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AUDION ELECTRIC CO., INC., petitioner, vs.

NATIONAL LABOR
RELATIONS COMMISSION and NICOLAS MADOLID, respondents.

DECISION

GONZAGA_REYES, J.:

In this special civil action for certiorari, petitioner seeks the


annulment of the resolution[1] dated March 24, 1992, of the National
Labor Relations Commission in NLRC NCR-CA No. 001034-90 and the
Order[2] dated July 31, 1992, denying petitioners motion for
reconsideration dated April 22, 1992.

The facts of the case as summarized by Labor Arbiter Cresencio R.


Iniego in his decision rendered on November 15, 1990 in NLRC-NCR
Case No. -00-08-03906-89, and which are quoted in the questioned
Resolution dated March 24, 1992 of the public respondent are as
follows:

From the position paper and affidavit corroborated by oral testimony,


it appears that complainant was employed by respondent Audion
Electric Company on June 30, 1976 as fabricator and continuously
rendered service assigned in different offices or projects as helper
electrician, stockman and timekeeper. He has rendered thirteen (13)
years of continuous, loyal and dedicated service with a clean
record. On August 3, complainant was surprised to receive a letter
informing him that he will be considered terminated after the turnover
of materials, including respondents tools and equipments not later
than August 15, 1989.

Complainant claims that he was dismissed without justifiable cause


and due process and that his dismissal was done in bad faith which
renders the dismissal illegal. For this reason, he claims that he is
entitled to reinstatement with full backwages. He also claims that he
is entitled to moral and exemplary damages. He includes payment of
his overtime pay, project allowance, minimum wage increase
adjustment, proportionate 13th month pay and attorneys fees.

On its part, respondent merely relied on its unverified letter-


communication signed by its project manager, dated September 25,
1989, the contents of which are as follows:

Your Honor:

Apropos to the complaints filed by NICOLAS MADOLID with your


honorable office are as stated and corresponding allegations as our
defense to said complaints.

A. ILLEGAL DISMISSAL- There is no course (sic) to complain since


employment contract signed by complainant with respondent is co-
terminus with the project. xxx

B. UNPAID WAGES- Admitting that salary payment was delayed due


to late remittance of collection from respondents Japanese prime
contractor but nonetheless settled with complainant as evidenced by
signed Payroll Slips by complainant. xxx

C. NON-PAYMENT OF 13th MONTH PAY- As earlier admitted, there


was a relative delay in the remittance of collection payment from our
Japanese prime contractor but respondent knowing the economic
predecament (sic) of complainant has seen to it that respondent be
satisfied without awaiting for remittance of 13th month from its
Japanese contractor. attached is a xxx

In full satisfaction of the enumerated complaints made by


complainant NICOLAS MADOLID against respondent THE AUDION
ELECTRIC CO., INC., we pray that charges against respondent be
withdrawn and dropped.[3]

On November 15, 1990, Labor Arbiter Cresencio R. Iniego rendered a


decision, the dispositive portion states:
WHEREFORE, judgment is hereby rendered ordering
respondent Audion Electric Co., Inc. and/or Robert S. Coran,
Manager:

1. to reinstate complainant Nicolas Madolid to his former position with


full backwages from the date of his dismissal on August 15, 1989 up
to the signing of this decision without loss of seniority rights in the
amount of P34,710.00;

2. to pay complainant his overtime pay for the period March 16 to


April 3, 1989 in the amount of P 765.63;

3. to pay complainant his project allowances as follows:

April 16, 1989 to April 30, 1989 P30.00

May 1 to May 15, 1989 P45.00

May 16 to May 31, 1989 P30.00

June 1 to June 15, 1989 P45.00

June 16 to June 30, 1989 P30.00

July 1 to July 15, 1989 P30.00

July 16 to July 31, 1989 P45.00

4. to pay complainant the minimum wage increase adjustment from


August 1 to 14, 1989 in the amount of P256.50;

5. to pay complainant his proportionate 13th month pay from January


to May 1988 in the amount of P700.00;

6. to pay complainant moral and exemplary damages in the amount of


P20,000.00; and

7. to pay attorneys fees equivalent to 10% of the total award of


complainant.[4]
Petitioner appealed to the National Labor Relations Commission
which rendered the questioned Resolution dated March 24, 1992
dismissing the appeal.

The motion for reconsideration filed by petitioner was denied by the


NLRC in its Order dated July 31, 1992.

Petitioner is now before us raising the following issues:

THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF


DISCRETION IN AFFIRMING THE DECISION OF THE LABOR ARBITER
DIRECTING THE REINSTATEMENT OF THE PRIVATE RESPONDENT
TO HIS FORMER POSITION WITHOUT LOSS OF SENIORITY RIGHTS
AND WITH BACKWAGES AMOUNTING TO P34,710.00
NOTWITHSTANDING THE FACT THAT THE PRIVATE RESPONDENT
WAS MERELY A PROJECT EMPLOYEE.

II

THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF


DISCRETION WHEN IT AWARDED THE CLAIM FOR OVERTIME PAY
TO PRIVATE RESPONDENT WHEN NO OVERTIME WORK WAS
RENDERED.

III

THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF


DISCRETION WHEN IT AWARDED THE CLAIMS OF PRIVATE
RESPONDENT FOR PROJECT ALLOWANCES, MINIMUM WAGE
INCREASE ADJUSTMENT AND PROPORTIONATE 13TH MONTH PAY
WITHOUT ANY EVIDENCE TO PROVE THE SAME.

IV

THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF


DISCRETION WHEN IT DENIED PETITIONERS CLAIM THAT IT WAS
DENIED DUE PROCESS.
V

THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF


DISCRETION WHEN IT DID NOT TOUCH UPON MUCH LESS DISCUSS
THE PETITIONERS ASSIGNMENTS OF ERRORS IN ITS APPEAL.

VI

THE RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF


DISCRETION IN AWARDING MORAL AND EXEMPLARY DAMAGES IN
THE AMOUNT OF P20,000 AS WELL AS ATTORNEYS FEES
CONSIDERING THAT THE SAME ARE WITHOUT FACTUAL AND
LEGAL BASIS.[5]

The core issues presented before us are (a) whether the respondent
NLRC committed grave abuse of discretion amounting to lack or
excess of jurisdiction when it ruled that private respondent was a
regular employee and not a project employee, (b) whether petitioner
was denied due process when all the money claims of private
respondent, i.e. overtime pay, project allowances, salary differential,
proportionate 13th month pay, moral and exemplary damages as well
as attorneys fees, were granted.

Petitioner contends that as an electrical contractor, its business


depends on contracts it may obtain from private and government
establishments, hence the duration of the employment of its work
force is not permanent but co-terminous with the project to which
they are assigned; that the conclusion reached by the Labor Arbiter
and affirmed by the respondent court that private respondent was a
regular employee of petitioner was merely based on mere allegations
of private respondent since the Labor Arbiter did not consider the
letter-communication filed by petitioner through its project manager
for the reason that it was not under oath; that although private
respondents employment records showed that he was hired by
petitioner as fabricator, helper/electrician, stockman and timekeeper
in its various projects from 1976 to August 14, 1989, the same
employment record showed a gap in his employment service by
reason of completion of a particular project, hence, private
respondent would be re-assigned to other on-going projects of the
petitioner or be laid off if there is no available project; that private
respondent is a project worker whose employment is co-terminous
with the completion of project, regardless of the number of projects in
which he had worked as provided under Policy Instruction No. 20 of
the Labor Department defining project employees as those employed
in connection with a particular construction project. Petitioner relies
on the rulings laid down in Sandoval Shipyard Inc. vs. NLRC[6] and
Cartagenas vs. Romago Electric Co., Inc[7] where this court declared
the employment of project employees as co-terminous with the
completion of the project for which they were hired.

Well-settled is the rule that the findings of the NLRC, except when
there is grave abuse of discretion, are practically conclusive on this
Court. It is only when the NLRCs findings are bereft of any substantial
support from the records that the Court may step in and proceed to
make its own independent evaluation of the facts.[8] We see no reason
to deviate from the rule.

In finding that private respondent was a regular employee of


petitioner and not a mere project employee, the respondent
Commission held:

"Firstly, respondents assigning complainant to its various projects


did not make complainant a project worker. As found by the Labor
Arbiter, it appears that complainant was employed by respondent xxx
as fabricator and or projects as helper electrician, stockman and
timekeeper. Simply put, complainant was a regular non-project
worker."[9]

Private respondents employment status was established by


the Certification of Employment dated April 10, 1989 issued by
petitioner which certified that private respondent is a bonafide
employee of the petitioner from June 30, 1976 up to the time the
certification was issued on April 10, 1989. The same certificate of
employment showed that private respondents exposure to their field
of operation was as fabricator, helper/electrician,
stockman/timekeeper.This proves that private respondent was
regularly and continuously employed by petitioner in various job
assignments from 1976 to 1989, for a total of 13 years. The alleged
gap in employment service cited by petitioner does not defeat private
respondents regular status as he was rehired for many more projects
without interruption and performed functions which are vital,
necessary and indispensable to the usual business of petitioner.

We have held that where the employment of project employees is


extended long after the supposed project has been finished, the
employees are removed from the scope of project employees and
considered regular employees.[10]Private respondent had presented
substantial evidence to support his position, while petitioner merely
presented an unverified position paper merely stating therein that
private respondent has no cause to complain since the employment
contract signed by private respondent with petitioner was co-
terminous with the project. Notably, petitioner failed to present such
employment contract for a specific project signed by private
respondent that would show that his employment with the petitioner
was for the duration of a particular project. Moreover, notwithstanding
petitioners claim in its reply that in taking interest in the welfare of its
workers, petitioner would strive to provide them with more
continuous work by successively employing its workers, in this case,
private respondent, petitioner failed to present any report of
termination. Petitioner should have submitted or filed as many reports
of termination as there were construction projects actually finished,
considering that private respondent had been hired since 1976. The
failure of petitioner to submit reports of termination supports the
claim of private respondent that he was indeed a regular employee.

Policy Instruction No. 20 of the Department of Labor is explicit that


employers of project employees are exempted from the clearance
requirement but not from the submission of termination report. This
court has consistently held that failure of the employer to file
termination reports after every project completion with the nearest
public employment office is an indication that private respondent was
not and is not a project employee.[11] Department Order No. 19
superseding Policy Instruction No. 20 expressly provides that the
report of termination is one of the indications of project
employment.[12]

As stated earlier, the rule in our jurisdiction is that findings of facts of


the NLRC affirming those of the Labor Arbiter are entitled to great
weight and will not be disturbed if they are supported by substantial
evidence.[13]Substantial evidence is an amount of relevant evidence
which a reasonable mind might accept as adequate to justify a
conclusion.[14] We find no grave abuse of discretion committed by
NLRC in finding that private respondent was not a project employee.

Our ruling in the case of Sandoval Shipyard vs. NLRC, supra, is not in
point. In the said case, the hiring of construction workers was not
continuous for the reason that the shipyard merely accepts contracts
for shipbuilding or for repair of vessels from third parties and, it is
only on occasions when it has work contracts of this nature that it
hires workers for the job which lasts only for less than a year or
longer. With respect to Cartagenas vs. Romago Electric Co. also
relied upon by the petitioner, the complainants were considered
project employees because they were issued appointments from
project to project, which were co-terminous with the phase or item of
work assigned to them in said project, a situation which is not
obtaining in the instant case.

Petitioner further claims that respondent Commission erred in


sustaining the awards for overtime pay, project allowances, minimum
wage increase adjustment and proportionate 13th month pay to
private respondent in the absence of any substantial evidence
supporting the same; that private respondent failed to present any
documentary evidence other than his self-serving allegation that he
actually rendered overtime work and that he failed to specify in his
position paper the actual number of overtime work alleged to have
been rendered; that in petitioners letter-communication filed with the
labor arbiter, it showed that claims for allowances and salary
differential and 13th month pay were already satisfied although
petitioner admitted that there was a delay in the payment which was
not rebutted by private respondent.

We find no merit in petitioners contention.

