9 Coca-Cola Bottlers v. Agito PDF

8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 579
G.R. No. 179546. February 13, 2009.*
COCA-COLA BOTTLERS PHILS., INC., petitioner, vs. 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,
respondents.
Appeals; While factual findings of the Court of Appeals are generally

binding upon the Supreme Court, an exception to this rule is when the
factual findings of the former are contrary to those of the trial court, or the
lower administrative body.—As a general rule, factual findings of the Court
of Appeals are binding upon the Supreme Court. One exception to this rule
is when the factual findings of the former are contrary to those of the trial
court, or the lower administrative body, as the case may be. This Court is
obliged to resolve an issue of fact herein due to the incongruent findings of
the Labor Arbiter and the NLRC and those of the Court of Appeals.
Labor Law; Job Contracting; Labor-Only Contracting; Words and
Phrases; In a legitimate job contract, an employer enters into a contract
with a job contractor for the performance of the former’s work; In
legitimate job contracting, the law creates an employer-employee
relationship between the employer and the contractor’s employees only for a
limited purpose, i.e., to ensure that the employees are paid their wages;
Labor-only contracting is an arrangement wherein the contractor merely
acts as an agent in recruiting and supplying the principal employer with
workers for the purpose of circumventing labor law provisions setting down
the rights of employees; A finding by appropriate authorities that a
contractor is a “labor-only” contractor establishes an employer-employee
relationship between the principal employer and the contractor’s employees
and the former becomes solidarily liable for all the rightful claims of the
employees.—A legitimate job contract, wherein an employer enters into a
contract with a job contractor for the performance of the former’s work, is
permitted by law. Thus, the employer-employee relationship between the
job contractor and his employees is maintained. In legitimate job
contracting, the law creates an employer-employee
_______________
* THIRD DIVISION.
446
446 SUPREME COURT REPORTS ANNOTATED
Coca-Cola Bottlers Phils., Inc. vs. Agito
www.central.com.ph/sfsreader/session/0000016c8ba7710b80c8fe37003600fb002c009e/t/?o=False 1/22
relationship between the employer and the contractor’s employees only for a
limited purpose, i.e., to ensure that the employees are paid their wages. The
employer becomes jointly and severally liable with the job contractor only
for the payment of the employees’ wages whenever the contractor fails to
pay the same. Other than that, the employer is not responsible for any claim
made by the contractor’s employees. On the other hand, labor-only
contracting is an arrangement wherein the contractor merely acts as an agent
in recruiting and supplying the principal employer with workers for the
purpose of circumventing labor law provisions setting down the rights of
employees. It is not condoned by law. A finding by the appropriate
authorities that a contractor is a “labor-only” contractor establishes an
employer-employee relationship between the principal employer and the
contractor’s employees and the former becomes solidarily liable for all the
rightful claims of the employees.
Same; Same; Same; 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 law clearly establishes an employer-employee
relationship between the principal employer and the contractor’s employee
upon a finding that the contractor is engaged in “labor-only” contracting.
Article 106 of the Labor Code categorically states: “There is ‘labor-only’
contracting where the person supplying workers to an 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.
Same; Same; Same; 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.—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
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VOL. 579, FEBRUARY 13, 2009 447
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 latter’s 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.
Same; Same; Same; Burden of Proof; The contractor, not the employee, has
the burden of proof that it has the substantial capital, investment, and tool to
engage in job contracting.—The contractor, not the employee, has the
burden of proof that it has the substantial capital, investment, and tool to
engage in job contracting. Although not the contractor itself (since
Interserve no longer appealed the judgment against it by the Labor Arbiter),
said burden of proof herein falls upon petitioner who is invoking the
supposed status of Interserve as an independent job contractor. Noticeably,
petitioner failed to submit evidence to establish that the service vehicles and
equipment of Interserve, valued at P510,000.00 and P200,000.00,
respectively, were sufficient to carry out its service contract with petitioner.
Certainly, petitioner could have simply provided the courts with records
showing the deliveries that were undertaken by Interserve for the Lagro
area, the type and number of equipment necessary for such task, and the
valuation of such equipment. Absent evidence which a legally compliant
company could have easily provided, the Court will not presume that
Interserve had sufficient investment in service vehicles and equipment,
especially since respondents’ allegation—that they were using equipment,
such as
448
forklifts and pallets belonging to petitioner, to carry out their jobs—was

