San Miguel Corporation vs. Aballa

392 SUPREMECOURTREPORTSANNOTATED

SanMiguelCorporationvs.Aballa

G.R.No.149011.June28,2005.*

SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A.ABALLA,BONNYJ.ABARING,EDWINM.ADLAON,ALVINC. ALCALDE, CELANIO D. ARROLLADO, EDDIE A.ARROLLADO, REYNALDO T. ASONG, RENE A. ASPERA,JOELD.BALATERIA,JOSEPHD.BALATERIA,JOSEJOLLENBALLADOS, WILFREDO B. BASAS, EDWIN E. BEATINGO,SONNY V. BERONDO, CHRISTOPHER D. BRIONES,MARLON D. BRIONES, JOEL C. BOOC, ENRIQUECABALIDA, DIOSCORO R. CAHINOD, ERNESTO P.CAHINOD, RENANTE S. CAHINOD, RUDERICK R.CALIXTON,RONILOC.CALVEZ,PANCHOCAETE,JUNNYCASTEL, JUDY S. CELESTE, ROMEO CHUA, DANILOCOBRA, ARMANDO C. DEDOYCO, JOEY R. DELA CRUZ,JOHND.DELFIN,RENELITOP.DEON,ARNELC.DEPEDRO,ORLANDODERDER,CLIFFORDA.DESPI,RAMIEA.DESPI,SR.,VICTORA.DESPI,ROLANDOL.DINGLE,ANTONIOD.DOLORFINO, LARRY DUMAOP, NOEL DUMOL, CHITO L.DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR,RIC E. GALPO, MANSUETO GILLE, MAXIMO L. HILAUS,GERARDOJ.JIMENEZ,ROBERTLYY.HOFILEA,ROBERTOHOFILEA,VICENTEINDENCIO,JONATHANT.INVENTOR,PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO,RENATO LAMINA, ALVIN LAS POBRES, ALBERT LASPOBRES, LEONARD LEMONCHITO, JERRY LIM, JOSECOLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDOMATILLANO, VICENTE M. MATILLANO, TANNY C.MENDOZA,WILLIAMP.NAVARRO,WILSONP.NAVARRO,LEO A. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C.PAROCHILIN, REYNALDO C. PAROCHILIN, RICKYPALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOEMARIES.PUGNA,EDWING.RIBON,RAUL

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*THIRDDIVISION.

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A. RUBIO, HENRY S. SAMILLANO, EDGAR SANTIAGO,ROLANDB.SANTILLANA,ROLDANV.SAYAM,JOSEPHS.SAYSON,RENESUARNABA,ELMARTABLIGAN,JERRYD.TALITE, OSCAR TALITE,WINIFREDO TALITE, CAMILON.TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA,TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A.TORMIS,ADELINOC.UNTAL,FELIXT.UNTAL,RONILOE.VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and theCOURTOFAPPEALS,respondents.

ActionsPleadingsandPracticeCertificateofNonForumShoppingProceduralRulesandTechnicalitiesThegeneralruleisthatthecertificateofnonforumshoppingmustbesignedbyalltheplaintiffsorpetitionersinacaseandthesignatureofonlyoneof themis insufficientStrictcompliancewith theprovisions regarding the certificateof nonforumshoppingmerelyunderscores its mandatory nature in that the certification cannot bealtogetherdispensedwithor its requirementscompletelydisregardedbut itdoes not thereby interdict substantial compliancewith its provisions underjustifiable circumstances.While the general rule is that the certificate ofnonforum shoppingmust be signedby all the plaintiffs or petitioners in acase and the signature of only one of them is insufficient, this Court hasstressed that the ruleson forumshopping,whichweredesigned topromoteandfacilitate theorderlyadministrationof justice,shouldnotbe interpretedwith such absolute literalness as to subvert its own ultimate and legitimateobjective. Strict compliancewith the provisions regarding the certificate ofnonforum shopping merely underscores its mandatory nature in that thecertification cannot be altogether dispensed with or its requirementscompletely disregarded. It does not, however, thereby interdict substantialcompliancewithitsprovisionsunderjustifiablecircumstances.

Same Same Same Same Given the collective nature of the petitionfiledbeforetheappellatecourtbyninetysevenpersons,raisingonecommoncauseofactionagainstacorporation,theexecutionbyonlythreeoftheminbehalf of the others of the certificate of nonforum shopping constitutessubstantialcompliancewiththeRulesThemeritsofthesubstantiveaspects

of the casemayalso be deemedasspecial circumstanceorcompellingreasontotakecognizanceof

394



a petition although the certification against forum shopping was notexecutedandsignedbyallofthepetitioners.Giventhecollectivenatureofthe petition filed before the appellate court by herein private respondents,raisingonecommoncauseof actionagainstSMC, theexecutionbyprivaterespondentsWinifredoTalite,RenelitoDeonandJoseTemporosa inbehalfofall theotherprivaterespondentsofthecertificateofnonforumshoppingconstitutes substantial compliance with the Rules. That the three indeedrepresented their copetitioners before the appellate court is, as it correctlyfound, subsequently proven to be true as shown by the signatures of themajorityofthepetitionersappearingintheirmemorandumfiledbeforeUs.Additionally, themerits of the substantive aspects of the casemay also bedeemedasspecialcircumstanceorcompellingreasontotakecognizanceof a petition although the certification against forum shopping was notexecutedandsignedbyallofthepetitioners.

Same Same Same Same It is the appellate court which ultimatelydetermines if the supporting documents are sufficient tomake out a primafaciecase.SMCgoeson to argue that thepetition filedbefore theCA isfatally defective as itwas not accompanied by copies of all pleadings anddocumentsrelevantandpertinenttheretoincontraventionofSection1,Rule65 of the Rules of Court. This Court is not persuaded. The records showthatprivate respondents appended the followingdocuments to their petitionbefore the appellate court: the September 23, 1997Decision of the LaborArbiter,theirNoticeofAppealwithAppealMemorandumdatedOctober16,1997filedbefore theNLRC, theDecember29,1998NLRCDecision, theirMotionforReconsiderationdatedMarch26,1999filedwiththeNLRCandtheSeptember10,1999NLRCResolution.Itbearsstressingatanyratethatit is the appellate court which ultimately determines if the supportingdocumentsaresufficienttomakeoutaprimafaciecase.Itdiscernswhetheron the basis of what have been submitted it could already judiciouslydeterminethemeritsofthepetition.Inthecaseatbar,theCAfoundthatthepetitionwasadequatelysupportedbyrelevantandpertinentdocuments.

SameSameSameSameInstancesWhereaLiberalConstructionofthe Rule on the Accomplishment of a Certificate of NonForum ShoppingAllowed Rules of procedure should indeed be viewed as mere tools

designedtofacilitatetheattainmentofjusticetheirstrict

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and rigid application, which would result in technicalities that tend tofrustrateratherthanpromotesubstantialjustice,mustalwaysbeeschewed.Atallevents, thisCourthasalloweda liberalconstructionof the ruleontheaccomplishmentofacertificateofnonforumshopping in the followingcases: (1) where a rigid application will result in manifest failure ormiscarriage of justice (2) where the interest of substantial justice will beserved (3) where the resolution of the motion is addressed solely to thesoundandjudiciousdiscretionofthecourtand(4)wheretheinjusticetotheadversepartyisnotcommensuratewiththedegreeofhisthoughtlessnessinnot complying with the procedure prescribed. Rules of procedure shouldindeed be viewed as mere tools designed to facilitate the attainment ofjustice.Theirstrictandrigidapplication,whichwouldresultintechnicalitiesthattendtofrustrateratherthanpromotesubstantialjustice,mustalwaysbeeschewed.

AdministrativeLawWhenthefindingsof factof thelaborarbiterandtheNLRCarenotsupportedbysubstantialevidenceor their judgmentwasbased on a misapprehension of facts, the appellate court may make anindependentevaluationofthefactsofthecase.Thegeneralrule,nodoubt,is that findings of facts of an administrative agency which has acquiredexpertise in theparticularfieldof itsendeavorareaccordedgreatweightonappeal. The rule is not absolute and admits of certain wellrecognizedexceptions,however.Thus,whenthefindingsoffactofthelaborarbiterandtheNLRCarenot supportedby substantial evidenceor their judgmentwasbased on a misapprehension of facts, the appellate court may make anindependentevaluationofthefactsofthecase.

LaborLawPleadingsandPracticeVerificationThat theverificationwhere it ismanifested that the one signing is one of the complainants andwascausingthepreparationof thecomplaintwiththeauthorityofmycocomplainants indubitably shows that he was representing the rest of hiscocomplainants in signing the verification in accordance with Section 7,RuleIIIofthe1990NRLCRules,nowSection8,Rule3ofthe1997NLRCRules.Aperusalofthecomplaintshowsthattheninetysevencomplainantswerebeingrepresentedbytheircounselofchoice.Thusthefirstsentenceoftheir complaint alleges: x x x complainants, by counsel and unto thisHonorableOfficerespectfullystatexxx.Andthecomplaintwassignedby

Atty.JoseMaxS.Ortizascounselforthecomplainants.

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FollowingSection6,RuleIIIofthe1990RulesofProcedureoftheNLRC,nowSection7,RuleIIIofthe1999NLRCRules,Atty.Ortizispresumedtobe properly authorized by private respondents in filing the complaint. Thatthe verificationwherein it ismanifested that private respondent Talitewasone of the complainants and was causing the preparation of the complaintwith the authority of my cocomplainants indubitably shows that TalitewasrepresentingtherestofhiscocomplainantsinsigningtheverificationinaccordancewithSection7,Rule IIIof the1990NLRCRules,nowSection8, Rule 3 of the 1999NLRCRules, which states: Section 7.Authority tobind party.Attorneys and other representatives of parties shall haveauthority to bind their clients in allmatters of procedure but they cannot,without a special power of attorney or express consent, enter into acompromiseagreementwiththeopposingpartyinfullorpartialdischargeofaclientsclaim.

