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[G.R. No. 157373.

July 27, 2004]

PENTAGON INTERNATIONAL SHIPPING, INC., petitioner, vs. WILLIAM B. ADELANTAR, respondent.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review on certiorari assailing the decision[1] of the Court of Appeals dated
September 26, 2002 in CA-G.R. SP No. 62839 which modified the decision[2] of the National Labor
Relations Commission (NLRC).

The antecedent facts are as follows:

On August 16, 1997, respondent William B. Adelantar was hired by Dubai Ports Authority of Jebel Ali
under an employment contract (first contract) which provided for an unlimited period of employment
with a monthly salary of five thousand five hundred dirhams (Dhs 5,500).

On September 3, 1997, Adelantar and petitioner Pentagon International Shipping, Inc. (Pentagon), for
and in behalf of Dubai Ports Authority of Jebel Ali, entered into a Philippine Overseas Employment
Administration (POEA) standard employment contract (second contract), this time providing for a 12-
month period with basic monthly salary of US$380.00 and fixed overtime pay of US$152.00.

Upon completion of his probationary period on April 5, 1998, Adelantars basic salary was increased to
five thousand eight hundred ninety dirhams (Dhs 5,890), while his overtime pay was increased to two
thousand three hundred fifty-six dirhams (Dhs 2,356) effective April 1, 1998.

On June 11, 1998, however, the management barred Adelantar from entering the port due to a
previous dispute with his superior. He was asked to hand in his health and employment card. On the
same date, he received a letter from his employer, stating that he was being terminated for assaulting
his superior officer, although he was promised employment in another company.

Adelantar was eventually repatriated after nine (9) months and seven (7) days of service. After almost
a year of waiting with no work forthcoming, Adelantar filed a complaint for illegal dismissal with
money claim against Pentagon International Shipping, Inc. with the NLRC, docketed as NLRC NCR OFW
(M) 99-05-0693.

The Labor Arbiter found that the dismissal of Adelantar was illegal. Consequently, he ordered
Pentagon to pay Adelantar the amount of Dhs 24,738.00 representing the latters three (3) months
basic salary inclusive of overtime pay. All other claims were denied for lack of merit. [3]

Adelantar appealed to the NLRC arguing that the Labor Arbiter erred in granting backwages of only
three (3) months and in not granting attorneys fees, moral and exemplary damages and
reinstatement.
The NLRC affirmed the Labor Arbiters decision and held that under Section 10 of R.A. 8042, otherwise
known as the Migrant Workers and Overseas Filipinos Act of 1995, an illegally dismissed contract
worker is entitled to the salaries corresponding to the unexpired portion of his contract, or for three
(3) months for every year of the unexpired term, whichever is less. Thus, the NLRC awarded
backwages to Adelantar equivalent to three (3) months of his basic salary, but exclusive of overtime
pay.[4]

Aggrieved, Adelantar filed a petition for certiorari with the Court of Appeals.

On September 26, 2002, the Court of Appeals rendered judgment modifying the amounts awarded by
the Labor Arbiter and the NLRC. The Court of Appeals awarded full backwages to respondent
computed from the time of the dismissal up to the finality of the decision. It ruled that Section 10 of
R.A. No 8042 is not applicable in this case because said provision only contemplates a fixed period of
employment. Moreover, Article 279 of the Labor Code should apply and not Section 10 of R.A. No.
8042, considering that Adelantars first contract provided for an unlimited period of employment.

Pentagon International Shipping, Inc. filed the instant petition for review on certiorari raising the
following arguments:

THE COURT OF APPEALS ERRED IN (a) COMPLETELY IGNORING AND REFUSING TO FOLLOW THE
RULING OF THE SUPREME COURT IN THE LANDMARK CASE OF MILLARES, et al. vs. NLRC, et al., G.R.
NO. 110524, JULY 29, 2002 AND (b) IN APPLYING PRIMARILY ARTICLES 279 AND 280 OF THE LABOR
CODE INSTEAD OF THE MIGRANT WORKERS AND OVERSEAS FILIPINOS ACT OF 1995 (R.A. 8042) AND
(c) POEA RULES AND REGULATIONS IN DETERMINING THE LIABILITY OF PETITIONER AND THE
EMPLOYMENT STATUS OF RESPONDENT.

II

THE COURT OF APPEALS ERRED IN RULING THAT THE CONTRACT EXECUTED EXCLUSIVELY BETWEEN
RESPONDENT ADELANTAR AND DUBAI PORTS AUTHORITY UNDER FOREIGN LABOR LAWS WITHOUT
THE APPROVAL OF POEA AND PARTICIPATION OF PENTAGON IS THE VALID AND BINDING CONTRACT
CONTRARY TO THE PRINCIPLE OF FORUM NON CONVENIENS AND LEX LOCI CONTRACTUS.

III

THE COURT OF APPEALS ERRED WHEN IT GRANTED THE AWARD OF ATTORNEYS FEES EVEN WHEN
THERE WAS NO BASIS THEREFOR AND OVER AND BEYOND WHAT WAS CONSISTENTLY AND
ORIGINALLY PRAYED FOR BY THE RESPONDENT.[5]

The petition is meritorious.

The August 16, 1997 contract, i.e., the first contract, provided for an unspecified period of
employment with Adelantar, as Tug Master, receiving a monthly salary, after his probationary period,
of Dhs 5,890.00. This figure in Dirhams was used by the Labor Arbiter in computing the award
equivalent to three months salary or the amount of Dhs 24,738.00 inclusive of fixed overtime. This
was also used by the NLRC when it affirmed the award equivalent to three months, albeit, excluding
the fixed overtime.

The Court of Appeals likewise used the salary stated in Adelantars first contract in adjudging
Pentagons liability but it did not limit the award to three months only. In interpreting the above
provision, the Court of Appeals, citing Marsaman Manning Agency, Inc. v. NLRC,[6] held:

x x x. A plain reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally
dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion of his
employment contract or three (3) months salary for every year of the unexpired term, whichever is
less, comes into play only when the employment contract concerned has a term of at least one (1)
year or more. This is evident from the words for every year of the unexpired term which follows the
words salaries x x x for three months. x x x.

Proceeding from the premise that the first contract, providing for an unlimited period of employment,
is the applicable contract rather than the POEA-sanctioned second contract, the Court of Appeals
concluded that Section 10 of R.A. No. 8042 is not applicable because there will be no basis by which to
determine the number of years within which the grant of salaries will be based.[7] Stated differently,
Section 10 of R.A. No. 8042, or The Migrant Workers and Overseas Filipinos Act of 1995, is not
applicable in this case because said provision only contemplates a fixed period of employment while
the first contract provides for an unlimited period of employment. Section 10 of R.A. No. 8042
provides:

In case of termination of overseas employment without just, valid or authorized cause as defined by
law or contract, the worker shall be entitled to the full reimbursement of his placement fee with
interest at twelve percent (12%) per annum, plus his salaries for the unexpired portion of his
employment contract or for three (3) months for every year of the unexpired term, whichever is less.
(Italics ours)

In this respect, the Court of Appeals applied Article 279 of the Labor Code[8] using principles of
statutory construction to supplement the omission in R.A. No. 8042 regarding the unlimited period of
employment. It ratiocinated that the Labor Code and R.A. No. 8042 are statutes in pari materia.

The issue, therefore, is whether the Court of Appeals properly used as basis Article 279 of the Labor
Code in its award for backwages to Adelantar.

As early as the case of Coyoca v. NLRC,[9] we held that Filipino seamen are governed by the Rules and
Regulations of the POEA. The Standard Employment Contract governing the Employment of All
Filipino Seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically
provides that the contract of seamen shall be for a fixed period. In no case should the contract of
seamen be longer than 12 months. It reads:
Section C. Duration of Contract.

The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be
stated in the Crew contract. Any extension of the Contract period shall be subject to the mutual
consent of the parties.

Under the circumstances, the Court of Appeals erred in resolving the issue of backwages based on the
first contract which provided for an unlimited period of employment as this violated the explicit
provision of the Rules and Regulations of the POEA. While we recognize that Adelantar executed a
contract with Dubai Ports Authority of Ali Jebel and might even have applied said contract in his
overseas station, this contract was not sanctioned by the POEA. We agree with the NLRC when it
observed thus:

It should be stressed that whatever status of employment or increased benefits that the complainant
may have gained while under the employ of Dubai Ports Authority, the undisputed fact remains that
prior to his deployment, he agreed to be hired under a 12-month POEA contract, the duration of
which is the basis for the determination of the extent of the respondents liability.[10]

The Court of Appeals erred when it adjudged the first contract as the basis for Pentagons liability
instead of the second contract, which is in conformity with the POEAs Standard Employment Contract.
As such, there would have been no need to resort to statutory construction where the rules and
jurisprudence are clear.

Besides, in Millares v. NLRC,[11] we held that:

. . . [I]t is clear that seafarers are considered contractual employees. They can not be considered as
regular employees under Article 280 of the Labor Code. Their employment is governed by the
contracts they sign every time they are rehired and their employment is terminated when the
contract expires. Their employment is contractually fixed for a certain period of time. They fall under
the exception of Article 280 whose employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of engagement of the
employee or where the work or services to be performed is seasonal in nature and the employment is
for the duration of the season.

xxxxxxxxx

Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed
period only. Constrained by the nature of their employment which is quite peculiar and unique in
itself, it is for the mutual interest of both the seafarer and the employer why the employment status
must be contractual only or for a certain period of time. Seafarers spend most of their time at sea and
understandably, they can not stay for a long and an indefinite period of time at sea. Limited access to
shore society during the employment will have an adverse impact on the seafarer. The national,
cultural and lingual diversity among the crew during the COE is a reality that necessitates the
limitation of its period.
Therefore, Adelantar, a seafarer, is not a regular employee as defined in Article 280 of the Labor Code.
Hence, he is not entitled to full backwages and separation pay in lieu of reinstatement as provided in
Article 279 of the Labor Code. As we held in Millares, Adelantar is a contractual employee whose
rights and obligations are governed primarily by Rules and Regulations of the POEA and, more
importantly, by R.A. 8042, or the Migrant Workers and Overseas Filipinos Act of 1995.