uncontroverted.
Same; Same; Same; Power of Control; An employer is a labor-only
contractor where it does not exercise the right to control the performance of
the work of its employees.—It is also apparent that Interserve is a labor-only
contractor under Section 5(ii) of the Rules Implementing Articles 106-109
of the Labor Code, as amended, since it did not exercise the right to control
the performance of the work of respondents. The lack of control of
Interserve over the respondents can be gleaned from the Contract of
Services between Interserve (as the CONTRACTOR) and petitioner (as the
CLIENT).
Same; Same; Same; The power to recommend penalties or dismiss
workers is the strongest indication of a company’s right of control as direct
employer.—Also significant was the right of petitioner under paragraph 2 of
the Contract to “request the replacement of the CONTRACTOR’S
personnel.” True, this right was conveniently qualified by the phrase “if
from its judgment, the jobs or the projects being done could not be
completed within the time specified or that the quality of the desired result is
not being achieved,” but such qualification was rendered meaningless by the
fact that the Contract did not stipulate what work or job the personnel
needed to complete, the time for its completion, or the results desired. The
said provision left a gap which could enable petitioner to demand the
removal or replacement of any employee in the guise of his or her inability
to complete a project in time or to deliver the desired result. The power to
recommend penalties or dismiss workers is the strongest indication of a
company’s right of control as direct employer.
Same; Same; Same; An independent job contractor, who is answerable to
the principal only for the results of a certain work, job, or service need not
guarantee to said principal the daily attendance of the workers assigned to
the latter.—Paragraph 4 of the same Contract, in which Interserve warranted
to petitioner that the former would provide relievers and replacements in
case of absences of its personnel, raises another red flag. An independent
job contractor, who is answerable to the principal only for the results of a
certain work, job, or service need not guarantee to said principal the daily
attendance of the workers assigned to the latter. An independent job
contractor would surely have the discretion over the pace at which
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VOL. 579, FEBRUARY 13, 2009 449
the work is performed, the number of employees required to complete the

same, and the work schedule which its employees need to follow.
PETITION for review on certiorari of a decision of the Court of

Appeals.
The facts are stated in the opinion of the Court.
De La Rosa & Nograles for petitioner.
Armando San Antonio for respondents.
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the
Rules of Court, assailing the Decision1 dated 19 February 2007,
promulgated by the Court of Appeals in CA-G.R. SP No. 85320,
reversing the Resolution2 rendered on 30 October 2003 by the
National Labor Relations Commission (NLRC) in NLRC NCR CA
No. 036494-03. 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.
Petitioner is a domestic corporation duly registered with the
Securities and Exchange Commission (SEC) and engaged in
manufacturing, bottling and distributing soft drink beverages and
other allied products.
_______________
1 Penned by Associate Justice Rosalinda Asuncion-Vicente with Associate

Justices Elvi John S. Asuncion and Enrico M. Lanzanas, concurring. Rollo, pp. 57-69.
2 Rollo, pp. 152-157.
450

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. The two cases, docketed as NLRC NCR
Case No. 04-02345-2002 and NLRC NCR Case No. 05-03137-02,
were consolidated.
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.3
Petitioner filed its Position Paper (with Motion to Dismiss),4
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 Services5 executed between petitioner
and Interserve on 23 March 2002. 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;6 (2) the Certificate of
Registration of Interserve with the Bureau of Internal
_______________
3 Id., at pp. 236-242.

4 CA Rollo, pp. 55-69.
5 Id., at pp. 71-76.
6 Id., at pp. 78-87.
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VOL. 579, FEBRUARY 13, 2009 451

Revenue;7 (3) the Income Tax Return, with Audited Financial

Statements, of Interserve for 2001;8 and (4) the Certificate of
Registration of Interserve as an independent job contractor, issued
by the Department of Labor and Employment (DOLE).9
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;10 (2) respondents’
Contract of Temporary Employment with Interserve;11 and (3) the
payroll records of Interserve.12
Petitioner, thus, sought the dismissal of respondents’ complaint
against it on the ground that the Labor Arbiter did not acquire
jurisdiction over the same in the absence of an employer-employee
relationship between petitioner and the respondents.13
In a Decision dated 28 May 2003, the Labor Arbiter found that
respondents were employees of Interserve and not of petitioner. She
reasoned that the standard put forth in Article 280 of the Labor Code
for determining regular employment (i.e., that the employee is
performing activities that are necessary and desirable in the usual
business of the employer) was
_______________
7 Id., at p. 88.
8 Id., at pp. 89-93.
9 Id., at p. 131.
10 Id., at pp. 94, 97, 100, 103, 106, 109. Only six Personal Data Files were
attached to the Position Paper. Personal Data Files of two of the respondents, Alfonso
Paa, Jr. and Edwin Golez, were not submitted.
11 Id., at pp. 95-96, 98-99, 101-102, 104-405, 107-108, 110-111. Only six
Contracts of Temporary Employment were attached to the Position Paper. The
Contracts for Temporary Employment of two of the respondents, Alfonso Paa, Jr. and
Edwin Golez, were not submitted.
12 Id., at pp. 112-130.
13 Id., at pp. 66-69.
452

not determinative of the issue of whether an employer-employee

relationship existed between petitioner and respondents. While
respondents performed activities that were necessary and desirable
in the usual business or trade of petitioner, the 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 Labor Arbiter placed considerable weight on the fact that
Interserve was registered with the DOLE as an independent job
contractor, with total assets amounting to P1,439,785.00 as of 31
December 2001. It was Interserve that kept and maintained
respondents’ employee records, including their Personal Data
Sheets; Contracts of Employment; and remittances to the Social
Securities System (SSS), Medicare and Pag-ibig Fund, thus, further
supporting the Labor Arbiter’s finding that respondents were
employees of Interserve. She ruled that the circulars, rules and
regulations which petitioner issued from time to time to respondents
were not indicative of control as to make the latter its employees.
Nevertheless, the Labor Arbiter directed Interserve to pay
respondents their pro-rated 13th month benefits for the period of
14
January 2002 until April 2002.
In the end, the Labor Arbiter decreed:
“WHEREFORE, judgment is hereby rendered finding that [herein

respondents] are employees of [herein petitioner] INTERSERVE
MANAGEMENT & MANPOWER RESOURCES, INC. Concomitantly,
respondent Interserve is further ordered to pay [respondents] their pro-rated
13th month pay.
The complaints against COCA-COLA BOTTLERS PHILS., INC. is
DISMISMMED for lack of merit.
In like manner the complaints against PEERLESS INTEGRATED
SERVICES, INC., BETTER BUILDING INC. and EX-
_______________
14 Rollo, pp. 134-149.
453
VOL. 579, FEBRUARY 13, 2009 453

