G.R. No.

185918: April 18, 2012

LOCKHEED DETECTIVE AND
WATCHMAN AGENCY, INC., Petitioner,
v. UNIVERSITY OF THE PHILIPPINES,
Respondent.
VILLARAMA, JR.,J.:
FACTS:
Petitioner Lockheed Detective and
Watchman Agency, Inc. (Lockheed)
entered into a contract for security
services with respondent University of the
Philippines (UP).
In 1998, several security guards assigned
to UP filed separate complaints against
Lockheed and UP for payment of
underpaid wages, 25% overtime pay,
premium pay for rest days and special
holidays, holiday pay, service incentive
leave pay, night shift differentials, 13th
month pay, refund of cash bond, refund of
deductions for the Mutual Benefits Aids
System (MBAS), unpaid wages from
December 16-31, 1998, and attorneys
fees.
The LA held Lockheed and UP as solidarily
liable to complainants. As the parties did
not appeal the NLRC decision, the same
became final and executory. A writ of
execution was then issued but later
quashed by the Labor Arbiter upon motion
of UP due to disputes regarding the
amount of the award. Later, however, said
order quashing the writ was reversed by
the NLRC.
The NLRC order and resolution having
become final, Lockheed filed a motion for
the issuance of an alias writ of execution
which was subsequently granted. A Notice
of Garnishment was issued to Philippine
National Bank (PNB) UP Diliman Branch for
the satisfaction of the award
UP filed an Urgent Motion to Quash
Garnishment. UP contended that the funds
being subjected to garnishment at PNB are
government/public funds. The Labor
Arbiter, however, dismissed the urgent

motion for lack of merit. UP filed a petition

for certiorari before the CA. The CA held
that although the subject funds do not
constitute public funds, in light of the
ruling in the case of National
Electrification Administration v. Morales
mandates that all money claims against
the government must first be filed with
the Commission on Audit (COA). Hence,
petitioner filed this petition before the SC.
ISSUE: Whether or not the garnishment is
against the funds of UP is valid.
HELD: No.
Political Law Doctrine: It is the COA which
has primary jurisdiction to examine, audit
and settle "all debts and claims of any
sort" due from or owing the Government
or any of its subdivisions, agencies and
instrumentalities, including governmentowned or controlled corporations and their
subsidiaries.
This Court finds that the CA correctly
applied theNEAcase. Like NEA, UP is a
juridical personality separate and distinct
from the government and has the capacity
to sue and be sued. Thus, also like NEA, it
cannot evade execution, and its funds
may be subject to garnishment or levy.
However, before execution may be had, a
claim for payment of the judgment award
must first be filed with the COA.
Under Commonwealth Act No. 327, as
amended by Section 26 of P.D. No. 1445, it
is the COA which has primary jurisdiction
to examine, audit and settle "all debts and
claims of any sort" due from or owing the
Government or any of its subdivisions,
agencies and instrumentalities, including
government-owned or controlled
corporations and their subsidiaries. With
respect to money claims arising from the
implementation of Republic Act No.
6758,their allowance or disallowance is for
COA to decide, subject only to the remedy
of appeal by petition for certiorari to this
Court.

A reading of the pertinent Commonwealth

Act provision clearly shows that it does not
make any distinction as to which of the
government subdivisions, agencies and
instrumentalities, including governmentowned or controlled corporations and their
subsidiaries whose debts should be filed
before the COA.
As to the fait accompli argument of
Lockheed, contrary to its claim that there
is nothing that can be done since the
funds of UP had already been garnished,
since the garnishment was erroneously
carried out and did not go through the
proper procedure (the filing of a claim with
the COA), UP is entitled to reimbursement
of the garnished funds plus interest of 6%
per annum, to be computed from the time
of judicial demand to be reckoned from
the time UP filed a petition for certiorari
before the CA which occurred right after
the withdrawal of the garnished funds
from PNB.
DENIED.

PORTILLO VS. RUDOLF LIETZ, INC. ET AL.

G.R. NO. 196539, OCTOBER 10, 2012

Petition for certiorari assailing the

Resolutionll dated 14 October 2010 of the
Court of Appeals in CA-G.R. SP No. I 065g I
which modified its Decisionl dated 31
March 2009, thus allowing the legal
compensation or petitioner Marietta N.
Portillo's (Portillo) monetary claims against
respondent corporation Rudolf Lietz, Inc.'s
(Lietz Inc.)rll claim for liquidated
damages arising from Portillos alleged
violation of the "Goodwill Clause" in the
employment contract executed by the
parties.
Facts
In a letter agreement dated 3 May 1991,
signed by individual respondent Rudolf
Lietz (Rudolf) and conformed to by Portillo,

the latter was hired by the former under

the following terms and conditions:
A copy of [Lietz Inc.s] work rules and
policies on personnel is enclosed and an
inherent part of the terms and conditions
of employment.
We acknowledge your proposal in your
application specifically to the effect that
you will not engage in any other gainful
employment by yourself or with any other
company either directly or indirectly
without written consent of [Lietz Inc.], and
we hereby accept and henceforth consider
your proposal an undertaking on your
part, a breach of which will render you
liable to [Lietz Inc.] for liquidated
damages.
On her tenth year with Lietz Inc.,
specifically on 1 February 2002, Portillo
was promoted to Sales Representative and
received a corresponding increase in basic
monthly salary and sales quota. In this
regard, Portillo signed another letter
agreement containing a "Goodwill Clause:"
Three years thereafter, on 6 June 2005,
Portillo resigned from Lietz Inc. During her
exit interview, Portillo declared that she
intended to engage in businessa rice
dealership, selling rice in wholesale. On 15
June 2005, Lietz Inc. accepted Portillos
resignation and reminded her of the
"Goodwill Clause" in the last letter
agreement she had signed. Upon receipt
thereof, Portillo jotted a note thereon that
the latest contract she had signed in
February 2004 did not contain any
"Goodwill Clause" referred to by Lietz Inc.
In response thereto, Lietz Inc.
categorically wrote
Please be informed that the standard
prescription of prohibiting employees from
engaging in business or seeking
employment with organizations that
directly or indirectly compete against
[Lietz Inc.] for three (3) years after
resignation remains in effect.

Subsequently, Lietz Inc. learned that

Portillo had been hired by Ed Keller
Philippines, Limited to head its Pharma
Raw Material Department. Ed Keller
Limited is purportedly a direct competitor
of Lietz Inc.
14 September 2005, Portillo filed a
complaint with the National Labor
Relations Commission (NLRC) for nonpayment of 1 months salary two (2)
months commission, 13th month pay, plus
moral, exemplary and actual damages and
attorneys fees. In its position paper, Lietz
Inc. admitted liability for Portillos money
claims in the total amount of P110,662.16.
However, Lietz Inc. raised the defense of
legal compensation: Portillos money
claims should be offset against her liability
to Lietz Inc. for liquidated damages in the
amount of 869,633.09l for Portillos
alleged breach of the "Goodwill Clause" in
the employment contract when she
became employed with Ed Keller
Philippines, Limited.
On 25 May 2007, Labor Arbiter granted
Portillos complaint ordering respondents
Rudolf Lietz, Inc. to pay complainant
Marietta N. Portillo the amount of
Php110,662.16 representing her salary
and commissions, including 13th month
pay.rll
Lietz Inc. filed a petition for certiorari
before the Court of Appeals, alleging
grave abuse of discretion in the labor
tribunals rulings. The CA initially affirmed
the labor tribunals, but on motion for
reconsideration, modified its previous
decision. While upholding the monetary
award in favor of Portillo in the aggregate
sum P110, 662.16, the CA allowed legal
compensation or set-off of such award of
monetary claims by her liability to Lietz
Inc. for liquidated damages arising from
her violation of the Goodwill Clause in
her employment contract with them.
Portillos motion for reconsideration was
denied. Hence, this petition for certiorari
before the SC.
Issue

Whether Portillos money claimes for

unpaid salaries may be offset against Lietz
Inc.s claim for liquidated damages
Ruling
Paragraph 4 of Article 217 of the Labor
Code appears to have caused the reliance
by the Court of Appeals on the "causal
connection between Portillos monetary
claims against respondents and the
latters claim from liquidated damages
against the former."
Art. 217. Jurisdiction of Labor Arbiters and
the Commission.
(a) Except as otherwise provided under
this code, the Arbiters shall have original
and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days
after the submission of the case by the
parties for decision without extension,
even in the absence of stenographic
notes, the following case involving all
workers, whether agricultural or
nonagricultural
4. Claims for actual, moral, exemplary and
other forms of damages arising from the
employer-employee relations;
(Underscoring supplied)
Evidently, the Court of Appeals is
convinced that the claim for liquidated
damages emanates from the "Goodwill
Clause of the employment contract and,
therefore, is a claim for damages arising
from the employeremployee relations.
Singapore Airlines Limited v. Pa, we
established that not all disputes between
an employer and his employee(s) fall
within the jurisdiction of the labor
tribunals. We differentiated between
abandonment per se and the manner and
consequent effects of such abandonment
and ruled that the first, is a labor case,
while the second, is a civil law case.
Stated differently, petitioner seeks
protection under the civil laws and claims
no benefits under the Labor Code. The
primary relief sought is for liquidated

damages for breach of a contractual

obligation. The other items demanded are
not labor benefits demanded by workers
generally taken cognizance of in labor
disputes, such as payment of wages,
overtime compensation or separation pay.
The items claimed are the natural
consequences flowing from breach of an
obligation, intrinsically a civil dispute.
The Court, therefore, believes and so holds
that the "money claims of workers"
referred to in paragraph 3 of Article 217
embraces money claims which arise out of
or in connection with the employeremployee relationship, or some aspect or
incident of such relationship. Put a little
differently, that money claims of workers
which now fall within the original and
exclusive jurisdiction of Labor Arbiters are
those money claims which have some
reasonable causal connection with the
employer-employee relationship.
In Dai-Chi Electronics Manufacturing
Corporation v. Villarama, Jr.,which
reiterated the San Miguel ruling and allied
jurisprudence, we pronounced that a noncompete clause, as in the "Goodwill
Clause" referred to in the present case,
with a stipulation that a violation thereof
makes the employee liable to his former
employer for liquidated damages, refers to
post-employment relations of the parties

That the "Goodwill Clause" in this case is

likewise a postemployment issue should
brook no argument. There is no dispute as
to the cessation of Portillos employment
with Lietz Inc. She simply claims her
unpaid salaries and commissions, which
Lietz Inc. does not contest. At that
juncture, Portillo was no longer an
employee of Lietz Inc. The "Goodwill
Clause" or the "Non-Compete Clause" is a
contractual undertaking effective after the
cessation of the employment relationship
between the parties. In accordance with
jurisprudence, breach of the undertaking
is a civil law dispute, not a labor law case.

It is clear, therefore, that while Portillos

claim for unpaid salaries is a money claim
that arises out of or in connection with an
employer-employee relationship, Lietz
Inc.s claim against Portillo for violation of
the goodwill clause is a money claim
based on an act done after the cessation
of the employment relationship. And, while
the jurisdiction over Portillos claim is
vested in the labor arbiter, the jurisdiction
over Lietz Inc.s claim rests on the regular
courts. Thus:
As it is, petitioner does not ask for any
relief under the Labor Code. It merely
seeks to recover damages based on the
parties' contract of employment as redress
for respondent's breach thereof. Such
cause of action is within the realm of Civil
Law, and jurisdiction over the controversy
belongs to the regular courts. More so
must this be in the present case, what
with the reality that the stipulation refers
to the postemployment relations of the
parties.
The Court of Appeals was misguided. Its
conclusion was incorrect.
There is no causal connection between the
petitioner employees claim for unpaid
wages and the respondent employers
claim for damages for the alleged
"Goodwill Clause" violation. Portillos claim
for unpaid salaries did not have anything
to do with her alleged violation of the
employment contract as, in fact, her
separation from employment is not
"rooted" in the alleged contractual
violation. She resigned from her
employment. She was not dismissed.
Portillos entitlement to the unpaid salaries
is not even contested. Indeed, Lietz Inc.s
argument about legal compensation
necessarily admits that it owes the money
claimed by Portillo.
Indeed, the application of compensation in
this case is effectively barred by Article
113 of the Labor Code which prohibits
wage deductions except in three
circumstances:

ART. 113. Wage Deduction. No employer,

in his own behalf or in behalf of any
person, shall make any deduction from
wages of his employees,
except:chanroblesvirtuallawlibrary
(a) In cases where the worker is insured
with his consent by the employer, and the
deduction is to recompense the employer
for the amount paid by him as premium on
the insurance;
(b) For union dues, in cases where the
right of the worker or his union to checkoff has been recognized by the employer
or authorized in writing by the individual
worker concerned; and
(c) In cases where the employer is
authorized by law or regulations issued by
the Secretary of Labor.
WHEREFORE, the petition is
GRANTED.

. PORTILLO VS. RUDOLF LIETZ, INC. ET

AL. G.R. NO. 196539, OCTOBER 10,
2012
Petition for certiorari assailing the
Resolutionll dated 14 October 2010 of the
Court of Appeals in CA-G.R. SP No. I 065g I
which modified its Decisionl dated 31
March 2009, thus allowing the legal
compensation or petitioner Marietta N.
Portillo's (Portillo) monetary claims against
respondent corporation Rudolf Lietz, Inc.'s
(Lietz Inc.)rll claim for liquidated
damages arising from Portillos alleged
violation of the "Goodwill Clause" in the
employment contract executed by the
parties.
Facts
In a letter agreement dated 3 May 1991,
signed by individual respondent Rudolf
Lietz (Rudolf) and conformed to by Portillo,
the latter was hired by the former under
the following terms and conditions:
A copy of [Lietz Inc.s] work rules and
policies on personnel is enclosed and an
inherent part of the terms and conditions
of employment.
We acknowledge your proposal in your
application specifically to the effect that
you will not engage in any other gainful
employment by yourself or with any other
company either directly or indirectly
without written consent of [Lietz Inc.], and
we hereby accept and henceforth consider
your proposal an undertaking on your
part, a breach of which will render you
liable to [Lietz Inc.] for liquidated
damages.

On her tenth year with Lietz Inc.,

specifically on 1 February 2002, Portillo
was promoted to Sales Representative and
received a corresponding increase in basic
monthly salary and sales quota. In this
regard, Portillo signed another letter
agreement containing a "Goodwill Clause:"
Three years thereafter, on 6 June 2005,
Portillo resigned from Lietz Inc. During her
exit interview, Portillo declared that she
intended to engage in businessa rice
dealership, selling rice in wholesale. On 15
June 2005, Lietz Inc. accepted Portillos
resignation and reminded her of the
"Goodwill Clause" in the last letter
agreement she had signed. Upon receipt
thereof, Portillo jotted a note thereon that
the latest contract she had signed in
February 2004 did not contain any
"Goodwill Clause" referred to by Lietz Inc.
In response thereto, Lietz Inc.
categorically wrote
Please be informed that the standard
prescription of prohibiting employees from
engaging in business or seeking
employment with organizations that
directly or indirectly compete against
[Lietz Inc.] for three (3) years after
resignation remains in effect.
Subsequently, Lietz Inc. learned that
Portillo had been hired by Ed Keller
Philippines, Limited to head its Pharma
Raw Material Department. Ed Keller
Limited is purportedly a direct competitor
of Lietz Inc.
14 September 2005, Portillo filed a
complaint with the National Labor
Relations Commission (NLRC) for nonpayment of 1 months salary two (2)
months commission, 13th month pay, plus
moral, exemplary and actual damages and
attorneys fees. In its position paper, Lietz
Inc. admitted liability for Portillos money
claims in the total amount of P110,662.16.
However, Lietz Inc. raised the defense of
legal compensation: Portillos money
claims should be offset against her liability
to Lietz Inc. for liquidated damages in the
amount of 869,633.09l for Portillos

alleged breach of the "Goodwill Clause" in

the employment contract when she
became employed with Ed Keller
Philippines, Limited.
On 25 May 2007, Labor Arbiter granted
Portillos complaint ordering respondents
Rudolf Lietz, Inc. to pay complainant
Marietta N. Portillo the amount of
Php110,662.16 representing her salary
and commissions, including 13th month
pay.rll
Lietz Inc. filed a petition for certiorari
before the Court of Appeals, alleging
grave abuse of discretion in the labor
tribunals rulings. The CA initially affirmed
the labor tribunals, but on motion for
reconsideration, modified its previous
decision. While upholding the monetary
award in favor of Portillo in the aggregate
sum P110, 662.16, the CA allowed legal
compensation or set-off of such award of
monetary claims by her liability to Lietz
Inc. for liquidated damages arising from
her violation of the Goodwill Clause in
her employment contract with them.
Portillos motion for reconsideration was
denied. Hence, this petition for certiorari
before the SC.
Issue
Whether Portillos money claimes for
unpaid salaries may be offset against Lietz
Inc.s claim for liquidated damages
Ruling
Paragraph 4 of Article 217 of the Labor
Code appears to have caused the reliance
by the Court of Appeals on the "causal
connection between Portillos monetary
claims against respondents and the
latters claim from liquidated damages
against the former."
Art. 217. Jurisdiction of Labor Arbiters and
the Commission.
(a) Except as otherwise provided under
this code, the Arbiters shall have original
and exclusive jurisdiction to hear and
decide, within thirty (30) calendar days

after the submission of the case by the

parties for decision without extension,
even in the absence of stenographic
notes, the following case involving all
workers, whether agricultural or
nonagricultural
4. Claims for actual, moral, exemplary and
other forms of damages arising from the
employer-employee relations;
(Underscoring supplied)
Evidently, the Court of Appeals is
convinced that the claim for liquidated
damages emanates from the "Goodwill
Clause of the employment contract and,
therefore, is a claim for damages arising
from the employeremployee relations.
Singapore Airlines Limited v. Pa, we
established that not all disputes between
an employer and his employee(s) fall
within the jurisdiction of the labor
tribunals. We differentiated between
abandonment per se and the manner and
consequent effects of such abandonment
and ruled that the first, is a labor case,
while the second, is a civil law case.
Stated differently, petitioner seeks
protection under the civil laws and claims
no benefits under the Labor Code. The
primary relief sought is for liquidated
damages for breach of a contractual
obligation. The other items demanded are
not labor benefits demanded by workers
generally taken cognizance of in labor
disputes, such as payment of wages,
overtime compensation or separation pay.
The items claimed are the natural
consequences flowing from breach of an
obligation, intrinsically a civil dispute.
The Court, therefore, believes and so holds
that the "money claims of workers"
referred to in paragraph 3 of Article 217
embraces money claims which arise out of
or in connection with the employeremployee relationship, or some aspect or
incident of such relationship. Put a little
differently, that money claims of workers
which now fall within the original and
exclusive jurisdiction of Labor Arbiters are

those money claims which have some

reasonable causal connection with the
employer-employee relationship.
In Dai-Chi Electronics Manufacturing
Corporation v. Villarama, Jr.,which
reiterated the San Miguel ruling and allied
jurisprudence, we pronounced that a noncompete clause, as in the "Goodwill
Clause" referred to in the present case,
with a stipulation that a violation thereof
makes the employee liable to his former
employer for liquidated damages, refers to
post-employment relations of the parties

That the "Goodwill Clause" in this case is

likewise a postemployment issue should
brook no argument. There is no dispute as
to the cessation of Portillos employment
with Lietz Inc. She simply claims her
unpaid salaries and commissions, which
Lietz Inc. does not contest. At that
juncture, Portillo was no longer an
employee of Lietz Inc. The "Goodwill
Clause" or the "Non-Compete Clause" is a
contractual undertaking effective after the
cessation of the employment relationship
between the parties. In accordance with
jurisprudence, breach of the undertaking
is a civil law dispute, not a labor law case.
It is clear, therefore, that while Portillos
claim for unpaid salaries is a money claim
that arises out of or in connection with an
employer-employee relationship, Lietz
Inc.s claim against Portillo for violation of
the goodwill clause is a money claim
based on an act done after the cessation
of the employment relationship. And, while
the jurisdiction over Portillos claim is
vested in the labor arbiter, the jurisdiction
over Lietz Inc.s claim rests on the regular
courts. Thus:
As it is, petitioner does not ask for any
relief under the Labor Code. It merely
seeks to recover damages based on the
parties' contract of employment as redress
for respondent's breach thereof. Such
cause of action is within the realm of Civil
Law, and jurisdiction over the controversy

belongs to the regular courts. More so

must this be in the present case, what
with the reality that the stipulation refers
to the postemployment relations of the
parties.
The Court of Appeals was misguided. Its
conclusion was incorrect.
There is no causal connection between the
petitioner employees claim for unpaid
wages and the respondent employers
claim for damages for the alleged
"Goodwill Clause" violation. Portillos claim
for unpaid salaries did not have anything
to do with her alleged violation of the
employment contract as, in fact, her
separation from employment is not
"rooted" in the alleged contractual
violation. She resigned from her
employment. She was not dismissed.
Portillos entitlement to the unpaid salaries
is not even contested. Indeed, Lietz Inc.s
argument about legal compensation
necessarily admits that it owes the money
claimed by Portillo.
Indeed, the application of compensation in
this case is effectively barred by Article
113 of the Labor Code which prohibits
wage deductions except in three
circumstances:
ART. 113. Wage Deduction. No employer,
in his own behalf or in behalf of any
person, shall make any deduction from
wages of his employees,
except:chanroblesvirtuallawlibrary
(a) In cases where the worker is insured
with his consent by the employer, and the
deduction is to recompense the employer
for the amount paid by him as premium on
the insurance;
(b) For union dues, in cases where the
right of the worker or his union to checkoff has been recognized by the employer
or authorized in writing by the individual
worker concerned; and
(c) In cases where the employer is
authorized by law or regulations issued by
the Secretary of Labor.