SameLaborOnlyContracting Independent Contractors The test todetermine the existence of independent contractorship is whether oneclaiming to be an independent contractor has contracted to do the workaccordingtohisownmethodsandwithoutbeingsubjecttothecontroloftheemployer, except only as to the results of the work In laboronlycontracting, the statute creates an employeremployee relationship for acomprehensive purposeto prevent a circumvention of labor laws.Thetest todeterminetheexistenceof independentcontractorshipiswhetheroneclaiming to be an independent contractor has contracted to do the workaccordingtohisownmethodsandwithoutbeingsubject to thecontroloftheemployer,exceptonlyastotheresultsofthework. In legitimate laborcontracting,thelawcreatesanemployeremployeerelationshipforalimitedpurpose, i.e., to ensure that the employees are paid their wages. Theprincipal employer becomes jointly and severally liable with the jobcontractor, only for the payment of the employees wages whenever thecontractor fails to pay the same.Other than that, the principal employer isnot responsible for any claim made by the employees. In laboronlycontracting, the statute creates an employeremployee relationship for acomprehensive purpose: to prevent a circumvention of labor laws. Thecontractor is consideredmerely an agent of the principal employer and thelatterisresponsibletotheemployeesofthelaboronlycontractorasifsuch

employeeshadbeendirectlyemployedbytheprincipalemployer.

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SameSameSameThe languageofacontract isnotdeterminativeofthe parties relationshipit is the totality of the facts and surroundingcircumstances of the case.The Contract of Services between SMC andSunflower shows that the parties clearly disavowed the existence of anemployeremployeerelationshipbetweenSMCandprivaterespondents.Thelanguage of a contract is not, however, determinative of the partiesrelationship rather it is the totality of the facts and surroundingcircumstancesofthecase.Apartycannotdictate,bythemereexpedientofaunilateraldeclarationinacontract,thecharacterofitsbusiness,i.e.,whetheras laboronly contractor or job contractor, it being crucial that its characterbemeasuredintermsofanddeterminedbythecriteriasetbystatute.

Same Same SameWhere it is shown that the workers daily timerecordswere signedby the principal and control of the premises inwhichtheyworkedwasbytheprincipal,thesetendtodisprovetheindependenceofthe contractor who engaged the services of the workers.Sunflower didnot carry on an independent business or undertake the performance of itsservice contract according to its own manner and method, free from thecontrolandsupervisionofitsprincipal,SMC,itsapparentrolehavingbeenmerely to recruit persons towork for SMC. Thus, it is gathered from theevidence adduced by private respondents before the labor arbiter that theirdailytimerecordsweresignedbySMCsupervisorsIkePuentebella,JoemelHaro, Joemari Raca, Erwin Tumonong, Edison Arguello, and StephenPalabrica, which fact shows that SMC exercised the power of control andsupervisionoveritsemployees.AndcontrolofthepremisesinwhichprivaterespondentsworkedwasbySMC.These tend todisprove the independenceofthecontractor.

Same Same Same The circumstance that the contractors workershadbeenworkingalongsideregularemployeesof theprincipal,performingidentical jobs under the same supervisors, is another indicium of theexistence of laboronly contractorship.Private respondents had beenworking in the aqua processing plant inside the SMC compound alongsideregularSMCshrimpprocessingworkersperformingidenticaljobsunderthesame SMC supervisors. This circumstance is another indicium of theexistenceofalaboronlycontractorship.

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SameTwoKindsofRegularEmployeesWorkerswhowere engagedin janitorial and messengerial tasks fall under the category of regularemployees who have rendered at least one year of service, whethercontinuous or broken, with respect to the activity in which they areemployed,andareentitledtodifferentialpayandbenefitsextendedtootherregular employees from the day immediately following their first year ofservice.The law of course provides for two kinds of regular employees,namely: (1) thosewho are engaged to perform activitieswhich are usuallynecessaryordesirableintheusualbusinessortradeoftheemployerand(2)thosewhohaverenderedatleastoneyearofservice,whethercontinuousorbroken,withrespecttotheactivityinwhichtheyareemployed.Asforthoseof private respondents who were engaged in janitorial and messengerialtasks,theyfallunderthesecondcategoryandarethusentitledtodifferentialpay and benefits extended to other SMC regular employees from the dayimmediatelyfollowingtheirfirstyearofservice.

Same Retrenchment Words and Phrases Where a particulardepartmentunderacorporategroupofcompanieswasclosedallegedlydueto serious business reverses, this constitutes retrenchment by, and notclosure of, the enterprise or the company.In the case at bar, a particulardepartmentunder theSMCgroupofcompanieswasclosedallegedlyduetoseriousbusinessreverses.Thisconstitutesretrenchmentby,andnotclosureof, the enterprise or the company itself as SMC has not totally ceasedoperations but is still very much an ongoing and highly viable businessconcern.

Same Same Requisites.Retrenchment is a management prerogativeconsistentlyrecognizedandaffirmedbythisCourt.Itis,however,subjecttofaithful compliance with the substantive and procedural requirements laiddownbylawandjurisprudence.Forretrenchmenttobeconsideredvalidthefollowing substantial requirements must be met: (a) the losses expectedshouldbesubstantialandnotmerelydeminimisinextent(b)thesubstantiallosses apprehendedmust be reasonably imminent such as can be perceivedobjectivelyandingoodfaithbytheemployer(c) theretrenchmentmustbereasonably necessary and likely to effectively prevent the expected lossesand (d) the alleged losses, if already incurred, and the expected imminentlossessoughttobeforestalled,mustbeprovedbysufficientandconvincingevidence.

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SameSameThe financialstatementsmustbepreparedandsignedbyindependent auditors failing which they can be assailed as selfservingdocuments.Inthedischargeof theserequirements, it is theemployerwhohas theonus, being in the nature of an affirmative defense. Normally, thecondition of business losses is shown by audited financial documents likeyearly balance sheets, profit and loss statements and annual income taxreturns. The financial statements must be prepared and signed byindependent auditors failing which they can be assailed as selfservingdocuments.

SameSameDamagesWherethedismissalisbasedonanauthorizedcauseunderArticle283oftheLaborCodebuttheemployerfailedtocomplywith the notice requirement, the sanction should be stiff as the dismissalprocess was initiated by the employers exercise of his managementprerogative, as opposed to dismissal based on a just cause under Article282.Where the dismissal is based on an authorized cause under Article283 of the Labor Code but the employer failed to comply with the noticerequirement, the sanction should be stiff as the dismissal process wasinitiated by the employers exercise of his management prerogative, asopposedtoadismissalbasedonajustcauseunderArticle282withthesameprocedural infirmity where the sanction to be imposed upon the employershould be tempered as the dismissal processwas, in effect, initiated by anact imputable to the employee. In light of the factual circumstances of thecase at bar, this Court awards P50,000.00 to each private respondent asnominaldamages.

SameAttorneysFeesAlthoughanexpressfindingoffactsandlawisstillnecessarytoprovethemeritoftheawardofattorneysfees,thereneednotbeanyshowingthattheemployeractedmaliciouslyorinbadfaithwhenitwithheld thewagesthereneedonlybeashowing that the lawfulwageswerenotpaidaccordingly.With respect to attorneys fees, in actions forrecovery of wages or where an employee was forced to litigate and thusincurred expenses to protect his rights and interests, a maximum of tenpercent (10%) of the total monetary award by way of attorneys fees isjustifiableunderArticle111oftheLaborCode,Section8,RuleVIII,BookIII of its Implementing Rules, and paragraph 7, Article 2208 of the CivilCode. Although an express finding of facts and law is still necessary toprove the merit of the award, there need not be any showing that theemployeractedmaliciouslyorinbadfaithwhenitwithheldthe

400

1.

A.B.C.

A.



wages. There need only be a showing that the lawfulwageswere not paidaccordingly,asinthiscase.

PETITIONforreviewoncertiorariofthedecisionandresolutionoftheCourtofAppeals.

ThefactsarestatedintheopinionoftheCourt.DeLimaBohol&MeezLawOfficesforpetitioner.JoseMaxS.Ortizforprivaterespondents. Filomeno B. Tan for Purok Sunflower MultiPurpose

Cooperative.

CARPIOMORALES,J.:

Petitioner San Miguel Corporation (SMC), represented by itsAssistantVicePresidentandVisayasAreaManagerforAquacultureOperations Leopoldo S. Titular, and Sunflower MultiPurposeCooperative(Sunflower),representedbytheChairmanofitsBoardof Directors Roy G. Asong, entered into a oneyear Contract ofServices

1

commencing on January 1, 1993, to be renewed on amonthtomonthbasisuntilterminatedbyeitherparty.Thepertinentprovisionsofthecontractread:

The cooperative agrees andundertakes to performand/orprovide for the company, on a nonexclusive basis for aperiodof one year the following services for theBacolodShrimpProcessingPlant:

Messengerial/JanitorialShrimpHarvesting/ReceivingSanitation/Washing/ColdStorage

2

_______________

1Rolloatpp.278286.2AnnexedtotheServiceContractisadetailedlistingofthescopeoftheservices

tobeprovidedtoSMC:

ShrimpReceiving/Harvesting

Assistinthecrushingandloadingofice

2.

B.

1.

2.

3.

4.

C.

1.

2.

3.

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To carry out the undertaking specified in the immediatelypreceding paragraph, the cooperative shall employ thenecessary personnel and provide adequate equipment,materials,toolsand

_______________

Receivetherawmaterialsandputthemintothechillingtanks

Sorttheshrimpaccordingtostandardqualityspecifications

Packtherawmaterialsintostyroporboxes/containersandassistonthedeliveryoftheharvestedrawmaterialstotheprocessing

plant

Prepareharvestmaterialsandequipmentandcleanthemafteruseand

Performotherdutiesthatthecompanymayassignfromtimetotime.

JanitorialandMessengerialServices

Maintain,sanitizeandcleanthefollowing:

Streetscementedandotherwise

Canalsandfloorarea

Administrationbuildingofficesandcomfortrooms

Logistics/materials/warehousebuilding

Clinicandcomfortroom

Plantgrounds/lawn

MaintainandWatertheplantsandtrees

Haulanddisposegarbagedailyfromdesignatedwastecontainerswithinthecompoundtoanareaoutsideandfarfromthecompound.

Performmessengerial activitieswithinBacolodCity and other duties thatmaybeassignedduringofficehours.

Sanitation/WashingServices

Washandsanitizeboxes,chillingtanks,traysandotherharvestingmaterials.

Storeharvestingmaterialsinthedesignatedareaafterwashing.

Loadandunloadboxes,trays,chillingtanksandotherharvestingmaterialstobeusedduringharvestschedule.

3.

A.

B.

C.

4.

