FIRST PHILIPPINE INDUSTRIAL CORPORATIONvs.RAQUEL M. CALIMBAS AND LUISA P. MAHILOMFirst Philippine Industrial Corporation (FPIC) is a domestic corporation primarily engaged in the transportation of petroleum products by pipeline. Upon the other hand, petitioners Raquel Calimbas and Luisa Mahilom were engaged by De Guzman Manpower Services ("DGMS") to perform secretarial and clerical jobs for FPIC. [DGMS] is engaged in the business of supplying manpower to render general clerical, building and grounds maintenance, and janitorial and utility services.FPIC, represented by its Senior Vice-President and Head of Administration Department, Eustaquio Generoso, Jr. entered into a Contract of Special Services with DGMS, represented by its Operations Manager, Manuel De Guzman, wherein the latter agreed to undertake some aspects of building and grounds maintenance at FPIC’s premises, offices and facilities, as well as to provide clerical and other utility services as may be required from time to time by FPIC.Calimbas was assigned as a department secretary at the Technical Services Department beginning June 3, 1996, while Mahilom served as a clerk at the Money Movement Section of the Finance Divisioninformed the petitioners that their services to the company would no longer be needed by July 31, 2001 as a result of the "Pace-Setting" Study conducted by an outside consultant. Accordingly, on July 9, 2001, Priscilla de Leon, Treasurer of DGMS, formally notified both the petitioners that their respective work assignments in FPIC were no longer available to them effective July 31, 2001, citing the termination of the Project Contract with FPIC as the main reason thereof. On August 3, 2001, petitioners Calimbas and Mahilom signed quitclaims, releasing and discharging DGMS from whatever claims that they might have against it by virtue of their past employment, upon receipt of the sums of P17,343.10 and P23,459.14, respectivelyComplaint against FPIC for illegal dismissal and for the collection of monetary benefits: regular employees of FPIC for having served the same for almost five (5) years, rendering services which were usually necessary or desirable in the usual business or trade of FPIC: their real employer was FPIC, and that DGMS was merely its agent for having been engaged in prohibited labor-only contracting: DGMS did not have substantial capital or investment by way of tools, equipment, machines, work places and other materials: their direct superiors, who were managerial employees of FPIC, had control over them since the latter made sure that they always complied with the policies of FPICLA: ILLEGAL DISMISSAL; employee-employer relationshipNLRC: DISMISSED; AFFIRMED LAOn Motion for Reconsideration: NLRC: reversed:no employee-employer relationship: Contract of Special Services was signed by FPIC and DGMS on March 29, 1993 which shows that complainants’ employment in February and June 1996 was pursuant to said contract which belies their submission that their working paper were forwarded by FPIC after directly employing them in February and June 1996

: undisputed in FPIC’s statement that, capitalized at P75,000.00, DGMS serviced the manpower requirements of other clients like the Makati Commercial Estate Association and the Philippine Transmarine Carrier which reinforces its being an independent contractor.

: complainants’ realization that DGMS and not respondent FPIC, was their employer is shown by the fact that after they were disengaged, they went to DGMS, which paid them the amount of P17,343. (sic) for Calimbas and P23,454.14 for Mahilom.

:The fact that DGMS had only a capitalization of P75,000.00, without an investment in tools, equipment, etc., does not necessarily constitute the latter as labor-only contractor since it has shown its adequacy of resources, directly or indirectly, in the performance of completion of the job, work or service contracted out, including operating costs, administrative costs such as training, overhead and other costs as are necessary to enably (sic) DGMS to exercise control, supervision, or direction over its employees in all aspects in performing or completing the job, work or services contracted out

:not having investment in the form of tools or machineries does not automatically reduce the independent contractor to be a labor-only contractor.

:taken judicial notice of the general practice adopted in several government and private institution and industries of hiring independent contractors to perform special services.

:copy of payroll adduced on record persuade us that complainants received their wages from DGMS contrary to their allegations that the contract consideration is by reimbursement of wages. The execution likewise by complainants Calimbas and Mahilom of their respective quitclaim and release fortifies the fact of their belief that their actual employer is DGMS and not respondent FPIC

CA: reversed and set aside NLRC

(1) whether respondents are employees of petitioner; and (2) whether respondents were lawfully dismissed from their employment

SC: CA AFFIRMED WITH MODIFICATION; PETITION DENIED

:Given the foregoing standards, we sustain the findings of the CA that respondents are petitioner’s employees and that DGMS is engaged in labor-only contracting.

: DGMS’s actual paid-in capital in the amount of P75,000.00 does not constitute substantial capital essential to carry out its business as an independent job contractor

: petitioner exercised the power of control and supervision over the respondents

: 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 subjected to the control of the employer, except only to the results of the work. Obviously, on this score alone, petitioner cannot rightly claim that DGMS was an independent job contractor inasmuch as respondents were subjected to the control and supervision of petitioner while they were performing their jobs

: served for almost five years at petitioner’s company, respondents had already attained the status of regular employees

NOTES:

Article 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.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job-contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

For a worker’s dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality of the manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutes substantive due process.

Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first notice apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second notice informs the employee of the employer’s decision to dismiss him. Before the issuance of the second notice, the requirement of a hearing must be complied with by giving the worker an opportunity to be heard. It is not necessary that an actual hearing be conducted.

BENIGNO M. VIGILLA ET ALv. PHILIPPINE COLLEGE OF CRIMINOLOGY INC. AND/OR GREGORY ALAN F. BAUTISTAPCCr is a non-stock educational institution, while the petitioners were janitors, janitresses and supervisor in the Maintenance Department of PCCr under the supervision and control of Atty. Florante A. Seril (Atty. Seril), PCCr’s 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.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 school’s relationship with MBMSI, resulting in the dismissal of the employees or maintenance personnel under MBMSI, except Alfonso Bongot (Bongot) who was retired. (it was the school, not MBMSI, which was their real employer because (a) MBMSI’s certification had been revoked; (b) PCCr had direct control over MBMSI’s operations; (c) there was no contract between MBMSI and PCCr; and (d) the selection and hiring of employees were undertaken by PCCr.)LA: (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.: did not touch on the validity and authenticity of the waivers and quitclaimsNLRC: AFFIRMED: As Respondent MBMSI and Atty. Seril, together are found to be labor only contractor, they are solidarily [liable] with Respondent PCCr and Gregory Alan F. Bautista for the valid claims of Complainants pursuant to Article 109 of the Labor Code on the [solidary] liability of the employer and indirect employer. This liability, however, is effectively expunged by the acts of the 17 Complainants of executing Release, Waiver, and Quitclaims (pp. 170-184, Records) in favor of Respondent MBMSI. The liability being joined, the release of one redounds to the benefit of the others, pursuant to Art. 1217 of the Civil Code, which provides that “[P]ayment made by one of the solidary debtors extinguishes the obligation. x x x.”CA: DENIED PETITION; AFFIRMED NLRC: based on the principle of solidary liability and Article 121711 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.SC: PETITION DENIEDISSUE: 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.The Releases, Waivers andQuitclaims are Valid

:forged signature-> an afterthought: Respondents should not be penalized for the failure of the notary public to submit his Notarial Report.On the Revocation of MBMSI’sCertificate of IncorporationThe executed releases, waivers and quitclaims are valid and binding notwithstanding the revocation of MBMSI’s Certificate of Incorporation. The revocation does not result in the termination of its liabilities. Section 12227 of the Corporation Code provides for a three-year winding up period for a corporation whose charter is annulled by forfeiture or otherwise to continue as a body corporate for the purpose, among others, of settling and closing its affairs.

Even if said documents were executed in 2009, six (6) years after MBMSI’s dissolution in 2003, the same are still valid and binding upon the parties and the dissolution will not terminate the liabilities incurred by the dissolved corporation pursuant to Sections 122 and 14528 of the Corporation Code.A Labor-only Contractor is SolidarilyLiable with the Employer

“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.” Sec 19 of DO-18AEach of the solidary debtors, insofar as the creditor/s is/are concerned, is the debtor of the entire amount; it is only with respect to his  co-debtors that he/she is liable to the extent of his/her share in the obligation. Such being the case, the Civil Code allows each solidary debtor, in actions filed by the creditor/s, to avail himself of all defenses which are derived from the nature of the obligation and of those which are personal to him, or pertaining to his share [citing Section 1222 of the Civil Code].

NOTES: although the time during which the corporation, through its own officers, may conduct the liquidation of its assets and sue and be sued as a corporation is limited to three years from the time the period of dissolution commences, there is no time limit within which the trustees must complete a liquidation placed in their hands. What is provided in Section 122 of the Corporation Code is that the conveyance to the trustees must be made within the three-year period. But it may be found impossible to complete the work of liquidation within the three-year period or to reduce disputed claims to judgment. The trustees to whom the corporate assets have been conveyed pursuant to the authority of Section 122 may sue and be sued as such in all matters connected with the liquidation.

Section 145 of the Corporation Code clearly provides that "no right or remedy in favor of or against any corporation, its stockholders, members, directors, trustees, or officers, nor any liability incurred by any such corporation, stockholders, members, directors, trustees, or officers, shall be removed or impaired either by the subsequent dissolution of said corporation." Even if no trustee is appointed or designated during the three-year period of the liquidation of the corporation, the Court has held that the board of directors may be permitted to complete the corporate liquidation by continuing as "trustees" by legal implication.

Jurisprudence is also replete with pronouncements that a job-only contractor is solidarily liable with the employer.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-employees 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 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 "labor-only" contractor responsible to the latter's employees for the more effective safeguarding of the employees' rights under the Labor CodeIn legitimate job 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.

On the other hand, 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 principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees

JOEB M. ALIVIADO et al v PROCTER & GAMBLE PHILS., INC., AND PROMM-GEM INC.,Labor laws expressly prohibit "labor-only" contracting.  To prevent its circumvention, the Labor Code establishes an employer-employee relationship between the employer and the employees of the `labor-only' contractor.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.LA: no employer-employee relationshipNLRC: AFFIRMEDCA: AFFIRMEDPETITION: they were recruited by the salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS.  They further claim that when the latter had its so-called re-alignment program, petitioners were instructed to fill up application forms and report to the agencies which P&G created.: Promm-Gem and SAPS are labor-only contractors providing services of manpower to their clientRESPONDENTS: is no employment relationship between it and petitioners.  It was Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid their salaries; (3) wielded the power of dismissal; and (4) had the power of control over their conduct of work.