WHEREFORE, the petition is GRANTED.

Building Care Corp. vs. Macaraeg, G.R. No.
198357, December 10, 2012
Petitioners are in the business of providing security
services to their clients. They hired respondent as a
security guard beginning August 25, 1996, assigning
her at Genato Building in Caloocan City. However,
on March 9, 2008, respondent was relieved of her
post. She was re-assigned to Bayview Park Hotel
from March 9-13, 2008, but after said period, she was
allegedly no longer given any assignment. Thus, on
September 9, 2008, respondent filed a complaint
against
petitioners
for
illegal
dismissal,
underpayment of salaries, non-payment of separation
pay and refund of cash bond. Conciliation and
mediation proceedings failed, so the parties
were ordered to submit their respective position
papers.
Respondent claimed that petitioners failed to give her
an assignment for more than nine months, amounting
to constructive dismissal, and this compelled her to
file the complaint for illegal dismissal.
On the other hand, petitioners that respondent was
relieved from her post as requested by the client
because of her habitual tardiness, persistent
borrowing of money from employees and tenants of
the client, and sleeping on the job. Respondent filed a
complaint for illegal dismissal with the Labor Arbiter.
The Labor Arbiter (LA) in favor of petitioners,
holding that the dismissal of Macaraeg was valid, but
ordered the former to pay a certain sum as financial
assistance. The Appeal which respondent filed with
the NLRC was for having been filed out of time.
Hence, NLRC declared that the LA's Decision had
become final and executory on June 16, 2009.
Respondent elevated the case to the CA via a petition
for certiorari. The CA reversed and set aside the
decision of NLRC and declared Macaraeg to have
been illegally dismissed. Petitioners were ordered to
reinstate petitioner without loss of seniority rights,
benefits and privileges; and to pay her backwages
and other monetary benefits during the period of
her illegal dismissal up to actual reinstatement.
Petitioners' motion for reconsideration was denied.
Hence, the present petition.
ISSUE:

Whether the CA erred in liberally applying the rules

of procedure and ruling that respondent's appeal
should be allowed and resolved on the merits despite
having been filed out of time.
RULING:
The Court cannot sustain the CA's Decision. It should
be emphasized that the resort to a liberal application,
or suspension of the application of procedural rules,
must remain as the exception to the well-settled
principle that rules must be complied with for the
orderly administration of justice. In Marohomsalic v.
Cole, the Court stated: While procedural rules may be
relaxed in the interest of justice, it is well-settled that these are
tools designed to facilitate the adjudication of cases. The
relaxation of procedural rules in the interest of justice was never
intended to be a license for erring litigants to violate
the rules with impunity. Liberality in the
interpretation and application of the rules can be invoked
only in proper cases and under justifiable causes and
circumstances. While litigation is not a game of technicalities,
every case must be prosecuted in accordance with the prescribed
procedure to ensure an orderly and speedy administration of
justice.
The later case of Daikoku Electronics Phils., Inc.
v. Raza, further explained that:
To be sure, the relaxation of procedural rules cannot be made
without any valid reasons proffered for or underpinning it. To
merit liberality, petitioner must show reasonable cause justifying
its non-compliance with the rules and must convince the Court
that the outright dismissal of the petition would defeat the
administration of substantial justice. x x x The desired leniency
cannot be accorded absent valid and compelling reasons for such
a procedural lapse. x x x
In this case, the justifications given by the CA for its
liberality by choosing to overlook the belated filing
of the appeal are, the importance of the issue raised,
i.e., whether respondent was illegally dismissed; and
the belief that respondent should be "afforded the
amplest opportunity for the proper and just
determination of his cause, free from the constraints
of technicalities," considering that the belated filing
of respondent's appeal before the NLRC was the fault
of respondent's former counsel. Note, however, that neither
respondent nor her former counsel gave any explanation or
reason citing extraordinary circumstances for her
lawyer's failure to abide by the rules for filing an
appeal. Respondent merely insisted that she had not
been remiss in following up her case with said
lawyer. It is, however, an oft-repeated ruling that

the negligence and mistakes of counsel bind the

client. A departure from this rule would bring
about never-ending suits, so long as lawyers could
allege their own fault or negligence to support
the clients case and obtain remedies and reliefs
already lost by the operation of law.
It should also be borne in mind that the right of the
winning party to enjoy the finality of the resolution of
the case is also an essential part of public policy and
the orderly administration of justice. Hence, such
right is just as weighty or equally important as the
right of the losing party to appeal or seek
reconsideration within the prescribed period.
When the Labor Arbiter's Decision became final,
petitioners attained a vested right to said judgment.

month after the purported commencement of his

employment
was
a
patent
nullity.

G.R. Nos. 178034 & 178117/G.R. Nos. 186984-85 :

OCTOBER
17,
2013
ANDREW JAMES MCBURNIE, Petitioner, v.
EULALIO GANZON, EGI-MANAGERS, INC.
and
E.
GANZON,
INC.,
Respondents.
REYES,

J.:

FACTS:
On October 4, 2002, Andrew James McBurnie
(McBurnie), an Australian national, instituted a
complaint for illegal dismissal and other monetary
claims against Eulalio Ganzon, EGI-Managers, Inc.,
and E. Ganzon, Inc., (respondents). McBurnie
claimed that on May 11, 1999, he signed a 5-year
employment agreement with the company EGI as an
Executive Vice-President who shall oversee the
management of the company hotels and resorts
within the Philippines. He performed work for the
company until sometime in November 1999, when he
figured in an accident that compelled him to go back
to Australia while recuperating from his injuries.
While in Australia, he was informed by respondent
Ganzon that his services were no longer needed
because their intended project would no longer push
through.
The respondents contend that their agreement with
McBurnie was to jointly invest in and establish a
company for the management of the hotels. They did
not intend to create an employer-employee
relationship, and the execution of the employment
contract that was being invoked by McBurnie was
solely for the purpose of allowing McBurnie to
obtain an alien work permit in the Philippines, and
that McBurnie had not obtained a work permit.
On September 30, 2004, the Labor Arbiter (LA)
declared McBurnie as having been illegally
dismissed from employment. The respondents filed
their Memorandum of Appeal and Motion to Reduce
Bond, and posted an appeal bond in the amount of
P100,000.00. They claimed that an award of more
than P60 Million Pesos to a single foreigner who had
no work permit and who left the country for good one

On March 31, 2005, the NLRC denied the motion to

reduce bond explaining that in cases involving
monetary award, an employer seeking to appeal the
LA decision to the Commission is unconditionally
required by Art. 223, Labor Code to post bond
equivalent
to
the
monetary
award.
The motion for reconsideration was denied, the
respondents appealed to the CA via a Petition for
Certiorari and Prohibition (with extremely urgent
prayer for the issuance of a Preliminary Injunction
and/or Temporary Restraining Order) docketed as
CA-G.R.
SP
No.
90845.
The NLRC dismissed their appeal due to respondent's
failure to post the required additional bond. The
respondents motion for reconsideration was denied
on June 30, 2006. This prompted respondents to filed
with the CA the Petition for Certiorari docketed as
CA-G.R SP No. 95916, which was later consolidated
with
CA-G.R.
SP
No.
90845
The CA granted the respondent's application for a
writ of preliminary injunction on February 16, 2007.
It directed the NLRC, McBurnie, and all persons
acting for and under their authority to refrain from
causing the execution and enforcement of the LA
decision in favor of McBurnie, conditioned upon the
respondents posting of a bond in the amount of
P10,000,000.00. The reconsideration of issuance of
the writ of preliminary injunction sought by
McBurnie
was
denied
by
the
CA.
McBurnie filed with the Supreme Court a Petition for
Review on Certiorari (G.R. Nos. 178034 and 178117)
assailing the CA resolutions that granted the
respondent's; application for the injunctive writ. On
July 4, 2007, the Court denied the petition. A motion
for reconsideration was denied with a finality on
October
7,
2007.
McBurnie filed a Motion for Leave (1) To File
Supplemental Motion for Reconsideration and (2) to
Admit the Attached Supplemental Motion for
Reconsideration, a prohibited pleading under Section
2, Rule 56 of the Rules of Court. Thus, the motion for
leave was denied by the Court and the July 4, 2007
became final and executor on November 13, 2007.

On October 27, 2008, the CA ruled on the merits of

CA-G.R. SP No. 90845 and CA-G.R. SP No. 95916
and rendered a decision allowing the respondent's
motion to reduce appeal bond and directing the
NLRC to give due course to their appeal. The CA
also ruled that the NLRC committed grave abuse of
discretion in immediately denying the motion without
fixing an appeal bond in an amount that was
reasonable, as it denied the respondents of their right
to appeal from the decision of the LA.
McBurnie filed a motion for reconsideration. The
respondents moved that the appeal be resolved on the
merits by the CA. The CA denied both motions.
McBurnie then filed with the Supreme Court the
Petition for Review on Certiorari (G.R. Nos. 18698485)
The NLRC, acting on the CA order of remand,
accepted the appeal from the LA decision and
reversed and set aside the decision of the LA, and
entered a new on dismissing McBurnie complaint.
On September 18, 2009, the third division of this
court rendered its decision granting respondents
motion to reduce appeal bond. This Court also
reinstated and affirmed the NLRC decision
dismissing respondent's appeal for failure to perfect
an appeal and denying their motion for
reconsideration. The aforementioned decision
became final and executor on March 14, 2012.
The respondents filed a Motion for Leave to File
Attached Third Motion for Reconsideration, with an
attached Motion for Reconsideration with Motion to
Refer These Cases to the Honorable Court En Banc.
The Court En Banc accepted the case from the third
division and issued a temporary restraining order
(TRO) enjoining the implementation of the LA
Decision. McBurnie filed a Motion for
Reconsideration where he invoked that the Court
September 18, 2009 decision had become final and
executor.
ISSUE:
Whether or not McBurnie was illegally dismissed?
HELD:
There was no employer-employee relationship.

LABOR LAW: employment permit for nonresident aliens; illegal dismissal

Considering that McBurnie, an Australian,
alleged illegal dismissal and sought to
claim under our labor laws, it was
necessary for him to establish, first and
foremost, that he was qualified and duly
authorized to obtain employment within
our jurisdiction.A requirement for
foreigners who intend to work within the
country is an employment permit, as
provided under Article 40, Title II of the
Labor Code.
In WPP Marketing Communications, Inc. v.
Galera, we held that a foreign national
failure to seek an employment permit prior
to employment poses a serious problem in
seeking relief from the Court.
Clearly, this circumstance on the failure of
McBurnie to obtain an employment permit,
by itself, necessitates the dismissal of his
labor complaint.
McBurnie failed to present any
employment permit which would have
authorized him to obtain employment in
the Philippines.This circumstance negates
McBurnie claim that he had been
performing work for the respondents by
virtue of an employer-employee
relationship.The absence of the
employment permit instead bolsters the
claim that the supposed employment of
McBurnie was merely simulated, or did not
ensue due to the non-fulfillment of the
conditions that were set forth in the letter
of May 11, 1999.
McBurnie failed to present other
competent evidence to prove his claim of
an employer-employee relationship. iven
the partiesconflicting claims on their true
intention in executing the agreement, it
was necessary to resort to the established
criteria for the determination of an
employer-employee relationship, namely:
(1) the selection and engagement of the
employee; (2) the payment of wages; (3)

the power of dismissal; and (4) the power

to control the employee conduct. The rule
of thumb remains: the onus probandi falls
on the claimant to establish or
substantiate the claim by the requisite
quantum of evidence.Whoever claims
entitlement to the benefits provided by
law should establish his or her right
thereto. McBurnie failed in this regard.As
previously observed by the NLRC,
McBurnie even failed to show through any
document such as payslips or vouchers
that his salaries during the time that he
allegedly worked for the respondents were
paid by the company. In the absence of an
employer-employee relationship between
McBurnie and the respondents, McBurnie
could not successfully claim that he was
dismissed, much less illegally dismissed,
by the latter.Even granting that there was
such an employer-employee relationship,
the records are barren of any document
showing that its termination was by the
respondentsdismissal of McBurnie.
The motion for reconsideration filed
on September 26, 2012 by petitioner
Andrew James McBurnie is DENIED.
The motion for reconsideration filed
on March 27, 2012 by respondents
Eulalio Ganzon, EGI-Managers, Inc.
and E. Ganzon, Inc. is GRANTED.

INDOPHIL TEXTILE MILLS, INC.,v. ENGR.

SALVADOR ADVIENTO. G.R. No. 171212, 20
August 2014,
THIRD DIVISION, (Peralta, J.)
Regular courts have jurisdiction over the
negligent act of an employerwho failed to
provide a safe and healthy working
environment. The Court formulated the
reasonable causal connection rule,
wherein if there is a reasonable causal
connection between the claim asserted
and the employer-employee relations,
then the case is within the jurisdiction of
the labor courts; and in the absence
thereof, it is the regular courts that have
jurisdiction.
Engr. Salvador Adviento was hired by
Indophil Textile Mills, Inc. (Indophil) to
maintain its thread manufacturing
business in Bulacan. Adviento alleged that
there were no adequate safety measures
introduced by Indophil when he conducted
a maintenance check on the dye house
area.The workplace is very hot and emits
foul chemical odor. According to Adviento,
the air washer dampers and all roof
exhaust vests are blown into open air,
carrying dust thereto. He recommended to
management to place roof insulation but
such was turned down by management
due to high cost. Twelve years later,

Adviento experienced weakness and

dizziness, and was thereafter diagnosed
with Chronic Poly Sinusitis and Allergic
Rhinitis.
Adviento filed a complaint with the
Regional Trial Court, alleging that he
contracted such occupational disease by
reason of the gross negligence of
petitioner to provide him with a safe,
healthy and workable environment.
Indophil argued that the RTC has no
jurisdiction over the subject matter of the
complaint because the same falls under
the original and exclusive jurisdiction of
the Labor Arbiter.RTC sustained its
jurisdiction on the ground that the case is
a quasi-delict, that Indophil's failure to
provide its employees with a safe, healthy
and workable environment is an act of
negligence.
ISSUE: Does RTC have jurisdiction over a
negligent employerwhofailed to provide a
safe and healthy working environment?
RULING:
Yes, the jurisdiction rests on the regular
courts.According to the Court, not all
claims involving employees can be
resolved solely by labor courts, specifically
when the law provides otherwise.
The Court formulated the reasonable
causal connection rule, wherein if there is
a reasonable causal connection between
the claim asserted and the employeremployee relations, then the case is within
the jurisdiction of the labor courts; and in
the absence thereof, it is the regular
courts that have jurisdiction. UST Law
Review, Vol. LIX, No. 1, May 2015 In the
case at bar, Adviento's claim for damages
is specifically grounded on Indophil's gross
negligence to provide a safe, healthy and
workable environment for its employees
a case of quasi-delict. The Court
ascertained this from reading the
complaint, which enumerated the acts
and/or omissions of Indophil relative to the
conditions in the workplace.

It is a basic tenet that jurisdiction over the

subject matter is determined upon the
allegations made in the complaint,
irrespective of whether or not the plaintiff
is entitled to recover upon the claim
asserted therein, which is a matter
resolved only after and as a result of a
trial.Neither can jurisdiction of a court be
made to depend upon the defenses made
by a defendant in his answer or motion to
dismiss. In this case, a perusal of the
complaint would reveal that the subject
matter is one of claim for damages arising
from quasi-delict, which is within the
ambit of the regular court's jurisdiction.
Adviento alleges that due to the continued
and prolonged exposure to textile dust
seriously inimical to his health, he suffered
work-contracted disease which is now
irreversible and incurable, and deprived
him of job opportunities.Clearly, injury and
damages were allegedly suffered by
respondent, an element of quasi-delict.
It also bears stressing that respondent is
not praying for any relief under the Labor
Code of the Philippines. He neither claims
for reinstatement nor backwages or
separation pay resulting from an illegal
termination. The cause of action herein
pertains to the consequence of
petitioners omission which led to a workrelated disease suffered by respondent,
causing harm or damage to his person.
Such cause of action is within the realm of
Civil Law, and jurisdiction over the
controversy belongs to the regular courts.
Where the resolution of the dispute
requires expertise, not in labor
management relations nor in wage
structures and other terms and conditions
of employment, but rather in the
application of the general civil law, such
claim falls outside the area of competence
of expertise ordinarily ascribed to the LA
and the NLRC.The RTC has jurisdiction
over the subject matter of respondents
complaint praying for moral damages,
exemplary damages, compensatory
damages, anchored on petitioners alleged

gross negligence in failing to provide a

safe and healthy working environment for
respondent.

domestic corporation which operated a

mining claim in Placer, Surigao del Norte,
2.
In compliance with existing
environmental laws, petitioner maintained
a tailing pond, a tailings containment
facility required for the storage of waste
materials generated by its mining
operations. When the mine tailings being
pumped into the tailing pond reached the
maximum level in, petitioner temporarily
shut down its mining operations pending
approval of its application to increase said
faciltys capacity by the Department of
Environment and Natural ResourcesEnvironment Management Bureau (DENREMB).
3.
Although the DENR-EMB issued a
temporary authority for it to be able to
continue operating the tailing pond for
another six (6) months and to increase its
capacity, petitioner failed to secure an
extension permit when said temporary
authority eventually lapsed.
4.
Petitioner served a notice,
informing its employees and the
Department of Labor and Employment
Regional Office No. XII (DOLE) of the
temporary suspension of its operations for
six months and the temporary lay-off of
two-thirds of its employees. After the lapse
of said period, petitioner notified the DOLE
that it was extending the temporary
shutdown of its operations for another six
months.