Private respondent clearly specified in his affidavit the specific dates


in which he was not paid overtime pay, that is, from the period March
16, 1989 to April 3, 1989 amounting to P765.63, project allowance from
April 16, 1989 to July 31, 1989 in the total amount of P255.00, wage
adjustment for the period from August 1, 1989 to August 14, 1989 in
the amount of P256.50 and the proportionate 13th month pay for the
period covering January to May 1988, November-December 1988, and
from January to August 1989. This same affidavit was confirmed by
private respondent in one of the scheduled hearings where he moved
that he be allowed to present his evidence ex-parte for failure of
petitioner or any of his representative to appear thereat. On the other
hand, petitioner submitted its unverified Comment to private
respondents complaint stating that he had already satisfied the
unpaid wages and 13th month pay claimed by private respondent, but
this was not considered by the Labor Arbiter for being unverified. As
a rule, one who pleads payment has the burden of proving it. Even
where the plaintiff must allege non-payment, the general rule is that
the burden rests on the defendant to prove payment, rather than on
the plaintiff to prove non-payment.[15] The debtor has the burden of
showing with legal certainty that the obligation has been discharged
by payment.[16]Petitioner failed to rebut the claims of private
respondent. It failed to show proof by means of payroll or other
evidence to disprove the claim of private respondent. Petitioner was
given the opportunity to cross-examine private respondent yet
petitioner forfeited such chance when it did not attend the hearing,
and failed to rebut the claims of private respondent.
Petitioners contention that it was denied due process when it was not
given the chance to cross-examine the adverse party and his
witnesses, is devoid of merit. The essence of due process is simply
an opportunity to be heard[17] or as applied to administrative
proceedings, an opportunity to explain ones side or an opportunity to
seek a reconsideration of the action or ruling complained of.[18] What
the law prohibits is absolute absence of the opportunity to be heard;
hence, a party cannot feign denial of due process where he had been
afforded the opportunity to present his side.[19] Petitioner was not
denied due process. As the respondent commission observed:

The case was initially set for hearing on September 12, 1989 wherein
complainant himself appeared. Respondents representative appeared
late. For this reason, the case was reset to September 26, 1989 at 9:30
a.m. wherein both parties appeared. Complainant filed his position
paper and respondents through its project manager filed a one-page
unverified communication stating therein its defense. The case was
then reset to October 9 and 10, 1990 both at 3:00 p.m. warning the
parties that no further postponement will be allowed. On October 9,
1989 complainant and his counsel appeared but respondents and
representative failed to appear despite due notice and warning. A
reply to respondents position paper was filed by complainant through
counsel during the hearing. To give a chance to respondents to
appear, hearing was reset the next day, October 10, 1989. However,
respondents or representative again failed to appear which
constrained counsel for complainant to move that he be allowed to
present evidence ex-parte which motion was granted. Complainant
was presented as witness, confirmed his affidavit, testified on
additional direct examination and identified the annexes attached to
his position paper.

To allow the respondents to cross examine the complainant, hearing


was again reset to October 31, 1989 at 9:30 a.m. with the warning that
if respondents again fail to appear, presentation of evidence will be
deemed waived and the case will be considered submitted for
decision. On October 31, 1989, despite due notice and warning,
counsel for respondents failed to appear although a representative
appeared requesting for a resetting alleging that counsel for
respondents is busy with the Office of the Commission of
Immigration. Said motion was denied and the motion of counsel for
complainant to submit the case for decision was granted.[20]

Clearly, petitioner had ample opportunity to present its side of the


controversy not only before the Labor Arbiter but also with the NLRC
on appeal, where petitioner submitted a memorandum as well as a
motion for reconsideration, which were all considered by the NLRC in
the course of resolving the case.[21] It cannot thereafter interpose lack
of due process since it was given the chance to be heard and present
his case.[22] Consequently, the alleged defect in the proceedings
before the Labor Arbiter, if there be any, should be deemed cured.

Petitioners contention that the respondent Commission did not touch


upon each one of the errors enumerated in petitioners appeal in its
resolution of March 24, 1992 is untenable. In affirming the decision of
the Labor Arbiter, the respondent NLRC found the evidence
supporting the labor arbiters factual findings to be substantial, and
for this reason found it unnecessary to make a separate discussion.

However, the award of moral and exemplary damages must be deleted


for being devoid of legal basis. Moral and exemplary damages are
recoverable only where the dismissal of an employee was attended by
bad faith or fraud, or constituted an act oppressive to labor, or was
done in a manner contrary to morals, good customs or public
policy.[23] The person claiming moral damages must prove the
existence of bad faith by clear and convincing evidence for the law
always presumes good faith.[24] It is not enough that one merely
suffered sleepless nights, mental anguish, serious anxiety as the
result of the actuations of the other party. Invariably, such action
must be shown to have been willfully done in bad faith or with ill
motive, and bad faith or ill motive under the law cannot be presumed
but must be established with clear and convincing
evidence.[25] Private respondent predicated his claim for such
damages on his own allegations of sleepless nights and mental
anguish, without establishing bad faith, fraud or ill motive as legal
basis therefor.

Private respondent not being entitled to award of moral damages, an


award of exemplary damages is likewise baseless.[26] Where the award
of moral and exemplary damages is eliminated, so must the award for
attorneys fees be deleted.[27] Private respondent has not shown that
he is entitled thereto pursuant to Art. 2208 of the Civil Code.

WHEREFORE, the challenged resolutions of the respondent NLRC are


hereby AFFIRMED with the MODIFICATION that the awards of moral
and exemplary damages and attorneys fees are DELETED.

SO ORDERED.
[G.R. No. 157373. July 27, 2004]

PENTAGON INTERNATIONAL SHIPPING, INC., petitioner, vs. WILLIAM


B. ADELANTAR, respondent.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari assailing the decision[1] of


the Court of Appeals dated September 26, 2002 in CA-G.R. SP No.
62839 which modified the decision[2] of the National Labor Relations
Commission (NLRC).

The antecedent facts are as follows:


On August 16, 1997, respondent William B. Adelantar was hired by
Dubai Ports Authority of Jebel Ali under an employment contract (first
contract) which provided for an unlimited period of employment with
a monthly salary of five thousand five hundred dirhams (Dhs 5,500).

On September 3, 1997, Adelantar and petitioner Pentagon


International Shipping, Inc. (Pentagon), for and in behalf of Dubai
Ports Authority of Jebel Ali, entered into a Philippine Overseas
Employment Administration (POEA) standard employment contract
(second contract), this time providing for a 12-month period with
basic monthly salary of US$380.00 and fixed overtime pay of
US$152.00.

Upon completion of his probationary period on April 5, 1998,


Adelantars basic salary was increased to five thousand eight hundred
ninety dirhams (Dhs 5,890), while his overtime pay was increased to
two thousand three hundred fifty-six dirhams (Dhs 2,356) effective
April 1, 1998.

On June 11, 1998, however, the management barred Adelantar from


entering the port due to a previous dispute with his superior. He was
asked to hand in his health and employment card. On the same date,
he received a letter from his employer, stating that he was being
terminated for assaulting his superior officer, although he was
promised employment in another company.

Adelantar was eventually repatriated after nine (9) months and seven
(7) days of service. After almost a year of waiting with no work
forthcoming, Adelantar filed a complaint for illegal dismissal with
money claim against Pentagon International Shipping, Inc. with the
NLRC, docketed as NLRC NCR OFW (M) 99-05-0693.

The Labor Arbiter found that the dismissal of Adelantar was illegal.
Consequently, he ordered Pentagon to pay Adelantar the amount of
Dhs 24,738.00 representing the latters three (3) months basic salary
inclusive of overtime pay. All other claims were denied for lack of
merit.[3]
Adelantar appealed to the NLRC arguing that the Labor Arbiter erred
in granting backwages of only three (3) months and in not granting
attorneys fees, moral and exemplary damages and reinstatement.

The NLRC affirmed the Labor Arbiters decision and held that under
Section 10 of R.A. 8042, otherwise known as the Migrant Workers and
Overseas Filipinos Act of 1995, an illegally dismissed contract worker
is entitled to the salaries corresponding to the unexpired portion of
his contract, or for three (3) months for every year of the unexpired
term, whichever is less. Thus, the NLRC awarded backwages to
Adelantar equivalent to three (3) months of his basic salary, but
exclusive of overtime pay.[4]

Aggrieved, Adelantar filed a petition for certiorari with the Court of


Appeals.

On September 26, 2002, the Court of Appeals rendered judgment


modifying the amounts awarded by the Labor Arbiter and the NLRC.
The Court of Appeals awarded full backwages to respondent
computed from the time of the dismissal up to the finality of the
decision. It ruled that Section 10 of R.A. No 8042 is not applicable in
this case because said provision only contemplates a fixed period of
employment. Moreover, Article 279 of the Labor Code should apply
and not Section 10 of R.A. No. 8042, considering that Adelantars first
contract provided for an unlimited period of employment.

Pentagon International Shipping, Inc. filed the instant petition for


review on certiorari raising the following arguments:

THE COURT OF APPEALS ERRED IN (a) COMPLETELY IGNORING


AND REFUSING TO FOLLOW THE RULING OF THE SUPREME COURT
IN THE LANDMARK CASE OF MILLARES, et al. vs. NLRC, et al., G.R.
NO. 110524, JULY 29, 2002 AND (b) IN APPLYING PRIMARILY
ARTICLES 279 AND 280 OF THE LABOR CODE INSTEAD OF THE
MIGRANT WORKERS AND OVERSEAS FILIPINOS ACT OF 1995 (R.A.
8042) AND (c) POEA RULES AND REGULATIONS IN DETERMINING
THE LIABILITY OF PETITIONER AND THE EMPLOYMENT STATUS OF
RESPONDENT.

II

THE COURT OF APPEALS ERRED IN RULING THAT THE CONTRACT


EXECUTED EXCLUSIVELY BETWEEN RESPONDENT ADELANTAR
AND DUBAI PORTS AUTHORITY UNDER FOREIGN LABOR LAWS
WITHOUT THE APPROVAL OF POEA AND PARTICIPATION OF
PENTAGON IS THE VALID AND BINDING CONTRACT CONTRARY TO
THE PRINCIPLE OF FORUM NON CONVENIENS AND LEX LOCI
CONTRACTUS.

III

THE COURT OF APPEALS ERRED WHEN IT GRANTED THE AWARD


OF ATTORNEYS FEES EVEN WHEN THERE WAS NO BASIS
THEREFOR AND OVER AND BEYOND WHAT WAS CONSISTENTLY
AND ORIGINALLY PRAYED FOR BY THE RESPONDENT.[5]

The petition is meritorious.

The August 16, 1997 contract, i.e., the first contract, provided for an
unspecified period of employment with Adelantar, as Tug Master,
receiving a monthly salary, after his probationary period, of Dhs
5,890.00. This figure in Dirhams was used by the Labor Arbiter in
computing the award equivalent to three months salary or the amount
of Dhs 24,738.00 inclusive of fixed overtime. This was also used by
the NLRC when it affirmed the award equivalent to three months,
albeit, excluding the fixed overtime.

The Court of Appeals likewise used the salary stated in Adelantars


first contract in adjudging Pentagons liability but it did not limit the
award to three months only. In interpreting the above provision, the
Court of Appeals, citing Marsaman Manning Agency, Inc. v.
NLRC,[6] held:
x x x. A plain reading of Sec. 10 clearly reveals that the choice of
which amount to award an illegally dismissed overseas contract
worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of the
unexpired term, whichever is less, comes into play only when the
employment contract concerned has a term of at least one (1) year or
more. This is evident from the words for every year of the unexpired
term which follows the words salaries x x x for three months. x x x.

Proceeding from the premise that the first contract, providing for an
unlimited period of employment, is the applicable contract rather than
the POEA-sanctioned second contract, the Court of Appeals
concluded that Section 10 of R.A. No. 8042 is not applicable because
there will be no basis by which to determine the number of years
within which the grant of salaries will be based.[7] Stated differently,
Section 10 of R.A. No. 8042, or The Migrant Workers and Overseas
Filipinos Act of 1995, is not applicable in this case because said
provision only contemplates a fixed period of employment while the
first contract provides for an unlimited period of employment. Section
10 of R.A. No. 8042 provides:

In case of termination of overseas employment without just, valid or


authorized cause as defined by law or contract, the worker shall be
entitled to the full reimbursement of his placement fee with interest at
twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less. (Italics ours)

In this respect, the Court of Appeals applied Article 279 of the Labor
Code[8] using principles of statutory construction to supplement the
omission in R.A. No. 8042 regarding the unlimited period of
employment. It ratiocinated that the Labor Code and R.A. No. 8042 are
statutes in pari materia.
The issue, therefore, is whether the Court of Appeals properly used as
basis Article 279 of the Labor Code in its award for backwages to
Adelantar.

As early as the case of Coyoca v. NLRC,[9] we held that Filipino


seamen are governed by the Rules and Regulations of the POEA. The
Standard Employment Contract governing the Employment of All
Filipino Seamen on Board Ocean-Going Vessels of the POEA,
particularly in Part I, Sec. C specifically provides that the contract of
seamen shall be for a fixed period. In no case should the contract of
seamen be longer than 12 months. It reads:

Section C. Duration of Contract.

