1. Rabago vs.
NLRC restraining order enjoining the NLRC from enforcing and/or carrying out is
G.R. No. 82868. August 5, 1991.
FACTS: In 1981, Ace Building Care and the Philippine Tuberculosis Society
entered into a contract under which the former would provide the latter with
janitorial and allied services for a stipulated consideration, subject to such
adjustment as might be subsequently required by law. The contract
was renewed yearly until 1985, when the services were placed under public
bidding and a new contract was awarded to another company.
On September 9, 1985, the 41 janitors ABC had earlier detailed to PTS
filed a complaint with the National Labor Relations Commission against both
ABC and PTS for unpaid wage differentials under Wage Order Nos. 5 and 6,
holiday premium pay, damages and attorney’s fees, reimbursement of cash
bond, incentive leave pay and bonus and separation pay.
ABC: Filed a cross-claim against PTS, contending that the latter was liable for
the statutory increases.
PTS: Moved to dismiss on the ground that it belonged to the public sector and
was not covered by the Labor Code.
Labor Arbiter Felipe T. Garduque II: The complainants were not entitled to
legal holiday pay and to reimbursement of cash bond or separation pay except
for five of them who were allowed separation pay. The decision also awarded
incentive leave with pay except for seven of them, who had worked less than
one year. ABC and PTSI jointly and severally liable for payment of the wage
differentials under Wage Orders Nos. 5 and 6.
NLRC: Affirmed the decision with respect to the award of separation pay and
service incentive leave with pay but held that it was ABC alone that should pay
the wage differentials under Wage Orders Nos. 5 and 6.
The complainants and ABC filed their respective motions for reconsideration
and, upon denial thereof, filed the separate petitions for certiorari with this
Court. Upon motion of ABC, we issued on May 11, 1988, a temporary
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Sept. 16)
decision
ISSUES:
1. Whether or not Ace Building Care is liable for the wages and
allowances mandated by Wage Orders Nos. 5 and 6;
RULING: YES. The SC has already resolved this issue in Court in Eagle
Security Agency, Inc. vs. NLRC, in which petitioners’ solidary liability for the
amounts due the security guards finds support in Articles 106, 107 and 109 of
the Labor Code.
Art. 106. Contractor or subcontractor.—Whenever an employer enters into a
contract with another person for the performance of the former’s work, the
employees of the contractor and of the latters’ subcontractor, if any, shall be
paid in accordance with the provisions of this Code. In the event that the
contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with
his contractor or subcontractor to such employees to the extent that he is liable
to employees directly employed by him.
xxx
Art. 107. Indirect employer.—The provisions of the immediately preceding
Article shall likewise apply to any person, partnership, association or
corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.
xxx
Art. 109. Solidary liability.—The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible
with his contractor or subcontractor for any violation of this Code. For purposes
of determining the extent of the civil liability under this Chapter, they shall be
considered as direct employers.
This joint and several liability of the contractor and the principal is mandated by
the Labor Code to assure compliance of the provisions therein including the
statutory minimum wage (Article 99, Labor Code). The contractor is made liable
by virtue of his status as direct employer. The principal, on the other hand, is
made the indirect employer of the contractor’s employees for purposes of
paying the employees their wages should the contractor be unable to pay them.
This joint and several liability facilitates, if not guarantees, payment of the
workers’ performance of any work, task, job or project, thus giving the workers
ample protection as mandated by the 1987
Constitution (See Article II, Sec. 18 and Article XIII, Sec. 3).
In the case at bar, it is beyond dispute that the security guards are the
employees of EAGLE. That they were assigned to guard the premises of PTSI
pursuant to the latter’s contract with EAGLE and that neither of these two
entities paid their wage and allowance increases under the subject wage orders
are also admitted. Thus, the application of the aforecited provisions of the Labor
Code.
2. Whether or not herein respondent Philippine Tuberculosis Society, Inc.
should be exempted from the payment of the wages and allowances
under the said Wage Orders to the individual respondents.
PTSI: It is exempt from payment under the subject Wage Orders because it is a
public sector employer while the Wage Orders cover only employers and
employees in the private sector.
Further, While it is true that the term “employer” as used in Title II, Book Three of
the
Labor Code, includes “the Government and all its branches, subdivisions and
instrumentalities, all government-owned or controlled corporations and
institutions . . .,” it does not follow that the government and all its branches,
subdivisions, agencies and instrumentalities are covered by Wage Orders Nos.
5 and 6.
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Sept. 16)
RULING: The wage orders do not apply to the direct employees of PTS who in
fact are members of the Government Service Insurance System. The
complainants in G.R. No. 82868 unquestionably belong to the private sector
and for this reason are covered by the Social Security System. They are the
indirect employees of the PTS and as such are entitled to hold it liable, solidarily
with their direct employer, for their unpaid wage differentials. In this sense, the
PTS is correctly classified as an employer coming under the private sector. The
reference to it as belonging to the public sector relates only to its direct
employees “for purposes of coverage under the Employees’ Compensation
Commission,” not to its indirect employees coming from the private sector.
2. VIRGINIA G. NERI and JOSE CABELIN, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION FAR EAST BANK & TRUST COMPANY (FEBTC)
and BUILDING CARE CORPORATION, respondents.
G.R. Nos. 97008-09. July 23, 1993.
FACTS: Petitioners Virginia G. Neri and Jose Cabelin applied for positions with,
and were hired by, respondent BCC, a corporation engaged in providing
technical, maintenance, engineering, housekeeping, security and other specific
services to its clientele. They were assigned to work in the Cagayan de Oro City
Branch of respondent FEBTC on 1 May 1979 and 1 August 1980, respectively,
Neri as radio/telex operator and Cabelin as janitor, before being promoted to
messenger on 1 April 1989.
On 28 June 1989, petitioners instituted complaints against FEBTC and BCC
before Regional Arbitration Branch No. 10 of the Department of Labor and
Employment to compel the bank to accept them as regular employees and for it
to pay the differential between the wages being paid them by BCC and those
received by FEBTC employees with similar length of service.
LA: Dismissed the complaint for lack of merit. Respondent BCC was
considered an independent contractor because it proved it had substantial
capital. Thus, petitioners were held to be regular employees of BCC, not
FEBTC.
NLRC: Affirmed. Hence, this petition.
Petitioners:BCC is engaged in “labor-only” contracting because it failed to
adduce evidence purporting to show that it invested in the form of tools,
equipment, machineries, work premises and other materials which are
necessary in the conduct of its business. And that they perform duties which are
directly related to the principal business or operation of FEBTC. If the definition
of “labor-only” contracting is to be read in conjunction with job contracting,5 then
the only logical conclusion is that BCC is a “labor-only” contractor.
Consequently, they must be deemed employees of respondent bank by
operation of law since BCC is merely an agent of FEBTC
ISSUE: Whether or not BCC is engaged in Labor Contracting
RULING: NO. Respondent BCC need not prove that it made investments in the
form of tools, equipment, machineries, work premises, among others, because
it has established that it has sufficient capitalization. The Labor Arbiter and the
NLRC both determined that BCC had a capital stock of P1 million fully
subscribed and paid for.7 BCC is therefore a highly capitalized venture and
cannot be deemed engaged in “labor-only” contracting.
It is well-settled that there is “labor-only” contracting where: (a) the person
supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among
others; and, (b) the workers recruited and placed by such person are performing
activities which are directly related to the principal business of the employer.
Art. 106. Contractor or subcontractor.—x x x x There is
“labor-only” contracting where the person supplying workers to an
employer does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises, among others, and
the workers recruited by such persons are performing activities which
are directly related to the principal business of such employer x x x x
Based on the foregoing, BCC cannot be considered a “labor-only”
contractor because it has substantial capital. While there may be no evidence
that it has investment in the form of tools, equipment, machineries, work
premises, among others, it is enough that it has substantial capital, as was
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Sept. 16)
established before the Labor Arbiter as well as the NLRC. In other words, the
law does not require both substantial capital and investment in the form of tools,
equipment, machineries, etc. This is clear from the use of the conjunction “or”. If
the intention was to
require the contractor to prove that he has both capital and the requisite
investment, then the conjunction “and” should have been used. But, having
established that it has substantial capital, it was no longer necessary for BCC to
further adduce evidence to prove that it does not fall within the purview of
“labor-only” contracting. There is even no need for it to refute petitioners’
contention that the activities they perform are directly related to the principal
business of respondent bank.
While the services may be considered directly related to the principal
business of the employer, nevertheless, they are not necessary in the
conduct of the principal business of the employer.
Be that as it may, the Court has already taken judicial notice of the general
practice adopted in several government and private institutions and industries of
hiring independent contractors to perform special services. These services
range from janitorial, security and even technical or other specific services such
as those performed by petitioners Neri and Cabelin. While these services may
be considered directly related to the principal business of the employer,
nevertheless, they are not necessary in the conduct of the principal business of
the employer.
3.Vinoya vs. NLRC
FACTS: Petitioner Vinoya was hired by RFC as sales representative. He avers
that he was transferred by RFC to PMCI, an agency which provides RFC with
additional contractual workers. In PMCI, he was reassigned to RFC as sales
representative and then later informed by the personnel manager of RFC that
his services were terminated. RFC maintains that no employer-employee
relationship existed between petitioner and itself. Petitioner filed complaint for
illegal dismissal. RFC alleges that PMCI is an independent contractor as the
latter is a highly capitalized venture.
ISSUE: Whether or not petitioner was an employee of RFC and thereby,
illegally dismissed.
HELD: Yes. PMCI was a labor-only contractor. Although the Neri doctrine
stated that it was enough that a contractor had substantial capital to show it
was an independent contractor, the case of Fuji Xerox clarified the doctrine
stating that an independent business must undertake the performance of the
contract according to its own manner and method free from the control of the
principal. In this case, PMCI did not even have substantial capitalization as only
a small amount of its authorized capital stock was actually paid-in.
Also, PMCI did not carry on an independent business or undertake the
performance of its contract according to its own manner and method.
