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NLRC applied to and was accepted by PMCI was a labor- - From Neri v. NLRC Philippine and prohibited act, is an
Regent Food Corporation (RFC) as only contractor. Fuji Xerox Corporation vs. NLRC, it arrangement where the
sales representative. may be inferred that it is not enough contractor or subcontractor
- He was immediately issued a to show substantial capitalization or merely recruits, supplies or
company I.D., was made to report on investment in the form of tools, places workers to perform a
a daily basis, sent to supermarkets equipment, machineries and work job, work or service for a
and grocery stores to book sales premises, among others, to be principal.
orders and collect payments for RFC, considered as an independent - The elements of labor-only
and was made to issue a monthly contractor. contracting are: (a) The
bond of P200.00 as security deposit to - In fact, jurisprudential holdings are to contractor or subcontractor
guarantee the performance of his the effect that in determining the does not have substantial
obligation as sales representative. existence of an independent capital or investment to
- He alleges that he was under the contractor relationship, several actually perform the job, work
direct control and supervision of the factors might be considered such as, or service under its own
RFC plant manager and senior but not necessarily confined to, account and responsibility;
salesman. whether the contractor is carrying on and (b) The employees
- A little over a year later, he was an independent business; the nature recruited, supplied or placed
transferred by RFC to the Peninsula and extent of the work; the skill by such contractor or
Manpower Corporation, Inc. (PMCI), required; the term and duration of subcontractor are performing
an agency which provides RFC with the relationship; the right to assign activities which are directly
additional contractual workers the performance of specified pieces of related to the main business of
pursuant to a contract for the supply work; the control and supervision of the principal.
of manpower services. the workers; the power of the - Permissible job contracting or
- He was thereafter reassigned to RFC employer with respect to the hiring, subcontracting refers to an
as sales representative, a few months firing and payment of the workers of arrangement whereby a
following which his services were the contractor; the control of the principal agrees to put out or
terminated, allegedly following the premises; the duty to supply farm out with a contractor or
expiration of contract between RFC premises, tools, appliances, materials subcontractor the performance
and PMCI. and labor; and the mode, manner and or completion of a specific job,
- He thus filed charges for illegal terms of payment. work or service within a
dismissal and non-payment of 13th - In the case at bar, PMCI does not definite or predetermined
month pay against RFC before the have substantial capitalization or period, regardless of whether
NLRC. investment in the form of tools, such job, work or service is to
- On the other hand, while RFC admits equipment, machineries, work be performed or completed
that it had control and supervision premises, among others, to qualify as within or outside the premises
over Vinoya, it argues, among others, an independent contractor. of the principal.
that such was exercised in - While it has an authorized capital - Its elements are: (a) The
coordination with PMCI. stock of P1,000,000.00, only contractor or subcontractor
P75,000.00 is actually paid-in, which, carries on a distinct and
to the Courts mind, cannot be independent business and
considered as substantial undertakes to perform the job,
capitalization. work or service on its own
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- PMCI did not carry on an account and under its own
independent business nor did it responsibility according to its
undertake the performance of its own manner and method, and
contract according to its own manner free from the control and
and method, free from the control direction of the principal in all
and supervision of its principal, RFC. matters connected with the
- The evidence at hand shows that the performance of the work
workers assigned by PMCI to RFC except as to the results
were under the control and thereof; (b) The contractor or
supervision of the latter, as RFC had subcontractor has substantial
earlier admitted, and as evidenced by capital or investment; and (c)
RFCs control over the work hours. The agreement between the
- PMCI was not engaged to perform a principal and contractor or
specific and special job or service, subcontractor assures the
which is one of the strong indicators contractual employees
that an entity is an independent entitlement to all labor and
contractor. occupational safety and health
- Since the undertaking of PMCI did standards, free exercise of the
not involve the performance of a right to self-organization,
specific job, but rather the supply of security of tenure, and social
- Whether or not manpower only, PMCI clearly and welfare benefits.
there was an EER. conducted itself as labor-only - In determining the existence of
contractor. employer-employee
- Lastly, in labor-only contracting, the relationship the following
employees recruited, supplied or elements of the "four-fold test"
placed by the contractor perform are generally considered,
activities which are directly related to namely: (1) the selection and
the main business of its principal. In engagement of the employee
this case, the work of petitioner as or the power to hire; (2) the
sales representative is directly payment of wages; (3) the
related to the business of RFC. power to dismiss; and (4) the
- The position of sales representative power to control the employee.
was not one of those subject of the
contract between RFC and PMCI
which only means that Vinoya was
never really intended to be one of
those whose services would be
contracted out.