The period of employment shall be for a fixed period but in no case to


exceed 12 months and shall be stated in the Crew contract. Any
extension of the Contract period shall be subject to the mutual
consent of the parties.

Under the circumstances, the Court of Appeals erred in resolving the


issue of backwages based on the first contract which provided for an
unlimited period of employment as this violated the explicit provision
of the Rules and Regulations of the POEA. While we recognize that
Adelantar executed a contract with Dubai Ports Authority of Ali Jebel
and might even have applied said contract in his overseas station,
this contract was not sanctioned by the POEA. We agree with the
NLRC when it observed thus:

It should be stressed that whatever status of employment or


increased benefits that the complainant may have gained while under
the employ of Dubai Ports Authority, the undisputed fact remains that
prior to his deployment, he agreed to be hired under a 12-month
POEA contract, the duration of which is the basis for the
determination of the extent of the respondents liability.[10]

The Court of Appeals erred when it adjudged the first contract as the
basis for Pentagons liability instead of the second contract, which is
in conformity with the POEAs Standard Employment Contract. As
such, there would have been no need to resort to statutory
construction where the rules and jurisprudence are clear.

Besides, in Millares v. NLRC,[11] we held that:

. . . [I]t is clear that seafarers are considered contractual employees.


They can not be considered as regular employees under Article 280 of
the Labor Code. Their employment is governed by the contracts they
sign every time they are rehired and their employment is terminated
when the contract expires. Their employment is contractually fixed for
a certain period of time. They fall under the exception of Article 280
whose employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined 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.

xxxxxxxxx

Moreover, it is an accepted maritime industry practice that


employment of seafarers are for a fixed period only. Constrained by
the nature of their employment which is quite peculiar and unique in
itself, it is for the mutual interest of both the seafarer and the
employer why the employment status must be contractual only or for
a certain period of time. Seafarers spend most of their time at sea and
understandably, they can not stay for a long and an indefinite period
of time at sea. Limited access to shore society during the employment
will have an adverse impact on the seafarer. The national, cultural and
lingual diversity among the crew during the COE is a reality that
necessitates the limitation of its period.

Therefore, Adelantar, a seafarer, is not a regular employee as defined


in Article 280 of the Labor Code. Hence, he is not entitled to full
backwages and separation pay in lieu of reinstatement as provided in
Article 279 of the Labor Code. As we held in Millares, Adelantar is a
contractual employee whose rights and obligations are governed
primarily by Rules and Regulations of the POEA and, more
importantly, by R.A. 8042, or the Migrant Workers and Overseas
Filipinos Act of 1995.

We find, however, that the Court of Appeals correctly awarded ten


percent (10%) of the monetary award in Adelantars favor as attorneys
fees, as he was forced to litigate and hence incurred expenses to
protect his rights and interest.[12]

WHEREFORE, in view of the foregoing, the petition is partly


GRANTED and the decision of the Court of Appeals in CA-G.R. SP No.
62839 is REVERSED and SET ASIDE. Petitioner Pentagon
International Shipping, Inc. is ORDERED to pay private respondent
William B. Adelantar the amount equivalent to the unexpired portion
of the September 3, 1997 POEA Standard Contract of Employment
plus ten percent (10%) of the award as attorneys fees.

SO ORDERED.

PANGILINAN vs GENERAL MILLING CORPORATION Case Digest

[G.R. No. 149329 July 12, 2004]

ROSITA PANGILINAN, YOLANDA LAYOLA, SALLY GOLDE, AIDA


QUITE, FERDINAND CALE, RAUL ARUITA, MANUEL ERIFUL, ARNEL
PAULO, ROSEMARIE GEOTINA, SAMUELA KUMAR, REBECCA
PEREZ, EDGAR BELLO, JOSEPH SORIANO, DANILO AMPULLER,
TOLENTINO CALLAO, MANOLITA MANALANG, TORIBIO LETIM,
NANCY BELGICA, ALFREDO ARELLANO, JOSEFA CEBUJANO, JUN
DEL ROSARIO, AVELINO AGUILAR, MILAROSA TIAMSON, EDNA
DICHOSO, JASMIN BOLISAY, JULIETA DIDAL, GERARDO BARISO,
ANGELITO PEÑAFLOR, NERISSA LETIM, ALEXANDER BARBOSA,
ELIZABETH SAENS, NYMPHA LUGTU, MYRNA MORALES, LIZA
CRUZ, ELENA FANG, EDNA CRUZA, GORGONIO PALMA, JOSE
VERGARA, ALDRIN REMORQUE, RUDY BLANCO, MARIO
BUENVIAJE, MA. CRISTY CEA, REYNALDO GUELAS VILLASENOR,
RHOY TADO, LYDIA SALIPOT, ANGELITO PEREZ VERGARA,
RODOLFO GACHO, JESSIE SAN PEDRO, MARINAO ORCA, JR.,
PEBELITO LERONA, PEPE CONGRESO, NIMFA NAPAO, WILHELMINA
BAGUISA, OLIVIA CAINCAY, JERRY MANUEL NICOLAS, CARLOS
ABRATIQUE, JESUS LIM, JR., AND GERRY ROXAS, Petitioners, -
versus - GENERAL MILLING CORPORATION, Respondent.

FACTS: The respondent General Milling Corporation is a domestic


corporation engaged in the production and sale of livestock and poultry. It
is, likewise, the distributor of dressed chicken to various restaurants and
establishments nationwide. As such, it employs hundreds of employees,
some on a regular basis and others on a casual basis, as “emergency
workers.” The petitioners were employed by the respondent on different
dates as emergency workers at its poultry plant in Cainta, Rizal, under
separate “temporary/casual contracts of employment” for a period of five
months. Most of them worked as chicken dressers, while the others served
as packers or helpers. Upon the expiration of their respective contracts,
their services were terminated. They later filed separate complaints for
illegal dismissal and non-payment of holiday pay, 13th month pay, night-
shift differential and service incentive leave pay against the respondent
before the Arbitration Branch of the National Labor Relations Commission.

The petitioners alleged that their work as chicken dressers was necessary
and desirable in the usual business of the respondent, and added that
although they worked from 10:00 p.m. to 6:00 a.m., they were not paid
night-shift differential. They stressed that based on the nature of their work,
they were regular employees of the respondent; hence, could not be
dismissed from their employment unless for just cause and after due
notice. They asserted that the respondent GMC terminated their contract of
employment without just cause and due notice. They further argued that
the respondent could not rely on the nomenclature of their employment as
“temporary or casual.”
ISSUE: Whether or not the petitioners were regular employees of the
respondent GMC when their employment was terminated.

HELD: The SC held the petitioners were employees with a fixed period,
and, as such, were not regular employees. Article 280 of the Labor Code
comprehends three kinds of employees: (a) regular employees or those
whose work is necessary or desirable to the usual business of the
employer; (b) project employees or those whose 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; and, (c) casual
employees or those who are neither regular nor project employees.

A regular employee is one who is engaged to perform activities which are


necessary and desirable in the usual business or trade of the employer as
against those which are undertaken for a specific project or are
seasonal.[41] There are two separate instances whereby it can be
determined that an employment is regular: (1) if the particular activity
performed by the employee is necessary or desirable in the usual business
or trade of the employer; and, (2) if the employee has been performing the
job for at least a year. Article 280 of the Labor Code does not proscribe or
prohibit an employment contract with a fixed period. It does not necessarily
follow that where the duties of the employee consist of activities usually
necessary or desirable in the usual business of the employer, the parties
are forbidden from agreeing on a period of time for the performance of such
activities. There is thus nothing essentially contradictory between a definite
period of employment and the nature of the employee’s duties.
Stipulations in employment contracts providing for term employment or
fixed period employment are valid when the period were agreed upon
knowingly and voluntarily by the parties without force, duress or improper
pressure, being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or where it satisfactorily appears that
the employer and employee dealt with each other on more or less equal
terms with no moral dominance whatever being exercised by the former
over the latter. An examination of the contracts entered into by the
petitioners showed that their employment was limited to a fixed period,
usually five or six months, and did not go beyond such period. The records
reveal that the stipulations in the employment contracts were knowingly
and voluntarily agreed to by the petitioners without force, duress or
improper pressure, or any circumstances that vitiated their consent.
Similarly, nothing therein shows that these contracts were used as a
subterfuge by the respondent GMC to evade the provisions of Articles 279
and 280 of the Labor Code.

The petitioners were hired as “emergency workers” and assigned as


chicken dressers, packers and helpers at the Cainta Processing Plant.
While the petitioners’ employment as chicken dressers is necessary and
desirable in the usual business of the respondent, they were employed on
a mere temporary basis, since their employment was limited to a fixed
period. As such, they cannot be said to be regular employees, but are
merely “contractual employees.” Consequently, there was no illegal
dismissal when the petitioners’ services were terminated by reason of the
expiration of their contracts. Lack of notice of termination is of no
consequence, because when the contract specifies the period of its
duration, it terminates on the expiration of such period. A contract for
employment for a definite period terminates by its own term at the end of
such period.
Abc di

gest

Manila Electric v. Quisumbing

G.R. No. 127598 February 22, 2000

Facts:

Members of the Private respondent union were dissatisfied with the terms
of a CBA with petitioner. The parties in this case were ordered by the Sec.
of Labor to execute a collective bargaining agreement (CBA) wherein.The
CBA allowed for the increase in the wages of the employees concerned.
The petitioner argues that if such increase were allowed, it would pass off
such to the consumers.

Issue: W/N matters of salary are part of management prerogative

RULING: Yes. There is no need to consult the Secretary of Labor in cases


involving contracting out for 6 months or more as it is part of management
prerogative. However, a line must be drawn with respect to management
prerogatives on business operations per se and those which affect the
rights of the workers. Employers must see to it that that employees are
properly informed of its decisions to attain harmonious labor relations and
enlighten the worker as to their rights.
The contracting out business or services is an exercise of business
judgment if it is for the promotion of efficiency and attainment of economy.
Management must be motivated by good faith and contracting out should
not be done to circumvent the law. Provided there was no malice or that it
was not done arbitrarily, the courts will not interfere with the exercise of this
judgment.

Manila Electric v. Quisumbing

G.R. No. 127598 February 22, 2000

Facts:

Members of the Private respondent union were dissatisfied with the terms
of a CBA with petitioner. The parties in this case were ordered by the Sec.
of Labor to execute a collective bargaining agreement (CBA) wherein.The
CBA allowed for the increase in the wages of the employees concerned.
The petitioner argues that if such increase were allowed, it would pass off
such to the consumers.

Issue: W/N matters of salary are part of management prerogative

RULING: Yes. There is no need to consult the Secretary of Labor in cases


involving contracting out for 6 months or more as it is part of management
prerogative. However, a line must be drawn with respect to management
prerogatives on business operations per se and those which affect the
rights of the workers. Employers must see to it that that employees are
properly informed of its decisions to attain harmonious labor relations and
enlighten the worker as to their rights.

The contracting out business or services is an exercise of business


judgment if it is for the promotion of efficiency and attainment of economy.
Management must be motivated by good faith and contracting out should
not be done to circumvent the law. Provided there was no malice or that it
was not done arbitrarily, the courts will not interfere with the exercise of this
judgment.

LEO V. MAGO AND LEILANIE E. COLOBONG, Petitioners, v. SUN


POWER MANUFACTURING LIMITED, Respondent.

DECISION

REYES, JR., J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of


Court, seeking the review of the Decision2 dated October 8, 2013 and
Resolution3 dated January 13, 2014 of the Court of Appeals (CA) in CA-
G.R. SP No. 131059. In these assailed issuances, the CA reversed the
decision4 of the National Labor Relations Commission (NLRC) declaring
Leo V. Mago (Leo) and Leilanie E. Colobong (Leilanie) (petitioners) as
employees of Sunpower Philippines Manufacturing Limited (Sunpower) and
consequently, holding that Jobcrest Manufacturing, Incorporated (Jobcrest)
was a labor-only contractor. The NLRC in turn reversed the ruling5 of the
labor arbiter (LA) dismissing the petitioners' complaint for illegal dismissal.

