3 Final

LABOR STANDARDS | CONTRACTING
ARRANGEMENT
44.PHILIPPINE
BANK
OF
COMMUNICATIONS vs.
THE NATIONAL LABOR RELATIONS
COMMISSION et al. G.R. No. L66598 December 19, 1986
FACTS: Petitioner Philippine Bank of
Communications
and
the
Corporate
Executive Search Inc. (CESI) entered into a
letter agreement dated January 1976
under which (CESI) undertook to provide
"Tempo[rary]
Services"
to
petitioner
Consisting of the "temporary services" of
eleven (11) messengers. The contract
period is described as being "from January
1976." The petitioner in truth undertook
to pay a "daily service rate of P18, " on a
per person basis.
Attached to the letter agreement was a
"List of Messengers assigned at Philippine
Bank of Communications" which list
included, as item No. 5 thereof, the name
of private respondent Ricardo Orpiada.
Ricardo Orpiada was thus assigned to
work with the petitioner bank. As such, he
rendered services to the bank, within the
premises of the bank and alongside other
people also rendering services to the
bank. There was some question as to
when
Ricardo
Orpiada
commenced
rendering services to the bank. As noted
above, the letter agreement was dated
January 1976. However, the position paper
submitted by (CESI) to the National Labor
Relations Commission stated that (CESI)
hired Ricardo Orpiada on 25 June 1975 as
a Tempo Service employee, and assigned
him to work with the petitioner bank "as
evidenced by the appointment memo
issued to him on 25 June 1975. " Be that
as it may, on or about October 1976, the
petitioner requested (CESI) to withdraw
Orpiada's assignment because, in the
allegation of the bank, Orpiada's services
"were no longer needed."
On 29 October 1976, Orpiada instituted a
complaint in the Department of Labor
(now Ministry of Labor and Employment)
against the petitioner for illegal dismissal
and failure to pay the 13th month pay
provided for in Presidential Decree No.
851. This complaint was docketed as Case
No. R04-1010184-76-E.After investigation,
the Office of the Regional Director,

Regional Office No. IV of the Department
of Labor, issued an order dismissing
Orpiada's
complaint
for
failure
of
Mr.Orpiada to show the existence of an
employer-employee relationship between
the bank and himself.
Despite the foregoing order, Orpiada
succeeded in having his complaint
certified for compulsory arbitration in Case
No. RB-IV-11187-77 entitled "Ricardo
Orpiada, complaint vs. Philippine Bank of
Communications, respondent." During the
compulsory arbitration proceedings, CESI
was brought into the picture as an
additional respondent by the bank. Both
the bank and (CESI) stoutly maintained
that (CESI) (and not the bank) was the
employer of Orpiada.
ISSUE: Whether or not an employeremployee relationship existed between
the
petitioner
bank
and
private
respondent Ricardo Orpiada.
HELD: The petitioner bank maintains that
no employer-employee relationship was
established between itself and Ricardo
Orpiada and that Ricardo Orpiada was an
employee of (CESI) and not of the bank.
The second ("payment of wages") and
third ("power of dismissal") factors
suggest that the relevant relationship was
that subsisting between (CESI) and
Orpiada, a relationship conceded by (CESI)
to be one between employer and
employee. Upon the other hand, the first
("selection and engagement") and fourth
("control of employee's conduct") factors
indicate that some direct relationship did
exist between Orpiada and the bank and
that such relationship may be assimilated
to employment. Perhaps the most
important circumstance which emerges
from an examination of the facts of the trilateral relationship between the bank,
(CESI) and Orpiada is that the employeremployee relationship between (CESI) and
Orpiada was established precisely in
anticipation of, and for the very purpose of
making possible, the secondment of
Orpiada to the bank. It is therefore
necessary to confront the task of
determining
the
appropriate
characterization
of
the
relationship

ARRANGEMENT
between the bank and (CESI) was that
relationship one of employer and job
(independent) contractor or one of
employer and "labor-only" contractor?
Under the general rule set out in the first
and second paragraphs of Article 106, an
employer who enters into a contract with
a contractor for the performance of work
for the employer, does not thereby create
an
employer-employes
relationship
between himself and the employees of the
contractor. Thus, the employees of the
contractor
remain
the
contractor's
employees and his alone. Nonetheless
when a contractor fails to pay the wages
of his employees in accordance with the
Labor Code, the employer who contracted
out the job to the contractor becomes
jointly and severally liable with his
contractor to the employees of the latter
"to the extent of the work performed
under the contract" as such employer
were the employer of the contractor's
employees. The law itself, in other words,
establishes
an
employer-employee
relationship between the employer and
the job contractor's employees for a
limited purpose, i.e., in order to ensure
that the latter get paid the wages due to
them.
A similar situation obtains where there is
"labor only" contracting. The "labor-only"
contractor-i.e "the person or intermediary"
is considered "merely as an agent of the
employer. " The employer is made by the
statute responsible to the employees of
the "labor only" contractor as if such
employees had been directly employed by
the employer. Thus, where "labor only"
contracting exists in a given case, the
statute itself implies or establishes an
the employer (the owner of the project)
and the employees of the "labor only"
contractor, this time for a comprehensive
purpose: "employer for purposes of this
Code, to prevent any violation or
circumvention of any provision of this
Code. " The law in effect holds both the
employer and the "labor-only" contractor
responsible to the latter's employees for
the more effective safeguarding of the
employees' rights under the Labor Code.
Both the petitioner bank and (CESI) have
insisted that (CESI) was not a "labor only"
contractor. Section 9 of Rule VIII of Book III

entitled "Conditions of Employment," of
the Omnibus Rules Implementing the
Labor Code provides as follows:
In contrast, job contracting-contracting out
a particular job to an independent
contractor is defined by the Implementing
Rules as follows:
The definition of "labor-only" contracting
in Rule VIII, Book III of the Implementing
Rules must be read in conjunction with the
definition of job contracting given in
Section 8 of the same Rules. The
undertaking given by CESI in favor of the
bank was not the performance of a
specific job for instance, the carriage
and delivery of documents and parcels to
the addresses thereof. There appear to be
many companies today which perform this
discrete service, companies with their own
personnel who pick up documents and
packages from the offices of a client or
customer, and who deliver such materials
utilizing their own delivery vans or
motorcycles to the addresses. In the
present case, the undertaking of (CESI)
was toprovideits client-thebank-with a
certain number of persons able to carry
out the work of messengers. Such
undertaking of CESI was complied with
when the requisite number of persons
were assigned or seconded to the
petitioner bank. Orpiada utilized the
premises and office equipment of the bank
and not those of (CESI) Messengerial workthe delivery of documents to designated
persons whether within or without the
bank premises is of course directly
related to the day-to-day operations of the
bank. Section 9(2) quoted above does
notrequire for its applicability that the
petitioner must be engaged in the delivery
of items as a distinct and separate line of
business.
Succinctly put, CESI is not a parcel
delivery company: as its name indicates, it
is
a
recruitment
and
placement
corporation placing bodies, as it were, in d
ifferent client companies for longer or
shorter periods of time. It is this factor
that, to our mind, distinguishes this case
from American President v. Clave et al,
114
SCRA
826
(1982)
if
indeed
distinguishing way is needed.

ARRANGEMENT
The bank urged that the letter agreement
entered into with CESI was designed to
enable the bank to obtain the temporary
services of people necessary to enable the
bank to cope with peak loads, to replace
temporary workers who were out on
vacation or sick leave, and to handle
specialized work. There is, of course,
nothing illegal about hiring persons to
carry out "a specific project or undertaking
the completion or termination of which
[was] determined at the time of the
engagement of [the] employee, or where
the work or service to be performed is
seasonal in nature and the employment is
for the duration of the season" (Article
281, Labor Code).<re||an1w> The
letter agreement itself, however, merely
required (CESI) to furnish the bank with
eleven 11) messengers for " a contract
period from January 19, 1976 ." The
eleven (11) messengers were thus
supposed to render "temporary" services
for an indefinite or unstated period of
time. Ricardo Orpiada himself was
assigned to the bank's offices from 25
June 1975 and rendered services to the
bank until sometime in October 1976, or a
period of about sixteen months. Under the
Labor Code, however, any employee who
has rendered at least one year of service,
whether such service is continuous or not,
shall be considered a regular employee
(Article
281,
Second
paragraph).
Assuming, therefore, that Orpiada could
properly be regarded as a casual (as
distinguished from a regular) employee of
the bank, he became entitled to be
regarded as a regular employee of the
bank as soon as he had completed one
year of service to the bank. Employers
may not terminate the service of a regular
employee except for a just cause or when
authorized under the Labor Code (Article
280, Labor Code). It is not difficult to see
that
to
uphold
the
contractual
arrangement between the bank and (CESI)
would in effect be to permit employers to
avoid the necessity of hiring regular or
permanent employees and to enable them
to keep their employees indefinitely on a
temporary or casual status, thus to deny
them security of tenure in their jobs.
Article 106 of the Labor Code is precisely
designed to prevent such a result.
We hold that, in the circumstances

'instances of this case, (CESI) was
engaged in "labor-only" or attracting vis-avis the petitioner and in respect c Ricardo
Orpiada, and that consequently, the
petitioner bank is liable to Orpiada as if
Orpiada had been directly, employed not
only by (CESI) but also by the bank. It may
well be that the bank may in turn proceed
against (CESI) to obtain reimbursement of,
or some contribution to, the amounts
which the bank will have to pay to
Orpiada; but this it is not necessary to
determine here.
WHEREFORE, the petition for certiorari is
DENIED and the decision promulgated on
29 December 1983 of the National Labor
Relations Commission is AFFIRMED. The
Temporary Restraining Order issued by
this Court on 11 April 1984 is hereby lifted.
Costs against petitioner.
SO ORDERED.
45.VIRGINIA
G. NERI
and
JOSE
CABELIN vs. NATIONAL LABOR
RELATIONS COMMISSION FAR EAST
BANK & TRUST COMPANY (FEBTC)
and BUILDING CARE CORPORATION
G.R. No. Nos. 97008-09 July 23,
1993
FACTS: Neri and Cabelinapllied for and
were hired by respondent BCC, a
corporation
engaged
in
providing
technical,
maintenance,
engineering,
housekeeping, security and other specific
services to its clientele.They were
assigned to work in the Cagayan de Oro
City Branch of respondent FEBTC on 1 May
1979 and 1 August 1980, respectively,
Neri a radio/telex operator and Cabelin as
janitor,
before
being
promoted
to
messenger on 1 April 1989.
On 28 June 1989, petitioners instituted
complaints against FEBTC and BCC before
Regional Arbitration Branch No. 10 of the
Department of Labor and Employment to
recognize them as its regular employees
and be paid the same wages which its
employees receive.
On 16 November 1989, the Labor Arbiter
dismissed the complaint for lack of
merit.Respondent BCC was considered an

ARRANGEMENT
independent contractor because it proved
it had substantial capital. Thus, petitioners
were held to be regular employees of BCC,
not FEBTC. The dismissal was appealed to
NLRC which on 28 September 1990
affirmed the decision on appeal. On 22
October
1990,
NLRC
denied
reconsideration
of
its
affirmance,prompting petitioners to seek
redress from this Court.
Nevertheless, petitioners insist before that
BCC is engaged in "labor-only" contracting
hence, they conclude, they are employees
of respondent FEBTC.
ISSUE: Whether or not BCC is only a job
contracting company, hence petitioners
are not regular employees of FEBTC.
RULING: We cannot sustain the petition.
Respondent BCC need not prove that it
made investments in the form of tools,
equipment, machineries, work premises,
among others, because it has established
that it has sufficient capitalization. The
Labor Arbiter and the NLRC both
determined that BCC had a capital stock of
P1 million fully subscribed and paid
for.BCC is therefore a highly capitalized
venture and cannot be deemed engaged
in "labor-only" contracting.
It is well-settled that there is "labor-only"
contracting where:
(a) the person supplying workers to an
employer does not have substantial
capital or investment in the form of tools,
among others; and,
(b) the workers recruited and placed by
such person are performing activities
which are directly related to the principal
business of the employer.
Article 106 of the Labor Code defines
"labor-only" contracting thus
Art. 106. Contractor or subcontractor. . . . .
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,
among others, and the workers recruited
by such persons are performing activities
business of such employer . . . . (emphasis

supplied).
Based on the foregoing, BCC cannot be
considered a "labor-only" contractor
because it has substantial capital. While
there may be no evidence that it has
among others, it is enough that it has
substantial capital, as was established
before the Labor Arbiter as well as the
NLRC. In other words, the law does not
require both substantial capital and
equipment, machineries, etc. This is clear
from the use of the conjunction "or". If the
intention was to require the contractor to
prove that he has both capital and the
requisite investment, then the conjunction
"and" should have been used. But, having
established that it has substantial capital,
it was no longer necessary for BCC to
further adduce evidence to prove that it
does not fall within the purview of "laboronly" contracting. There is even no need
for it to refute petitioners' contention that
the activities they perform are directly
related to the principal business of
respondent bank.
Even
assuming
ex
argumentithat
petitioners were performing activities
directly related to the principal business of
the bank, under the "right of control" test
they must still be considered employees of
BCC. In the case of petitioner Neri, it is
admitted that FEBTC issued a job
description which detailed her functions as
a radio/telex operator. However, a cursory
reading of the job description shows that
what was sought to be controlled by
FEBTC was actually the end-result of the
task,e.g., that the daily incoming and
outgoing telegraphic transfer of funds
received and relayed by her, respectively,
tallies with that of the register. The
guidelines were laid down merely to
ensure that the desired end-result was
achieved. It did not, however, tell Neri how
the radio/telex machine should be
operated.
More importantly, under the terms and
conditions of the contract, it was BCC
alone which had the power to reassign
petitioners. Their deployment to FEBTC

ARRANGEMENT
was not subject to the bank's acceptance.
Cabelin was promoted to messenger
because the FEBTC branch manager
promised BCC that two (2) additional
janitors would be hired from the company
if the promotion was to be effected.
Furthermore, BCC was to be paid in lump
sum unlike in the situation in Philippine
Bank of Communications where the
contractor, CESI, was to be paid at a daily
rate on a per person basis. And, the
contract therein stipulated that the CESI
was merely to provide manpower that
would render temporary services. In the
case at bar, Neri and Cabelin were to
perform
specific
special
services.
Consequently, petitioners cannot be held
to be employees of FEBTC as BCC "carries
an independent business" and undertaken
the performance of its contract with
various clients according to its "own
manner and method, free from the control
and supervision" of its principals in all
matters "except as to the results thereof."
The Petition for Certiorari is dismissed.
attributing to management a secret

understanding to block the demand; and,
for denyingresponsibility, his gate pass
was unceremoniously cancelled on 6
February 1992 and he was subsequently
dismissed
46. Filipinas
Synthetic
Fiber
Corporation vs. NLRC, et al.[257
SCRA 336 June 14, 1996]
HELD: DE LIMA is an independent job

contractor, therefore no direct employeremployee relationship exists between
petitioner FILSYN andprivate respondent
Felipe Loterte. The relationship between
petitioner
Filipinas
Synthetic
Fiber
Corporation
(FILSYN)
and
private
respondent DeLima Trading and General
Services (DE LIMA) is one of jobcontractorship.
FACTS: On 4 April 1991 FILSYN, a

domestic corporation engaged in the
manufacture of polyester fiber, contracted
with De Lima Trading andGeneral Services
(DE LIMA) for the performance of specific
janitorial
services
Pursuant
to
the
agreement Felipe Loterte, among others,
wasdeployed at FILSYN to take care of the
plants and maintain general cleanliness
around the premises.On 24 February 1992
Loterte sued FILSYN and DE LIMA as
alternative
defendants
for
illegal
dismissal, underpayment of wages,nonpayment of legal holiday pay, service
incentive leave pay and 13th month pay
alleging that he was first assigned to
perform janitorial work atFILSYN in 1981
by the La Saga General Services; that the
La Saga was changed to DE LIMA on
August 1991; that when a movement
todemand increased wages and 13th
month pay arose among the workers on
December 1991 he was accused by a
certain Dodie La Flores of havingposted in
the bulletin board at FILSYN an article
Loterte was classified by the Labor Arbiter

as a regular employee on the ground that
he performed tasks usually necessary or
desirablein the main business of FILSYN
for more than ten (10) years or since
1981. FILSYN was declared to be the real
employer of Loterte and DELIMA as a mere
labor contractor. Hence, FILSYN was
adjudged
liable
for
Loterte's
reinstatement,
payment
of
salary
differentials and back wages and other
benefits. Hence, this petition for certiorari
by FILSYN.
ISSUE: Whether or not there exists an
FILSYN and private respondent Felipe
Loterte.
Under the Labor Code, two (2) elements

must exist for a finding of labor-only
contracting: (a) the person supplying
workers to anemployer does not have
substantial capital or investment in the
form of tools, equipment, machineries,
work premises, among others, and (b)
theworkers recruited and placed by such
persons are performing activities directly
related to the principal business of such
employer.
These two (2) elements do not exist in the
instant case. As pointed out by petitioner,
private respondent DE LIMA is a going
concernduly registered with the Securities
and
Exchange
Commission
with
substantial
capitalization
of

ARRANGEMENT
P1,600,000.00, P400,000.00 of which is
actuallysubscribed. Hence, it cannot be
considered as engaged in labor-only
contracting being a highly capitalized
venture.
Moreover,
while
the
janitorialservices performed by Felipe
Loterte pursuant to the agreement
between FILSYN and DE LIMA may be
considered directly related to theprincipal
business of FILSYN which is the
manufacture
of
polyester
fiber,
nevertheless, they are not necessary in its
operation. On the contrary,they are
merely incidental thereto, as opposed to
being integral, without which production
and company sales will not suffer. Judicial
notice hasalready been taken of the
general practice in private as well as in
government institutions and industries of
hiring janitorial services on anindependent
contractor basis.
Respondent De Lima Trading and General
Services (DE LIMA) are ordered to
reinstate
private
respondent
FELIPE
LOTERTE to hisformer position or its
equivalent without loss of seniority rights.
And private respondent De Lima Trading
and General Services (DE LIMA) isordered
jointly and severally with petitioner
Filipinas
Synthetic Fiber
Corporation
(FILSYN) to pay private respondent FELIPE
LOTERTE his salary differentials, 13th
month pay, service incentive leave pay,
and backwages without prejudice to
FILSYN seeking reimbursement from
DELIMA for whatever amount the former
may pay or have paid the latter
47.Alejandro Maraguinot and Paulino
Enero v. NLRC, GR No. 120969, 22
January 1998
FACTS: Maraguinot and Enero were both
hired by Vic del Rosario to work for his
projects under Viva films;
Sometime in 1992, they asked for their
salary to be adjusted according to the
minimum wage;
It is to be noted that at the time,
Maraguinot was having a salary of only
475 per week (this was in 1991);
Both Maraguinot and Enero asked their
supervisors for their wage to be adjusted
according to the minimum wage however,
they were told that their concern is to be

aired to the owner of Viva;
They were told that their wage will be
adjusted but they have to sign a blank
employment contract; Enero did not
accept and so he was fired;
Maraguinot was fired but was asked to
return few days after;
He was once again asked to sign a blank
employment contract in exchange of the
adjustment of his salary according to the
minimum wage; this, he did not accede to,
hence, he was fired;
A case was filed by the two against Viva
but NLRC ruled in favour of Viva saying
that there was really no employeremployee relationship between them;
Issue
1.
Whether there was employeremployee relationship between Viva and
the complainants that would merit a filing
of an illegal dismissal case?
Held
1.
Yes,
the
complainants
are
employees of Viva. In fact in most cases, it
was Viva that paid the complainants.
Further, the argument of Viva that they
are contractual employees is untenable for
the reason that the complainants are
employed on long-term basis.
48.Urbanes Jr. vs. Sec. of Labor, G.R.
No. 122791, Feb. 19, 2003
Facts:
Petitioner Placido O. Urbanes, Jr., doing
business under the name and style of
Catalina Security Agency, entered into an
agreement to provide security services to
respondent Social Security System (SSS).
During the effectivity of the agreement,
petitioner, by letter of May 16, 1994,
requested the SSS for the upward
adjustment of their contract rate in view of
Wage Order No. NCR-03 which was issued
by the Regional Tripartite Wages and
Productivity Board-NCR.
Petitioner sent several letters dated June 7
and June 8, 1994, reiterating the request.
On June 24, 1994, petitioner pulled out his
agencys services from the premises of
the SSS. Petitioner, on June 29, 1994, filed
a complaint with the DOLE-NCR against

ARRANGEMENT
the SSS seeking the implementation of
Wage Order No. NCR-03.
SSS prayed for the dismissal of the
complaint on the ground that petitioner is
not the real party in interest and has no
legal capacity to file the same. In any
event, it argued that if it had any
obligation, it was to the security guards.
Morever, it contended that the security
guards assigned to the SSS do not have
any legal basis to file a complaint against
it for lack of contractual privity.
The Regional Director held in favor of
petitioner
ordering
SSS
to
pay
complainant the sum of P 1,600,858.46
representing the wage differentials under
Wage Order No. NCR-03 of the 168
Security Guards of Catalina Security
Agency
covering
the
period
from
December 16, 1993 to June 24, 1994.
The SSS moved to reconsider the
September 16, 1994 Order of the Regional
Director, praying that the computation be
revised. The amount was reduced to P
1,237,740.00.
The SSS appealed to the Secretary of
Labor upon several assigned errors.
Thereafter, the Secretary of Labor, by
Order of June 22, 1995, set aside the order
of the Regional Director and remanded the
records of the case "for recomputation of
the wage differentials using P 5,281.00 as
the basis of the wage adjustment." And
the Secretary held petitioners security
agency "Jointly and severally liable for
wage differentials, the amount of which
should be paid directly to the security
guards concerned."
Issues:
1.
Whether or not the Secretary of
Labor has jurisdiction to review appeals
from decisions of the Regional Directors.
2.
Whether or not SSS is liable to pay
petitioner for wage differentials.
Contentions:
Petitioner asserts that the Secretary of
Labor does not have jurisdiction to review
appeals from decisions of the Regional
Directors in complaints filed under Article
129 of the Labor Code. Petitioner thus
contends that as the appeal of SSS was
filed with the wrong forum, it should have
been dismissed.
The SSS, on the other hand, contends that

Article 128, not Article 129, is applicable
to the case. Article 128.
Held:
Neither the petitioners contention nor the
SSSs is impressed with merit.Lapanday
Agricultural Development Corporation v.
Court of Appealsinstructs so. In that case,
the security agency filed a complaint
before the RTC against the principal or
client
Lapanday
for
the
upward
adjustment of the contract rate in
accordance with Wage Order Nos. 5 and 6.
Lapanday argued that it is the National
Labor Relations Commission, not the civil
courts, which has jurisdiction to resolve
the issue in the case, it involving the
enforcement of wage adjustment and
other benefits due the agencys security
guards as mandated by several wage
orders. Holding that the RTC has
jurisdiction over the controversy, this
Court ruled:
We agree with the respondent that the
RTC has jurisdiction over the subject
matter of the present case. It is well
settled in law and jurisprudence that
where no employer-employee relationship
exists between the parties and no issue is
involved which may be resolved by
reference to the Labor Code, other labor
statutes or any collective bargaining
agreement, it is the Regional Trial Court
that has jurisdiction. In its complaint,
private respondent is not seeking any
relief under the Labor Code but seeks
payment of a sum of money and damages
on account of petitioner's alleged breach
of its obligation under their Guard Service
Contract. The action is within the realm of
civil law hence jurisdiction over the case
belongs to the regular courts. While the
resolution of the issue involves the
application of labor laws, reference to the
labor code was only for the determination
of the solidary liability of the petitioner to
the respondent where no employeremployee relation exists.
In the case at bar, even if
petitioner filed the complaint on his and
also on behalf of the security guards, the
relief sought has to do with the
enforcement of the contract between him
and the SSS which was deemed amended
by virtue of Wage Order No. NCR-03. The

ARRANGEMENT
controversy subject of the case at bar is
thus a civil dispute, the proper forum for
the resolution of which is the civil courts.
But even assuming arguendo that
petitioners complaint were filed with the
proper forum, for lack of cause of action it
must be dismissed. Articles 106, 107 and
109 of the Labor Code provide:
ART.
106.
CONTRACTOR
OR
SUBCONTRACTOR. Whenever an employer
enters into 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 wage 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.
ART. 107 INDIRECT EMPLOYER. The
provisions of the immediately preceding
Article shall likewise apply to any person,
partnership, association or corporation
which, not being an employer, contracts
with an independent contractor for the
performance of any work, task, job or
project.
ART.
109.
SOLIDARY
LIABILTY.
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.
As to the second issue, the liability
of the SSS to reimburse petitioner arises
only if and when petitioner pays his
employee-security guards "the increases"
mandated by Wage Order No. NCR-03.
The records do not show that
petitioner
has
paid
the
mandated
increases to the security guards. The
security guards in fact have filed a
complaint with the NLRC against petitioner
relative
to,
among
other
things,
underpayment of wages.
49.San Miguel vs. Maerc Integrated

Services G.R. No. 144672, July 10,
2003
FACTS:
291 workers filed their complaints against
San Miguel Corporation and Maerc
Integrated Services, Inc, for illegal
dismissal, underpayment of wages, nonpayment of service incentive leave pays
and other labor standards benefits, and for
separation pays.
The complainants alleged that they were
hired by San Miguel Corporation (SMC)
through its agent or intermediary Maerc
Integrated Services, Inc. (MAERC) to work
in 2 designated workplaces in Mandaue
City. They washed and segregated various
kinds of empty bottles used by SMC to sell
and distribute its beer beverages to the
consuming public. They were paid on a per
piece or pakiao basis except for a few who
worked as checkers and were paid on daily
wage basis.
Complainants alleged that long before
SMC contracted the services of MAERC a
majority of them had already been
working for SMC under the guise of being
employees of another contractor, Jopard
Services, until the services of the latter
were terminated on 31 January 1988.
SMC denied liability for the claims and
averred that the complainants were not its
employees but of MAERC, an independent
contractor whose primary corporate
purpose was to engage in the business of
cleaning, receiving, sorting, classifying,
etc., glass and metal containers.
In a letter dated 15 May 1991, SMC
informed MAERC of the termination of
their service contract by the end of June
1991. SMC cited its plans to phase out its
segregation activities starting 1 June 1991
due to the installation of labor and costsaving devices.
When
the
service
contract
was
terminated, complainants claimed that
SMC stopped them from performing their
jobs; that this was tantamount to their
being illegally dismissed by SMC who was
their real employer as their activities were
directly related, necessary and desirable
to the main business of SMC; and, that
MAERC was merely made a tool or a shield

ARRANGEMENT
by SMC to avoid its liability under the
Labor Code. MAERC admitted that it
recruited the complainants and placed
them in the bottle segregation project of
SMC but maintained that it was only
conveniently used by SMC as an
intermediary in operating the project.
The Labor Arbiter rendered a decision
holding that MAERC was an independent
contractor. The National Labor Relations
Commission (NLRC) ruled that MAERC was
a
labor-only
contractor
and
that
complainants were employees of SMC.
ISSUE: Whether the complainants are
employees of petitioner SMC or of
respondent MAERC.
HELD: Employees are those of SMC.
In ascertaining an employer-employee
relationship, the following factors are
considered:
(a) the selection and engagement of
employee;
(b) the payment of wages;
(c) the power of dismissal; and,
(d) the power to control an employee's
conduct.
Evidence discloses that petitioner played a
large and indispensable part in the hiring
of MAERC's workers. It also appears that
majority of the complainants had already
been working for SMC long before the
signing of the service contract between
SMC and MAERC in 1988.
In the case, the incorporators of MAERC
admitted having supplied and recruited
workers for SMC even before MAERC was
created. The NLRC also found that when
MAERC was organized into a corporation in
February 1988, the complainants who
were then already working for SMC were
made to go through the motion of
applying for work with Ms. Olga Ouano,
President and General Manager of MAERC.
As for the payment of workers' wages,
SMC assumed the responsibility of paying
for the mandated overtime, holiday and
rest day pays of the MAERC workers. SMC
also paid the employer's share of the SSS
and Medicare contributions, the 13th
month pay, incentive leave pay and
maternity benefits. These lend credence to
the complaining workers' assertion that
while MAERC paid the wages of the
complainants, it merely acted as an agent

of SMC.
SMC maintained a constant presence in
the workplace through its own checkers.
The responsibility of watching over the
MAERC workers by MAERC personnel
became superfluous with the presence of
additional checkers from SMC. Control of
the premises in which the contractor's
work was performed was also viewed as
another phase of control over the work,
and this strongly tended to disprove the
independence of the contractor.
But the most telling evidence is a letter by
Mr. Antonio Ouano, Vice-President of
MAERC addressed to Francisco Eizmendi,
SMC President and Chief Executive Officer,
asking the latter to reconsider the phasing
out of SMC's segregation activities in
Mandaue City. The letter attested to an
arrangement entered into by the two (2)
parties which was not reflected in the
Contract
of
Services.
A
peculiar
relationship mutually beneficial for a time
but nonetheless ended in dispute when
SMC decided to prematurely end the
contract leaving MAERC to shoulder all the
obligations to the workers.
While MAERC's investments in the form of
buildings, tools and equipment amounted
to more than P4 Million, one cannot
disregard the fact that it was the SMC
which required MAERC to undertake such
investments under the understanding that
the
business
relationship
between
petitioner and MAERC would be on a long
term basis.
NOTES:
Jurisprudence has it that in determining
the
existence
of
an
independent
contractor relationship, several factors
may be considered such as:
o whether the contractor was carrying on
an independent business
o the nature and extent of the work
o the skill required
o
the term and duration of the
relationship
o the right to assign the performance of
specified pieces of work
o
the control and supervision of the
workers

ARRANGEMENT
o the power of the employer with respect
to the hiring, firing and payment of the
workers of the contractor
o the control of the premises
o
i.the duty to supply premises, tools,
appliances, materials and labor
the mode, manner and terms of

payment.
50.Mariveles Shipyard Corp v. Court
of Appeals G.R. No. 144134,
Novemeber 11, 2003
FACTS: Petitioner submits that respondent
Court of Appeals (CA) erred in its decisions
in the previous cases where the petitioner
was involved. The latter contend that,
among other issues, CA gravely erred in
its affirmation on the National Labor
Relations Commissions (NLRC) decision
that the petitioner together with Longest
Force, a security agency, are jointly and
severally liable for the payment of back
wages and overtime pay to private
respondents. The petitioner invokes that it
has already paid all the necessary
compensation to the private respondents.
ISSUE: Whether or not
should be held jointly and
together with Longest
payment of back wages
respondents as affirmed
CA?
the petitioner
severally liable,
Force in the
to the private
by respondent
HELD: Yes.
Under Article 106, par. 2 of the Labor
Code, in the event that the contractor or
subcontractor fails to pay wages of his
employeesthe employer shall be jointly
and severally liable with his contractor or
subcontractor xxx. Also, in Article 107 of
the same Code, the law states that the
preceding Article shall likewise apply to
person,
partnership,
association
or
corporation which, not being an employer,
contracts
with
an
independent
contractor. Pursuant to the mentioned
provisions of the Labor Code, the Court
said that, in this case, the petitioner as an
indirect employer, shall truly be liable
jointly and severally with Longest Force
in paying backwages and overtime pay to
the private respondents. Moreover, the
Court emphasized that Labor standard
are enacted by the legislature to alleviate

the plight of workers whose wages barely
meet the spiraling costs of their basic
needs. Labor laws are considered written
in every contract. Stipulations in violation
thereof are considered null. Therefore, the
petitioner should be held jointly and
severally liable, together with Longest
Force to the private respondents as
earlier decided by NLRC, as affirmed by
the CA.
51.G.R. No. 154715, Dec. 11, 2003
New Golden City Builders vs. CA
FACTS:
Petitioner
entered
into
a
construction contract with Prince David
Development
Corporation
for
the
construction of a 17-storey office and
residential
condominium
building.
Petitioner engaged the services of
NiloLayno Builders to do the specialized
concrete works, forms works and steel
rebars works. Pursuant to the contract,
NiloLayno
Builders
hired
private
respondents to perform work at the
project.
After the completion of the phase for
which NiloLayno Builders was contracted,
private respondents filed a complaint
against petitioner and its president (NGC
Builder and Manuel Sy) for unfair labor
practice, non-payment of 13th month pay,
service incentive leave, illegal dismissal
and
severance
pay,
in
lieu
of
reinstatement.
The Labor Arbiter ruled in favor of
respondents, but dismissed the charges
for illegal dismissal including their prayers
for back wages and unfair labor practice
and other monetary claims except their
13th month pay and service incentive
leave pay. It was also found that NiloLayno
Builders was a labor-only-contractor, thus
private
respondents
were
deemed
employees of the petitioner. Both parties
appealed to the National Labor Relations
Commission, which affirmed the Labor
Arbiter's decision with modification that
private
respondents
were
illegally
dismissed.

