6.02.

Manila Electric Co. vs Quisumbing 302 SCRA 173

FACS!
Meralco Workers Association (MEWA) is a duly recognized labor organization
of the rank-and-fle employees of MEA!"#$ #n %ept$ &' ())*' it informed
MEA!"# of its intention to renegotiate the terms and conditions of their
e+isting()),-)& "-A co.ering the remaining period of , years starting from
/ecember (' ())* to 0o.ember 12' ())&$
MEA!"# signifed its 3illingness to re-negotiate through a letter and formed
a "-A negotiating panel for the purpose$
-argaining negotiations proceeded$ 4o3e.er' despite the series of meetings
bet$ 5he negotiating panels' the parties failed to arri.e at 6terms and
conditions acceptable to both of them$
#n April ,1' ())7' MEWA fled a 0otice of %trike 3ith the 0ational "apital
egion -ranch of the 0ational "onciliation and Mediation -oard (0"M-) of the
/epartment of !abor and Employment (/#!E) on the grounds of bargaining
deadlock and unfair labor practices$ 5he 0"M- then conducted a series of
conciliation meetings but the parties failed to reach an amicable settlement$
8aced 3ith the imminence of a strike' MEA!"# fled an urgent petition 3ith
the /#!E praying the %ecretary to assume 9urisdiction o.er the labor dispute
and to en9oin the striking employees to go back to 3ork$
5he %ecretary did so and conducted conciliation conferences bet3een the
parties to bridge their di:erences$ 5hereafter' the parties submitted their
respecti.e memoranda and on August ()' ())7' the %ecretary resol.ed the
labor dispute through an #rder$
/issatisfed' MEA!"# fled this petition contending that the %ec$ of !abor
gra.ely abused its discretion in a3arding 3age increases and other economic
benefts (like , months "hristmas bonus' loan for the employees
cooperati.e' signing hours' ;2- day union lea.e' sick lea.e' etc$)' in
e+panding the scope of the bargaining unit to all regular rank and fle
employees' in e+ercising discretion in determining the retroacti.ity of the
"-A' etc$
"SS#E! Whether or not the %ecretary of !abor gra.ely abuse his discretion in
ordering that MEA!"# should consult the union before any contracting out
for more than 7 months$
$E%&! 'ES.
We recognize that contracting out is not unlimited< rather' it is a prerogati.e
that management en9oys sub9ect to 3ell-defned legal limitations$
=age 1 of (2
As 3e ha.e pre.iously held' the company can determine in its best business
9udgment 3hether it should contract out the performance of some of its 3ork
for as long as the employer is moti.ated by good faith' and the contracting
out must not ha.e been resorted to circum.ent the la3 or must not ha.e
been the result of malicious or arbitrary action$
5he !abor "ode and its implementing rules also contain specifc rules
go.erning contracting out (/epartment of !abor #rder 0o$ (2' May 12' ())&'
%ections$ (-,*)$
>i.en these realities' 3e recognize that a balance already e+ist in the parties
relationship 3ith respect to contracting out< MEA!"# has its legally defned
and protected management prerogati.es 3hile 3orkers are guaranteed their
o3n protection through specifc labor pro.isions and the recognition of limits
to the e+ercise of management prerogati.es$
8rom these premises' 3e can only conclude that the %ecretarys added
re?uirement only introduces an imbalance in the parties collecti.e
bargaining relationship on a matter that the la3 already su@ciently
regulates$
$ence) *e rule t+at t+e Secretar,-s a..e. re/uirement) being
unreasonable) restrictive an. 0otentiall, .isru0tive s+oul. be struc1
.o*n.
=roceeding from our ruling in San Miguel Employees Union-PTGWO vs
Bersamina' (3here 3e recognized that contracting out of 3ork is a
proprietary right of the employer in the e+ercise of an inherent management
prerogati.e)
We note that the %ecretary himself has considered that management should not be
hampered in the operations of its business 3hen he said thatA
BWe feel that the limitations imposed by the union ad.ocates are too
specifc and may not be applicable to the situations that the company
and the union may face in the future$ 5o our mind' the greater risk
3ith this type of limitation is that it 3ill tend to curtail rather than
allo3 the business gro3th that the company and the union must
aspire for$ 4ence' 3e are for the general limitations 3e ha.e stated
abo.e because they 3ill allo3 a calibrated response to specifc future
situations the company and the union may face$C
2A% .s$ %"3A4
FACS!
=age 2 of (2
=etitioner =hilippine Airlines as #3ner' and %ynergy %er.ices "orporation
(%ynergy) as "ontractor' entered into an Agreement$
Dt e+pressly pro.ided that %ynergy 3as 6an independent contractor and $ $ $
that there 3ould be no employer-employee relationship bet3een
"#05A"5# andEor its employees on the one hand' and #W0E' on the
other$6
#n the other hand' espondents main 9ob is to load and unload baggage and
cargo of passengers F is directly related to the main business of petitioner$
espondents' 3ho appear to ha.e been assigned by %ynergy to petitioner
follo3ing the e+ecution of the Agreement' fled complaints against petitioner'
%ynergy for underpayment' non-payment of premium pay for holidays'
premium pay for rest days' ser.ice incenti.e lea.e pay' (1
th
month pay and
allo3ances' and for regularization of employment status 3ith petitioner$
5he !A ruled that =A! and %ynergy 9ointly and se.erally to pay all the
complainants$ 5he 0!" set aside the decision of the !A and declared
%ynergy to be a Glabor-onlyG contractor and ordered 2A% to accept' as its
regular employees' all the complainants.5he "A a@rmed the /ecision of the
0!"$
"SS#E! W#0 %ynergy is a 9ob-only contractor or a legitimate contractor$
$E%&! %ynergy is a labor-only contractor$
While petitioner claimed that it 3as %ynergyGs super.isors 3ho actually
super.ised respondents' it failed to present e.idence thereon$ Dt did not e.en
identify 3ho 3ere the %ynergy super.isors assigned at the 3orkplace$
!ike3ise' petitioner failed to present e.idences that synergy has a substantial
capital to engage in legitimate contracting$
5he importance of this decision is' Df %ynergy is found to be a mere 9ob-only
contractor' respondents could be considered as regular employees of
petitioner as %ynergy 3ould then be a mere agent of petitioner< other3ise' if
%ynergy is found to be a legitimate contractor' respondentsG claims against
petitioner must fail as they 3ould then be considered employees of %ynergy$
5here is 6labor-only6 contracting 3here the person supplying 3orkers to an
employer .oes not +ave substantial ca0ital or investment in t+e 5orm
o5 tools) e/ui0ment) mac+ineries) *or1 0remises) among ot+ers' A0/
t+e *or1ers recruite. an. 0lace. b, suc+ 0erson are 0er5orming
activities *+ic+ are .irectl, relate. to t+e 0rinci0al business o5 suc+
em0lo,er$
o Dn such cases' t+e 0erson or interme.iar, s+all be consi.ere.
merel, as an agent o5 t+e em0lo,er *+o s+all be res0onsible
=age 3 of (2
to t+e *or1ers in t+e same manner an. e6tent as i5 t+e latter
*ere .irectl, em0lo,e. b, +im$
Trilateral relationship in contracting arrangements. Dn legitimate
contracting' there e+ists a trilateral relationship under 3hich there is a
contract for a specifc 9ob) 3ork or ser.ice bet3een the principal and the
contractor or subcontractor) and a contract of employment bet3een the
contractor or subcontractor and its 3orkers$
4ence' there are three parties in.ol.ed in these arrangements' the principal
3hich decides to farm out a 9ob or ser.ice to a contractor or subcontractor'
the contractor or subcontractor 3hich has the capacity to independently
undertake the performance of the 9ob' 3ork or ser.ice' and the contractual
3orkers engaged by the contractor or subcontractor to accomplish the 9ob'
3ork or ser.ice$
%abor7onl, contracting is hereby declared prohibited$
8ne *+o claims to be an in.e0en.ent contractor +as to 0rove t+at
+e contracte. to .o t+e *or1 accor.ing to +is o*n met+o.s an.
*it+out being sub9ect to t+e em0lo,er:s control e6ce0t onl, as to t+e
results.
5he e+press pro.ision in the Agreement that %ynergy 3as an independent
contractor and there 3ould be 6no employer-employee relationship bet3een
H%ynergyI andEor its employees on one hand' and HpetitionerI on the other
hand6 is not legally binding and conclusi.e as contractual pro.isions are not
.alid determinants of the e+istence of such relationship$
8or it is the totalit, o5 t+e 5acts an. surroun.ing circumstances o5 t+e
case 3hich is determinati.e of the partiesG relationship$
2A% ;. %"3A4 <(7 SCRA 1=1 >200=?
FACS!
=A! and %ynergy %er.ices "orp entered into an agreement 3hereby %ynergy
undertook to pro.ide loading' unloading' deli.ery of baggage and cargo and other
related ser.ices from =A!s aircraft at the Mactan station$
($ Dt 3as e+pressly stipulated in the contract that %ynergy 3as an independent
contractor and there 3ould be no employer-employee relationship bet3een
the "ontractor (%ynergy) andEor its employees and =A!$
,$ Dt 3as also specifed that should =A! fnd the ser.ices pro.ided by %ynergy to
be unsatisfactory' %ynergy has (* days to impro.e its ser.ices other3ise =A!
has the right the terminate its agreement immediately and 3ithout notice
1$ espondents fled a complaint for underpayment' nonpayment of premium
pay for holidays' ser.ice incenti.e lea.e pay' (1
th
month pay and allo3ances
and for regularization of employment status 3ith =A!
=age ( of (2
;$ !A found %ynergy an independent contractor and dismissed the respondents
complaint for regularization against petitioner but granted their money claims
*$ 0!" re.ersed !A decision and declared %ynergy to be a labor-only contractor
and ordered =A! to accept as regular employees' all complainants and gi.e
each of the salaries and benefts pro.ided for in the "-A
7$ =A! argued that the la3 does not prohibit an employer from engaging an
independent contractor like %ynergy' 3hich has substantial capital in carrying
on an independent business of contracting' to perform specifc 9obs$
=etitioner also maintained that its contracting out to %ynergy ser.ices like
9anitorial' baggage-handling etc' 3hich are directly related to its business'
does not make respodents its employees
&$ =A! also a.erred that none of the ; elements of an employer-employee
relationship bet3een petitioner and respondents' i$e$' selection and
engagement of an employee' payment of 3ages' po3er of dismissal' and the
po3er to control employees conduct' 3ere present in the case$
"SS#E! W#0 %J0E>J D% A MEE KL#--#0!JC "#05A"5# # A !E>D5DMA5E
"#05A"5#
$E%&! %ynergy is a mere Klabor-onlyC 5here is 6labor-only6 contracting 3here
the person supplying 3orkers to an employer .oes not +ave substantial
ca0ital or investment in t+e 5orm o5 tools) e/ui0ment) mac+ineries)
*or1 0remises) among ot+ers' A0/ t+e *or1ers recruite. an. 0lace.
b, suc+ 0erson are 0er5orming activities *+ic+ are .irectl, relate.
to t+e 0rinci0al business o5 suc+ em0lo,er$
Dn such cases' t+e 0erson or interme.iar, s+all be consi.ere. merel,
as an agent o5 t+e em0lo,er *+o s+all be res0onsible to t+e *or1ers
in t+e same manner an. e6tent as i5 t+e latter *ere .irectl,
em0lo,e. b, +im$
#ne 3ho claims to be an independent contractor has to pro.e that he
contracted to do the 3ork according to his o3n methods and 3ithout being
sub9ect to the employerGs control e+cept only as to the results$
While petitioner claimed that it 3as %ynergyGs super.isors 3ho actually
super.ised respondents' it failed to present e.idence thereon$ Dt did not e.en
identify 3ho 3ere the %ynergy super.isors assigned at the 3orkplace$
espondents ha.ing performed tasks 3hich are usually necessary and
desirable in the air transportation business of petitioner' they should be
deemed its regular employees and %ynergy as a labor-only contractor$
@"3 AA MA4#FAC#RER .s$ E#"Q#"8 A484"8) AA' A484"8) FE%"C"S"M8
A484"8) and %E84AR&8 A484"8) SR.
