FONTERRA BRANDS PHILS., INC. VS.

LEONARDO LARGADO and TEOTIMO ESTRELLADO

G.R. NO. 205300, MARCH 18, 2015

FACTS: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal and
setting aside of the decision of the CA dated September 6, 2012, as well as its January 11, 2013 Resolution
denying reconsideration thereof finding petition liable for monetary benefits in favor of respondents.

ISSUE/S: Are Zytron and A.C. Sicat, labor-only contractors, making Fonterra the employer of herein
respondents?

LAW/S: Article 106 Labor Code: Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this
Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to
the extent of the work performed under the contract, in the same manner and extent that he is liable to
employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out
of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within
these types of contracting and determine who among the parties involved shall be considered the employer for
purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment, machineries, work premises, among others, and the
workers recruited and placed by such person are performing activities which are directly related to the principal
business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him.

Article 109 of the Labor Code: Solidary liability. The provisions of existing laws to the contrary notwithstanding,
every employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability under this
Chapter, they shall be considered as direct employers.

CASE HISTORY: Petitioner Fonterra contracted the services of Zytron for the marketing and promotion of its milk
and dairy products. Pursuant to the contract, Zytron provided Fonterra with trade merchandising
representatives (TMRs), including respondents Largado and Estrellado). The engagement of their services began
on September 15, 2003 and May 27, 2002, respectively, and ended on June 6, 2006.
On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions contract, effective June 5, 2006.
Fonterra then entered into an agreement for manpower supply with A.C. Sicat. Desirous of continuing their work
as TMRs, respondents submitted their job applications with A.C. Sicat, which hired them for a term of five (5)
months, beginning June 7, 2006 up to November 6, 2006.
When respondents 5-month contracts with A.C. Sicat were about to expire, they allegedly sought renewal
thereof, but were allegedly refused. This prompted respondents to file complaints for illegal dismissal,
regularization, non-payment of service incentive leave and 13th month pay, and actual and moral damages,
against petitioner, Zytron, and A.C. Sicat.

The Labor Arbiter dismissed the complaint and ruled that: (1) respondents were not illegally dismissed. As a
matter of fact, they were the ones who refused to renew their contract and that they voluntarily complied with
the requirements for them to claim their corresponding monetary benefits in relation thereto; and (2) they were
consecutively employed by Zytron and A.C. Sicat, not by Fonterra. The NLRC affirmed the Labor Arbiter. Ruling
on the petition, CA reversed the Decision, found that A.C. Sicat satisfies the requirements of legitimate job
contracting, but Zytron does not. According to the CA: (1) Zytrons paid-in capital of 250,000 cannot be
considered as substantial capital; (2) its Certificate of Registration was issued by the DOLE months after
respondents supposed employment ended; and (3) its claim that it has the necessary tools and equipment for
its business is unsubstantiated. Therefore, according to the CA, respondents were Fonterras employees.
Additionally, the CA held that respondents were illegally dismissed since Fonterra itself failed to prove that their
dismissal is lawful. Zytron and Fonterra moved for reconsideration, but to no avail. Hence, this petition.

RULING: Supreme Court ruled in favor of petitioner.

No. A.C. Sicat is a legitimate job contractor. As regards Zytron, SC found it immaterial to the resolution of illegal
dismissal for the reason that respondents voluntarily terminated their employment with Zytron, contrary to
their allegation. As correctly held by the Labor Arbiter and the NLRC, the termination of respondents
employment with Zytron was brought about by the cessation of their contracts with the latter. We give
credence to the Labor Arbiters conclusion that respondents were the ones who refused to renew their
contracts with Zytron, and the NLRCs finding that they themselves acquiesced to their transfer to A.C. Sicat.In
short, respondents voluntarily terminated their employment with Zytron by refusing to renew their employment
contracts with the latter, applying with A.C. Sicat, and working as the latters employees, thereby abandoning
their previous employment with Zytron. Too, it is well to mention that for obvious reasons, resignation is
inconsistent with illegal dismissal. This being the case, Zytron cannot be said to have illegally dismissed
respondents, contrary to the findings of the CA.

CA correctly found that A.C. Sicat is engaged in legitimate job contracting. It duly noted that A.C. Sicat was able
to prove its status as a legitimate job contractor for having presented the following evidence, to wit:
1.Certificate of Business Registration; 2.Certificate of Registration with the Bureau of Internal Revenue;
3.Mayors Permit; 4.Certificate of Membership with the Social Security System; 5.Certificate of Registration with
the Department of Labor and Employment; 6.Company Profile; and 7.Certifications issued by its clients.
Furthermore, A.C. Sicat has substantial capital, having assets totaling 5,926,155.76 as of December 31, 2006.
Too, its Agreement with Fonterra clearly sets forth that A.C. Sicat shall be liable for the wages and salaries of its
employees or workers, including benefits, premiums, and protection due them, as well as remittance to the
proper government entities of all withholding taxes, Social Security Service, and Medicare premiums, in
accordance with relevant laws. CA correctly held that Fonterras issuance of Merchandising Guidelines, stock
monitoring and inventory forms, and promo mechanics, for compliance and use of A.C. Sicats employees
assigned to them, does not establish that Fonterra exercises control over A.C. Sicat. We agree with the CAs
conclusion that these were imposed only to ensure the effectiveness of the promotion services to be rendered
by the merchandisers as it would be risky, if not imprudent, for any company to completely entrust the
performance of the operations it has contracted out. These sufficiently show that A.C. Sicat carries out its
merchandising and promotions business, independent of Fonterras business.1wphi1 Thus, having settled that
A.C. Sicat is a legitimate job contractor. Concomitantly, respondents cannot be said to have been illegally
dismissed.

OPINION: I intensely agree with the ruling of the Supreme Court. There are pieces of evidence presented by A.C.
Sicat that convincingly, it is engaged in legitimate job contracting. While the law mostly favors labor, it should
not be unjust and oppressive towards law abiding job contractors.
PETRON CORPORATION VS. ARMZ CABERTE et. al.
G.R. No. 182255, June 15, 2015

FACTS: This Petition for Review on Certiorari1 assails the November 14, 2007 decision of the CA which reversed
the May 14, 2003 decision and November 27, 2003 resolution of the NLRC. The NLRC affirmed the March 7,
2002 decision of the Labor Arbiter dismissing the Complaints for illegal dismissal and payment of monetary
claims filed by respondents Armz Caberte, Antonio Caberte, Jr., Michael Servicio, Ariel Develos, Adolfo Gestupa ,
Archie Ponteras, Arnold Blanco, Dante Mariano, Virgilio Galorosa and Camilo Te against petitioner Petron, ABC
Contracting Services (ABC), and its owner Antonio B. Caberte, Sr..

ISSUE/S: Is ABC engaged in permissible job contracting?

LAW/S: Article 106 of the Labor Code and Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code (Implementing Rules), as amended by Department Order No. 18-02

CASE HISTORY: Petron is a domestic corporation engaged in the manufacture and distribution to the general
public of various petroleum products. Petron owns and operates several bulk plants in the country for receiving,
storing and distributing its products. On various dates from 1979 to 1998, respondents were hired to work at
Petrons Bacolod Bulk Plant in Bacolod City, Negros Occidental as LPG/Gasul fillers, maintenance crew,
warehousemen, utility workers and tanker receiving crew. For the periods from March 1, 1996 to February 28,
1999 and November 1, 1996 to June 30, 1999, Petron and ABC, a labor contracting business owned and
operated by Caberte Sr., entered into a Contract for Services and a Contract for LPG Assistance Services. Under
both service contracts, ABC undertook to provide utility and maintenance services to Petron in its Bacolod Bulk
Plant. On July 2, 1999, respondents Caberte, Caberte Jr., Servicio, Develos, Gestupa, Ponteras, Blanco and
Mariano filed before the Labor Arbiter a Complaint for illegal dismissal, underpayment of wages and non-
payment of allowances, 13th month pay, overtime pay, holiday pay, service incentive leave pay, moral and
exemplary damages and attorneys fees against Petron, ABC and Caberte Sr.. Subsequently, respondents
Galorosa and Te separately filed similar complaints. Respondents averred that even before Petron engaged ABC
as contractor in 1996, most of them had already been working for Petron for years. However, every time Petron
engages a new contractor, it would designate such new contractor as their employer. Despite such arrangement,
Petron exercised control and supervision over their work, the performance of which is necessary and desirable
in its usual trade and business. Respondents added that ABC is a mere labor-only contractor which had no
substantial capital and investment, and had no control over the manner and method on how they accomplished
their work. Thus, Petron is their true employer. On July 1, 1999, however, Petron no longer allowed them to
enter and work in the premises of its Bacolod Bulk Plant.

Petron asserted that ABC is an independent contractor which supplied the needed manpower for the
maintenance of its bulk handling premises and offices, as well as for tanker assistance in the receiving and re-
filling of its LPG products; that it has no direct control and supervision over respondents who were tasked to
perform work required by the service contracts it entered into with ABC. To prove the legitimacy and capacity of
ABC as an independent contractor, Petron submitted among others (1) Contractors Pre-Qualification
Statement; (2) Petrons Conflict of Interest Policy signed by Caberte Sr., as proprietor of ABC; (3) ABCs
Certificate of Registration issued by the Bureau of Internal Revenue (BIR); (4) Value-Added Tax Return for the
year 1995; (5) BIR Confirmation Receipt; (8) ABCs Audited Financial Statements for the years 1992, 1993 and
1994; (9) ABCs Mayors Permit for the year 1995; and, (10) ABCs Certificate of Registration of Business Name
issued by the Department of Trade and Industry (DTI). In addition, it averred that ABC had duly posted a
performance bond. Petron further revealed that ABC/Caberte Sr. has the power to hire and fire respondents and
was the one paying their wages. Labor Arbiter Danilo C. Acosta held that ABC is an independent contractor that
has substantial capital and that respondents were its employees. He likewise ruled that ABCs cessation of
operation is a force majeure that justifies respondents dismissal. NLRC affirmed the ruling of the Labor Arbiter
after it found that ABC is not a mere labor contractor but a legitimate independent contractor. CA found merit in
respondents Petition. It ruled that ABC is engaged in labor-only. MR is denied. Hence, this present recourse.

RULING: No. ABC is a labor-only contractor. The law presumes a contractor to be a labor-only contractor and the
employees are not expected to prove the negative fact that the contractor is a labor-only contractor. Thus, it is
not respondents but Petron which bears the burden of establishing that ABC is not a labor-only contractor but a
legitimate independent contractor. Petron failed to overcome the presumption that ABC is a labor-only
contractor. A contractor is deemed to be a labor-only contractor if the following elements are present: (i) the
contractor does not have substantial capital or investment to actually perform the job, work or service under its
own account and responsibility; and (ii) the employees recruited, supplied or placed by such contractor are
performing activities which are directly related to the main business of the principal.45 Conversely, in proving
that ABC is not a labor-only contractor, it is incumbent upon Petron to show that ABC has substantial capital or
investment and that respondents were performing activities which were not directly related to Petrons
principal business. Court observes that the documents submitted are not conclusive evidence of ABCs financial
capability. At most, they merely show that ABC is engaged in business and licensed by the appropriate
government agencies. As for the financial statements presented, it appears that only the audited financial
statements of ABC for the years 1992, 1993 and 1994 were submitted. As aptly observed by the CA, these
documents cannot be given much credence considering that the service contracts between Petron and ABC
commenced in 1996 and ended in 1999. However, no audited financial statements for the years material to this
case (1996, 1997, 1998 and 1999) were submitted. Petron should have presented ABCs financial statements for
the said years which are presumed to be in Petrons possession considering that they are part of the
requirements that it itself set for its accredited contractors.

Neither does the performance bond taken out by ABC serve as significant evidence of its substantial capital. The
performance bond posted by ABC was not shown to be enough to cover not only payrolls, rentals and
equipment but also possible damages to the equipment and to third parties and other contingent liabilities. It is
evident that ABC had been renting a forklift from Petron in order to carry out the job of respondents. This only
shows that ABC does not own basic equipment needed in the performance of respondents job. Similarly and
again as correctly held by the CA, the fact that ABC leased a property for the establishment of its Bacolod office
is immaterial since it was not shown that it was used in the performance or completion of the job contracted out
"Substantial capital or investment."

Petron avers that the same were not necessary or desirable to its principal business. In fact, the service
contracts it entered into with ABC clearly referred to respondents functions as maintenance and utility works
only which are remote to its principal business of manufacturing and distributing petroleum products.The Court
finds otherwise. Gestupa, Ponteras, Develos, Blanco and Mariano were LPG fillers and maintenance crew;
Caberte was an LPG operator supervisor; Te was a warehouseman and utility worker; and Servicio and Galorosa
were tanker receiving crew and utility workers. Undoubtedly, the work they rendered were directly related to
Petrons main business, vital as they are in the manufacture and distribution of petroleum products. The
repeated and continuing need for the performance of the job is sufficient evidence of the necessity, if not
indispensability of the activity to the business. Further, Petron has the power of control over respondents in the
performance of their work. It bears stressing that the power of control merely calls for the existence of the right
to control and not necessarily the exercise thereof. Here, Petron admitted that the supervision of a Petron
employee is required over LPG and tanker assistance jobs for inventory control and safety checking purposes.

OPINION: I humbly submit to the ruling of the Supreme Court. The facts clearly states that respondents were in
fact, working for petitioner years before it entered into a contract with ABC Contracting services.

If at all, the bond was a convenient smoke screen to disguise the real nature of ABCs employment as an agent of
Petron.
AVELINO S. ALILIN, ET. AL., VS. PETRON CORPORATION
G.R. NO. 177592, JUNE 9, 2014

FACTS: This Petition for Review on Certiorari assails the decision dated May 10, 2006 of the CA which granted
the Petition for Certiorari filed therewith, reversed and set aside the February 18, 2005 decision and August 24,
2005 Resolution of the NLRC and dismissed the complaint for illegal dismissal filed by petitioners Alilin, Calesa,
Hindang, Gindang, Sungahid, Lee, Morato, Gabilan, Laurente against respondent Petron. Also assailed in this
petition is the CA Resolution dated March 30, 2007 which denied petitioners Motion for Reconsideration and
Supplemental Motion for Reconsideration.

ISSUE/S: Is RDG a legitimate contractor?

LAW/S: Article 106 of the Labor Code and Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code (Implementing Rules), as amended by Department Order No. 18-02

CASE HISTORY: Petron is a domestic corporation engaged in oil business. It owns several bulk plants in the
country for receiving, storing and distributing its petroleum products. In 1968, Romualdo D. Gindang Contractor,
which was owned and operated by Romualdo , started recruiting laborers for fielding to Petrons Mandaue Bulk
Plant. When Romualdo died in1989, his son Romeo, through Romeo D. Gindang Services (RDG), took over the
business and continued to provide manpower services to Petron. Petitioners were among those recruited by
Romualdo D. Gindang Contractor and RDG to work in the premises of the said bulk plant, from 1968-1993 as
dates of hiring and work duties such as utility/tanker, receiver/barge, loader/warehouseman, mixer/forklift
driver, etc.. On June 2000, Petron and RDG entered into a Contract of Services, whereby the latter undertook to
provide respondent the above-mentioned services. The contract was extended and upon expiration of such, it
was no longer renewed. Alleging that petitioners were barred from continuing their work, they filed before LA
illegal dismissal and prayed for payment of benefits. They posited that RDG is a labor-only contractor, hence,
their true employer is the respondent. This allegation was supported by RDG. Petron on the other hand denied
said allegation, stating that, RDG is a legitimate contractor with sufficient capital investment and tools necessary
for its operations; that RDG hired and supervised petitioners.

LA ruled in favor of petitioners finding RDG as labor-only contractor with no substantial capital. This ruling was
affirmed by NLRC. However, CA revered the decision finding RDG a legitimate job contractor evidenced by the
documents submitted by Petron. MR denied. Hence, this recourse.

