GRANDSPAN DEVELOPMENT

CORPORATION,

Petitioner,




- versus -



RICARDO BERNARDO, ANTONINO
CEIDOZA an EDGARDO DEL
PRADO, survivin! "arent o# EDGAR
DEL PRADO,
Res"onents$

G$R$ No$ %&%&'&


Present(

PANGANIBAN, J$,
C)air*an,
SANDOVAL-G+TIERREZ,
CORONA,
CARPIO MORALES, an
GARCIA, JJ$


Pro*u,!ate(


Se"te*-er .%, .//0

1
---------------------------------------------------------------------------------
---------------------------1

D E C I S I O N

SANDOVAL-G+TIERREZ, J$(


Be#ore us is a "etition #or revie2 on 3ertiorari uner Ru,e &0
o# t)e %445 Ru,es o# Civi, Pro3eure, as a*ene, assai,in! t)e
De3ision6%7 ate Se"te*-er %5, %444 an Reso,ution6.7 ate
8anuar9 ', ./// renere -9 t)e Court o# A""ea,s in CA-G$R$ SP
No$ 0/'%/, entit,e :Ricardo Bernardo, Antonino Ceidoza and
Edgardo Del Prado, as surviving parent of Edgar Del Prado vs.
National Laor Relations Co!!ission, "randspan Develop!ent
Corporation and Joa#uin Narag doing usiness under t$e na!e %
st&le of J. Narag Construction$;

The instant controversy stemmed from a complaint for illegal dismissal and non-payment of
benefits filed with the Labor Arbiter by Ricardo Bernardo, Antonino Ceidoza and dgar !el
"rado, respondents, against #randspan !evelopment Corporation, petitioner, and$or its
wareho%se manager, &an%el #' Lee, doc(eted as )LRC Case )o' RAB-*+-,,--./0-12-R*'

Res"onents, in t)eir 3o*",aint, a,,e!e t)at so*eti*e in
%44/, t)e9 2ere e*",o9e as tru3< s3a,e *onitors -9 "etitioner
2it) a ai,9 sa,ar9 o# P%/&$// ea3)$ Eventua,,9, t)e9 2ere
assi!ne at its Tru3< S3a,e Se3tion o# t)e =are)ouse>Materia,s
De"art*ent$ T)e9 2ere issue ienti?3ation 3ars si!ne -9
Boni#a3io Se,*o, "etitioner@s "ersonne, *ana!er$ On O3to-er .A,
%44., "etitioner sent t)e* a noti3e ter*inatin! t)eir servi3es
eBe3tive O3to-er .4, %44. #or usin! "ro#ane or oBensive
,an!ua!e, in vio,ation o# Arti3,e VI C.D CaD o# t)e 3o*"an9@s Ru,es
an Re!u,ations$
"etitioner denied the allegations of respondents in their complaint, claiming that they are
employees of 3' )arag Constr%ction' 4ometime in the third 5%arter of ,112, Canad 3apan Co',
Ltd' engaged petitioner6s services for fabrication wor(s of several ro%nd and rectang%lar steel
tan(s needed for the 7C&# or 4ogo pro8ect d%e for completion in 4eptember, ,112' As a
conse5%ence, petitioner s%bcontracted the services of 3' )arag Constr%ction which, in t%rn,
assigned its 9 helpers :herein respondents; to wor( for petitioner6s pro8ect' 4ometime in
<ctober, ,112, &an%el #' Lee, manager of petitioner6s =areho%se !epartment received a report
from s%pervisor Robert <ng that respondents vandalized the company6s log boo( and chairs'
This prompted petitioner to send 3' )arag Constr%ction a memorand%m terminating the services
of respondents for violation of the company6s R%les and Reg%lations'

After the s%bmission of the parties6 pleadings and position papers, the Labor Arbiter rendered a
!ecision dated 3%ne 9/, ,11- dismissing respondents6 complaint' *n concl%ding that respondents
were validly dismissed from employment, the Labor Arbiter held that they were pro8ect
employees whose services were terminated %pon completion of the pro8ect for which they were
hired'
+"on a""ea,, t)e Nationa, La-or Re,ations Co**ission
CNLRCD issue a Reso,ution ate Mar3) 5, %440 re*anin! t)e
3ase to t)e La-or Ar-iter #or a""ro"riate "ro3eein!s to
eter*ine 2)et)er t)ere is an e*",o9er-e*",o9ee re,ations)i"
-et2een t)e "arties$