Factual Antecedents

The petitioners are former employees of Jobcrest, a corporation duly


organized under existing laws of the Philippines, engaged in the business
of contracting management consultancy and services.6 Jobcrest was
licensed by the Department of Labor and Employment (DOLE) through
Certificate of Registration No. NCR-MUNTA-64209-0910-087-R.7 During
the time material to this case, the petitioners' co-habited together.8

On October 10, 2008, Jobcrest and Sunpower entered into a Service


Contract Agreement, in which Jobcrest undertook to provide business
process services for Sunpower, a corporation principally engaged in the
business of manufacturing automotive computer and other electronic
parts.9 Jobcrest then trained its employees, including the petitioners, for
purposes of their engagement in Sunpower.10 After the satisfactory
completion of this training, the petitioners were assigned to Sunpower's
plant in Laguna Technopark. Leo was tasked as a Production Operator in
the Coinstacking Station on July 25, 2009,11while Leilanie was assigned as
a Production Operator, tasked with final visual inspection in the Packaging
Station on June 27, 2009.12 Jobcrest's On-site Supervisor, Allan Dimayuga
(Allan), supervised the petitioners during their assignment with Sunpower.13

It was alleged that sometime in October 2011, Sunpower conducted an


operational alignment, which affected some of the services supplied by
Jobcrest. Sunpower decided to terminate the Coinstacking/Material
Handling segment and the Visual Inspection segment.14 Meanwhile, Leo
and Leilanie were respectively on paternity and maternity leave because
Leilanie was due to give birth to their common child.15

When Leo reported for work to formally file his paternity leave, Allan
purportedly informed Leo that his employment was terminated due to his
absences. Leo, however, further alleged that he was asked to report to
Jobcrest on December 14, 2011 for his assignment to Sunpower.16 In their
defense, both Jobcrest and Allan denied terminating Leo's employment
from Jobcrest.17

Leo complied with the directive to go to Jobcrest's office on December 14,


2011. While he was there, Jobcrest's Human Resource Manager, Noel J.
Pagtalunan (Noel), served Leo with a "Notice of Admin Charge/Explanation
Slip."18 The notice stated that Leo violated the Jobcrest policy against
falsification or tampering because he failed to disclose his relationship with
Leilanie. Leo denied the charges and explained that he already filed a
complaint for illegal dismissal with the NLRC.19

Leilanie, on the other hand, alleged that when she reported for work at
Jobcrest on November 29, 2011, she was informed by one of the Jobcrest
personnel that she will be transferred to another client company. She was
likewise provided a referral slip for a medical examination, pursuant to her
new assignment.20

Instead of complying with Jobcrest's directives, Leo and Leilanie filed a


complaint for illegal dismissal and regularization on December 15, 2011,
with the NLRC Regional Arbitration Branch No. IV. Leo alleged that he was
dismissed on October 30, 2011, while Leilanie alleged that she was
dismissed from employment on December 4, 2011.21 Despite the filing of
the complaint, Leilanie returned to Jobcrest on December 16, 2011, where
she was served with a similar "Notice of Admin Charge/Explanation Slip,"
requiring her to explain why she failed to disclose her co-habitation status
with Leo.22

During the mandatory conference, Jobcrest clarified that the petitioners


were not dismissed from employment and offered to accept them when
they report back to work. The petitioners refused and insisted that they
were regular employees of Sunpower, not Jobcrest.23

There being no amicable settlement of the matter among the parties, they
proceeded to file their respective position papers.24

Ruling of the LA

In a Decision25 dated July 3, 2012, the LA held that Jobcrest is a legitimate


independent contractor and the petitioners' statutory employer:

WHEREFORE, premises considered, the complaint for illegal dismissal


against [Sunpower] and Dwight Deato is DISMISSED for lack of employer-
employee relationship. [Jobcrest] is declared as the statutory employer and
is ordered to reinstate complainants sans backwages to substantially
equivalent positions within ten (10) days from receipt hereof.

SO ORDERED.26

The LA found the capital of Jobcrest substantial enough to comply with the
requirements for an independent contractor, and that Jobcrest exercised
control over the petitioners' work.27 The LA likewise rejected the petitioners'
claim that they were illegally dismissed, ruling that the petitioners failed to
establish the fact of dismissal itself.28

Jobcrest partially appealed the LA's Decision dated July 3, 2012. Among its
arguments is the assertion that the petitioners refused to be reinstated.
Hence, they were considered constructively resigned from their
employment with Jobcrest, especially because they obtained a job
somewhere else. As an alternative relief, Jobcrest prayed that it be directed
to pay the petitioners' separation pay instead of reinstating them to their
former positions.29

The petitioners, on the other hand, attributed serious error on the LA for
ruling against their complaint.30

Ruling of the NLRC

The NLRC reversed the LA's findings in its Decision31 dated April 24, 2013
and ruled favorably for the petitioners, viz.:

WHEREFORE, the decision appealed from is hereby SET ASIDE and a


NEW ONE ENTERED declaring that [the petitioners] are regular
employees of respondent [Sunpower], respondent [Jobcrest] being a mere
labor-only contractor that [petitioners] were illegally dismissed; hence,
respondent [Sunpower] is hereby ordered to reinstate them to their former
position with full backwages, from the time they were refused to work on
October 31, 2011 until reinstated, within ten (10) days from notice plus 10%
of the total monetary awards as and for attorney's fees.

SO ORDERED.32

According to the NLRC, the contract between Jobcrest and Sunpower was
for the sole supply of manpower. The tools and equipment for the
performance of the work were for the account of Sunpower, which
supposedly contradicted the claim that Jobcrest has the required capital for
a legitimate contractor.33 The NLRC also disagreed that Jobcrest exercised
control over the petitioners and likewise gave more credence to the
petitioners' sworn statements, which narrate that Sunpower employees
allegedly supervised their work.34 Lastly, on the basis of the "Notice of
Administrative Charge/Explanation Slip" furnished to the petitioners, the
NLRC reversed the LA's ruling and held that the petitioners were illegally
dismissed from employment.35
Sunpower moved for the reconsideration of the NLRC's Decision dated
April 24, 2013.36 Unconvinced, the NLRC denied this motion in its
Resolution37 dated May 28, 2013 as follows:

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED


for lack of merit.

No further motion of this nature shall be entertained.

SO ORDERED.38

As a result of the NLRC's ruling, Sunpower filed a petition for certiorari with
the CA, with a prayer for the issuance of an injunctive writ.39 Sunpower
attributed grave abuse of discretion, amounting to lack or excess of
jurisdiction, on the NLRC for holding that the petitioners were regular
employees of Sunpower despite evidence to the contrary.40 Sunpower also
disagreed that Jobcrest is a labor-only contractor, and further submitted
that the NLRC misinterpreted its Service Contract Agreement with
Jobcrest.41

Ruling of the CA

In a Decision42 dated October 8, 2013, the CA granted Sunpower's petition


for certiorari and enjoined the implementation of the assailed NLRC ruling:

WHEREFORE, premises considered, the Petition is GRANTED. The


Decision dated 24 April 2013 and Resolution dated 28 May 2013 of the
[NLRC] (Second Division) in NLRC-LAC No. 09-002582-12; NLRC RAB-IV-
12-01978-11-B are NULLIFIED. All the respondents and/or persons acting
for and on their behalf are ENJOINED from enforcing or implementing the
same. The Decision dated 03 July 2012 of LA Renell Joseph R. Dela Cruz
is hereby REINSTATED. No pronouncement as to costs.

SO ORDERED.43

The CA ruled that Sunpower was able to overcome the presumption that
Jobcrest was a labor-only contractor, especially considering that the DOLE
Certificate of Registration issued in favor of Jobcrest carries the
presumption of regularity. In contrast with the NLRC ruling, the CA found
that the Service Contract Agreement between Sunpower and Jobcrest
specifically stated the job or task contracted out by stating that it was for
the performance of various business process services.44 The CA also held
that Jobcrest has substantial capital and as such, it was no longer
necessary to prove that it has investment in the form of tools, equipment,
machinery, and work premises.45

Also, the CA found that there is an employer-employee relationship


between Jobcrest and the petitioners under the four-fold test. The CA
appreciated the affidavits of Jobcrest employees, as well as the sworn
statements of Sunpower employees who the petitioners claim to supervise
their work. In these statements, the Sunpower employees categorically
denied under oath that they supervised the manner of the petitioners' work.
Taken together with other pieces of evidence, the CA ruled that there was
no employer-employee relationship between Sunpower and the petitioners.
Finally, the CA held that any form of supervision, which Sunpower
exercised over the results of the petitioners' work, was necessary and
allowable under the circumstances.46

Consequently, the CA rejected the claim that the petitioners were illegally
dismissed from employment, especially in light of Jobcrest's earlier offer to
accept the petitioners' return to work.47

Following their receipt of the CA's Decision dated October 8, 2013, the
petitioners filed their Motions for Reconsideration and to Investigate the
Reviewer Who Recommended the Palpably Erroneous Decision.48The CA
firmly denied these motions in its Resolution49 dated January 13, 2014 for
failure to raise any substantial argument that would warrant the
reconsideration of its decision:

WHEREFORE, premises considered, the Motions for Reconsideration and


to Investigate the Reviewer Who Recommended the Palpably Erroneous
Decision are DENIED for sheer lack of merit.

SO ORDERED.50
The petitioners are now before this Court, seeking to reverse and set aside
the CA's issuances, and to reinstate the NLRC's decision.51 The petitioners
insist that Jobcrest is a labor-only contractor, and that the DOLE Certificate
of Registration is not conclusive of Jobcrest's legitimate status as a
contractor.52 They further argue that, aside from lacking substantial capital,
Jobcrest only supplied manpower to Sunpower.53 These services, the
petitioners allege, are directly related and necessary to Sunpower's
business.54

Furthermore, the petitioners submit that it was Sunpower that controlled


their work. They refute the evidentiary weight and value of the sworn
statements of Jobcrest and Sunpower employees.55 The petitioners assert
that the NLRC was correct in ruling that Sunpower was their statutory
employer, and in ordering their reinstatement with payment of full
backwages and attorney's fees.56 The petitioners thus pray that this Court
reverse and set aside the Decision dated October 8, 2013 and Resolution
dated January 13, 2014 of the CA.57

Ruling of the Court

The Court resolves to deny the petition.

Jobcrest is a legitimate and independent contractor.

Article 106 of the Labor Code defines labor-only contracting as a situation


"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."58

DOLE Department Order (DO) No. 18-02, the regulation in force at the time
of the petitioners' assignment to Sunpower, reiterated the language of the
Labor Code:

Section 5. Prohibition against labor-only contracting. x x x [L]abor-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.

Thus, in order to become a legitimate contractor, the contractor must have


substantial capital or investment, and must carry a distinct and independent
business free from the control of the principal. In addition, the Court
requires the agreement between the principal and the contractor or
subcontractor to assure the contractual employees' entitlement to all labor
and occupational safety and health standards, free exercise of the right to
self-organization, security of tenure, and social welfare benefits.59

Furthermore, the Court considers job contracting or subcontracting as


permissible when the principal agrees to farm out the performance of a
specific job, work or service to the contractor, for a definite or
predetermined period of time, regardless of whether such job, work, or
service is to be performed or completed within or outside the premises of
the principal.60 Ordinarily, a contractor is presumed to be a labor-only
contractor, unless the contractor is able to discharge the burden of
overcoming this presumption. In cases when it's the principal claiming the
legitimacy of the contractor, then the burden is borne by the principal.61

Preliminarily, the Court finds that there is no such burden resting on either
Sunpower or Jobcrest in this case. It is true that Sunpower maintained its
position that Jobcrest is a legitimate and independent contractor.62 But
since the petitioners do not dispute that Jobcrest was a duly-registered
contractor under Section 11 of DOLE DO No. 18-02,63 there is no operative
presumption that Jobcrest is a labor-only contractor.64

Conversely, the fact of registration with DOLE does not necessarily create
a presumption that Jobcrest is a legitimate and independent
contractor. The Court emphasizes, however, that the DOLE Certificate
of Registration issued in favor of Jobcrest is presumed to have been
issued in the regular performance of official duty.65 In other words, the
DOLE officer who issued the certificate in favor of Jobcrest is presumed,
unless proven otherwise, to have evaluated the application for registration
in accordance with the applicable rules and regulations.66 The petitioners
must overcome the presumption of regularity accorded to the official act of
DOLE, which is no less than the agency primarily tasked with the regulation
of job contracting.67

For the reasons discussed below, the Court is constrained to give more
weight to the substantiated allegations of Sunpower, as opposed to the
unfounded self-serving accusations of the petitioners.

Jobcrest has substantial capital.