CELLENT PARTNERS COOPERATIVE are DISMISSED for failure of

complainants to pursue against them.
Other claims are dismissed for lack of merit.
The computation of the Computation and Examination Unit, this
Commission if (sic) made part of this Decision.”15
Unsatisfied with the foregoing Decision of the Labor Arbiter,

respondents filed an appeal with the NLRC, docketed as NLRC
NCR CA No. 036494-03.
In their Memorandum of Appeal,16 respondents maintained that
contrary to the finding of the Labor Arbiter, their work was
indispensable to the principal business of petitioner. Respondents
supported their claim with copies of the Delivery Agreement17
between petitioner and TRMD Incorporated, stating that petitioner
was “engaged in the manufacture, distribution and sale of soft drinks
and other related products with various plants and sales offices and
warehouses located all over the Philippines.” Moreover, petitioner
supplied the tools and equipment used by respondents in their jobs
such as forklifts, pallet, etc. Respondents were also required to work
in the warehouses, sales offices, and plants of petitioner.
Respondents pointed out that, in contrast, Interserve did not own
trucks, pallets cartillas, or any other equipment necessary in the sale
of Coca-Cola products.
Respondents further averred in their Memorandum of Appeal that
petitioner exercised control over workers supplied by various
contractors. Respondents cited as an example the case of Raul
Arenajo (Arenajo), who, just like them, worked for petitioner, but
was made to appear as an employee of the contractor Peerless
Integrated Services, Inc. As proof of control by petitioner,
respondents submitted copies of: (1) a Memorandum18 dated 11
August 1998 issued by Vicente Dy
_______________
15 Id., at pp. 149-150.
16 CA Rollo, pp. 150-170.
17 Id., at p. 186.
18 Id., at p. 193.
454

(Dy), a supervisor of petitioner, addressed to Arenajo, suspending

the latter from work until he explained his disrespectful acts toward
the supervisor who caught him sleeping during work hours; (2) a
Memorandum19 dated 12 August 1998 again issued by Dy to
Arenajo, informing the latter that the company had taken a more
lenient and tolerant position regarding his offense despite having
found cause for his dismissal; (3) Memorandum20 issued by Dy to
the personnel of Peerless Integrated Services, Inc., requiring the
latter to present their timely request for leave or medical certificates
for their absences; (4) Personnel Workers Schedules,21 prepared by
RB Chua, another supervisor of petitioner; (5) Daily Sales
Monitoring Report prepared by petitioner;22 and (6) the
Conventional Route System Proposed Set-up of petitioner.23
The NLRC, in a Resolution dated 30 October 2003, affirmed the
Labor Arbiter’s Decision dated 28 May 2003 and pronounced that
no employer-employee relationship existed between petitioner and
respondents. It reiterated the findings of the Labor Arbiter that
Interserve was an independent contractor as evidenced by its
substantial assets and registration with the DOLE. In addition, it was
Interserve which hired and paid respondents’ wages, as well as paid
and remitted their SSS, Medicare, and Pag-Ibig contributions.
Respondents likewise failed to convince the NLRC that the
instructions issued and trainings conducted by petitioner proved that
petitioner exercised control over respondents as their employer.24
The dispositive part of the NLRC Resolution states:25
“WHEREFORE, the instant appeal is hereby DISMISSED for lack of

merit. However, respondent Interserve Management & Man-
_______________
19 Id., at p. 194.
20 Id., at p. 195.
21 Id., at pp. 201-202.
22 Id., at p. 196.
23 Id., at p. 197.
24 Rollo, pp. 152-156.
25 Id., at p. 156.
455
VOL. 579, FEBRUARY 13, 2009 455

power Resources, Inc., is hereby ordered to pay the [herein respondents]
their pro-rated 13th month pay.”
Aggrieved once more, respondents sought recourse with the

Court of Appeals by filing a Petition for Certiorari under Rule 65,
docketed as CA-G.R. SP No. 85320.
The Court of Appeals promulgated its Decision on 9 February
2007, reversing the NLRC Resolution dated 30 October 2003. The
appellate court ruled that Interserve was a labor-only contractor,
with insufficient capital and investments for the services which it
was contracted to perform. With only P510,000.00 invested in its
service vehicles and P200,000.00 in its machineries and equipment,
Interserve would be hard-pressed to meet the demands of daily soft
drink deliveries of petitioner in the Lagro area. The Court of
Appeals concluded that the respondents used the equipment, tools,
and facilities of petitioner in the day-to-day sales operations.
Additionally, the Court of Appeals determined that petitioner had
effective control over the means and method of respondents’ work
as evidenced by the Daily Sales Monitoring Report, the
Conventional Route System Proposed Set-up, and the memoranda
issued by the supervisor of petitioner addressed to workers, who,
like respondents, were supposedly supplied by contractors. The
appellate court deemed that the respondents, who were tasked to
deliver, distribute, and sell Coca-Cola products, carried out functions
directly related and necessary to the main business of petitioner. The
appellate court finally noted that certain provisions of the Contract
of Service between petitioner and Interserve suggested that the
latter’s undertaking did not involve a specific job, but rather the
supply of manpower.
The decretal portion of the Decision of the Court of Appeals
reads:26

