding account if any, with
MAFINCO;
11. To assure performance by the PEDDLER of his obligation to his employees
under the Social Security Act, the applicable labor laws and for damages suffered by
third persons, PEDDLER shall furnish a performance bond of P1,000.00 in favor of
MAFINCO from a SURETY COMPANY acceptable to MAFINCO.
IN WITNESS WHEREOF, the parties hereto have signed this instrument at the City
of Manila, Philippines, this May 31, 1972.
MAFINCO TRADING CORPORATION
By:
(Sgd.) RODRIGO REPOMANTA (Sgd.) SALVADOR C. PICA
Peddler General Manager
(Witnesses and notarial acknowledgment are omitted)
On December 7, 1972 Mafinco, pursuant to section 9 of the contract, terminated the
same. The notice to Repomanta reads as follows:
Dear Mr. Repomanta:
This has reference to the Peddling Contract you executed with the Mafinco Trading
Corporation on May 31, 1972. Please be informed that in accordance with the
provisions of paragraph 9 of the said peddling contract, we are hereby serving notice
of termination thereof effective on December 12, 1972.
Yours truly,
(Sgd.) SALVADOR C. PICA
General Manager
Complaints of Repomanta and Moralde and NLRCs dismissal thereof. Four days
later or on December 11, 1972 Repomanta and Moralde, through their union, the
57
FOITAF, filed a complaint with the NLRC, charging the general manager of
Mafinco with having violated Presidential Decree No. 21, issued on October 14,
1972, which created the NLRC and which was intended "to promote industrial peace,
maximize productivity and secure social justice for all". The brief complaint reads as
follows:
Hon. Amado Gat Inciong, Chairman
National Labor Relations Commission
Phoenix Bldg., Intramuros,
Manila
Sir:
Pursuant to the Presidential Decree No. 21, Sections 2 and 11, the FOITAF files a
complaint against SALVADOR C. PICA, General Manager of MAFINCO
TRADING CORP. located at Room 715, Equitable Bank Bldg., Juan Luna, Manila,
for terminating union officials (sic), Mr. Rodrigo Refumanta and Mr. Rey Moralde,
which is a violation of the above mentioned decree.
Notice of termination is herewith attach (sic).
We anticipate your due attention and assistance.
Respectfully yours,
(Signed by National Secretary of FOITAF)
Mafinco filed a motion to dismiss the complaint on the ground that the NLRC had no
jurisdiction because Repomanta and Moralde were not its employees but were
independent contractors. It stressed that there was termination of the contract, not a
dismissal of an employee. In Repomanta's case, it pointed out that he was registered
with the Social Security System as an employer who, as a peddler, paid premiums
for his employees; that he secured the mayor's permit to do business and the
corresponding peddler's license and paid the privilege tax and that he obtained
workmen's compensation insurance for his own employees or helpers. It alleged that
Moralde was in the same situation as Repomanta.
Mafinco further alleged that the Bureau of Labor Relations denied the application of
peedlers for registration as a labor union because they were not employees but
employers in their own right of delivery helpers (Decision dated January 4, 1966 by
the Registrar of Labor Organizations in Registration Proceeding No. 4, In the Matter
of Cosmos Supervisors Association-PTGWO); that the Court of Industrial Relations
in Case No. 4399-ULP, Cosmos Supervisors' Association PTGWO vs. Manila
Cosmos Aerated Water Factory, Inc., held in its decision dated July 17, 1967 that the
peddlers were not employees of Cosmos, and that the Court of Appeals held in
Rapajon vs. Fong Kui and Figueras vs. Asierto, CA-G.R. No. 19477-R and 21397-R,
March 18, 1958 that the delivery helpers of the peddlers were not employees of
Cosmos, a ruling which this Court refused to review (L-14072-74, Rapajon vs. Fung
Kui, Resolution dated July 16, 1958).
The complaint was referred to a factfinder who in a lengthy report dated January 22,
1973 found, after "exhaustively and impartially" considering the contentions of the
parties, that the peddlers were employers or "independent businessmen', as held by
the Court of Industrial Relations and the Court of Appeals, and that that holding has
the force of res judicata. The factfinder recommended the dismissal of the complaint.
The old NLRC, composed of Amado G. Inciong, Diego P. Atienza and Ricardo O.
Castro, adopted that recommendation in its order dated February 2, 1973. That order,
which analyzes the peddling contract and reviews the court rulings on the matter, is
quoted below:
The question of whether peddling contracts of the kind entered into between the
parties give rise to an employer-employee relationship is not new. Nor are the
contracts themselves of recent vintage.
For at least twenty years respondent MAFINCO and its predecessor and/or principal,
the Manila-Cosmos Aerated Water Factory, have entered into contracts with
peddlers, under the terms of which the latter buy from the former at a special price,
and sell in Manila, the former's soft drink products. The distributor provides the
peddler with a delivery truck with the distributor answering for the cost of fuel and
maintenance. If a peddler buys a certain number of cases or more a day, he is entitled
to a fixed amount of peddler's discount.
The peddler himself drives the truck but if he engages a driver or helpers, the latter
are his employees and he assumes all the responsibilities of an employer in relation
to them. He also obtains at his own expense all licenses and permits required by law
of salesmen.
The peddler clears his accounts with the distributor at the end of each day, and
unpaid accounts are charged against the cash deposit or bond which he gives the
distributor upon the execution of the peddling contract. He answers for damages
caused by him or his employees to third persons.
Ruling upon this type of contracts, and the practices and relationships that attended
its implementation, the Court of Appeals, in CA-G.R. No. 19477-R, said that it did
not create a relationship of employer and employee; that the peddlers under such
contract were not employees of the manufacturer or distributor, and accordingly
58
dismissed the complaints in the said case. (The peddler-complainants in that case
were claiming overtime pay and damages, among others.) Elevated to the Supreme
Court on review (G.R. Nos.
L-14072 to L-14074, 2 August 1958), the decision of the Court of Appeals was in
effect affirmed, for the petition for review was dismissed by the Supreme Court 'for
being factual and for lack of merit!
The Court of Industrial Relations is of the same persuasion. After inquiring
extensively into substantially the same terms and conditions of peddling contracts
and the practices and relationships that went into their implementation, the Court
said in Case No. 4399ULP that the peddlers of the Manila-Cosmos Aerated Water
Factory were not employees of the latter.
These precedents apply squarely to the case at hand. The complainants here have not
shown that their peddling contracts with the respondent differ in any substantial
degree from those that were at issue in the Court of Industrial Relations, the Court of
Appeals and the Supreme Court in the cases cited above. Indeed, a comparison
between the contracts involved in those cases and those in the instant litigation do
not show any difference that would warrant a different conclusion than that reached
by those courts. If at all, the additional stipulations in the present contracts strengthen
the position that the complainant peddlers are independent contractors or
businessman, not employees of the respondent.
Nor has there been shown any substantial change in the old practices of peddlers vis-
a-vis the distributor or manufacturer. The points raised by the complainants in their
pleadings regarding these practices were extensively discussed by the CIR in the
ULP case above referred to.
We are not prepared to depart from this rule of long standing. It is the law of the
case.
We therefore hold that the complainants in this case were not employees of
MAFINCO and Presidential Decree No. 21 does not I apply to them.
Complainants' appeal and the Labor Secretary's decision that they were employees of
Mafinco. Complainants Repomanta and Moralde appealed to the Secretary of
Labor. They argued that the NLRC erred (1) in holding that they were independent
contractors and not employees; (2) in relying on the peddler's contract to determine
the existence of employer-employee relationship; (3) in anchoring its decisions on
precedents which have only persuasive force and which did not rule squarely on the
issue of employer-employee relationship, and (4) in dismissing their complaint.
As stated at the outset, the Secretary in his decision reversed al the NLRC order. He
ruled that Repomanta and Moralde were employees of Mafinco and that,
consequently, the NLRC had jurisdiction over their complaint. The Secretary
directed the NLRC to hear the case on the merits.
The Secretary found that the complainants "were driver-salesmen of the company,
driving the trucks and distributing the products of the company" and that they were
not independent contractors because they had no capital of their own. That finding
was based on the following considerations:
(1) That the contracts are Identical; (2) that the complainants were originally plant
drivers' of the company; (3) that the complainants had no capital of their own; (4)
that their delivery trucks were provided by the company; (5) that the use of the trucks
were 'exclusively' for peddling the products of the company; (6) that they were
required to observe regulations; (7) that they were required to drive the trucks; (8)
that the company furnished the gasoline and oil to run the said trucks in business
trips; (9) that the company shouldered the cost of maintenance and repair of the said
trucks arising from an ordinary wear and tear; (10) that the company required them
to secure the necessary licenses and permits; (11) that the company prohibited them
from selling the company's products higher than the fixed price of the company; and
(12) that they and their helpers were paid on commission basis.
The Secretary relied on this Court's ruling that a person who possesses no capital or
money of his own to pay his obligations to his workers but relies-entirely upon the
contract price to be paid by the company, falls short of the requisites or conditions
necessary for an independent contractor (Mansal vs. Gocheco Lumber Co., 96 Phil.
941).
He observed that "behind the peddling cloak there was in fact employee-employer
relationship". He said:
While, generally, written employment contracts are held sufficient in determining the
nature of employment, such contracts, however, cannot be always held conclusive
where the actual circumstances of employment indicate otherwise. For example,
some employers, in order to avoid or evade coverage of the Workmen's
Compensation Act, enter into pseudo contracts with their employees who are named
as 'employers' or 'independent contractors'. Such 'written contracts as distinguished
from oral Agreements, purporting to make persons independent contractors, no
matter how 'adroitly framed', can be carefully scanned and the real relationship
ascertained' (Glielmi vs. Netherlands Dairy Co., 254 N.Y. 60 (1930), Morabe &
Inton, Workmen's Compensation Act. p. 69).
If the Peddling Contract were carefully scanned, the conclusion may be drawn that
the contract is but a device and subterfuge to evade coverage under the labor laws.
There is more than meets the eye in item 2 of the Peddling Contract which required
the peddlers to do that which the law intends the employer to have done.
59
In fact, such contracts, as the one in question, exempting or tending to exempt the
employers from their legal obligations to their workers are null and void under Sec. 7
of the Workmen's Compensation Act, as amended, which states:
Any contract, regulation or device of any sort intended to exempt the employer from
all or part of the liability created by this Act shall be null and void.
To rule otherwise would be to open the floodgate to employers in this territory to
evade liabilities to their workers by simply letting contracts for the doing of their
business. 'Such construction could not only narrow the provisions of the Act, but
would defeat its intent and purposes in their entirety. (Andoyo vs. Manila Railroad
Co., supra).
The motion for the reconsideration of the decision was denied by the Secretary in his
order of July 16,1973.
The Committee's report that the peddlers are independent contractors. On July 25,
1973 Mafinco moved for the clarification of the decision by inquiring whether the
question of employee-employer relationship would be included in the hearing on the
merits.
Action on the said motion was deferred until the receipt of the report of the
committee created to study the status of peddlers of Cosmos products. On September
3, 1973- the Secretary directed the committee composed of Ernesto Valencia,
Vicente R. Guzman and Eleo Cayapas to conduct an in-depth study of the actual
relationship existing between the Cosmos Bottling Co. and its peddlers.
The committee in its report dated September 17, 1973 arrived at the conclusion that
the relationship actually existing between Cosmos and Mafinco, on one hand, and
the peddlers of Cosmos products, on the other, is not one of employer and employee
and "that the peddlers are independent contractors".
The committee after a perusal of the record of NLRC Case No. LR-086 interviewed
twenty peddlers, an officer of Cosmos and an officer of Mafinco. In the conduct of
the interviews it 44 observed judicious adherence to impartiality and
openmindedness but with a modicum of friendliness and much of informality". The
report reads in part as follows:
(1) Implications of the 'Agreement To Peddler Soft Drinks'. Of vital
importance to the mind of your committee is the fact that this Agreement entered
into between Cosmos and the Peddlers has, as its prefatory statement but before the
enumeration of its terms and conditions, the following:
That the Peddler has agreed to buy and sell the products of the MANUFACTURER
under the following conditions:

Similarly, the 'Peddling Contract' entered into between Mafinco and the Peddlers.
contains peculiarly Identical wordings. viz:
WHEREAS, the PEDDLER is desirious of buying and selling in Manila the
'COSMOS' Soft Drink Products handled by
MAFINCO:
It is immediately clear from the beginning that the relationship that the parties would
want to establish between them is one of buyer and seller of the Cosmos Products.
Moreover, this type of Agreement or Contract has its roots since some twenty (20)
years earlier, with modifications only with respect to the factory price, the amount of
over prices or what the peddlers refer to as commission, and the amount pertaining to
the dealer's discount. which appear to vary depending upon the market demands.
We are, however, tempted to argue, as did the Peddlers, that this Agreement or
Contract might have been contrived as a device to evade responsibilities imposed
upon Cosmos or Mafinco under our labor laws as well as under other national or
municipal laws. Nevertheless, a close reading thereof will show a flaw in this line of
insistence, when we consider that this type of Agreement or Contract has been
substantially the same since the beginning of this relationship. More than this, it has
withstood the test of time by pronouncements of the CIR in ULP Case No. 4399,
Cosmos Supervisors Association vs. Manila Cosmos Aerated Water Factory, Inc.'
July 17, 1967; by judicial review of the Court of Appeals in CA-G.R. Nos. 19477-R,
19478-R and 21397-R, 'Eustaquio Repajon, et al. vs. Manila Cosmos Aerated Water
Factory, Inc.', promulgated on March 18, 1958; and impliedly by resolution of the
Supreme Court in G.R. Nos. L-14072 to L-14074 when the Court of Appeals cases
were appealed to that Tribunal.
But the more basic and indeed forceful ratiocination in favor of the validity of the
Agreement or Contract which covenants that the relationship between the Peddlers
and Cosmos or Mafinco is one of buyer and seller of the Cosmos Products on the
part of the Peddlers, and, therefore, one of an independent contractorship, finds
substantive support in our Civil Code which provides: (here arts. 1370 and 1374 of
the Civil Code regarding interpretation of contracts are quoted).