ARRANGEMENT
Since
petitioner's
motion
for
reconsideration was denied, it instituted a
special civil action for certiorariwith the
Court of Appeals, but the latter denied the
same; hence, a petition for review in SC.
Issue: Whether NiloLayno Builders was an
"independent contractor" or a "labor-only"
contractor
Ruling:
NiloLayno
Builders
independent contractor.
is
an
Under Section 8, Rule VIII, Book III, of the

Omnibus Rules Implementing the Labor
Code, an independent contractor is one
who undertakes "job contracting," i.e., a
person who: (a) carries on an independent
business and undertakes the contract
work on his own account under his own
responsibility according to his own manner
and method, free from the control and
direction of his employer or principal in all
matters connected with the performance
of the work except as to the results
thereof; and (b) has substantial capital or
and other materials which are necessary
in
the
conduct
of
the
business.
Jurisprudential holdingsare to the effect
that in determining the existence of an
independent
contractor
relationship,
several factors may be considered, such
as, but not necessarily confined to,
whether or not the contractor is carrying
on an independent business; the nature
and extent of the work; the skill required;
the term and duration of the relationship;
the right to assign the performance of
specified pieces of work; the control and
supervision of the work to another; the
employer's power with respect to the
hiring, firing and payment of the
contractor's workers; the control of the
premises; the duty to supply premises,
tools, appliances, materials and labor; and
the mode, manner and terms of payment.
We are convinced that Nilo Layno Builders
is undertaking permissible labor or job
contracting. NiloLayno Builders is a duly
licensed labor contractor carrying on an
independent business for a specialized
work that involves the use of some
particular, unusual and peculiar skills and

expertise, like concrete works, form works
and steel rebars works. As a licensed labor
contractor, it complied with the conditions
set forth in Section 5, Rule VII-A, Book III,
Rules to Implement the Labor Code,
among others, proof of financial capability
and list of equipment, tools, machineries
and implements to be used in the
business. Further, it entered into a written
contract with the petitioner, a requirement
under Section 3, Rule VII-A, Book III, Rules
to Implement the Labor Code to assure
the employees of the minimum labor
standards and benefits provided by
existing laws.
The test to determine the existence of
independent contractorship is whether
one claiming to be an independent
contractor has contracted to do the work
according to his own methods and without
being subject to the control of the
employer, except only to the results of the
work. This is exactly the situation
obtaining in the case at bar. NiloLayno
Builders hired its own employees, the
private respondents, to do specialized
work in the Prince David Project of the
petitioner. The means and methods
adopted by the private respondents were
directed by NiloLayno Builders except
that, from time to time, the engineers of
the petitioner visited the site to check
whether the work was in accord with the
plans and specifications of the principal.
As admitted by Nilo G. Layno, he
undertook the contract work on his own
account and responsibility, free from
interference from any other persons,
except as to the results; that he was the
one paying the salaries of private
respondents; and that as employer of the
private respondents, he had the power to
terminate or dismiss them for just and
valid cause. Indubitably, the Court finds
that
NiloLayno
Builders
maintained
effective supervision and control over the
private complainants.
Thus, it was plain conjecture on the part of
the Labor Arbiter, the NLRC and the Court
of Appeals to conclude that Nilo Layno
Builders was a labor-only contractor
merely because it does not have

ARRANGEMENT
investment in the form of tools or
machineries. They failed to appreciate the
fact that Nilo Layno Builders had
substantial capitalization for it did not only
provide labor to do the specified project
and pay their wages, but it furnished the
materials to be used in the construction.
In Neri v. NLRC, we held that the labor
contractor which sufficiently proved that it
had substantial capital was not engaged in
labor-only contracting. Thus:
While there may be no evidence that it
has investment in the form of tools,
among others, it is enough that it has
substantial capital, as was established
before the Labor Arbiter as well as the
NLRC. In other words, the law does not
require both substantial capital and
equipment, machineries, etc. This is clear
from the use of the conjunction or. If the
intention was to require the contractor to
prove that he has both capital and the
requisite investment, then the conjunction
and should have been used.
52.NFA
vs.
MASADA
SECURITY
AGENCY,
INC.G.R.
No.
163448.March 08, 2005
Facts:
On September 17, 1996, respondent
MASADA Security Agency, Inc., entered
into a one year contract with NFA to
provide security services to the various
offices, warehouses and installations of
the scope of the NFA Region I.
Upon the expiration of said contract, the
parties extended the effectivity of the
contract on a monthly basis under same
terms and condition.
Meanwhile on several occasions, the
Regional Tripartite Wages and Productivity
Board issued several wage orders
mandating increases in the daily wage
rate.
Therefore because of the wage orders
mandating increase in the wage rates,
respondent
requested
NFA
for
a
corresponding upward adjustment in the
monthly contract rate consisting of the
increases in the daily minimum wage of
the security guards as well as the
corresponding raise in their overtime pay,

holiday pay, 13th month pay, holiday and
rest day pay.
NFA, however, granted the request but
only with respect to the increase in the
daily wage and denied the same with
respect to the adjustments in the other
benefits and remunerations computed on
the basis of the daily wage.
Respondent sought the intervention of the
Office of the Regional Director, Regional
Office No. I.
Despite the advisory of DOLE Regional
Director
sustaining
the
claim
of
respondent that the increase mandated by
Republic Act No. 6727 (RA 6727) and the
wage orders issued by the RTWPB is not
limited to the daily pay, NFA maintained
its stance that it is not liable to pay the
corresponding adjustments in the wage
related benefits of respondents security
guards.
Respondent filed with the Regional Trial
Court of Quezon, City, Branch 83, a case
for recovery of sum of money against NFA.
On September 19, 2002, the trial court
rendered a decision in favor of respondent
holding that NFA is liable to pay the
security guards wage related benefits
pursuant to RA 6727.
NFA appealed to the Court of Appeals but
the same was dismissed on February 12,
2004.
Hence, this petition.
Issue:
Whether or not the liability of principals in
service contracts under Section 6 of RA
6727 and the wage orders issued by the
Regional Tripartite Wages and Productivity
Board is limited only to the increment in
the minimum wage.
Ruling:
General rule, payment of the increases in
the wage rate of workers is ordinarily
shouldered by the employer.
However, Section 6 of RA 6727, expressly
lodged said obligation to the principals or
indirect employers in construction projects
and establishments providing security,
janitorial and similar services.
Section 6 of RA 6727, provides:
SEC. 6.
In the case of contracts for
construction projects and for security,

ARRANGEMENT
janitorial and similar services, the
prescribed increases in the wage rates of
the workers shall be borne by the
principals
or
clients
of
the
construction/service contractors and the
contract shall be deemed amended
accordingly. In the event, however, that
the principal or client fails to pay the
prescribed
wage
rates,
the
construction/service contractor shall be
jointly and severally liable with his
principal or client.
There is merit on the contention of NFA
that its additional liability under the
aforecited provision is limited only to the
payment of the increment in the statutory
minimum wage rate, i.e., the rate for a
regular eight (8) hour work day.
The term wage as used in Section 6 of
RA 6727 pertains to no other than the
statutory minimum wage which is the
lowest wage rate fixed by law that an
employer can pay his worker. Hence, the
prescribed increases or the additional
liability to be borne by the principal under
Section 6 of RA 6727 is the increment or
amount added to the remuneration of an
employee for an 8-hour work.
Therefore, since the increase in wage
referred to in Section 6 pertains to the
statutory minimum wage as defined
herein, principals in service contracts
cannot be made to pay the corresponding
wage increase in the overtime pay, night
shift differential, holiday and rest day pay,
premium pay and other benefits granted
to workers.
Applying the elementary rule on statutory
construction that if the statute is clear,
plain and free from ambiguity, it must be
given its literal meaning and applied
without interpretation. Therefore, the
presumption is that lawmakers are well
aware that the word wage as used in
Section 6 means the statutory minimum
wage. If their intention was to extend the
obligation of principals in service contracts
to the payment of the increment in the
other benefits and remuneration of
workers, it would have so expressly
specified. In not so doing, the only logical
conclusion is that the legislature intended
to limit the additional obligation imposed
on principals in service contracts to the
payment of the increment in the statutory

minimum wage.
Although the general rule is that
construction
of
a
statute
by
an
administrative agency charged with the
task of interpreting or applying the same
is entitled to great weight and respect.
The Court, however, is not bound to apply
said
rule
where
such
executive
interpretation, is clearly erroneous, or
when there is no ambiguity in the law
interpreted, or when the language of the
words used is clear and plain, as in the
case at bar.
Besides, administrative
interpretations are at best advisory for it is
the Court that finally determines what the
law means.
Hence, the interpretation given by the
labor agencies in the instant case which
went as far as supplementing what is
otherwise not stated in the law cannot
bind this Court.
So long as the minimum obligation of the
principal, i.e., payment of the increased
statutory minimum wage is complied with,
the Wage Rationalization Act is not
violated.
WHEREFORE, the petition is GRANTED
53. Abella vs. PLDT, G.R. No. 159469,
June 8, 2005
Facts:
Respondent
Peoples
Security
Incorporated entered into an agreement
with the PLDT to provide the latter with
such number of qualified uniformed and
properly armed security guards for the
purpose of guarding and protecting PLDTs
installations and properties from theft,
pilferage, intentional damage, trespass or
other unlawful acts. Under the agreement,
it was expressly provided that there shall
be no employer-employee relationship
between the PLDT and the security
guards, which may be supplied to it by
PSI, and that the latter shall have the
entire charge, control and supervision over
the work and services of the supplied
security guards. It was likewise stipulated
therein that PSI shall also have the
exclusive authority to select, engage, and
discharge its security guards, with full

ARRANGEMENT
control over their
compensation.
wages,
salaries
or
Consequently,
respondent
PSI
deployed security guards to the PLDT. The
sixty-five (65) security guards supplied by
respondent PSI filed a Complaint for
regularization against the PLDT alleging
that petitioner security guards have been
employed by the company through the
years and that PSI acted as the
middleman in the payment of the
minimum pay to the security guards, but
no premium for work rendered beyond
eight hours was paid to them nor were
they paid their 13th month pay. In sum,
the Complaint states that inasmuch as the
complainants are under the direct control
and supervision of PLDT. Hence they
should
be
considered
as
regular
employees by the latter.
Issue:
Whether or not an employeremployee relationship exists between
petitioners and respondent PLDT;
Ruling:
We considered the following factors
in considering the existence of an
employer-employee relationship: (1) the
selection
and
engagement
of
the
employee; (2) the payment of wages; (3)
the power to dismiss; and (4) the power to
control the employees conduct.
Testimonies during the trial reveal
that interviews and evaluation were
conducted by PLDT to ensure that the
standards it set are met by the security
guards.
In fact, PLDT rarely failed to
accept security guards referred to by PSI
but on account of height deficiency. The
referral is nothing but for possible
assignment in a designated client which
has the inherent prerogative to accept and
reject the assignee for justifiable grounds
or even arbitrarily. We are thus convinced
that the employer-employee relationship is
deemed perfected even before the posting
of the complainants with the PLDT, as
assignment only comes after employment.
PSI is a legitimate job contractor
pursuant to Section 8, Rule VII, Book II of

Labor Code. It is a registered corporation
duly licensed by the Philippine National
Police to engage in security business. It
has substantial capital and investment in
the
form
of
guns,
ammunitions,
communication
equipments,
vehicles,
office
equipments
like
computer,
typewriters, photocopying machines, etc.,
and above all, it is servicing clients other
than PLDT like PCIBank, Crown Triumph,
and Philippine Cable, among others. Here,
the security guards which PSI had
assigned to PLDT are already the formers
employees prior to assignment and if the
assigned guards to PLDT are rejected by
PLDT for reasons germane to the security
agreement,
then
the
rejected
or
terminated guard may still be assigned to
other clients of PSI as in the case of
Jonathan Daguno who was posted at PLDT
on
21
February
1996
but
was
subsequently relieved therefrom and
assigned at PCIBank Makati Square
effective 10 May 1996. Therefore, the
evidence as it stands is at odds with
petitioners assertion that PSI is an inhouse agency of PLDT so as to call for a
piercing of veil of corporate identity
It is PSI that determined and paid
the petitioners wages, salaries, and
compensation. As elucidated by the Labor
Arbiter, petitioners witness testified that
his wages were collected and withdrawn
at the office of PSI and PLDT pays PSI for
the security services on a lump-sum basis
and that the wages of complainants are
only a portion of the total sum.
The
signature of the PLDT supervisor in the
Daily Time Records does not ipso facto
make PLDT the employer of complainants
inasmuch as the Labor Arbiter had found
that the record is replete with evidence
showing that some of the Daily Time
Records do not bear the signature of a
PLDT supervisor yet no complaint was
lodged for nonpayment of the guards
wages evidencing that the signature of the
PLDTs supervisor is not a condition
precedent for the payment of wages of the
guards. Notably, it was not disputed that
complainants enjoy the benefits and
incentives of employees of PSI and that

ARRANGEMENT
they are reported as employees of PSI with
the SSS.
renewed
and
private
respondent
continued to perform their tasks.
Lastly, petitioners capitalize on the

delinquency reports prepared by PLDT
personnel against some of the security
guards as well as certificates of
participation in civil disturbance course,
certificates of attendance in first aid
training, certificate of completion in fire
brigade training seminar and certificate of
completion on restricted land mobile radio
telephone operation to show that the
petitioners are under the direct control
and supervision of PLDT and that the latter
has, in fact, the power to dismiss them.
Later,
private
respondents
filed
a
complaint praying to be declared as
regular employees of SMC, with claims of
recovery of all benefits and privileges.
The Labor Arbiter found from the

evidence that the delinquency reports
were nothing but reminders of the
infractions committed by the petitioners
while on duty which serve as basis for
PLDT to recommend the termination of the
concerned security guard from PLDT. As
already adverted to earlier, termination of
services from PLDT did not ipso facto
mean dismissal from PSI inasmuch as
some of those pulled out from PLDT were
merely detailed at the other clients of PSI
as in the case of Jonathan Daguno, who
was merely transferred to PCIBank Makati.
54.) San Miguel vs. Aballa, G.R. No.
149011, June 28, 2005
Facts:
Petitioner San Miguel Corporation entered
into a one-year contract with the
Sunflower Multi-Purpose Cooperative.
Sunflower undertook and agreed to
perform and provide the company on a
non exclusive basis for a period of one
year
the
following:
Messengerial,
Janitorial,
Shrimp
harvesting
and
Sanitation.
Pursuant to the contract, Sunflower
engaged private respondents to render
services at SMCs Bacolod Shrimp
Processing Plant. The contract was
Issue:
Whether or not Sunflower is

engaged in labor only contracting
Ruling:
independent contractorship is whether
one claiming to be an independent
employer, except only as to the results of
the work.
In legitimate labor contracting, the law
creates
an
employer-employee
relationship for a limited purpose, i.e., to
ensure that the employees are paid their
wages. The principal 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 principal employer is not
responsible for any claim made by the
employees.
In labor-only contracting, the statute
creates
an
employer-employee
relationship for a comprehensive purpose:
to prevent a circumvention of labor laws.
The contractor is considered merely an
agent of the principal employer and the
latter is responsible to the employees of
the labor-only contractor as if such
employees had been directly employed by
the principal employer.
The following would show that sunflower is
engaged in labor only contracting: What

ARRANGEMENT
appears is that Sunflower does not have
substantial capitalization or investment in
the form of tools, equipment, machineries,
work premises and other materials to
qualify it as an independent contractor.
It is gathered that the lot, building,
machineries and all other working tools
utilized by private respondents in carrying
out their tasks were owned and provided
by SMC.
Sunflower, during the existence of its
service contract with respondent SMC, did
not own a single machinery, equipment, or
working tool used in the processing plant.
Everything was owned and provided by
respondent SMC. The lot, the building,
and working facilities are owned by
respondent SMC.
And from the job description provided by
SMC itself, the work assigned to private
respondents was directly related to the
aquaculture
operations
of
SMC.
Undoubtedly, the nature of the work
performed by private respondents in
shrimp harvesting, receiving and packing
formed an integral part of the shrimp
processing operations of SMC.
As for
janitorial and messengerial services, that
they are considered directly related to the
principal business of the employer has
been
jurisprudentially
recognized.
Furthermore, Sunflower 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, SMC, its apparent role having
been merely to recruit persons to work for
SMC.
Therefore since Sunflower is labor only
contracting, there is the existence of an
employer- employee relationship between
SMC and private respondents.
55. Manila Electric Co. vs. Benamira,

G.R. No. 145271, July 14, 2005
Facts:
The individual respondents are
licensed
security
guards
formerly
employed by Peoples Security, Inc. and
deployed as such at MERALCOs head
office. The security service agreement
between
PSI
and
MERALCO
was
terminated.
Thereafter, 56 of PSIs
security guards, including herein eight
individual respondents, filed a complaint
for unpaid monetary benefits against PSI
and MERALCO. Meanwhile, the security
service agreement between respondent
Armed Security & Detective Agency, Inc.,
(ASDAI) and MERALCO took effect.
Subsequently, the individual respondents
were absorbed by ASDAI and retained at
MERALCOs head office. Later, the security
service agreement between respondent
Advance Forces Security & Investigation
Services, Inc. (AFSISI) and MERALCO took
effect, terminating the previous security
service agreement with ASDAI. The
individual respondents amended their
complaint to implead AFSISI as party
respondent.
Issue: Whether or not the individual
respondents are employees of MERALCO;
Ruling:
No. In this case, the terms and
conditions embodied in the security
service agreement between MERALCO and
ASDAI expressly recognized ASDAI as the
employer of individual respondents. Under
the security service agreement, it was
ASDAI which (a) selected, engaged or
hired and discharged the security guards;
(b) assigned them to MERALCO according
to the number agreed upon; (c) provided
the uniform, firearms and ammunition,
nightsticks, flashlights, raincoats and
other paraphernalia of the security guards;
(d) paid them salaries or wages; and, (e)
disciplined and supervised them or
principally controlled their conduct. The
agreement even explicitly provided that
[n]othing herein contained shall be
understood to make the security guards
under this Agreement, employees of the
COMPANY, it being clearly understood that

ARRANGEMENT
such security guards shall be considered
as they are, employees of the AGENCY
alone. Clearly, the individual respondents
are the employees of ASDAI.
Neither is the stipulation that the
agency cannot pull out any security guard
from MERALCO without its consent an
indication of control. It is simply a security
clause designed to prevent the agency
from unilaterally removing its security
guards from their assigned posts at
MERALCOs premises to the latters
detriment.
The clause that MERALCO has the
right at all times to inspect the guards of
the agency detailed in its premises is
likewise not indicative of control as it is
not a unilateral right.
The agreement
provides that the agency is principally
mandated to conduct inspections, without
prejudice to MERALCOs right to conduct
its own inspections.
Moreover, ASDAI and AFSISI are not
labor-only contractors. There is labor
only contract when the person acting as
contractor is considered merely as an
agent or intermediary of the principal who
is responsible to the workers in the same
manner and to the same extent as if they
had been directly employed by him. On
the other hand, job (independent)
contracting is present if the following
conditions are met: (a) the contractor
carries on an independent business and
undertakes the contract work on his own
account under his own responsibility
according to his own manner and method,
free from the control and direction of his
employer or principal in all matters
connected with the performance of the
work except to the result thereof; and (b)
the contractor has substantial capital or
investments in the form of tools,
equipment, machineries, work premises
and other materials which are necessary
in the conduct of his business. Given the
above distinction and the provisions of the
security service agreements entered into
by petitioner with ASDAI and AFSISI, we
are convinced that ASDAI and AFSISI were
engaged in job contracting.
The individual respondents can not
be considered as regular employees of the
MERALCO for, although security services
are necessary and desirable to the
business of MERALCO, it is not directly

related to its principal business and may
even be considered unnecessary in the
conduct of MERALCOs principal business,
which is the distribution of electricity.
Furthermore, the fact that the
individual respondents filed their claim for
unpaid monetary benefits against ASDAI is
a clear indication that the individual
respondents acknowledge that ASDAI is
their employer.
56. Granspan Development Corp., vs.

Bernardo, G.R. No. 141464, Sept. 21,
2005
Facts:
The instant controversy stemmed from a
complaint for illegal dismissal and nonpayment of benefits filed with the Labor
Arbiter by Ricardo Bernardo, Antonino
Ceidoza
and
Edgar
Del
Prado,
respondents,
against
Grandspan
Development
Corporation,
petitioner,
and/or its warehouse manager, Manuel G.
Lee, docketed as NLRC Case No. RAB-IV11-4605-92-RI.
Those three respondents alleged in their
complaint that they were terminated
illegally,
the
petitioners
(granspan
development corp) sent them a notice
that they were terminated on the grounds
that they vandalized the logbooks and for
the use of profane language. Also they
alleged that they were employed by the
petitioner, they were given ID and a daily
salary of 104 php.

ARRANGEMENT
Petitioner
denied
these
allegations,
claiming that they are contractors. Thus
there
is
no
employee-employer
relationship, And that the warehouse
manager received reports from their
supervisor
that
those
respondents
vandalized the companys log book, which
violates their companys rules and
regulations.
After the submission of the parties
pleadings and position papers, the Labor
Arbiter rendered a Decision dated June 30,
1994 dismissing respondents complaint.
In concluding that respondents were
validly dismissed from employment, the
Labor Arbiter held that they were project
employees
whose
services
were
terminated upon completion of the project
for which they were hired.
When the case was appealed at the NLRC,
the NLRC ordered that the case is
remanded to the labor arbiter for proper
proceeding. This prompted both parties to
file motion for reconsideration, which were
denied by the NLRC.
Then respondents filed a petition for
certiorari in Supreme Court(SC), which
was referred to the Court of Appeals (CA).
While the case was pending, Del Prado
died and was substituted by his surviving
parent, Edgardo Del Prado.
The CA, ruled in favor of the respondents.
The court ordered that these respondents
should be reinstated and that del prado
shall be paid of his separation pay.
Petitioner
filed
a
motion
for
reconsideration. Respondents also filed a
motion
for
reconsideration
and/or
clarification praying that the Appellate
Courts Decision be modified by awarding
respondent Del Prado his backwages.
Court
of
Appeals
promulgated
its
Resolution denying petitioners motion for
reconsideration but modifying its Decision
in the sense that petitioner and J. Narag

Construction
are
ordered
to
pay
respondent Del Prado his separation pay
and backwages.
Hence, this petition for review on certiorari
in SC.
Issues:
Whether or Not there is employeremployee relationship in the case at bar.
Ruling:
Yes,
there
relationship.
is
employer-employee
The SC upheld the CAs ruling. CA found

that the J. Narag Construction assigned
the respondents to perform activities
directly related to the main business of the
petitioner, all the documents that proved
the employment of the respondents were
all approved by the petitioner, such as the
payrolls, the using of equipment, materials
and supplies of the J. narag construction.
The termination of the respondents also
proves that there is employer-employee
relationship, since it was the petitioner
who terminated them and the J. Narag
construction.
Being a legitimate independent contractor
cannot be pinned on J. Narag Construction,
rather the CA held that they are labor-only
contractor which was upheld by the SC
too.
On the basis of the records, we have no
reason to deviate from the Appellate
Courts finding that J. Narag Construction
is indeed a labor-only contractor. These
are the reasons: (1) it is not registered as
a building contractor with the SEC; (2) it
has no contract with petitioner; and (3)
there is no proof of its financial capability
and has no list of equipment, tools,
machineries and implements used in the
business.