Bot) "arties ?,e t)eir res"e3tive *otions #or
re3onsieration -ut 2ere enie -9 t)e NLRC in se"arate
Reso,utions ate A"ri, .A, %440 an Ma9 E%, %440$

Res"onents t)en ?,e 2it) t)is Court a "etition #or
3ertiorari$ Pursuant to our ru,in! in 't. (artin)s *uneral +o!e vs.
NLRC,6E7 2e re#erre t)e "etition to t)e Court o# A""ea,s #or its
a""ro"riate a3tion an is"osition$

Meanti*e, res"onent De, Prao ie an 2as su-stitute
-9 )is survivin! "arent, E!aro De, Prao$

On Se"te*-er %5, %444, t)e A""e,,ate Court renere a
De3ision settin! asie t)e NLRC@s Reso,utions an orerin!
"etitioner C%D to reinstate res"onents Bernaro an CeFioGa to
t)eir #or*er "ositions an "a9, Hoint,9 an severa,,9 2it) 8$ Nara!
Constru3tion, t)eir -a3<2a!es an ot)er -ene?ts, an C.D to "a9
res"onent De, Prao )is se"aration "a9$
T)e Court o# A""ea,s #oun t)at res"onents are e*",o9ees
o# "etitionerI t)at t)e9 2ere non-"roHe3t 2or<ersI an t)at t)e9
2ere enie ue "ro3ess, t)us(

In the instant case, petitioners were assigned to the Truck Scaling
Materials Department of Grandspan. They worked in Grandspans
premises using the materials, supplies and euipment of Grandspan.
They were under the super!ision of Grandspan as to the manner and
results of their work, and performed ser!ices directly connected to the
usual "usiness of respondent Grandspan for the fa"rication of hea!y
structural components. The memorandum dated #$ %cto"er &''# (p. )*
+ollo, dismissing the petitioners in fact emanated from Grandspan
Materials Manager Manuel G. -ee and is addressed to the .ersonnel
Department of Grandspan, al"eit containing the self/ser!ing claim that the
employees/petitioners were 01. 2arag 3onstruction personnel. 4nder the
circumstances, 5e rule that 1. 2arag was a la"or/only contractor. 5hile
petitioners were in 1. 2arag 3onstructions payroll, such fact does not per
se esta"lish 1. 2arag 3onstruction as an independent contractor, i.e., the
employer of the petitioners. 6 6 6.

6 6 6 6 6 6

The %ffice of the Solicitor General opines that petitioners were non/
pro7ect employees as they were assigned at Grandspans Materials
Department. 5e agree. Moreo!er, if petitioners were truly pro7ect
employees, pri!ate respondents should ha!e presented proof that they
su"mitted to the nearest pu"lic employment office a report of termination
of ser!ice of their pro7ect employees upon completion of the construction
pro7ect, as reuired "y .olicy Instruction 2o. #8. 6 6 6.

Going now to the issue of whether or not petitioners were illegally
dismissed, 5e rule in the affirmati!e. In the letter9memo dated #$
%cto"er &''# (+ollo, p. )*,, "y which Grandspan ostensi"ly reuested 1.
2arag to terminate petitioners contract immediately, the reason cited for
the dismissal was !iolation of :rticle ;I #.a. of company +ules and
+egulations (the use of profane or offensi!e languages addressed to
company officers, committed, according to the petitioners, through the
!andalism of log"ooks and office furniture at the Truck Scale Section of
the 5arehouse9Materials Department with o"scene drawings. 6 6 6.

<owe!er, this is not supported "y su"stantial e!idence which is
necessary in order that petitioners may "e dismissed for 7ust cause.
3onsidering that pri!ate respondent failed to discharge the "urden of proof
reposed on it to show that the dismissal was 7ustified, the ine!ita"le result
is a finding that the dismissal was un7ustified (Uy vs. NLRC, 261 SCRA
505; Caurdanetaan Piece Worers Union vs. La!ues"a, 2#6 SCRA $01,.