402



apparatus, to efficiently, fully and speedily accomplish the work andservicesundertakenbythecooperative.xxx

In consideration of the above undertaking the companyexpresslyagreestopaythecooperativethefollowingratesperactivity:

Messengerial/JanitorialMonthly Fixed Service Charge of:NineteenThousandFiveHundredPesosOnly(P19,500.00)Harvesting/ShrimpReceiving.Piece rateofP0.34/kg.OrP100.00minimumperperson/activitywhichever ishigher,withprovisionsasfollows:

P25.00FixedFeeperperson

AdditionalmealallowanceP15.00everymealtimeincaseharvestdurationexceedsonemeal.

ThiswillbepreseteveryharvestbasedonharvestplanapprovedbytheSeniorBuyer.

Sanitation/WashingandColdStorageP125.00/personfor3shifts.Onehalfof thepayment for all services rendered shall bepayable on the fifteenth and the other half, on the end ofeachmonth.Thecooperativeshallpaytaxes,fees,duesandother impositions that shallbecomedueasa resultof thiscontract.The cooperative shall have the entire charge, control andsupervisionoftheworkandserviceshereinagreedupon.xxx

There is no employeremployee relationship between thecompanyandthecooperative,orthecooperativeandanyofits members, or the company and any members of thecooperative. The cooperative is an association of selfemployed members, an independent contractor, and anentrepreneur.Itissubjecttothecontrolanddirectionofthecompany only as to the result to be accomplished by thework or services herein specified, and not as to theworkherein contracted. The cooperative and its members

5.

6.

8.

recognize that it is taking a business risk in accepting afixedservicefeetoprovidetheservicescontractedforandits realization of profit or loss from its undertaking, inrelation to all its other undertakings, will depend on howefficiently itdeploysandfields itsmembersandhowtheyperformtheworkandmanageitsoperations.

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The cooperative shall, whenever possible, maintain andkeepunder its control thepremiseswhere theworkunderthiscontractshallbeperformed.The cooperative shall have exclusive discretion in theselection,engagementanddischargeofitsmemberworkersor otherwise in the direction and control thereof. Thedetermination of the wages, salaries and compensation ofthememberworkers of the cooperative shall bewithin itsfullcontrol. It is furtherunderstood that thecooperative isan independent contractor, and as such, the cooperativeagrees tocomplywithall the requirementsofallpertinentlaws and ordinances, rules and regulations.Although it isunderstood and agreed between the parties hereto that thecooperative,intheperformanceofitsobligations,issubjecttothecontrolordirectionofthecompanymerelyasa(sic)result to be accomplished by the work or services hereinspecified, and not as to the means and methods ofaccomplishingsuchresult,thecooperativeherebywarrantsthatitwillperformsuchworkorservicesinsuchmanneraswillbeconsistentwiththeachievementoftheresulthereincontractedfor.xxxThecooperativeundertakestopaythewagesorsalariesofitsmemberworkers, aswell as allbenefits,premiumsandprotection in accordance with the provisions of the laborcode, cooperative code and other applicable laws anddecrees and the rules and regulations promulgated bycompetentauthorities,assumingallresponsibilitytherefor.The cooperative further undertakes to submit to thecompanywithin the first ten (10) days of everymonth, astatementmade,signedandsworntobyitsdulyauthorizedrepresentative before a notary public or other officer

12.

authorizedbylawtoadministeroaths,totheeffectthatthecooperative has paid all wages or salaries due to itsemployees or personnel for services rendered by themduring the month immediately preceding, includingovertime, if any, and that such payments were all inaccordancewiththerequirementsoflaw.xxxUnless sooner terminated for the reasons stated inparagraph 9 this contract shall be for a period of one (1)year commencing on January 1, 1993. Thereafter, thisContract will be deemed renewed on a monthtomonthbasisuntilterminatedbyeitherparty

404



bysendingawrittennotice to theotherat least thirty(30)daysprior to theintendeddateoftermination.

xxx3

(Underscoringsupplied)

Pursuanttothecontract,Sunflowerengagedprivaterespondentsto,as they did, render services at SMCsBacolod Shrimp ProcessingPlantatSta.Fe,BacolodCity.Thecontractwasdeemedrenewedbythepartieseverymonthafter itsexpirationonJanuary1,1994andprivaterespondentscontinuedtoperformtheirtasksuntilSeptember11,1995.

In July 1995, private respondents filed a complaint before theNLRC,RegionalArbitrationBranchNo.VI,BacolodCity,prayingto be declared as regular employees of SMC, with claims forrecoveryofallbenefitsandprivilegesenjoyedbySMCrankandfileemployees.

PrivaterespondentssubsequentlyfiledonSeptember25,1995anAmendedComplaint

4

toincludeillegaldismissalasadditionalcauseofactionfollowingSMCsclosureofitsBacolodShrimpProcessingPlantonSeptember15,1995

5

which resulted in the terminationoftheirservices.

SMC filed a Motion for Leave to File Attached Third PartyComplaint

6

datedNovember27,1995toimpleadSunflowerasThirdParty Defendant which was, by Order

7

of December 11, 1995,grantedbyLaborArbiterRayAlanT.Drilon.

In themeantime,onSeptember30,1996,SMCfiledbefore theRegional Office at Iloilo City of the Department of Labor and

Employment (DOLE) a Notice of Closure8

of its aquacultureoperationseffectiveonevendate,citingseriousbusinesslosses.

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3Rolloatpp.279283.4Id.,atpp.114117.5Id.,atp.502.6Id.,atpp.118120.7Id.,atp.121.8Id.,atp.340.

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ByDecisionofSeptember23,1997,LaborArbiterDrilondismissedprivate respondents complaint for lack of merit, ratiocinating asfollows:

Wesustainthestandof therespondentSMCthat itcouldproperlyexerciseitsmanagementprerogative tocontractout thepreparationandprocessingaspectsofitsaquacultureoperations.Judicialnoticehasalreadybeentakenregardingthegeneralpracticeadoptedingovernmentandprivateinstitutionsandindustriesofhiringindependentcontractorstoperformspecialservices.xxx

xxxIndeed, the law allows job contracting. Job contracting is permissible

undertheLaborCodeunderspecificconditionsandwedonotseehowthisactivity could not be legally undertaken by an independent servicecooperativelikethethirdpartyrespondentherein.

There is nobasis to thedemand for regularization simplyon the theorythat complainantsperformedactivitieswhich arenecessary anddesirable inthe business of respondent. It has been held that the definition of regularemployees as those who perform activities which are necessary anddesirable for the business of the employer is not always determinativebecauseanyagreementmayprovideforone(1)party torenderservicesforand inbehalfof another for a considerationevenwithoutbeinghiredas anemployee.

The charge of the complainants that thirdparty respondent is a merelaboronly contractor is a sweeping generalization and completelyunsubstantiated. x x x In the absence of clear and convincing evidenceshowingthat thirdpartyrespondentactedmerelyasa laboronlycontractor,we are firmly convinced of the legitimacy and the integrity of its service

contractwithrespondentSMC.In the same vein, the closure of the Bacolod Shrimp Processing Plant

wasamanagementdecisionpurelydictatedbyeconomic factorswhichwas(sic) mainly serious business losses. The law recognizes the right of theemployertoclosehisbusinessorceasehisoperationsforbonafidereasons,as much as it recognizes the right of the employer to terminate theemployment of any employee due to closure or cessation of businessoperations, unless the closing is for the purpose of circumventing theprovisionsofthelawonsecurityoftenure.ThedecisionofrespondentSMCtocloseitsBacolodShrimpProcessingPlant,duetoseriousbusinesslosseswhichhas(sic)

406



clearlybeenestablished,isamanagementprerogativewhichcouldhardlybeinterferedwith.

x x x The closure did affect the regular employees andworkers of theBacolod Processing Plant, who were accordingly terminated following thelegal requisites prescribed by law.The closure, however, in so far as thecomplainants are concerned, resulted in the termination of SMCs servicecontractwiththeircooperativexxx

9

(Italicssupplied)

PrivaterespondentsappealedtotheNLRC.By Decision of December 29, 1998, the NLRC dismissed the

appeal for lack of merit, it finding that third party respondentSunflowerwasanindependentcontractorinlightofitsobservationthat [i]n all the activities of private respondents, theywere underthe actual direction, control and supervision of third partyrespondentSunflower,aswellasthepaymentofwages,andpowerofdismissal.

10

Private respondents Motion for Reconsideration11

having beendeniedby theNLRCfor lackofmeritbyResolutionofSeptember10, 1999, they filed a petition for certiorari

12

before the Court ofAppeals(CA).

Before the CA, SMC filed a Motion to Dismiss13

privaterespondents petition for noncompliance with the Rules on CivilProcedureandfailuretoshowgraveabuseofdiscretiononthepartoftheNLRC.

SMCsubsequentlyfiled itsComment14

tothepetitiononMarch30,2000.

ByDecision of February 7, 2001, the appellate court reversedtheNLRCdecisionandaccordingly found forprivate respondents,

disposingasfollows:

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9Id.,atpp.504507.10Id.,atpp.553557.11Id.,atpp.559563.12Id.,atpp.574587.13CARolloatpp.7482.14Id.,atpp.108142.

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WHEREFORE, the petition is GRANTED. Accordingly, judgment isherebyRENDERED: (1)REVERSINGandSETTINGASIDEboth the29December1998decision and10September 1999 resolutionof theNationalLabor Relations Commission (NLRC), Fourth Division, Cebu City inNLRCCaseNo.V036197 aswell as the 23September 1997 decision ofthe labor arbiter in RAB Case No. 06071031695 (2)ORDERING therespondent,SanMiguelCorporation,toGRANTpetitioners:(a)separationpayinaccordancewiththecomputationgiventotheregularSMCemployeesworking at its Bacolod Shrimp Processing Plant with full backwages,inclusive of allowances and other benefits or their monetary equivalent,from 11 September 1995, the time their actual compensationwaswithheldfrom them, up to the time of the finality of this decision (b) differentialspays (sic) effective as of and from the time petitioners acquired regularemployment status pursuant to the disquisition mentioned above, and allsuch other and further benefits as provided by applicable collectivebargainingagreement(s)orotherrelations,orbylaw,beginningsuch timeup to their termination from employment on 11 September 1995 andORDERINGprivaterespondentSMCtoPAYuntothepetitionersattorneysfeesequivalenttoten(10%)percentofthetotalaward.

Nopronouncementastocosts.SOORDERED.