ARRANGEMENT
The allegations of the petitioners that the
respondents are project employees, thus
making them contractors and that their
services ended up when the project was
finished is untenable. petitioner could not
present employment contracts signed by
respondents
showing
that
their
employment was for the duration of the
HCMG or Sogo project. Likewise, as
correctly observed by the Court of
Appeals, petitioner failed to present any
report terminating the
services of
respondents when its projects were
actually finished.
Time and again, we held that failure of the
employer to file termination reports after
every project completion with the nearest
public
employment
office
is an
indication
that
respondents
were
employees.
Records show that respondents were not
served by petitioner with notices, verbal or
written, informing them of the particular
acts for which their dismissal is sought.
Neither were they required to give their
side regarding the alleged serious
misconduct imputed against them.
We thus sustain the Court of Appeals

ruling that respondents were deprived of
both their substantive and procedural
rights to due process and, therefore, the
termination of their employment is illegal.
57. ACEVEDO
157656
ADVANSTAR,
GR
FACTS:
The Advanstar Company Inc. (ACI)
was engaged in the distribution and sale
of various brands of liquor and alcoholic
spirits, including the Tanduay brand. To
effectively launch its vigorous marketing
operations, ACI hired several salesmen,

one of whom was Tony Jalapadan. On
September 1, 1994, ACI executed an
Agreement for the Sale of Merchandise
with Jalapadan for a period of one year,
renewable for another year under the
same terms and conditions. Under the
agreement, the parties agreed, inter alia,
that Jalapadan would promote and sell
products of ACI, solicit from customers and
outlets within his designated territory,
collect payments from such customers
and account the same to ACI. Jalapadan
was provided with a 6-wheeler truck to
facilitate the sale and delivery of products
to customers and outlets from his base of
operations. Jalapadan was also authorized
to employ and discharge a driver and
other assistants as he deemed necessary.
It was stipulated, however, that the
hired hands would be considered his
employees, and that he alone would
be liable for their compensation and
actual expenses, including meals
while on duty.
Jalapadan hired Arnulfo Acevedo as
the driver of the truck assigned to him by
ACI. Acevedo was tasked to sell and
deliver stocks to outlets and customers,
collect payments, and to maintain the
truck in good and clean condition. He
reported for work from 6:00 a.m. to 8:00
or 9:00 p.m. Acevedo received a daily
wage of P152.00 and was paid on a
weekly basis. He also enjoyed sick leave
privilege, which benefit was convertible
into cash. Sometime in June 1998, he
received
from
Jalapadan
a
salary
differential for the period of December
1997 to June 1998, following a P15.00
increase in his daily wage. He received his
wages from Jalapadan through vouchers
approved by the latter.
Sometime in July 1998, Acevedo
failed
to
comply
with
Jalapadans
instructions. At that time, they were on

ARRANGEMENT
their way to Plaridel, Misamis Oriental on
board the truck.
Jalapadan ordered
Acevedo to alight from the truck, and
threatened to leave him behind to fend for
himself. However, Jalapadan later asked
him to return to work and the latter
agreed.
On October 7, 1998, Acevedo failed
to report for work. The next day,
Jalapadan inquired why he failed to check
and wash the truck. Jalapadan berated
Acevedo and ordered him to get his
personal belongings and leave. Acevedo
did as he was told. Later, Jalapadan urged
Acevedo to go back to work, stating that
they were one big family, but Acevedo
refused. He then signed a Letterdated
October 10, 1998, informing Jalapadan
that he was resigning effective that date.
However, on October 26, 1998,
Acevedo filed a complaint against
Jalapadan, ACI and its general manager,
Felipe Loi, for illegal dismissal and for the
recovery
of
backwages
and
other
monetary benefits.
ISSUES:
1. WON ACI was the employer of
Jalapadan---YES.
LABOR-ONLY
CONTRACTOR
2. WON Acevedo is an employee of
ACI---YES
3. WON Acevedo resigned from his
employment---NO
HELD:
ISSUES 1&2:
The pertinent provision of the
Labor Code on labor-only contracting is
paragraph 4 of Article 106, which
provides:
There is labor-only
contracting
where
the
person supplying workers to

an employer does not have
substantial
capital
or
investment in the form of
tools,
equipment,
machineries, work premises,
among others, and the
workers
recruited
and
placed by such persons are
performing activities which
are directly related to the
principal business of such
employer. 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.
Rule VIII-A, Book III, Section 4(f) of

Labor Code further defines labor-only
contracting as 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;
(b)
The
employees
recruited,
supplied or placed by such
contractor or subcontractor,
are performing activities

ARRANGEMENT
which are directly related to
the main business of the
principal.
In such case, the law creates an

employee-employer relationship so that
labor laws may not be circumvented. The
principal employer becomes solidarily
liable with the labor-only contractor for all
the rightful claims of the employees. The
labor-only contractor is considered merely
as an agent of the employer, the employer
having been made, by law, responsible to
the employees of the labor-only contractor
as if such employees had been directly
employed by it.
On the other hand, permissible job
contracting or subcontracting refers to an
arrangement whereby a principal agrees
to put out or farm out with the 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 engaging in
legitimate
job
contracting
or
subcontracting if the following conditions
concur:
(a)
The
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
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 selforganization, security of
tenure, and social and
welfare benefits.
The test to determine the

existence
of
an
independent
contractorship is whether one who
claims
to
be
an
independent
contractor has contracted to do the
work according to his own methods
and without being subject to the
employers control except only as to
the results. Each case must be
determined by its own facts and all the
features of the relationship are to be
considered.
In the case of Vinoya v. NLRC, the
Court declared that it is not enough to
show
substantial
capitalization
or
equipment, etc. to determine whether one
is an independent contractor.
Other
factors that may be considered include the
following: whether or not the contractor is

ARRANGEMENT
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,
the mode and manner or terms of
payment.
In
the
present
case,
the
respondents
failed
to
prove
that
respondent Jalapadan was an independent
contractor.
Indeed,
the
substantial
evidence on record shows that he was
merely a labor-only contractor.
First. The respondents failed to
adduce a scintilla of evidence that
respondent Jalapadan had any substantial
capital or investment, such as tools and
equipment,
to
perform
the
work
contracted for. There is even no evidence
that respondent Jalapadan had any assets,
or that he maintained an office, staff or a
terminal for the truck entrusted to him by
respondent ACI.
Second.
Respondent Jalapadan
bound and obliged himself to work
exclusively for respondent ACI during the
terms of the agreement.
Third.
Under the agreement,
respondent ACI had the right to control not
only the end to be attained but also the
manner and means to be used in
accomplishing that end or purpose. Aside
from Jalapadans duties/obligations as
salesman, respondent ACI could require
him to perform other duties and
obligations. Respondent Jalapadan was,
likewise, mandated to obey all rules,

regulations, orders, and instructions,
whether oral or written, of respondent
ACI. He was obliged to work only in the
territory assigned to him, which may be
altered at any time upon the discretion of
ACI.
He was also prohibited from
overpricing or underpricing the products of
respondent ACI, and was required to sell
the same according to the prices dictated
solely by it. While Jalapadan was entitled
to a monthly compensation of P3,590.00
payable on a bi-monthly basis and an
unspecified commission based on booking
sales fully remitted to respondent ACI, the
latter had the absolute right to change, at
any time, the amount and/or all the
payments of such compensation and
commission. Moreover, notice of such
changes
was only
for
information
purposes. Furthermore, Jalapadan was
obliged to inform respondent ACI of his
activities, situation or whereabouts. Since
he did not have any truck for the delivery
of products to customers or outlets, he
had to rely on the truck entrusted to him
by respondent ACI or, in lieu thereof, a
traveling allowance of P600.00 a month
which
could
even
be
changed.
Respondent Jalapadan was prohibited from
incurring any other expenses unless
permission was first secured from
respondent ACI. He was prohibited from
using the truck for purposes other than
the performance of his duties and
responsibilities under the agreement.
Respondent Jalapadan was mandated to
maintain the truck and its accessories in
clean and good order and condition. The
agreement was for a period of one year,
renewable under the same terms and
conditions but the parties could terminate
the agreement upon notice to the other.
Moreover, while respondent ACI did not fix
or impose any quota on respondent
Jalapadan, it reserved the right to do so.

ARRANGEMENT
Fourth. Respondent Jalapadan was
obliged to pay the petitioners monthly
wage of P3,648.00, as well as that of his
helper,
another P4,000.00
a
month,
totaling P7,648.00, exclusive of other
expenses such as meals, gasoline, and the
upkeep of the vehicle. On the other hand,
respondent Jalapadan received from
respondent ACI only P3,590.00 a month as
compensation. He had no other means of
income because he was obliged, under the
agreement, to devote all his time for
respondent ACI. Respondent Jalapadans
claim that he sold the products of the
respondent ACI for a marked-up price as
his commission is belied by their
agreement, which precisely prohibited him
from selling such products at a different
price. Respondent Jalapadan was only
entitled to a commission based on their
booked sales. Aside from the fact that
such commission was not fixed, there is no
evidence on record how much, if any,
respondent Jalapadan received from the
respondent ACI by way of commission.
Considering all these, then, the
Court concludes that the petitioners
wages must have been paid for by
respondent ACI through respondent
Jalapadan, its labor-only contractor.
ISSUE 3:
Ruling of NLRC and CA which the SC
agrees with:
The only incident
from
which
complainant
drew
the conclusion that
he was dismissed
from work is when he
was allegedly told to

disembark from the
vehicle. Nothing on
record shows that he
was terminated from
work.
On
the
contrary,
complainant himself
reveals
that
previously (in July
1995) he was also
told to disembark to
be left on the road by
an angry Jalapadan,
the latter went back
to fetch him and told
him that we are just
one
family.
Evidently,
[these]
incidents were mere
expressions of anger
on
the
part
of
Jalapadan
without
intention
of
terminating
his
employment.
Rather,
it
was
complainant
as
admitted by him
who,
this
time,
refused to return to
work
When he testified before the Labor

Arbiter, the petitioner admitted that he
was not dismissed from employment. In
fact, respondent Jalapadan appealed to
the petitioner to go back to work, and the
latter spurned such plea. The Court finds,
however, that contrary to the rulings of
the NLRC and the CA, the petitioner did
not resign from his employment.
Reliance on the handwritten letter of
resignation dated October 10, 1998 signed
and thumbmarked by the petitioner is
misplaced.
The
handwritten
letter

ARRANGEMENT
of resignation signed by the petitioner is
inconsistent with the respondents claim
that respondent Jalapadan was the
petitioners employer. This is so because
the said letter is addressed to Tanduay
Corporation, and not to respondent
Jalapadan, thus:
TANDUAY CORPORATION
OZAMIS BRANCH
THRU:
MR.
TONY
JALAPADAN, SALESMAN
SIR:
I HAVE THE HONOR
TO
TENDER
MY
RESIGNATION,
EFFECTIVE
OCT. 10, 1998, BY REASON
THAT I AM SEARCHING FOR
BETTER INCOME. BY VIRTUE
THAT
MY
SALARY
CURRENTLY
IS
NOT
SUFFICIENT FOR MY FAMILY.
HOPE AND PRAY FOR
YOUR CONSIDERATION AND
I REMAIN PRAYING FOR THE
CONTINUOUS SUCCESS OF
YOUR MOST PROGRESSIVE
COMPANY AND I HAVE NO
CLAIM WHATSOEVER.
HANDTHUMBMARK
VERY
YOURS,
TRULY
(SGD.)________
HANDTHUMBMARK
ARNULFO
ACEBEDO
Neither the petitioner nor the

respondents explained why the letter was
addressed
to
Tanduay
Corporation.
Significantly, respondent Jalapadan did not
deny the petitioners claim that the letter
was handwritten by him (Jalapadan). If
such claim were true, there is neither
rhyme
nor
reason
why
Tanduay
Corporation was its addressee. Moreover,
it appears that the letter was coursed
through
respondent
Jalapadan
as
salesman of the said corporation, which is
antithetical to the respondents claim that
he was the petitioners employer and an
independent contractor of respondent ACI.
58. Big AA Manufacturer vs. Antonio,

G.R. No. 1608504, March 3, 2006
Facts:
Petitioner
is
a
sole
proprietorship
registered in the name of its proprietor,
Enrico E. Alejo, with office address at 311
Barrio Santol, Balagtas, Bulacan.
On January 13, 2000, herein respondents
Eutiquio Antonio,Jay Antonio, Felicisimo
Antonio, Leonardo Antonio, Sr. and
Roberto Fabian filed a complaint for illegal
lay-off and illegal deductions before the
NLRCs Regional Arbitration Branch No. III.
They claimed that they were dismissed on
January 11, 2000 and sought separation
pay from petitioner.
In
respondents
position
paper,they
alleged that as regular employees, they
worked from 8:00 a.m. to 5:00 p.m. at
petitioners premises using petitioners
tools and equipment and they received
P250 per day. Eutiquio was employed as
carpenter-foreman from 1991-1999; Jay as
carpenter from 1993-1999; Felicisimo as

ARRANGEMENT
carpenter from 1994-1999; and Leonardo,
Sr. also as carpenter from 1997-1999.
According to respondents, they were
dismissed without just cause and due
process;
hence,
their
prayer
for
reinstatement and full backwages.
On the other hand, petitioner denied that
respondents were its regular employees.
Instead, petitioner claimed that Eutiquio
Antonio was one of its independent
contractors who used the services of the
other respondents. According to petitioner,
its independent contractors were paid by
results and were responsible for the
salaries of their own workers. Allegedly,
there
was
no
employer-employee
relationship
between
petitioner
and
respondents. However, petitioner stated it
allowed respondents to use its facilities to
meet job orders.
Petitioner also denied that respondents
were laid-off, since they were project
employees only. It added that since
Eutiquio Antonio had refused a job order of
office tables, their contractual relationship
ended.
On June 1, 2000, the Labor Arbiter
rendered a decisionordering petitioner to
pay separation pay and backwages. It
ruled that respondents were regular
employees
because
their
work
as
carpenters was necessary and desirable in
petitioners business. Since Eutiquio
worked in petitioners premises and was
without substantial capital or investment
in the form of tools, equipment, machinery
or work premises, the Labor Arbiter held
that Eutiquio was not an independent
contractor.
Noting
the
absence
of
contracts providing the duration of
respondents employment and of reports
of project completion to the Department of
Labor and Employment (DOLE), the Labor
Arbiter also rejected petitioners allegation
that respondents were project employees.
The Labor Arbiter further held that

respondents
were
constructively
dismissed
when
the
Implementing
Guidelines changed their status from
regular employees to project employees.
On appeal, the NLRC modified the Labor
Arbiters decision by ordering petitioner to
reinstate respondents to their former
positions or to pay them separation pay in
case reinstatement was no longer feasible,
with full backwages in either case. It ruled
that respondents were regular employees,
not independent contractors. It further
held that petitioner failed to justify its
reason for terminating respondents and its
failure to comply with the due process
requirements.
Issue:
Whether or not respondents were regular
employees and were illegally dismissed.
Ruling:
Respondents are petitioners regular
employees. Respondents were employed
for more than one year and their work as
carpenters was necessary or desirable in
petitioners usual trade or business of
manufacturing office furniture. Under
Article 280 of the Labor Code, the
applicable test to determine whether an
employment should be considered regular
or
non-regular
is
the
reasonable
connection between the particular activity
performed by the employee in relation to
the usual business or trade of the
employer.
True, certain forms of employment require
the performance of usual or desirable
functions and exceed one year but do not
necessarily result to regular employment
under Article 280 of the Labor Code.Some
specific exceptions include project or
seasonal employment. Yet, in this case,

ARRANGEMENT
respondents cannot be considered project
employees. Petitioner had neither shown
that respondents were hired for a specific
project the duration of which was
determined at the time of their hiring nor
identified the specific project or phase
thereof for which respondents were hired.
We also agree that Eutiquio was not an
independent contractor for he does not
carry a distinct and independent business,
and he does not possess substantial
capital or investment in tools, equipment,
machinery or work premises.He works
within petitioners premises using the
latters tools and materials, as admitted
by petitioner. Eutiquio is also under
petitioners
control
and
supervision.
Attesting to this is petitioners admission
that it allowed respondents to use its
facilities for the "proper implementation"
of job orders. Moreover, the Implementing
Guidelines
regulating
attendance,
overtime, deadlines, penalties; providing
petitioners right to fire employees or
"contractors"; requiring the carpentry
division to join petitioners exercise
program; and providing rules on machine
maintenance, all reflect control and
supervision over respondents.
Petitioner likewise alleges that it did not
dismiss respondents as they were not its
regular employees; that respondents
failed to sufficiently establish the fact of
illegal dismissal; and that respondents
abandoned the work after it issued the
Implementing Guidelines.
Having ruled that respondents are regular
employees, we shall proceed to determine
whether respondents have, as petitioner
contends, abandoned their work, or they
have been illegally dismissed.
The consistent rule is that the employer
must
affirmatively
show
rationally
adequate evidence that the dismissal was
for a justifiable cause, failing in which

would make the termination illegal, as in
this case.
For
accusing
respondents
of
abandonment, petitioner must present
evidence (1) not only of respondents
failure to report for work or absence
without valid reason, but (2) also of
respondents clear intention to sever
employer-employee
relations
as
manifested by some overt acts. The
second element is the more determinative
factor.
Here, petitioners argument in support of
its abandonment charge
was that
respondents may have resented its
issuance of the Implementing Guidelines.
This, in our view, fails to establish
respondents intention to abandon their
jobs. On the contrary, by filing the
complaint for illegal dismissal within two
days of their dismissal on January 11,
2000 and by seeking reinstatement in
their
position
paper,
respondents
manifested
their
intention
against
severing their employment relationship
with petitioner and abandoning their jobs.
It is settled that an employee who
forthwith protests his layoff cannot be said
to have abandoned his work.
Finally,
Article
279
of
the
Labor
Code,provides that a regular employee
who is unjustly dismissed from work is
entitled to reinstatement without loss of
seniority rights and other privileges and to
his
full
backwages,
inclusive
of
allowances, and to his other benefits or
their monetary equivalent computed from
the time his compensation was withheld
from him up to the time of his actual
reinstatement. If reinstatement is no
longer feasible, separation pay equivalent
to one month salary for every year of
service should be awarded as an
alternative. This has been our consistent

ARRANGEMENT
ruling in the award of separation pay to
illegally dismissed employees in lieu of
reinstatement.
59.) DOLE Philippines, Inc. Vs. Esteva
G.R. No. 161115, Nov. 30, 2006
Petition for Review on Certiorari

under Rule 45 of the revised Rules of Civil
Procedure seeking the reversal of the
Decision, dated 20 May 2002, and the
Amended Decision, dated 27 November
2003, both rendered by the Court of
Appeals in CA-G.R. SP No. 63405, which
declared
herein
petitioner
Dole
Philippines, Inc. as the employer of herein
respondents, Medel Esteva and 86 others;
found petitioner guilty of illegal dismissal;
and ordered petitioner to reinstate
respondents to their former positions and
to pay the latter backwages.
Facts
Petitioner is a corporation engaged
principally
in
the
production
and
processing of pineapple for the export
market. Respondents are members of the
Cannery
Multi-Purpose
Cooperative
(CAMPCO). CAMPCO was organized in
accordance with Republic Act No. 6938,
otherwise known as the Cooperative Code
of the Philippines. Pursuant to the Service
Contract, CAMPCO members rendered
services to petitioner. The number of
CAMPCO members that report for work
and the type of service they performed
depended on the needs of petitioner at
any given time. Although the Service
Contract specifically stated that it shall
only be for a period of six months, i.e.,
from 1 July to 31 December 1993, the
parties had apparently extended or
renewed the same for the succeeding
years without executing another written
contract.
It
was
under
these
circumstances that respondents came to
work for petitioner. DOLE organized a Task
Force that conducted an investigation into
the
alleged
labor-only
contracting
activities of the cooperatives. The Task

Force identified six cooperatives that were
engaged in labor-only contracting, one of
which was CAMPCO. In this case,
respondents alleged that they started
working for petitioner at various times in
the years 1993 and 1994, by virtue of the
Service
Contract
executed
between
CAMPCO and petitioner.
All of the
respondents had already rendered more
than one year of service to petitioner.
While some of the respondents were still
working for petitioner, others were put on
stay home status on varying dates in
the years 1994, 1995, and 1996 and were
no longer furnished with work thereafter.
Together, respondents filed a Complaint
with the NLRC for illegal dismissal,
regularization,
wage
differentials,
damages and attorneys fees. Petitioner
denied
that
respondents
were
its
employees. It explained that it found the
need to engage external services to
augment its regular workforce, which was
affected by peaks in operation, work
backlogs, absenteeism, and excessive
leaves. It used to engage the services of
individual workers for definite periods
specified in their employment contracts
and never exceeding one year. However,
such an arrangement became the subject
of a labor case, in which petitioner was
accused of preventing the regularization of
such workers.
Issues
Whether or not the court of

appeals was correct when it
made
its
own
factual
findings and disregarded
the factual findings of the
labor arbiter and the NLRC.
Whether or not CAMPCO
was a mere labor-only
contractor.
Ruling
The Court in the exercise of its equity
jurisdiction may look into the records of
the case and re-examine the questioned
findings. As a corollary, this Court is
clothed with ample authority to review
matters, even if they are not assigned as
errors in their appeal, if it finds that their

ARRANGEMENT
consideration is necessary to arrive at a
just decision of the case. The same
principles are now necessarily adhered to
and are applied by the Court of Appeals in
its expanded jurisdiction over labor cases
elevated through a petition for certiorari;
thus, we see no error on its part when it
made anew a factual determination of the
matters and on that basis reversed the
ruling of the NLRC.
On the second issue, CAMPCO was a mere
labor-only contractor. First, although
petitioner touts the multi-million pesos
assets of CAMPCO, it does well to
remember that such were amassed in the
years following its establishment. In 1993,
when CAMPCO was established and the
Service Contract between petitioner and
CAMPCO was entered into, CAMPCO only
had P6,600.00 paid-up capital, which
could hardly be considered substantial. It
only managed to increase its capitalization
and assets in the succeeding years by
continually and defiantly engaging in what
had been declared by authorized DOLE
officials as labor-only contracting. Second,
CAMPCO did not carry out an independent
business from petitioner. It was precisely
established to render services to petitioner
to augment its workforce during peak
seasons. Petitioner was its only client.
Even as CAMPCO had its own office and
office equipment, these were mainly used
for administrative purposes; the tools,
machineries, and equipment actually used
by CAMPCO members when rendering
services to the petitioner belonged to the
latter. Third, petitioner exercised control
over the CAMPCO members, including
respondents. Petitioner attempts to refute
control by alleging the presence of a
CAMPCO supervisor in the work premises.
Yet, the mere presence within the
premises of a supervisor from the
cooperative did not necessarily mean that
CAMPCO had control over its members.
Section 8(1), Rule VIII, Book III of the
implementing rules of the Labor Code, as
amended, required for permissible job
contracting that the contractor undertakes
the contract work on his 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.
As alleged by the
respondents,
and
unrebutted
by
petitioner, CAMPCO members, before
working for the petitioner, had to undergo
instructions and pass the training provided
by
petitioners
personnel.
It
was
petitioner who determined and prepared
the work assignments of the CAMPCO
members. CAMPCO members worked
within
petitioners
plantation
and
processing
plants
alongside
regular
employees performing identical jobs, a
circumstance recognized as an indicium of
a
labor-only
contractorship.
Fourth,
CAMPCO was not engaged to perform a
specific and special job or service. In the
Service Contract of 1993, CAMPCO agreed
to assist petitioner in its daily operations,
and perform odd jobs as may be
assigned. CAMPCO complied with this
venture
by
assigning
members to
petitioner. Apart from that, no other
particular job, work or service was
required from CAMPCO, and it is apparent,
with such an arrangement, that CAMPCO
merely acted as a recruitment agency for
petitioner.
Since the undertaking of
CAMPCO did not involve the performance
of a specific job, but rather the supply of
manpower
only,
CAMPCO
clearly
conducted itself as a labor-only contractor.
Lastly, CAMPCO members, including
respondents, performed activities directly
related to the principal business of
petitioner. They worked as can processing
attendant, feeder of canned pineapple and
pineapple processing, nata de coco
processing
attendant,
fruit
cocktail
processing attendant, and etc., functions
which were, not only directly related, but
were very vital to petitioners business of
production and processing of pineapple
products for export.
The declaration that CAMPCO is
indeed engaged in the prohibited
activities of labor-only contracting,
then consequently, an employeremployee relationship is deemed to
exist
between
petitioner
and
respondents, since CAMPCO shall
be considered as a mere agent or
intermediary of petitioner.

ARRANGEMENT
Since
respondents
are
now
recognized
as
employees
of
petitioner, this Court is tasked to
determine the nature of their
employment. In consideration of
all the attendant circumstances in
this case, this Court concludes that
respondents are regular employees
of petitioner. As such, they are
entitled to security of tenure. They
could only be removed based on
just and authorized causes as
provided for in the Labor Code, as
amended, and after they are
accorded procedural due process.
Therefore, petitioners acts of
placing some of the respondents on
stay home status and not giving
them work assignments for more
than six months were already
tantamount to constructive and
illegal dismissal.
60.G.R. No. 147566
December 6,
2006
SAN
MIGUEL
CORPORATION,
petitioner vs. NATIONAL LABOR
RELATIONS
COMMISSION
AND
RAFAEL MALIKSI, respondent.
FACTS:
On 16 October 1990, Rafael M.
Maliksi filed a complaint against the San
Miguel
Corporation-Magnolia
Division,
herein referred to as SMC and Philippine
Software Services and Education Center
herein referred to as PHILSSEC to compel
the said respondents to recognize him as a
regular employee. He amended the
complaint on 12 November 1990 to
include the charge of illegal dismissal
because his services were terminated on
31 October 1990.
The complainants employment
record indicates that he rendered service
with Lipercon Services from 1 April 1981
to February 1982 as budget head assigned
to SMC-Beer Division, then from July 1983
to April 1985 with Skillpower, Inc., as
accounting clerk assigned to SMCMagnolia Division, then from October 1988
to 1989 also with Skillpower, Inc. as acting
clerk assigned to SMC-Magnolia Finance,

and from October 1989 to 31 October
1990 with PHILSSEC assigned to Magnolia
Finance
as
accounting
clerk.
The
complainant considered himself as an
employee of SMC-Magnolia. Lipercon
Services, Skillpower, Inc. and PHILSSEC
are labor-only contractors and any one of
which had never been his employer. His
dismissal, according to him, was in
retaliation for his filing of the complaint for
regularization in service. His dismissal was
illegal there being no just cause for the
action. He was not accorded due process
neither was his dismissal reported to the
Department of Labor and Employment.
SMC likewise contends that PHILSSEC
exercised
exclusive
managerial
prerogative over the complainant as to
hiring, payment of salary, dismissal and
most importantly, the control over his
work. SMC was interested only in the
result of the work specified in the contract
but not as to the means and methods of
accomplishing
the
same.
Moreover,
PHILSSEC has substantial capital of its
own. It has an IBM system, 3 computers,
17 IBM or IBM-compatible computers; it
has a building where the computer
training center and main office are
located. What it markets to clients are
computer programs and training systems
on computer technology and not the usual
labor
or
manpower
supply
to
establishment concerns. Moreover, what
PHILSSEC
set
up
employing
the
complainant, among others, has no
relation to the principal business of SMC,
which is food and beverage..
The Labor Arbiter declared
Maliksi a regular employee of PHILSSEC
and absolved SMC from liability. Maliksi
appealed to the NLRC. In turn, in a
decision dated January 26, 1998, the NLRC
reversed that of the Labor Arbiter by
declaring Maliksi a regular employee of
the petitioner and ordering the latter to
reinstate him without loss of seniority
rights and with full benefits.
Issue:
WHETHER OR NOT PRIVATE

RESPONDENT IS A REGULAR EMPLOYEE
OF
PETITIONER
SMC
DESPITE
ITS

ARRANGEMENT
FINDINGS
THAT
PHILSSEC
IS
AN
INDEPENDENT
JOB
CONTRACTOR?
(affirmative)
Ruling:
SMC concedes that Maliksi, before
his employment with PHILSSEC, worked in
SMC from November 1988 to April 1990,
but as employee of Skillpower and that he
was previously assigned to SMC between
1981 up to February 1985, for periods
spread apart. The Labor Arbiter found, as
earlier stated, that Maliksi rendered
service with Lipercon from 1 April 1981 to
February 1982 as budget head assigned to
SMC-Beer Division; from July 1983 to April
1985 with Skillpower as accounting clerk
assigned to SMC-Magnolia Division, then
from October 1988 to 1989 also with
Skillpower as acting clerk assigned to
SMC-Magnolia Finance, and from October
1989 to 31 October 1990 with PHILSSEC
assigned
to
Magnolia
Finance
as
accounting clerk. In all, it appears that,
while under the employ of either Lipercon
or Skillpower, Maliksi has undisputedly
rendered service with SMC for at least
three years and seven months.
The Court takes judicial notice of the
fact that Lipercon and Skillpower were
declared to be labor-only contractors,
providing as they do manpower services
to the public for a fee. The existence of an
employer-employee relationship is factual
and we give due deference to the factual
findings of both the NLRC and the CA that
an
employer-employee
relationship
existed between SMC and Maliksi. Indeed,
having served SMC for an aggregate
period of more than three (3) years
through employment contracts with these
two labor contractors, Maliksi should be
considered as SMCs regular employee.
The hard fact is that he was hired and rehired by SMC to perform administrative
and clerical work that was necessary to
SMCs business on a daily basis.
The act of hiring and re-hiring the
petitioners over a period of time without
considering them as regular employees
evidences bad faith on the part of private
respondent. The public respondent made
a finding to this effect when it stated that
the subsequent re-hiring of petitioners on

a probationary status clearly appears to
be a convenient subterfuge on the part of
management to prevent complainants
(petitioners)
from
becoming
regular
employees.
Issue: Whether or not individual private
respondents should first comply with
certain requirements, like submission of
NBI and police clearances and submission
to physicak and medical examinations and
etc?
Ruling: Considering that the clearances
and examinations sought by petitioners
from private respondents are not 'periodic'
in nature but are made preconditions for
reinstatement, as in fact the petition filed
alleged that reinstatement shall be
effective upon compliance with such
requirements, which should not be the
case because this is not a case of initial
hiring, the workers concerned having
rendered years of service to petitioners
who are considered direct employers, and
that regularization is a labor benefit that
should apply to all qualified employees
similarly situated and may not be denied
merely because some employees were
allegedly not parties to or were not
impleaded in the voluntary arbitration
case, even as the finding of Labor Arbiter
Genilo is to the contrary, this Court finds
no grave abuse of discretion committed by
Labor Arbiter Genilo in issuing the
questioned order of October 20, 1988.
61.Eparwa Security and Janitorial
Services vs. Liceo De Cagayan
University
Facts:
Eparwa
and
LDCU,
through
their
representatives, entered into a Contract
for Security Services. Subsequently, 11
security guardswhom Eparwa assigned to
LDCU filed a complaint before the NLRCRAB against both Eparwa and LDCU for
underpayment of salary, legalholiday pay,
13th month pay, rest day, service
incentive leave, night shift differential,
overtime pay, and payment for attorney's
fees. LDCU madea cross-claim and prayed
that Eparwa should reimburse LDCU for
any payment to the security guards.The

ARRANGEMENT
LA found that the security guards are
entitled to wage differentials and premium
for holiday and rest day work. The LA held
Eparwa
and
LDCU
solidarily
liable
pursuant to Article 109 of the Labor Code
and likewise orderd Eparwa to reimburse
LDCU for whateveramount the latter may
be required to pay the security guards. On
appeal to the NLRC, Eparwa and LDCU was
held
solidarily
liable
for
the
wagedifferentials and premium for holiday
and rest day work, but the NLRC did not
require Eparwa to reimburse LDCU for its
payments to thesecurity guards. Upon
motion for reconsideration, NLRC declared
that although Eparwa and LDCU are
solidarily liable to the security guards
forthe monetary award, LDCU alone is
ultimately liable ordering it to reimburse
Eparwa for payments made to the
contractual employees. Uponappeal to the
CA, the appellate court allowed LDCU to
claim
reimbursement
from
Eparwa.
Eparwa then filed an action for certiorari
before the SC.
Creditors, such as the security guards,

may collect from anyone of the solidary
debtors. Solidary liabilitydoes not mean
that, as between themselves, two solidary
debtors are liable for only half of the
payment. LDCU's ultimate liability comes
intoplay because of the expiration of the
Contract for Security Services. There is no
privity of contract between the security
guards and LDCU, butLDCU's liability to
the security guards remains because of
Articles 106, 107 and 109 of the Labor
Code. Eparwa is already precluded from
askingLDCU for an adjustment in the
contract price because of the expiration of
the contract, but Eparwa's liability to the
security guards remainsbecause of their
employer-employee relationship. In lieu of
an adjustment in the contract price,
Eparwa may claim reimbursement from
LDCUfor any payment it may make to the
security guards. However, LDCU cannot
claim any reimbursement from Eparwa for
any payment it maymake to the security
guards.
Issue: Whether or not LDCU alone is

ultimately liable to the security guards for
the wage differentials and premium for
holiday and rest daypay without any right
of reimbursement from Eparwa.
62.Lapanday Agri Development Corp.,

vs. Court of Appeals, 324 SCRA 39
Ruling: This joint and several liability of

the contractor and the principal is
mandated by the Labor Code to assure
compliance
of
theprovisions
therein
including the statutory minimum wage.
The contractor is made liable by virtue of
his status as direct employer. The
principal,on the other hand, is made the
indirect employer of the contractor's
employees for purposes of paying the
employees
their
wages
should
thecontractor be unable to pay them. This
joint and several liability facilitates, if not
guarantees, payment of the workers'
performance of any work,task, job or
project, thus giving the workers ample
protection as mandated by the 1987
Constitution. For the security guards, the
actual source of the payment of their
wage differentials and premium for holiday
and rest day work does not matter as long
as they are paid. This is the import of
Eparwa and LDCU's solidary liability.
FACTS: On June 1986 private respondent

and plaintiff entered into a Guard Service
Contract. Respondent provided security
guards in defendant's banana plantation.
The contract called for the payment to a
guard of P754.28 on a daily 8-hour basis
and an additional P565.72 for a four hour
overtime while the shift-in-charge was to
be paid P811.40 on a daily 8-hour basis
and P808.60 for the 4-hour overtime.
Wage Orders increasing the minimum
wage in 1983 were complied with by the
defendant. On June 16, 1984, Wage Order
No. 5 was promulgated directing an
increase of P3.00 per day on the minimum
wage of workers in the private sector and
a P5.00 increase on the ECOLA. This was
followed on November 1, 1984 by Wage
Order No. 6 which further increased said
minimum wage by P3.00 on the ECOLA.
Both Wage Orders contain the following
provision:
"In the case of contract for construction
projects and for security, janitorial and
similar services, the increase in the
minimum wage and allowances rates of