FACS!
=age < of (2
=etitioner is a sole proprietorship registered in the name of its proprietor'
Enrico E$ Ale9o$ #n (E(1E,222' respondents Euti?uio Antonio' Lay Antonio'
8elicisimo Antonio' !eonardo Antonio' %r$ and oberto 8abian fled a complaint
for illegal lay-o: and illegal deductions before the 0!"s egional Arbitration
-ranch 0o$ DDD$ 5hey claimed that they 3ere dismissed on (E((E,222 and
sought separation pay from petitioner$
5he amicable settlement during the mandatory conference failed' the parties
3ere re?uired to fle their position papers$
5he !abor Arbiter did not dismiss the complaint 3ith respect to oberto
8abian' despite his failure to fle a position paper$
0either did the !abor Arbiters decision concern oberto 8abian$ 4ence' this
petition shall apply only to Euti?uio' Lay' 8elicisimo' and !eonardo' %r$' all
surnamed Antonio' the respondents herein$
espondents alleged that as regular employees' they 3orked from MA22 a$m$
to *A22 p$m$ at petitioners premises using petitioners tools and e?uipment
and they recei.ed =,*2 per day$ According to respondents' they 3ere
dismissed 3ithout 9ust cause and due process< hence' their prayer for
reinstatement and full back3ages$
5hey also impleaded one 4ermie Ale9o' a relati.e of the petitioners o3ner' as
co-respondent in their complaint$
=etitioner -ig AA Manufacturer' a@rmed it is a sole proprietorship registered
in the name of Enrico Ale9o and engaged in manufacturing o@ce furniture$
=etioner claims thatA
o espondents are not regular employees and Euti?uio Antonio 3as one
of its independent contractors 3ho used the ser.ices of the other
respondents$
o 5here 3as no employer-employee relationship bet3een petitioner and
respondents$
o 4o3e.er' petitioner stated it allo3ed respondents to use its facilities to
meet 9ob orders$
o espondents 3ere not laid-o:' since they 3ere 0ro9ect em0lo,ees
onl,$ Dt added that since Euti?uio Antonio had refused a 9ob order of
o@ce tables' their contractual relationship ended$
o =etitioner surmised that Euti?uio resented the (E(2E,222 Dmplementing
>uidelines it issued to impro.e e@ciency and performance$
Dn espondents reply to the allegations of =etition' it stated that Enrico Ale9o
should be impleaded as a proper or indispensable party as sole proprietor of
-ig AA$
o 5hey also pointed out that petitioners payroll sho3s that Euti?uio
Antonio 3as assigned in its carpentry section and obtained ad.ances
on salaries on .arious dates$
=age 6 of (2
o 5he Dmplementing >uidelines and 3ritten 3arnings addressed to
Euti?uio Antonio also pro.e that respondents 3ere under petitioners
control and super.ision$
#n 7E(E,222' the !abor Arbiter ruled thatA
espondents 3ere regular employees because their 3ork as carpenters 3as
necessary and desirable in petitioners business$
Euti?uio 3orked in petitioners premises and 3as 3ithout substantial capital
or in.estment in the form of tools' e?uipment' machinery or 3ork premises$
5hus' he could not ?ualify as an independent contractor$
0oting the absence of contracts pro.iding the duration of respondents
employment and of reports of pro9ect completion to the /#!E' espondents
cannot be considered as pro9ect employees$ 5hey 3ere constructi.ely
dismissed 3hen the Dmplementing >uidelines changed their status from
regular employees to pro9ect employees$
-oth parties appealed to the 0!"$
=etitioner claimed that the !abor Arbiter committed errors in his fndings of
facts$
o Dt also prayed that (() Euti?uio Antonio be declared a labor-only
contractor< (,) 4ermie Ale9o be dropped from the case< (1) respondents
be ordered to report back to 3ork< and (;) the respondents claim for
separation pay and back3ages be dismissed$
5he 0!" modifed the !abor Arbiters decision$
o Dt ordered petitioner to reinstate respondents to their former positions
or to pay them separation pay in case reinstatement 3as no longer
feasible' 3ith full back3ages in either case$
o 5he 0!" ruled that respondents 3ere regular employees' not
independent contractors$
o Dt further held that petitioner failed to 9ustify its reason for terminating
respondents and its failure to comply 3ith the due process
re?uirements$
Npon denial of the parties motions for reconsideration' petitioner fled a
petition for certiorari before the "A' 3hich dismissed the petition but a@rmed
the 0!" decision$ 4ence' this petition 3ith prayer for 5#$
"SS#E! W#0 respondents are regular employees of petitioner$
$E%&! 'ES.
=age 7 of (2
espondents 3ere employed for more than one year and their 3ork as
carpenters 3as necessary or desirable in petitioners usual trade or business
of manufacturing o@ce furniture$
Nnder Article ,M2 of the !abor "ode' the applicable test to .etermine
3hether an employment should be considered regular or non-regular is t+e
reasonable connection bet*een t+e 0articular activit, 0er5orme. b,
t+e em0lo,ee in relation to t+e usual business or tra.e o5 t+e
em0lo,er.
"ertain forms of employment re?uire the performance of usual or desirable
functions and e+ceed one year but do not necessarily result to regular
employment under Article ,M2 of the !abor "ode$
4o3e.er' specifc e+ceptions include pro9ect or seasonal employment' but in
this case' res0on.ents cannot be consi.ere. 0ro9ect em0lo,ees.
=etitioner had neither sho3n that respondents 3ere hired for a specifc
pro9ect the duration of 3hich 3as determined at the time of their hiring nor
identifed the specifc pro9ect or phase thereof for 3hich respondents 3ere
hired$
We also agree that Euti/uio *as not an in.e0en.ent contractor for he
does not carry a distinct and independent business' and he does not possess
substantial capital or in.estment in tools' e?uipment' machinery or 3ork
premises$
4e 3orks 3ithin petitioners premises using the latters tools and materials'
as admitted by petitioner$
Euti/uio is also un.er 0etitioner-s control an. su0ervision$
Dt is supported by the fact that petitioner allo3ed respondents to use its
facilities for the 6proper implementation6 of 9ob orders$
Moreo.er' the Dmplementing >uidelines regulating attendance' o.ertime'
deadlines' penalties< pro.iding petitioners right to fre employees or
6contractors6< re?uiring the carpentry di.ision to 9oin petitioners e+ercise
program< and pro.iding rules on machine maintenance' all reOect control and
super.ision o.er respondents$
&"S28S""84! =etition is /E0DE/ for lack of merit$
0oteA #ther issues include F (() Palid termination Q (,) abandonment by the
espondents H=etitioner failed to establish .alid cause of termination$ "harge of
abandonment 3as based only on =etitioners presumption that espondents
resented its issuance of the Dmplementing >uidelines$ 5he espondents fling the
complaint for illegal dismissal 3ithin t3o days manifested intention against se.ering
employment relationship 3ith petitioner and abandoning their 9obs$I
=age = of (2
%a1as vs @urlingame Cor0 <2( SCRA 6B0
FACS!
=etitioner in this case sought to represent all rank-and-fle promo employees
of respondent$ Dt alleged that said group of employees is not represented by a
Nnion$
%o' they fled a petition for certifcation election before the /epartment of
!abor and Employment$ espondent' ho3e.er' opposed said petition on the
ground that there e+ists no employer-employee relation bet3een the parties$
espondent here further claimed that the employees sought to be
represented by petitioner are not their employees but the employees of 8$
>aril Manpo3er %er.ices' a duly licensed local employment agency$
"SS#E! Whether or not 8$ >aril Manpo3er ser.ices is an independent contractor or a
labor-only contractor$
$E%&! 8$ >aril is not an independent contractor$
8$ >aril does not ha.e substantial capitalization or in.estment in the form of
tools' e?uipment' machineries' 3ork premises' and other materials' to ?ualify
as an independent contractor$
0o proof 3as adduced to sho3 8$ >arils capitalization$
5he 3ork of the promo-girls 3as directly related to the principal business or
operation of -urlingame$
Marketing and selling of products is an essential acti.ity to the main business
of the principal$
8$ >aril did not carry on an independent business or undertake the
performance of its ser.ice contract according to its o3n manner and method'
free from the control and super.ision of its principal' -urlingame$
8$ >aril 3as engaged in labor-only contracting' and as such' is considered
merely an agent of -urlingame$
Dn labor-only contracting' the la3 creates an employer-employee relationship
to pre.ent a circum.ention of labor la3s$
5he 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$
=age B of (2
%ince 8$ >aril is a labor-only contractor' the 3orkers it supplied should be
considered as employees of -urlingame in the eyes of the la3$
5he 6four-fold test6 3ill sho3 that respondent is the employer of petitioners
members$ 5he elements to determine the e+istence of an employment
relationship areA (a) the selection and engagement of the employee< (b) the
payment of 3ages< (c) the po3er of dismissal< and (d) the employers po3er
to control the employees conduct$
5he most important element is the employers control of the employees
conduct' not only as to the result of the 3ork to be done' but also as to the
means and methods to accomplish it$
5he in.ol.ement of 8$ >aril in the hiring process 3as only 3ith respect to the
recruitment aspect' i.e$ the screening' testing and pre-selection of the
personnel it pro.ided to -urlingame$
5he actual hiring itself 3as done through the deployment of personnel to
establishments by -urlingame$
5he contract states that -urlingame 3ould pay the 3orkers through 8$ >aril'
stipulating that -urlingame shall pay 8$ >aril a certain sum per 3orker on the
basis of eight-hour 3ork e.ery (*
th
and 12
th
of each calendar month$
5he contract states that -urlingame 3ould pay the 3orkers through 8$ >aril'
stipulating that -urlingame shall pay 8$ >aril a certain sum per 3orker on the
basis of eight-hour 3ork e.ery (*
th
and 12
th
of each calendar month$
5he contract also pro.ides that 6any personnel found to be ine@cient'
troublesome' uncooperati.e and not obser.ing the rules and regulations set
forth by -urlingame shall be reported to 8$ >aril and may be replaced upon
re?uest$6
"orollary to this circumstance 3ould be the e+ercise of control and
super.ision by -urlingame o.er 3orkers supplied by 8$ >aril in order to
establish the ine@cient' troublesome' and uncooperati.e nature of
undesirable personnel$
Also implied in the pro.ision on replacement of personnel carried upon
re?uest by -urlingame is the po3er to fre personnel$
8$ >aril 3as not left alone in the super.ision and control of its alleged
employees$ "onse?uently' it can be concluded that 8$ >aril 3as not an
independent contractor$
Manila Electric Co. vs @enamira
=age 10 of (2
FACSA
-enamira et al are security guards 3ho 3orked for =%D$ =%D 3as the security
agency contracted by MEA!"#$
5he contract bet3een =%D and ME" e+pired$
MEA!"# subse?uently contracted A%/AD as its ne3 security agency$ A%/AD
absorbed -enamira et al upon MEA!"#s ad.ice$
After t3o years' the contract bet3een A%/AD and MEA!"# e+pired$
MEA!"# subse?uently contracted A8%D%D$
A8%D%D did not schedule any 3ork for -enamira et al$ Dt 3as interpreted as a
constructi.e dismissal$ -enamira sued MEA!#' A%/AD' and A8%D%D$
5he !abor Arbiter ruled that A%/AD should reinstate -enamira et al and that
MEA!"# is solidarily liable$ 0o liability for A8%D%D$
0!" a@rmed !A$
5he "A re.ersed the lo3er courts$
o 5he "A ruled that the employer is actually MEA!"#$
"SS#E! Whether or not MEA!"# is the employer of the fred security guards$
$E%&! 0o$
Nnder the contract bet3een A%/AD and MEA!"#' it can be seen that A%/AD
is indeed the employer of the guards$ Applying the ; 8old 5estA A%/AD
employed the guards 3hen it absorbed them from =%D$
A%/AD pro.ided the salaries of the guards (MEA!"# merely pays A%/AD for
pro.iding the guards)$
A%/AD has control o.er the guards because they are being inspected
(MEA!"# has the right to conduct its o3n inspection as per contract 3ith
A%/AD only)$
A%/AD has the po3er to terminate the guards' as 3hen they did not pro.ide
any tours or schedules to them$
5he indi.idual respondents cannot be considered as regular employees of the
MEA!"# for' although security ser.ices are necessary and desirable to the
business of MEA!"#' it is not directly related to its principal business and
may e.en be considered unnecessary in the conduct of MEA!"#s principal
business' 3hich is the distribution of electricity$
=age 11 of (2
5he fact that the indi.idual respondents fled their claim for unpaid monetary
benefts against A%/AD is a clear indication that the indi.idual respondents
ackno3ledge that A%/AD is their employer$
A8%D%D is not the employer of the guards as 3ell (as claimed by the guards)
because A8%D%D ne.er absorbed them nor 3as there any e.idence sho3ing
other3ise$
AS&A" an. AFS"S" are not Clabor7onl,D contractors.