The law and the relevant regulatory rules require the contractor to have
substantial capital or investment, in order to be considered a legitimate and
independent contractor. Substantial capital or investment was defined in
DOLE DO No. 18-02 as "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."
DOLE initially did not provide a specific amount as to what constitutes
substantial capital. It later on specified in its subsequent issuance, DOLE
DO No. 18-A, series of 2011, that substantial capital refers to paid-up
capital stocks/shares of at least Php 3,000,000.00 in the case of
corporations.68 Despite prescribing a threshold amount under DO No. 18-A,
certificates of registration issued under DO No. 18-02, such as that of
Jobcrest, remained valid until its expiration.69
The records show that as early as the proceedings before the LA, Jobcrest
established that it had an authorized capital stock of Php 8,000,000.00,
Php 2,000,000.00 of which was subscribed, and a paid-up capital stock of
Php 500,000.00, in full compliance with Section 13 of the Corporation
Code.70 For the year ended December 31, 2011, the paid-up capital of
Jobcrest increased to Php 8,000,000.00,71 notably more than the
required capital under DOLE DO No. 18-A.72

The balance sheet submitted by Jobcrest for the year ending on December
31, 2010 also reveals that its total assets for the year 2009 amounted to
Php 11,280,597.94, and Php 16,825,271.30 for the year 2010, which
were comprised of office furniture, fixtures and equipment, land,
building, and motor vehicles, among others.73 As of December 31,
2012, the total assets for the years 2011 and 2012 also increased to Php
35,631,498.58 and Php 42,603,167.16, respectively.74

Evidently, Jobcrest had substantial capital to perform the business process


services it provided Sunpower. It has its own office, to which the petitioners
admittedly reported to, possessed numerous assets for the conduct of its
business, and even continuously earned profit as a result.75 The Court can
therefore reasonably conclude from Jobcrest's financial statements that it
carried its own business independent from and distinctly outside the control
of its principals.

The petitioners argue that the amount of substantial capital is irrelevant


because Sunpower provided the tools and owned the work premises.
These supposedly negate the claim that Jobcrest has substantial
capital.76 The Court does not agree with the petitioners.

DOLE DO No. 18-02 and DO No. 18-A, as well as Article 106 of the Labor
Code itself, all use the conjunctive term "or" in prescribing that the
contractor should have substantial capital or investment. Having
established that Jobcrest had substantial capital, it is unnecessary for this
Court to determine whether it had sufficient investment in the form of tools,
equipment, machinery and work premises.
In Neri v. NLRC,77 the Court rejected the same argument put forward by the
petitioners, arid ruled that proof of either substantial capital or investment is
sufficient for purposes of determining whether the first element of labor-only
contracting is absent:

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.78 (Emphasis Ours)

The agreement between Jobcrest and Sunpower also complied with the
statutory requirement of ensuring the observance of the contractual
employees' rights under the law. Specifically, paragraph 7 of the Service
Contract Agreement obligates Jobcrest to observe all laws, rules and
regulations pertaining to the employment of its employees.79

Suncrest does not control the manner by which the petitioners


accomplished their work.

In most cases, despite proof of substantial capital, the Court declared a


contractor as a labor-only contractor whenever it is established that the
principal—not the alleged legitimate contractor—actually controls the
manner of the employees' work.80 The element of control was defined
under DOLE DO No. 18-02 as:
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.81

In other words, the contractor should undertake the performance of the


services under its contract according to its own manner and method, free
from the control and supervision of the principal.82Otherwise, the contractor
is deemed an illegitimate or labor-only contractor.

The control over the employees' performance of the work is, as the Court
ruled in some cases, usually manifested through the power to hire, fire, and
pay the contractor's employees,83 the power to discipline the employees
and impose the corresponding penalty,84 and more importantly, the actual
supervision of the employees' performance.85 On this point, the petitioners
claim that Sunpower employees supervised their work while in the
premises of Sunpower's own plant. They also disclaim the affidavits of
Sunpower employees, which denied exercising any form of supervision
over the petitioners,86 by alleging that these are self-serving assertions.
The petitioners also refute the veracity of the sworn statements of
Jobcrest's employees.87

Upon review of the records, the Court finds that the evidence clearly points
to Jobcrest as the entity that exercised control over the petitioners' work
with Sunpower. Upon the petitioners' assignment to Sunpower, Jobcrest
conducted a training and certification program, during which time, the
petitioners reported directly to the designated Jobcrest trainer.88 The
affidavit of Jobcrest's Operations Manager, Kathy T. Morales (Kathy),
states that operational control over Jobcrest employees was exercised to
make sure that they conform to the quantity and time specifications of the
service agreements with Jobcrest's clients. She narrated that manager and
shift supervisors were assigned to the premises of Sunpower, with the task
to oversee the accomplishment of the target volume of work. She also
mentioned that there is administrative control over Jobcrest employees
because they monitor the employees' attendance and punctuality, and the
employees' observance of other rules and regulations.89
The affidavit of Kathy was markedly corroborated by the sworn statement
of Jobcrest's On-site Supervisor, Allan, in which he affirmed that he directly
supervised the petitioners while they were stationed in Sunpower. He also
confirmed that during this period, he issued several memoranda to the
petitioners for violating rules and regulations, and provided their hourly
output performance assessment, which "determine[s] their fitness to
continue their employment with Jobcrest."90

The petitioners' very own sworn statements further establish this


point. In his statement, Leo averred that when he reported for work to file
his application for paternity leave, he reported to Allan, Jobcrest's
supervisor, who then approved his leave application. He likewise narrated
that it was Jobcrest's Human Resource Manager, Noel, who informed Leo
about the disciplinary charge against him for allegedly violating the
Jobcrest Code of Conduct.91

The same conclusion holds for Leilanie. In her statement, Leilanie narrated
that she reported for work to the Jobcrest office on November 29, 2011
after giving birth to her second child. She also alleged in her affidavit that
similar to Leo, it was Noel who informed her of the disciplinary action
against her, through the service of a copy of the "Notice of Admin
Charge/Explanation Slip."92

Notably, other documentary evidence plainly show that Leo's paternity


leave application was indeed filed with Jobcrest,93 and the respective
notices of disciplinary action against the petitioners were prepared and
signed by the Jobcrest Human Resource Manager.94 These are clear
indications that Jobcrest exercised control over the petitioners' work.

The fact that the petitioners were working within the premises of Sunpower,
by itself, does not negate Jobcrest's control over the means, method, and
result of the petitioners' work.95 Job contracting is permissible "whether
such job, work, or service is to be performed or completed within or outside
the premises of the principal"96 for as long as the elements of a labor-only
contractor are not present. Since Jobcrest was a provider of business
process services, its employees would necessarily work within the
premises of its client companies in order for Jobcrest to perform its
contractual undertaking. Mere physical presence in Sunpower's plant does
not necessarily mean that Sunpower controlled the means and method of
the petitioners' work. The petitioners, despite working in Sunpower's plant
for most of the time, admit that whenever they file their leave application, or
whenever required by their supervisors in Jobcrest, they report to the
Jobcrest office. Designated on-site supervisors from Jobcrest were the
ones who oversaw the performance of the employees' work within the
premises of Sunpower.

Besides, while the Court repeatedly recognizes that there are employers
who abuse the system of subcontracting, we also acknowledge that
contracts for services does not necessarily provide "untrammeled
freedom" to the contractor in undertaking the engagement.97 What is
important, as incontrovertibly established in this case, is that the principal's
right to control is limited to the results of the work of the contractor's
employees.

The petitioners were regular employees of Jobcrest.

The four-fold test is the established standard for determining the existence
of an employer-employee relationship:98 (a) the selection and engagement
of the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the power of control over the employee's conduct. Of the four elements,
the power of control is the most important.99 Having found that Jobcrest
exercised control over the petitioners' work, the Court is constrained to
determine whether the petitioners were regular employees of Jobcrest by
virtue of the three other elements of the four-fold test.

The petitioners themselves admit that they were hired by Jobcrest.100 In


their subsequent engagement to Sunpower, it was Jobcrest that selected
and trained the petitioners.101 Despite their assignment to Sunpower,
Jobcrest paid the petitioners' wages, including their contributions to the
Social Security System (SSS), Philippine Health Insurance Corporation
(Philhealth), and Home Development Mutual Fund (HDMF, also known as
Pag-IBIG).102 The power to discipline the petitioners was also retained by
Jobcrest, as evidenced by the "Notice of Admin Charge/Explanation Slip"
furnished the petitioners through Jobcrest's Human Resource
department.103

The Court further notes that on December 27, 2010 and January 25, 2011,
Leilanie and Leo were respectively confirmed as regular employees of
Jobcrest.104 Jobcrest did not even deny that the petitioners were their
regular employees. Consequently, the petitioners cannot be terminated
from employment without just or authorized cause.105

A review of the petitioners' repeated submissions reveals that while they


claim to have been illegally dismissed from employment,106 Jobcrest
actually intended to assign Leo again to Sunpower, and provide Leilanie
with another engagement with a different client company. The petitioners
all admitted to these facts in their sworn statement, heavily quoted in their
position paper filed with the LA:107

41. Noong December 14, 2011, ako [Leo Mago] ay tinawagan sa aking
cellular phone ng nagpakilalang Julie at taga HR ng JOBCREST
at ang sabi sa akin ay magreport umano ako sa opisina upang
ipadala sa SUNPOWER;

xxxx

44. Noong November 29, 2011, ako [Leilani Colobong] ay nagreport sa


JOBCREST at aking nakausap ang isa sa staff ng JOBCREST na
hindi ko alam ang pangalan at ang sabi niya sa akin ay ililipat
umano ako sa kompanyang FIRST SUMIDEN dahil hindi na umano
ako pwedeng m[a]gtrabaho sa SUNPOWER na hindi niya sinabi kung
anu ang dahilan;

45. Noong December 1, 2011, ako ay bumalik sa JOBCREST at ako ay


binigyan nila ng referral para magpamedical para sa aking bagong
requirements diumano sa aking bagong trabaho sa FIRST SUMIDEN
dahil hindi na talaga umano ako tatanggapin sa SUNPOWER sa aking
pagbabalik trabaho ng December 4, 2011 na hindi naman niya sinabi
kung anu ang dahilan; Kalakip nito ang nas[a]bing referral slip bilang
Exhibit "S"108 (Emphasis Ours)

It was also uncontroverted that Jobcrest offered to accept the petitioners'


return to work, but they refused this offer during the mandatory
conference.109 Clearly, the petitioners were not illegally dismissed, much
less terminated from their employment. There is nothing on record that
established the dismissal of the petitioners in the first place.

In MZR Industries, et al. v. Colambot,110 the employee claimed to have


been illegally dismissed through a verbal directive. The employer denied
this and alleged waiting for the employee to report for work, only to later
find out that a complaint for illegal dismissal was filed against them. The
Court recognized that while the employer is generally required to establish
the legality of the employee's termination, the employee should first
establish the fact of dismissal from service. Failing such, as in this case,
the Court cannot rule that the employee was illegally dismissed.

The "Notice of Admin Charge/Explanation Slip" is also insufficient proof of


the petitioners' termination from employment. The notice merely required
the petitioners to explain whether they violated Jobcrest's Code of Conduct.
No penalty was imposed on the petitioners yet when they were furnished
with a copy of the notices.111 In fact, Jobcrest was unable to take the
appropriate action on the charge, considering that the petitioners
immediately filed their complaint for illegal dismissal with the NLRC the
following day, or on December 15, 2011.112

All things considered, Sunpower is not the statutory employer of the


petitioners. The circumstances obtaining in this case, as supported by the
evidence on record, establish that Jobcrest was a legitimate and
independent contractor. There is no reason for this Court to depart from the
CA's findings.
WHEREFORE, premises considered, the present petition is
hereby DENIED for lack of merit. The Court of Appeals' Decision dated
October 8, 2013 and Resolution dated January 13, 2014 in CA-G.R. SP
No. 131059 are AFFIRMED, which nullified the National Labor Relations
Commission's Decision dated April 24, 2013 and Resolution dated May 28,
2013, and reinstated the Labor Arbiter's Decision dated July 3, 2012. No
costs.

SO ORDERED.

Manila Electric Company v Benamira

July 14, 2005

Facts:The individual respondents are licensed security guards formerly


employed by People’s Security, Inc. (PSI) and deployed as such at
MERALCO’s head office in Ortigas Avenue, Pasig, Metro
Manila. On November 30, 1990, the security service agreement between
PSI and MERALCO was terminated. Immediately thereafter, fifty-six of
PSI’s security guards, including herein eight individual respondents, filed a
complaint for unpaid monetary benefits against PSI and MERALCO.

Meanwhile, the security service agreement between respondent Armed


Security & Detective Agency, Inc., (ASDAI) and MERALCO took effect
on December 1, 1990. In the agreement, ASDAI was designated as the
AGENCY while MERALCO was designated as the COMPANY.

Subsequently, the individual respondents were absorbed by ASDAI and


retained at MERALCO’s head office. On June 29, 1992, Labor Arbiter
Manuel P. Asuncion rendered a decision in favor of the former PSI security
guards, including the individual respondents. Less than a month later, or on
July 21, 1992, the individual respondents filed another complaint for unpaid
monetary benefits, this time against ASDAI and MERALCO.

