SECOND DIVISION G.R. No. 160506 : March 9, 2010 JOEB M.

ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO, ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, FRANZ DAVID, NESTOR IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO PASCUAL, ERNESTO CALANAO, ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR., ARNEL ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR, EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO MACABENTE, MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO, ALSTANDO MONTOS, RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO, ENRIQUE F. TALLEDO, WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY, TADEO DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ, ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR CARDANO, MARIANO NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N. GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M. LOZA, MARIO N. CULDAYON, ORLANDO P. JIMENEZ, FRED P. JIMENEZ, RESTITUTO C. PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ BUSTENERA, ROBERTO B. CRUZ, ROSEDY O. YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and ORLANDO S. BALANGUE, Petitioners, v. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents. DECISION DEL CASTILLO, J.: Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code establishes an employer-employee relationship between the employer and the employees of the labor-only contractor.
chanroblesvirtua|awlibary

The instant petition for review assails the March 21, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 52082 and its October 20, 2003 Resolution2 denying the motions for
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15. Arsenio Soriano. Julio Rey 14. 1993 March 11. Jr. 1998 Decision of the National Labor Relations Commission (NLRC). 1993 May 5. Inc. Jose Fernando Gutierrez 9. 1993 March 11. Maximino Pascual 16. Ernesto Calanao[. 1992 4. Estanislao Buenaventura 10. Nestor Ignacio 13. Abraham Basmayor[. 1996 Decision3 of the Labor Arbiter.] 6. 1988 1982 1989 1982 1989 1985 1990 1987 1983 1988 1988 1985 1983 1988 1983 Date Dismissed May 5. (Promm-Gem) and Sales and Promotions Services (SAPS) to be legitimate independent contractors and the employers of the petitioners. 1993 March 11. Aliviado 2. 7. Arthur Corpuz 3. Inc. 21. 1993 May 5. 1993 March 11. 1992 March 11. Jr. 1993 March 11. [Roehl] Agoo 19. 1993 March 11. 1992 March 11. Roberto Enriquez December. to either May 5. All these decisions found Promm-Gem. 1993 May 5. cЃa Factual Antecedents Petitioners worked as merchandisers of P&G from various dates. Joeb M. 1993 March 11. Franz David 12. 1992 May 5.] 17. 23. Eric Aliviado 5. 1993 March 11. Monchito Ampeloquio September. 1993 March 11. Jr. Arnel Endaya 22. allegedly starting as early as 1982 or as late as June 1991. 1992 May 5. 1988 . Bonifacio Ortega 20.reconsideration separately filed by petitioners and respondent Procter & Gamble Phils. 1993 March 11. Jonathan Mateo May. 1993 March 11. 1985 1988 1985 1987 1988 1985 1988 June. Nestor [Es]quila Date Employed November. 1992 May 5. The appellate court affirmed the July 27. which in turn affirmed the November 29. 1993. Jr. Lope Salonga 11. 1993 March 11. (P&G). Ruben [Vasquez]. Lorenzo Platon 8. more specifically as follows: Name 1. 1992 March 11. 1993 March 11. 1992 or March 11. Rolando Romasanta 18.