- Using the four-fold test would
result in the same finding that Vinoya
was in fact an employee of RFC.
- To the Supreme Courts mind, the ID
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card is enough proof that petitioner
was previously hired by RFC prior to
his transfer as agency worker to
PMCI.
- Even though the wages were coursed
through PMCI, the Supreme Court
noted that the funds actually came
from the pockets of RFC. Thus, in the
end, RFC is still the one who paid the
wages of petitioner albeit indirectly.
- The Contract of Service gave RFC the
right to terminate the workers
assigned to it by PMCI without the
latter's approval which was what
happened in the instant case.
- The labor arbiters finding and the
admission of RFC that it exercised
control and supervision over
petitioner, the same being a
declaration against interest, is
sufficient to prove that the power of
control truly exists.
- Having been dismissed without valid
grounds and in violation of the right
to due process, Vinoya is entitled to
reinstatement to his former position
without loss of seniority rights and to
payment of full backwages
corresponding to the period from his
illegal dismissal up to actual
reinstatement
Lapanday v. - Lapanday Agricultural and - WON the RTC had - YES. It is well settled in law and - Art. 107, Labor Code: Indirect
NLRC Commando Security entered into a jurisdiction to hear jurisprudence that where no EER employer. The provisions of
Guard Service Contract (GSC) the case. exists between the parties and no the immediately preceding
wherein the latter was to provide issue is involved which may be Article shall likewise apply to
security guards in the formers resolved by reference to the Labor any person, partnership,
banana plantation. Code, other labor statutes or any association or corporation
- 2 Wage Orders increasing minimum collective bargaining agreement, it is which, not being an employer,
wage were issued. As such, the RTC that has jurisdiction. contracts with an independent
Commando demanded that its GSC be - Who is liable to pay - Here, what is involved is claim based contractor for the performance
upgraded in compliance with the the wage increases on the alleged breach of the GSC. of any work, task, job or
Wage Orders. Lapanday refused. pursuant to the - Art. 107 provides that the principal project.
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- It was the position of Lapanday that Wage Orders? and the contractor are solidarily - The soliday liability of the
the rate adjustment mandated by the liable to the employees for their contractor and the principal is
Wage Orders was the obligation of wages. mandated by the Labor Code
Commando as the employers of the - While the principal is the one liable to assure compliance with the
security guards. for the wage increases, the contractor provisions therein including
- RTC ruled in favor of Commando may pay the employees, subject to the the minimum wage.
stating that before the security right to claim reimbursement from - The contractor is made liable
agency can pay the wage increase, the principal. by virtue of his status as direct
the principal must have paid the - In this case, Commando has not employer. The principal is
agency first. MR was denied. actually paid the increases under the made the indirect employer of
- It is Lapandays position that the Wage Orders. As such, it has no cause the contractors employees to
increases were due to the guards and of action against Lapanday to recover secure payment of their wages
not to the agency, and that the RTC the wage increases. should the contractor be
had no jurisdiction to hear the case. unable to pay them.
San Miguel - San Miguel Corporation (SMC) - W/n Sunflower is a - Sunflower is a labor-only contractor - The test to determine the
Corp. v. Aballa entered into a Contract of Services labor-only - The test to determine the existence of existence of independent
with Sunflower Multi-Purpose contractor or an independent contractorship is contractorship is whether one
Cooperative (Sunflower) for the latter independent whether one claiming to be an claiming to be an
to provide the manpower (janitorial, contractor. independent contractor has independent contractor has
messengerial, shrimp harvesting, contracted to do the work contracted to do the work
sanitation, washing and cold storage) according to his own methods and according to his own
for the Bacolod Shrimp Processing without being subject to the methods and without being
Plant of SMC. control of the employer, except subject to the control of the
- Then, the private respondents in this only as to the results of the work. employer, except only as to
case filed a complaint with the Labor - The language of the contract that the results of the work.