MANILA MINING CORPORATION,

Petitioner,
vs.
LOWITO AMOR, ET. AL., Respondents.
[G.R. No. 182800; April 20, 2015 ]
FACTS: (chronological order)
1.
Respondents Lowito Amor, Rollybie
Ceredon, Julius Cesar, Ronito Martinez and
Fermin Tabili, Jr. were regular employees of
petitioner Manila Mining Corporation, a

5.
Adversely affected by petitioners
continued failure to resume its operations,
respondents filed the complaint for
constructive dismissal and monetary
claims before the Regional Arbitration
Branch of the National Labor Relations
Commission (NLRC).
6.
Executive Labor Arbiter Benjamin
E. Pelaez held petitioner liable for
constructive dismissal in view of the
suspension of its operations beyond the
six-month period allowed under Article
2867 of the Labor Code of the Philippines finding that the cause of suspension of

petitioners business was not beyond its

control. The labor arbiter awarded, among
others, separation pay to respondents.
7.
The NLRC reversed the appealed
decision. Finding that the continued
suspension of petitioners operations was
due to circumstances beyond its control,
the NLRC ruled that, under Article 283 of
the Labor Code, respondents were not
even entitled to separation pay
considering the eventual closure of their
employers business due to serious
business losses or financial reverses.
8.
Respondents filed the Rule 65
petition for certiorari before the CA. Aside
from the fact that the Labor Arbiter
decision had already attained finality,
respondents faulted the NLRC for applying
Article 283 of the Labor Code absent
allegation and proof of compliance with
the requirements for the closure of an
employers business due to serious
business losses. On the other hand,
petitioner insist that the cessation of its
operations was due to causes beyond its
control, petitioner argued that the
subsequent closure of its business due to
business losses exempted it from paying
separation pay.
9.
The CA rendered the herein
assailed decision, granting respondents
petition and decreed that the Labor
Arbiters Decision had already attained
finality and, for said reason, had been
placed beyond the NLRCs power of
review.
10.
Petitioner seeks the reversal of the
CAs resolution.
ISSUE(S): Whether or not petitioners
cessation of its operations was due to
causes beyond its control, hence, the
closure of its business due to business
losses exempted it from paying separation
pay.
HELD: NO. Closure of petitioners business
was not beyond its control. Petitioner is
liable for separation pay to respondents.

RATIO:
Without necessarily resulting to a
termination of employment, an employer
may at any rate, bona fide suspend the
operation of its business for a period of
not exceeding six months under Article
286 of the Labor Code.43 While the
employer is, on the one hand, duty bound
to reinstate his employees to their former
positions without loss of seniority rights if
the operation of the business is resumed
within six months, employment is deemed
terminated where the suspension exceeds
said period.44
Not having resumed its operations within
six months from the time it suspended its
operations on 27 July 2001, it necessarily
follows that petitioner is liable to pay
respondents separation pay45 computed
at one (1) month pay or at least one-half
(1/2) month pay for every year of service,
whichever is higher,46 as well as the
damages and attorneys fees adjudicated
by the Labor Arbiter. Without proof of the
serious business losses it allegedly
sustained and/or compliance with the
reportorial requirements under Article 283
of the Labor Code, petitioner cannot
expediently plead exemption from said
liabilities due to the supposed financial
reverses which led to the eventual closure
of its business.
It is essentially required that the alleged
losses in business operations must be
proven for, otherwise, said ground for
termination would be susceptible to abuse
by scheming employers who might be
merely feigning business losses or
reverses in their business ventures in
order to ease out employees.47 The
condition of business losses justifying
retrenchment is normally shown by
audited financial documents like yearly
balance sheets and profit and loss
statements as well as annual income tax
returns48 which were not presented in this
case.
Neither can petitioner evade said liabilities
on the strength of the 28 July 2005

Decision rendered by the CA's TwentySecond Division in CAG.R. SP No. 00072,

entitled Rosita Asumen, et al. v. National
Labor Relations Commission, et al., where
its employees' claim for separation pay
was denied on account of the subsequent
closure of its business due to serious
business losses and financial reverses.49
Although the employees Rule 45 petition
for review on certiorari had been,50 the
ruling in said case can hardly be
considered binding on respondents who
were not parties thereto.
As for the inequality in benefits which
would supposedly result if the CA's
assailed decision and resolution were not
reversed, suffice it to say that this Court
had sustained the claim for separation
pay of petitioner's employees in the case
of Manila Mining Corp Employees
Association-Federation of Free Workers
Chapter, et al. v. Manila Mining
Corporation, et al.51 Stare decisis is
inapplicable; the matter of separation pay
for petitioner's employees has been
decided case to case.

[G.R. No. 206612. August 17, 2015.]

TOYOTA ALABANG, INC., petitioner,
vs. EDWIN GAMES, respondent.
FACTS:
Games worked as a foreman for Toyota
Alabang. He was dismissed by the
petitioner for allegedly stealing vehicle
lubricants and charged him with Qualified
theft before the trial Court. Two years
later, Games filed a Complainant for illegal
dismissal, nonpayment of benefits, and
damages against petitioner. Petitioner
failed to file its position paper and they
alleged that the failure was due to the fact
that their lawyer is no longer connected
with the company. Despite repeated
rescheduling of the hearings, Toyota still
failed to appear hence the case was
submitted for decision.
The Labor Arbiter ruled in favor of Games
and Toyota did not file an MR so it became
final and executory. LA issued a writ of
execution so Toyota filed a Motion to
Quash and petitioned for the re-opening of
the case. Toyota alleged that their failure
to file the pleading was due to the
negligence of their lawyer. These were
denied by the LA hence they appealed the
case to the NLRC.
NLRC dismissed the case citing that the LA
decision is now final and executor. Toyota
filed an appeal to the CA but was
dismissed due to their failure to comply
with the bond requirements and that the

decision is no longer appealable. Toyota

then filed for Certiorari with the SC but
was denied in an SC Resolution. They then
filed this MR.
ISSUE: WON posting a bond is
required to perfect the appeal in this
case.

a monetary award, as in this case,14 that

ruling can only be appealed after the
employer posts a bond. The purpose of
the bond is to ensure that the employee
has properties on which he or she can
execute upon in the event of a final,
providential award. PETITION DENIED.

RULING:
The decision that petitioner illegally
dismissed respondent was already final
and executory because of petitioner's
failure to file a timely appeal. Petitioner
itself was negligent in advancing its case
and failed to exhibit diligence when it did
not attend the hearings. the Court finds
that the CA justly refused to reopen the
case in the former's favor. Definitely,
petitioner cannot now be allowed to claim
denial of due process when it was
petitioner who was less than vigilant of its
rights. No appeal may be taken from an
order of execution of a final and executory
judgment. After all, just as a losing party
has the right to file an appeal within the
prescribed period, so does the winning
party have the correlative right to enjoy
the finality of the resolution of the case.
An appeal is not a matter of right, but is a
mere statutory privilege.

Social Security System vs. Ubana,

GR No. 200114, Aug 25, 2015
Facts:

The bond is required to perfect an appeal.

Article223 of the Labor Code and Section
6, Rule VI of the 2011 NLRC Rules of
Procedure, uniformly state that In case
the decision of the Labor Arbiter or the
Regional Director involves a monetary
award, an appeal by the employer may be
perfected only upon the posting of a bond,
which shall either be in the form of cash
deposit or surety bond equivalent in
amount to the monetary award, exclusive
of damages and attorney's fees. These
rules generally state that in case the
ruling of the LA involves a monetary
award, an employer's appeal may be
perfected only upon the posting of a bond.
Therefore, absent any qualifying terms,13
so long as the decision of the LA involves

On December 26, 2002, respondent

Debbie Ubana filed a civil case for
damages against the DBP Service
Corporation, petitioner Social Security
System (SSS), and the SSS Retirees
Association5 before the RTC of Daet,
Camarines Norte.
The case was
docketed as Civil Case No. 7304 and
assigned to RTC Branch 39.
In her Complaint,6 respondent alleged
that in July 1995, she applied for
employment
with
the
petitioner.
However,
after
passing
the
examinations and accomplishing all the
requirements for employment, she was
instead
referred
to
DBP
Service

Corporation
for
"transitory
employment." She took the preemployment examination given by DBP
Service Corporation and passed the
same. On May 20, 1996, she was told to
report for training to SSS, Naga City
branch, for immediate deployment to
SSS Daet branch. On May 28, 1996, she
was made to sign a six-month Service
Contract Agreement.
After that respondent worked for SSS for
6 years, occupying several positions
during this time period. Respondent
claims she was not properly paid by
petitioner and because of the oppressive
and prejudicial treatment by SSS, she
was forced to resign on August 26, 2002
as she could no longer stand being
exploited, the agony of dissatisfaction,
anxiety, demoralization, and injustice.
She asserted that she dedicated six
years of her precious time faithfully
serving SSS, foregoing more satisfying
employment elsewhere, yet she was
merely exploited and given empty and
false
promises;
that
defendants
conspired to exploit her and violate civil
service laws and regulations and Civil
Code provisions on Human Relations,
particularly Articles 19, 20, and 21.8 As
a result, she suffered actual losses by
way of unrealized income, moral and
exemplary damages, attorney's fees and
litigation expenses.
On October 1, 2003, the RTC issued an
Order10
dismissing
respondent's
complaint for lack of jurisdiction, stating
that her claim for damages "has a
reasonable causal connection with her
employer-employee relations with the
defendants" and so should fall under the
labor arbiter of the NLRC. Respondents
filed a motion for reconsideration and
said motion was granted. The RTC
stated:
Section 2(1), Art. K-B, 1987 Constitution,
expressly provides that "the civil service

embraces all branches, subdivisions,

instrumentalities, and agencies of the
government,
including
governmentowned or controlled corporation[s] with
original charters." Corporations with
original charters are those which have
been created by special law[s] and not
through the general corporation law. In
contrast, labor law claims against
government-owned
and
controlled
corporations without original charters
fall within the jurisdiction of the
Department of Labor and Employment
and not the Civil Service Commission.
(Light Rail Transit Authority vs. Perfecto
Venus, March 24, 2006.)
Having been created under an original
charter, RA No. 1161 as amended by
R.A. 8282, otherwise known as the
Social Security Act of 1997, the SSS is
governed by the provision[s] of the Civil
Service Commission. However, since the
SSS denied the existence of an
employer-employee relationship, and
the case is one for Damages, it is not
the Civil Service Commission that has
jurisdiction to try the case, but the
regular courts.
A perusal of the Complaint filed by the
plaintiff against the defendant SSS
clearly shows that the case is one for
Damages.
The RTC then ordered the case
reinstated in the docket of active civil
cases.
Petitioned
filed
a
motion
for
reconsideration
but
was
denied.
Petitioner was also denied upon appeal
to the CA.
Issue:
Whether the trial court had jurisdiction
over the case or if it was one that should
be filed with the labor arbiter.
Ruling:

The trial court had jurisdiction over the

case, it being one for damages.
In
her
Complaint,
respondent
acknowledges
that
she
is
not
petitioner's employee, but that precisely
she was promised that she would be
absorbed into the SSS plantilla after all
her years of service with SSS; and that
as SSS Processor, she was paid only
P229.00 daily or P5,038.00 monthly,
while a regular SSS Processor receives a
monthly salary of P18,622.00, or
P846.45 daily wage. In its pleadings,
petitioner denied the existence of an
employer-employee
relationship
between it and respondent; in fact, it
insists on the validity of its service
agreements
with
DBP
Service
Corporation
and
SSS
Retirees
Association - meaning that the latter,
and not SSS, are respondent's true
employers. Since both parties admit that
there is no employment relation
between them, then there is no dispute
cognizable
by
the
NLRC.
Thus,
respondent's case is premised on the
claim that in paying her only P229.00
daily - or P5,038.00 monthly - as against
a monthly salary of P18,622.00, or
P846.45 daily wage, paid to a regular
SSS Processor at the time, petitioner
exploited her, treated her unfairly, and
unjustly enriched itself at her expense.
For Article 217 of the Labor Code to
apply, and in order for the Labor Arbiter
to acquire jurisdiction over a dispute,
there must be an employer-employee
relation between the parties thereto x x
x It is well settled in law and
jurisprudence that where no employeremployee relationship exists between
the parties and no issue is involved
which may be resolved by reference to
the Labor Code, other labor statutes or
any collective bargaining agreement, it
is the Regional Trial Court that has
jurisdiction, x x x The action is within the

realm of civil law hence jurisdiction over

the case belongs to the regular courts.
While the resolution of the issue
involves the application of labor laws,
reference to the labor code was only for
the determination of the solidary liability
of the petitioner to the respondent
where no employer-employee relation
exists. Article 217 of the Labor Code as
amended vests upon the labor arbiters
exclusive original jurisdiction only over
the following.
1. Unfair labor practices;
2. Termination disputes;
3. If accompanied with a claim for
reinstatement, those cases that workers
may file involving wages, rates of pay,
hours of work and other terms and
conditions of employment;
4. Claims for actual, moral, exemplary
and other forms of damages arising
from employer-employee relations;
5. Cases arising from any violation of
Article 264 of this Code, including
questions involving legality of strikes
and lockouts; and
6.
Except
claims
for
Employees
Compensation, Social Security, Medicare
and maternity benefits, all other claims,
arising
from
employeremployee
relations, including those of persons in
domestic or household service, involving
an amount exceeding five thousand
pesos (P5,000.00) regardless of whether
accompanied
with
a
claim
for
reinstatement.
In all these cases, an employeremployee
relationship
is
an
indispensable jurisdictional requisite x x
x.26
Since there is no employer-employee
relationship between the parties herein,
then there is no labor dispute cognizable
by the Labor Arbiters or the NLRC.

There being no employer-employee

relation or any other definite or direct
contract
between
respondent
and
petitioner, the latter being responsible
to the former only for the proper
payment of wages, respondent is thus
justified in filing a case against
petitioner, based on Articles 19 and 20
of the Civil Code, to recover the proper
salary due her as SSS Processor.

QUANTUM FOODS, INC., petitioner,

vs. MARCELINO ESLOYO AND GLEN
MAGSILA, respondents.
FACTS:
Petitioner Quantum Foods, Inc.
is a
domestic corporation engaged in the
distribution and selling of food products
nationwide. It hired Esloyo as Major
Accounts Representative and later on
promoted to the position of Regional
Sales
Manager
for
Visayas
and
Mindanao. On the other hand, it hired
Magsila as Key Accounts Representative
for the Panay Area.
Quantum decided to reorganize its sales
force nationwide following a drastic drop
in its net income, and Magsila was
among those retrenched. However,
Magsilas final pay and other benefits
were not release due to alleged
discovery
of
unauthorized/undocumented
deductions, which he purportedly failed
to explain.
Esloyo was terminated from work on the
ground of loss of trust and confidence
due to his numerous violations of the
company rules and regulations.

Aggrieved, Esloyo and Magsila filed

separate complaints for illegal dismissal
with money claims against Quantum.
They also impleaded Dole Philippines,
Inc. as party to the case, claiming that
said company required them to perform
additional tasks that were necessary
and desirable for its operations, and that
Dole, as well as its Executive personnel
had created and organized Quantum,
and thus, should be held jointly and
solidarily liable with Quantum for
respondents claims.
Quantum maintained that respondents
dismissal were valid, hence, it is not
liable for their money claims. On the
other hand, Dole deined any employeremployee relationship with respondents.
The Labor Arbiter found respondents to
have been illegally dismissed and
ordered Quantum to pay respondents a
total
monetary
judgment
of
P1,817,856.71 but DOLE was deleted as
party to the case, upon a finding that it
has no employer-employee relationship
with respondents. Dissatisfied, Quantum
filed
its
Notice
of
Appeal
and
Memorandum of Appeal before the NLRC
accompanied by a Motion to Reduce
Bond and a cash bond in the amount of
P400,000 (partial bond).
Before the NLRC could act on the Motion
to Reduce Bond, Quantum posted a
surety
bond
from
an
accredited
insurance company fully covering the
monetary judgment.
The NLRC gave due course to
Quantums appeal holding that there
was substantial compliance with the
bond requirement and held that
respondents
were
not
illegally
dismissed.
The Court of Appeals reversed and set
aside the NLRCs ruling and reinstated
the LAs Decision. It ruled that
Quantums failure to post the required

bond in an amount equivalent to the

monetary
judgment
impeded
the
perfection of its appeal, and rendered
the LAs Decision final and executory.
Thus, the NLRC was bereft of jurisdiction
and abused its discretion in entertaining
the appeal.
ISSUE: Whether the appeal bond
posted accompanied by a motion to
reduce bond is reasonable in order
to suspend the period to perfect an
appeal.
RULING: YES.
While it has been settled that the
posting of a cash or surety bond is
indispensable to the perfection of an
appeal in cases involving monetary
awards from the decision of the LA, in
several cases, the Court has relaxed this
stringent
requirement
whenever
justified. Thus, the Rules specifically
Section 6, Rule VI thereof, allow the
reduction of the appeal bond upon a
showing of: (a) the existence of a
meritorious ground for reduction, and
(b) the posting of a bond in a reasonable
amount in relation to the monetary
award.
In Nicol vs. Footjoy Industrial Corp., the
Court summarized the guidelines under
which the NLRC must exercise its
discretion in considering an appellants
motion for reduction of bond in this
wise:
The
bond
requirement
on
appeals involving monetary awards has
been and may be relaxed in meritorious
cases. These cases include instances in
which
(1)
there
was
substantial
compliance
with
the
Rules,
(2)
surrounding facts and circumstances
constitute meritorious grounds to reduce
the bond, (3) a liberal interpretation of
the requirement of an appeal bond
would serve the desired objective of
resolving controversies on the merits, or

(4) the appellants, at the very least,

exhibited their willingness and/or good
faith by posting a partial bond during
the reglementary period.
Here, Quantum posted a partial bond in
the amount of P400,000, or more than
twenty percent (20%) of the monetary
judgment, within the reglementary
period to appeal, together with the
Motion to Reduce Bond anchored on its
averred difficulty in raising the amount
of the bond and searching for an
insurance company that can cover said
amount within the short period of time
to perfect its appeal. Before the NLRC
could even act on the Motion to Reduce
Bond, Quantum posted a surety bond
from an accredited insurance company
covering fully the judgment award.