_______________
26 Id., at pp. 57-68.

456

“WHEREFORE, the petition is GRANTED. The assailed Resolutions of

public respondent NLRC are REVERSED and SET ASIDE. The case is
remanded to the NLRC for further proceedings.”
Petitioner filed a Motion for Reconsideration, which the Court of

Appeals denied in a Resolution, dated 31 August 2007.27
Hence, the present Petition, in which the following issues are
raised:28
I
WHETHER OR NOT THE COURT OF APPEALS ACTED IN
ACCORDANCE WITH EVIDENCE ON RECORD, APPLICABLE LAWS
AND ESTABLISHED JURISPRUDENCE WHEN IT RULED THAT
INTERSERVE IS A LABOR-ONLY CONTRACTOR;
II
WHETHER OR NOT THE COURT OF APPEALS ACTED IN
ACCORDANCE WITH APPLICABLE LAWS AND ESTABLISHED
JURISPRUDENCE WHEN IT CONCLUDED THAT RESPONDENTS
PERFORMED WORK NECESSARY AND DESIRABLE TO THE
BUSINESS OF [PETITIONER];
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
SERIOUS ERROR WHEN IT DECLARED THAT RESPONDENTS
WERE EMPLOYEES OF [PETITIONER], EVEN ABSENT THE FOUR
ELEMENTS INDICATIVE OF AN EMPLOYMENT RELATIONSHIP;
AND
IV
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED
WHEN IT CONCLUDED THAT INTERSERVE WAS ENGAGED BY
[PETITIONER] TO SUPPLY MANPOWER ONLY.
The Court ascertains that the fundamental issue in this case is

whether Interserve is a legitimate job contractor. Only
_______________
27 CA Rollo, pp. 456-457.

28 Rollo, p. 330.
457
VOL. 579, FEBRUARY 13, 2009 457

by resolving such issue will the Court be able to determine whether

an employer-employee relationship exists between petitioner and the
respondents. To settle the same issue, however, the Court must
necessarily review the factual findings of the Court of Appeals and
look into the evidence presented by the parties on record.
As a general rule, factual findings of the Court of Appeals are
binding upon the Supreme Court. One exception to this rule is when
the factual findings of the former are contrary to those of the trial
court, or the lower administrative body, as the case may be. This
Court is obliged to resolve an issue of fact herein due to the
incongruent findings of the Labor Arbiter and the NLRC and those
of the Court of Appeals.29
The relations which may arise in a situation, where there is an
employer, a contractor, and employees of the contractor, are
identified and distinguished under Article 106 of the Labor Code:
“Article 106. Contractor or subcontractor.—Whenever an employer

enters into a contract with another person for the perfor-mance of the
former’s work, the employees of the contractor and of the latter’s
subcontractor, if any, shall be paid in accordance with the provisions of this
Code.
In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers
established under this Code. In so prohibiting or restriction, 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
_______________
29 Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. v. Puente, G.R. No.

153832, 18 March 2005, 453 SCRA 820, 826.
458

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 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. 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.”
The afore-quoted provision recognizes two possible relations

among the parties: (1) the permitted legitimate job contract, or (2)
the prohibited labor-only contracting.
A legitimate job contract, wherein an employer enters into a
contract with a job contractor for the performance of the former’s
work, is permitted by law. Thus, the employer-employee relationship
between the job contractor and his employees is maintained. In
legitimate job contracting, the law creates an employer-employee
relationship between the employer and the contractor’s employees
only for a limited purpose, i.e., to ensure that the employees are paid
their wages. The employer becomes jointly and severally liable with
the job contractor only for the payment of the employees’ wages
whenever the contractor fails to pay the same. Other than that, the
employer is not responsible for any claim made by the contractor’s
employees.30
On the other hand, labor-only contracting is an arrangement
wherein the contractor merely acts as an agent in recruiting and
supplying the principal employer with workers for the purpose of
circumventing labor law provisions setting down the rights of
employees. It is not condoned by law. A finding by the appropriate
authorities that a contractor is a
_______________
30 San Miguel Corporation v. MAERC Integrated Services, Inc., 453 Phil. 543,
566-567; 405 SCRA 579, 596 (2003).
459
VOL. 579, FEBRUARY 13, 2009 459

“labor-only” contractor establishes an employer-employee

relationship between the principal employer and the contractor’s
employees and the former becomes solidarily liable for all the
rightful claims of the employees.31
Section 5 of the Rules Implementing Articles 106-109 of the
Labor Code, as amended, provides the guidelines in determining
whether labor-only contracting exists:
“Section 5. Prohibition against labor-only contracting. Labor-only

contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies, or places workers to perform a job,
work or service for a principal, and any of the following elements are [is]
present:
i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work, or service to be performed and
the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; or
ii) The contractor does not exercise the right to control the performance
of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of
Article 248(C) of the Labor Code, as amended.
“Substantial capital or investment” refers to capital stocks and
subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job,
work, or service contracted out.
The “right to control” shall refer to the right reversed to the person for
whom the services of the contractual workers are performed, to determine
not only the end to be achieved, but also the manner and means to be used in
reaching that end.” (Emphasis supplied.)
When there is labor-only contracting, Section 7 of the same

implementing rules, describes the consequences thereof:

_______________
31 Id., at p. 567; p. 596.
460

“Section 7. Existence of an employer-employee relationship.—The
contractor or subcontractor shall be considered the employer of the
contractual employee for purposes of enforcing the provisions of the Labor
Code and other social legislation. The principal, however, shall be solidarily
liable with the contractor in the event of any violation of any provision of
the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee
in any of the following case, as declared by a competent authority:
a. where there is labor-only contracting; or
b. where the contracting arrangement falls within the prohibitions
provided in Section 6 (Prohibitions) hereof.”
According to the foregoing provision, labor-only contracting

would give rise to: (1) the creation of an employer-employee
relationship between the principal and the employees of the
contractor or sub-contractor; and (2) the solidary liability of the
principal and the contractor to the employees in the event of any
violation of the Labor Code.
Petitioner argues that there could not have been labor-only
contracting, since respondents did not perform activities that were
indispensable to petitioner’s principal business. And, even assuming
that they did, such fact alone does not establish an employer-
employee relationship between petitioner and the respondents, since
respondents were unable to show that petitioner exercised the power
to select and hire them, pay their wages, dismiss them, and control
their conduct.
The argument of petitioner is untenable.
The law clearly establishes an employer-employee relationship
between the principal employer and the contractor’s employee upon
a finding that the contractor is engaged in “labor-only” contracting.
Article 106 of the Labor Code categorically states: “There is ‘labor-
only’ contracting where the person supplying workers to an
employee does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises, among others, and
the workers
461
VOL. 579, FEBRUARY 13, 2009 461

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 Agreement32 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.33 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
_______________
32 Rollo, p. 199.
33 Based on respondents’ Personal Data files, which were kept by Interserve,
respondent Regolo Oca worked in Coca-Cola in September 2000 as a salesman and
his contract was renewed three more times until he was dismissed in April 2002.
Respondent Ernesto Alario worked in Coca-Cola in October 2001, and his contract
was renewed one more time before his dismissal in April 2002. Respondent Gil
Francisco worked in Coca-cola as a Driver on August 1998 and later on as leadman in
December 1998, and his contract was renewed until he was dismissed in April 2002.
Respondent Arvin Urquia worked as a salesman in Coca-Cola in October 2001, and
his contract was renewed in February 2002 until he was dismissed in April 2002.
Lastly, respondent Alan Agito worked in Coca-Cola as salesman in May 2002, and
his contract was renewed until he was dismissed in April 2002. (CA Rollo, pp. 94, 97,
100, 103, 106, and 109.)
462

Supervisors who supervise and control the salesmen and sales route
helpers.34
As to the supposed substantial capital and investment required of
an independent job contractor, petitioner calls the attention of the
Court to the authorized capital stock of Interserve amounting to
P2,000,000.00.35 It cites as authority Filipinas Synthetic Fiber Corp.
v. National Labor Relations Commission36 and Frondozo v. National
Labor Relations Commission,37 where the contractors’ authorized
capital stock of P1,600,000.00 and P2,000,000.00, respectively, were
considered substantial for the purpose of concluding that they were
legitimate job contractors. Petitioner also refers to Neri v. National
Labor Relations Commission38 where it was held that a contractor
ceases to be a labor-only contractor by having substantial capital
alone, without investment in tools and equipment.
This Court is unconvinced.
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 latter’s employees, and uses the dubious phrase
“tasks and activities that are considered contractible under existing
laws and regulations.” Even in its pleadings, petitioner care-
_______________
34 Rollo, p. 283.
35 Id., at pp. 331-338.
36 327 Phil. 144; 257 SCRA 334 (1996).
37 CA-G.R. SP No. 102442, 30 May 2008.
38 G.R. Nos. 97008-09, 23 July 1993, 224 SCRA 717.
463
VOL. 579, FEBRUARY 13, 2009 463

fully 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.39 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.
Petitioner cannot seek refuge in Neri v. National Labor Relations
Commission. Unlike in Neri, petitioner was unable to prove in the
instant case that Interserve had substantial capitalization to be an
independent job contractor. In San Miguel Corporation v. MAERC
Integrated Services, Inc.,40 therein petitioner San Miguel
Corporation similarly invoked Neri, but was rebuffed by the Court
based on the following ratiocination:41
“Petitioner also ascribes as error the failure of the Court of Appeals to

apply the ruling in Neri v. NLRC. In that case, it was held that the law did
not require one to possess both substantial capital and investment in the
form of tools, equipment, machinery, work premises, among others, to be
considered a job contractor. The second condition to establish permissible
job contracting was sufficiently met if one possessed either attribute.
Accordingly, petitioner alleged that the appellate court and the NLRC
erred when they declared MAERC a labor-only contractor despite the
finding that MAERC had investments amounting to P4,608,080.00
consisting of buildings, machinery and equipment.
However, in Vinoya v. NLRC, we clarified that it was not enough to show
substantial capitalization or investment in the form
_______________
39 CA Rollo, p. 78.
40 Supra note 30.
41 Id., at pp. 564-566; pp. 594-595.
464