P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly outsourced. Thus, an employer can farm out any of its activities to an independent contractor, regardless of whether such activity is peripheral or core in nature.  It insists that the determination of whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of management prerogative.

SC: PETITION GRANTED; REVERSED AND SET ASIDELabor-only contracting and job contracting:legitimate independent contractor

:In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

:The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

:There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

NOTES: "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.

there is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a principal and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.

"Where `labor-only' contracting exists, the Labor Code itself establishes an employer-employee relationship between 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 labor-only contractor as if such employees had been directly employed by the principal employer.Termination of servicesMisconduct has been defined as improper or wrong conduct; the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent and not mere error of judgment. The misconduct to be serious must be of such grave and aggravated character and not merely trivial and unimportant. To be a just cause for dismissal, such misconduct (a) must be serious; (b) must relate to the performance of the employee's duties; and (c) must show that the employee has become unfit to continue working for the employer..  A misconduct which is not serious or grave, as that existing in the instant case, cannot be a valid basis for dismissing an employee.

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice. A breach of trust is willful if it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.Moral and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals, good customs or public policy

RODOLFO D. GARCIA,VS

PHILIPPINE AIRLINES and/orCRISTINA W. TRINIDAD, Manager, Catering Operations

Stellar Industrial Services, Inc. (Stellar) had a standing agreement to supply PAL with workers for janitorial and sanitation functionsDuring the course of his employment, petitioner received a warning from Stellar for absences incurredConsequently, in a letter dated March 28, 1990, Carlos P. Callanga, VP-Operations/Comptroller of Stellar, demanded from petitioner a written explanation why no disciplinary action should be taken against him, in view of the following charges: (1) poor performance/negligence of duty; and (2) selling of cigarettes while on duty. It appears that sometime in 1988, Stellar employees assigned at PAL filed complaints for regularization against the air carrier. One of the complainants against PAL was petitioner. LA: existence of an employer-employee relationship between the Stellar employees and PALNLRC: AFFIRMEDNLRC [ON MOTION FOR RECON]: REVERSED AND SET ASIDE: petitioner was “guilty of gross and habitual neglect and was consequently terminated for cause and with due process.’’CA: PETITION GRANTED: CA merely sustained the NLRC ruling that Stellar is an independent contractor. However, it is only private respondent Stellar who is responsible to petitioner as the former is an independent contractorISSUE: whether PAL is petitioner’s employer and solidarily liable with Stellar for illegal dismissal.SC: petition denied:PAL is not petitioner’s employer and cannot thus be held solidarily liable with Stellar for illegal dismissal.:In this petition, res judicata in the concept of conclusiveness of judgment obtains. The concept is applicable here as there is identity of parties and subject matter but not of causes of action.: Applying the rule on conclusiveness of judgment to this case, the parties are now precluded from relitigating the same issue of the existence of an employment relationship between PAL and petitioner.NOTES: The other elements being virtually the same, the fundamental difference between the rule of res judicata as a bar by former judgment and as merely a rule on the conclusiveness of judgment is that, in the first, there is an identity in the cause of action in both cases involved whereas, in the second, the cause of action in the first case is different from that in the second case

GSIS V NLRC AND LANTING SECURITY and WATCHMAN AGENCY

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.

GSIS terminated the Security Service Contract with LSWA. All the complainants, except Virgilio Soriano, were absorbed by the incoming security agency. 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 monthLA: IN FAVOR OF COMPLAINANTS: Ordering, respondents Lanting Security and Watchman Agency and/or Thomas Lanting and the Government Service Insurance System, jointly and severally liable to pay the complainants, their salary differentials; cash equivalent of their service incentive leaves and proportionate 13th month payNLRC: NOT ILLEGALLY DIMISSED; : the GSIS solely liable for payment of complainants' money claimsSC: PETITION DENIED; AFFIRMED with the MODIFICATION that the joint and solidary liability of LSWA and the GSIS to pay complainants' salary differentials shall be without prejudice to the GSIS's right of reimbursement from LSWA.: 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.: 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

NOTES: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 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

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.

MERALCO INDUSTRIAL ENGINEERING SERVICES CORPORATION

- versus -

 NATIONAL LABOR RELATIONS COMMISSION, OFELIA P. LANDRITO GENERAL SERVICES and/or OFELIA P. LANDRITO

Meralco Industrial Engineering Services Corporation (MIESCOR) is a corporation duly organized and existing under the laws of the Republic of the Philippines and a client of private respondents. Private respondent Ofelia P. Landrito General Services (OPLGS) is a business firm engaged in providing and rendering general services, such as janitorial and maintenance work to its clients, while private respondent Ofelia P. Landrito is the Proprietor and General Manager of OPLGS

 On 7 November 1984, petitioner and private respondents executed Contract Order No. 166-84, whereby the latter would supply the petitioner janitorial services, which include labor, materials, tools and equipment, as well as supervision of its assigned employees, at petitioner’s Rockwell Thermal Plant in Makati City. Pursuant thereto, private respondents assigned their 49 employees as janitors to petitioner’s Rockwell Thermal Plant with a daily wage of P51.50 per employee

petitioner sent a letter to private respondents informing them that effective at the close of business hours on 31 January 1990, petitioner was terminating Contract Order No. 166-84.

LA: COMPLAINT DISMISSED

NLRC: LA AFFIRMED; with the modification that the petitioner was solidarily liable with the private respondents

: held [petitioner] as “jointly and severally liable with [herein private respondents] in the judgment award on underpayment and on the non-payment of overtime pay,” our directive being that the Arbiter should now satisfy said labor-standards award, as well as that of the separation pay, exclusively through the surety bond posted by [private respondents].

CA: modifying the Decision of the NLRC dated 30 January 1996 and holding the petitioner solidarily liable with the private respondents for the satisfaction of the laborers’ separation pay.

SC: PETITION MERITORIOUS; CA REVERSED AND SET ASIDE

: while it is true that the petitioner was the indirect employer of the complainants, it cannot be held liable in the same way as the employer in every respect. The petitioner may be considered an indirect employer only for purposes of unpaid wages.

: It is the established fact of conspiracy that will tie the principal or indirect employer to the illegal dismissal of the contractor or subcontractor’s employees. In the present case, there is no allegation, much less proof presented, that the petitioner conspired with private respondents in the illegal dismissal of the latter’s employees; hence, it cannot be held liable for the same.

: But while this Court had previously ruled that the indirect employer can recover whatever amount it had paid to the employees in accordance with the terms of the service contract between itself and the contractor, the said ruling cannot be applied in reverse to this case as to allow the private respondents (the independent contractor), who paid for the judgment awards in full, to recover from the petitioner (the indirect employer).

: Having already received from petitioner the correct amount of wages and benefits, but having failed to turn them over to the complainants, private respondents should now solely bear the liability for the underpayment of wages and non-payment of the overtime pay.

NOTES:

Law of the case has been defined as the opinion delivered on a former appeal.  It is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court. Indeed, courts must adhere thereto, whether the legal principles laid down were “correct on general principles or not” or “whether the question is right or wrong” because public policy, judicial orderliness and economy require such stability in the final judgments of courts or tribunals of competent jurisdiction.

JEROMIE D. ESCASINAS and EVAN RIGOR SINGCO, - versus -SHANGRI-LA’S MACTAN ISLAND RESORT and DR. JESSICA J.R. PEPITORegistered nurses Jeromie D. Escasinas and Evan Rigor Singco (petitioners) were engaged in 1999 and 1996, respectively, by Dr. Jessica Joyce R. Pepito (respondent doctor) to work in her clinic at respondent Shangri-la’s Mactan Island Resort (Shangri-la) in Cebu of which she was a retained physician.FILED A COMPLAINT FOR for regularization, underpayment of wages, non-payment of holiday pay, night shift differential and 13th month pay differential against respondents, claiming that they are regular employees of Shangri-laShangri-la claimed, however, that petitioners were not its employees but of respondent doctor whom it retained via Memorandum of Agreement (MOA) pursuant to Article 157 of the Labor CodeLA: regular employees of Shangri-laNLRC: granted Shangri-la’s and respondent doctor’s appeal and dismissed petitioners’ complaint for lack of meritCA: all aspects of the employment of petitioners being under the supervision and control of respondent doctor and since Shangri-la is not principally engaged in the business of providing medical or healthcare services, petitioners could not be regarded as regular employees of Shangri-laSC: PETITION DENIED; CA AFFIRMED: Art. 157 does not require the engagement of full-time nurses as regular employees of a company employing not less than 50 workers:Where the undertaking is nonhazardous in nature, the physician and dentist may be engaged on retained basis, subject to such regulations as the Secretary of Labor may prescribe to insure immediate availability of medical and dental treatment and attendance in case of emergency. : Shangri-la, which employs more than 200 workers, is mandated to “furnish” its employees with the services of   a full-time registered nurse, a part-time physician and dentist, and an emergency clinic which means that it should provide or make available such medical and allied services to its employees, not necessarily to hire or employ a service provider. : The phrase “services of a full-time registered nurse” should thus be taken to refer to the kind of services that the nurse will render in the company’s premises and to its employees, not the manner of his engagement. NOTES:The existence of an independent and permissible contractor relationship is generally established by considering the following determinants: whether the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply the premises, tools, appliances, materials and labor; and the mode, manner and terms of payment

ILIGAN CEMENT CORPORATION,

– versus –  ILIASCOR EMPLOYEES AND WORKERS UNION – SOUTHERN PHILIPPINES FEDERATION OF LABOR (IEWU-SPFL), ET AL

Iligan Industrial and Agency Services Corporation (ILIASCOR), is the accredited job contractor of petitioner which provided stevedoring and arrastre services to the latter since its operations in the 1970s at its private pier in Kiwalan, Iligan City

Vedali General Services (Vedali) is an accredited service agency which provided general services to petitioner’s various departments.

The contract between petitioner and LVMASI was not perfected when it was discovered that LVMASI was a dormant corporation which was neither a stevedoring company nor possessed with sufficient capital to engage in the stevedoring and arrastre works

Vedali fielded stevedores, including herein respondents. Petitioner’s Packhouse Manager Alex Sagario readily engaged stevedores

LA: DISMISSED FOR LACK OF MERIT

Other than the payment of wages, the principal employer is not responsible for any claim made by the employee.