Furthermore, PMCI was not engaged to perform a specific and special job or
service, which is one of the strong indicators that is an independent contractor.
Lastly, in labor-only contracting, the employees supplied by the contractor
perform activities, which are directly related to the main business of its
principal. It is clear that in this case, the work of petitioner as sales
representative was directly related to the business of RFC. Since due to
petitioner’s length of service, he attained the status of regular employee thus
cannot be terminated without just or valid cause. RFC failed to prove that his
dismissal was for cause and that he was afforded procedural due process.
Petitioner is thus entitled to reinstatement plus full backwages from his
dismissal up to actual reinstatement.
4. Roosewood Processing vs. NLRC
FACTS: Private respondents were security guards of Veterans Philippine
Scout Security Agency. Some were assigned to other companies and detailed
to Rosewood, while others are re-assigned to other companies from
Rosewood, and still others were put on “floating” status without assignment.
Most were underpaid or their wages were never paid. All these circumstances
led to the filing of a complaint for illegal dismissal, underpayment of wages, and
for nonpayment of overtime pay, legal holiday pay, premium pay for holiday and
rest day, thirteenth month pay, cash bond deposit, unpaid wages and damages
was filed against Veterans Philippine Scout Security Agency and/or Sergio
Jamila IV (collectively referred to as the "security agency," for brevity).
Thereafter, petitioner Rosewood Processing, Inc. was impleaded as a
third-party respondent by the security agency. In due course, Labor Arbiter
Ricardo C. Nora rendered a consolidated Decision dated March 26, 1993
finding the security agency and Rosewood as solidarily liable to pay the
monetary benefits due the security guards.
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Sept. 16)
ISSUE: Whether or not petitioner Rosewood was solidarily liable with the
security agency for the non-payment of wages, as provided in Articles 106, 107
and 109 of the Labor Code.
RULING: The Supreme Court held that while it is undisputable that by
operation of the provisions of Articles 106, 107 and 109, the Employer which is
Rosewood has solidary liability for payment of wage differentials, such liability
however should only be to the extent of the period when the respondent guards
were under its employment. For the periods where said guards were assigned
somewhere else, the Supreme Court held that Rosewood cannot be liable. The
Supreme Court further held that since there was no evidence presented
pointing to the fact that Rosewood conspired with the security agency in
illegally dismissing the guards, it cannot be made liable to pay back wages as
provided in Article 109. Finally, since an order to pay back wages and
separation pay is invested with a punitive character, such that an indirect
employer should not be made liable without a finding that it had committed or
conspired in the illegal dismissal, then Rosewood, which was no longer the
employer of the guards when they were dismissed, should not be compelled to
pay since it was clear that it took no part in the illegal dismissal.
5. ESCARIO VS. NLRC
FACTS: Private respondent California Marketing Co. Inc. (CMC) is a
domestic corporation principally engaged in the manufacturing of food products
and distribution of such products to wholesalers and retailers.
Private respondent Donna Louise Advertising and Marketing Associates,
Inc. (D.L. Admark) is a duly registered promotional firm.
Petitioners worked as merchandisers for the products of CMC. Their services
were terminated on 16 March 1992.
Petitioners allege that they were employed by CMC as merchandisers. Among
the tasks assigned to them were the withdrawing of stocks from the warehouse,
the fixing of prices, price-tagging, displaying of merchandise, and the inventory
of stocks. These were done under the control, management and supervision of
CMC. The materials and equipment necessary in the performance of their job,
such as price markers, gun taggers, toys, pentel pen, streamers and posters
were provided by CMC. Their salaries were being paid by CMC. According to
petitioners, the hiring, control and supervision of the workers and the payment
of salaries, were all coursed by CMC through its agent D.L. Admark in order for
CMC to avoid its liability under the law.
On 1992, petitioners filed a case against CMC before the Labor Arbiter for the
regularization of their employment status. During the pendency of the case
before the Labor Arbiter, D.L. Admark sent to petitioners notice of
termination of their employment effective 16 March 1992. Hence, their
complaint was amended so as to include illegal dismissal as cause of action.
Thereafter, twenty-seven more persons joined as complainants. CMC filed a
motion to implead as party-defendant D. L. Admark and at the same time the
latter filed a motion to intervene. Both motions were granted.
CMC = denied the existence of an employer-employee relationship between
petitioner and itself. Rather, CMC contended that it is D.L. Admark who is the
employer of the petitioners. While CMC is engaged in the manufacturing of food
products and distribution of such to wholesalers and retailers, it is not allowed
by law to engage in retail or direct sales to end consumers. It, however, hired
independent job contractors such as D.L. Admark, to provide the necessary
promotional activities for its product lines.
D.L. Admark = asserted that it is the employer of the petitioners. Its primary
purpose is to carry on the business of advertising, promotion and publicity, the
sales and merchandising of goods and services and conduct survey and
opinion polls. And thus, they were independent contractor of CMC.
LA = petitioners are the employees of CMC as they were engaged in activities
that are necessary and desirable in the usual business or trade of CMC
NLRC = no employer-employee relationship existed between the petitioners
and CMC. It, likewise, held that D.L. Admark is a legitimate independent
contractor, hence, the employer of the petitioners.
ISSUE: 1. whether petitioners are employees of CMC or D.L. Admark.
2. whether D.L. Admark is a labor-only contractor or an independent
contractor.
RULING: There is labor-only contracting when the contractor or
sub-contractor merely recruits, supplies or places workers to perform a job,
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Sept. 16)
work or service for a principal. In labor-only contracting, the following elements
are present:
(a) The person supplying workers to an employer does not
have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others; and
(b) The workers recruited and placed by such person are
performing activities which are directly related to the principal
business of the employer.
In contrast, there is permissible job contracting when a principal agrees to put
out or farm out with a contractor or a subcontractor the performance or
completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job or work or service is to be performed or
completed within or outside the premises of the principal. In this arrangement,
the following conditions must concur:
(a)....The contractor carries on a distinct and independent
business and undertakes the contract work on his account
under his own responsibility according to his own manner and
method, free from the control and direction of his employer or
principal in all matters connected with the performance of his
work except as to the results thereof; and
(b)....The contractor has substantial capital or investment in
the form of tools, equipment, machineries (sic), work
premises, and other materials which are necessary in the
conduct of his business
However, in the case of Alexander Vinoya vs. NLRC et al.,this Court ruled that in
order to be considered an independent contractor it is not enough to show
substantial capitalization or investment in the form of tools, equipment,
machinery and work premises. In addition, the following factors need be
considered: (a) whether the contractor is carrying on an independent business;
(b) the nature and extent of the work; (c) the skill required; (d) the term and
duration of the relationship; (e) the right to assign the performance of specified
pieces of work; (f) the control and supervision of the workers; (g) the power of
the employer with respect to the hiring, firing and payment of workers of the
contractor; (h) the control of the premises; (i) the duty to supply premises, tools,
appliances, materials, and labor; and (j) the mode, manner and terms of
payment.
Based on the foregoing criterion, we find that D.L. Admark is a legitimate
independent contractor.
Among the circumstances that tend to establish the status of D.L. Admark as a
legitimate job contractor are:
1) The SEC registration certificate of D.L. Admark states that it is a firm engaged
in promotional, advertising, marketing and merchandising activities.
2) The service contract between CMC and D.L. Admark clearly provides that the
agreement is for the supply of sales promoting merchandising services rather
than one of manpower placement.
3) D.L. Admark was actually engaged in several activities, such as advertising,
publication, promotions, marketing and merchandising.
4) It had its own capital assets to carry out its promotion business assets.
Moreover, by applying the four-fold test used in determining
employer-employee relationship, the status of D.L. Admark as the true
employer of petitioners is further established. The elements of this test are (1)
the selection and engagement of employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the power to control the employees conduct.
Having proven the existence of an employer-employee relationship between
D.L. Admark and petitioners, it is no longer relevant to determine whether the
activities performed by the latter are necessary or desirable to the usual
business or trade of CMC.
6. DOLE PHILS VS. ESTEVA ET AL
FACTS: Petitioner is a corporation engaged principally in the production and
processing of pineapple for the export market. Its plantation is located in
Polomolok, South Cotabato. Respondents are members of the Cannery
Multi-Purpose Cooperative (CAMPCO). CAMPCO was organized in
accordance with R.A. No. 6938, the Cooperative Code of the Philippines, and
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Sept. 16)
duly – registered with the Cooperative Development Authority (CDA).On 17
August 1993, petitioner and CAMPCO entered into a Service Contract wherein
CAMPCO members will render their services to petitioner for six months.
The parties apparently extended or renewed the same fort the succeeding
years without executing another written contract. However, due to
investigations and reliable information, the RD of DOLE, in the exercise of his
visitorial and enforcement power, found out that CAMPCO is engaged in
labor-only contracting together with some other “cooperatives”.
ISSUE: 1. WON CAMPCO was a labor-only contractor.
2. WON DOLE Phils is their real employer.
RULING: 1.YES. CAMPCO is engaged in labor-only contracting. Although the
relationship of petitioner and CAMPCO have some factors suggestive of an
independent contractor relationship (i.e., CAMPCO chose who among its
members should be sent to work for petitioner; petitioner paid CAMPCO
the wages of the members, plus a percentage thereof as administrative
charge; CAMPCO paid the wages of the members who rendered service to
petitioner), many other factors are present which would indicate a labor-only
contracting arrangement between petitioner and CAMPCO:
a.) CAMPCO only had P6,600.00 paid-up capital which is hardly substantial.
b.) CAMPCO did not carry out an independent business from petitioner.
c.) Petitioner exercised control over the CAMPCO members.
CAMPCO members, before working for the petitioner, had to undergo
instructions and pass the training provided by petitioner’s personnel. It was the
petitioner who determined and prepared the work assignments of the
CAMPCO members.