5here is Klabor onlyC contract 3hen the person acting as contractor is
considered merely as an agent or intermediary of the principal 3ho is
responsible to the 3orkers in the same manner and to the same e+tent as if
they had been directly employed by him$
#n the other hand' K9ob (independent) contractingC is present if the follo3ing
conditions are metA
(a) the contractor carries on an independent business and
undertakes the contract 3ork on his o3n account under his o3n
responsibility according to his o3n manner and method' free
from the control and direction of his employer or principal in all
matters connected 3ith the performance of the 3ork e+cept to
the result thereof< and
(b) the contractor has substantial capital or in.estments in the
form of tools' e?uipment' machineries' 3ork premises and other
materials 3hich are necessary in the conduct of his business$
>i.en the abo.e distinction and the pro.isions of the security ser.ice
agreements entered into by petitioner 3ith A%/AD and A8%D%D' 3e are
con.inced that A%/AD and A8%D%D 3ere engaged in 9ob contracting$
C8CA7C8%A @8%ERS 2$"% "4C ;. 4%RC 307 SCRA 131 >1BBB?
FACS! #n April &' ()M7 "oca-"ola entered into a contract of 9anitorial ser.ices
3ith -acolod Lanitorial %er.ices (-L%) as an independent contractor$
=ri.ate respondent amon "anonicato 3as hired as a 9anitor by the -acolod
Lanitorial %er.ices (-L%)$ 4e 3as assigned at the "oca "ola -ottlers' Dnc$
considering his familiarity 3ith its premises' ha.ing been pre.ious casual
employee there$
=age 12 of (2
>oaded by information that "#"A "#!A employed pre.ious -L% employees
3ho fled a complaint against the company for regularization pursuant to a
compromise agreement' "anonicato submitted a similar complaint against
"#"A "#!A to the !abor Arbiter on M Lune ())1 and conse?uently did not
report for 3ork$
#n %eptember ,M'())1' -L% sent him a letter ad.ising him to report to 3ork
3ithin 1 days from receipt' other3ise he 3ould be terminated$
#n Luly ,1' ())1' respondent fled 3ith !A a complaint for illegal dismissal
and underpayment of 3ages$ 4e included -L% therein as a co-respondent$
o 5he !abor Arbiter dismissed the complaint and ruled that a) there 3as
no employer-employee relationship bet3een "anonicato and "oca "ola
o -L% 3as a legitimate 9ob contractor' hence' any liability of "#"A "#!A
as to "anonicatoGs salary or 3age di:erentials 3as solidary 3ith -L% in
accordance 3ith pars$ ( and , of Art$ (27' !abor "ode<
o "#"A "#!A and -L% must 9ointly and se.erally pay "anonicato his
3age di:erentials amounting to=,'&&7$M2 and his (1th month salary of
=('27M$22' including ten ((2R) percent attorneyGs fees in the sum of
=1M;$;M$
5he 0!" re9ected the decision of !A on the ground that the 9anitorial
ser.ices of "anonicato 3ere found to be necessary in the usual trade of "oca
"ola$
o Dn so holding' 0!" applied Art$,M2 !abor "ode and declared that
"anonito 3as a regular employee of "oca-"ola$
Dts motion for reconsideration ha.ing been denied' "oca "ola fled this
petition$
"SS#E! Whether "anonicato is a regular employee of petitioner company$
$E%&! 48.
Dn Kimberly Independent Labor Union v. Drilon 3here the "ourt took 9udicial
notice of the practice adopted in se.eral go.ernment and pri.ate institutions
and industries of hiring 9anitorial ser.ices on an 6independent contractor
basis$6
Dn this respect' although 9anitorial ser.ices may be considered directly related
to the principal business of an employer' as 3ith e.ery business' 3e deemed
them unnecessary in the conduct of the employerGs principal business$
5his 9udicial notice' of course' rests on the assumption that the independent
contractor is a legitimate 9ob contractor so that there can be no doubt as to
the e+istence of an employer-employee relationship bet3een contractor and
the 3orker$
Dn this situation' the only pertinent ?uestion that may arise 3ill no longer deal
3ith 3hether there e+ists an employment bond but 3hether the employee
=age 13 of (2
may be considered regular or casual as to deser.e the application of Art$ ,M2
of the !abor "ode$
Dt 3as error therefore for the 0!" to apply Art$ ,M2 of the !abor "ode in
determining the e+istence of an employment relationship of the parties
herein' especially in light of our e+plicit holding in Singer Sewing Machine
Company v. Drilon that K5he "ourt agrees 3ith the petitionerGs argument that
Article ,M2 is not the yardstick for determining the e+istence of an
employment relationship because it merely distinguishes bet3een t3o kinds
of employees' i$e$' regular employees and casual employees' for purposes of
determining the right of an employee to certain benefts' to 9oin or form a
union' or to security of tenure$
Article ,M2 does not apply 3here the e+istence of an employment
relationship is in disputeC
Dn determining the e+istence of an employer-employee relationship it is
necessary to determine 3hether the follo3ing factors are presentA
(a) the selection and engagement of the employee<
(b) the payment of 3ages<
(c) the po3er to dismiss< and'
(d) the po3er to control the employeeGs conduct$ 0otably' these
are all found in the relationship bet3een -L% and "anonicato
and not bet3een "anonicato and petitioner "#"A "#!A$
-L% satisfed all the re?uirements of a 9ob-contractor under the la3' namely'
(a) the ability to carry on an independent business and undertake the
contract 3ork on its o3n account under its o3n responsibility according to its
manner and method' free from the control and direction of its principal or
client in all matters connected 3ith the performance of the 3ork e+cept as to
the results thereof< and' (b) the substantial capital or in.estment in the form
of tools' e?uipment' machinery' 3ork premises' and other materials 3hich
are necessary in the conduct of its business$
All told' there being no employer-employee relationship bet3een "anonicato and
"#"A "#!A' the latter cannot be .alidly ordered to reinstate the former and pay
him back 3ages$
R8MME% C. 8RE3AS) &ARE"4 R. $"%AR"8 A4& S$ERE"4 A. AR@8%E&A .s$
4%RC) &#S" $8E% 4"FF8) 2$"%"22"4E $8E%"ER:S "4C8R28RAE& and
F;A MA428EER RA"4"43 CE4ER G SER;"CES
FACS!
=etitioners ommel "$ #regas' /ar3in $ 4ilario and %her3in A$ Arboleda
3orked as .alet parking and door attendants in respondent /usit 4otel 0ikko$
=age 1( of (2
5hey ha.e employment contracts 3ith respondent 8PA$ Dn ,222' 8PA recalled
petitioners from /usit$ =etitioners then instituted a complaint for illegal
dismissal' regularization' premium pay for holiday and rest day' holiday pay'
ser.ice incenti.e lea.e pay' (1
th
month pay and attorneyGs fees against
respondents /usit' =hilippine 4otelierGs' Dnc$ and 8PA$
o =etitioners alleged that despite the length of their ser.ice' /usit ne.er
granted them the status and benefts of a regular employee$
o 5hus' 3hen the rank and fle employeesG union of /usit learned that
petitioners 3ere entitled to regularization' /usit immediately
terminated their ser.ices due to 6end of contract$6
#n 1E7E,22(' Labor Arbiter Potenciano S. Caniares! "r. dismissed the
complaint #or lac$ o# merit.
o =etitioners failed to pro.e that they 3ere employees of /usit$
o =etitioners admitted that they transferred to 8PA after their pre.ious
placement agencies terminated their contracts of ser.ices 3ith /usit$
o !abor Arbiter "anizares also noted that petitioners signed application
and employment contracts 3ith 8PA and 3ere under its payrolls and
accounts$
o 5hus' 8PA 3as petitionersG employer$ 8inally' he ruled that petitioners
3ere merely recalled and not dismissed from the ser.ice by 8PA$
#n appeal' the %L&C iss'ed a &esol'tion dated A'g'st ()! (**+! modi#ying
the decision o# !abor Arbiter$
o 5he 0!" obser.ed that the four-fold test in determining the e+istence
of an employer-employee relationship is present in petitionersG
relationship 3ith 8PA$
o #n the matter of selection and engagement' records sho3ed that
petitioners applied 3ith and 3ere employed by 8PA$
o Although they 3ere re?uired to test dri.e by /usit' it 3as done only to
.erify if they had the necessary skills and competence re?uired by the
9ob$
o #n the matter of control' it 3as established that petitioners maintained
their daily time records 3ith 8PA$
o #n the matter of dismissal' 8PA e+ercised its po3er to dismiss 3hen it
recalled petitioners from /usit$
o 8inally' on the matter of payment of 3ages' it is undisputed that
petitioners 3ere under the payrolls and accounts of 8PA$
o 0e.ertheless' the 0!" noted that after petitionersG recall' they 3ere
no longer gi.en ne3 assignments$
o %ince more than si+ months ha.e already lapsed' petitioners 3ere
deemed to ha.e been constructi.ely dismissed and therefore entitled
to separation pay of one-half month pay for e.ery year of ser.ice$
=etitioners ele.ated the case to the "A 3hich a@rmed the 0!" resolution$
=age 1< of (2
econsideration ha.ing been denied' petitioners raises the instant petition$
"SS#ES!
W#0 espondent 8PA is an independent contractor
W#0 there an EM=!#JE-EM=!#JEE E!A5D#0%4D= e+ists bet3een =etitioners and
espondent 4otel
$E%&
1. 'ES. the !abor Arbiter' 0!" and the "A 3ere unanimous in fnding that 8PA
3as a legitimate 9ob contractor$ Among t+e circumstances t+at
establis+e. t+e status o5 F;A as a legitimate 9ob contractor are!
