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Tabas vs. California Manufacturing Co., Inc.

[169 SCRA 497, GR 80680]

Posted by Pius Morados on November 17, 2011
(Labor Standards Both employer and labor only contractor may be liable)
Facts: Petitioners filed a petition in the NLRC for reinstatement and payment of various
benefits against California Manufacturing Company. The respondent company then
denied the existence of an employer-employee relationship between the company and the
Pursuant to a manpower supply agreement, it appears that the petitioners prior their
involvement with California Manufacturing Company were employees of Livi Manpower
service, an independent contractor, which assigned them to work as promotional
merchandisers. The agreement provides that:
California has no control or supervisions whatsoever over [Livis] workers with respect
to how they accomplish their work or perform [Californias] obligation It was further
expressly stipulated that the assignment of workers to California shall be on a seasonal
and contractual basis; that cost of living allowance and the 10 legal holidays will be
charged directly to [California] at cost ; and that payroll for the preceding [sic] week
shall be delivered by Livi at Californias premises.
Issue: WON principal employer is liable.
Held: Yes. The existence of an employer-employee relation cannot be made the subject
of an agreement.
Based on Article 106, labor-only contractor is considered merely as an agent of the
employer, and the liability must be shouldered by either one or shared by both.
There is no doubt that in the case at bar, Livi performs manpower services, meaning to
say, it contracts out labor in favor of clients. We hold that it is one notwithstanding its
vehement claims to the contrary, and notwithstanding the provision of the contract that it
is an independent contractor. The nature of ones business is not determined by selfserving appellations one attaches thereto but by the tests provided by statute and
prevailing case law. The bare fact that Livi maintains a separate line of business does not
extinguish the equal fact that it has provided California with workers to pursue the latters
own business. In this connection, we do not agree that the petitioners had been made to
perform activities which are not directly related to the general business of
manufacturing, Californias purported principal operation activity. Livi, as a
placement agency, had simply supplied California with the manpower necessary to carry
out its (Californias) merchandising activities, using its (Californias) premises and