We find, however, that the Court of Appeals correctly awarded ten percent (10%) of the monetary
award in Adelantars favor as attorneys fees, as he was forced to litigate and hence incurred expenses
to protect his rights and interest.[12]

WHEREFORE, in view of the foregoing, the petition is partly GRANTED and the decision of the Court of
Appeals in CA-G.R. SP No. 62839 is REVERSED and SET ASIDE. Petitioner Pentagon International
Shipping, Inc. is ORDERED to pay private respondent William B. Adelantar the amount equivalent to
the unexpired portion of the September 3, 1997 POEA Standard Contract of Employment plus ten
percent (10%) of the award as attorneys fees.

SO ORDERED.

PANGILINAN vs GENERAL MILLING CORPORATION Case Digest

[G.R. No. 149329 July 12, 2004]

ROSITA PANGILINAN, YOLANDA LAYOLA, SALLY GOLDE, AIDA QUITE, FERDINAND CALE, RAUL ARUITA,
MANUEL ERIFUL, ARNEL PAULO, ROSEMARIE GEOTINA, SAMUELA KUMAR, REBECCA PEREZ, EDGAR
BELLO, JOSEPH SORIANO, DANILO AMPULLER, TOLENTINO CALLAO, MANOLITA MANALANG, TORIBIO
LETIM, NANCY BELGICA, ALFREDO ARELLANO, JOSEFA CEBUJANO, JUN DEL ROSARIO, AVELINO
AGUILAR, MILAROSA TIAMSON, EDNA DICHOSO, JASMIN BOLISAY, JULIETA DIDAL, GERARDO BARISO,
ANGELITO PEÑAFLOR, NERISSA LETIM, ALEXANDER BARBOSA, ELIZABETH SAENS, NYMPHA LUGTU,
MYRNA MORALES, LIZA CRUZ, ELENA FANG, EDNA CRUZA, GORGONIO PALMA, JOSE VERGARA,
ALDRIN REMORQUE, RUDY BLANCO, MARIO BUENVIAJE, MA. CRISTY CEA, REYNALDO GUELAS
VILLASENOR, RHOY TADO, LYDIA SALIPOT, ANGELITO PEREZ VERGARA, RODOLFO GACHO, JESSIE SAN
PEDRO, MARINAO ORCA, JR., PEBELITO LERONA, PEPE CONGRESO, NIMFA NAPAO, WILHELMINA
BAGUISA, OLIVIA CAINCAY, JERRY MANUEL NICOLAS, CARLOS ABRATIQUE, JESUS LIM, JR., AND GERRY
ROXAS, Petitioners, - versus - GENERAL MILLING CORPORATION, Respondent.

FACTS: The respondent General Milling Corporation is a domestic corporation engaged in the
production and sale of livestock and poultry. It is, likewise, the distributor of dressed chicken to various
restaurants and establishments nationwide. As such, it employs hundreds of employees, some on a
regular basis and others on a casual basis, as “emergency workers.” The petitioners were employed by
the respondent on different dates as emergency workers at its poultry plant in Cainta, Rizal, under
separate “temporary/casual contracts of employment” for a period of five months. Most of them
worked as chicken dressers, while the others served as packers or helpers. Upon the expiration of their
respective contracts, their services were terminated. They later filed separate complaints for illegal
dismissal and non-payment of holiday pay, 13th month pay, night-shift differential and service incentive
leave pay against the respondent before the Arbitration Branch of the National Labor Relations
Commission.

The petitioners alleged that their work as chicken dressers was necessary and desirable in the usual
business of the respondent, and added that although they worked from 10:00 p.m. to 6:00 a.m., they
were not paid night-shift differential. They stressed that based on the nature of their work, they were
regular employees of the respondent; hence, could not be dismissed from their employment unless for
just cause and after due notice. They asserted that the respondent GMC terminated their contract of
employment without just cause and due notice. They further argued that the respondent could not rely
on the nomenclature of their employment as “temporary or casual.”

ISSUE: Whether or not the petitioners were regular employees of the respondent GMC when their
employment was terminated.

HELD: The SC held the petitioners were employees with a fixed period, and, as such, were not regular
employees. Article 280 of the Labor Code comprehends three kinds of employees: (a) regular employees
or those whose work is necessary or desirable to the usual business of the employer; (b) project
employees or those whose employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the
employee or where the work or services to be performed is seasonal in nature and the employment is
for the duration of the season; and, (c) casual employees or those who are neither regular nor project
employees.

A regular employee is one who is engaged to perform activities which are necessary and desirable in the
usual business or trade of the employer as against those which are undertaken for a specific project or
are seasonal.[41] There are two separate instances whereby it can be determined that an employment
is regular: (1) if the particular activity performed by the employee is necessary or desirable in the usual
business or trade of the employer; and, (2) if the employee has been performing the job for at least a
year. Article 280 of the Labor Code does not proscribe or prohibit an employment contract with a fixed
period. It does not necessarily follow that where the duties of the employee consist of activities usually
necessary or desirable in the usual business of the employer, the parties are forbidden from agreeing on
a period of time for the performance of such activities. There is thus nothing essentially contradictory
between a definite period of employment and the nature of the employee’s duties.
Stipulations in employment contracts providing for term employment or fixed period employment are
valid when the period were agreed upon knowingly and voluntarily by the parties without force, duress
or improper pressure, being brought to bear upon the employee and absent any other circumstances
vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each
other on more or less equal terms with no moral dominance whatever being exercised by the former
over the latter. An examination of the contracts entered into by the petitioners showed that their
employment was limited to a fixed period, usually five or six months, and did not go beyond such period.
The records reveal that the stipulations in the employment contracts were knowingly and voluntarily
agreed to by the petitioners without force, duress or improper pressure, or any circumstances that
vitiated their consent. Similarly, nothing therein shows that these contracts were used as a subterfuge
by the respondent GMC to evade the provisions of Articles 279 and 280 of the Labor Code.

The petitioners were hired as “emergency workers” and assigned as chicken dressers, packers and
helpers at the Cainta Processing Plant. While the petitioners’ employment as chicken dressers is
necessary and desirable in the usual business of the respondent, they were employed on a mere
temporary basis, since their employment was limited to a fixed period. As such, they cannot be said to
be regular employees, but are merely “contractual employees.” Consequently, there was no illegal
dismissal when the petitioners’ services were terminated by reason of the expiration of their contracts.
Lack of notice of termination is of no consequence, because when the contract specifies the period of its
duration, it terminates on the expiration of such period. A contract for employment for a definite period
terminates by its own term at the end of such period.

Abc di

gest

Manila Electric v. Quisumbing

G.R. No. 127598 February 22, 2000

Facts:
Members of the Private respondent union were dissatisfied with the terms of a CBA with petitioner. The
parties in this case were ordered by the Sec. of Labor to execute a collective bargaining agreement (CBA)
wherein.The CBA allowed for the increase in the wages of the employees concerned. The petitioner
argues that if such increase were allowed, it would pass off such to the consumers.

Issue: W/N matters of salary are part of management prerogative

RULING: Yes. There is no need to consult the Secretary of Labor in cases involving contracting out for 6
months or more as it is part of management prerogative. However, a line must be drawn with respect to
management prerogatives on business operations per se and those which affect the rights of the
workers. Employers must see to it that that employees are properly informed of its decisions to attain
harmonious labor relations and enlighten the worker as to their rights.

The contracting out business or services is an exercise of business judgment if it is for the promotion of
efficiency and attainment of economy. Management must be motivated by good faith and contracting
out should not be done to circumvent the law. Provided there was no malice or that it was not done
arbitrarily, the courts will not interfere with the exercise of this judgment.

Manila Electric v. Quisumbing

G.R. No. 127598 February 22, 2000

Facts:

Members of the Private respondent union were dissatisfied with the terms of a CBA with petitioner. The
parties in this case were ordered by the Sec. of Labor to execute a collective bargaining agreement (CBA)
wherein.The CBA allowed for the increase in the wages of the employees concerned. The petitioner
argues that if such increase were allowed, it would pass off such to the consumers.

Issue: W/N matters of salary are part of management prerogative

RULING: Yes. There is no need to consult the Secretary of Labor in cases involving contracting out for 6
months or more as it is part of management prerogative. However, a line must be drawn with respect to
management prerogatives on business operations per se and those which affect the rights of the
workers. Employers must see to it that that employees are properly informed of its decisions to attain
harmonious labor relations and enlighten the worker as to their rights.

The contracting out business or services is an exercise of business judgment if it is for the promotion of
efficiency and attainment of economy. Management must be motivated by good faith and contracting
out should not be done to circumvent the law. Provided there was no malice or that it was not done
arbitrarily, the courts will not interfere with the exercise of this judgment.

LEO V. MAGO AND LEILANIE E. COLOBONG, Petitioners, v. SUN POWER MANUFACTURING


LIMITED, Respondent.

DECISION

REYES, JR., J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, seeking the review of the
Decision2 dated October 8, 2013 and Resolution3 dated January 13, 2014 of the Court of Appeals (CA) in
CA-G.R. SP No. 131059. In these assailed issuances, the CA reversed the decision4 of the National Labor
Relations Commission (NLRC) declaring Leo V. Mago (Leo) and Leilanie E. Colobong (Leilanie)
(petitioners) as employees of Sunpower Philippines Manufacturing Limited (Sunpower) and
consequently, holding that Jobcrest Manufacturing, Incorporated (Jobcrest) was a labor-only contractor.
The NLRC in turn reversed the ruling5 of the labor arbiter (LA) dismissing the petitioners' complaint for
illegal dismissal.