Arbiter to be declared as regular there is no employer-employee - The language of the contract
employees of the SMC. Subsequently, relationship between SMC and the that there is no EER is not
the private respondents filed an private respondents is not controlling controlling.
amended complaint to include illegal - It is to be noted that Sunflower does - Substantial capitalization or
dismissal in their cause of action not have substantial capitalization or investment in the form of
because of the closure of the Bacolod investment in the form of tools, tools, equipment, machineries,
Shrimp Processing Plant. equipment, machineries, work work premises and other
- The Labor Arbiter dismissed the premises and other materials to materials qualify a contractor
complaint. qualify it as an independent as an independent contractor.
- The NLRC dismissed the appeal. contractor. It is gathered that the lot,
- However, the CA reversed the building, machineries and all other
decision of the NLRC ruling that working tools utilized by private
Sunflower is a labor-only contractor respondents in carrying out their
and consequently, the private tasks were owned and provided by
respondents are the employees of SMC.
SMC. - And from the job description provided
by SMC itself, the work assigned to
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private respondents was directly
related to the aquaculture operations
of SMC. Undoubtedly, the nature of
the work performed by private
respondents in shrimp harvesting,
receiving and packing formed an
integral part of the shrimp processing
operations of SMC. As for janitorial
and messengerial services, that they
are considered directly related to the
principal business of the employer
has been jurisprudentially
recognized.
- SMC also had control over the private
respondents as evidenced by the fact
that their daily time records were
signed by SMC supervisors and
control of the premises in which
private respondents worked was by
SMC.
Manila Water - Manila Water was contracted by the - Whether or not - YES. The collectors were regular - Job contracting is permissible
Company v. Metropolitan Waterworks and there exists an employees of Manila Water and ACGI only if the following conditions
Pea Sewerage System (MWSS). employer-employee was merely a labor-only contractor. are met: 1) the contractor
- It was engaged in the business of relationship The work of the private respondents carries on an independent
managing the water distribution between Manila was directly related to the principal business and undertakes the
system. Manila Water absorbed part Water and private business or operation of the contract work on his own
of the pool of the former employees of respondents. petitioner. account under his own
MWSS. - ACGI was not an independent responsibility according to his
- The private respondents in this case contractor. own manner and method, free
were not absorbed by Manila Water. - ACGI does not have substantial from the control and direction
Nevertheless, petitioner signed a capitalization or investment in the of his employer or principal in
three-month contract with them to be form of tools, equipment, all matters connected with the
contractual collectors. machineries, work premises, and performance of the work
- Prior to the end of the contract, the other materials, to qualify as an except as to the results
collectors formed the Association of independent contractor. While it has thereof; and 2) the contractor
Collectors Group, Inc. (ACGI), with an authorized capital stock of has substantial capital or
which Manila Water transacted with P1,000,000.00, only P62,500.00 is investment in the form of
for its collection needs. actually paid-in, which cannot be tools, equipment, machineries,
- When the petitioner terminated its considered substantial capitalization. work premises, and other
contract with the ACGI, the Further, private respondents reported materials which are necessary
employees filed a case for illegal daily to the branch office of the in the conduct of the business.
dismissal and money claims against petitioner because ACGI has no office - Labor-only contracting
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the petitioner. They claimed that they or work premises. refers to an arrangement
were employees of Manila Water - The work of the private respondents where the contractor or
since the methods and procedures of was directly related to the principal subcontractor merely recruits,
their collections were controlled by business or operation of the MWC. supplies or places workers to
the petitioner. Being in the business of providing perform job, work or service
- On the other hand, Manila Water water to the consumers, the for a principal, and any of the
claimed that they were employees of collection of the charges by the following elements is present:
ACGI, the latter being an independent collectors for the petitioner can only i. The contractor or
contractor; thus, the employees had be categorized as clearly related to, subcontractor does not
no cause of action against it. and in the pursuit of the latters have substantial capital
business. or investment which
- ACGI did not carry on an independent relates to the job, work
business or undertake the or service to be
performance of its service contract performed and the
according to its own manner and employees recruited,
method, free from the control and supplied or placed by
supervision of its principal, MWC. such contractor or
Prior to private respondents alleged subcontractor are
employment with ACGI, they were performing activities
already working for MWC, subject to which are directly
its rules and regulations in regard to related to the main
the manner and method of business of the
performing their tasks. This form of principal; or
control and supervision never ii. The contractor does not
changed although they were already exercise the right to control
under the seeming employ of ACGI. over the performance of the
- ACGI was engaged in labor-only work of the contractual
contracting, and as such, is employee.
considered merely an agent of MWC.