15

(Italicssupplied)

Justifying its reversal of the findings of the labor arbiter and theNLRC,theappellatecourtreasoned:

Although the terms of the nonexclusive contract of service between SMCand [Sunflower] showed a clear intent to abstain from establishing anemployeremployee relationship between SMC and [Sunflower] or thelattersmembers, the extent to which the parties successfully realized this

intent in the light of the applicable law is the controlling factor indeterminingtherealandactualrelationshipbetweenoramongtheparties.

xxxWithrespect to thepower tocontrolpetitionersconduct, itappears that

petitioners were under the direct control and supervision of SMCsupervisorsbothastothemannertheyperformedtheir

_______________

15Rolloatp.22.

408



functions and as to the end results thereof. It was only after petitionerslodged a complaint to have their status declared as regular employees ofSMCthatcertainmembersof[Sunflower]begantocountersignpetitionersdaily time records tomake it appear that they (petitioners) were under thecontrolandsupervisionof[Sunflower]teamleaders(rollo,pp.523527).xxx

Even without these instances indicative of control by SMC over thepetitioners, it is safe to assume that SMC would never have allowed thepetitioners toworkwithin its premises, using its own facilities, equipmentand tools, alongside SMC employees discharging similar or identicalactivitiesunlessitexercisedasubstantialdegreeofcontrolandsupervisionoverthepetitionersnotonlyastothemannertheyperformedtheirfunctionsbutalsoastotheendresultsofsuchfunctions.

xxxx x x it becomes apparent that [Sunflower] and the petitioners do not

qualify as independent contractors. [Sunflower] and the petitioners did nothave substantial capital or investment in the form of tools, equipment,implements, work premises, et cetera necessary to actually perform theserviceundertheirownaccount,responsibility,andmethod.Theonlyworkpremisesmaintainedby[Sunflower]wasasmallofficewithintheconfinesof a small carinderia or refreshment parlor owned by the mother of itschair,RoyAsong theonlyequipment itownedwasa typewriter(rollo,pp.525525)and, the only assets it providedSMCwere the bare bodies of itsmembers,thepetitionersherein(rollo,p.523).

Inaddition,asshownearlier,petitioners,whoworkedinsidethepremisesof SMC, were under the control and supervision of SMC both as to themanner andmethod in discharging their functions and as to the resultsthereof.

Besides, itshouldbe taken intoaccount that theactivitiesundertakenby

the petitioners as cleaners, janitors, messengers and shrimp harvesters,packers and handlers were directly related to the aquaculture business ofSMC (SeeGuarin vs.NLRC,198SCRA267, 273). This is confirmed bytherenewaloftheservicecontractfromJanuary1993toSeptember1995,aperiodofclosetothree(3)years.

Moreover,thepetitionersherenumberingninetyseven(97),byitself,isaconsiderable workforce and raises the suspicion that the nonexclusiveservicecontractbetweenSMCand[Sunflower]wasdesignedtoevadetheobligationsinherentinanemployeremployee

409

VOL.461,JUNE28,2005 409


relationship (See RhonePoulenc Agrochemicals Philippines, Inc. vs.NLRC,217SCRA249,259).

Equallysuspiciousisthefactthatthenotarypublicwhosignedthebylaws of [Sunflower] and its [Sunflower] retained counsel are bothpartnersofthelocalcounselofSMC(rollo,p.9).

xxxWith these observations, no other logical conclusion can be reached

exceptthat[Sunflower]actedasanagentofSMC,facilitatingthemanpowerrequirements of the latter, the real employer of the petitioners.We simplycannot allow these two entities through the convenience of a nonexclusiveservicecontract tostipulateontheexistenceofemployeremployeerelation.Such existence is a question of law which cannot be made the subject ofagreement to the detriment of the petitioners (Tabas vs. CaliforniaManufacturing,Inc.,169SCRA497,500).

xxxThere being a finding of laboronly contracting, liability must be

shoulderedeitherbySMCor[Sunflower]orsharedbyboth(SeeTabasvs.California Manufacturing, Inc., supra, p. 502). SMC however should beheldsolely liable for [Sunflower]becamenonexistent with the closure oftheaquaculturebusinessofSMC.

Furthermore, since the closure of the aquaculture operations of SMCappears tobevalid, reinstatement isno longer feasible.Consistentwith thepronouncement in Bustamante, et al. vs. NLRC, G.R. No. 111651, 28November 1996, petitioners are thus entitled to separation pay (in thecomputationsimilartothosegiventoregularSMCemployeesatitsBacolodShrimpProcessingPlant)withfullbackwages,inclusiveofallowancesandother benefits or their monetary equivalent, from the time their actualcompensationwaswithheldfromthemuptothetimeofthefinalityofthisdecision.This iswithoutprejudice todifferentialspays(sic)effectiveasofandfromthetimepetitionersacquiredregularemploymentstatuspursuantto

the discussionmentioned above, and all such other and further benefits asprovidedbyapplicablecollectivebargainingagreement(s)orotherrelations,orbylaw,beginningsuchtimeuptotheirtermi

410



nation from employment on 11 September 1995.16

(Emphasis and italicssupplied)

SMCsMotionforReconsideration17

havingbeendeniedforlackofmeritbyResolutionofJuly11,2001,itcomesbeforethisCourtviathepresentpetitionforreviewoncertiorariassigningtotheCAthefollowingerrors:

I

THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUECOURSE AND GRANTING RESPONDENTS PATENTLY DEFECTIVEPETITION FOR CERTIORARI. IN DOING SO, THE COURT OFAPPEALS DEPARTED FROM THE ACCEPTED AND USUALCOURSEOFJUDICIALPROCEEDINGS.

II

THECOURTOFAPPEALSGRAVELYERRED IN RECOGNIZINGALLTHERESPONDENTSASCOMPLAINANTSINTHECASEBEFORETHE LABOR ARBITER. IN DOING SO, THE COURT OF APPEALSDECIDEDTHISCASEINAMANNERNOTINACCORDWITHLAWOR WITH THE APPLICABLE DECISIONS OF THE SUPREMECOURT.

III

THECOURTOFAPPEALSGRAVELYERREDINFINDINGTHATRESPONDENTSAREEMPLOYEESOFSMC.

IV

THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG(sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF.THE CLOSURE OF THE BACOLOD SHRIMP PROCESSING PLANTWASDUETOSERIOUSBUSINESSLOSSES.

18

(Italicssupplied)

_______________

16Id.,atpp.1521a.17Id.,atpp.623637.18Id.,atpp.5758.

411

VOL.461,JUNE28,2005 411


SMCbewailsthefailureoftheappellatecourttooutrightlydismissthepetitionforcertiorariasonlythreeoutoftheninetysevennamedpetitioners signed the verification and certification against forumshopping.

While the general rule is that the certificate of nonforumshoppingmustbesignedbyalltheplaintiffsorpetitionersinacaseandthesignatureofonlyoneofthemisinsufficient,

19

thisCourthasstressed that the ruleson forumshopping,whichweredesigned topromote and facilitate the orderly administration of justice, shouldnotbeinterpretedwithsuchabsoluteliteralnessastosubvertitsownultimate and legitimate objective.

20

Strict compliance with theprovisions regarding the certificate of nonforum shoppingmerelyunderscores itsmandatorynature in that thecertificationcannotbealtogether dispensed with or its requirements completelydisregarded.

21

It does not, however, thereby interdict substantialcompliancewithitsprovisionsunderjustifiablecircumstances.

22

Thus in the recent caseofHLCConstructionandDevelopmentCorporation v. Emily Homes Subdivision HomeownersAssociation,

23

thisCourtheld:

Respondents (who were plaintiffs in the trial court) filed the complaintagainstpetitionersasagroup,representedbytheirhomeownersassociationpresident who was likewise one of the plaintiffs, Mr. Samaon M. Buat.Respondentsraisedonecauseofactionwhichwasthebreachofcontractualobligationsandpaymentofdamages.Theysharedacommoninterest in thesubjectmatterofthecase,

_______________

19Docenav.Lapesura,355SCRA658,667(2001).20Cavilev.HeirsofClaritaCavile,400SCRA255,261262(2003)(citationsomitted).21 HLC Construction and Development Corporation v. Emily Homes Subdivision

HomeownersAssociation,411SCRA504,508(2003).22Cavilev.HeirsofClaritaCavile,400SCRA255,262(2003)(citationomitted).23411SCRA504(2003).

412



beingtheaggrievedresidentsofthepoorlyconstructedanddevelopedEmilyHomesSubdivision.Due to the collective nature of the case, therewas nodoubt that Mr. SamaonM. Buat could validly sign the certificate of nonforumshoppinginbehalfofallhiscoplaintiffs. Incases thereforewhere itis highly impractical to require all the plaintiffs to sign the certificate ofnonforum shopping, it is sufficient, in order not to defeat the ends ofjustice, for one of the plaintiffs, acting as representative, to sign thecertificate provided that xxx theplaintiffs share a common interest in thesubjectmatterof thecaseor filed the caseasacollective, raisingonlyonecommoncauseofactionordefense.

24

(Emphasisanditalicssupplied)

Giventhecollectivenatureofthepetitionfiledbeforetheappellatecourt by herein private respondents, raising one common cause ofactionagainstSMC,theexecutionbyprivaterespondentsWinifredoTalite,RenelitoDeonandJoseTemporosainbehalfofalltheotherprivate respondents of the certificate of nonforum shoppingconstitutes substantial compliance with the Rules.

25

That the threeindeedrepresentedtheircopetitionersbeforetheappellatecourtis,asitcorrectlyfound,subsequentlyproventobetrueasshownby

_______________

24Id.,atpp.509510.25Vide:Cavilev.HeirsofClaritaCavile,400SCRA255(2003)wherethisCourt

found:

WefindthattheexecutionbyThomasGeorgeCavile,Sr.inbehalfofalltheotherpetitioners

ofthecertificateofnonforumshoppingconstitutessubstantialcompliancewiththeRules.All

the petitioners, being relatives and coowners of the properties in dispute, share a common

interestthereon.Theyalsoshareacommondefenseinthecomplaintforpartitionfiledbythe

respondents.Thus,whentheyfiledtheinstantpetition,theyfileditasacollective,raisingonly

oneargument todefend their rightsover theproperties inquestion.There is sufficientbasis,

therefore, forThomasGeorgeCavili,Sr. tospeakforand inbehalfofhiscopetitioners that

theyhavenotfiledanyactionorclaiminvolvingthesameissuesinanothercourtortribunal,

nor is there other pending action or claim in another court or tribunal involving the same

issues.

413

VOL.461,JUNE28,2005 413


the signatures of themajority of the petitioners appearing in theirmemorandumfiledbeforeUs.

