Republic of the Philippines

Court of Appeals
Manila TWELFTH DIVISION

COCA COLA BOTTLERS PHILS. INC., Petitioner, -versusERNESTO OSTANI, EMMANUEL E SARTE, FRANKLIN CABACCAN, ALFREDO CUNANAN, JR., DANILO LATINA, EFREN RUBIO, RODOLFO PERFECTO, JR., WILFREDO M. PANTALEON, RENATO MOSTE, LEONARDO CALINYAO, REMEGIO CLARITO, REYNALDO GOYON, ROQUE SAMALCA, JR., MANUEL MOSTE, ISMAEL GOYON, REYNALDO MUNAN, DEXTER CAMIA, ROMMEL CRUZ, ROGELIO ISMAEL AND NATIONAL LABOR RELATIONS COMMISSION, Respondents.

CA-G.R. SP NO. 84524 Members: SABIO, JR. J. L., Chairman REYES, JR., J. C. and DIMARANAN VIDAL, JJ. Promulgated:

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DECISION
VIDAL, M.D., J.: In this Petition for Certiorari,1 the Petitioner COCA-COLA BOTTLERS PHILS, INC., (hereinafter Petitioner) is seeking the reversal
1

Rollo, pp. 2-32

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of the Decision dated 5 November 20032 of the National Labor Relations Commission (NLRC) in NLRC CA No. 027031-01 which consolidated the following cases: 1) NLRC NCR Case No. 07-07856-99 entitled ERNESTO OSTANI, EMMANUEL E. SARTE, FRANKLIN CABACCAN, ALFREDO CUNANAN, JR., DANILO LATINA, EFREN RUBIO, RODOLFO PERFECTO, JR., WILFREDO M. PANTALEON, RENATO MOSTE, LEONARDO CALINYAO AND REMIGO CLARITO VS. COCA COLA BOTTLERS PHILS., INC., INTERIM SERVICES, INC., AND/OR ROMEO SIMPANO, ED DEL ROSARIO, NOLI VILLENA and ROMEO SIMPAO; and 2) NLRC NCR Case No. 00-08-08606-99 entitled REYNALDO GOYON, ROQUE SAMALCA, JR., MANUEL MOSTE, ISMAEL GOYON, REYNALDO MUNAN vs. COCA-COLA BOTTLERS PHILIPPINES, INC. et al.; and NLRC NCR Case No. 00-09-09252-99 entitled DEXTER CAMIA, ROMMEL CRUZ, ROGELIO ISMAEL vs. COCA-COLA BOTTLERS PHILIPPINES, INC. et al. THE FACTS As culled from the evidentiary records: Respondents filed separate complaints3 against the Petitioner for Illegal Dismissal, Moral and Exemplary Damages, CBA Benefits and Attorneys Fees. In their Joint Affidavit4, the Respondents alleged that: 1) they were regular employees of the Petitioner; 2) their purported employer, Interim Services, Inc., was a labor-only contractor for the Petitioner; 3) as Petitioners employees, they performed activities which
were usually necessary or desirable in the Petitioners usual trade or business; and 4) their wages were paid by the Petitioner through Interim Services, Inc.

The Respondents employment period and positions are summarized as follows:

2 3

Id., pp. 162-168 Id., pp. 39-47 4 Id., pp. 93-95

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Name F. Cabacan L. Calinvao D. Camia R. Clarito A. Cunanan R. Cruz I. Govon R. Govon R. Ismael D. Latima M. Moste R, Moste R. Munar E. Ostani W. Pantaleon R. Perfecto E. Rubio R. Samalca E. Sarte

Employment Period May 1997 to 1 July 1999 April 1990 to 1 July 1999 6 June 1997 to 1 July 1999 June 1996 to 1 July 1999 May 1994 to 1 July 1999 22 November 1997 to 1 July 1999 1995 to 1 July 1999 1992 to 1 July 1999 8 November 1995 to 1 July 1999 1991 to July 1999 March 1990 to 1 July 1999 March 1990 to 1 July 1999 1996 to 1 July 1999 September 1994 to 1 July 1999 1992 to 1 July 1999 1998 to 1999 October 1989 to 1 July 1999 1997 to 1 July 1999 1994 to 1 July 1999

Position Sales Route Helper Sales Route Helper Service Technician Route Checker Sales Route Helper Sales Route Helper Messenger Sales Route Helper Finance Filing Clerk Sales Route Helper Forklift Operator Finance Filing Clerk Sales Route Helper Sales Route Helper Finance Store Sales Route Helper Sales Route Helper Sales Route Helper