Factual Antecedents

The petitioners are former employees of Jobcrest, a corporation duly organized under existing laws of
the Philippines, engaged in the business of contracting management consultancy and services.6 Jobcrest
was licensed by the Department of Labor and Employment (DOLE) through Certificate of Registration
No. NCR-MUNTA-64209-0910-087-R.7 During the time material to this case, the petitioners' co-habited
together.8

On October 10, 2008, Jobcrest and Sunpower entered into a Service Contract Agreement, in which
Jobcrest undertook to provide business process services for Sunpower, a corporation principally
engaged in the business of manufacturing automotive computer and other electronic parts.9 Jobcrest
then trained its employees, including the petitioners, for purposes of their engagement in
Sunpower.10 After the satisfactory completion of this training, the petitioners were assigned to
Sunpower's plant in Laguna Technopark. Leo was tasked as a Production Operator in the Coinstacking
Station on July 25, 2009,11while Leilanie was assigned as a Production Operator, tasked with final visual
inspection in the Packaging Station on June 27, 2009.12 Jobcrest's On-site Supervisor, Allan Dimayuga
(Allan), supervised the petitioners during their assignment with Sunpower.13
It was alleged that sometime in October 2011, Sunpower conducted an operational alignment, which
affected some of the services supplied by Jobcrest. Sunpower decided to terminate the
Coinstacking/Material Handling segment and the Visual Inspection segment.14 Meanwhile, Leo and
Leilanie were respectively on paternity and maternity leave because Leilanie was due to give birth to
their common child.15

When Leo reported for work to formally file his paternity leave, Allan purportedly informed Leo that his
employment was terminated due to his absences. Leo, however, further alleged that he was asked to
report to Jobcrest on December 14, 2011 for his assignment to Sunpower.16 In their defense, both
Jobcrest and Allan denied terminating Leo's employment from Jobcrest.17

Leo complied with the directive to go to Jobcrest's office on December 14, 2011. While he was there,
Jobcrest's Human Resource Manager, Noel J. Pagtalunan (Noel), served Leo with a "Notice of Admin
Charge/Explanation Slip."18 The notice stated that Leo violated the Jobcrest policy against falsification or
tampering because he failed to disclose his relationship with Leilanie. Leo denied the charges and
explained that he already filed a complaint for illegal dismissal with the NLRC.19

Leilanie, on the other hand, alleged that when she reported for work at Jobcrest on November 29, 2011,
she was informed by one of the Jobcrest personnel that she will be transferred to another client
company. She was likewise provided a referral slip for a medical examination, pursuant to her new
assignment.20

Instead of complying with Jobcrest's directives, Leo and Leilanie filed a complaint for illegal dismissal and
regularization on December 15, 2011, with the NLRC Regional Arbitration Branch No. IV. Leo alleged that
he was dismissed on October 30, 2011, while Leilanie alleged that she was dismissed from employment
on December 4, 2011.21 Despite the filing of the complaint, Leilanie returned to Jobcrest on December
16, 2011, where she was served with a similar "Notice of Admin Charge/Explanation Slip," requiring her
to explain why she failed to disclose her co-habitation status with Leo.22

During the mandatory conference, Jobcrest clarified that the petitioners were not dismissed from
employment and offered to accept them when they report back to work. The petitioners refused and
insisted that they were regular employees of Sunpower, not Jobcrest.23

There being no amicable settlement of the matter among the parties, they proceeded to file their
respective position papers.24

Ruling of the LA

In a Decision25 dated July 3, 2012, the LA held that Jobcrest is a legitimate independent contractor and
the petitioners' statutory employer:

WHEREFORE, premises considered, the complaint for illegal dismissal against [Sunpower] and Dwight
Deato is DISMISSED for lack of employer-employee relationship. [Jobcrest] is declared as the statutory
employer and is ordered to reinstate complainants sans backwages to substantially equivalent positions
within ten (10) days from receipt hereof.
SO ORDERED.26

The LA found the capital of Jobcrest substantial enough to comply with the requirements for an
independent contractor, and that Jobcrest exercised control over the petitioners' work.27 The LA likewise
rejected the petitioners' claim that they were illegally dismissed, ruling that the petitioners failed to
establish the fact of dismissal itself.28

Jobcrest partially appealed the LA's Decision dated July 3, 2012. Among its arguments is the assertion
that the petitioners refused to be reinstated. Hence, they were considered constructively resigned from
their employment with Jobcrest, especially because they obtained a job somewhere else. As an
alternative relief, Jobcrest prayed that it be directed to pay the petitioners' separation pay instead of
reinstating them to their former positions.29

The petitioners, on the other hand, attributed serious error on the LA for ruling against their
complaint.30

Ruling of the NLRC

The NLRC reversed the LA's findings in its Decision31 dated April 24, 2013 and ruled favorably for the
petitioners, viz.:

WHEREFORE, the decision appealed from is hereby SET ASIDE and a NEW ONE ENTERED declaring that
[the petitioners] are regular employees of respondent [Sunpower], respondent [Jobcrest] being a mere
labor-only contractor that [petitioners] were illegally dismissed; hence, respondent [Sunpower] is
hereby ordered to reinstate them to their former position with full backwages, from the time they were
refused to work on October 31, 2011 until reinstated, within ten (10) days from notice plus 10% of the
total monetary awards as and for attorney's fees.

SO ORDERED.32

According to the NLRC, the contract between Jobcrest and Sunpower was for the sole supply of
manpower. The tools and equipment for the performance of the work were for the account of
Sunpower, which supposedly contradicted the claim that Jobcrest has the required capital for a
legitimate contractor.33 The NLRC also disagreed that Jobcrest exercised control over the petitioners and
likewise gave more credence to the petitioners' sworn statements, which narrate that Sunpower
employees allegedly supervised their work.34 Lastly, on the basis of the "Notice of Administrative
Charge/Explanation Slip" furnished to the petitioners, the NLRC reversed the LA's ruling and held that
the petitioners were illegally dismissed from employment.35

Sunpower moved for the reconsideration of the NLRC's Decision dated April 24, 2013.36 Unconvinced,
the NLRC denied this motion in its Resolution37 dated May 28, 2013 as follows:

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit.

No further motion of this nature shall be entertained.


SO ORDERED.38

As a result of the NLRC's ruling, Sunpower filed a petition for certiorari with the CA, with a prayer for the
issuance of an injunctive writ.39 Sunpower attributed grave abuse of discretion, amounting to lack or
excess of jurisdiction, on the NLRC for holding that the petitioners were regular employees of Sunpower
despite evidence to the contrary.40 Sunpower also disagreed that Jobcrest is a labor-only contractor, and
further submitted that the NLRC misinterpreted its Service Contract Agreement with Jobcrest.41

Ruling of the CA

In a Decision42 dated October 8, 2013, the CA granted Sunpower's petition for certiorari and enjoined
the implementation of the assailed NLRC ruling:

WHEREFORE, premises considered, the Petition is GRANTED. The Decision dated 24 April 2013 and
Resolution dated 28 May 2013 of the [NLRC] (Second Division) in NLRC-LAC No. 09-002582-12; NLRC
RAB-IV-12-01978-11-B are NULLIFIED. All the respondents and/or persons acting for and on their behalf
are ENJOINED from enforcing or implementing the same. The Decision dated 03 July 2012 of LA Renell
Joseph R. Dela Cruz is hereby REINSTATED. No pronouncement as to costs.

SO ORDERED.43

The CA ruled that Sunpower was able to overcome the presumption that Jobcrest was a labor-only
contractor, especially considering that the DOLE Certificate of Registration issued in favor of Jobcrest
carries the presumption of regularity. In contrast with the NLRC ruling, the CA found that the Service
Contract Agreement between Sunpower and Jobcrest specifically stated the job or task contracted out
by stating that it was for the performance of various business process services.44 The CA also held that
Jobcrest has substantial capital and as such, it was no longer necessary to prove that it has investment in
the form of tools, equipment, machinery, and work premises.45

Also, the CA found that there is an employer-employee relationship between Jobcrest and the
petitioners under the four-fold test. The CA appreciated the affidavits of Jobcrest employees, as well as
the sworn statements of Sunpower employees who the petitioners claim to supervise their work. In
these statements, the Sunpower employees categorically denied under oath that they supervised the
manner of the petitioners' work. Taken together with other pieces of evidence, the CA ruled that there
was no employer-employee relationship between Sunpower and the petitioners. Finally, the CA held
that any form of supervision, which Sunpower exercised over the results of the petitioners' work, was
necessary and allowable under the circumstances.46

Consequently, the CA rejected the claim that the petitioners were illegally dismissed from employment,
especially in light of Jobcrest's earlier offer to accept the petitioners' return to work.47

Following their receipt of the CA's Decision dated October 8, 2013, the petitioners filed their Motions for
Reconsideration and to Investigate the Reviewer Who Recommended the Palpably Erroneous
Decision.48The CA firmly denied these motions in its Resolution49 dated January 13, 2014 for failure to
raise any substantial argument that would warrant the reconsideration of its decision:
WHEREFORE, premises considered, the Motions for Reconsideration and to Investigate the Reviewer
Who Recommended the Palpably Erroneous Decision are DENIED for sheer lack of merit.

SO ORDERED.50

The petitioners are now before this Court, seeking to reverse and set aside the CA's issuances, and to
reinstate the NLRC's decision.51 The petitioners insist that Jobcrest is a labor-only contractor, and that
the DOLE Certificate of Registration is not conclusive of Jobcrest's legitimate status as a
contractor.52 They further argue that, aside from lacking substantial capital, Jobcrest only supplied
manpower to Sunpower.53 These services, the petitioners allege, are directly related and necessary to
Sunpower's business.54

Furthermore, the petitioners submit that it was Sunpower that controlled their work. They refute the
evidentiary weight and value of the sworn statements of Jobcrest and Sunpower employees.55 The
petitioners assert that the NLRC was correct in ruling that Sunpower was their statutory employer, and
in ordering their reinstatement with payment of full backwages and attorney's fees.56 The petitioners
thus pray that this Court reverse and set aside the Decision dated October 8, 2013 and Resolution dated
January 13, 2014 of the CA.57

Ruling of the Court

The Court resolves to deny the petition.

Jobcrest is a legitimate and independent contractor.

Article 106 of the Labor Code defines labor-only contracting as a situation "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 and placed by such person are
performing activities which are directly related to the principal business of such employer."58

DOLE Department Order (DO) No. 18-02, the regulation in force at the time of the petitioners'
assignment to Sunpower, reiterated the language of the Labor Code:

Section 5. Prohibition against labor-only contracting. x x x [L]abor-only contracting shall refer to an


arrangement where the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal, and any of the following elements are present:

i) 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
ii) the contractor does not exercise the right to control over the performance of the work of the
contractual employee.