CAMPCO membersworked within petitioner’s plantation and processing plant
s alongside regular employees performing identical jobs.
d.) CAMPCO was not engaged to perform a specific and special job or
service. In their Service Agreement, CAMPCO agreed to assist petitioner in its
daily operations and perform odd jobs as may be assigned.
ES C. MORAL ES I, UMANGAY (L ABOR CASE DIGEST S -
e.) CAMPCO members performed activities directly related to the principal
business of the petitioner.
They worked as
can processing attendant, feeder ofcanned pineappleandpineapple processing
, nata de coco processing attendant, fruit cocktail processing attendant etc.,
functions which were, not only directly related, but were very vital to petitioner’s
business of product ion and processing of pineapple products for export.
2. YES. Since CAMPCO is engaged in labor-only contracting,
then an employer-employee relationship exists between petitioner and
CAMPCO. Further, this Court concludes that respondents are regular
employees of petitioner.
This Court cannot sustain the previous NLRC ruling that the CAMPCO
members were valid “term employments,” wherein the employer and employee
knowingly and voluntarily agreed to employment for only a limited or specified
period of time. There is no proof that the respondents were aware and had
knowingly and voluntarily agreed to such term employment. Petitioner did not
enter into individual contracts with the CAMPCO members, but executed a
Service Contract with CAMPCO alone.
Although the Service Contract of 1993 stated that it shall be for a specific
6-month period, petitioner and CAMPCO continued the service arrangement
beyond 1993. Since there was no written renewal of the Service Contract,
there was no further indication that the engagement by petitioner of the
services of CAMPCO members was for another definite or specified period
only.
Respondents, as regular employees of petitioner, are entitled to security of
tenure. They could only be removed based on just and authorized causes as
provided for in the Labor Code, and after they are accorded procedural due
process. Therefore, petitioner’s acts of placing some of the respondents on
“stay home status” and not giving them work assignments for more than 6
months were already tantamount to constructive and illegal dismissal
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Sept. 16)
7. SAN MIGUEL CORPORATION, petitioner vs. NLRC
GR NO. 1475666 December 6, 2006
FACTS: Rafael Maliksi filed a complaint against the San Miguel
Corporation-Magnolia Division, compel the said responde(SMC) and Philippine
Software Services and Education Center (PHILSSEC) to nts to recognize him
as a regular employee. He amended the complaint include the charge of illegal
dismissal because his services were terminated on 31 October 1990.
The complainants employment record indicates that he rendered service with
Lipercon Services from 1 April 1981 to February 1982 as budget head
assigned to SMC-Beer Division, then from July 1983 to April 1985 with
Skillpower, Inc., as accounting clerk assigned to SMC-Magnolia Division, then
from October 1988 to 1989 also with Skillpower, Inc. as acting clerk assigned
to SMC-Magnolia Finance, and from October 1989 to 31 October 1990 with
PHILSSEC assigned to Magnolia Finance as accounting clerk. The
complainant considered himself as an employee of SMC-Magnolia. Lipercon
Services, Skillpower, Inc. and PHILSSEC are labor-only contractors and any
one of which had never been his employer.
His dismissal, according to him, was in retaliation for his filing of the complaint
for regularization in service. His dismissal was illegal there being no just cause
for the action. He was not accorded due process neither was his dismissal
reported to the Department of Labor and Employment.
PHILSSEC disclaimed liability. As an entity catering computer systems and
program for business enterprises, it has contracted with SMC-Magnolia to
computerize the latters manual accounting reporting systems of its provincial
sales. PHILSSEC uses its computer system and technology and provided the
necessary manpower to compliment the transfer of the technology to
SMC-Magnolia. Complainant Maliksi was one of those employed by
PHILSSEC whose principal function was the manual control of data needed
during the computerization. Like all assigned to the project, the complainants
work was controlled by PHILSSEC supervisors, his salary paid by the agency
and he reported directly to PHILSSEC. The computerization project was
completed on 31 October 1990, and so, the complainant was terminated on the
said date.
SMC, on the other hand, submitted its position. In the contract SMC entered
with PHILSSEC, the latter undertook to set up the computerization of the
provincial sales reporting system of Magnolia Division. To carry out the task,
PHILSSEC utilized 3 computer programmers and the rest were data encoders.
SMC likewise contends that PHILSSEC exercised exclusive managerial
prerogative over the complainant as to hiring, payment of salary, dismissal and
most importantly, the control over his work. SMC was interested only in the
result of the work specified in the contract but not as to the means and methods
of accomplishing the same.
Moreover, what PHILSSEC set up employing the complainant, among others,
has no relation to the principal business of SMC, which is food and beverage. It
was a single relationship between the people utilized by PHILSSEC and SMC
Labor Arbiter declared Maliksi a regular employee of PHILSSEC and absolved
SMC from liability.
Maliksi appealed to the NLRC.
NLRC reversed the decision of the Labor Arbiter by declaring Maliksi a regular
employee of the petitioner and ordering the latter to reinstate him without loss
of seniority rights and with full benefits. e CA found SMC to have utilized
PHILSSEC, Lipercon Services, Inc. (Lipercon) and Skillpower, Inc. (Skillpower)
as conduits to circumvent Article 280 of the Labor Code, employing Maliksi as
contractual or project employee through these entities, thereby undermining his
right to gain regular employment status under the law.
The appellate court echoed the NLRCs assessment that Maliksis work was
necessary or desirable in the business of SMC in its Magnolia Division, for
more than the required one-year period. It affirmed the NLRCs finding that the
three (3) conduit entities adverted to, Lipercon and Skillpower, are labor-only
contractors such that Maliksis previous employment contracts with SMC,
through these two entities, are deemed to have been entered into in violation
of labor laws.
Consequently, Maliksis employment with SMC became permanent and regular
after the statutory period of one year of service through these entities. The CA
concluded that on account of his past employment contracts with SMC under
Lipercon and Skillpower, Maliksi was already a regular employee of SMC when
he entered into SMCs computerization project as part of the PHILSSEC project
complement.
ISSUE: Whether or not respondent Maliksi was under labor-only contracts
and subsequently a regular employee of San Miguel Corporation.
8|P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G AY ( L A B O R C A S E D I G E S T S -
Sept. 16)
RULING:
The Court ruled that respondent Maliksi was a regular employee of SMC. 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.
The Court find respondent Maliksi to be similarly situated with those of
the complainants in Madriaga. Indeed, Lipercon and Skillpower have figured in
not just a few of our decisions, so much so that we are inclined to believe that
these two were involved in labor-only contracting with respect to Maliksi. We
hold that the finding of the NLRC and the CA as to SMCs resorting to labor-only
contracting is entitled to consideration in its full weight.
With respect to PHILSSEC, there was no need for Maliksi to be
employed under the formers computerization program to be considered a
regular employee of SMC at the time. Moreover, SMC itself admits that Maliksis
work under the computerization program did not require the operation of a
computer system, such as the software program being developed by
PHILSSEC. Given this admission, we are simply at a loss to understand why
Maliksi should be included in the computerization project as a project
employee. Not being a computer expert, Maliksis inclusion in the project was
uncalled for. To our mind, his placement in the project was for the purpose of
circumventing labor laws. The evidence shows that immediately before he
entered the PHILSSEC project in October 1989, Maliksi was fresh out of his
employment with SMC (through Skillpower) as acting clerk assigned to
SMC-Magnolia Finance (from October 1988 to 1989).
Maliksis work under the PHILSSEC project was mainly administrative
in nature and necessary to the development of SMCs business. These were:
a. posting manually the daily account
balances in the workset;
b. fitting the daily totals into the monthly
totals;
 c. comparing the manual totals with the
computer generated totals;
d. locating the differences between the
totals; and,
e. adjusting and correcting errors.
Simply put, the data gathered by SMC on a daily basis through Maliksis work
would be submitted for analysis and evaluation, thereby allowing SMC to make
the necessary business decisions that would enable it to market its products
better, or monitor its sales and collection with efficiency. Without the data
gatherer or encoder, no analysis could occur. SMC would then, for the most
part, be kept in the dark.
8. SAN MIGUEL CORPORATION, petitioner vs. MAERC
GR NO. 144672 July 10, 2003
FACTS:
291 workers filed their complaints against San Miguel Corporation and Maerc
Integrated Services, Inc, for illegal dismissal, underpayment of wages,
non-payment of service incentive leave pays and other labor standards
benefits, and for separation pays The complainants alleged that they were
hired by San Miguel Corporation (SMC) through its agent or intermediary
Maerc Integrated Services, Inc. (MAERC) to work in 2 designated workplaces
in Mandaue City. They washed and segregated various kinds of empty bottles
used by SMC to sell and distribute its beer beverages to the consuming public.
They were paid on a per piece or pakiao basis except for a few who worked as
checkers and were paid on daily wage basis.
Complainants alleged that long before SMC contracted the services of MAERC
a majority of them had already been working for SMC under the guise of being
employees of another contractor, Jopard Services, until the services of the
latter were terminated on 31 January 1988.
SMC denied liability for the claims and averred that the complainants were not
its employees but of MAERC, an independent contractor whose primary
corporate purpose was to engage in the business of cleaning, receiving, sorting,
classifying, etc., glass and metal containers.
9|P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G AY ( L A B O R C A S E D I G E S T S -
Sept. 16)
In a letter dated 15 May 1991, SMC informed MAERC of the termination of their
service contract by the end of June 1991. SMC cited its plans to phase out its
segregation activities starting 1 June 1991 due to the installation of labor and
cost-saving devices.
When the service contract was terminated, complainants claimed that SMC
stopped them from performing their jobs; that this was tantamount to their
being illegally dismissed by SMC who was their real employer as their activities
were directly related, necessary and desirable to the main business of SMC;
and, that MAERC was merely made a tool or a shield by SMC to avoid its
liability under the Labor Code. MAERC admitted that it recruited the
complainants and placed them in the bottle segregation project of SMC but
maintained that it was only conveniently used by SMC as an intermediary in
operating the project.