For its adjective interpretation, our Rules of Court specifically provides: (Here parol
evidence rule in see. 7, Rule 130, Rules of Court is quoted)
It must b restated at this point for purposes of emphasis that the validity of the
aforesaid Agreement or Contract has not been seriously assailed by the parties. In
fact, their rallying cause was the Agreement or Contract itself. To strengthen these
provisions of the Civil Code and the Rules of Court, stabilized jurisprudence have
held that it is elementary rule of contract that the laws in force at the time the
60
contract was made must govern its interpretation and application; that the terms of
the contract, where unambiguous, are conclusive, in the absence of averment and
proof of mistake, the question being, not what intention existed in the minds of the
parties, but what intention is expressed by the language used; that interpretation of an
agreement does not include its modifications or the creation of a new or different
one; that Courts cannot make for the parties better agreements than they themselves
have been satisfied to make, or rewrite contracts because they operate harshly or
inequitably as to one of the parties; and that there is no right to interpret an
agreement as meaning something different from what the parties intended as
expressed by the language they saw fit to employ.
xxx xxx xxx
(1) The selection and engagement of the employees.-Nothing in the Agreement
to Peddler Soft Drinks in the case of Cosmos and in the Peddling Contract in the case
of Mafinco, will reveal and we cannot logically infer therefrom, that the Peddlers
were engaged as employees of Cosmos or Mafinco. The selection of the Peddlers
who will buy and sell Cosmos products is left entirely between the parties; it is not
the sole prerogative of either one of the parties. There must be meeting of the minds
in order to consummate the Agreement or Contract and no evidence of coercion or
imposition of the will of one over the other is evident or apparent from the Peddlers'
or Managements' interviews had by the members of your Committee. This test,
therefore, cannot be invoked by the Peddlers in their attempt at presenting arguments
to the effect that they are employees of Cosmos or Mafinco. Upon the other hand, the
Agreement or Contract itself provides that the Peddlers can hire helpers and drivers
under their direction and responsibility, and to whom they shall be liable for payment
of 'salaries, wages, overtime pay, separation pay, bonus and other remuneration and
privileges.' As a matter of fact, drivers were employed by Mrs. Victoria Ariz and M.
Fong Kui, who are peddlers in their own right. This evidently shows the discretion
granted the peddlers to hire employees of their own.
(2) The payment of wages. On the basis of the clear terms of the Agreement
or Contract, no mention is made of the wages of the Peddlers; neither can an
inference be made that any salary or wage is given to Peddlers. In the interviews,
however, with the Peddlers, they vehemently take the position that the 'dealer's
discount' which was given to them at the rate of Pll.50 in excess of 200 cases of
Cosmos products they sell a day, constitutes their 'wages'. The term 'wages' as
defined in Section 2 of the Minimum Wage Law (Rep. Act No. 602, as amended) is
as follows:
(g) 'Wage' paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money whether fixed or
ascertained on a time, task, piece, commission basis, or other method of calculating
the same, which is payable by an employer to an under a written or unwritten
contract of employement for work done or to be done or for services rendered or to
be rendered, and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily furnished by the
employer to the employee. ...
Section 10 (k) of the same law provides as follows:
(k) Notification of wage conditions. It shall be the duty of every employer to
notify his employees at the time of hiring of the wage conditions under which they
are employed, which shall include the following particulars:
(1) The rate of wages payable;
(2) The method of calculation of wages;
(3) The periodicity of wage payment; the day, the hour and pIace of payment;
and
(4) Any change with respect to any of the foregoing items.
To the Committee's mind, all these requirements have not been shown to exist in the
relationship between the Peddlers and the Cosmos or Mafinco. If it were true that the
Pedders' 'dealer's discount' is in the nature of wages, then they must be notifed fully
of the wage conditions. Moreover, such 'wages' must be paid to them periodically at
least once every two weeks or twice a month. (See Par. (h) of See. 10 of Act No.
602, as amended). The absence of such notification to the Peddlers and the lack of
periodicity of such payment in the manner and procedure contemplated in the
Minimum Wage Law destroy, quiet evidently, their allegation that the 'dealer's
discount' was their 'wage'. Take note that the 'dealer's discount' was given only about
a week after the end of the month, and from the evidence submitted by Cosmos, it
appears clearly that the 'dealer's discount' varies from month to month. Thus, the
earnings of Mr. Salvador Abonales, who is a Peddler, from January to August, 1973,
amounted to P12,520.70, while that of Mr. Alberto S. Garcia, for the same period,
amounted to P13,633.42, and 4 their earnings every month vary decisively. This
factor defeats factually the insistence of the Peddlers that they are employees of
Cosmos or Mafinco.
Upon the other hand, the Peddlers' declarations reveal that the wages of their helpers
are taken from the overprice or what is ordinarily termed as 'commission' of ten
centavos (P0.10) per case that they get-a factor which indicates that they are
themselves employers of their helpers. In addition, the Peddlers are reported as
Employers of these helpers with the Social Security System, and that they also
purchase workmen's compensation policies in their names as Employers of their own
helpers for purposes of workmen's compensation insurance of their liabilities, which
are all in accordance with the terms and conditions of the Agreement or Contract and
indicative of an attribute of one who is an independent merchant.
61
(3) The power of dismissal. In the case of 'Rodrigo Repomanta and Rey
Moralde vs. Mafinco Trading Corp.,' NLRC Case No. LR-086, which served as one
of our bases for this study, the complainants therein appear to have complained
before the National Labor Relations Commission for being allegedly illegally
dismissed or that their services were terminated without cause. A search of the
alleged dismissal however shows that the Identical letters both dated December 7,
1972 addressed to the said complainants were not actually what complainants
pictured them to be, but the termination of the peddling in accordance with
paragraph 9 of said Contract.
xxx xxx xxx
Thus, complainants' services were not terminated, only their Peddling Contracts with
Mafinco were. The power of dismissal is not lodged with either Mafinco or Cosmos,
for based on the Agreement or Contract none whatsoever exists. Certainly, to
attribute a power of dismissal to Cosmos or Mafinco where none exists is careless
imprudence and a height of inaccuracy. This power of dismissal by Cosmos or
Mafinco is not countenanced in the Agreement or Contract.
There is, however, an allegation by the Peddlers that the hiring and firing of the
helpers ultimately rest on Cosmos or Mafinco. This allegation nevertheless, is
controverted by Cosmos and Mafinco. Nonetheless, we checked the basic document
the Agreement or Contract and we find that the hiring and, impliedly firing, we
is a prerogative of the Peddlers and not of Cosmos or Mafinco.
(4) The power to control the employee's conduct. From the interviews had
by your Committee with both the Peddlers and the representatives of Cosmos and
Mafinco, we gather that the following findings on the power of control are
substantially correct:
(a) That the delivery trucks assigned to the Peddlers are available to them early
in the morning and are free to get them, which they usually do between 5:30 A.M. to
6:30 A.M. There was no compulsion on the part of the Peddlers to report for work at
that time, as in fact, they did not sign any time record. The practice of getting the
delivery trucks early in the morning is more beneficial to the Peddlers than to
Cosmos or Mafinco since they can finish the peddling of Cosmos products much
earlier and spend the rest of the day at their own pleasure. The signing of the
'logbooks' is both pertinent and necessary since the trucks used in the delivery of
Cosmos products are owned by Cosmos or Mafinco and are simply utilized by
Peddlers as a measure of convenience and for advertising purposes. But peddlers are
not precluded from getting trucks of their own should they so desire.
(b) That liaison officers (supervisors) are assigned by Cosmos or Mafinco in
definite areas routes or zones, not so much of supervision over Peddlers, since their
areas, routes or zones were already agreed upon or pre-arranged among them through
the Cosmos Peddlers Association, Inc. of which all Peddlers are members, as
principally for market analysis since soft drinks selling is a highly competitive
business, and also to inquire or check on sales, and the result of which, report is
made direct to the Office of Cosmos or Mafinco.
(c) That the use of the uniform does not seem to be an imposition by
management of Cosmos or Mafinco upon the Peddlers, but a voluntary arrangement
among the Peddlers themselves. For, from the documents submitted to this
Committee, it appears that the Cosmos Peddlers Association, in a meeting held on
August 5, 1967, adopted a resolution to 'always wear their uniform while in the
performance of their sales work,' and in their meeting on January 25, 1969, it
adopted another resolution penalizing Peddlers who failed to wear their uniform in
the amount of P2.00 per violation. Certainly, the resolutions of the Cosmos Peddlers
Association, an independent association of Peddlers and duly registered with the
Securities and Exchange Commission, and possessing an entirely distinct existence,
cannot be taken as impositions from Cosmos or Mafinco.
(d) That the matter of turning in of sales of collection which, if found short, is
charged against the Peddler's cash bond, is to the mind of the Committee, giving
effect to the valid terms and conditions of the Agreement or Contract, and also an
ordinary business practice which necessarily requires liquidation of the day's
accounts. We do not see any evidence of control on the part of Cosmos or Mafinco
over the activities, including the sales, of the Cosmos products by the Peddlers
themselves who are, apparently, left to their own choices of routes, areas or zones as
pre-arranged, with no definite, much less supervised, time schedule.
(e) That in the matter of reprimand or discipline which the peddlers attempt to
project when they failed to report for work, your Committee found no substantial
evidence on this point. The evidence shows that the peddlers are free to choose their
time. Obviously, any absence that they may incur means so much reduction from
their earnings. Thus, if their attention is incidentally called on this matter it is for the
observance of their agreements which is present in any contractual relations.
As to the aspect of employer-employee relation, therefore, between Cosmos or
Mafinco and the Peddlers, your Committee does not have sufficient basis to
reasonably sustain the stand of the Peddlers that there is such relationship.
(c) Attributes of an independent contractor. As a countercheck, as it were, to
the issue of employer-employee relationship your committee has taken the task of
testing such relationship against the attributes of an independent contractor which,
from the interviews and documents submitted by the parties, appear to exists on the
part of the Peddlers. The earlier case of Andoyo vs. Manila Railroad Co., G.R. No.
34722, promulgated on March 28, 1932, furnishes us the definition of an
'independent contractor.' Our Supreme Court of pre-war composition, ruled:
62
An independent contractor is one who exercises independent employment and
contracts to do a piece of work according to his own methods and without being
subject to control of his employer except as to the resuIt of thework. A person who
has no capital or money of his own to pay his laborers or to comply with his
obligations to them, who files no bond to answer for the fulfillment of his contract
with his employer, falls short of the requisites or conditions necessary to classify him
as independent contractor.
These requisites and conditions were reiterated in the postwar cases of Philippine
Manufacturing Co., Inc. vs. Geronimo, G. R. No. L-6968, promulgated on November
29, 1954, and Koppel (Phil.), Inc. vs. Darlucio et, al., G.R. No. L-14903,
promulgated on August. 29, 1960. Analyzing the definition of 'independent
contractor', the following may be gathered from the relationship between the
Peddlers, on the one hand, and Cosmos or Mafinco, on the other:
(1) Peddlers contract to sell and buy Cosmos products from Cosmos or
Mafinco, the latter furnishing the delivery truck, but the former sell Cosmos products
according to their own methods, subject to the pre-arranged routes, areas and zones,
and go back to the Company compound to return the delivery truck and to make
accounting of the day's sales collection at any time in the morning or in the
afternoon. Essentially, control, if at all, extends only as to observance of traffic
regulations which is inherent in ownership of the delivery truck by Cosmos or
Mafinco and the end result which is the liquidation of the sales collection. Control
over the details of the Peddlers' sales activities seems to be farfetched in this case.
(2) Capital or money of the Peddlers to pay their own helpers is evidently
within their prerogative, although it appears that the wages of helpers are uniform at
P6.00 per trip. But can we safely say that the cash bond of Pl,500.00 by the Peddlers
constitute their capital? For big-time businessmen, this small amount may not be
considered capital, but when it is taken as a 'deposit on consignment' since the same
answers for any deficiencies that the Peddlers may incur during the day's sales
collection, then it can be taken to mean 'capital' within its signification that it
allocates to every day business dealing. The amount of capital, to us, is immaterial; it
is the purpose for which the same is deposited that is most significant.
(3) The Peddlers are required under the Agreement to Peddler Soft Drinks and
Peddling Contract to put up not only the cash bond of P1,500.00, but also a
performance bond of P1,000.00 as embodied in said Agreement to Peddler Soft
Drinks as follows:
(4) To assure performance by the PEDDLER of his obligation to his employees
under the Social Security Act, the applicable labor laws, and for damages suffered by
third persons PEDDLER shall furnish a performance bond of P1,000.00 in favor of
the MANUFACTURER from a surety Company acceptable to the
MANUFACTURER. And, in case Performance Bond within 30 days from the date
of signing of this Contract, such failure shall be sufficient ground for the
MANUFACTURER to suspend the business relationship with the Peddler until the
Peddler complies with this provision.
Again, to the mind of your Committee, the amount of the Performance Bond is not
so relevant and material as to the purpose for which the same is executed- which is to
assure performance of the Peddlers' obligations as employer of his helpers. This is an
attribute of an independent contractor to which the Peddlers are bound under the
Agreement or Contract.
(4) Peddlers are doing business for themselves since they took out licenses in
the City of Manila, and have paid their corresponding professional or occupation tax
to the Bureau of Internal Avenue. This fact strengthens the Committee findings that
the peddlers are carrying on a business as independent merchants.
The Secretary in his resolution of October 18, 1973 ignored the committee's
conclusion. He clarified that the NLRC should determine whether the two
complainants were illegally dismissed and that the jurisdictional issue should not be
taken up anymore.
The instant petition; the issue and the ruling thereon. Mafinco filed the instant
actions on November 14, 1973. It prayed for a declaration that the Secretary of Labor
and the NLRC had no jurisdiction to entertain the complaints of Repomanta and
Moralde; that the Secretary's decision should be set aside, and that the NLRC and the
Secretary be enjoined from further proceeding in NLRC Case No. LR-086.
Parenthetically, it should be noted that under section 5 of Presidential Decree No. 21
the Secretary's decision "is appealable" to the President of the Philippines (Nation
Multi Service Labor Union vs. Agcaoili, L-39741, May 30, 1975, 64 SCRA 274).
However, under section 22 of the old NLRC regulations, an appeal to the President
should be made only "in national interest cases".
On the other hand, judicial review of the decision of an administrative agency or
official exercising quasi-judicial functions is proper in cases of lack of jurisdiction,
error of law, grave abuse of discretion, fraud or collusion or in case the
administrative action or resolution is "corrupt, arbitrary or capricious (San Miguel
Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56;
Commissioner of Customs vs. Valencia, 100 Phil. 165; Villegas vs. Auditor General,
L-21352, November 29, 1966, 18 SCRA 877, 891).
