Geling, Ma. Kristiana M.

3HR1

PHILIPPINE AIRLINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION

[G.R. No. 125792. November 9, 1998]

FACTS
Petitioner PAL entered into a service agreement with Stellar, a domestic corporation engaged in the
business of job contracting janitorial services. Pursuant to this agreement, Stellar hired workers to
perform janitorial and maintenance services for PAL, to which Parenas and the 47 other private
respondents belong. The latters works were under the supervision of Stellars supervisors and
timekeepers. They were also furnished by Stellar with janitorial supplies such as vacuum cleaners and
polishers. The contract expired in 1990. PAL called for the bidding of its janitorial requirements. But PAL
informed Stellar that the service agreement would not be renewed since janitorial services were bidded to
other job contractors. Alleging that they were illegally dismissed, the private respondents filed with the
NLRC complaints against PAL for illegal dismissal and for payment of separation pay. NLRC held PAL
liable for the payment of separation pay.

ISSUE:
1. Whether or not the individual respondents are regular employees of PAL
2. Whether or not PAL should be held liable for the payment of separation pay.
3. Whether or not the individual private respondents was a labor-only contractor
4. Whether the individual private respondents became regular employees of PAL because they are
allowed to continue working for petitioner after the expiration of the service contract

RULING
1. No. The main business of STELLAR is the supply of manpower to perform janitorial services for
its clients, and the individual respondents were janitors engaged to perform activities that were
necessary and desirable to STELLARs enterprise. The individual respondents were STELLARs
regular employees, and there was no valid cause for their dismissal. Its STELLARs regular
employees not PAL.
2. No. It is evident that there was permissible job contracting for the entire duration of the
employment of private respondents. In fact, Stellar claims that it fails under the definition of an
independent job contractor. This being the case, employer employee relationship never existed
between PAL and private respondents. In legitimate job contracting, no employer-employee
relation exists between the principal and the jdb contractors employees. The principal (PAL) is
responsible to the job contractors employees only for the payment of wages and not separation
pay.
JOB CONTRACTING; In legitimate job contracting, there exists no employer-employee relation
between the principal and the worker cupplied by a job contractor. The principal is considered
employer of the job contractors employees only for the payment of wages but not for separation pay.

3. 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 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.

4. Yes. Petitioners continued employment of [complainants] inspite of the expiration of the janitorial
contract is an implied absorption to the point of making them its regular employees and making
illegal their subsequent termination from service.