Another point worth discussing is that, the separation pay is based on the collective bargaining agreement entered into between the individual complainants and the complaining union, ILIASCOR IEWU-SPFL. Respondent ICC is not a privy to that CBA, thus the former cannot be held liable or be demanded upon to pay the same to the complainants.

NLRC: REVERSED LA; illegal dismissal

: Declaring complainants regular employees of respondent ICC for the period August 2, 2000 to November 15, 2000

CA: DISMISSED

SC: petition denied; NLRC affirmed

: The Charge Invoices, billing statements and certificates of payments only show that the wages of individual respondents were paid by petitioner

: Petitioner is a mere labor-only contractor because it only supplied workers to petitioner to work at its pier

: Individual respondent’s work as stock-pilers, arrastre and stevedores were undoubtedly directly related to and in pursuit of the cement manufacturing and sales business of petitioner

NOTES:

Labor-only contracting,31 which is prohibited, is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present:

(a) The contractor or subcontractor does not have substantial capital or investment to actually perform the job, work or service under its own account and responsibility; and

(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal.

On the other hand, permissible job contracting or subcontracting32 refers to an arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;

(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.

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

Under the Labor Code, as amended, the requirements for the lawful dismissal of an employee are two-fold, the substantive and the procedural.37 Not only must the dismissal be for a valid or authorized cause,38 the rudimentary requirements of due process - notice and hearing – must, likewise, be observed before an employee may be dismissed.39 One does not suffice; without their concurrence, the termination would, in the eyes of the law, be illegal

VALLUM SECURITY SERVICES and BAGUIO LEISURE CORPORATION (HYATT TERRACES BAGUIO) vs.THE NATIONAL LABOR RELATIONS COMMISSION ET AL

On 1 September 1986, petitioner Baguio Leisure Corporation (Hyatt Terraces Baguio) ("Hyatt Baguio") and petitioner Vallum Security Services ("Vallum") entered into a contract for security services under the terms of which Vallum agreed to protect the properties and premises of Hyatt Baguio by providing fifty (50) security guards, on a 24-hour basis, a day

Contract terminated

directed to report to Vallum's head office at Sucat Road, in Muntinlupa, Metropolitan Manila, not later than 15 July 1988 for re-assignment. They were also told that failure to report at Sucat would be taken to mean that they were no longer interested in being re-assigned to some other client of Vallum.

None of the private respondents reported at Sucat for re-assignment.

LA: DISMISSED

:termination of services of private respondents by Vallum did not constitute an unfair labor practice, considering that such termination had been brought about by lack of work.

NLRC: REVERSED

SC: DISMISSED

:VALLUM- LABOR ONLY CONTRACTOR;

NOTES:

Where labor-only contracting exists in a given case, the law itself implies or establishes an employer-employee relationship between the employer (the owner of the project or establishment) (here, Hyatt Baguio) and the employees of the labor-only contractor (here, Vallum) to prevent any violation or circumvention of provisions of the Labor Code

COCA-COLA BOTTLERS PHILS., INC. vs.ALAN M. AGITO, REGOLO S. OCA III, ERNESTO G. ALARIAO, JR., ALFONSO PAA, JR., DEMPSTER P. ONG, URRIQUIA T. ARVIN, GIL H. FRANCISCO, and EDWIN M. GOLEZ

respondents [salesmen assigned at the Lagro Sales Office for 4 years but not regularized] filed 2 complaints against Coca Cola Bottlers, Interserve, Peerless Integrated Services, Inc., Better Builders, Inc., and Excellent Partners, Inc. for reinstatement with backwages, regularization, nonpayment of 13th month pay, and damages.

Their employment was terminated on 8 April 2002 without just cause and due process. However, they failed to state the reason/s for filing a complaint against Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.; and Excellent Partners, Inc

COCA-COLA’S STAND: respondents employees of Interserve [(1) respondents’ Personal Data Files in the records of Interserve (2) respondents’ Contract of Temporary Employment with Interserve (3) the payroll records of Interserve]; contracted services

: interserve is bona fide independent contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its business [as provided by (1) the Articles of Incorporation of Interserve (2) the Certificate of Registration of Interserve with the BIR (3) the Income Tax Return, with Audited Financial Statements, of Interserve (4) the Certificate of Registration of Interserve as an independent job contractor, issued by DOLE]

LA: DISMISSED; employees of Interserve and not of Coca-cola

:Art. 280 not applicable

: While respondents performed activities that were necessary and desirable in the usual business or trade of petitioner, respondents’ functions were not indispensable to the principal business of petitioner, which was manufacturing and bottling soft drink beverages and similar products

: the circulars, rules and regulations which petitioner issued from time to time to respondents were not indicative of control as to make the latter its employees

NLRC: AFFIRMED; no er-ee relationship between respondents and Coca-Cola Bottlers

: Interserve was an independent contractor as evidenced by its substantial assets and registration with the DOLE; it was Interserve which hired and paid respondents’ wages, SSS, Medicare, and Pag-ibig contributions

CA: REVERSED- regular employees of coca cola; Interserve Management & Manpower Resources, Inc. (Interserve) was a labor-only contractor, whose presence was intended merely to preclude respondents from acquiring tenurial security

:Coca-Cola exercises control; respondents, who were tasked to deliver, distribute, and sell Coca-Cola products, carried out functions directly related and necessary to the main business of petitioner

: provisions of the Contract of Service between Coca-Cola and Interserve suggested that the latter’s undertaking did not involve a specific job, but rather the supply of manpower

ISSUE: whether Interserve is a legitimate job contractor

PETITION: labor-only contracting since respondents did not perform activities that were indispensable to petitioner’s principal business; unable to show that petitioner exercised the power to select and hire them, pay their wages, dismiss them, and control their conduct

SC: PETITION DISMISSED|CA AFFIRMED WITH MODIFICATION| ILEGALLY DISMISSED

: The law clearly establishes an employer-employee relationship between the principal employer and the contractor’s employee upon a finding that the contractor is engaged in "labor-only" contracting. Article 106 of the Labor Code categorically states: "There is ‘labor-only’ contracting where the person supplying workers to an employee does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer." Thus, performing activities directly related to the principal business of the employer is only one of the two indicators that "labor-only" contracting exists; the other is lack of substantial capital or investment. The Court finds that both indicators exist in the case at bar.

: The work of respondents, constituting distribution and sale of Coca-Cola products, is clearly indispensable to the principal business of petitioner. The repeated re-hiring of some of the respondents supports this finding.

: The Court does not set an absolute figure for what it considers substantial capital for an independent job contractor, but it measures the same against the type of work which the contractor is obligated to perform for the principal. However, this is rendered impossible in this case since the Contract between petitioner and Interserve does not even specify the work or the project that needs to be performed or completed by the latter’s employees.

: The CONTRACTOR, not the employee, has the burden of proof that it has the substantial capital, investment, and tool to engage in job contracting; burden of proof herein falls upon petitioner who is invoking the supposed status of Interserve as an independent job contractor

: Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work premises; and respondents, its supposed employees, performed work which was directly related to the principal business of petitioner. It is, thus, evident that Interserve falls under the definition of a "labor-only" contractor [ART 106; SEC 5 (i) of the Rules implementing arts 106-109]

: Interserve did not exercise right to control as [SEC 5 (ii) of the Rules implementing arts 106-109]

:Paragraph 3 of contract between Coca cola and Interserve explicitly established control of coca cola over the conduct of respondents

:paragraph 2 of contract- left a gap which could enable petitioner to demand the removal or replacement of any employee in the guise of his or her inability to complete a

project in time or to deliver the desired result. The power to recommend penalties or dismiss workers is the strongest indication of a company’s right of control as direct employer

:paragraph 4 of contract- independent job contractor would surely have the discretion over the pace at which the work is performed, the number of employees required to complete the same, and the work schedule which its employees need to follow

: Interserve was engaged in prohibited labor-only contracting, Coca-Cola shall be deemed the true employer of respondents

NOTES:

Art 106 recognizes two possible relations among the parties: (1) the permitted legitimate job contract, or (2) the prohibited labor-only contracting.

A legitimate job contract, wherein an employer enters into a contract with a job contractor for the performance of the former’s work, is permitted by law. Thus, the employer-employee relationship between the job contractor and his employees is maintained. In legitimate job contracting, the law creates an employer-employee relationship between the employer and the contractor’s employees only for a limited purpose, i.e., to ensure that the employees are paid their wages. The employer becomes jointly and severally liable with the job contractor only for the payment of the employees’ wages whenever the contractor fails to pay the same. Other than that, the employer is not responsible for any claim made by the contractor’s employees.

On the other hand, labor-only contracting is an arrangement wherein the contractor merely acts as an agent in recruiting and supplying the principal employer with workers for the purpose of circumventing labor law provisions setting down the rights of employees. It is not condoned by law. A finding by the appropriate authorities that a contractor is a "labor-only" contractor establishes an employer-employee relationship between the principal employer and the contractor’s employees and the former becomes solidarily liable for all the rightful claims of the employees. 

____________________________________________________________

Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, provides the guidelines in determining whether labor-only contracting exists:

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work or service for a principal, and any of the following elements are [is] present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work, or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or

ii) The contractor does not exercise the right to control the performance of the work of the contractual employee.

______________________________________________________________

"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work, or service contracted out.

The "right to control" shall refer to the right reversed to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end

____________________________________________________________

When there is labor-only contracting, Section 7 of the same implementing rules, describes the consequences thereof:

Section 7. Existence of an employer-employee relationship.—The contractor or subcontractor shall be considered the employer of the contractual employee for purposes of enforcing the provisions of the Labor Code and other social legislation. The principal, however, shall be solidarily liable with the contractor in the event of any violation of any provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following case, as declared by a competent authority:

a. where there is labor-only contracting; or

b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.

According to the foregoing provision, labor-only contracting would give rise to: (1) the creation of an employer-employee relationship between the principal and the employees of the contractor or sub-contractor; and (2) the solidary liability of the principal and the contractor to the employees in the event of any violation of the Labor Code.

_____________________________________________________________

it was not enough to show substantial capitalization or investment in the form of tools, equipment, machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential holdings were to the effect that in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether the contractor was carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the workers; the power of the employer with respect to the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment

RANDY ALMEDA, EDWIN M. AUDENCIAL, NOLIE D. RAMIREZ, ERNESTO M. CALICAGAN and REYNALDO M. CALICAGAN vs.ASAHI GLASS PHILIPPINES, INC.