As to what constitutes a reasonable

amount of bond that must accompany
the motion to reduce bond in order to
suspend the period to perfect an appeal,
the Court, in McBurnei vs. Ganzon,
pronounce:
To reduce that the provisions of
Section 6, Rule VI of the NLRC Rules of
Procedure that give parties the chance
to seek a reduction of the appeal bond
are effectively carried out, without
however defeating the benefits of the
bond requirement in favor of a winning
litigant, all motions to reduce bond that
are to be filed with the NLRC shall be
accompanied by the posting of a cash or
surety bond equivalent to 10% of the
monetary award that is subject of the
appeal, which shall provisionally be
deemed the reasonable amount of the
bond in the meantime that an
appellants motion is pending resolution
by the Commission. ..
Hence, the posting of a P400,000 cash
bond equivalent to more than 20% of
the monetary judgment, together with

Motion to Reduce Bond within the

reglementary period was sufficient to
suspend the period to perfect the
appeal. The posting of the said partial
bond coupled with the subsequent
posting of a surety bond in an amount
equivalent to the monetary judgment
also signified Quantums good faith and
willingness to recognize the final
outcome of its appeal.
It should be emphasized that the NLRC
has full discretion to grant or deny the
motion to reduce bond, and its ruling
will not be disturbed unless tainted with
grave abuse of discretion. Verily, an act
of a court of tribunal can only be
considered to be tainted with grave
abuse of discretion when such act is
done in a capricious or whimsical
exercise of judgment as is equivalent to
lack of jurisdiction, which clearly is not
extant with respect to the NLRCs
cognizance of Quantums appeal. Far
from
having
gravely
abused
its
discretion, the NLRC correctly preferred
substantial justice over the rigid and
stringent application of procedural rules.

OTHER
IMPORTANT
LABOR
PROVISIONS
A.CONTRACTING
ARRANGEMENT
. Aliviado, et. al. vs. Proctor &
Gamble Phils., G.R. No. 160506,
March 9, 2010
Facts:
Petitioners worked as merchandisers of
P&G from various dates, allegedly
starting as early as 1982 or as late as
June 1991, to either May 5, 1992 or
March 11, 1993. They all individually
signed employment contracts with
either Promm-Gem or SAPS for periods
of more or less five months at a time.
They were assigned at different outlets,
supermarkets and stores where they
handled all the products of P&G. They
received their wages from Promm-Gem
or SAPS.
SAPS
and
Promm-Gem
imposed
disciplinary
measures
on
erring
merchandisers for reasons such as
habitual absenteeism, dishonesty or
changing day-off without prior notice.
P&G is principally engaged in the
manufacture and production of different
consumer and health products, which it
sells on a wholesale basis to various
supermarkets
and
distributors.
To
enhance consumer awareness and
acceptance of the products, P&G
entered into contracts with Promm-Gem
and SAPS for the promotion and
merchandising of its products.
In December 1991, petitioners filed a
complaint
against
P&G
for
regularization, service incentive leave
pay and other benefits with damages.
The complaint was later amended to
include the matter of their subsequent
dismissal.

On November 29, 1996, the Labor

Arbiter dismissed the complaint for lack
of merit and ruled that there was no
employer-employee
relationship
between petitioners and P&G. He found
that the selection and engagement of
the petitioners, the payment of their
wages, the power of dismissal and
control with respect to the means and
methods by which their work was
accomplished, were all done and
exercised by Promm-Gem/SAPS. He
further found that Promm-Gem and
SAPS were legitimate independent job
contractors.
Appealing to the NLRC, petitioners
disputed the Labor Arbiters findings. On
July 27, 1998, the NLRC rendered a
Decision
dismissing
their
appeal.
Petitioners then filed a petition for
certiorari with the CA, alleging grave
abuse of discretion amounting to lack or
excess of jurisdiction on the part of the
Labor Arbiter and the NLRC. However,
said petition was also denied by the CA.
Petitioners
filed
a
motion
for
reconsideration but the motion was also
denied. Hence, this petition.

Issue: Whether or not Promm-Gem and

SAPS are labor-only contractors

Ruling:
Promm-Gem
is
an
independent
contractor however, SAPS is a labor-only
contractor.
The pertinent Labor Code provision on
the matter states:
ART. 106. Contractor or subcontractor.
Whenever an employer enters into a
contract with another person for the
performance of the formers work, the
employees of the contractor and of the

latters subcontractor, if any, shall be

paid in accordance with the provisions of
this Code.
In the event that the contractor or
subcontractor fails to pay the wages of
his employees in accordance with this
Code, the employer shall be jointly and
severally liable with his contractor or
subcontractor to such employees to the
extent of the work performed under the
contract, in the same manner and
extent that he is liable to employees
directly employed by him.
There is "labor-only" contracting where
the person supplying workers to an
employer does not have substantial
capital or investment in the form of
tools, equipment, machineries, work
premises, among others, and the
workers recruited and placed by such
person are performing activities which
are directly related to the principal
business of such employer. In such
cases, the person or intermediary shall
be considered merely as an agent of the
employer who shall be responsible to
the workers in the same manner and
extent as if the latter were directly
employed by him.
Rule VIII-A, Book III of the Omnibus Rules
Implementing the Labor Code, as
amended by Department Order No. 1802, distinguishes between legitimate
and labor-only contracting:
Section 3. Trilateral Relationship in
Contracting Arrangements. In legitimate
contracting, there exists a trilateral
relationship under which there is a
contract for a specific job, work or
service between the principal and the
contractor or subcontractor, and a
contract of employment between the
contractor or subcontractor and its
workers. Hence, there are three parties
involved in these arrangements, the
principal which decides to farm out a job

or
service
to
a
contractor
or
subcontractor,
the
contractor
or
subcontractor which has the capacity to
independently
undertake
the
performance of the job, work or service,
and the contractual workers engaged by
the contractor or subcontractor to
accomplish the job, work or service.
Section 5. Prohibition against labor-only
contracting. Labor-only contracting is
hereby declared prohibited. For this
purpose, labor-only contracting shall
refer to an arrangement where the
contractor or subcontractor merely
recruits, supplies or places workers to
perform a job, work or service for a
principal, and any of the following
elements are present:
i) The contractor or subcontractor does
not
have
substantial
capital
or
investment which relates to the job,
work or service to be performed and the
employees recruited, supplied or placed
by such contractor or subcontractor are
performing activities which are directly
related to the main business of the
principal; or
ii) [T]he contractor does not exercise the
right to control over the performance of
the work of the contractual employee.
The foregoing provisions shall be
without prejudice to the application of
Article 248 (c) of the Labor Code, as
amended.
"Substantial capital or investment"
refers to capital stocks and subscribed
capitalization
in
the
case
of
corporations,
tools,
equipment,
implements, machineries and work
premises, actually and directly used by
the contractor or subcontractor in the
performance or completion of the job,
work or service contracted out.
The "right to control" shall refer to the
right reserved to the person for whom

the services of the contractual workers

are performed, to determine not only
the end to be achieved, but also the
manner and means to be used in
reaching that end.
Clearly, the law and its implementing
rules allow contracting arrangements for
the performance of specific jobs, works
or services. Indeed, it is management
prerogative to farm out any of its
activities, regardless of whether such
activity is peripheral or core in nature.
However, in order for such outsourcing
to be valid, it must be made to an
independent contractor because the
current labor rules expressly prohibit
labor-only contracting.
In the instant case, the financial
statements of Promm-Gem show that it
has authorized capital stock of P1
million and a paid-in capital, or capital
available for operations, of P500,000.00
as of 1990. It also has long term assets
worth P432,895.28 and current assets of
P719,042.32. Promm-Gem has also
proven that it maintained its own
warehouse and office space with a floor
area of 870 square meters. It also had
under its name three registered vehicles
which were used for its promotional /
merchandising business. Promm-Gem
also has other clients aside from P&G.
Under the circumstances, we find that
Promm-Gem has substantial investment
which relates to the work to be
performed. These factors negate the
existence of the element specified in
Section 5(i) of DOLE Department Order
No. 18-02. The records also show that
Promm-Gem supplied its complainantworkers with the relevant materials,
such as markers, tapes, liners and
cutters, necessary for them to perform
their work. Promm-Gem also issued
uniforms to them. It is also relevant to
mention that Promm-Gem already
considered the complainants working

under it as its regular, not merely

contractual or project, employees. This
circumstance negates the existence of
element (ii) as stated in Section 5 of
DOLE Department Order No. 18-02,
which speaks of contractual employees.
This, furthermore, negates on the part
of Promm-Gem bad faith and intent to
circumvent labor laws which factors
have often been tipping points that lead
the
Court
to
strike
down
the
employment practice or agreement
concerned as contrary to public policy,
morals, good customs or public order.
Under the circumstances, Promm-Gem
cannot be considered as a labor-only
contractor. We find that it is a legitimate
independent contractor.
On the other hand, the Articles of
Incorporation of SAPS shows that it has
a paid-in capital of only P31,250.00.
There is no other evidence presented to
show how much its working capital and
assets are. Furthermore, there is no
showing of substantial investment in
tools, equipment or other assets.
In Vinoya v. National Labor Relations
Commission, the Court held that "[w]ith
the current economic atmosphere in the
country, the paid-in capitalization of
PMCI amounting to P75,000.00 cannot
be considered as substantial capital and,
as such, PMCI cannot qualify as an
independent contractor."Applying the
same rationale to the present case, it is
clear that SAPS having a paid-in
capital of only P31,250 - has no
substantial capital. SAPS lack of
substantial capital is underlined by the
records which show that its payroll for
its merchandisers alone for one month
would already total P44,561.00. It had 6month contracts with P&G. Yet SAPS
failed to show that it could complete the
6-month contracts using its own capital
and investment. Its capital is not even
sufficient for one months payroll. SAPS

failed to show that its paid-in capital of

P31,250.00 is sufficient for the period
required for it to generate its needed
revenue to sustain its operations
independently. Substantial capital refers
to
capitalization
used
in
the
performance or completion of the job,
work or service contracted out. In the
present case, SAPS has failed to show
substantial capital.
Furthermore, the petitioners have been
charged with the merchandising and
promotion of the products of P&G, an
activity
that
has
already
been
considered by the Court as doubtlessly
directly related to the manufacturing
business, which is the principal business
of P&G. Considering that SAPS has no
substantial capital or investment and
the workers it recruited are performing
activities which are directly related to
the principal business of P&G, we find
that the former is engaged in "labor-only
contracting".

"Where labor-only contracting exists,

the Labor Code itself establishes an
employer-employee
relationship
between
the
employer
and
the
employees
of
the
labor-only
contractor." The statute establishes this
relationship
for
a
comprehensive
purpose: to prevent a circumvention of
labor laws. The contractor is considered
merely an agent of the principal
employer and the latter is responsible to
the employees of the labor-only
contractor as if such employees had
been directly employed by the principal
employer.
Consequently, petitioners recruited and
supplied by SAPS -- which engaged in
labor-only contracting -- are considered
as the employees of P&G while those
having worked under, and been
dismissed
by
Promm-Gem,
are

considered the employees of PrommGem, not of P&G.

Consequently, Vicente et al., as

complainants, filed a complaint for
illegal dismissal with the Labor Arbiter
against AMPCO, Merlyn V. Polidario, SMC
and Rufino I. Yatar, SMC Plant Manager,
as respondents. Complainants assert
that they are regular employees of SMC.
However, SMC utilized AMPCO making it
appear that the latter was their
employer, so that SMC may evade the
responsibility of paying the benefits due
them under the law.

SAN MIGUEL CORPORATION

VICENTE B. SEMILLANO

The Labor Arbiter rendered judgment

declaring Vicente, et al. as regular
employees of San Miguel Corporation.
Initially, the NLRC Fourth Division
affirmed with modifications the findings
of the LA but in a Resolution, the NLRC
reversed its earlier ruling. It absolved
petitioner from liability and instead held
AMPCO, as employer of respondents, as
an independent contractor.

vs.

FACTS:
AMPCO hired the services of Vicente
Semillano, Nelson Mondejar, Jovito
Remada and Alex Hawod, herein
respondents. All of them were assigned
to work in SMC's Bottling Plant situated
at Brgy. Granada Sta. Fe, Bacolod City,
in order to perform the following tasks:
segregating bottles, removing dirt
therefrom, filing them in designated
places, loading and unloading the
bottles to and from the delivery trucks,
and performing other tasks as may be
ordered by SMC's officers. They were
required to work inside the premises of
SMC using SMCs equipment. They
rendered service with SMC for more
than 6 months.
Subsequently, SMC entered into a
Contract of Services with AMPCO
designating the latter as the employer
of Vicente, et al., As a result, Vicente et
al., failed to claim the rights and
benefits ordinarily accorded a regular
employee of SMC. In fact, they were not
paid their 13th month pay. They were
not allowed to enter the premises of
SMC. The project manager of AMPCO,
Merlyn Polidario, told them to wait for
further instructions from the SMC's
supervisor. Vicente et al., waited for one
month, unfortunately, they never heard
a word from SMC.

The Court of Appeals overturned the

Commissions finding that petitioner
SMC wielded the power of control over
respondent and the power of dismissal
and that AMPCO was a labor-only
contractor since "a capital of nearly one
million pesos" was insufficient for it to
qualify as an independent contractor.
SMC filed a motion for reconsideration
but was denied. Hence, this petition for
review on certiorari.
Petitioner SMC argues that the CA
wrongly assumed that it exercised
power of control over the respondents
just because they performed their work
within SMC's premises. In advocacy of
its claim that AMPCO is an independent
contractor, petitioner relies on the
provisions of the service contract
between petitioner and AMPCO, wherein
the latter undertook to provide the
materials, tools and equipment to
accomplish the services contracted out
by petitioner. The same contract

provides that AMPCO shall have

exclusive discretion in the selection,
engagement and discharge of its
employees/personnel or otherwise in the
direction and control thereof. Petitioner
also adds that AMPCO determines the
wages of its employees/personnel who
shall be within its full control.
In its Comment, respondent AMPCO
essentially
advanced
the
same
arguments in support of its claim as a
legitimate job contractor.
ISSUE:
WON AMPCO
contractor

is

legitimate

job

RULING:
NO,
AMPCO
contractor.

is

labor-only

The test to determine the existence of

independent contractorship is whether
or not the one claiming to be an
independent contractor has contracted
to do the work according to his own
methods and without being subject to
the control of the employer, except only
as to the results of the work.
Although there may be indications of an
independent contractor arrangement
between petitioner and AMPCO, the
most determinant of factors exists which
indicate otherwise.
AMPCO's main business activity is
trading, maintaining a store catering to
members and the public. Its job
contracting with SMC is only a minor
activity or sideline. The component of
AMPCO's substantial capital are in fact
invested and used in the trading
business.
AMPCO does not have substantial
equipment, tools, machineries, and
supplies actually and directly used by it
in the performance or completion of the

segregation and piling job. There is

nothing in AMPCO's list of fixed assets,
machineries, tools, and equipment
which it could have used, actually and
directly,
in
the
performance
or
completion of its contracted job, work or
service with petitioner. Thus, there can
be no other logical conclusion but that
the tools and equipment utilized by
respondents are owned by petitioner
SMC. It is likewise noteworthy that
neither petitioner nor AMPCO has shown
that the latter had clients other than
petitioner. Therefore, AMPCO has no
independent business.
In
connection
therewith,
DOLE
Department Order No. 10 also states
that an independent contractor carries
on an independent business and
undertakes the contract work on his own
account, under his own responsibility,
according to his own manner and
method, and free from the control and
direction of his employer or principal in
all
matters
connected
with
the
performance of the work except as to
the results thereof. This embodies what
has
long
been
jurisprudentially
recognized as the control test to
determine the existence of employeremployee relationship.
In the case at bench, petitioner failed to
show how AMPCO took "entire charge,
control and supervision of the work and
service agreed upon."
Moreover, the Court was not convinced
that
AMPCO
wielded
"exclusive
discretion
in
the
discharge"
of
respondents. AMPCO's project manager,
even told respondents to "wait for
further instructions from the SMC's
supervisor" after they were prevented
from entering petitioner SMC's premises.
Despite the fact that the service
contracts contain stipulations which are
earmarks of independent contractorship,

they do not make it legally so. The

language of a contract is neither
determinative nor conclusive of the
relationship
between
the
parties.
Petitioner SMC and AMPCO cannot
dictate, by a declaration in a contract,
the character of AMPCO's business, that
is, whether as labor-only contractor, or
job contractor. AMPCO's character
should be measured in terms of, and
determined by, the criteria set by
statute. At a closer look, AMPCO's actual
status and participation regarding
respondents' employment clearly belie
the contents of the written service
contract.
Petitioner cannot rely either on AMPCO's
Certificate of
Registration as
an
Independent Contractor issued by the
proper Regional Office of the DOLE to
prove its claim. It is not conclusive
evidence of such status. The fact of
registration simply prevents the legal
presumption of being a mere labor-only
contractor from arising. In distinguishing
between permissible job contracting and
prohibited labor-only contracting, the
totality of the facts and the surrounding
circumstances of the case are to be
considered.
Thus, petitioner SMC, as principal
employer, is solidarily liable with
AMPCO, the labor-only contractor, for all
the rightful claims of respondents. Under
this set-up, AMPCO, as the "labor-only"
contractor, is deemed an agent of the
principal (SMC). The law makes the
principal
responsible
over
the
employees of the "labor-only" contractor
as if the principal itself directly hired the
employees.