MAERC for its part admitted that it recruited the complainants and placed them
in the bottle segregation project of SMC but maintained that it was only
conveniently used by SMC as an intermediary in operating the project or work
directly related to the primary business concern of the latter with the end in
view of avoiding its obligations and responsibilities towards the complaining
workers.
The Labor Arbiter rendered a decision holding that MAERC was an
independent contractor and dismissed the complaints for illegal dismissal but
ordered MAERC to pay complainants' separation benefits
The National Labor Relations Commission (NLRC) ruled that MAERC was a
labor-only contractor and that complainants were employees of SMC. The
NLRC also held that whether MAERC was a job contractor or a labor-only
contractor, SMC was still solidarily liable with MAERC for the latter's unpaid
obligations, citing Art. 1094 of the Labor Code. Thus, the NLRC modified the
judgment of the Labor Arbiter and held SMC jointly and severally liable with
MAERC for complainants' separation benefits.
SMC filed a petition for certiorari.
Court of Appeals denied the petition and affirmed the decision of the NLRC.
ISSUE: Whether the complainants are employees of petitioner SMC or of
respondent MAERC.
HELD: The Court ruled that employees are those of SMC. In ascertaining an
employer-employee relationship, the following factors are considered: (a) the
selection and engagement of employee; (b) the payment of wages; (c) the
power of dismissal; and, (d) the power to control an employee's conduct.
Evidence discloses that petitioner played a large and indispensable part in the
hiring of MAERC's workers. It also appears that majority of the complainants
had already been working for SMC long before the signing of the service
contract between SMC and MAERC in 1988.
In the case, the incorporators of MAERC admitted having supplied and
recruited workers for SMC even before MAERC was created. The NLRC also
found that when MAERC was organized into a corporation in February 1988,
the complainants who were then already working for SMC were made to go
through the motion of applying for work with Ms. Olga Ouano, President and
General Manager of MAERC.
As for the payment of workers' wages, SMC assumed the responsibility of
paying for the mandated overtime, holiday and rest day pays of the MAERC
workers. SMC also paid the employer's share of the SSS and Medicare
contributions, the 13th month pay, incentive leave pay and maternity benefits.
These lend credence to the complaining workers' assertion that while MAERC
paid the wages of the complainants, it merely acted as an agent of SMC.
SMC maintained a constant presence in the workplace through its own
checkers. The responsibility of watching over the MAERC workers by MAERC
personnel became superfluous with the presence of additional checkers from
SMC. Control of the premises in which the contractor's work was performed
was also viewed as another phase of control over the work, and this strongly
tended to disprove the independence of the contractor.
But the most telling evidence is a letter by Mr. Antonio Ouano, Vice-President
of MAERC addressed to Francisco Eizmendi, SMC President and Chief
Executive Officer, asking the latter to reconsider the phasing out of SMC's
segregation activities in Mandaue City. The letter attested to an arrangement
entered into by the two (2) parties which was not reflected in the Contract of
Services. A peculiar relationship mutually beneficial for a time but nonetheless
ended in dispute when SMC decided to prematurely end the contract leaving
MAERC to shoulder all the obligations to the workers.
MAERC, as earlier discussed, displayed the characteristics of a labor-only
contractor. Moreover, while MAERC's investments in the form of buildings,
tools and equipment amounted to more than P4 Million, we cannot disregard
10 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G A Y ( L A B O R C A S E
DIGESTS- Sept. 16)
the fact that it was the SMC which required MAERC to undertake such
investments under the understanding that the business relationship between
petitioner and MAERC would be on a long term basis. Nor do we believe
MAERC to have an independent business. Not only was it set up to specifically
meet the pressing needs of SMC which was then having labor problems in its
segregation division, none of its workers was also ever assigned to any other
establishment, thus convincing us that it was created solely to service the
needs of SMC. Naturally, with the severance of relationship between MAERC
and SMC followed MAERC's cessation of operations, the loss of jobs for the
whole MAERC workforce and the resulting actions instituted by the workers.
The Court ruled that respondent Maerc Integrated Services, Inc. is declared to
be a labor-only contractor. Accordingly, both petitioner San Miguel Corporation
and respondent Maerc Integrated Services, Inc., are ordered to jointly and
severally pay complainants (private respondents herein) separation benefits
and wage differentials as may be finally recomputed by the Labor Arbiter
9. 7K CORPORATION v. NLRC
G.R. No. 148490 Nov. 22, 2006
FACTS: In February of 1997, petitioner 7K Corporation and Universal Janitorial
and Allied Services (Universal) entered into a service contract where the latter
bound itself to provide petitioner with drivers at the rate of P4, 537.00 per driver
a month.
- Sometime in March and April 1997, Rene Corona and Alex Catingan (private
respondents) were interviewed by petitioner. Corona then started working with
petitioner on March 7, 1997 while Catingan started on April 11, 1997. Pursuant
to the service contract, petitioner paid Universal the sum of P 4, 367.00 per
driver. As to overtime pay, petitioner directly paid the private respondents.
- A controversy arose when the overtime paid by the accounting department of
petitioner was short of the actual overtime rendered by the private
respondents. Their time cards reflected that they had overtime up to 70 hours
however, it was reduced to 20 hours only. After grievances were repeatedly
ignored, they filed separate complaints for illegal dismissal, payment of salary
differentials, unpaid overtime and reinstatement with backwages against
Universal and/or petitioner before the Labor Arbiter.
LABOR ARBITER: Declared Universal as the employer of the private
respondents. He also held that the respondents were illegally dismissed, thus
entitled to backwages and separation pay. He gave weight to the service
contract between petitioner and Universal which provided that:
‘’The Contractor [Universal] shall continue to be the employer
of the workers assigned to the clients [petitioners] premises and shall
assume all responsibilities of an employer as provided for under the
Labor Code of the Philippines, and shall be solely responsible to its
employees for labor laws, rules and regulations, particularly those
relating to minimum wage, overtime pay, holiday pay, thirteenth month
pay and similar labor standards. The Contractor shall exercise in full its
power of control and supervision over the workers assigned. The
Contractor shall monitor the conduct of its workers in their working
conditions.’’
- Universal appealed to the NLRC claiming that it is petitioner which is the
employer of the private respondents because it was petitioner which hired and
accepted the two as its drivers. It was petitioner which had direct control and
supervision over the two. It also claimed that the private respondents were not
illegally dismissed, thus, they are not entitled to backwages and reinstatement.
NLRC: Modified LA’s decision. It found that Universal is a labor-only contractor
since it does not have substantial capital or investment in the form of tools,
equipments, machineries and the like, and the workers recruited are
performing activities which are directly related to the principal business of the
employer.
- It further held that since Universal is a labor-only contractor, petitioner, as the
principal employer, is solidarily liable with Universal for all the rightful claims of
private respondents. No illegal dismissal as the LA failed to identify who
dismissed the complainants.
- Both petitioner and private respondents filed their motions for reconsideration
but the NLRC issued a resolution denying their respective motions for
reconsideration. The Commission did not exceed its jurisdiction when it
modified the Labor Arbiters decision. The Commission merely defined the
relationship between complainants and the respondent firms in accordance
with the provisions of Articles 107 and 109 in relation to Article 106 of the Labor
Code. The fact that complainants did not appeal therefrom will not deprive the
Commission from entertaining the appeal of Universal.
- Petitioner went to the CA on a petition for certiorari claiming that the NLRC
gravely abused its discretion when it petitioner which was not a party to the
11 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G A Y ( L A B O R C A S E
DIGESTS- Sept. 16)
appealed case, and by ignoring the fact that the LA decision has already
become final and executory.
CA: Dismissed the petition and ruled that: Universal’s appeal to the NLRC was
regularly filed; petitioner failed to substantiate its claim that the LA decision had
become final and executory; petitioners claim that the LAs decision was
already final with respect to them and the private respondents is without merit,
because when a party files a seasonable appeal. In this case, Universal, the
whole case goes up to the appellate court for review and all the parties below
automatically become parties on appeal; the cases cited by petitioner to
support its argument that the NLRC cannot modify the award granted to an
employee who did not appeal the decision of the LA are not applicable to the
case at bar since in the said cases, the NLRC modified the LAs decision and
gave additional awards to employees who did not appeal; in this case, there
was no additional award given and some of the awards granted by the LA were
even deleted; Universal is a labor-only contractor as defined under Art. 106,
par. 4 of the Labor Code; Universal admitted such fact in its appeal
memorandum when it stated that the power of control over complainants was
vested in and exercised by petitioner.
ISSUES: Whether or not the CA gravely erred:
(1) In not holding that the NLRC had no jurisdiction to entertain the belated
appeal of Universal as the decision of the LA becomes final and executory;
(2) In not holding that the NLRC exceeded its authority in declaring that
Universal is a Labor-only contractor.
- Petitioner argues that private respondents and petitioner did not appeal from
the decision of the LA, thus such decision becomes final and executory. As the
Universal did not file a position paper with the LA, its right to appeal with the
NLRC should be deemed foreclosed.
HELD:
(1) NO. The NLRC had acquired jurisdiction over the appeal of Universal. The
contention of the petitioner is not supported by records. Universal received the
LA decision on December 15, 1998. The NLRC also categorically held that
Universal’s appeal was regularly filed. Also, without merit is the contention that
since petitioner and private respondents did not appeal the decision of LA,
such has become final as far as they are concerned.
- The records show that Universal filed a timely appeal before the NLRC
therefore, the decision of the LA has not become final and executory.
(2) NO. The fact that the service contract entered into by petitioner and
Universal stipulated that private respondents shall be the employees of
Universal, would not help petitioner, as the language of a contract is not
determinative of the relationship of the parties. Petitioner and Universal cannot
dictate, by the mere expedient of a declaration in a contract, the character of
Universals business, i.e., whether as labor-only contractor, or job contractor, it
being crucial that Universals character be measured in terms of and determined
by the criteria set by statute.
‘’Art. 106 of the Labor Code provides that there is labor-only
contracting where (1) the person supplying workers to an employer
does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises, among others, and (2) the
workers recruited and placed by such person are performing activities
which are directly related to the principal business of such employer.’’