On 1 December 2002, respondent terminated its service contract with SSASI, which in turn, terminated the employment of petitioners on the same date. Believing that SSASI was a labor-only contractor, and having continuously worked as glass cutters and quality controllers for the respondent - functions which are directly related to its main line of business as glass manufacturer - for three to 11 years, petitioners asserted that they should be considered regular employees of the respondent

Respondent, on the other hand, refuted petitioners’ allegations that they were its regular employees. Instead, respondent claimed that petitioners were employees of SSASI and were merely assigned by SSASI to work for respondent to perform intermittent services pursuant to an Accreditation Agreement

LA: dismissed

: San Sebastian Allied Services, Inc. is hereby ordered to pay

NLRC: vacated and set aside

: SSASI was engaged in labor-only contracting since it did not have substantial capital and investment in the form of tools, equipment and machineries.

: petitioners were recruited and assigned by SSASI to respondent as glass cutters, positions which were directly related to respondent’s principal business of glass manufacturing.

: The liability of [respondent] and [SSASI] for [petitioners’] backwages is further declared to be joint and several.

CA: REVERSED NLRC

: SSASI is a legitimate job contractor

: SSASI is a legitimate job contractor as proven by its Certificate of Registration issued by the DOLE

: The service contract itself, which was duly approved by the DOLE, defined the relationship between SSASI and petitioners as one of employer-employees

: SSASI which exercised the power of control over petitioners. Petitioners were merely allowed to work at respondent’s premises for reasons of efficiency.

:SSASI, not respondent, who terminated petitioners’ services

SC: PETITION GRANTED

; 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.

: Even respondent’s claim that petitioners’ services were required only intermittently, depending on the market, deserves scant credit. The indispensability of petitioners’

services was fortified by the length and continuity of their performance,

: 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. Respondent’s bare allegations, without supporting proof that SSASI had substantial capital or investment, do not sway this Court. The Court did not find a single financial statement or record to attest to the economic status and financial capacity of SSASI to venture into and sustain its own business independent from petitioner

: 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.

: Certificate of Registration of SSASI was merely secured in order to blanket the previous relations between SSASI and respondent with legality

:To permit respondent to disguise the true nature of its transactions with SSASI by the terms of its contract, for the purpose of evading its liabilities under the law, would seriously impair the administration of justice. 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.

: having gained regular status, petitioners were entitled to security of tenure and could only be dismissed on just or authorized causes and after they had been accorded due process.

: since SSASI was a labor-only contractor, and petitioners were to be deemed the employees of respondent, then the said reason would not constitute a just or authorized cause23 for petitioners’ dismissal

NOTES:

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.13 A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;

(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.14

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 principal.15 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 which are directly related to the main business of the principal.16

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.

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

The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. x x x The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists

DAMIAN AKLAN, ET AL,  vs. SAN MIGUEL CORPORATION, BMA PHILASIA, INC., and ARLENE EUSEBIO

BMA Philasia, Inc. (BMA) is a domestic corporation engaged in the business of transporting and hauling of cargoes, goods, and commodities of all kinds.

Petitioners hired under fixed-term contracts

Elmer Caboteja was charged with insubordination and disrespect to superior, failure to properly perform his job assignment, and unauthorized change of schedule; terminated for the offenses of disregard of company rules and regulations and rude attitude to supervisors

BMA agreed to a settlement with some of the complainants in the case4 for underpayment of wages.5 Eleven of the present petitioners executed quitclaims and releases in favor of BMA and Eusebio in the presence of DOLE district officers. BMA refused to settle the claim of other complainants.

picket disrupted the business operations of private respondents, prompting BMA to terminate their services. Subsequently, petitioners filed separate complaints against BMA, Eusebio, and SMC for illegal dismissal

SMC showed that under their contract, BMA provided delivery trucks, drivers, and helpers in the storage and distribution of SMC products

LA: BMA LIABLE FOR ILLEGAL DISMISSAL

: BMA- LEGITIMATE INDEPENDENT CONTRACTOR AND HE ACTUAL EMPLOYER

: BMA and SMC were found jointly and severally liable for the payment of petitioners’ backwages and money claims.

NLRC: reversed; no illegal dismissal

: just and valid cause

: The only evident fact is that they just stopped reporting for work beginning October 18, 2001 without informing BMA why there were doing so.

: their refusal to go back to their work was a deliberate move to force respondents to give in to their demands. Considering this refusal, it is not hard to believe that complainants were not dismissed but rather they refused to work in order to paralyze respondents’ operations and force them to give in to complainants’ demands.

CA: AFFIRMED NLRC

SC:

Petitioners argue mainly that their employer is, in fact, respondent SMC, not respondent BMA. They contend that BMA is a labor-only contractor and SMC, as their true employer, should be held directly liable for their money claims.

: question of fact

: . Apart from the fact that it was BMA which paid for the wages and benefits, as well as SSS contributions of petitioners, it was also the management of BMA which directly supervised and imposed disciplinary actions on the basis of established rules and regulations of the company.

: . The absence of registration only gives rise to the presumption that the contractor is engaged in labor-only contracting, a presumption that respondent BMA ably refuted.

: While it is true that the defense of abandonment may not be given credence or is negated by the immediate filing of illegal dismissal cases by the affected employees, records clearly reveal that as of October 18, 2001, petitioners without justifiable cause failed and refused to report back to their work.

: the quitclaims effectively barred petitioners from questioning their dismissal

NOTES:

A finding that a contractor is a "labor-only" contractor, as opposed to permissible job contracting, is equivalent to declaring that there is an employer-employee relationship between the principal and the employees of the supposed contractor, and the "labor-only" contractor is considered as a mere agent of the principal, the real employer.

Unless there is a showing that the employee signed involuntarily or under duress, quitclaims and releases are upheld by this Court as the law between the parties.21 If the agreement was voluntarily entered into by the employee, with full understanding of what he was doing, and represents a reasonable settlement of the claims of the employee, it is binding on the parties and may not be later disowned simply because of a change of mind.

MANDAUE GALLEON TRADE, INC. and/or GAMALLOSONS TRADERS, INC., petitioners, vs.VICENTE ANDALES, RESTITUTA SOLITANA, *   ELPIDIO SUELTO, ET AL. ** , respondents1.

rattan furniture manufacturing for export

The complainants alleged that MGTI hired them on various dates as weavers, grinders, sanders and finishers; sometime in August 1998, workers in the Finishing Department were told that they would be transferred to a contractor and they were given Visitor Identification Cards (IDs), while workers in the Weaving Department were told to look for work elsewhere as the company had no work for them; sometime in September 1998, workers in the Grinding Department were not allowed to enter the company premises, while workers in the Sanding Department were told that they could no longer work since there was no work available; workers who were issued IDs were allowed to go inside the premises; and they were dismissed without notice and just cause.

LA: regular piece-rate employees of MGTI since they were made to perform functions which are necessary to MGTI's rattan furniture manufacturing business; the independent contractors were not properly identified

: was no dismissal but only a claim for separation pay.

NLRC: affirmed

: labor-only contracting and not job-contracting was present since the alleged contractors did not have substantial capital in the form of equipment, machineries and work premises

: constructively dismissed when they were unilaterally transferred to a contractor to evade payment of separation pay as a result of the retrenchment

CA: NLRC AFFIRMED

: labor only contractors

SC: petition denied

NOTES:

Factual findings of quasi-judicial bodies like the NLRC, when adopted and confirmed by the CA and if supported by substantial evidence, are accorded respect and even finality by this Court.22 The existence of an employer-employee relationship is a factual matter that will not be delved into by this Court, since only questions of law may be raised in petitions for review.23 The Court has recognized several exceptions to this rule, such as: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings, the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on

the supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.24 None of these exceptions, however, has been convincingly shown by petitioners to apply in the present case.

The first two paragraphs of Article 106 set the general rule that a principal is permitted by law to engage the services of a contractor for the performance of a particular job, but the principal, nevertheless, becomes solidarily liable with the contractor for the wages of the contractor's employees. The third paragraph of Article 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 employer-employee relationship between the principal and the employees of the supposed contractor, and the "labor-only" contractor is considered as a mere agent of the principal, the real employer

based on Article 106 of the Labor Code and Sections 5 and 7 of the Implementing Rules, "labor-only" contracting exists when the following criteria are present: (1) where the contractor or subcontractor supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among other things; and the workers recruited and placed by the contractor or subcontractor are performing activities which are directly related to the principal business of such employer; or (2) where the contractor does not exercise the right to control the performance of the work of the contractual employee

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

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.

The only recognized exceptions to the general rule are the correction of clerical errors, the so-called nunc pro tunc entries which cause no prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.32 None of the exceptions are present in the instant case.

WACK WACK GOLF & COUNTRY CLUB,   Petitioners,  vs.NATIONAL LABOR RELATIONS COMMISSION, MARTINA G. CAGASAN, CARMENCITA F. DOMINGUEZ, and BUSINESS STAFFING AND MANAGEMENT, INC., Respondents.

a fire destroyed a large portion of the main clubhouse of the Wack Wack Golf and Country Club (Wack Wack), including its kitchen; filed a notice with the Department of Labor and Employment (DOLE) on April 14, 1997 that it was going to suspend the operations of the Food and Beverage (F & B) Department one (1) month thereafter.; need not report for work anymore after April 14, 1997 but that they would still be paid their salaries up to May 14, 1997. They were further told that they would be informed once full operations in Wack Wack resume

The Wack Wack Golf Employees Union branded the suspension of operations of the F & B Department as arbitrary, discriminatory and constitutive of union-busting, so they filed a notice of strike

An Agreement was forged whereby a special separation benefit/retirement package for interested Wack Wack employees, especially those in the F & B Department was offered

Wack Wack entered into a Management Contract13 with Business Staffing and Management, Inc. (BSMI); BSMI was to provide management services for Wack Wack

Pursuant to the Agreement, the retired employees of Wack Wack by reason of their experience were given priority by BSMI in hiring; eventually hired by BSMI to their former positions in Wack Wack as project employees and were issued probationary contracts

Due to these various management service contracts, BSMI undertook an organizational analysis and manpower evaluation to determine its efficacy, and to streamline its operations.