Fernando Macabent[a] 34. Liongson 32. 1993 March 11. Rainer N. 1993 May 5. Talledo 43. 1993 May 5. Allan Baltazar 48. Emmanuel E. Joel Billones 47. 28. Pedro G. 1992 March 11. Alstando Montos 38. 1993 March 11. Talledo 42. Emil Tawat 31. 1993 May 5. Santos Bacalso 26. Romeo Vasquez 46. Willie Ortiz 44. 1992 March 11. Jr. 1992 March 11. Aladino Gregor[e]. 1993 March 11. 1992 May 5. 1993 March 11. Reynaldo Jacaban 36. 1992 . [Pita] 51. 1993 May 5. Joseph Banico 54. Antonio Dacu[m]a 1989 1990 1984 1980 1987 1990 1988 1991 1984 1990 1987 1990 1985 1984 1984 1984 1987 1985 1988 1987 1988 1985 1987 1989 1991 1987 1990 1988 1988 1988 1990 1990 March 11. Noli Gabuyo 49. 1992 May 5. 1992 May 5. Salvador 39. Armando Villar 30. 1993 May 5. 1992 May 5. Ernesto Soyosa 45. Melecio Casapao 35. Garcia 33. Albert Leynes 55. Raul Dulay 52. Enrique [F].24. 1993 March 11. Ed[g]ardo Quiambao 25. 1992 May 5. Edwin Garcia 29. Ramir[o] E. Roy 41. 1992 March 11. 1993 May 5. 1992 May 5. 1992 March 11. 1992 March 11. 1993 May 5. Cresente J. Ramil Reyes 40. 1993 March 11. 1993 May 5. Tadeo Duran[o] 53. 1992 May 5. 1993 March 11. Ferdinand Salvo 37. 1992 March 11. Mario P. Laban 50. 1992 May 5. Leonardo [F]. Samson Basco 27.

1992 March 11. 1993 March 11. Gerry [G]. El[ia]s Bas[c]o 59. 1993 March 11. [Laspoña] 69. Alejandrino Abaton 80.6 cЃa cЃa SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such as habitual absenteeism. Orlando S. 1992 May 5.] 68. Loza 70. Toledo[. supermarkets and stores where they handled all the products of P&G. German N. 58. Philip M. 1992 May 5. Jr. 1992 May 14. Jimenez 73. Roberto Rosales May. Rodolfo C. Jr. Jimenez 72. Wilfredo Torres 60. 1993 March 11. 1992 March 11. 1989 May 5. Gilbert Y. 1990 June. Jr. Artuz Bustenera[. Restituto C. Roberto B. 1992 March 11. which it sells on a wholesale basis to various supermarkets and distributors.] 76. 1993 March 11. Miranda 67. 74. 1992 May 5. 1993 March 11.5 They were assigned at different outlets. Romeo Viernes. 1989 May 4. 1993 May 5. 1992 May 5. C[o]ldayon 71. They received their wages from Promm-Gem or SAPS. Rolando J. Melchor Carda[ñ]o 61. 19934 cЃa November 6. 1991 March 5. Balangue cralaw 1982 1986 1989 1986 1991 1989 1987 1987 November. Orlando P. 1992 June. 1993 March 11. Jr. Fred P. 1991 June 1991 March 5. 1993 March 11.8 To cЃa . 1990 June. 1993 March 11. Mario N. 1990 May. Renato dela Cruz 57. Cruz 77. 1991 May 14. John Sumergido 63. 1991 September.7 cЃa P&G is principally engaged in the manufacture and production of different consumer and health products. dishonesty or changing day-off without prior notice. Guevara 66.56. Pamintuan. 1992 May 5. 64. 1992 May 5. 1993 March 11. de Andres 75. [Marino] [Maranion] 62. 1991 May. 1991 December. Yordan 78. 1993 They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time. 1993 March 11. Dennis Dacasin 79. Rosedy O. 1990 1988 March. Arnold D. 1993 March 11. Gatpo 65.