Sec. 4 (f), Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code further defines labor-only contracting as follows:
(f) Labor-only contracting prohibited under this Rule
is an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform a job,
work or service for a principal, and the following elements are
present:
i) The contractor or subcontractor does not have
substantial capital or investment to actually perform the job,
work or service under its own account and responsibility; and
ii) The employees recruited, supplied or placed
by such contractor or subcontractor are performing activities
which are directly related to the main business of the
principal.
- Petitioner’s main argument is that since there is no proof that Universal does
not have substantial capital, then Universal should be considered as a
legitimate job contractor and not a labor-only contractor. Such contention is
incorrect.
12 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G A Y ( L A B O R C A S E
DIGESTS- Sept. 16)
- The presumption is that a contractor is a labor-only contractor unless such
contractor overcomes the burden of proving that it has substantial capital,
investment, tools and the like. The employees, in this case, private
respondents, should not be expected to prove the negative fact that the
contractor does not have substantial capital, investment and tools to engage in
job-contracting.
- Since neither petitioner nor Universal was able to adduce evidence that
Universal had any substantial capital, investment or assets to perform the work
contracted for, the presumption that Universal is a labor-only contractor stands.
- Thus, petitioner, the principal employer, is solidarily liable with Universal, the
labor-only contractor, for the rightful claims of the employees.1[30] Under this
set-up, Universal, as the labor-only contractor, is deemed an agent of the
principal, herein petitioner, and the law makes the principal responsible to the
employees of the labor-only contractor as if the principal itself directly hired or
employed the employees.
- Even granting en arguendo that Universal is a legitimate job contractor and not
a labor-only contractor, still petitioner cannot escape liability because even
without a direct employer-employee relationship between the principal
employer and the employees, the former is still jointly and severally liable with
the job contractor for the employees monetary claims2[32] following Arts. 106,
107 and 109 of the Labor Code, to wit:
Art. 106. Contractor or subcontractor. Whenever an employer
enters into a contract with another person for the performance of the formers
work, the employees of the contractor and the latters subcontractor, if any, shall
be paid in accordance with the provisions of this Code.
 In the event that the contractor or subcontractor fails to pay the wages
of his employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
xxx
Art. 107. Indirect employer. The provisions of the
immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not
being an employer contracts with an independent contractor
for the performance of any work, task, job or project.
xxx
Art. 109. Solidary liability. - The provisions of
existing laws to the contrary notwithstanding, every employer
or indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any provision
of this Code. For purposes of determining the extent of their
civil liability under this Chapter, they shall be considered as
direct employers.
- As the claim of private respondents in this case involve only monetary claims
that fall within the purview of wages, petitioner, even if found as the principal
employer in a legitimate job contracting, is still liable to them for the payment of
such claims.
10. GSIS v. NLRC
G.R. No. 180045 Nov. 17, 2010
FACTS: Respondents were employed as security guards by DNL Security
Agency. By virtue of the service contract entered into by DNL Security and
petitioner Government Service Insurance System on May 1, 1978, respondents
were assigned to petitioners Tacloban City office, each receiving a monthly
income of P1, 400.00. Sometime in July 1989, petitioner voluntarily increased
respondents monthly salary to P3,000.00.
- In February 1993, DNL Security informed respondents that its service contract
with petitioner was terminated. This notwithstanding, DNL Security instructed
respondents to continue reporting for work to petitioner. Respondents worked
as instructed until April 20, 1993, but without receiving their wages; after which,
they were terminated from employment.
13 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A
DIGESTS- Sept. 16)
- Respondents filed with the NLRC a complaint against DNL Security and
petitioner for illegal dismissal, separation pay, salary differential, 13th month
pay, and payment of unpaid salary.
LABOR ARBITER: Rendered a decision against DNL Security and petitioner.
Found that respondents were not illegally terminated from employment
because the employment of security guards is dependent on the service
contract between the security agency and its client. However, considering that
respondents had been out of work for a long period, and consonant with the
principle of social justice, the LA awarded respondents with separation pay
equivalent to one (1) month salary for every year of service, to be paid by DNL
Security. Because DNL Security instructed respondents to continue working for
petitioner from February 1993 to April 20, 1993, DNL Security was also made to
pay respondents wages for the period.
- The LA further granted respondents claim of salary differential, as they were
paid wages below the minimum wage as well as 13 th month pay. For these,
petitioner was made solidarily liable with DNL Security, as the indirect employer
of respondents.
- DNL Security filed a motion for reconsideration, while petitioner appealed to
the NLRC.
NLRC: Treated DNL Security’s motion for reconsideration as an appeal, but
dismissed the same, as it was not legally perfected. It likewise dismissed
petitioners appeal, having been filed beyond the reglementary period.
- Undaunted, petitioner filed a petition for certiorari under Rule 65 of the Rules
of Court before the CA.
CA: Affirmed the NLRC decision. Petitioner filed a motion for reconsideration
but the same was denied. Hence, this petition.
ISSUES:
(1) Whether or not the CA erred in ruling that the appeal was not filed on time;
and
(2) Whether or not the CA erred in ruling that petitioner GSIS is jointly and
severally liable with DNL Security Agency for payment of the unsubstantiated
amounts of Salary Differentials.
HELD:
(1) Timeliness of an appeal is a factual issue. It requires a review or evaluation
of the evidence which would show when the appeal was actually mailed to and
L ES C. MORAL ES I, UMANGAY (L ABOR CASE
received by the NLRC. In this case, to prove that it mailed the notice of appeal
and appeal memorandum on October 27, 1997, instead of October 28, 1997,
as shown by the stamped date on the envelope, petitioner presented Registry
Receipt No. 34581 bearing the earlier date.
- Under Section 3, Rule 13 of the Rules of Court, where the filing of pleadings,
appearances, motions, notices, orders, judgments, and all other papers with the
court/tribunal is made by registered mail, the date of mailing, as shown by the
post office stamp on the envelope or the registry receipt, shall be considered as
the date of filing.
- Thus, the date of filing is determinable from two sources: from the post office
stamp on the envelope or from the registry receipt, either of which may suffice to
prove the timeliness of the filing of the pleadings. If the date stamped on one is
earlier than the other, the former may be accepted as the date of filing. This
presupposes, however, that the envelope or registry receipt and the dates
appearing thereon are duly authenticated before the tribunal where they are
presented.
- In exceptional cases, a belated appeal may be given due course if greater
injustice will be visited upon the party should the appeal be denied. In any case,
even if the appeal was filed one day late, the same should have been
entertained by the NLRC. Indeed, the appeal must be perfected within the
statutory or reglementary period. This is not only mandatory, but also
jurisdictional. Failure to perfect the appeal on time renders the assailed decision
final and executory and deprives the appellate court or body of the legal
authority to alter the final judgment, much less entertain the appeal. However,
this Court has, time and again, ruled that, in exceptional cases, a belated appeal
may be given due course if greater injustice will be visited upon the party should
the appeal be denied. The Court has allowed this extraordinary measure even
at the expense of sacrificing order and efficiency if only to serve the greater
principles of substantial justice and equity.
- Technicality should not be allowed to stand in the way of equitably and
completely resolving the rights and obligations of the parties. We have
consistently held that technical rules are not binding in labor cases and are not
to be applied strictly if the result would be detrimental to the working man.
- The Court notes, however, that while the CA affirmed the dismissal by the
NLRC of petitioners appeal for being filed out of time, it nonetheless delved into
the merits of the case. This notwithstanding, we do not entirely agree with the
appellate courts conclusion affirming in toto the LA decision.
14 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G A Y ( L A B O R C A S E
DIGESTS- Sept. 16)
- The court is constrained to review the merits of the case.
(2) NO. The petitioner is declared solidary liable with DNL Security to pay
respondents their wage differentials, 13th month pay and unpaid wages but is
exonerated from paying their separation pay.
- The fact that there is no actual and direct employer-employee relationship
between petitioner and respondents does not absolve the former from liability
for the latter’s monetary claims. When petitioner contracted DNL Security’s
services, petitioner became an indirect employer of respondents, pursuant to
Article 107 of the Labor Code:
ART. 107. Indirect employer. The provisions of the immediately
preceding Article shall likewise apply to any person, partnership, association or
corporation which, not being an employer, contracts with an independent
contractor for the performance of any work, task, job or project.
- After DNL Security failed to pay respondents the correct wages and other
monetary benefits, petitioner, as principal, became jointly and severally liable,
as provided in Articles 106 and 109 of the Labor Code, which state:
ART. 106. Contractor or subcontractor. Whenever an employer enters
into a contract with another person for the performance of the formers work, the
employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
ART. 109. Solidary liability. The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers.
- Petitioners liability covers the payment of respondent's salary differential and
13th month pay during the time they worked for petitioner. In addition, petitioner
is solidarily liable with DNL Security for respondents unpaid wages from
February 1993 until April 20, 1993. While it is true that respondents continued
working for petitioner after the expiration of their contract, based on the
instruction of DNL Security, petitioner did not object to such assignment and
allowed respondents to render service. Thus, petitioner impliedly approved the
extension of respondents services.
- Accordingly, petitioner is bound by the provisions of the Labor Code on indirect
employment. Petitioner cannot be allowed to deny its obligation to respondents
after it had benefited from their services. So long as the work, task, job, or
project has been performed for petitioners benefit or on its behalf, the liability
accrues for such services. The principal is made liable to its indirect employees
because, after all, it can protect itself from irresponsible contractors by
withholding payment of such sums that are due the employees and by paying
the employees directly, or by requiring a bond from the contractor or
subcontractor for this purpose.
- Petitioner's liability, however, cannot extend to the payment of separation pay.
An order to pay separation pay is invested with a punitive character, such that
an indirect employer should not be made liable without a finding that it had
conspired in the illegal dismissal of the employees.