of tools, equipment, machinery and work premises, etc., to be considered an
independent contractor. In fact, jurisprudential holdings were to the effect
that in determining the existence of an independent contractor relationship,
several factors may be considered, such as, but not necessarily confined to,
whether the contractor was 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 workers; the power of the employer with
respect to the hiring, firing and payment of the workers of the contractor; the
control of the premises; the duty to supply premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment.
In Neri, the Court considered not only the fact that respondent Building
Care Corporation (BCC) had substantial capitalization but noted that BBC
carried on an independent business and performed its contract according to
its own manner and method, free from the control and supervision of its
principal in all matters except as to the results thereof. The Court likewise
mentioned that the employees of BCC were engaged to perform specific
special services for their principal. The status of BCC had also been passed
upon by the Court in a previous case where it was found to be a qualified
job contractor because it was a “big firm which services among others, a
university, an international bank, a big local bank, a hospital center,
government agencies, etc.” Furthermore, there were only two (2)
complainants in that case who were not only selected and hired by the
contractor before being assigned to work in the Cagayan de Oro branch of
FEBTC but the Court also found that the contractor maintained effective
supervision and control over them.”
Thus, in San Miguel Corporation, the investment of MAERC,

the contractor therein, in the form of buildings, tools, and equipment
of more than P4,000,000.00 did not impress the Court, which still
declared MAERC to be a labor-only contractor. In another case,
Dole Philippines, Inc. v. Esteva,42 the Court did not recognize the
contractor therein as a legitimate job contractor, despite its paid-up
capital of over
_______________
42 G.R. No. 161115, 30 November 2006, 509 SCRA 332, 353 and 377.
465
VOL. 579, FEBRUARY 13, 2009 465

P4,000,000.00, in the absence of substantial investment in tools and

equipment used in the services it was rendering.
Insisting that Interserve had substantial investment, petitioner
assails, for being purely speculative, the finding of the Court of
Appeals that the service vehicles and equipment of Interserve, with
the values of P510,000.00 and P200,000.00, respectively, could not
have met the demands of the Coca-Cola deliveries in the Lagro area.
Yet again, petitioner fails to persuade.
The contractor, not the employee, has the burden of proof that it
has the substantial capital, investment, and tool to engage in job
contracting.43 Although not the contractor itself (since Interserve no
longer appealed the judgment against it by the Labor Arbiter), said
burden of proof herein falls upon petitioner who is invoking the
supposed status of Interserve as an independent job contractor.
Noticeably, petitioner failed to submit evidence to establish that the
service vehicles and equipment of Interserve, valued at P510,000.00
and P200,000.00, respectively, were sufficient to carry out its service
contract with petitioner. Certainly, petitioner could have simply
provided the courts with records showing the deliveries that were
undertaken by Interserve for the Lagro area, the type and number of
equipment necessary for such task, and the valuation of such
equipment. Absent evidence which a legally compliant company
could have easily provided, the Court will not presume that
Interserve had sufficient investment in service vehicles and
equipment, especially since respondents’ allegation—that they were
using equipment, such as forklifts and pallets belonging to
petitioner, to carry out their jobs—was uncontroverted.
_______________
43 Aboitiz Haulers, Inc. v. Dimapatoi, G.R. No. 148619, 19 September 2006, 502
SCRA 271, 289; Guarin v. National Labor Relations Commission, G.R. No. 86010, 3
October 1989, 178 SCRA 267, 273.
466

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.
The Court, however, does not stop at this finding. It is also
apparent that Interserve is a labor-only contractor under Section
5(ii)44 of the Rules Implementing Articles 106-109 of the Labor
Code, as amended, since it did not exercise the right to control the
performance of the work of respondents.
The lack of control of Interserve over the respondents can be
gleaned from the Contract of Services between Interserve
_______________
44 According to Section 5 of the Rules Implementing Articles 106-109, as

amended:
Section 5. Prohibition against labor-only contracting.—Labor-only contracting
is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an
arrangement where the contractor or subcontractor merely recruits, supplies, or places
workers to perform a job, work or service for a principal, and any of the following
elements are [is] present:
i) The contractor or subcontractor does not have substantial capital or investment
which relates to the job, work, or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are performing
activities which are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control the performance of the
work of the contractual employee.
The use of the words “any” and “or” in the foregoing provision means that the
elements of labor-only contracting identified therein need not exist concurrently. The
existence of one element is sufficient to establish labor-only contracting.
467
VOL. 579, FEBRUARY 13, 2009 467

(as the CONTRACTOR) and petitioner (as the CLIENT), pertinent

portions of which are reproduced below:
“WHEREAS, the CONTRACTOR is engaged in the business, among