After the parties had submitted their illuminating memoranda, Mafinco filed a
motion in this Court for the dismissal of the complaint in the defunct NLRC on three
grounds, to wit: (1) that the NLRC had no jurisdiction over the case because
Repomanta and Moralde had not sought reinstatement or backwages; (2) that the
63
employer's failure to secure written clearance from the Secretary of Labor before
dismissing an employee might constitute a crime punishable under article 327 of the
Labor Code and not mere contempt, as contemplated in section 10 of Presidential
Decree No. 21, and (3) that the contempt provisions of that decree were abrogated by
the Labor Code.
Mafinco in support of its motion for dismissal cited Quisaba vs. Sta. Ines-Melale
Veneer & Plywood, Inc., L-38088, August 30, 1974, 58 SCRA 771, where it was
held that the regular court, not the NLRC, has jurisdiction over an employee's action
for damages against his employer's act of demoting him.
Respondent Repomanta and Moralde opposed that motion to dismiss. They Pointed
out that, inasmuch as their complaint is pending in the new NLRC, this Court cannot
dismiss it. They also observed that article 327 was eliminated from the Labor Code
which, as amended by Presidential Decrees Nos. 570-A, 626 and 643, contains only
292 articles. Article 327 was superseded by article 278 of the amended Code.
The truth is that Mafinco's motion merely adduced additional grounds to support its
stand that the Secretary of Labor had no jurisdiction over the complaint of
Repomanta and Moralde.
This case was not rendered moot by the Labor Code. Although the Code abolished
the old NLRC (Art. 289), it created a new NLRC (Art. 213) and provided that cases
pending before the old NLRC should be transferred to, and processed by, the
corresponding labor relations division or the new NLRC and should be decided in
accordance with Presidential Decree No. 21 and the rules and regulations adopted
thereunder (Art. 290. See Sec. 5, P.D. No. 626).
The issue is whether the dismissal of Repomanta and Moralde was within the
jurisdiction of the old NLRC. If, as held by the old NLRC, it had no jurisdiction over
their complaint because they were not employees of Mafinco but independent
contractors, then the Secretary of Labor had no jurisdiction to remand the case to the
NLRC for a hearing on the merits of the complaint.
Hence, the crucial issue is whether Repomanta and Moralde were employees of
Mafinco under the peddling contract already quoted. Is the contract an employment
contract or a contract to sell or distribute Cosmos products?
The question of whether an employer-employee relationship exists in a certain
situation has bedevilled the courts. Businessmen, with the aid of lawyers, have tried
to avoid the bringing about of an employer-employee relationship in some of their
enterprises because that juridical relation spawns obligations connected with
workmen's compensation, social security, medicare, minimum wage, termination pay
and unionism.
Presidential Decree No. 21 provides:
SEC. 2. The Commission shall have original and exclusive jurisdiction over the
following:
1) All matters involving employee-employer relations including all disputes
and grievances which may otherwise lead to strikes and lockouts under Republic Act
No. 875;
xxx xxx xxx
SEC. 10.The President of the Philippines, on recommendation of the Commission
and the Secretary of Labor, may order the arrest and detention of any person held in
contempt by the Commission for non-compliance and defiance of any subpoena,
order or decision duly issued by the Commission in accordance with this Decree and
its implementing rules and regulations and for any violation of the provisions of this
Decree.
SEC. 11.No employer may shut down his establishment or dismiss or terminate the
services of regular employees with at least one year of service without the written
clearance of the Secretary of , Labor.
The Solicitor General, as counsel for the old NLRC and the Secretary of Labor,
argues that the question of whether Repomanta and Morale are independent
contractors or employees is factual in character and cannot be resolved by merely
construing the peddling contracts; that other relevant facts aliunde or dehors the said
contracts should be taken into account, and that the contracts were a part of an
"intricate network of devices (of Mafinco and Cosmos) developed. and perfected
through the years to conceal the true nature of their relationship to their sales
agents".
Repomanta and Moralde contend that their peddling contracts were terminated
because of their activities in organizing a union among the peddlers. Annexed to
their memorandum is a joint affidavit of sixty-three sales agents of Cosmos products
who described therein the nature of their work, the organization of their union and
the dismissal of Repomanta and Moralde. Annexed to their answer is Resolution No.
921 of the Social Security Commission dated November 16, 1972 in SSS Case No.
602 wherein it was held that peddlers and their helpers were employees of Cosmos.
Like the Solicitor General, Repomanta and Moralde harp on the argument that the
peddling contracts were a scheme to camouflage an employer-employee relationship
and thus evade the coverage of labor laws.
64
The parties in their pleadings and memoranda injected conflicting factual allegations
to support their diametrically opposite contentions. From the factual angle, the case
has become highly controversial.
In a certiorari and prohibition case, like the instant case, only legal issues affecting
the jurisdiction of the tribunal, board or officer involved may be resolved on the
basis of undisputed facts. Sections 1, 2 and 3, Rule 65 of the Rules of Court require
that in the verified petition for certiorari, mandamus and prohibition the petitioner
should allege "facts with certainty".
In this case the facts have become uncertain. Controversial evidentiary facts have
been alleged. What is certain and indubitable is that a notarized peddling contract
was executed.
This Court is not a trier of facts. It would be difficult, if not anomalous, to decide the
jurisdictional issue on the basis of the parties' contradictory factual submissions. The
record has become voluminous because of their efforts to persuade this Court to
accept their discordant factual statements.
Pro hac vice the issue of whether Repomanta and Moralde were employees of
Mafinco or were independent contractors should be resolved mainly in the light of
their peddling contracts. A different approach would lead this Court astray into the
field of factual controversy where its legal pronouncements would not rest on solid
grounds.
A restatement of the provisions of the peddling contract is necessary in order to find
out whether under that instrument Repomanta and Moralde were independent
contractors or mere employees of Mafinco.
Under the peddling contract, Mafinco would provide the peddler with a delivery
truck to be used in the distribution of Cosmos soft drinks (Par. 1). Should the peddler
employ a driver and helpers, he would be responsible for their compensation and
social security contributions and he should comply with applicable labor laws "in
relation to his employees" (Par. 2).
The peddler would be responsible for any damage to persons or property or to the
truck caused by his own acts or omissions or those of his driver and helpers (Par. 3).
Mafinco would bear the cost of gasoline and maintenance of the truck (Par. 4). The
peddler would secure at his own expense the necessary licenses and permits and bear
the expenses to be incurred in the sale of Cosmos products (Par. 5).
The soft drinks would be charged to the peddler at P2.52 per case of 24 bottles, ex-
warehouse. Should he purchase at least 250 cases a day, he would be entitled to a
peddler's discount of eleven pesos (Par. 6). The peddler would post a cash bond in
the sum of P1,500 to answer for his obligations to Mafinco (Par. 7) and another cash
bond of P1,000 to answer for his obligations to his employees (Par. 11). He should
liquidate his accounts at the end of each day (Par. 8). The contract would be effective
up to May 31, 1973. Either party might terminate it upon five days' prior notice to
the other (Par. 9).
We hold that under their peddling contracts Repomanta and Moralde were not
employees of Mafinco but were independent contractors as found by the NLRC and
its fact-finder and by the committee appointed by the Secretary of Labor to look into
the status of Cosmos and Mafinco peddlers. They were distributors of Cosmos soft
drinks with their own capital and employees. Ordinarily, an employee or a mere
peddler does not execute a formal contract of employment. He is simply hired and he
works under the direction and control of the employer.
Repomanta and Moralde voluntarily executed with Mafinco formal peddling
contracts which indicate the manner in which they would sell Cosmos soft drinks.
That Circumstance signifies that they were acting as independent businessmen. They
were to sign or not to sign that contract. If they did not want to sell Cosmos products
under the conditions defined in that contract; they were free to reject it.
But having signed it, they were bound by its stipulations and the consequences
thereof under existing labor laws. One such stipulation is the right of the parties to
terminate the contract upon five days' prior notice (Par. 9). Whether the termination
in this case was an unwarranted dismissal of an employee, as contended by
Repomanta and Moralde, is a point that cannot be resolved without submission of
evidence. Using the contract itself as the sole criterion, the termination should
perforce be characterized as simply the exercise of a right freely stipulated upon by
the parties.
"In determining the existence of employer-employee relationship, the following
elements are generally considered, namely: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees' conduct-although the latter is the most important element"
(Viana vs. Al-Lagadan and Piga, 99 Phil. 408, 411, citing 35 Am. Jur. 445).
On the other hand, an independent contractor is "one who exercises independent
employment and contracts to do a piece of work according to his own methods and
without being subject to control of his employer except as to the result of the work"
(Mansal vs. P.P. Gocheco Lumber Co., supra).
Among the factors to be considered are whether the contractor is carrying on an
independent business; whether the work is part of the employer's general 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 the work to another; the power to
terminate the relationship; the existence of a contract for the performance of a
specified piece of work; the control and supervision of the work; the employer's
65
powers and duties with respect to the hiring, firing, and payment of the contractor's
servants; the control of the premises; the duty to supply the premises, tools,
appliances, material and labor; and the mode, manner, and terms of payment. (56
C.J.S. 46).
Those tests to determine the existence of an employer-employee relationship or
whether the person doing a particular work for another is an independent contractor
cannot be satisfactorily applied in the instant case. It should be obvious by now that
the instant case is a penumbral, sui generis case lying on the shadowy borderline that
separates an employee from an independent contractor.
In determining whether the relationship is that of employer and employee or whether
one is an independent contractor, "each case must be determined on its own facts and
all the features of the relationship are to be considered" (56 C.J.S. 45). We are
convinced that on the basis of the peddling contract, no employer-employee
relationship was created. Hence, the old NLRC had no jurisdiction over the
termination of the peddling contract.
However, this ruling is without prejudice to the right of Repomanta and Moralde and
the other peddlers to sue in the proper Court of First Instance and to ask for a
reformation of the instrument evidencing the contract or for its annulment or to
secure a declaration that, disregarding the peddling contract, the actual juridical
relationship between them and Mafinco or Cosmos is that of employer and
employee. In that action a fulldress trial may be held and the parties may introduce
the evidence necessary to sustain their respective contentions.
Paragphrasing the dictum in the Quisaba case, supra, if Mafinco and Cosmos had
acted oppressively towards their peddlers, as contemplated in article 1701 of the
Civil Code, then they should file the proper action for damages in the regular courts.
Where there is a right, there is a remedy (Ubi jus, ubi remedium).
WHEREFORE, the decision, order and resolution of the Secretary of Labor in
NLRC Case No. LR-086 dated April 16, July 16 and October 18, 1973, respectively,
are set aside and the order of the NLRC dated February 2, 1973, dismissing the case
for lack of jurisdiction, is affirmed. No costs.
SO ORDERED.
 G.R. No. 127238. August 25, 1998.*
COCA-COLA BOTTLERS, PHILS., INC., petitioner, vs. DELFIN HINGPIT,
GABRIEL FRANCISCO, JR., CECILIO PINAR, JR., ABUNDIO
BALATERO, NARITO MANLULUYO, SECERO ZAMORA, MEDARDO
GABINES, ENRIQUE BANGALAO, JULITO APAT, SOTERO PANDAN,
NELSON UMALI, and the NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Labor Law; Dismissals; The services of Delfin Hingpit were properly terminated on
July 22, 1988, for (1) failing to qualify for the job and (2) for dishonesty.However,
Hingpit subsequently flunked the qualifying examinations for regular employment,
and was later discovered to have misled COCA COLA by submitting a police
clearance contradicted by the records of the Fiscals Office of Tagbilaran City
showing that he was then facing three (3) charges of physical injuries. Upon the
facts, therefore, there can be no question: first, of the propriety of his contract of
probationary employmentnot only executed before Labor officials, but also
admitted by him as freely and voluntarily entered intoand second, of the fact that
he had not only failed the qualifying examinations, but had also presented a false
clearance. Hence, his services were properly terminated on July 22, 1988, for (1)
failing to qualify for the job, and (2) for dishonesty.
Same; National Labor Relations Commission; Labor Arbiters; To disagree and set
aside the findings of the Labor Arbiters, the National Labor Relations Commission
should state an acceptable cause therefor.While it is within respondent
Commissions competence, as an appellate agency reviewing decisions of Labor
Arbiters, to disagree with and set aside the latters findings, it stands to reason that it
should state an acceptable cause therefor. It would otherwise be a whimsical,
capricious, oppressive, illogical, unreasonable exercise of quasi-judicial prerogative,
subject to invalidation by the extraordinary writ of certiorari.
Same; Employer-employee Relationship; The evidence satisfactorily establishes that
complainants were employees of LIPERCON.
The evidence therefore satisfactorily establishes that complainants were employees
of LIPERCON. It was LIPERCON that terminated their services at which time, as
found by the Labor Arbiter, the complainants signed quitclaim and release
documents in favor of LIPERCON. COCA COLA was not privy either to that act of
employment-termination or execution of quitclaim and release documents, or to
the earlier act of creation of the employment relationship between the complainants
and LIPERCON. COCA COLA was in no position to intervene in any manner in the
creation or termination of the relationship between complainants and LIPERCON.
Same; Same; It was erroneous for respondent Commission to demand that COCA
COLA present proof of just cause for the termination of the services of
complainants, the latter not being its employees, but LIPERCONs.It was
therefore erroneous for respondent Commission to demand that COCA COLA
66
present proof of just cause for the termination of the services of complainants, the
latter not being its employees, but LIPERCONs. For the same reason, it was
erroneous for the NLRC to expect COCA COLA to present its payrolls to show the
salaries and wages of the complainants although, it must be mentioned, COCA
COLA did cause presentation of LIPERCONs payrolls relative to its employees,
including complainants. And it was grave error for respondent Commission to
conclude that because proof of just cause for complainants removal from their
employment in LIPERCON was not presented by COCA COLA, said complainants
had been dismissed without just cause and due process.
NARVASA, CJ.:
The special civil action of certiorari at bar concerns seven (7) cases against petitioner
Coca-Cola Bottling, Phils., Inc. instituted in the Regional Arbitration Branch of the
National Labor Relations Commission in Cebu City over a period of four years or so,
by eleven (11) persons claiming to be employees of the companys Tagbilaran City
plant. These were:
(1) RAB Case No. VII-07-12-0657-88 initiated on August 9, 1988 by Delfin Hingpit
for illegal dismissal, back wages and damages;
(2) RAB Case No. VII-05-0398-89 filed on February 13, 1989 by Gabriel Francisco
for unjust dismissal, non-payment of overtime pay and service incentive;
(3) RAB Case No. VII-02-0189-90 jointly filed on February 7, 1990 by Nelson
Umali, Medardo Gabines, Enrique Bangalao, Julito Apat and Sotero Pandan for
illegal dismissal, separation pay, service incentive leave, and Cost of Living
Allowance mandated by law;
(4) RAB Case No. VII-02-0169-90 initiated by Severo Zamora on February 12, 1990
for illegal dismissal, service incentive leave, retirement pay, and separation pay;
(5) RAB Case No. VII-10-0896-89 filed by Cecilio Pinar on March 9, 1992 for
unjust dismissal and separation pay;
(6) RAB Case No. VII-11-1026-89 initiated by Abundio Balatero also on March 9,
1992 for unjust dismissal, non-payment of overtime pay and separation pay; and
(7) RAB Case No. VII-10-0897-89 commenced by Narito Manluluyo.