Respondents also alleged in their joint affidavit, supra, that although they were directly hired by the Petitioner, they were required to sign contracts with Interim Services, Inc. (hereinafter INTERIM) at the end of each contract before they were reemployed by the Petitioner. Respondents alleged that they were constructively dismissed when they refused to sign anew said contracts on 1 July 1999. Their refusal to sign was in line with their demand to be acknowledged as regular employees of the Petitioner and to be given the benefits due them as such regular employees. On the other hand, the Petitioner alleged that it engaged the services of INTERIM, a separate and distinct legal entity, which

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represented itself as a corporation organized under Philippine laws and as an independent contractor duly registered with the Department of Labor and Employment, to provide allied services. Under the Contract of Services between the petitioner and INTERIM, the latter had the right to select, hire, dismiss, supervise, control and discipline the personnel to be assigned to the Petitioners premises. Likewise, the payment of salaries of its personnel assigned to the Petitioner was the responsibility of INTERIM. The Contract also provided that INTERIM should use its own tools and equipment necessary for the services to be rendered. INTERIM failed to file a position paper despite due notice. On 29 August 2000, the Labor Arbiter rendered its Decision, supra, the dispositive portion of which reads:
WHEREFORE, Interim Services is hereby ordered to reinstate the complainants to their former jobs with full backwages from the date they were withheld until they are actually reinstated. To date, complainants (sic) backwages has (sic) reached as follows:

NAME 1. Franklin Cabaccan 2. Emmanuel Sarte 3. Alfredo Cunanan, Jr. 4. Danilo Latima 5. Efren Rubio 6. Rodolfo Perfecto, Jr. 7. Wilfredo Panteleon 8. Renato Moste 9. Leonardo Calinvao 10. Remegio Clarito 11. Dexter Camia 12. Rommel Cruz 13. Ismael Goyon 14. Reynaldo Goyon

BACKWAGES P 86,075.93 86,075.93 86,075.93 86,075.93 86,075.93 86,075.93 86,075.93 86,075.93 86,075.93 86,075.93 80,498.93 80,498.93 86,075.93 86,075.93

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NAME 15. Reynaldo Munar 16. Rogelio Ismael 17. Ernesto Ostani 18. Roque Samalca 19. Manuel Moste

BACKWAGES 86,075.93 80,498.93 86,075.93 86,075.93 86,303.14

Interim is likewise assessed the sum of P161,893.88 representing 10% of the benefits awarded as attorney's fees. The rest of the claims are dismissed for lack of merit. Respondent Coca Cola is absolved from any liability. SO ORDERED.5

On 18 October 2000, the Respondents filed a Partial Appeal6 to hold the Petitioner solidarily liable with INTERIM. Meanwhile, in the hearing held on 22 March 2002 for the issuance of a writ of execution of the Labor Arbiter's Decision, counsel of ROMEO SIMPAO, President of INTERIM testified that the agency has ceased to operate. Consequently, on 3 May 2002, the Respondents filed a Manifestation with Motion to Declare Simpao Personally Liable.7 On 5 November 2003, the NLRC rendered a Decision, supra, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby MODIFIED, in that respondents Coca Cola Bottlers Phils., Inc. and Interim Services, Inc. are being held SOLIDARILY LIABLE FOR THE JUDGMENT OF AWARDS. SO ORDERED.8

5 6

Id., pp. 124-125 Id., pp. 126-141 7 Id., pp. 158- 161 8 Id., p. 167

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Petitioner filed a Motion for Reconsideration which the NLRC denied in its 24 March 2004 Resolution.9 Hence, this Petition with the following issues: I THE NLRC SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION EQUIVALENT TO LACK OF JURISDICTION IN ISSUING THE NLRC DECISION AND THE NLRC RESOLUTION CONSIDERING THAT IT HELD THE COMPANY SOLIDARILY LIABLE WITH THE CONTRACTOR NOTWITHSTANDING THE FACT THAT: A. PRIVATE RESPONDENTS, HAVING THE BURDEN OF PROVING THAT THE CONTRACTOR IS A LABOR-ONLY CONTRACTOR, MISERABLY FAILED TO ESTABLISH THEIR CLAIM B. PRIVATE RESPONDENTS COMPLETELY FAILED TO ESTABLISH THEIR PURPORTED EMPLOYMENT RELATIONSHIP NOR THE BASIS OF THEIR CLAIM FOR REGULARIZATION WITH THE COMPANY II THE NLRC COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION BY UNJUSTLY REWARDING THE CONTRACTOR WITH AN ALLEVIATED LIABILITY DESPITE ITS FAILURE TO PARTICIPATE IN THE PROCEEDINGS BELOW AND TO APPEAL THE LABOR ARBITER'S DECISION10