RULING: No. RDG is a labor-only contractor. Petron failed to discharge the burden of proving that RDG is a
legitimate contractor. Hence, the presumption that RDG is a labor-only contractor stands. The audited financial
statements and other financial documents of RDG for the years 1999 to 2001 establish that it does have
sufficient working capital to meet the requirements of its service contract. In fact, the financial evaluation
conducted by Petron of RDGs financial statements for years 1998-2000 showed RDG to have a maximum
financial capability of Php4.807 Million as of December 1998, and Php1.611 Million as of December 2000. The
Court stresses though that this determination of RDGs status as an independent contractor is only with respect
to its financial capability for the period covered by the financial and other documents presented. In other words,
the evidence adduced merely proves that RDG was financially qualified as a legitimate contractor but only with
respect to its last service contract with Petron in the year 2000. As may be recalled, petitioners have rendered
work for Petron for a long period of time even before the service contract was executed in 2000. The respective
dates on which petitioners claim to have started working for Petron, as well as the fact that they have rendered
continuous service to it until October 2002, when they were prevented from entering the premises of Petron,
were not at all disputed by Petron. Hence, while Petron was able to establish that RDG was financially capable as
a legitimate contractor at the time of the execution of the service contract in 2000, it nevertheless failed to
establish the financial capability of RDG at the time when petitioners actually started to work for Petron. For job
contracting to be permissible, one of the conditions that has to be met is that the contractor must have
substantial capital or investment. Petron having failed to show that this condition was met by RDG, it can be
concluded, on this score alone, that RDG is a mere labor-only contractor.

SC also finds that the works performed by petitioners were directly related to Petrons business, another factor
which negates Petrons claim that RDG is an independent contractor. Petrons power of control over petitioners
exists in this case. Here, Petron could order petitioners to do work outside of their regular "maintenance/utility"
job. Also, petitioners were required to report for work every day at the bulk plant, observe an 8:00 a.m. to 5:00
p.m. daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety and security
measures being implemented within the bulk plant. All these imply control. In an industry where safety is of
paramount concern, control and supervision over sensitive operations, such as those performed by the
petitioners, are inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile
and flammable which, if mishandled or not properly attended to, may cause serious injuries and damage to
property and the environment. Naturally, supervision by Petron is essential in every aspect of its product
handling in order not to compromise the integrity, quality and safety of the products that it distributes to the
consuming public.

OPINION: I unequivocally agree with the ruling of the court. For not having complied with the requirements of
the law, RDG is a labor-only contractor. Concomitantly, Petron is liable for the benefits which the petitioners are
entitled. Petron cannot do indirectly what cannot be done directly.
DIGITAL TELECOMMUNICAITONS PHILIPPINES, INC. VS. DIGITEL EMPLOYEES UNION, ET. AL..
G.R. NO. 184903, OCTOBER 10, 2012 (PEREZ, J.)

FACTS: This treats of the petition for review filed by Digital Telecommunications Philippines, Inc. (Digitel)
assailing the 18 June 2008 decision and 9 October 2008 Resolution of the CA 10th Division which affirms the
Order of the Secretary of Labor and Employment directing Digitel to commence Collective Bargaining Agreement
(CBA) negotiations and which declares the dismissal of affected Digitel employees as illegal.

ISSUE/S: Is Digiserv a labor-only contractor?

LAW/S: Article 106 of the Labor Code and Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code (Implementing Rules), as amended by Department Order No. 18-02

CASE HISTORY: By virtue of a certification election, Digitel Employees Union (Union) became the exclusive
bargaining agent of all rank and file employees of Digitel in 1994. The Union and Digitel then commenced
collective bargaining negotiations which resulted in a bargaining deadlock. The Union threatened to go on strike,
but then the Labor Secretary assumed jurisdiction over the dispute and eventually directed the parties to
execute a CBA. However, no CBA was forged between Digitel and the Union. Some Union members abandoned
their employment with Digitel. The Union later became dormant. Ten (10) years thereafter or on 28 September
2004, Digitel received from Esplana, who was President of the Union, a letter containing the list of officers, CBA
proposals and ground rules. Digitel was reluctant to negotiate with the Union and demanded that the latter
Union show compliance with the provisions of the Unions Constitution and By-laws on union membership and
election of officers. On 4 November 2004, Esplana and his group filed a case for Preventive Mediation before the
National Conciliation and Mediation Board based on Digitels violation of the duty to bargain. On 25 November
2004, Esplana filed a notice of strike. On10 March 2005, the then Labor Secretary issued an Order assuming
jurisdiction over the labor dispute. During the pendency of the controversy, Digitel Service, Inc. (Digiserv), a non-
profit enterprise engaged in call center servicing, filed with the DOLE an Establishment Termination Report
stating that it will cease its business operation. The closure affected at least 100 employees, 42 of whom are
members of the herein respondent Union. Alleging that the affected employees are its members and in reaction
to Digiservs action, Esplana and his group filed another Notice of Strike for union busting, illegal lock-out, and
violation of the assumption order. On 23 May 2005, the Labor Secretary ordered the second notice of strike
subsumed by the previous Assumption Order. Meanwhile, on 14 March 2005, Digitel filed a petition with the
Bureau of Labor Relations (BLR) seeking cancellation of the Unions registration. In a Decision dated 11 May
2005, the Regional Director of the DOLE dismissed the petition for cancellation of union registration for lack of
merit. The appeal filed by Digitel with the BLR was eventually dismissed for lack of merit in a Resolution dated 9
March 2007.On 13 July 2005, the Secretary of Labor directed Digitel to commence the CBA negotiation with the
Union and certified for compulsory arbitration before the NLRC the issue of unfair labor practice. In accordance
with the order of the Secretary of Labor, the unfair labor practice issue was certified for compulsory arbitration
before the NLRC. On 31 January 2006, NLRC rendered a Decision dismissing the unfair labor practice charge
against Digitel but declaring the dismissal of the 13 employees of Digiserv as illegal and ordering their
reinstatement. The Union manifested that out of 42 employees, only 13 remained, as most had already
accepted separation pay. In view of this unfavorable decision, Digitel filed a petition on 9 June 2006 before
the Court of Appeals, challenging the above NLRC Decision and Resolution and arguing mainly that Digiserv
employees are not employees of Digitel. On 18 June 2008, CA partially granted the case for ULP, thus modifying
the assailed NLRC dispositions. The CA likewise sustained the finding that Digiserv is engaged in labor-only
contracting and that its employees are actually employees of Digital. Digitel filed a motion for reconsideration
but was denied in a Resolution dated 9 October 2008. Hence, this petition for review on certiorari.

RULING: Yes. Digiserv is a labor-only contractor. Labor-only contracting is expressly prohibited by our labor laws.
After an exhaustive review of the records, there is no showing that first, Digiserv has substantial investment in
the form of capital, equipment or tools. The NLRC, as echoed by the CA, did not find substantial Digiservs
authorized capital stock of P 1,000,000.00. It pointed out that only P 250,000.00 of the authorized capital stock
had been subscribed and only P 62,500.00 had been paid up. There was no increase in capitalization for the last
10 years. Moreover, in the Amended Articles of Incorporation, as well as in the General Information Sheets for
the years 1994, 2001 and 2005, the primary purpose of Digiserv is to provide manpower services. In PCI
Automation Center, Inc. v. National Labor Relations Commission, the Court made the following distinction: "the
legitimate job contractor provides services while the labor-only contractor provides only manpower. The
legitimate job contractor undertakes to perform a specific job for the principal employer while the labor-only
contractor merely provides the personnel to work for the principal employer. "The services provided by
employees of Digiserv are directly related to the business of Digitel. It is undisputed that as early as March 1994,
the affected employees, except for two, were already performing their job as Traffic Operator which was later
renamed as Customer Service Representative (CSR). It is equally undisputed that all throughout their
employment, their function as CSR remains the same until they were terminated effective May 30, 2005. Their
long period of employment as such is an indication that their job is directly related to the main business of
DIGITEL which is telecommunications. Furthermore, Digiserv does not exercise control over the affected
employees. Digiserv shared the same Human Resources, Accounting, Audit and Legal Departments with Digitel
which manifested that it was Digitel who exercised control over the performance of the affected employees. The
NLRC also relied on the letters of commendation, plaques of appreciation and certification issued by Digitel to
the Customer Service Representatives as evidence of control. Considering that Digiserv has been found to be
engaged in labor-only contracting, the dismissed employees are deemed employees of Digitel.

The affected employees were illegally dismissed. In addition to finding that Digiserv is a labor-only contractor,
records teem with proof that its dismissed employees are in fact employees of Digitel. The remaining affected
employees, except for two (2), were already hired by DIGITEL even before the existence of DIGISERV. Likewise,
the remaining affected employees continuously held the position of Customer Service Representative, which
was earlier known as Traffic Operator, from the time they were appointed on March 1, 1994until they were
terminated on May 30, 2005. Further, the Certificates issued to Customer Service Representative likewise show
that they are employees of DIGITEL, Take for example the "Service Award" issued to Ma. Loretta C. Esen, one of
the remaining affected employees. The "Service Award" was signed by the officers of DIGITELthe VP-Customer
Services Division, the VP-Human Resources Division and the Group Head-Human Resources Division. It cannot be
gainsaid that it is only the employer that issues service award to its employees.

OPINION: I unreservedly approve the ruling of the Supreme Court. Settled is the rule that the true employer
when labor-only contractor exists is principally liable with that of the latter. Facts clearly state that Digiserv has
no substantial capital nor has equipment. Further, employees job as directly related to the business of the
principal. Thus, both of them are liable for the monetary benefits.
GARDEN OF MEMORIES PARK and LIFE PLAN, INC. and PAULINA T. REQUIO VS. NLRC, LABOR ARBITER
GARDUQUE II and HILARIA CRUZ
G.R. NO. 160278, FEBRUARY 8, 2012 (MENDOZA, J.)

FACTS: This is a petition for review under Rule 45 of the Rules of Court seeking nullification of June 11, 2003
decision and Resolution of the CA which affirmed the decision of NLRC. The NLRC agreed with the Labor Arbiter
in finding that petitioner Garden of Memories Park and Life Plan Inc., was the employer of respondent Cruz, and
that petitioner and Paulina Requio, were jointly and severally liable for the money claims of Cruz.

ISSUE/S: Is Paulina Requio a legitimate job contractor?

LAW/S: Article 106 of the Labor Code and Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code (Implementing Rules), as amended by Department Order No. 18-02

CASE HISTORY: The case emanated from respondent Cruz dismissal as utility worker from 1991 until her
termination in 1998 due to the misunderstanding with a co-worker regarding the issue of the water hose. Cruz
posited that after the incident she was prevented from working inside the premises. She further argued that as a
regular employee of petitioner, she could not be terminated without just or valid cause. Thus, Cruz file a
complaint for illegal dismissal before Labor Arbiter against petitioners.

Petitioner on the other hand, denied liability for the claims of Cruz and asserted that it was not the employer of
Cruz but of Paulina Requio. It alleged that the former is an independent service contractor, who maintained the
park for a contract price. Requio, in her defense, stated that it was her mother, Victoriana, who hired Cruz, and
she merely took over the supervision and management of the workers of the memorial park when her mother
got ill.

Labor Arbiter ruled in favor of Cruz and declared that Requio was not an independent contractor but a labor-
only contractor. NLRC agreed with the decision of Labor Arbiter stating that, Requio had no substantial capital
or investments in the form of tools, equipment, machineries, and work premises, among others, for her to
qualify as an independent contractor. CA dismissed the petition and affirmed NLRCs decision. Hence, this
petition.

RULING: No. Paulina Requio is a labor-only contractor. Generally, the presumption is that the contractor is a
labor-only contracting unless such contractor overcomes the burden of proving that it has the substantial
capital, investment, tools and the like. In the present case, though Garden of Memories is not the contractor, it
has the burden of proving that Requio has sufficient capital or investment since it is claiming the supposed
status of Requio as independent contractor. Garden of Memories, however, failed to adduce evidence
purporting to show that Requio had sufficient capitalization. Neither did it show that she invested in the form
of tools, equipment, machineries, work premises and other materials which are necessary in the completion of
the service contract.

Furthermore, Requio was not a licensed contractor. Her explanation that her business was a mere livelihood
program akin to a cottage industry provided by Garden of Memories as part of its contribution to the upliftment
of the underprivileged residing near the memorial park proves that her capital investment was not substantial.
Substantial capital or investment refers to capital stocks and subscribed capitalization in the case of
corporations, tools, equipment, implements, machineries, and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job, work or service contracted
out. Obviously, Requio is a labor-only contractor.

Another determinant factor that classifies petitioner Requio as a labor-only contractor was her failure to
exercise the right to control the performance of the work of Cruz. This can be gleaned from the Service Contract
Agreement between Garden of Memories and Requio, to wit:
xxxx
NOW THEREFORE, premises considered, the parties hereto have hereunto agreed on the following terms and conditions:
1. That the Contractor shall undertake the maintenance of the above-mentioned works in strict compliance with and subject to
all the requirements and standards of GMMPLPI.
xxxx
The requirement of the law in determining the existence of independent contractorship is that the contractor
should undertake the work on his own account, under his own responsibility, according to his own manner and
method, free from the control and direction of the employer except as to the results thereof. In this case,
however, the Service Contract Agreement clearly indicates that Requio has no discretion to determine the
means and manner by which the work is performed. Rather, the work should be in strict compliance with, and
subject to, all requirements and standards of Garden of Memories.

Under the circumstances, there is no doubt that Requino is engaged in labor-only contracting, and is considered
merely an agent of Garden of Memories. As such, the workers she supplies should be considered as employees
of Gardem Memories. Consequenly, the latter is the principal employer, is responsible to the employees of the
labor-only contractor as if such employees have been directly employed by it. SC ruled that Cruz and illegally
dismissed, hence, entitled to the money claims.

OPINION: My opinion is in accord with the courts ruling in this case. Let it be underscored that the law is replete
with provisions favoring the oppressed. In this case, Requino is a labor only contracting for the reasons properly
discussed above. Thus, the principal employer should be held directly responsible with the former.
POLYFOAM-RGC INTERNATIONAL CORPORATION and PRECILLA A. GRAMAJE VS. EDGARDO CONCEPTION
G.R. NO. 172349, JUNE 13, 2012 (PERALTA, J.)

FACTS: This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioners Polyfoam
and Gramaje against respondent Edgardo Concepcion assailing the CA decision dated December 19, 2005 and
resolution dated April 25, 2006. The assailed decision reversed the NLRCs decision dated May 7, 2003, while the
assailed resolution denied petitioners and respondents motions for reconsideration.

ISSUE/S: Is Gramaje engaged in legitimate job contrating?

LAW/S: Article 106 of the Labor Code and Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code (Implementing Rules), as amended by Department Order No. 18-02

CASE HISTORY: This case stemmed from the alleged dismissal of respondent Conception as an all-around
factory worker for almost six years. On January 2000, he allegedly discovered that his time card was not in the
rack and was later informed by the security guard that he could no longer punch his time card. He protested but
the manager, Cheng, did not face him. Hence, he filed a complaint for illegal dismissal and prayed for monetary
claims against petitioner and Cheng. On April 2000, Gramaje filed a Motion for Intervention claiming to be the
real employer of respondent. Consequently, petitioners filed a motion to dismiss on the ground of lack of
jurisdiction because there is no employer-employee relationship between it and respondent.

Labor Arbiter Adolfo Babiano granted Gramajes motion but denied the motion of the petitioners. LA ruled in
favor of respondent finding Gramaje as a labor-only contractor. NLRC however, reversed the latters decision,
stating among others that, Gramaje is engaged in legitimate job contracting and consequently, absolved
Polyfoam from the case. CA revered NLRCs decision. It agreed with the decision of LA. CA declared that Gramaje
did not present evidence which would convincingly prove that it is a legitimate contractor. Hence, this present
petition.