In the first two (2) cases RAB Case No. VII-07-12-0657-88 and RAB Case No. VII-
05-0398-89 the respondents impleaded impleaded were Coca-Cola Bottling, Phils.,
Inc. (COCA-COLA) and its Tagbilaran Branch Manager, Godofredo Bagares. In the
other (5), the respondents named, aside from COCA-COLA, were Pioneer Multi
Services, Inc. and Lipercon Services Inc.

COCA-COLA is a corporation duly organized under Philippine laws with principal
offices at Ace Building, Legaspi Village, Makati, Metro Manila, engaged in the
bottling, distribution and sale of soft drink products.[1] It maintains, among others, a
bottling plant in Tagbilaran City, with sales offices and bodegas in strategic places to
serve the surrounding areas in Bohol Province.
Pioneer Multi-Services Co. (PIONEER) and Lipercon Services, Inc. (LIPERCON),
are manning companies with which COCA COLA successively entered into
contracts for the supply of the manpower needs of its plant in Tagbilaran. COCA-
COLAs contract with PIONEER was executed on May 28, 1983, and that with
LIPERCON, five (5) years later, on December 17, 1988.
The seven (7) cases against COCA-COLA were heard together after issues had been
joined; and judgment thereon was handed down by the Executive Labor Arbiter on
February 7, 1995.[2] The judgment found that complaints were supplied as workers
to COCA-COLA first by PIONEER and later, by LIPERCON; that whereas
LIPERCON was an independent contractor, PIONEER was not; that in any case,
(w)hen Lipercon entered into the picture,** complainant were already regular
employees of the respondent firm, and hence the subsequent coming in Lipercon did
nt deprive ** (them of) the right to claim separation pay ** as reinstatement is no
longer feasible. COCA-COLA was therefore sentenced to pay the complainants the
sum of Seventy One Thousand Six Hundred Fifty Six (P71,656.00) Pesos in concept
of separation pay in deferring amounts. The complaint was dismissed as regards
Godofredo Bagares (COCA COLAs Branch Manager at Tagbilaran), his liability not
having been established.
The eleven complainants appealed from the Decision of the Arbiter imputing
reversible error to the latter when he merely awarded separation pay instead of
reinstatement with backwages, despite his finding of illegal dismissal, without even
explaining in his decision why complainants could not be reinstated. The appeal was
filed only by Hingpit who represented that he was taking the appeal also in behalf of
the other complainants.
In its Decision of February 28, 1996, the Fourth Division of the National Labor
Relations Commission (Cebu City) AFFIRMED with MODIFICATION the
appealed judgment, commanding COCA-COLA to pay complainants an increased
amount of P2,022,076.94 representing full back wages and 13th month pay, holiday
pay, service incentive leave pay, cost of living allowance and rest day pay.[3] Both
COCA-COLA and the complainants moved for reconsideration of the Decision. By
Resolution of October 3, 1996,[4] COCA COLAs motion for reconsideration was
denied, while that of the complainants was granted in the sense that COCA-COLA
was additionally ordered to reinstate ** (them) to their former position without loss
of seniority rights and other privileges.
67
COCA COLA thereupon commenced the present certiorari action on December 11,
1996 through which it seeks the setting aside of the Commissions Decision on
February 28,1996 and its Resolution of October 3, 1996. The Court required the
respondents to comment on the petition and, upon a bond of P2,022,076.94, issued a
temporary restraining order stopping execution of the Commissions challenged
dispositions.[5]
On February 4, 1997, a pleading traversing the petition, entitled
Comments/Objection to Temporary Restraining Order, was filed by ten (10) of the
complainants themselves: Hingpit, Francisco, Pinar, Manluluyo, Zamora, Gabines,
Bangalao, Apat, Pandan, Umali;[6] and on February 12, 1997, another pleading,
Private Respondents Supplemental Comment, was submitted by the same ten (10)
parties.[7] On March 26, 1997, a COMMENT on behalf of the National Labor
Relations Commission was filed by the Solicitor Generals Office.[8] On June 13,
1997, COCA-COLA filed its REPLY To Private Respondents Supplemental
Comment), and on August 27, 1997 its REPLY To Public Respondents Comment).
It appears that all the complainants except Delfin Hingpit and Gabriel Francisco,
were originally recruited by PIONEER which detailed them, under its contract with
COCA COLA, in the latters Tagbilaran Plant, some being assigned as utility
workers, and other, as bottling crew members.[9] Three years afterwards, they were
absorbed by LIPERCON when it replaced PIONEER as COCA-COLAs labor
supplier.
It appears that Hingpit was recruited by LIPERCON for the Tagbilaran COCA
COLA plant, and first assigned as bottling crew member on November 24, 1984.
Sometime in 1988, Hingpit, being then involved in a labor case against his employer,
sent a letter to then President Corazon C. Aquino asking that she help him obtain
permanent employment in COCA COLA. This brought about a conciliation
conference in the Bohol Labor Extension Office in Tagbilaran city; and there, an
agreement was reached between Hingpit and COCA COLA, represented by its
Tagbilaran Personnel Officer, Ms. Suzette Gotera. According to Hingpit,[10] Ms.
Gotera had offered him the position of driver-helper or security guard if I possess the
necessary qualification for the aforesaid position, and he had accepted her offer as a
basis of this amicable agreement, and after obtaining a clearance from Lipercon
Services, Inc., Hingpit was hired by COCA COLA on a probationary basis for a
period of six (6) months effective May 16, 1988.
Hingpit was them required, among other things, to take examinations to qualify for
permanent placement and to submit a police clearance. He submitted a police
clearance issued by the Integrated National Police Command in Bohol which stated
that he was a resident of Batuan, Bohol, and that he had no criminal record thereat.
Unfortunately for him, not only did he obtain failing markes in the qualifying
examinations, but the police clearance submitted by him was shortly afterwards
revealed to be false, belied by a certification of the Office of the Fiscal of Tagbilaran
City to the effect that he was then facing charges of physical injuries in no less than
three (3) cases. As a result, his services considered temporary or probationary were
terminated on July 22, 1988, on the ground that he had (1) failed to measure up to the
standards of the firm, having flunked the required qualifying tests, and (2) been
shown to be dishonest, for not disclosing that he had been charged with 3 counts of
physical injuries.[11]
Gabriel Francisco originally worked as bottling crew member of San Miguel
Corporation at its Tagbilaran Plant from 1971 until 1976. He was reemployed in
1979, and assigned to the beer department of COCA COLA. In 1980, he was hired
by PIONEER, which was aforestated had concluded a contract to supply COCA
COLAs manpower needs. He worked under this arrangement unitl PIONEER was
replaced by LIPERCON, in December 1986. He continued working as bottling crew
member until he was separated from employment on December 15, 1988.[12]
The other complainant-employees Cecilio Pinar, Jr., Abundio Balatero, Narito
Manluluyo, Secero Zamora, Medardo Gabines, Enrique Bangalao, Julito Apat,
Sotero Pandan, Nelson Umali were, as already stated, found by the Labor Arbiter to
have been first placed in the COCA COLA Tagbilaran plant by their recruiter,
PIONEER, and after the latters contract expired, were recruited by LIPERCON and
again assigned at the same Tagbilaran plant.
The Executive Labor Arbiters decision of February 7, 1995[13] found that while
PIONEER was a labor only contractor,[14] LIPERCON which had also undertaken
to provide COCA COLA with manpower for such services as the repair and
maintenance of machines, activities related to projects, yard cleaning, utility jobs;
loading and unloading of full and empty bottles[15]-- was a legitimate labor
contractor. It had substantial capital of its own; paid its recruited employees regularly
even before receiving its stipulated fees from COCA-COLA; had control over
complainants-workers who could not get inside the premises of COCA COLA
without its written authority; attended to providing route helpers with requisition
slips; kept the signed daily time records of its recruited employees; monitored their
hours of work, and saw to it that they were at their places of work at the appointed
hours of work, and saw to it that they were at their places of work at the appointed
hours; and could receive, and act with finality on, complaints concerning its recruited
workers presented by COCA COLAs regular employees or supervisors.[16]
The Executive Labor Arbiters decision declared that when the complainants were
discharged from LIPERCON, they signed documents of quitclaim and release, a fact
not refuted by them.[17] Consequently, LIPERCON was absolved from liability. The
judgment was quick to point out, however, that when LIPERCON entered into the
picture after the lapse of COCA COLAs earlier contract with PIONEER said
complainants
68
** were already regular employees of of the respondent firm (COCA COLA). Its
entry, even if viewed as a consequence of a legitimate business of a manpower
servicing firm, resulted to (sic) the illegal termination of the complainants who at
that point in time had already acquired regular status. The coming in of Lipercon did
not deprive the complainants of the right to claim separation pay. Their severance
from respondent firm, it appears, was forced upon them. It is only fair, thus, that they
be given the benefits that they deserve while placed under Pioneer Multi-Services,
Inc. Considering that their termination was not legal and valid, they should be paid
one pay for every year of service as reinstatement is no longer feasible.[18]
For this reason, COCA COLA was sentenced to pay the complainants the sum of
Seventy One Thousand Six Hundred Fifty Six (P71,656.00) Pesos in concept of
separation pay in differing amounts.
Respondent Commission saw the case differently. It opined that (1) LIPERCON was
a labor-only, not an independent labor contractor; and (2) COCA COLA not having
presented evidence to establish any just cause for the termination of complainants
employment, such termination must be held illegal; and having, as well, failed to
submit the payrolls corresponding to the complainants, its monetary liability to them
should be increased.
In the special civil action of certiorari, COCA COLA submits that respondent
Commission acted with grave abuse of discretion
1) in completely ignoring the fact that Hingpit had no capacity to take an appeal in
behalf of the other complainants;
2) in not ruling that the Labor Arbiters decision had long become final and executory
because the complaints, except Hingpit, had already lost their right of appeal;
3) in disregarding the Labor Arbiters findings that the complainants were not regular
employees of COCA COLA;
4) even granting arguendo that complainants were employees of COCA COLA, in
requiring the latter to pay the former even when they did nothing;
5) in awarding complainants rest day pay despite their admission that they did not
work seven days a week;
6) in holding complainants to be entitled to holiday pay, service incentive leave pay,
cost of living allowance, 13th month pay, without any factual basis and contrary to
the evidence on record;
7) in not allowing Hingpit to raise the issue of his alleged employment with COCA
COLA although the same was already subject of a compromise agreement; and

8) in not ruling that Hingpit had been validly dismissed, having failed to meet the
company standards for a probationary employee.
The Court will deal with Delfin Hingpit first. It seems fairly evident from the record
that his services were validly terminated. As already narrated, on the basis of his
compromise agreement with the Tagbilaran Personnel Officer of COCA COLA
(entered into under the auspices of the Bohol Labor Extension Office), and after
obtaining a clearance from LIPERCON, Hingpit was employed by COCA COLA on
a probationary basis for a period of six (6) months effective May 16, 1988. However,
Hingpit subsequently flunked the qualifying examinations for regular employment,
and was later discovered to have misled COCA COLA by submitting a police
clearance contradicted by the records of the Fiscals Office of Tagbilaran City
showing that he was then facing three (3) charges of physical injuries. Upon the
facts, therefore, there can be be no question: first, of the propriety of his contract of
probationary employment not only executed before Labor officials, but also admitted
by him as freely and voluntarily entered into and second, of th fact that he had not
only failed the qualifying examinations, but had also presented a false clearance.
Hence, his services were properly terminated on July 22, 1988, for (1) failing to
qualify for the job, and (2) for dishonesty.[19]
Turning to another point, respondent Commission reversed the Labor Arbiters
conclusion that LIPERCON was an independent labor contractor. It declared it
instead to be a mere labor-only contractor, as the term is defined and described in the
Labor Code[20] and the Omnibus Rules Implementing said Code.[21] On the basis it
held that complainants were not employees of LIPERCON, but of COCA COLA.
In so ruling respondent Commission unaccountably ignored the evidence on which
the Labor Arbiter had based his contrary conclusion. That evidence, consisting
chiefly of the testimony of Filomena Legaspi, Head of LIPERCONs Accounting
Division, is summarized by the Arbiter as follows:[22]
The Lipercon has indeed substantial capital of its own is proven by the testimony of
its personnel in charge in Tagbilaran City, Filomena Legaspi. Legaspi affirmed the
fact that Lipercon paid its employees (the complainants herein) regularly even before
it is paid of its billing (TSN p. 49, September 2, 1992). She also testified that she had
control over the complainants. Without her signature, they cannot get inside the
premises of respondent firm. She signed her daily time records and monitored their
hours of work. She saw to it that they were in their positions and places of work. And
if the regular employees of CCBPI or their supervisors complain, they notify and
inform her of these complaints. With regard to the route helpers, these were covered
by requisition slips (TSN, p. 47, Sept. 2, 1992). In fact, after Lipercons contract with
repondent expired in December 1988, it was she who assigned some workers like
Cecilio Pinar, Jr. and Abundio Balatero to SMC (TSN, pp. 34, 35, 42-49, September
2, 1992). The payrolls of Lipercon (Exhs. 1 and 2 for CCBPI) and the resignation
69
letter addressed to Ms. Perla Caete (Exh. 4) by Gabriel Francisco, Jr. points out that
complainants were indeed employees of Lipercon. The aforecited facts were not
refuted by the complainant
*** *** ***
** Lipercon proved to be an independent contractor. Aside from hiring its own
employees and paying the workers their salaries, it also exercised supervision and
control over them which is the most important aspect in determining employer-
employee relations (Mafinco Trading Corp. v. Ople, 70 SCRA 139; Rosario Brothers
Inc. vs. Ople, 131 SCRA 72). That it indeed has substantial capital is proven by the
fact that it did not depend upon its billing on respondent regarding payment of
workers salaries. And when complainants were separated from Lipercon, they signed
quitclaim and release documents. **.