14 cЃa Petitioners filed a motion for reconsideration but the motion was denied in the November 19. The complaint was later amended11 to include the matter of their subsequent dismissal. the NLRC rendered a Decision13 disposing as follows: cЃa WHEREFORE. service incentive leave pay and other benefits with damages. premises considered.16 cЃa . chanroblesvirtua|awlibary SO ORDERED. However. SO ORDERED. the power of dismissal and control with respect to the means and methods by which their work was accomplished. 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 further found that PrommGem and SAPS were legitimate independent job contractors. were all done and exercised by Promm-Gem/SAPS.enhance consumer awareness and acceptance of the products. He found that the selection and engagement of the petitioners..9 cЃa In December 1991. is ordered to pay service incentive leave pay to petitioners. the decision of the National Labor Relations Commission dated July 27. 1998 Resolution. Inc. 1998 is AFFIRMED with the MODIFICATION that respondent Procter & Gamble Phils. cЃa cЃa Ruling of the Labor Arbiter On November 29. 1998. the appeal of complainants is hereby DISMISSED and the decision appealed from AFFIRMED. 1996.12 cЃa Ruling of the NLRC Appealing to the NLRC.15 cЃa Ruling of the Court of Appeals Petitioners then filed a petition for certiorari with the CA. P&G entered into contracts with Promm-Gem and SAPS for the promotion and merchandising of its products. petitioners disputed the Labor Arbiters findings. The dispositive portion of his Decision reads: WHEREFORE. judgment is hereby rendered Dismissing the above-entitled cases against respondent Procter & Gamble (Phils. the payment of their wages. petitioners filed a complaint10 against P&G for regularization. alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC. On July 27. premises considered. said petition was also denied by the CA which disposed as follows: WHEREFORE. for lack of merit. Inc. SO ORDERED.

cЃa chanroblesvirtua|awlibary Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services of manpower to their client. moral and exemplary damages as well as litigation costs and attorneys fees.. Hence.Petitioners filed a motion for reconsideration but the motion was also denied. informing the latter that their Merchandising Services Contract will no longer be renewed. INC. (2) whether petitioners were illegally dismissed. Petitioners insist that . They further claim that when the latter had its so-called re-alignment program. chanroblesvirtua|awlibary WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS HAD ACTED WITH GRAVE ABUSE OF DISCRETION WHEN THE LATTER DID NOT FIND THE PRIVATE RESPONDENTS LIABLE TO THE PETITIONERS FOR PAYMENT OF ACTUAL. chanroblesvirtua|awlibary WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A] REVERSIBLE ERROR WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN EXCESS OF JURISDICTION IN RENDERING THE QUESTIONED JUDGMENT WHEN. 1993. this petition. They claim that the contractors have neither substantial capital nor tools and equipment to undertake independent labor contracting. IS THEIR EMPLOYER AND THAT THEY WERE ILLEGALLY DISMISSED BY THE FORMER. the issues are: (1) whether P&G is the employer of petitioners. Issues Petitioners now come before us raising the following issues: I. Petitioners Arguments Petitioners insist that they are employees of P&G. and (3) whether petitioners are entitled for payment of actual. II. petitioners were instructed to fill up application forms and report to the agencies which P&G created.17 cЃa Simply stated. THE PETITIONERS WERE ABLE TO PROVE AND ESTABLISH THAT RESPONDENT PROCTER & GAMBLE PHILS. MORAL AND EXEMPLARY DAMAGES AS WELL AS LITIGATION COSTS AND ATTORNEYS FEES. They claim that they were recruited by the salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the existence of Promm-Gem and/or SAPS.18 cЃa Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its letter19 to SAPS dated February 24. OBVIOUSLY.