RULING: No. Gramaje is a labor only-contractor. First, Gramaje has no substantial capital or investment. The
presumption is that a contractor is a labor-only contractor unless he overcomes the burden of proving that it has
substantial capital, investment, tools, and the like. Gramaje claimed that it has substantial capital of its own as
well as investment in its office, equipment and tools. She pointed out that she furnished the plastic containers
and carton boxes used in carrying out the function of packing the mattresses of Polyfoam. She added that she
had placed in Polyfoams workplace ten (10) sealing machines, twenty (20) hand trucks, and two (2) forklifts to
enable respondent and the other employees of Gramaje assigned at Polyfoam to perform their job. Finally, she
explained that she had her own office with her own staff. However, aside from her own bare statement, neither
Gramaje nor Polyfoam presented evidence showing Gramajes ownership of the equipment and machineries
used in the performance of the alleged contracted job. Considering that these machineries are found in
Polyfoams premises, there can be no other logical conclusion but that the tools and equipment utilized by
Gramaje and her "employees" are owned by Polyfoam. Neither did Polyfoam nor Gramaje show that the latter
had clients other than the former. Since petitioners failed to adduce evidence that Gramaje had any substantial
capital, investment or assets to perform the work contracted for, the presumption that Gramaje is a labor-only
contractor stands.

Second, Gramaje did not carry on an independent business or undertake the performance of its service contract
according to its own manner and method, free from the control and supervision of its principal, Polyfoam, its
apparent role having been merely to recruit persons to work for Polyfoam. It is undisputed that respondent had
performed his task of packing Polyfoams foam products in Polyfoams premises. As to the recruitment of
respondent, petitioners were able to establish only that respondents application was referred to Gramaje, but
that is all. Prior to his termination, respondent had been performing the same job in Polyfoams business for
almost six (6) years. He was even furnished a copy of Polyfoams "Mga Alituntunin at Karampatang
Parusa," which embodied Polyfoams rules on attendance, the manner of performing the employees duties,
ethical standards, cleanliness, health, safety, peace and order. These rules carried with them the corresponding
penalties in case of violation.
While it is true that petitioners submitted the Affidavit of Polyfoams supervisor Victor Abadia, claiming that the
latter did not exercise supervision over respondent because the latter was not Polyfoams but Gramajes
employee, said Affidavit is insufficient to prove such claim. Petitioners should have presented the person who
they claim to have exercised supervision over respondent and their alleged other employees assigned to
Polyfoam. It was never established that Gramaje took entire charge, control and supervision of the work and
service agreed upon. And as aptly observed by the CA, "it is likewise highly unusual and suspect as to the
absence of a written contract specifying the performance of a specified service, the nature and extent of the
service or work to be done and the term and duration of the relationship."

Respondent is the employee of Petitioner. SC finds the former was illegally dismissed from employment.

OPINION: I respectfully concur with the ruling of the court. Pieces of evidence proved that Gramaje is not
engaged in legitimate job contracting. The law favors the employee especially when the facts clearly shows that
the alleged legitimate contractor is a farce.

MARANAW HOTELS AND RESORT CORP. VS. CA, SHERYL OABEL & MANILA RESOURCE DEVELOPMENT CORP.,
G.R. NO. 149660 JANUARY 20, 2009 PUNO, C.J.

FACTS: Before the Court is a petition for review on certiorari assailing a resolution issued by the Court of
Appeals. The resolution denied the petition for review filed by petitioner Maranaw Hotels and Resort Corp. The
present proceedings emanate from a complaint for regularization, subsequently converted into one for illegal
dismissal, filed before Labor Arbiter Madjayran H. Ajan by private respondent Sheryl Oabel.

ISSUE/S: Is MANRED an independent labor contracting?

LAW/S: Articles 106 of the Labor Code.

CASE HISTORY: It appears that private respondent Oabel was initially hired by petitioner as an extra beverage
attendant on April 24, 1995. This lasted until February 7, 1997. Respondent worked in Century Park Hotel, an
establishment owned by the petitioner. On September 16, 1996, petitioner contracted with Manila Resource
Development Corporation. Subsequently, private respondent Oabel was transferred to MANRED, with the latter
deporting itself as her employer. MANRED has intervened at all stages of these proceedings and has consistently
claimed to be the employer of private respondent Oabel. For the duration of her employment, private
respondent Oabel performed the several functions. On July 20, 1998, private respondent filed before the Labor
Arbiter a petition for regularization of employment against the petitioner. On August 1, 1998, however, private
respondent Oabel was dismissed from employment. Respondent converted her petition for regularization into a
complaint for illegal dismissal.

Labor Arbiter Madjayran H. Ajan rendered a decision dismissing the complaint against the petitioner. The NLRC
reversed the ruling of the Labor Arbiter and held that: (1) MANRED is a labor-only contractor, and (2) private
respondent was illegally dismissed. CA dismissed the present petition on the ground of non-compliance with the
rule on certification against forum shopping. Hence, this present petition.

RULING: NO. There is no merit in this petition. Petitioner posits that it has entered into a service agreement with
intervenor MANRED. The latter, in turn, maintains that private respondent Oabel is its employee and
subsequently holds itself out as the employer and offers the reinstatement of private respondent. Notably,
private respondents purported employment with MANRED commenced only in 1996, way after she was hired
by the petitioner as extra beverage attendant on April 24, 1995. There is thus much credence in the private
respondents claim that the service agreement executed between the petitioner and MANRED is a mere ploy to
circumvent the law on employment, in particular that which pertains on regularization.

In this regard, it has not escaped the notice of the Court that the operations of the hotel itself do not cease with
the end of each event or function and that there is an ever present need for individuals to perform certain tasks
necessary in the petitioners business. Thus, although the tasks themselves may vary, the need for sufficient
manpower to carry them out does not. In any event, as borne out by the findings of the NLRC, the petitioner
determines the nature of the tasks to be performed by the private respondent, in the process exercising control.
This being so, the Court finds no difficulty in sustaining the finding of the NLRC that MANRED is a labor-only
contractor. Concordantly, the real employer of private respondent Oabel is the petitioner.

OPINION: I humbly agree with the ruling of the Supreme Court. Employers who circumvent the law cannot be
permitted to escape liability to the prejudice of numerous workers. In the instant case, it has been proven that
MANRED was used as smokescreen in order that petitioner may evade its obligation to respondent. This being
so, Oabel is a regular employee of petitioner.

JOEB M. ALIVIADO, ET. AL. VS. PROTER AND GAMBLE PHILIPPINES, INC. AND PROMM-GEM, INC.
G.R. NO. 160506 JUNE 6, 2011 DEL CASTILLO, J.

FACTS: The instant petition for review assails the March 21, 2003 decision of the Court of and its
Resolution denying the motions for reconsideration separately filed by petitioners and respondent Procter &
Gamble Phils. Inc. (P&G). The appellate court affirmed the July 27, 1998 decision of the National Labor Relations
Commission, which in turn affirmed the November 29, 1996 decision of the Labor Arbiter. All these decisions
found Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be legitimate independent
contractors and the employers of the petitioners.

ISSUE/S: Are Promm-Gem and SAPS engaged in an independent labor contracting?

LAW/S: Articles 106 of the Labor Code.

CASE HISTORY: Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as
1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993.They all individually signed employment
contracts with either Promm-Gem or SAPS for periods of more or less five months at a time. They were assigned
at different outlets, supermarkets and stores where they handled all the products of P&G. They received their
wages from Promm-Gem or SAPS. SAPS and Promm-Gem imposed disciplinary measures on erring
merchandisers for reasons such as habitual absenteeism, dishonesty or changing day-off without prior notice.
P&G is principally engaged in the manufacture and production of different consumer and health products, which
it sells on a wholesale basis to various supermarkets and distributors. To enhance consumer awareness and
acceptance of the products, P&G entered into contracts with Promm-Gem and SAPS for the promotion and
merchandising of its products. In December 1991, petitioners filed a complaint against P&G for regularization,
service incentive leave pay and other benefits with damages. The complaint was later amended to include the
matter of their subsequent dismissal.

Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-employee
relationship between petitioners and P&G. NLRC affirmed LAs decision. CA also affirmed the labor tribunals
ruling. Hence, this petition.

RULING: YES but with regard to Promm-Gem only. SAPS a labor only contractor. The petition has merit.
In the instant case, the financial statements of Promm-Gem show that it has authorized capital stock of P1
million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990. It also has long term
assets worth P432,895.28 and current assets of P719,042.32. Promm-Gem has also proven that it maintained its
own warehouse and office space with a floor area of 870 square meters. It also had under its name three
registered vehicles which were used for its promotional/merchandising business.Promm-Gem also has other
clients aside from P&G. Under the circumstances, we find that Promm-Gem has substantial investment which
relates to the work to be performed. These factors negate the existence of the element specified in Section 5(i)
of DOLE Department Order No. 18-02. The records also show that Promm-Gem supplied its complainant-
workers with the relevant materials, such as markers, tapes, liners and cutters, necessary for them to perform
their work. Promm-Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already
considered the complainants working under it as its regular, not merely contractual or project, employees. This
circumstance negates the existence of element (ii) as stated in Section 5 of DOLE Department Order No. 18-02,
which speaks of contractual employees. This, furthermore, negates on the part of Promm-Gem bad faith and
intent to circumvent labor laws which factors have often been tipping points that lead the Court to strike down
the employment practice or agreement concerned as contrary to public policy, morals, good customs or public
order. Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that it is
a legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,250.00.
There is no other evidence presented to show how much its working capital and assets are. Furthermore, there
is no showing of substantial investment in tools, equipment or other assets.

OPINION: I overwhelmingly agree with the courts ruling. It must be underscored that the law and its
implementing rules allow contracting arrangements for the performance of specific jobs, works or services.
Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is
peripheral or core in nature. However, in order for such outsourcing to be valid, it must be made to
an independent contractor because the current labor rules expressly prohibit labor-only contracting. In this case,
Promm-Gem has proved that it is a legitimate job contractor.

NORKIS TRADING CORPORATION VS. JOAQUIN BUENA VISTA, ET. AL.

G.R. NO. 182018, OCTOBER 10, 2012 (REYES, J.)

FACTS: Before us is a Petition for Review on Certiorari filed by petitioner Norkis Trading Corporation to assail the
decision dated May 7, 2007 and Resolution dated March 4, 2008 of the Court of Appeals reversing NLRCs
decision dismissing respondents complaint of illegal suspension, illegal dismissal and unfair labor practice.

ISSUE/S: Is PASAKA a legitimate job contractor?

LAW/S: Article 106 of the Labor Code and Section 5, Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code (Implementing Rules), as amended by Department Order No. 18-02

CASE HISTORY: The petition stems from an amended complaint for illegal suspension, illegal dismissal, unfair
labor practice and other monetary claims filed with the National Labor Relations Commission (NLRC) by herein
respondents Joaquin Buenavista (Buenavista), Henry Fabroa (Fabroa), Ricardo Cape (Cape), Bertuldo Tulod
(Tulod), Willy Dondoyano (Dondoyano) and Glen Villariasa (Villariasa) against Norkis Trading and Panaghiusa sa
Kauswagan Multi-Purpose Cooperative (PASAKA). The respondents were hired by Norkis Trading, a domestic
corporation engaged in the business of manufacturing and marketing of Yamaha motorcycles and multi-purpose
vehicles, on separate dates and for various positions. Although they worked for Norkis Trading as skilled workers
assigned in the operation of industrial and welding machines owned and used by Norkis Trading for its business,
they were not treated as regular employees by Norkis Trading. Instead, they were regarded by Norkis Trading as
members of PASAKA, a cooperative organized under the Cooperative Code of the Philippines, and which was
deemed an independent contractor that merely deployed the respondents to render services for Norkis
Trading. The complainants produced steel crates which are exported directly by respondent Norkis Trading to
Japan. These crates are used as containers of motorcycle machines and are shipped from Japan back to
respondent Norkis Trading. The materials and supplies used by complainants in their work are supplied by
respondent Norkis Trading through Benjamin Gulbin, the companys Stockman, upon the request of Tirso
Maslog, a Leadman also employed by respondent Norkis Trading.Respondent Norkis Trading gave instructions
and supervised the work of complainants through Edwin Ponce and Kiven Alilin, who are both Leadmen, and
Rico Cabanas, who is the Production Supervisor, of the former. The salaries of complainants are paid inside the
premises of respondent Norkis Trading by Dalia Rojo and Belen Rubio, who are also employees of the said
company assigned at the accounting office. Despite having served respondent Norkis Trading for many years and
performing the same functions as regular employees, complainants were not accorded regular status. It was
made to appear that complainants are not employees of said company but that of respondent PASAKA.

Both Norkis Trading and PASAKA claimed that the respondents were not employees of Norkis Trading. They
insisted that the respondents were members of PASAKA, which served as an independent contractor that
merely supplied services to Norkis International Co., Inc. (Norkis International) pursuant to a job
contract16 which PASAKA and Norkis International executed on January 14, 1999 for 121,500 pieces of F/GF-
Series Reinforcement Production. After PASAKA received reports from its coordinator at Norkis International of
the respondents low efficiency and violation of the cooperatives rules, and after giving said respondents the
chance to present their side, a penalty of suspension was imposed upon them by the cooperative. The illegal
suspension being complained of was then not linked to the respondents employment, but to their membership
with PASAKA.
Norkis Trading stressed that the respondents were deployed by PASAKA to Norkis International, a company that
is entirely separate and distinct from Norkis Trading.

Labor Arbiter Jose G. Gutierrez dismissed the complaint. LA sustained the suspension imposed by PASAKA upon
the respondents, taking into account the offenses that the said respondents were found to have committed. In
the meantime, DOLE Regional Director Balanag ruled that PASAKA was engaged in labor-only contracting. NLRC
rendered its decision affirming with modification the decision of LA Gutierrez. It held that the respondents were
not illegally suspended from work, as it was their membership in the cooperative that was suspended after they
were found to have violated the cooperatives rules and regulations. It also declared that the respondents
dismissal was not established by substantial evidence. CA rendered its decision reversing and setting aside the
decision and resolution of the NLRC. Hence, this petition.

RULING: NO. Norkis Trading is the principal employer of the respondents, considering that PASAKA is a mere
labor-only contractor. This Court agrees with the finding of the DOLE Regional Director, as affirmed by the
Secretary of Labor in her assailed Order, that petitioners among them, herein petitioner were engaged in labor-
only contracting. First. PASAKA failed to prove that it has substantial capitalization or investment in the form of
tools, equipment, machineries, work premises, among others, to qualify as an independent contractor.
PASAKAs claim that it has machineries and equipment worth P 344,273.02 as reflected in its Financial
Statements and Supplementary Schedules is belied by private respondents among them, herein respondents
evidence which consisted of pictures showing machineries and equipment which were owned by and located at
the premises of petitioner NORKIS TRADING. Indeed it makes one wonder why, if PASAKA indeed had such
machineries and equipment worth P 344,273.02, private respondents were using machineries and equipment
owned by and located at the premises of NORKIS TRADING. Even granting that indeed PASAKA had machineries
and equipment worth P 344,273.02, it was not shown that said machineries and equipment were actually used
in the performance or completion of the job, work, or service that it was contracted to render under its
supposed job contract. Second, PASAKA likewise did not carry out an independent business from NORKIS
TRADING. While PASAKA was issued its Certificate of Registration on July 18, 1991, all it could show to prove
that it carried out an independent business as a job contractor were the Project Contract dated January 2, 1998
with NORKIS TRADING, and the Project Contract with NORKIS INTERNATIONAL. However, as earlier discussed,
the Project Contract dated December 18, 1998 with NORKIS INTERNATIONAL is nothing more than an
afterthought by the petitioners to confuse its workers and defeat their rightful claims. Third, Private
respondents performed activities directly related to the principal business of NORKIS TRADING. They worked as
welders and machine operators engaged in the production of steel crates which were sent to Japan for use as
containers of motorcycles that are then sent back to NORKIS TRADING. Private respondentsfunctions therefore
are directly related and vital to NORKIS TRADINGs business of manufacturing of Yamaha motorcycles. All the
foregoing considerations affirm by more than substantial evidence that NORKIS TRADING and PASAKA engaged
in labor-only contracting. Finally, contrary to the insinuations of Norkis Trading, the fact that PASAKA was a duly-
registered cooperative did not preclude the possibility that it was engaged in labor-only contracting, as
confirmed by the findings of the Regional Director. An entity is characterized as a labor-only contractor based on
the elements and guidelines established by law and jurisprudence, judging primarily on the relationship that the
said entity has with the company to which the workers are deployed, and not on any special arrangement that
the entity has with said workers.