LA: DISMISSED (DOMINGUEZ AND CAGASAN)

: ILLEGAL DISMISSAL (BALUYOT)

. Their claims were anchored on the Agreement between the Union and management, that they were promised to be rehired upon the full resumption of operations of Wack Wack.

NLRC: REINSTATE

: anchored its ruling on the Agreement dated June 16, 1997 reached between the Union and Wack Wack, particularly Section 425 thereof. The NLRC directed Wack Wack to reinstate the respondents and pay their backwages since "Business Staffing and Management, Inc. (BSMI) is a contractor who [merely] supplies workers to respondent Wack Wack. It has nothing to do with the grievance of the complainants with their employer, respondent Wack Wack."

CA: DISMISSED FOR FAILURE TO ATTACH AFFIDAVIT OF SERVICE

SC: PETITION GRANTED; NLRC REVERSED

:

In Novelty Philippines, Inc. v. Court of Appeals,32 the Court recognized the authority of the general manager to sue on behalf of the corporation and to sign the requisite verification and certification of non-forum shopping. The general manager is also one person who is in the best position to know the state of affairs of the corporation. It was also error for the CA not to admit the requisite proof of authority when in the Novelty case, the Court ruled that the subsequent submission of the requisite documents constituted substantial compliance with procedural rules. There is ample jurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaxation of the rules of procedure in the interest of justice.

It must be recalled that said respondents availed of the special separation package offered by the petitioner. This special separation package was thought of and agreed by the two parties (Wack Wack and the Union) after a series of discussions and negotiations to avert any labor unrest due to the closure of Wack Wack.35 Priority was given to the employees of the F & B Department, but was, likewise, offered to the other employees who may wish to avail of the separation package due to the reconstruction of Wack Wack. Respondents do not belong to the F & B Department and yet, on their own volition opted to avail of the special separation package.

: they presumably understood the contents of the documents they signed. There is no showing that the execution thereof was tainted with deceit or coercion. Further, the respondents were paid hefty amounts of separation pay indicating that their separation from the company was for a valuable consideration. Where the person making the waiver has done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a valid and binding undertaking.37 As in contracts, these quitclaims amount to a valid and binding compromise agreement between the parties which deserve to be respected.

: BSMI is an independent contractor, engaged in the management of projects, business operations, functions, jobs and other kinds of business ventures, and has sufficient capital and resources to undertake its principal business. It had provided management services to various industrial and commercial business establishments.

: 44 In accordance with its own recruitment policies, the respondents were made to sign applications for employment, accepting the condition that they were hired by BSMI as probationary employees only. Not being contrary to law, morals, good custom, public policy and public order, these employment contracts, which the parties are bound are considered valid. Unfortunately, after a study and evaluation of its personnel organization, BSMI was impelled to terminate the services of the respondents on the ground of redundancy. This right to hire and fire is another element of the employer-employee relationship

NOTES:

Jurisprudential holdings are 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.

MANILA ELECTRIC COMPANY,   Petitioner , vs.ROGELIO BENAMIRA, ERNIE DE SAGUN1, DIOSDADO YOGARE, FRANCISCO MORO2, OSCAR LAGONOY3, Rolando Beni, Alex Beni, Raul4 Guia, Armed Security & Detective Agency, Inc., (ASDAI) and Advance FORCES Security & INVESTIGATION Services, Inc., (AFSISI), Respondents.

licensed security guards formerly employed by People’s Security, Inc. (PSI) and deployed as such at MERALCO’s head office

the security service agreement between PSI and MERALCO was terminated.

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

LA: ASDAI and MERALCO jointly and solidarily liable to the monetary claims of individual respondents and dismissing the complaint against AFSISI.

NLRC: AFFIRMED

CA: AFFIRMED WITH MODIFICATION

:MERALCO changed the security agency manning its premises three times while engaging the services of the same people, the individual respondents; MERALCO employed a scheme of hiring guards through an agency and periodically entering into service contract with one agency after another in order to evade the security of tenure of individual respondents; individual respondents are regular employees of MERALCO

SC: petition granted; CA reversed

: In the matter of compensation, there can be no question at all that the guards or watchmen receive compensation from private respondent and not from the companies or establishments whose premises they are guarding. The fee contracted for to be paid by the client is admittedly not equal to the salary of a guard or watchman; such fee is arrived at independently of the salary to which the guard or watchman is entitled under his arrangements with private respondent.

: It is the agency that recruits, hires, and assigns the work of its watchmen.

: Always, the agency stands between the petitioner and the watchmen; and it is the agency that is answerable to the petitioner for the conduct of its guards

: "[n]othing herein contained shall be understood to make the security guards under this Agreement, employees of the COMPANY, it being clearly understood that such security guards shall be considered as they are, employees of the AGENCY alone."

: 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.

: Rules which serve as general guidelines towards the achievement of the mutually desired result are not indicative of the power of control

: ASDAI and AFSISI were engaged in job contracting

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

: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.

: The fact that there is no actual and direct employer-employee relationship between MERALCO and the individual respondents does not exonerate MERALCO from liability as to the monetary claims of the individual respondents. When MERALCO contracted for security services with ASDAI as the security agency that hired individual respondents to work as guards for it, MERALCO became an indirect employer of individual respondents pursuant to Article 107 of the Labor Code

: ASDAI may not seek exculpation by claiming that MERALCO’s payments to it were inadequate for the individual respondents’ lawful compensation. As an employer, ASDAI is charged with knowledge of labor laws and the adequacy of the compensation that it demands for contractual services is its principal concern and not any other’s.

NOTES:

As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants and to indicate fairly the nature of the claims or defenses of both parties, a party cannot subsequently take a position contrary to, or inconsistent, with his pleadings.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.

SOUTH DAVAO DEVELOPMENT COMPANY, INC. (NOW SODACO AGRICULTURAL CORPORATION) AND/OR MALONE PACQUIAO AND VICTOR A. CONSUNJI, Petitioners, vs.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.

Petitioner South Davao Development Company (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 profit-sharing 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.6 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.7

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; petitioner verbally terminated them en masse

LA: REVERSED; RESPONDENTS WERE PETITIONER’S EMPLOYEES

: nature of the job of the respondents could not result in an employer-employee relationship.

SC:

: there is permissible job contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job or work service is to be performed within or outside the premises of the principal.

: The investment must be sufficient to carry out the job at hand

: 24 Reliance on these primitive tools is not enough

: 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 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.

: 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.

: When 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; , Eleonor did not abandon her work.

NOTES:

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 non-existence of a fact of which the court has no constructive knowledge

RAUL G. LOCSIN and EDDIE B. TOMAQUIN, Petitioners, vs.PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,   Respondent.

Philippine Long Distance Telephone Company (PLDT) and the Security and Safety Corporation of the Philippines (SSCP) entered into a Security Services Agreement3 (Agreement) whereby SSCP would provide armed security guards to PLDT to be assigned to its various offices.

Despite the termination of the Agreement, however, petitioners continued to secure the premises of their assigned office.

petitioners’ services were terminated

Labor Arbiter rendered a Decision finding PLDT liable for illegal dismissal. It was explained in the Decision that petitioners were found to be employees of PLDT and not of SSCP. Such conclusion was arrived at with the factual finding that petitioners continued to serve as guards of PLDT’s offices. As such employees, petitioners were entitled to substantive and procedural due process before termination of employment. The Labor Arbiter held that respondent failed to observe such due process requirements.

LA: PLDT liable for illegal dismissal. It was explained in the Decision that petitioners were found to be employees of PLDT and not of SSCP. Such conclusion was arrived at with the factual finding that petitioners continued to serve as guards of PLDT’s offices. As such employees, petitioners were entitled to substantive and procedural due process before termination of employment.

NLRC: AFFIRMED

CA: NLRC REVERSED AND SET ASIDE

: citing the Agreement whereby it was stipulated that there shall be no employer-employee relationship between the security guards and PLDT

: Anent the pay slips that were presented by petitioners, the CA noted that those were issued by SSCP and not PLDT

SC: set aside

:An Employer-Employee Relationship Existed Between the Parties

:no employer-employee relationship between the parties from the time of petitioners’ first assignment to respondent by SSCP in 1988 until the alleged termination of the Agreement between respondent and SSCP

:petitioners became employees of respondent after the Agreement between SSCP and respondent was terminated.

: because upon the termination of the owners’ or managers’ agreement with the security agency, the agency’s undertaking of liability for any damage that the security guard would cause has already been terminated. Thus, in the event of an accident or otherwise damage caused by such security guards, it would be the business owners and/or managers who would be liable and not the agency. The business owners or managers would, therefore, be opening themselves up to

liability for acts of security guards over whom the owners or managers allegedly have no control.

: petitioners remained at their post under the instructions of respondent; Sufficient to establish er-ee relationaship

: Evidently, respondent having the power of control over petitioners must be considered as petitioners’ employer––from the termination of the Agreement onwards––as this was the only time that any evidence of control was exhibited by respondent over petitioners

NOTES:

Rule 131, Section 3(y) of the Rules of Court provides:

SEC. 3. Disputable presumptions.—The following presumptions are satisfactory if uncontradicted, but may be contradicted and overcome by other evidence:

x x x x

(y) That things have happened according to the ordinary course of nature and the ordinary habits of life.

In the ordinary course of things, responsible 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.