(() 8PA is registered 3ith the /#!E and the /5D<

(,) 8PA has a "ontract for %er.ices 3ith /usit for the supply of
.alet parking and door attendant ser.ices<

(1) 8PA has an independent business and pro.ides .alet parking
and door attendant ser.ices to other clients like Mandarin
#riental' Manila 4otel' =eninsula Manila 4otel' Westin
=hilippine =laza' >olden - 4otel' =an =acifc Manila 4otel' and
%trikezone -o3ling !ane<

and
(;) 8PAGs total assets from ())& to ())) amount to
=('*2,'*)&$&2 to =)'2,('11*$(1$

Dn addition' it pro.ides the
uniforms and lockers of its employees$

2. 48. @, a00l,ing t+e 5our75ol. test use. in .etermining an em0lo,er7
em0lo,ee relations+i0) t+e status o5 F;A as t+e em0lo,er o5
0etitioners is in.ubitabl, establis+e.$
a$ Petitioners applied and signed employment contracts 3ith 8PA$ 5hey
3ere merely assigned to /usit conformably 3ith the "ontract for
%er.ices bet3een 8PA and /usit$
b$ 8PA assigned a super.isor in /usit to monitor petitionersG attendance'
lea.es of absence' performance and conduct$ =etitioners also
maintained their daily time records 3ith 8PA$
c$ =etitioners 3ere duly notifed by 8PA that they 3ould be assigned to
/usit for f.e months only$ 5hereafter' they may either be recalled for
transfer to other clients or be reassigned to /usit depending on the
result of 8PAGs e.aluation of their performance$ Dn this case' 8PA opted
to recall petitioners from /usit$
d$ While 8PA billed /usit for the ser.ices rendered' it 3as actually 8PA
3hich paid petitionersG salaries$ Worthy of note' 8PA registered
petitioners 3ith the -ureau of Dnternal e.enue and the %ocial %ecurity
%ystem as its employees$
=age 16 of (2
Dn summary' this "ourt accepts as established the fact that 8PA is a legitimate 9ob
contractor and' in contemplation of la3' the employer of petitioners$
&"S28S""84! 5he instant petition is &E4"E& for lack of merit$ "As decision is
A88DME/$
Mercur, &rug Cor0. vs %ibunao (63 SCRA 331
FACS!
According to the plainti!"
!ibunao and his friend bought some items at Mercury$
4e paid for his purchase and placed his receipt in his pocket$
As they e+ited' they 3ere accosted by %ido' the security guard$ %ido 3as armed
3ith a ser.ice gun' and 3as ,2 pounds hea.ier than !ibunao$
4e held !ibunaos upper right arm and demanded to see the receipt$
!ibunao searched but it took time because %ido 3as holding his right arm$
%ido then said KWala yatang resibo yanSC !ibunao fnally found it' and asked
%ido' K%atisfed ka naTC
%ido reacted by lunging at him and saying K=utang ina moSC %ido 3as able to hit
!ibunao on the face' nose' chin' and mouth$
4e then pointed his re.ol.er at !ibunao and said K=utang ina mo' pag hindi kayo
lumabas dito papuputukin ko to sa iyoSC
!ibunao e.entually fled a criminal complaint against %ido$
4e 3as traumatized by the e.ent' he had to consult a psychiatrist' and 3as
found to be su:ering from post-traumatic depression syndrome$
According to the de#endants!
%ido' the security guard at Mercury' noticed !ibunao e+iting the store 3ith a
plastic bag' and that no receipt 3as stapled to it$
4e asked for the receipt' but 3as gi.en the plastic bag$
4e found no receipt' and 3hen !ibunao fnally found the receipt and sho.ed it in
his face' he 9ust e+plained he 3as doing hisduty$ !ibunao said K-aka hindi mo
ako kilala' security guard ka langS
Ano ba talaga ang problema moTC A .iolent argument ensued$
5he court rendered 9udgment in fa.or of the plainti:' that the defendants %ido'
Mercurly /rug "orporation' and %tore Manager Pilma %antos' pay the plainti:
moral and e+emplary damages to discourage disrespect of the public by such
acts as 3ere committed by defendants$
"SS#E! Whether or not the remedy of the petitioner is proper that Mercury /rug be
liable for %idos actions$
=age 17 of (2
$E%&! 0o$ 5he petitioner 3as not %idos employer< hence' Article ,(M2 of the "i.il
"ode should not be applied against petitioner$
5he respondent 3as burdened to pro.e that the petitioner 3as the employer
of %ido but failed to discharge this burden$ 5he respondents counsel
admitted %ido 3as not employed by the petitioner$ %tore manager %antos
testifed that %ido 3as not an employee of the petitioner' but of -%%"' -lack
%hield Agency$
5he petitioner adduced in e.idence its contract 3ith the -%%"' 3hich
contained the follo3ing pro.isionsA

($ 54E A>E0"J shall pro.ide the "!DE05 3ith the necessary number of armed'
uniformed and ?ualifed security guards properly licensed by the "hief of =hilippine
"onstabulary< 3ho shall pro.ide security ser.ices to the "!DE05 at its establishment
at F 5hese security guards during the life of the Agreement shall be assigned in
accordance 3ith arrangements to be made bet3een the "!DE05 and the A>E0"J$
$$$
7$ 5he A>E0"J assumes full responsibility for any claim or cause of action 3hich
may accrue in fa.or of any security guard by reason of employment 3ith the
A>E0"J' it being understood that security guards are employees of the A>E0"J
and not of the "!DE05$
5herefore' the respondent had no cause of action against the petitioner for
damages for %idos illegal and harmful acts$ 5he respondent should ha.e
sued %ido and the -%%" for damages' conformable to Article ,(M2$
Dn Soliman! "r. v. ,'aon the court held that 3here the security agency
recruits' hires and assigns the 3orks of its 3atchmen or security guards to a
client' the employer of such guards or 3atchmen is such agency' and not the
client' since the latter has no hand in selecting the security guards$ 5hus' the
duty to obser.e the diligence of a good father of a family cannot be
demanded from the said client$
5he petitioner had assigned %ido to help the management open and close the
door of the drug store< inspect the bags of customers as they enter the store<
and' check the receipts issued by the cashier to said customers for their
purchases$ %uch circumstances do not automatically make the security guard
the employee of the petitioner' and' as such' liable for the guardGs tortious
acts$
5he fact that a client company may gi.e instructions or directions to the
security guards assigned to it' does not' by itself' render the client
responsible as an employer of the security guards concerned and liable for
their 3rongful acts or omissions$
=age 1= of (2
2$"%"22"4E A"R%"4ES) "4C.) v. 4%RC
FACS!
=A! entered into a ser.ice agreement 3ith %5E!!A' a corporation engaged in
the business of 9ob contracting 9anitorial ser.ices$
=ursuant to their ser.ice agreement' %5E!!A hired 3orkers to perform
9anitorial and maintenance ser.ices for =A!$
5he 3orkers 3ere under the super.ision of %5E!!As super.isorsEforemen
and timekeepers and it also furnished 3ith 9anitorial supplies' such as
.acuum cleaner and polisher$
Dn())2' the ser.ice agreement bet3een =A! and %5E!!A e+pired$
=A! then called for the bidding of its 9anitorial re?uirements$
%5E!!A e+erted e:orts to maintain its 9anitorial contract 3ith =A! 3hich
allo3ed complainants to 3ork at the =A!s premises$
Dn a letter' =A! formally informed %5E!!A that the ser.ice agreement
bet3een them 3ould no longer be rene3ed$
espondents fled complaints against =A! and %5E!!A for Dllegal /ismissal$
5he !A ordered =A! to pay the complainants separation pay$ 0!" declared
that separation pay is sole liability of =A!$
"SS#EHs!
(() Whether petitioner 3as a labor-only contractor< and
(,) Whether the indi.idual pri.ate respondents became regular employees of =A!
because they 3ere allo3ed to continue 3orking for petitioner after the e+piration
of the ser.ice contract$
$E%&!
First "ssue! Aanitorial Service Agreement "s 4ot %abor78nl, Contracting
5he "ourt fnds no basis for holding that =A! engaged in labor-only
contracting$
5he true nature of the indi.idual pri.ate respondents employment is e.ident
from the ser.ice agreement bet3een petitioner and %5E!!A$
Aside from these stipulations in the ser.ice agreement' other pieces of
e.idence support the conclusion that %5E!!A' not =A!' 3as the employer of
the indi.idual pri.ate respondentsA
($ A contract o5 em0lo,ment e6iste. bet*een SE%%AR an. t+e
in.ivi.ual 0rivate res0on.ents$
=age 1B of (2
,$ Dt 3as also %5E!!A 3hich dismissed them' as e.idenced by "omplainant
termination letter' 3hich 3as signed by the P= for operations and comptroller
of %5E!!A$
1$ !ike3ise) t+e, *or1e. un.er SE%%AR-s o*n su0ervisors. SE%%AR
even +a. its o*n collective bargaining agreement *it+ its
em0lo,ees) inclu.ing t+e in.ivi.ual 0rivate res0on.ents$
;$ Moreo.er' 2A% +a. no 0o*er o5 control an. .ismissal over t+em.
Dn fact' SE%%AR claims t+at it +as suIcient ca0ital in t+e 5orm o5
tools an. e/ui0ment) li1e vacuum cleaners an. 0olis+ers) an.
substantial ca0italiJation as 0roven b, its Knancial statements.
8urther' %5E!!A has clients other than petitioner$ 5he 9anitorial ser.ice
agreement bet3een petitioner and %5E!!A is defnitely a case of permissible
9ob contracting$
E6tension o5 Service Contract is 4ot a Source o5 Em0lo,er7Em0lo,ee
Relation
=etitioner did not become the successor-employer of the indi.idual pri.ate
respondents 3hen the ser.ice contract e+pired$
5here 3as no transfer of the business of %5E!!A in this particular case$
5he separate undertakings of petitioner and %5E!!A continued e.en after
the e+piration of the ser.ice contract and the dismissal of indi.idual pri.ate
respondents$
Secon. "ssue! SE%%AR "s %iable 5or Se0aration 2a,. 4o Em0lo,er7
Em0lo,ee Relation @et*een Com0lainants an. 2A%.
Dn the case at bar' the ser.ice agreement 3as not a pro9ect because its
duration 3as not determined or determinable$
While the ser.ice agreement may ha.e had a specifc term' %5E!!A
disregarded it' repeatedly rene3ed the ser.ice agreement' and continued
hiring the indi.idual pri.ate respondents for thirteen consecuti.e years$
4ad %5E!!A 3on the bidding' the alleged Kpro9ectC 3ould ha.e ne.er ended$
Again' 3e must emphasize that the main business of %5E!!A is the supply
manpo3er to perform 9anitorial ser.ices for its clients' and the indi.idual
pri.ate respondents 3ere 9anitors engaged to perform acti.ities that 3ere
necessary and desirable to %5E!!As enterprise$
"n t+is case) *e +ol. t+at t+e in.ivi.ual 0rivate res0on.ents *ere
SE%%AR-s regular em0lo,ees) an. t+ere *as no vali. cause 5or t+eir
.ismissal.
=age 20 of (2
AA3#AR ;. SA%ES <<2 SCRA 2B< >200=?
FACS!
=etitioner Laguar %ecurity and Dn.estigation Agency is a pri.ate corporation
engaged in the business of pro.iding security ser.ices to its clients' one of
3hom is /elta Milling Dndustries Dnc$
espondents %ales et al 3ere hired as security guards by Laguar$
5hey 3ere assigned at the premises of /elta' !ibis$ %ales et al alleged that
they 3ere terminated by Laguar and that their dismissals 3ere arbitrary and
illegal$
All guard-employees claim monetary benefts
!A held in fa.or of %ales et al and ordered Laguar to pay %ales et al' 3age
di:erentials' o.ertime pay di:erentials' rest day pay' holiday pay' premium
holiday pay' (1
th
month pay etc$
Laguar a.erred that /elta 3as solidarily liable 3ith petitioner$ 0!" dismissed
the appeal since Laguar 3as the direct employer of the security guards' it is
the one principally liable to the employees$
"SS#E! Whether /elta is solidarily liable to pay 3ith Laguar the monetary benefts
claimed by respondents$
$E%&! 'ES.