While it is within respondent Commissions competence, as an appellate agency
reviewing decisions of Labor Arbiters, to disagree with and set aside the latters
findings, it stands to reason that it should state an acceptable cause therefor. It would
otherwise be a whimsical, capricious, oppressive, illogical, unreasonable exercise of
quasi-judicial prerogative, subject of invalidation by the extraordinary writ of
certiorari.
But that, regrettably, is precisely what respondent Commission appears to have done.
It overturned the Labor Arbiters factual determination regarding LIPERCONs being
a legitimate independent contractor without stating the reason therefor, without any
explanation whatever as to why the Arbiters evidentiary premises were not worthy of
credit, or why the inferences drawn therefrom were unacceptable, as a matter of law
or logic.
Respondent Commission grounded its reversal of the Arbiters adjudgment solely on
a 1989 judgment of this Court, Guarin et al. v. Lipercon[23]- in which LIPERCON
had also been involved as a labor contractor of another company.[24] There, the
Court held LIPERCON to be a labor only contractor; and declared that the NLRCs
finding that it was not a mere labor-only contractor because it has substantial capital
or investment in the form of tools, equipment, machineries, work premises, ** - was
based on insubstantial evidence, as the NLRC (had merely) pointed out that it
(LIPERCON) claims to be possessed among others, of substantial capital and
equipment essential to carry out its business as general independent contractor**. In
other words, in Guarin, LIPERCON was held to have failed to discharge its burden
of proof that it has substantial capital, investment, tools, etc.
Not so in the case at bar. Here, there is substantial evidence, detailed by the Labor
Arbiter, to establish LIPERCONs character as an independent contractor in the real
sense of the word,[25] which makes the Labor Arbiters ruling more acceptable than
respondent Commissions on the same matter, being founded solely on an
inapplicable precedent. Also more deserving of assent is said Labor Arbiters
conclusion that the complainants acceptance of employment in LEPERCON in
December, 1986 lasting for a period of some two years effectively operated as a
cessation of the prior relationship they had with PIONEER and COCA COLA in
consequence of which they became entitled to separation pay from COCA COLA,
PIONEER being merely its hiring agent.
The evidence therefore satisfactorily establishes that complainants were employees
of LIPERCON. It was LIPERCON that terminated their services at which time, as
found by the Labor Arbiter, the complainants signed quitclaim and release
documents in favor of LIPERCON. COCA COLA was not privy either to that act of
employment-termination or execution of quitclaim and release documents, or to the
earlier act of creation of the employment relationship between the complainants and
LIPERCON. COCA COLA was in no position to intervene in any manner in the
creation or termination of the relationship between complainants and LIPERCON.
It was therefore erroneous for respondent Commission to demand that COCA COLA
present proof of just cause for the termination of the services of complainants, the
latter not being its employees, but LIPERCONs. For the same reason, it was
erroneous for the NLRC to expect COCA COLA to present its payrolls to show the
salaries and wages of the complainants although, it must be mentioned, COCA
COLA did cause presentation of LIPERCONs payrolls relative to its employees,
including complainants. And it was grave error for respondent Commission to
conclude that because proof of just cause for complainants removal from their
employment in LIPERCON was not presented by COCA COLA, said complainants
had been dismissed without just cause and due process.
What has been said make it unecessary to address the other substantive issues raised
by COCA COLA.[26] And the adjective issue that it sets up respecting the validity
of Hingpits having attempted to appeal from the Labor Arbiters decision in behalf of
the other complainants appears to be too unsubstantial to merit consideration. All
things considered, and except as regards Delfin Hingpit, the Court is satisfied that the
Decision of the Executive Labor Arbiter fairly and reasonably disposed of the
controversy, and is worthy of adoption as the ultimate adjudgment of this case.
WHEREFORE, the petition for certiorari is GRANTED, and the challenged
Decision of the Fifth Division of the National Labor Relations Commission
promulgated on February 28, 1996 is NULLIFIED AND SET ASIDE. The Decision
of the Executive Labor Arbiter, Cebu City, dated February 7, 1995 is REINSTATED
and hereby AFFIRMED, with the sole modification that the complaint of DELFIN
HINGPIT is dismissed, for lack of merit. No pronouncement as to costs.
SO ORDERED.
70
G.R. No. 124055. June 8, 2000.*
ROLANDO E. ESCARIO, NESTOR ANDRES, CESAR AMPER, LORETO
BALDEMOR, EDUARDO BOLONIA, ROMEO E. BOLONIA, ANICETO
CADESIM, JOEL CATAPANG, NESTOR DELA CRUZ, EDUARDO
DUNGO, ESCARIO REY, ELIZALDE ESTASIO, CAROLINO M. FABIAN,
RENATO JANER, EMER B. LIQUIGAN, ALEJANDRO MABAWAD,
FERNANDO M. MAGTIBAY, DOMINADOR B. MALLILLIN, NOEL B.
MANILA, VIRGILIO A. MANIO, ROMEO M. MENDOZA, TIMOTEO
NOTARION, FREDERICK RAMOS, JOSEPH REYES, JESSIE SEVILLA,
NOEL STO. DOMINGO, DODJIE TAJONERA, JOSELITO TIONLOC,
ARNEL UMALI, MAURLIE C. VIBAR, ROLANDO ZALDUA, RODOLFO
TUAZON, TEODORO LUGADA, MAURING MANUEL, MARCIANO
VERGARA, JR., ARMANDO IBASCO, CAYETANO IBASCO, LEONILO
MEDINA, JOSELITO ODO, MELCHOR BUELA, GOMER GOMEZ,
HENRY PONCE, RAMON ORTIZ, JR., ANTONIO MIJARES, JR., MARIO
DIZER, REYNANTE PEJO, ARNALDO RAFAEL, NELSON BERUELA,
AUGUSTO RAMOS, RODOLFO VALENTIN, ANTONIO CACAM, VERNON
VELASQUEZ, NORMAN VALLO, ALEJANDRO ORTIZ, ROSANO VALLO,
ANDREW ESPINOSA, EDGAR CABARDO, FIDELES REYES, EDGARDO
FRANCISCO, FERNANDO VILLARUEL, LEOPOLDO OLEGARIO,
OSCAR SORIANO, GARY RELOS, DANTE IRANZO, RONALDO
BACOLOR, RONALD ESGUERA, VICTOR ALVAREZ, JOSE MARCELO,
DANTE ESTRELLADO, MELQUIADES ANGELES, GREGORIO
TALABONG, ALBERT BALAO, ALBERT CANLAS, CAMILO VELASCO,
PONTINO CHRISTOPHER, WELFREDO RAMOS, REYNALDO
RODRIGUEZ, RAZ GARIZALDE, MIGUEL TUAZON, ROBERTO
SANTOS, AND RICARDO MORTEL, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, CALIFORNIA MANUFACTURING CO., INC.
AND DONNA LOUISE ADVERTISING AND MARKET ING ASSOCIATES
INCORPORATED, respondents.
Labor Law; Contracts of Employment; There is labor-only contracting when the
contractor or sub-contractor merely recruits, supplies or places workers to perform a
job, work or service for a principal; Elements of labor-only contract.There is
labor-only contracting when 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 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 (b) The workers
recruited and placed by such person are performing activities which are directly
related to the principal business of the employer.
Same; Same; Where there is a Permissible Job Contracting; Conditions of
Permissible Job Contracting.There is permissible job contracting when a principal
agrees to put out or farm out with a contractor or a subcontractor the performance or
completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job or work or service is to be performed or
completed within or outside the premises of the principal. In this arrangement, the
following conditions must concur: (a) The contractor carries on a distinct and
independent business and undertakes the contract work on his 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 his work except as to the results thereof; and (b) The contractor has substantial
capital or investment in the form of tools, equipment, machineries (sic), work
premises, and other materials which are necessary in the conduct of his business.
Same; Same; In order to be considered an independent contractor it is not enough to
show substantial capitalization or investment in the form of tools, equipment,
machinery and work premises; Factors to be considered in determining an
independent contractor.In the recent case of Alexander Vinoya vs. NLRC, et al.,
this Court ruled that in order to be considered an independent contractor it is not
enough to show substantial capitalization or investment in the form of tools,
equipment, machinery and work premises. In addition, the following factors need be
considered: (a) whether the contractor is carrying on an independent business; (b) the
nature and extent of the work; (c) the skill required; (d) the term and duration of the
relationship; (e) the right to assign the performance of specified pieces of work; (f)
the control and supervision of the workers; (g) the power of the employer with
respect to the hiring, firing and payment of workers of the contractor; (h) the control
of the premises; (i) the duty to supply premises, tools, appliances, materials, and
labor; and (j) the mode, manner and terms of payment..
KAPUNAN, J.:
Before this Court is a petition for certiorari under Rule 65, which seeks to annul and
set aside the decision, promulgated on 10 May 1995, of the National Labor Relations
Commission (NLRC). The assailed decision reversed the decision of the Labor
Arbiter, and ruled that the petitioners are employees of Donna Louise Advertising
and Marketing Associates, Inc. and ordered the reinstatement of petitioners and the
payment of backwages.
Private respondent California Marketing Co. Inc. (CMC) is a domestic corporation
principally engaged in the manufacturing of food products and distribution of such
products to wholesalers and retailers. Private respondent Donna Louise Advertising
and Marketing Associates, Inc. (D.L. Admark) is a duly registered promotional firm.
Petitioners worked as merchandisers for the products of CMC. Their services were
terminated on 16 March 1992.
The parties presented conflicting versions of the facts.
71
Petitioners allege that they were employed by CMC as merchandisers. Among the
tasks assigned to them were the withdrawing of stocks from the warehouse, the
fixing of prices, price-tagging, displaying of merchandise, and the inventory of
stocks. These were done under the control, management and supervision of CMC.
The materials and equipment necessary in the performance of their job, such as price
markers, gun taggers, toys, pentel pen, streamers and posters were provided by
CMC. Their salaries were being paid by CMC. According to petitioners, the hiring,
control and supervision of the workers and the payment of salaries, were all coursed
by CMC through its agent D.L. Admark in order for CMC to avoid its liability under
the law.
On 7 February 1992, petitioners filed a case against CMC before the Labor Arbiter
for the regularization of their employment status. During the pendency of the case
before the Labor Arbiter, D.L. Admark sent to petitioners notice of termination of
their employment effective 16 March 1992. Hence, their complaint was amended so
as to include illegal dismissal as cause of action. Thereafter, twenty-seven more
persons joined as complainants. CMC filed a motion to implead as party-defendant
D. L. Admark and at the same time the latter filed a motion to intervene. Both
motions were granted.
CMC, on the other hand, denied the existence of an employer-employee relationship
between petitioner and itself. Rather, CMC contended that it is D.L. Admark who is
the employer of the petitioners. While CMC is engaged in the manufacturing of food
products and distribution of such to wholesalers and retailers, it is not allowed by law
to engage in retail or direct sales to end consumers. It, however, hired independent
job contractors such as D.L. Admark, to provide the necessary promotional activities
for its product lines.
For its part, D.L. Admark asserted that it is the employer of the petitioners. Its
primary purpose is to carry on the business of advertising, promotion and publicity,
the sales and merchandising of goods and services and conduct survey and opinion
polls. As an independent contractor it serves several clients among which include
Purefoods, Corona Supply, Firstbrand, Splash Cosmetics and herein private
respondent California Marketing.
On 29 July 1994, the Labor Arbiter rendered a decision finding that petitioners are
the employees of CMC as they were engaged in activities that are necessary and
desirable in the usual business or trade of CMC.[1] In justifying its ruling, the Labor
Arbiter cited the case of Tabas vs. CMC which, likewise, involved private
respondent CMC. In the Tabas case, this Court ruled that therein petitioner
merchandisers were employees of CMC, to wit:
There is no doubt that in the case at bar, Livi performs "manpower services,"
meaning to say, it contracts out labor in favor of clients. We hold that it is one not
withstanding its vehement claims to the contrary and not- withstanding its vehement
claims to the contrary, and notwithstanding the provision of the contract that it is "an
independent contractor." The nature of ones business is not determined by self-
serving appellations one attaches thereto but by the tests provided by statute and
prevailing case law. The bare fact that Livi maintains a separate line of business does
not extinguish the equal fact that it has provided California with workers to pursue
the latters own business. In this connection, we do not agree that the petitioner has
been made to perform activities "which are not directly related to the general
business of manufacturing," Californias purported "principal operation activity. The
petitioners had been charged with merchandising [sic] promotion or sale of the
products of [California] in the different sales outlets in Metro Manila including task
and occational [sic] price tagging," an activity that is doubtless, an integral part of
the manufacturing business. It is not, then, as if Livi had served as its (Californias)
promotions or sales arm or agent, or otherwise rendered a piece of work it
(California) could not itself have done; Livi as a placement agency, had simply
supplied it with manpower necessary to carry out its (Californias) merchandising
activities, using its (Californias) premises and equipment.[2]
On appeal, the NLRC set aside the decision of the Labor Arbiter. It ruled that no
employer-employee relationship existed between the petitioners and CMC. It,
likewise, held that D.L. Admark is a legitimate independent contractor, hence, the
employer of the petitioners. Finding no valid grounds existed for the dismissal of the
petitioners by D.L. Admark, it ordered their reinstatement. The dispositive portion of
the decision reads:
WHEREFORE, premises considered, the appealed judgment is modified. Intervenor
DL ADMARK is ordered to reinstate the eighty one (81) complainants mentioned in
the appealed decision to their former positions with backwages from March 16, 1992
until they are actually reinstated. The award of attorneys fees equivalent to ten (10%)
of the award is deleted for lack of basis.[3]
Petitioners filed a motion for reconsideration but the same was denied by the NLRC
for lack of merit. [4]
Hence, this petition.
In the main, the issue brought to fore is whether petitioners are employees of CMC
or D.L. Admark. In resolving this, it is necessary to determine whether D.L. Admark
is a labor-only contractor or an independent contractor.
Petitioners are of the position that D.L. Admark is a labor-only contractor and cites
this Courts ruling in the case of Tabas, which they claim is applicable to the case at
bar for the following reasons:
72
1. The petitioners are merchandisers and the petitioners in the Tabas case are also
merchandisers who have the same nature of work.
2. The respondent in this case is California Manufacturing Co. Inc. while respondent
in the Tabas case is the same California Manufacturing Co. Inc.
3. The agency in the Tabas case is Livi Manpower Services. In this case, there are at
least, three (3) agencies namely: the same Livi Manpower Services; the Rank
Manpower Services and D.L. Admark whose participation is to give and pay the
salaries of the petitioners and that the money came from the respondent CMC as in
the Tabas case.