- It should be understood, though, that the solidary liability of petitioner does not
preclude the application of Article 1217 of the Civil Code on the right of
reimbursement from its co-debtor. To be sure, petitioner’s charter should not be
used to evade liabilities to its employees, even to its indirect employees, as
mandated by the Labor Code.
11. ALVIADO vs PROCTER & GAMBLE PHILS.
FACTS: Petitioners worked as merchandisers of P&G from various dates,
allegedly starting as early as 1982 or as late as June 1991, to either May 5,
1992 or March 11, 1993. They all individually signed employment contracts with
either Promm-Gem or SAPS for periods of more or less five months at a time.
They were assigned at different outlets, supermarkets and stores where they
handled all the products of P&G. They received their wages from Promm-Gem
or SAPS.
SAPS and Promm-Gem imposed disciplinary measures on erring
merchandisers for reasons such as habitual absenteeism, dishonesty or
changing day-off without prior notice.
P&G is principally engaged in the manufacture and production of different
consumer and health products, which it sells on a wholesale basis to various
supermarkets and distributors. To enhance consumer awareness and
15 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G A Y ( L A B O R C A S E
DIGESTS- Sept. 16)
acceptance of the products, P&G entered into contracts with Promm-Gem and
SAPS for the promotion and merchandising of its products.
In December 1991, petitioners filed a complaint against P&G for regularization,
service incentive leave pay and other benefits with damages. The complaint
was later amended to include the matter of their subsequent dismissal.
LA—dismissed the complaint for lack of merit and ruled that there was no
employer-employee relationship between petitioners and P&G.
He found that the selection and engagement of the petitioners, the
payment of their wages, the power of dismissal and control with
respect to the means and methods by which their work was
accomplished, were all done and exercised by Promm-Gem/SAPS.
He further found that Promm-Gem and SAPS were legitimate
independent job contractors.
NLRC—dismissed the appeal.
CA—denied the appeal.
Hence, this petition.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim that
they were recruited by the salesmen of P&G and were engaged to
undertake merchandising chores for P&G long before the existence of
Promm-Gem and/or SAPS. They further claim that when the latter had
its so-called re-alignment program, petitioners were instructed to fill
up application forms and report to the agencies which P&G created.
Petitioners further claim that P&G instigated their dismissal from work
as can be gleaned from its letter[19to SAPS dated February 24, 1993,
informing the latter that their Merchandising Services Contract will no
longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-only
contractors providing services of manpower to their client. They claim
that the contractors have neither substantial capital nor tools and
equipment to undertake independent labor contracting. Petitioners
insist that since they had been engaged to perform activities which
 are necessary or desirable in the usual business or trade of P&G, then
they are its regular employees.
Respondents Arguments
On the other hand, P&G points out that the instant petition raises only
questions of fact and should thus be thrown out as the Court is not a
trier of facts. It argues that findings of facts of the NLRC, particularly
where the NLRC and the Labor Arbiter are in agreement, are deemed
binding and conclusive on the Supreme Court.
P&G further argues that there is no employment relationship between
it and petitioners. It was Promm-Gem or SAPS that (1) selected
petitioners and engaged their services; (2) paid their salaries; (3)
wielded the power of dismissal; and (4) had the power of control over
their conduct of work.
P&G also contends that the Labor Code neither defines nor limits
which services or activities may be validly outsourced. Thus, an
employer can farm out any of its activities to an independent
contractor, regardless of whether such activity is peripheral or core in
nature. It insists that the determination of whether to engage the
services of a job contractor or to engage in direct hiring is within the
ambit of management prerogative.
ISSUE: Whether P&G is the employer of petitioners.
RULING: YES.
In order to resolve the issue of whether P&G is the employer of petitioners, it is
necessary to first determine whether Promm-Gem and SAPS are labor-only
contractors or legitimate job contractors.
Clearly, the law and its implementing rules allow contracting arrangements for
the performance of specific jobs, works or services. However, in order for such
outsourcing to be valid, it must be made to an independent contractor because
the current labor rules expressly prohibit labor-only contracting.
To emphasize, there is labor-only contracting when the contractor or
sub-contractor merely recruits, supplies or places workers to perform a job,
work or service for a principal and any of the following elements are present:
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DIGESTS- Sept. 16)
i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed
andthe employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to
the main business of the principal; or
ii) The contractor does not exercise the right to control over the
performance of the work of the contractual
Under the circumstances, Promm-Gem cannot be considered as a labor-only
contractor. We find that it is a legitimate independent contractor.
Considering that SAPS has no substantial capital or investment and the
workers it recruited are performing activities which are directly related to the
principal business of P&G, we find that the former is engaged in “labor-only
contracting”.
Where labor-only contracting exists, the Labor Code itself establishes an
employer-employee relationship between the employer and the employees of
the labor-only contractor. The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer.
12.DE CASTRO ET AL vs COURT OF APPEALS
FACTS: Nuvoland, a corporation formed primarily "to own, use, improve,
develop, subdivide, sell, exchange, lease and hold for investment or otherwise,
real estate of all kinds, including buildings, houses, apartments and other
structures," was registered with the Securities and Exchange Commission
(SEC) on August 9, 2006. Respondent Ramon Bienvenida (Bienvenida) was
the principal stockholder and member of the Board of Directors while Raul
Martinez (Martinez) was its President.
Silvericon, on the other hand, was registered with the SEC on December 19,
2006. Its Articles: of Incorporation described it as a "corporation organized 'to
own, use, improve, develop, subdivide, sell, exchange, lease and hold for
investment or otherwise, real estate of all kinds, including buildings, houses,
apartments and other structures.'"
Martinez recruited petitioner Edward de Castro (De Castro), a sales and
marketing professional in the field of real estate, to handle its sales and
marketing operations, including the hiring and supervision of the sales and
marketing personnel. To formalize this undertaking, De Castro was made to
sign a Memorandum of Agreement (MOA), denominated as Shareholders
Agreement, wherein Martinez proposed to create a new corporation, through
which the latter's compensation, benefits and commissions, including those of
other sales personnel, would be coursed. It was stipulated in the said MOA that
the new corporation would have an authorized capital stock of P4,000,000.00,
of which P1,000,000.00 was subscribed and paid equally by the Martinez
Group and the De Castro Group.
As it turned out, the supposedly new corporation contemplated was Silvericon.
De Castro was appointed the President and majority stockholder of Silvericon
while Bienvenida and Martinez were named as stockholders and incorporators
thereof, each owning one (1) share of subscribed capital stock.
In the same MOA, Martinez was designated as Chairman of the new
corporation to whom De Castro, as President and Chief Operating Officer,
would directly report. De Castro was tasked to manage the day to day
operations of the new corporation based on policies, procedures and strategies
set by Martinez.
During De Castro's tenure as Chief Operating Officer of the newly created
Silvericon, he recruited forty (40) sales and marketing personnel. One of them
was petitioner Ma. Girlie F. Platon (Platon) who occupied the position of
Executive Property Consultant.
Thereafter, the Sales and Marketing Agreement (SMA), was purportedly
executed by Nuvoland and Silvericon, stipulating that all payments made for
the condominium projects of Nuvoland were to be given directly to it. Clients
secured by the sales and marketing personnel would issue checks payable to
Nuvoland while the cash payments, as the case may be, were deposited to
Nuvoland's account. Meanwhile, the corresponding sales commission of the
sales personnel were issued to them by Nuvoland, with Martinez signing on
behalf of the said company.
In a Letter, signed by Bienvenida, Nuvoland terminated the SMA on the ground
that Silvericon personnel committed an unauthorized walkout and
abandonment of the Nuvo City Showroom for two (2) days. In the same letter,
Nuvoland demanded that Silvericon make a full accounting of all its uses of the
marketing advances from Nuvoland. It, however, assured that all sales
commissions earned by Silvericon personnel would be released as per existing
policy.
17 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O
DIGESTS- Sept. 16)
After the issuance of the said termination letter, De Castro and all the sales and
marketing personnel of Silvericon were barred from entering the office
premises.
De Castro and Platon filed a complaint for illegal dismissal before the LA,
demanding the payment of their unpaid wages, commissions and other
benefits with prayer for the payment of moral and exemplary damages and
attorney's fees against Silvericon, Nuvoland, Martinez, Bienvenida, and the
Board of Directors of Nuvoland.
LA—rendered decision in favor of De Castro and Platon. He concluded that
Silvericon was a mere labor-only contractor and, therefore, a mere agent of
Nuvoland.
Nuvoland was adjudged as the direct employer of De Castro and
Platon and, thus, liable to pay their money claims as a consequence
of their illegal dismissal. According to the LA, the ground relied upon
for the termination of the employment of De Castro and Platon -
abandonment of the Nuvo City Showroom - was not at all proven.
Mere suspicion that De Castro instigated the walkout did not
discharge the burden of proof which heavily rested on the employer.
Without an unequivocal showing that an employee deliberately and
unjustifiably refused his employment sans any intention to return to
work, abandonment as a cause for dismissal could not stand. Worse,
procedural due process could not be said to have been observed
through the expediency of a letter in contravention to Article 277,
paragraph 2 of the Labor Code.
NLRC—reversed the decision of the LA.
In its view, in the SMA, Silvericon had full discretion on how to perform
and conduct its marketing and sales tasks; and there was no showing
that Nuvoland had exercised control over the method of sales and
marketing strategies used by Silvericon. The NLRC further concluded
that Silvericon had substantial capital. It pointed out that in several
cases decided by the Court, even an amount less than One Million
Pesos was sufficient to constitute : substantial capital; and so to
require Silvericon to prove that it had investments in the form of tools,
equipment, machinery, and work premises would be going beyond
what the law and jurisprudence required. Hence, it could not consider
Silvericon as a dummy corporation of Nuvoland organized to
effectively evade the latter's obligation of providing employment
benefits to its sales and marketing agents. This being the case, the
RAL ES C. MORAL ES I, UMANGAY (L ABOR CASE
 NLRC ruled that no employer-employee relationship existed between
Nuvoland, on one hand, and De Castro and Platon, on the other.