On July 25, 1992, the security service agreement between respondent


Advance Forces Security & Investigation Services, Inc. (AFSISI) and
MERALCO took effect, terminating the previous security service agreement
with ASDAI.[7] Except as to the number of security guards,[8] the amount to
be paid the agency,[9] and the effectivity of the agreement,[10] the terms and
conditions were substantially identical with the security service agreement
with ASDAI.

Issues: whether respondents are employees of MERALCO

Whether ASDAI and AFSISI are labor-only contractor

Held: no

In this case, the terms and conditions embodied in the security service
agreement between MERALCO and ASDAI expressly recognized ASDAI
as the employer of individual respondents.

Under the security service agreement, it was ASDAI which (a) selected,
engaged or hired and discharged the security guards; (b) assigned them to
MERALCO according to the number agreed upon; (c) provided the uniform,
firearms and ammunition, nightsticks, flashlights, raincoats and other
paraphernalia of the security guards; (d) paid them salaries or wages; and,
(e) disciplined and supervised them or principally controlled their
conduct. The agreement even explicitly provided that “[n]othing herein
contained shall be understood to make the security guards under this
Agreement, employees of the COMPANY, it being clearly understood that
such security guards shall be considered as they are, employees of the
AGENCY alone.” Clearly, the individual respondents are the employees of
ASDAI.

As to the provision in the agreement that MERALCO reserved the right to


seek replacement of any guard whose behavior, conduct or appearance is
not satisfactory, such merely confirms that the power to discipline lies with
the agency. It is a standard stipulation in security service agreements that
the client may request the replacement of the guards to it. Service-oriented
enterprises, such as the business of providing security services, generally
adhere to the business adage that “the customer or client is always right”
and, thus, must satisfy the interests, conform to the needs, and cater to the
reasonable impositions of its clients.
Neither is the stipulation that the agency cannot pull out any security
guard from MERALCO without its consent an indication of control. It
is simply a security clause designed to prevent the agency from unilaterally
removing its security guards from their assigned posts at MERALCO’s
premises to the latter’s detriment.

The clause that MERALCO has the right at all times to inspect the
guards of the agency detailed in its premises is likewise not indicative
of control as it is not a unilateral right. The agreement provides that the
agency is principally mandated to conduct inspections, without prejudice to
MERALCO’s right to conduct its own inspections.

Needless to stress, for the power of control to be present, the person for
whom the services are rendered must reserve the right to direct not only
the end to be achieved but also the means for reaching such end.[26] Not
all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former.[27] Rules which serve as general
guidelines towards the achievement of the mutually desired result are not
indicative of the power of control.

Moreover, ASDAI and AFSISI are not “labor-only” contractors. There


is “labor only” contract when the person acting as contractor is
considered merely as an agent or intermediary of the principal who is
responsible to the workers in the same manner and to the same
extent as if they had been directly employed by him. On the other
hand, “job (independent) contracting” is present if the following conditions
are met: (a) 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 to the result thereof; and (b) the
contractor has substantial capital or investments in the form of tools,
equipment, machineries, work premises and other materials which are
necessary in the conduct of his business.[29] Given the above distinction
and the provisions of the security service agreements entered into by
petitioner with ASDAI and AFSISI, we are convinced that ASDAI and
AFSISI were engaged in job contracting.

The individual respondents can not be considered as regular employees of


the MERALCO for, although security services are necessary and
desirable to the business of MERALCO, it is not directly related to its
principal business and may even be considered unnecessary in the
conduct of MERALCO’s principal business, which is the distribution
of electricity.

Manila Electric Company v Benamira

July 14, 2005

Facts:The individual respondents are licensed security guards formerly


employed by People’s Security, Inc. (PSI) and deployed as such at
MERALCO’s head office in Ortigas Avenue, Pasig, Metro
Manila. On November 30, 1990, the security service agreement between
PSI and MERALCO was terminated. Immediately thereafter, fifty-six of
PSI’s security guards, including herein eight individual respondents, filed a
complaint for unpaid monetary benefits against PSI and MERALCO.

Meanwhile, the security service agreement between respondent Armed


Security & Detective Agency, Inc., (ASDAI) and MERALCO took effect
on December 1, 1990. In the agreement, ASDAI was designated as the
AGENCY while MERALCO was designated as the COMPANY.

Subsequently, the individual respondents were absorbed by ASDAI and


retained at MERALCO’s head office. On June 29, 1992, Labor Arbiter
Manuel P. Asuncion rendered a decision in favor of the former PSI security
guards, including the individual respondents. Less than a month later, or on
July 21, 1992, the individual respondents filed another complaint for unpaid
monetary benefits, this time against ASDAI and MERALCO.

On July 25, 1992, the security service agreement between respondent


Advance Forces Security & Investigation Services, Inc. (AFSISI) and
MERALCO took effect, terminating the previous security service agreement
with ASDAI.[7] Except as to the number of security guards,[8] the amount to
be paid the agency,[9] and the effectivity of the agreement,[10] the terms and
conditions were substantially identical with the security service agreement
with ASDAI.

Issues: whether respondents are employees of MERALCO

Whether ASDAI and AFSISI are labor-only contractor

Held: no

In this case, the terms and conditions embodied in the security service
agreement between MERALCO and ASDAI expressly recognized ASDAI
as the employer of individual respondents.

Under the security service agreement, it was ASDAI which (a) selected,
engaged or hired and discharged the security guards; (b) assigned them to
MERALCO according to the number agreed upon; (c) provided the uniform,
firearms and ammunition, nightsticks, flashlights, raincoats and other
paraphernalia of the security guards; (d) paid them salaries or wages; and,
(e) disciplined and supervised them or principally controlled their
conduct. The agreement even explicitly provided that “[n]othing herein
contained shall be understood to make the security guards under this
Agreement, employees of the COMPANY, it being clearly understood that
such security guards shall be considered as they are, employees of the
AGENCY alone.” Clearly, the individual respondents are the employees of
ASDAI.

As to the provision in the agreement that MERALCO reserved the right to


seek replacement of any guard whose behavior, conduct or appearance is
not satisfactory, such merely confirms that the power to discipline lies with
the agency. It is a standard stipulation in security service agreements that
the client may request the replacement of the guards to it. Service-oriented
enterprises, such as the business of providing security services, generally
adhere to the business adage that “the customer or client is always right”
and, thus, must satisfy the interests, conform to the needs, and cater to the
reasonable impositions of its clients.
Neither is the stipulation that the agency cannot pull out any security
guard from MERALCO without its consent an indication of control. It
is simply a security clause designed to prevent the agency from unilaterally
removing its security guards from their assigned posts at MERALCO’s
premises to the latter’s detriment.

The clause that MERALCO has the right at all times to inspect the
guards of the agency detailed in its premises is likewise not indicative
of control as it is not a unilateral right. The agreement provides that the
agency is principally mandated to conduct inspections, without prejudice to
MERALCO’s right to conduct its own inspections.

Needless to stress, for the power of control to be present, the person for
whom the services are rendered must reserve the right to direct not only
the end to be achieved but also the means for reaching such end.[26] Not
all rules imposed by the hiring party on the hired party indicate that the
latter is an employee of the former.[27] Rules which serve as general
guidelines towards the achievement of the mutually desired result are not
indicative of the power of control.

Moreover, ASDAI and AFSISI are not “labor-only” contractors. There


is “labor only” contract when the person acting as contractor is
considered merely as an agent or intermediary of the principal who is
responsible to the workers in the same manner and to the same
extent as if they had been directly employed by him. On the other
hand, “job (independent) contracting” is present if the following conditions
are met: (a) 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 to the result thereof; and (b) the
contractor has substantial capital or investments in the form of tools,
equipment, machineries, work premises and other materials which are
necessary in the conduct of his business.[29] Given the above distinction
and the provisions of the security service agreements entered into by
petitioner with ASDAI and AFSISI, we are convinced that ASDAI and
AFSISI were engaged in job contracting.

The individual respondents can not be considered as regular employees of


the MERALCO for, although security services are necessary and
desirable to the business of MERALCO, it is not directly related to its
principal business and may even be considered unnecessary in the
conduct of MERALCO’s principal business, which is the distribution
of electricity.

[G.R. No. 160854 March 3, 2006]

BIG AA MANUFACTURER, Petitioner, vs. EUTIQUIO ANTONIO, JAY


ANTONIO, FELICISIMO ANTONIO, and LEONARDO ANTONIO, SR.,
Respondents.

FACTS

Petitioner is a sole proprietorship registered in the name of its proprietor,


Enrico E. Alejo. Respondents Eutiquio Antonio,Jay Antonio, Felicisimo
Antonio, Leonardo Antonio, Sr. and Roberto Fabian filed a complaint for
illegal lay-off and illegal deductions before the NLRC’s Regional Arbitration
Branch No. III. They claimed that they were dismissed on January 11, 2000
and sought separation pay from petitioner.

The respondents alleged that as regular employees, they worked from 8:00
a.m. to 5:00 p.m. at petitioner’s premises using petitioner’s tools and
equipment and they received P250 per day. Eutiquio was employed as
carpenter-foreman from 1991-1999; Jay as carpenter from 1993-1999;
Felicisimo as carpenter from 1994-1999; and Leonardo, Sr. also as
carpenter from 1997-1999. According to respondents, they were dismissed
without just cause and due process; hence, their prayer for reinstatement
and full backwages. They also impleaded one Hermie Alejo, a relative of
the petitioner’s owner, as co-respondent in their complaint.

On the other hand, petitioner Big AA Manufacturer, affirmed it is a sole


proprietorship registered in the name of Enrico Alejo and engaged in
manufacturing office furniture, but it denied that respondents were its
regular employees. Instead, petitioner claimed that Eutiquio Antonio was
one of its independent contractors who used the services of the other
respondents. According to petitioner, its independent contractors were paid
by results and were responsible for the salaries of their own workers.
Allegedly, there was no employer-employee relationship between petitioner
and respondents. However, petitioner stated it allowed respondents to use
its facilities to meet job orders. Petitioner also denied that respondents
were laid-off by Big AA Manufacturer, since they were project employees
only. It added that since Eutiquio Antonio had refused a job order of office
tables, their contractual relationship ended. Petitioner surmised that
Eutiquio resented the January 10, 2000 Implementing Guidelines it issued
to improve efficiency and performance.

ISSUE

Whether or not respondents are regular employees of petitioner Big AA.

HELD

The SC held that considering the submission of the parties, it is constrained


to agree with the unanimous ruling of the Court of Appeals, NLRC and
Labor Arbiter that respondents are petitioner’s regular employees.
Respondents were employed for more than one year and their work as
carpenters was necessary or desirable in petitioner’s usual trade or
business of manufacturing office furniture. Under Article 280 of the Labor
Code, the applicable test to determine whether an employment should be
considered regular or non-regular is the reasonable connection between
the particular activity performed by the employee in relation to the usual
business or trade of the employer.

True, certain forms of employment require the performance of usual or


desirable functions and exceed one year but do not necessarily result to
regular employment under Article 280 of the Labor Code.21Some specific
exceptions include project or seasonal employment. Yet, in this case,
respondents cannot be considered project employees. Petitioner had
neither shown that respondents were hired for a specific project the
duration of which was determined at the time of their hiring nor identified
the specific project or phase thereof for which respondents were hired.

It also agreed that Eutiquio was not an independent contractor for he does
not carry a distinct and independent business, and he does not possess
substantial capital or investment in tools, equipment, machinery or work
premises.He works within petitioner’s premises using the latter’s tools and
materials, as admitted by petitioner. Eutiquio is also under petitioner’s
control and supervision. Attesting to this is petitioner’s admission that it
allowed respondents to use its facilities for the "proper implementation" of
job orders. Moreover, the Implementing Guidelines regulating attendance,
overtime, deadlines, penalties; providing petitioner’s right to fire employees
or "contractors"; requiring the carpentry division to join petitioner’s exercise
program; and providing rules on machine maintenance, all reflect control
and supervision over respondents.

Petition is denied.
Philippine Airlines v. NLRC and Stellar Industries (G.R. No. 125792)

Date: August 27, 2016Author: jaicdn0 Comments

Facts:

Petitioner PAL, a local air carrier, entered into a Service Agreement with
respondent Stellar, a domestic corporation engaged in the business of job
contracting janitorial services. Pursuant to the agreement, Stellar hired
workers to perform janitorial and maintenance services for PAL. Sometime
later, PAL informed Stellar that the service agreement between them would
no longer be renewed since the janitorial requirements were bidded to
other job contractors. Herein private respondents-workers filed complaints
against PAL and Stellar alleging they were illegally dismissed. The NLRC
tribunal affirming the Labor Arbiter held both PAL and Stellar liable to the
workers. On reconsideration, the NLRC tribunal held PAL solely liable
stating it was the employer of the workers for it engaged in labor-only
contracting with Stellar.

