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San Miguel Corp vs NLRC 510 SCRA 181 (2006)

Facts: SMC (San Miguel) seeks to reverse the decision of the CA which affirmed the decision of
the NLRC that Rafael Maliksi is a REGULAR EMPLOYEE
On Oct. 16, 1990. Maliksi filed a complaint against SMC compelling them to recgonize
him as regular employee then on Oct 31, 1990, he was dismissed by SMC. His complaint then
now includes illegal dismissal.
Maliksi thru Lipercon (contractor), was assigned to SMC. After a while another
contractor (Skillpower) assigned him to SMC again then lastly, another contractor (Philippine
Sofware Services and Education Center or PHILSEC) assgined him to SMC. Those assignments
are from 1981 to 1985.
Maliksi argued that he is an employee of Magnolia (a division of SMC). He also argued
that the contractors are LABOR ONLY CONTRACTORS and not his employer.
PHILSEC disclaimed liability as it catered only to computerized accounting needs of businesses
like SMC. PHILSEC's principal funding being manual control of data needed during
computerization. He was terminated because the project ended.
SMC contends that PHILSEC exercised exclusive managerial prerogative over Maliksi as
ti hiring, payment of salary, dismissal, and control of his work (take note these are the requisites
for employee-employer relationship). PHILSEC has substantial capital of its own and what it
caters to clients are computer programs and training systems on computer tech and not the usual
labor or man power supply (test for independent contractor).
The Labor Arbiter declared that Maliksi is an employee of PHILSEC.
Maliksi appealed to the NLRC, reversed the decision of the Labor Arbiter, making SMC
the employer.
SMC appealed to the CA. CA affired the decision of the NLRC.
CA said that tho Lipercon and Skillpower are mere conduits on Maliksi being on SMC,
still made him (Maliksi) a regular employee because of the required one year period.
Issue: WON Maliksi is a regular employee.
Held: Yes. SMC concedes that Maliksi, before his employment with PHILSSEC, worked in
SMC from November 1988 to April 1990, but as employee of Skillpower and that he was
previously assigned to SMC between 1981 up to February 1985, for periods spread apart. The
Labor Arbiter found, as earlier stated, that Maliksi rendered service with Lipercon from 1 April
1981 to February 1982 as budget head assigned to SMC-Beer Division; from July 1983 to
April 1985 with Skillpower as accounting clerk assigned to SMC-Magnolia Division,
then from October 1988 to 1989 also with Skillpower as acting clerk assigned to SMCMagnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC assigned to

Magnolia Finance as accounting clerk. In all, it appears that, while under the employ of either
Lipercon or Skillpower, Maliksi has undisputedly rendered service with SMC for at least three
years and seven months.

The Court takes judicial notice of the fact that Lipercon and Skillpower were declared to
be labor-only contractors, providing as they do manpower services to the public for a fee. The
existence of an employer-employee relationship is factual and we give due deference to the
factual findings of both the NLRC and the CA that an employer-employee relationship existed
between SMC (or its subsidiaries) and Maliksi. Indeed, having served SMC for an aggregate
period of more than three (3) years through employment contracts with these two labor
contractors, Maliksi should be considered as SMCs regular employee. The hard fact is that he
was hired and re-hired by SMC to perform administrative and clerical work that was necessary to
SMCs business on a daily basis. It is worth noting that, except for the computerization project of
PHILSSEC, petitioner did not make any insinuation at all that the services of Maliksi with SMC
was project-related such that an employment contract with Lipercon and Skillpower was
necessary.

COCA COLA BOTTLERS PHILS., INC. vs. NLRC


Facts: On 7 April 1986 COCA COLA entered into a contract of janitorial services with Bacolod
Janitorial Services (BJS) stipulating among others.
That the First Party (COCA COLA) desires to engage the services of the Second Party
(BJS), as an Independent Contractor, to perform and provide for the maintenance, sanitation and
cleaning services for the areas mentioned, all located within the aforesaid building of the First
Party. Respondent was given orders and control as to his number hours for work and what to
clean. All those were stipulated in their contract.
Every year thereafter a service contract was entered into between the parties under
similar terms and conditions until about May 1994. On 26 October 1989 COCA COLA hired
private respondent Ramon Canonicato as a casual employee and assigned him to the bottling
crew as a substitute for absent employees. In April 1990 COCA COLA terminated Canonicato's
casual employment. Later that year COCA COLA availed of Canonicato's services, this time as a
painter in contractual projects which lasted from fifteen (15) to thirty (30) days.
When respondent learned that some of COCA COLA employed previously by BJS
employees filed for regularization he also filed the said complaint. Without notifying BJS,
Canonicato no longer reported to his COCA COLA assignment starting 29 June 1993. On 15 July
1993 he sent his sister Rowena to collect his salary from BJS. [10] BJS released his salary but
advised Rowena to tell Canonicato to report for work. Claiming that he was barred from entering
the premises of COCA COLA on either 14 or 15 July 1993, Canonicato met with the proprietress
of BJS, Gloria Lacson, who offered him assignments in other firms which he however refused.