There was no evidence showing that Nuvoland hired, paid wages,
dismissed or controlled De Castro and Platon, or anyone of
Silvericon's employees. Resultantly, Martinez and Bienvenida could
not be held liable for they merely acted as officers of Nuvoland.
CA—affirmed the finding of the NLRC
Pointing out that what was terminated was the SMA. As such, the
employment of the forty (40) personnel hired by Silvericon, as well as
the petitioners' employment, was not affected. Considering that there
was no employer-employee relationship between the petitioners and
Nuvoland, the CA deemed that the latter could not be held liable for
the claim of illegal dismissal. Even assuming that De Castro was
illegally dismissed, the CA opined that the NLRC was correct in
refraining from taking cognizance of the complaint because De
Castro's employment with Silvericon put him within the ambit of
Section 5.2 of Republic Act (R.A.) No. 8799, otherwise known as The
Securities Regulation Code. As such, his claim should have been
brought before the Regional Trial Court (RTC) instead.
Hence, this petition.
ISSUE: Whether or not Silvercon is a labor-only contractor.
RULING: YES.
In the present case, the Court is hounded by nagging doubts in its review of the
assailed decision. Several factors showing that Silvericon was not an
independent contractor were, conveniently brushed aside resulting in an unjust
outcome. For clarity, the Court lists down these factors, most of which were left
unexplained by the respondents.
First. As earlier pointed out, D.O. 18-02 expressly provides for a registration
requirement. Remarkably, the respondents do not deny the apparent
non-compliance with the rules governing independent contractors.
This failure on the part of Silvericon reinforces the Court's view that it was
engaged in labor-only contracting. Nuvoland did not even bother to make
Silvericon comply with this vital requirement had it really entered into a
legitimate contracting arrangement with a truly independent outfit. The efforts
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DIGESTS- Sept. 16)
which the two corporations have put into the drafting of the SMA belie mere
inadvertence and heedlessness on this matter.
Second. D.O. No. 18-A, series of 2011, defines substantial capital as the
paid-up capital stocks/shares of at least P3,000,000.00 in the case of
corporations, partnerships and cooperatives. This amount was set with
speciflty to avoid the subterfuge resorted to by entities with the intention to
circumvent the law. As things now stand, even the subscribed capital of
Silvericon was a far cry from the amount set by the rules. It is important to note
that at the time Nuvoland engaged the services of Silvericon, the latter's
authorized stock capital was P4,000,000.00, out of which only P1,000,000.00
was subscribed.
Third. Silvericon had no substantial equipment in the form of tools, equipment,
machinery, and work premises. Records reveal that Nuvoland itself designed
and constructed the model units used in the sales and marketing of its
condominium units. This indisputably proves that at the time of its engagement,
Silvericon had no such investment necessary for the conduct of its business.
Fourth. Although it is true that the respondents had explicitly assailed the
authenticity of the MO A attached with the petition, their faint denial fails to
explain the exclusivity which had characterized the relationship between
Nuvoland and Silvericon. If Silvericon was an independent contractor, it is only
but logical that it should have also offered its services to the public.
Fifth. The respondents do not deny that Nuvoland and Silvericon shared the
same officers and employees: respondents Bienvenida and Martinez were
stockholders and incorporators thereof while De Castro was the President and
majority stockholder of Silvericon. At the same time, Bienvenida was a principal
stockholder and member of the Board of Directors of Nuvoland while Martinez
was Nuvoland's President. Admittedly, this fact alone does not give rise to an
inference that Nuvoland and Silvericon are one and the same. It effectively
sows doubt, however, when taken together with the other indicators of
labor-only contracting, as previously discussed.
Sixth. As additional basis of this outcome, the Court highlights the presence of
the elements of an employer-employee relationship between the parties. In
determining the presence or absence of an employer-employee relationship,
the Court has consistently looked for the following incidents, to wit; (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee on
the means and methods by which the work is accomplished. The last element,
the so-called control test, is the most important element.[29] Jurisprudentially
RAL ES C. MORAL ES I, UMANGAY (L ABOR CASE
speaking, there is no hard and fast rule designed to establish the aforesaid
elements. It depends on the peculiar facts of each case.[30] Here, the Court
acknowledges the findings of the LA since the inception of this legal
controversy.
As regards the power of control, the only argument raised by the respondents
was the inclusion of a provision in the SMA which stated that Silvericon, as its
agent, "shall be responsible for all advertisements, promotions, public relations,
special events, marketing collaterals, road shows, open houses, etc. as part of
its marketing efforts."
For Nuvoland, this provision in the SMA showed that Silvericon exercised full
and exclusive control over all levels of work, especially as to the means
thereof. Regrettably, the existence of the subject provision would not cause an
automatic proposition that Silvericon exercised control over the work of its
personnel. A clear showing of Silvericon's control over its day-to-day operations
and ultimate work performance would have dispelled any doubt, but Nuvoland
fell short on this score. Worse, it again opted for silence when the petitioners
alleged that Nuvoland provided the work premises of the sales and marketing;
personnel of Silvericon; that Nuvoland dictated the end result of the
undertaking, that is, to sell at least eighty percent of the condominium project
within a period of twenty-four months; that Nuvoland decided on the models,
designs and prices of the units; that Nuvoland was the ultimate recipient of all
amounts collected by the sales and marketing team; and lastly, Nuvoland
determined the maximum amount of marketing expenses for the
accomplishment of the goal.
13. NASIPIT LUMBER v. NWPC
FACTS: The Region X Board on 1990 issued Wage Order No. RX-01 which
increases the minimum wage rates applicable to workers and employees in the
private sector in Northern Mindanao (Region X). Subsequently, a
supplementary Wage Order No. RX-01-A was issued by the Board on
November 6, 1990 which provides all workers and employees in the private
sector in Region X already receiving wages above the statutory minimum wage
rates up to one hundred and twenty pesos (P120.00) per day shall also receive
an increase of P13, P11, P9 per day, as provided for under Wage Order No.
RX-01.
Petitioner together with PWC and ALCO claiming to be separate and
distinct from each other but for expediency and practical purposes, jointly filed
an application for exemption from the above-mentioned Wage Orders as
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DIGESTS- Sept. 16)
distressed establishments under Guidelines No. 3, issued by the herein Board
on November 26, 1990, specifically Sec. 3(2) thereof which, among others.
Petitioners aver that they are engaged in logging and integrated wood
processing industry but are distressed due to conditions beyond their control,
to wit: 1) Depressed economic conditions due to worldwide recession; 2)
Peace and order and other emergency-related problems causing disruption
and suspension of normal logging operations; 3) Imposition of environmental
fee for timber production in addition to regular forest charges; 4) Logging
moratorium in Bukidnon; 5) A reduction in the annual allowable volume of cut
logs of NALCO & ALCO by 59%; 6) Highly insufficient raw material supply; 7)
Extraordinary increases in the cost of fuel, oil, spare parts, and maintenance; 8)
Excessive labor cost/production ratio that is more or less 47%; and 9) Lumber
export ban.
While Respondents jointly opposed the application for exemption on
the ground that said companies are not distressed establishments since their
capitalization has not been impaired by 25%.
 RTWBP – approved Respondent’s joint application
Dissatisfied with the RTWPB's Decision, the private respondents lodged an
appeal with the NWPC.
 NWPC – affirmed ALCO's application but reversed the
applications of herein petitioners, NALCO and PWC. The
NWPC reasoned.
NWPC’s reason: The fact that applicant companies relied in good faith upon
Guidelines No. 3 issued by the Board a quo, the same is not sufficient reason
that they should be assessed based on the criteria of said Guidelines
considering that it does not conform to the policies and guidelines relative to
wage exemption issued by this Commission pursuant to Republic Act 6727.
Consequently, it has no force and effect.
As such, said Guidelines No. 3 cannot therefore be a source of a right no matter
if one has relied on it in good faith. In like manner that the workers, who are
similarly affected, cannot be bound thereof. Moreover, even assuming that
Guidelines No. 3 conforms to the procedural requirement, still, the same cannot
be given effect insofar as it grants exemption by industry considering that the
subject Wage Order mentioned only distressed establishments as one of those
to be exempted thereof. It did not mention exemption by industries.
Well-settled is the rule that an implementing guidelines [sic] cannot expand nor
limit the provision of [the] law it seeks to implement. Otherwise, it shall be
considered ultra vires. And, contrary to applicant companies' claim, this
Commission does not approve rules implementing the Wage Orders issued by
the Regional Tripartite Wages and Productivity Boards. Perforce, it cannot be
said that this Commission has approved the Rules Implementing Wage Order
No[s]. RX-01 and RX-01 A.
Petitioners contend that the NWPC gravely abused its discretion in
overturning the RTWPB's approval of their application for exemption from
Wages Orders RX-01 and RX-01-A. They argue that under Art. 122 (e) of the
Labor Code, the RTWPB has the power "[t]o receive, process and act on
applications for exemption from prescribed wage rates as may be provided by
law or any wage order."
They also maintain that no law expressly requires the approval of the NWPC for
the effectivity of the RTWPB's Guideline No. 3. Assuming arguendo that the
approval of the NWPC was legally necessary, petitioners should not be
prejudiced by their observance of the guideline, pointing out that the NWCP's
own guidelinestook effect "only on March 18, 1991 long after Guideline No. 3
was issued on November 26, 1990." Lastly, they posit that the NWPC
guidelines "cannot be given retroactive effect as [they] will effect or change the
petitioners' vested rights."
ISSUE: WON guideline issued by an RTWPB without the approval of or, worse,
contrary to the guidelines promulgated by the NWPC valid?
RULING: The Court ruled that power to prescribe guidelines lodged in the
NWPC, not in the RTWPB. RA 6727 (the Wage Rationalization Act), amending
the Labor Code, created both the NWPC and the RTWPB and defined their
respective powers. Article 121 of the Labor Code lists the powers and functions
of the NWPC. Article 122 of the Labor Code, on the other hand, prescribes the
powers of the RTWPB.