Moreo!er, petitioners were not gi!en ample opportunity to prepare
adeuately for their defense, including legal representation (A%iera vs.
NLRC, su&ra; Pan!asinan ''' ()ectric Coo&erative, 'nc. vs. NLRC, 215
SCRA 66#,, nor were they ser!ed notice of in!estigation, nor gi!en an
opportunity to "e heard. This !iolates the reuirement of notice and
hearing in case of employee dismissal, thus petitioners dismissal was !oid
(A%iera vs. NLRC, 202 SCRA *; +a)!uera vs. Lansan!an, 251 SCRA ,6$,.

:s illegally dismissed employees, petitioners are protected "y
:rticle #)' of the -a"or 3ode, 6 6 6.

In the case of petitioner =dgar del .rado, now deceased and
represented in this petition "y his sur!i!ing parent =dgardo del .rado,
reinstatement is no longer possi"le, thus he should "e paid separation pay
eui!alent to one month salary for e!ery year of ser!ice in addition to
"ackwages ('nternationa) P-a"aceutica)s, 'nc. vs. NLRC, 2.* SCRA
22./.

5<=+=>%+=, finding merit in the petition, the same is
G+:2T=D. The assailed 2-+3 resolutions dated ) March &''* and #$
:pril &''* are :224--=D and S=T :SID=.

.ri!ate respondent Grandspan is ordered to reinstate petitioners
+icardo ?ernardo and :ntonino 3e@idoAa to their former positions without
loss of seniority rights. Grandspan and 1. 2arag 3onstruction are
declared 7ointly and se!erally lia"le to pay said petitioners full "ackwages
and other "enefits and pri!ileges en7oyed "y respondent Grandspan
employees.

.ri!ate respondents Grandspan and 1. 2arag 3onstruction are
likewise ordered to pay petitioner =dgardo del .rado, sur!i!ing parent of
=dgar del .rado, the latters separation pay at the rate of one (&, month
salary for e!ery year of ser!ice rendered "y the deceased.

S% %+D=+=D.B

On O3to-er A, %444, "etitioner ?,e a *otion #or
re3onsieration$ Res"onents a,so ?,e a *otion #or
re3onsieration an>or 3,ari?3ation "ra9in! t)at t)e A""e,,ate
Court@s De3ision -e *oi?e -9 a2arin! res"onent De, Prao
)is -a3<2a!es$

On 8anuar9 ', .///, t)e Court o# A""ea,s "ro*u,!ate its
Reso,ution en9in! "etitioner@s *otion #or re3onsieration -ut
*oi#9in! its De3ision in t)e sense t)at "etitioner an 8$ Nara!
Constru3tion are orere to "a9 res"onent De, Prao )is
se"aration "a9 an -a3<2a!es$

7ence, this petition for review on certiorari'

T)e issue #or our reso,ution is 2)et)er t)e Court o# A""ea,s
erre in )o,in! t)at res"onents are e*",o9ees o# "etitioner$

"etitioner arg%es that it has no employer-employee relationship with respondents since they are
employees of 3' )arag Constr%ction, an independent contractor'

*n Miguel vs. JCT Group, Inc.,6&7 we held>


The test for determining an employer/employee relationship hinges on
resol!ing who has the power to select employees, who pays for their
wages, who has the power to dismiss them, and who e6ercises control in
the methods and the results "y which the work is accomplished.B

T)e Court o# A""ea,s #oun t)at 8$ Nara! Constru3tion
assi!ne res"onents to "er#or* a3tivities directly related to
the main business of petitioner$ T)e9 2or<e in "etitioner@s
"re*ises, usin! its eJui"*ent, *ateria,s an su"",ies$ 8$ Nara!
Constru3tion@s "a9ro,, 2or<s)eets 3overin! t)e "erio #ro*
De3e*-er .%, %44/ to 8u,9 E%, %44% s)o2 t)at t)e "a9*ent o#
t)eir sa,aries 2as a""rove -9 "etitioner$ T)e *ana!er an
su"ervisor o# "etitioner@s =are)ouse De"art*ent su"ervise t)e
*anner an resu,ts o# t)eir 2or<$ It 2as "etitioner 2)o
ter*inate t)eir servi3es a#ter ?nin! t)e* !ui,t9 o# usin!
"ro#ane or oBensive ,an!ua!e in vio,ation o# Arti3,e VI C.D CaD o#
t)e 3o*"an9@s Ru,es an Re!u,ations$ T)e A""e,,ate Court t)en
3on3,ue t)at t)ese 3ir3u*stan3es 3on?r* t)e e1isten3e o# an
e*",o9er-e*",o9ee re,ations)i" -et2een "etitioner an
res"onents$
=e a!ree$

?nswayed, petitioner insists that 3' )arag Constr%ction, being a legitimate independent
contractor, is the employer of respondents' <n this point, the Co%rt of Appeals held that 3'
)arag Constr%ction is a labor-only contractor'

Arti3,e %/' o# t)e La-or Coe, as a*ene, "rovies in "art(

:+T. &8C. Contractor or su%contractin!. D 6 6 6.

