Title of the Case: Aliviado vs.

Proctor and Gamble

GR Number: 160506
Ponente: J. Del Castillo
Date: March 9, 2010

 Doctrine:
In labor-only contracting, ANY of the following elements are present:
o The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and 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;
or
o The contractor does not exercise the right to control over the performance of the work of the
contractual employee
 For serious misconduct to be a just cause for dismissal, such misconduct:
o (a) must be serious;
o (b) must relate to the performance of the employee’s duties; and
o (c) must show that the employee has become unfit to continue working for the employer.
 Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that the
employee concerned holds a position of responsibility or of trust and confidence. In order to constitute a just
cause for dismissal, the act complained of must be work-related and must show that the employee is unfit to
continue to work for the employer.

Facts:
 Petitioners were hired by Promm-Gem or SAPS as merchandisers for P&G, a company principally engaged
in the manufacture and production of different consumer and health products, on a contractual basis for
periods of more or less 5 months and assigned to different outlets.
 SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as
habitual absenteeism, dishonesty or changing day-off without prior notice.
 Petitioners filed a complaint against P&G for regularization, later amended to include matter of their
subsequent dismissal
 LA: no ER-EE relationship between petitioner and P&G. Promm-Gem and SAPS are legitimate
independent job contractors. 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.
 NLRC: Affirmed LA
 CA: Affirmed NLRC
 Petitioner’s arguments:
o They were recruited by P&G long before the existence of Promm-Gem and SAPS
o P&G instigated their dismissal
o Promm-Gem and SAPS have no substantial capital nor tools and equipment to undertake
independent labor contracting
o Petitioners perform activities necessary or desirable in the usual business of P&G
 Respondent’s arguments:
o 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.

First Issue:
Whether or not P&G is the employer of the Petitioners? Only to the SAP Employees not the Promm-Gem
employees.
Held:
 Law allows contracting agreements. However, in order to be valid, it must be to an independent contractor
because rules prohibit labor-only contracting
 In labor-only contracting, ANY of the following elements are present:
o The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and 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;
or
o The contractor does not exercise the right to control over the performance of the work of the
contractual employee
 Records show that Promm-Gem has sufficient capital and investment, maintained its own warehouse and office
space, three registered vehicles, has other clients aside from P&G. Promm-Gem also supplies its petitioners
with the relevant materials, petitioners were also considered as regular and not contractual
 On the other hand, SAPS shows that it has a paid-in capital of only P31,250.00. There is no other evidence
presented to show how much its working capital and assets are. Furthermore, there is no showing of substantial
investment in tools, equipment or other assets (labor-only contracting)
o SAPS’ lack of substantial capital is underlined by the records which show that its payroll for its
merchandisers alone for one month would already total P44,561.00
 "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"
 Petitioners, who, having been recruited and supplied by SAPS, which engaged in labor-only contracting, are
considered as the employees of P&G.
Second Issue:
Whether or not petitioners were illegally dismissed? Yes.
Held:
 In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified the
cause of dismissal as grave misconduct and breach of trust
 Misconduct has been defined as improper or wrong conduct; the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying wrongful intent
and not mere error of judgment. The misconduct to be serious must be of such grave and aggravated
character and not merely trivial and unimportant.
 To be a just cause for dismissal, such misconduct:
o (a) must be serious;
o (b) must relate to the performance of the employee’s duties; and
o (c) must show that the employee has become unfit to continue working for the employer.
o In the instant case, petitioners-employees of Promm-Gem may have committed an error of
judgment in claiming to be employees of P&G, but it cannot be said that they were motivated by
any wrongful intent in doing so. As such, we find them guilty of only simple misconduct for
assailing the integrity of Promm-Gem as a legitimate and independent promotion firm. A
misconduct which is not serious or grave, as that existing in the instant case, cannot be a valid
basis for dismissing an employee.
 Loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust
reposed in the employee by his employer. Loss of trust and confidence, as a cause for termination of
employment, is premised on the fact that the employee concerned holds a position of responsibility or of
trust and confidence. In order to constitute a just cause for dismissal, the act complained of must be work-
related and must show that the employee is unfit to continue to work for the employer.
o The petitioners-employees of Promm-Gem have not been shown to be occupying positions of
responsibility or of trust and confidence. Neither is there any evidence to show that they are unfit
to continue to work as merchandisers for Promm-Gem.
 While Promm-Gem had complied with the procedural aspect of due process in terminating the employment
of petitioners-employees, i.e., giving two notices and in between such notices, an opportunity for the
employees to answer and rebut the charges against them, it failed to comply with the substantive aspect of
due process as the acts complained of neither constitute serious misconduct nor breach of trust. Hence, the
dismissal is illegal.