4. The supervision, management and/or control rest upon respondent California
Manufacturing Co. Inc. as found by the Honorable Labor Arbiter which is also, true
in the Tabas Case.[5]
We cannot sustain the petition.
Petitioners reliance on the Tabas case is misplaced. In said case, we ruled that therein
contractor Livi Manpower Services was a mere placement agency and had simply
supplied herein petitioner with the manpower necessary to carry out the companys
merchandising activity. We, however, further stated that :
It would have been different, we believe, had Livi been discretely a promotions firm,
and that California had hired it to perform the latters merchandising activities. For
then, Livi would have been truly the employer of its employees and California, its
client. x x x.[6]
In other words, CMC can validly farm out its merchandising activities to a legitimate
independent contractor.
There is labor-only contracting when the contractor or sub-contractor 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 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
(b) The workers recruited and placed by such person are performing activities which
are directly related to the principal business of the employer. [7]
In contrast, there is permissible job contracting when a principal agrees to put out or
farm out with a contractor or a subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined period, regardless of
whether such job or work or service is to be performed or completed within or
outside the premises of the principal. In this arrangement, the following conditions
must concur:
(a)....The contractor carries on a distinct and independent business and undertakes
the contract work on his 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 his work except as to the results
thereof; and
(b)....The contractor has substantial capital or investment in the form of tools,
equipment, machineries (sic), work premises, and other materials which are
necessary in the conduct of his business.[8]
In the recent case of Alexander Vinoya vs. NLRC et al.,[9] this Court ruled that in
order to be considered an independent contractor it is not enough to show substantial
capitalization or investment in the form of tools, equipment, machinery and work
premises. In addition, the following factors need be considered: (a) whether the
contractor is carrying on an independent business; (b) the nature and extent of the
work; (c) the skill required; (d) the term and duration of the relationship; (e) the right
to assign the performance of specified pieces of work; (f) the control and supervision
of the workers; (g) the power of the employer with respect to the hiring, firing and
payment of workers of the contractor; (h) the control of the premises; (i) the duty to
supply premises, tools, appliances, materials, and labor; and (j) the mode, manner
and terms of payment.[10]
Based on the foregoing criterion, we find that D.L. Admark is a legitimate
independent contractor.
Among the circumstances that tend to establish the status of D.L. Admark as a
legitimate job contractor are:
1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in
promotional, advertising, marketing and merchandising activities.
2) The service contract between CMC and D.L. Admark clearly provides that the
agreement is for the supply of sales promoting merchandising services rather than
one of manpower placement.[11]
3) D.L. Admark was actually engaged in several activities, such as advertising,
publication, promotions, marketing and merchandising. It had several merchandising
contracts with companies like Purefoods, Corona Supply, Nabisco Biscuits, and
Licron. It was likewise engaged in the publication business as evidenced by it
magazine the "Phenomenon."[12]
73
4) It had its own capital assets to carry out its promotion business. It then had current
assets amounting to P6 million and is therefore a highly capitalized venture.[13] It
had an authorized capital stock of P500,000.00. It owned several motor vehicles and
other tools, materials and equipment to service its clients. It paid rentals of P30,020
for the office space it occupied.
Moreover, by applying the four-fold test used in determining employer-employee
relationship, the status of D.L. Admark as the true employer of petitioners is further
established. The elements of this test are (1) the selection and engagement of
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to
control the employees conduct.[14]
As regards the first element, petitioners themselves admitted that they were selected
and hired by D.L. Admark.[15]
As to the second element, the NLRC noted that D.L. Admark was able to present in
evidence the payroll of petitioners, sample SSS contribution forms filed and
submitted by D.L. Admark to the SSS, and the application for employment by R. de
los Reyes, all tending to show that D.L. Admark was paying for the petitioners
salaries. In contrast, petitioners did not submit an iota of evidence that it was CMC
who paid for their salaries. The fact that the agreement between CMC and D.L.
Admark contains the billing rate and cost breakdown of payment for core
merchandisers and coordinators does not in any way establish that it was CMC who
was paying for their salaries. As correctly pointed out by both CMC[16] and the
Office of the Solicitor General,[17] such cost breakdown is a standard content of
service contracts designed to insure that under the contract, employees of the job
contractor will receive benefits mandated by law.
Neither did the petitioners prove the existence of the third element. Again petitioners
admitted that it was D.L. Admark who terminated their employment.[18]
To prove the fourth and most important element of control, petitioners presented the
memoranda of CMCs sales and promotions manager. The Labor Arbiter found that
these memos "indubitably show that the complainants were under the supervision
and control of the CMC people."[19] However, as correctly pointed out by the
NLRC, a careful scrutiny of the documents adverted to, will reveal that nothing
therein would remotely suggest that CMC was supervising and controlling the work
of the petitioners:
x x x The memorandums (Exhibit "B") were addressed to the store or grocery owners
telling them about the forthcoming sales promotions of CMC products. While in one
of the memorandums a statement is made that "our merchandisers and demonstrators
will be assigned to pack the premium with your stocks in the shelves x x x, yet it
does not necessarily mean to refer to the complainants, as they claim, since CMC has
also regular merchandisers and demonstrators. It would be different if in the
memorandums were sent or given to the complainants and their duties or roles in the
said sales campaign are therein defined. It is also noted that in one of the
memorandums it was addressed to: "All regular merchandisers/demonstrators." x x x
we are not convinced that the documents sufficiently prove employer-employee
relationship between complainants and respondents CMC.[20]
The Office of the Solicitor General, likewise, notes that the documents fail to show
anything that would remotely suggest control and supervision exercised by CMC
over petitioners on the matter on how they should perform their work. The
memoranda were addressed either to the store owners or "regular" merchandisers and
demonstrators of CMC. Thus, petitioners, who filed a complaint for regularization
against respondent CMC, thereby, conceding that they are not regular employees of
the latter, cannot validly claim to be the ones referred to in said memos.[21]
Having proven the existence of an employer-employee relationship between D.L.
Admark and petitioners, it is no longer relevant to determine whether the activities
performed by the latter are necessary or desirable to the usual business or trade of
CMC.
On the issue of illegal dismissal, we agree with the findings of the NLRC that D.L.
Admark "admits having dismissed the petitioners for allegedly disowning and
rejecting them as their employer." Undoubtedly, the reason given is not just cause to
terminate petitioners.[22] D.L. Admarks belated claim that the petitioners were not
terminated but simply did not report to work[23] is not supported by the evidence on
record. Moreover, there is no showing that due process was afforded the petitioners.
IN VIEW OF THE FOREGOING, finding no grave abuse of discretion on the part of
the National Labor Relations Commission, the assailed decision is AFFIRMED in
toto.
SO ORDERED.
74
G.R. Nos. 116476-84. May 21, 1998.*
ROSEWOOD PROCESSING, INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, NAPOLEON C. MAMON, ARSENIO
GAZZINGAN, ROMEO C. VELASCO, ARMANDO L. BALLON, VICTOR E.
ALDEZA, JOSE L. CABRERA, VETERANS PHILIPPINE SCOUT
SECURITY AGENCY, and/or ENGR. SERGIO JAMILA IV, respondents
.
Labor Law; Labor Code; Appeals; Perfection of an appeal within the reglementary
period and in the manner prescribed by law is jurisdictional, and noncompliance with
such legal requirement is fatal and effectively renders the judgment final and
executory.The perfection of an appeal within the reglementary period and in the
manner prescribed by law is jurisdictional, and noncompliance with such legal
requirement is fatal and effectively renders the judgment final and executory.
Same; Same; Same; The appeal of a decision involving a monetary award in labor
cases may be perfected only upon the posting of a cash or surety bond.
Indisputable is the legal doctrine that the appeal of a decision involving a monetary
award in labor cases may be perfected only upon the posting of a cash or surety
bond. The lawmakers intended the posting of the bond to be an indispensable
requirement to perfect an employers appeal.
Same; Same; Same; In a number of cases, the Court has relaxed the requirement in
order to bring about the immediate and appropriate resolution of controversies on the
merits.However, in a number of cases, this Court has relaxed this requirement in
order to bring about the immediate and appropriate resolution of controversies on the
merits. Some of these cases include: (a) counsels reliance on the footnote of the
notice of the decision of the labor arbiter that the aggrieved party may appeal x x x
within ten (10) working days; (b) fundamental consideration of substantial justice;
(c) prevention of miscarriage of justice or of unjust enrichment, as where the tardy
appeal is from a decision granting separation pay which was already granted in an
earlier final decision; and (d) special circumstances of the case combined with its
legal merits or the amount and the issue involved.
Same; Same; Same; Court ruled that a relaxation of the appeal bond requirement
could be justified by substantial compliance with the rule.In Quiambao vs.
National Labor Relations Commission, this Court ruled that a relaxation of the
appeal bond requirement could be justified by substantial compliance with the rule.
Same; Same; Same; In actual practice, the NLRC allows the reduction of the appeal
bond upon motion of the appellant and on meritorious grounds.In Globe General
Services and Security Agency vs. National Labor Relations Commission, the Court
observed that the NLRC, in actual practice, allows the reduction of the appeal bond
upon motion of the appellant and on meritorious grounds; hence, petitioners in that
case should have filed a motion to reduce the bond within the reglementary period
for appeal.
Same; Same; Same; Petitioners motion to reduce the bond is a substantial
compliance with the Labor Code.We hold that petitioners motion to reduce the
bond is a substantial compliance with the Labor Code. This holding is consistent
with the norm that letter-perfect rules must yield to the broader interest of substantial
justice.
Same; Same; Same; Employers cannot hide behind their contracts in order to evade
their or their contractors or subcontractors liability for noncompliance with the
statutory minimum wage.Legally untenable, however, is the contention that
petitioner is not liable for any wage differential for the reason that it paid the
employees in accordance with the contract for security services which it had entered
into with the security agency. Notwithstanding the service contract between the
petitioner and the security agency, the former is still solidarily liable to the
employees, who were not privy to said contract, pursuant to the aforecited provisions
of the Code. Labor standard legislations are enacted to alleviate the plight of workers
whose wages barely meet the spiraling costs of their basic needs. They are
considered written in every contract, and stipulations in violation thereof are
considered not written. Similarly, legislated wage increases are deemed amendments
to the contract. Thus, employers cannot hide behind their contracts in order to evade
their or their contractors or subcontractors liability for noncompliance with the
statutory minimum wage.
PANGANIBAN, J.:
Under the Labor Code, an employer is solidarily liable for legal wages due security
guards for the period of time they were assigned to it by its contracted security
agency. However, in the absence of proof that the employer itself committed the acts
constitutive of illegal dismissal or conspired with the security agency in the
performance of such acts, the employer shall not be liable for back wages and/or
separation pay arising as a consequence of such unlawful termination.
The Case
These are the legal principles on which this Court bases its resolution of this special
civil action for certiorari, seeking the nullification of the April 28, 1994 Resolution
and the July 12, 1994 Order of the National Labor Relations Commission, which
dismissed petitioners appeal from the labor arbiters Decision and denied its Motion
for Reconsideration, respectively, in NLRC NCR Case Nos. 00-05-02834-91, 00-08-
04630-91, 00-07-03966-91, 00-09-05617-91, 00-07-03967-91, 00-07-04455-91, 00-
08-05030-91, 00-11-06389-91, and 00-03-01642-92.
On May 13, 1991, a complaint for illegal dismissal; underpayment of wages; and for
nonpayment of overtime pay, legal holiday pay, premium pay for holiday and rest
day, thirteenth month pay, cash bond deposit, unpaid wages and damages was filed
against Veterans Philippine Scout Security Agency and/or Sergio Jamila IV
75
(collectively referred to as the security agency, for brevity). Thereafter, petitioner
was impleaded as a third-party respondent by the security agency. In due course,
Labor Arbiter Ricardo C. Nora rendered a consolidated Decision dated March 26,
1993, which disposed as follows:[1]
IN VIEW OF ALL THE FOREGOING, respondents Veterans Philippine Scout
Security Agency, Sergio Jamila IV, and third-party respondent Rosewood
Processing, Inc. are hereby ordered to pay jointly and severally complainants the
following amounts, to wit:
1. Napoleon Mamon P126,411.10
2. Arsenio Gazzingan 128,639.71
3. Rodolfo Velasco 147,114.43
4. Armando Ballon 116,894.70
5. Jose L. Cabrera 133,047.81
6. Victor Aldeza 137,046.64
TOTAL P789,154.39
===========
representing their monetary benefits in the amount of SEVEN HUNDRED EIGHTY
NINE THOUSAND ONE HUNDRED FIFTY FOUR PESOS AND 39/100
CENTAVOS (P789,154.39).
Respondents are likewise ordered to pay attorneys fees in the amount of P78,915.43
within ten (10) days from receipt of this Decision.
All other issues are hereby [d]ismissed for failure of the complainants to fully
substantiate their claims.
The appeal filed by petitioner was dismissed by the National Labor Relations
Commission[2] in its Resolution promulgated April 28, 1994, for failure of the
petitioner to file the required appeal bond within the reglementary period.[3]
Pertinent portions of the challenged Resolution are herewith quoted:
It appears on record that [petitioner] received their copy of the [labor arbiters]
decision on April 2, 1993 and subsequently filed a Notice of Appeal with
Memorandum of Appeal on April 26, 1993, in violation of Rule VI, Section 1, 3, and
6 of the 1990 New Rules of Procedure of the NLRC xxx.

xxxxxxxxx
Clearly, the appeal filed by the [petitioners] on April 12, 1993 was not perfected
within the reglementary period, and the decision dated March 26, 1993 became final
and executory as of April 23, 1993.
WHEREFORE, the appeal is hereby DISMISSED.
In its motion for reconsideration, petitioner contended that it received a copy of the
labor arbiters Decision only on April 6, 1993, and that it filed on April 16, 1993
within the prescribed time, a Notice of Appeal with a Memorandum on Appeal, a
Motion to Reduce Appeal Bond and a surety bond issued by Prudential Guarantee
and Assurance, Inc. in the amount of P50,000.[4] Though not opposed by the
complainants and the security agency, the arguments stated in the motion were not
taken up by Respondent Commission. Reconsideration was nonetheless denied by
Respondent Commission in its Order of July 12, 1994, quoted below:[5]
Section 14, Rule VII of the NLRC New Rules of Procedure allows [u]s to entertain a
motion for reconsideration only on palpable or patent errors [w]e may have
committed in [o]ur disputed April 28, 1994 resolution.