Issues:

(1) Whether or not there is labor-only contracting;

(2) Whether or not there is employer-employee relationship between PAL


and the respondent workers.

Ruling: NO.

(1) Prohibited labor-only contracting is defined in Article 106 of the Labor


Code as follows: xxx 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. xxx

Applying the foregoing provision to the present case, the Court finds no
basis for holding that PAL engaged in labor-only contracting. In fact,
STELLAR claims that it falls under the definition of an independent job
contractor. Thus, it alleges that it has sufficient capital in the form of tools
and equipment and substantial capitalization as proven by its financial
statements. Further, STELLAR has clients other than petitioner.

STELLAR undertook said contract on its account, under its own


responsibility, according to its own manner and method, and free from the
control and direction of the petitioner. Where the control of the principal is
limited only to the result of the work, independent job contracting exists.
The janitorial service agreement between petitioner and STELLAR is
definitely a case of permissible job contracting.

(2) STELLAR, not PAL, was the employer of the individual private
respondents. A contract of employment existed between STELLAR and the
individual private respondents, proving that it was said corporation which
hired them. It was also STELLAR which dismissed them, as evidenced by
termination letter, which was signed by the vice president for operations
and comptroller of STELLAR. Likewise, they worked under STELLAR’s
own supervisors. STELLAR even had its own collective bargaining
agreement with its employees, including the individual private respondents.
Moreover, PAL had no power of control and dismissal over them.

In legitimate job contracting, no employer-employee relation exists between


the principal and the job contractor’s employees. The principal is
responsible to the job contractor’s employees only for the proper payment
of wages.

[G.R. NO. 141464. September 21, 2005]

GRANDSPAN DEVELOPMENT CORPORATION, Petitioner, v. RICARDO


BERNARDO, ANTONINO CE IDOZA and EDGARDO DEL PRADO,
surviving parent of EDGAR DEL PRADO, Respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997


Rules of Civil Procedure, as amended, assailing the Decision1 dated
September 17, 1999 and Resolution2 dated January 6, 2000 rendered by
the Court of Appeals in CA-G.R. SP No. 50610, entitled "Ricardo Bernardo,
Antonino Ceñidoza and Edgardo Del Prado, as surviving parent of Edgar
Del Prado v. National Labor Relations Commission, Grandspan
Development Corporation and Joaquin Narag doing business under the
name & style of J. Narag Construction."

The instant controversy stemmed from a complaint for illegal dismissal and
non-payment of benefits filed with the Labor Arbiter by Ricardo Bernardo,
Antonino Ceñidoza and Edgar Del Prado, Respondents, against
Grandspan Development Corporation, Petitioner, and/or its warehouse
manager, Manuel G. Lee, docketed as NLRC Case No. RAB-IV-11-4605-
92-RI.

Respondents, in their complaint, alleged that sometime in 1990, they were


employed as truck scale monitors by petitioner with a daily salary
of P104.00 each. Eventually, they were assigned at its Truck Scale Section
of the Warehouse/Materials Department. They were issued identification
cards signed by Bonifacio Selmo, petitioner's personnel manager. On
October 28, 1992, petitioner sent them a notice terminating their services
effective October 29, 1992 for using profane or offensive language, in
violation of Article VI (2) (a) of the company's Rules and Regulations.

Petitioner denied the allegations of respondents in their complaint, claiming


that they are employees of J. Narag Construction. Sometime in the third
quarter of 1992, Canad Japan Co., Ltd. engaged petitioner's services for
fabrication works of several round and rectangular steel tanks needed for
the HCMG or Sogo project due for completion in September, 1992. As a
consequence, petitioner subcontracted the services of J. Narag
Construction which, in turn, assigned its 3 helpers (herein respondents) to
work for petitioner's project. Sometime in October, 1992, Manuel G. Lee,
manager of petitioner's Warehouse Department received a report from
supervisor Robert Ong that respondents vandalized the company's log
book and chairs. This prompted petitioner to send J. Narag Construction a
memorandum terminating the services of respondents for violation of the
company's Rules and Regulations.
After the submission of the parties' pleadings and position papers, the
Labor Arbiter rendered a Decision dated June 30, 1994 dismissing
respondents' complaint. In concluding that respondents were validly
dismissed from employment, the Labor Arbiter held that they were project
employees whose services were terminated upon completion of the project
for which they were hired.

Upon appeal, the National Labor Relations Commission (NLRC) issued a


Resolution dated March 7, 1995 remanding the case to the Labor Arbiter
for appropriate proceedings to determine whether there is an employer-
employee relationship between the parties.

Both parties filed their respective motions for reconsideration but were
denied by the NLRC in separate Resolutions dated April 28, 1995 and May
31, 1995.

Respondents then filed with this Court a petition for certiorari . Pursuant to
our ruling in St. Martin's Funeral Home v. NLRC,3 we referred the petition to
the Court of Appeals for its appropriate action and disposition.

Meantime, respondent Del Prado died and was substituted by his surviving
parent, Edgardo Del Prado.

On September 17, 1999, the Appellate Court rendered a Decision setting


aside the NLRC's Resolutions and ordering petitioner (1) to reinstate
respondents Bernardo and Ceñidoza to their former positions and pay,
jointly and severally with J. Narag Construction, their backwages and other
benefits, and (2) to pay respondent Del Prado his separation pay.

The Court of Appeals found that respondents are employees of petitioner;


that they were non-project workers; and that they were denied due process,
thus:

"In the instant case, petitioners were assigned to the Truck Scaling
Materials Department of Grandspan. They worked in Grandspan's
premises using the materials, supplies and equipment of Grandspan. They
were under the supervision of Grandspan as to the manner and results of
their work, and performed services directly connected to the usual business
of respondent Grandspan for the fabrication of heavy structural
components. The memorandum dated 28 October 1992 (p. 75 Rollo)
dismissing the petitioners in fact emanated from Grandspan Materials
Manager Manuel G. Lee and is addressed to the Personnel Department of
Grandspan, albeit containing the self-serving claim that the employees-
petitioners were 'J. Narag Construction personnel'. Under the
circumstances, We rule that J. Narag was a labor-only contractor. While
petitioners were in J. Narag Construction's payroll, such fact does not per
se establish J. Narag Construction as an independent contractor, i.e., the
employer of the petitioners. x x x.

xxxxxx

The Office of the Solicitor General opines that petitioners were non-project
employees as they were assigned at Grandspan's Materials Department.
We agree. Moreover, if petitioners were truly project employees, private
respondents should have presented proof that they submitted to the
nearest public employment office a report of termination of service of their
project employees upon completion of the construction project, as required
by Policy Instruction No. 20. x x x.

Going now to the issue of whether or not petitioners were illegally


dismissed, We rule in the affirmative. In the letter/memo dated 28 October
1992 (Rollo, p. 75), by which Grandspan ostensibly requested J. Narag to
terminate petitioners' contract immediately, the reason cited for the
dismissal was violation of Article VI 2.a. of company Rules and Regulations
(the use of profane or offensive languages addressed to company officers)
committed, according to the petitioners, through the vandalism of logbooks
and office furniture at the Truck Scale Section of the Warehouse/Materials
Department with obscene drawings. x x x.

However, this is not supported by substantial evidence which is necessary


in order that petitioners may be dismissed for just cause. Considering that
private respondent failed to discharge the burden of proof reposed on it to
show that the dismissal was justified, the inevitable result is a finding that
the dismissal was unjustified (Uy v. NLRC, 261 SCRA 505; Caurdanetaan
Piece Workers Union v. Laguesma, 296 SCRA 401).

Moreover, petitioners were not given ample opportunity to prepare


adequately for their defense, including legal representation (Abiera v.
NLRC, supra; Pangasinan III Electric Cooperative, Inc. v. NLRC, 215
SCRA 669), nor were they served notice of investigation, nor given an
opportunity to be heard. This violates the requirement of notice and hearing
in case of employee dismissal, thus petitioners' dismissal was void (Abiera
v. NLRC, 202 SCRA 7; Falguera v. Lansangan, 251 SCRA 364).

As illegally dismissed employees, petitioners are protected by Article 279 of


the Labor Code, x x x.

In the case of petitioner Edgar del Prado, now deceased and represented
in this petition by his surviving parent Edgardo del Prado, reinstatement is
no longer possible, thus he should be paid separation pay equivalent to
one month salary for every year of service in addition to backwages
(International Phamaceuticals, Inc. v. NLRC, 287 SCRA 228).

WHEREFORE, finding merit in the petition, the same is GRANTED. The


assailed NLRC resolutions dated 7 March 1995 and 28 April 1995 are
ANNULLED and SET ASIDE.

Private respondent Grandspan is ordered to reinstate petitioners Ricardo


Bernardo and Antonino Ceñidoza to their former positions without loss of
seniority rights. Grandspan and J. Narag Construction are declared jointly
and severally liable to pay said petitioners full backwages and other
benefits and privileges enjoyed by respondent Grandspan employees.

Private respondents Grandspan and J. Narag Construction are likewise


ordered to pay petitioner Edgardo del Prado, surviving parent of Edgar del
Prado, the latter's separation pay at the rate of one (1) month salary for
every year of service rendered by the deceased.

SO ORDERED."
On October 8, 1999, petitioner filed a motion for reconsideration.
Respondents also filed a motion for reconsideration and/or clarification
praying that the Appellate Court's Decision be modified by awarding
respondent Del Prado his backwages.

On January 6, 2000, the Court of Appeals promulgated its Resolution


denying petitioner's motion for reconsideration but modifying its Decision in
the sense that petitioner and J. Narag Construction are ordered to pay
respondent Del Prado his separation pay and backwages.

Hence, this Petition for Review on Certiorari .

The issue for our resolution is whether the Court of Appeals erred in
holding that respondents are employees of petitioner.

Petitioner argues that it has no employer-employee relationship with


respondents since they are employees of J. Narag Construction, an
independent contractor.

In Miguel v. JCT Group, Inc.,4 we held:

"The test for determining an employer-employee relationship hinges on


resolving who has the power to select employees, who pays for their
wages, who has the power to dismiss them, and who exercises control in
the methods and the results by which the work is accomplished."

The Court of Appeals found that J. Narag Construction assigned


respondents to perform activities directly related to the main business of
petitioner. They worked in petitioner's premises, using its equipment,
materials and supplies. J. Narag Construction's payroll worksheets
covering the period from December 21, 1990 to July 31, 1991 show that the
payment of their salaries was approved by petitioner. The manager and
supervisor of petitioner's Warehouse Department supervised the manner
and results of their work. It was petitioner who terminated their services
after finding them guilty of using profane or offensive language in violation
of Article VI (2) (a) of the company's Rules and Regulations. The Appellate
Court then concluded that these circumstances confirm the existence of an
employer-employee relationship between petitioner and respondents.
We agree.

Unswayed, petitioner insists that J. Narag Construction, being a legitimate


independent contractor, is the employer of respondents. On this point, the
Court of Appeals held that J. Narag Construction is a labor-only contractor.

Article 106 of the Labor Code, as amended, provides in part:

"ART. 106. Contractor or subcontracting. - x x x.

xxxxxx

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. x x x."

On the basis of the records, we have no reason to deviate from the


Appellate Court's finding that J. Narag Construction is indeed a labor-only
contractor. These are the reasons: (1) it is not registered as a building
contractor with the SEC; (2) it has no contract with petitioner; and (3) there
is no proof of its financial capability and has no list of equipment, tools,
machineries and implements used in the business.

Clearly, J. Narag Construction could not be respondents' employer.

But petitioner maintains that respondents are project employees and as


such, their services ended in September, 1992 upon completion of its
HCMG or Sogo project.

In Kiamco v. NLRC,5 we held:

"The principal test for determining whether particular employees are


properly characterized as 'project employees,' as distinguished from
'regular employees,' is whether or not the 'project employees' were
assigned to carry out a 'specific project or undertaking,' the duration and
scope of which were specified at the time the employees were engaged for
that project. As defined, project employees are those workers hired (1) for a
specific project or undertaking, and (2) the completion or termination of
such project or undertaking has been determined at the time of
engagement of the employee."

Here, petitioner could not present employment contracts signed by


respondents showing that their employment was for the duration of the
HCMG or Sogo project.

Likewise, as correctly observed by the Court of Appeals, petitioner failed to


present any report terminating the services of respondents when its
projects were actually finished.