Thus, in order to become a legitimate contractor, the contractor must have substantial capital or
investment, and must carry a distinct and independent business free from the control of the principal. In
addition, the Court requires the agreement between the principal and the contractor or subcontractor
to assure the contractual employees' entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits.59

Furthermore, the Court considers job contracting or subcontracting as permissible when the principal
agrees to farm out the performance of a specific job, work or service to the contractor, for a definite or
predetermined period of time, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal.60 Ordinarily, a contractor is presumed to be a
labor-only contractor, unless the contractor is able to discharge the burden of overcoming this
presumption. In cases when it's the principal claiming the legitimacy of the contractor, then the burden
is borne by the principal.61

Preliminarily, the Court finds that there is no such burden resting on either Sunpower or Jobcrest in this
case. It is true that Sunpower maintained its position that Jobcrest is a legitimate and independent
contractor.62 But since the petitioners do not dispute that Jobcrest was a duly-registered contractor
under Section 11 of DOLE DO No. 18-02,63 there is no operative presumption that Jobcrest is a labor-only
contractor.64

Conversely, the fact of registration with DOLE does not necessarily create a presumption that Jobcrest is
a legitimate and independent contractor. The Court emphasizes, however, that the DOLE Certificate of
Registration issued in favor of Jobcrest is presumed to have been issued in the regular performance of
official duty.65 In other words, the DOLE officer who issued the certificate in favor of Jobcrest is
presumed, unless proven otherwise, to have evaluated the application for registration in accordance
with the applicable rules and regulations.66 The petitioners must overcome the presumption of
regularity accorded to the official act of DOLE, which is no less than the agency primarily tasked with the
regulation of job contracting.67

For the reasons discussed below, the Court is constrained to give more weight to the substantiated
allegations of Sunpower, as opposed to the unfounded self-serving accusations of the petitioners.

Jobcrest has substantial capital.

The law and the relevant regulatory rules require the contractor to have substantial capital or
investment, in order to be considered a legitimate and independent contractor. Substantial capital or
investment was defined in DOLE DO No. 18-02 as "capital stocks and subscribed capitalization in the case
of corporations, tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out." DOLE initially did not provide a specific amount as to what constitutes substantial
capital. It later on specified in its subsequent issuance, DOLE DO No. 18-A, series of 2011,
that substantial capital refers to paid-up capital stocks/shares of at least Php 3,000,000.00 in the case of
corporations.68 Despite prescribing a threshold amount under DO No. 18-A, certificates of registration
issued under DO No. 18-02, such as that of Jobcrest, remained valid until its expiration.69

The records show that as early as the proceedings before the LA, Jobcrest established that it had an
authorized capital stock of Php 8,000,000.00, Php 2,000,000.00 of which was subscribed, and a paid-up
capital stock of Php 500,000.00, in full compliance with Section 13 of the Corporation Code.70 For the
year ended December 31, 2011, the paid-up capital of Jobcrest increased to Php
8,000,000.00,71 notably more than the required capital under DOLE DO No. 18-A.72

The balance sheet submitted by Jobcrest for the year ending on December 31, 2010 also reveals that
its total assets for the year 2009 amounted to Php 11,280,597.94, and Php 16,825,271.30 for the year
2010, which were comprised of office furniture, fixtures and equipment, land, building, and motor
vehicles, among others.73 As of December 31, 2012, the total assets for the years 2011 and 2012 also
increased to Php 35,631,498.58 and Php 42,603,167.16, respectively.74

Evidently, Jobcrest had substantial capital to perform the business process services it provided
Sunpower. It has its own office, to which the petitioners admittedly reported to, possessed numerous
assets for the conduct of its business, and even continuously earned profit as a result.75 The Court can
therefore reasonably conclude from Jobcrest's financial statements that it carried its own business
independent from and distinctly outside the control of its principals.

The petitioners argue that the amount of substantial capital is irrelevant because Sunpower provided
the tools and owned the work premises. These supposedly negate the claim that Jobcrest has
substantial capital.76 The Court does not agree with the petitioners.

DOLE DO No. 18-02 and DO No. 18-A, as well as Article 106 of the Labor Code itself, all use the
conjunctive term "or" in prescribing that the contractor should have substantial capital or investment.
Having established that Jobcrest had substantial capital, it is unnecessary for this Court to determine
whether it had sufficient investment in the form of tools, equipment, machinery and work premises.

In Neri v. NLRC,77 the Court rejected the same argument put forward by the petitioners, arid ruled that
proof of either substantial capital or investment is sufficient for purposes of determining whether the
first element of labor-only contracting is absent:

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
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.78 (Emphasis Ours)

The agreement between Jobcrest and Sunpower also complied with the statutory requirement of
ensuring the observance of the contractual employees' rights under the law. Specifically, paragraph 7 of
the Service Contract Agreement obligates Jobcrest to observe all laws, rules and regulations pertaining
to the employment of its employees.79

Suncrest does not control the manner by which the petitioners accomplished their work.

In most cases, despite proof of substantial capital, the Court declared a contractor as a labor-only
contractor whenever it is established that the principal—not the alleged legitimate contractor—actually
controls the manner of the employees' work.80 The element of control was defined under DOLE DO No.
18-02 as:

The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.81

In other words, the contractor should undertake the performance of the services under its contract
according to its own manner and method, free from the control and supervision of the
principal.82Otherwise, the contractor is deemed an illegitimate or labor-only contractor.

The control over the employees' performance of the work is, as the Court ruled in some cases, usually
manifested through the power to hire, fire, and pay the contractor's employees,83 the power to
discipline the employees and impose the corresponding penalty,84 and more importantly, the actual
supervision of the employees' performance.85 On this point, the petitioners claim that Sunpower
employees supervised their work while in the premises of Sunpower's own plant. They also disclaim the
affidavits of Sunpower employees, which denied exercising any form of supervision over the
petitioners,86 by alleging that these are self-serving assertions. The petitioners also refute the veracity of
the sworn statements of Jobcrest's employees.87

Upon review of the records, the Court finds that the evidence clearly points to Jobcrest as the entity that
exercised control over the petitioners' work with Sunpower. Upon the petitioners' assignment to
Sunpower, Jobcrest conducted a training and certification program, during which time, the petitioners
reported directly to the designated Jobcrest trainer.88 The affidavit of Jobcrest's Operations Manager,
Kathy T. Morales (Kathy), states that operational control over Jobcrest employees was exercised to
make sure that they conform to the quantity and time specifications of the service agreements with
Jobcrest's clients. She narrated that manager and shift supervisors were assigned to the premises of
Sunpower, with the task to oversee the accomplishment of the target volume of work. She also
mentioned that there is administrative control over Jobcrest employees because they monitor the
employees' attendance and punctuality, and the employees' observance of other rules and
regulations.89

The affidavit of Kathy was markedly corroborated by the sworn statement of Jobcrest's On-site
Supervisor, Allan, in which he affirmed that he directly supervised the petitioners while they were
stationed in Sunpower. He also confirmed that during this period, he issued several memoranda to the
petitioners for violating rules and regulations, and provided their hourly output performance
assessment, which "determine[s] their fitness to continue their employment with Jobcrest."90

The petitioners' very own sworn statements further establish this point. In his statement, Leo averred
that when he reported for work to file his application for paternity leave, he reported to Allan, Jobcrest's
supervisor, who then approved his leave application. He likewise narrated that it was Jobcrest's Human
Resource Manager, Noel, who informed Leo about the disciplinary charge against him for allegedly
violating the Jobcrest Code of Conduct.91

The same conclusion holds for Leilanie. In her statement, Leilanie narrated that she reported for work to
the Jobcrest office on November 29, 2011 after giving birth to her second child. She also alleged in her
affidavit that similar to Leo, it was Noel who informed her of the disciplinary action against her, through
the service of a copy of the "Notice of Admin Charge/Explanation Slip."92

Notably, other documentary evidence plainly show that Leo's paternity leave application was indeed
filed with Jobcrest,93 and the respective notices of disciplinary action against the petitioners were
prepared and signed by the Jobcrest Human Resource Manager.94 These are clear indications that
Jobcrest exercised control over the petitioners' work.

The fact that the petitioners were working within the premises of Sunpower, by itself, does not negate
Jobcrest's control over the means, method, and result of the petitioners' work.95 Job contracting is
permissible "whether such job, work, or service is to be performed or completed within or outside the
premises of the principal"96 for as long as the elements of a labor-only contractor are not present. Since
Jobcrest was a provider of business process services, its employees would necessarily work within the
premises of its client companies in order for Jobcrest to perform its contractual undertaking. Mere
physical presence in Sunpower's plant does not necessarily mean that Sunpower controlled the means
and method of the petitioners' work. The petitioners, despite working in Sunpower's plant for most of
the time, admit that whenever they file their leave application, or whenever required by their
supervisors in Jobcrest, they report to the Jobcrest office. Designated on-site supervisors from Jobcrest
were the ones who oversaw the performance of the employees' work within the premises of Sunpower.

Besides, while the Court repeatedly recognizes that there are employers who abuse the system of
subcontracting, we also acknowledge that contracts for services does not necessarily provide
"untrammeled freedom" to the contractor in undertaking the engagement.97 What is important, as
incontrovertibly established in this case, is that the principal's right to control is limited to the results of
the work of the contractor's employees.

The petitioners were regular employees of Jobcrest.


The four-fold test is the established standard for determining the existence of an employer-employee
relationship:98 (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the power of control over the employee's conduct. Of the four elements, the
power of control is the most important.99 Having found that Jobcrest exercised control over the
petitioners' work, the Court is constrained to determine whether the petitioners were regular
employees of Jobcrest by virtue of the three other elements of the four-fold test.

The petitioners themselves admit that they were hired by Jobcrest.100 In their subsequent engagement
to Sunpower, it was Jobcrest that selected and trained the petitioners.101 Despite their assignment to
Sunpower, Jobcrest paid the petitioners' wages, including their contributions to the Social Security
System (SSS), Philippine Health Insurance Corporation (Philhealth), and Home Development Mutual
Fund (HDMF, also known as Pag-IBIG).102 The power to discipline the petitioners was also retained by
Jobcrest, as evidenced by the "Notice of Admin Charge/Explanation Slip" furnished the petitioners
through Jobcrest's Human Resource department.103

The Court further notes that on December 27, 2010 and January 25, 2011, Leilanie and Leo were
respectively confirmed as regular employees of Jobcrest.104 Jobcrest did not even deny that the
petitioners were their regular employees. Consequently, the petitioners cannot be terminated from
employment without just or authorized cause.105

A review of the petitioners' repeated submissions reveals that while they claim to have been illegally
dismissed from employment,106 Jobcrest actually intended to assign Leo again to Sunpower, and provide
Leilanie with another engagement with a different client company. The petitioners all admitted to these
facts in their sworn statement, heavily quoted in their position paper filed with the LA:107

41. Noong December 14, 2011, ako [Leo Mago] ay tinawagan sa aking cellular phone ng
nagpakilalang Julie at taga HR ng JOBCREST at ang sabi sa akin ay magreport umano ako sa
opisina upang ipadala sa SUNPOWER;

xxxx

44. Noong November 29, 2011, ako [Leilani Colobong] ay nagreport sa JOBCREST at aking nakausap
ang isa sa staff ng JOBCREST na hindi ko alam ang pangalan at ang sabi niya sa akin ay ililipat
umano ako sa kompanyang FIRST SUMIDEN dahil hindi na umano ako pwedeng m[a]gtrabaho sa
SUNPOWER na hindi niya sinabi kung anu ang dahilan;

45. Noong December 1, 2011, ako ay bumalik sa JOBCREST at ako ay binigyan nila ng referral para
magpamedical para sa aking bagong requirements diumano sa aking bagong trabaho sa FIRST
SUMIDEN dahil hindi na talaga umano ako tatanggapin sa SUNPOWER sa aking pagbabalik trabaho
ng December 4, 2011 na hindi naman niya sinabi kung anu ang dahilan; Kalakip nito ang nas[a]bing
referral slip bilang Exhibit "S"108 (Emphasis Ours)

It was also uncontroverted that Jobcrest offered to accept the petitioners' return to work, but they
refused this offer during the mandatory conference.109 Clearly, the petitioners were not illegally
dismissed, much less terminated from their employment. There is nothing on record that established
the dismissal of the petitioners in the first place.