5here is no ?uestion as regards the respecti.e liabilities of petitioner and
/elta Milling$
Nnder Articles (27' (2& and (2) !abor "ode' the 9oint and se.eral liability of
the contractor and the principal is mandated to assure compliance of the
pro.isions therein including the statutory minimum 3age$
5he contractor' petitioner in this case' is made liable by .irtue of his status as
direct employer$ #n the other hand' /elta Milling' as principal' is made the
indirect employer of the contractorGs employees for purposes of paying the
employees their 3ages should the contractor be unable to pay them$
5his 9oint and se.eral liability facilitates' if not guarantees' payment of the
3orkersG performance of any 3ork' task' 9ob or pro9ect' thus gi.ing the
3orkers ample protection as mandated by the ()M& "onstitution$
Dn the e.ent that petitioner pays his obligation to the guard employees
pursuant to the /ecision of the !abor Arbiter' as a@rmed by the 0!" and
"A' petitioner has the right of reimbursement from /elta Milling under Article
(,(& "i.il "ode' 3hich pro.idesA
=age 21 of (2
Art$ (,(&$ =ayment made by one of the solidary debtors
e+tinguishes the obligation$ Df t3o or more solidary debtors o:er
to pay' the creditor may choose 3hich o:er to accept$
4e 3ho made the payment may claim from his co-debtors only
the share 3hich corresponds to each' 3ith the interest for the
payment already made$ Df the payment is made before the debt
is due' no interest for the inter.ening period may be demanded$
+e action is *it+in t+e realm o5 civil la* +ence 9uris.iction over t+e
case belongs to t+e regular courts. E+ile t+e resolution o5 t+e issue
involves t+e a00lication o5 labor la*s) re5erence to t+e labor co.e
*as onl, 5or t+e .etermination o5 t+e soli.ar, liabilit, o5 t+e
0etitioner to t+e res0on.ent *+ere no em0lo,er7em0lo,ee relation
e6ists$
Dn the present case' there e+ists no employer-employee relationship bet3een
petitioner and /elta Milling$
5he liability of /elta Milling to reimburse petitioner 3ill only arise if and 3hen
petitioner actually pays its employees the ad9udged liabilities$
Meralco "n.ustrial Engineering Services Cor0oration >M"ESC8R? .s 4%RC
and 82%3S
FACS!
#n ((E&E()M;' MDE%"# and #=!>% e+ecuted a contract 3herein #=!>%
3ould supply the MDE%"# 9anitorial ser.ices at its ock3ell 5hermal =lant in
Makati "ity$
o =ursuant thereto' ;) employees 3ere assigned as 9anitors to
petitioners ock3ell 5hermal =lant$
#n )E,2E()M)' the ;) employees (complainants) lodged a "omplaint for
illegal deduction' underpayment' non-payment of o.ertime pay' legal holiday
pay' premium pay for holiday and rest day and night di:erentials against the
pri.ate respondents before the !abor Arbiter$
Dn .ie3 of the enactment of epublic Act 0o$ 7&,&' the contract bet3een the
petitioner and the pri.ate respondents 3as amended for the (2
th
time on
((E1E()M) to increase the minimum daily 3age per employee from =71$** to
=M)$22 or =,'7&2$22 per month$
=age 22 of (2
#n (E,E())2' MDE%"# sent a letter to #=!>% informing them that MDE%"#
3as terminating the contract' e:ecti.e at the close of business hours on
(E1(E())2$
Accordingly' the complainants 3ere pulled out from their 3ork$
5hus' on ,E,&E())2' complainants amended their "omplaint to include the
charge of illegal dismissal and to implead the petitioner as a party
respondent therein$
5hereafter' a /ecision 3as rendered by the !abor Arbiter on 1E,7E())('
dismissing the "omplaint against the petitioner for lack of merit' but ordering
the pri.ate respondents to pay the complainants the total amount of
=;M&',M&$2&$
All other claims of the complainants against the pri.ate respondents 3ere
dismissed$
=ri.ate respondents appealed the aforesaid /ecision to the 0!"$
o =ri.ate respondents alleged' among other things' thatA t+e 0etitioner)
being t+e 0rinci0al) *as soli.aril, liable *it+ t+e 0rivate
res0on.ents 5or 5ailure to ma1e an a.9ustment on t+e *ages o5
t+e com0lainants.
#n *E,ME())1' 0!" a@rmed the !abor Arbiters /ecision *it+ t+e
mo.iKcation t+at t+e 0etitioner *as soli.aril, liable *it+ t+e 0rivate
res0on.ents.
MDE%"# and #=!>% separately mo.ed for reconsideration$
5he 0!" issued an #rder noting that base. on t+e recor.s o5 t+e case)
t+e 9u.gment a*ar. in t+e amount o5 2(=7)2=7.07 *as secure. b, a
suret, bon. 0oste. b, t+e 0rivate res0on.ents.
esultantly' the 0!" denied #=!>% Motion for econsideration$
5he 0!" like3ise directed the !abor Arbiter to enforce the monetary a3ard
against the #=!>% surety bond and to determine 3ho should fnally shoulder
the liability therefor$
#n (E12E())7' the 0!" issued an #rder 3hich declared the soli.aril,
liabilit, o5 82%3S an. M"ESC8R on t+e un.er0a,ment an. on t+e
non70a,ment o5 t+e overtime 0a, and t+e sole liabilit, o5 82%3S on
t+e 0a,ment o5 se0aration 0a,$
5hus' an alias 3rit of e+ecution 3as issued pursuant thereto$
#n appeal to "A' the "ourt rendered the assailed /ecision 3hich mo.iKe.
t+e &ecision o5 t+e 4%RC an. +ol.ing t+e 0etitioner soli.aril, liable
*it+ t+e 0rivate res0on.ents 5or t+e satis5action o5 t+e laborers
se0aration 0a,$
4ence' this petition$
=age 23 of (2
"SS#E! Whether or not MDE%"# should be held solidarily liable 3ith #=!>% for the
satisfaction of the laborers separation pay$
$el.! 48.
5he "ourt of Appeals erred 3hen it ruled that the MDE%"# 3as 9ointly and
solidarily liable 3ith the #=!>% as regards the payment of separation pay$
5he appellate court used as basis Article (2) of the !abor "ode' as amended'
in holding the petitioner solidarily liable 3ith the pri.ate respondents for the
payment of separation payA
A5$ (2)$ %olidary !iability$ - 5he pro.isions of e+isting la3s to
the contrary not3ithstanding' e.ery employer or indirect
employer shall be held responsible 3ith his contractor or
subcontractor 5or an, violation o5 an, 0rovision o5 t+is
Co.e$ 8or purposes of determining the e+tent of their ci.il
liability under this "hapter' they shall be considered as direct
employers$ 4o3e.er' the afore-?uoted pro.ision must be read in
con9unction 3ith Articles (27 and (2& of the !abor "ode' as
amended$
Article (2& of the !abor "ode' as amended' defnes an indirect employer as
any person' partnership' association or corporation 3hich' not being an
employer' contracts 3ith an independent contractor for the performance of
any 3ork' task' 9ob or pro9ect$
5o ensure that the contractors employees are paid their appropriate 3ages'
Article (27 of the !abor "ode' as amended' pro.idesA
A5$ (27$ C-%,&AC,-& -& SU.C-%,&AC,-&$
Dn the e.ent that the contractor or subcontractor fails to pay the
3ages of his employees in accordance 3ith this "ode' the
employer shall be 9ointly and se.erally liable 3ith his contractor
or subcontractor to such employees to the e+tent of the 3ork
performed under the contract' in the same manner and e+tent
that he is liable to employees directly employed by him$
5aken together' an indirect employer can onl, be +el. soli.aril, liable
*it+ t+e in.e0en.ent contractor or subcontractor in the e.ent that the
latter fails to pay the 3ages of its employees$ While it is true that the
petitioner 3as the indirect employer of the complainants' it cannot be +el.
liable in t+e same *a, as t+e em0lo,er in ever, res0ect$
5he petitioner may be considered an indirect employer onl, 5or 0ur0oses
o5 un0ai. *ages$
=age 2( of (2
5here is no ?uestion that pri.ate respondents are operating as an
independent contractor and that the complainants 3ere their employees$
5here 3as no employer-employee relationship that e+isted bet3een the
petitioner and the complainants$
5hus' the former could not ha.e dismissed the latter from employment$ #nly
pri.ate respondents' as the employer' can terminate their ser.ices and
should be held liable$
+e onl, instance *+en t+e 0rinci0al can also be +el. liable *it+ t+e
in.e0en.ent contractor or subcontractor 5or t+e bac1*ages an.
se0aration 0a, o5 t+e latters em0lo,ees is *+en t+ere is 0roo5 t+at
t+e 0rinci0al cons0ire. *it+ t+e in.e0en.ent contractor or
subcontractor in t+e illegal .ismissal o5 t+e em0lo,ees$
Dt is the established fact of conspiracy that 3ill tie the principal or indirect
employer to the illegal dismissal of the contractor or subcontractors
employees$
Dn the present case' there is no allegation and proof presented' that the
petitioner conspired 3ith pri.ate respondents in the illegal dismissal of the
latters employees$
4ence' it cannot be held liable for the same$
0either can the liability for the separation pay of the complainants be
e+tended to the petitioner based on contract$ Contract e6ecute. bet*een
t+e M"ESC8R an. 82%3S contains no 0rovision 5or se0aration 0a,
u0on termination o5 contract$
A contract is the la3 bet3een the parties and the stipulations therein shall be
binding as bet3een the parties$
4ence' if the contract does not pro.ide for such a liability' the "ourt cannot
9ust read the same into the contract 3ithout possibly .iolating the intention of
the parties$
Although MDE%"# is not liable for separation pay' the "ourt conforms to the
consistent fndings that the petitioner is solidarily liable 3ith #=!>% for the
9udgment a3ards for underpayment of 3ages and non-payment of o.ertime
pay$
Dn this case' ho3e.er' #=!>% had already posted a surety bond su@cient to
co.er all the 9udgment a3ards due the complainants' including those for
underpayment of 3ages and non-payment of o.ertime pay$
=age 2< of (2
5he 9oint and se.eral liability of the principal 3ith the contractor and
subcontractor 3ere enacted to ensure compliance 3ith the pro.isions of the
!abor "ode$
5his liability facilitates' if not guarantees' payment of the 3orkers
compensation$
With #=!>% surety bond' the interests of the complainants are already
ade?uately protected$
"onse?uently' it 3ill be futile to continuously hold the petitioner 9ointly and
solidarily liable 3ith the pri.ate respondents for the 9udgment a3ards for
underpayment of 3ages and non-payment of o.ertime pay$
-ut 3hile this "ourt had pre.iously ruled that the indirect employer can
reco.er 3hate.er amount it had paid to the employees in accordance 3ith
the terms of the ser.ice contract bet3een itself and the contractor' the said
ruling cannot be applied in re.erse to this case as to allo3 the #=!>% (the
independent contractor)' 3ho paid for the 9udgment a3ards in full' to reco.er
from the MDE%"# (the indirect employer)$
MDE%"# had already handed o.er to #=!>% the 3ages and other benefts of
the complainants$ ecords re.eal that it had complied 3ith complainants
salary increases in accordance 3ith the minimum 3age set by epublic Act
0o$ 7&,& by faithfully ad9usting the contract price for the 9anitorial ser.ices$
4a.ing already recei.ed from petitioner the correct amount of 3ages and
benefts' but ha.ing failed to turn them o.er to the complainants' #=!>%
should no3 solely bear the liability for the underpayment of 3ages and non-
payment of the o.ertime pay$
&"S28S""84! 5he petition is 3RA4E&$ 5he /ecision and esolution of the "ourt
of Appeals are RE;ERSE& A4& SE AS"&E$
E0ar*a Securit, vs %iceo .e Caga,an #niversit, >%&C#? <0= SCRA 370
L2007M
Facts!
