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OCA-COLA BOTTLERS PHILS., INC. vs. ALAN M. AGITO, et al GR No. 179546 February 13, 2009 FACTS: Petitioner (Coke) is a domestic corporation engaged in manufacturing, bottling and distributing soft drink beverages and other allied products. Respondents were salesmen assigned at Coke Lagro Sales Office for years but were not regularized. Coke averred that respondents were employees of Interserve who were tasked to perform contracted services in accordance with the provisions of the Contract of Services executed between Coke and Interserve on 23 March 2002. Said Contract constituted legitimate job contracting, given that the latter was a bona fideindependent contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its business. To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence: (1) the Articles of Incorporation of Interserve; (2) the Certificate of Registration of Interserve with the Bureau of Internal Revenue; (3) the Income Tax Return, with Audited Financial Statements, of Interserve for 2001; and (4) the Certificate of Registration of Interserve as an independent job contractor, issued by the Department of Labor and Employment (DOLE). As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them, paid their wages, and supervised their work, as proven by: (1) respondents Personal Data Files in the records of Interserve; (2) respondents Contract of Temporary Employment with Interserve; and (3) the payroll records of Interserve. ISSUES: 1. Whether or not Inteserve is a labor-only contractor; 2. Whether or not an employer-employee relationship exists between petitioner Coca-Cola Bottlers Phils. Inc. and respondents. RULING: At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting to P2,000,000.00, only P625,000.00 thereof was paid up as of 31 December 2001. The Court does not set an absolute figure for what it considers substantial capital for an independent job contractor, but it measures the same against the type of work which the contractor is obligated to perform for the principal. However, this is rendered impossible in this case since the Contract between petitioner and Interserve does not even specify the work or the project that needs to be performed or completed by the latters employees, and uses the dubious phrase tasks and activities that are considered contractible under existing laws and regulations. Even in its pleadings, petitioner carefully sidesteps identifying or describing the exact nature of the services that Interserve was obligated to render to petitioner. The importance of identifying with particularity the work or task which Interserve was supposed to accomplish for petitioner becomes even more evident, considering that the Articles of Incorporation of Interserve states that its primary purpose is to operate, conduct, and maintain the business of janitorial and allied services. But respondents were hired as salesmen and leadman for petitioner. The Court cannot, under such ambiguous circumstances, make a reasonable determination if Interserve had substantial capital or investment to undertake the job it was contracting with petitioner. [In] Vinoya v. NLRC, we clarified that 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. In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work premises; and respondents, its supposed employees, performed work which was directly related to the principal business of petitioner. It is, thus, evident that Interserve falls under the definition of a labor-only contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the Rules Implementing Articles 106-109 of the Labor Code, as amended. It is also apparent that Interserve is a labor-only contractor under Section 5(ii) of the Rules Implementing Articles 106-109 of the Labor Code, as amended, since it did not exercise the right to control the performance of the work of respondents.

The lack of control of Interserve over the respondents can be gleaned from the Contract of Services between Interserve (as the CONTRACTOR) and petitioner (as the CLIENT). The Contract of Services between Interserve and petitioner did not identify the work needed to be performed and the final result required to be accomplished. Instead, the Contract specified the type of workers Interserve must provide petitioner (Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD) and their qualifications (technical/vocational course graduates, physically fit, of good moral character, and have not been convicted of any crime). The Contract also states that, to carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ the necessary personnel, thus, acknowledging that Interserve did not yet have in its employ the personnel needed by petitioner and would still pick out such personnel based on the criteria provided by petitioner. In other words, Interserve did not obligate itself to perform an identifiable job, work, or service for petitioner, but merely bound itself to provide the latter with specific types of employees. These contractual provisions strongly indicated that Interserve was merely a recruiting and manpower agency providing petitioner with workers performing tasks directly related to the latters principal business. The certification issued by the DOLE stating that Interserve is an independent job contractor does not sway this Court to take it at face value, since the primary purpose stated in the Articles of Incorporation of Interserve is misleading. According to its Articles of Incorporation, the principal business of Interserve is to provide janitorial and allied services. The delivery and distribution of Coca-Cola products, the work for which respondents were employed and assigned to petitioner, were in no way allied to janitorial services. While the DOLE may have found that the capital and/or investments in tools and equipment of Interserve were sufficient for an independent contractor for janitorial services, this does not mean that such capital and/or investments were likewise sufficient to maintain an independent contracting business for the delivery and distribution of Coca-Cola products. With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer of respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or authorized causes, none of which were alleged or proven to exist in this case, the only defense of petitioner against the charge of illegal dismissal being that respondents were not its employees. Records also failed to show that petitioner afforded respondents the twin requirements of procedural due process, i.e., notice and hearing, prior to their dismissal. Respondents were not served notices informing them of the particular acts for which their dismissal was sought. Nor were they required to give their side regarding the charges made against them. Certainly, the respondents dismissal was not carried out in accordance with law and, therefore, illegal.

T h u r s d a y, D e c e m b e r 6 , 2 0 1 2

FRANCISCO vs. NLRC Case Digest

ANGELINA FRANCISCO vs. NLRC

500 SCRA 690 (2006)

Facts: Petitoner was hired by Kasei Corporation during the incorporation stage. She was designated as accountant and corporate secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liason Officer to the City of Manila to secure permits for the operation of the company.

In 1996, Petitioner was designated as Acting Manager. She was assigned to handle recruitment of all employees and perform management administration functions. In 2001, she was replaced by Liza Fuentes as Manager. Kasei Corporation reduced her salary to P2,500 per month which was until September. She asked for her salary but was informed that she was no longer connected to the company. She did not anymore report to work since she was not paid for her salary. She filed an action for constructive dismissal with the Labor Arbiter.

The Labor Arbiter found that the petitioner was illegally dismissed. NLRC affirmed the decision while CA reversed it.

Issue: Whether or not there was an employer-employee relationship.

Ruling: The court held that in this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation. Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee relationship.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employers power to control the employee with respect to the means and methods by which the work is to be accomplished; and (2) the underlying economic realities of the activity or relationship.

In Sevilla v. Court of Appeals, the court observed the need to consider the existing economic conditions prevailing between the parties, in addition to the standard of right-of-control like the inclusion of the employee in the payrolls, to give a clearer picture in determining the existence of an employer-employee

relationship based on an analysis of the totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, such as: (1) the extent to which the services performed are an integral part of the employers business; (2) the extent of the workers investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the workers opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in that line of business.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct control and supervision of Seiji Kamura, the corporations Technical Consultant. It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latters line of business.

There can be no other conclusion that petitioner is an employee of respondent Kasei Corporation. She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment in that line of business. Her main job function involved accounting and tax services rendered to Respondent Corporation on a regular basis over an indefinite period of engagement. Respondent Corporation hired and engaged petitioner for compensation, with the power to dismiss her for cause. More importantly, Respondent Corporation had the power to control petitioner with the means and methods by which the work is to be accomplished.

ERT- ECONOMIC REALITY TEST