In MZR Industries, et al. v. Colambot,110 the employee claimed to have been illegally dismissed through a
verbal directive. The employer denied this and alleged waiting for the employee to report for work, only
to later find out that a complaint for illegal dismissal was filed against them. The Court recognized that
while the employer is generally required to establish the legality of the employee's termination, the
employee should first establish the fact of dismissal from service. Failing such, as in this case, the Court
cannot rule that the employee was illegally dismissed.

The "Notice of Admin Charge/Explanation Slip" is also insufficient proof of the petitioners' termination
from employment. The notice merely required the petitioners to explain whether they violated
Jobcrest's Code of Conduct. No penalty was imposed on the petitioners yet when they were furnished
with a copy of the notices.111 In fact, Jobcrest was unable to take the appropriate action on the charge,
considering that the petitioners immediately filed their complaint for illegal dismissal with the NLRC the
following day, or on December 15, 2011.112

All things considered, Sunpower is not the statutory employer of the petitioners. The circumstances
obtaining in this case, as supported by the evidence on record, establish that Jobcrest was a legitimate
and independent contractor. There is no reason for this Court to depart from the CA's findings.

WHEREFORE, premises considered, the present petition is hereby DENIED for lack of merit. The Court of
Appeals' Decision dated October 8, 2013 and Resolution dated January 13, 2014 in CA-G.R. SP No.
131059 are AFFIRMED, which nullified the National Labor Relations Commission's Decision dated April
24, 2013 and Resolution dated May 28, 2013, and reinstated the Labor Arbiter's Decision dated July 3,
2012. No costs.

SO ORDERED.

Manila Electric Company v Benamira

July 14, 2005

Facts:The individual respondents are licensed security guards formerly employed by People’s Security,
Inc. (PSI) and deployed as such at MERALCO’s head office in Ortigas Avenue, Pasig, Metro
Manila. On November 30, 1990, the security service agreement between PSI and MERALCO was
terminated. Immediately thereafter, fifty-six of PSI’s security guards, including herein eight individual
respondents, filed a complaint for unpaid monetary benefits against PSI and MERALCO.
Meanwhile, the security service agreement between respondent Armed Security & Detective Agency,
Inc., (ASDAI) and MERALCO took effect on December 1, 1990. In the agreement, ASDAI was designated
as the AGENCY while MERALCO was designated as the COMPANY.

Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCO’s head
office. On June 29, 1992, Labor Arbiter Manuel P. Asuncion rendered a decision in favor of the former
PSI security guards, including the individual respondents. Less than a month later, or on July 21, 1992,
the individual respondents filed another complaint for unpaid monetary benefits, this time against
ASDAI and MERALCO.

On July 25, 1992, the security service agreement between respondent Advance Forces Security &
Investigation Services, Inc. (AFSISI) and MERALCO took effect, terminating the previous security service
agreement with ASDAI.[7] Except as to the number of security guards,[8] the amount to be paid the
agency,[9] and the effectivity of the agreement,[10] the terms and conditions were substantially identical
with the security service agreement with ASDAI.

Issues: whether respondents are employees of MERALCO

Whether ASDAI and AFSISI are labor-only contractor

Held: no

In this case, the terms and conditions embodied in the security service agreement between MERALCO
and ASDAI expressly recognized ASDAI as the employer of individual respondents.

Under the security service agreement, it was ASDAI which (a) selected, engaged or hired and discharged
the security guards; (b) assigned them to MERALCO according to the number agreed upon; (c) provided
the uniform, firearms and ammunition, nightsticks, flashlights, raincoats and other paraphernalia of the
security guards; (d) paid them salaries or wages; and, (e) disciplined and supervised them or principally
controlled their conduct. The agreement even explicitly provided that “[n]othing herein contained shall
be understood to make the security guards under this Agreement, employees of the COMPANY, it being
clearly understood that such security guards shall be considered as they are, employees of the AGENCY
alone.” Clearly, the individual respondents are the employees of ASDAI.

As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard
whose behavior, conduct or appearance is not satisfactory, such merely confirms that the power to
discipline lies with the agency. It is a standard stipulation in security service agreements that the client
may request the replacement of the guards to it. Service-oriented enterprises, such as the business of
providing security services, generally adhere to the business adage that “the customer or client is always
right” and, thus, must satisfy the interests, conform to the needs, and cater to the reasonable
impositions of its clients.

Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without
its consent an indication of control. It is simply a security clause designed to prevent the agency from
unilaterally removing its security guards from their assigned posts at MERALCO’s premises to the latter’s
detriment.

The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its
premises is likewise not indicative of control as it is not a unilateral right. The agreement provides that
the agency is principally mandated to conduct inspections, without prejudice to MERALCO’s right to
conduct its own inspections.

Needless to stress, for the power of control to be present, the person for whom the services are
rendered must reserve the right to direct not only the end to be achieved but also the means for
reaching such end.[26] Not all rules imposed by the hiring party on the hired party indicate that the latter
is an employee of the former.[27] Rules which serve as general guidelines towards the achievement of
the mutually desired result are not indicative of the power of control.

Moreover, ASDAI and AFSISI are not “labor-only” contractors. There is “labor only” contract when the
person acting as contractor is considered merely as an agent or intermediary of the principal who is
responsible to the workers in the same manner and to the same extent as if they had been directly
employed by him. On the other hand, “job (independent) contracting” is present if the following
conditions are met: (a) the contractor carries on an independent business and undertakes the contract
work on his own 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 the work except to the result thereof; and (b) the contractor has substantial capital or
investments in the form of tools, equipment, machineries, work premises and other materials which are
necessary in the conduct of his business.[29] Given the above distinction and the provisions of the
security service agreements entered into by petitioner with ASDAI and AFSISI, we are convinced that
ASDAI and AFSISI were engaged in job contracting.

The individual respondents can not be considered as regular employees of the MERALCO for, although
security services are necessary and desirable to the business of MERALCO, it is not directly related to
its principal business and may even be considered unnecessary in the conduct of MERALCO’s principal
business, which is the distribution of electricity.

Manila Electric Company v Benamira

July 14, 2005

Facts:The individual respondents are licensed security guards formerly employed by People’s Security,
Inc. (PSI) and deployed as such at MERALCO’s head office in Ortigas Avenue, Pasig, Metro
Manila. On November 30, 1990, the security service agreement between PSI and MERALCO was
terminated. Immediately thereafter, fifty-six of PSI’s security guards, including herein eight individual
respondents, filed a complaint for unpaid monetary benefits against PSI and MERALCO.
Meanwhile, the security service agreement between respondent Armed Security & Detective Agency,
Inc., (ASDAI) and MERALCO took effect on December 1, 1990. In the agreement, ASDAI was designated
as the AGENCY while MERALCO was designated as the COMPANY.

Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCO’s head
office. On June 29, 1992, Labor Arbiter Manuel P. Asuncion rendered a decision in favor of the former
PSI security guards, including the individual respondents. Less than a month later, or on July 21, 1992,
the individual respondents filed another complaint for unpaid monetary benefits, this time against
ASDAI and MERALCO.

On July 25, 1992, the security service agreement between respondent Advance Forces Security &
Investigation Services, Inc. (AFSISI) and MERALCO took effect, terminating the previous security service
agreement with ASDAI.[7] Except as to the number of security guards,[8] the amount to be paid the
agency,[9] and the effectivity of the agreement,[10] the terms and conditions were substantially identical
with the security service agreement with ASDAI.

Issues: whether respondents are employees of MERALCO

Whether ASDAI and AFSISI are labor-only contractor

Held: no

In this case, the terms and conditions embodied in the security service agreement between MERALCO
and ASDAI expressly recognized ASDAI as the employer of individual respondents.

Under the security service agreement, it was ASDAI which (a) selected, engaged or hired and discharged
the security guards; (b) assigned them to MERALCO according to the number agreed upon; (c) provided
the uniform, firearms and ammunition, nightsticks, flashlights, raincoats and other paraphernalia of the
security guards; (d) paid them salaries or wages; and, (e) disciplined and supervised them or principally
controlled their conduct. The agreement even explicitly provided that “[n]othing herein contained shall
be understood to make the security guards under this Agreement, employees of the COMPANY, it being
clearly understood that such security guards shall be considered as they are, employees of the AGENCY
alone.” Clearly, the individual respondents are the employees of ASDAI.

As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard
whose behavior, conduct or appearance is not satisfactory, such merely confirms that the power to
discipline lies with the agency. It is a standard stipulation in security service agreements that the client
may request the replacement of the guards to it. Service-oriented enterprises, such as the business of
providing security services, generally adhere to the business adage that “the customer or client is always
right” and, thus, must satisfy the interests, conform to the needs, and cater to the reasonable
impositions of its clients.

Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without
its consent an indication of control. It is simply a security clause designed to prevent the agency from
unilaterally removing its security guards from their assigned posts at MERALCO’s premises to the latter’s
detriment.

The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its
premises is likewise not indicative of control as it is not a unilateral right. The agreement provides that
the agency is principally mandated to conduct inspections, without prejudice to MERALCO’s right to
conduct its own inspections.

Needless to stress, for the power of control to be present, the person for whom the services are
rendered must reserve the right to direct not only the end to be achieved but also the means for
reaching such end.[26] Not all rules imposed by the hiring party on the hired party indicate that the latter
is an employee of the former.[27] Rules which serve as general guidelines towards the achievement of
the mutually desired result are not indicative of the power of control.