Issue: WON petitioner is the employer of respondent.

Held: No.
In the instant case, the selection and engagement of the janitors for petitioner were done
by BJS. The application form and letter submitted by private respondent (Canonicato) to BJS
show that he acknowledged the fact that it was BJS who did the hiring and not petitioner x x x x
BJS paid the wages of private respondent, as evidenced by the fact that on July 15, 1993,
private respondent sent his sister to BJS with a note authorizing her to receive his pay.
Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that assigns
the janitors to its clients and transfers them when it sees fit. Since BJS is the one who engages
their services, then it only follows that it also has the power to dismiss them when justified under
the circumstances.
Lastly, BJS has the power to control the conduct of the janitors. The supervisors of
petitioner, being interested in the result of the work of the janitors, also gives suggestions as to
the performance of the janitors, but this does not mean that BJS has no control over them. The
interest of petitioner is only with respect to the result of their work. On the other hand, BJS
oversees the totality of their performance.
The power of the employer to control the work of the employee is said to be the most the
most significant determinant. Canonicato disputed this power of BJS over him by asserting
that his employment with COCA COLA was not interrupted by his application with BJS since
his duties before and after he applied for regularization were the same, involving as they did,
working in the maintenance department and doing painting tasks within its facilities. Canonicato
cited the Labor Utilization Reports of COCA COLA showing his painting assignments. These
reports, however, are not expressive of the true nature of the relationship between Canonicato
and COCA COLA; neither do they detract from the fact that BJS exercised real authority over
Canonicato as its employee.
Moreover, a closer scrutiny of the reports reveals that the painting jobs were performed
by Canonicato sporadically, either in a few days within a month and only for a few months in a
year. This infrequency or irregularity of assignments countervails Canonicatos submission that
he was assigned specifically to undertake the task of painting the whole year round. If anything,
it hews closely to the assertion of BJS that it assigned Canonicato to these jobs to maintain and
sanitize the premises of petitioner COCA COLA pursuant to its contract of services with the
company.

It is clear from these established circumstances that NLRC should have recognized BJS as
the employer of Canonicato and not COCA COLA. This is demanded by the fact that it did not
disturb, and therefore it upheld, the finding of the Labor Arbiter that BJS was truly a legitimate
job-contractor and could by itself hire its own employees. The Commission could not have
reached any other legitimate conclusion considering that BJS satisfied all the requirements of a
job-contractor under the law, namely, (a) the ability to carry on an independent business and
undertake the contract work on its own account under its own responsibility according to its
manner and method, free from the control and direction of its principal or client in all matters
connected with the performance of the work except as to the results thereof; and, (b) the
substantial capital or investment in the form of tools, equipment, machinery, work premises, and
other materials which are necessary in the conduct of its business.
MANILA WATER COMPANY, INC. vs. HERMINIO D. PENA

Facts: Petitioner Manila Water Company, Inc. is one of the two private concessionaires
contracted by the Metropolitan Waterworks and Sewerage System (MWSS) to manage the water
distribution system in the East Zone of Metro Manila, pursuant to Republic Act No. 8041,
otherwise known as the National Water Crisis Act of 1995. Under the Concession Agreement,
petitioner undertook to absorb former employees of the MWSS whose names and positions were
in the list furnished by the latter, while the employment of those not in the list was terminated on
the day petitioner took over the operation of the East Zone, which was on August 1,
1997. Private respondents, being contractual collectors of the MWSS, were among the 121
employees not included in the list; nevertheless, petitioner engaged their services without written
contract from August 1, 1997 to August 31, 1997. Thereafter, on September 1, 1997, they signed
a three-month contract to perform collection services for eight branches of petitioner in the East
Zone.
Before the end of the three-month contract, the 121 collectors incorporated the
Association Collectors Group, Inc. (ACGI), which was contracted by petitioner to collect charges
for the Balara Branch. Subsequently, most of the 121 collectors were asked by the petitioner to
transfer to the First Classic Courier Services, a newly registered corporation. Only private
respondents herein remained with ACGI. Petitioner continued to transact with ACGI to do its
collection needs until February 8, 1999, when petitioner terminated its contract with ACGI.
Private respondents filed a complaint for illegal dismissal and money claims against
petitioner, contending that they were petitioners employees as all the methods and procedures of
their collections were controlled by the latter.

On the other hand, petitioner asserts that private respondents were employees of ACGI,
an independent contractor. It maintained that it had no control and supervision over private
respondents manner of performing their work except as to the results. Thus, petitioner did not
have an employer-employee relationship with the private respondents, but only a service
contractor-client relationship with ACGI.