10

Id., pp. 181-182 Id., pp. 11-12

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OUR RULING We discuss the issues in seriatim. Anent subparagraph (A) of the first issue, the Petitioner claims that the Respondents failed to discharge the burden of proving that INTERIM is a labor-only contractor. We disagree. In the first place, in termination cases, the burden of proving that a dismissal was legally made resides in the employer.11 Failure to discharge such burden ineluctably leads to the conclusion that the dismissal was unjust. In the case at bar, the Respondents were constructively dismissed. Constructive dismissal is defined as an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.12 The Respondents herein were terminated after they declined from renewing their contracts with INTERIM. Renewing their contracts would have been unreasonable in light of the fact that they were Petitioners regular employees by operation of law. Certainly, the change in status from a regular employee to a casual employee denotes a diminution in rank. The basis for placing the burden of proof on the employer is found in no less than the Constitution, which lays a protective mantle over the ordinary working man. The Constitution provides:

11 12

Maxi Security and Detective Agency vs. NLRC et al, G.R. No. 162850. December 16, 2005. Leonardo v. NLRC, G.R. No. 125303, June 16, 2000

CA-G.R. SP NO. 84524 Decision ARTICLE II Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. ARTICLE XIII Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. xxx They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns to investments, and to expansion and growth.

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In a litany of cases, the Supreme Court has implemented a liberal approach which favors the laborers welfare in interpreting the Constitutional mandate as well as the labor laws and its implementing rules and regulations. In Cebu Royal Plant [San Miguel Corporation] vs. Minister of Labor,13 the Supreme Court emphatically held:
We take this opportunity to reaffirm our concern for the lowly worker who, often at the mercy of his employers, must look up to the law for his protection. Fittingly, that law regards him with tenderness and even favor and always with faith and hope in his capacity to help in shaping the nation's future. It is error to take him for granted. He deserves our abiding respect. How society treats him will determine whether the knife in his hands shall be a caring tool for beauty and progress or an angry weapon of defiance and revenge. The choice is obvious, of course. If we cherish him as we should, we must resolve to lighten "the weight of centuries" of exploitation and disdain that bends his back but does not bow his head.

The pivotal issue remains as to whether or not INTERIM is a labor-only contractor. The Petitioner avers that it engaged in legitimate independent contracting when it procured the services of INTERIM through a Contract of Services. Respondents, on the other hand,
13

G.R. No. 58639, August 12, 1987

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admitted that they were required to sign contracts with INTERIM to perform services for the Petitioner, but they averred that the contracts were in the nature of labor-only contracts. We agree with the Respondents. The elements of independent contracting are: (1) the contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility, according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the result thereof; (2) the contractor or subcontractor has substantial capital and investment; and (3) the agreement between the principal and contractor or subcontractor assures the contractual employees' entitlement to all labor and occupational safety and health controls, for exercise of the right to self-organization, security of tenure, and social and welfare benefits. On the other hand, labor-only contracting occurs when the contractor merely recruits, supplies or places workers to perform a job for a principal. The elements of labor-only contracting are: a) the person supplying workers to one employer does not have substantial capital or investment in the form of tools, equipment, machines, work premises, among others, and b) the workers recruited and placed by such persons are performing activities related to the principal business of such employer.

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In the case at bar, the Petitioner's contention that INTERIM is an

independent contractor is unsubstantiated. As correctly held by the NLRC:
In the instant case, the contract submitted by respondent CCBPI does not spell out specific job, work or service that respondent Interim Services was supposed to perform for the former. All it has is a vague reference to a certain work which it desires to be performed by the independent contractor (304 SCRA 448). It is not even notarized. The records are bereft of even a single piece of evidence in support of the contention that respondent Interim Services has substantial capital or investment. Since the evidence submitted by respondent CCBPI is woefully inadequate to support its contentions, and since it is undisputed that the work performed by the complainants was usually necessary or desirable in the usual business of respondent CCBPI, it can only be concluded that there was labor-only contracting. It is settled that a party alleging a critical fact must support his allegations with substantial evidence (De Paul/King Philip Custom Tailor vs. NLRC, 304 SCRA 448).14

Undoubtedly, the twin elements of labor-only contracting are present in this case. It does not appear in the records that INTERIM has substantial capital or investment. The contention of the Petitioner to the contrary remains to be a bare allegation unsubstantiated by proof. It is basic that mere allegation is not proof.15 Furthermore, the Respondents herein, who were employed as sales route helpers, service technicians, route checkers, finance and filing clerks, forklift operators and messengers, were performing activities related to the principal business of such employer. The Petitioners contention that the Respondents functions are not integral to its operations as a manufacturer does not persuade. Instructive is the case of Tabas vs. California Manufacturing Co., Inc.,16 wherein the Supreme Court emphatically held that merchandising activities are an integral part of the manufacturing business. Applying the principle by analogy, common sense dictates that the business of a softdrink
14 15