26

Additionally, the merits of the substantive aspects of the casemay also be deemed as special circumstance or compellingreason to take cognizance of a petition although the certificationagainst forum shoppingwasnot executed and signedby all of thepetitioners.

27

SMC goes on to argue that the petition filed before the CA isfatally defective as it was not accompanied by copies of allpleadings and documents relevant and pertinent thereto incontraventionofSection1,Rule65oftheRulesofCourt.

28

This Court is not persuaded. The records show that privaterespondents appended the following documents to their petitionbefore theappellatecourt: theSeptember23,1997Decisionof theLaborArbiter,

29

theirNotice of Appeal with Appeal MemorandumdatedOctober16,1997filedbeforetheNLRC,

30

_______________

26Rolloatp.28.27Torresv.SpecializedPackagingDevelopmentCorporation,433SCRA455,467

(2004) Cavile v. Heirs of Clarita Cavile, 400 SCRA 255, 262 (2003) (citationomitted).

28 SECTION 1. Petition for Certiorari.When any tribunal, board or officerexercisingjudicialorquasijudicialfunctionshasactedwithoutorinexcessofitsorhis jurisdiction, or with grave abuse of discretion amounting to lack or excess ofjurisdiction,andthereisnoappeal,oranyplain,speedy,andadequateremedyintheordinarycourseoflaw,apersonaggrievedtherebymayfileaverifiedpetitioninthepropercourt,allegingthefactswithcertaintyandprayingthatjudgmentberenderedannullingormodifyingtheproceedingsofsuchtribunal,boardorofficer,andgrantingsuchincidentalreliefsaslawandjusticemayrequire.

Thepetitionshallbeaccompaniedbyacertifiedtruecopyofthejudgment,orderor resolution subject thereof, copies of all pleadings and documents relevant andpertinentthereto,andasworncertificationofnonforumshoppingasprovidedinthethirdparagraphofsection3,Rule46.

29CARolloatpp.1631.30Id.,atpp.3347.

414



the December 29, 1998 NLRC Decision,31

their Motion forReconsideration datedMarch 26, 1999 filedwith theNLRC

32

andtheSeptember10,1999NLRCResolution.

33

Itbears stressingat any rate that it is theappellate courtwhichultimatelydetermines if the supportingdocuments are sufficient tomake out aprima facie case.

34

It discernswhether on the basis ofwhathavebeensubmitteditcouldalreadyjudiciouslydeterminethemerits of the petition.

35

In the case at bar, the CA found that thepetition was adequately supported by relevant and pertinentdocuments.

Atallevents,thisCourthasallowedaliberalconstructionoftheruleon theaccomplishmentofacertificateofnonforumshoppingin the following cases: (1)where a rigid applicationwill result inmanifest failureormiscarriageof justice (2)where the interestofsubstantial justice will be served (3) where the resolution of themotion isaddressedsolely to thesoundand judiciousdiscretionofthe court and (4) where the injustice to the adverse party is notcommensurate with the degree of his thoughtlessness in notcomplyingwiththeprocedureprescribed.

36

Rules of procedure should indeed be viewed as mere toolsdesignedtofacilitatetheattainmentofjustice.Theirstrictandrigidapplication,whichwouldresultintechnicalitiesthattendtofrustrateratherthanpromotesubstantialjustice,mustalwaysbeeschewed.

37

SMC further argues that the appellate court exceeded itsjurisdictioninreversingthedecisionsofthelaborarbiterand

_______________

31Id.,atpp.4861.32Id.,atpp.6367.33Id.,atpp.6869.34Atillov.Bombay,351SCRA361,369(2001).35Ibid.36Manila Hotel Corporation v. Court of Appeals, 384 SCRA 520, 524 (2002)

(citationomitted).37Serranov.GalantMaritimeServices,Inc.,408SCRA523,528(2003)(citations

omitted).

415

VOL.461,JUNE28,2005 415


the NLRC as findings of facts of quasijudicial bodies like the

NLRC are accorded great respect and finality, and that thisprincipleacquiresgreaterweightandapplicationinthecaseatbarasthelaborarbiterandtheNLRChavethesamefactualfindings.

The general rule, no doubt, is that findings of facts of anadministrativeagencywhichhasacquiredexpertiseintheparticularfieldofitsendeavorareaccordedgreatweightonappeal.

38

Theruleis not absolute and admits of certain wellrecognized exceptions,however.Thus,whenthefindingsoffactofthelaborarbiterandtheNLRCarenotsupportedbysubstantialevidenceor their judgmentwas based on amisapprehension of facts, the appellate courtmaymakeanindependentevaluationofthefactsofthecase.

39

SMC further faults the appellate court in giving due course toprivaterespondentspetitiondespitethefactthatthecomplaintfiledbefore the labor arbiter was signed and verified only by privaterespondent Winifredo Talite that private respondents positionpaper

40

was verified by only six41

out of the ninety sevencomplainantsand that their JointAffidavit

42

wasexecutedonlybytwelve

43

ofthecomplainants.

_______________

38PepsiCola Distributors of the Philippines, Inc. v. National Labor RelationsCommission,272SCRA267,276(1997)TrendlineEmployeesAssociationSouthernPhilippinesFederationofLaborv.NationalLaborRelationsCommission,272SCRA172,179(1997)(citationomitted).

39 EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 515516 (2004)(citationsomitted)Villarv.NationalLaborRelationsCommission,331SCRA686,692(2000)(citationomitted).

40Rolloatpp.124136.41WinifredoTalite,CamiloTemporosa,ArnelDePedro,JonathanInventor,Ramie

DespiandRoderickDuquesa.42Rolloatpp.483489.43 Winifredo Talite, Jerry Talite, Clifford Despi, Joey de la Cruz, Jonathan

Inventor, RamieDespi, Arnel De Pedro, Leonardo Lemoncito, Camilo Temporosa,RenelitoDeon,JoseTemporosaandVictorDespi.

416



Specifically with respect to the JointAffidavit of privaterespondents,SMCassertsthatitshouldnothavebeenconsideredbythe appellate court in establishing the claimsof thosewhodidnotsign the same, citing this Courts ruling in Southern Cotabato

DevelopmentandConstruction,Inc.v.NLRC.44

SMCspositiondoesnotlie.A perusal of the complaint shows that the ninety seven

complainants were being represented by their counsel of choice.Thus the first sentence of their complaint alleges: xxxcomplainants, by counsel and unto this Honorable Officerespectfullystatexxx.AndthecomplaintwassignedbyAtty.JoseMaxS.Ortizascounselfor thecomplainants.FollowingSection6, Rule III of the 1990 Rules of Procedure of the NLRC, nowSection7,RuleIIIofthe1999NLRCRules,Atty.Ortizispresumedto be properly authorized by private respondents in filing thecomplaint.

That the verification wherein it is manifested that privaterespondentTalitewasoneofthecomplainantsandwascausingthepreparation of the complaint with the authority of my cocomplainants indubitably shows that Talite was representing therestofhiscocomplainantsinsigningtheverificationinaccordancewithSection7,Rule III of the1990NLRCRules, nowSection8,Rule3ofthe1999NLRCRules,whichstates:

Section7.Authority tobindparty.Attorneys and other representatives ofparties shallhaveauthority tobind theirclients inallmattersofprocedurebuttheycannot,withoutaspecialpowerofattorneyorexpressconsent,enterinto a compromise agreement with the opposing party in full or partialdischargeofaclientsclaim.(Italicssupplied)

As regards private respondents position paper which bore thesignaturesofonlysixofthem,appendedtoitwasanAu

_______________

44280SCRA853(1997).

417

VOL.461,JUNE28,2005 417


thority/ConfirmationofAuthority45

signedby theninetyoneothersconferringauthority to theircounseltofileRABCaseNo.06071031695, entitled Winifredo Talite, et al. v. San MiguelCorporationpresentlypendingbeforethesalaofLaborArbiterRayAlan Drilon at the NLRC Regional Arbitration Branch No. VI inBacolod City and appointing him as their retained counsel torepresenttheminthesaidcase.

Thattherehasbeensubstantialcompliancewiththerequirementon verification of position papers under Section 3, Rule V of the1990 NLRC Rules of Procedure

46

is not difficult to appreciate inlightoftheprovisionofSection7,RuleVofthe1990NLRCRules,nowSection9,RuleVofthe1999NLRCRuleswhichreads:

Section7.NatureofProceedings.TheproceedingsbeforeaLaborArbitershallbenonlitigious innature.Subject to the requirementsofdueprocess,thetechnicalitiesoflawandprocedure

_______________

45Rolloatpp.133135.46Section3.SubmissionofPositionPapers/Memorandum.Shouldthepartiesfailtoagree

upon an amicable settlement, either in whole or in part, during the conferences, the Labor

Arbiter shall issue an order stating therein thematters taken up and agreed upon during the

conferences and directing the parties to simultaneously file their respective verified position

papers.

Theseverifiedpositionpapersshallcoveronly thoseclaimsandcausesofactionraised in

thecomplaintexcludingthosethatmayhavebeenamicablysettled,andshallbeaccompanied

byall supportingdocuments including theaffidavitsof their respectivewitnesseswhich shall

take the place of the latters direct testimony. The parties shall thereafter not be allowed to

allege facts, or present evidence to prove facts, not referred to and any cause or causes of

actionnotincludedinthecomplaintorpositionpapers,affidavitsandotherdocuments.Unless

otherwise requested inwriting by both parties, the LaborArbiter shall direct both parties to

submitsimultaneouslytheirpositionpapers/memorandumwiththesupportingdocumentsand

affidavitswithinfifteen(15)calendardaysfromthedateofthelastconference,withproofof

havingfurnishedeachotherwithcopiesthereof.

418



andtherulesobtainingin thecourtsof lawshallnotstrictlyapply thereto.TheLaborArbitermayavailhimselfofallreasonablemeanstoascertainthefacts of the controversy speedily, including ocular inspection andexaminationofwellinformedpersons.(italicssupplied)

As regards private respondents JointAffidavit which is beingassailed in view of the failure of some complainants to affix theirsignatures thereon, this Court quotes with approval the appellatecourtsratiocinations:

A perusal of the Southern Cotabato Development Case would reveal thatmovant did not quote the whole text of paragraph 5 on page 865 of 280

SCRA.Thewholeparagraphreads:

Clearlythen,astothosewhooptedtomoveforthedismissaloftheircomplaints,ordid not submit their affidavits nor appear during trial and in whose favor no otherindependentevidencewasadduced,noawardforbackwagescouldhavebeenvalidlyandproperlymadeforwantoffactualbasis.Thereisnoshowingatallthatanyoftheaffidavitsofthethirtyfour(34)complainantswereofferedasevidenceforthosewhodidnot submit theiraffidavits,or that suchaffidavitshadanybearingatallon therightsandinterestofthelatter.Inthesamevein,privaterespondentspositionpaperwasnotofanyhelptothesedelinquentcomplainants.