ARRANGEMENT
the workers shall be borne by the principal
or client of the construction/service
contractor and the contracts shall be
deemed amended accordingly, subject to
the provisions of Sec. 3 (b) of this order"
(Sec. 6 and Sec. 9, Wage Orders No. 5 and
6, respectively).
- Respondent demanded that its Guard
Service Contract with defendant be
upgraded in compliance with Wage Order
Nos. 5 and 6. Plaintiff refused. Their
Contract expired on June 6, 1986 without
the rate adjustment called for Wage Order
Nos. 5 and 6 being implemented. The
security agency then filed a case for the
collection of a sum of money with the
regional Trial Court that had jurisdiction
over the case. Lapanday opposed, stating
the NLRC was the proper forum for the
case.
ISSUES:
1. WON RTC has jurisdiction over the case
2. WON petitioner is liable to the private
respondent for the wage adjustments
provided under Wage Order Nos. 5 and 6
and for attorney's fees
RULING:
1. YES
The enforcement of the written contract
does not fall under the jurisdiction of the
NLRC because the money claims involved
therein did not arise from employeremployee relations between the parties
and is intrinsically a civil dispute. Thus,
jurisdiction lies with the regular courts.
The RTC has jurisdiction over the subject
matter of the present case. It is well
settled in law and jurisprudence that
where no employer-employee relationship
exists between the parties and no issue is
involved which may be resolved by
reference to the Labor Code, other labor
statutes or any collective bargaining
agreement, it is the Regional Trial Court
that has jurisdiction.
In its complaint, private respondent is not
seeking any relief under the Labor Code
but seeks payment of a sum of money and
damages on account of petitioner's
alleged breach of its obligation under their
Guard Service Contract. The action is
within the realm of civil law hence
jurisdiction over the case belongs to the
regular courts. While the resolution of the

issue involves the application of labor
laws, reference to the labor code was only
for the determination of the solidary
liability of the petitioner to the respondent
where no employer-employee relation
exists.
The liability of the petitioner to reimburse
the respondent only arises if and when
respondent actually pays its employees
the increases granted by Wage Order Nos.
5 and 6. Payment, which means not only
the delivery of money but also the
performance, in any other manner, of the
obligation, is the operative fact which will
entitle either of the solidary debtors to
seek reimbursement for the share which
corresponds to each of the debtors.
It is not disputed that the private
respondent has not actually paid the
security guards the wage increases
granted under the Wage Orders in
question. Neither is it alleged that there is
an
extant
claim
for
such
wage
adjustments from the security guards
concerned, whose services have already
been terminated by the contractor.
Accordingly, private respondent has no
cause of action against petitioner to
recover the wage increases. Needless to
stress, the increases in wages are
intended for the benefit of the laborers
and the contractor may not assert a claim
against the principal for salary wage
adjustments that it has not actually paid.
Otherwise, as correctly put by the
respondent, the contractor would be
unduly enriching itself by recovering wage
increases, for its own benefit.
Finally, considering that the private
respondent has no cause of action against
the petitioner, private respondent is not
entitled to attorney's fees.
Petition GRANTED. The complaint of
private respondent COMMANDO SECURITY
SERVICE
AGENCY,
INC.
is
hereby
DISMISSED.
63.Escario vs. NLRC, 333 SCRA 257
[2000]
FACTS:
Petitioners
worked
as
merchandisers for CMC, a company
engaged in manufacturing and distributing
food products. They filed a case against

ARRANGEMENT
CMC to regularize their employment
status. Pending determination of the case,
D.L.
Admark,
a
promotional
firm,
dismissed the petitioners. Hence, they
amended their complaint to include illegal
dismissal as a cause of action and
impleaded
D.L.
Admark
as
partydefendant.
The issue brought to the fore is whether
petitioners are employees of CMC or D.L.
Admark. IDESTH
The Labor Arbiter ruled that petitioners
should be reinstated by CMC as they are
employees engaged in activities necessary
and desirable in the usual business of
CMC. The NLRC, on the other hand, ruled
that D.L. Admark is a legitimate
independent contractor, which should be
the one to reinstate the petitioners with
backwages.
Hence, this petition.
ISSUE:
Whether
petitioners
are
employees of CMC or D.L. Admark. In
resolving this, it is necessary to determine
whether D.L. Admark is a labor-only
contractor or an independent contractor.
HELD: The Supreme Court affirmed the
decision of the NLRC, ruling that based on
the criteria for determining whether there
is
labor-only
contracting
or
job
contracting, the status of D.L. Admark as a
job contractor or independent contractor,
hence, the true employer of petitioners,
was established in this case. The Court
also affirmed the NLRC finding that D.L.
Admark had no just cause in dismissing
petitioners for allegedly disowning them
as their employer.
There is labor-only contracting when the
contractor
or
sub-contractor
merely
(a) The person supplying workers to an
among others; and
(b) The workers recruited and placed by

business of the employer. 7
In contrast, there is permissible job
contracting when a principal agrees to put
out or farm out with a contractor or a
subcontractor
the
performance
or
period, regardless of whether such job or
of the principal. In this arrangement, the
following conditions must concur:
(a) The contractor carries on a distinct and
independent business and undertakes the
contract work on his account under his
own responsibility according to his own
and direction of his employer or principal
in all matters connected with the
performance of his work except as to the
results thereof; and cdphil
(b) The contractor has substantial capital
or investment in the form of tools,
equipment,
machineries
(sic),
work
premises, and other materials which are
necessary in the conduct of his business.
In the recent case of Alexander Vinoya vs.
NLRC, et al., 9 this Court ruled that in
order to be considered an independent
contractor it is not enough to show
the form of tools, equipment, machinery
and work premises. In addition, the
following factors need be considered: (a)
whether the contractor is carrying on an
independent business; (b) the nature and
extent of the work; (c) the skill required;
(d) the term and duration of the
relationship; (e) the right to assign the
(f) the control and supervision of the
workers; (g) the power of the employer
with respect to the hiring, firing and
payment of workers of the contractor; (h)
the control of the premises; (i) the duty to
supply
premises,
tools,
appliances,
materials, and labor; and (j) the mode,
manner and terms of payment. 10
Based on the foregoing criterion, we find
that D.L. Admark is a legitimate

ARRANGEMENT
Among the circumstances that tend to
establish the status of D.L. Admark as a
legitimate job contractor are:
1) The SEC registration certificate of D.L.
Admark states that it is a firm engaged in
promotional, advertising, marketing and
merchandising activities.
2) The service contract between CMC and
D.L. Admark clearly provides that the
agreement is for the supply of sales
promoting merchandising services rather
than one of manpower placement. 11
3) D.L. Admark was actually engaged in
several activities, such as advertising,
publication, promotions, marketing and
merchandising.
It
had
several
merchandising contracts with companies
like Purefoods, Corona Supply, Nabisco
Biscuits, and Licron. It was likewise
engaged in the publication business as
evidenced
by
its
magazine
the
"Phenomenon." 12
4) It had its own capital assets to carry out
its promotion business. It then had current
assets amounting to P6 million and is
therefore a highly capitalized venture. 13
It had an authorized capital stock of
P500,000.00. It owned several motor
vehicles and other tools, materials and
equipment to service its clients. It paid
rentals of P30,020 for the office space it
occupied.
64. ABOITIZ HAULERS VS.DIMAPATOI
Sept. 19, 2006, G.R. No. 148619
Facts:
Petitioner Aboitiz Haulers, Inc. is a

domestic corporation principally engaged
in the nationwide and overseas forwarding
and distribution of cargoes. Private
respondents MonaoraiDimapatoi, Cecilia
Agawin,
Raul
Mamate,
Emmanuel
Guerrero and GemenianoBigaw worked as
checkers in the Mega Warehouse, which is
owned by the petitioner, located at the
Tabacalera Compound, United Nations
Avenue, Manila.
Respondents maintain that during
their employment with the petitioner, they
were not paid their regular holiday pay,
night shift differential, 5-day service
incentive leave, and overtime premium.
They also averred that illegal deductions

were being made on their wages,
particularly the contributions for a Mutual
Assistance Fund, a Cash Bond, and claims
for damaged and misrouted cargoes
incurred by petitioner.
On 17 May 1996, respondent Raul
Mamate filed a complaint before the
Department of Labor and Employment
(DOLE) for nonpayment of wages and
other benefits, as well as illegal
deductions. The other respondents filed
their own complaints. Since the claims of
the respondents exceeded Five Thousand
Pesos (P5,000.00), the case was referred
to the NLRC. Thereafter, respondents filed
their complaint for illegal dismissal and
other money claims before the Arbitration
Branch of the NLRC.
Petitioner claims that respondents
are not its employees, rather they are the
employees of Grigio Security Agency and
General Services (Grigio), a manpower
agency that supplies security guards,
checkers and stuffers. It allegedly entered
into a Written Contract of Service with
Grigio on 1 March 1994. By virtue of the
aforementioned
Written
Contract
of
Service, Grigio supplied petitioner with
security guards, checkers and stuffers for
petitioner's
Mega
Warehouse.
The
respondents were among the checkers
that were assigned to the petitioner's
warehouse.
Petitioner emphasizes that Grigio
retained control over the respondents by
providing their own supervisors to oversee
Grigio's personnel, as well as time cards to
monitor the attendance of its personnel.
Petitioner also alleges that on 9 May 1996,
the respondents left the warehouse and
did not report to work thereafter. As a
result of
the
respondents' sudden
abandonment of their work, there was no
orderly and proper turnover of papers and
other company property in connection
with the termination of the Written
Contract for Services.
Respondents, on the other hand,
claim that most of them worked as
checkers in petitioner's warehouse even
before 1 March 1994.
Issue:

ARRANGEMENT
Whether or not Grigio is a "laboronly" contractor.
Ruling:
Grigio is a "labor-only" contractor.
The first issue that needs to be resolved is
whether Grigio is a "labor-only" contractor,
which is tantamount to a finding that the
petitioner is the employer of the
respondents.
Article 106 of the Labor
Code 24 explains the relations which may
arise between an employer, a contractor
and the contractor's employees thus:
ART. 106.
Contractor or
subcontractor. Whenever
an employer enters into a
contract
with
another
person for the performance
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.
subcontractor fails to pay the wages of his
work performed under the contract in the
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 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
and placed by such persons are
performing activities which 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 first two paragraphs of Art. 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.
The
third
paragraph of Art. 106, however, empowers
the
Secretary
of
Labor
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
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. Section
7 of the Rules Implementing Articles 106
to 109 of the Labor Code, as amended,
reiterates the rules in determining the
existence
of
employer-employee
relationship between employer, contractor
or subcontractor, and the contractor's or
subcontractor's employee.
Section 7.
Existence of
an
employer-employee
relationship.
The
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

ARRANGEMENT
any of the following cases, as declared by
a competent authority:
a. where there is a labor-only
contracting; or
b. where the contracting arrangement
falls
within
the
prohibitions
provided in Section 6 (Prohibitions)
hereof.
In determining whether or not a
"labor-only" contracting exists, Art. 106 of
the Labor Code and Section 5 of the Rules
Implementing Articles 106 to 109 of the
Labor Code, as amended, provides the
following criteria: (1) 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 other
things; (2) the workers recruited and
placed by such persons are performing
activities which are directly related to the
principal business of such employer; and
(3) the contractor does not exercise the
right to control the performance of the
work of the contractual employee. In order
that one is considered by law as a "laboronly" contractor, all three aforementioned
criteria need not be present. If the
contractor enters into an arrangement
characterized by any one of the criteria
provided, this would be a clear case of
"labor-only
contracting."
The
clear
phrasing of Section 5 of the Rules
Implementing
Articles 106 to 109 of the Labor
Code,
as
amended,
support
this
interpretation.
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
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
over
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 reserved to the person for whom
the services of the contractual workers are
performed, to determine not only the end
to be achieved, but also the manner and
means to be used in reaching that end.
The allegation of the petitioner that
Grigio is an independent job contractor,
and, therefore, this case is one of
permissible job contracting, is without
basis. In this case, the respondents' work,
as warehouse checkers, is directly related
to the principal business of the petitioner.
Petitioner also exercises the right to
control and determines not only the end to
be achieved, but also the manner and
Lastly, petitioner failed to sufficiently
prove that Grigio had "substantial capital
or investment."
The respondents, as checkers, were
employed to check and inspect these

ARRANGEMENT
cargoes, a task which is clearly necessary
for the petitioner's business of forwarding
and distributing of cargoes. The petitioner
did not dispute the fact that the
respondents were hired as checkers as
early as 1992. The fact that they were
employed before the Written Contract of
Services took effect on 24 February 1994,
and continued with their jobs until 1996,
after the said contract had already expired
on 24 February 1995, 29 indicates that the
respondents' work was indeed necessary
for the petitioner's business. In a similar
case, Guarin v. National Labor Relations
Commission, the workers' contracts were
repeatedly renewed to perform services
necessary for the employer's business.
Thus,
the
Court
described
the
arrangement as "labor-only" contracting:
The jobs assigned to the petitioners
as mechanics, janitors, gardeners, firemen
and grasscutters were directly related to
the business of Novelty as a garment
manufacturer. In the case of Philippine
Bank of Communications vs. NLRC, 146
SCRA 347, we ruled that the work of a
messenger is directly related to a bank's
operations. In its Comment, Novelty
contends that the services which are
directly
related
to
manufacturing
garments are sewing, textile cutting,
designs, dying, quality control, personnel,
administration,
accounting,
finance,
customs, delivery and similar other
activities; and that allegedly, "it is only by
stretching the imagination that one may
conclude that the services of janitors,
janitresses,
firemen,
grasscutters,
mechanics and helpers are directly related
to
the
business
of
manufacturing
garments" (p. 78, Rollo). Not so, for the
work of gardeners in maintaining clean
and well-kept grounds around the factory,
mechanics
to
keep
the
machines
functioning properly, and firemen to look
out for fires, are directly related to the
daily operations of a garment factory. That
fact is confirmed by Novelty's rehiring the
workers or renewing the contract with
Lipercon every year from 1983 to 1986, a
period of three (3) years.
As Lipercon was a "labor-only"
contractor, the workers it supplied Novelty
became
regular employees of the
latter.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.
In
addition,
Grigio
did
not
undertake the performance of its service
contract according to its own manner and
method, free from the control and
supervision of its principal. The work
activities, work shifts, and schedules of
the respondents, including the time
allowed for "recess" were set under the
Written Contract of Services. This clearly
indicates that these matters, which consist
of the means and methods by which the
work is to be accomplished, were not
within the absolute control of Grigio. By
stipulating these matters in a contract,
Grigio is constrained to follow these
provisions and would no longer be able to
exercise the freedom to alter these work
shifts
and
schedules
at
its
own
convenience. Such being the case, Grigio
cannot be considered as an independent
job contractor.
Petitioner's allegation that Grigio
retained control over the respondents by
providing supervisors to monitor the
performance of the respondents cannot be
given much weight. Instead of exercising
their own discretion or referring the matter
to the officers of Grigio, Grigio's
supervisors were obligated to refer to
petitioner's supervisors any discrepancy in
the performance of the respondents with
their specified duties. The Written
Contract of Services provided that:
5.c.
That
the
GRIGIO
personnel,
particularly the supervisors, shall perform
the following:
The Supervisor for the warehouse
operation shall monitor the performance
and productivity of all the checkers,
jacklifters,
stuffers/strippers,
forklift
operators, drivers, and helpers. He shall
coordinate
with
AHI's
supervisors
regarding the operations at the Warehouse
to ensure safety at the place of work.
He shall see to it that the cargoes are not
overlanded, shortlanded, delivered at a
wrong destination, or misdelivered to
consignee's port of destination. Any
discrepancy shall be reported immediately

ARRANGEMENT
to AHI's Logistic Manager, Mr. Andy
Valeroso.
The
control
exercised
by
petitioner's
supervisors
over
the
performance of respondents was to such
extent
that
petitioner's
Warehouse
Supervisor, Roger Borromeo, confidently
gave an evaluation of the performance of
respondent
MonaoraiDimapatoi,
who
likewise felt obliged to obtain such
Certification from Borromeo.
Petitioner's
control
over
the
respondents is evident. And it is this right
to control the employee, not only as to the
result of the work to be done, but also as
to the means and methods by which the
same is to be accomplished, that
constitutes the most important index of
the existence of the employer-employee
relationship.
Lastly, 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. In this case,
neither Grigio nor the petitioner was able
to present any proof that Grigio had
substantial capital. There was no evidence
pertaining to its capitalization nor 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. Grigio was merely expected to
supply petitioner with manpower to carry
out work necessary for its business, to be
carried out in the manner which petitioner
provided in the contract.
Thus, Grigio is obviously a "laboronly" contractor since it did not have
substantial capital or investment which
relates to the service performed; the
respondents performed activities which
were directly related to the main business
of the petitioner; and Grigio did not
exercise control over the performance of
the
work
of
the
respondents.
Consequently, the petitioner is considered
as the employer of the respondents.
In
prohibiting
"labor-only"
contracting and creating an employeremployee
relationship
between
the
principal and the supposed contractor's
employees, the law intends to prevent

employers from circumventing labor laws
intended to protect employees. In the case
of Aurora Land Projects Corp. v. National
Labor Relations Commission, this Court
pronounced:
The question as to whether an
employer-employee relationship exists in a
certain situation continues to bedevil the
courts. Some businessmen try to avoid the
bringing about of an employer-employee
relationship in their enterprises because
that judicial relation spawns obligations
connected with workmen's compensation,
social security, medicare, minimum wage,
termination pay, and unionism. In light of
this observation, it behooves this Court to
be ever vigilant in checking the
unscrupulous efforts of some of our
entrepreneurs,
primarily
aimed
at
maximizing their return on investments at
the expense of the lowly workingman.
65. GSIS vs. NLRC, G.R. No. 157647,
October 15, 2007, citing Rosewood
Processing vs. NLRC, 290 SCRA 408
Facts:
Tomas Lanting, doing business
under the name and style of Lanting
Security and Watchman Agency (LSWA)
entered into a Security Service Contract to
provide security guards to the properties
of the Government Service Insurance
System (GSIS) at the contract rate of
P3,000.00 per guard per month.
During the effectivity of the
contract, LSWA requested the GSIS for an
upward adjustment of the contract rate in
view of Section 7 of Wage Order No. 1 and
Section 3 of Wage Order No. 2, which were
issued by the Regional Tripartite Wages
and Productivity Board-NCR pursuant to
Republic Act No. 6727, otherwise known
as the Wage Rationalization Act.
Acting on the request of LSWA, the
GSIS, through its Board of Trustees and
under Board Resolution No. 207, dated
May 24, 1991, approved the upward
adjustments of the contract price from
P3,000.00 to P3,716.07 per guard, per
month effective November 1, 1990 to
January 7, 1991, and P4,200.00 effective
January 8, 1991 to May 31, 1991. LSWA

ARRANGEMENT
assigned security guards Daniel Fanila,
Hector
Moreno,
IsauroFerrer,
Rubin
Wilfredo, Jesus Delima Jr., Maria Legaspi,
Santiago Noto Jr., and Virgilio Soriano
(hereafter complainants) to guard one of
GSIS's properties.
On
March
15,
1993,
GSIS
terminated the Security Service Contract
with LSWA. All the complainants, except
Virgilio Soriano, were absorbed by the
incoming security agency.
On March 7,
1994,
complainants
filed
separate
complaints
against
LSWA
for
underpayment of wages and non-payment
of labor standard benefits from March
1991 to March 15, 1993. Virgilio Soriano
also complained of illegal dismissal.
In its Position Paper, LSWA alleged
that complainants were estopped from
claiming that they were underpaid
because they were informed that the pay
and benefits given to them were based on
the contract rate of P103.00 per eight
hours of work or about P3,100.00 per
month.
On August 9, 1994, LSWA filed a
Third-Party Complaint against GSIS for
underpayment of complainants' wages.
In its Position Paper, GSIS alleged
that the Third-Party Complaint states no
cause of action against it; that LSWA
obligated itself in the Security Service
Contract to be solely liable for the
enforcement of and compliance with all
existing labor laws, rules and regulations;
that the GSIS Board of Trustees approved
the upward adjustment on a month-tomonth basis, at P4,200 per guard per
month, effective January 8, 1991 to May
31, 1991, under Board Resolution No. 207
dated May 24, 1991, which was
incorporated in the Security Service
Contract; that GSIS fully paid the services
of the security guards as agreed upon in
the Security Service Contract.
Issues:
Whether GSIS is solidarily
liable for payment of complainantsrespondnents' salary differentials.
Ruling:
Yes. Articles 106 and 107 of the
Labor Code provide:
ART. 106.
Contractor or
subcontractor. Whenever
an employer enters into

contract
with
another
person for the performance
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.
subcontractor fails to pay the wage of his
ART. 107
Indirect
employer. The provisions
of
the
immediately
preceding
Article
shall
likewise
apply
to
any
person,
partnership,
association or corporation
which,
not
being
an
employer, contracts with an
independent contractor for
the performance of any
work, task, job or project.
In this case, the GSIS cannot evade
liability by claiming that it had fully paid
complainants' salaries by incorporating in
the Security Service Contract the salary
rate increases mandated by Wage Order
Nos. 1 and 2 by increasing the contract
price from P3,000.00 to P3,176.07 per
guard per month effective November 1,
1990 to January 7, 1991, and P4,200.00
effective January 8, 1991 to May 31, 1991.
In Rosewood Processing, Inc. v.
National Labor Relations Commission, 25
the Court explained the rationale for the
joint and several liability of the employer,
thus:
The joint and several liability of the
employer or principal was enacted to
ensure compliance with the provisions of
the Code, principally those on statutory
minimum wage. The contractor or
subcontractor is made liable by virtue of
his or her status as a direct employer, and
the principal as the indirect employer of
the contractor's employees. This liability
facilitates, if not guarantees, payment of

ARRANGEMENT
the workers' compensation, thus, giving
the
workers
ample
protection
as
mandated by the 1987 Constitution. This
is not unduly burdensome to the
employer. Should the indirect employer be
constrained to pay the workers, it can
recover whatever amount it had paid in
accordance with the terms of the service
contract between itself and the contractor.
Thus, the Court does not agree
with the GSIS's claim that a double burden
would be imposed upon the latter because
it would be paying twice for complainants'
services. Such fears are unfounded. Under
Article 1217 of the Civil Code, if the GSIS
should pay the money claims of
complainants, it has the right to recover
from LSWA whatever amount it has paid in
accordance with the terms of the service
contract between the LSWA and the GSIS.
Joint and solidary liability is simply
meant to assure aggrieved workers of
immediate and sufficient payment of what
is due them. This is in line with the policy
of the State to protect and alleviate the
plight of the working class.
66. Republic of the Phils/SSC/SSS vs.

Asiapro Cooperative, G.R. No. 172101,
November 23, 2007
Facts:
Respondent Asiapro, as a cooperative, is
composed of owners-members. Under its
by-laws, owners-members are of two
categories, to wit: (1) regular member,
who is entitled to all the rights and
privileges of membership; and (2)
associate member, who has no right to
vote and be voted upon and shall be
entitled only to such rights and privileges
provided in its by-laws.
In the discharge of the aforesaid primary
objectives,
respondent
cooperative
entered
into
several
Service
Contracts with Stanfilco - a division of
DOLE Philippines, Inc. and a company
based in Bukidnon
The owners-members do not receive

compensation
or
wages
from
the
respondent cooperative. Instead, they
receive
a
share
in
the
service
surplus[10] which
the
respondent
cooperative earns from different areas of
trade it engages in, such as the income
derived from the said Service Contracts
with Stanfilco. The owners-members get
their income from the service surplus
generated by the quality and amount of
services
they
rendered,
which
is
determined by the Board of Directors of
the respondent cooperative.
In order to enjoy the benefits under the
Social Security Law of 1997, the ownersmembers of the respondent cooperative,
who were assigned to Stanfilco requested
the services of the latter to register them
with petitioner SSS as self-employed and
to remit their contributions as such. Also,
to comply with Section 19-A of Republic
Act No. 1161, as amended by Republic Act
No. 8282, the SSS contributions of the said
owners-members were equal to the share
of both the employer and the employee.
SSS said that it is respondent who should
register their owner-members to the SSS
as they are the ones employing the said
owner-members.
petitioner SSS, on 12 June 2003, filed a
Petition before petitioner SSC against the
respondent cooperative and Stanfilco
praying that the respondent cooperative
or, in the alternative, Stanfilco be directed
to register as an employer and to report
respondent
cooperatives
ownersmembers as covered employees under the
compulsory coverage of SSS and to remit
the necessary contributions in accordance
with the Social Security Law of 1997
Respondent cooperative filed its Answer
with Motion to Dismiss alleging that no
employer-employee relationship exists
between it and its owners-members, thus,
petitioner SSC has no jurisdiction over the
respondent cooperative. Stanfilco, on the
other hand, filed an Answer with Crossclaim
against
the
respondent
cooperative.