OLDARICO S. TRAVEÑO, 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. CAÑA, EVELYN D. ARCENAL and JEORGE M. NONO, Petitioners, vs.BOBONGON BANANA GROWERS MULTI-PURPOSE COOPERATIVE, TIMOG AGRICULTURAL CORPORATION, DIAMOND FARMS, INC., and DOLE ASIA PHILIPPINES,   Respondents.

respondent Timog Agricultural Corporation (TACOR) and respondent Diamond Farms, Inc. (DFI) hired them to work at a banana plantation at Bobongon, Santo Tomas, Davao Del Norte which covered lands previously planted with rice and corn but whose owners had agreed to convert into a banana plantation upon being convinced that TACOR and DFI could provide the needed capital, expertise, and equipment. Petitioners helped prepare the lands for the planting of banana suckers and eventually carried out the planting as well.

these companies used different schemes to make it appear that petitioners were hired through independent contractors, including individuals, unregistered associations, and cooperatives;

utilizing harassment tactics to ease them out of their jobs. Without first seeking the approval of the Department of Labor and Employment (DOLE), they changed their compensation package from being based on a daily rate to a pakyawan rate that depended on the combined productivity of the "gangs" they had been grouped into. Soon thereafter, they stopped paying their salaries, prompting them to stop working

DFI answered for itself and TACOR, which it claimed had been merged with it and ceased to exist as a corporation. Denying that it had engaged the services of petitioners,6 DFI alleged that during the corporate lifetime of TACOR, it had an arrangement with several landowners in Santo Tomas, Davao Del Norte whereby TACOR was to extend financial and technical assistance to them for the development of their lands into a banana plantation on the condition that the bananas produced therein would be sold exclusively to TACOR

LA: ILLEGAL DISMISSAL

NLRC: the employer of petitioners is the Cooperative, there being no showing that the earlier mentioned Orders of the DOLE Secretary had been set aside by a court of competent jurisdiction

SC: DISMISSED

:DFI did not farm out to the Cooperative the performance of a specific job, work, or service

: The Cooperative would hire its own workers and pay their wages and benefits, and sell exclusively to DFI all export quality bananas produced that meet the specifications agreed upon.

the Contract between the Cooperative and DFI, far from being a job contracting arrangement, is in essence a business partnership that partakes of the nature of a joint venture.

POLYFOAM-RGC INTERNATIONAL, CORPORATION and PRECILLA A. GRAMAJE, Petitioners, vs.EDGARDO CONCEPCION,   Respondent.

hired by Polyfoam as an "all-around" factory worker and served as such for almost six years.5 On January 14, 2000, he allegedly discovered that his time card was not in the rack and was later informed by the security guard that he could no longer punch his time card.6 When he protested to his supervisor, the latter allegedly told him that the management decided to dismiss him due to an infraction of a company rule.

LA: ILLEGAL DISMISSAL

NLRC: MODIFIED

:EXONERATING POLYFOAM FROM LIABILITY FOR RESPONDENT’S CLAIM FOR SEPARATION PAY…

: Gramaje to be an independent contractor who contracted the packaging aspect of the finished foam products of Polyfoam.

: likewise concluded that Gramaje had its own office equipment, tools, and substantial capital and, in fact, supplied the plastic containers and carton boxes used by her employees in performing their duties.

CA: REVERSED

: not a legitimate job contractor but only a "labor-only" contractor

: respondent was indeed Polyfoam’s employee; Polyfoam’s exercise of supervision over the work of respondent

SC:

: Gramaje is a Labor-Only Contractor

: no substantial capital or investment. The presumption is that a contractor is a labor-only contractor unless he overcomes the burden of proving that it has substantial capital, investment, tools, and the like.

: Gramaje did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, Polyfoam, its apparent role having been merely to recruit persons to work for Polyfoam.

: it is likewise highly unusual and suspect as to the absence of a written contract specifying the performance of a specified service, the nature and extent of the service or work to be done and the term and duration of the relationship.

: Polyfoam and Gramaje are, therefore, solidarily liable for the rightful claims of respondent.

:ILLEGAL DISMISSAL; Abandonment cannot be inferred from the actuations of respondent.

NOTES:

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 subcontracting if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;

(b) The contractor or subcontractor has substantial capital or investment; and

(c) The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.

The test 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 as to the results of the work."

x x x [W]hether 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 a specified piece of work; the control and supervision of the work to another; the employer’s power with respect to the hiring, firing and payment of the contractor’s workers; the control of the premises; the duty to supply the premises, tools, appliances, materials, and labor; and the mode, manner and terms of payment

GARDEN OF MEMORIES PARK and LIFE PLAN, INC. and PAULINA T. REQUIÑO, Petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION, LABOR ARBITER FELIPE T. GARDUQUE II and HILARIA CRUZ,   Respondents.

Upon motion of Garden of Memories, Requiño was impleaded as respondent on the alleged ground that she was its service contractor and the employer of Cruz.

she had a misunderstanding with a co-worker named Adoracion Requiño regarding the use of a garden water hose. When the misunderstanding came to the knowledge of Requiño, the latter instructed them to go home and not to return anymore. After three (3) days, Cruz reported for work but she was told that she had been replaced by another worker. She immediately reported the matter of her replacement to the personnel manager of Garden of Memories and manifested her protest.

of Requiño, its independent service contractor, who maintained the park for a contract price.

LA: LA ruled that Requiño was not an independent contractor but a labor-only contractor and that her defense that Cruz abandoned her work was negated by the filing of the present case.8 The LA declared both Garden of Memories and Requiño, jointly and severally, liable for the monetary claims of Cruz

NLRC: AFFIRMED

: Requiño had no substantial capital or investments in the form of tools, equipment, machineries, and work premises, among others, for her to qualify as an independent contractor

CA: DISMISSED; AFFIRMED NLRC

SC: DENIED

: Both the capitalization requirement and the power of control on the part of Requiño are wanting.

: Requino’s explanation that her business was a mere livelihood program akin to a cottage industry provided by Garden of Memories as part of its contribution to the upliftment of the underprivileged residing near the memorial park proves that her capital investment was not substantial.

: Requiño is a labor-only contractor.

: failure to exercise the right to control the performance of the work of Cruz.

: Requiño is engaged in labor-only contracting, and is considered merely an agent of Garden of Memories. As such, the workers she supplies should be considered as employees of Garden of Memories. Consequently, the latter, as principal employer, is responsible to the employees of the labor-only contractor as if such employees have been directly employed by it

NOTES:

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 requirement of the law in determining the existence of independent contractorship is that the contractor should undertake the work on his own account, under his own responsibility, according to his own manner and method, free from the control and direction of the employer except as to the results thereof

DEVELOPMENT BANK OF THE PHILIPPINES,   petitioner , vs.NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ISABEL P. ORTIGUERRA, and LABOR ALLIANCE FOR NATIONAL DEVELOPMENT, respondents.

LIRAG was a mortgage debtor of DBP. Private respondent Labor Alliance for National Development (LAND, for brevity) was the bargaining representative of the more or less 800 former rank and file employees of LIRAG. Around September 1981, LIRAG started terminating the services of its employees on the ground of retrenchment. By December of the said year there were already 180 regular employees separated from the service. LIRAG has since ceased operations presumably due to financial reverses.

Labor Arbiter ordered LIRAG to pay the individual complainants. The NLRC (Third Division) affirmed the same on 28 March 1982. That judgment became final and executor

DBP extrajudicially foreclosed the mortgaged properties for failure of LIRAG to pay its mortgage obligation; Since DBP was the sole mortgagee, no actual payment was made

By reason of said foreclosure, the Writ of Execution issued in favor of the complainants remained unsatisfied

LA: DBP IMPLEADED

: granted the Writ of Garnishment and directed DBP to remit to the NLRC the sum of P6,292,380.00 out of the proceeds of the foreclosed properties of LIRAG sold at public auction in order to satisfy the judgment previously rendered.

NLRC (First Division) affirmed the appealed Order and dismissed the DBP appeal

SC: GRANTED

It is true that DBP was not an original party and that it was ordered impleaded only after the Writs of Execution were not satisfied because the properties levied upon on execution had been foreclosed extrajudicially by it. DBP had to be impleaded, however, for the proper satisfaction of a final judgment

Its inclusion as a party could not have been accomplished at the earlier stages of the proceedings because at the time of the filing of the Complaint, private respondents' cause of action was only against LIRAG.

Notably, the terms "declaration" of bankruptcy or "judicial" liquidation have been eliminated. liquidation proceedings have NOT been done away with.

NOTES:

Article 110 of the Labor Code provides:

Art. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards wages due them for services rendered during the period prior to the bankruptcy or liquidation, any provision to the contrary notwithstanding. Unpaid wages shall be paid in full before other creditors

may establish any claim to a share in the assets of the employer.

In implementation of the foregoing, Section 10, Rule VIII, Book III of the Revised Rules and Regulations Implementing the Labor Code, as amended, provides:

Sec. 10. Payment of wages in case of bankruptcy. — Unpaid wages earned by the employees before the declaration of bankruptcy or judicial liquidation of the employer's business shall be given first preference and shall be paid in full before other creditors may establish any claim to a share in the assets of the employer. (Emphasis supplied).

In interpreting the foregoing provisions, the Court, in Development Bank of the Philippines vs. Santos (G.R. Nos. 78261-62, 8 March 1989), categorically stated:

It is quite clear from the provision that a declaration of bankruptcy or a judicial liquidation must be present before the workers preference may be enforced. Thus, Article 110 of the Labor Code and its implementing rule cannot be invoked by the respondents in this case absent a formal declaration of bankruptcy or a liquidation order. . . .

Since then, however, Article 110 has been amended by Republic Act No. 6715 and now reads as follows:

Sec. 1. Article 110 of Presidential Decree No. 442, as amended, otherwise known as the Labor Code of the Philippines, is hereby further amended to read as follows:

Art. 110. Worker preference in case of bankruptcy. — In the event of bankruptcy or liquidation of an employer's business, his workers shall enjoy first preference as regards their unpaid wages and other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and monetary claims shall be paid in full before the claims of the Government and other creditors may be paid. (Amendments emphasized).

The amendment expands worker preference to cover not only unpaid wages but also other monetary claims to which even claims of the Government must be deemed subordinate.

A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first ahead of other claims which may be established against the debtor. Logically, it becomes material only when the properties and assets of the debtors are insufficient to pay his debts in full; for if the debtor is amply able to pay his various creditors in full, how can the necessity exist to determine which of his creditors shall be paid first or whether they shall be paid out of the proceeds of the sale the debtor's specific property? Indubitably, the preferential right of credit attains significance only after the properties of the debtor have been inventoried and liquidated, and the claims held by his various creditors have been established

A preference applies only to claims which do not attach to specific properties. A lien creates a charge on a particular property. The right of first preference as regards unpaid wages recognized by Article 110 does not constitute a lien on the property of the insolvent debtor in favor of workers. It is but a preference of credit in their favor, a preference in application. It is a method adopted to determine and specify the order in which credits should be paid in the final distribution of the proceeds of the insolvent's assets. It is a right to a first preference in the discharge of the funds of the judgment debtor.