The implication is thatas long as the affidavits of the complainantswere offered as evidence for those who did not submit theirs, or theaffidavits werematerial and relevant to the rights and interest of thelatter,suchaffidavitsmaybesufficienttoestablishtheclaimsofthosewhodidnotgivetheiraffidavits.

Here,areadingofthejointaffidavitsignedbytwelve(12)oftheninetyseven (97) complainants (petitioners herein) would readily reveal that theaffidavitwasofferedasevidencenotonlyforthesignatoriesthereinbutforall of the complainants. (These ninetyseven (97) individuals werepreviously identified during the mandatory conference as the onlycomplainants in the proceedings before the labor arbiter) Moreover, theaffidavit touched on the common interest of all of the complainants as itsupportedtheirclaimoftheexistenceofanemployeremployeerelationshipbetweenthemand

419

VOL.461,JUNE28,2005 419


respondentSMC.Thus,thesaidaffidavitwasenoughtoprovetheclaimsoftherestofthecomplainants.

47

(Emphasissupplied,italicsintheoriginal)

Inanyevent,SMCisremindedthattherulesofevidenceprevailingin courts of law or equity do not control proceedings before theLaborArbiter.SoArticle221oftheLaborCodeenjoins:

ART. 221. Technical rules not binding and prior resort to amicablesettlement.Inanyproceedingbefore theCommissionoranyof theLaborArbiters,therulesofevidenceprevailingincourtsoflaworequityshallnotbe controlling and it is the spirit and intention of this Code that theCommissionanditsmembersandtheLaborArbitersshalluseeveryandallreasonablemeanstoascertainthefactsineachcasespeedilyandobjectivelyandwithoutregardtotechnicalitiesoflaworprocedure,allintheinterestofdueprocess.xxx

Assuch, their applicationmaybe relaxed to serve thedemandsofsubstantialjustice.

48

Onthemerits,thepetitionjustthesamefails.SMC insists that private respondents are the employees of

Sunflower, an independent contractor. On the other hand, privaterespondentsassertthatSunflowerisalaboronlycontractor.

Article106oftheLaborCodeprovides:

ART. 106. Contractor or subcontracting.Whenever an employer entersinto a contract with another person for the performance of the formerswork, the employees of the contractor and of the latters subcontractor, ifanyshallbepaidinaccordancewiththeprovisionsofthisCode.

_______________

47Rolloatp.26.48HavtorManagementPhils., Inc. v.NationalLaborRelationsCommission, 372

SCRA 271, 274 (2001) (citation omitted) Samahan ng Manggagawa sa MoldexProducts, Inc. v.NationalLaborRelationsCommission,324 SCRA237, 252 (2000)(citationomitted).

420



Intheeventthatthecontractororsubcontractorfailstopaythewagesofhisemployees in accordancewith thisCode, the employer shall be jointly andseverallyliablewithhiscontractororsubcontractortosuchemployeestotheextent of the work performed under the contract, in the same manner andextentthatheisliabletoemployeesdirectlyemployedbyhim.

The Secretary of Labor may, by appropriate regulations, restrict orprohibit the contracting out of labor to protect the rights of workersestablished under the Code. In so prohibiting or restricting, he may makeappropriate distinctions between laboronly contracting and job contractingas well as differentiations within these types of contracting and determinewho among the parties involved shall be considered the employer forpurposes of this Code, to prevent any violation or circumvention of anyprovisionofthisCode.

Thereislaboronlycontractingwherethepersonsupplyingworkerstoan employer does not have substantial capital or investment in the formoftools, equipment, machineries, work premises, among others, and theworkersrecruitedandplacedbysuchpersonareperformingactivitieswhicharedirectlyrelatedtotheprincipalbusinessofsuchemployer.Insuchcases,the person or intermediary shall be considered merely as an agent of the

i)

ii)

employerwho shall be responsible to theworkers in the samemanner andextentasifthelatterweredirectlyemployedbyhim.

Rule VIIIA, Book III of the Omnibus Rules Implementing theLaborCode,asamendedbyDepartmentOrderNo.18,distinguishesbetweenlegitimateandlaboronlycontracting:

Section 3. Trilateral Relationship in Contracting Arrangements.Inlegitimatecontracting,thereexistsatrilateralrelationshipunderwhichthereisacontractforaspecificjob,workorservicebetweentheprincipalandthecontractor or subcontractor, and a contract of employment between thecontractor or subcontractor and its workers. Hence, there are three partiesinvolvedinthesearrangements,theprincipalwhichdecidestofarmoutajobor service to a contractor or subcontractor, the contractor or subcontractorwhich has the capacity to independently undertake the performance of thejob,workorservice,and thecontractualworkersengagedby thecontractororsubcontractortoaccomplishthejob,workorservice.

421

VOL.461,JUNE28,2005 421


Section 5. Prohibition against laboronly contracting.Laboronlycontracting is hereby declared prohibited. For this purpose, laboronlycontracting shall refer to an arrangement where the contractor orsubcontractormerely recruits, supplies or placesworkers to performa job,work or service for a principal, and any of the following elements arepresent:

Thecontractororsubcontractordoesnothavesubstantialcapitalorinvestmentwhichrelatestothejob,workorservicetobeperformedand theemployees recruited, suppliedorplacedby suchcontractororsubcontractorareperformingactivitieswhicharedirectlyrelatedtothemainbusinessoftheprincipal,or

The contractor does not exercise the right to control over theperformanceoftheworkofthecontractualemployee.

TheforegoingprovisionsshallbewithoutprejudicetotheapplicationofArticle248(c)oftheLaborCode,asamended.

Substantialcapitalorinvestmentreferstocapitalstocksandsubscribedcapitalization in the case of corporations, tools, equipment, implements,machineriesandworkpremises,actuallyanddirectlyusedbythecontractoror subcontractor in the performance or completion of the job, work orservicecontractedout.

The right to control shall refer to the right reserved to the person forwhom the services of the contractual workers are performed, to determinenotonlytheendtobeachieved,butalsothemannerandmeanstobeusedinreachingthatend.

Thetesttodeterminetheexistenceofindependentcontractorshipiswhether one claiming to be an independent contractor hascontracted to do the work according to his own methods andwithoutbeingsubjecttothecontroloftheemployer,exceptonlyastotheresultsofthework.

49

_______________

49NewGoldenCityBuilders&DevelopmentCorporationv.CourtofAppeals,418SCRA411,417(2003)Vinoyav.NationalLaborRelationsCommission,324 SCRA469, 487 (2000) (citation omitted) Philippine Airlines, Inc. v. National LaborRelationsCommission,298SCRA430,444(1998)(citationomitted).

422



In legitimate labor contracting, the law creates an employeremployee relationship fora limitedpurpose, i.e., toensure that theemployees are paid their wages. The principal employer becomesjointly and severally liable with the job contractor, only for thepaymentof the employeeswageswhenever the contractor fails topay the same. Other than that, the principal employer is notresponsibleforanyclaimmadebytheemployees.

50

In laboronly contracting, the statute creates an employeremployee relationship for a comprehensive purpose: to prevent acircumventionoflaborlaws.Thecontractorisconsideredmerelyanagent of theprincipal employer and the latter is responsible to theemployees of the laboronly contractor as if such employees hadbeendirectlyemployedbytheprincipalemployer.

51

The Contract of Services between SMC and Sunflower showsthat the parties clearly disavowed the existence of an employeremployee relationship between SMC and private respondents.Thelanguageofacontractisnot,however,determinativeofthepartiesrelationshipratheritisthetotality

_______________

50NewGoldenCityBuilders&DevelopmentCorporationv.CourtofAppeals,418

SCRA 411, 419 (2003) (citation omitted) San Miguel Corporation v. MAERCIntegratedServices,Inc.,405SCRA579,596(2003)(citationomitted).

51 Manila Water Company, Inc. v. Pea, 434 SCRA 53, 61 (2004) (citationomitted)SanMiguelCorporation v.MAERC Integrated Services, Inc., 405 SCRA579, 596 (2003)PhilippineAirlines, Inc. v.National LaborRelationsCommission,298 SCRA 430, 447 (1998) (citation omitted) Ponce v. National Labor RelationsCommission, 293 SCRA 366, 375376, (1998) (citations omitted) Tiu v. NationalLabor Relations Commission, 254 SCRA 1, 9 (1996) (citations omitted) Ecal v.NationalLaborRelationsCommission,195SCRA224,231(1991)(citationomitted)Philippine Bank of Communications v. National Labor Relations Commission, 146SCRA347,356(1986).

423

VOL.461,JUNE28,2005 423


of the facts and surrounding circumstances of the case.52

A partycannotdictate,bythemereexpedientofaunilateraldeclarationinacontract, the character of its business, i.e., whether as laboronlycontractor or job contractor, it being crucial that its character bemeasuredintermsofanddeterminedbythecriteriasetbystatute.

53

SMC argues that Sunflower could not have been issued acertificate of registration as a cooperative if it had no substantialcapital.

54

While indeed Sunflower was issued Certificate of RegistrationNo. IL0875

55

on February 10, 1992 by the CooperativeDevelopment Authority, this merely shows that it had at leastP2,000.00 in paidup share capital as mandated by Section 5 ofArticle 14

56

of Republic Act No. 6938, otherwise known as theCooperativeCode,which amount cannot be considered substantialcapitalization.

What appears is that Sunflower does not have substantialcapitalization or investment in the form of tools, equipment,machineries,work premises and othermaterials to qualify it as anindependentcontractor.

_______________

52SanMiguelCorporationv.MAERCIntegratedServices,Inc,405SCRA579,589(2003) (citation omitted), Bernardo v. National Labor Relations Commission, 310SCRA186,205(1999)(citationomitted).

53De los Santos v. National Labor Relations Commission, 372 SCRA 723, 734(2001).

54Rolloatp.76.