ARRANGEMENT
On 17 February 2004, petitioner SSC
issued an Order denying the Motion to
Dismiss
filed
by
the
respondent
cooperative. The respondent cooperative
moved for the reconsideration of the said
Order, but it was likewise denied in
another Order issued by the SSC dated 16
September 2004.
respondent cooperative filed a Motion for
Extension of Time to File a Petition for
Review
before
the
Court
of
Appeals. Subsequently,
respondent
cooperative filed a Manifestation stating
that it was no longer filing a Petition for
Review. In
its
place,
respondent
cooperative
filed
a
Petition
forCertiorari before the Court of Appeals.
Issues presented by each side:
Petitioner:
The
[petitioner
SSC]
has
jurisdiction over the petitioncomplaint filed before it by the
[petitioner SSS] under R.A. No.
8282.
There is an employer-employee
relationship between [respondent
cooperative] and its [ownersmembers].
Respondent
[Petitioner]
SSC
arbitrarily proceeded with
the case as if it has
jurisdiction
over
the
petition a quo, considering
that it failed to first resolve
the issue of the existence of
an
employer-employee
relationship
between
[respondent]
cooperative
and its owners-members.
[Respondent] is not an
employer
within
the
contemplation of the Labor
Law but is a multi-purpose
cooperative
created
pursuant to Republic Act No.
6938 and composed of
owners-members,
not
employees.
B.
T
he rights and
obligations of
the
ownersmembers of
[respondent]
cooperative
are
derived
from
their
Membership
Agreements,
the
Cooperatives
By-Laws, and
Republic Act
No. 6938, and
not from any
contract
of
employment
or from the
Labor
Laws. Moreov
er,
said
ownersmembers
enjoy
rights
that are not
consistent
with
being
mere
employees of
a
company,
such as the
right
to
participate
and vote in
decisionmaking
for
the
cooperative.
C.
A
s
found
by the
Bureau
of
Interna
l
Reven
ue
[BIR],
the

ARRANGEMENT
owner
smemb
ers of
[respo
ndent]
cooper
ative
are not
paid
any
compe
nsatio
n
incom
e. (Em
phasis
supplie
d.)
Ruling:
The existence of an employer-employee
relationship cannot be negated by
expressly repudiating it in a contract,
when
the
terms
and
surrounding
circumstances
show
otherwise. The
employment status of a person is defined
and prescribed by law and not by what the
parties say it should be.
First. It is expressly provided in the
Service Contracts that it is the respondent
cooperative which has the exclusive
discretion
in
the selection
and
engagement of the owners-members as
well as its team leaders who will be
assigned at Stanfilco. Second. Wages are
defined as remuneration or earnings,
however designated, capable of being
expressed in terms of money, whether
fixed or ascertained, on a time, task, piece
or commission basis, or other method of
calculating the same, which is payable by
an employer to an employee under a
written
or
unwritten
contract
of
employment for work done or to be done,
or for service rendered or to be
rendered. In
this
case,
the weekly stipends or the so-called
shares in the service surplus given by the
respondent cooperative to its ownersmembers were in reality wages, as the
same were equivalent to an amount not
lower than that prescribed by existing
labor laws, rules and regulations, including
the wage order applicable to the area and

industry; or the same shall not be lower
than the prevailing rates of wages. It
cannot be doubted then that those
stipends or shares in the service surplus
are indeed wages, because these are
given
to
the
owners-members
as
compensation in rendering services to
respondent
cooperatives
client,
Stanfilco. Third. It is also stated in the
above-mentioned Service Contracts that it
is the respondent cooperative which has
the power to investigate, discipline and
remove the owners-members and its team
leaders who were rendering services at
Stanfilco. Fourth. As earlier opined, of the
four elements of the employer-employee
relationship, the control test is the most
important. In the case at bar, it is
the respondent cooperative which has the
sole control over the manner and means
of performing the services under the
Service Contracts with Stanfilco as well as
the means and methods of work. Also, the
respondent cooperative is solely and
entirely responsible for its ownersmembers, team leaders and other
representatives at Stanfilco. All these
clearly prove that, indeed, there is an
the respondent cooperative and its
owners-members.
It is true that the Service Contracts
executed
between
the
respondent
cooperative
and
Stanfilco
expressly
provide that there shall be no employeremployee
relationship
between
the
respondent cooperative and its ownersmembers. This Court, however, cannot
give the said provision force and effect.
It bears stressing, too, that a cooperative
acquires juridical personality upon its
registration
with
the
Cooperative
Development Authority. It has its Board of
Directors, which directs and supervises its
business; meaning, its Board of Directors
is the one in charge in the conduct and
management of its affairs. With that, a
cooperative can be likened to a
corporation with a personality separate
and
distinct
from
its
ownersmembers. Consequently,
an
ownermember of a cooperative can be an

ARRANGEMENT
employee of the latter and an employeremployee relationship can exist between
them.
In the present case, it is not disputed that
the respondent cooperative had registered
itself with the Cooperative Development
Authority, as evidenced by its Certificate
of Registration No. 0-623-2460. In its bylaws, its Board of Directors directs,
controls, and supervises the business and
manages the property of the respondent
cooperative. Clearly
then,
the
management of the affairs of the
respondent cooperative is vested in its
Board of Directors and not in its ownersmembers as a whole. Therefore, it is
completely logical that the respondent
cooperative,
as
a
juridical
person
represented by its Board of Directors, can
enter into an employment with its ownersmembers.
As
there
is
employee-employer
relationship, SSC jurisdiction.
considered regular employees of the

Asahi; and that their dismissal from
employment without the benefit of due
process of law was unlawful.
Asahi 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. SSASI
averred that it was the one who hired
petitioners and assigned them to work for
respondent on occasions that the latters
work force could not meet the demands of
its
customers.
Eventually,
however,
respondent ceased to give job orders to
SSASI, constraining the latter to terminate
petitioners employment.
Issue: Are Almeda, et al employees of

Asahi Glass even considering that they
were originally hired by San Sebastian
Allied Services, Inc.?
67. Almeda et al., vs. Asahi Glass,

G.R. No. 177785, Sept. 3, 2008
Facts:
Ruling:
This a complaint for illegal dismissal with

claims for moral and exemplary damages
and attorneys fees filed by Almeda, et al
against Asahi Glass and San Sebastian
Allied Services, Inc. SSASI. Petitioners
alleged that Asahi and SSASI entered into
a
service
contract
whereby
SSASI
undertook to provide Asahi 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. Asahi 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
Yes. Almeda, et al are employees of Asahi

Glass.
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. A person is considered engaged
in
legitimate
job
contracting
or
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

ARRANGEMENT
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.
On the other hand, labor-only contracting,
a prohibited act, is an arrangement in
which the contractor or subcontractor
merely recruits, supplies or places workers
to perform a job, work or service for a
(a) The contractor or subcontractor does
to actually perform the job, work or
service under its own account and
responsibility;
(b) The employees recruited, supplied or
placed
by
such
contractor
or
subcontractor is performing activities
which are directly related to the main
business of the principal.
In labor-only contracting, the statutes
create an employer-employee relationship
for a comprehensive purpose: to prevent
circumvention
of
labor
laws.
The
contractor is considered as merely the
agent of the principal employer and the
latter is responsible to the employees of
the labor-only contractor as if such
employees are directly employed by the
principal employer. Therefore, if SSASI was
a labor-only contractor, then respondent
shall be considered as the employer of
petitioners who must bear the liability for
the dismissal of the latter, if any.
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. 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.
The
indispensability of petitioners services
was fortified by the length and continuity
of their performance, lasting for periods
ranging from three to 11 years.
More importantly, the Court finds that the
crucial element of control over petitioners
rested in respondent. The power of control
refers to the authority of the employer to
control the employee not only with regard
to the result of work to be done, but also
to the means and methods by which the
work is to be accomplished. It should be
borne in mind that the power of control
refers merely to the existence of the
power and not to the actual exercise
thereof. It is not essential for the employer
to actually supervise the performance of
duties of the employee; it is enough that
the former has a right to wield the power.
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

ARRANGEMENT
the manner and method of accomplishing
the jobs. Other than being the one who
hired petitioners, there was absolute lack
of evidence that SSASI exercised control
over them or their work.
The fact that it was SSASI which dismissed
petitioners from employment is irrelevant.
It is hardly proof of control, since it was
demonstrated only at the end of
petitioners employment. What is more,
the dismissal of petitioners by SSASI was a
mere result of the termination by
respondent of its contractual relations with
SSASI.
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.
Equally unavailing is respondents stance
that its relationship with petitioners should
be
governed
by
the
Accreditation
Agreement stipulating that petitioners
were to remain employees of SSASI and
shall not become regular employees of the
respondent. A party cannot dictate, by the
mere expedient of a unilateral declaration
in a contract, the character of its business,
i.e., whether as labor-only contractor or as
job contractor, it being crucial that its
character be measured in terms of and
determined by the criteria set by statute.
68.
ROLANDO
SASAN,
SR., vs
NATIONAL
LABOR
RELATIONS
COMMISSION
Assailed in this Petition for Review
under Rule 45 of the Rules of Court are the
Decision[1] dated 24 April 2006 of the
Court of Appeals in CA-G.R. SP No. 79912,
which affirmed the Decision dated 22
January 2003 of the National Labor
Relations Commission (NLRC) in NLRC
Case No. V-000241-2002 finding that
Helpmate, Inc. (HI) is a legitimate
independent job contractor and that the
petitioners were not illegally dismissed
from work
Respondent Equitable-PCI Bank (EPCIBank), a banking entity duly organized
and existing under and by virtue of
Philippine laws, entered into a Contract for
Services with HI, a domestic corporation
primarily engaged in the business of

providing janitorial and messengerial
services. The contract was impliedly
renewed every year after year.
July 23, 2001, petitioners filed with
the Arbitration Branch of the NLRC in Cebu
City against HI and E- PCIBANK for illegal
dismissal with claims for separation pay,
service incentive leave pay, allowances,
damages, attorneys fees and costs.
Position papers were submitted.
Petitioners claimed that they had become
regular employees of E-PCIbank with
respect to activities for which they were
employed and that the bank had direct
control and supervision over the means
and methods by which they were to
perform their jobs and their dismissal by
HI was null and void since they were
regular employees of E-PCIBANK.
PCI Bank said 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.
It was HI that paid
petitioners wages, monitored petitioners
daily time records (DTR) and uniforms,
and
exercised
direct
control
and
supervision over the petitioners and that
therefore HI has every right to terminate
their services legally. E-PCIBank could not
be held liable for whatever misdeed HI had
committed against its employees.
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-PCIBank was one of
its clients. Petitioners were its employees,
part of its pool of janitors/messengers
assigned to E-PCIBank. The Contract for
Services between HI and E-PCIBank
expired on 15 July 2000. E-PCIBank no
longer renewed said contract with HI and,
instead,
bidded
out
its
janitorial
requirements to two other job contractors,
Able Services and Puritan. HI designated
petitioners to new work assignments, but
the latter refused to comply with the
same. Petitioners were not dismissed by
HI, whether actually or constructively,
thus, petitioners complaints before the
NLRC were without basis.

ARRANGEMENT
On 7 January 2002, 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
responsibility as required under the Labor
Code. HI
is therefore
a
labor-only
contractor and the real employer of
petitioners is E-PCIBank which is held
liable to petitioners.
Aggrieved by the decision of Labor
Arbiter Gutierrez, respondents E-PCIBank
and HI appealed the same to the
NLRC,
4th Division, stationed in Cebu City. The
NLRC promulgated its Decision on 22
January 2003 modifying 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.
Petitioners moved for a motion for
recon was denied by NLRC.In the CA, it
affirmed the findings of the NLRC that HI
was a legitimate job contractor and that it
did not illegally dismiss petitioners
because they were offered new work
assignments to various establishments but
they refused to.
Issue:
A) Whether HI is a labor-only contactor?
B)
E-PCIBank
should
be
petitioners principal employer?
deemed
Held: A) NO.
The court finds
legitimate job contractor.
that
HI
is
HI has a certification of registration

issued by the DOLE. Moreover, the DOLE
being the agency primarily responsible for
regulating the business of independent job
contractors, we can presume in the
absence of evidence to the contrary that it
thoroughly evaluated the requirements
submitted by HI as a precondition to the
issuance of the Cerificate of Registration.
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.
The evidence on record also shows
that HI is carrying on a distinct and
independent
business
from
EPCIBank. 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.
The court declared that while these
services rendered by the petitioners as
janitors,
messengers
and
drivers
are considered directly related to the
principal business of a bank, in this case EPCIBank, nevertheless, they are not
necessary in the conduct of its (EPCIBANKs) principal business.
Permissible
job
contracting
or
farm out to a contractor or subcontractor
the performance or completion of a
definite
or
predetermined
period,
principal.[35] A
person
is
considered
engaged in legitimate job contracting or
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
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

ARRANGEMENT
(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.[36]
In contrast, labor-only contracting, a
prohibited act, is an arrangement where
the contractor or subcontractor merely
principal.[37] In labor-only contracting, the
(a) The contractor or subcontractor does
to actually perform the job, work or
responsibility; and
(b) The employees recruited, supplied or
placed
by
such
contractor
or
subcontractor are performing activities
business of the principal.
In
distinguishing
between
permissible job contracting and prohibited
labor-only
contracting, we
elucidated
in Vinoya v. National Labor Relations
Commission, that it is not enough to show
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
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,
the mode and manner or terms of
payment.[41] Simply put, the totality of the
facts and the surrounding circumstances
of the case are to be considered. [42] Each
case must be determined by its own facts
and all the features of the relationship are
to be considered.
B )NO.
The presence of the first requisite
for the existence of an employer-employee
relationship to wit, the selection and
engagement of the employee is shown by
the fact that it was HI which selected and
engaged the services of petitioners as its
employees.
On the second requisite regarding
the payment of wages, it was HI who paid
petitioners their wages and who provided
their daily time records and uniforms and
other materials necessary for the work
they performed. Therefore, it is HI who is
responsible for petitioners claims for
wages and other employees benefits.
As to the third requisite on the
power to control the employees conduct,
and the fourth requisite regarding the
power of dismissal, again E-PCIBank did
not have the power to control petitioners
with respect to the means and methods by
which their work was to be accomplished.
Considering the foregoing, plus
taking judicial notice of the general
practice in private, as well as in
government institutions and industries, of
hiring an independent contractor to
perform special services, ranging from
janitorial, security and even technical
services, we can only conclude that HI is a
legitimate
job
contractor. As
such
legitimate job contractor, the law creates
an
employer-employee
relationship
between HI and petitioners which renders
HI liable for the latters claims.
69. Purefoods Corp. vs. NLRC et al.,
G.R. No. 172241, November 20, 2008
FACTS:
Lolita Neri (Neri) originally filed a
claim for nonpayment of additional wage
increase, regularization, nonpayment of
service incentive leave, underpayment of
13th month pay, and nonpayment of
premium pay for holiday and holiday pay
against Purefoods Corporation (Purefoods).
By
July 4, 1992, however, Neri was
dismissed from her work as a DeliAttendant. Subsequently, or on 13 July

ARRANGEMENT
1992,
eleven
(11)
other
complainantsjoined forces with Neri and
together they filed an amended complaint,
with Neri charging Purefoods with illegal
dismissal.All the other complainants, save
for Neri, were still working for Purefoods at
the time of the filing of the amended
complaint. On August 31, 1993, Labor
declared Neri and the complainants as
Purefoods' regular employees; and Neri as
having been illegally dismissed and
entitled to reinstatement with payment of
backwages. Purefoods filed a partial
appeal, praying that the claims of
complainants be dismissed for lack of
merit, or in the alternative, the case be
remanded for formal hearing on the merits
and to implead D.L. Admark as a partyrespondent.The NLRC granted the appeal
and remanded the case for further
hearings on the factual issues.
The case was remanded to Labor
Arbiter, who, after finding that Neri is not
an employee of petitioner, but rather
of D.L. Admark, an independent labor
contractor, dismissed the complaint. A
memorandum on appeal was nominally
filed by all the complainants; the NLRC
ruled in complainants' favor and reversed
and set aside the labor arbiter's decision.
According to the NLRC, the pieces of
evidence on record established the
Purefoods and Neri and the other
complainants. Purefoods moved for the
reconsideration of the decision but its
motion was denied for lack of merit.
Hence, its recourse to the Court of Appeals
via a petition for certiorari.
The Court of Appeals, relying on
the case of Escario v. NLRC, held that D.L.
Admark is a legitimate independent
contractor.
However,
it
ruled
that
complainants are regular employees of
Purefoods. Citing Art. 280 of the Labor
Code, the appellate court found that
complainants were engaged to perform
activities which are usually necessary or
desirable in the usual business or trade of
Purefoods, and that they were under the
control and supervision of Purefoods'
supervisors, and not of D.L. Admark's. It
noted that in the Promotions Agreements
between D.L. Admark and Purefoods, there
was no mention of the list of D.L. Admark
employees who will handle particular

promotions for petitioner, and that
complainants' periods of employment are
not fully covered by the Promotions
Agreements.
Issue: Whether or not Neri and the other
complainants
are
employees
of
PUREFOODS or A.D. ADMARKS
Ruling:
The Court agrees with Purefoods'
argument that Art. 280 of the Labor
Codefinds no application in a trilateral
relationship involving a principal, an
independent job contractor, and the
latter's employees. Indeed, the Court has
ruled that said provision is not the
yardstick for determining the existence of
an employment relationship because it
merely distinguishes between two kinds of
employees, i.e., regular employees and
casual employees, for purposes of
determining the right of an employee to
certain benefits, to join or form a union, or
to security of tenure; it does not apply
where the existence of an employment
relationship is in dispute. It is therefore
erroneous on the part of the Court of
Appeals to rely on Art. 280 in determining
whether
an
employer-employee
relationship exists between respondent
Neri and Purefoods.
Permissible job contracting or
farm
out
with
the
contractor
or
subcontractor
the
performance
or
period regardless of whether such job,
of the principal. In this arrangement, the
following conditions must be met: (a)the
contractor carries on a distinct and
contract work on his account under his
own responsibility according to his own
and direction of his employer or principal
in all matters connected with the
performance of his work except as to the
results thereof; (b)the contractor has
substantial
capital
or
investment;

ARRANGEMENT
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 welfare benefits.
To support its position that
respondent is not its employee, Purefoods
relies on the following: (i) the Promotions
Agreements it entered into with D.L.
Admark; (ii) Department Order No. 10
(Series of 1997) which defines legitimate
contracting or subcontracting; and (iii)
Escario v. NLRC wherein the Court
declared D.L. Admark as a legitimate labor
contractor.
On the other hand, early on, Neri
and the rest of the complainants admitted
that they worked for petitioner through
D.L. Admark. However, they also averred
that they were under the control and
supervision of petitioner's employees
salesmen, poultry sales managers, deli
supervisorswho give them work orders
and to whom they submit weekly
inventory reports and monthly competitive
sales report. In support of these
statements,
Neri
appended
several
documents (various Identification Cards,
Certification from Rustan's Supermarkets
stating that respondent Neri is from
Purefoods, Memoranda to respondent Neri
written by a supervisor from
Purefoods, letters from Purefoods
area
sales
managers
introducing
complainants
as
Purefoods
Merchandisers). Purefoods, meanwhile,
claims that these documents must be
taken in the context of the performance of
the service contracted outpromotion of
its products.
In the first place, D.L. Admark's
status as a legitimate independent
contractor has already been established in
Escario v. NLRC. In the said case,
complainants, through D.L. Admark,
worked as merchandisers for California
Manufacturing Corporation (CMC). They
filed a case before the labor arbiter for the
regularization of their employment status
with CMC, and while the case was
pending, D.L. Admark sent termination
letters to complainants. The complainants
thereafter amended their complaint to
include illegal dismissal. The Court

considered the following circumstances as
tending to establish D.L. Admark's status
as a legitimate job contractor:
1) The SEC registration
certificate of D.L. Admark states
that it is a firm engaged in
promotional, advertising, marketing
and merchandising activities.
2) The service contract
between CMC and D.L. Admark
clearly
provides
that
the
agreement is for the supply of
sales promoting merchandising
services rather than one of
manpower placement.
3) D.L. Admark was actually
engaged in several activities, such
as
advertising,
publication,
promotions,
marketing
and
merchandising. It had several
merchandising
contracts
with
companies like Purefoods, Corona
Supply, Nabisco Biscuits, and
Licron. It was likewise engaged in
the
publication
business
as
evidenced by its magazine the
"Phenomenon."
4) It had its own capital
assets to carry out its promotion
business. It then had current assets
amounting to P6 million and is
therefore a highly capitalized
venture. It had an authorized
capital stock of P500,000.00. It
owned several motor vehicles and
other
tools,
materials
and
equipment to service its clients. It
paid rentals of P30,020 for the
office space it occupied.
Moreover, applying the four-fold
test used in determining employeremployee relationship, the Court found
that: the employees therein were selected
and hired by D.L. Admark; D.L. Admark
paid their salaries, as evidenced by the
payroll prepared by D.L. Admark and
sample contribution forms; D.L. Admark
had the power of dismissal as it admitted
that it was the one who terminated the
employment of the employees; and finally,
it was D.L. Admark who exercised control
and supervision over the employees.
Furthermore, it is evident from
the Promotions Agreements entered

ARRANGEMENT
into by Purefoods that D.L. Admark is
a legitimate labor contractor. A sample
agreement reads in part:
WHEREAS, The FIRST PARTY
is
engaged
in
the
general
promotion business;
WHEREAS, The SECOND
PARTY will launch its "Handogsa
Graduates" promotion project;
WHEREAS, The FIRST PARTY
has offered its services to the
SECOND PARTY, in connection with
the said promotion project, and the
latter has accepted the said offer;
NOW, THEREFORE, for and
in consideration of the foregoing
premises, and of the mutual
convenience between them, the
parties have agreed as follows:
1. The FIRST PARTY
shall handle and implement
the "Handogsa Graduates"
promotion project of the
SECOND PARTY, said project
to last from February 1,
1992 to July 31, 1992.
2. The FIRST PARTY
shall indemnify the SECOND
PARTY for any loss or
damage to the latter's
properties, if such loss or
damage is due to the fault
or negligence of the FIRST
PARTY or its agents or
employees.
3. There shall be no
employer-employee
relationship between the
FIRST PARTY or its agents or
employees and the SECOND
PARTY.
4. In consideration
for the services to be
rendered by the FIRST
PARTY to the SECOND
PARTY, the latter shall pay
the former the amount of
Two Million Six Hundred Fifty
Two Thousand pesos only
(P2,652,000.00) payable as
follows:
The agreements confirm that
D.L. Admark is an independent
contractor
which
Purefoods
had
engaged to supply general promotion
services, and not mere manpower

services, to it. The provisions expressly
permit D.L. Admark to handle and
implement
Purefoods'
project,
and
categorically state that there shall be no
D.L. Admark's employees and Purefoods.
While it may be true that complainants
were required to submit regular reports
and were introduced as Purefoods
merchandisers, these are not enough to
establish Purefoods' control over them.
Even if the report requirements are
somehow considered as control measures,
they were imposed only to ensure the
effectiveness of the promotion services
rendered by D.L. Admark. It would be a
rare contract of service that gives
untrammelled freedom to the party hired
and eschews any intervention whatsoever
in
his
performance
of
the
engagement.Indeed, it would be foolhardy
for any company to completely give the
reins and totally ignore the operations it
has contracted out.
Significantly,
the
pieces
of
evidence submitted by Neri do not support
her claim of having been a regular
employee of Purefoods. We note that two
"Statement
of
Earnings
and
Deductions"were issued for the same
period, December 1989, and in one
"Statement," someone deliberately erased
the notation "January 1997," thereby
casting doubt on the authenticity of the
said documents. Even the identification
cards presented by Neri are neither
binding on Purefoods nor even indicative
of her claimed employee status of
Purefoods, issued as they were by the
supermarkets concerned and not by
Purefoods itself. Moreover, the check
voucher issued by Purefoods marked "IN
PAYMENT
OF
DL
ADMARK
DELI
ATTENDANTS 12.00 PESOS ADJUSTMENT
JAN 30, 1991 TO JUNE 22, 1992," signed
and received by Neri, is proof that
Purefoods never considered Neri as its
own employee, but rather as one of D.L.
Admark's deli attendants.
We also note that Neri herself
admitted in her SinumpaangSalaysay and
in the hearings that she applied with D.L.
Admark and that she worked for Purefoods
through D.L. Admark. Neri was aware from

ARRANGEMENT
the start that D.L. Admark was her
employer and not Purefoods. She had kept
her contract with D.L. Admark, and
inquired about her employment status
with D.L. Admark. It was D.L. Admark, as
her employer, which had the final say in,
and
which
actually
effected,
her
termination.
In view of the foregoing, we hold
that Neri is not an employee of
Purefoods, but that of D.L. Admark.
In the absence of employer-employee
relations
between
Neri
and
Purefoods, the complaint for illegal
dismissal and other monetary claims
must fail.
70. MARANAW HOTELS and RESPORT
CORP. vs. CA
FACTS:
Private respondent Sheryl Oabel filed a
complaint
for
regularization,
subsequently converted into one for
illegal dismissal before LA Madjayran
H. Ajan.
Oabel was initially hired by Maranaw
Hotels as an extra beverage attendant
on April 24, 1995. This lasted until
February 7, 1997. Oabel worked in Century
Park Hotel, an establishment owned by the
petitioner. Petitioner then contracted with
Manila Resource Devt Corp. (MANRED).
Subsequently, Oabel was transferred to
MANRED with the latter deporting
itself as her employer. MANRED has
intervened in all stages of the proceedings
and has consistently claimed to be the
employer of Oabel. Oabel performed the
following functions: Secretary Public
Relations, Gift Shop Attendant, Waitress,
and Shop Attendant from 1997 1998.
function basis or a need basis thus

Oabel could not even be considered as
a casual employee nor a provisional
employee. Maranaw consider Oabel, at
most, as a project employee which
does not ripen into a regular
employee.
Oabel appealed before the NLRC. NLRC
reversed the ruling of LA and held that
MANRED is a labor-only contractor
and Oabel was illegaly dismissed for it
was done without a valid or just
cause. NLRC grounded these findings on
the fat that:
1. Under the terms of the service
contract, MANRED shall provide
Maranaw not specific jobs or
services but personnel; and
2. That MANDRED had insufficient
capitalization
and
was
not
sufficiently equipped to provide
specific jobs; and
3. That the activities performed by
Oabel was directly related to and
usually necessary or desirable in
the business of Maranaw.
Maranaw then filed a petition before the
CA. CA dismissed the petition on account
of the failure of Maranaw to append
the board resolution authorizing the
counsel for petitioner to file the
petition before the CA.
In the present petition, petitioner invokes,
substantial justice as justification for
a reversal of the resolution of the CA.
Further, Maranaw contends that the filing
of a MR with the certificate of non-forum
shopping attached constitutes substantial
compliance with the requirement.
ISSUE:
In 1998, Oabel filed before LA a

petition
for
regularization
of
employment
against
petitioner.
However, in the same year, Oabel was
dismissed from employment. Thus, Oabel
converted her petition into a complaint
for illegal dismissal.
WON there was substantial compliance

with respect on the certificate of nonforum shopping. Further, WON there exists
an EE-ER relationship between Oabel and
Maranaw.
LA dismissed the complaint claiming that

Oabel never disputed the fact that her
work with petitioner was on a per
RULING:

ARRANGEMENT
Specific authorization, the Court held,
could only come in the form of a board
resolution issued by the Board of
Directors that specifically authorizes the
counsel to institute the petition and
execute the certification, to make his
actions binding on his principal, i.e.,the
corporation.
Art. 280. Regular and casual
employment. The provisions of
written agreement to the contrary
notwithstanding and regardless of the
oral agreement of the parties, an
employment shall be deemed to be
regular where the employee has been
engaged to perform activities which
are usually necessary or desirable in
the usual business or trade of the
employer,
except
where
the
employment has been fixed for a
specific project or undertaking the
completion or termination of which
has been determined at the time of
the engagement of the employee or
where the work or service to be
performed is seasonal in nature and
the employment is for the duration of
the season.
An employment shall be deemed
to be casual if it is not covered by
the
preceding
paragraph:
Provided, That any employee who
has rendered at least one year of
service, whether such service is
continuous or broken, shall be
considered a regular employee
with respect to the activity in
which he is employed and his
employment shall continue while
such activity exists.
APPLICATION:
The procedural aspects placed aside, it
may be seen sustained by this court that
MANRED is a labor-only contractor
and that the real employer of Oabel is
Manaraw.
Further, it appears that Oabel has
already rendered more than one year
of service to the petitioner, for the
period of 1995-1998, for which she must

already be considered a regular
employee, as stated in Art. 280 of LC.
Notably, the operations of the hotel itself
do not cease with the end of each even or
function and that there is an ever present
need for individuals to perform certain
tasks necessary in petitioners business.
Thus, although the tasks themselves may
vary, the need for sufficient manpower to
carry them out does not. Thus, in any
event, the petitioner determines the
nature of the tasks to be performed
by Oabel. Therefore, in the process,
exercising control.
DENIED.
71. Coca-Cola Bottlers Phils., Inc. vs.
Alan M. Agito, et al.
[GR No. 179546 February 13, 2009]
FACTS:
Coca-Cola
Bottlers
Phils.
Inc.
(COKE), the petitioner herein is a domestic
corporation engaged in manufacturing,
bottling and distributing soft drink
beverages and other allied products.
Respondents were salesmen assigned at
Coke Lagro Sales Office for years but were
not regularized.
Coke 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 Coke and Interserve on 23 March
2002. Said Contract constituted legitimate
job contracting, given that the latter was a
bona fide independent contractor with
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

ARRANGEMENT
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.
ISSUES:
1. Whether or not Inteserve is a
legitimate job contractor;
2. Whether or not an employeremployee relationship exists
between petitioner Coca-Cola
Bottlers
Phils.
Inc.
and
respondents.
RULING:
No. Inteserve is not a legitimate job
contractor
There is "labor-only" contracting
where the person supplying workers to an
employee does not have substantial
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 laboronly 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 employeremployee
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
the
principal
employer
and
the
contractor's employees and the former
becomes solidarily liable for all the rightful
claims of the employees.
Section
5
of
the
Rules
Implementing Articles 106-109 of the
Labor Code, as amended, provides the
guidelines in determining whether laboronly 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
principal, and any of the following
elements are [is] present:
i)
The contractor or subcontractor
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

ARRANGEMENT
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 reserved to the person for whom
the services of the contractual workers are
(Emphasis supplied.)
In sum, Interserve did not have
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.
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). 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 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 latters 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
Incorporation
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

ARRANGEMENT
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.
72.[G.R. No. 171814. May 8, 2009.]

SOUTH
DAVAO
DEVELOPMENT
COMPANY, INC. (NOW
SODACO
AGRICULTURAL
CORPORATION) AND/OR
MALONE
PACQUIAO
AND
VICTOR
A.
CONSUNJI, petitioners, v
s. SERGIO L. GAMO,
ERNESTO
BELLEZA,
FELIX TERONA, CARLOS
ROJAS,
MAXIMO
MALINAO,
VIRGILIO
COSEP,
ELEONOR
COSEP,
MAXIMO
TOLDA,
NELSON
BAGAAN, and TRADE
UNION
OF
THE
PHILIPPINES
and
ALLIED
SERVICES
(TUPAS), respondents.
Facts:
Petitioner
Company
South Davao Development

(petitioner
or
petitioner
corporation) is the operator of a coconut

and mango farm in San Isidro, Davao
Oriental and Inawayan/Baracatan, Davao
del Sur. On August 1963 petitioner hired
respondent Sergio L. Gamo (Gamo) as a
foreman. Sometime in 1987, petitioner
appointed Gamo as a copra maker
contractor. Respondents Ernesto Belleza,
Carlos Rojas, Maximo Malinao were all
employees in petitioner's coconut farm,
while respondents Felix Terona, Virgilio
Cosep, Maximo Tolda, and Nelson Bagaan
were assigned to petitioner's mango farm.
All of the abovenamed respondents (copra
workers) were later transferred by
petitioner
to
Gamo
as
the
latter's copraceros. From 1987 to 1999,
Gamo and petitioner entered into a profitsharing agreement wherein 70% of the net
proceeds of the sale of copra went to
petitioner and 30% to Gamo. The copra
workers were paid by Gamo from his 30%
share.
Petitioner
wanted
to
standardize
payments to its "contractors" in its
coconut farms. On 2 October 1999,
petitioner proposed a new payment
scheme to Gamo. The new scheme
provided a specific price for each copra
making activity. Gamo submitted his
counter proposal.
Petitioner did not
accept Gamo's counter proposal since it
was higher by at least fifty percent (50%)
from its original offer. Without agreeing to
the new payment scheme, Gamo and his
copra workers started to do harvesting
work. Petitioner told them to stop.
Eventually, petitioner and Gamo agreed
that the latter may continue with the
harvest provided that it would be his last
"contract"
with
petitioner.
Gamo
suggested to petitioner to look for a new
"contractor" since he was not amenable to
the new payment scheme.
Gamo and petitioner failed to agree on a
payment scheme, thus, petitioner did not
renew the "contract" of Gamo. Gamo and
the copra workers alleged that they were
illegally dismissed.
On the other hand, respondent Eleonor
Cosep (Eleonor) was employed as a
mango classifier in the packing house of
petitioner's mango farm in San Isidro,
Davao Oriental. Sometime in October

ARRANGEMENT
1999, she did not report for work as she
had wanted to raise and sell pigs instead.
Petitioner, through Malone Pacquiao, tried
to convince Eleonor to report for work but
to no avail
On 22 March 2000, respondents filed a
complaint for illegal dismissal against
petitioner. They alleged that sometime in
December
1999,
petitioner
verbally
terminated them en masse.
Issues:
(1) whether the Court of Appeals failed to
take judicial notice of the accepted
practice of independent contractors in the
coconut industry; (2) whether there is a
valid job contracting between petitioner
and Gamo; and (3) whether Eleonor had
effectively abandoned her work.
Held:
The labor arbiter took judicial notice of the
alleged prevailing business practices in
the coconut industry that copra making
activities are done quarterly; that the
workers can contract with other farms;
and that the workers are independent
from the land owner on all work aspects.
Petitioner wants this Court to take judicial
notice of the current business practice in
the coconut industry which allegedly
treats copraceros as
independent
contractors. In Expertravel & Tours, Inc. v.
Court of Appeals, we held, thus:
Generally
speaking,
matters of judicial notice
have
three
material
requisites: (1) the matter
must be one of common
and general knowledge;
(2) it must be well and
authoritatively settled and
not doubtful or uncertain;
and (3) it must be known
to be within the limits of
the jurisdiction of the
court. The principal guide
in determining what facts
may be assumed to be
judicially known is that of
notoriety. Hence, it can be
said that judicial notice is
limited to facts evidenced
by public records and
facts of general notoriety.