#n ( /ecember ())&' Epar3a and !/"N' through their representati.es'
entered into a "ontract for %ecurity %er.ices$ #n ,( /ecember ())M' ((
security guards 3hom Epar3a assigned to !/"N fled a complaint before the
0!"' against both Epar3a and !/"N for underpayment of salary' legal
=age 26 of (2
holiday pay' (1
th
month pay' rest day' ser.ice incenti.e lea.e' night shift
di:erential' o.ertime pay' and payment for attorneys fees$
5he !abor Arbiter found that the security guards are entitled to 3age
di:erentials and premium for holiday and rest day 3ork$
o 5he !abor Arbiter held Epar3a and !/"N solidarily liable pursuant to
Article (2) of the !abor "ode$
!/"N fled an appeal before the 0!"$
5he 0!" found that the security guards are entitled to 3age di:erentials and
premium for holiday and rest day 3ork$
o Although the 0!" held Epar3a and !/"N solidarily liable for the 3age
di:erentials and premium for holiday and rest day 3ork' the 0!" did
not re?uire Epar3a to reimburse !/"N for its payments to the security
guards$
Epar3a and !/"N again fled separate motions for partial reconsideration'
!/"N ?uestioned the 0!"s deletion of !/"Ns entitlement to
reimbursement by Epar3a$ Epar3a' on the other hand' prayed that !/"N be
made to reimburse Epar3a for 3hate.er amount it may pay to the security
guards$
5he 0!" declared that although Epar3a and !/"N are solidarily liable to the
security guards for the monetary a3ard' !/"N alone is ultimately liable$
!/"N fled a petition for certiorari before the "A' !/"N stated that this 3ould
free Epar3a from any liability for payment of the security guards money
claims$
"A also allo3ed !/"N to claim reimbursement from Epar3a$
"SS#E! Ds !/"N alone ultimately liable to the security guards for the 3age
di:erentials and premium for holiday and rest day payT
$E%&! 'ES.
!/"Ns ultimate liability comes into play because of the e+piration of the
"ontract for %ecurity %er.ices$
5here is no pri.ity of contract bet3een the security guards and !/"N' but
!/"Ns liability to the security guards remains because of Articles (27' (2&
and (2) of the !abor "ode$
Epar3a is already precluded from asking !/"N for an ad9ustment in the
contract price because of the e+piration of the contract' but Epar3as liability
to the security guards remains because of their employer-employee
relationship$
Dn lieu of an ad9ustment in the contract price' Epar3a may claim
reimbursement from !/"N for any payment it may make to the security
guards$
=age 27 of (2
4o3e.er' !/"N cannot claim any reimbursement from Epar3a for any
payment it may make to the security guards$
8or the security guards' the actual source of the payment of their 3age
di:erentials and premium for holiday and rest day 3ork does not matter as
long as they are paid$
5his is the import of Epar3a and !/"Ns solidary liability$ "reditors' such as
the security guards' may collect from anyone of the solidary debtors$
%olidary liability does not mean that' as bet3een themsel.es' t3o solidary
debtors are liable for only half of the payment$
Articles (27' (2& and (2) of the !abor "ode readA
Art$ (27$ Contractor or s'bcontractor. / Whene.er an employer enters into a
contract 3ith another person for the performance of the formers 3ork' the
employees of the contractor and of the latters subcontractor' if any' shall be paid in
accordance 3ith the pro.isions of this "ode$
Dn the e.ent that the contractor or subcontractor fails to pay the 3ages of his
employees in accordance 3ith this "ode' the employer shall be 9ointly and se.erally
liable 3ith his contractor or subcontractor to such employees to the e+tent of the
3ork performed under the contract' in the same manner and e+tent that he is liable
to employees directly employed by him$
5he %ecretary of !abor may' by appropriate regulations' restrict or prohibit the
contracting out of labor to protect the rights of 3orkers established under this "ode$
Dn so prohibiting or restricting' he may make appropriate distinctions bet3een labor-
only contracting and 9ob contracting as 3ell as di:erentiations 3ithin these types of
contracting and determine 3ho among the parties in.ol.ed shall be considered the
employer for purposes of this "ode' to pre.ent any .iolation or circum.ention of any
pro.ision of this "ode$
5here is 6labor-only6 contracting 3here the person supplying 3orkers to an
employer does not ha.e substantial capital or in.estment in the form of tools'
e?uipment' machineries' 3ork premises' among others' and the 3orkers recruited
and placed by such persons are performing acti.ities 3hich are directly related to
the principal business of the employer$ Dn such cases' the person or intermediary
shall be considered merely as an agent of the employer 3ho shall be responsible to
the 3orkers in the same manner and e+tent as if the latter 3ere directly employed
by him$
Article (2&$ Indirect employer. / 5he pro.isions of the immediately preceding
Article shall like3ise apply to any person' partnership' association or corporation
3hich' not being an employer' contracts 3ith an independent contractor for the
performance of any 3ork' task' 9ob or pro9ect$
=age 2= of (2
Article (2)$ Solidary liability$ / 5he pro.isions of e+isting la3s to the contrary
not3ithstanding' e.ery employer or indirect employer shall be held responsible 3ith
his contractor or subcontractor for any .iolation of any pro.ision of this "ode$ 8or
purposes of determining the e+tent of their ci.il liability under this "hapter' they
shall be considered as direct employers$
5his 9oint and se.eral liability of the contractor and the principal is mandated by the
!abor "ode to assure compliance of the pro.isions therein including the statutory
minimum 3age HArticle ))' !abor "odeI$ 5he contractor is made liable by .irtue of
his status as direct employer$ 5he principal' on the other hand' is made the indirect
employer of the contractors employees for purposes of paying the employees their
3ages should the contractor be unable to pay them$ 5his 9oint and se.eral liability
facilitates' if not guarantees' payment of the 3orkers performance of any 3ork'
task' 9ob or pro9ect' thus gi.ing the 3orkers ample protection as mandated by the
()M& "onstitution H%ee Article DD %ec$ (M and Article UDDD %ec$ 1I$
MA4&A#E etc. v. A4&A%ES
FACS!
=etitioners Mandaue >alleon 5rade' Dnc$ (M>5D) and >amallosons 5raders' Dnc$
(>5D) are business entities engaged in rattan furniture manufacturing for
e+port$
espondent Andales fled a complaint 3ith !A against both petitioners for
illegal dismissal and non-payment of (1
th
month pay and ser.ice incenti.e
lea.e pay$
4is other co-3orkers numbering ,72 fled a similar complaint against
petitioner M>5D only$
M>5D denied the e+istence of employer-employee relationship 3ith
complainants' claiming that they are 3orkers of independent contractors
3hose ser.ices 3ere engaged temporarily and seasonally 3hen the demands
for its products are high and could not be met by its regular 3orkforce< the
independent contractors recruited and hired the complainants' prepared the
payroll and paid their 3ages' super.ised and directed their 3ork' and had
authority to dismiss them$
!A rendered a /ecision holding that (M1 complainants are regular employees
of M>5D since they 3ere made to perform functions 3hich are necessary to
M>5DGs rattan furniture manufacturing business and such independent
contractors 3ere not properly identifed$
0!" a@rmed the !AGs decision$
=age 2B of (2
Dt held that labor-only contracting and not 9ob-contracting 3as present since
the alleged contractors did not ha.e substantial capital in the form of
e?uipment' machineries and 3ork premises$
5he "A a@rmed the fndings of the 0!"$

"SS#E! W#0 the "A committed gra.e abuse and irre.ersible error in considering
the respondents as employees of the petitioner$
$E%&! 5he "ourt sees no reason to disturb the fndings of fact of the 0!" and the
"A$
-ased on Article (27 of the !abor "ode and %ections * and & of the
Dmplementing ules' 6labor-only6 contracting e+ists 3hen the follo3ing
criteria are presentA
(() 3here the contractor or subcontractor supplying 3orkers to
an employer does not ha.e substantial capital or in.estment in
the form of tools' e?uipment' machineries' 3ork premises'
among other things< and the 3orkers recruited and placed by
the contractor or subcontractor are performing acti.ities 3hich
are directly related to the principal business of such employer<
or
(,) 3here the contractor does not e+ercise the right to control
the performance of the 3ork of the contractual employee$
Dn the present case' petitionersG claim that their contractors are independent
contractors' and' therefore' this case is one of permissible 9ob contracting' is
3ithout basis$
$irst) respondentsG 3ork as 3ea.ers' grinders' sanders and fnishers is directly
related to M>5DGs principal business of rattan furniture manufacturing$
Where the employees are tasked to undertake acti.ities usually desirable or
necessary in the usual business of the employer' the contractor is considered as a
6labor-only6 contractor and such employees are considered as regular employees of
the employer$
Second) M>5D 3as unable to present any proof that its contractors had substantial
capital$ 5here 3as no e.idence pertaining to the contractorsG capitalization< nor to
their in.estment in tools' e?uipment or implements actually used in the
performance or completion of the 9ob' 3ork' or ser.ice that they 3ere contracted to
render$ 5he la3 casts the burden on the contractor to pro.e that it has substantial
capital' in.estment' tools' etc$ Employees' on the other hand' need not pro.e that
=age 30 of (2
the contractor does not ha.e substantial capital' in.estment' and tools to engage in
9ob-contracting$
5hus' the contractors are 6labor-only6 contractors since they do not ha.e
substantial capital or in.estment 3hich relates to the ser.ice performed and
respondents performed acti.ities 3hich 3ere directly related to M>5DGs main
business$
M>5D' the principal employer' is solidarily liable 3ith the labor-only
contractors' for the rightful claims of the employees$
Nnder this set-up' 6labor-only6 contractors are deemed agents of the
principal' M>5D' and the la3 makes the principal responsible to the employees
of the 6labor-only6 contractor as if the principal itself directly hired or
employed the employees$
"n 0ro+ibiting Nlabor7onl,N contracting an. creating an em0lo,er7
em0lo,ee relations+i0 bet*een t+e 0rinci0al an. t+e su00ose.
contractor:s em0lo,ees) t+e la* inten.s to 0revent em0lo,ers 5rom
circumventing labor la*s inten.e. to 0rotect em0lo,ees.
A@8""O $A#%ERS "4C ;. &"MA2A8" <02 SCRA 271 >2006?
EVND%D5E% A0/ =#4D-D5D#0 #8 !A-# "#05A"5# #0!J
FACS!