The foregoing clearly grants the NWPC, not the RTWPB, the power to
"prescribe the rules and guidelines" for the determination of minimum wage and
productivity measures. While the RTWPB has the power to issue wage orders
20 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G A Y ( L A B O R C A S E
DIGESTS- Sept. 16)
under Article 122 (b) of the Labor Code, such orders are subject to the
guidelines prescribed by the NWPC. One of these guidelines is the "Rules on
Minimum Wage Fixing," which was issued on June 4, 1990.\Rule IV, Section 2
thereof, allows the RTWPB to issue wage orders exempting enterprises from
the coverage of the prescribed minimum wages. However, the NWPC has the
power not only to prescribe guidelines to govern wage orders, but also to issue
exemptions therefrom, as the said rule provides that "[w]henever a wage order
provides for exemption, applications thereto shall be filed with the appropriate
Board which shall process the same, subject to guidelines issued by the
Commission." In short, the NWPC lays down the guidelines which the RTWPB
implements.
Significantly, the NWPC authorized the RTWPB to issue exemptions
from wage orders, but subject to its review and approval. Since the NWPC
never assented to Guideline No. 3 of the RTWPB, the said guideline is
inoperative and cannot be used by the latter in deciding or acting on petitioners'
application for exemption. Moreover, Rule VIII, Section 1 of the NWPC's Rules
of Procedure on Minimum Wage Fixing issued on June 4, 1990 — which was
prior to the effectivity of RTWPB Guideline No. 3 — requires that an application
for exemption from wage orders should be processed by the RTWPB, subject
specifically to the guidelines issued by the NWPC.
To allow RTWPB Guideline No. 3 to take effect without the approval of
the NWPC is to arrogate unto RTWPB a power vested in the NWPC by Article
121 of the Labor Code, as amended by RA 6727. The Court will not
countenance this naked usurpation of authority. It is a hornbook doctrine that
the issuance of an administrative rule or regulation must be in harmony with the
enabling law. If a discrepancy occurs "between the basic law and an
implementing rule or regulation, it is the former that prevails." This is so because
the law cannot be broadened by a mere administrative issuance. It is axiomatic
that "[a]n administrative agency cannot amend an act of Congress." Article 122
(e) of the Labor Code cannot be construed to enable the RTWPB to decide
applications for exemption on the basis of its own guidelines which were not
reviewed and approved by the NWPC, for the simple reason that a statutory
grant of "powers should not be extended by implication beyond what may be
necessary for their just and reasonable execution. Official powers cannot be
merely assumed by administrative officers, nor can they be created by the
courts in the exercise of their judicial functions."
There is no basis for petitioners' claim that their vested rights were
prejudiced by the NWPC's alleged retroactive application of its own rules which
were issued on February 25, 1991 and took effect on March 18, 1991. Such
claim cannot stand because Guideline No. 3, as previously discussed and as
correctly concluded by the NWPC, was not valid and, thus, cannot be a source
of a right; much less, a vested one.
Note: The Insertion in Guideline No. 3 of "Distressed Industry" as a
Criterion for Exemption Void - RX-O1, Section 3 (4), must not be construed
to automatically include all establishments belonging to a distressed industry.
The fact that the wording of a wage order may contain some ambiguity would
not help petitioners. Basic is the rule in statutory construction that all doubts in
the implementation and the interpretation of the provisions of the Labor Code,
as well as its implementing rules and regulations, must be resolved in favor of
labor. By exempting all establishments belonging to a distressed industry,
Guideline No. 3 surreptitiously and irregularly takes away the mandated
increase in the minimum wage awarded to the affected workers. In so acting,
the RTWPB proceeded against the declared policy of the State, enshrined in the
enabling act, "to rationalize the fixing of minimum wages and to promote
productivity-improvement and gain-sharing measures to ensure a decent
standard of living for the workers and their families; to guarantee the rights of
labor to its just share in the fruits of production; . . ." Thus, Guideline No. 3 is
void not only because it lacks NWPC approval and contains an arbitrarily
inserted exemption, but also because it is inconsistent with the avowed State
policies protective of labor.
NWPC Decision Not Arbitrary - In the case at bar, it is undisputed that during
the relevant accounting period, NALCO, ALCO and PWC sustained capital
impairments of 1.89, 28.72, and 5.03 percent, respectively. Clearly, it was only
ALCO which met the exemption standard. Hence, the NWPC did not commit
grave abuse of discretion in approving the application only of ALCO and in
denying those of petitioners. Indeed, the NWPC acted within the ambit of its
administrative prerogative when it set guidelines for the exemption of a
distressed establishment. Absent any grave abuse of discretion, NWPC's
actions will not be subject to judicial review. Accordingly, we deem the appealed
Decisions to be consistent with law.
14. MANILA FASHIONS INC. v. NLRC
FACTS: On 15 March 1993 respondent Nagkakaisang Manggagawa ng Manila
Fashions, Inc., through its President, respondent Nonito Zamora, filed a
complaint before the Labor Arbiter on behalf of its 150 members who were
regular employees of Petitioner. The complaint charged petitioner with
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DIGESTS- Sept. 16)
non-compliance with Wage Order No. NCR-02 and 02-A mandating a P12
increase in wages effective 8 January 1991. As a result, complainant’s basic
pay, 13th month pay, service incentive leave pay, legal holiday pay, night shift
differential and overtime pay were all underpaid.
Petitioner countered that the failure to comply with the pertinent Wage
Order was brought about by the tremendous losses suffered by it which were
aggravated when the workers staged a strike on account of the non-adjustment
of their basic pay. To forestall continuous suspension/closure of business
operations, which Petitioner did for three (3) months, the strikers sent a notice
that they were willing to condone the implementation of the increase. The
condonation was distinctly stated in Sec. 3, Art. VIII, of the CBA dated 4
February 1992, which was voluntarily entered into by the parties and represents
a reasonable settlement.
Sec. 3. The Union realizes the company’s closeness to insolvency
and, as such, sympathizes with the company’s financial condition.
Therefore, the Union has agreed, as it hereby agrees, to condone the
implementation of Wage Order No. NCR-02 and 02-A.
The complainants admitted the existence of the aforementioned provision
in the CBA; however they denied the validity thereof inasmuch as it was not
reached after due consultation with the members.
 LA - subject provision of the CBA was void but based its
conclusion on a different ground; the same is not enforceable
since said agreement is null and void, it being contrary to law.
It is only the Tripartite Wage Productivity Board of DOLE that
could approve exemption (of) an establishment from
coverage of (a) Wage Order.
Both parties were unsatisfied with the decision, prompting them to
seek relief from respondent NLRC. The basis of petitioners appeal was that the
ruling was not in accordance with the facts and the law. On the part of the
private respondents, they assailed the computation of the award as erroneous.
 NLRC – was not persuaded by petitioner. On the other hand,
the appeal of private respondents was no longer considered
as it was filed beyond the reglementary period. Thus on 31
May 1994 the disputed decision was affirmed.
 Petitioner maintains that the condonation is valid. In support thereof, it
invokes cases decided by this Court applying the rule that if the agreement was
voluntarily entered into and represents a reasonable settlement it is binding on
the parties and may not be disowned simply because of a change of mind.
Granting the CBA provision is indeed void, petitioner offers the alternative
argument that the computation of the award was erroneous and arbitrary.
ISSUE: Was the condonation of the implementation of Wage Order No. NCR-02
and 02-A contained in Sec. 3, Art. VIII, of the CBA valid?
RULING: We sustain the decision of the Labor Arbiter as affirmed by
respondent NLRC that the condonation appearing in Sec. 3, Art. VIII, of the CBA
did not exempt petitioner from compliance with Wage Order No. NCR-02 and
02-A.
As regards the alternative argument of petitioner that the computation
of the award was erroneous and arbitrary, it must be rejected outright as it was
apparently never brought to the attention of respondent NLRC. Consequently, it
cannot be raised for the first time before this Court since that would be offensive
to the basic rule of fair play, justice and due process. Moreover, the original and
exclusive jurisdiction of this Court to review a decision of respondent NLRC in a
petition for certiorari under Rule 65 does not normally include an inquiry into the
correctness of its evaluation of the evidence but confined merely to issues of
jurisdiction or grave abuse of discretion.

A CBA refers to the negotiated contract between a legitimate labor

organization and the employer concerning wages, hours of work and all other
terms and conditions of employment in a bargaining unit, including mandatory
provisions for grievances and arbitration machineries. As in all other contracts,
the parties in a CBA may establish such stipulations, clauses, terms and
conditions as they may deem convenient provided they are not contrary to law,
morals, good customs, public order or public policy. Section 3, Art. VIII, of the
CBA is a void provision because by agreeing to condone the implementation of
the Wage Order the parties thereby contravened its mandate on wage increase
of P12.00 effective 8 January 1991. Also, as stated by the Labor Arbiter, it is
only the Tripartite Wage Productivity Board of the DOLE that could approve
exemption of an establishment from coverage of a Wage Order.

If petitioner is a financially distressed company then it should have

applied for a wage exemption so that it could meet its labor costs without
endangering its viability or its very existence upon which both management and
labor depend for a living. The Office of the Solicitor General emphasizes the
point that parties to a CBA may not, by themselves, set a wage lower than the
minimum wage. To do so would render nugatory the purpose of a wage
exemption, not to mention the possibility that employees may be duped or be
unwittingly put in a position to accept a lower wage.

The cases that petitioner relies on are simply inapplicable because,

unlike the present case which involves a stipulation in the CBA in contravention
of law, they are concerned with compromise settlements as a means to end
labor disputes recognized by Art. 227 of the Labor Code and considered not
against public policy by doctrinal rules established by this Court.
22 | P a g e A G U I N A L D O , D I N O , L A P E Z , M A N G U E R A , M O R A L E S C . M O R A L E S I , U M A N G A Y ( L A B O R C A S E
DIGESTS- Sept. 16)