Moreover,
a
judicially
noticed fact must be one
not
subject
to
a
reasonable dispute in that
it is either: (1) generally
known
within
the
territorial jurisdiction of
the trial court; or (2)
capable of accurate and
ready determination by
resorting to sources whose
accuracy
cannot
reasonably
be
questionable.
Things
of
"common
knowledge",
of
which
courts
take
judicial
matters coming to the
knowledge
of
men
generally in the course of
the ordinary experiences
of life, or they may be
matters
which
are
generally accepted
by
mankind as true and are
capable of ready and
unquestioned
demonstration. Thus, facts
which
are
universally
known, and which may be
found in encyclopedias,
dictionaries
or
other
publications, are judicially
noticed, provided, they
are of such universal
notoriety and so generally
understood that they may
be regarded as forming
part of the
common
knowledge
of
every
person. As the common
knowledge of man ranges
far and wide, a wide
variety of particular facts
have
been
judicially
noticed as being matters
of
common
knowledge. But a court
cannot take judicial notice
of any fact which, in part,
is dependent on the
existence
or
nonexistence of a fact of

ARRANGEMENT
which the court has no
constructive knowledge.
An invocation that the Court take judicial
notice of certain facts should satisfy the
requisites set forth by case law. A mere
prayer for its application shall not suffice.
Thus, in this case the Court cannot take
judicial notice of the alleged business
practices in the copra industry since none
of the material requisites of matters of
judicial notice is present in the instant
petition. The record is bereft of any
indication that the matter is of common
knowledge to the public and that it has
the characteristic of notoriety, except
petitioners' self-serving claim. CaASIc
A related issue is whether Gamo is an
independent contractor. In Escario v.
NLRC, we ruled that there is permissible
job contracting when a principal agrees to
put out or farm out with a contractor or a
subcontractor
the
performance
or
period, regardless of whether such job or
work service is to be performed within or
outside the premises of the principal. To
establish the existence of an independent
contractor, we apply the following
conditions: first, the contractor carries on
an independent business and undertakes
the contract work on his own account
under his own responsibility according to
his own manner and method, free from the
control and direction of his employer or
principal in all matters connected with the
performance of the work except to the
result thereof; and second, the contractor
has substantial capital or investments in
work premises and other materials which
are necessary in the conduct of his
business.
The Implementing Rules and Regulation of
the Labor Code defines investment as
tools,
equipment,
implements,
completion of the job, work, or service
contracted out. The investment must be
sufficient to carry out the job at hand.
In the case at bar, Gamo and the copra

workers did not exercise independent
judgment in the performance of their
tasks. The tools used by Gamo and his
copra
workers
like
the karit,
bolo,
pangbunot, panglugit and pangtapok are
not sufficient to enable them to complete
the job. Reliance on these primitive tools
is not enough. In fact, the accomplishment
of their task required more expensive
machineries and equipment, like the
trucks to haul the harvests and the drying
facility, which petitioner corporation owns.
In order to determine the existence of an
employer-employee relationship, the Court
has frequently applied the four-fold test:
(1) the selection and engagement of the
employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power
to control the employee's conduct, or the
so called "control test", which is
considered
the
most
important
element. From the time they were hired
by petitioner corporation up to the time
that they were reassigned to work under
Gamo's supervision, their status as
petitioner corporation's employees did not
cease. Likewise, payment of their wages
was merely coursed through Gamo. As to
the most determinative test the power
of control, it is sufficient that the power to
control the manner of doing the work
exists, it does not require the actual
exercise of such power. In this case, it was
in the exercise of its power of control when
petitioner corporation transferred the
copra workers from their previous
assignments to work as copraceros. It was
also in the exercise of the same power
that petitioner corporation put Gamo in
charge of the copra workers although
under a different payment scheme. Thus,
it is clear that an employer-employee
relationship
has
existed
between
petitioner corporation and respondents
since the beginning and such relationship
did not cease despite their reassignments
and the change of payment scheme.
It is well settled that abandonment as a
just and valid ground for dismissal
requires the deliberate and unjustified
refusal of the employee to return for work.
Two elements must be present, namely:
(1) the failure to report for work or

ARRANGEMENT
absence without valid or justifiable reason,
and (2) a clear intention to sever the
employer-employee
relationship.
The
second element is more determinative of
the intent and must be evinced by overt
acts. Mere absence, not being sufficient,
the burden of proof rests upon the
employer to show that the employee
clearly and deliberately intended to
discontinue her employment without any
intention of returning. 28 In Samarca v.
Arc-Men Industries, Inc., we held that
abandonment is a matter of intention and
cannot lightly be presumed from certain
equivocal acts.
To constitute abandonment, there must be
clear proof of deliberate and unjustified
intent to sever the employer-employee
relationship. Clearly, the operative act is
still the employee's ultimate act of putting
an end to his employment. 29 However,
an employee who takes steps to protest
her layoff cannot be said to have
abandoned her work because a charge of
abandonment is totally inconsistent with
the immediate filing of a complaint for
illegal dismissal, more so when it includes
a prayer for reinstatement. 30When
Eleonor
filed
the
illegal
dismissal
complaint, it totally negated petitioner's
theory of abandonment.
Also, to effectively dismiss an employee
for abandonment, the employer must
comply with the due process requirement
of sending notices to the employee.
In Brahm Industries, Inc. v. NLRC, 31 we
ruled that this requirement is not a mere
formality that may be dispensed with at
will. Its disregard is a matter of serious
concern since it constitutes a safeguard of
the highest order in response to man's
innate sense of justice. 32 Petitioner was
not able to send the necessary notice
requirement
to
Eleonor.
Petitioner's
belated claim that it was not able to send
the notice of infraction prior to the filing of
the illegal dismissal case cannot simply
unacceptable. 33 Based on the foregoing,
Eleonor did not abandon her work.
WHEREFORE, the petition is DENIED. The
Decision of the Court of Appeals is
AFFIRMED.
73.
G.R.
No.
September 3, 2009
164205
Oldarico S. Traveo, Rovel A. Genelsa,

Ruel U. Villarmente, Alfredo A.
Panilagao,
Carmen
P.
Danila,
Elizabeth B. Macalino, Ramil P. Albito,
Reynaldo
A.
Ladrillo,
Lucas
G.
Tamayo, Diosdado A. Amorin, Rodino
C. Vasquez, Gloria A. Felicano, Nole E.
Fermilan, Joselito B. Rendon, Cristeta
D. Caa, Evelyn D. Arcenal and Jeorge
M. Nono vs. Bobongon Banana
Growers Multi-Purpose Cooperative,
Timog
Agricultural
Corporation,
Diamond Farms, Inc., and Dole Asia
Philippines, Respondents.
FACTS:
a. Origin of Case
The case originated from three

separate complaints for illegal
dismissal filed by petitioners,
individually and collectively, with
the
National
Labor
Relations
Commission
against
the
respondents including respondent
Dole Asia Philippines as it then
supposedly
owned
Timog
Agricultural Corporation (TACOR),
for unpaid salaries, overtime pay,
13th month pay, service incentive
leave
pay,
damages,
and
attorneys fees.
Petitioners Traveno, et. al. were

hired by TACOR and Diamond
Farms (DFI) to work at a Banana
Plantation
in
Bobongon,
Sto.
Tomas, Davao del Norte, where
they helped to prepare the lands
for the planting of banana.
While petitioners worked under the

direct control of supervisors from
TACOR and DFI, these companies
made it appear that they were
hired
through
independent
contractors including individuals,
unregistered
associations
and
cooperatives, such as the other
respondent
Bobongon
Banana

ARRANGEMENT
Growers
Cooperative.
Multi-purpose
Sometime in 2000, the respondents

began harassing the respondents
in order to ease them out of their
jobs. They unilaterally changed
their compensation package from
being based on a daily rate to a
pakyawan rate and then soon after,
they stopped paying their salaries
which prompted the petitioners to
also stop working.
b. Respondents Defense
TACOR and DFI (answering as a

merged company) claim that they
never engaged the services of the
petitioners. They allege that when
TACOR still existed, it had an
arrangement with several land
owners in Sto. Tomas that it would
extend technical and financial
assistance to these landowners for
the development of their lands into
a banana plantation on the
condition that TACOR would be the
exclusive buyer of the bananas
produced with such assistance.
TACOR maintains that it is the
landowners
who
formed
the
cooperative who hired laborers for
the farms.
c. Petitioners Argument
Petitioners argue that while the

Cooperative was their employer on
paper, the other respondents
exercised control and supervision
over
them
and
that
the
Cooperative was a labor-only
contractor.
RULING:
The
Cooperatives
corespondents are not solidarily
liable for the illegal dismissal
and money claims
Job contracting or subcontracting refers to

an arrangement whereby a principal
agrees to farm out with a contractor or
subcontractor the performance of a
definite
or
predetermined
period,
principal. The present case does not
involve such an arrangement.
Dole entered into a Banana Production and
Purchase Agreement (Contract) with the
Cooperative. Such contract partakes only
the nature of a joint venture agreement
and not a job contracting arrangement.
By way of the four-fold test of employeremployee relationship, it is only the
Cooperative and not the other corespondents who can be considered the
petitioners employer because:
a.) DFI has total lack of knowledge on who
actually were engaged by the Cooperative
to work in the banana plantation (selection
of workers)
b.) The Cooperative handles the fund in
the operational expenses including the
wages of the workers (payment of wages)
c.) The Contract stipulated that the
Cooperative was to be responsible for the
proper conduct and general welfare of its
members and workers in the plantation
(power of dismissal and power of control)
ISSUE/S:
The case is anchored on the issue of
whether or not DFI (with which TACOR had
been merged) and Dole should be held
solidarily liable with the Cooperative for
petitioners illegal dismissal and money
claims.
74. Raul G. Locsin & Eddie Tomaquin

v. PLDT,

ARRANGEMENT
G.R. No. 185251
Yes, petitioners became employees of

respondent after the Agreement between
SSCP and respondent was terminated.
Facts
On November 1, 1990, PLDT and

the Security and Safety Corporation of the
Philippines (SSCP) entered into a Security
Services Agreement whereby SSCP would
provide armed security guards to PLDT to
be assigned to its various offices.
Petitioners
Raul
Locsin
and
Eddie
Tomaquin were among those posted at a
PLDT office. However, on August 30, 2001,
PLDT
terminated
the
Agreement
effective October 1, 2001.
However, despite the termination
of the Agreement, petitioner continued to
secure the premises of the office because
they were allegedly told to maintain their
posts. Then, on September 30, 2002,
petitioners services were terminated.
Petitioners sought recourse to the
Labor Arbiter for illegal dismissal and
recover of money claims, such remedy
was thereby granted, finding PLDT liable
for the dismissal. PLDT raised its appeal
first to the NLRC and then consequently to
the CA asking for the nullification of the
Resolution issued by the NLRC as well as
the Labor Arbiters Decision. The CA ruled
that SSCP was not a labor-only contractor
and was an independent contractor having
substantial capital to operate and conduct
its own business. Furthermore, the
agreement stipulates against an employeremployee relationship.
ISSUE
Whether petitioners became employees of
respondent after the Agreement between
SSCP and respondent was terminated.
RULING
Notable,
ordinarily,
business
owners or managers would not allow
security guards of an agency with whom
the owners or managers have severed ties
with to continue to stay within the
business premises. Moreover, from the
foregoing circumstances, it can be
assumed that petitioners remained at
their post under the instructions of
respondent. We can further conclude that
respondent dictated upon petitioners that
the latter perform their regular duties to
secure the premises during operating
hours. This, to our mind and under the
circumstances, is sufficient to establish
the existence of an employer-employee
relationship.
While there is no legal relationship
with the SSCP because of the termination
of the Agreement, petitioners continued to
hold post, indicating that the element of
control is exercised by the respondent
over petitioners.
Furthermore, Article 106 of the
Labor Code contains a provision on
contractors, to wit: xxx
The Secretary of
Labor and Employment
may,
by
appropriate
regulations, restrict or
prohibit the contractingout 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

ARRANGEMENT
be
considered
the
employer for purposes of
this Code, to prevent any
violation
or
circumvention
of
any
provision of this Code.
Thus, the Secretary of Labor issued

Department Order No. 18-2002, Series of
2002, implementing Art. 106 as follows:
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
merely recruits, supplies or
places workers to perform a
job, work or service for a
principal, and any of the
following
elements
are
present:xxx
(ii)
the
contractor
does
not exercise the
right to control
over
the
performance
of
the work of the
contractual
employee.
There is no question
that respondent having control
over the petitioners must be
considered
as
petitioners
employerfrom the termination of
the Agreement onwardsas this
was the only time that any
evidence of control was exhibited
by respondent over petitioners and
in light of our ruling inAbella. Thus,
as aptly declared by the NLRC,
petitioners were entitled to the
rights and benefits of employees of
respondent, including due process

requirements in the termination of
their services.
75. Aliviado, et. al. vs. Proctor &

Gamble Phils., G.R. No. 160506,
March 9, 2010
Facts:
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.
On November 29, 1996, the Labor Arbiter
dismissed the complaint for lack of merit
and ruled that there was no employeremployee relationship between petitioners
and P&G. He found that the selection and
engagement of the petitioners, the
payment of their wages, the power of
dismissal and control with respect to the
means and methods by which their work
was accomplished, were all done and

ARRANGEMENT
exercised by Promm-Gem/SAPS. He further
found that Promm-Gem and SAPS were
legitimate independent job contractors.
Appealing to the NLRC, petitioners
disputed the Labor Arbiters findings. On
July 27, 1998, the NLRC rendered a
Decision
dismissing
their
appeal.
Petitioners then filed a petition for
certiorari with the CA, alleging grave
abuse of discretion amounting to lack or
excess of jurisdiction on the part of the
Labor Arbiter and the NLRC. However, said
petition was also denied by the CA.
Petitioners
filed
a
motion
for
reconsideration but the motion was also
denied. Hence, this petition.
Issue: Whether or not Promm-Gem and
SAPS are labor-only contractors
Ruling:
Promm-Gem is an independent contractor
however, SAPS is a labor-only contractor.
The pertinent Labor Code provision on the
matter states:
ART. 106. 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
Code.
There is "labor-only" contracting where the
person supplying workers to an employer
and placed by such person are performing
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
employed by him.
Rule VIII-A, Book III of the Omnibus Rules
Implementing
the
Labor
Code,
as
amended by Department Order No. 18-02,
distinguishes between legitimate and
labor-only contracting:
Section 3. Trilateral Relationship in
Contracting Arrangements. In legitimate
contracting, there exists a trilateral
relationship under which there is a
contract for a specific job, work or service
between the principal and the contractor
or subcontractor, and a contract of
employment between the contractor or
subcontractor and its workers. Hence,
there are three parties involved in these
arrangements, the principal which decides
to farm out a job or service to a contractor
or subcontractor, the contractor or
subcontractor which has the capacity to
independently undertake the performance
of the job, work or service, and the
contractual workers engaged by the
contractor or subcontractor to accomplish
the job, work or service.
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
i) The contractor or subcontractor does
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
main business of the principal; or
ii) [T]he contractor does not exercise the
right to control over the performance of
the work of the contractual employee.

ARRANGEMENT
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,
contracted out.
The "right to control" shall refer to the
right reserved to the person for whom the
services of the contractual workers are
Clearly, 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 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
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.
In Vinoya v. National Labor Relations
Commission, the Court held that "[w]ith
the current economic atmosphere in the
country, the paid-in capitalization of PMCI
amounting to P75,000.00 cannot be
considered as substantial capital and, as
such, PMCI cannot qualify as an
independent
contractor."Applying
the
same rationale to the present case, it is
clear that SAPS having a paid-in capital
of only P31,250 - has no substantial
capital. SAPS lack of substantial capital is
underlined by the records which show that
its payroll for its merchandisers alone for
one
month
would
already
total
P44,561.00. It had 6-month contracts with
P&G. Yet SAPS failed to show that it could
complete the 6-month contracts using its
own capital and investment. Its capital is
not even sufficient for one months
payroll. SAPS failed to show that its paid-in
capital of P31,250.00 is sufficient for the

ARRANGEMENT
period required for it to generate its
needed revenue to sustain its operations
independently. Substantial capital refers to
capitalization used in the performance or
contracted out. In the present case, SAPS
has failed to show substantial capital.
Furthermore, the petitioners have been
charged with the merchandising and
promotion of the products of P&G, an
activity that has already been considered
by the Court as doubtlessly directly
related to the manufacturing business,
which is the principal business of P&G.
Considering that SAPS has no substantial
capital or investment and the workers it
recruited are performing activities which
are directly related to the principal
business of P&G, we find that the former is
engaged in "labor-only contracting".
"Where labor-only contracting exists, the
Labor Code itself establishes an employeremployee
relationship
between
the
employer and the employees of the laboronly contractor." The statute establishes
this relationship for a comprehensive
purpose: to prevent a circumvention of
labor laws. The contractor is considered
merely an agent of the principal employer
and the latter is responsible to the
employees of the labor-only contractor as
if such employees had been directly
employed by the principal employer.
Consequently, petitioners recruited and
supplied by SAPS -- which engaged in
labor-only contracting -- are considered as
the employees of P&G while those having
worked under, and been dismissed by
Promm-Gem,
are
considered
the
employees of Promm-Gem, not of P&G.
76. SAN MIGUEL CORPORATION
vs. VICENTE B. SEMILLANO
FACTS:
AMPCO hired the services of
Vicente
Semillano,
Nelson
Mondejar, Jovito Remada and Alex
Hawod, herein respondents. All of
them were assigned to work in

SMC's Bottling Plant situated at
Brgy. Granada Sta. Fe, 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 SMC's officers. They
were required to work inside the
premises of SMC using SMCs
equipment. They rendered service
with SMC for more than 6 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. 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 SMC's supervisor. Vicente et al.,
waited
for
one
month,
unfortunately, they never heard a
word from SMC.
Consequently, Vicente et al., as
complainants, filed a complaint for
illegal dismissal with the Labor
Arbiter against AMPCO, Merlyn V.
Polidario, SMC and Rufino I. Yatar,
SMC
Plant
Manager,
as
respondents. Complainants 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.
The
Labor
Arbiter
rendered
judgment declaring Vicente, et al.
as regular employees of San Miguel
Corporation. Initially, the NLRC
Fourth Division affirmed with
modifications the findings of the LA

ARRANGEMENT
but in a Resolution, the NLRC
reversed its earlier ruling. It
absolved petitioner from liability
and instead held AMPCO, as
employer of respondents, as an
The Court of Appeals overturned the
Commissions finding that petitioner SMC
wielded the power of control over
respondent and the power of dismissal
and that AMPCO was a labor-only
contractor since "a capital of nearly one
million pesos" was insufficient for it to
qualify as an independent contractor.
SMC filed a motion for reconsideration but
was denied. Hence, this petition for review
on certiorari.
Petitioner SMC argues that the CA wrongly
assumed that it exercised power of control
over the respondents just because they
performed their work within SMC's
premises. In advocacy of its claim that
AMPCO is an independent contractor,
petitioner relies on the provisions of the
service contract between petitioner and
AMPCO, wherein the latter undertook to
provide
the
materials,
tools
and
equipment to accomplish the services
contracted out by petitioner. The same
contract provides that AMPCO shall have
exclusive discretion in the selection,
engagement
and
discharge
of
its
employees/personnel or otherwise in the
direction and control thereof. Petitioner
also adds that AMPCO determines the
wages of its employees/personnel who
shall be within its full control.
In its Comment, respondent AMPCO
essentially advanced the same arguments
in support of its claim as a legitimate job
contractor.
ISSUE:
WON AMPCO is a legitimate job contractor
RULING:
NO, AMPCO is a labor-only contractor.

independent contractorship is whether or
not the one claiming to be an independent
employer, except only as to the results of
the work.
Although there may be indications of an
independent
contractor
arrangement
between petitioner and AMPCO, the most
determinant of factors exists which
indicate otherwise.
AMPCO's 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 AMPCO's substantial
capital are in fact invested and used in the
trading business.
AMPCO does not have substantial
equipment,
tools,
machineries,
and
supplies actually and directly used by it in
the performance or completion of the
segregation and piling job. There is
nothing in AMPCO's 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. Thus, 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.
In connection therewith, DOLE Department
Order No. 10 also states that an
independent contractor carries on an
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

ARRANGEMENT
as the control test to determine the
existence
of
employer-employee
relationship.
In the case at bench, petitioner failed to
show how AMPCO took "entire charge,
control and supervision of the work and
service agreed upon."
Moreover, the Court was not convinced
that AMPCO wielded "exclusive discretion
in the discharge" of respondents. AMPCO's
project manager, even told respondents to
"wait for further instructions from the
SMC's supervisor" after they were
prevented from entering petitioner SMC's
premises.
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 AMPCO's business, that is,
whether as labor-only contractor, or job
contractor. AMPCO's character should be
measured in terms of, and determined by,
the criteria set by statute. At a closer look,
AMPCO's actual status and participation
regarding
respondents'
employment
clearly belie the contents of the written
service contract.
Petitioner cannot rely either on AMPCO's
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.
Thus,
petitioner
SMC,
as
principal
employer, is solidarily liable with AMPCO,
the labor-only contractor, for all the
rightful claims of respondents. Under this

set-up, AMPCO, as the "labor-only"
contractor, is deemed an agent of the
principal (SMC). The law makes the
principal responsible over the employees
of the "labor-only" contractor as if the
principal
itself
directly
hired
the
employees.
77.Manila Water
Dalumpines
Facts:
Company
Inc.
vs
By virtue of Republic Act No. 8041,

otherwise known as the "National Water
Crisis Act of 1995," the Metropolitan
Waterworks
and
Sewerage
System
(MWSS) was given the authority to enter
into concession agreements allowing the
private sector in its operations. 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. The east
service area included the following towns
and cities: Mandaluyong, Marikina, Pasig,
Pateros, San Juan, Taguig, Makati, parts of
Quezon City and Manila, Angono, Antipolo,
Baras, Binangonan, Cainta, Cardona, JalaJala, Morong, Pililla, Rodriguez, Tanay,
Taytay, Teresa, and San Mateo.3
On November 21, 1997, 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. However, Manila Water contracted
ACGI for collection services only in its
Balara Branch.6
In December 1997, 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 2002.7 Earlier, in a
memorandum dated November 28, 1997,

ARRANGEMENT
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, 1997.8
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."9 The
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
complaints were consolidated and jointly
heard.
Petitioner Manila Water, for its part,
denied that there was an employeremployee
relationship
between
its
company and respondent bill collectors.
Based on the agreement between FCCSI
and
Manila
Water,
respondent
bill
collectors are the employees of the
former, as it is the former that has the
right to select/hire, discipline, supervise,
and control. FCCSI has a separate and
distinct legal personality from Manila
Water, and it was duly registered as an
independent contractor before the DOLE.
Issues:
WON FCCSI was a labor-only contractor
and that respondent bill collectors are
employees of petitioner Manila Water
Held:
Yes. FCCSI was a labor-only contractor and
that respondent bill
collectors are
employees of petitioner Manila Water.
"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.
Department Order No. 18-02,

Series of 2002, enunciates that labor-only
contracting refers to an arrangement
where the contractor or subcontractor
merely recruits, supplies, or places
workers to perform a job, work, or service
for a principal, and any of the following
elements are present: (i) the contractor or
subcontractor does not have substantial
capital or investment which relates to the
job, work, or service to be performed and
the employees recruited, supplied, or
placed
by
such
contractor
or
subcontractor are performing activities
business of the principal; or (ii) the
contractor does not exercise the right to
control the performance of the work of the
contractual employee.
FCCSI has no sufficient investment
in the form of tools, equipment and
machinery to undertake contract services
for Manila Water involving a fleet of
around 100 collectors assigned to several
branches and covering the service area of
Manila Water customers spread out in
several cities/towns of the East Zone. The
only rational conclusion is that it is Manila
Water that provides most if not all the
logistics and equipment including service
vehicles in the performance of the
contracted service, notwithstanding that
the contract between FCCSI and Manila
Water states that it is the Contractor
which shall furnish at its own expense all
materials, tools and equipment needed to
perform the tasks of collectors.
78.Teng vs. Pahagac, G.R. No.
169704, November 17, 2010
Facts:
Albert Teng Fish Trading is engaged
in deep sea fishing and, for this purpose,
owns boats (basnig), equipment, and
other fishing paraphernalia. As owner of
the business, Teng claims that he
customarily enters into joint venture
agreements
with
master
fishermen
(maestros) who are skilled and are experts

ARRANGEMENT
in deep sea fishing; they take charge of
the management of each fishing venture,
including the hiring of the members of its
complement. He avers that the maestros
hired the respondent workers as checkers
to determine the volume of the fish caught
in every fishing voyage.
On
February
20,
2003,
the
respondent workers filed a complaint for
illegal dismissal against Albert Teng Fish
Trading, Teng, and Chua before the NCMB,
Region Branch No. IX, Zamboanga City.
Issues:
1. WON the VAs decision is not
subject
to
a
motion
for
reconsideration.
2. WON
an
employer-employee
relationship existed between Teng
and the respondent workers.
Held: The petition is denied.
1. Article 262-A of the Labor Code
does not prohibit the filing of a
motion for reconsideration.
On
March
21,
1989,
Republic Act No. 6715 took effect,
amending, among others, Article
263 of the Labor Code which was
originally worded as:
Art. 263 x x x Voluntary
arbitration awards or decisions
shall be final, unappealable, and
executory.
As amended, Article 263 is now
Article 262-A, which states:
Art. 262-A. x x x [T]he award
or decision x x x shall contain
the facts and the law on
which it is based. It shall be
final and executory after ten
(10) calendar days from

receipt of the copy of the
award or decision by the
parties.
Notably,
Article
262-A
deleted the word "unappealable"
from Article 263. The deliberate
selection of the language in the
amendatory act differing from that
of the original act indicates that the
legislature intended a change in
the law, and the court should
endeavor to give effect to such
intent. We recognized the intent of
the change of phraseology in
Imperial Textile Mills, Inc. v.
Sampang, where we ruled that:
It is true that the present
rule [Art. 262-A] makes the
voluntary arbitration award final
and executory after ten calendar
days from receipt of the copy of the
award or decision by the parties.
Presumably, the decision may still
be reconsidered by the Voluntary
Arbitrator on the basis of a motion
for reconsideration duly filed during
that period.
Tengs allegation that the
VAs decision had become final and
executory
by
the
time
the
respondent workers filed an appeal
with the CA thus fails. We
consequently
rule
that
the
respondent workers seasonably
filed a motion for reconsideration of
the VAs judgment, and the VA
erred in denying the motion
because
no
motion
for
reconsideration is allowed.
2. There exists an employer-employee
relationship between Teng and the
respondent workers.

ARRANGEMENT
While Teng alleged that it
was the maestros who hired the
respondent workers, it was his
company that issued to the
respondent workers identification
cards (IDs) bearing their names as
employees and Tengs signature as
the employer. Generally, in a
business establishment, IDs are
issued to identify the holder as a
bona fide employee of the issuing
entity.
For the 13 years that the
respondent workers worked for
Teng, they received wages on a
regular basis, in addition to their
shares in the fish caught. The
worksheet
showed
that
the
respondent
workers
received
uniform amounts within a given
year, which amounts annually
increased until the termination of
their employment in 2002. Tengs
claim that the amounts received by
the respondent workers are mere
commissions is incredulous, as it
would mean that the fish caught
throughout the year is uniform and
increases in number each year.
More
importantly,
the
element of control which we have
ruled in a number of cases to be a
strong indicator of the existence of
an employer-employee relationship
is present in this case. Teng not
only
owned
the
tools
and
equipment, he directed how the
respondent
workers
were
to
perform their job as checkers; they,
in fact, acted as Tengs eyes and
ears in every fishing expedition.
Teng cannot hide behind his
argument that the respondent
workers
were
hired
by
the
maestros.
To
consider
the
respondent workers as employees

of the maestros would mean that
Teng
committed
impermissible
labor-only contracting. As a policy,
the Labor Code prohibits labor-only
contracting:
ART. 106. Contractor or
Subcontractor x x x The Secretary
of Labor and Employment may, by
appropriate regulations, restrict or
prohibit the contracting-out of
labor.
xxxx
There
is
"labor-only"
contracting where the person
supplying
workers
to
an
employer
does
not
have
substantial
capital
or
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
employed by him.
Section 5 of the DO No. 1802, which implements Article 106
of the Labor Code, provides:
Section
5.
Prohibition
against
labor-only
contracting.
Labor-only
contracting
is
hereby declared prohibited.For
this purpose, labor-only contracting
shall refer to an arrangement
where
the
contractor
or

ARRANGEMENT
subcontractor
merely
recruits,
supplies or places workers to
principal, and any of the following
elements are present:
(i)
The
contractor
or
subcontractor
does
not
have
substantial capital or investment
which relates to the job, work or
service to be performed and the
employees recruited, supplied or
placed by such contractor or
subcontractor
are
performing
activities which are directly related
to the main business of the
principal; or
(ii) The contractor does not
exercise the right to control over
the performance of the work of the
contractual employee.
In the present case, the
maestros did not have any
substantial capital or investment.
Teng admitted that he solely
provided
the
capital
and
equipment, while the maestros
supplied the workers. The power of
control
over
the
respondent
workers was lodged not with the
maestros but with Teng. As
checkers, the respondent workers
main tasks were to count and
classify the fish caught and report
them to Teng. They performed
tasks that were necessary and
desirable in Tengs fishing business.
Taken together, these incidents
confirm the existence of a laboronly contracting which is prohibited
in our jurisdiction, as it is
considered to be the employers
attempt to evade obligations
afforded by law to employees.
Accordingly, we hold that

employer-employee
ties
exist
between Teng and the respondent
workers. A finding that the
maestros are labor-only contractors
is equivalent to a finding that an
employer-employee
relationship
exists between Teng and the
respondent workers. As regular
employees, the respondent workers
are entitled to all the benefits and
rights appurtenant to regular
employment.
79. GSIS vs. NLRC, et. al., G.R. No.