Manila Water
Dalumpines

Company

Inc.

vs

Facts:
By virtue of Republic Act No. 8041,
otherwise known as the "National Water
Crisis Act of 1995," the Metropolitan
Waterworks and Sewerage System
(MWSS) was given the authority to enter
into concession agreements allowing the
private
sector
in
its
operations.
Petitioner Manila Water Company, Inc.
(Manila Water) was one of two private
concessionaires contracted by the
MWSS to manage the water distribution
system in the east zone of Metro Manila.
The east service area included the
following
towns
and
cities:
Mandaluyong, Marikina, Pasig, Pateros,
San Juan, Taguig, Makati, parts of
Quezon City and Manila, Angono,
Antipolo, Baras, Binangonan, Cainta,
Cardona,
Jala-Jala,
Morong,
Pililla,
Rodriguez, Tanay, Taytay, Teresa, and
San Mateo.3
On November 21, 1997, before the
expiration of the contract of services,
the 121 bill collectors formed a
corporation duly registered with the
Securities and Exchange Commission
(SEC) as the "Association Collectors
Group, Inc." (ACGI). ACGI was one of the
entities engaged by Manila Water for its
courier service. However, Manila Water
contracted ACGI for collection services
only in its Balara Branch.6
In December 1997, Manila Water
entered into a service agreement with
respondent
First
Classic
Courier
Services, Inc. (FCCSI) also for its courier
needs. The service agreements between
Manila Water and FCCSI covered the
periods 1997 to 1999 and 2000 to
2002.7 Earlier, in a memorandum dated

November 28, 1997, FCCSI gave a

deadline for the bill collectors who were
members of ACGI to submit applications
and letters of intent to transfer to FCCSI.
The individual respondents in this case
were among the bill collectors who
joined FCCSI and were hired effective
December 1, 1997.8
On various dates between May and
October 2002, individual respondents
were terminated from employment.
Manila Water no longer renewed its
contract with FCCSI because it decided
to implement a "collectorless" scheme
whereby Manila Water customers would
instead remit payments through "Bayad
Centers."9 The aggrieved bill collectors
individually filed complaints for illegal
dismissal,
unfair
labor
practice,
damages, and attorneys fees, with
prayer for reinstatement and backwages
against petitioner Manila Water and
respondent FCCSI. The complaints were
consolidated and jointly heard.
Petitioner Manila Water, for its part,
denied that there was an employeremployee relationship between its
company and respondent bill collectors.
Based on the agreement between FCCSI
and Manila Water, respondent bill
collectors are the employees of the
former, as it is the former that has the
right to select/hire, discipline, supervise,
and control. FCCSI has a separate and
distinct legal personality from Manila
Water, and it was duly registered as an
independent contractor before the
DOLE.
Issues:
WON FCCSI was a labor-only contractor
and that respondent bill collectors are
employees of petitioner Manila Water
Held:

Yes. FCCSI was a labor-only contractor

and that respondent bill collectors are
employees of petitioner Manila Water.
"Contracting" or "subcontracting" refers
to an arrangement whereby a principal
agrees to put out or farm out with a
contractor
or
subcontractor
the
performance or completion of a specific
job, work, or service within a definite or
predetermined period, regardless of
whether such job, work, or service is to
be performed or completed within or
outside the premises of the principal.
Department Order No. 18-02, Series of
2002,
enunciates
that
labor-only
contracting refers to an arrangement
where the contractor or subcontractor
merely recruits, supplies, or places
workers to perform a job, work, or
service for a principal, and any of the
following elements are present: (i) the
contractor or subcontractor does not
have substantial capital or investment
which relates to the job, work, or service
to be performed and the employees
recruited, supplied, or placed by such
contractor
or
subcontractor
are
performing activities which are directly
related to the main business of the
principal; or (ii) the contractor does not
exercise the right to control the
performance of the work of the
contractual employee.
FCCSI has no sufficient investment in
the form of tools, equipment and
machinery
to
undertake
contract
services for Manila Water involving a
fleet of around 100 collectors assigned
to several branches and covering the
service area of Manila Water customers
spread out in several cities/towns of the
East Zone. The only rational conclusion
is that it is Manila Water that provides
most if not all the logistics and
equipment including service vehicles in
the performance of the contracted
service,
notwithstanding
that
the

contract between FCCSI and Manila

Water states that it is the Contractor
which shall furnish at its own expense all
materials, tools and equipment needed
to perform the tasks of collectors.

determine the volume of the fish caught

in every fishing voyage.
On February 20, 2003, the
workers filed a complaint
dismissal against Albert
Trading, Teng, and Chua
NCMB,
Region
Branch
Zamboanga City.

respondent
for illegal
Teng Fish
before the
No.
IX,

Issues:
1. WON the VAs decision is not
subject
to
a
motion
for
reconsideration.
2. WON
an
employer-employee
relationship existed between Teng
and the respondent workers.

Held: The petition is denied.

1. Article 262-A of the Labor Code
does not prohibit the filing of a
motion for reconsideration.

78.
Teng vs. Pahagac, G.R.
No. 169704, November 17,
2010

Facts:
Albert Teng Fish Trading is engaged in
deep sea fishing and, for this purpose,
owns boats (basnig), equipment, and
other fishing paraphernalia. As owner of
the business, Teng claims that he
customarily enters into joint venture
agreements with master fishermen
(maestros) who are skilled and are
experts in deep sea fishing; they take
charge of the management of each
fishing venture, including the hiring of
the members of its complement. He
avers that the maestros hired the
respondent workers as checkers to

On March 21, 1989, Republic Act No.

6715 took effect, amending, among
others, Article 263 of the Labor Code
which was originally worded as:
Art. 263 x x x Voluntary arbitration
awards or decisions shall be final,
unappealable, and executory.
As amended, Article 263 is now Article
262-A, which states:
Art. 262-A. x x x [T]he award or decision
x x x shall contain the facts and the law
on which it is based. It shall be final and
executory after ten (10) calendar days
from receipt of the copy of the award or
decision by the parties.
Notably, Article 262-A deleted the word
"unappealable" from Article 263. The
deliberate selection of the language in
the amendatory act differing from that
of the original act indicates that the

legislature intended a change in the law,

and the court should endeavor to give
effect to such intent. We recognized the
intent of the change of phraseology in
Imperial
Textile
Mills,
Inc.
v.
Sampang, where we ruled that:
It is true that the present rule [Art. 262A] makes the voluntary arbitration
award final and executory after ten
calendar days from receipt of the copy
of the award or decision by the parties.
Presumably, the decision may still be
reconsidered by the Voluntary Arbitrator
on the basis of a motion for
reconsideration duly filed during that
period.
Tengs allegation that the VAs decision
had become final and executory by the
time the respondent workers filed an
appeal with the CA thus fails. We
consequently rule that the respondent
workers seasonably filed a motion for
reconsideration of the VAs judgment,
and the VA erred in denying the motion
because no motion for reconsideration is
allowed.
2. There
exists
an
employeremployee relationship between
Teng and the respondent workers.
While Teng alleged that it was the
maestros who hired the respondent
workers, it was his company that issued
to the respondent workers identification
cards (IDs) bearing their names as
employees and Tengs signature as the
employer. Generally, in a business
establishment, IDs are issued to identify
the holder as a bona fide employee of
the issuing entity.
For the 13 years that the respondent
workers worked for Teng, they received
wages on a regular basis, in addition to
their shares in the fish caught. The
worksheet showed that the respondent
workers received uniform amounts
within a given year, which amounts

annually increased until the termination

of their employment in 2002. Tengs
claim that the amounts received by the
respondent
workers
are
mere
commissions is incredulous, as it would
mean that the fish caught throughout
the year is uniform and increases in
number each year.
More importantly, the element of control
which we have ruled in a number of
cases to be a strong indicator of the
existence of an employer-employee
relationship is present in this case.
Teng not only owned the tools and
equipment, he directed how the
respondent workers were to perform
their job as checkers; they, in fact, acted
as Tengs eyes and ears in every fishing
expedition.
Teng cannot hide behind his argument
that the respondent workers were hired
by the maestros. To consider the
respondent workers as employees of the
maestros would mean that Teng
committed
impermissible
labor-only
contracting. As a policy, the Labor Code
prohibits labor-only contracting:
ART. 106. Contractor or Subcontractor
x x x The Secretary of Labor and
Employment
may,
by
appropriate
regulations, restrict or prohibit the
contracting-out of labor.
xxxx
There is "labor-only" contracting
where
the
person
supplying
workers to an employer does not
have
substantial
capital
or
investment in the form of tools,
equipment,
machineries,
work
premises, among others, and the
workers recruited and placed by
such
persons
are
performing
activities which are directly related
to the principal business of such
employer. In such cases, the person or
intermediary shall be considered merely

as an agent of the employer who shall

be responsible to the workers in the
same manner and extent as if the latter
were directly employed by him.
Section 5 of the DO No. 18-02, which
implements Article 106 of the Labor
Code, provides:
Section 5. Prohibition against labor-only
contracting. Labor-only contracting
is hereby declared prohibited.For
this purpose, labor-only contracting shall
refer to an arrangement where the
contractor or subcontractor merely
recruits, supplies or places workers to
perform a job, work or service for a
principal, and any of the following
elements are present:
(i) The contractor or subcontractor does
not
have
substantial
capital
or
investment which relates to the job,
work or service to be performed and the
employees recruited, supplied or placed
by such contractor or subcontractor are
performing activities which are directly
related to the main business of the
principal; or
(ii) The contractor does not exercise the
right to control over the performance of
the work of the contractual employee.
In the present case, the maestros did
not have any substantial capital or
investment. Teng admitted that he
solely
provided
the
capital
and
equipment, while the maestros supplied
the workers. The power of control over
the respondent workers was lodged not
with the maestros but with Teng. As
checkers, the respondent workers main
tasks were to count and classify the fish
caught and report them to Teng. They
performed tasks that were necessary
and desirable in Tengs fishing business.
Taken together, these incidents confirm
the existence of a labor-only contracting
which is prohibited in our jurisdiction, as
it is considered to be the employers

attempt to evade obligations afforded

by law to employees.
Accordingly, we hold that employeremployee ties exist between Teng and
the respondent workers. A finding that
the maestros are labor-only contractors
is equivalent to a finding that an
employer-employee relationship exists
between Teng and the respondent
workers. As regular employees, the
respondent workers are entitled to all
the benefits and rights appurtenant to
regular employment.
GSIS vs. NLRC, et. al., G.R. No.
180045, Nov. 17, 2010
Facts:
Respondents Dionisio Banlasan, Alfredo
T. Tafalla, Telesforo D. Rubia, Rogelio A.
Alvarez, Dominador A. Escobal, and
Rosauro Panis were employed as
security guards by DNL Security Agency
(DNL Security). By virtue of the service
contract entered into by DNL Security
and petitioner Government Service
Insurance System on May 1, 1978,
respondents
were
assigned
to
petitioners Tacloban City office, each
receiving
a
monthly
income
ofP1,400.00. Sometime in July 1989,
petitioner
voluntarily
increased
respondents
monthly
salary
to
P3,000.00.3
In February 1993, DNL Security informed
respondents that its service contract
with petitioner was terminated. This
notwithstanding,
DNL
Security
instructed respondents to continue
reporting
for
work
to
petitioner.
Respondents worked as instructed until
April 20, 1993, but without receiving
their wages; after which, they were
terminated from employment.4
On June 15, 1995, respondents filed with
the
National
Labor
Relations
Commission (NLRC), Regional Arbitration

Branch No. VIII, Tacloban City, a

complaint against DNL Security and
petitioner
for
illegal
dismissal,
separation pay, salary differential, 13th
month pay, and payment of unpaid
salary.

Issue: WON GSIS is jointly and severally

liable with DNL Security Agency for
payment
of
the
unsubstantiated
amounts of Salary Differentials and the
13th Month Pay to the private
respondent security guards.

employees of the contractor and of the

latters subcontractor, if any, shall be
paid in accordance with the provisions of
this Code.
In the event that the contractor or
subcontractor fails to pay the wages of
his employees in accordance with this
Code, the employer shall be jointly and
severally liable with his contractor or
subcontractor to such employees to the
extent of the work performed under the
contract, in the same manner and
extent that he is liable to employees
directly employed by him. x x x.
xxxx

Held:
The fact that there is no actual and
direct employer-employee relationship
between petitioner and respondents
does not absolve the former from
liability for the latters monetary claims.
When
petitioner
contracted
DNL
Securitys services, petitioner became
an indirect employer of respondents,
pursuant to Article 107 of the Labor
Code, which reads:
ART. 107. Indirect employer. The
provisions of the immediately preceding
Article shall likewise apply to any
person, partnership, association or
corporation which, not being an
employer,
contracts
with
an
independent
contractor
for
the
performance of any work, task, job or
project.
After DNL Security failed to pay
respondents the correct wages and
other monetary benefits, petitioner, as
principal, became jointly and severally
liable, as provided in Articles 106 and
109 of the Labor Code, which state:
ART. 106. Contractor or subcontractor.
Whenever an employer enters into a
contract with another person for the
performance of the formers work, the

ART. 109. Solidary liability. The

provisions of existing laws to the
contrary
notwithstanding,
every
employer or indirect employer shall be
held responsible with his contractor or
subcontractor for any violation of any
provision of this Code. For purposes of
determining the extent of their civil
liability under this Chapter, they shall be
considered as direct employers.
This statutory scheme is designed to
give the workers ample protection,
consonant with labor and social justice
provisions of the 1987 Constitution.
Petitioners liability covers the payment
of respondents salary differential and
13th month pay during the time they
worked for petitioner. In addition,
petitioner is solidarily liable with DNL
Security for respondents unpaid wages
from February 1993 until April 20, 1993.
While it is true that respondents
continued working for petitioner after
the expiration of their contract, based
on the instruction of DNL Security,
petitioner did not object to such
assignment and allowed respondents to
render
service.
Thus,
petitioner
impliedly approved the extension of
respondents
services.
Accordingly,
petitioner is bound by the provisions of

the Labor Code on indirect employment.

Petitioner cannot be allowed to deny its
obligation to respondents after it had
benefited from their services. So long as
the work, task, job, or project has been
performed for petitioners benefit or on
its behalf, the liability accrues for such
services. The principal is made liable to
its indirect employees because, after all,
it can protect itself from irresponsible
contractors by withholding payment of
such sums that are due the employees
and by paying the employees directly,
or by requiring a bond from the
contractor or subcontractor for this
purpose.
Petitioners liability, however, cannot
extend to the payment of separation
pay. An order to pay separation pay is
invested with a punitive character, such
that an indirect employer should not be
made liable without a finding that it had
conspired in the illegal dismissal of the
employees.
Lastly, we do not agree with petitioner
that the enforcement of the decision is
impossible
because
its
charter
unequivocally
exempts
it
from
execution.
To be sure, petitioners charter should
not be used to evade its liabilities to its
employees,
even
to
its
indirect
employees, as mandated by the Labor
Code.

Marialy Sy, et al.

Knitcraft Co., Inc.,

vs.

Fairland

x--------------------------------------x
(consolidated with)
Susan T. De Leon vs.
Knitcraft Co., Inc., et al.

Fairland

Facts:
Fairland is a domestic corporation
engaged in garments business, while
Susan
de
Leon (Susan) is
the
owner/proprietress
of
Weesan
Garments (Weesan).
On the other hand, the complaining
workers, Marialy Sy and 33 others (the
workers) are sewers, trimmers, helpers,
a guard and a secretary who were hired
by Weesan.
The workers filed separate complaints
for underpayment and/or non-payment
of wages, overtime pay, premium pay,
13th month pay and other monetary
benefits against Susan/Weesan. These
complaints were then consolidated by
the Arbitration Branch of the NLRC in
January 2003.
February 5, 2003, Weesan filed before
the
Department
of
Labor
and
Employment-National Capital Region
(DOLE-NCR) a report on its temporary
closure for a period of not less than six
months. On the same day, the workers
were not anymore allowed to work. So
on February 18, 2003 they filed an
Amended Complaint, and on March 13,
2003,
another
pleading
entitled
Amended Complaints and Position Paper
for Complainants, to include the charge
of illegal dismissal and impleaded
Fairland and its manager, Debbie
Manduabas (Debbie), as additional
respondents.
At the Hearings set by the Labor Arbiter
Ramon Valentin Reyes, Atty. Antonio
Geronimo
represented
both
Susan/Weesan
and
Fairland.
He
submitted 2 position papers for the two
entities. The workers filed a Reply, to
which Atty. Geronimo also submitted a
Consolidated Reply by Susan/Weesan
and Fairland. Workers answered back
through a Rejoinder.

The Labor Arbiter dismissed the case for

lack of merit, but ordered the
respondent companies to pay each
complainant P5,000.00 by way of
financial assistance.
The NLRC granted the workers appeal
and set aside the Labor Arbiters
decision. The Commission declared the
dismissal of the workers as illegal and
ordered
reinstatement,
will
full
backwages from February 5, 2003 and
payment all the unpaid benefits to be
paid solidarily by Susan/Weesan and
Fairland.
Atty. Geronimo filed a Motion for
Reconsideration. However, Fairland filed
another
Motion
for
Reconsideration through Atty. Melina O.
Tecson (Atty. Tecson) assailing the
jurisdiction of the Labor Arbiter and the
NLRC over it, claiming that it was never
summoned to appear, attend or
participate in all the proceedings
conducted therein. It also denied that it
engaged the services of Atty. Geronimo.
These MRs were denied by the NLRC.
Thus, Fairland and Susan/Weesan filed
their petitions for certiorari before the
Court of Appeals.
CAs decision on Fairlands petition:
The CA denied Fairlands petition and
affirmed the NLRC ruling which held
Fairland solidarily liable with Susan.
On MR, Fairland moved also for the
voluntary inhibition of Justices Leagogo
and Maambong. The CA granted the
motion for voluntary inhibition and
transferred the case from the First
Division to the Ninth Division. The Ninth
Division reversed the earlier denial of
Fairlands petition It held that the labor
tribunals did not acquire jurisdiction
over the person of Fairland, and even
assuming they did, Fairland is not liable
to the workers since Weesan is not a

mere labor-only contractor but a bona

fide
independent
contractor. The
Special Ninth Division thus annulled and
set aside the assailed NLRC Decision
and Resolution insofar as Fairland is
concerned and excluded the latter
therefrom.
Workers appealed this decision to the
Supreme Court.
CAs decision on Susans petition:
Susans petition was denied due course
and dismissed for lack of merit. The CA
affirmed the NLRC ruling with respect to
Susan.
Her MR was denied by the CA.
Before the Supreme Court:
Susan filed a petition for review on
certiorari with the SC, which was
dismissed by the Supreme Court on
technicality and for failure to sufficiently
show any reversible error in the assailed
judgment. Susan filed an appeal but
before it could be resolved, the Supreme
Court consolidated Susans case with
that the workers.
The Supreme Court granted Susans
Motion
for
Reconsideration
and
reinstated her petition for review on
certiorari.
Issues:
1. Whether or not Susan/Weesan is a
labor-only contracting agent acting as
an agent of Fairland?
2. Whether or not the individual private
respondents (Sy, et al.) were illegal
dismissed?
Ruling:
G.R. No. 182915 (Susan de Leon vs.
Fairland, Sy et al.)