Moreover, ASDAI and AFSISI are not “labor-only” contractors. There is “labor only” contract when the
person acting as contractor is considered merely as an agent or intermediary of the principal who is
responsible to the workers in the same manner and to the same extent as if they had been directly
employed by him. On the other hand, “job (independent) contracting” is present if the following
conditions are met: (a) the contractor carries on an independent business and undertakes the contract
work on his own 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 the work except to the result thereof; and (b) the contractor has substantial capital or
investments in the form of tools, equipment, machineries, work premises and other materials which are
necessary in the conduct of his business.[29] Given the above distinction and the provisions of the
security service agreements entered into by petitioner with ASDAI and AFSISI, we are convinced that
ASDAI and AFSISI were engaged in job contracting.

The individual respondents can not be considered as regular employees of the MERALCO for, although
security services are necessary and desirable to the business of MERALCO, it is not directly related to
its principal business and may even be considered unnecessary in the conduct of MERALCO’s principal
business, which is the distribution of electricity.

[G.R. No. 160854 March 3, 2006]

BIG AA MANUFACTURER, Petitioner, vs. EUTIQUIO ANTONIO, JAY ANTONIO, FELICISIMO ANTONIO,
and LEONARDO ANTONIO, SR., Respondents.

FACTS
Petitioner is a sole proprietorship registered in the name of its proprietor, Enrico E. Alejo. Respondents
Eutiquio Antonio,Jay Antonio, Felicisimo Antonio, Leonardo Antonio, Sr. and Roberto Fabian filed a
complaint for illegal lay-off and illegal deductions before the NLRC’s Regional Arbitration Branch No. III.
They claimed that they were dismissed on January 11, 2000 and sought separation pay from petitioner.

The respondents alleged that as regular employees, they worked from 8:00 a.m. to 5:00 p.m. at
petitioner’s premises using petitioner’s tools and equipment and they received P250 per day. Eutiquio
was employed as carpenter-foreman from 1991-1999; Jay as carpenter from 1993-1999; Felicisimo as
carpenter from 1994-1999; and Leonardo, Sr. also as carpenter from 1997-1999. According to
respondents, they were dismissed without just cause and due process; hence, their prayer for
reinstatement and full backwages. They also impleaded one Hermie Alejo, a relative of the petitioner’s
owner, as co-respondent in their complaint.

On the other hand, petitioner Big AA Manufacturer, affirmed it is a sole proprietorship registered in the
name of Enrico Alejo and engaged in manufacturing office furniture, but it denied that respondents
were its regular employees. Instead, petitioner claimed that Eutiquio Antonio was one of its
independent contractors who used the services of the other respondents. According to petitioner, its
independent contractors were paid by results and were responsible for the salaries of their own
workers. Allegedly, there was no employer-employee relationship between petitioner and respondents.
However, petitioner stated it allowed respondents to use its facilities to meet job orders. Petitioner also
denied that respondents were laid-off by Big AA Manufacturer, since they were project employees only.
It added that since Eutiquio Antonio had refused a job order of office tables, their contractual
relationship ended. Petitioner surmised that Eutiquio resented the January 10, 2000 Implementing
Guidelines it issued to improve efficiency and performance.

ISSUE

Whether or not respondents are regular employees of petitioner Big AA.

HELD

The SC held that considering the submission of the parties, it is constrained to agree with the unanimous
ruling of the Court of Appeals, NLRC and Labor Arbiter that respondents are petitioner’s regular
employees. Respondents were employed for more than one year and their work as carpenters was
necessary or desirable in petitioner’s usual trade or business of manufacturing office furniture. Under
Article 280 of the Labor Code, the applicable test to determine whether an employment should be
considered regular or non-regular is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the employer.

True, certain forms of employment require the performance of usual or desirable functions and exceed
one year but do not necessarily result to regular employment under Article 280 of the Labor
Code.21Some specific exceptions include project or seasonal employment. Yet, in this case, respondents
cannot be considered project employees. Petitioner had neither shown that respondents were hired for
a specific project the duration of which was determined at the time of their hiring nor identified the
specific project or phase thereof for which respondents were hired.

It also agreed that Eutiquio was not an independent contractor for he does not carry a distinct and
independent business, and he does not possess substantial capital or investment in tools, equipment,
machinery or work premises.He works within petitioner’s premises using the latter’s tools and materials,
as admitted by petitioner. Eutiquio is also under petitioner’s control and supervision. Attesting to this is
petitioner’s admission that it allowed respondents to use its facilities for the "proper implementation"
of job orders. Moreover, the Implementing Guidelines regulating attendance, overtime, deadlines,
penalties; providing petitioner’s right to fire employees or "contractors"; requiring the carpentry division
to join petitioner’s exercise program; and providing rules on machine maintenance, all reflect control
and supervision over respondents.

Petition is denied.

Philippine Airlines v. NLRC and Stellar Industries (G.R. No. 125792)

Date: August 27, 2016Author: jaicdn0 Comments

Facts:

Petitioner PAL, a local air carrier, entered into a Service Agreement with respondent Stellar, a domestic
corporation engaged in the business of job contracting janitorial services. Pursuant to the agreement,
Stellar hired workers to perform janitorial and maintenance services for PAL. Sometime later, PAL
informed Stellar that the service agreement between them would no longer be renewed since the
janitorial requirements were bidded to other job contractors. Herein private respondents-workers filed
complaints against PAL and Stellar alleging they were illegally dismissed. The NLRC tribunal affirming the
Labor Arbiter held both PAL and Stellar liable to the workers. On reconsideration, the NLRC tribunal held
PAL solely liable stating it was the employer of the workers for it engaged in labor-only contracting with
Stellar.

Issues:

(1) Whether or not there is labor-only contracting;

(2) Whether or not there is employer-employee relationship between PAL and the respondent workers.

Ruling: NO.

(1) Prohibited labor-only contracting is defined in Article 106 of the Labor Code as follows: xxx 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 and placed by
such persons are performing activities which are directly related to the principal business of such
employer. xxx

Applying the foregoing provision to the present case, the Court finds no basis for holding that PAL
engaged in labor-only contracting. In fact, STELLAR claims that it falls under the definition of an
independent job contractor. Thus, it alleges that it has sufficient capital in the form of tools and
equipment and substantial capitalization as proven by its financial statements. Further, STELLAR has
clients other than petitioner.

STELLAR undertook said contract on its account, under its own responsibility, according to its own
manner and method, and free from the control and direction of the petitioner. Where the control of the
principal is limited only to the result of the work, independent job contracting exists. The janitorial
service agreement between petitioner and STELLAR is definitely a case of permissible job contracting.

(2) STELLAR, not PAL, was the employer of the individual private respondents. A contract of employment
existed between STELLAR and the individual private respondents, proving that it was said corporation
which hired them. It was also STELLAR which dismissed them, as evidenced by termination letter, which
was signed by the vice president for operations and comptroller of STELLAR. Likewise, they worked
under STELLAR’s own supervisors. STELLAR even had its own collective bargaining agreement with its
employees, including the individual private respondents. Moreover, PAL had no power of control and
dismissal over them.

In legitimate job contracting, no employer-employee relation exists between the principal and the job
contractor’s employees. The principal is responsible to the job contractor’s employees only for the
proper payment of wages.

[G.R. NO. 141464. September 21, 2005]

GRANDSPAN DEVELOPMENT CORPORATION, Petitioner, v. RICARDO BERNARDO, ANTONINO CE IDOZA


and EDGARDO DEL PRADO, surviving parent of EDGAR DEL PRADO, Respondent.
DECISION

SANDOVAL-GUTIERREZ, J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision1 dated September 17, 1999 and Resolution2 dated January 6, 2000
rendered by the Court of Appeals in CA-G.R. SP No. 50610, entitled "Ricardo Bernardo, Antonino
Ceñidoza and Edgardo Del Prado, as surviving parent of Edgar Del Prado v. National Labor Relations
Commission, Grandspan Development Corporation and Joaquin Narag doing business under the name &
style of J. Narag Construction."

The instant controversy stemmed from a complaint for illegal dismissal and non-payment of benefits
filed with the Labor Arbiter by Ricardo Bernardo, Antonino Ceñidoza and Edgar Del
Prado, Respondents, against Grandspan Development Corporation, Petitioner, and/or its warehouse
manager, Manuel G. Lee, docketed as NLRC Case No. RAB-IV-11-4605-92-RI.

Respondents, in their complaint, alleged that sometime in 1990, they were employed as truck scale
monitors by petitioner with a daily salary of P104.00 each. Eventually, they were assigned at its Truck
Scale Section of the Warehouse/Materials Department. They were issued identification cards signed by
Bonifacio Selmo, petitioner's personnel manager. On October 28, 1992, petitioner sent them a notice
terminating their services effective October 29, 1992 for using profane or offensive language, in
violation of Article VI (2) (a) of the company's Rules and Regulations.

Petitioner denied the allegations of respondents in their complaint, claiming that they are employees of
J. Narag Construction. Sometime in the third quarter of 1992, Canad Japan Co., Ltd. engaged petitioner's
services for fabrication works of several round and rectangular steel tanks needed for the HCMG or Sogo
project due for completion in September, 1992. As a consequence, petitioner subcontracted the services
of J. Narag Construction which, in turn, assigned its 3 helpers (herein respondents) to work for
petitioner's project. Sometime in October, 1992, Manuel G. Lee, manager of petitioner's Warehouse
Department received a report from supervisor Robert Ong that respondents vandalized the company's
log book and chairs. This prompted petitioner to send J. Narag Construction a memorandum terminating
the services of respondents for violation of the company's Rules and Regulations.

After the submission of the parties' pleadings and position papers, the Labor Arbiter rendered a Decision
dated June 30, 1994 dismissing respondents' complaint. In concluding that respondents were validly
dismissed from employment, the Labor Arbiter held that they were project employees whose services
were terminated upon completion of the project for which they were hired.

Upon appeal, the National Labor Relations Commission (NLRC) issued a Resolution dated March 7, 1995
remanding the case to the Labor Arbiter for appropriate proceedings to determine whether there is an
employer-employee relationship between the parties.

Both parties filed their respective motions for reconsideration but were denied by the NLRC in separate
Resolutions dated April 28, 1995 and May 31, 1995.
Respondents then filed with this Court a petition for certiorari . Pursuant to our ruling in St. Martin's
Funeral Home v. NLRC,3 we referred the petition to the Court of Appeals for its appropriate action and
disposition.