OPINION: I wholeheartedly concur with the courts ruling. It was properly supported with evidence in this case
the finding that Norkis Trading should be treated as the respondents true employer, with PASAKA being merely
an agent of said employer. PASAKA failed to sufficiently show that it had substantial capital or investment in the
form of tools, equipment, machineries and work premises required from legitimate job contractors. The work
required from the respondents, being welders and/or operators of industrial machines, were also directly
related to Norkis Tradings principal business of manufacturing. Thus, petitioner cannot escape liability.

EMMANUEL BABAS, ET. AL. VS. LORENZO SHIPPING CORPORATION

G.R. NO. 186091 - DECEMBER 15, 2010 NACHURA, J.

FACTS: Petitioners Emmanuel Babas, Danilo T. Banag, Arturo V. Villarin, Sr., Edwin Javier, Sandi Bermeo, Rex
Allesa, Maximo Soriano, Jr., Arsenio Estorque, and Felixberto Anajao appeal by certiorari under Rule 45 of the
Rules of Court the decision of the Court of Appeals and Resolution, denying its reconsideration.
ISSUE/S: Is BMSI a labor-only contractor?

LAW/S: Articles 106-109 and 280 of the Labor Code.

CASE HISTORY: Respondent Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation
engaged in the shipping industry; it owns equipment necessary for its business. On September 29, 1997, LSC
entered into a General Equipment Maintenance Repair and Management Services Agreement with Best
Manpower Services, Inc. (BMSI). Under the Agreement, BMSI undertook to provide maintenance and repair
services to LSCs container vans, heavy equipment, trailer chassis, and generator sets. BMSI further undertook to
provide checkers to inspect all containers received for loading to and/or unloading from its vessels.
Simultaneous with the execution of the Agreement, LSC leased its equipment, tools, and tractors to BMSI. The
period of lease was coterminous with the Agreement. BMSI then hired petitioners on various dates to work at
LSC as checkers, welders, utility men, clerks, forklift operators, motor pool and machine shop workers,
technicians, trailer drivers, and mechanics. Six years later, or on May 1, 2003, LSC entered into another contract
with BMSI, this time, a service contract. In September 2003, petitioners filed with the Labor Arbiter a complaint
for regularization against LSC and BMSI. On October 1, 2003, LSC terminated the Agreement, effective October
31, 2003. Consequently, petitioners lost their employment. BMSI asserted that it is an independent contractor. It
averred that it was willing to regularize petitioners; however, some of them lacked the requisite qualifications
for the job. BMSI was willing to reassign petitioners who were willing to accept reassignment. BMSI denied
petitioners claim for underpayment of wages and non-payment of 13th month pay and other benefits. LSC, on
the other hand, averred that petitioners were employees of BMSI and were assigned to LSC by virtue of the
Agreement. BMSI is an independent job contractor with substantial capital or investment in the form of tools,
equipment, and machinery necessary in the conduct of its business. The Agreement between LSC and BMSI
constituted legitimate job contracting. Thus, petitioners were employees of BMSI and not of LSC.

LA rendered a decision dismissing petitioners complaint. The LA found that petitioners were employees of
BMSI. It was BMSI which hired petitioners, paid their wages, and exercised control over them. NLRC
promulgated its decision reversing the LA. CA rendered the now challenged Decision, reversing the NLRC. Hence,
this present case.

RULING: YES. We sustain the petitioners contention that BMSI is engaged in labor-only contracting.
First, petitioners worked at LSCs premises, and nowhere else. Other than the provisions of the Agreement,
there was no showing that it was BMSI which established petitioners working procedure and methods, which
supervised petitioners in their work, or which evaluated the same. There was absolute lack of evidence that
BMSI exercised control over them or their work, except for the fact that petitioners were hired by BMSI. Second,
LSC was unable to present proof that BMSI had substantial capital. The record before us is bereft of any proof
pertaining to the contractors capitalization, nor to its investment in tools, equipment, or implements actually
used in the performance or completion of the job, work, or service that it was contracted to render. What is
clear was that the equipment used by BMSI were owned by, and merely rented from, LSC. Third, petitioners
performed activities which were directly related to the main business of LSC. The work of petitioners as
checkers, welders, utility men, drivers, and mechanics could only be characterized as part of, or at least clearly
related to, and in the pursuit of, LSCs business. Logically, when petitioners were assigned by BMSI to LSC, BMSI
acted merely as a labor-only contractor. Lastly, as found by the NLRC, BMSI had no other client except for LSC,
and neither BMSI nor LSC refuted this finding, thereby bolstering the NLRC finding that BMSI is a labor-only
contractor.
Indubitably, BMSI can only be classified as a labor-only contractor. The CA, therefore, erred when it ruled
otherwise. Consequently, the workers that BMSI supplied to LSC became regular employees of the latter. Having
gained regular status, petitioners were entitled to security of tenure and could only be dismissed for just or
authorized causes and after they had been accorded due process.

OPINION: I concur with the ruling of the highest court. Settled is the rule that the burden on the contractor to
prove that it has substantial capital, investment, tools, etc. Employees, on the other hand, need not prove that
the contractor does not have substantial capital, investment, and tools to engage in job-contracting.
Furthermore, despite the fact that the service contracts contain stipulations which are earmarks of independent
contractorship, it is not legally binding. The statute determines the relationship between parties and based on
the surrounding circumstances. Not the stipulations in the contract as in this case. Therefore, respondent is the
employer of petitioners.
COCA-COLA BOTTLERS PHILIPPINES, INC. VS. ALAN AGITO, ET. AL.
G.R. NO. 179546 FEBRUARY 13, 2009 CHICO-NAZARIO, J.

FACTS: This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the decision
promulgated by the Court of Appeals, reversing the Resolution of the National Labor Relations Commission. The
Court of Appeals, in its assailed decision, declared that respondents Alan M. Agito, Regolo S. Oca III, Ernesto G.
Alariao, Jr., Alfonso Paa, Jr., Dempster P. Ong, Urriquia T. Arvin, Gil H. Francisco, and Edwin M. Golez were
regular employees of petitioner Coca-Cola Bottlers Phils., Inc; and that Interserve Management & Manpower
Resources, Inc. (Interserve) was a labor-only contractor, whose presence was intended merely to preclude
respondents from acquiring tenurial security.

ISSUE/S: Is Interserve Management and Manpower Resources, Inc. engaged in legitimate job contracting?

LAW/S: Articles 106-109 and 280 of the Labor Code.

CASE HISTORY: Petitioner is a domestic corporation duly registered with SEC and engaged in manufacturing,
bottling and distributing soft drink beverages and other allied products. On 15 April 2002, respondents filed
before the NLRC two complaints against petitioner, Interserve, Peerless Integrated Services, Inc., Better Builders,
Inc., and Excellent Partners, Inc. for reinstatement with backwages, regularization, nonpayment of 13th month
pay, and damages. Respondents alleged in their Position Paper that they were salesmen assigned at the Lagro
Sales Office of petitioner. They had been in the employ of petitioner for years, but were not regularized. Their
employment was terminated on 8 April 2002 without just cause and due process. However, they failed to state
the reason/s for filing a complaint against Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.; and
Excellent Partners, Inc.
Petitioner filed its Position Paper (with Motion to Dismiss), where it averred that respondents were employees
of Interserve who were tasked to perform contracted services in accordance with the provisions of the Contract
of Services executed between petitioner and Interserve. Said Contract between petitioner and Interserve,
covering the period of 1 April 2002 to 30 September 2002, constituted legitimate job contracting, given that the
latter was a bona fide independent contractor with substantial capital or investment in the form of tools,
equipment, and machinery necessary in the conduct of its business.

To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of
evidence: (1) the Articles of Incorporation of Interserve; (2) the Certificate of Registration of Interserve with the
Bureau of Internal Revenue; (3) the Income Tax Return, with Audited Financial Statements, of Interserve for
2001; and (4) the Certificate of Registration of Interserve as an independent job contractor, issued by the
Department of Labor and Employment (DOLE). As a result, petitioner asserted that respondents were employees
of Interserve, since it was the latter which hired them, paid their wages, and supervised their work, as proven
by: (1) respondents Personal Data Files in the records of Interserve; (2) respondents Contract of Temporary
Employment with Interserve; and (3) the payroll records of Interserve.

Labor Arbiter found that respondents were employees of Interserve and not of petitioner. Labor Arbiter
underscored that respondents functions were not indispensable to the principal business of petitioner, which
was manufacturing and bottling soft drink beverages and similar products. The NLRC, in a Resolution affirmed
the Labor Arbiters decision and pronounced that no employer-employee relationship existed between
petitioner and respondents. Court of Appeals promulgated its decision reversing the NLRC Resolution.

RULING: NO. The argument of petitioner is untenable. The law clearly establishes an employer-employee
relationship between the principal employer and the contractors employee upon a finding that the contractor is
engaged in "labor-only" contracting. Article 106 of the Labor Code categorically states: "There is labor-only
contracting where the person supplying workers to an employee does not have substantial capital or investment
in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and
placed by such persons are performing activities which are directly related to the principal business of such
employer." Thus, performing activities directly related to the principal business of the employer is only one of
the two indicators that "labor-only" contracting exists; the other is lack of substantial capital or investment. The
Court finds that both indicators exist in the case at bar.
Respondents worked for petitioner as salesmen, with the exception of respondent Gil Francisco whose job was
designated as leadman. In the Delivery Agreement between petitioner and TRMD Incorporated, it is stated that
petitioner is engaged in the manufacture, distribution and sale of softdrinks and other related products. The
work of respondents, constituting distribution and sale of Coca-Cola products, is clearly indispensable to the
principal business of petitioner. The repeated re-hiring of some of the respondents supports this finding.
Petitioner also does not contradict respondents allegations that the former has Sales Departments and Sales
Offices in its various offices, plants, and warehouses; and that petitioner hires Regional Sales Supervisors and
District Sales Supervisors who supervise and control the salesmen and sales route helpers.

At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting
to P2,000,000.00, only P625,000.00 thereof was paid up as of 31 December 2001. The Court does not set an
absolute figure for what it considers substantial capital for an independent job contractor, but it measures the
same against the type of work which the contractor is obligated to perform for the principal. However, this is
rendered impossible in this case since the Contract between petitioner and Interserve does not even specify the
work or the project that needs to be performed or completed by the latters employees, and uses the dubious
phrase "tasks and activities that are considered contractible under existing laws and regulations." Even in its
pleadings, petitioner carefully sidesteps identifying or describing the exact nature of the services that Interserve
was obligated to render to petitioner. The importance of identifying with particularity the work or task which
Interserve was supposed to accomplish for petitioner becomes even more evident, considering that the Articles
of Incorporation of Interserve states that its primary purpose is to operate, conduct, and maintain the business
of janitorial and allied services. But respondents were hired as salesmen and leadman for petitioner. The Court
cannot, under such ambiguous circumstances, make a reasonable determination if Interserve had substantial
capital or investment to undertake the job it was contracting with petitioner.
In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries,
and work premises; and respondents, its supposed employees, performed work which was directly related to
the principal business of petitioner. It is, thus, evident that Interserve falls under the definition of a "labor-only"
contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the Rules Implementing Articles 106-
109 of the Labor Code, as amended.

With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed
the true employer of respondents. As regular employees of petitioner, respondents cannot be dismissed except
for just or authorized causes, none of which were alleged or proven to exist in this case, the only defense of
petitioner against the charge of illegal dismissal being that respondents were not its employees. Records also
failed to show that petitioner afforded respondents the twin requirements of procedural due process, i.e.,
notice and hearing, prior to their dismissal. Respondents were not served notices informing them of the
particular acts for which their dismissal was sought. Nor were they required to give their side regarding the
charges made against them. Certainly, the respondents dismissal was not carried out in accordance with law
and, therefore, illegal.

OPINION: I totally agree with the courts ruling. As held in the catena of cases, the contractor, not the employee,
has the burden of proof that it has the substantial capital, investment, and tool to engage in job contracting. In
this case, Interserve failed to discharge the burden before the courts. Consequently, respondents are regular
employees of petitioner.

COCA-COLA BOTTLERS PHILIPPINES, INC. VS. RICKY DELA CRUZ, ET. AL.
G.R. NO. 184977 DECEMBER 7, 2009 BRION, J.

FACTS: The present petition for review on certiorari challenges the decision and resolution of the Court of
Appeals rendered on August 29, 2008 and October 13, 2008, respectively, in CA-G.R. SP No. 102988.

ISSUE/S: Is Peerless and Excellent a labor-only contractor?

LAW/S: Articles 106-109 and 280 of the Labor Code.

CASE HISTORY: Respondents Ricky E. Dela Cruz, Rolando M. Guasis, Manny C. Pugal, Ronnie L. Hermo, Rolando
C. Somero, Jr., Dibson D. Diocares, and Ian Ichapare (respondents) filed two separate complaints for
regularization with money claims against Coca-Cola Bottlers Philippines, Inc., (petitioner or the company). The
complaints were consolidated and subsequently amended to implead Peerless Integrated Service, Inc. (Peerless)
as a party-respondent. Before the Labor Arbiter, the respondents alleged that they are route helpers assigned to
work in the petitioners trucks. They go from the Coca- Cola sales offices or plants to customer outlets such as
sari-sari stores, restaurants, groceries, supermarkets and similar establishments; they were hired either directly
by the petitioner or by its contractors, but they do not enjoy the full remuneration, benefits and privileges
granted to the petitioners regular sales force. They argued that the services they render are necessary and
desirable in the regular business of the petitioner. In defense, the petitioner contended that it entered into
contracts of services with Peerless and Excellent Partners Cooperative, Inc. (Excellent) to provide allied services;
under these contracts, Peerless and Excellent retained the right to select, hire, dismiss, supervise, control and
discipline and pay the salaries of all personnel they assign to the petitioner; in return for these services, Peerless
and Excellent were paid a stipulated fee. The petitioner posited that there is no employer-employee relationship
between the company and the respondents and the complaints should be dismissed for lack of jurisdiction on
the part of the National Labor Relations Commission (NLRC). Peerless did not file a position paper, although
nothing on record indicates that it was ever notified of the amended complaint. In reply, the respondents
countered that they worked under the control and supervision of the companys supervisors who prepared their
work schedules and assignments. Peerless and Excellent, too, did not have sufficient capital or investment to
provide services to the petitioner. The respondents thus argued that the petitioners contracts of services with
Peerless and Excellent are in the nature of "labor-only" contracts prohibited by law.
Labor Arbiter Joel S. Lustria dismissed the complaint for lack of jurisdiction after finding that the respondents
were the employees of either Peerless or Excellent and not of the petitioner. NLRC denied the appeal and
affirmed the labor arbiters ruling. However, CA found that Peerless and Excellent were engaged in labor-only
contracting, a prohibited undertaking.

RULING: YES. In the present case, both the capitalization of Peerless and Excellent and their control over the
means and manner of their operations are live sub-issues before us.Although it is understood and agreed
between the parties hereto that the CONTRACTOR, in the performance of its obligations hereunder, is subject to
the control and direction of the COMPANY merely as to result to be accomplished by the work or services herein
specified, and not as to the means and methods of accomplishing such result, the CONTRACTOR hereby
warrants that it will perform such work or services in such manner as will be consistent with the achievement of
the result herein contracted for.

The fact that the service contract entered into by petitioner and Universal stipulated that private respondents
shall be the employees of Universal, would not help petitioner, as the language of a contract is not
determinative of the relationship of the parties. Petitioner and Universal cannot dictate, by the mere expedient
of a declaration in a contract, the character of Universal business, i.e., whether as labor-only contractor , or job
contractor, it being crucial that Universals character be mentioned in terms of and determined by the criteria
set by the statute.

The argument of petitioner that its usual business or trade is softdrink manufacturing and that the work
assigned to the respondent workers so involves merely "postproduction activities," one which is not
indispensable in the manufacture of its products, scarcely can be persuasive. If, as so argued by petitioner
company, only those whose work are directly involved in the production of softdrinks may be held performing
functions necessary and desirable in its usual business or trade, there would have been no need for it to even
maintain regular truck sales route helpers. The nature of the work performed must be viewed from a
perspective of the business or trade in its entirety and not only in a confined scope. While the respondents were
not direct parties to this ruling, the petitioner was the party involved and Magsalin described in a very significant
way the manufacture of softdrinks and the companys sales and distribution activities in relation with one
another. Following the lead we gave in Magsalin, the CA concluded that the contracted personnel who served as
route helpers were really engaged in functions directly related to the overall business of the petitioner. This led
to the further CA conclusion that the contracted personnel were under the companys supervision and control
since sales and distribution were in fact not the purported contractors independent, discrete and separable
activities, but were component parts of sales and distribution operations that the company controlled in its
softdrinks business.