it is necessary to first determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors. our pronouncements with regard to SAPS are only for the purpose of determining the obligations of P&G. chanroblesvirtua|awlibary P&G also contends that the Labor Code neither defines nor limits which services or activities may be validly outsourced. the Court is constrained to wade into factual matters when there is insufficient or insubstantial evidence on record to support those factual findings. chanroblesvirtua|awlibary P&G further argues that there is no employment relationship between it and petitioners. we find the need to review the records to ascertain the facts. (2) paid their salaries. if any. It was Promm-Gem or SAPS that (1) selected petitioners and engaged their services.since they had been engaged to perform activities which are necessary or desirable in the usual business or trade of P&G. an employer can farm out any of its activities to an independent contractor. cЃa cЃa Our Ruling The petition has merit.20 cЃa Respondents Arguments On the other hand. Thus.22 Hence. however. regardless of whether such activity is peripheral or core in nature. it is worth mentioning that on January 29. chanroblesvirtua|awlibary At this juncture. (3) wielded the power of dismissal. the Court refrains from reviewing factual assessments of lower courts and agencies exercising adjudicative functions. or when too much is concluded.21 Also. It argues that findings of facts of the NLRC. particularly where the NLRC and the Labor Arbiter are in agreement. we deemed as waived the filing of the Comment of Promm-Gem on the petition. are deemed binding and conclusive on the Supreme Court. P&G points out that the instant petition raises only questions of fact and should thus be thrown out as the Court is not a trier of facts. and (4) had the power of control over their conduct of work. Occasionally. although SAPS was impleaded as a party in the proceedings before the Labor Arbiter and the NLRC.23 In the present case. 2007. inferred or deduced from the bare or incomplete facts appearing on record. The pertinent Labor Code provision on the matter states: . cЃa Labor-only contracting and job contracting In order to resolve the issue of whether P&G is the employer of petitioners. such as the NLRC. it was no longer impleaded as a party in the proceedings before the CA. chanroblesvirtua|awlibary As a rule. then they are its regular employees. It insists that the determination of whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of management prerogative.

the principal which decides to farm out a job or service to a contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the formers work. For this purpose.) Rule VIII-A. 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. Labor-only contracting is hereby declared prohibited. In such cases. 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.24 distinguishes between legitimate and labor-only contracting: cЃa xxxx Section 3.] work or service. if any. equipment. 106. and the contractual workers engaged by the contractor or subcontractor to accomplish the job[. there are three parties involved in these arrangements. work premises. supplies or places workers to perform a job. Prohibition against labor-only contracting. there exists a trilateral relationship under which there is a contract for a specific job. Trilateral Relationship in Contracting Arrangements. work or service for a principal. In so prohibiting or restricting. the contractor or subcontractor which has the capacity to independently undertake the performance of the job. machineries. shall be paid in accordance with the provisions of this Code. and the workers recruited and placed by such person are performing activities which are directly related to the principal business of such employer. chanroblesvirtua|awlibary xxxx Section 5. 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. In legitimate contracting. as amended by Department Order No. (Emphasis and underscoring supplied. labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits.ART. chanroblesvirtua|awlibary In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code. among others. he may make appropriate distinctions between labor-only contracting and job contracting 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. the employees of the contractor and of the latters subcontractor. and a contract of employment between the contractor or subcontractor and its workers. 18-02. in the same manner and extent that he is liable to employees directly employed by him. work or service. Hence. The Secretary of Labor may. Book III of the Omnibus Rules Implementing the Labor Code. work or service between the principal and the contractor or subcontractor. by appropriate regulations. and any of the following elements are present: . Contractor or subcontractor. restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code.

042. it is management prerogative to farm out any of its activities. regardless of whether such activity is peripheral or core in nature. the financial statements26 of Promm-Gem show that it cЃa has authorized capital stock of P1 million and a paid-in capital.28 It also had under its name three cЃa cЃa . but also the manner and means to be used in reaching that end. supplies or places workers to perform a job.00 as of 1990. of P500.000. the law and its implementing rules allow contracting arrangements for the performance of specific jobs. supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal. work or service to be performed and the employees recruited. actually and directly used by the contractor or subcontractor in the performance or completion of the job. or ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee. supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal. (Underscoring supplied) In the instant case. or capital available for operations.27 It also has long term assets worth P432.) Clearly. chanroblesvirtua|awlibary The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code. work or service to be performed and the employees recruited. as amended. work or service for a principal25 and any of the following elements are present: cЃa i) The contractor or subcontractor does not have substantial capital or investment which relates to the job. to determine not only the end to be achieved. Promm-Gem has also proven that it maintained its own warehouse and office space with a floor area of 870 square meters. chanroblesvirtua|awlibary To emphasize. there is labor-only contracting when the contractor or sub-contractor merely recruits. tools. Indeed. implements. works or services. However. work or service contracted out.32. x x x x (Underscoring supplied.28 and current assets of P719. machineries and work premises. or ii) [T]he contractor does not exercise the right to control over the performance of the work of the contractual employee.895. it must be made to an independent contractor because the current labor rules expressly prohibit labor-only contracting. equipment. chanroblesvirtua|awlibary The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed.i) The contractor or subcontractor does not have substantial capital or investment which relates to the job. chanroblesvirtua|awlibary "Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations. in order for such outsourcing to be valid.