Meantime, respondent Del Prado died and was substituted by his surviving parent, Edgardo Del Prado.

On September 17, 1999, the Appellate Court rendered a Decision setting aside the NLRC's Resolutions
and ordering petitioner (1) to reinstate respondents Bernardo and Ceñidoza to their former positions
and pay, jointly and severally with J. Narag Construction, their backwages and other benefits, and (2) to
pay respondent Del Prado his separation pay.

The Court of Appeals found that respondents are employees of petitioner; that they were non-project
workers; and that they were denied due process, thus:

"In the instant case, petitioners were assigned to the Truck Scaling Materials Department of Grandspan.
They worked in Grandspan's premises using the materials, supplies and equipment of Grandspan. They
were under the supervision of Grandspan as to the manner and results of their work, and performed
services directly connected to the usual business of respondent Grandspan for the fabrication of heavy
structural components. The memorandum dated 28 October 1992 (p. 75 Rollo) dismissing the
petitioners in fact emanated from Grandspan Materials Manager Manuel G. Lee and is addressed to the
Personnel Department of Grandspan, albeit containing the self-serving claim that the employees-
petitioners were 'J. Narag Construction personnel'. Under the circumstances, We rule that J. Narag was a
labor-only contractor. While petitioners were in J. Narag Construction's payroll, such fact does not per
se establish J. Narag Construction as an independent contractor, i.e., the employer of the petitioners. x x
x.

xxxxxx

The Office of the Solicitor General opines that petitioners were non-project employees as they were
assigned at Grandspan's Materials Department. We agree. Moreover, if petitioners were truly project
employees, private respondents should have presented proof that they submitted to the nearest public
employment office a report of termination of service of their project employees upon completion of the
construction project, as required by Policy Instruction No. 20. x x x.

Going now to the issue of whether or not petitioners were illegally dismissed, We rule in the affirmative.
In the letter/memo dated 28 October 1992 (Rollo, p. 75), by which Grandspan ostensibly requested J.
Narag to terminate petitioners' contract immediately, the reason cited for the dismissal was violation of
Article VI 2.a. of company Rules and Regulations (the use of profane or offensive languages addressed to
company officers) committed, according to the petitioners, through the vandalism of logbooks and
office furniture at the Truck Scale Section of the Warehouse/Materials Department with obscene
drawings. x x x.

However, this is not supported by substantial evidence which is necessary in order that petitioners may
be dismissed for just cause. Considering that private respondent failed to discharge the burden of proof
reposed on it to show that the dismissal was justified, the inevitable result is a finding that the dismissal
was unjustified (Uy v. NLRC, 261 SCRA 505; Caurdanetaan Piece Workers Union v. Laguesma, 296 SCRA
401).

Moreover, petitioners were not given ample opportunity to prepare adequately for their defense,
including legal representation (Abiera v. NLRC, supra; Pangasinan III Electric Cooperative, Inc. v. NLRC,
215 SCRA 669), nor were they served notice of investigation, nor given an opportunity to be heard. This
violates the requirement of notice and hearing in case of employee dismissal, thus petitioners' dismissal
was void (Abiera v. NLRC, 202 SCRA 7; Falguera v. Lansangan, 251 SCRA 364).

As illegally dismissed employees, petitioners are protected by Article 279 of the Labor Code, x x x.

In the case of petitioner Edgar del Prado, now deceased and represented in this petition by his surviving
parent Edgardo del Prado, reinstatement is no longer possible, thus he should be paid separation pay
equivalent to one month salary for every year of service in addition to backwages (International
Phamaceuticals, Inc. v. NLRC, 287 SCRA 228).

WHEREFORE, finding merit in the petition, the same is GRANTED. The assailed NLRC resolutions dated 7
March 1995 and 28 April 1995 are ANNULLED and SET ASIDE.

Private respondent Grandspan is ordered to reinstate petitioners Ricardo Bernardo and Antonino
Ceñidoza to their former positions without loss of seniority rights. Grandspan and J. Narag
Construction are declared jointly and severally liable to pay said petitioners full backwages and other
benefits and privileges enjoyed by respondent Grandspan employees.

Private respondents Grandspan and J. Narag Construction are likewise ordered to pay petitioner
Edgardo del Prado, surviving parent of Edgar del Prado, the latter's separation pay at the rate of one (1)
month salary for every year of service rendered by the deceased.

SO ORDERED."

On October 8, 1999, petitioner filed a motion for reconsideration. Respondents also filed a motion for
reconsideration and/or clarification praying that the Appellate Court's Decision be modified by awarding
respondent Del Prado his backwages.

On January 6, 2000, the Court of Appeals promulgated its Resolution denying petitioner's motion for
reconsideration but modifying its Decision in the sense that petitioner and J. Narag Construction are
ordered to pay respondent Del Prado his separation pay and backwages.

Hence, this Petition for Review on Certiorari .

The issue for our resolution is whether the Court of Appeals erred in holding that respondents are
employees of petitioner.

Petitioner argues that it has no employer-employee relationship with respondents since they are
employees of J. Narag Construction, an independent contractor.
In Miguel v. JCT Group, Inc.,4 we held:

"The test for determining an employer-employee relationship hinges on resolving who has the power to
select employees, who pays for their wages, who has the power to dismiss them, and who exercises
control in the methods and the results by which the work is accomplished."

The Court of Appeals found that J. Narag Construction assigned respondents to perform
activities directly related to the main business of petitioner. They worked in petitioner's premises,
using its equipment, materials and supplies. J. Narag Construction's payroll worksheets covering the
period from December 21, 1990 to July 31, 1991 show that the payment of their salaries was approved
by petitioner. The manager and supervisor of petitioner's Warehouse Department supervised the
manner and results of their work. It was petitioner who terminated their services after finding them
guilty of using profane or offensive language in violation of Article VI (2) (a) of the company's Rules and
Regulations. The Appellate Court then concluded that these circumstances confirm the existence of an
employer-employee relationship between petitioner and respondents.

We agree.

Unswayed, petitioner insists that J. Narag Construction, being a legitimate independent contractor, is
the employer of respondents. On this point, the Court of Appeals held that J. Narag Construction is a
labor-only contractor.

Article 106 of the Labor Code, as amended, provides in part:

"ART. 106. Contractor or subcontracting. - x x x.

xxxxxx

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 and placed by such person are performing activities which are directly
related to the principal business of such employer. x x x."

On the basis of the records, we have no reason to deviate from the Appellate Court's finding that J.
Narag Construction is indeed a labor-only contractor. These are the reasons: (1) it is not registered as a
building contractor with the SEC; (2) it has no contract with petitioner; and (3) there is no proof of its
financial capability and has no list of equipment, tools, machineries and implements used in the
business.

Clearly, J. Narag Construction could not be respondents' employer.

But petitioner maintains that respondents are project employees and as such, their services ended in
September, 1992 upon completion of its HCMG or Sogo project.

In Kiamco v. NLRC,5 we held:


"The principal test for determining whether particular employees are properly characterized as 'project
employees,' as distinguished from 'regular employees,' is whether or not the 'project employees' were
assigned to carry out a 'specific project or undertaking,' the duration and scope of which were specified
at the time the employees were engaged for that project. As defined, project employees are those
workers hired (1) for a specific project or undertaking, and (2) the completion or termination of such
project or undertaking has been determined at the time of engagement of the employee."

Here, petitioner could not present employment contracts signed by respondents showing that their
employment was for the duration of the HCMG or Sogo project.

Likewise, as correctly observed by the Court of Appeals, petitioner failed to present any report
terminating the services of respondents when its projects were actually finished.

Section 2.2 (e) of the Labor Department Order No. 19 expressly provides that the report of termination
is one of the indications of project employment.6

Time and again, we held that failure of the employer to file termination reports after every project
completion with the nearest public employment office is an indication that respondents were

not project employees.7

We, therefore, uphold the finding of the Court of Appeals that respondents are petitioner's regular
employees. As such, they are entitled to security of tenure and can only be dismissed for a just or
authorized cause, as provided by Article 279 of the Labor Code, as amended, thus:

"ARTICLE 279. Security of Tenure. - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his
actual reinstatement."

In Bolinao Security and Investigation Service, Inc. v. Toston8 , we emphasized that "it is incumbent upon
the employer to prove by the quantum of evidence required by law that the dismissal of an employee is
not illegal, otherwise, the dismissal would be unjustified."

Here, petitioner failed to discharge its burden. In terminating respondents' services, it merely relied on
the alleged completion of the HCMG or Sogo project and on the report that respondents uttered
profane or offensive language in violation of the company's Rules and Regulations. As earlier mentioned,
they are not project employees. And as found by the Court of Appeals, there is no evidence to
substantiate the charge of uttering profane or offensive language.

It also appears that petitioner violated respondents' right to due process.

In Loadstar Shipping Co., Inc. v. Mesano,9 we held:


"The law requires that an employee sought to be dismissed must be served two written notices before
termination of his employment. The first notice is to apprise the employee of the particular acts or
omissions by reason of which his dismissal has been decided upon; and the second notice is to inform
the employee of the employer's decision to dismiss him. Failure to comply with the requirement of two
notices makes the dismissal illegal. The procedure is mandatory. Non-observance thereof renders the
dismissal of an employee illegal and void."

Records show that respondents were not served by petitioner with notices, verbal or written, informing
them of the particular acts for which their dismissal is sought. Neither were they required to give their
side regarding the alleged serious misconduct imputed against them.

We thus sustain the Court of Appeals ruling that respondents were deprived of both their substantive
and procedural rights to due process and, therefore, the termination of their employment is illegal.

Since respondents were illegally dismissed from work, they are entitled to reinstatement without loss of
seniority rights, full backwages, inclusive of allowances, and other benefits or their monetary
equivalent computed from the time their compensation was withheld from them up to the time of
their actual reinstatement.10

However, the circumstances obtaining in this case do not warrant the reinstatement of respondents.
Antagonism caused a severe strain in the parties' employer-employee relationship. Thus, a more
equitable disposition would be an award of separation pay equivalent to at least one month pay, or one
month pay for every year of service, whichever is higher, (with a fraction of at least six (6) months being
considered as one (1) whole year),11 in addition to their full backwages, allowances and other benefits.12

Records show that respondents were employed by petitioner from 1990 to October 29, 1992, or for two
(2) years, with a daily salary of P104.00 each, hence, entitled to a separation pay of P4,992.00.13

WHEREFORE, the assailed Decision dated September 17, 1999 and Resolution dated January 6, 2000 of
the Court of Appeals in CA-G.R. SP No. 50610 are hereby AFFIRMED with MODIFICATION in the sense
that petitioner is ordered to pay each respondent separation pay equivalent to P4,992.00, plus their
respective full backwages, and other privileges and benefits, or their monetary equivalent, during the
period of their dismissal up to their supposed actual reinstatement.