OPINION: I cannot agree less with the ruling of the Supreme Court. Based on these considerations, Peerless and
Excellent were mere suppliers of labor who had no sufficient capitalization and equipment to undertake sales
and distribution of softdrinks as independent activities separate from the manufacture of softdrinks, and who
had no control and supervision over the contracted personnel. Further, the contract between the employer and
contractor is not determinative whether the latter is engaged in legitimate job contracting or not. They are
therefore labor-only contractors. Therefore, respondents are employees of petitioner.

PHILIPPINE AIRLINES, INC. VS. ENRIQUE LIGAN, ET. AL.

G.R. NO. 146408 FEBRUARY 29, 2008 CARPIO MORALES, J.
FACTS: This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of CA in
affirming the NLRCs ruling which reversed LAs decision which finds petitioner as legitimate job contractor.

ISSUE/S: Is Synergy an independent legitimate job contractor?

LAW/S: Articles 106-109 and 280 of the Labor Code.

CASE HISTORY: Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as
Contractor, entered into an Agreement on whereby Synergy undertook to "provide loading, unloading, delivery
of baggage and cargo and other related services to and from petitioner's aircraft at the Mactan Station. And it
expressly provided that Synergy was "an independent contractor and that there would be no employer-
employee relationship between CONTRACTOR and/or its employees on the one hand, and OWNER, on the
other."

Except for respondent Benedicto Auxtero ,the rest of the respondents, who appear to have been assigned by
Synergy to petitioner following the execution of the July 15, 1991 Agreement, filed on March 3, 1992 complaints
before the NLRC Regional Office VII at Cebu City against petitioner, Synergy and their respective officials
for underpayment, non-payment of premium pay for holidays, premium pay for rest days, service
incentive leave pay, 13th month pay and allowances, and for regularization of employment status with
petitioner, they claiming to be "performing duties for the benefit of [petitioner] since their job is directly
connected with its business.
Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials
for regularization of his employment status. Later alleging that he was, without valid ground, verbally dismissed,
he filed a complaint against petitioner and Synergy and their respective officials for illegal dismissal and
reinstatement with full backwages.

Labor Arbiter Dominador Almirante found Synergy an independent contractor and dismissed respondents'
complaint for regularization against petitioner, but granted their money claims. NLRC, Fourth Division, Cebu City,
vacated and set aside the decision of the Labor Arbiter. CA affirmed the Decision of the NLRC

RULING: NO. From the records of the case, it is gathered that the work performed by almost all of the
respondents - loading and unloading of baggage and cargo of passengers - is directly related to the main
business of petitioner. And the equipment used by respondents as station loaders, such as trailers and
conveyors, are owned by petitioner. In the case at bar, while petitioner steadfastly asserted before the Labor
Arbiter and the NLRC that Synergy has a substantial capital to engage in legitimate contracting, it failed to
present evidence thereon. It was only after the appellate court rendered its challenged decision when
petitioner, in its Motion for Reconsideration of the decision, sought to prove, for the first time, Synergy's
substantial capitalization by attaching photocopies of Synergy's financial statements. More significantly,
however, is that respondents worked alongside petitioner's regular employees who were performing identical
work.

The express provision in the Agreement that Synergy was an independent contractor and there would be "no
employer-employee relationship between Synergy] and/or its employees on one hand, and petitioner on the
other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the
existence of such relationship, for it is the totality of the facts and surrounding circumstances of the case which
is determinative of the parties' relationship.

The Court affirms the ruling of both the NLRC and the appellate court, ordering petitioner to accept them as its
regular employees and to give each of them the salaries, allowances and other employment benefits and
privileges of a regular employee under the pertinent Collective Bargaining Agreement.

OPINION: I support the ruling of the court. As repeatedly held in several cases, one who claims to be an
independent contractor has to prove that he contracted to do the work according to his own methods and
without being subject to the employer's control except only as to the results. In this case, petitioner in fact
admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of plane
arrivals. Moreover, petitioners managers and supervisors approved respondents' weekly work assignments and
respondents and other regular PAL employees were all referred to as station attendants of the cargo operation
and airfreight services of petitioner. Hence, it cannot be gainsaid that petitioner is not directly liable.
RANDY ALMEDA, ET. AL VS. ASAHI GLASS PHILIPPINES, INC.
G.R. NO. 177785 SEPTEMBER 3, 2008 CHICO-NAZARIO, J.

FACTS: Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed
by petitioners Randy Almeda, Edwin Audencial, Nolie Ramirez, Ernesto Calicagan and Reynaldo Calicagan,
seeking to reverse and set aside the decision and the Resolution of the Court of Appeals. The appellate court
reversed and set aside the Decision and Resolution NLRC finding respondent Asahi Glass Philippines, Inc. jointly
and severally liable with San Sebastian Allied Services, Inc. (SSASI) for illegal dismissal, and ordering both
respondent and SSASI to reinstate petitioners to their former positions and to pay their backwages from 2
December 2002 up to the date of their actual reinstatement. Instead, the Court of Appeals reinstated the
Decision dated 18 February 2004 of the Labor Arbiter dismissing petitioners complaint for illegal dismissal
against respondent and SSASI, but ordering the payment of separation benefits to petitioners.

ISSUE/S: Is SSASI a legitimate job contractor?

LAW/S: Articles 106-109 and 280 of the Labor Code.

CASE HISTORY: Petitioners alleged that respondent (a domestic corporation engaged in the business of glass
manufacturing) and SSASI (a labor-only contractor) entered into a service contract whereby the latter undertook
to provide the former with the necessary manpower for its operations. Pursuant to such a contract, SSASI
employed petitioners Randy Almeda, Edwin Audencial, Nolie Ramirez and Ernesto Calicagan as glass cutters, and
petitioner Reynaldo Calicagan as Quality Controller, all assigned to work for respondent. Petitioners worked for
respondent for periods ranging from three to 11 years. On 1 December 2002, respondent terminated its service
contract with SSASI, which in turn, terminated the employment of petitioners on the same date. Believing that
SSASI was a labor-only contractor, and having continuously worked as glass cutters and quality controllers for
the respondent - functions which are directly related to its main line of business as glass manufacturer - for
three to 11 years, petitioners asserted that they should be considered regular employees of the respondent; and
that their dismissal from employment without the benefit of due process of law was unlawful. In support of their
complaint, petitioners submitted a copy of their work schedule to show that they were under the direct control
of the respondent which dictated the time and manner of performing their jobs.

Respondent, on the other hand, refuted petitioners allegations that they were its regular employees. Instead,
respondent claimed that petitioners were employees of SSASI and were merely assigned by SSASI to work for
respondent to perform intermittent services pursuant to an Accreditation Agreement, the validity of which was
never assailed by the petitioners. Respondent contested petitioners contention that they were performing
functions that were directly related to respondents main business since petitioners were simply tasked to do
mirror cutting, an activity occasionally performed upon a customers order. Respondent likewise denied
exercising control over petitioners and asserted that such was wielded by SSASI. Finally, respondent maintained
that SSASI was engaged in legitimate job contracting. SSASI, for its part, claimed that it was a duly registered
independent contractor

On 18 February 2004, the Labor Arbiter promulgated his Decision finding that respondent submitted
overwhelming documentary evidence to refute the bare allegations of the petitioners and accordingly dismissing
the complaint for lack of merit. On appeal, the NLRC reversed the afore-quoted Decision of the Labor Arbiter,
giving more evidentiary weight to petitioners testimonies. The Court of Appeals rendered a Decision granting
respondents Petition for Certiorari and reversing the NLRC decision. Hence, this petition.

RULING: NO. An important element of legitimate job contracting is that the contractor has substantial capital or
investment, which respondent failed to prove. There is a dearth of evidence to prove that SSASI possessed
substantial capital or investment when respondent began contractual relations with it more than a decade
before 2003. Respondents bare allegations, without supporting proof that SSASI had substantial capital or
investment, do not sway this Court. The Court did not find a single financial statement or record to attest to the
economic status and financial capacity of SSASI to venture into and sustain its own business independent from
petitioner.

Furthermore, the Court is unconvinced by respondents argument that petitioners were performing jobs that
were not directly related to respondents main line of business. Respondent is engaged in glass manufacturing.
One of the petitioners served as a quality controller, while the rest were glass cutters. The only excuse offered
by respondent - that petitioners services were required only when there was an increase in the markets
demand with which respondent could not cope - only prove even more that the services rendered by petitioners
were indeed part of the main business of respondent. It would mean that petitioners supplemented the regular
workforce when the latter could not comply with the markets demand; necessarily, therefore, petitioners
performed the same functions as the regular workforce. Even respondents claim that petitioners services were
required only intermittently, depending on the market, deserves scant credit. The indispensability of petitioners
services was fortified by the length and continuity of their performance, lasting for periods ranging from three to
11 years. In the instant case, petitioners worked at the respondents premises, and nowhere else. Petitioners
followed the work schedule prepared by respondent. They were required to observe all rules and regulations of
the respondent pertaining to, among other things, the quality of job performance, regularity of job output, and
the manner and method of accomplishing the jobs. Obscurity hounds respondents argument that even if
petitioners were working under its roof, it was still SSASI which exercised control over the manner in which they
accomplished their work. There was no showing that it was SSASI who established petitioners working
procedure and methods, or who supervised petitioners in their work, or who evaluated the same. The totality of
the facts and the surrounding circumstances of the case convey otherwise. SSASI is a labor-only contractor;
hence, it is considered as the agent of respondent. Respondent is deemed by law as the employer of petitioners.
Surely, respondent cannot expect this Court to sustain its stance and accord full evidentiary weight to the
documentary evidence belatedly procured in its vain attempt to evade liability as petitioners employer.

OPINION: I concur with the courts ruling. As gleaned from the facts, respondent adamantly insists that
petitioners were not its employees but those of SSASI, a legitimate job contractor duly licensed by the DOLE to
undertake job contracting activities. However, the job performed by petitioners were directly related to
respondents primary venture as flat glass manufacturer, for they were assigned to the mirroring line to perform
glass cutting on occasions when the employees of respondent could not comply with the markets intermittent
increased demand. And petitioners were working at respondents premises, it was also the respondent which
effectively supervised the manner and method petitioners performed their jobs and not just the results result
thereof. Verily, respondent is the employer of petitioners.

SUPERIOR PACKAGING CORPORATION VS. ARNEL BALAGSAY, ET. AL.

G.R. NO. 178909 OCTOBER 10, 2012 REYES, J.

FACTS: This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision of CA
affirming with modification the decision of the Secretary of Dole, finding petitioner liable as employer.

ISSUE/S: Is Lancer a legitimate labor contractor?

LAW/S: Articles 106-109 of the Labor Code and DOLE Department Order No. 10, Series of 1997.

CASE HISTORY: Petitioner engaged the services of Lancer to provide reliever services to its business, which
involves the manufacture and sale of commercial and industrial corrugated boxes. According to petitioner, the
respondents were engaged for four (4) months from February to June 1998 and their tasks included loading,
unloading and segregation of corrugated boxes.
Pursuant to a complaint filed by the respondents against the petitioner and its President, Cesar Luz (Luz), for
underpayment of wages, non-payment of premium pay for worked rest, overtime pay and non-payment of
salary, the Department of Labor and Employment (DOLE) conducted an inspection of the petitioners premises
and found several violations, to wit: (1) non-presentation of payrolls and daily time records; (2) non-submission
of annual report of safety organization; (3) medical and accident/illness reports; (4) non-registration of
establishment under Rule 1020 of Occupational and Health Standards; and (5) no trained first aide Due to the
petitioners failure to appear in the summary investigations conducted by the DOLE, an Order was issued on
June 18, 2003 finding in favor of the respondents and adopting the computation of the claims submitted.
Petitioner and Luz were ordered, among others, to pay respondents their total claims in the amount of Eight
Hundred Forty Thousand Four Hundred Sixty-Three Pesos and 38/100 (P 840,463.38).

They filed a motion for reconsideration on the ground that respondents are not its employees but of Lancer and
that they pay Lancer in lump sum for the services rendered. The DOLE, however, denied its motion in its
Resolution dated February 16, 2004, ruling that the petitioner failed to support its claim that the respondents
are not its employees, and even assuming that they were employed by Lancer, the petitioner still cannot escape
liability as Section 13 of the Department Order No. 10, Series of 1997, makes a principal jointly and severally
liable with the contractor to contractual employees to the extent of the work performed when the contractor
fails to pay its employees wages.
Their appeal to the Secretary of DOLE was dismissed per Order dated July 30, 2004 and the Order dated June 18,
2003 and Resolution dated February 16, 2004 were affirmed. Their motion for reconsideration likewise having
been dismissed by the Secretary. CA affirmed the Secretary of DOLEs orders, with the modification in that Luz
was absolved of any personal liability under the award.

RULING: NO. The petition is bereft of merit. It was the consistent conclusion of the DOLE and the CA that Lancer
was not an independent contractor but was engaged in "labor-only contracting"; hence, the petitioner was
considered an indirect employer of respondents and liable to the latter for their unpaid money claims. According
to the CA, the totality of the facts and surrounding circumstances of this case point to such conclusion. The
Court agrees.

The ratio of Lancers authorized capital stock of P 400,000.00 as against its subscribed and paid-up capital stock
of P 25,000.00 shows the inadequacy of its capital investment necessary to maintain its day-to-day operations.
And while the Court does not set an absolute figure for what it considers substantial capital for an independent
job contractor, it measures the same against the type of work which the contractor is obligated to perform for
the principal. Moreover, the nature of respondents work was directly related to the petitioners business. The
marked disparity between the petitioners actual capitalization (P 25,000.00) and the resources needed to
maintain its business, i.e., "to establish, operate and manage a personnel service company which will conduct
and undertake services for the use of offices, stores, commercial and industrial services of all kinds," supports
the finding that Lancer was, indeed, a labor-only contractor. Aside from these is the undisputed fact that the
petitioner failed to produce any written service contract that might serve as proof of its alleged agreement with
Lancer.
Finally, a finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed contractor, and the
"labor only" contractor is considered as a mere agent of the principal, the real employer. The former becomes
solidarily liable for all the rightful claims of the employees. The petitioner therefore, being the principal
employer and Lancer, being the labor-only contractor, are solidarily liable for respondents unpaid money
claims.

OPINION: I humbly submit with the courts ruling. It cannot be more emphasized that Labor-only contracting is
prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly
employed by him. All the circumstances found in this case proved that Lancer is not a legitimate job contractor.
Hence, the law states that petitioner should be held directly and solidarily liable.

ROLANDO SASAN SR., ET. AL. VS. NLRC

G.R. NO. 176240 OCTOBER 17, 2008 CHICO-NAZARIO, J.

FACTS: Assailed in this Petition for Review under Rule 45 of the Rules of Court are the decision of the Court of
Appeals which affirmed the decision of the National Labor Relations Commission (NLRC) finding that Helpmate,
Inc. (HI) is a legitimate independent job contractor and that the petitioners were not illegally dismissed from
work; and the Resolution of the same court denying the Motion for Reconsideration filed by the petitioners.

ISSUE/S: (1) Is HI a legitimate independent job contractor? (2) Did HI illegally dismissed petitioners?

LAW/S: Articles 106-109 of the Labor Code of the Philippines.

CASE HISTORY: Petitioners filed with the Arbitration Branch of the NLRC separate complaints against E-PCI Bank
and HI for illegal dismissal. In their position papers, petitioners claimed that they had become regular employees
of E-PCI Bank with respect to the activities for which they were employed, having continuously rendered
janitorial and messengerial services to the bank for more than one year; that E-PCI Bank had direct control and
supervision over the means and methods by which they were to perform their jobs; and that their dismissal by
HI was null and void because the latter had no power to do so since they had become regular employees of E-
PCI Bank. For its part, E-PCI Bank averred that it entered into a Contract for Services with HI, an independent job
contractor which hired and assigned petitioners to the bank to perform janitorial and messengerial services
thereat. HI, on the other hand, asserted that it was an independent job contractor engaged in the business of
providing janitorial and related services to business establishments, and E-PCI Bank was one of its clients.

