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Aliviado et al. v.

P&G HELD:
G.R. No. 160506. LABOR-ONLY CONTRACTING AND JOB CONTRACTING
March 9, 2010  ART. 106. Contractor or subcontractor.—
o “…The Secretary of Labor may, by appropriate regulations, restrict or prohibit
DOCTRINE: the contracting out of labor to protect the rights of workers established under
 The Law and its implementing rules allow contracting arrangements for the performance this Code. In so prohibiting or restricting, he may make appropriate
of specific jobs, works of services; The current labor rules expressly prohibit labor-only distinctions between laboronly contracting and job contracting as well as
contracting differentiations within these types of contracting and determine who among
o in order for such outsourcing to be valid, it must be made to an independent the parties involved shall be considered the employer for purposes of this
contractor because the current labor rules expressly prohibit labor-only Code, to prevent any violation or circumvention of any provision of this Code.”
contracting o “There is “labor-only” contracting where the person supplying workers to an
 Elements of labor-only contracting employer does not have substantial capital or investment in the form of tools,
o i) The contractor or subcontractor does not have substantial capital or equipment, machineries, work premises, among others, and the workers
investment which relates to the job, work or service to be performed and the recruited and placed by such person are performing activities which are
employees recruited, supplied or placed by such contractor or subcontractor directly related to the principal business of such employer. In such cases, the
are performing activities which are directly related to the main business of the person or intermediary shall be considered merely as an agent of the employer
principal; or who shall be responsible to the workers in the same manner and extent as if
o ii) The contractor does not exercise the right to control over the performance the latter were directly employed by him.”
of the work of the contractual employee  the OMNIBUS Rules Implementing the Labor Code. distinguishes between legitimate and
 Promm-Gem cannot be considered as a labor-only contractor; It is a legitimate labor-only contracting:
independent contractor. o In legitimate contracting, there exists a trilateral relationship under which
there is a contract for a specific job, work or service between the principal and
FACTS: the contractor or subcontractor, and a contract of employment between the
 Petitioners Aliviado et al (80 workers) worked as merchandisers of P&G contractor or subcontractor and its workers.
o They all individually signed employment contracts with either Promm- o Labor-only contracting is hereby declared prohibited. For this purpose,
Gem or SAPS labor-only contracting shall refer to an arrangement where the contractor or
o They received their wages from PrommGem or SAPS subcontractor merely recruits, supplies or places workers to perform a
o SAPS and Promm-Gem imposed disciplinary measures on erring job, work or service for a principal, and any of the following elements are
merchandisers present
 for reasons such as habitual absenteeism, dishonesty or changing  i) The contractor or subcontractor does not have substantial capital
day-off without prior notice or investment which relates to the job, work or service to be
 P&G is principally engaged in the manufacture and production of different consumer and performed and the employees recruited, supplied or placed by such
health products contractor or subcontractor are performing activities which are
o To enhance consumer awareness and acceptance of the products, directly related to the main business of the principal; or
 P&G entered into contracts with Promm-Gem and SAPS for the  ii) [T]he contractor does not exercise the right to control over the
promotion and merchandising of its products performance of the work of the contractual employee
 petitioners filed a complaint10 against P&G for regularization, and for other benefits  Article 248 (c) of the Labor Code
 RULING OF LABOR ARBITER o “Substantial capital or investment” refers to capital stocks and subscribed
o L/A ruled that there was no ER-EE Relationship between petitioners and P&G. capitalization in the case of corporations, tools, equipment, implements,
 that the selection and engagement of the petitioners, the payment of machineries and work premises, actually and directly used by the contractor or
their wages, the power of dismissal and control with respect to the subcontractor in the performance or completion of the job, work or service
means and methods by which their work was accomplished, were contracted out.
all done and exercised by Promm-Gem/SAPS. o The “right to control” shall refer to the right reserved to the person for whom
 that Promm-Gem and SAPS were legitimate independent job the services of the contractual workers are performed, to determine not only
contractors the end to be achieved, but also the manner and means to be used in reaching
 NLRC: affirmed that end.
 CA: affirmed
PROMM-GEM IS A LEGITIMATE INDEPENDENT CONTRACTOR
ISSUE: Whether P&G is the employer of petitioners. [YES]  the financial statements of Promm-Gem show that it has authorized capital stock of P1
million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990
o Promm-Gem has also proven that it maintained its own warehouse and office
space
o Promm-Gem also has other clients aside from P&G
 Under the circumstances, the Court find that Promm-Gem has substantial investment
which relates to the work to be performed
 Based on records,
o Promm-Gem supplied its complainant-workers with the relevant materials
necessary for them to perform their work.
o Promm-Gem also issued uniforms to them.
o relevant to mention that Promm-Gem already considered the complainants
working under it as its regular, not merely contractual or project, employees
 Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor.
We find that it is a legitimate independent contractor

SAPS IS A LABOR-ONLY CONTRACTOR


 Only has P31,250.00 paid-in capital
 no other evidence presented to show how much its working capital and assets are
 no showing of substantial investment in tools, equipment or other asset
 SAPS—having a paid-in capital of only P31,250—has no substantial capital.
 Considering that SAPS has no substantial capital or investment and the workers it
recruited are performing activities which are directly related to the principal business of
P&G, the Court find that the former is engaged in “labor-only contracting.”

WHEN LABOR-ONLY CONTRATING EXISTS


 the Labor Code itself establishes an employer-employee relationship between the
employer and the employees of the ‘labor-only’ contractor.”
o Purpose: to prevent a circumvention of labor laws.
 The contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer
 Consequently, the petitioners who were recruited by SAPS are considered as the
employees of P&G
o While those who worked and been dismissed by Promm-Gem, are considered
the employees of Promm-Gem, not of P&G
 But the Court found that there was no valid cause for the dismissal
of petitioners-employees of Promm-Gem.