55Id.,atp.287.56 (5) No cooperative shall be registered unless the articles of cooperation is

accompaniedwiththebondsoftheaccountableofficersandaswornstatementofthetreasurer elected by the subscribers showing that at least twentyfive per centum(25%)oftheauthorizedsharecapitalhasbeensubscribedandatleasttwentyfivepercentum(25%)ofthetotalsubscriptionhasbeenpaid:Provided,ThatinnocaseshallthepaidupsharecapitalshallbelessthanTwothousandpesos(P2,000.00).

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Ontheotherhand, it isgathered that the lot,building,machineriesand all other working tools utilized by private respondents incarryingouttheirtaskswereownedandprovidedbySMC.Considerthe following uncontroverted allegations of private respondents intheJointAffidavit:

[Sunflower], during the existence of its service contract with respondentSMC,didnotowna singlemachinery, equipment,orworking toolused inthe processing plant. Everything was owned and provided by respondentSMC.Thelot,thebuilding,andworkingfacilitiesareownedbyrespondentSMC.Themachineries and equipments (sic) likewashermachine, oven orcooking machine, sizer machine, freezer, storage, and chilling tanks, pushcarts, hydrolic (sic) jack, tables, and chairs were all owned by respondentSMC. All the boxes, trays, molding pan used in the processing are alsoownedbyrespondentSMC.TheglovesandbootsusedbythecomplainantswerealsoownedbyrespondentSMC.Eventhemops,electricfloorcleaners,brush,hoose(sic),soaps,floorwaxes,chlorine,liquidstainremovers,lysoland the like used by the complainants assigned as cleanerswere all ownedandprovidedbyrespondentSMC.

Simplystated,thirdpartyrespondentdidnotownevenasmallcapitalintheformoftools,machineries,orfacilitiesusedinsaidprawnprocessing

xxxTheallegedofficeof[Sunflower]isfoundwithintheconfinesofasmall

carinderiaorrefreshment(sic)ownedbythemotheroftheCooperativeChairmanRoyAsong.

x x x In said . . . office, the only equipment used and owned by[Sunflower]wasatypewriter.

57

And from the job description provided by SMC itself, the workassigned to private respondents was directly related to theaquacultureoperationsofSMC.Undoubtedly,thenatureoftheworkperformed by private respondents in shrimp harvesting, receiving

andpackingformedanintegralpartofthe

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57Rolloatpp.483486.

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shrimp processing operations of SMC. As for janitorial andmessengerialservices,thattheyareconsidereddirectlyrelatedtotheprincipal business of the employer

58

has been jurisprudentiallyrecognized.

Furthermore,Sunflowerdidnotcarryonanindependentbusinessorundertaketheperformanceofitsservicecontractaccordingtoitsownmannerandmethod,freefromthecontrolandsupervisionofitsprincipal, SMC, its apparent role having been merely to recruitpersonstoworkforSMC.

Thus, it is gathered from the evidence adduced by privaterespondents before the labor arbiter that their daily time recordswere signed by SMC supervisors Ike Puentebella, Joemel Haro,Joemari Raca, Erwin Tumonong, Edison Arguello, and StephenPalabrica, which fact shows that SMC exercised the power ofcontrol and supervision over its employees.

59

And control of thepremisesinwhichprivaterespondentsworkedwasbySMC.Thesetendtodisprovetheindependenceofthecontractor.

60

More. Private respondents had been working in the aquaprocessingplantinsidetheSMCcompoundalongsideregularSMCshrimpprocessingworkersperformingidenticaljobsunderthesameSMC supervisors.

61

This circumstance is another indicium of theexistenceofalaboronlycontractorship.

62

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58CocaColaBottlers Phils., Inc. v.National LaborRelationsCommission, 307SCRA 131, 137 (1999) (citation omitted) Neri v. National Labor RelationsCommission,224SCRA717,722(1993)(citationomitted)Guarinv.NationalLaborRelationsCommission,178SCRA267,273(1989)(citationomitted).

59De los Santos v. National Labor Relations Commission, 372 SCRA 723, 732(2001).

60SanMiguelCorporationv.MAERC IntegratedServices, Inc.,405 SCRA579,590(2003)(citationomitted).

61Rolloatp.485.

62 Vide: Philippine Bank of Communications v. National Labor RelationsCommission(146SCRA347,354)wherethisCourtfound:

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AndasprivaterespondentsallegedintheirJointAffidavitwhichdidnot escape the observation of theCA, no showing to the contraryhaving been proffered by SMC, Sunflower did not cater to clientsother thanSMC,

63

andwith the closureofSMCsBacolodShrimpProcessing Plant, Sunflower likewise ceased to exist. ThisCourtsruling in SanMiguel Corporation v.MAERC Integrated Services,Inc.

64

isthusinstructive.

xxxNordowebelieveMAERCtohaveanindependentbusiness.NotonlywasitsetuptospecificallymeetthepressingneedsofSMCwhichwasthenhaving labor problems in its segregationdivision,none of itsworkerswasalsoeverassignedtoanyotherestablishment,thusconvincingusthatitwascreatedsolelytoservicetheneedsofSMC.Naturally,withtheseveranceofrelationship between MAERC and SMC followed MAERCs cessation ofoperations, the loss of jobs for the whole MAERC workforce and theresultingactionsinstitutedbytheworkers.

65

(Italicssupplied)

All the foregoing considerations affirm by more than substantialevidence the existence of an employeremployee relationshipbetweenSMCandprivaterespondents.

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TurningtothepowertocontrolOrpiadasconduct,itshouldbenotedimmediatelythatOrpiadaperformedhisfunctionswithin thebankspremises,andnotwithin theofficepremisesofCESI.Assuch,Orpiadamusthavebeensubjecttoatleastthesamecontrolandsupervisionthatthebankexercisesoveranyotherpersonphysicallywithinitspremisesandrenderingservicestoorforthebank,inotherwords,anyemployeeorstaffmemberofthebank.ItseemsunreasonabletosupposethatthebankwouldhaveallowedOrpiadaandtheotherpersonsassignedtothebankbyCESItoremainwithinthebankspremisesandthererenderservicestothebank,withoutsubjectingthemtoasubstantialmeasureofcontrolandsupervisionxxx

63Vide:CocaColaBottlersPhils.,Inc.v.NationalLaborRelationsCommission,307SCRA131,140(1999).

64405SCRA579(2003).65Id.,atpp.595596.

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Sinceprivate respondentswhowere engaged in shrimpprocessingperformed tasks usually necessary or desirable in the aquaculturebusinessofSMC,theyshouldbedeemedregularemployeesofthelatter

66

and as such are entitled to all the benefits and rightsappurtenanttoregularemployment.

67

Theyshould thusbeawardeddifferentialpaycorresponding to thedifferencebetween thewagesand benefits given them and those accorded SMCs other regularemployees.

Respecting the private respondents who were tasked withjanitorial andmessengerial duties, thisCourt quoteswith approvaltheappellatecourtsrulingthereon:

Those performing janitorial and messengerial services however acquiredregularstatusonlyafterrenderingoneyearservicepursuant toArticle280of the Labor Code. Although janitorial and messengerial services areconsidered directly related to the aquaculture business of SMC, they aredeemed unnecessary in the conduct of its principal business hence, thedistinction(SeeCocaColaBottlersPhils., Inc. v.NLRC,307SCRA131,136137andPhilippineBankofCommunicationsv.NLRC,supra,p.359).

68

The law of course provides for two kinds of regular employees,namely: (1) thosewhoareengaged toperformactivitieswhichareusuallynecessaryordesirable in theusualbusinessor tradeof theemployer and (2) those who have rendered at least one year ofservice,whethercontinuousorbroken,withrespecttotheactivityinwhichtheyareemployed.

69

As for those of private respondents who were engaged injanitorialandmessengerialtasks,theyfallunderthesecondcategoryandarethusentitledtodifferentialpayandbenefits

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66ManilaWaterCompany,Inc.v.Pea,434SCRA53,62(2004).67 Ecal v. National Labor Relations Commission, 195 SCRA 224, 234 (1991)

(citationsomitted).68Rolloatp.21.69KimberlyIndependentUnionv.Drilon,185SCRA190,203(1990).

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extendedtootherSMCregularemployeesfromthedayimmediatelyfollowingtheirfirstyearofservice.

70

Regarding theclosureofSMCsaquacultureoperationsand theconsequent termination of private respondents, Article 283 of theLaborCodeprovides:

ART. 283. Closure of establishment and reduction of personnel.Theemployer may also terminate the employment of any employee due to theinstallation of labor saving devices, redundancy, retrenchment to preventlosses or the closing or cessation of operation of the establishment orundertaking unless the closing is for the purpose of circumventing theprovisionsof thisTitle,byservingawrittennoticeon theworkersand theDepartment of Labor and Employment at least one (1) month before theintendeddate thereof. Incaseof terminationdue to the installationof laborsavingdevicesorredundancy,theworkeraffectedtherebyshallbeentitledtoaseparationpayequivalenttoatleasthisone(1)monthpayortoatleastone(1) month pay for every year of service, whichever is higher. In case ofretrenchment to prevent losses and in cases of closures or cessation ofoperationsofestablishmentorundertakingnotduetoseriousbusinesslossesorfinancialreverses,theseparationpayshallbeequivalenttoone(1)monthpay or to at least onehalf (1/2) month pay for every year of service,whicheverishigher.Afractionofatleastsix(6)monthsshallbeconsideredone(1)wholeyear.(Italicssupplied)

Inthecaseatbar,aparticulardepartmentundertheSMCgroupofcompanies was closed allegedly due to serious business reverses.Thisconstitutes retrenchmentby,andnotclosureof, theenterpriseorthecompanyitselfasSMChasnottotallyceasedoperationsbutisstillverymuchanongoingandhighlyviablebusinessconcern.

71

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70Id.,atp.205.71Catatista v.National LaborRelationsCommission, 247 SCRA46, 51 (1995)

Construction&Development Corporation of the Philippines v. Leogardo, Jr., 125SCRA863,867(1983).

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Retrenchment isamanagementprerogativeconsistentlyrecognized

and affirmed by this Court. It is, however, subject to faithfulcompliance with the substantive and procedural requirements laiddownbylawandjurisprudence.

72

Forretrenchmenttobeconsideredvalidthefollowingsubstantialrequirements must be met: (a) the losses expected should besubstantialandnotmerelydeminimis in extent (b) the substantiallosses apprehended must be reasonably imminent such as can beperceived objectively and in good faith by the employer (c) theretrenchmentmustbereasonablynecessaryandlikelytoeffectivelyprevent the expected losses and (d) the alleged losses, if alreadyincurred,andtheexpectedimminentlossessoughttobeforestalled,mustbeprovedbysufficientandconvincingevidence.