Costs against petitioner.

SO ORDERED.

G.R. No. 154715, Dec. 11, 2003


New Golden City Builders vs. CA

FACTS:

Petitioner entered into a construction contract with Prince David Development Corporation for the
construction of a 17-storey office and residential condominium building. Petitioner engaged the services
of NiloLayno Builders to do the specialized concrete works, forms works and steel rebars works.
Pursuant to the contract, NiloLayno Builders hired private respondents to perform work at the project.

After the completion of the phase for which NiloLayno Builders was contracted, private respondents
filed a complaint against petitioner and its president (NGC Builder and Manuel Sy) for unfair labor
practice, non-payment of 13th month pay, service incentive leave, illegal dismissal and severance pay, in
lieu of reinstatement.

The Labor Arbiter ruled in favor of respondents, but dismissed the charges for illegal dismissal including
their prayers for back wages and unfair labor practice and other monetary claims except their 13th
month pay and service incentive leave pay. It was also found that NiloLayno Builders was a labor-only-
contractor, thus private respondents were deemed employees of the petitioner. Both parties
appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter's decision with
modification that private respondents were illegally dismissed.

Since petitioner's motion for reconsideration was denied, it instituted a special civil action for
certiorariwith the Court of Appeals, but the latter denied the same; hence, a petition for review in SC.

Issue: Whether NiloLayno Builders was an "independent contractor" or a "labor-only" contractor

Ruling: NiloLayno Builders is an independent contractor.

Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, an independent
contractor is one who undertakes "job contracting," i.e., a person who: (a) carries on an independent
business and undertakes the contract work on his own 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 the work except as to the results thereof; and (b) has
substantial capital or investment in the form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of the business. Jurisprudential holdingsare to the
effect that in determining the existence of an independent contractor relationship, several factors may
be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an
independent business; the nature and extent of the work; the skill required; the term and duration of
the relationship; the right to assign the performance of specified pieces of work; the control and
supervision of the work to another; the employer's power with respect to the hiring, firing and payment
of the contractor's workers; the control of the premises; the duty to supply premises, tools, appliances,
materials and labor; and the mode, manner and terms of payment.

We are convinced that Nilo Layno Builders is undertaking permissible labor or job contracting. NiloLayno
Builders is a duly licensed labor contractor carrying on an independent business for a specialized work
that involves the use of some particular, unusual and peculiar skills and expertise, like concrete works,
form works and steel rebars works. As a licensed labor contractor, it complied with the conditions set
forth in Section 5, Rule VII-A, Book III, Rules to Implement the Labor Code, among others, proof of
financial capability and list of equipment, tools, machineries and implements to be used in the business.
Further, it entered into a written contract with the petitioner, a requirement under Section 3, Rule VII-A,
Book III, Rules to Implement the Labor Code to assure the employees of the minimum labor standards
and benefits provided by existing laws.

The test to determine the existence of independent contractorship is whether one claiming to be an
independent contractor has contracted to do the work according to his own methods and without being
subject to the control of the employer, except only to the results of the work. This is exactly the
situation obtaining in the case at bar. NiloLayno Builders hired its own employees, the private
respondents, to do specialized work in the Prince David Project of the petitioner. The means and
methods adopted by the private respondents were directed by NiloLayno Builders except that, from
time to time, the engineers of the petitioner visited the site to check whether the work was in accord
with the plans and specifications of the principal. As admitted by Nilo G. Layno, he undertook the
contract work on his own account and responsibility, free from interference from any other persons,
except as to the results; that he was the one paying the salaries of private respondents; and that as
employer of the private respondents, he had the power to terminate or dismiss them for just and valid
cause. Indubitably, the Court finds that NiloLayno Builders maintained effective supervision and control
over the private complainants.

Thus, it was plain conjecture on the part of the Labor Arbiter, the NLRC and the Court of Appeals to
conclude that Nilo Layno Builders was a labor-only contractor merely because it does not have
investment in the form of tools or machineries. They failed to appreciate the fact
that Nilo Layno Builders had substantial capitalization for it did not only provide labor to do the specified
project and pay their wages, but it furnished the materials to be used in the construction.

In Neri v. NLRC, we held that the labor contractor which sufficiently proved that it had substantial capital
was not engaged in labor-only contracting. Thus:

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 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.

PANGILINAN vs GENERAL MILLING CORPORATION Case Digest

[G.R. No. 149329 July 12, 2004]

ROSITA PANGILINAN, YOLANDA LAYOLA, SALLY GOLDE, AIDA QUITE, FERDINAND CALE, RAUL ARUITA,
MANUEL ERIFUL, ARNEL PAULO, ROSEMARIE GEOTINA, SAMUELA KUMAR, REBECCA PEREZ, EDGAR
BELLO, JOSEPH SORIANO, DANILO AMPULLER, TOLENTINO CALLAO, MANOLITA MANALANG, TORIBIO
LETIM, NANCY BELGICA, ALFREDO ARELLANO, JOSEFA CEBUJANO, JUN DEL ROSARIO, AVELINO
AGUILAR, MILAROSA TIAMSON, EDNA DICHOSO, JASMIN BOLISAY, JULIETA DIDAL, GERARDO BARISO,
ANGELITO PEÑAFLOR, NERISSA LETIM, ALEXANDER BARBOSA, ELIZABETH SAENS, NYMPHA LUGTU,
MYRNA MORALES, LIZA CRUZ, ELENA FANG, EDNA CRUZA, GORGONIO PALMA, JOSE VERGARA,
ALDRIN REMORQUE, RUDY BLANCO, MARIO BUENVIAJE, MA. CRISTY CEA, REYNALDO GUELAS
VILLASENOR, RHOY TADO, LYDIA SALIPOT, ANGELITO PEREZ VERGARA, RODOLFO GACHO, JESSIE SAN
PEDRO, MARINAO ORCA, JR., PEBELITO LERONA, PEPE CONGRESO, NIMFA NAPAO, WILHELMINA
BAGUISA, OLIVIA CAINCAY, JERRY MANUEL NICOLAS, CARLOS ABRATIQUE, JESUS LIM, JR., AND GERRY
ROXAS, Petitioners, - versus - GENERAL MILLING CORPORATION, Respondent.

FACTS: The respondent General Milling Corporation is a domestic corporation engaged in the
production and sale of livestock and poultry. It is, likewise, the distributor of dressed chicken to various
restaurants and establishments nationwide. As such, it employs hundreds of employees, some on a
regular basis and others on a casual basis, as “emergency workers.” The petitioners were employed by
the respondent on different dates as emergency workers at its poultry plant in Cainta, Rizal, under
separate “temporary/casual contracts of employment” for a period of five months. Most of them
worked as chicken dressers, while the others served as packers or helpers. Upon the expiration of their
respective contracts, their services were terminated. They later filed separate complaints for illegal
dismissal and non-payment of holiday pay, 13th month pay, night-shift differential and service incentive
leave pay against the respondent before the Arbitration Branch of the National Labor Relations
Commission.

The petitioners alleged that their work as chicken dressers was necessary and desirable in the usual
business of the respondent, and added that although they worked from 10:00 p.m. to 6:00 a.m., they
were not paid night-shift differential. They stressed that based on the nature of their work, they were
regular employees of the respondent; hence, could not be dismissed from their employment unless for
just cause and after due notice. They asserted that the respondent GMC terminated their contract of
employment without just cause and due notice. They further argued that the respondent could not rely
on the nomenclature of their employment as “temporary or casual.”

ISSUE: Whether or not the petitioners were regular employees of the respondent GMC when their
employment was terminated.

HELD: The SC held the petitioners were employees with a fixed period, and, as such, were not regular
employees. Article 280 of the Labor Code comprehends three kinds of employees: (a) regular employees
or those whose work is necessary or desirable to the usual business of the employer; (b) project
employees or those whose employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the
employee or where the work or services to be performed is seasonal in nature and the employment is
for the duration of the season; and, (c) casual employees or those who are neither regular nor project
employees.

A regular employee is one who is engaged to perform activities which are necessary and desirable in the
usual business or trade of the employer as against those which are undertaken for a specific project or
are seasonal.[41] There are two separate instances whereby it can be determined that an employment
is regular: (1) if the particular activity performed by the employee is necessary or desirable in the usual
business or trade of the employer; and, (2) if the employee has been performing the job for at least a
year. Article 280 of the Labor Code does not proscribe or prohibit an employment contract with a fixed
period. It does not necessarily follow that where the duties of the employee consist of activities usually
necessary or desirable in the usual business of the employer, the parties are forbidden from agreeing on
a period of time for the performance of such activities. There is thus nothing essentially contradictory
between a definite period of employment and the nature of the employee’s duties.
Stipulations in employment contracts providing for term employment or fixed period employment are
valid when the period were agreed upon knowingly and voluntarily by the parties without force, duress
or improper pressure, being brought to bear upon the employee and absent any other circumstances
vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each
other on more or less equal terms with no moral dominance whatever being exercised by the former
over the latter. An examination of the contracts entered into by the petitioners showed that their
employment was limited to a fixed period, usually five or six months, and did not go beyond such period.
The records reveal that the stipulations in the employment contracts were knowingly and voluntarily
agreed to by the petitioners without force, duress or improper pressure, or any circumstances that
vitiated their consent. Similarly, nothing therein shows that these contracts were used as a subterfuge
by the respondent GMC to evade the provisions of Articles 279 and 280 of the Labor Code.

The petitioners were hired as “emergency workers” and assigned as chicken dressers, packers and
helpers at the Cainta Processing Plant. While the petitioners’ employment as chicken dressers is
necessary and desirable in the usual business of the respondent, they were employed on a mere
temporary basis, since their employment was limited to a fixed period. As such, they cannot be said to
be regular employees, but are merely “contractual employees.” Consequently, there was no illegal
dismissal when the petitioners’ services were terminated by reason of the expiration of their contracts.
Lack of notice of termination is of no consequence, because when the contract specifies the period of its
duration, it terminates on the expiration of such period. A contract for employment for a definite period
terminates by its own term at the end of such period.