=etitioner Aboitiz 4aulers Dnc is a domestic corporation principally engaged in
nation3ide and o.erseas for3arding and distribution of cargo$ =ri.ate
respondents /imapatoi' Aga3in et al 3orked as checkers in the Mega
Warehouse' o3ned by Aboitiz 4aulers$
=etitioner claimed respondents are not its employees but the employees of
>rigio %ecurity Agency' a manpo3er agency that supplies security guards'
checkers' and stu:ers$ Dt allegedly entered into a contract of ser.ice 3ith
>rigio March ()); 3here >rigio 3as to supply the petitioner 3ith security
guards' checkers and stu:ers$
Among the checkers assigned to the petitioners 3arehouse 3ere the pri.ate
respondents
Aboitiz a.erred that >rigio retained control o.er the respondents by pro.iding
their o3n super.isors to o.ersee >rigios personnel' as 3ell as time cards to
monitor the attendance of its personnel$
=etitioner also alleged that on May )' ())7' the respondents left the
3arehouse and did not report to 3ork thereafter$
=age 31 of (2
As a result of the respondents sudden abandonment of 3ork' there 3as no
orderly turno.er of papers and other company property in connection 3ith
the termination of the contract for ser.ices$
Whereas the respondents claimed that they ha.e been employed by Aboitiz
4aulers e.en before March ());$
/imapatoi et al maintain that during their employment 3ith petitioner' they
3ere not paid their regular holiday pay' nightshift di:erential' * day ser.ice
incenti.e lea.e and #5 premium$
5hey also a.erred that illegal deductions 3ere being made on their 3ages'
particularly for a mutual assistance fund' a cash bond and claims for
damaged and misrouted cargo incurred by petitioner$
espondents alleged that on May (*' ())7' Aboitiz 4aulers dismissed them
on the prete+t that the 3ritten contract of ser.ice bet3een >rigio and
petitioner had been terminated$
espondents fled a complaint for non-payment of 3ages and other benefts
and illegal deductions$
!A held in fa.or of Aboitiz 4aulers since respondents 3ere unable to o:er any
e.idence to sho3 that >rigio had no substantial capital (>rigio 3as held to be
a legitimate independent 9ob contractor)$
0!" a@rmed the same$
"A re.ersed the decision citing that >rigio 3as not an independent 9ob
contractor' despite its claim that it has su@cient capital$
o >rigio does not carry on an independent business' since the
respondents 3ork as 3arehouse checkers is necessary and desirable
to the petitioners business of for3arding and distribution of cargo$
"SS#E! W#0 >D>D# D% A K!A-# #0!JC "#05A"5#$
$E%&! 0o' >rigio is not a Klabor onlyC contractor$
Dn determining 3hether or not a 6labor-only6 contracting e+ists' Art$ (27 of
the !abor "ode and %ection * of the ules Dmplementing Articles (27 to (2)
of the !abor "ode' as amended' pro.ides the follo3ing criteriaA
(() 3here the person supplying 3orkers to an employer does not ha.e
substantial capital or in.estment in the form of tools' e?uipment'
machineries' 3ork premises' among other things<
(,) the 3orkers recruited and placed by such persons are performing
acti.ities 3hich are directly related to the principal business of such
employer< and
(1) the contractor does not e+ercise the right to control the performance of
the 3ork of the contractual employee$
=age 32 of (2
Dn order that one is considered by la3 as a 6labor-only6 contractor' all three
aforementioned criteria need not be present$ Df the contractor enters into an
arrangement characterized by any one of the criteria pro.ided' this 3ould be
a clear case of 6labor-only contracting$6
5he clear phrasing of %ection * of the ules Dmplementing Articles (27 to (2)
of the !abor "ode' as amended' support this interpretation$
5he allegation of the petitioner that >rigio is an independent 9ob contractor'
and' therefore' this case is one of permissible 9ob contracting' is 3ithout
basis$
"n t+is case) the respondents 3ork' as 3arehouse checkers' is directly
related to the principal business of the petitioner$
=etitioner also e+ercises the right to control and determines not only the end
to be achie.ed' but also the manner and means to be used in reaching that
end$
!astly' petitioner failed to su@ciently pro.e that >rigio had 6substantial
capital or in.estment$6
5he respondents' as checkers' 3ere employed to check and inspect these
cargoes'
,M
a task 3hich is clearly necessary for the petitioners business of
for3arding and distributing of cargoes$
5he petitioner did not dispute the fact that the respondents 3ere hired as
checkers as early as ()),$
5he fact that they 3ere employed before the Written "ontract of %er.ices
took e:ect on ,; 8ebruary ());' and continued 3ith their 9obs until ())7'
after the said contract had already e+pired on ,; 8ebruary ())*' indicates
that the respondents 3ork 3as indeed necessary for the petitioners
business$
Dn a similar case' >uarin .$ 0ational !abor elations "ommission' the 3orkers
contracts 3ere repeatedly rene3ed to perform ser.ices necessary for the
employers business$
5hus' >rigio is ob.iously a 6labor-only contractor since it did not ha.e
substantial capital or in.estment 3hich relates to the ser.ice performed< the
respondents performed acti.ities 3hich 3ere directly related to the main
business of the petitioner< and >rigio did not e+ercise control o.er the
performance of the 3ork of the respondents$
"onse?uently' the petitioner is considered as the employer of the
respondents$
A%EAA4&R8 MARA3#"48) AR. and 2A#%"48 E4ER8 .s$ 4%RC) ;"C &E%
R8SAR"8 and ;";A F"%MS
FACS!
=age 33 of (2
=etitioner Ale9andro Maraguinot' Lr$ maintains that he 3as employed by
pri.ate respondents as part of the flming cre3 a salary of =1&*$22 per 3eek$
About ; months later' he 3as designated Asst$ Electrician and later' he 3as
then promoted to the rank of Electrician$
#n the other hand' =etitioner =aulino Enero claims that pri.ate respondents
employed him as a member of the shooting cre3$ 5he tasks of =etitioners
include the loading' unloading and arranging mo.ie e?uipment in the
shooting area as instructed by the cameraman' returning the e?uipment to
Pi.a 8ilms 3arehouse' assisting in the Kf+ingC of the lighting system' and
performing other tasks that the cameraman andEor director may assign$
Dn May ()),' =etitioners sought the assistance of their super.isor' Mrs$
Ale9andria "esario' to facilitate their re?uest that pri.ate respondents ad9ust
their salary in accordance 3ith the minimum 3age la3$
5hey 3ere then informed that Mr$ Pic del osario 3ould agree to increase
their salary only if they signed a blank employment contract$
=etitioners refused to sign' pri.ate respondents forced Enero to go on lea.e
then refused to take him back 3hen he reported for 3ork$
Mean3hile' Maraguinot 3as dropped from the company payroll but 3as
returned and again asked to sign a blank employment contract' and 3hen he
still refused' pri.ate respondents terminated his ser.ices$
=etitioners thus sued for illegal dismissal before the !abor Arbiter$
o =ri.ate espondents assert that they contract persons called
KproducersC -- also referred to as Kassociate producersC -- to KproduceC
or make mo.ies for pri.ate respondents< and contend that petitioners
are pro9ect employees of the associate producers 3ho' in turn' act as
independent contractors$
o As such' there is no employer-employee relationship bet3een
petitioners and pri.ate respondents< that it 3as the associate producer
of a flm 3ho hired Maraguinot and he 3as released upon payment of
his last salary' as his ser.ices 3ere no longer needed< that Enero 3as
hired for a mo.ie' 3ent on .acation and by the time he reported back
to 3ork the mo.e had been completed$
5he !abor Arbiter ruled that "omplainants are the employees of the
respondents$
5he producer cannot be considered as an independent contractor but should
be considered only as a labor-only contractor and acts as a mere agent of the
real employer$
Also' it is an admitted fact that the complainants recei.ed their salaries from
the respondents for acti.ities 3hich are necessary and essential to the
business of the respondents' that of mo.iemaking$
"omplainant Maraguinot 3orked as an electrician' 3hile complainant Enero
3orked as a cre3 member$ 4ence' the complainants 3ere illegally dismissed$
=age 3( of (2
=ri.ate espondents appealed to the 0!" and the latter re.ersed the !abor
Arbiters decision' concluding that upon circumstances' taken together'
indicated that complainants 3ere Kpro9ect employees$C
Mainly' "omplainants 3ere hired for specifc mo.ie pro9ects and their
employment 3as co-terminus 3ith each mo.ie pro9ect the
completionEtermination of 3hich are pre-determined' such fact being made
kno3n to complainants at the time of their engagement$
=etitioners alleged that' in supporting their claim that they 3ere regular (and
not pro9ect) employees of pri.ate respondents' petitioners cited their
performance of acti.ities that 3ere necessary or desirable in the usual trade
or business of pri.ate respondents and added that their 3ork 3as continuous$
=etitioners thus considered themsel.es part of a 3ork pool from 3hich pri.ate
respondents dre3 3orkers for assignment to di:erent pro9ects$
=etitioners lamented that there 3as no basis for the 0!"s conclusion that
they 3ere pro9ect employees$
=ri.ate respondents reiterate their .ersion of the facts and stress that their
e.idence supports the .ie3 that petitioners are pro9ect employees< point to
petitioners irregular 3ork load and 3ork schedule< emphasize the 0!"s
fnding that petitioners ne.er contro.erted the allegation that they 3ere not
prohibited from 3orking 3ith other mo.ie companies< and ask that the facts
be .ie3ed in the conte+t of the peculiar characteristics of the mo.ie industry$
5he #%> is con.inced that this petition is improper since petitioners raise
?uestions of fact< and submits that petitioners reliance on Article ,M2 of the
!abor "ode to support their contention that they should be deemed regular
employees is misplaced' as said section Kmerely distinguishes bet3een t3o
types of employees' i.e$' regular employees and casual employees' for
purposes of determining the right of an employee to certain benefts$C
5he #%> like3ise re9ects petitioners contention that since they 3ere hired
not for one pro9ect' but for a series of pro9ects' they should be deemed
regular employees$
Dn closing' the #%> disagrees 3ith petitioners claim that the 0!"s
classifcation of the mo.ie producers as independent contractors had no basis
in fact and in la3' since' on the contrary' the 0!" Ktook pains in e+plaining
its basisC for its decision$
"SS#ES
($ W#0 this is a proper action
,$ W#0 an employer-employee relationship e+isted bet3een the petitioners and
pri.ate respondents or any one of them
$E%&
($ 'ES. A special ci.il action for certiorari under ule 7* of the ules of "ourt is the
proper remedy for one 3ho complains that the 0!" acted in total disregard of
=age 3< of (2
e.idence material to or decisi.e of the contro.ersy$ Dn the instant case'
petitioners allege that the 0!"s conclusions ha.e no basis in fact and in la3'
hence the petition may not be dismissed on procedural or 9urisdictional grounds$
,$ 'ES. 5he relations+i0 bet*een ;";A an. its 0ro.ucers or associate
0ro.ucers seems to be t+at o5 agenc,' as the latter make mo.ies on behalf
of PDPA' 3hose business is to KmakeC mo.ies$ As such' the employment
relationship bet3een petitioners and producers is actually one bet3een
petitioners and PDPA' 3ith the latter being the direct employer$
Aob Contracting
o Dt is settled that the contracting out o5 labor is allo*e. onl, in
case o5 9ob contracting and if contractor has substantial capital or
in.estment in the form of tools' e?uipment' machineries' 3ork
premises and other materials 3hich are necessary in the conduct of his
business
o Assuming that the associate producers are 9ob contractors' they must
then be engaged in the business of making motion pictures$ As such'
and to be a 9ob contractor under the preceding description' associate
producers must ha.e tools' e?uipment' machinery' 3ork premises' and
other materials necessary to make motion pictures$ 4o3e.er' the
associate producers here ha.e none of these$ =ri.ate respondents
e.idence re.eals that the mo.ie-making e?uipment are supplied to the
producers and o3ned by PDPA$ Df pri.ate respondents insist that their
associate producers are labor contractors' then these producers can
only be Klabor-onlyC contractors$
%abor7onl, contracting
o 5here is Klabor-onlyC contracting 3here the person supplying 3orkers
to an employer does not ha.e substantial capital or in.estment in the
form of tools' e?uipment' machineries' 3ork premises' among others'
and the 3orkers recruited and placed by such persons are performing
acti.ities 3hich are directly related to the principal business of such
employer$ Dn such cases' t+e 0erson or interme.iar, shall be
considered merely as an agent of the em0lo,er *+o s+all be
res0onsible to t+e *or1ers in t+e same manner an. e6tent as i5
t+e latter *ere .irectl, em0lo,e. b, +im.
