Phil Bank v NLRC

FACTS:
Petitioner and CESI entered into a letter agreement wherein CESI will provide “Temporary
Services” to petitioner. Attached to the letter was a list of messengers, assigned to work with
the petitioner, including respondent Orpiada. Orpiada rendered services within the premises
of the bank. On October 1976, petitioner requested CESI to withdraw Orpiada’s assignment
because Orpiada’s services were no longer needed. Thus,Orpiada filed a complaint against
petitioner for illegal dismissal and failure top ay the 13th month pay.

ISSUE:
W/N an ER-EE relationship existed between the bank and respondent

HELD:
Yes.In the case at bar, Orpiada is not previously selected by the bank but was assigned to
work by CESI. The selection of Orpiada by CESI, was however subject to the acceptance of
the bank. With respect to the payment of Orpiada’s wages, the bank remitted to CESI the
daily rate or Orpiada and CESI pays the latter his wages. He was also listed in the payroll of
CESI with SSS deduction. In respect of the power of dismissal, the bank requested CESI to
withdraw Orpiada’s assignment, which resulted to the latter’s termination. With regards to
power of control, Orpiada performed his functions within the bank’s premises and not
inCESA/Payment of wages and power of dismissal exist between CESI and Orpiada.
However, selection and control exist between Orpiada and the bank. Thus, it is necessary to
determine the relationship between the bank and CESI, whether the latter is a job
(independent) contactor or a labor-only contracting.In the present case, the undertaking of
CESI in favor of the bank was not the performance of a specific job,but to produce its client –
the bank – with a certain number of persons to work as messengers. Thus, Orpiada utilized
the premises and office equipment of the bank and not of CESI. Orpiada worked in the bank
for a period of 16 months. Under the Labor Code, any employee who has rendered at least 1
year, whether continuous or not, shall be considered as a regular employee. Therefore, CESI
was only engaged in a labor-only contracting with petitioner and Orpiada. As a result,
petitioner is liable to Opiada as if Opiada had been directly employer by the bank. Wherefore,
petition of certiorari is denied.
TO : CCV
FROM : ILG
DATE : 19 May 2014

Aliviado v. Procter & Gamble Philippines, Inc.

G.R. No. 160506, 614 SCRA 563, March 9, 2010

FACTS:
• Petitioners worked as merchandisers of respondent Procter & Gamble Philippines, Inc.
(hereafter, P&G) from various dates, allegedly starting as early as 1982 or as late as June 1991,
to either May 5, 1992 or March 11, 1993.
• Petitioners signed employment contracts with respondent Promm-Gem, Inc. (Promm-Gem) and
Sales and Promotions Services (SAPS). They were employed for five months at time, assigned
to different stations in supermarkets.
• SAPS and Promm-Gem paid petitioners’ wages and imposed disciplinary measures on
petitioners when warranted.
• P&G entered into contracts with SAPS and Promm-Gem for the promotion of its products. It
appears that petitioners were assigned to promote P&G’s products.
• In December 1991, petitioners filed a complaint for regularization and other money claims
against P&G. The complaint was later amended to include charges of illegal dismissal.
• Labor Arbiter: Dismissed the complaint; there was no employer-employee relationship (EER)
between petitioners and P&G, as the former were employed by Promm-Gem and SAPS.
o Applied the four-fold test for EER:
1. Selection and engagement;
2. Payment of wages;
3. Power of dismissal;
4. Power of control.
o Declared Promm-Gem and SAPS legitimate job contractors.
• Petitioners appealed to the NLRC.
• NLRC: Dismissed the appeal, affirmed the Labor Arbiter’s Decision. Motion for
reconsideration denied.
• Petitioners sought recourse with the Court of Appeals via a petition for certiorari under Rule
65 of the Rules of Court.
• CA: Denied the petition and affirmed the NLRC’s Decision with modification.
o P&G ordered to pay service incentive leave pay to petitioners.
o Petitioners’ motion for reconsideration was denied.
• Hence, this petition for review by certiorari under Rule 45 of the Rules of Court.

ISSUES + RATIO:

Whether or not contracting out of a company’s core activities is allowed under the Labor
Code and its Implementing Rules. YES.
• To be sure, the Labor Code and its Implementing Rules do not prohibit job contracting. The
law allows contracting arrangements for the performance of specific jobs, works or services.
• Indeed, it is management prerogative to farm out any of its activities, regardless of whether
such activity is peripheral or core in nature. However, in order for such outsourcing to be
 valid, it must be made to an independent contractor because the current labor rules expressly
prohibit labor-only contracting.
• Labor-only contracting exists where the “contractor” merely recruits, supplies or places
workers to perform a job, work or service for a principal. Moreover, any of the following
elements must concur:
o 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
o The contractor does not exercise the right to control over the performance of the work
of the contractual employee.

Whether or not Promm-Gem is engaged in labor-only contracting. NO; it is a legitimate job

contractor.
• It has substantial capital, as shown by its financial statements.
o Authorized capital stock – P1 million.
o Paid-in capital – P500,000.
• It has substantial investments in the form of warehouses, office spaces, and vehicles.
• Promm-Gem has other clients aside from P&G.
• Promm-Gem provided its workers with uniforms and materials. The latter were considered
regular employees.