Article 110 of the Labor Code does not purport to create a lien in favor of workers or employees for unpaid wages either upon all of the properties or upon any particular property owned by their employer. Claims for unpaid wages do not therefore fall at all within the category of specially preferred claims established under Articles 2241 and 2242 of the Civil Code, except to the extent that such complaints for unpaid wages are already covered by Article 2241, number 6: "claims for laborers wages, on the goods manufactured or the work done;" or by Article 2242, number 3: "claims of laborers and other workers engaged in the construction, reconstruction or repair of buildings, canals and other works, upon said buildings, canals and other works, upon said buildings, canals and other works." To the extent that claims for unpaid wages fall outside the scope of Article 2241, number 6 and 2242, number 3, they would come within the ambit of the category of ordinary preferred credits under Article 2244.

the right to preference given to workers under Article 110 of the Labor Code cannot exist in any effective way prior to the time of its presentation in distribution proceedings. It will find application when, in proceedings such as insolvency, such unpaid wages shall be paid in full before the "claims of the Government and other creditors" may be paid. But, for an orderly settlement of a debtor's assets, all creditors must be convened, their claims ascertained and inventoried, and thereafter the preferences determined in the course of judicial proceedings which have for their object the subjection of the property of the debtor to the payment of his debts or other lawful obligations. Thereby, an orderly determination of preference of creditors' claims is assured

SEPARATE OPINIONS:

CRUZ: SOCIAL JUSTICE mandate we should pursue with energy and sincerity if we are to truly insure the dignity and well-being of the labourer

PADILLA: LIRAG's only remaining asset was mortgaged to Development Bank of the Philippines (DBP) which on 15 April 1983 foreclosed the mortgage and acquired said property at public auction for P31,346.462.90, in partial satisfaction of LIRAG's indebtedness to DBP.

: whether P6,292,380.00 should be deducted from the P31,346,462.90 realized by DBP from the foreclosure sale of LIRAG's property, to fully satisfy LAND's claim for LIRAG workers' unpaid wages, thereby leaving a balance of P25,054,082.90 only in partial satisfaction of LIRAG's debt to DBP.

: Under the provisions of the Civil Code, specifically, Articles 2241 and 2242, jointly with Articles 2246 to 2249, a two-tier order of preference of credits is established. The first tier includes only taxes, duties and fees on specific movable or immovable property. All other special preferred credits stand on a second tier. 1

Under the system of preferences in the Civil Code, only taxes enjoy absolute preference i.e., they exclude the credits of the lower order until such taxes are fully satisfied out of the

proceeds of the sale of the property subject of the preference, and taxes can even exhaust such proceeds. All other special preferred credits enjoy no priority among themselves but must be paid or satisfied pro rata.

: whether or not there be a judicial proceeding in rem, i.e., insolvency, bankruptcy or liquidation proceedings, the fact remains that Congress intends that the assets of the insolvent debtor be held, first and above all else, to satisfy in full the unpaid wages and monetary claims of its workers

SARMIENTO: under Republic Act No. 6715, the payment of unpaid wages and other benefits to labor enjoys preference over all other indebtedness, including taxes, of management, with or without a declaration of insolvency

JOSE MAX S. ORTIZ, Petitioner, vs.SAN MIGUEL CORPORATION,   Respondent

Petitioner is a member of the Philippine Bar who represented the complainants in NLRC Cases

NLRC Case No. V-0255-94 (Aguirre Cases

:ILLEGAL DISMISSAL (LA & NLRC)

NLRC Case No. V-0068-95 (Toquero Case)

: ILLEGAL DISMISSAL (LA)

NLRC: MODIFIED

CA-G.R. SP No. 54576-77

the complainants agreed to settle their claims against private respondent for amounts less than what the NLRC actually awarded

CA: AFFIRMED NLRC1996 in the Aguirre Cases, only insofar as it concerned complainant Alfredo Gadian, Jr. (complainant Gadian), the only complainant who did not execute a Deed of Release, Waiver and Quitclaim. With respect to the other complainants in the Aguirre and Toquero Cases, their complaints were dismissed on account of their duly executed Deeds of Release, Waiver and Quitclaim

SC:

: claiming additional attorney’s fees, representing the difference between the amount as decreed in the NLRC Decisions in the Aguirre and Toquero Cases and the amount he already received from private respondent, equivalent to the 10% attorney’s fees the latter withheld from the amounts it actually paid to the complainants who signed the Deeds of Release, Waiver and Quitclaim.

: involves a question of law. In determining whether the petitioner should be entitled to the attorney’s fees stated in the NLRC Decisions

: to interpret the award of attorney’s fees by the NLRC in its extraordinary concept. And since the attorney’s fees pertained to the complainants as indemnity for damages, it was totally within the complainants’ right to waive the amount of said attorney’s fees and settle for a lesser amount thereof in exchange for the immediate end to litigation. Petitioner cannot prevent complainants from compromising and/or withdrawing their complaints at any stage of the proceedings just to protect his anticipated attorney’s fees.

: petitioner is not the real party in interest; hence, he cannot file this Petition to recover the attorney’s fees as adjudged by the NLRC in its Decisions

: petitioner’s remedy is not against the private respondent, but against his own clients, the complainants

NOTES:

a question of law exists when there is a doubt or controversy as to what the law is on a certain state of facts. On the other hand, there is a question of fact when the doubt or difference

arises as to the alleged truth or falsehood of the alleged facts. For a question to be one of law, it must involve no examination of the probative value of the evidence presented by the litigants or any of them.35 The test of whether a question is one of law or of fact is not the appellation given to such question by the party raising the same; rather, it is whether the appellate court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise, it is a question of fact.

ART. 111. ATTORNEY’S FEES. - (a) In cases of unlawful withholding of wages the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered.

(b) It shall be unlawful for any person to demand or accept, in any judicial or administrative proceedings for the recovery of the wages, attorney’s fees which exceed ten percent of the amount of wages recovered.

there are two commonly accepted concepts of attorney’s fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services the former has rendered to the latter. The basis of this compensation is the fact of the attorney’s employment by and his agreement with the client. In its extraordinary concept, attorney’s fees are deemed indemnity for damages ordered by the court to be paid by the losing party in a litigation. The instances in which these may be awarded are those enumerated in Article 2208 of the Civil Code, specifically paragraph 739thereof, which pertains to actions for recovery of wages, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.40Article 111 of the Labor Code, as amended, contemplates the extraordinary concept of attorney’s fees.

an exception to the declared policy of strict construction in the awarding of attorney’s fees. Although express findings of fact and law are still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. In carrying out and interpreting the Labor Code’s provisions and implementing regulations, the employee’s welfare should be the primordial and paramount consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided in Article 4 of the Labor Code, which states that "all doubts in the implementation and interpretation of the provisions of the Labor Code including its implementing rules and regulations, shall be resolved in favor of labor"; and Article 1702 of the Civil Code, which provides that "in case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer."

SEC. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest.

The established rule is that a real party in interest is one who would be benefited or injured by the judgment, or one entitled to the avails of the suit. The word "interest," as contemplated by the Rules, means material interest or an interest in issue and to be affected by the judgment, as distinguished from mere interest in the question involved or a mere incidental interest. Stated differently, the rule refers to a real or present substantial interest as distinguished from a mere expectancy or a future, contingent, subordinate, or consequential interest.

As a general rule, one who has no right or interest to protect cannot invoke the jurisdiction of the court as party-plaintiff in an action.44

The afore-quoted rule has two requirements: 1) to institute an action, the plaintiff must be the real party in interest; and 2) the action must be prosecuted in the name of the real party in interest. Necessarily, the purposes of this provision are 1) to prevent the prosecution of actions by persons without any right or title to or interest in the case; 2) to require that the actual party entitled to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage litigation and keep it within certain bounds, pursuant to sound public policy

The only requisites for the validity of any Deed of Release, Waiver and Quitclaim are the following: (1) that there was no fraud or deceit on the part of any of the parties; (2) that the consideration for the quitclaim is credible and reasonable; and (3) that the contract is not contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law.

SKIPPERS UNITED PACIFIC, INC. and SKIPPERS MARITIME SERVICES, INC., LTD., Petitioners, vs.NATHANIEL DOZA, NAPOLEON DE GRACIA, ISIDRO L. LATA, and CHARLIE APROSTA,   Respondents.

unremitted home allotment for the month of December 1998, salaries for the unexpired portion of their employment contracts, moral damages, exemplary damages, and attorney’s fees.

LA: DISMISSED

NLRC: DISMISSED

CA: GRANTED; REVERSED LA & NLRC

: The telex message was "a self-serving document that does not satisfy the requirement of substantial evidence, or that amount of relevant evidence which a reasonable mind might accept as adequate to justify the conclusion that petitioners indeed voluntarily demanded their immediate repatriation."

De Gracia, et al. claimed that Skippers failed to remit their respective allotments for almost five months, compelling them to air their grievances with the Romanian Seafarers Free Union.

SC:DENIED, CA AFFIRMED

: , since De Gracia, et al.’s dismissal was illegal, their repatriation expenses were for the account of Skippers and could not be offset with the home allotment pay

: the nature of extraordinary money where the burden of proof is shifted to the worker who must prove he is entitled to such monetary benefit," Section 8 of POEA Memorandum Circular No. 55, series of 1996, states that the allotment actually constitutes at least eighty percent (80%) of the seafarer’s salary

NOTES:

For a worker’s dismissal to be considered valid, it must comply with both procedural and substantive due process. The legality of the manner of dismissal constitutes procedural due process, while the legality of the act of dismissal constitutes substantive due process.56

Procedural due process in dismissal cases consists of the twin requirements of notice and hearing. The employer must furnish the employee with two written notices before the termination of employment can be effected: (1) the first notice apprises the employee of the particular acts or omissions for which his dismissal is sought; and (2) the second notice informs the employee of the employer’s decision to dismiss him. Before the issuance of the second notice, the requirement of a hearing must be complied with by giving the worker an opportunity to be heard. It is not necessary that an actual hearing be conducted.57

Substantive due process, on the other hand, requires that dismissal by the employer be made under a just or authorized cause under Articles 282 to 284 of the Labor Code.

LORENZO T. TANGGA-AN, *   Petitioner,   vs.PHILIPPINE TRANSMARINE CARRIERS, INC., UNIVERSE TANKSHIP DELAWARE LLC, and CARLOS C. SALINAS, Respondents.