1. Susan is a mere labor-only contractor.

There is labor-only contracting when
the contractor or subcontractor merely
recruits, supplies or places workers to
perform a job, work or service for a
principal. In labor-only contracting, the
following elements are present:
(a) The person supplying workers to an
employer does not have substantial
capital or investment in the form of
tools, equipment, machineries, work
premises, among others; and
(b) The workers recruited and placed by
such person are performing activities
which are directly related to the
principal business of the employer.
The workers, majority of whom are
sewers,
were
recruited
by
Susan/Weesan and that they performed
activities which are directly related to
Fairlands
principal
business
of
garments. Did Susan/Weesan have
substantial capital or investment in the
form of tools, equipment, machineries,
work premises, among others? The SC
said that there was nothing in the
records that would show that Weesan
has investment in the form of tools,
equipment or machineries. The records
show that Fairland has to furnish
Weesan with sewing machines for it to
be able to provide the sewing needs of
the former. Weesan was unable to show
that apart from the borrowed sewing
machines, it owned and possessed any
other tools, equipment, and machineries
necessary to its being a contractor or
sub-contractor for garments. Neither
was Weesan able to prove that it has
substantial capital for its business.
Further, the work premises utilized by
Weesan is owned by Fairland, which
significantly, was not in the business of
renting properties. They also advanced
that there was no showing that
Susan/Weesan paid any rentals for the

use of the premises. Instead of refuting

the workers allegations, Susan instead
claimed that Weesan rented the
premises from another entity, De
Luxe. To support this, she attached to
her
petition
two
Contracts
of
Lease purportedly entered into by her
and De Luxe for the lease of the
premises covering the periods August 1,
1997 to July 31, 2000 and January 1,
2001 to December 31, 2004 as well as
TCTs and Tax declarations in De Luxes
name but the SC found it wanting. There
were no rental receipts presented nor
did the TCTs indicate with certainty that
the registered property is the same one
used for Weesans work premises.
Weesan does not have its own
workplace and is only utilizing the
workplace of Fairland to whom it
supplied workers for its garment
business.
Suffice it to say that [t]he presumption
is that a contractor is a labor-only
contractor
unless
such
contractor
overcomes the burden of proving that it
has substantial capital, investment,
tools and the like. As Susan/Weesan
was not able to adduce evidence that
Weesan had any substantial capital,
investment or assets to perform the
work contracted for, the presumption
that Weesan is a labor-only contractor
stands.
2. Yes, the
dismissed.

workers

were

illegally

Susan relies on Article 283 of the Labor

Code which allows as a mode of
termination of employment the closure
or termination of business, which is a
management prerogative. The exercise
of
which
requires:
a)
that
the
closure/cessation of business is bona
fide, i.e., its purpose is to advance the
interest of the employer and not to
defeat or circumvent the rights of
employees under the law or a valid

agreement; b) that written notice was

served on the employees and the DOLE
at least one month before the intended
date of closure or cessation of business;
and c) in case of closure/cessation of
business not due to financial losses,
that the employees affected have been
given separation pay equivalent to
month pay for every year of service or
one month pay, whichever is higher.
The burden of proving that a temporary
suspension is bona fide falls upon the
employer. Clearly here, Susan/Weesan
was not able to discharge this
burden. The
documents
Weesan
submitted to support its claim of severe
business losses cannot be considered as
proof of financial crisis to justify the
temporary suspension of its operations
since they clearly appear to have not
been duly filed with the BIR. Weesan
failed to satisfactorily explain why the
Income Tax Returns and financial
statements it submitted do not bear the
signature of the receiving officers. Also
hard to ignore is the absence of the
mandatory 30-day prior notice to the
workers.

Hence, the Court finds that Susan failed

to prove that the suspension of
operations of Weesan was bona fide and
that it complied with the mandatory
requirement of notice under the
law. Susan likewise failed to discharge
her burden of proving that the
termination of the workers was for a
lawful cause. Therefore, the NLRC and
the CA, in CA-G.R. SP No. 93860, did not
err in their findings that the workers
were
illegally
dismissed
by
Susan/Weesan.

The court also ruled that Fairlands

claim of prescription does not deserve
consideration. Fairland says that they

only engaged Weesans services 1996 to

1997, but in January 31, 2003, Fairland
wrote Weesan requesting for the sewing
machines back.

G.R. No. 182915 (Sy vs. Fairland)

It is basic that the Labor Arbiter cannot

acquire jurisdiction over the person of
the respondent without the latter being
served with summons. However, if
there is no valid service of summons,
the court can still acquire jurisdiction
over the person of the defendant by
virtue
of
the
latters
voluntary
appearance. Although not served with
summons, jurisdiction over Fairland and
Debbie was acquired through their
voluntary
appearance.
When
the
workers complaint was before the Labor
Arbiter, it is confirmed that Fairland and
Debbie were never summoned.

The crucial question now is: Did

Fairland and Debbie voluntarily appear
before the Labor Arbiter as to submit
themselves to its jurisdiction?

Fairland argued before the CA

that it did not engage Atty. Geronimo as
its counsel. However, the Court held
in Santos v. National Labor Relations
Commission viz:

Moreover, jurisdiction over the person of

the defendant in civil cases is acquired
not only by service of summons but also
by voluntary appearance in court and
submission to its authority. Appearance
by a legal advocate is such voluntary
submission to a courts jurisdiction. It

may be made not only by actual

physical appearance but likewise by the
submission of pleadings in compliance
with the order of the court or tribunal.

The fact that Atty. Geronimo

entered his appearance for Fairland and
Debbie and that he actively defended
them before the Labor Arbiter raised the
presumption that he is authorized to
appear for them. As held in Santos, it is
unlikely that Atty. Geronimo would have
been so irresponsible as to represent
Fairland and Debbie if he were not in
fact authorized. As an officer of the
Court, Atty. Geronimo is presumed to
have
acted
with
due
propriety. Moreover,
[i]t
strains
credulity that a counsel who has no
personal interest in the case would fight
for and defend a case with persistence
and vigor if he has not been authorized
or employed by the party concerned.

The presumption of authority of

counsel to appear on behalf of a client is
found both in the Rules of Court and in
the New Rules of Procedure of the NLRC.

Sec. 8, Rule III of the New Rules of

Procedure of the NLRC, which is the rules
prevailing at that time, states in part:

SECTION 8.
APPEARANCES. - An
attorney appearing for a party is
presumed to be properly authorized for
that purpose. However, he shall be
required to indicate in his pleadings his
PTR and IBP numbers for the current
year.

As Atty. Geronimo consistently indicated

his PTR and IBP numbers in the
pleadings he filed, there is no reason for
the Labor Arbiter not to extend to Atty.
Geronimo the presumption that he is
authorized to represent Fairland.

Moreover, the fact that Debbie signed

the verification attached to the position
paper filed by Atty. Geronimo, without a
secretarys
certificate
or
board
resolution attached thereto, is not
sufficient reason for the Labor Arbiter to
be on his guard and require Atty.
Geronimo
to
prove
his
authority. Debbie, as General Manager
of Fairland is one of the officials of the
company who can sign the verification
without need of a board resolution
because as such, she is in a position to
verify the allegations in the petition.

Suffice it to say that an attorneys

presumption of authority is a strong
one. A mere denial by a party that he
authorized an attorney to appear for
him, in the absence of a compelling
reason, is insufficient to overcome the
presumption, especially when the denial
comes after the rendition of an adverse
judgment, such as in the present case.

To stress, Article 224 contemplates the

furnishing of copies of final decisions,
orders or awards both to the parties and
their counsel in connection with the
execution of such final decisions, orders
or awards. However, for the purpose of
computing the period for filing an appeal
from the NLRC to the CA, same shall be
counted from receipt of the decision,
order or award by the counsel of record
pursuant to the established rule that
notice to counsel is notice to party. In
sum, we hold that the Labor Arbiter

had validly acquired jurisdiction

over Fairland and its manager,
Debbie, through the appearance of
Atty. Geronimo as their counsel and
likewise, through the latters filing
of pleadings on their behalf.

Further proof that Fairland is Weesans

principal:
(1)
aside
from
sewing
machines, Fairland also lent Weesan
other
equipment
such
as
fire
extinguishers, office tables and chairs,
and
plastic
chairs; (2)
no
proof
evidencing the contractual arrangement
between Weesan and Fairland was ever
submitted by Fairland; (3) while both
Weesan and Fairland assert that the
former had other clients aside from the
latter, no proof of Weesans contractual
relationship with its other alleged client
is extant on the records; and (4) there is
no showing that any of the workers were
assigned to other clients aside from
Fairland. Moreover, the activities, the
manner of work and the movement of
the workers were subject to Fairlands
control.

Fairland, therefore, as the principal

employer, is solidarily liable with
Susan/Weesan,
the
labor-only
contractor, for the rightful claims of the
employees.
Under
this
set-up,
Susan/Weesan, as the "labor-only"
contractor, is deemed an agent of the
principal, Fairland, and the law makes
the
principal
responsible
to
the
employees of the "labor-only" contractor
as if the principal itself directly hired or
employed the employees.

WHEREFORE, the Court,

1) in GR No. 189658 denies Susans
Petition for Review on Certiorari. The CA

decision declaring her

contractor is affirmed.

labor-only

2) in G.R. No. 182915, grants the

workers
Petition
for
Review
on Certiorari. Decision of the CA (ninth
division) which excluded Fairland from
being solidarily liable is reversed and set
aside. The Decision of the CA (first
division) which held Fairland as solidarily
liable with Susan/Weesan is reinstated
and affirmed.

Polyfoam-RGC International Corp.,

vs. Concepcion G.R. No. 172349,
June 13, 2012
Facts:
Respondent filed a complaint against
petitioner Polyfoam for illegal dismissal
alleging that he was an all-around
factory worker who served for almost six
years. He was illegally dismissed when
he discovered that his time card was not
in the rack and that he was informed by
the security guard that he can no longer
punch his card. Protesting to the
supervisor, he found out that he was
dismissed due to an infraction of a
company rule. A request was sent to
Polyfoams
manager
asking
for
respondents re-admittance but was
unheeded.
Co-petitioner Gramaje filed a Motion for
Intervention claiming to be the real
employer of respondent. She alleges
that her business PAGES is a legitimate
job contractor. Polyfoam, then, filed a
Motion to Dismiss since there was no
employer-employee
relationship
between Polyfoam and respondent.
Gramaje assert that respondent was not

illegally dismissed but rather, it was

respondent that abandoned work.
The Motion to Intervene was granted but
the Motion to Dismiss was denied. In
denying the motion to dismiss, the
Labor Arbiter ruled that the nonexistence of the relationship is a matter
of defense. In deciding the case, the
Labor Arbiter ruled in favor of
respondent finding him to be illegally
dismissed and awarded his money
claims. It ruled that Polyfoam and
Gramaje
are
solidarily
liable
to
respondent. On appeal the NLRC, the
LAs
decision
was
modified
by
exonerating Polyfoam from responsibility
and deleting some of the money awards.
It ruled that Gramaje is an independent
contractor
and
was
not
illegally
dismissed but abandoned work. On
appeal to the CA, the NLRCs decision
was reversed and the LAs decision
reinstated. Aggrieved, petitioners filed
this petition for review on ceritiorari.

method, free from the control and

supervision of its principal, Polyfoam. On
the first ground, it was not able to prove
ownership over the equipment in
Polyfoams premises that is allegedly
owned by Gramaje.
Respondent was illegally dismissed.
Credence was given to respondents
narration of facts. Several circumstance
also
negated
the
theory
of
abandonment like: (a) he immediately
inquired from his supervisor; (b) he
wrote a letter asking to be re-admitted
and (c) he filed a case for illegal
dismissal.

Issues:
Whether or not Polyfoam is
solidarily
liable?
Whether or not respondent was
illegally dismissed?
Ruling:
Yes, Polyfoam is solidarily liable. Yes,
respondent was illegally dismissed. The
Court ruled that Gramaje was involved
in labor-only contracting and that
respondent did not abandon work but
was illegally dismissed.
In support of its conclusion that
Polyfoam is involved in labor-only
contracting,
the
following
were
considered by the Court: (a) Gramaje
has no substantial capital; and (b)
Gramaje
did
not
carry
on
an
independent business or undertake the
performance of its service contract
according to its own manner and

SUPERIOR PACKAGING CORP., VS.

BALAGSAY ET AL., G.R. NO.
178909, OCTOBER 10, 2012
Facts:
Superior
Packaging
Corporation
(Superior)
is
involved
in
the
manufacture and sale of commercial
and industrial corrugated boxes. It
engaged the services of Lancer Staffing
& Services Network, Inc. (Lancer) to
provide reliever services to its business.
The respondents in this case are the
workers of Lancer assigned to Superior
for such reliever services.

The workers filed a complaint with the

DOLE
against
Superior
for
underpayment of wages, non- payment
of premium pay for worked rest,
overtime pay and non-payment of
salaries. The DOLE then conducted an
inspection of the Superiors premises
and made a finding, among others, that
Superior is engaged in labor-only
contracting and is consequently an
indirect employer of the workers. Having
found that Superior committed the
violations alleged by the workers, the
DOLE issued an Order finding in favor of
the workers and ordering Superior to
pay their claims.
Superior
filed
a
motion
for
reconsideration on the ground that the
workers are not its employees but of
Lancer. It objects to the finding that it is
engaged in labor-only contracting and is
consequently an indirect employer, and
alleges that it is beyond the visitorial
and enforcement power of the DOLE to
make such conclusion. According to
Superior, such conclusion may be made
only upon consideration of evidentiary
matters and cannot be determined
solely through a labor inspection.
Issue:
Can the DOLE make a finding as to the
existence or non-existence of employeremployee relationship in the course of
an inspection conducted pursuant to its
visitorial and enforcement power?
Ruling:
Yes, the DOLE can.
Under Art. 128(b) of the Labor Code, as
amended by RA 7730, the DOLE is fully
empowered to make a determination as
to the existence of an employeremployee relationship in the exercise of
its visitorial and enforcement power.
The
expanded
visitorial
and
enforcement power of the DOLE granted
by RA 7730 would be rendered nugatory

if the alleged employer could, by the

simple expedient of disputing the
employer-employee relationship, force
the referral of the matter to the NLRC. At
least a prima facie showing of the
absence of an employer-employee
relationship be made to oust the DOLE
of jurisdiction. But it is precisely the
DOLE that will be faced with that
evidence, and it is the DOLE that
will weigh it, to see if the same
does
successfully
refute
the
existence of an employer- employee
relationship.
Here, the DOLE finding Lancer was not
an independent contractor and that
Superior and Lancer were engaged in
labor-only contracting is a finding as
to the existence of employer-employee
relationship.
Hence,
Superior
was
considered an indirect employer of the
workers and liable to the latter for their
unpaid money claims.

DIGITAL
TELECOMMUNICATIONS
PHIL., INC. VS. DIGITEL EMPLOYEES
UNION
(G.R.
NOS.
184903,
10OCT2012)

FACTS:
By virtue of a certification election,
Digitel Employees Union (Union) became
the exclusive bargaining agent of all
rank and file employees of Digitel in
1994. The Union and Digitel then
commenced
collective
bargaining
negotiations which resulted in a
bargaining
deadlock.
The
Union
threatened to go on strike, but then
the Labor Secretary assumed jurisdiction
over the dispute and eventually directed
the parties to execute a CBA.

However, no CBA was forged between

Digitel and the Union. Some Union
members abandoned their employment
with
Digitel.
The
Union
later
became dormant.
Ten
(10)
years
thereafter or on 28 September 2004,
Digitel received from Esplana, who was
President of the Union, a letter
containing the list of officers, CBA
proposals and ground rules.

Digitel was reluctant to negotiate with

the Union and demanded that the latter
Union show compliance with the
provisions of the Unions Constitution
and By -laws on union membership and
election of officers. On 4 November
2004, Esplana and his group filed a case
for Preventive Mediation before the
National Conciliation and Mediation
Board based on Digitels violation of the
duty to bargain. On 25 November 2004,
Esplana filed a notice of strike. On 10
March 2005, the then Labor Secretary
issued an Order.

Assuming jurisdiction over the labor

dispute. During the pendency of the
controversy,
Digitel
Service,
Inc.
(Digiserv),
a
non-profit
enterprise
engaged in call center servicing, filed
with the DOLE an Establishment
Termination Report stating that it will
cease its business operation. The
closure affected at least 100 employees,
42 of whom are members of the herein
respondent Union. Alleging that the
affected employees are its members
and in reaction to Digiservs action,
Esplana and his group filed another
Notice of Strike for union busting, illegal
lock-out, and violation of the assumption
order. On 23 May 2005, the Labor
Secretary ordered the second notice
of strike subsumed by the previous
Assumption Order.

Meanwhile, on 14 March 2005, Digitel

filed a petition with the Bureau of Labor
Relations (BLR) seeking cancellation
of the Unions registration. In a Decision
dated 11 May 2005, the Regional
Director of the DOLE dismissed the
petition
forcancellation
of
union
registration for lack of merit. The appeal
filed by Digitel with the BLR was
eventually dismissed for lackof merit in
a Resolution dated 9 March 2007. In an
Order dated 13 July 2005, the Secretary
of Labor directed Digitel to commence
the CBA negotiation with theUnion and
certified for compulsory arbitration
before the NLRC the issue of unfair labor
practice.In accordance with the 13 July
2005 Order of the Secretary of Labor,
the unfair labor practice issue was
certified
forcompulsory
arbitration
before the NLRC. On 31 January 2006,
NLRC rendered a Decision dismissing the
unfair labor practicecharge against
Digitel but declaring the dismissal of the

13 employees of Digiserv as illegal and

ordering their reinstatement.

The Union manifested that out of 42

employees, only 13 remained, as
most had already accepted separation
pay.In view of this unfavorable decision,
Digitel filed a petition on 9 June 2006
before the Court of Appeals, challenging
theabove NLRC Decision and Resolution
and
arguing
mainly
that Digiserv
employees are not employees of
Digitel.On 18 June 2008, CA partially
granted the case for ULP, thus modifying
the assailed NLRC dispositions. The
CAlikewise
sustained
the
finding
that Digiserv is engaged in labor-only
contracting and that its employees are
actually employeesof Digitel.Digitel filed
a motion for reconsideration but was
denied in a Resolution dated 9 October
2008. Hence, this petition forreview on
certiorari.

ISSUES:
1) Whether Digiserv
contractor; and

is

a legitimate

2) Whether there was a valid dismissal.

RULING:

Digiserv is a labor-only contractor.

Labor-only contracting is expressly

prohibited by our labor laws. After an
exhaustive review of the records, there
is no showing that first, Digiserv has
substantial investment in the form of
capital, equipment or tools. The NLRC,
as echoed by the CA, did not find
substantial Digiservs authorized capital

stock of P 1,000,000.00. It pointed out

that only P 250,000.00 of the authorized
capital stock had been subscribed and
only P 62,500.00 had been paid up.
There was no increase in capitalization
for the last 10 years.

Moreover, in the Amended Articles of

Incorporation, as well as in the General
Information Sheets for the years 1994,
2001 and 2005, the primary purpose of
Digiserv is to provide manpower
services. In PCI Automation Center, Inc.
v. National Labor Relations Commission
the Court made the following distinction:
"the legitimate job contractor provides
services while the labor-only contractor
provides only manpower. The legitimate
job contractor undertakes to perform a
specific job for the principal employer
while the labor-only contractor merely
provides the personnel to work for the
principal
employer."The
services
provided by employees of Digiserv are
directly related to the business of
Digitel. It is undisputed that as early as
March 1994, the affected employees,
except for two, were already performing
their job as Traffic Operator which was
later renamed as Customer Service
Representative (CSR). It is equally
undisputed that all throughout their
employment, their function as CSR
remains the same until they were
terminated effective May 30, 2005. Their
long period of employment as such is an
indication that their job is directly
related to the main business of DIGITEL
which
is
telecommunications.
Furthermore, Digiserv does not exercise
control over the affected employees.
Digiserv shared the same Human
Resources, Accounting, Audit and Legal
Departments
with
Digitel
which
manifested that it was Digitel who
exercised control over the performance
of the affected employees. The NLRC

also
relied on
the
letters
of commendation,
plaques
of
appreciation and certification issued by
Digitel
to
the Customer
Service
Representatives as evidence of control.
Considering that Digiserv has been
found to be engaged in labor-only
contracting, the dismissed employees
aredeemed employees of Digitel.