6 6 6 6 6 6

There is 0la"or/only contracting where the person supplying
workers to an employer does not ha!e su"stantial capital or in!estment in
the form of tools, euipment, machineries, work premises, among others,
and the workers recruited and placed "y such person are performing
acti!ities which are directly related to the principal "usiness of such
employer. 6 6 6.B

On t)e -asis o# t)e re3ors, 2e )ave no reason to eviate
#ro* t)e A""e,,ate Court@s ?nin! t)at 8$ Nara! Constru3tion is
inee a ,a-or-on,9 3ontra3tor$ T)ese are t)e reasons( C%D it is
not re!istere as a -ui,in! 3ontra3tor 2it) t)e SECI C.D it )as no
3ontra3t 2it) "etitionerI an CED t)ere is no "roo# o# its ?nan3ia,
3a"a-i,it9 an )as no ,ist o# eJui"*ent, too,s, *a3)ineries an
i*",e*ents use in t)e -usiness$

Clearly, 3' )arag Constr%ction co%ld not be respondents6 employer'

But "etitioner *aintains t)at res"onents are "roHe3t
e*",o9ees an as su3), t)eir servi3es ene in Se"te*-er, %44.
u"on 3o*",etion o# its KCMG or So!o "roHe3t$

In ,ia!co vs. NLRC,[5] 2e )e,(
The principal test for determining whether particular employees are
properly characteriAed as 0pro7ect employees, as distinguished from
0regular employees, is whether or not the 0pro7ect employees were
assigned to carry out a 0specific pro7ect or undertaking, the duration and
scope of which were specified at the time the employees were engaged
for that pro7ect. :s defined, pro7ect employees are those workers hired (&,
for a specific pro7ect or undertaking, and (#, the completion or termination
of such pro7ect or undertaking has "een determined at the time of
engagement of the employee.B


Kere, "etitioner 3ou, not "resent e*",o9*ent 3ontra3ts
si!ne -9 res"onents s)o2in! t)at t)eir e*",o9*ent 2as #or t)e
uration o# t)e KCMG or So!o "roHe3t$

Li<e2ise, as 3orre3t,9 o-serve -9 t)e Court o# A""ea,s,
"etitioner #ai,e to "resent an9 re"ort ter*inatin! t)e servi3es o#
res"onents 2)en its "roHe3ts 2ere a3tua,,9 ?nis)e$

Se3tion .$. CeD o# t)e La-or De"art*ent Orer No$ %4
e1"ress,9 "rovies t)at t)e re"ort o# ter*ination is one o# t)e
ini3ations o# "roHe3t e*",o9*ent$6'7

Ti*e an a!ain, 2e )e, t)at #ai,ure o# t)e e*",o9er to ?,e
ter*ination re"orts a#ter ever9 "roHe3t 3o*",etion 2it) t)e
nearest "u-,i3 e*",o9*ent oL3e is an ini3ation t)at
res"onents 2ere
not "roHe3t e*",o9ees$657
=e, t)ere#ore, u")o, t)e ?nin! o# t)e Court o# A""ea,s t)at
res"onents are "etitioner@s re!u,ar e*",o9ees$ As su3), t)e9
are entit,e to se3urit9 o# tenure an 3an on,9 -e is*isse #or a
Hust or aut)oriGe 3ause, as "rovie -9 Arti3,e .54 o# t)e La-or
Coe, as a*ene, t)us(

E:+TI3-= #)'. Security o0 1enure. F In cases of regular
employment, the employer shall not terminate the ser!ices of an employee
e6cept for a 7ust cause or when authoriAed "y this Title. :n employee who
is un7ustly dismissed from work shall "e entitled to reinstatement without
loss of seniority rights and other pri!ileges and to his full "ackwages,
inclusi!e of allowances, and to his other "enefits or their monetary
eui!alent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.E