Section 2.2 (e) of the Labor Department Order No. 19 expressly provides
that the report of termination is one of the indications of project
employment.6

Time and again, we held that failure of the employer to file termination
reports after every project completion with the nearest public employment
office is an indication that respondents were

not project employees.7

We, therefore, uphold the finding of the Court of Appeals that respondents
are petitioner's regular employees. As such, they are entitled to security of
tenure and can only be dismissed for a just or authorized cause, as
provided by Article 279 of the Labor Code, as amended, thus:

"ARTICLE 279. Security of Tenure. - In cases of regular employment, the


employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be 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."

In Bolinao Security and Investigation Service, Inc. v. Toston8 , we


emphasized that "it is incumbent upon the employer to prove by the
quantum of evidence required by law that the dismissal of an employee is
not illegal, otherwise, the dismissal would be unjustified."

Here, petitioner failed to discharge its burden. In terminating respondents'


services, it merely relied on the alleged completion of the HCMG or Sogo
project and on the report that respondents uttered profane or offensive
language in violation of the company's Rules and Regulations. As earlier
mentioned, they are not project employees. And as found by the Court of
Appeals, there is no evidence to substantiate the charge of uttering profane
or offensive language.

It also appears that petitioner violated respondents' right to due process.

In Loadstar Shipping Co., Inc. v. Mesano,9 we held:

"The law requires that an employee sought to be dismissed must be served


two written notices before termination of his employment. The first notice is
to apprise the employee of the particular acts or omissions by reason of
which his dismissal has been decided upon; and the second notice is to
inform the employee of the employer's decision to dismiss him. Failure to
comply with the requirement of two notices makes the dismissal illegal. The
procedure is mandatory. Non-observance thereof renders the dismissal of
an employee illegal and void."

Records show that respondents were not served by petitioner with notices,
verbal or written, informing them of the particular acts for which their
dismissal is sought. Neither were they required to give their side regarding
the alleged serious misconduct imputed against them.

We thus sustain the Court of Appeals ruling that respondents were


deprived of both their substantive and procedural rights to due
process and, therefore, the termination of their employment is illegal.

Since respondents were illegally dismissed from work, they are entitled to
reinstatement without loss of seniority rights, full backwages, inclusive of
allowances, and other benefits or their monetary equivalent computed
from the time their compensation was withheld from them up to the
time of their actual reinstatement.10
However, the circumstances obtaining in this case do not warrant the
reinstatement of respondents. Antagonism caused a severe strain in the
parties' employer-employee relationship. Thus, a more equitable
disposition would be an award of separation pay equivalent to at least one
month pay, or one month pay for every year of service, whichever is higher,
(with a fraction of at least six (6) months being considered as one (1) whole
year),11 in addition to their full backwages, allowances and other benefits.12

Records show that respondents were employed by petitioner from 1990 to


October 29, 1992, or for two (2) years, with a daily salary of P104.00 each,
hence, entitled to a separation pay of P4,992.00.13

WHEREFORE, the assailed Decision dated September 17, 1999 and


Resolution dated January 6, 2000 of the Court of Appeals in CA-G.R. SP
No. 50610 are hereby AFFIRMED with MODIFICATION in the sense that
petitioner is ordered to pay each respondent separation pay equivalent
to P4,992.00, plus their respective full backwages, and other privileges and
benefits, or their monetary equivalent, during the period of their dismissal
up to their supposed actual reinstatement.

Costs against petitioner.

SO ORDERED.

G.R. No. 154715, Dec. 11, 2003

New Golden City Builders vs. CA

FACTS:
Petitioner entered into a construction contract with Prince David
Development Corporation for the construction of a 17-storey office and
residential condominium building. Petitioner engaged the services of
NiloLayno Builders to do the specialized concrete works, forms works and
steel rebars works. Pursuant to the contract, NiloLayno Builders hired
private respondents to perform work at the project.

After the completion of the phase for which NiloLayno Builders was
contracted, private respondents filed a complaint against petitioner and its
president (NGC Builder and Manuel Sy) for unfair labor practice, non-
payment of 13th month pay, service incentive leave, illegal dismissal and
severance pay, in lieu of reinstatement.

The Labor Arbiter ruled in favor of respondents, but dismissed the charges
for illegal dismissal including their prayers for back wages and unfair labor
practice and other monetary claims except their 13th month pay and
service incentive leave pay. It was also found that NiloLayno Builders was
a labor-only-contractor, thus private respondents were deemed employees
of the petitioner. Both parties appealed to the National Labor Relations
Commission, which affirmed the Labor Arbiter's decision with modification
that private respondents were illegally dismissed.

Since petitioner's motion for reconsideration was denied, it instituted a


special civil action for certiorariwith the Court of Appeals, but the latter
denied the same; hence, a petition for review in SC.

Issue: Whether NiloLayno Builders was an "independent contractor" or a


"labor-only" contractor
Ruling: NiloLayno Builders is an independent contractor.

Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing
the Labor Code, an independent contractor is one who undertakes "job
contracting," i.e., a person who: (a) 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 (b)
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. Jurisprudential holdingsare to the effect that in
determining the existence of an independent contractor relationship,
several factors may be considered, such as, but not necessarily confined
to, 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 specified pieces
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 premises, tools,
appliances, materials and labor; and the mode, manner and terms of
payment.

We are convinced that Nilo Layno Builders is undertaking permissible labor


or job contracting. NiloLayno Builders is a duly licensed labor contractor
carrying on an independent business for a specialized work that involves
the use of some particular, unusual and peculiar skills and expertise, like
concrete works, form works and steel rebars works. As a licensed labor
contractor, it complied with the conditions set forth in Section 5, Rule VII-A,
Book III, Rules to Implement the Labor Code, among others, proof of
financial capability and list of equipment, tools, machineries and
implements to be used in the business. Further, it entered into a written
contract with the petitioner, a requirement under Section 3, Rule VII-A,
Book III, Rules to Implement the Labor Code to assure the employees
of the minimum labor standards and benefits provided by existing 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 to the results of the work. This is
exactly the situation obtaining in the case at bar. NiloLayno Builders hired
its own employees, the private respondents, to do specialized work in the
Prince David Project of the petitioner. The means and methods adopted by
the private respondents were directed by NiloLayno Builders except that,
from time to time, the engineers of the petitioner visited the site to check
whether the work was in accord with the plans and specifications of the
principal. As admitted by Nilo G. Layno, he undertook the contract work on
his own account and responsibility, free from interference from any other
persons, except as to the results; that he was the one paying the salaries of
private respondents; and that as employer of the private respondents, he
had the power to terminate or dismiss them for just and valid
cause. Indubitably, the Court finds that NiloLayno Builders
maintained effective supervision and control over the private complainants.

Thus, it was plain conjecture on the part of the Labor Arbiter, the NLRC and
the Court of Appeals to conclude that Nilo Layno Builders was a labor-only
contractor merely because it does not have investment in the form of tools
or machineries. They failed to appreciate the fact that Nilo Layno Builders
had substantial capitalization for it did not only provide labor to do the
specified project and pay their wages, but it furnished the materials to be
used in the construction.
In Neri v. NLRC, we held that the labor contractor which sufficiently proved
that it had substantial capital was not engaged in labor-only
contracting. Thus:

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.

PANGILINAN vs GENERAL MILLING CORPORATION Case Digest

[G.R. No. 149329 July 12, 2004]

ROSITA PANGILINAN, YOLANDA LAYOLA, SALLY GOLDE, AIDA


QUITE, FERDINAND CALE, RAUL ARUITA, MANUEL ERIFUL, ARNEL
PAULO, ROSEMARIE GEOTINA, SAMUELA KUMAR, REBECCA
PEREZ, EDGAR BELLO, JOSEPH SORIANO, DANILO AMPULLER,
TOLENTINO CALLAO, MANOLITA MANALANG, TORIBIO LETIM,
NANCY BELGICA, ALFREDO ARELLANO, JOSEFA CEBUJANO, JUN
DEL ROSARIO, AVELINO AGUILAR, MILAROSA TIAMSON, EDNA
DICHOSO, JASMIN BOLISAY, JULIETA DIDAL, GERARDO BARISO,
ANGELITO PEÑAFLOR, NERISSA LETIM, ALEXANDER BARBOSA,
ELIZABETH SAENS, NYMPHA LUGTU, MYRNA MORALES, LIZA
CRUZ, ELENA FANG, EDNA CRUZA, GORGONIO PALMA, JOSE
VERGARA, ALDRIN REMORQUE, RUDY BLANCO, MARIO
BUENVIAJE, MA. CRISTY CEA, REYNALDO GUELAS VILLASENOR,
RHOY TADO, LYDIA SALIPOT, ANGELITO PEREZ VERGARA,
RODOLFO GACHO, JESSIE SAN PEDRO, MARINAO ORCA, JR.,
PEBELITO LERONA, PEPE CONGRESO, NIMFA NAPAO, WILHELMINA
BAGUISA, OLIVIA CAINCAY, JERRY MANUEL NICOLAS, CARLOS
ABRATIQUE, JESUS LIM, JR., AND GERRY ROXAS, Petitioners, -
versus - GENERAL MILLING CORPORATION, Respondent.

FACTS: The respondent General Milling Corporation is a domestic


corporation engaged in the production and sale of livestock and poultry. It
is, likewise, the distributor of dressed chicken to various restaurants and
establishments nationwide. As such, it employs hundreds of employees,
some on a regular basis and others on a casual basis, as “emergency
workers.” The petitioners were employed by the respondent on different
dates as emergency workers at its poultry plant in Cainta, Rizal, under
separate “temporary/casual contracts of employment” for a period of five
months. Most of them worked as chicken dressers, while the others served
as packers or helpers. Upon the expiration of their respective contracts,
their services were terminated. They later filed separate complaints for
illegal dismissal and non-payment of holiday pay, 13th month pay, night-
shift differential and service incentive leave pay against the respondent
before the Arbitration Branch of the National Labor Relations Commission.

The petitioners alleged that their work as chicken dressers was necessary
and desirable in the usual business of the respondent, and added that
although they worked from 10:00 p.m. to 6:00 a.m., they were not paid
night-shift differential. They stressed that based on the nature of their work,
they were regular employees of the respondent; hence, could not be
dismissed from their employment unless for just cause and after due
notice. They asserted that the respondent GMC terminated their contract of
employment without just cause and due notice. They further argued that
the respondent could not rely on the nomenclature of their employment as
“temporary or casual.”

ISSUE: Whether or not the petitioners were regular employees of the


respondent GMC when their employment was terminated.
HELD: The SC held the petitioners were employees with a fixed period,
and, as such, were not regular employees. Article 280 of the Labor Code
comprehends three kinds of employees: (a) regular employees or those
whose work is necessary or desirable to the usual business of the
employer; (b) project employees or those whose 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; and, (c) casual
employees or those who are neither regular nor project employees.

A regular employee is one who is engaged to perform activities which are


necessary and desirable in the usual business or trade of the employer as
against those which are undertaken for a specific project or are
seasonal.[41] There are two separate instances whereby it can be
determined that an employment is regular: (1) if the particular activity
performed by the employee is necessary or desirable in the usual business
or trade of the employer; and, (2) if the employee has been performing the
job for at least a year. Article 280 of the Labor Code does not proscribe or
prohibit an employment contract with a fixed period. It does not necessarily
follow that where the duties of the employee consist of activities usually
necessary or desirable in the usual business of the employer, the parties
are forbidden from agreeing on a period of time for the performance of such
activities. There is thus nothing essentially contradictory between a definite
period of employment and the nature of the employee’s duties.

Stipulations in employment contracts providing for term employment or


fixed period employment are valid when the period were agreed upon
knowingly and voluntarily by the parties without force, duress or improper
pressure, being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or where it satisfactorily appears that
the employer and employee dealt with each other on more or less equal
terms with no moral dominance whatever being exercised by the former
over the latter. An examination of the contracts entered into by the
petitioners showed that their employment was limited to a fixed period,
usually five or six months, and did not go beyond such period. The records
reveal that the stipulations in the employment contracts were knowingly
and voluntarily agreed to by the petitioners without force, duress or
improper pressure, or any circumstances that vitiated their consent.
Similarly, nothing therein shows that these contracts were used as a
subterfuge by the respondent GMC to evade the provisions of Articles 279
and 280 of the Labor Code.

The petitioners were hired as “emergency workers” and assigned as


chicken dressers, packers and helpers at the Cainta Processing Plant.
While the petitioners’ employment as chicken dressers is necessary and
desirable in the usual business of the respondent, they were employed on
a mere temporary basis, since their employment was limited to a fixed
period. As such, they cannot be said to be regular employees, but are
merely “contractual employees.” Consequently, there was no illegal
dismissal when the petitioners’ services were terminated by reason of the
expiration of their contracts. Lack of notice of termination is of no
consequence, because when the contract specifies the period of its
duration, it terminates on the expiration of such period. A contract for
employment for a definite period terminates by its own term at the end of
such period.

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