Whether or not SAPS is engaged in labor-only contracting. YES.

• It does not have substantial capital—its paid-in capital is only P31,250.
o Monthly payroll already totaled P44,561. Its contracts with P&G were for six-month
periods. Its capital is not even sufficient for one month’s payroll.
o SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for the period
required for it to generate its needed revenue to sustain its operations independently.
• Neither is there a showing of substantial investment in tools, equipment or other assets.
• Furthermore, petitioners’ activities which consisted of merchandising and promotion of P&G
products are directly related to the manufacturing business.
• Considering that SAPS has no substantial capital or investment and the workers it recruited are
performing activities which are directly related to the principal business of P&G, the Court
found that SAPS is engaged in “labor-only contracting.”

Whether or not an employer-employee relationship exists between P&G and petitioners.

YES.
• Where labor-only contracting exits, the law establishes an EER between the employer and the
employees of the “contractor.”
• Rationale: to prevent circumvention of labor laws.
• The petitioners recruited by SAPS are considered P&G employees. The petitioners who worked
under Promm-Gem are not, since the latter is a legitimate job contractor.

Whether or not petitioners (Promm-Gem employees) were illegally dismissed. YES.

• Promm-Gem dismissed petitioners for “grave misconduct and breach of trust” after they sought
regularization from P&G. Promm-Gem claimed that this “assailed the integrity of the company
as a legitimate and independent promotion firm.”
• To be a just cause for dismissal, misconduct (a) must be serious; (b) must relate to the
performance of the employee’s duties; and (c) must show that the employee has become unfit
to continue working for the employer.
o In the instant case, petitioners-employees of Promm-Gem may have committed an error
of judgment in claiming to be employees of P&G, but it cannot be said that they were
motivated by any wrongful intent in doing so.
 o Thus, petitioners are guilty only of simple misconduct.
• Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful
breach of the trust reposed in the employee by his employer.
o The erring employee must hold a position of responsibility or of trust and confidence.
And, in order to constitute a just cause for dismissal, the act complained of must be
work-related and must show that the employee is unfit to continue to work for the
employer.
o Here, the petitioners-employees of Promm-Gem have not been shown to be occupying
positions of responsibility or of trust and confidence. Neither is there any evidence to
show that they are unfit to continue to work as merchandisers for Promm-Gem.

Whether or not petitioners (SAPS-P&G employees) were illegally dismissed. YES.

• They were not afforded procedural due process (two notice rule). They were merely verbally
informed of the termination of their services.
• Petitioners were dismissed upon the initiation of P&G. When the latter did not renew its
contract with SAPS, petitioners’ services were automatically terminated evidently because
SAPS had no other clients.

Whether or not petitioners are entitled to the payment of damages, costs, and attorney’s fees.
YES.
• With regard to the employees of Promm-Gem, their dismissals were not attended with bad faith
so as to warrant the award of moral and exemplary damages.
• As for P&G, the records show that it dismissed its employees through SAPS in a manner
oppressive to labor. The sudden and peremptory barring of the concerned petitioners from
work, and from admission to the work place, after just a one-day verbal notice, and for no valid
cause bellows oppression and utter disregard of the right to due process of the concerned
petitioners. Hence, an award of moral damages is called for.
• P&G is also liable for attorney’s fees.
• Finally, all petitioners having been illegally dismissed, they are entitled to reinstatement with
backwages.

DISPOSITION: Petition granted. Case remanded to Labor Arbiter for computation of

backwages and other benefits.

Aliviado v. Procter & Gamble Philippines, Inc.

(Motion to refer the case to the Supreme Court en banc)
G.R. No. 160506, 650 SCRA 400, June 6, 2011

ISSUE + RATIO:

Whether or not the Court erred in ruling that SAPS is a labor-only contractor. NO.
• P&G claims that the Court should have applied the four-fold test, specifically the “control test,”
in determining whether SAPS is a legitimate job contractor or a labor-only contractor.
• This is incorrect. The “control test” is only one of the ways to determine the existence of labor-
only contracting.
• Pertinently, Department Order No. 18-02 provides:

Section 5. Prohibition against labor-only contracting. — Labor only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,
and ANY of the following elements are 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) [T]he contractor does not exercise the right to control over the performance of the work of the
contractual employee. (Emphasis supplied)

• In the case at bar, the Court already concluded that (1) SAPS merely recruited workers for
P&G, (2) it did not have substantial capital or investment, and (3) the workers performed
activities directly related to the business of the principal.
• Hence, SAPS may be considered a labor-only contractor under D.O. 18-02, Sec. 5 (i).
• In Coca-Cola Bottlers Phils., Inc. v. Agito, the Court ruled:

“The law clearly establishes an employer-employee relationship between the principal employer and the
contractor’s employee upon a finding that the contractor is engaged in ‘labor-only’ contracting. Article
106 of the Labor Code categorically states: ‘There is labor-only contracting where the person supplying
workers to an 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.’ Thus,
performing activities directly related to the principal business of the employer is only one of the
two indicators that labor-only contracting exists; the other is lack of substantial capital or
investment. The Court finds that both indicators exist in the case at bar.” (Emphasis supplied)

DISPOSITION: Judgment affirmed.