73

Inthedischargeoftheserequirements,itistheemployerwhohastheonus,beinginthenatureofanaffirmativedefense.

74

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72EMCOPlywoodCorporation v.Abelgas,427 SCRA496, 511 (2004) (citationomitted).

73EMCOPlywoodCorporation v.Abelgas,427 SCRA496, 508 (2004) (citationomitted)PhilippineTobaccoFlueCuring&RedryingCorporationv.NationalLaborRelationsCommission, 300 SCRA 37, 5556 (1998) (citation omitted) SomervilleStainlessSteelCorporationv.NationalLaborRelationsCommission,287SCRA420,430 (1998) (citation omitted) Edge Apparel, Inc. v. National Labor RelationsCommission, 286 SCRA 302, 313 (1998) (citation omitted) San Miguel JeepneyServicev.NationalLaborRelationsCommission,265SCRA35,44 (1996) (citationomitted)Catatistav.NationalLaborRelationsCommission,247SCRA46,52(1995)(citationomitted).

74SomervilleStainlessSteelCorporationv.NationalLaborRelationsCommission,287SCRA420,432(1998)(citationomitted)SanMiguelJeepneyServicev.NationalLaborRelationsCommission,265SCRA35,45(1996)(citationomitted)Guerrerov.NationalLaborRelationsCommission,261SCRA301,306(1996)(citationomitted).

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Normally, the condition of business losses is shown by auditedfinancial documents like yearly balance sheets, profit and lossstatementsandannual income taxreturns.Thefinancialstatementsmustbepreparedandsignedbyindependentauditorsfailingwhichtheycanbeassailedasselfservingdocuments.

75

In the case at bar, company losses were duly established byfinancial documents audited by Joaquin Cunanan & Co. showing

that the aquaculture operations of SMCs Agribusiness DivisionaccumulatedlossesamountingtoP145,848,172.00in1992resultingin the closure of its Calatrava Aquaculture Center in NegrosOccidental, P11,393,071.00 in 1993 and P80,325,608.00 in 1994which led to the closure of its San Fernando Shrimp ProcessingPlant in Pampanga and the Bacolod Shrimp Processing Plant in1995.

SMC has thus proven substantial business reverses justifyingretrenchmentofitsemployees.

Forterminationduetoretrenchmenttobevalid,however,thelawrequiresthatwrittennoticesoftheintendedretrenchmentbeservedby the employer on theworker and on theDOLE at least one (1)monthbeforetheactualdateof theretrenchment,

76

inorder togiveemployeessometimetopreparefor theeventual lossof their jobs,aswell as togiveDOLE theopportunity to ascertain theverityoftheallegedcauseoftermination.

77

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75AsianAlcoholCorporationv.NationalLaborRelationsCommission,305SCRA417(1999)(citationsomitted).

76 EMCO Plywood Corporation v. Abelgas, 427 SCRA 496, 511512 (2004)(citationomitted)SanMiguelCorporationv.MAERCIntegratedServices,Inc.,405SCRA579, 596 (2003) (citations omitted) Guerrero v. National Labor RelationsCommission,261SCRA301,307(1996).

77EMCOPlywoodCorporation v.Abelgas,427 SCRA496, 512 (2004) (citationomitted)Sebuguero v.National LaborRelationsCommission, 248 SCRA532, 545(1995).

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Private respondents, however, were merely verbally informed onSeptember10,1995bySMCPrawnManagerPoncianoCapaythateffectivethefollowingdayoronSeptember11,1995,theywerenolongertoreportforworkasSMCwouldbeclosingitsoperations.

78

Where the dismissal is based on an authorized cause underArticle 283 of the Labor Code but the employer failed to complywith the notice requirement, the sanction should be stiff as thedismissal process was initiated by the employers exercise of hismanagementprerogative,asopposedtoadismissalbasedonajustcause underArticle 282with the same procedural infirmitywherethesanctiontobeimposedupontheemployershouldbetemperedas

thedismissalprocesswas,ineffect,initiatedbyanactimputabletotheemployee.

79

Inlightofthefactualcircumstancesofthecaseatbar,thisCourtawardsP50,000.00toeachprivaterespondentasnominaldamages.

The grant of separation pay as an incidence of termination ofemployment due to retrenchment to prevent losses is a statutoryobligationonthepartoftheemployerandademandablerightonthepart of the employee. Private respondents should thus be awardedseparationpayequivalenttoatleastone(1)monthpayortoatleastonehalfmonthpayforeveryyearofservice,whicheverishigher,asmandated byArticle 283 of theLaborCode or the separation payawarded by SMC to other regular SMC employees that wereterminated as a result of the retrenchment, depending onwhich ismostbeneficialtoprivaterespondents.

Considering that private respondents were not illegallydismissed, however, no backwages need be awarded. It is wellsettledthatbackwagesmaybegrantedonlywhenthereisa

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78Rolloat126.79JAKAFoodProcessingCorporationv.Pacot,G.R.No.151378,March28,2005,

454SCRA119.

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finding of illegal dismissal.80

The appellate court thus erred inawarding backwages to private respondents upon the authority ofBustamantev.NLRC,

81

whatwasinvolvedinthatcasebeingoneofillegaldismissal.

Withrespecttoattorneysfees,inactionsforrecoveryofwagesor where an employee was forced to litigate and thus incurredexpenses to protect his rights and interests,

82

a maximum of tenpercent (10%) of the totalmonetary award

83

by way of attorneysfeesis justifiableunderArticle111of theLaborCode,

84

Section8,RuleVIII, Book III of its ImplementingRules,

85

and paragraph 7,Article 2208 of the Civil Code.

86

Although an express finding offactsandlawisstillnecessarytoprovethemeritoftheaward,thereneednotbeanyshowingthat theemployeractedmaliciouslyor inbadfaithwhen

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80J.A.T.GeneralServicesv.NationalLaborRelationsCommission,421SCRA78,91(2004)(citationomitted).

81265SCRA61,71(1996).82 Manila Water v. Pea , 434 SCRA 53, 6465 (2004) (citation omitted)

Rasonable v. National Labor Relations Commission, 253 SCRA 815, 819 (1996)(citationsomitted).

83 Reyes v. Court of Appeals, 409 SCRA 267, 284 (2003) (citations omitted)MarsamanManningAgency,Inc.v.NationalLaborRelationsCommission,313SCRA88,99(1999).

84ART.111.Attorneysfees.(a)Incasesofunlawfulwithholdingofwagestheculpablepartymaybeassessedattorneysfeesequivalenttotenpercentoftheamountofwagesrecovered.(b)Itshallbeunlawfulforanypersontodemandoraccept,inanyjudicialoradministrativeproceedingsfor therecoveryof thewages,attorneysfeeswhichexceedtenpercentoftheamountofwagesrecovered.

85 SEC. 8. Attorneys fees.Attorneys fees in any judicial or administrativeproceedingsfortherecoveryofwagesshallnotexceed10%oftheamountawarded.Thefeesmaybedeductedfromthetotalamountduethewinningparty.

86 ART. 2208. In the absence of stipulation, attorneys fees and expenses oflitigation,otherthanjudicialcosts,cannotberecovered,except:xxx(7)Inactionsfortherecoveryofwagesofhouseholdhelpers,laborersandskilledworkers.

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itwithheldthewages.Thereneedonlybeashowingthatthelawfulwageswerenotpaidaccordingly,asinthiscase.

87

AbsentanyevidenceshowingthatSunflowerhasbeendissolvedinaccordancewithlaw,pursuanttoRuleVIIIA,Section19

88

oftheOmnibus Rules Implementing the Labor Code, Sunflower is heldsolidarily liable with SMC for all the rightful claims of privaterespondents.

WHEREFORE, the petition isDENIED.The assailedDecisiondatedFebruary7, 2001 andResolutiondated July11, 2001of theCourtofAppealsareAFFIRMEDwithMODIFICATION.

PetitionerSanMiguelCorporationandSunflowerMultiPurposeCooperativeareherebyORDEREDtojointlyandseverallypayeachprivate respondent differential pay from the time they becameregularemployeesuptothedateoftheirterminationseparationpayequivalenttoatleastone(1)monthpayortoatleastonehalfmonthpayforeveryyearofservice,whichever ishigher,asmandatedbyArticle 283 of the Labor Code or the separation pay awarded by

SMC to other regular SMC employees that were terminated as aresultoftheretrenchment,dependingonwhichismostbeneficialtoprivaterespondentsandtenpercent(10%)attorneysfeesbasedonthehereinmodifiedaward.

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87Reyesv.CourtofAppeals,409SCRA267,283(2003)(citationsomitted).88 SEC. 19. Solidary Liability.The principal shall be deemed as the direct

employer of the contractual employees and therefore, solidarily liable with thecontractororsubcontractorforwhatevermonetaryclaimsthecontractualemployeesmayhaveagainst the former in thecaseofviolationsasprovided for inSections5(LaborOnlycontracting),6 (Prohibitions),8 (RightsofContractualEmployees)and16(Delisting)oftheseRules.Inaddition,theprincipalshallalsobesolidarilyliablein case the contract between the principal and contractor or subcontractor ispreterminatedforreasonsnotattributedtothefaultofthecontractororsubcontractor.

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PetitionerSanMiguelCorporationisfurtherORDEREDtopayeachprivaterespondent theamountofP50,000.00,representingnominaldamagesfornoncompliancewithstatutorydueprocess.

TheawardofbackwagesisDELETED.SOORDERED.

Panganiban(Chairman),SandovalGutierrez,Corona andGarcia,JJ.,concur.

Petition denied, assailed decision and resolution affirmed withmodification.

Notes.The President of a corporation who actively managesthe business falls within the meaning of an employer ascontemplated by the Labor Code and may be held jointly andseverallyliablefortheobligationsofthecorporationtoitsdismissedemployees.(Naguiatvs.NationalLaborRelationsCommission,269SCRA564[1997])

The principal test for determining whether an employee is aprojectemployeeoraregularemployeeiswhetherornottheprojectemployee was assigned to carry out a specific project orundertaking, thedurationandscopeofwhichwerespecifiedat thetime the employee was engaged for that project. (Nagusara vs.

NationalLaborRelationsCommission,290SCRA249[1998])

o0o

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