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.
Rosewood - All the complainants were employed - Was it proper to - With respect to the wage - An employer is solidarily liable
Processing, by the Veterans as security guards: hold Rosewood differential, all the guards except for legal ages due security
Inc. v. NLRC Napoleon Mamon, Arsenio Gazzingan, liable for the wage Cabrera are entitled to claim wage guards for the period of time
Rodolfo C. Velasco, Armando Ballon, differentials and differentials from Rosewood they were assigned to it by its
Victor Aldeza, Jose L. Cabrera. All of backwages/separati (solidarily with the Veterans) contracted security agency.
them at one time during their on pay claimed by corresponding to the time the guards However, in the absence of
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employment with the security agency, the employee- were assigned to Rosewood. Cabrera proof that the employer itself
were assigned as a guard for guards? was never assigned to Rosewood, committed the acts
Rosewood, except Cabrera. therefore no wage differential for constitutive of illegal dismissal
- The said guards were dismissed for him. or conspired with the security
several different grounds. It is - The guards are not entitled to agency in the performance of
worthy to note that each of them was backwages/separation pay from such acts, the employer shall
dismissed while not being assigned as Rosewood because Rosewood never not be liable for back wages
a guard for Rosewood. committed the acts constitutive of and/or separation pay arising
- A complaint for illegal dismissal; illegal dismissal or conspired with the as a consequence of such
underpayment of wages; and for security agency in the performance of unlawful termination.
nonpayment of overtime pay, legal such acts.
holiday pay, premium pay for holiday - Under Art 106-109 of the Labor Code,
and rest day, thirteenth month pay, should the contractor fail to pay the
cash bond deposit, unpaid wages and wages of its employees in accordance
damages was filed against Veterans with law, the indirect employer
Philippine Scout Security Agency. (Rosewood in this case), is jointly and
Thereafter, Rosewood was impleaded severally liable with the contractor,
as a third-party respondent by the but such responsibility should be
security agency. understood to be limited to the extent
of the work performed under the
contract, in the same manner and
extent that he is liable to the
employees directly employed by him.
- Similarly, the solidary liability for
payment of back wages and
separation pay is limited, under
Article 106, to the extent of the work
performed under the contract; under
Article 107, to the performance of
any work, task, job or project; and
under Article 109, to the extent of
their civil liability under this Chapter
[on payment of wages].
- These provisions cannot apply to
Rosewood, considering that the
complainants were no longer working
for or assigned to it when they were
illegally dismissed. Furthermore, an
order to pay back wages and
separation pay is invested with a
punitive character, such that an
indirect employer should not be made
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liable without a finding that it had
committed or conspired in the illegal
dismissal. There being no proof of
such commission or conspiracy,
Rosewood cannot be held liable for
the backwages and separation pay.
NFA v. Masada - MASADA Security Agency, Inc., - Whether or not the - YES. - Read Articles 106, 107 and
Security entered into a one year contract to liability of principals - The legislature intended to limit the 109 of the Labor Code.
Agency provide security services to the in service contracts additional obligation imposed on
various offices, warehouses and under Section 6 of principals in service contracts to the
installations of NFA within the scope RA 6727 and the payment of the increment in the
of the NFA Region I following wage orders issued statutory minimum wage.
expiration of which there were by the Regional - The parties may enter into
monthly renewals thereof under the Tripartite Wages stipulations increasing the liability of
same terms and conditions. and Productivity the principal. So long as the
- Meanwhile, the Regional Tripartite Board is limited minimum obligation of the principal,
Wages and Productivity Board issued only to the i.e., payment of the increased
several wage orders mandating increment in the statutory minimum wage is complied
increases in the daily wage rate. minimum wage. with, the Wage Rationalization Act is
- Accordingly, respondent requested not violated.