morals. chanroblesvirtua|awlibary On the other hand. 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. necessary for them to perform their work. National Labor Relations Commission.registered vehicles which were used for its promotional/merchandising business. the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31. we find that Promm-Gem has substantial investment which relates to the work to be performed. Promm-Gem also issued uniforms to them. Substantial capital refers to capitalization used in the performance or completion of the job.31 Under the circumstances. PMCI cannot qualify as an independent contractor. employees. work or service contracted out. This.250. It had 6-month contracts with P&G.00. equipment or other assets. It is also relevant to mention that Promm-Gem already considered the complainants working under it as its regular. Promm-Gem cannot be considered as a labor-only contractor. cЃa cЃa cЃa cЃa chanroblesvirtua|awlibary Furthermore.00."35 Applying the same rationale to the present case. tapes. an activity that has already been considered by the Court as doubtlessly directly related to the manufacturing business.has no substantial capital. We find that it is a legitimate independent contractor. 18-02. In the present case. it is clear that SAPS having a paid-in capital of only P31.32 This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE Department Order No. 18-02. the paid-in capitalization of PMCI amounting to P75. chanroblesvirtua|awlibary In Vinoya v. SAPS lack of substantial capital is underlined by the records36 which show that its payroll for its merchandisers alone for one month would already total P44. Furthermore.38 which is the principal business of P&G. SAPS failed to show that its paid-in capital of P31.34 the Court held that "[w]ith the current economic atmosphere in the country.561.250. not merely contractual or project.000.37 Yet SAPS failed to show that it could complete the 6-month contracts using its own capital and investment. These factors negate the existence of the element specified in Section 5(i) of DOLE Department Order No. such as markers. there is no showing of substantial investment in tools. cЃa cЃa cЃa chanroblesvirtua|awlibary The records also show that Promm-Gem supplied its complainant-workers with the relevant materials. SAPS has failed to show substantial capital. as such.00 is sufficient for the period required for it to generate its needed revenue to sustain its operations independently. Its capital is not even sufficient for one months payroll. cЃa chanroblesvirtua|awlibary . liners and cutters.00 cannot be considered as substantial capital and. the petitioners have been charged with the merchandising and promotion of the products of P&G. 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.29 Promm-Gem also has other clients30 aside from P&G. furthermore. good customs or public order.250 . which speaks of contractual employees.33 cЃa cЃa Under the circumstances. There is no other evidence presented to show how much its working capital and assets are. we find that the former is engaged in "labor-only contracting".