180045, Nov. 17, 2010
Facts:
Respondents Dionisio Banlasan, Alfredo T.
Tafalla, Telesforo D. Rubia, Rogelio A.
Alvarez, Dominador A. Escobal, and
Rosauro Panis were employed as security
guards by DNL Security Agency (DNL
Security). By virtue of the service contract
entered into by DNL Security and
petitioner Government Service Insurance
System on May 1, 1978, respondents were
assigned to petitioners Tacloban City
office, each receiving a monthly income
ofP1,400.00. Sometime in July 1989,
petitioner
voluntarily
increased
respondents
monthly
salary
to
P3,000.00.3
In February 1993, DNL Security informed
respondents that its service contract with
petitioner
was
terminated.
This
notwithstanding, DNL Security instructed
respondents to continue reporting for work
to petitioner. Respondents worked as
instructed until April 20, 1993, but without
receiving their wages; after which, they
were terminated from employment.4
On June 15, 1995, respondents filed with
the National Labor Relations Commission
(NLRC), Regional Arbitration Branch No.
VIII, Tacloban City, a complaint against
DNL Security and petitioner for illegal
dismissal,
separation
pay,
salary
differential, 13th month pay, and payment
of unpaid salary.

ARRANGEMENT
Issue: WON GSIS is jointly and severally

liable with DNL Security Agency for
payment of the unsubstantiated amounts
of Salary Differentials and the 13th Month
Pay to the private respondent security
guards.
Held:
The fact that there is no actual and direct
petitioner and respondents does not
absolve the former from liability for the
latters monetary claims. When petitioner
contracted
DNL
Securitys
services,
petitioner became an indirect employer of
respondents, pursuant to Article 107 of
the Labor Code, which reads:
ART. 107. Indirect employer. The
provisions of the immediately preceding
Article shall likewise apply to any person,
partnership, association or corporation
which, not being an employer, contracts
with an independent contractor for the
performance of any work, task, job or
project.
After DNL Security failed to pay
respondents the correct wages and other
monetary benefits, petitioner, as principal,
became jointly and severally liable, as
provided in Articles 106 and 109 of the
Labor Code, which state:
ART. 106. 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
Code.
to employees directly employed by him. x

x x.
xxxx
ART. 109. 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.
This statutory scheme is designed to give
the workers ample protection, consonant
with labor and social justice provisions of
the 1987 Constitution.
Petitioners liability covers the payment of
respondents salary differential and 13th
month pay during the time they worked
for petitioner. In addition, petitioner is
solidarily liable with DNL Security for
respondents unpaid wages from February
1993 until April 20, 1993. While it is true
that respondents continued working for
petitioner after the expiration of their
contract, based on the instruction of DNL
Security, petitioner did not object to such
assignment and allowed respondents to
render service. Thus, petitioner impliedly
approved the extension of respondents
services. Accordingly, petitioner is bound
by the provisions of the Labor Code on
indirect employment. Petitioner cannot be
allowed to deny its obligation to
respondents after it had benefited from
their services. So long as the work, task,
job, or project has been performed for
petitioners benefit or on its behalf, the
liability accrues for such services. The
principal is made liable to its indirect
employees because, after all, it can
protect
itself
from
irresponsible
contractors by withholding payment of
such sums that are due the employees
and by paying the employees directly, or
by requiring a bond from the contractor or
subcontractor for this purpose.
Petitioners liability, however, cannot
extend to the payment of separation pay.
An order to pay separation pay is invested
with a punitive character, such that an

ARRANGEMENT
indirect employer should not be made
liable without a finding that it had
conspired in the illegal dismissal of the
employees.
Lastly, we do not agree with petitioner
that the enforcement of the decision is
impossible
because
its
charter
unequivocally exempts it from execution.
To be sure, petitioners charter should not
be used to evade its liabilities to its
employees, even to its indirect employees,
as mandated by the Labor Code.
80. Marialy Sy, et al. vs. Fairland
Knitcraft Co., Inc.,
x--------------------------------------x
(consolidated with)
Susan T. De Leon vs.
Knitcraft Co., Inc., et al.
Fairland
Facts:
Fairland is a domestic corporation
engaged in garments business, while
Susan
de
Leon (Susan) is
the
owner/proprietress
of
Weesan
Garments (Weesan).
On the other hand, the complaining
workers, Marialy Sy and 33 others (the
workers) are sewers, trimmers, helpers, a
guard and a secretary who were hired by
Weesan.
The workers filed separate complaints for
underpayment and/or non-payment of
wages, overtime pay, premium pay, 13th
month pay and other monetary benefits
against Susan/Weesan. These complaints
were then consolidated by the Arbitration
Branch of the NLRC in January 2003.
February 5, 2003, Weesan filed before the
Department of Labor and EmploymentNational Capital Region (DOLE-NCR) a
report on its temporary closure for a
period of not less than six months. On the
same day, the workers were not anymore
allowed to work. So on February 18, 2003
they filed an Amended Complaint, and on
March 13, 2003, another pleading entitled
Amended Complaints and Position Paper
for Complainants, to include the charge of
illegal dismissal and impleaded Fairland

and its manager, Debbie Manduabas
(Debbie), as additional respondents.
At the Hearings set by the Labor Arbiter
Ramon Valentin Reyes, Atty. Antonio
Geronimo represented both Susan/Weesan
and Fairland. He submitted 2 position
papers for the two entities. The workers
filed a Reply, to which Atty. Geronimo also
submitted a Consolidated Reply by
Susan/Weesan and Fairland. Workers
answered back through a Rejoinder.
The Labor Arbiter dismissed the case for
lack of merit, but ordered the respondent
companies to pay each complainant
P5,000.00 by way of financial assistance.
The NLRC granted the workers appeal and
set aside the Labor Arbiters decision. The
Commission declared the dismissal of the
workers
as
illegal
and
ordered
reinstatement, will full backwages from
February 5, 2003 and payment all the
unpaid benefits to be paid solidarily by
Susan/Weesan and Fairland.
Atty. Geronimo filed a Motion for
Reconsideration. However, Fairland filed
another
Motion
for
Reconsideration through Atty. Melina O.
Tecson (Atty. Tecson) assailing the
jurisdiction of the Labor Arbiter and the
NLRC over it, claiming that it was never
summoned
to
appear,
attend
or
participate
in
all
the
proceedings
conducted therein. It also denied that it
engaged the services of Atty. Geronimo.
These MRs were denied by the NLRC.
Thus, Fairland and Susan/Weesan filed
their petitions for certiorari before the
Court of Appeals.
CAs decision on Fairlands petition:
The CA denied Fairlands petition and
affirmed the NLRC ruling which held
Fairland solidarily liable with Susan.
On MR, Fairland moved also for the
voluntary inhibition of Justices Leagogo
and Maambong. The CA granted the
motion for voluntary inhibition and
transferred the case from the First Division

ARRANGEMENT
to the Ninth Division. The Ninth Division
reversed the earlier denial of Fairlands
petition It held that the labor tribunals did
not acquire jurisdiction over the person of
Fairland, and even assuming they did,
Fairland is not liable to the workers since
Weesan is not a mere labor-only
contractor but a bona fide independent
contractor. The Special Ninth Division
thus annulled and set aside the assailed
NLRC Decision and Resolution insofar as
Fairland is concerned and excluded the
latter therefrom.
Workers appealed this decision to the
Supreme Court.
CAs decision on Susans petition:
Susans petition was denied due course
and dismissed for lack of merit. The CA
affirmed the NLRC ruling with respect to
Susan.
Her MR was denied by the CA.
Before the Supreme Court:
Susan filed a petition for review on
certiorari with the SC, which was
dismissed by the Supreme Court on
technicality and for failure to sufficiently
show any reversible error in the assailed
judgment. Susan filed an appeal but
before it could be resolved, the Supreme
Court consolidated Susans case with that
the workers.
The Supreme Court granted Susans
Motion for Reconsideration and reinstated
her petition for review on certiorari.
Issues:
1. Whether or not Susan/Weesan is a
labor-only contracting agent acting as an
agent of Fairland?
2. Whether or not the individual private
respondents (Sy, et al.) were illegal
dismissed?
Ruling:
G.R. No. 182915 (Susan de Leon
vs. Fairland, Sy et al.)
1. Susan is a mere labor-only contractor.

There is labor-only contracting when the
contractor
or
subcontractor
merely
(a) The person supplying workers to an
among others; and
(b) The workers recruited and placed by
business of the employer.
The workers, majority of whom are sewers,
were recruited by Susan/Weesan and that
they performed activities which are
directly related to Fairlands principal
business of garments. Did Susan/Weesan
have substantial capital or investment in
work premises, among others? The SC
said that there was nothing in the records
that would show that Weesan has
investment in the form of tools, equipment
or machineries. The records show that
Fairland has to furnish Weesan with
sewing machines for it to be able to
provide the sewing needs of the
former. Weesan was unable to show that
apart from the borrowed sewing machines,
it owned and possessed any other tools,
equipment, and machineries necessary to
its being a contractor or sub-contractor for
garments. Neither was Weesan able to
prove that it has substantial capital for its
business.
Further, the work premises utilized by
Weesan is owned by Fairland, which
significantly, was not in the business of
renting properties. They also advanced
that
there
was
no
showing
that
Susan/Weesan paid any rentals for the use
of the premises. Instead of refuting the
workers
allegations,
Susan
instead
claimed that Weesan rented the premises
from another entity, De Luxe. To support
this, she attached to her petition two
Contracts of Lease purportedly entered

ARRANGEMENT
into by her and De Luxe for the lease of
the premises covering the periods August
1, 1997 to July 31, 2000 and January 1,
2001 to December 31, 2004 as well as
TCTs and Tax declarations in De Luxes
name but the SC found it wanting. There
were no rental receipts presented nor did
the TCTs indicate with certainty that the
registered property is the same one used
for Weesans work premises. Weesan does
not have its own workplace and is only
utilizing the workplace of Fairland to whom
it supplied workers for its garment
business.
Suffice it to say that [t]he presumption is
that a contractor is a labor-only contractor
unless such contractor overcomes the
burden of proving that it has substantial
capital, investment, tools and the like. As
Susan/Weesan was not able to adduce
evidence that Weesan had any substantial
capital, investment or assets to perform
the work contracted for, the presumption
that Weesan is a labor-only contractor
stands.
2. Yes, the
dismissed.
workers
were
illegally
Susan relies on Article 283 of the Labor

Code which allows as a mode of termination
of employment the closure or termination of
business,
which
is
a
management
prerogative. The exercise of which requires: a)
that the closure/cessation of business is bona
fide, i.e., its purpose is to advance the interest
of the employer and not to defeat or
circumvent the rights of employees under the
law or a valid agreement; b) that written
notice was served on the employees and the
DOLE at least one month before the intended
date of closure or cessation of business; and
c)
in
case
of
closure/cessation
of
business not due to financial losses, that the
employees affected have been given
separation pay equivalent to month pay for
every year of service or one month pay,
whichever is higher.
The burden of proving that a temporary
suspension is bona fide falls upon the
employer. Clearly here, Susan/Weesan was
not able to discharge this burden. The
documents Weesan submitted to support
its claim of severe business losses cannot
be considered as proof of financial crisis to

justify the temporary suspension of its
operations since they clearly appear to
have not been duly filed with the
BIR. Weesan failed to satisfactorily explain
why the Income Tax Returns and financial
statements it submitted do not bear the
signature of the receiving officers. Also
hard to ignore is the absence of the
mandatory 30-day prior notice to the
workers.
Hence, the Court finds that Susan failed to
prove that the suspension of operations of
Weesan
was bona
fide and
that
it
complied with the mandatory requirement
of notice under the law. Susan likewise
failed to discharge her burden of proving
that the termination of the workers was for
a lawful cause. Therefore, the NLRC and
the CA, in CA-G.R. SP No. 93860, did not
err in their findings that the workers were
illegally dismissed by Susan/Weesan.
The court also ruled that Fairlands claim
of
prescription
does
not
deserve
consideration. Fairland says that they only
engaged Weesans services 1996 to 1997,
but in January 31, 2003, Fairland wrote
Weesan requesting for the sewing
machines back.
G.R. No. 182915 (Sy vs. Fairland)
It is basic that the Labor Arbiter cannot
acquire jurisdiction over the person of the
respondent without the latter being served
with summons. However, if there is no
valid service of summons, the court can
still acquire jurisdiction over the person of
the defendant by virtue of the latters
voluntary appearance. Although not
served with summons, jurisdiction over
Fairland and Debbie was acquired through
their voluntary appearance. When the
workers complaint was before the Labor
Arbiter, it is confirmed that Fairland and
Debbie were never summoned.
The crucial question now is: Did
Fairland and Debbie voluntarily appear
before the Labor Arbiter as to submit
themselves to its jurisdiction?

ARRANGEMENT
Fairland argued before the CA that
it did not engage Atty. Geronimo as its
counsel.
However,
the
Court
held
in Santos v. National Labor Relations
Commission viz:
Moreover, jurisdiction over
the person of the defendant in civil
cases is acquired not only by
service of summons but also by
voluntary appearance in court and
submission
to
its
authority. Appearance by a legal
advocate
is
such
voluntary
submission
to
a
courts
jurisdiction. It may be made not
only by actual physical appearance
but likewise by the submission of
pleadings in compliance with the
order of the court or tribunal.
The fact that Atty. Geronimo
entered his appearance for Fairland and
Debbie and that he actively defended
them before the Labor Arbiter raised the
presumption that he is authorized to
appear for them. As held in Santos, it is
unlikely that Atty. Geronimo would have
been so irresponsible as to represent
Fairland and Debbie if he were not in fact
authorized. As an officer of the Court,
Atty. Geronimo is presumed to have acted
with due propriety. Moreover, [i]t strains
credulity that a counsel who has no
personal interest in the case would fight
for and defend a case with persistence
and vigor if he has not been authorized or
employed by the party concerned.
The presumption of authority of
counsel to appear on behalf of a client is
found both in the Rules of Court and in the
New Rules of Procedure of the NLRC.
Sec. 8, Rule III of the New Rules of
Procedure of the NLRC, which is the
rules prevailing at that time, states
in part:
SECTION 8. APPEARANCES. - An
attorney appearing for a party is
presumed
to
be
properly
authorized
for
that
purpose.
However, he shall be required to
indicate in his pleadings his PTR

and IBP numbers for the current
year.
As Atty. Geronimo consistently indicated
his PTR and IBP numbers in the pleadings
he filed, there is no reason for the Labor
Arbiter not to extend to Atty. Geronimo the
presumption that he is authorized to
represent Fairland.
Moreover, the fact that Debbie signed the
verification attached to the position paper
filed by Atty. Geronimo, without a
secretarys certificate or board resolution
attached thereto, is not sufficient reason
for the Labor Arbiter to be on his guard
and require Atty. Geronimo to prove his
authority. Debbie, as General Manager of
Fairland is one of the officials of the
company who can sign the verification
without need of a board resolution
because as such, she is in a position to
verify the allegations in the petition.
Suffice it to say that an attorneys
presumption of authority is a strong
one. A mere denial by a party that he
authorized an attorney to appear for him,
in the absence of a compelling reason, is
insufficient to overcome the presumption,
especially when the denial comes after the
rendition of an adverse judgment, such
as in the present case.
To stress, Article 224 contemplates the
furnishing of copies of final decisions,
orders or awards both to the parties and
their counsel in connection with the
execution of such final decisions, orders or
awards. However, for the purpose of
computing the period for filing an appeal
from the NLRC to the CA, same shall be
counted from receipt of the decision, order
or award by the counsel of record
pursuant to the established rule that
notice to counsel is notice to party. In
sum, we hold that the Labor Arbiter
had validly acquired jurisdiction over
Fairland and its manager, Debbie,
through the appearance of Atty.
Geronimo as their counsel and
likewise, through the latters filing of
pleadings on their behalf.

ARRANGEMENT
Further proof that Fairland is Weesans
principal: (1) aside from sewing machines,
Fairland also lent Weesan other equipment
such as fire extinguishers, office tables
and chairs, and plastic chairs; (2) no proof
evidencing the contractual arrangement
between Weesan and Fairland was ever
submitted by Fairland; (3) while both
Weesan and Fairland assert that the
former had other clients aside from the
latter, no proof of Weesans contractual
relationship with its other alleged client is
extant on the records; and (4) there is no
showing that any of the workers were
assigned to other clients aside from
Fairland. Moreover, the activities, the
manner of work and the movement of the
workers were subject to Fairlands
control.
Fairland, therefore, as the principal
employer,
is
solidarily
liable
with
Susan/Weesan, the labor-only contractor,
for the rightful claims of the employees.
Under this set-up, Susan/Weesan, as the
"labor-only" contractor, is deemed an
agent of the principal, Fairland, 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.
WHEREFORE, the Court,
1) in GR No. 189658 denies Susans
Petition for Review on Certiorari. The CA
decision declaring her a labor-only
contractor is affirmed.
2) in G.R. No. 182915, grants the workers
Petition for Review on Certiorari. Decision
of the CA (ninth division) which excluded
Fairland from being solidarily liable is
reversed and set aside. The Decision of
the CA (first division) which held Fairland
as solidarily liable with Susan/Weesan is
reinstated and affirmed.
Respondent filed a complaint against

petitioner Polyfoam for illegal dismissal
alleging that he was an all-around factory
worker who served for almost six years.
He was illegally dismissed when he
discovered that his time card was not in
the rack and that he was informed by the
security guard that he can no longer
punch his card. Protesting to the
supervisor, he found out that he was
dismissed due to an infraction of a
company rule. A request was sent to
Polyfoams
manager
asking
for
respondents re-admittance but was
unheeded.
Co-petitioner Gramaje filed a Motion for
Intervention claiming to be the real
employer of respondent. She alleges that
her business PAGES is a legitimate job
contractor. Polyfoam, then, filed a Motion
to Dismiss since there was no employeremployee relationship between Polyfoam
and respondent. Gramaje assert that
respondent was not illegally dismissed but
rather, it was respondent that abandoned
work.
The Motion to Intervene was granted but
the Motion to Dismiss was denied. In
denying the motion to dismiss, the Labor
Arbiter ruled that the non-existence of the
relationship is a matter of defense. In
deciding the case, the Labor Arbiter ruled
in favor of respondent finding him to be
illegally dismissed and awarded his money
claims. It ruled that Polyfoam and Gramaje
are solidarily liable to respondent. On
appeal the NLRC, the LAs decision was
modified by exonerating Polyfoam from
responsibility and deleting some of the
money awards. It ruled that Gramaje is an
independent contractor and was not
illegally dismissed but abandoned work.
On appeal to the CA, the NLRCs decision
was reversed and the LAs decision
reinstated. Aggrieved, petitioners filed this
petition for review on ceritiorari.
Issues:
81. Polyfoam-RGC International Corp.,

vs. Concepcion G.R. No. 172349, June
13, 2012
Facts:
Whether or not Polyfoam is

solidarily
liable?
Whether or not respondent was
illegally dismissed?

ARRANGEMENT
Ruling:
Yes, Polyfoam is solidarily liable. Yes,
respondent was illegally dismissed. The
Court ruled that Gramaje was involved in
labor-only contracting and that respondent
did not abandon work but was illegally
dismissed.
others, that Superior is engaged in laboronly contracting and is consequently an

indirect employer of the workers. Having
found that Superior committed the
violations alleged by the workers, the
DOLE issued an Order finding in favor of
the workers and ordering Superior to pay
their claims.
In support of its conclusion that Polyfoam

is involved in labor-only contracting, the
following were considered by the Court:
(a) Gramaje has no substantial capital;
and (b) Gramaje did not carry on an
independent business or undertake the
performance of its service contract
free from the control and supervision of its
principal, Polyfoam. On the first ground, it
was not able to prove ownership over the
equipment in Polyfoams premises that is
allegedly owned by Gramaje.
Superior filed a motion for reconsideration

on the ground that the workers are not its
employees but of Lancer. It objects to the
finding that it is engaged in labor-only
contracting and is consequently an
indirect employer, and alleges that it is
beyond the visitorial and enforcement
power of the DOLE to make such
conclusion. According to Superior, such
conclusion may be made only upon
consideration of evidentiary matters and
cannot be determined solely through a
labor inspection.
Respondent
was
illegally
dismissed.
Credence was given to respondents
narration of facts. Several circumstance
also negated the theory of abandonment
like: (a) he immediately inquired from his
supervisor; (b) he wrote a letter asking to
be re-admitted and (c) he filed a case for
illegal dismissal.
Issue:
Can the DOLE make a finding as to the
existence or non-existence of employeremployee relationship in the course of an
inspection conducted pursuant to its
visitorial and enforcement power?
.
82.SUPERIOR PACKAGING CORP., VS.
BALAGSAY ET AL., G.R. NO.
178909, OCTOBER 10, 2012
Facts:
Superior Packaging Corporation (Superior)
is involved in the manufacture and sale of
commercial and industrial corrugated
boxes. It engaged the services of Lancer
Staffing & Services Network, Inc. (Lancer)
to provide reliever services to its business.
The respondents in this case are the
workers of Lancer assigned to Superior for
such reliever services.
The workers filed a complaint with the
DOLE against Superior for underpayment
of wages, nonpayment of premium pay
for worked rest, overtime pay and nonpayment of salaries. The DOLE then
conducted an inspection of the Superiors
premises and made a finding, among
Ruling:
Yes, the DOLE can.
Under Art. 128(b) of the Labor Code, as
amended by RA 7730, the DOLE is fully
empowered to make a determination as to
the existence of an employer-employee
relationship in the exercise of its visitorial
and enforcement power.
The expanded visitorial and enforcement
power of the DOLE granted by RA 7730
would be rendered nugatory if the alleged
employer could, by the simple expedient
of disputing the employer-employee
relationship, force the referral of the
matter to the NLRC. At least a prima facie
showing of the absence of an employeremployee relationship be made to oust
the DOLE of jurisdiction. But it is
precisely the DOLE that will be faced
with that evidence, and it is the DOLE
that will weigh it, to see if the same
does
successfully
refute
the
existence of an employer- employee
relationship.

ARRANGEMENT
Here, the DOLE finding Lancer was not an
independent contractor and that Superior
and Lancer were engaged in labor-only
contracting is a finding as to the
existence
of
employer-employee
relationship.
Hence,
Superior
was
considered an indirect employer of the
workers and liable to the latter for their
unpaid money claims.
83.
DIGITAL
TELECOMMUNICATIONS
PHIL., INC. VS. DIGITEL
EMPLOYEES UNION (G.R.
NOS.
184903,
10OCT2012)
FACTS:
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. On 10 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
forcancellation of union registration for
lack of merit. The appeal filed by Digitel
with the BLR was eventually dismissed for
lackof merit in a Resolution dated 9
March 2007. In an Order dated 13 July
2005, the Secretary of Labor directed
Digitel to commence the CBA negotiation
with theUnion and certified for compulsory
arbitration before the NLRC the issue of
unfair labor practice.In accordance with
the 13 July 2005 Order of the Secretary of
Labor, the unfair labor practice issue was
certified forcompulsory arbitration before
the NLRC. On 31 January 2006, NLRC
rendered a Decision dismissing the unfair
labor practicecharge against Digitel but
declaring
the dismissal
of
the
13

ARRANGEMENT
employees of Digiserv as
ordering their reinstatement.
illegal and
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
theabove 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
CAlikewise
sustained
the
finding
that Digiserv is engaged in labor-only
contracting and that its employees are
actually employeesof Digitel.Digitel filed a
motion for reconsideration but was denied
in a Resolution dated 9 October 2008.
Hence, this petition forreview on certiorari.
ISSUES:
1) Whether Digiserv
contractor; and
is
a legitimate
2) Whether there was a valid dismissal.
RULING:
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 aredeemed
employees of Digitel.
The affected employees were illegally

dismissed.

ARRANGEMENT
In addition to finding that Digiserv is a
labor-only contractor, records teemwith
proof that its dismissed employees are in
fact employees of Digitel. The NLRC
enumerated these pieces of evidence,
thus:
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 DIGITEL - the 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.
As an alternative argument, Digitel

maintains that the affected employees
were validly dismissed on the grounds of
closure of Digiserv, a department within
Digitel. In the recent case of Waterfront
Cebu City Hotel v. Jimenez.
We reffered to the closure of a department or

division of a company as retrenchment. For
a
valid retrenchment,
the
following
elements
must
be present:(1)
That retrenchment
is
reasonably
necessary and likely to prevent business
losses which, if already incurred, must be
substantial, serious, actual and real, or if
only expected, are reasonably imminent
as perceived objectively and in good

faith by the employer;(2) That the
employer served written notice both to the
employees and to the Department of
Labor and Employment at least one month
prior
to
the
intended
date
of
retrenchment;(3) That the employer pays
the retrenched employees separation pay
equivalent to one (1) month pay or
at least month pay for every year of
service, whichever is higher;(4) That
the employer exercises its prerogative to
retrench employees in good faith for
the advancement of its interest and not to
defeat or circumvent the employees right
to security of tenure; and
(5) That the employer used fair and
reasonable criteria in ascertaining who
would be dismissed and who would be
retained among the employees, such
as status, efficiency, seniority, physical
fitness, age, and financial hardship for
certain workers.
Only the 3 elements of a valid

retrenchment had been here satisfied.
Indeed, it is management prerogative to
close a department of the company.
Digitels decision to outsource the call
center operation of the company is a valid
reason to close down the operations of a
department under which the affected
employees were employed. The fifth
element regarding the criteria to be
observed by Digitel clearly does not apply
because all employees under Digiserv
were dismissed. The instant case is all
about the fourth element, that is, whether
or not the affected employees were
dismissed in good faith. We find that there
was no good faith in the retrenchment.
Prior to the cessation of Digiservs
operations, the Secretary of Labor had
issued the first and second assumption
order. The effects of the assumption order
issued by the Secretary of Labor are twofold. It enjoins an impending strike on the
part of the employees and orders the
employer to maintain the status quo.
There is no doubt that Digitel defied the
assumption order by abruptly closing
down
Digiserv.
The
closure
of
a
department is not illegal per se. What

ARRANGEMENT
makes it unlawful is when the closure is
undertaken in bad faith. In St. John Colleges,
Inc.v. St. John Academy Faculty and
Employees Union, bad faith was evidenced
by the timing of and reasons for the
closure andthe timing of and reasons for
the subsequent opening.
84. NORKIS TRADING CORPORATION
vs. JOAQUIN BUENA VISTA et al
G.R. No. 182018
October 10,
2012
The Facts
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.4 The
respondents nonetheless believed that
they were regular employees of Norkis
Trading, citing in their Position Paper 5 the
following circumstances that allegedly
characterized their employment with the
company:
The work of the operators involves
operating industrial machines, such as,
press machine, hydraulic machine, and
spotweld machine. On the other hand, the
welders used the welding machines. The
machines used by complainants herein
respondents in their work are all owned by
respondent
Norkis
Trading
herein
petitioner and these are installed and
located in the working area of the
complainants
inside
the
companys
premises.
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.6
Against the foregoing scenario, the
respondents, together with several other
complainants,7 filed on June 9, 1999 with
the Department of Labor and Employment
(DOLE) a complaint against Norkis Trading
and PASAKA for labor-only contracting and
non-payment of minimum wage and
overtime pay. The complaint was docketed
as LSED Case No. RO700-9906-CI-CS-168.
The filing of the complaint for labor-only
contracting
allegedly
led
to
the
suspension
of
the
respondents
membership with PASAKA. On July 22,
1999, they were served by PASAKA with
memoranda charging them with a
violation of the rule against commission of
acts injurious or prejudicial to the interest
or welfare of the cooperative. The
memoranda cited that the respondents
filing of a case against Norkis Trading had
greatly prejudiced the interest and welfare
of the cooperative.8 In their answer9 to the
memoranda, the respondents explained
that they merely wanted to be recognized
as regular employees of Norkis Trading.
The case records include copies of the
memoranda
sent
to
respondents
Buenavista, Fabroa and Dondoyano.10
On August 16, 1999, the respondents
received another set of memoranda from
PASAKA, now charging them with the
following violations of the cooperatives
rules
and
regulations:
(1)
serious
misconduct or willful disobedience of
superiors instructions or orders; (2) gross
and habitual neglect of duties by
abandoning work without permission; (3)