On the basis of the parties position papers and documentary evidence, Labor Arbiter Gutierrez rendered a
Decision finding that HI was not a legitimate job contractor on the ground that it did not possess the required
substantial capital or investment to actually perform the job, work, or service under its own account and
responsibility as required under the Labor Code. HI is therefore a labor-only contractor and the real employer of
petitioners is E-PCI Bank which is held liable to petitioners. Aggrieved by the decision of Labor Arbiter Gutierrez,
respondents E-PCI Bank and HI appealed the same to the NLRC, 4th division. The NLRC modified the ruling of
Labor Arbiter Gutierrez. The NLRC took into consideration the documentary evidence presented by HI for the
first time on appeal and, on the basis thereof, declared HI as a highly capitalized venture with sufficient
capitalization, which cannot be considered engaged in "labor-only contracting." Distressed by the decision of the
NLRC, petitioners sought recourse with the CA by filing a Petition for Certiorari under Rule 65. In its Decision, the
CA affirmed the findings of the NLRC that HI was a legitimate job contractor and that it did not illegally dismiss
petitioners. Hence, the present petition.

Ruling: (1) NO. Permissible job contracting or subcontracting refers to an arrangement whereby a principal
agrees to put out or farm out to a contractor or subcontractor the performance or completion of a specific job,
work or service within a definite or predetermined period, regardless of whether such job, work or service is to
be performed or completed within or outside the premises of the principal. It is not enough to show substantial
capitalization or investment in the form of tools, equipment, etc. Other facts that may be considered include the
following: 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 employers power with respect
to the hiring, firing and payment of the contractors workers; the control of the premises; the duty to supply
premises, tools, appliances, materials and labor; and the mode and manner or terms of payment. Simply put,
the totality of the facts and the surrounding circumstances of the case are to be considered. In the case at bar,
we find substantial evidence to support the finding of the NLRC, affirmed by the Court of Appeals, that HI is a
legitimate job contractor.

We take note that HI has been issued by the Department of Labor and Employment (DOLE) Certificate of
Registration. The evidence on record also shows that HI is carrying on a distinct and independent business from
E-PCIBank. The employees of HI are assigned to clients to perform janitorial and messengerial services, clearly
distinguishable from the banking services in which E-PCIBank is engaged. HI has substantial capital in the
amount of P20,939,935.72. It has its own building where it holds office and it has been engaged in business for
more than a decade now. As observed by the Court of Appeals, surely, such a well-established business entity
cannot be considered a labor-only contractor.

(2) NO. It is undisputed that the contract between respondent HI and its client E-PCIBank expired on July 15,
2000. The record shows that after said expiration, respondent HI offered the petitioners new work assignments
to various establishments which are HIs clients. The petitioners, therefore, were not even placed on "floating
status." They simply refused, without justifiable reason, to assume their new work assignments which refusal
was tantamount to abandonment. There being no illegal dismissal, petitioners are not entitled to backwages or
separation pay.

OPINION: I support the Supreme Courts ruling. As held in many cases, an independent contractor must have
either substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others. The law does not require both substantial capital and investment in the form of tools, equipment,
machineries, etc. It is enough that it has substantial capital.
In the case, HI has proven both.

SAN MIGUEL CORPORATION VS. VICENTE B. SEMILLANO, ET. AL.

G.R. NO. 164257 JULY 5, 2010 MENDOZA, J.
FACTS: This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing (i) the February 19,
2004 decision of the Court of Appeals which reversed and set aside the February 28, 2002 and September 27,
2002 Resolutions of the National Labor Relations Commission in NLRC; and (ii) its May 28, 2004 Resolution
denying petitioners motion for the reconsideration thereof.

ISSUE/S: (1) Is SMC directly liable as the employer of respondents?

LAW/S: Articles 106-109 of the Labor Code of the Philippines.

CASE HISTORY: It appears that AMPCO hired the services of Vicente et al., respondents herein, on different
dates in December of 1991 and 1994. All of them were assigned to work in SMCs Bottling Plant situated at
Bacolod City, in order to perform the following tasks: segregating bottles, removing dirt therefrom, filing them in
designated places, loading and unloading the bottles to and from the delivery trucks, and performing other tasks
as may be ordered by SMCs officers. They were required to work inside the premises of SMC using SMCs
equipment. They rendered service with SMC for more than six months. Subsequently, SMC entered into a
Contract of Services with AMPCO designating the latter as the employer of Vicente, et al. As a result, Vicente et
al. failed to claim the rights and benefits ordinarily accorded a regular employee of SMC. In fact, they were not
paid their 13th month pay. On June 6, 1995, they were not allowed to enter the premises of SMC. The project
manager of AMPCO, Merlyn Polidario, told them to wait for further instructions from the SMCs supervisor.
Vicente et al. waited for one month, unfortunately, they never heard a word from SMC. Consequently, Vicente
et al., as complainants, filed on July 17, 1995 a COMPLAINT FOR ILLEGAL DISMISSAL with the Labor Arbiter
against AMPCO and SMC, as respondents. Complainants alleged that they were fillers of SMC Bottling Plant
assigned to perform activities necessary and desirable in the usual business of SMC. They claim that they were
under the control and supervision of SMC personnel and have worked for more than six months in the company.
As such, they assert that they are regular employees of SMC. However, SMC utilized AMPCO making it appear
that the latter was their employer, so that SMC may evade the responsibility of paying the benefits due them
under the law. On the other hand, respondent SMC raised the defense that it is not the employer of the
complainants. According to SMC, AMPCO is their employer because the latter is an independent contractor. Also
SMC alleged that it was AMPCO that directly paid their salaries and remitted their contributions to the SSS.

LA ruled in favor of respondents declaring that SMC is their true employer and not AMPCO. NLRC and CA
affirmed. Hence, this present petition.

RULING: YES. Although there may be indications of an independent contractor arrangement between petitioner
and AMPCO, the most determinant of factors exists which indicate otherwise. Petitioners averment that
AMPCO had total assets amounting to P932,599.22 and income of P2,777,603.46 in 1994 was squarely
debunked by the LA. Thus: Furthermore, there are no pieces of evidence that AMPCO has substantial capital or
investment. An examination its "Statement of Income and Changes in Undivided Savings" show that its income
for the year 1994 was P2,777,603.46 while its operating expenses for said year is P2,718,315.33 or a net income
of P59,288.13 for the year 1994; that its cash on hand for 1994 is P22,154.80. In contrast, the (sic) AMPCOs
main business activity is trading, maintaining a store catering to members and the public. Its job contracting with
SMC is only a minor activity or sideline. The component of AMPCOs substantial capital are in fact invested and
used in the trading business. This is palpably shown in the sizable amount of its accounts receivables amounting
to more than P.6M out of its members capital of only P.47M in 1994. Neither did petitioner prove that AMPCO
had substantial equipment, tools, machineries, and supplies actually and directly used by it in the performance
or completion of the segregation and piling job. In fact, as correctly pointed out by the NLRC in its original
decision, there is nothing in AMPCOs list of fixed assets, machineries, tools, and equipment which it could have
used, actually and directly, in the performance or completion of its contracted job, work or service with
petitioner. For said reason, there can be no other logical conclusion but that the tools and equipment utilized by
respondents are owned by petitioner SMC. It is likewise noteworthy that neither petitioner nor AMPCO has
shown that the latter had clients other than petitioner. Therefore, AMPCO has no independent business.
Petitioner faults the CA for holding that the respondents were under the control of petitioner whenever they
performed the task of loading in the delivery trucks and unloading from them. It, however, fails to show how
AMPCO took "entire charge, control and supervision of the work and service agreed upon." AMPCOs Comment
on the Petition is likewise utterly silent on this point. Moreover, the Court is not convinced that AMPCO wielded
"exclusive discretion in the discharge" of respondents. As the CA correctly pointed out, Merlyn Polidario,
AMPCOs project manager, even told respondents to "wait for further instructions from the SMCs supervisor"
after they were prevented from entering petitioner SMCs premises. Based on the foregoing, no other logical
conclusion can be reached than that it was petitioner, not AMPCO, who wielded power of control. Despite the
fact that the service contracts contain stipulations which are earmarks of independent contractorship, they do
not make it legally so. The language of a contract is neither determinative nor conclusive of the relationship
between the parties. Petitioner SMC and AMPCO cannot dictate, by a declaration in a contract, the character of
AMPCOs business, that is, whether as labor-only contractor, or job contractor. AMPCOs character should be
measured in terms of, and determined by, the criteria set by statute. Petitioner cannot rely either on AMPCOs
Certificate of Registration as an Independent Contractor issued by the proper Regional Office of the DOLE to
prove its claim. It is not conclusive evidence of such status. The fact of registration simply prevents the legal
presumption of being a mere labor-only contractor from arising. In distinguishing between permissible job
contracting and prohibited labor-only contracting, the totality of the facts and the surrounding circumstances of
the case are to be considered.

OPINION: I support SCs ruling. An independent 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,
and 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. This embodies what has long been jurisprudentially
recognized as the control test to determine the existence of employer-employee relationship.
Therefore, since in this case, supported by evidence, SMC wielded the power determinant of employer-
employee relationship and not AMPCO. The petition, thus, must fail.

DAMIAN AKLAN, ET.AL. VS. SAN MIGUEL CORPORATION, BMA PHILASIA, INC.
G.R. NO. 168537 DECEMBER 11, 2008 REYES, R.T., J.

FACTS: This is a review on certiorari of the decision of the Court of Appeals upholding that of the National Labor
Relations Commission, finding the dismissal of petitioners justified and BMA is engaged in legitimate job-
contracting.

ISSUE/S: (1) Is BMA a labor-only contractor?

LAW/S: Articles 106-109 of the Labor Code of the Philippines.

CASE HISTORY: Respondent BMA Philasia, Inc. (BMA) is a domestic corporation engaged in the business of
transporting and hauling of cargoes, goods, and commodities of all kinds. Respondent Arlene Eusebio is the
president of BMA. Petitioners, numbering forty-seven (47) in all, are the former employees of respondent BMA
at respondent San Miguel Corporations (SMC) warehouse in Pasig City. They were hired under fixed-term
contracts beginning October 1999.
On July 31, 2001, a number of petitioners went to the Department of Labor and Employment (DOLE) District
Office to file a complaint against BMA and Eusebio for underpayment of wages and non-payment of premium
pay for rest day, 13th month pay, and service incentive leave pay. On August 14, 2001, petitioner Elmer Caboteja
was charged with insubordination and disrespect to superior, failure to properly perform his job assignment,
and unauthorized change of schedule. He was directed to submit his written explanation within forty-eight (48)
hours. On August 17, 2001, Caboteja was terminated for the offenses of disregard of company rules and
regulations and rude attitude to supervisors. On August 27, 2001, he filed a complaint for illegal dismissal
against BMA. On various dates thereafter, BMA agreed to a settlement with some of the complainants in the
case for underpayment of wages. Eleven of the present petitioners executed quitclaims and releases in favor of
BMA and Eusebio in the presence of DOLE district officers. BMA refused to settle the claim of other
complainants. On September 13, 2001, petitioners Joan Erico Dumalagan and Ronaldo Salvador were also
terminated for failure to perform their job responsibilities. On September 17, 2001, Dumalagan and Salvador
filed complaints for illegal dismissal against BMA. On October 18, 2001, petitioners held a picket at the
warehouse premises to protest BMAs refusal to pay the claim for underpayment of the rest of the workers. This
picket disrupted the business operations of private respondents, prompting BMA to terminate their services.
Subsequently, petitioners filed separate complaints against BMA, Eusebio, and SMC for illegal dismissal. All the
complaints for illegal dismissal were consolidated.

Petitioners alleged that they were illegally dismissed after filing a complaint for underpayment of wages and
non-payment of benefits before the DOLE; they were terminated after staging a peaceful picket to protest the
non-payment of their claims. According to them, BMA is a labor-only contractor. SMC was not only the owner of
the warehouse and equipment used by BMA, it was their true employer. Private respondents BMA and Eusebio
countered that petitioners Caboteja, Dumalagan, and Salvador were validly and justly dismissed. They were
among the eleven who already signed quitclaims and releases before the DOLE district office after receiving an
amount in settlement of their claims. As for the rest of petitioners (36 complainants), there was no illegal
dismissal to speak of. Said employees simultaneously did not go back to work for no apparent reason on October
18, 2001. Private respondent SMC maintained that it had no employer-employee relationship with petitioners
who were hired and supervised exclusively by BMA pursuant to a warehousing and delivery agreement in
consideration of a fixed monthly fee. SMC showed that under their contract, BMA provided delivery trucks,
drivers, and helpers in the storage and distribution of SMC products. On a day-to-day basis, after the routes
were made by SMC salesmen, they would book the orders they obtained. In turn, BMAs Schedular Planner,
detailed at the Pasig Warehouse, downloaded these booked orders from the computer and processed the
necessary documents to be forwarded to the Warehouse Checker, also an employee of BMA.

LA ruled in favor of petitioners. NLRC reversed. CA affirmed in toto. Hence, this petition.

RULING: NO. It is the BMA which actually conducts the hauling, storage, handling, transporting, and delivery
operations of SMCs products pursuant to their warehousing and Delivery Agreement. BMA itself hires and
supervises its own workers to carry out the aforesaid business activities. Apart from the fact that it was BMA
which paid for the wages and benefits, as well as SSS contributions of petitioners, it was also the management of
BMA which directly supervised and imposed disciplinary actions on the basis of established rules and regulations
of the company. The documentary evidence consisting of numerous memos throughout the period of
petitioners employment leaves no doubt in the mind of this Court that petitioners are only too aware of who is
their true employer. Petitioners received daily instructions on their tasks form BMA management, particularly,
private respondent Arlene C. Eusebio, and whenever they committed lapses or offenses in connection with their
work, it was to said officer that they submitted compliance such as written explanations, and brought matters
connected with their specific responsibilities.

The records fully disclose that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for
just and valid causes. Caboteja was cited for violation of company rules and regulations and disrespectful
conduct. Dumalagan and Salvador were investigated for failure to perform duties and responsibilities. After their
explanations were found unacceptable, they were accordingly dismissed. As for the other petitioners, they
contend that they were illegally dismissed when respondent BMA barred them from entering the work premises
and from performing their work. Both the NLRC and the CA found that petitioners failed to substantiate this
contention. Rather, what was shown in the records was that they simply stopped reporting for work starting
October 18, 2001 when they staged a picket.

OPINION: I approve the courts ruling. There was no grave abuse of discretion in the CA observation that
respondent BMA is the true employer of petitioners who should be held directly liable for their claims. Likewise,
no grave abuse of discretion can be ascribed to the CA when it ruled that illegal dismissal was absent. The
employer-employee relationship between BMA and petitioners is not blemished by the absence of registration
with DOLE as an independent job contractor on the part of BMA. The absence of registration only gives rise to
the presumption that the contractor is engaged in labor-only contracting, a presumption that respondent BMA
ably refuted.
Therefore, the petition must fail.

JEROMIE D. ESCASINAS AND EVAN SINGCO VS.

SHANGRI-LAS MACTAN ISLAND RESORT AND DR. PEPITO
G.R. NO. 178827 MARCH 4, 2009 CARPIO-MORALES, J.

FACTS: This is a petition for review seeking to reverse the ruling of CA finding no employer-employee
relationship between petitioner and respondent.

ISSUE/S: (1) Is Dr. Pepito a legitimate job contractor?