others, of performing and/or undertaking, managing for consideration,
varied projects, jobs and other related management-oriented services;
WHEREAS, the CONTRACTOR warrants that it has the necessary
capital, expertise, technical know-how and a team of professional
management group and personnel to undertake and assume the
responsibility to carry out the above mentioned project and services;
WHEREAS, the CLIENT is desirous of utilizing the services and
facilities of the CONTRACTOR for emergency needs, rush jobs, peak
product loads, temporary, seasonal and other special project requirements
the extent that the available work of the CLIENT can properly be done by
an independent CONTRACTOR permissible under existing laws and
regulations;
WHEREAS, the CONTRACTOR has offered to perform specific
jobs/works at the CLIENT as stated heretofore, under the terms and
conditions herein stated, and the CLIENT has accepted the offer.
NOW THEREFORE, for and in consideration of the foregoing premises
and of the mutual covenants and stipulations hereinafter set forth, the parties
have hereto have stated and the CLIENT has accepted the offer:
1. The CONTRACTOR agrees and undertakes to perform and/or
provide for the CLIENT, on a non-exclusive basis for tasks or activities that
are considered contractible under existing laws and regulations, as may be
needed by the CLIENT from time to time.
2. To carry out the undertakings specified in the immediately preceding
paragraph, the CONTRACTOR shall employ the necessary personnel like
Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD who are at
least Technical/Vocational courses graduates provided with adequate
uniforms and appropriate identification cards, who are warranted by the
CONTRACTOR to be so trained as to efficiently, fully and speedily
accomplish the work and services undertaken herein by the
CONTRACTOR. The CONTRACTOR represents that its personnel shall be
in such number as will be sufficient to cope with the requirements of the
services and work
468

herein undertaken and that such personnel shall be physically fit, of good
moral character and has not been convicted of any crime. The CLIENT,
however, may request for the replacement of the CONTRACTOR’S
personnel if from its judgment, the jobs or the projects being done could not
be completed within the time specified or that the quality of the desired
result is not being achieved.
3. It is agreed and understood that the CONTRACTOR’S personnel
will comply with CLIENT, CLIENT’S policies, rules and regulations and
will be subjected on-the-spot search by CLIENT, CLIENT’S duly
authorized guards or security men on duty every time the assigned personnel
enter and leave the premises during the entire duration of this agreement.
4. The CONTRACTOR further warrants to make available at times
relievers and/or replacements to ensure continuous and uninterrupted
service as in the case of absences of any personnel above mentioned, and to
exercise the necessary and due supervision over the work of its
personnel.”45
Paragraph 3 of the Contract specified that the personnel of

contractor Interserve, which included the respondents, would
comply with “CLIENT” as well as “CLIENT’s policies, rules and
regulations.” It even required Interserve personnel to subject
themselves to on-the-spot searches by petitioner or its duly
authorized guards or security men on duty every time the said
personnel entered and left the premises of petitioner. Said paragraph
explicitly established the control of petitioner over the conduct of
respondents. Although under paragraph 4 of the same Contract,
Interserve warranted that it would exercise the necessary and due
supervision of the work of its personnel, there is a dearth of
evidence to demonstrate the extent or degree of supervision
exercised by Interserve over respondents or the manner in which it
was actually exercised. There is even no showing that Interserve had
representatives who supervised respondents’ work while they were
in the premises of petitioner.
_______________
45 Rollo, pp. 74-75.
469
VOL. 579, FEBRUARY 13, 2009 469

Also significant was the right of petitioner under paragraph 2 of

the Contract to “request the replacement of the CONTRACTOR’S
personnel.” True, this right was conveniently qualified by the phrase
“if from its judgment, the jobs or the projects being done could not
be completed within the time specified or that the quality of the
desired result is not being achieved,” but such qualification was
rendered meaningless by the fact that the Contract did not stipulate
what work or job the personnel needed to complete, the time for its
completion, or the results desired. The said provision left a gap
which could enable petitioner to demand the removal or replacement
of any employee in the guise of his or her inability to complete a
project in time or to deliver the desired result. The power to
recommend penalties or dismiss workers is the strongest indication
of a company’s right of control as direct employer.46
Paragraph 4 of the same Contract, in which Interserve warranted
to petitioner that the former would provide relievers and
replacements in case of absences of its personnel, raises another red
flag. An independent job contractor, who is answerable to the
principal only for the results of a certain work, job, or service need
not guarantee to said principal the daily attendance of the workers
assigned to the latter. An independent job contractor would surely
have the discretion over the pace at which the work is performed,
the number of employees required to complete the same, and the
work schedule which its employees need to follow.
As the Court previously observed, the Contract of Services
between Interserve and petitioner did not identify the work needed
to be performed and the final result required to be accomplished.
Instead, the Contract specified the type of workers Interserve must
provide petitioner (“Route Helpers, Salesmen, Drivers, Clericals,
Encoders & PD”) and their
_______________
46 Brotherhood Labor Unity Movement of the Philippines v. Zamora, G.R. No. L-

48645, 7 January 1987, 147 SCRA 49, 59.
470

qualifications (technical/vocational course graduates, physically fit,

of good moral character, and have not been convicted of any crime).
The Contract also states that, “to carry out the undertakings specified
in the immediately preceding paragraph, the CONTRACTOR shall
employ the necessary personnel,” thus, acknowledging that
Interserve did not yet have in its employ the personnel needed by
petitioner and would still pick out such personnel based on the
criteria provided by petitioner. In other words, Interserve did not
obligate itself to perform an identifiable job, work, or service for
petitioner, but merely bound itself to provide the latter with specific
types of employees. These contractual provisions strongly indicated
that Interserve was merely a recruiting and manpower agency
providing petitioner with workers performing tasks directly related
to the latter’s principal business.
The certification issued by the DOLE stating that Interserve is an
independent job contractor does not sway this Court to take it at face
value, since the primary purpose stated in the Articles of
Incorporation47 of Interserve is misleading. According to its Articles
of Incorporation, the principal business of Interserve is to provide
janitorial and allied services. The delivery and distribution of Coca-
Cola products, the work for which respondents were employed and
assigned to petitioner, were in no way allied to janitorial services.
While the DOLE may have found that the capital and/or investments
in tools and equipment of Interserve were sufficient for an
independent contractor for janitorial services, this does not mean
that such capital and/or investments were likewise sufficient to
maintain an independent contracting business for the delivery and
distribution of Coca-Cola products.
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,
_______________
47 CA Rollo, p. 78.
471
VOL. 579, FEBRUARY 13, 2009 471