ILLEGAL DISMISSAL CASE

entered into an overseas employment contract with Philippine Transmarine Carriers, Inc. (PTC) for and in behalf of its foreign employer, Universe Tankship Delaware, LLC. Under the employment contract, he was to be employed for a period of six months as chief engineer of the vessel the S.S. "Kure".

Tangga-an was deployed. While performing his assigned task, he noticed that while they were loading liquid cargo at Cedros, Mexico, the vessel suddenly listed too much at the bow. At that particular time both the master and the chief mate went on shore leave together, which under maritime standard was prohibited. To avoid any conflict, he chose to ignore the unbecoming conduct of the senior officers of the vessel

the master required Tangga-an and the rest of the Filipino Engineer Officers to report to his office where they were informed that they would be repatriated on account of the delay in the cargo discharging in Japan, which was principally a duty belonging to the deck officers. He imputed the delay to the non-readiness of the turbo generator and the inoperation of the boom, since the turbo generator had been prepared and synchronized for 3.5 hours or even before the vessel arrived in Japan. Moreover, upon checking the boom, they found the same [sic] operational. Upon verification, they found out that when the vessel berthed in Japan, the cargo hold was not immediately opened and the deck officers concerned did not prepare the stock. Moreover, while cargo discharging was ongoing, both the master and the chief mate again went on shore leave together at 4:00 in the afternoon and returned to the vessel only after midnight. To save face, they harped on the Engine Department for their mistake. Tangga-an and the other Engineering Officers were ordered to disembark from the vessel on April 2, 2002 and thereafter repatriated.

LA: ILLEGAL DISMISSAL

NLRC: AFFIRMED

CA: MODIFIED

SC: GRANTED

:ILLEGAL DISMISSAL

NOTES:

A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his employment contract or three (3) months salary for every year of the unexpired term, whichever is less, comes into play only when the employment contract concerned has a term of at least one (1) year or more. This is evident from the wording "for every year of the unexpired term" which follows the wording "salaries x x x for three months." To follow petitioners’ thinking that private respondent is entitled to three (3) months salary only simply because it is the lesser amount is to completely disregard and overlook some words

used in the statute while giving effect to some. This is contrary to the well-established rule in legal hermeneutics that in interpreting a statute, care should be taken that every part or word thereof be given effect since the lawmaking body is presumed to know the meaning of the words employed in the statute and to have used them advisedly. Ut res magis valeat quam pereat.

'Settled is the rule that in actions for recovery of wages, or where an employee was forced to litigate and, thus, incur expenses to protect his rights and interests, a monetary award by way of attorney's fees is justifiable under Article Ill of the Labor Code; Section 8, Rule VIII, Book III of its Implementing Rules; and paragraph 7, Article 208 of the Civil Code. The award of attorney's fees is proper, and there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly.'

the award of attorney's fees due and appropriate since the respondent therein incurred legal expenses after he was forced to file an action for recovery of his lawful wages and other benefits to protect his rights.

SYCIP, GORRES, VELAYO & COMPANY,   Petitioner,  vs.CAROL DE RAEDT, Respondent.

Sometime in June 1989, the Philippine Government and the Commission for European Communities (Commission) entered into a Financing Memorandum whereby the Commission undertook to provide financial and technical assistance for the implementation of rural micro projects in five provinces of the Cordillera area in Northern Luzon. Consequently, the Central Cordillera Agricultural Programme (CECAP) project was launched to be implemented by the Department of Agriculture (DA).

On 22 May 1989, the DA contracted Travers Morgan International Ltd. (TMI) to provide the required technical assistance services for CECAP.

On 1 July 1989, TMI and SGV entered into a Sub-Consultancy Agreement for the latter to undertake part of the technical assistance services requirements of the CECAP. SGV would provide for the Technical Assistance Services. Hence, SGV proposed qualified consultants as defined by the Terms of Reference

While the CECAP was in progress, TMI received verbal and written complaints from the project staff regarding De Raedt’s performance and working relations with them.

In compliance with TMI’s instructions, SGV facilitated De Raedt’s withdrawal from the CECAP.

LA: DE RAEDT an employee of SGV-> ILLEGAL DISMISSAL

: How she conducted herself and how she carried out the project were dependent on and prescribed by SGV and TMI

: SGV is considered as the employer of De Raedt since it acted indirectly in the interest of TMI, the entity directly in-charge of the CECAP project for which De Raedt was hired

:SGV as the entity which is the source of De Raedt’s income and other benefits

NLRC: SGV

: SGV had no discretion in the selection of De Raedt for the position of Sociologist in the CECAP. The selection was made by the TMI, upon recommendation of Gimenez of the DA, to be approved by the DA and the Commission. The engagement of De Raedt was coursed through SGV

: The NLRC found that SGV did not exercise control over De Raedt’s work. The Sub-Consultancy Agreement between TMI and SGV clearly required De Raedt to work closely with and under the direction and supervision of both the Team leader and the Project Coordinator.

: SGV’s participation is to merely monitor her attendance, through time records, for the payment of her retainer fee and to validate the time she expended in the project with her written reports.

:The following circumstances also indicated that no employment relationship existed between the parties: (1) De Raedt was engaged on a contract basis; (2) the letter-agreement between the parties clearly states that there is no employer-employee relationship between the parties and that De Raedt was at all times to be considered an independent contractor; and (3) De Raedt was allowed to engage in other employment during all the time she was connected with the project.

CA: REVERSED NLRC

: based on the letter-agreement between the parties, SGV engaged De Raedt for the project on a contract basis for 40 months over a period of five years during which she was to work full time. She could not engage in any other employment

: Whether actual supervision of her work had turned out to be minimal or not, SGV reserved the right to exercise it at any time; SGV asserted its right to terminate her services

SC: PETITON GRANTED

: Selection and Engagement of the Employee- De Raedt was contracted by SGV as part of the latter’s obligation under the Sub-Consultancy Agreement with TMI, which was in turn contracted by the DA to provide the services required for the foreign-assisted CECAP project. De Raedt was neither engaged by SGV as an ordinary employee, nor was she picked by SGV from a pool of consultants already working for SGV. Hence, SGV engaged De Raedt’s services precisely because SGV had an existing Sub-Consultancy Agreement with TMI to provide such services

: Payment of Wages- By the terms of the Sub-Consultancy Agreement, TMI paid SGV remuneration of the fixed unit rate component of the part services; SGV made it clear that payments made by TMI "should not be construed as being due [De Raedt] since these items are intended for the administration, overhead expenses, and other related expenses of [SGV] in the development, management, and supervision of [De Raedt’s] assignment."

: Power of Dismissal- Under the letter-agreement between the parties, SGV may terminate De Raedt’s services "at anytime that the contract between the Department of Agriculture – Government of the Philippines and Travers Morgan International, Consulting Engineers, Planners and Management Consultants is terminated for any cause whatsoever."

: If De Raedt were indeed SGV’s employee, she should have been able to resign for whatever professional or personal reason at anytime, even prior to the end of the contract between the DA and TMI or between TMI and SGV, without incurring any liability for such resignation.

: Power of Control- The services to be performed by her specified what she needed to achieve but not on how she was to go about it

: SGV did not exercise control over the means and methods by which De Raedt performed her duties as Sociologist. SGV did impose rules on De Raedt, but these were necessary to ensure SGV’s faithful compliance with the terms and

conditions of the Sub-Consultancy Agreement it entered into with TMI.

: no employer-employee relationship between the parties. De Raedt is an independent contractor, who was engaged by SGV to render services to SGV’s client TMI, and ultimately to DA on the CECAP project, regarding matters in the field of her special knowledge and training for a specific period of time

PHILIPPINE AIRLINES, INC., petitioner, vs.ENRIQUE LIGAN, et al

Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered into an Agreement1 on July 15, 1991 whereby Synergy undertook to "provide loading, unloading, delivery of baggage and cargo and other related services to and from [petitioner]'s aircraft at the Mactan Station."

And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no employer-employee relationship between CONTRACTOR and/or its employees on the one hand, and OWNER, on the other."

LA: Dismissed complaint for illegal dismisal; Synergy an independent contractor

NRLC: vacated and set aside

CA: affirmed NLRC

PETTION: the law does not prohibit an employer from engaging an independent contractor, like Synergy, which has substantial capital in carrying on an independent business of contracting, to perform specific jobs.

:its contracting out to Synergy various services like janitorial, aircraft cleaning, baggage-handling, etc., which are directly related to its business, does not make respondents its employees.

: none of the four (4) elements of an employer-employee relationship between petitioner and respondents, viz: selection and engagement of an employee, payment of wages, power of dismissal, and the power to control employee's conduct, is present in the case.

: reinstatement of respondents had been rendered impossible because it had reduced its personnel due to heavy losses as it had in fact terminated its service agreement with Synergy

effective June 30, 1998 as a cost-saving measure.

ISSUE: whether Synergy is a mere job-only contractor or a legitimate contractor

< If Synergy is found to be a mere job-only contractor, respondents could be considered as regular employees of petitioner as Synergy would then be a mere agent of petitioner in which case respondents would be entitled to all the benefits granted to petitioner's regular employees; ><otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered employees of Synergy>

SC: CA AFFIRMED WITH MODIFICATION

: the work performed by almost all of the respondents - loading and unloading of baggage and cargo of passengers - is directly related to the main business of petitioner. And the equipment used by respondents as station loaders, such as trailers and conveyors, are owned by petitioner

: Contractor shall require all its workers, employees, suppliers and visitors to comply with OWNER'S rules, regulations, procedures and directives relative to the safety and security of OWNER'S premises, properties and operations. For this

purpose, CONTRACTOR shall furnish its employees and workers identification cards to be countersigned by OWNER and uniforms to be approved by OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit entry into OWNER'S premises of any person employed therein by CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not comply with OWNER'S reasonable instructions and requests regarding security, safety and other matters and such person shall not again be employed to perform the services hereunder without OWNER'S permission.

: The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship. For it is the totality of the facts and surrounding circumstances of the case33 which is determinative of the parties' relationship.

NOTES:

Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02, Series of 2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended) as follows:

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. (Emphasis and underscoring supplied)

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal,and any of the following elements are [ sic ] 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. (Emphasis, underscoring and capitalization supplied)

"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.

For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for convenience, re-quoted:

(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.

Even if only one of the two elements is present then, there is labor-only contracting.

One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employer's control except only as to the results