LAW/S: Art. 157 vis a vis Art. 280 and the provisions on permissible job contracting of the Labor Code, as
amended.
ART. 157. Emergency medical and dental services. It shall be the duty of every employer to furnish his
employees in any locality with free medical and dental attendance and facilities consisting of:
(a) The services of a full-time registered nurse when the number of employees exceeds fifty (50) but not more
than two hundred (200) except when the employer does not maintain hazardous workplaces, in which case the
services of a graduate first-aider shall be provided for the protection of the workers, where no registered nurse
is available. The Secretary of Labor shall provide by appropriate regulations the services that shall be required
where the number of employees does not exceed fifty (50) and shall determine by appropriate order hazardous
workplaces for purposes of this Article;
(b) The services of a full-time registered nurse, a part-time physician and dentist, and an emergency clinic, when
the number of employees exceeds two hundred (200) but not more than three hundred (300); and
(c) The services of a full-time physician, dentist and full-time registered nurse as well as a dental clinic, and an
infirmary or emergency hospital with one bed capacity for every one hundred (100) employees when the
number of employees exceeds three hundred (300).

CASE HISTORY: Petitioners are registered nurses. They were engaged in 1999 and 1996, respectively, by Dr.
Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-las Mactan Island Resort
(Shangri-la) in Cebu of which she was a retained physician.In late 2002, petitioners filed with the National Labor
Relations Commission (NLRC) Regional Arbitration a complaint for regularization, underpayment of wages, non-
payment of holiday pay, night shift differential and 13th month pay differential against respondents, claiming
that they are regular employees of Shangri-la. Shangri-la claimed, however, that petitioners were not its
employees but of respondent doctor whom it retained via Memorandum of Agreement (MOA) pursuant to
Article 157 of the Labor Code, as amended.
Respondent doctor for her part claimed that petitioners were already working for the previous retained
physicians of Shangri-la before she was retained by Shangri-la; and that she maintained petitioners services
upon their request.

LA ruled in favor of petitioners. NLRC reversed. It found no employer-employee relationship exists between
petitioner and Shangri-la. CA affirmed. Hence, this petition.

RULING: YES. Contrary to petitioners postulation, Art. 157 does not require the engagement of full-time nurses
as regular employees of a company employing not less than 50 workers. In cases of hazardous workplaces, no
employer shall engage the services of a physician or dentist who cannot stay in the premises of the
establishment for at least two (2) hours, in the case of those engaged on part-time basis, and not less than eight
(8) hours in the case of those employed on full-time basis. Where the undertaking is nonhazardous in nature,
the physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of
Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case of
emergency. Under the foregoing provision, Shangri-la, which employs more than 200 workers, is mandated to
"furnish" its employees with the services of a full-time registered nurse, a part-time physician and dentist, and
an emergency clinic which means that it should provide or make available such medical and allied services to its
employees, not necessarily to hire or employ a service provider.
The term "full-time" in Art. 157 cannot be construed as referring to the type of employment of the person
engaged to provide the services, for Article 157 must not be read alongside Art. 280 in order to vest employer-
employee relationship on the employer and the person so engaged. The phrase "services of a full-time
registered nurse" should thus be taken to refer to the kind of services that the nurse will render in the
companys premises and to its employees, not the manner of his engagement.

As to whether respondent doctor can be considered a legitimate independent contractor, the Court holds that
respondent doctor is a legitimate independent contractor. That Shangri-la provides the clinic premises and
medical supplies for use of its employees and guests do not necessarily prove that respondent doctor lacks
substantial capital and investment. Besides, the maintenance of a clinic and provision of medical services to its
employees is required under Art. 157, which are not directly related to Shangri-las principal business
operation of hotels and restaurants. As to payment of wages, respondent doctor is the one who paid all of it
including SSS and insurance. It is unlikely that respondent doctor would report petitioners as workers, pay their
SSS premium as well as their wages if they were not indeed her employees. With respect to the supervision and
control of the nurses and clinic staff, it is not disputed that a document, "Clinic Policies and Employee
Manual" claimed to have been prepared by respondent doctor exists, to which petitioners gave their
conformity and in which they acknowledged their co-terminus employment status. It is thus presumed that said
document, and not the employee manual being followed by Shangri-las regular workers, governs how they
perform their respective tasks and responsibilities. Contrary to petitioners contention, the various office
directives issued by Shangri-las officers do not imply that it is Shangri-las management and not respondent
doctor who exercises control over them or that Shangri-la has control over how the doctor and the nurses
perform their work. The letter addressed to respondent doctor dated February 7, 2003 from a certain Tata L.
Reyes giving instructions regarding the replenishment of emergency kits is, at most, administrative in nature,
related as it is to safety matters; while the letter dated May 17, 2004 from Shangri-las Assistant Financial
Controller, Lotlot Dagat, forbidding the clinic from receiving cash payments from the resorts guests is a matter
of financial policy in order to ensure proper sharing of the proceeds, considering that Shangri-la and respondent
doctor share in the guests payments for medical services rendered. In fine, as Shangri-la does not control how
the work should be performed by petitioners, it is not petitioners employer.

OPINION: I agree with the courts ruling. The following determinants generally established the existence of an
independent and permissible contractor relationship is by considering the: whether the contractor is carrying on
an independent business; the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of work; the control and supervision of the
work to another; the employer's power with respect to the hiring, firing and payment of the contractor's
workers; the control of the premises; the duty to supply the premises, tools, appliances, materials and labor;
and the mode, manner and terms of payment. In this case, it all leads to the conclusion that Dr. Pepito is a
legitimate job-contractor.

S.I.P. FOOD HOUSE AND MR&MRS. ALEJANDRO PABLO VS.

RESTITUTO BATOLINA, ET.AL.
G.R. NO. 192473 OCTOBER 11, 2010

FACTS: We resolve the present petition for review on certiorari which seeks to nullify the decision and
resolution of the Court of Appeals (CA), promulgated on November 27, 2009 and May 31, 2010, respectively.

ISSUE/S: (1) Is petitioner a labor-only contractor?

LAW/S: Articles 106-109 of the Labor Code of the Philippines

CASE HISTORY: The GSIS Multi-Purpose Cooperative (GMPC) is an entity organized by the employees of the
Government Service Insurance System (GSIS). Incidental to its purpose, GMPC wanted to operate a canteen in
the new GSIS Building, but had no capability and expertise in this area. Thus, it engaged the services of the
petitioner S.I.P. Food House (SIP), owned by the spouses Alejandro and Esther Pablo, as concessionaire. The
respondents Restituto Batolina and nine (9) others (the respondents) worked as waiters and waitresses in the
canteen. In February 2004, GMPC terminated SIPs "contract as GMPC concessionaire," because of GMPCs
decision "to take direct investment in and management of the GMPC canteen;" SIPs continued refusal to heed
GMPCs directives for service improvement; and the alleged interference of the Pablos two sons with the
operation of the canteen. The termination of the concession contract caused the termination of the
respondents employment, prompting them to file a complaint for illegal dismissal, with money claims, against
SIP and the spouses Pablo.

Labor Arbiter Francisco A. Robles rendered a Decision on June 30, 2005 dismissing the complaint for lack of
merit. He found that the respondents were GMPCs employees, and not SIPs, as there existed a labor-only
contracting relationship between the two entities. NLRC found that SIP was the respondents employer, but it
sustained the labor arbiters ruling that the employees were not illegally dismissed as the termination of SIPs
concession to operate the canteen constituted an authorized cause for the severance of employer-employee
relations. CA granted the petition in part. While it affirmed the award, it found merit in SIPs objection to the
NLRC computation and assumption that a month had twenty-six (26) working days, instead of twenty (20)
working days.

RULING: No. SC affirms the CA ruling that SIP was the respondents employer. Respondents have been the
concessionaire of GMPC canteen for nine (9). During this period, complainants were employed at the said
canteen. On February 29, 2004, respondents concession with GMPC was terminated. When respondents were
prevented from entering the premises as a result of the termination of their concession, they sent a protest
letter dated April 14, 2004 to GMPC thru their counsel. Pertinent portion of the letter:
We write this letter in behalf of our client Mr. & Mrs. Alejandro C. Pablo, the concessionaires who used to
occupy and/or rent the area for a cafeteria/canteen at the 2nd Floor of the GSIS Building for the past
several years.
Last March 12, 2004, without any court writ or order, and with the aid of your armed agents, you
physically barred our clients & their employees/helpers from entering the said premises and from
performing their usual duties of serving the food requirements of GSIS personnel and others.
Clearly, no less than respondents, thru their counsel, admitted that complainants herein were their employees.
That complainants were employees of respondents is further bolstered by the fact that respondents do not deny
that they were the ones who paid complainants salary. When complainants charged them of underpayment,
respondents even interposed the defense of file board and lodging given to complainants.
Furthermore, these IDs issued to complainants bear the signature of respondent Alejandro C. Pablo. Likewise,
the memoranda issued to complainants regarding their absences without leave were signed by respondent
Alejandro C. Pablo. All these pieces of evidence clearly show that respondents are the employer of
complainants. The CA ruled out SIPs claim that it was a labor-only contractor or a mere agent of GMPC. SC
agree with the CA; SIP and its proprietors could not be considered as mere agents of GMPC because they
exercised the essential elements of an employment relationship with the respondents such as hiring, payment of
wages and the power of control, not to mention that SIP operated the canteen on its own account as it paid a
fee for the use of the building and for the privilege of running the canteen. The fact that the respondents
applied with GMPC in February 2004 when it terminated its contract with SIP, is another clear indication that the
two entities were separate and distinct from each other.

OPINION: I concur with the courts ruling. It was proved and supported by pieces of evidence in this case that
petitioner is not a labor-only contractor. Hence, GSIS is not liable for unpaid money claims.

MANDAUE GALLEON TRADE, INC. AND/OR GAMALLOSONS TRADERS, INC. VS.

VICENTE ANDALES ET.AL.
G.R. NO. 159668 March 7, 2008 AUSTRIA-MARTINEZ, J.

FACTS: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the
decision dated May 21, 2003 and the Amended decision dated August 19, 2003 of the Court of Appeals

ISSUE/S: (1) Is petitioner liable as principal/employer due to existence of labor-only contracting?

LAW/S: Articles 106-109 of the Labor Code of the Philippines

CASE HISTORY: Petitioners Mandaue Galleon Trade, Inc. (MGTI) and Gamallosons Traders, Inc. (GTI) are business
entities engaged in rattan furniture manufacturing for export, with principal place of business at Cabangcalan,
Mandaue City. Respondent Vicente Andales filed a complaint with the Labor Arbiter (LA) against both petitioners
for illegal dismissal and non-payment of 13th month pay and service incentive leave pay. His other co-workers
numbering 260 filed a similar complaint against petitioner MGTI only.
The complainants alleged that MGTI hired them on various dates as weavers, grinders, sanders and finishers;
sometime in August 1998, workers in the Finishing Department were told that they would be transferred to a
contractor and they were given Visitor Identification Cards (IDs), while workers in the Weaving Department were
told to look for work elsewhere as the company had no work for them; sometime in September 1998, workers in
the Grinding Department were not allowed to enter the company premises, while workers in the Sanding
Department were told that they could no longer work since there was no work available; workers who were
issued IDs were allowed to go inside the premises; and they were dismissed without notice and just cause. They
further alleged that they are regular employees of MGTI.
On the other hand, MGTI denied the existence of employer-employee relationship with complainants, claiming
that they are workers of independent contractors whose services were engaged temporarily and seasonally
when the demands for its products are high and could not be met by its regular workforce; the independent
contractors recruited and hired the complainants, prepared the payroll and paid their wages, supervised and
directed their work, and had authority to dismiss them. It averred that due to the economic crisis and internal
squabble in the company, the volume of orders from foreign buyers dived; as a survival measure, management
decided to retrench its employees; and the substantial separation pay paid to retrenched employees caught the
jealous eyes of complainants who caused the filing of the complaint for illegal dismissal.

LA ruled in favor of respondents declaring that there in labor-only contracting but no illegal dismissal. NLRC
affirmed but it found respondents constructively dismissed. CA affirmed.
RULING: YES. Petitioners' claim that their contractors are independent contractors, and, therefore, this case is
one of permissible job contracting, is without basis.
First, respondents' work as weavers, grinders, sanders and finishers is directly related to MGTI's principal
business of rattan furniture manufacturing. Where the employees are tasked to undertake activities usually
desirable or necessary in the usual business of the employer, the contractor is considered as a "labor-only"
contractor and such employees are considered as regular employees of the employer.
Second, MGTI was unable to present any proof that its contractors had substantial capital. There was no
evidence pertaining to the contractors' capitalization; nor to their investment in tools, equipment or implements
actually used in the performance or completion of the job, work, or service that they were contracted to render.
The law casts the burden on the contractor to prove that it has substantial capital, investment, tools, etc.
Employees, on the other hand, need not prove that the contractor does not have substantial capital, investment,
and tools to engage in job-contracting. Thus, the contractors are "labor-only" contractors since they do not have
substantial capital or investment which relates to the service performed and respondents performed activities
which were directly related to MGTI's main business. MGTI, the principal employer, is solidarily liable with the
labor-only contractors, for the rightful claims of the employees. Under this set-up, "labor-only" contractors are
deemed agents of the principal, MGTI, and the law makes the principal responsible to the employees of the
"labor-only" contractor as if the principal itself directly hired or employed the employees. In prohibiting "labor-
only" contracting and creating an employer-employee relationship between the principal and the supposed
contractor's employees, the law intends to prevent employers from circumventing labor laws intended to
protect employees.

OPINION: I definitely agree with the ruling of the Supreme Court. Article 106 set the general rule that a principal
is permitted by law to engage the services of a contractor for the performance of a particular job, but the
principal, nevertheless, becomes solidarily liable with the contractor for the wages of the contractor's
employees. However, the Secretary of Labor is empowered to make distinctions between permissible job
contracting and "labor-only" contracting, which is a prohibited act further defined under the last paragraph. A
finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-
employee relationship between the principal and the employees of the supposed contractor, and the "labor-
only" contractor is considered as a mere agent of the principal, the real employer.
Therefore, the petition must perforce fail.

CELEBES JAPAN FOODS CORPORATION VS. SUSAN YERMO, ET. AL.

G.R. NO. 175855, OCTOBER 2, 2009, DEL CASTILLO, J.:

FACTS: Assailed in this petition for review on certiorari are the decision dated June 27, 2005 and the
Resolution dated September 22, 2006 of the Court of Appeals, Mindanao Station, Cagayan de Oro City, declaring
that the dismissal was legal but petitioner was ordered to pay P50,000 to each respondents as nominal
damages.

ISSUE/S: (1) Is Penta Manpower a labor-only contractor? (2) Was dismissal valid?

LAW/S: Articles 106-109 of the Labor Code of the Philippines

CASE HISTORY: Petitioner Celebes Japan Foods Corporation is engaged in the business of buying, processing and
exporting of tuna fish, with buying station and plant located at the Davao Fish Port Complex, Daliao, Toril, Davao
City. Kanemitsu Yamaoka, Cesar Romero and Kenji Fuji were the Chairman, Office Manager and Plant Supervisor,
respectively, of petitioner Celebes. Petitioner contracted with Penta Manpower and Allied Resources to provide
manpower services for the former's business, with the latter recruiting people to work for the former, people
who included respondents Susan Yermo, et.al. Respondents performed jobs such as slicer, laboratory crew
packers, recorders/encoders, loiners, vinyl bag openers/receivers or storage persons, and who were necessary
and desirable to the main business of petitioner.
On November 7, 2000, respondents were refused entrance by the guards manning the gate of the Davao Fish
Port Complex, as they were already terminated from work effective November 1, 2000 based on a
memorandum dated November 7, 2000 issued by Romero, petitioner's office manager. The memorandum was
posted in the guardhouse.
On November 16, 2000, respondents filed with the Labor Arbiter a Complaint for illegal dismissal with money
claims for holiday pay, service incentive, leave pay, allowances, unpaid salaries, damages and attorney's fees
against petitioner and Penta Manpower, alleging that they were dismissed without just and valid cause and due
process.
On July 2, 2001, the LA rendered a decision in favor of respondents. It declared the dismissal was illegal and
ordered petitioner to pay the awards. NLRC vacated the decision and remanded the case to LA for arbitration for
violation of due process in favor of Celebes. MR denied. CA reversed. Hence, this petition.

Ruling: (1) Yes. Respondents were petitioner's employees and not of Penta Manpower, as the latter was merely
engaged in labor-only contracting; that there was an employer-employee relationship between respondents and
petitioner; that respondents' works were necessary to petitioner's business of processing tuna fish; that as
regular employees, respondents were entitled to security of tenure; that Penta Manpower was a labor-only
contractor, since it did not have substantial capital or investment in the form of tools, equipment and
machineries, which were necessary for the performance of the required services; and that it was petitioner that
actually managed, supervised and controlled respondents' employment. The LA found respondents' dismissal to
be illegal.