having worked under. 1992. Inc. Tadeo Durano. Philip M. Rosedy O. Allan Baltazar. the employer shall not terminate the services of an employee except for a just43 or authorized44 cause. is deemed as an act of disloyalty prejudicial to the interests of our Company: serious misconduct and breach of trust reposed upon you as employee of our Company which [co]nstitute just cause for the termination of your employment... Inc. Rolando J. Laban. Liongson. Jose Fernando Gutierrez. Ramil Reyes. has been terminated. Talledo. Renato dela Cruz.40 cЃa cЃa Consequently. Edwin Garcia. Melencio Casapao. as follows: xxxx This informs you that effective May 5. Bonifacio Ortega. De Andres. Coldayon. Marino Maranion. Cresente J. Cruz. Santos Bacalso. Antonio Dacuma. your employment with our company. Julio Rey. Nestor Ignacio. Maximino Pascual. the Labor Code itself establishes an employer-employee relationship between the employer and the employees of the labor-only contractor. cЃa chanroblesvirtua|awlibary The following petitioners..are considered as the employees of P&G: Arthur Corpuz. Miranda.. John Sumergido.42 cЃa Termination of services We now discuss the issue of whether petitioners were illegally dismissed. Arsenio Soriano. Yordan. Melchor Cardano. Jr. Aladino Gregore. cЃa cЃa chanroblesvirtua|awlibary In the instant case. Garcia. Jr. Raul Dulay. Roberto Rosales. Jr.which engaged in labor-only contracting -. Orlando P. and Joeb Aliviado. Artuz Bustenera. Ferdinand Salvo. Promm-Gem. Roberto B. Elias Basco and Dennis Dacasin. Balangue."Where labor-only contracting exists. Laspoña. Enrique F. Jimenez. Eric Aliviado. Mario N. Monchito Ampeloquio. Albert Leynes. Loza. Rodolfo C. Roy. Leonardo F. Jr. Samson Basco. Ramiro Pita. Franz David. and been dismissed by Promm-Gem. Noli Gabuyo. Abraham Basmayor. We find your expressed admission. Jimenez. Gilbert V. Fernando Macabenta. Gerry Gatpo. Arnel Endaya.. Estanislao Buenaventura. Joseph Banico. Toledo. Joel Billones. Roberto Enriquez. Lope Salonga. Emmanuel A. and assailing the integrity of the Company as legitimate and independent promotion firm. Alejandrino Abaton. the termination letters given by Promm-Gem to its employees uniformly specified the cause of dismissal as grave misconduct and breach of trust.. Jr. Reynaldo Jacaban.. that you considered yourself as an employee of Procter & Gamble Phils. Emil Tawat.. Orlando S. Ernesto Soyosa. Jr. Ernesto Calanao. Romeo Viernes. Rainer N. Rolando Romasanta. Talledo. Jr. Roehl Agoo. Edgardo Quiambao. Pamintuan. Fred P.. Pedro G. Lorenzo Platon."39 The statute establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws. Jonathan Mateo. are considered the employees of Promm-Gem. Alstando Montos. having been recruited and supplied by SAPS41 -. Jr. 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. Mario P. the following petitioners. Nestor Esquila. Jr. Restituto C. Ruben Vasquez. Salvador.. Arnold D. In cases of regular employment. Armando Villar. not of P&G: Wilfredo Torres. Jr.. chanroblesvirtua|awlibary . Willie Ortiz. German Guevara. Romeo Vasquez.