NFA for a corresponding upward - The parties acknowledged the
adjustment in the monthly contract application to their contract of the
rate consisting of the increases in the wage orders issued by the RTWPB
daily minimum wage of the security pursuant to RA 6727.
guards as well as the corresponding - There being no assumption by NFA of
raise in their overtime pay, holiday a greater liability than that mandated
pay, 13th month pay, holiday and rest by Section 6 of the Act, its obligation
day pay. is limited to the payment of the
- It also claimed increases in Social increased statutory minimum wage
Security System (SSS) and Pag-ibig rates which, as admitted by
premiums as well as in the respondent, had already been
administrative costs and margin. satisfied by NFA.
- NFA, however, granted the request
only with respect to the increase in
the daily wage by multiplying the
amount of the mandated increase by
30 days and denied the same with
respect to the adjustments in the
other benefits and remunerations
computed on the basis of the daily
wage.
- An action for the recovery of a sum of
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money was commenced by MASADA
against NFA.
- It was NFAs argument that
respondent cannot demand an
adjustment on said salary related
benefits because it is bound by their
contract expressly limiting NFAs
obligation to pay only the increment
in the daily wage.
Manila - The individual respondents are - Whether or not - SC held that no such - For the power of control
Electric licensed security guards formerly an employer- relationship exists. to be present, the person for
Company v. employed by Peoples Security, Inc. employee - Under the security service whom the services are
Benamira (PSI) and deployed as such at relationship exists agreement, it was ASDAI which (a) rendered must reserve the
MERALCOs head office. between MERALCO selected, engaged or hired and right to direct not only the end
- Immediately after the security and the security discharged the security guards; (b) to be achieved but also the
service agreement between PSI and guards. assigned them to MERALCO means for reaching such end.
MERALCO was terminated, fifty-six of according to the number agreed Not all rules imposed by the
PSIs security guards filed a upon; (c) provided the uniform, hiring party on the hired party
complaint for unpaid monetary firearms and ammunition, indicate that the latter is an
benefits against PSI and MERALCO nightsticks, flashlights, raincoats and employee of the former. Rules
before the NLRC. other paraphernalia of the security which serve as general
- Meanwhile, the security service guards; (d) paid them salaries or guidelines towards the
agreement between respondent wages; and, (e) disciplined and achievement of the mutually
Armed Security & Detective Agency, supervised them or principally desired result are not
Inc., (ASDAI) and MERALCO took controlled their conduct. indicative of the power of
effect and the individual respondents - The agreement even explicitly control.
were absorbed by ASDAI and provided that such security guards - Art. 107. Indirect
retained at MERALCOs head office. shall be considered as employees of employer - The provisions of
- Labor Arbiter rendered a the AGENCY alone. the immediately preceding
decision in the former case in favor of - In fact, the security service Article shall likewise apply to
the former PSI security guards. agreements provided that all specific any person, partnership,
- Less than a month later, the instructions by MERALCO relating to association or corporation
individual respondents filed another the discharge by the security guards which, not being an employer,
complaint for unpaid monetary of their duties shall be directed to the contracts with an independent
benefits, this time against ASDAI and agency and not directly to the contractor for the
MERALCO. individual respondents. This clearly performance of any work,
- The security service agreement shows that MERALCO has no control task, job or project.
between respondent Advance Forces over their performance. - Art. 106 and 109 of the
Security & Investigation Services, - As such, respondents cannot be Labor Code
Inc. (AFSISI) and MERALCO took considered as regular employees of - Four-fold test to
effect, terminating the previous the MERALCO and the Agnecy is not determine the existence of an
security service agreement with engaged in labor-only contracting employer-employee relation,
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ASDAI. services since, although security namely: (1) the power to hire,
services are necessary and desirable (2) the payment of wages, (3)
to the business of MERALCO, it is not the power to dismiss, and (4)
directly related to its principal the power to control.
business and may even be considered
unnecessary in the conduct of
MERALCOs principal business,
which is the distribution of electricity.