Issue: WON ACGI is an independent contractor or a labor-only contractor.

Held: ACGI is an independent contractor but a labor- only contractor.


There is no doubt that ACGI was engaged in labor-only contracting, and as such, is
considered merely an agent of the petitioner. In labor-only contracting, the statute creates an
employer-employee relationship for a comprehensive purpose: to prevent a circumvention of
labor laws. The contractor is considered merely an agent of the principal employer and the latter
is responsible to the employees of the labor-only contractor as if such employees had been
directly employed by the principal employer. Since ACGI is only a labor-only contractor, the
workers it supplied should be considered as employees of the petitioner.
Even the four-fold test will show that petitioner is the employer of private
respondents. The elements to determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employers power to control the employees conduct. The most important element is
the employers control of the employees conduct, not only as to the result of the work to be done,
but also as to the means and methods to accomplish it.
We agree with the Labor Arbiter that in the three stages of private respondents services
with the petitioner, i.e., (1) from August 1, 1997 to August 31, 1997; (2) from September 1,
1997to November 30, 1997; and (3) from December 1, 1997 to February 8, 1999, the latter
exercised control and supervision over the formers conduct.
Petitioner contends that the employment of private respondents from August 1,
1997 to August 30, 1997 was only temporary and done to accommodate their request to be
absorbed since petitioner was still undergoing a transition period. It was only when its business
became settled that petitioner employed private respondents for a fixed term of three months.
Although petitioner was not obliged to absorb the private respondents, by engaging their
services, paying their wages in the form of commission, subjecting them to its rules and

imposing punishment in case of breach thereof, and controlling not only the end result but the
manner of achieving the same as well, an employment relationship existed between them.
Notably, private respondents performed activities which were necessary or desirable to its
principal trade or business. Thus, they were regular employees of petitioner, regardless of
whether the engagement was merely an accommodation of their request, pursuant to Article 280
of the Labor Code.

San Miguel Corporation vs Aballa


Facts: Petitioner San Miguel Corporation entered into a 1 year contract with Sunflower MultiPurpose Coop. The latter undertook and agreed to perform and provide the company on a nonexclusive basis for a period of one year the following: Messengerial, Janitorial, Shrimp
harvesting and Sanitation. Pursuant to the contract, Sunflower engaged private respondents to
render services at SMCs Bacolod Shrimp Plant. The contract was renewed and private
respondent continued to perform the tasks. Later, private respondents filed a complaint praying
to be decided as regular employees of SMC, with claims of recovery of all benefits and
privileges.

Issue: WON Sunflower is engaged in labor only contract.

Held: The test to determine the existence of independent contractorship is whether one
claiming to be an independent contractor has contracted to do the work according to his
own methods and without being subject to the control of the employer, except only as to the
results of the work.
In legitimate labor contracting, the law creates an employer-employee relationship for a
limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer
becomes jointly and severally liable with the job contractor, only for the payment of the
employees wages whenever the contractor fails to pay the same. Other than that, the principal
employer is not responsible for any claim made by the employees.
In labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is responsible to the employees of the
labor-only contractor as if such employees had been directly employed by the principal
employer.
The Contract of Services between SMC and Sunflower shows that the parties clearly
disavowed the existence of an employer-employee relationship between SMC and private
respondents. The language of a contract is not, however, determinative of the parties
relationship; rather it is the totality of the facts and surrounding circumstances of the case. [52] A
party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character
of its business, i.e., whether as labor-only contractor or job contractor, it being crucial that its
character be measured in terms of and determined by the criteria set by statute.

Sunower, during the existence of its service contract with respondent SMC, did not own
a single machinery, equipment, or working tool used in the processing plant. Everything was
owned provided by respondent SMC. The lot, the building, and working facilities are owned by
respondent SMC.
As for janitorial and messengerial services, that they are considered directly related to the
principal business of the employer has been jurisprudentially recognized. Furthermore,
Sunower
did
not
carry on an independent business or undertake the performance of its service contract according
to its own manner and method, free from the control and supervision of its principal,
SMC, its apparent role having been merely to recruit persons to work for SMC.
Therefore, Sunflower is labor only contracting, there is an existence of employeremployee relationship between SMC and private respondent.

Lanzaderas vs Amethyst Security and General Services Inc.


Facts: Respondent RICC is engaged in the manufacture of industrial glue at Nahalinan,
Jasaan, Misamis Oriental. It leased a portion of its compound to its sister company, PICMW,
which operated a shipbuilding and repair facility. To secure their properties and personnel, RICC
and PICMW entered into separate service contracts for detailing of security guards with
respondent Amethyst Security. Amethyst had been RICC/PICMWs security contractor since
1968.
One of the conditions of the service contracts between Amethyst and RICC/PICMW was
for Amethyst to supply the latter companies with security guards who must be between 25 to 45
years of age. The aforesaid condition was maintained with every renewal of the service contracts.
Per payrolls submitted by Amethyst, the petitioners who signed therein were paid the minimum
wage and benefits provided for by law, to wit: regular wage, nightshift differentials, 5-day
incentive leave pay, cost of living allowance, overtime pay, and holiday pay.