There being no such assignment here, [petitioners] motion for reconsideration dated
May 19, 1994 is hereby DENIED for lack of merit.
Hence, this recourse.[6]
In a Resolution dated March 20, 1995, this Court issued a temporary restraining
order enjoining the respondents and their agents from implementing and enforcing
the assailed Resolution and Order until further notice.[7]
The Facts
Undisputed are the facts of this case, narrated by the labor arbiter as follows:
All the complainants were employed by the [security agency] as security guards:
Napoleon Mamon on October 7, 1989; Arsenio Gazzingan on September 25, 1988;
Rodolfo C. Velasco on January 5, 1987; Armando Ballon on June 28, 1990; Victor
Aldeza on March 21, 1990; and Jose L. Cabrera [in] January 1988.
Napoleon Mamon started working for the [security agency] on October 7, 1989 and
was assigned as office guard for three (3) days without any pay nor allowance as it
was allegedly an on[-the-]job training so there [was] no pay[.] On October 10, 1989,
he was transferred to the residence of Mr. Benito Ong with 12 hours duty a day
receiving a salary very much less than the minimum wage for eight (8) hours work
76
until February 3, 1990 when he received an order transferring him to Rosewood
Processing, Inc. effective that date xxx; [a]t Rosewood Processing, Inc., he was
required to render also 12 hours duty every day with a salary of P2,600.00/month. He
was not given his pay for February 1 and 2 by the paymaster of [the security agency]
allegedly because the payroll could not be located so after 3 to 4 times of going back
and forth to [the security agencys] office to get his salary[;] [after] xxx two (2) days
he gave up because he was already spending more than what he could get thru
transportation alone. On May 16, 1991, Rosewood Processing, Inc. asked for the
relief of Mamon and other guards at Rosewood because they came to know that
complainants filed a complaint for underpayment on May 13, 1991 with the National
Labor Relations Commission[.] On May 18 to 19, 1991, [the security agency]
assigned him to their [m]ain [o]ffice. After that, complainant was floated until May
29, 1991 when he was assigned to Mead Johnson Philippines Corporation. [A]t about
a week later, [the security agency] received summons on complainants complaint for
underpayment and he was called to [the security agencys] office. When he reported,
he was told to sign a Quitclaim and Waiver[] by Lt. R. Rodriguez because according
to the latter, he [could] only get a measly sum from his complaint with the NLRC
and if he (complainant) [signed] the quitclaim and waiver he [would] be retained at
his present assignment which [was] giving quite a good salary and other benefits but
if he [did] not sign the quitclaim and waiver, he [would] be relieved from his post
and [would] no longer be given any assignment. xxx He was given up to the end of
July 1991 to think it over. At the end of July 1991, h[e] was approached by the
Security in Charge A. Azuela and asked him to sign the quitclaim and waiver and
when he refused to sign, he was told that the following day August 1, 1991, he
[would have] no more assignment and should report to their office. Thinking that it
was only a joke, he reported the following day to the detachment commander Mr. A.
Yadao and he was told that the main office xxx relieved him because he did not sign
the quitclaim and waiver. He reported to their office asking for an assignment but he
was told by R. Rodriguez that I no longer can be given an assignment so I had better
resign. He went back several times to the office of the [security agency] but every
time the answer was the same[:] that he better tender his resignation because he
cannot be given any assignment although respondent was recruiting new guards and
posting them.
Arsenio Gazzingan started to work for the [security agency] on September 29, 1988.
[Note: the introductory paragraph stated September 25, 1988.] He was assigned to
Purefoods Breeding Farm at Calauan, Laguna and given a salary of P54.00 a day
working eight (8) hours. After three (3) months, he was given an examination and
passed the same. On December 26, 1988, he was given an increase and was paid
P64.00/day working eight (8) hours; [h]e remained at the same post for 8 months and
transferred to Purefoods Feed Mill at Sta. Rosa, Laguna, with the same salary and the
same tour of duty, 8 hours[.] After four (4) months, he was transferred to Purefoods
Grand Perry at Sta. Rosa, Laguna, and after eleven (11) days on June 1989, he was
transferred to Rosewood Processing, Inc. at Meycauayan, Bulacan and required to
work for 12 hours at a salary of P94.00/day for one year. [In] June 1990, he was
assigned at Purefoods DELPAN [to] guard x x x a barge loaded with corn and
rendered 12 hours work/day with a salary of only P148.00/day and after 24 days, he
was floated for one month. He reported to [the security agencys] office and was
assigned to Purefoods Breeder Farm in Canlubang rendering 8 hours work per day
receiving only P78.00/day. After 11 days, he asked to be transferred to Manila[.]
[B]ecause of the distance from his home xxx the transfer was approved but instead of
being transferred to Manila, he was assigned to Purefoods B-F-4 in Batangas
rendering 12 hours duty/day and receiving only P148.00 per day until January 28,
1991[;] and again he requested for transfer which was also approved by the [security
agencys] office[,] but since then he was told to come back again and again. [U]p to
the present he has not been given any assignment. Because of the fact that his family
[was] in danger of going hungry, he sought relief from the NLRC-NCR-Arbitration
Branch.
Rodolfo Velasco started working for the [security agency] on January 5, 1987. He
was assigned to PCI Bank Elcano, Tondo Branch, as probationary, and [for] working
8 hours a day for 9 days he received only P400.00. On January 16, 1987, he was
assigned to [the security agencys] headquarters up to January 31, 1987, working 12
hours a day[; he] received only P650.00 for the 16 days. On September 1, 1988, he
was assigned to Imperial Synthetic Rubber Products rendering 12 hours duty per day
until December 31, 1988 and was given a salary of P1,600.00/month. He was later
transferred to various posts like Polypaper Products working 12 hours a day given a
salary of P1,800.00 a month; Paramount Electrical, Inc. working 12 hours a day
given P1,100.00 for 15 days; Rosewood Processing, Inc., rendering 12 hours duty
per day receiving P2,200.00/month until May 16, 1991[;] Alen Engineering
rendering 12 hours duty/day receiving P1,100/month; Purefoods Corporation on
Delta II rendering 12 hours duty per day received P4,200.00 a month. He was
relieved on August 24 and his salary for the period August 20 to 23 has not been paid
by [the security agency.] He was suspended for no cause at all.
Armando Ballon started as security guard with [the security agency] July 1990
[Note: the introductory paragraph stated June 28, 1990] and was assigned to
Purefoods Corporation in Marikina for five (5) months and received a salary of
P50.00 per day for 8 hours. He was transferred to Rosewood Processing, Inc. on
November 6, 1990 rendering 12 hours duty as [d]etachment [c]ommander and a
salary of P2,700.00/month including P200.00 officers allowance until May 15, 1991.
On May 16, 1991, he applied for sick leave on orders of his doctor for 15 days but
the HRM, Miss M. Andres[,] got angry and crumpled his application for sick leave,
that [was] why he was not able to forward it to the SSS. After 15 days, he came back
to the office of [the security agency] asking for an assignment and he was told that
he [was] already terminated. Complainant found out that the reason why Miss
Andres crumpled his application for sick leave was because of the complaint he
previously filed and was dismissed for failure to appear. He then refiled this case to
seek redress from this Office.
77
Jose L. Cabrera started working for the [security agency] as security guard January,
1988 and was assigned to Alencor Residence rendering 12 hours duty per day and
received a salary of P2,400.00 a month for 3 months[.] [I]n May, 1988, he was
transferred to E & L Restaurant rendering 12 hours duty per day and receiv[ing] a
salary of P1,500.00 per month for 6 months[.] [I]n January, 1989, he was transferred
to Paramount rendering 12 hours duty per day receiving only P1,800.00 per month
for 6 months[.] [I]n July 1989, he was transferred to Benito Ong[s] residence
rendering 12 hours duty per day and receiving a salary of P1,400.00 per month for 4
months[.] [I]n December, 1989, he was transferred to Sea Trade International
rendering xxx 12 hours duty per day and receiving a salary of P1,900 per month for 6
months[.] [I]n July, 1990, he was transferred to Holland Pacific & Paper Mills
rendering 8 hours duty per day and receiving a salary of P2,400.00 per month until
September 1990[.] [In] October 1990, he was transferred to RMG residence
rendering 12 hours duty per day receiving a salary of P2,200.00 per month for 3
months[.] [In] February 1991, he was transferred to Purefoods Corporation at
Mabini, Batangas rendering 12 hours duty per day with a salary of P3,600.00 per
month for only one month because he was hospitalized due to a stab wound inflicted
by his [d]etachment [c]ommander. When he was discharged from the hospital and
after he was examined and declared fit to work by the doctor, he reported back to
[the security agencys] office but was given the run-around [and was told to] come
back tomorrow[.] [H]e [could] see that [the agency was] posting new recruits. He
then complained to this Honorable Office to seek redress, hiring the services of a
counsel.
Victor Aldeza started working for the [security agency] on March 21, 1990 and was
assigned to Meridian Condominium, rendering 12 hours work per day and receiving
a salary of P1,500.00 per month. Although he knew that the salary was below
minimum yet he persevered because he had spent much to get this job and stayed on
until October 15, 1990[.] On October 16, 1990, he was transferred to Rosewood
Processing, Inc., rendering 12 hours duty per day and receiving a salary of P2,600.00
per month up to May 15, 1991[.] On the later part of May 1991, he was assigned to
UPSSA (Sandoval Shipyard) rendering 12 hours duty per day receiving a salary of
P3,200.00 per month. [Aldeza] complained to [the security agency] about the salary
but [the agency] did not heed him; thus, he filed his complaint for underpayment[.]
[The agency] upon complainants complaint for underpayment xxx, instead of
adjusting his salary to meet the minimum prescribed by law[,] relieved him and left
him floating[.] xxx When he complained of the treatment, he was told to resign
because he could no longer be given any assignment. Because of this, complainant
was forced to file another complaint for illegal dismissal.
Labor Arbiters Ruling
The labor arbiter noted the failure of the security agency to present evidence to refute
the complainants allegation. Instead, it impleaded the petitioner as third-party
respondent, contending that its actions were primarily caused by petitioners
noncompliance with its obligations under the contract for security services, and the Backwages 81,874.00
subsequent cancellation of the said contract.
Separation Pay __3,843.85 P116,894.70
The labor arbiter held petitioner jointly and severally liable with the security agency
as the complainants indirect employer under Articles 106, 107 and 109 of the Labor 5. Jose Cabrera
Code, citing the case of Spartan Security & Detective Agency, Inc. vs. National
Labor Relations Commission.[8] Wage Differentials P30,032.63

Although the security agency could lawfully place the complainants on floating Backwages 91,483.63
status for a period not exceeding six months, the act was illegal because the former
had issued a newspaper advertisement for new security guards. Since the relation Separation Pay _11,531.55 P133,047.81
between the complainants and the agency was already strained, the labor arbiter
ordered the payment of separation pay in lieu of reinstatement. 6. Victor Aldeza

The award for wage differential, limited back wages and separation pay contained Wage Differentials P49,406.86
the following details:
Backwages 83,795.93
1. Napoleon Mamon
Separation Pay __3,843.85 P137,046.64
Wage Differentials P45,959.02
P789,154.39
Backwages 72,764.38
=========
Separation Pay __7,687.70 P126,411.10
Ruling of Respondent Commission
2. Arsenio Gazzingan
As earlier stated, Respondent Commission dismissed petitioners appeal, because it
Wage Differentials P24,855.76 was allegedly not perfected within the reglementary ten-day period. Petitioner
received a copy of the labor arbiters Decision on April 2, 1993, and it filed its
Backwages 96,096.25 Memorandum of Appeal on April 12, 1993. However, it submitted the appeal bond
on April 26, 1993, or twelve days after the expiration of the period for appeal per
Separation Pay __7,687.70 P128,639.71 Rule VI, Sections 1, 3 and 6 of the 1990 Rules of Procedure of the National Labor
Relations Commission. Thus, it ruled that the labor arbiters Decision became final
3. Rodolfo Velasco and executory on April 13, 1993.

Wage Differentials P66,393.58 In the assailed Order, Respondent Commission denied reconsideration, because
petitioner allegedly failed to raise any palpable or patent error committed by said
Backwages 69,189.30 commission.

Separation Pay _11,531.55 P147,114.43 Assignment of Errors

4. Armando Ballon Petitioner imputes the following errors to Respondent Commission:

Wage Differentials P31,176.85

78
Respondent NLRC committed grave abuse of discretion amounting to lack of
jurisdiction when it dismissed petitioners appeal despite the fact that the same was
perfected within the reglementary period provided by law.
Respondent NLRC committed grave abuse of discretion amounting to lack of
jurisdiction when it dismissed petitioners appeal despite the clearly meritorious
grounds relied upon therein.
Otherwise stated, the petition raises these two issues: first, whether the appeal from
the labor arbiter to the NLRC was perfected on time; and second, whether petitioner
is solidarily liable with the security agency for the payment of back wages, wage
differential and separation pay.
The Courts Ruling
The petition is impressed with some merit and deserves partial grant.
First Issue: Substantial Compliance with the Appeal Bond Requirement
The perfection of an appeal within the reglementary period and in the manner
prescribed by law is jurisdictional, and noncompliance with such legal requirement is
fatal and effectively renders the judgment final and executory.[9] The Labor Code
provides:
ART. 223. Appeal.Decisions, awards or orders of the Labor Arbiter are final and
executory unless appealed to the Commission by any or both parties within ten (10)
calendar days from receipt of such decisions, awards, or orders. xxx
xxxxxxxxx
In case of a judgment involving a monetary award, an appeal by the employer may
be perfected only upon the posting of a cash or surety bond issued by a reputable
bonding company duly accredited by the Commission in the amount equivalent to
the monetary award in the judgment appealed from.
x x x x x x x x x.
Indisputable is the legal doctrine that the appeal of a decision involving a monetary
award in labor cases may be perfected only upon the posting of a cash or surety
bond.[10] The lawmakers intended the posting of the bond to be an indispensable
requirement to perfect an employers appeal.[11]
However, in a number of cases, this Court has relaxed this requirement in order to
bring about the immediate and appropriate resolution of controversies on the
merits.[12] Some of these cases include: (a) counsels reliance on the footnote of the
79
notice of the decision of the labor arbiter that the aggrieved party may appeal xxx
within ten (10) working days; (b) fundamental consideration of substantial justice;
(c) prevention of miscarriage of justice or of unjust enrichment, as where the tardy
appeal is from a decision granting separation pay which was already granted in an
earlier final decision; and (d) special circumstances of the case combined with its
legal merits or the amount and the issue involved.[13]
In Quiambao vs. National Labor Relations Commission,[14] this Court ruled that a
relaxation of the appeal bond requirement could be justified by substantial
compliance with the rule.