o As labor-only contracting is prohibited' the la3 considers the person or
entity engaged in the same a mere agent or intermediary of the direct
employer$ -ut e.en by the preceding standards' the associate
producers of PDPA cannot be considered labor-only contractors as they
did not supply' recruit nor hire the 3orkers$ Dn the instant case' it *as
Auanita Cesario) S+ooting #nit Su0ervisor an. an em0lo,ee o5
=age 36 of (2
;";A) 3ho recruited cre3 members from an Ka.ailable group of free-
lance 3orkers 3hich includes the complainants Maraguinot and Enero$C
5he employer-employee relationship bet3een petitioners and PDPA can be
further established by the Kcontrol test$C
While four elements are usually considered in determining the e+istence
of an employment relationship' namelyA
(a) the selection and engagement of the employee<
(b) the payment of 3ages<
(c) the po3er of dismissal< and
(d) the employers po3er to control the employees conduct' the most
important element is the employers control of the employees conduct'
not only as to the result of the 3ork to be done but also as to the means
and methods to accomplish the same$
Control est
o PDPAs control is e.ident in its mandate that the end result must be a
K?uality flm acceptable to the company$C 5he means and methods to
accomplish the result are like3ise controlled by PDPA' .iz$' the mo.ie
pro9ect must be fnished 3ithin schedule 3ithout e+ceeding the budget'
and additional e+penses must be 9ustifed< certain scenes are sub9ect
to change to suit the taste of the company< and the %uper.ising
=roducer' the Keyes and earsC of PDPA and del osario' inter.enes in
the mo.ie-making process by assisting the associate producer in
sol.ing problems encountered in making the flm$
o Dt may not be .alidly argued then that petitioners are actually sub9ect
to the mo.ie directors control' and not PDPAs direction$ 5he director
merely instructs petitioners on ho3 to better comply 3ith PDPAs
re?uirements to ensure that a ?uality flm is completed 3ithin schedule
and 3ithout e+ceeding the budget$ At bottom' the director is akin to a
super.isor 3ho merely o.ersees the acti.ities of rank-and-fle
employees 3ith control ultimately resting on the employer$
o A00ointment Sli0s issued to all cre3 members stateA K/uring the
term of this appointment you shall comply 3ith the duties and
responsibilities of your position as 3ell as obser.e the rules and
regulations promulgated by your superiors and by 5op Management$C
o 5he 3ords KsuperiorsC and K5op ManagementC can only refer to the
KsuperiorsC and K5op ManagementC of PDPA$ -y commanding cre3
members to obser.e the rules and regulations promulgated by PDPA'
the appointment slips only emphasize PDPAs control o.er petitioners$
o Aside from control' the element of selection and engagement is
present$ A sample appointment slip 3as o:ered by pri.ate
=age 37 of (2
respondents to pro.e that members of the shooting cre3 e+cept the
dri.er are pro9ect employees of the Dndependent =roducers$ 0otably'
no3here in the appointment slip does it appear that it 3as the
producer or associate producer 3ho hired the cre3 members . "t is
;";A-s cor0orate name *+ic+ a00ears on t+e +ea.ing o5 t+e
a00ointment sli0$ What like3ise tells against PDPA is that it paid
petitioners salaries as e.idenced by .ouchers' containing PDPAs
letterhead' for that purpose$
&"S28S""84! =etition is >A05E/$
Man.aue etc. vs An.ales <(= SCRA 17 L200=M
Facts!
=etitioners Mandaue >alleon 5rade' Dnc$ (M>5D) and >amallosons 5raders' Dnc$
(>5D) are business entities engaged in rattan furniture manufacturing for
e+port' 3ith principal place of business at "abangcalan' Mandaue "ity$
espondent Picente Andales (Andales) fled a complaint 3ith (!A) against
both petitioners for illegal dismissal and non-payment of (1
th
month pay and
ser.ice incenti.e lea.e pay$
4is other co-3orkers numbering ,72 fled a similar complaint against
petitioner M>5D only$
5he complainants alleged that M>5D hired them on .arious dates as 3ea.ers'
grinders' sanders and fnishers< these 3orkers 3ere told that they could no
longer 3ork because theres no 3ork for them< thus they 3ere dismissed
3ithout 9ust notice and 9ust cause$
M>5D denied the e+istence of employer-employee relationship 3ith
complainants' claiming that they are 3orkers of independent contractors
3hose ser.ices 3ere engaged temporarily and seasonally 3hen the demands
for its products are high and could not be met by its regular 3orkforce$
5he !A rendered a /ecision holding that (M1 complainants are regular piece-
rate employees of M>5D since they 3ere made to perform functions 3hich are
necessary to M>5DGs rattan furniture manufacturing business$
5he 0!" a@rmed the !AGs fnding of employer-employee relationship$ Dt held
that labor-only contracting and not 9ob-contracting 3as present since the
alleged contractors did not ha.e substantial capital in the form of e?uipment'
machineries and 3ork premises$
5he "A a@rmed the fndings of the 0!"$
o Dt held that M>5D is liable to the respondents because the alleged
contractors are not independent contractors but labor-only contractors<
that respondents 3ere constructi.ely dismissed 3hen they 3ere
=age 3= of (2
unilaterally transferred to another contractor< and that the allegation of
retrenchment 3as not pro.en$
"SS#E! What is the e:ect of the fnding that the contractor 3as a labor-only
contractorT
$E%&! AN5#MA5D" /E"!AA5D#0 #8 EUD%5E0"E #8 EM=!#JE-EM=!#JEE
E!A5D#0%4D=
A fnding that a contractor is a 6labor-only6 contractor is e?ui.alent to
declaring that there is an employer-employee relationship bet3een the
principal and the employees of the supposed contractor and the 6labor-only6
contractor is considered as a mere agent of the principal' the real employer$
5he e:ect of this is the immediate application of !abor %tandards' %ecurity of
5enure' etc$ bet3een the employees and the principal$
A%T" &'(" )ontractor or su*contractor$ F Whene.er an employer enters
into a contract 3ith another person for the performance of the formerGs 3ork'
the employees of the contractor and of the latterGs subcontractor' if any' shall
be paid in accordance 3ith the pro.isions of this "ode$
Dn the e.ent that the contractor or subcontractor fails to pay the 3ages of his
employees in accordance 3ith this "ode' the employer shall be 9ointly and
se.erally liable 3ith his contractor or subcontractor to such employees to the
e+tent of the 3ork performed under the contract' in the same manner and
e+tent that he is liable to employees directly employed by him$
5he %ecretary of !abor may' by appropriate regulations' restrict or prohibit
the contracting out of labor to protect the rights of 3orkers established under
this "ode$ Dn so prohibiting or restricting' he may make appropriate
distinctions bet3een labor-only contracting and 9ob contracting as 3ell as
di:erentiations 3ithin these types of contracting and determine 3ho among
the parties in.ol.ed shall be considered the employer for purposes of this
"ode' to pre.ent any .iolation or circum.ention of any pro.ision of this "ode$
5here is 6labor-only6 contracting 3here the person supplying 3orkers to an
employer does not ha.e substantial capital or in.estment in the form of tools'
e?uipment' machineries' 3ork premises' among others' and the 3orkers
recruited and placed by such persons are performing acti.ities 3hich directly
related to the principal business of such employer$ Dn such cases' the person
or intermediary shall be considered merely as an agent of the employer 3ho
shall be responsible to the 3orkers in the same manner and e+tent as if the
latter 3ere directly employed by him$
=age 3B of (2
SA4 M"3#E% C8R2. ;. MAERC "ntegrate. Services) "nc.
FACS!
,)(3orkers fled their complaints against %an Miguel "orporation (%M") and
Maerc Dntegrated %er.ices' Dnc$' for illegal dismissal' underpayment of 3ages
etc$
5he complainants alleged that they 3ere hired by %M" through its agent
MAE" to 3ork inside the %M" premises and in the =hilphos Warehouse
o3ned by MAE"$
5hey 3ashed and segregated .arious kinds of empty bottles used by %M" to
sell and distribute its beer be.erages to the consuming public$
5hey 3ere paid on a per piece or pakiao basis e+cept for a fe3 3ho 3orked as
checkers and 3ere paid on daily 3age basis$
%M" cited its plans to phase out its segregation acti.ities due to the
installation of labor and cost sa.ing de.ices$
When the ser.ice contract 3as terminated' respondents fled a complaint for
illegal dismissal$ $
5he !A rendered a decision holding that MAE" 3as an independent
contractor$
#n appeal' the 0!" ruled that MAE" 3as a labor-only contractor and that
complainants 3ere employees of %M"$
o 5he 0!" also held that 3hether MAE" 3as a 9ob contractor or a
labor-only contractor' %M" 3as still solidarily liable 3ith MAE" for the
latterGs unpaid obligations$
5he "A a@rmed the decision of the 0!"$
"SS#E ! W#0 the complainants are employees of petitioner %M" or of respondent
MAE"$
$E%&! We fnd no basis to o.erturn the "ourt of Appeals and the 0!"$
Eell7establis+e. is t+e 0rinci0le t+at Kn.ings o5 5act o5 /uasi79u.icial
bo.ies) li1e t+e 4%RC) are accor.e. *it+ res0ect) even Knalit,) i5
su00orte. b, substantial evi.ence.
2articularl, *+en 0asse. u0on an. u0+el. b, t+e Court o5 A00eals)
t+e, are bin.ing an. conclusive u0on t+e Su0reme Court an. *ill not
normall, be .isturbe..
Evi.ence .iscloses t+at 0etitioner 0la,e. a large an. in.is0ensable
0art in t+e +iring o5 MAERC:s *or1ers.
=age (0 of (2
Dt also appears that ma9ority of the complainants had already been 3orking
for %M" long before the signing of the ser.ice contract bet3een %M" and
MAE"$
+e 4%RC 5oun. t+at *+en MAERC *as organiJe. into a cor0oration)
SMC gave instructions t+roug+ its su0ervisors to ma1e it a00ear t+at
com0lainants *ere +ire. b, MAERC.
+is *as testiKe. to b, t*o >2? o5 t+e *or1ers *+o *ere segregator
an. 5or1li5t o0erator *+o +a. been *or1ing *it+ SMC un.er a
0ur0orte. contractor since Marc+ 1B7B an. Marc+ 1B=1)
res0ectivel,.
@ot+ *itnesses also testiKe. t+at toget+er *it+ ot+er com0lainants
t+e, continue. *or1ing 5or SMC *it+out brea1 5rom Ao0ar. Services
to MAERC.
As 5or t+e 0a,ment o5 *or1ers: *ages) t+e memoranda of the labor
rates re.eals that %M" assumed the responsibility of paying for the mandated
o.ertime' holiday and rest day pays of the MAE" 3orkers$
%M" also paid the employerGs share of the %%% and Medicare contributions'
the (1th month pay' incenti.e lea.e pay and maternity benefts$
Dn the lump sum recei.ed' MAE" earned a marginal amount representing the
contractors share$ 5hese lend credence that MAE" merely acted as an
agent of %M"$
"n .eci.ing t+e /uestion o5 control' .ie3ed alongside the fndings of the
!abor Arbiter the responsibility of 3atching o.er the MAE" 3orkers by
MAE" personnel became superOuous 3ith the presence of additional
checkers from %M"$
Another are letters by %M" to the MAE" management' the letters named
three (1) 3orkers 3ho 3ere responsible for the re9ection of se.eral bottles
then recommended the penalty to be imposed$
E.idently' these 3orkers 3ere reported by the %M" checkers to the %M"
inspector$ 5hese sho3ed the right of petitioner to recommend disciplinary
measures o.er MAE" employees$
Also' the minutes of the meeting held by the %M" o@cers 3hich discussed to
pass the eye e+amination to be done by %M" EE05 company doctor and a
re.ie3 of compensationEincenti.e system for segregators to impro.e the
segregation acti.ities$
-ut the most telling e.idence is a letter by Pice-=resident of MAE"
addressed to %M" =resident and "hief E+ecuti.e #@cer' asking the latter to
reconsider the phasing out of %M"s segregation acti.ities in Mandaue "ity$
Dn comparison' MAE"' as earlier discussed' displayed the characteristics of a labor-
only contractor$
=age (1 of (2
A@8""O $A#%ERS "4C ;. &"MA2A8" <02 SCRA 271 >2006?
"SS#E! W4A5 D% 54E E88E"5 #8 /E5EMD0D0> D8 A "#M=A0J D% A !A-# #0!J
"#05A"5#$
$E%&!
>enerally' the fndings of fact made by the labor arbiter and the 0!"' as the
specialized agencies presumed to ha.e the e+pertise on matters 3ithin their
respecti.e felds' are accorded much respect and e.en fnality' 3hen supported by
ample e.idence$ 4o3e.er' 3hen the fndings of the labor arbiter and the 0!" are
contrary to the e.idence on record' this "ourt shall lay aside such erroneous
fndings$

=age (2 of (2