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.48
Given that respondents were illegally dismissed by petitioner,
they are entitled to reinstatement, full backwages, inclusive of
allowances, and to their other benefits or the monetary equivalents
thereof computed from the time their compensations were withheld
from them up to the time of their actual reinstatement, as mandated
under Article 279 of the Labor Code.
IN VIEW OF THE FOREGOING, the instant Petition is
DENIED. The Court AFFIRMS WITH MODIFICATION the
Decision dated 19 February 2007 of the Court of Appeals in CA-
G.R. SP No. 85320. The Court DECLARES that respondents were
illegally dismissed and, accordingly, ORDERS petitioner to reinstate
them without loss of seniority rights, and to pay them full back
wages computed from the time their compensation was withheld up
to their actual reinstatement. Costs against the petitioner.
_______________
48 Abesco Construction and Development Corporation v. Ramirez, G.R. No.

141168, 10 April 2006, 487 SCRA 9, 15; Grandspan Development Corporation v.
Bernardo, G.R. No. 141464, 21 September 2005, 470 SCRA 461, 470; Raycor
Aircontrol Systems, Inc. v. National Labor Relations Commission, 330 Phil. 306, 334;
261 SCRA 589, 613 (1996).
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8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 579

G.R. No. 179546. February 13, 2009.*

COCA-COLA BOTTLERS PHILS., INC., petitioner, vs. ALAN M.

Appeals; While factual ﬁndings of the Court of Appeals are generally

446 SUPREME COURT REPORTS ANNOTATED

Coca-Cola Bottlers Phils., Inc. vs. Agito

VOL. 579, FEBRUARY 13, 2009 447

Coca-Cola Bottlers Phils., Inc. vs. Agito

for what it considers substantial capital for an independent job contractor,

448 SUPREME COURT REPORTS ANNOTATED

Coca-Cola Bottlers Phils., Inc. vs. Agito

forklifts and pallets belonging to petitioner, to carry out their jobs—was

VOL. 579, FEBRUARY 13, 2009 449

Coca-Cola Bottlers Phils., Inc. vs. Agito

the work is performed, the number of employees required to complete the

PETITION for review on certiorari of a decision of the Court of

1 Penned by Associate Justice Rosalinda Asuncion-Vicente with Associate

450 SUPREME COURT REPORTS ANNOTATED

On 15 April 2002, respondents ﬁled before the NLRC two

3 Id., at pp. 236-242.

VOL. 579, FEBRUARY 13, 2009 451

Revenue;7 (3) the Income Tax Return, with Audited Financial

452 SUPREME COURT REPORTS ANNOTATED

not determinative of the issue of whether an employer-employee

“WHEREFORE, judgment is hereby rendered ﬁnding that [herein

14 Rollo, pp. 134-149.

VOL. 579, FEBRUARY 13, 2009 453

CELLENT PARTNERS COOPERATIVE are DISMISSED for failure of

Unsatisﬁed with the foregoing Decision of the Labor Arbiter,

454 SUPREME COURT REPORTS ANNOTATED

(Dy), a supervisor of petitioner, addressed to Arenajo, suspending

“WHEREFORE, the instant appeal is hereby DISMISSED for lack of

VOL. 579, FEBRUARY 13, 2009 455

Aggrieved once more, respondents sought recourse with the

26 Id., at pp. 57-68.

456 SUPREME COURT REPORTS ANNOTATED

“WHEREFORE, the petition is GRANTED. The assailed Resolutions of

Petitioner ﬁled a Motion for Reconsideration, which the Court of

The Court ascertains that the fundamental issue in this case is

27 CA Rollo, pp. 456-457.

VOL. 579, FEBRUARY 13, 2009 457

by resolving such issue will the Court be able to determine whether

“Article 106. Contractor or subcontractor.—Whenever an employer

29 Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. v. Puente, G.R. No.

458 SUPREME COURT REPORTS ANNOTATED

be considered the employer for purposes of this Code, to prevent any

The afore-quoted provision recognizes two possible relations

VOL. 579, FEBRUARY 13, 2009 459

“labor-only” contractor establishes an employer-employee

“Section 5. Prohibition against labor-only contracting. Labor-only

When there is labor-only contracting, Section 7 of the same

31 Id., at p. 567; p. 596.

460 SUPREME COURT REPORTS ANNOTATED

According to the foregoing provision, labor-only contracting

VOL. 579, FEBRUARY 13, 2009 461

recruited and placed by such persons are performing activities which

462 SUPREME COURT REPORTS ANNOTATED

VOL. 579, FEBRUARY 13, 2009 463

fully sidesteps identifying or describing the exact nature of the

“Petitioner also ascribes as error the failure of the Court of Appeals to

464 SUPREME COURT REPORTS ANNOTATED

Thus, in San Miguel Corporation, the investment of MAERC,

VOL. 579, FEBRUARY 13, 2009 465