Guarin vs National Labor Relations Commission

Summary of a Philippine Supreme Court Decision

G.R. No. 86010 October 3, 1989
LEOPOLDO GUARIN and ONE HUNDRED TWENTY (120) OTHERS, petitioners, vs.NATIONAL
LABOR RELATIONS COMMISSION, LIPERCON SERVICES, INC., and/or NOVELTY PHILIPPINES,
INC., respondents.
Facts of the case:
In 1983, private respondents Lipercon Services, Inc. and Novelty Philippines, Inc. entered
into a "Contract of Services" in which the former, for a contract price, undertook to provide
the latter with Contractual Laborers/Helpers/Janitors. For this reason, petitioners were
hired by Lipercon to work with Novelty as helpers, janitors, janitresses, firemen, and
mechanics. Petitioners worked with Novelty as such for three years. In 1986, Novelty
terminated its agreement with Lipercon and consequently petitioners were dismissed.
Petitioners filed an illegal dismissal case against Novelty and Lipercon, in which case the
Labor Arbiter ruled that petitioners were regular employees of Novelty and declared their
dismissal illegal. Both employers appealed. The National Labor Relations Commission
reversed the Labor Arbiter's decision and ruled that Lipercon was an independent
contractor. It ordered Lipercon to reinstate petitioners.
Issue:
Whether or not Lipercon is an independent contractor and the petitioners are its
employees.
Ruling:
The Supreme Court ruled that as provided in Article 106 of the Labor Code, and as can be
gleaned from the agreement between Lipercon and Novelty, it was clear that Lipercon was a
"labor-only" contractor and thus served merely an agent of Novelty tasked to provide it with
manpower. Lipercon's contention that it is an independent contractor because it claimed to
have substantial capital and investment in tools and equipment was not given merit because
it was not able to present substantial evidence to that effect. On the contrary, the Supreme
Court held that petitioners' works were directly related to the daily operations of a garment
factory since gardeners work to maintain clean and well-kept grounds around the factory,
mechanics to keep the machines functioning properly, and firemen to look out for fires. This
fact is confirmed, according to the Court, by Novelty's rehiring the workers or renewing the
contract with Lipercon every year from 1983 to 1986, a period of three (3) years.
As Lipercon was a "labor-only" contractor, the workers it supplied Novelty became regular
employees of the latter and the Court ordered their reinstatement with backwages.