(2) YES. But respondents were denied due process. Respondents' dismissal was for an authorized cause, as
petitioner asserted that the absence or termination of their work was caused by a cessation of its operation as a
consequence of prolonged lack of adequate supply for high-quality fresh tuna. Although respondents were
dismissed for an authorized cause, the CA found that petitioner did not comply with the statutory requirement
of due process; thus, it ordered petitioner to pay each of the respondents nominal damages in the amount
of P50,000.00.
OPINION: I humbly concur with the ruling of the Supreme Court in affirming the decision of the Court of
Appeals. Due process is a constitutional requirement which employers cannot feign ignorance. The law provides
that before an employer can dismiss an employee, it must give the latter notice before the date of dismissal.
This is very important so as to apprise the employees of the impending end of his job; to enable them to protect
their rights; or to prepare and start finding another job. I, of course, recognize the hardships of business
reverses. However, this cannot place due process in the shadow.
Therefore, it just but right, that the affected employees are paid by way of nominal damages for there
was clearly a violation to their constitutional right to due process.

MANILA WATER COMPANY, INC. VS. JOSE DALUMPINES, ET. AL.

G.R. NO. 175501 OCTOBER 4, 2010 NACHURA, J.:

FACTS: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the
decision dated September 12, 2006 and the Resolution dated November 17, 2006 of the Court of Appeals which
annulled and set aside the ruling of LA and NLRC, declaring petitioner as true employer of respondents.

ISSUE/S: Is First Classic Courier Services, Inc. engaged in labor-contracting?

LAW/S: Articles 106-109 of the Labor Code of the Philippines.

CASE HISTORY: Petitioner Manila Water Company, Inc. (Manila Water) was one of two private concessionaires
contracted by the MWSS to manage the water distribution system in the east zone of Metro Manila. Under the
concession agreement, Manila Water undertook to absorb the regular employees of MWSS listed by the latter
effective August 1, 1997. Individual respondents, with the exception of Zapatero and Pamoraga, were among
the 121 employees not included in the list of employees to be absorbed by Manila Water. Nevertheless, Manila
Water engaged their services without written contract from August 1, 1997 to August 31, 1997. On September
1, 1997, individual respondents signed a three-month contract to perform collection services on commission
basis for Manila Waters branches in the east zone. Before the expiration of the contract of services, the 121 bill
collectors formed a corporation duly registered with the Securities and Exchange Commission (SEC) as the
"Association Collectors Group, Inc." (ACGI.) ACGI was one of the entities engaged by Manila Water for its courier
service. Manila Water entered into a service agreement with respondent First Classic Courier Services, Inc.
(FCCSI) also for its courier needs. The service agreements between Manila Water and FCCSI covered the periods
1997 to 1999 and 2000 to 2002. FCCSI gave a deadline for the bill collectors who were members of ACGI to
submit applications and letters of intent to transfer to FCCSI. The individual respondents in this case were
among the bill collectors who joined FCCSI and were hired effective December 1, 1997. On various dates
between May and October 2002, individual respondents were terminated from employment. Manila Water no
longer renewed its contract with FCCSI because it decided to implement a "collectorless" scheme whereby
Manila Water customers would instead remit payments through "Bayad Centers." Thus, aggrieved bill collectors
individually filed complaints for illegal dismissal, unfair labor practice, damages, and attorneys fees, with prayer
for reinstatement and backwages against petitioner Manila Water and respondent FCCSI.

The LA rendered a decision dismissing the complaint for lack of employer-employee relationship. Respondent
bill collectors filed an appeal to the NLRC but the same was denied. Respondents filed a petition for certiorari to
the CA which reversed the decision of the NLRC. Petitioners filed a motion for reconsideration but the same was
denied. Hence, this petition.

RULING: YES. Job contracting is permissible only if the following conditions are met:
[1] The contractor carries on an independent business and undertakes the contract work on his own account
under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results
thereof; and, [2] The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of the business.

In the instant case, the CA found that FCCSI is a labor-only contractor. Based on the factual findings of the CA,
FCCSI does not have substantial capital or investment to qualify as an independent contractor. FCCSI was
incorporated on November 14, 1995, with an authorized capital stock ofP400,000, of which onlyP100,000.00 is
actually paid-in. Such capitalization can hardly be considered substantial. As correctly ruled by the CA, FCCSIs
capitalization may not be considered substantial considering that it had close to a hundred collectors covering
the east zone service area of Manila Water customers. The allegation in the position paper of FCCSI that it serves
other companies courier needs does not "cure" the fact that it has insufficient capitalization to qualify as
independent contractor. Neither did FCCSI prove its allegation by substantial evidence other than by their self-
serving declarations. What is evident is that it was Manila Water that provided the equipment and service
vehicles needed in the performance of the contracted service, even if the contract between FCCSI and Manila
Water stated that it was the Contractor which shall furnish at its own expense all materials, tools, and
equipment needed to perform the tasks of collectors. Therefore, petitioner is the employer of respondents.

OPINION: I totally agree with the courts ruling. 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 the employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the
workers in the same manner and to the same extent as if the latter were directly employed by him.
It is clear in this case that FCCSI in engaged in labor-only contracting, thus, it is considered as mere agent
of petitioner. Hence, petitioner is liable to respondents as their employer. The law is replete of provisions
protecting labor sector in this rampant scheme employed by the employers to circumvent the law in not giving
the workers what are due to them. And this is one of those.

ILIGAN CEMENT CORPORATION VS. ILIASCOR EMPLOYEES AND WORKERS UNION SOUTHERN PHILIPPINES
FEDERATION OF LABOR (IEWU-SPFL), ET. AL.
G.R. NO. 158956 APRIL 24, 2009, LEONARDO-DE CASTO, J.:

FACTS: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the twin
Resolutions of the Court of Appeals in CA-G.R. SP No. 72267 dated October 17, 2002 , and July 3, 2003 which
dismissed the petition for certiorari and denied petitioners motion for reconsideration respectively.

ISSUES: (1) Is Vedali General Services a legitimate labor contractor? (2) Were respondents illegally dismissed?

LAW/S: Articles 106-109 of the Labor Code of the Philippines.

CASE HISTORY: Petitioner Iligan Cement Corp. (ICC) is a Philippine corporation with plant offices at Kiwalan,
Iligan City. It filed a petition for review on certiorari under Rule 45 of the ROC, assailing the twin resolutions of
CA, which dismissed the petition for certiorari and denied petitioners MR respectively. ILIASCOR is ICCs
accredited job contractor which provided stevedoring and arrastre services since the 1970s at its private pier.
Respondent ILIASCOR Employees and Workers Union (IEWU-SPFL) is the certified bargaining representative of
ILIASCORs arrastre and stevedoring workers, including herein individual respondents.
Vedali is an accredited service agency, which provided general services to petitioners various departments. On
November 11, 1999, Blue Circle took over the management of ICCs business and decided to bid out the services
at the latters private pier. IEWU-SPFL asked that the employment of ILIASCOR workers be continued however,
VP for Operations Peter Brinkley denied the request as the ILIASCOR contract had already expired. ILIASCOR lost
the bidding to LVMASI, which prompted the former to pay the individual respondents their separation pay of
month for every year of service, contrary to the CBA, which provided for 1 month pay for every year. The
LVMASI contract did not push through, so ICC issued a service order to Vedali, which supplied the company with
stevedores, including herein respondents. ICCs Packhouse Mananager Alex Sagario readily engaged the
stevedores.

The individual respondents filed a complaint with NLRC against ICC and demanded for the declaration of their
status as regular employees and payment of the half of their separation pay which ILIASCOR withheld. ICC
entered into a stevedoring and arrastre contract with NMIPSC, which took over the stevedoring duties of the
individual respondents, prompting the individual respondents to file a Supplemental Complaint for illegal
dismissal.

The Labor Arbiter dismissed the complaint for lack of merit, claiming that ICC is not liable to pay the unpaid
portion of separation pay because it is not the employer of the workers. ICC is merely the principal; ILIASCOR,
the independent contractor, is the employer of the individual complainants.
On appeal, NLRC reversed the Labor Arbiters decision and declared, among others, that respondents are regular
employees of ICC. CA dismissed ICCs petition for certiorari and MR, hence the present case.

RULING: 1. No. In determining the true status of Vedali viz-a-viz the petitioner, it is important to ascertain first
whether Vedali is a labor-only contractor or an independent contractor.
Labor-only contracting, which is prohibited, is an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only
contracting, the following elements are present:
(a) The contractor or subcontractor does not have substantial capital or investment to actually perform
the job, work or service under its own account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal.

On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a
principal agrees to put out or farm out with a contractor or subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the premises of the principal. A person is considered
engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to
perform the job, work or service on its own account and under its own responsibility according to its
own manner and method, and free from the control and direction of the principal in all matters
connected with the performance of the work except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational safety and health standards, free exercise of the
right to self-organization, security of tenure, and social and welfare benefits.

Petitioner failed to present any service contract with Vedali in the proceedings with the Labor Arbiter. There is
nothing on record that Vedali has a substantial capital or investment to actually perform the service under its
own account and responsibility. Petitioner only attached to its petition with the CA Vedalis Certificate of
Registration and Business permit, which merely pertain to the registration of Vedali with the SEC as engaged in
Construction and General Services.

In a labor-only contract, there are three parties involved: (1) the labor-only contractor; (2) the employee who
is ostensibly under the employ of the labor-only contractor; and (3) the principal who is deemed the real
employer. Under this scheme, the labor-only contractor is the agent of the principal. Here, Vedali is the labor-
only contractor; individual respondents are the employees and petitioner is the principal. The law makes the
principal responsible to the employees of the labor-only contractor as if the principal itself directly hired or
employed the employees.

The Court agrees with the conclusion of the NLRC that petitioner and not Vedali, is the employer of individual
respondents and the latter are employees of petitioner. Individual respondents work as stock-pilers, arrastre
and stevedores were undoubtedly directly related to and in pursuit of the cement manufacturing and sales
business of petitioner. Petitioners packing plant operations would have been hampered were it not for the work
rendered by individual respondents.

With respect to the unpaid separation pay under the CBA with ILIASCOR, petitioner is not liable. It was not privy
to the CBA and it was the principal.

2. Yes. Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee are two-
fold, the substantive and the procedural.

As the employer, petitioner has the burden of proving that the dismissal of petitioner was for a cause
allowed under the law and that petitioner was afforded procedural due process. Petitioner failed to discharge
this burden. Indeed, it failed to show any valid or authorized cause under the Labor Code which allowed it to
terminate the services of individual respondents. Neither did petitioner show that individual respondents were
given ample opportunity to contest the legality of their dismissal. No notice of such impending termination was
ever given to them. Individual respondents were definitely denied due process. Having failed to establish
compliance with the requirements on termination of employment under the Labor Code, the dismissal of
individual respondents was tainted with illegality.

OPINION: The constitution mandates to afford full protection to labor. Thus, if the court has ruled otherwise in
this case, that will be tantamount to abandonment of their duty to the aforesaid constitutional mandate. Hence,
I cannot agree less with the courts ruling. The workers in this case worked for the petitioner way back in 1995.
Without them, petitioners company will not operate. Their tasks are necessary to the business of the employer.
From these, there can no plausible reason why they should not be protected.

ILIASCOR was proven to be a legitimate contractor, thus, respondents recourse for the difference of their
unpaid salary is to the former. Being their employer, ILIASCOR is bound on what is stated in their CBA. The
petitioner on the other hand, cannot be made liable because it is protected also by the law. Since, ILIASCOR is a
legitimate contractor, petitioner did not in any way circumvent the law. The workers were fully protected.
However, it was not the case when petitioner engaged the services of Vedali, a labor-only contractor. This is for
the reason that the true employer now is petitioner. Therefore, the latter is liable.

GENERAL SANTOS COCA-COLA PLANT FREE WORKERS UNION-TUPAS, Petitioner vs.

COCA-COLA BOTTLERS PHILS., INC. (GENERAL SANTOS CITY), THE COURT OF APPEALS AND THE NLRC
G.R. No. 178647 February 13, 2009, Nachura, j.:

FACTS: In this Petition for Review on Certiorari under Rule 45 of the Revised Rules on Civil Procedure, petitioner
General Santos Coca-Cola Plant Free Workers Union-Tupas (Union) is seeking the reversal of the April 18, 2006
Decision and May 30, 2007 Resolution of the Court of. The CA affirmed the January 31, 2003 and August 29,
2003 Resolutions of the National Labor Relations Commission (NLRC) in favor of respondent Coca-Cola Bottlers
Phil., Inc. (CCBPI).

ISSUES: (1) Did CCBPI commit ULP? (2) Is JLBP Services Corporation a legitimate job contractor?

LAW/S: ART. 248. UNFAIR LABOR PRACTICE OF EMPLOYERS. It shall be unlawful for an employer to commit any
of the following unfair labor practices:
xxx
(c) To contract out services or functions being performed by union members when such will interfere with,
restrain or coerce employees in the exercise of their right to self-organization;
xxx

CASE HISTORY: Respondent CCBPI experienced a significant decline in profitability due to the Asian economic
crisis, thus to curb the negative effects on the company, it implemented three (3) waves of an Early Retirement
Program. An inter-office memorandum was also issued mandating to put on hold all requests for hiring to fill in
vacancies in both regular and temporary positions in the Head Office and in the Plants. Faced with the freeze
hiring directive, CCBPI Gen San engaged the services of JLBP Services Corporation (JLBP), a manning agency.
Petitioner then filed with the National Conciliation and Mediation Board (NCMB) a Notice of Strike on the
ground of alleged unfair labor practice committed by CCBPI Gen San for contracting-out services regularly
performed by union members.

NLRC ruled that CCBPI was not guilty of unfair labor practice for contracting out jobs to JLBP.
The NLRC held that petitioner failed to prove by substantial evidence that the system was meant to curtail the
right to self-organization of petitioners members. Petitioner filed a Petition for Certiorari before the Court of
Appeals. The latter uphold the NLRCs finding that CCBPI was not guilty of unfair labor practice. It held that the
contract between CCBPI and JLBP did not amount to labor-only contracting. It found that JLBP was an
independent contractor and that the decision to contract out jobs was a valid exercise of management
prerogative to meet exigent circumstances. Hence, this Petition.

RULING: No for both issues. The issues raised by petitioner of whether JLBP is an independent contractor,
whether CCBPIs contracting-out of jobs to JLBP amounted to unfair labor practice, and whether such action was
a valid exercise of management prerogative, call for a re-examination of evidence, which is not within the ambit
of this Courts jurisdiction. The CA squarely addressed the issue of job contracting in its assailed Decision and
Resolution. The CA itself examined the facts and evidence of the parties and found that, based on the evidence,
CCBPI did not engage in labor-only contracting and, therefore, was not guilty of unfair labor practice. The NLRC
found and the same was sustained by the CA that the companys action to contract-out the services and
functions performed by Union members did not constitute unfair labor practice as this was not directed at the
members right to self-organization. Both the NLRC and the CA found that petitioner was unable to prove its
charge of unfair labor practice. It was the Union that had the burden of adducing substantial evidence to
support its allegations of unfair labor practice, which burden it failed to discharge. WHEREFORE, the foregoing
premises considered, the Petition is DENIED. The assailed Decision and Resolution of the Court of Appeals are
AFFIRMED.

OPINION: I concur with the opinion of the highest court. He who allege must prove the same. It is the burden of
petitioner union to prove that CCBPI has committed unfair labor practice by union busting when it engaged the
services of JLBP. Unfortunately, it failed so. The law tilts in favor of the workers when they are unreasonably
oppressed. But when there are legitimate business reverses that employers need to address to save the
company, then, they are just exercising their prerogative which the court should respect as in this case.

It has also been proven before the CA that JLBP is a legitimate contractor, thus, it complied the entire
requirement set forth by the law. Therefore, absence of showing that CCBPI is committing unfair labor practice,
the petitioner must perforce fail.