chanroblesvirtua|awlibary While Promm-Gem had complied with the procedural aspect of due process in terminating the employment of petitioners-employees.47 cЃa cЃa In other words. petitioners-employees of Promm-Gem may have committed an error of judgment in claiming to be employees of P&G. must be based on the willful breach of the trust reposed in the employee by his employer. thoughtlessly. we find no valid cause for the dismissal of petitioners-employees of Promm-Gem. chanroblesvirtua|awlibary With regard to the petitioners placed with P&G by SAPS. we find them guilty of only simple misconduct for assailing the integrity of Promm-Gem as a legitimate and independent promotion firm.49 Loss of trust and confidence. The records show that upon receipt by SAPS of P&Gs letter terminating their . is premised on the fact that the employee concerned holds a position of responsibility or of trust and confidence.. unlawful in character implying wrongful intent and not mere error of judgment.48 In the instant case. handling or care and protection of the property and assets of the employer. he must be invested with confidence on delicate matters. cannot be a valid basis for dismissing an employee. It is equally important and required that the act or conduct must have been performed with wrongful intent. a forbidden act. in order to constitute serious misconduct which will warrant the dismissal of an employee under paragraph (a) of Article 282 of the Labor Code.50 In the instant case. knowingly and purposely. they were given no written notice of dismissal. A misconduct which is not serious or grave. it is not sufficient that the act or conduct complained of has violated some established rules or policies. as a cause for termination of employment. without justifiable excuse. And. the dismissal is illegal. Ordinary breach will not suffice. i. and (c) must show that the employee has become unfit to continue working for the employer. Neither is there any evidence to show that they are unfit to continue to work as merchandisers for Promm-Gem. cЃa chanroblesvirtua|awlibary Meanwhile. as that existing in the instant case. giving two notices and in between such notices.46 To be a just cause for dismissal. loss of trust and confidence. in order to constitute a just cause for dismissal. The misconduct to be serious must be of such grave and aggravated character and not merely trivial and unimportant. the transgression of some established and definite rule of action. as a ground for dismissal. Hence. As such.x x x x45 cЃa Misconduct has been defined as improper or wrong conduct. heedlessly or inadvertently. such as custody. but it cannot be said that they were motivated by any wrongful intent in doing so. such misconduct (a) must be serious. the petitioners-employees of Promm-Gem have not been shown to be occupying positions of responsibility or of trust and confidence. As such. it failed to comply with the substantive aspect of due process as the acts complained of neither constitute serious misconduct nor breach of trust.e. cЃa chanroblesvirtua|awlibary cЃa All told. as distinguished from an act done carelessly. an opportunity for the employees to answer and rebut the charges against them. a dereliction of duty. (b) must relate to the performance of the employees duties. the act complained of must be work-related and must show that the employee is unfit to continue to work for the employer. A breach of trust is willful if it is done intentionally.

we were no longer allowed to work and we were refused entrance by the security guards posted. NON Sales Merchandising III 6. 1993. all merchandisers of Procter and Gamble under S[APS] who filed a case in the Dept. Quezon City Attention: Mr. 1993. Saturnino A. we reported to our respective outlet assignments. 1993. But. Ponce President & General Manager Gentlemen: Based on our discussions last 5 and 19 February 1993. On March 11. (Sgd. To prove that Procter and Gamble was the one responsible in our dismissal. On March 12. According to the security guards. Saturnino A. they in turn verbally informed the concerned petitioners not to report for work anymore. The concerned petitioners related their dismissal as follows: xxxx 5. 1993. We were told by Mr. This is without prejudice to whatever obligations you may have to the company under the abovementioned contract. of Labor are already dismissed as per letter of Procter and Gamble dated February 25. x x x52 cralaw cЃa . 1993. Ponce that we should already stop working immediately because that was the order of Procter and Gamble. he showed to us the letter51 dated February 24. x x x cЃa February 24. 142 Kamias Road.) EMMANUEL M. According to him he could not do otherwise because Procter and Gamble was the one paying us.. 1993 Sales and Promotions Services Armons Bldg. we were called to a meeting at SAPS office. this formally informs you that we will not be renewing our Merchandising Services Contract with your agency. Very truly yours. chanroblesvirtua|awlibary Please immediately undertake efforts to ensure that your services to the Company will terminate effective close of business hours of 11 March 1993."Merchandising Services Contact" effective March 11.