The
affected
employees were
illegally dismissed.

In addition to finding that Digiserv is a

labor-only contractor, records teemwith
proof that its dismissed employees are
in fact employees of Digitel. The NLRC
enumerated these pieces of evidence,
thus:

The remaining affected employees,

except for two (2), were already hired by
DIGITEL even before the existence
of DIGISERV. Likewise, the remaining
affected employees continuously held
the position of Customer Service
Representative, which was earlier known
as Traffic Operator, from the time they
were appointed on March 1, 1994until
they were terminated on May 30, 2005.

Further, the Certificates issued to

Customer
Service
Representative
likewise show that they are employees
of DIGITEL, Take for example the
"Service Award" issued to Ma. Loretta C.
Esen, one of the remaining affected
employees. The "Service Award" was
signed by the officers of DIGITEL - the
VP-Customer Services Division, the VPHuman Resources Division and the
Group Head-Human Resources Division.
It cannot be gainsaid that it is only the

employer that issues service award to

its employees.

As an alternative argument, Digitel

maintains that the affected employees
were validly dismissed on the grounds of
closure of Digiserv, a department within
Digitel. In the recent case of Waterfront
Cebu City Hotel v. Jimenez.

We reffered to the closure of a

department or division of a company as
retrenchment. For a valid retrenchment,
the following elements must be present:
(1) That retrenchment is reasonably
necessary and likely to prevent business
losses which, if already incurred, must
be substantial, serious, actual and real,
or if only expected, are reasonably
imminent as perceived objectively and
in good faith by the employer;(2) That
the employer served written notice both
to
the
employees
and
to
the
Department of Labor and Employment
at least one month prior to the intended
date of retrenchment;(3) That the
employer
pays
the retrenched
employees separation pay equivalent to
one (1) month pay or at least month
pay for every year of service, whichever
is
higher;(4)
That
the employer
exercises its prerogative to retrench
employees
in
good
faith
for
the advancement of its interest and
not to
defeat
or
circumvent
the
employees right to security of tenure;
and
(5) That the employer used fair and
reasonable criteria in ascertaining who
would be dismissed and who would be
retained among the employees, such
as status, efficiency, seniority, physical
fitness, age, and financial hardship for
certain workers.

Only the 3 elements of a valid

retrenchment had been here satisfied.
Indeed, it is management prerogative to
close a department of the company.
Digitels decision to outsource the call
center operation of the company is a
valid reason to close down the
operations of a department under which
the affected employees were employed.
The fifth element regarding the criteria
to be observed by Digitel clearly does
not apply because all employees under
Digiserv were dismissed. The instant
case is all about the fourth element, that
is, whether or not the affected
employees were dismissed in good faith.
We find that there was no good faith in
the retrenchment. Prior to the cessation
of Digiservs operations, the Secretary of
Labor had issued the first and second
assumption order. The effects of the
assumption
order
issued
by
the
Secretary of Labor are two-fold. It
enjoins an impending strike on the part
of the employees and orders the
employer to maintain the status quo.
There is no doubt that Digitel defied the
assumption order by abruptly closing
down Digiserv. The closure of a
department is not illegal per se. What
makes it unlawful is when the closure is
undertaken in bad faith. In St. John
Colleges, Inc.v. St. John Academy Faculty
and Employees Union, bad faith was
evidenced by the timing of and reasons
for the closure andthe timing of and
reasons for the subsequent opening.

NORKIS TRADING CORPORATION vs.

JOAQUIN
BUENA
VISTA
et
al
G.R. No. 182018
October
10, 2012
The Facts
The respondents were hired by Norkis
Trading,
a
domestic
corporation
engaged
in
the
business
of
manufacturing and marketing of Yamaha
motorcycles and multi-purpose vehicles,
on separate dates and for various
positions.
Although they worked for Norkis Trading
as skilled workers assigned in the
operation of industrial and welding
machines owned and used by Norkis
Trading for its business, they were not
treated as regular employees by Norkis
Trading. Instead, they were regarded by
Norkis Trading as members of PASAKA, a
cooperative
organized
under
the
Cooperative Code of the Philippines, and
which was deemed an independent
contractor that merely deployed the
respondents to render services for
Norkis
Trading.4 The
respondents
nonetheless believed that they were
regular employees of Norkis Trading,
citing in their Position Paper5 the
following circumstances that allegedly
characterized their employment with the
company:
The work of the operators involves
operating industrial machines, such as,
press machine, hydraulic machine, and
spotweld machine. On the other hand,
the welders used the welding machines.
The machines used by complainants
herein respondents in their work are all
owned by respondent Norkis Trading
herein petitioner and these are installed

and located in the working area of the

complainants inside the companys
premises.
The salaries of complainants are paid
inside the premises of respondent Norkis
Trading by Dalia Rojo and Belen Rubio,
who are also employees of the said
company assigned at the accounting
office.
Despite having served respondent
Norkis Trading for many years and
performing the same functions as
regular employees, complainants were
not accorded regular status. It was
made to appear that complainants are
not employees of said company but that
of respondent PASAKA.6
Against the foregoing scenario, the
respondents, together with several other
complainants,7 filed on June 9, 1999 with
the
Department
of
Labor
and
Employment (DOLE) a complaint against
Norkis Trading and PASAKA for labor-only
contracting
and
non-payment
of
minimum wage and overtime pay. The
complaint was docketed as LSED Case
No. RO700-9906-CI-CS-168.
The filing of the complaint for labor-only
contracting
allegedly
led
to
the
suspension
of
the
respondents
membership with PASAKA. On July 22,
1999, they were served by PASAKA with
memoranda charging them with a
violation of the rule against commission
of acts injurious or prejudicial to the
interest or welfare of the cooperative.
The
memoranda
cited
that
the
respondents filing of a case against
Norkis Trading had greatly prejudiced
the interest and welfare of the
cooperative.8 In their answer9 to the
memoranda, the respondents explained
that they merely wanted to be
recognized as regular employees of
Norkis Trading. The case records include
copies of the memoranda sent to

respondents Buenavista,
Dondoyano.10

Fabroa

and

On August 16, 1999, the respondents

received another set of memoranda
from PASAKA, now charging them with
the
following
violations
of
the
cooperatives rules and regulations: (1)
serious
misconduct
or
willful
disobedience of superiors instructions
or orders; (2) gross and habitual neglect
of duties by abandoning work without
permission; (3) absences without filing
leave of absence; and (4) wasting time
or loitering on companys time or
leaving their post temporarily without
permission during office hours.11 Copies
of the memoranda12 sent to Fabroa and
Cape form part of the records.
On August 26, 1999, PASAKA informed
the respondents of the cooperatives
decision to suspend them for fifteen (15)
working days, to be effective from
September 1 to 21, 1999, for violation of
PASAKA rules.
The records include copies of the
memoranda13 sent to Fabroa and Cape.
The
suspension
prompted
the
respondents to file with the NLRC the
complaint for illegal suspension against
Norkis Trading and PASAKA.
The
15-day
suspension
of
the
respondents was extended for another
period of 15 days, from September 22,
1999 to October 12, 1999.14 Copies of
PASAKAs
separate
letters15 to
Buenavista,
Fabroa,
Cape
and
Dondoyano
on
the
cooperatives
decision to extend the suspension form
part of the records.
On October 13, 1999, the respondents
were to report back to work but during
the hearing in their NLRC case, they
were informed by PASAKA that they
would be transferred to NorkisTradings
sister company, PortaCoeli Industrial

Corporation (PortaCoeli), as washers of

Multicab vehicles.
The respondents opposed the transfer
as it would allegedly result in a change
of employers, from Norkis Trading to
PortaCoeli.
The
respondents
also
believed that the transfer would result in
a demotion since from being skilled
workers in NorkisTrading, they would be
reduced to being utility workers.These
circumstances made the respondents
amend their complaint for illegal
suspension, to include the charges of
unfair labor practice, illegal dismissal,
damages and attorneys fees.
For their part, both Norkis Trading and
PASAKA claimed that the respondents
were not employees of Norkis Trading.
They insisted that the respondents were
members of PASAKA, which served as an
independent contractor that merely
supplied services to Norkis International
Co., Inc. (Norkis International) pursuant
to a job contract16 which PASAKA and
Norkis International executed on January
14, 1999 for 121,500 pieces of F/GFSeries Reinforcement Production. After
PASAKA received reports from its
coordinator at Norkis International of the
respondents low efficiency and violation
of the cooperatives rules, and after
giving said respondents the chance to
present their side, a penalty of
suspension was imposed upon them by
the cooperative. The illegal suspension
being complained of was then not linked
to the respondents employment, but to
their membership with PASAKA.
Norkis Trading stressed that the
respondents were deployed by PASAKA
to Norkis International, a company that
is entirely separate and distinct from
Norkis Trading.
ISSUES:
1) THE COURT OF APPEALS HAS
DEPARTED FROM THE USUAL COURSE

OF JUDICIAL PROCEEDINGS WHEN IT

MADE ITS OWN FACTUAL FINDINGS AND
DISREGARDED THE UNIFORM AND
CONSISTENT FACTUAL FINDINGS OF THE
LABOR ARBITER AND THE NLRC, WHICH
MUST BE ACCORDED GREAT WEIGHT,
RESPECT AND EVEN FINALITY. IN SO
DOING, THE COURT OF APPEALS
EXCEEDED
ITS
AUTHORITY
ON
CERTIORARI UNDER RULE 65 OF THE
RULES OF COURT BECAUSE SUCH
FACTUAL FINDINGS WERE BASED ON
SPECULATIONS AND NOT ON OTHER
EVIDENCES [SIC] ON RECORD.
This Courts Ruling
The Court resolves to deny the petition.
Factual findings of labor officials
may be examined by the courts
when there is a showing that they
were arrived at arbitrarily or in
disregard of evidence on record.
As regards the first ground, the
petitioner questions the CAs reversal of
LA Gutierrezs and the NLRCs rulings,
and argues that said rulings should have
been accorded great weight and finality
by the appellate court as these were
allegedly supported by substantial
evidence.
On this matter, the settled rule is that
factual findings of labor officials, who
are deemed to have acquired expertise
in matters within their jurisdiction, are
generally accorded not only respect but
even finality by the courts when
supported by substantial evidence, i.e.,
the amount of relevant evidence which a
reasonable mind might accept as
adequate to support a conclusion. We
emphasize, nonetheless, that these
findings are not infallible. When there is
a showing that they were arrived at
arbitrarily or in disregard of the
evidence on record, they may be
examined by the courts. The CA can
then grant a petition for certiorari if it

finds that the NLRC, in its assailed

decision or resolution, has made a
factual finding that is not supported by
substantial evidence. It is within the
jurisdiction of the CA, whose jurisdiction
over labor cases has been expanded to
review the findings of the NLRC.47
We have thus explained in Cocomangas
Hotel Beach Resort v. Visca48 that the CA
can take cognizance of a petition
for certiorari if it finds that the NLRC
committed grave abuse of discretion by
capriciously, whimsically, or arbitrarily
disregarding
evidence
which
are
material
to
or
decisive
of
the
controversy. The CA cannot make this
determination without looking into the
evidence presented by the parties. The
appellate court needs to evaluate the
materiality or significance of the
evidence, which are alleged to have
been
capriciously,
whimsically,
or
arbitrarily disregarded by the NLRC, in
relation to all other evidence on record.
This case falls within the exception to
the general rule that findings of fact of
labor officials are to be accorded respect
and finality on appeal. As our
discussions in the other grounds that are
raised in this petition will demonstrate,
the CA has correctly held that the NLRC
has disregarded facts and evidence that
are material to the outcome of the
respondents case. No error can be
ascribed to the appellate court for
making its own assessment of the facts
that are significant to the case to
determine the presence or absence of
grave abuse of discretion on the part of
the NLRC, even if the CAs findings turn
out to be different from the factual
findings of both the LA and NLRC.
Termination of an employment for
no
just
or
authorized
cause
amounts to an illegal dismissal.

As to the issue of whether the

respondents were illegally dismissed by
Norkis Trading, we answer in the
affirmative, although not by constructive
dismissal as declared by the CA, but by
actual dismissal.
Where an entity is declared to be a
labor-only contractor, the employees
supplied by said contractor to the
principal employer become regular
employees of the latter. Having gained
regular status, the employees are
entitled to security of tenure and can
only be dismissed for just or authorized
causes and after they had been afforded
due
process.66 Termination
of
employment without just or authorized
cause and without observing procedural
due process is illegal.1wphi1
In claiming that they were illegally
dismissed from their employment, the
respondents
alleged
having
been
informed by PASAKA that they would be
transferred, upon the behest of Norkis
Trading, as Multicab washers or utility
workers to PortaCoeli, a sister company
of Norkis Trading. Norkis Trading does
not dispute that such job transfer was
relayed
by
PASAKA
unto
the
respondents, although the company
contends that the transfer was merely
an "offer" that did not constitute a
dismissal. It bears mentioning, however,
that the respondents were not given any
other option by PASAKA and Norkis
Trading but to accede to said transfer. In
fact, there is no showing that Norkis
Trading would still willingly accept the
respondents to work for the company.
Worse, it still vehemently denies that
the respondents had ever worked for it.
Again, all defenses of Norkis Trading that
anchor on the alleged lack of employeremployee relationship between it and
the respondents no longer merit any
consideration, given that this Courts
findings in G.R. Nos. 180078-79 have

become
conclusive.
Thus,
the
respondents transfer to PortaCoeli,
although relayed to the respondents by
PASAKA was effectively an act of Norkis
Trading. Where labor-only contracting
exists, the Labor Code itself establishes
an
employer-employee
relationship
between
the
employer
and
the
employees of the labor-only contractor.
The statute establishes this relationship
for a comprehensive purpose: to prevent
a circumvention of labor laws. The
contractor is considered merely an
agent of the principal employer and the
latter is responsible to the employees of
the labor-only contractor as if such
employees had been directly employed
by the principal employer.67
No further evidence or document should
then be required from the respondents
to prove such fact of dismissal,
especially
since
Norkis
Trading
maintains that it has no duty to admit
and treat said respondents as its
employees. Considering that PortaCoeli
is an entity separate and distinct from
Norkis
Trading,
the
respondents
employment with Norkis Trading was
necessarily severed by the change in
work assignment. It then did not even
matter whether or not the transfer
involved a demotion in the respondents
rank and work functions; the intention to
dismiss, and the actual dismissal of the
respondents
were
sufficiently
established.
In the absence of a clear showing that
the respondents dismissal was for just
or authorized causes, the termination of
the respondents employment was
illegal. What may be reasonably
deduced from the records was that
Norkis Trading decided on the transfer,
after the respondents had earlier filed
their
complaint
for
labor-only
contracting against the company. Even
Norkis Tradings contention that the

transfer may be deemed a valid exercise

of
management
prerogative
is
misplaced. First,
the
exercise of
management prerogative presupposes
that the transfer is only for positions
within the business establishment.
Second, the exercise of management
prerogative by employers is not
absolute, as it is limited by law and the
general principles of fair play and
justice.
WHEREFORE, premises considered, the
petition is DENIED.
SO ORDERED.

GOYA,
INC.
v. GOYA,
INC.
EMPLOYEES UNION-FFW G.R. No.
170054 : January 21, 2013
FACTS:
Goya, Inc. (Company) is a
domestic corporation engaged in the
manufacture,
importation,
and
wholesale of top quality food products.
Sometime in January 2004, the
company hired contractual employees
from PESO Resources Development
Corporation
(PESO)
to
perform
temporary and occasional services.
Respondent Goya, Inc. Employees
UnionFFW (Union) requested for a
grievance conference on the ground that
the contractual workers do not belong to
the categories of employees stipulated
in the existing CBA.
The
hiring
of
contractual
employees was in contravention to their
CBA agreement which has been applied

since 1970 where there are only 3 kinds

of employees: regular employees,
probationary employees and casual
employees. The Union asserted that the
hiring of contractual employees from
PESO is not a management prerogative
and in gross violation of the CBA
tantamount to unfair labor practice
(ULP).
The Union moreover advanced
that sustaining the Companys position
would easily weaken and ultimately
destroy the former with the latters
resort
to
retrenchment
and/or
retirement of employees and not filling
up the vacant regular positions through
the hiring of contractual workers from
PESO, and that a possible scenario could
also be created by the Company
wherein it could "import" workers from
PESO during an actual strike.
The case was brought before the
NCMB when the matter remained
unsolved for voluntary arbitration.
Voluntary Arbitrator Bienvenido E.
Laguesma manifested that amicable
settlement was no longer possible;
hence, they agreed to submit for
resolution
the
solitary
issue
of
"[w]hether or not the Company is guilty
of unfair labor acts in engaging the
services of PESO, a third party service
provider, under the existing CBA, laws,
and jurisprudence."
ISSUE:
Whether or not the Company is
guilty of unfair labor acts in engaging
the services of PESO, a third party
service provider, under the existing CBA,
laws, and jurisprudence.

RULING:
The companys defense is
that their act of hiring contractual

employees
prerogative
thereof.

is
a
and is

management
a valid act

Declaring that a particular act falls

within the concept of management
prerogative is significantly different from
acknowledging that such act is a valid
exercise thereof. What the VA and the
CA correctly ruled was that the
Companys
act
of
contracting
out/outsourcing is within the purview of
management prerogative. Both did not
say, however, that such act is a valid
exercise thereof. Obviously, this is due
to the recognition that the CBA
provisions agreed upon by the Company
and the Union delimit the free exercise
of management prerogative pertaining
to the hiring of contractual employees.
Indeed, the VA opined that "the right of
the management to outsource parts of
its operations is not totally eliminated
but is merely limited by the CBA," while
the CA held that "this management
prerogative of contracting out services,
however, is not without limitation. x x x
These
categories
of
employees
particularly with respect to casual
employees serve as limitation to the
Companys prerogative to outsource
parts of its operations especially when
hiring contractual employees.
A collective bargaining agreement is the
law between the parties.
It is familiar and fundamental doctrine in
labor law that the CBA is the law
between the parties and they are
obliged to comply with its provisions.
A collective bargaining agreement or
CBA refers to the negotiated contract
between a legitimate labor organization
and the employer concerning wages,
hours of work and all other terms and
conditions
of
employment
in
a
bargaining unit. As in all contracts, the
parties in a CBA may establish such

stipulations,
clauses,
terms
and
conditions
as
they
may
deem
convenient provided these are not
contrary to law, morals, good customs,
public order or public policy. Thus, where
the CBA is clear and unambiguous, it
becomes the law between the parties
and compliance therewith is mandated
by the express policy of the law.
Moreover, if the terms of a contract, as
in a CBA, are clear and leave no doubt
upon the intention of the contracting
parties, the literal meaning of their
stipulations shall control.