Id., p. 166 Marubeni Corporation v. Lirag, 415 Phil. 29 (2001) 16 G.R. No. 80680, 26 January 1989

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manufacturer does not stop at the manufacturing stage. Parenthetically, the postmix operations to which the Respondents are assigned are very much relevant nay necessary to the day-to-day operations of the Petitioner. Further, in the case of messengers employed in a bank, the Supreme Court held in PCIB vs. NLRC17 that the requirement for laboronly contracting under Section 9.2 of Rule VIII of Book III of the Omnibus Rules Implementing the Labor Code that the workers recruited are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed does not require for its applicability that the employer be engaged in the delivery of items as a distinct and separate line of business. In other words, the function of a messenger may be considered directly related to the principal business of the employer if indeed a messenger is necessary to the employers day-to-day operations. The consequences of labor-only contracting are as follows: Firstly, the labor-only contractor is considered by law as merely an agent of the employer who is directly liable to the employees of the labor-only contractor as if they had been directly employed by the employer. Article 106 pertinently provides:
ARTICLE 106. Contractor or sub-contractor. xxx 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. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
17

G.R. No. L-66598, 19 December 1986

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Secondly, the employees of the labor-only contractor are entitled to the benefits under the principals Collective Bargaining Agreement with regular employees.18 In finding that the Petitioner is directly liable to the Respondents as their employer, there being labor-only contracting, the NLRC committed no grave abuse of discretion amounting to lack or excess of jurisdiction. Having established the existence of labor-only contracting which in effect establishes an employer-employee relationship between the Petitioner and the Respondents, we need not belabor the issue under subparagraph (B) of the first issue. Moreover, employer-employee relationship between the

Respondents and INTERIM was sustained by both the Labor Arbiter and the NLRC.19 The presence of an employer-employee relationship is a finding of fact and law that is well within the jurisdiction of both administrative bodies to determine. These tribunals have, through the years, acquired specialized skills in their field of expertise. As such, their findings of fact and law are entitled to great weight and must not be disturbed in the absence of cogent reasons. Anent the second issue, it is by operation of law that Petitioners liability to the Respondents is direct, there being a finding of labor-only contracting. In Broadway Motors, Inc., vs. NLRC,20 the Supreme Court enunciated the doctrine that both the labor-only contractor and the principal employer are liable to the formers employees for their rights under the Labor Code.
18 19

Tabas vs. California Manufacturing Co., Inc., G.R. No. 80680, 26 January 1989 The Decisions of the Labor Arbiter and the NLRC disagreed on the issue of whether or not the Petitioner was liable as the principal employer of the Respondents. 20 G.R. No. 98382, Dec. 14, 1987

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The failure of INTERIM to participate in proceedings below is not fatal to the Respondents cause of action. Petitioners admission that it entered into a contract of services with INTERIM and the Respondents admission that they were the employees contracted to perform services for the Petitioner ostensibly under INTERIM adequately provided the missing link in the chain of reasoning caused by INTERIMs nonparticipation. Besides, We cannot unwittingly sanction a scenario wherein a principal employer successfully evades its responsibility to its employees through the silence or the vanishing act of the labor-only contractor. Such would provide unscrupulous employers with a cunningly simple escape route from their obligations to labor. Having chosen to contract with INTERIM, Petitioner must bear the consequences of its actions. It bears stressing that the Petitioner merely submitted an unsigned photocopy of its purported contract with INTERIM. It failed to adduce more competent evidence. If indeed Petitioner engaged in legitimate labor contracting, it should have been more prudent in keeping records relating to their transactions with INTERIM as well as documents proving the latters viability as an independent contractor. A multi-national company with decades of corporate experience, the Petitioner cannot feign ignorance of the laws cautious stance in demarcating permissible and nonpermissible job contracting and its vigilance in ensuring that employees are not deprived of their security of tenure and other labor rights through covert contracts masquerading as legitimate job-contracting. WHEREFORE, premises considered, instant Petition is DENIED. The assailed Decision and Resolution of the NLRC are AFFIRMED. SO ORDERED.

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MYRNA DIMARANAN-VIDAL Associate Justice WE CONCUR: JOSE L. SABIO, JR. Associate Justice JOSE C. REYES, JR. Associate Justice

CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

JOSE L. SABIO, JR. Associate Justice Chairman 12th Division