When RICC/PICMW renewed their service contract with Amethyst in January 1998,
respondent RICC in a letter dated January 15, 1998, reminded Amethyst of their stipulated age
limit for the latters guards detailed at the RICC/PICMW compound. This prompted respondent
Amethyst to issue an order on January 23, 1998, directing all security guards to submit copies of
their respective Birth Certificates. On January 30, 1998, petitioners who were at that time over
45 years of age received Memorandum/Relief Orders relieving them from their existing postings
as security guards of Amethyst with RICC/PICMW, effective February 1, 1998. Petitioners were
instructed to report to the main office of Amethyst for reassignment. The order further stated that
the failure of petitioners to comply with the directive would be construed as a manifestation of
their lack of interest to continue working as security personnel and Amethyst would consider
them absent without official leave (AWOL).
Amethyst then issued an order that it had been able to renegotiate their
assignments and warned the petitioners that failure to report will mean that they are no longer
interested to work but the respondent alleged that there was no options that was given to them.
Issue: WON petitioners were constructively dismissed, thus, entitling them to their claims and
other monetary benefits.

Held: This averment is inaccurate. Admittedly, the security services contract between Amethyst
(formerly Calmar) Security Agency and RICC/PICMW had continuously been renewed since
1968 and featured the particular provision on the age limit (not exceeding 45 years) of the
security guards with each renewal. Petitioners could not claim ignorance of the said provision.
They could not claim to be have been caught by surprise when Amethyst relieved them from
their posting at RICC/PICMW due to their failure to meet the stipulated age limits. Petitioners
acted in bad faith when they tried to mislead Amethyst as to their respective actual age.
Lastly, petitioners claims of constructive dismissal could not be sustained. Their
averments fall short of what this Court considers as constructive dismissal. Petitioners could not
fairly claim involuntary resignation on the ground that their continued employment was rendered
impossible, unreasonable or unlikely. Neither could they show persuasively that their transfer or
assignment from security guards to firewatch guards involved diminution in pay or demotion in
rank. Nor was there a clear showing of an act of clear discrimination, insensibility or disdain by
their employer - Amethyst - that made their employment so unbearable that it could foreclose
any option by them except to forego their continued employment.
The condition imposed by respondent RICC/PICMW, as a principal or client of the
contractor Amethyst, regarding the age requirement of the security guards to be designated in its
compound, is a valid contractual stipulation. It is an inherent right of RICC/PICMW, as the
principal or client, to specify the qualifications of the guards who shall render service pursuant to
a service contract. It stands to reason that in a service contract, the client may require from the
service contractor that the personnel assigned to the client should meet certain standards and
possess certain qualifications, conformably to the clients needs.
Security of tenure, although provided in the Constitution, does not give an employee an
absolute vested right in a position as would deprive the company of its prerogative to change
their assignment or transfer them where they will be most useful. When a transfer is not
unreasonable, nor inconvenient, nor prejudicial to an employee; and it does not involve a
demotion in rank or diminution of his pay, benefits, and other privileges, the employee may not
complain that it amounts to a constructive dismissal.
Case law recognizes the employers right to transfer or assign employees from one area of
operation to another, or one office to another or in pursuit of its legitimate business interest,
provided there is no demotion in rank or diminution of salary, benefits and other privileges and
not motivated by discrimination or made in bad faith, or effected as a form of punishment or
demotion without sufficient cause. This matter is a prerogative inherent in the employers right to
effectively control and manage the enterprise.

We note that Amethyst gave petitioners an option as to their new deployment. They could
stay on with RICC/PICMW as firewatch guards, pursuant to negotiated agreement between
Amethyst and RICC/PICMW to accommodate the displaced security guards. Or they could be
transferred to another locality, Cagayan de Oro City, but in the same role as security guards.
Petitioners, however, refused to report to Amethyst headquarters, despite knowledge that they
were being called to receive instructions regarding new deployment. Petitioners action not to
report for work is a form of defiant action that petitioners failed to justify. Even if it could be
argued that their collective action stemmed from their resentment against the age rule being
enforced by Amethyst, we find nothing in the circumstances of this case to show sufficient
reason to excuse petitioners failure to heed managements exercise of a management prerogative.
Thus, we agree with respondents that there is no reason to hold Amethyst liable for
violations claimed by petitioners. It follows also that we find no ground to hold co-respondents
RICC/PICMW liable, except for salary differential ordered in the NLRC decision.

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