In Bolinao 'ecurit& and -nvestigation 'ervice, -nc. vs.
.oston[8], 2e e*")asiGe t)at :it is in3u*-ent u"on t)e
e*",o9er to "rove -9 t)e Juantu* o# evien3e reJuire -9 ,a2
t)at t)e is*issa, o# an e*",o9ee is not i,,e!a,, ot)er2ise, t)e
is*issa, 2ou, -e unHusti?e$;

7ere, petitioner failed to discharge its b%rden' *n terminating respondents6 services, it merely
relied on the alleged completion of the 7C&# or 4ogo pro8ect and on the report that respondents
%ttered profane or offensive lang%age in violation of the company6s R%les and Reg%lations' As
earlier mentioned, they are not pro8ect employees' And as fo%nd by the Co%rt of Appeals, there
is no evidence to s%bstantiate the charge of %ttering profane or offensive lang%age'

*t also appears that petitioner violated respondents6 right to d%e process'

*n Loadstar Shipping Co., Inc. vs. Mesano,[9] we held>

The law reuires that an employee sought to "e dismissed must "e
ser!ed two written notices "efore termination of his employment. The first
notice is to apprise the employee of the particular acts or omissions "y
reason of which his dismissal has "een decided uponG and the second
notice is to inform the employee of the employers decision to dismiss
him. >ailure to comply with the reuirement of two notices makes the
dismissal illegal. The procedure is mandatory. 2on/o"ser!ance thereof
renders the dismissal of an employee illegal and !oid.B


Records show that respondents were not served by petitioner with notices, verbal or written,
informing them of the partic%lar acts for which their dismissal is so%ght' )either were they
re5%ired to give their side regarding the alleged serio%s miscond%ct imp%ted against them'

=e th%s s%stain the Co%rt of Appeals r%ling that respondents were deprived of both their
substantive and procedural rights to due process and, therefore, the termination of their
employment is illegal'

Sin3e res"onents 2ere i,,e!a,,9 is*isse #ro* 2or<, t)e9
are entit,e to reinstate*ent 2it)out ,oss o# seniorit9 ri!)ts, #u,,
-a3<2a!es, in3,usive o# a,,o2an3es, an ot)er -ene?ts or t)eir
*onetar9 eJuiva,ent computed from the time their
compensation was withheld from them up to the time of
their actual reinstatement$6%/7

Ko2ever, t)e 3ir3u*stan3es o-tainin! in t)is 3ase o not
2arrant t)e reinstate*ent o# res"onents$ Anta!onis* 3ause a
severe strain in t)e "arties@ e*",o9er-e*",o9ee re,ations)i"$
T)us, a *ore eJuita-,e is"osition 2ou, -e an a2ar o#
se"aration "a9 eJuiva,ent to at ,east one *ont) "a9, or one
*ont) "a9 #or ever9 9ear o# servi3e, 2)i3)ever is )i!)er, C2it) a
#ra3tion o# at ,east si1 C'D *ont)s -ein! 3onsiere as one C%D
2)o,e 9earD,6%%7 in aition to t)eir #u,, -a3<2a!es, a,,o2an3es
an ot)er -ene?ts$6%.7

Re3ors s)o2 t)at res"onents 2ere e*",o9e -9
"etitioner #ro* %44/ to O3to-er .4, %44., or #or t2o C.D 9ears,
2it) a ai,9 sa,ar9 o# P%/&$// ea3), )en3e, entit,e to a
se"aration "a9 o# P&,44.$//$6%E7

WHEREFORE, t)e assai,e De3ision ate Se"te*-er %5,
%444 an Reso,ution ate 8anuar9 ', ./// o# t)e Court o#
A""ea,s in CA-G$R$ SP No$ 0/'%/ are )ere-9 AFFIRMED with
MODIFICAIO! in t)e sense t)at "etitioner is orere to "a9
ea3) res"onent se"aration "a9 eJuiva,ent to P&,44.$//, ",us
t)eir res"e3tive #u,, -a3<2a!es, an ot)er "rivi,e!es an -ene?ts,
or t)eir *onetar9 eJuiva,ent, urin! t)e "erio o# t)eir is*issa,
u" to t)eir su""ose a3tua, reinstate*ent$

Costs a!ainst "etitioner$

SO ORDERED'