In Globe General Services and Security Agency vs. National Labor Relations
Commission,[15] the Court observed that the NLRC, in actual practice, allows the
reduction of the appeal bond upon motion of the appellant and on meritorious
grounds; hence, petitioners in that case should have filed a motion to reduce the bond
within the reglementary period for appeal.
That is the exact situation in the case at bar. Here, petitioner claims to have received
the labor arbiters Decision on April 6, 1993.[16] On April 16, 1993, it filed, together
with its memorandum on appeal[17] and notice of appeal, a motion to reduce the
appeal bond[18] accompanied by a surety bond for fifty thousand pesos issued by
Prudential Guarantee and Assurance, Inc.[19] Ignoring petitioners motion (to reduce
bond), Respondent Commission rendered its assailed Resolution dismissing the
appeal due to the late filing of the appeal bond.
The solicitor general argues for the affirmation of the assailed Resolution for the sole
reason that the appeal bond, even if it was filed on time, was defective, as it was not
in an amount equivalent to the monetary award in the judgment appealed from. The
Court disagrees.
We hold that petitioners motion to reduce the bond is a substantial compliance with
the Labor Code. This holding is consistent with the norm that letter-perfect rules
must yield to the broader interest of substantial justice.[20]
Where a decision may be made to rest on informed judgment rather than rigid rules,
the equities of the case must be accorded their due weight because labor
determinations should not only be secundum rationem but also secundum
caritatem.[21] A judicious reading of the memorandum of appeal would have made it
evident to Respondent Commission that the recourse was meritorious. Respondent
Commission acted with grave abuse of discretion in peremptorily dismissing the
appeal without passing upon -- in fact, ignoring -- the motion to reduce the appeal
bond.
We repeat: Considering the clear merits which appear, res ipsa loquitur, in the appeal
from the labor arbiters Decision, and the petitioners substantial compliance with
rules governing appeals, we hold that the NLRC gravely abused its discretion in
dismissing said appeal and in failing to pass upon the grounds alleged in the Motion
for Reconsideration.
Second Issue: Liability of an Indirect Employer
The overriding premise in the labor arbiters Decision holding the security agency
and the petitioner liable was that said parties offered no evidence refuting or
rebutting the complainants computation of their monetary claims. The arbiter ruled
that petitioner was liable in solidum with the agency for salary differentials based on
Articles 106, 107 and 109 of the Labor Code which hold an employer jointly and
severally liable with its contractor or subcontractor, as if it is the direct employer.
We quote said provisions below:
ART. 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.
x x x x x x x x x.
ART. 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.
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.
Upon the other hand, back wages and separation pay were awarded because the
complainants were constructively and illegally dismissed by the security agency
which placed them on floating status and at the same time gave assignments to newly
hired security guards. Noting that the relationship between the security agency and
the complainants was already strained, the labor arbiter granted separation pay in lieu
of reinstatement.
80
In its memorandum of appeal, petitioner controverts its liability for the mentioned
monetary awards on the following grounds:[22]
A. Complainant Jose Cabrera never rendered security services to [petitioner] or was
[n]ever assigned as security guard [for] the latters business establishment;
B. Complainants Napoleon Mamon, Arsenio Gazzingan, Rodolfo Velasco, Armando
Ballon and Victor Aldeza rendered security services to [petitioner] for a fixed period
and were thereafter assigned to other entities or establishments or were floated or
recalled to the headquarters of Veterans; and,
C. The relationship between [petitioner] and Veterans was governed by a Contract
for Guard Services under which [petitioner] dutifully paid a contract price of
P3,500.00 a month for 12 hour duty per guard and later increased to P4,250.00 a
month for 12 hour duty per guard which are within the prevailing rates in the
industry and in accordance with labor standard laws.
The first two grounds are meritorious. Legally untenable, however, is the contention
that petitioner is not liable for any wage differential for the reason that it paid the
employees in accordance with the contract for security services which it had entered
into with the security agency. Notwithstanding the service contract between the
petitioner and the security agency, the former is still solidarily liable to the
employees, who were not privy to said contract, pursuant to the aforecited provisions
of the Code. Labor standard legislations are enacted to alleviate the plight of workers
whose wages barely meet the spiraling costs of their basic needs.
They are considered written in every contract, and stipulations in violation thereof
are considered not written. Similarly, legislated wage increases are deemed
amendments to the contract. Thus, employers cannot hide behind their contracts in
order to evade their or their contractors or subcontractors liability for noncompliance
with the statutory minimum wage.
The joint and several liability of the employer or principal was enacted to ensure
compliance with the provisions of the Code, principally those on statutory minimum
wage. The contractor or subcontractor is made liable by virtue of his or her status as
a direct employer, and the principal as the indirect employer of the contractors
employees. This liability facilitates, if not guarantees, payment of the workers
compensation, thus, giving the workers ample protection as mandated by the 1987
Constitution.[23] This is not unduly burdensome to the employer. Should the indirect
employer be constrained to pay the workers, it can recover whatever amount it had
paid in accordance with the terms of the service contract between itself and the
contractor.[24]
Withal, fairness likewise dictates that the petitioner should not, however, be held
liable for wage differentials incurred while the complainants were assigned to other
companies. Under these cited provisions of the Labor Code, should the contractor
fail to pay the wages of its employees in accordance with law, the indirect employer
(the petitioner in this case), is jointly and severally liable with the contractor, but
such responsibility should be understood to be limited to the extent of the work
performed under the contract, in the same manner and extent that he is liable to the
employees directly employed by him. This liability of petitioner covers the payment
of the workers performance of any work, task, job or project. So long as the work,
task, job or project has been performed for petitioners benefit or on its behalf, the
liability accrues for such period even if, later on, the employees are eventually
transferred or reassigned elsewhere.
We repeat: The indirect employers liability to the contractors employees extends
only to the period during which they were working for the petitioner, and the fact
that they were reassigned to another principal necessarily ends such responsibility.
The principal is made liable to his indirect employees, because it can protect itself
from irresponsible contractors by withholding such sums and paying them directly to
the employees or by requiring a bond from the contractor or subcontractor for this
purpose.
Similarly, the solidary liability for payment of back wages and separation pay is
limited, under Article 106, to the extent of the work performed under the contract;
under Article 107, to the performance of any work, task, job or project; and under
Article 109, to the extent of their civil liability under this Chapter [on payment of
wages].
These provisions cannot apply to petitioner, considering that the complainants were
no longer working for or assigned to it when they were illegally dismissed.
Furthermore, an order to pay back wages and separation pay is invested with a
punitive character, such that an indirect employer should not be made liable without
a finding that it had committed or conspired in the illegal dismissal.
The liability arising from an illegal dismissal is unlike an order to pay the statutory
minimum wage, because the workers right to such wage is derived from law. The
proposition that payment of back wages and separation pay should be covered by
Article 109, which holds an indirect employer solidarily responsible with his
contractor or subcontractor for any violation of any provision of this Code, would
have been tenable if there were proof -- there was none in this case -- that the
principal/employer had conspired with the contractor in the acts giving rise to the
illegal dismissal.
With the foregoing discussion in mind, we now take up in detail the petitioners
liability to each of the complainants.
Case No. NCR-00-08-04630-91
81
Mamon worked for petitioner for a period of a little more than one year beginning
February 3, 1990 until May 16, 1991. Inasmuch as petitioner was his indirect
employer during such time, it should thus be severally liable for wage differential
from the time of his employment until his relief from duty. He was relieved upon the
request of petitioner, after it had learned of the complaint for underpayment of wages
filed by Mamon and several other security guards.
However, this was not a dismissal from work because Mamon was still working for
the security agency and was immediately assigned, on May 29, 1991, to its other
client, Mead Johnson Philippines. His dismissal came about later, when he refused to
sign a quitclaim and waiver in favor of the security agency. Thus, he was illegally
dismissed by the agency when he was no longer employed by petitioner, which
cannot thus be held liable for back wages and separation pay in his case.
Napoleon Mamon x x x received an order transferring him to Rosewood Processing,
Inc. effective x x x February 3, 1990; x x x. On May 16, 1991, Rosewood
Processing, Inc. asked for the relief of Mamon and other guards at Rosewood
because they came to know that complainants filed a complaint for underpayment on
May 13, 1991 with the National Labor Relations Commission[.] x x x After that,
complainant was floated until May 29, 1991 when he was assigned to Mead Johnson
Philippines Corporation. x x x [A] week later, [the security agency] received
summons on complainants complaint for underpayment and he was called to [the
security agency] office. When he reported, he was told to sign a Quitclaim and
Waiver[] by Lt. R. Rodriguez x x x and x x x if he [did] not sign the quitclaim and
waiver, he [would] be relieved from his post and [would] no longer be given any
assignment. xxxx At the end of July 1991, he was approached by the Security in
Charge, A. Azuela, x x x [for him] to sign the quitclaim and waiver[,] and when he
refused to sign, he was told that x x x he ha[d] no more assignment and should report
to their office. x x x [H]e reported the following day to the detachment commander,
Mr. A. Yadao and he was told that the main office ha[d] relieved him x x x. He
reported to their office asking for an assignment but he was told by R. Rodriguez that
I no longer can be given an assignment so I had better resign. He went back several
times to the office of the [security agency] but every time the answer was the same x
x x although respondent was recruiting new guards and posting them.[25]
Case No. NCR-00-07-03966-91
Gazzingan was assigned to petitioner as a security guard for a period of one year. For
said period, petitioner is solidarily liable with the agency for underpayment of wages
based on Articles 106, 107 and 109 of the Code.
Arsenio Gazzingan x x x after eleven (11) days on June 1989, xxx was transferred to
Rosewood Processing, Inc. x x x. [I]n June 1990, he was assigned at Purefoods
DELPAN x x x. After 11 days, he asked to be transferred to Manila because of the
distance from his home and the transfer was approved but instead of being
transferred to Manila, he was assigned to Purefoods B-F-4 in Batangas x x x again he
requested for transfer which was also approved by the [security agency] office but
since then he was told to come back again and again and up to the present he has not
been given any assignment. x x x x.[26]
His dismissal cannot be blamed on the petitioner. Like Mamon, Gazzingan had
already been assigned to another client of the agency when he was illegally
dismissed. Thus, Rosewood cannot be held liable, jointly and severally with the
agency, for back wages and separation pay.
Case No. NCR-00-07-03967-91
Rodolfo Velasco was assigned to petitioner from December 31, 1988 until May 16,
1991. Thus, petitioner is solidarily liable for wage differentials during such period.
Petitioner is not, however, liable for back wages and separation pay, because Velasco
was no longer working for petitioner at the time of his illegal dismissal.
Rodolfo Velasco started working for the [security agency] on January 5, 1987. x x x
[On] December 31, 1988 xxx he was x x x transferred to various posts like x x x
Rosewood Processing, Inc., x x x until May 16, 1991 x x x. He was relieved on
August 24 and his salary for the period August 20 to 23 has not been paid by [the
security agency]; [h]e was suspended for no cause at all.[27]
Case No. NCR-00-07-0445-91
Petitioner was the indirect employer of Ballon during the period beginning
November 6, 1990 until May 15, 1991; thus, it is liable for wage differentials for said
period. However, it is not liable for back wages and separation pay, as there was no
evidence presented to show that it participated in Ballons illegal dismissal.
x x x [H]e [Armando Ballon] was transferred to Rosewood Processing, Inc. on
November 6, 1990 rendering 12 hours duty as [d]etachment [c]ommander and
received a salary of P2,700.00/month including P200.00 officers allowance until
May 15, 1991. On May 16, 1991, he applied for sick leave on orders of his doctor for
15 days but the HRM, Miss M. Andres[,] got angry and crumpled his application for
sick leave that is why he was not able to forward it to the SSS. After 15 days, he
came back to the office of [the security agency] asking for an assignment and he was
told that he [was] already terminated. Complainant found out that the reason why
Miss Andres crumpled his application for sick leave was because of the complaint he
previously filed and was dismissed for failure to appear. He then refiled this case to
seek redress from this Office.[28]
Case No. NCR-00-08-05030-91
82
Petitioner is liable for wage differentials in favor of Aldeza during the period he
worked with petitioner, that is, October 16, 1990 until May 15, 1991.
x x x On October 16, 1990, he [Aldeza] was transferred to Rosewood Processing,
Inc., x x x up to May 15, 1991[.] On the later part of May 1991, he was assigned to
UPSSA (Sandoval Shipyard) x x x. Complainant [sic] complained to [the security
agency] about the salary but [the security agency] did not heed him; thus, he filed his
complaint for underpayment[.] [The security agency] upon complainants complaint
for underpayment reacted xxx, instead of adjusting his salary to meet the minimum
prescribed by law[,] relieved him and left him floating[;] and when he complained of
the treatment, he was told to resign because he could no longer be given any
assignment. Because of this, complainant was forced to file another complaint for
illegal dismissal.[29]
The cause of Aldezas illegal dismissal is imputable, not to petitioner, but solely to
the security agency. In Aldezas case, the solidary liability for back wages and
separation pay arising from Articles 106, 107 and 109 of the Code has no
application.
Case No. NCR-00-09-05617-91
Cabrera was an employee of the security agency, but he never rendered security
services to petitioner. This fact is evident in the labor arbiters findings:
Jose L. Cabrera started working for the [security agency] as [a] security guard on
January, 1988 and was assigned to Alencor Residence x x x. [I]n May, 1988, he was
transferred to E & L Restaurant x x x[.] [I]n January, 1989, he was transferred to
Paramount x x x[.] [I]n July 1989, he was transferred to Benito Ong[s] residence x x
x[.] [I]n December, 1989, he was transferred to Sea Trade International xxx[.] [I]n
July, 1990, he was transferred to Holland Pacific & Paper Mills x x x[.] [I]n October
1990, he was transferred to RMG [R]esidence x x x[.] [I]n February 1991, he was
transferred to Purefoods Corporation at Mabini, Batangas x x x. When he was
discharged from the hospital and after he was examined and declared fit to work by
the doctor, he reported back to [the security agency] office but was given the run-
around [and was told to] come back tomorrow[,] although he [could] see that [it was]
posting new recruits. He then complained to this Honorable Office to seek redress,
hiring the services of a counsel.[30]
Hence, petitioner is not liable to Cabrera for anything.
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 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. No costs.

SO ORDERED.

83