ARRANGEMENT
absences without filing leave of absence;
and (4) wasting time or loitering on
companys time or leaving their post
temporarily without permission during
office
hours.11 Copies
of
the
memoranda12 sent to Fabroa and Cape
form part of the records.
On August 26, 1999, PASAKA informed the
respondents of the cooperatives decision
to suspend them for fifteen (15) working
days, to be effective from September 1 to
21, 1999, for violation of PASAKA rules.
The records include copies of the
memoranda13 sent to Fabroa and Cape.
The suspension prompted the respondents
to file with the NLRC the complaint for
illegal suspension against Norkis Trading
and PASAKA.
The 15-day suspension of the respondents
was extended for another period of 15
days, from September 22, 1999 to October
12, 1999.14 Copies of PASAKAs separate
letters15 to Buenavista, Fabroa, Cape and
Dondoyano on the cooperatives decision
to extend the suspension form part of the
records.
On October 13, 1999, the respondents
were to report back to work but during the
hearing in their NLRC case, they were
informed by PASAKA that they would be
transferred
to
NorkisTradings
sister
company, PortaCoeli Industrial Corporation
(PortaCoeli), as washers of Multicab
vehicles.
The respondents opposed the transfer as
it would allegedly result in a change of
employers, from Norkis Trading to
PortaCoeli. The respondents also believed
that the transfer would result in a
demotion since from being skilled workers
in NorkisTrading, they would be reduced to
being utility workers.These circumstances
made the respondents amend their
complaint for illegal suspension, to include
the charges of unfair labor practice, illegal
dismissal, damages and attorneys fees.
For their part, 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.
ISSUES:
1) THE COURT OF APPEALS HAS DEPARTED
FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS WHEN IT MADE ITS OWN
FACTUAL FINDINGS AND DISREGARDED
THE UNIFORM AND CONSISTENT FACTUAL
FINDINGS OF THE LABOR ARBITER AND
THE NLRC, WHICH MUST BE ACCORDED
GREAT WEIGHT, RESPECT AND EVEN
FINALITY. IN SO DOING, THE COURT OF
APPEALS EXCEEDED ITS AUTHORITY ON
CERTIORARI UNDER RULE 65 OF THE
RULES OF COURT BECAUSE SUCH FACTUAL
FINDINGS WERE BASED ON SPECULATIONS
AND NOT ON OTHER EVIDENCES [SIC] ON
RECORD.
4) THE COURT OF APPEALS HAS
DETERMINED A QUESTION OF SUBSTANCE
NOT IN ACCORD WITH LAW AND
JURISPRUDENCE IN RULING THAT THE
RESPONDENTS WERE CONSTRUCTIVELY
DISMISSED CONTRARY TO THE FACTUAL
FINDINGS OF THE LABOR ARBITER AND
THE NLRC AND WITHOUT SHOWING ANY

ARRANGEMENT
EVIDENCE TO OVERTURN SUCH FINDING
OF FACT.42
This Courts Ruling
The Court resolves to deny the
petition.
Factual findings of labor officials
may be examined by the courts
when there is a showing that they
were arrived at arbitrarily or in
disregard of evidence on record.
As regards the first ground, the petitioner
questions the CAs reversal of LA
Gutierrezs and the NLRCs rulings, and
argues that said rulings should have been
accorded great weight and finality by the
appellate court as these were allegedly
supported by substantial evidence.
On this matter, the settled rule is that
factual findings of labor officials, who are
deemed to have acquired expertise in
matters within their jurisdiction, are
generally accorded not only respect but
even finality by the courts when supported
by substantial evidence, i.e., the amount
of relevant evidence which a reasonable
mind might accept as adequate to support
a conclusion. We emphasize, nonetheless,
that these findings are not infallible. When
there is a showing that they were arrived
at arbitrarily or in disregard of the
evidence on record, they may be
examined by the courts. The CA can then
grant a petition for certiorari if it finds that
the NLRC, in its assailed decision or
resolution, has made a factual finding that
is not supported by substantial evidence.
It is within the jurisdiction of the CA,
whose jurisdiction over labor cases has
been expanded to review the findings of
the NLRC.47
We have thus explained in Cocomangas
Hotel Beach Resort v. Visca48 that the CA
can take cognizance of a petition
for certiorari if it finds that the NLRC
committed grave abuse of discretion by
capriciously, whimsically, or arbitrarily
disregarding evidence which are material
to or decisive of the controversy. The CA
cannot make this determination without

looking into the evidence presented by the
parties. The appellate court needs to
evaluate the materiality or significance of
the evidence, which are alleged to have
been
capriciously,
whimsically,
or
arbitrarily disregarded by the NLRC, in
relation to all other evidence on record.
This case falls within the exception to the
general rule that findings of fact of labor
officials are to be accorded respect and
finality on appeal. As our discussions in
the other grounds that are raised in this
petition will demonstrate, the CA has
correctly held that the NLRC has
disregarded facts and evidence that are
material
to
the
outcome
of
the
respondents case. No error can be
ascribed to the appellate court for making
its own assessment of the facts that are
significant to the case to determine the
presence or absence of grave abuse of
discretion on the part of the NLRC, even if
the CAs findings turn out to be different
from the factual findings of both the LA
and NLRC.
Termination of an employment for
no
just
or
authorized
cause
amounts to an illegal dismissal.
As to the issue of whether the respondents
were illegally dismissed by Norkis Trading,
we answer in the affirmative, although not
by constructive dismissal as declared by
the CA, but by actual dismissal.
Where an entity is declared to be a laboronly contractor, the employees supplied
by said contractor to the principal
employer become regular employees of
the latter. Having gained regular status,
the employees are entitled to security of
tenure and can only be dismissed for just
or authorized causes and after they had
been afforded due process.66 Termination
of employment without just or authorized
cause and without observing procedural
due process is illegal.1wphi1
In claiming that they were illegally
dismissed from their employment, the
respondents alleged having been informed

ARRANGEMENT
by PASAKA that they would be transferred,
upon the behest of Norkis Trading, as
Multicab washers or utility workers to
PortaCoeli, a sister company of Norkis
Trading. Norkis Trading does not dispute
that such job transfer was relayed by
PASAKA unto the respondents, although
the company contends that the transfer
was merely an "offer" that did not
constitute
a
dismissal.
It
bears
mentioning,
however,
that
the
respondents were not given any other
option by PASAKA and Norkis Trading but
to accede to said transfer. In fact, there is
no showing that Norkis Trading would still
willingly accept the respondents to work
for the company. Worse, it still vehemently
denies that the respondents had ever
worked for it. Again, all defenses of Norkis
Trading that anchor on the alleged lack of
it and the respondents no longer merit any
consideration, given that this Courts
findings in G.R. Nos. 180078-79 have
become
conclusive.
Thus,
the
respondents
transfer
to
PortaCoeli,
although relayed to the respondents by
PASAKA was effectively an act of Norkis
Trading. Where labor-only contracting
exists, the Labor Code itself establishes an
the employer and the employees of the
labor-only
contractor.
The
statute
establishes
this
relationship
for
a
comprehensive purpose: to prevent a
circumvention
of
labor
laws.
The
contractor is considered merely an agent
of the principal employer and the latter is
responsible to the employees of the laboronly contractor as if such employees had
been directly employed by the principal
employer.67
No further evidence or document should
then be required from the respondents to
prove such fact of dismissal, especially
since Norkis Trading maintains that it has
no duty to admit and treat said
respondents as its employees. Considering
that PortaCoeli is an entity separate and
distinct
from
Norkis
Trading,
the
respondents employment with Norkis
Trading was necessarily severed by the
change in work assignment. It then did not
even matter whether or not the transfer
involved a demotion in the respondents

rank and work functions; the intention to
dismiss, and the actual dismissal of the
respondents were sufficiently established.
In the absence of a clear showing that the
respondents dismissal was for just or
authorized causes, the termination of the
respondents employment was illegal.
What may be reasonably deduced from
the records was that Norkis Trading
decided on the transfer, after the
respondents had earlier filed their
complaint
for
labor-only
contracting
against the company. Even Norkis
Tradings contention that the transfer may
be
deemed
a
valid
exercise
of
management prerogative is misplaced.
First, the exercise of management
prerogative presupposes that the transfer
is only for positions within the business
establishment. Second, the exercise of
management prerogative by employers is
not absolute, as it is limited by law and
the general principles of fair play and
justice.
WHEREFORE, premises considered, the
petition is DENIED.
SO ORDERED.
85.
GOYA,
INC.
v. GOYA,
INC.
EMPLOYEES UNION-FFW G.R. No.
170054 : January 21, 2013
FACTS:
Goya, Inc. (Company) is a domestic
corporation engaged in the manufacture,
importation, and wholesale of top quality
food products.
Sometime in January 2004, the
company hired contractual employees
from
PESO
Resources
Development
Corporation (PESO) to perform temporary
and occasional services. Respondent
Goya, Inc. Employees UnionFFW (Union)
requested for a grievance conference on

ARRANGEMENT
the ground that the contractual workers
do not belong to the categories of
employees stipulated in the existing CBA.
The
hiring
of
contractual
employees was in contravention to their
CBA agreement which has been applied
since 1970 where there are only 3 kinds of
employees:
regular
employees,
probationary
employees
and
casual
employees. The Union asserted that the
hiring of contractual employees from PESO
is not a management prerogative and in
gross violation of the CBA tantamount to
unfair labor practice (ULP).
The Union moreover advanced that
sustaining the Companys position would
easily weaken and ultimately destroy the
former with the latters resort to
retrenchment
and/or
retirement
of
employees and not filling up the vacant
regular positions through the hiring of
contractual workers from PESO, and that a
possible scenario could also be created by
the Company wherein it could "import"
workers from PESO during an actual strike.
The case was brought before the
NCMB when the matter remained unsolved
for
voluntary
arbitration.
Voluntary
Arbitrator
Bienvenido
E.
Laguesma
manifested that amicable settlement was
no longer possible; hence, they agreed to
submit for resolution the solitary issue of
"[w]hether or not the Company is guilty of
unfair labor acts in engaging the services
of PESO, a third party service provider,
under the existing CBA, laws, and
jurisprudence."
ISSUE:
Whether or not the Company is
guilty of unfair labor acts in engaging the
services of PESO, a third party service
provider, under the existing CBA, laws,
and jurisprudence.
RULING:
The companys defense
is that their act of hiring contractual
employees
is
a
management
prerogative and is a valid act thereof.
Declaring that a particular act falls
within the concept of management
prerogative is significantly different from
acknowledging that such act is a valid
exercise thereof. What the VA and the CA
correctly ruled was that the Companys act
of contracting out/outsourcing is within the
purview of management prerogative. Both
did not say, however, that such act is a
valid exercise thereof. Obviously, this is
due to the recognition that the CBA
provisions agreed upon by the Company
and the Union delimit the free exercise of
management prerogative pertaining to the
hiring of contractual employees. Indeed,
the VA opined that "the right of the
management to outsource parts of its
operations is not totally eliminated but is
merely limited by the CBA," while the CA
held that "this management prerogative of
contracting out services, however, is not
without limitation. x x x These categories
of employees particularly with respect to
casual employees serve as limitation to
the Companys prerogative to outsource
parts of its operations especially when
hiring contractual employees.
A collective bargaining agreement
is the law between the parties.
It is familiar and fundamental
doctrine in labor law that the CBA is the
law between the parties and they are
obliged to comply with its provisions.
A collective bargaining agreement
or CBA refers to the negotiated contract
between a legitimate labor organization
and the employer concerning wages,

ARRANGEMENT
hours of work and all other terms and
conditions of employment in a bargaining
unit. As in all contracts, the parties in a
CBA may establish such stipulations,
clauses, terms and conditions as they may
deem convenient provided these are not
contrary to law, morals, good customs,
public order or public policy. Thus, where
the CBA is clear and unambiguous, it
becomes the law between the parties and
compliance therewith is mandated by the
express policy of the law.
Moreover, if the terms of a
contract, as in a CBA, are clear and leave
no doubt upon the intention of the
contracting parties, the literal meaning of
their stipulations shall control.
On the power of the voluntary arbitrator:

In general, the arbitrator is
expected to decide those questions
expressly stated and limited in the
submission agreement. However, since
arbitration is the final resort for the
adjudication of disputes, the arbitrator can
assume that he has the power to make a
final settlement. Thus, assuming that the
submission empowers the arbitrator to
decide
whether an employee
was
discharged for just cause, the arbitrator in
this instance can reasonably assume that
his powers extended beyond giving a yesor-no answer and included the power to
reinstate him with or without back pay.
Maintenance Department of PCCr under

the supervision and control of Atty.
Florante A. Seril (Atty. Seril), PCCrs Senior
Vice President for Administration. The
petitioners, however, were made to
understand,
upon
application
with
respondent school, that they were under
MBMSI, a corporation engaged in providing
janitorial services to clients. Atty. Seril is
also the President and General Manager of
MBMSI.
Sometime in 2008, PCCr discovered that
the Certificate of Incorporation of MBMSI
had been revoked as of July 2, 2003. On
March 16, 2009, PCCr, through its
President, respondent Gregory Alan F.
Bautista (Bautista), citing the revocation,
terminated the schools relationship with
MBMSI, resulting in the dismissal of the
employees or maintenance personnel
under MBMSI, except Alfonso Bongot
(Bongot) who was retired.
In September, 2009, the dismissed
employees, led by their supervisor,
Benigno Vigilla (Vigilla), filed their
respective complaints for illegal dismissal,
reinstatement, back wages, separation
pay (for Bongot), underpayment of
salaries, overtime pay, holiday pay,
service incentive leave, and 13th month
pay against MBMSI, Atty. Seril, PCCr, and
Bautista.
Facts:
In their complaints, they alleged that it

was the school, not MBMSI, which was
their real employer because (a) MBMSIs
certification had been revoked; (b) PCCr
had
direct
control
over
MBMSIs
operations; (c) there was no contract
between MBMSI and PCCr; and (d) the
selection and hiring of employees were
undertaken by PCCr.
PCCr is a non-stock educational institution,

while the petitioners were janitors,
janitresses
and
supervisor
in
the
On the other hand, PCCr and Bautista

contended that (a) PCCr could not have
illegally dismissed the complainants
86.Vigilla et al., vs. Phil. College of

Criminology
Inc.,
G.R.
No.
200094, June 10, 2013

ARRANGEMENT
because it was not their direct employer;
(b) MBMSI was the one who had complete
and direct control over the complainants;
and (c) PCCr had a contractual agreement
with MBMSI, thus, making the latter their
direct employer.
On September 11, 2009, PCCr submitted
several documents before LA Ronaldo
Hernandez, including releases, waivers
and quitclaims in favor of MBMSI executed
by the complainants to prove that they
were employees of MBMSI and not PCCr.
Ruling of the Labor Arbiter
After due proceedings, the LA handed
down his decision, finding that (a) PCCr
was the real principal employer of the
complainants ; (b) MBMSI was a mere
adjunct or alter ego/labor-only contractor;
(c) the complainants were regular
employees of PCCr; and (d) PCCr/Bautista
were in bad faith in dismissing the
complainants.
The LA explained that PCCr was actually
the one which exercised control over the
means and methods of the work of the
petitioners, thru Atty. Seril, who was
acting, throughout the time in his capacity
as Senior Vice President for Administration
of PCCr, not in any way or time as the
supposed employer/general manager or
president of MBMSI.
.Ruling of the NLRC
Not satisfied, the respondents filed an
appeal before the NLRC. In its Resolution,
dated February 11, 2011, the NLRC
affirmed the LAs findings. Nevertheless,
the respondents were excused from their
liability by virtue of the releases, waivers
and
quitclaims
executed
by
the
petitioners.
In their motion for reconsideration,

petitioners attached as annexes their
affidavits denying that they had signed
the releases, waivers, and quitclaims.
They prayed for the reinstatement in toto
of the July 30, 2010 Decision of the
LA.8 MBMSI/Atty. Seril also filed a motion
for
reconsideration9 questioning
the
declaration of the NLRC that he was
solidarily liable with PCCr.
On April 28, 2011, NLRC modified its
February 11, 2011 Resolution by affirming
the July 30, 2010 Decision10 of the LA only
in so far as complainants Ernesto B.
Ayento and Eduardo B. Salonga were
concerned.
As
for
the
other
17
complainants, the NLRC ruled that their
awards had been superseded by their
respective
releases,
waivers
and
quitclaims.
Ruling of the Court of Appeals
On September 16, 2011, the CA denied
the petition and affirmed the two
Resolutions of the NLRC, dated February
11, 2011 and April 28, 2011. The CA
pointed out that based on the principle of
solidary liability and Article 1217 11 of the
New Civil Code, petitioners respective
releases, waivers and quitclaims in favor
of MBMSI and Atty. Seril redounded to the
benefit of the respondents. The CA also
upheld the factual findings of the NLRC as
to the authenticity and due execution of
the individual releases, waivers and
quitclaims because of the failure of
petitioners to substantiate their claim of
forgery and to overcome the presumption
of regularity of a notarized document.
Petitioners motion for reconsideration was
likewise denied by the CA in its January 4,
2012 Resolution.
Hence, this petition under
challenging the CA Decision
Rule
45

ARRANGEMENT
Issue:
xxx
Whether or not their claims against
the respondents were amicably
settled by virtue of the releases,
waivers and quitclaims which they
had executed in favor of MBMSI.
o
whether or not petitioners

executed the said releases,
waivers and quitclaims
whether or not a labor-only
contractor is solidarily liable
with the employer.
Ruling:
The petition fails.
The Releases, Waivers and Quitclaims
are Valid
We noted that the individual
quitclaims, waivers and releases executed
by the complainants showing that they
received their separation pay from MBMSI
were duly notarized by a Notary Public.
Such notarization gives prima facie
evidence of their due execution. Further,
said releases, waivers, and quitclaims
were not refuted nor disputed by
complainants herein, thus, we have no
recourse but to uphold their due execution
A Labor-only Contractor is Solidarily
Liable with the Employer
The issue of whether there is
solidary liability between the labor-only
contractor and the employer is crucial in
this case. If a labor-only contractor is
solidarily liable with the employer, then
the releases, waivers and quitclaims in
favor of MBMSI will redound to the benefit
of PCCr. On the other hand, if a labor-only
contractor is not solidarily liable with the
employer, the latter being directly liable,
then the releases, waivers and quitclaims
in favor of MBMSI will not extinguish the
liability of PCCr.
The NLRC and the CA correctly

ruled that the releases, waivers and
quitclaims executed by petitioners in favor
of MBMSI redounded to the benefit of PCCr
pursuant to Article 1217 of the New Civil
Code. The reason is that MBMSI is
solidarily liable with the respondents for
the valid claims of petitioners pursuant to
Article 109 of the Labor Code.
As correctly pointed out by the
respondents, the basis of the solidary
liability of the principal with those
engaged in labor-only contracting is the
last paragraph of Article 106 of the Labor
Code, which in part provides: "In such
cases labor-only contracting, 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."
Xxx
Under the general rule set out in
the first and second paragraphs of Article
106, an employer who enters into a
contract with a contractor for the
performance of work for the employer,
does not thereby create an employeremployees relationship between himself
and the employees of the contractor.
Thus, the employees of the contractor
remain the contractor's employees and his
alone. Nonetheless when a contractor fails
to pay the wages of his employees in
accordance with the Labor Code, the
employer who contracted out the job to
the contractor becomes jointly and
severally liable with his contractor to the
employees of the latter "to the extent of
the work performed under the contract" as
such employer were the employer of the
contractor's employees. The law itself, in
other words, establishes an employeremployee
relationship
between
the
employer and the job contractor's
employees for a limited purpose, i.e., in
order to ensure that the latter get paid the
wages due to them.

ARRANGEMENT
A similar situation obtains where
there is "labor only" contracting. The
"labor-only" contractor-i.e "the person or
intermediary" - is considered "merely as
an agent of the employer." The employer
is made by the statute responsible to the
employees of the "labor only" contractor
as if such employees had been directly
employed by the employer. Thus, where
"labor-only" contracting exists in a given
case, the statute itself implies or
establishes
an
employer-employee
relationship between the employer (the
owner of the project) and the employees
of the "labor only" contractor, this time for
a comprehensive purpose: "employer for
purposes of this Code, to prevent any
violation or circumvention of any provision
of this Code." The law in effect holds both
the
employer
and
the
"laboronly"
contractor responsible to the latter's
employees
for
the
more
effective
safeguarding of the employees' rights
under the Labor Code.35
87.BPI Employees Union-Davao cityFUBU vs. Bank of the Phil Islands

et al., G.R. No. 174912, July 24,
2013
Facts:
BOMC, which was created pursuant to
Central Bank Circular No. 1388, Series of
1993 (CBP Circular No. 1388, 1993), and
primarily engaged in providing and/or
handling support services for banks and
other financial institutions, is a subsidiary
of the Bank of Philippine Islands (BPI)
operating and functioning as an entirely
separate and distinct entity.
A service agreement between BPI and

BOMC was initially implemented in BPIs
Metro Manila branches. In this agreement,
BOMC undertook to provide services such
as check clearing, delivery of bank

statements,
fund
transfers,
card
production, operations accounting and
control, and cash servicing, conformably
with BSP Circular No. 1388. Not a single
BPI employee was displaced and those
performing the functions, which were
transferred to BOMC, were given other
assignments.
The Manila chapter of BPI Employees

Union (BPIEU-Metro ManilaFUBU) then filed
a complaint for unfair labor practice (ULP).
The Labor Arbiter (LA) decided the case in
favor of the union. The decision was,
however, reversed on appeal by the NLRC.
BPIEU-Metro Manila-FUBU filed a petition
for certiorari before the CA which denied
it, holding that BPI transferred the
employees in the affected departments in
the pursuit of its legitimate business. The
employees were neither demoted nor
were their salaries, benefits and other
privileges diminished.
On January 1, 1996, the service

agreement was likewise implemented in
Davao City. Later, a merger between BPI
and Far East Bank and Trust Company
(FEBTC) took effect on April 10, 2000 with
BPI
as
the
surviving
corporation.
Thereafter, BPIs cashiering function and
FEBTCs
cashiering,
distribution
and
bookkeeping functions were handled by
BOMC. Consequently, twelve (12) former
FEBTC employees were transferred to
BOMC to complete the latters service
complement.
BPI Davaos rank and file collective

bargaining agent, BPI Employees UnionDavao City-FUBU (Union), objected to the
transfer of the functions and the twelve
(12) personnel to BOMC contending that
the functions rightfully belonged to the BPI
employees and that the Union was
deprived of membership of former FEBTC
personnel who, by virtue of the merger,
would have formed part of the bargaining

ARRANGEMENT
unit represented by the Union pursuant to
its union shop provision in the CBA.7
The Union then filed a formal protest on
June 14, 2000 addressed to BPI Vice
Presidents Claro M. Reyes and Cecil
Conanan reiterating its objection. It
requested the BPI management to submit
the BOMC issue to the grievance
procedure under the CBA, but BPI did not
consider it as "grievable." Instead, BPI
proposed
a
Labor
Management
Conference (LMC) between the parties.
Thereafter, the Union demanded that the
matter be submitted to the grievance
machinery as the resort to the LMC was
unsuccessful. As BPI allegedly ignored the
demand, the Union filed a notice of strike
before the National Conciliation and
Mediation Board (NCMB) on the following
grounds:
a) Contracting out services/functions
performed by union members that
interfered with, restrained and/or coerced
the employees in the exercise of their
right to self-organization;
b) Violation of duty to bargain; and
c) Union busting.
BPI then filed a petition for assumption of
jurisdiction/certification with the Secretary
of the Department of Labor and
Employment (DOLE), who subsequently
issued an order certifying the labor
dispute to the NLRC for compulsory
arbitration. The DOLE Secretary directed
the parties to cease and desist from
committing any act that might exacerbate
the situation.
On October 27, 2000, a hearing was
conducted. Thereafter, the parties were
required to submit their respective
position papers
On December 21, 2001, the NLRC came
out with a resolution upholding the validity
of the service agreement between BPI and
BOMC and dismissing the charge of ULP. It
ruled that the engagement by BPI of
BOMC to undertake some of its activities
was clearly a valid exercise of its
management prerogative. It further stated

that the spinning off by BPI to BOMC of
certain services and functions did not
interfere
with,
restrain
or
coerce
employees in the exercise of their right to
self-organization. The Union did not
present even an iota of evidence showing
that BPI had terminated employees, who
were its members. In fact, BPI exerted
utmost diligence, care and effort to see to
it
that
no
union
member
was
terminated.13 The NLRC also stressed that
Department Order (D.O.) No. 10 series of
1997, strongly relied upon by the Union,
did not apply in this case as BSP Circular
No. 1388, series of 1993, was the
applicable rule.
After the denial of its motion for
reconsideration, the Union elevated its
grievance to the CA via a petition for
certiorari under Rule 65. The CA, however,
affirmed the NLRCs December 21, 2001
Resolution with modification that the
enumeration of functions listed under BSP
Circular No. 1388 in the said resolution be
deleted. The CA noted at the outset that
the petition must be dismissed as it
merely touched on factual matters which
were beyond the ambit of the remedy
availed of.14 Be that as it may, the CA
found that the factual findings of the NLRC
were supported by substantial evidence
and, thus, entitled to great respect and
finality. To the CA, the NLRC did not act
with grave abuse of discretion as to merit
the reversal of the resolution.
As to the applicability of D.O. No. 10, the
CA agreed with the NLRC that the said
order did not apply as BPI, being a
commercial bank, its transactions were
subject to the rules and regulations of the
BSP.
Not satisfied, the Union filed a motion for

reconsideration which was, however,
denied by the CA.
Hence, the present petition

Issue:

ARRANGEMENT
Whether or not the act of BPI to

outsource the cashiering, distribution
and bookkeeping functions to BOMC is
in conformity with the law and the
existing CBA. Particularly in dispute is
the validity of the transfer of twelve
(12) former FEBTC employees to
BOMC, instead of being absorbed in
BPI after the corporate merger.
Ruling:
ART.
261.
Jurisdiction
of Voluntary
Arbitrators
or
panel
of
Voluntary
Arbitrators. x x x Accordingly, violations
of a Collective Bargaining Agreement,
except those which are gross in character,
shall no longer be treated as unfair labor
practice and shall be resolved as
grievances
under
the
Collective
Bargaining Agreement. For purposes of
this article, gross violations of Collective
Bargaining Agreement shall mean flagrant
and/or malicious refusal to comply with
the
economic
provisions
of
such
agreement.
Clearly, only gross violations of the
economic provisions of the CBA are
treated as ULP. Otherwise, they are mere
grievances.
In the present case, the alleged violation
of the union shop agreement in the CBA,
even assuming it was malicious and
flagrant, is not a violation of an economic
provision in the agreement. The provisions
relied upon by the Union were those
articles referring to the recognition of the
union as the sole and exclusive bargaining
representative
of
all
rank-and-file
employees, as well as the articles on union
security, specifically, the maintenance of
membership in good standing as a
condition for continued employment and
the union shop clause.26 It failed to take

into consideration its recognition of the
banks exclusive rights and prerogatives,
likewise provided in the CBA, which
included
the
hiring
of
employees,
promotion, transfers, and dismissals for
just cause and the maintenance of order,
discipline and efficiency in its operations
The Union, however, insists that jobs
being outsourced to BOMC were included
in the existing bargaining unit, thus,
resulting in a reduction of a number of
positions in such unit. The reduction
interfered with the employees right to
self-organization because the power of a
union primarily depends on its strength in
number.28
It is incomprehensible how the "reduction
of positions in the collective bargaining
unit" interferes with the employees right
to
self-organization
because
the
employees themselves were neither
transferred nor dismissed from the
service. As the NLRC clearly stated:
In the case at hand, the union has not
presented even an iota of evidence that
petitioner bank has started to terminate
certain employees, members of the union.
In fact, what appears is that the Bank has
exerted utmost diligence, care and effort
to see to it that no union member has
been terminated. In the process of the
consolidation or merger of the two banks
which resulted in increased diversification
of functions, some of these non-banking
functions were merely transferred to the
BOMC
without affecting
the
union
membership

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LABOR STANDARDS | CONTRACTING

the Office of the Regional Director,

LABOR STANDARDS | CONTRACTING

contractor. Section 9 of Rule VIII of Book III

LABOR STANDARDS | CONTRACTING

We hold that, in the circumstances

LABOR STANDARDS | CONTRACTING

business of such employer . . . . (emphasis

LABOR STANDARDS | CONTRACTING

attributing to management a secret

HELD: DE LIMA is an independent job

FACTS: On 4 April 1991 FILSYN, a

Loterte was classified by the Labor Arbiter

Under the Labor Code, two (2) elements

LABOR STANDARDS | CONTRACTING

they were told that their concern is to be

LABOR STANDARDS | CONTRACTING

The SSS, on the other hand, contends that

LABOR STANDARDS | CONTRACTING

49.San Miguel vs. Maerc Integrated

LABOR STANDARDS | CONTRACTING

complainants, it merely acted as an agent

LABOR STANDARDS | CONTRACTING

the mode, manner and terms of

are enacted by the legislature to alleviate

LABOR STANDARDS | CONTRACTING

Under Section 8, Rule VIII, Book III, of the

particular, unusual and peculiar skills and

LABOR STANDARDS | CONTRACTING

corresponding raise in their overtime pay,

LABOR STANDARDS | CONTRACTING

payment of the increment in the statutory

LABOR STANDARDS | CONTRACTING

the Omnibus Rules Implementing the

LABOR STANDARDS | CONTRACTING

Lastly, petitioners capitalize on the

The Labor Arbiter found from the

Whether or not Sunflower is

LABOR STANDARDS | CONTRACTING

55. Manila Electric Co. vs. Benamira,

LABOR STANDARDS | CONTRACTING

business of MERALCO, it is not directly

56. Granspan Development Corp., vs.

LABOR STANDARDS | CONTRACTING

in the sense that petitioner and J. Narag

The SC upheld the CAs ruling. CA found

LABOR STANDARDS | CONTRACTING

We thus sustain the Court of Appeals

operations, ACI hired several salesmen,

LABOR STANDARDS | CONTRACTING

person supplying workers to

Rule VIII-A, Book III, Section 4(f) of

LABOR STANDARDS | CONTRACTING

In such case, the law creates an

principal in all matters

The test to determine the

LABOR STANDARDS | CONTRACTING

likewise, mandated to obey all rules,

LABOR STANDARDS | CONTRACTING

was allegedly told to

When he testified before the Labor

LABOR STANDARDS | CONTRACTING

Neither the petitioner nor the