CASE 2013-0021: FIRST PHILIPPINE INDUSTRIAL ORPORATION, PETITIONER, -VERSUS- RAQUEL M. CALIMBAS AND LUISA P. MAHILOM, RESPONDENTS (G.R. NO. 179256, 10 JULY 2013, PERALTA J.) SUBJECT/S: LABOR ONLY CONTRACTING; PERMISSIBLE JOB CONTRACTING; ILLEGAL DISMISSAL. (BRIEF TITLE: FIRST PHIL INDUSTRIAL VS. CALIMBAS ET AL.)
DISPOSITIVE:
“WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The Decision dated March 6, 2007 and Resolution dated August 16, 2007 of the Court of Appeals in CA-G.R. SP No. 90527 are hereby AFFIRMED with MODIFICATION that respondents shall be entitled to separation pay equivalent to one month salary for every year of service.
SO ORDERED.”
SUBJECTS/DOCTRINES/DIGEST:
FIRST PHIL INDUSTRIAL ARGUES THAT RESPONDENTS WERE THE EMPLOYEES OF DGMS WHO ACTED AS INDEPENDENT CONTRACTOR. IS THEIR CONTENTION CORRECT?
NO. DGMS IS NOT AN INDEPENDENT JOB CONTRACTOR BUT WAS ENGAGED IN LABOR ONLY CONTRACTING.
PROOFS: THEY HAVE NO SUBSTANTIAL CAPITAL AND HAS NO SUBSTANTIAL EQUIPMENT IN THE FORM OF TOOLS, EQUIPMENT AND MACHINERY.
Given the foregoing standards, we sustain the findings of the CA that respondents are petitioner’s employees and that DGMS is engaged in labor only contracting.
First, in Vinoya v. National Labor Relations Commission,12 this Court categorically stated that the actual paid-in capital of P75,000.00 could not be considered as substantial capital. Thus, DGMS’s actual paid-in capital in the amount of P75,000.00 does not constitute substantial capital essential to carry out its business as an independent job contractor. In spite of its bare assertion that the Vinoya case does not apply in the present case, DGMS has not shown any serious and cogent reason to disregard the ruling in the aforementioned case. Records likewise reveal that DGMS has no substantial equipment in the form of tools, equipment and machinery. As a matter of fact, respondents were using office equipment and materials owned by petitioner while they were rendering their services at its offices.
Second, petitioner exercised the power of control and supervision over The respondents. As aptly observed by the CA, “the daily time records of respondents even had to be countersigned by the officials of petitioner to check whether they had worked during the hours declared therein.
Furthermore, the fact that DGMS did not assign representatives to supervise over respondents’ work in petitioner’s company tends to disprove the independence of DGMS. It is axiomatic that the test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subjected to the control of the employer, except only to the results of the work. Obviously, on this score alone, petitioner cannot rightly claim that DGMS was an independent job contractor inasmuch as respondents were subjected to the control and supervision of petitioner while they were performing their jobs.”13
Third, also worth stressing are the points highlighted by respondents: (1) Respondents worked only at petitioner’s offices for an uninterrupted period of five years, occupying the same position at the same department under the supervision of company officials; (2) Three weeks ahead of the termination letters issued by DGMS, petitioner’s HR Manager Lorna Young notified respondents, in a closed-door meeting, that their services to the company would be terminated by July 31, 2001; (3) In the termination letters prepared by DGMS, it was even stressed that the said termination letters will formalize the verbal notice given by petitioner’s HR Administration personnel; (4) The direct superiors of respondents were managerial employees of petitioner, and had direct control over all the work-related activities of the latter. This control included the supervision of respondents’ performance of their work and their compliance with petitioner’s company policies and procedures. DGMS, on the other hand, never maintained any representative at the petitioner’s office to oversee the work of respondents.
All told, an employer-employee relationship exists between petitioner and respondents. And having served for almost five years at petitioner’s company, respondents had already attained the status of regular employees.
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WERE RESPONDENTS ILLEGALLY DISMISSED?
YES. PETITIONER FAILED TO FOLLOW BOTH SUBSTANTIVE AND PROCEDURAL DUE PROCESS. PETITIONER FAILED TO SHOW ANY VALID OR JUST CAUSE UNDER THE LABOR CODE TO JUSTIFY TERMINATION OF SERVICES. THEY ALSO FAILED TO NOTIFY RESPONDENTS REGARDING THE ACTS OR OMISSIONS WHICH LED TO THEIR TERMINATION.
In the present case, petitioners failed to show any valid or just cause under the Labor Code on which it may justify the termination of services of respondents. Also, apart from notifying that their services had already been terminated, petitioner failed to comply with the rudimentary requirement of notifying respondents regarding the acts or omissions which led to the termination of their services as well as giving them an ample opportunity to contest the legality of their dismissal. Having failed to establish compliance with the requirements of termination of employment under the Labor Code, respondents’ dismissal is tainted with illegality.
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SUPPOSE AN EMPLOYER ENGAGES A CONTRACTOR AND THE CONTRACTOR FAILS TO PAY THE WAGES OF HIS EMPLOYEES WHAT IF ANY IS THE LIABILITY OF THE EMPLOYER?
THE EMPLOYER SHALL BE JOINTLY AND SEVERALLY LIABLE WITH HIS CONTRACTOR 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.
Article 106. Contractor or subcontractor. – Whenever an
employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s 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.
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IS CONTRACTING-OUT OF LABOR ILLEGAL?
PER SE IT IS NOT ILLEGAL. ONLY REGULATED TO PROTECT THE RIGHTS OF WORKERS. IT CAN BE LABOR-ONLY CONTRACTING OR JOB CONTRACTING. LABOR-ONLY CONTRACTING IS PROHIBITED. JOB CONTRACTING IS REGULATED.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting-out of labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and jobcontracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
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WHEN IS THERE LABOR-ONLY CONTRACTING?
WHEN THE PERSON SUPPLYING WORKERS TO AN EMPLOYER:
A) 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 SUCH EMPLOYER.
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.
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WHEN IS JOB CONTRACTING PERMISSIBLE?
IF THE FOLLOWING CONDITIONS ARE MET:
(1) THE 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, 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; AND
(2) THE CONTRACTOR HAS SUBSTANTIAL CAPITAL OR INVESTMENT IN THE FORM OF TOOLS, EQUIPMENT, MACHINERIES, WORK PREMISES, AND OTHER MATERIALS WHICH ARE NECESSARY IN THE CONDUCT OF HIS BUSINESS.
Sec. 8. Job contracting. – There is job contracting permissible under the Code if the following conditions are met:
(1) The 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, 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; and
(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business. (RULES)
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J.A.B. Bulao & Associates 