On the power
arbitrator:

of

the

voluntary

In general, the arbitrator is expected to

decide those questions expressly stated
and
limited
in
the
submission
agreement. However, since arbitration is
the final resort for the adjudication of
disputes, the arbitrator can assume that
he has the power to make a final
settlement. Thus, assuming that the
submission empowers the arbitrator to
decide whether an employee was
discharged for just cause, the arbitrator
in this instance can reasonably assume
that his powers extended beyond giving
a yes-or-no answer and included the
power to reinstate him with or without
back pay.

Vigilla et al., vs. Phil. College of

Criminology Inc., G.R. No. 200094,
June 10, 2013
Facts:
PCCr
is a
non-stock educational
institution, while the petitioners were
janitors, janitresses and supervisor in
the Maintenance Department of PCCr
under the supervision and control of
Atty. Florante A. Seril (Atty. Seril), PCCrs
Senior Vice President for Administration.
The petitioners, however, were made to
understand, upon application with
respondent school, that they were under
MBMSI, a corporation engaged in
providing janitorial services to clients.
Atty. Seril is also the President and
General Manager of MBMSI.
Sometime in 2008, PCCr discovered that
the Certificate of Incorporation of MBMSI
had been revoked as of July 2, 2003. On
March 16, 2009, PCCr, through its
President, respondent Gregory Alan F.
Bautista
(Bautista),
citing
the
revocation, terminated the schools
relationship with MBMSI, resulting in the
dismissal
of
the
employees
or
maintenance personnel under MBMSI,
except Alfonso Bongot (Bongot) who
was retired.
In September, 2009, the dismissed
employees, led by their supervisor,
Benigno Vigilla (Vigilla), filed their
respective
complaints
for
illegal
dismissal, reinstatement, back wages,
separation
pay
(for
Bongot),
underpayment of salaries, overtime pay,
holiday pay, service incentive leave, and
13th month pay against MBMSI, Atty.
Seril, PCCr, and Bautista.

In their complaints, they alleged that it

was the school, not MBMSI, which was
their real employer because (a) MBMSIs
certification had been revoked; (b) PCCr
had direct control over MBMSIs
operations; (c) there was no contract
between MBMSI and PCCr; and (d) the
selection and hiring of employees were
undertaken by PCCr.
On the other hand, PCCr and Bautista
contended that (a) PCCr could not have
illegally dismissed the complainants
because it was not their direct
employer; (b) MBMSI was the one who
had complete and direct control over the
complainants; and (c) PCCr had a
contractual agreement with MBMSI,
thus, making the latter their direct
employer.
On September 11, 2009, PCCr submitted
several documents before LA Ronaldo
Hernandez, including releases, waivers
and quitclaims in favor of MBMSI
executed by the complainants to prove
that they were employees of MBMSI and
not PCCr.
Ruling of the Labor Arbiter
After due proceedings, the LA handed
down his decision, finding that (a) PCCr
was the real principal employer of the
complainants ; (b) MBMSI was a mere
adjunct
or
alter
ego/labor-only
contractor; (c) the complainants were
regular employees of PCCr; and (d)
PCCr/Bautista were in bad faith in
dismissing the complainants.
The LA explained that PCCr was actually
the one which exercised control over the
means and methods of the work of the
petitioners, thru Atty. Seril, who was
acting, throughout the time in his
capacity as Senior Vice President for
Administration of PCCr, not in any way
or
time
as
the
supposed
employer/general manager or president
of MBMSI.

.Ruling of the NLRC

Not satisfied, the respondents filed an
appeal before the NLRC. In its
Resolution, dated February 11, 2011, the
NLRC affirmed the LAs findings.
Nevertheless, the respondents were
excused from their liability by virtue of
the releases, waivers and quitclaims
executed by the petitioners.
In their motion for reconsideration,
petitioners attached as annexes their
affidavits denying that they had signed
the releases, waivers, and quitclaims.
They prayed for the reinstatement in
toto of the July 30, 2010 Decision of the
LA.8 MBMSI/Atty. Seril also filed a motion
for
reconsideration9 questioning
the
declaration of the NLRC that he was
solidarily liable with PCCr.
On April 28, 2011, NLRC modified its
February 11, 2011 Resolution by
affirming the July 30, 2010 Decision 10 of
the LA only in so far as complainants
Ernesto B. Ayento and Eduardo B.
Salonga were concerned. As for the
other 17 complainants, the NLRC ruled
that their awards had been superseded
by their respective releases, waivers and
quitclaims.
Ruling of the Court of Appeals
On September 16, 2011, the CA denied
the petition and affirmed the two
Resolutions of the NLRC, dated February
11, 2011 and April 28, 2011. The CA
pointed out that based on the principle
of solidary liability and Article 1217 11 of
the
New
Civil
Code,
petitioners
respective
releases,
waivers
and
quitclaims in favor of MBMSI and Atty.
Seril redounded to the benefit of the
respondents. The CA also upheld the
factual findings of the NLRC as to the
authenticity and due execution of the
individual
releases,
waivers
and
quitclaims because of the failure of
petitioners to substantiate their claim of

forgery
and
to
overcome
the
presumption of regularity of a notarized
document.
Petitioners
motion
for
reconsideration was likewise denied by
the CA in its January 4, 2012 Resolution.
Hence, this petition under
challenging the CA Decision

Rule

45

Issue:

Whether or not their claims

against the respondents were
amicably settled by virtue of the
releases, waivers and quitclaims
which they had executed in favor
of MBMSI.
o

whether or not petitioners

executed
the
said
releases,
waivers
and
quitclaims

whether or not a laboronly contractor is solidarily

liable with the employer.

Ruling:
The petition fails.
The
Releases,
Waivers
Quitclaims are Valid

and

We noted that the individual quitclaims,

waivers and releases executed by the
complainants
showing
that
they
received their separation pay from
MBMSI were duly notarized by a Notary
Public. Such notarization gives prima
facie evidence of their due execution.
Further, said releases, waivers, and
quitclaims were not refuted nor disputed
by complainants herein, thus, we have
no recourse but to uphold their due
execution
A Labor-only Contractor is Solidarily
Liable with the Employer

The issue of whether there is solidary

liability
between
the
labor-only
contractor and the employer is crucial in
this case. If a labor-only contractor is
solidarily liable with the employer, then
the releases, waivers and quitclaims in
favor of MBMSI will redound to the
benefit of PCCr. On the other hand, if a
labor-only contractor is not solidarily
liable with the employer, the latter being
directly liable, then the releases,
waivers and quitclaims in favor of
MBMSI will not extinguish the liability of
PCCr.
xxx
The NLRC and the CA correctly ruled
that
the
releases,
waivers
and
quitclaims executed by petitioners in
favor of MBMSI redounded to the benefit
of PCCr pursuant to Article 1217 of the
New Civil Code. The reason is that
MBMSI is solidarily liable with the
respondents for the valid claims of
petitioners pursuant to Article 109 of the
Labor Code.
As correctly pointed out by the
respondents, the basis of the solidary
liability of the principal with those
engaged in labor-only contracting is the
last paragraph of Article 106 of the
Labor Code, which in part provides: "In
such cases labor-only contracting, the
person
or
intermediary
shall
be
considered merely as an agent of the
employer who shall be responsible to
the workers in the same manner and
extent as if the latter were directly
employed by him."
Xxx
Under the general rule set out in the
first and second paragraphs of Article
106, an employer who enters into a
contract with a contractor for the
performance of work for the employer,
does not thereby create an employeremployees relationship between himself

and the employees of the contractor.

Thus, the employees of the contractor
remain the contractor's employees and
his
alone.
Nonetheless
when
a
contractor fails to pay the wages of his
employees in accordance with the Labor
Code, the employer who contracted out
the job to the contractor becomes jointly
and severally liable with his contractor
to the employees of the latter "to the
extent of the work performed under the
contract" as such employer were the
employer of the contractor's employees.
The law itself, in other words,
establishes
an
employer-employee
relationship between the employer and
the job contractor's employees for a
limited purpose, i.e., in order to ensure
that the latter get paid the wages due to
them.

A similar situation obtains where there is

"labor only" contracting. The "laboronly" contractor-i.e "the person or
intermediary" - is considered "merely as
an agent of the employer." The
employer is made by the statute
responsible to the employees of the
"labor only" contractor as if such
employees had been directly employed
by the employer. Thus, where "laboronly" contracting exists in a given case,
the statute itself implies or establishes
an
employer-employee
relationship
between the employer (the owner of the
project) and the employees of the "labor
only" contractor, this time for a
comprehensive purpose: "employer for
purposes of this Code, to prevent any
violation or circumvention of any
provision of this Code." The law in effect
holds both the employer and the
"laboronly" contractor responsible to the
latter's employees for the more effective
safeguarding of the employees' rights
under the Labor Code.35

BPI Employees Union-Davao cityFUBU vs. Bank of the Phil Islands et

al., G.R. No. 174912, July 24, 2013
Facts:
BOMC, which was created pursuant to
Central Bank Circular No. 1388, Series of
1993 (CBP Circular No. 1388, 1993), and
primarily engaged in providing and/or
handling support services for banks and
other
financial
institutions,
is
a
subsidiary of the Bank of Philippine
Islands (BPI) operating and functioning
as an entirely separate and distinct
entity.

A service agreement between BPI and

BOMC was initially implemented in BPIs
Metro
Manila
branches.
In
this
agreement, BOMC undertook to provide
services such as check clearing, delivery
of bank statements, fund transfers, card
production, operations accounting and
control, and cash servicing, conformably
with BSP Circular No. 1388. Not a single
BPI employee was displaced and those
performing the functions, which were
transferred to BOMC, were given other
assignments.

The Manila chapter of BPI Employees

Union (BPIEU-Metro ManilaFUBU) then
filed a complaint for unfair labor practice
(ULP). The Labor Arbiter (LA) decided
the case in favor of the union. The
decision was, however, reversed on
appeal by the NLRC. BPIEU-Metro
Manila-FUBU filed a petition for certiorari
before the CA which denied it, holding
that BPI transferred the employees in
the affected departments in the pursuit
of
its
legitimate
business.
The
employees were neither demoted nor

were their salaries, benefits and other

privileges diminished.

On January 1, 1996, the service

agreement was likewise implemented in
Davao City. Later, a merger between BPI
and Far East Bank and Trust Company
(FEBTC) took effect on April 10, 2000
with BPI as the surviving corporation.
Thereafter, BPIs cashiering function and
FEBTCs cashiering, distribution and
bookkeeping functions were handled by
BOMC. Consequently, twelve (12) former
FEBTC employees were transferred to
BOMC to complete the latters service
complement.

BPI Davaos rank and file collective

bargaining agent, BPI Employees UnionDavao City-FUBU (Union), objected to
the transfer of the functions and the
twelve
(12)
personnel
to
BOMC
contending that the functions rightfully
belonged to the BPI employees and that
the Union was deprived of membership
of former FEBTC personnel who, by
virtue of the merger, would have formed
part of the bargaining unit represented
by the Union pursuant to its union shop
provision in the CBA.7
The Union then filed a formal protest on
June 14, 2000 addressed to BPI Vice
Presidents Claro M. Reyes and Cecil
Conanan reiterating its objection. It
requested the BPI management to
submit the BOMC issue to the grievance
procedure under the CBA, but BPI did
not consider it as "grievable." Instead,
BPI proposed a Labor Management
Conference (LMC) between the parties.
Thereafter, the Union demanded that
the matter be submitted to the
grievance machinery as the resort to the
LMC was unsuccessful. As BPI allegedly
ignored the demand, the Union filed a

notice of strike before the National

Conciliation
and
Mediation
Board
(NCMB) on the following grounds:
a) Contracting out services/functions
performed by union members that
interfered
with,
restrained
and/or
coerced the employees in the exercise
of their right to self-organization;
b) Violation of duty to bargain; and
c) Union busting.
BPI then filed a petition for assumption
of jurisdiction/certification with the
Secretary of the Department of Labor
and
Employment
(DOLE),
who
subsequently issued an order certifying
the labor dispute to the NLRC for
compulsory
arbitration.
The
DOLE
Secretary directed the parties to cease
and desist from committing any act that
might exacerbate the situation.
On October 27, 2000, a hearing was
conducted. Thereafter, the parties were
required to submit their respective
position papers
On December 21, 2001, the NLRC came
out with a resolution upholding the
validity of the service agreement
between BPI and BOMC and dismissing
the charge of ULP. It ruled that the
engagement by BPI of BOMC to
undertake some of its activities was
clearly
a
valid
exercise
of
its
management prerogative. It further
stated that the spinning off by BPI to
BOMC of certain services and functions
did not interfere with, restrain or coerce
employees in the exercise of their right
to self-organization. The Union did not
present even an iota of evidence
showing that BPI had terminated
employees, who were its members. In
fact, BPI exerted utmost diligence, care
and effort to see to it that no union
member was terminated.13 The NLRC
also stressed that Department Order

(D.O.) No. 10 series of 1997, strongly

relied upon by the Union, did not apply
in this case as BSP Circular No. 1388,
series of 1993, was the applicable rule.
After the denial of its motion for
reconsideration, the Union elevated its
grievance to the CA via a petition for
certiorari under Rule 65. The CA,
however, affirmed the NLRCs December
21, 2001 Resolution with modification
that the enumeration of functions listed
under BSP Circular No. 1388 in the said
resolution be deleted. The CA noted at
the outset that the petition must be
dismissed as it merely touched on
factual matters which were beyond the
ambit of the remedy availed of.14 Be
that as it may, the CA found that the
factual findings of the NLRC were
supported by substantial evidence and,
thus, entitled to great respect and
finality. To the CA, the NLRC did not act
with grave abuse of discretion as to
merit the reversal of the resolution.
As to the applicability of D.O. No. 10, the
CA agreed with the NLRC that the said
order did not apply as BPI, being a
commercial bank, its transactions were
subject to the rules and regulations of
the BSP.

Not satisfied, the Union filed a motion

for reconsideration which was, however,
denied by the CA.

Hence, the present petition

Issue:

Whether or not the act of BPI to

outsource
the
cashiering,
distribution
and
bookkeeping
functions to BOMC is in conformity
with the law and the existing CBA.
Particularly in dispute is the validity
of the transfer of twelve (12) former

FEBTC employees to BOMC, instead

of being absorbed in BPI after the
corporate merger.
Ruling:
ART. 261. Jurisdiction of Voluntary
Arbitrators or panel of Voluntary
Arbitrators. x x x Accordingly,
violations of a Collective Bargaining
Agreement, except those which are
gross in character, shall no longer be
treated as unfair labor practice and shall
be resolved as grievances under the
Collective Bargaining Agreement. For
purposes of this article, gross violations
of Collective Bargaining Agreement shall
mean flagrant and/or malicious refusal
to comply with the economic provisions
of such agreement.
Clearly, only gross violations of the
economic provisions of the CBA are
treated as ULP. Otherwise, they are
mere grievances.
In the present case, the alleged violation
of the union shop agreement in the CBA,
even assuming it was malicious and
flagrant, is not a violation of an
economic provision in the agreement.
The provisions relied upon by the Union
were those articles referring to the
recognition of the union as the sole and
exclusive bargaining representative of
all rank-and-file employees, as well as
the
articles
on
union
security,
specifically,
the
maintenance
of
membership in good standing as a
condition for continued employment and
the union shop clause.26 It failed to take
into consideration its recognition of the
banks exclusive rights and prerogatives,
likewise provided in the CBA, which
included the hiring of employees,
promotion, transfers, and dismissals for
just cause and the maintenance of
order, discipline and efficiency in its
operations

The Union, however, insists that jobs

being outsourced to BOMC were
included in the existing bargaining unit,
thus, resulting in a reduction of a
number of positions in such unit. The
reduction interfered with the employees
right to self-organization because the
power of a union primarily depends on
its strength in number.28
It
is
incomprehensible
how
the
"reduction of positions in the collective
bargaining unit" interferes with the
employees right to self-organization
because the employees themselves
were neither transferred nor dismissed
from the service. As the NLRC clearly
stated:
In the case at hand, the union has not
presented even an iota of evidence that
petitioner bank has started to terminate
certain employees, members of the
union. In fact, what appears is that the
Bank has exerted utmost diligence, care
and effort to see to it that no union
member has been terminated. In the
process of the consolidation or merger
of the two banks which resulted in
increased diversification of functions,
some of these non-banking functions
were merely transferred to the BOMC
without affecting the union membership

AVELINO S. ALILIN et al. vs

PETRON CORP G.R. NO. 177592,
2014-06-09
FACTS:
Petron is a domestic corporation
engaged in the oil business. In 1968,
Romualdo D. Gindang Contractor,
owned and operated by Romualdo D.
Gindang, started recruiting laborers
for fielding to Petrons Mandaue Bulk
Plant. When Romualdo died in 1989,
his son Romeo, through Romeo D.
Gindang Services (RDG), took over
and continued to provide manpower
services to Petron.
Petron and RDG entered into a
Contract for Services from June 1,
2000 to May 31, 2002, to provide
Petron with janitorial, maintenance,
tanker receiving, packaging and other
utility services. This was extended
until Sept 30, 2002. Upon expiration,
no renewal was done and workers
were dismissed. Petitioners filed an
illegal dismissal complaint against
Petron alleging that they were barred
from continuing their services on Oct
16, 2002. Petitioners claim that
although it was RDG who hired them
and paid their salaries, RDG is a laboronly contractor, acting as an agent of
Petron, their true employer. Claiming
to be regular employees, petitioners
asserted that their dismissal allegedly
in view of the expiration of the service
contract between Petron and RDG is
illegal.
RDG denied liability over petitioners
claim of illegal dismissal while also
corroborating petitioners claim that
they are regular employees of Petron.
Petron, on the other hand, maintained
that RDG is an independent contractor
and the real employer of the

petitioners. It was RDG, which hired

and selected petitioners, paid their
salaries and wages, and directly
supervised their work.
Both Labor Arbiter and NLRC ruled that
petitioners are Petrons regular
employees. CA however ruled
otherwise stating that there is no
employer-employee relationship, and
that RDG is in fact an independent
labor contractor with sufficient
capitalization and investment. The
Motion for Reconsideration by
Petitioners was dismissed, hence this
petition.
ISSUE: (1) Whether RDG is a a laboronly contractor (2) Whether Petron is
liable for petitioners dismissal
RULING:
(1) YES. The contractor is always
presumed to be a labor-only
contractor, unless such contractor
overcomes the burden of proving
otherwise. However, where the
principal is the one claiming that the

contractor is legitimate, said principal

(Petron) has the burden of proving so.
In this case, the presumption that RDG
is a labor-only contractor stands, due
to the failure of Petron to discharge
the burden of proving otherwise. The
Court also found that the works
performed were directly related to
Petrons business negating further
Petrons claim that RDG is
independent.
(2) YES. [A] finding that a contractor
is a labor- only contractor is
equivalent to declaring that there is an
employer-employee relationship
between the principal and the
employees of the supposed
contractor. In this case, the employeremployee relationship becomes all the
more apparent due to the presence of
the power of control on the part of
Petron over RDG. Petron therefore,
being the principal employer and RDG,
being the labor-only contractor, are
solidarily liable for petitioners illegal
dismissal and monetary claims.