Tan, Christine Joyce Z.

LABOREL

G.R. No 114952 January 29, 1996

MAGNOLIA DAIRY PRODUCTS CORPORATION (petitioner)
VS.
NLRC and JENNY CALIBO (respondents)

Facts:
Petitioner, Magnolia Dairy Product Corporation, entered into a contract of service with
Skillpower Inc. The latter is tasked to provide manpower service to the corporation. Respondent,
Jenny Cabibo was assigned by Skill power to the petitioner's Tetra Paster Division, wherein she
has responsibilities of: A. to remove damaged goods B. To replace the removed items and
resealed the carton C. To dispose of the disposed, or returned the damaged goods to the
Magnolia warehouse D. To clean the leftover spill for the tetra packs. In 1989, respondent
applied to Lippercon Services Inc. after her contract with Skill power expired where in she was
also assigned to work as a cleaning aide in the same division. But because of the upgrades
being done, she was terminated from service due to installation of automated machines.
Respondent then filed a complaint citing illegal dismissal against petitioner, the latter averred
that there was no employer-employee relationship between the company and the respondents,
and the dismissal was valid due to installing labor service devices.

Issue:
1. Is there an employer-employee relationship between the petitioner and the respondent?
2. Is the dismissal of employer considered as illegal dismissal?

Ruling:
Local Arbiter:
ruled that respondent is considered an employee of the petitioner because both Skillpower Inc,
and Lippercon Services Inc, were only were “labor-only” contractors. Additionally, although the
reason of installation of labor saving devices was valid, the dismissal was not as the due
process of law was not followed by the petitioner. ​Backwages with reinstatement.

In the argument of the Petitioner, they insist that there was no employer-employee relationship
as 1. Skillpower Inc. and Lippercon Services Inc were solely responsible for the employment of
the respondent. She is also not an employee in the reason that her job, a janitor, is not related
nor connected to the main purpose of the business which is producing manufactured fruit juice.
2. Petitioner also argued that Skillpower Inc and Lippercon Inc is not a “labor-only” companies
as they are sufficient investment in forms of tools, and also had sufficient capitalization.

The Arbiter rebutted that workers supplied by Skillpower Inc and Lippercon Services Inc
performs usual, regular and necessary services for petitioner’s production of goods. The
Tan, Christine Joyce Z.
LABOREL

highlighted that work performed by the respondent, is ​directly related to the day to day
operation​ of the respondent. Moreover, Magnolia was the real employer as the contract
entered into between the two man power corporation and the petitioner were “labor only” thus
the ​private respondent is an employee of Magnolia​. Magnolia also has a power to discipline
and suspend respondent.

Petitioner argued the same regarding the relationship between petitioner and respondent.
Respondent is also not illegally dismissed as the cause of her termination is specifically written
in the labor code.

Final:
Even when the law state such, it does not exclude the petitioner from giving a notice to the
employee and the DOLE one month before the date of termination. This procedure is on the
ground of good faith character. Nevertheless, the termination is merely defective as there was
no bad faith involved, but the reason is valid. BACKWAGES AND REINSTATEMENT is not
possible due to the valid reason given by the petitioner. But SEPARATION PAY must be given
as a measure of social justice since the reason for dismissal is not in the fault of the respondent.
The law also stated the termination of employee due to the installation of labor saving devices is
entitled to Separation pay.

THE INITIAL DECISION IS THEN MODIFIED. Payment of SEPARATION PAY IS MANDATED.