54 In the instant case. It is evident that SAPS does not carry on its own business because the termination of its contract with P&G automatically meant for it also the termination of its employees services. Hence. and for no valid cause bellows oppression and utter disregard of the right to due process of the concerned petitioners. we cannot consider SAPS as an independent contractor. inclusive of allowances. cЃa chanroblesvirtua|awlibary Lastly. unlike Promm-Gem which dismissed its employees for grave misconduct and breach of trust due to disloyalty. It is obvious from its act that SAPS had no other clients and had no intention of seeking other clients in order to further its merchandising business.Neither SAPS nor P&G dispute the existence of these circumstances. Under the circumstances prevailing in the instant case. under Article 279 of the Labor Code. there being no evidence of bad faith. the burden of proof rests upon the employer to show that the dismissal is for just and valid cause. P&G failed to discharge the burden of proving the legality and validity of the dismissals of those petitioners who are considered its employees. and from admission to the work place. existed to cater solely to the need of P&G for the supply of employees in the latters merchandising concerns only.55 cЃa With regard to the employees of Promm-Gem.53 In termination cases. it must be emphasized that the onus probandi to prove the lawfulness of the dismissal rests with the employer. fraud or any oppressive act on the part of the latter. the records show that it dismissed its employees through SAPS in a manner oppressive to labor. cЃa . an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges.57 Hence. Moral and exemplary damages are recoverable where the dismissal of an employee was attended by bad faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals. after just a one-day verbal notice. The sudden and peremptory barring of the concerned petitioners from work. Parenthetically. chanroblesvirtua|awlibary Going back to the matter of dismissal. chanroblesvirtua|awlibary As for P&G. Hence. From all indications SAPS. having been illegally dismissed are entitled to reinstatement without loss of seniority rights and with full back wages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement. good customs or public policy. we find no support for the award of damages. SAPS dismissed its employees upon the initiation of P&G. an award of moral damages is called for. cЃa cЃa Damages We now go to the issue of whether petitioners are entitled to damages. and other benefits or their monetary equivalent from the time the compensation was withheld up to the time of actual reinstatement. chanroblesvirtua|awlibary Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed in bad faith and were compelled to litigate or incur expenses to protect their rights by reason of the oppressive acts56 of P&G. the dismissals necessarily were not justified and are therefore illegal. all the petitioners.

Emil Tawat. SO ORDERED. Enrique F. Mario N. Jimenez. Laspoña. Jr. Roehl Agoo. The Decision dated March 21. Joel Billones. Loza. SP No. Rodolfo C. P25. is further ORDERED to pay each of those petitioners considered as its employees.00 as moral damages plus ten percent of the total sum as and for attorneys fees. Gilbert Y. Jr. Santos Bacalso. namely Arthur Corpuz.. Cresente J. 2003 are REVERSED and SET ASIDE. Allan Baltazar. 52082 and the Resolution dated October 20.. and ten percent of the total sum as and for attorneys fees as stated above. Leonardo F. of petitioners backwages and other benefits. Elias Basco and Dennis Dacasin. Arnold D. Edgardo Quiambao. Cruz. Jimenez. Orlando P. Miranda. Bonifacio Ortega. Melencio Casapao. Toledo. De Andres. Rainer N. Noli Gabuyo.. Rolando J. Balangue.000. Garcia. Jr. Philip M. 2003 of the Court of Appeals in CA-G. Rosedy O. Inc. the petition is GRANTED. Jr. Pedro G. Alstando Montos. Roberto Enriquez. Pamintuan.. Gerry Gatpo. Jr. Procter & Gamble Phils. Eric Aliviado.. within 30 days from receipt of this Decision. Abraham Basmayor. and for immediate execution. Romeo Viernes. Inc.. Franz David. Romeo Vasquez. Yordan.. are ORDERED to reinstate their respective employees immediately without loss of seniority rights and with full backwages and other benefits from the time of their illegal dismissal up to the time of their actual reinstatement. Orlando S. Restituto C.WHEREFORE. Fred P.R. Salvador. German Guevara. Talledo. Renato dela Cruz. Inc. Lope Salonga. Jonathan Mateo. Nestor Ignacio. Monchito Ampeloquio. chanroblesvirtua|awlibary Let this case be REMANDED to the Labor Arbiter for the computation. Artuz Bustenera. Roy. Rolando Romasanta. Procter & Gamble Phils. Samson Basco.. Arsenio Soriano. Lorenzo Platon. Jr. Arnel Endaya. Roberto B. . Estanislao Buenaventura. Talledo. Coldayon. and Promm-Gem.

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