- However, even if there is no
actual and direct employer-employee
relationship Meralco is still liable to
respondents for unpaid monetary
claims. When MERALCO contracted
for security services with ASDAI,
MERALCO became an indirect
employer and shall be solidarily liable
with the agency.
DOLE Phils. V. - DOLE and CAMPCO entered into a - Whether or not - SC held that it is engaged in - Sec. 9, DO 18-02: Labor-Only
Esteva Service Contract whereby CAMPCO CAMPCO is labor-only contracting because Contracting a) Any person
shall render services to DOLE in engaged in labor- although some factors exists as to who undertakes to supply
exchange for the amount of only contracting. qualify it as an independent job workers to an employer shall
P220,000.00. contractor, be deemed to be engaged in
- DOLE issued a judgment after due - (1) It initially started only at labor-only contracting where
investigation that CAMPCO is P6,600 paid-up capital. It only such person:
engaging in illegal labor-only managed to increase its capitalization - 1) Does not have substantial
contracting services. and assets in the succeeding years by capital or investment in the
- CAMPCO then filed a case for illegal continually engaging in labor-only form of tools, equipment,
dismissal of employees against DOLE contracting. machineries, work premises
since the latter placed several of its - (2) CAMPCO did not carry out an and other materials; and
members on floating status. independent business from - 2) The workers recruited and
petitioner. It was precisely placed by such person are
established to render services to performing activities which
petitioner to augment its workforce are directly related to the
during peak seasons. They used tools principal business or operation
and equipment of DOLE when of the employer to which
rendering services to the latter. workers are habitually
- (3) DOLE has control over employed.
CAMPCO employees despite presence - b) Labor-only contracting as
of supervisor. They had to undergo defined herein is hereby
instructions and pass the training prohibited and the person
provided by petitioners personnel. acting as contractor shall be
Petitioner prepared the work considered merely as an agent
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assignments of the CAMPCO or intermediary of the
members. employer who shall be
- (4) CAMPCO merely acted as a responsible to the workers in
recruitment agency for petitioner. the same manner and extent
Since the undertaking of CAMPCO as if the latter were directly
did not involve the performance of a employed by him.
specific job, but rather the supply of - Violation of the afore-quoted
manpower only. provision is considered a labor
- (5) CAMPCO members, including standards violation and thus,
respondents, performed activities within the visitorial and
directly related to the principal enforcement powers of the
business of petitioner. They worked Secretary of Labor and
as can processing attendant, feeder Employment (Art. 128).
of canned pineapple and pineapple - The existence of an
processing, nata de coco processing independent and permissible
attendant, fruit cocktail processing contractor relationship is
attendant, and etc. generally established by the
- Hence, an employer-employee following criteria: whether or
relationship exists between them. not the contractor is carrying
on an independent business;
- SC held that they are regular the nature and extent of the
employees because: work; the skill required; the
- 1. The activities performed by term and duration of the
respondents are necessary or relationship; the right to
desirable to the usual business of assign the performance of a
petitioner. specified piece of work; the
- 2. Respondents continued control and supervision of the
employment for more than one year work to another; the
clearly demonstrates the continuing employer's power with respect
necessity and indispensability of to the hiring, firing and
respondents employment to the payment of the contractor's
business of petitioner. workers; the control of the
- 3. There is absence of proof that premises; the duty to supply
the respondents were aware and had the premises tools, appliances,
knowingly and voluntarily agreed to materials and labor; and the
such term employment. Petitioner mode, manner and terms of
did not enter into individual contracts payment.
with the CAMPCO members. - The primary standard,
Although the Service Contract of therefore, of determining a
1993 stated that it shall be for a regular employment is the
specific period, petitioner and reasonable connection
CAMPCO continued the service between the particular activity
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arrangement beyond 1993. Since performed by the employee in
there was no written renewal of the relation to the usual business
Service Contract, there was no or trade of the employer. The
further indication that the test is whether the former is
engagement by petitioner of the usually necessary or desirable
services of CAMPCO members was in the usual business or trade
for another definite or specified of the employer.
period only.
- Therefore, petitioners acts of
placing some of the respondents on
stay home status and not giving
them work assignments for more than
six months were already tantamount
to constructive and illegal dismissal.
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