PHILIPPINE AIRLINES, INC. VS.
ENRIQUE LIGAN FACTS:
G.R. No. 1464408 | 29 Feb 2008 | | Carpio-Morales | Santos
PETITIONER: Philippine Airlines, Inc.
RESPONDENTS:
RECIT-READY: PAL and Synergy Services Corporation entered into an
Agreement whereby Synergy would provide loading, unloading, delivery
of baggage and cargo services to and from petitioner’s aircraft at the
Mactan Station. Respondents having been assigned by Synergy to
petitioner, filed complaints before the NLRC against petitioner, Synergy,
and their respective officials for underpayment, regularization, non-
payment of premium pays. They contest that the duties they performed
are for the benefit of petitioner since their job is directly related to its
business or trade. Labor-only contracting is present in any of the
following instances: (a) the contractor/subcontractor does not have
substantial capital or investment which relates to the job to be performed
and the employees recruited and the employers recruited, supplied or
placed by such contractor/subcontractor are performing activities which
are directly related to the main business of the principal; (b) the
contractor does not exercise the right to control over the performance of
the work of the contractual employee. Petitioner failed to present
evidence on the contractor’s substantial capital. The respondents were
likewise placed to work alongside petitioner’s regular employees, which is
an indicium of labor-only contracting. It is clear respondents perfomed
tasks which are usually necessary and desirable in the air transportation
business of petitioner, they should be deemed its regular employees and
Synergy as a labor-only contractor.
Most importantly, the express provision in the Agreement that Synergy
was an independent contractor and there would be no employer-
employee relationship between Synergy and its employees and PAL is
not legally binding and conclusive as contractual provisions are not valid
determinants of the existence of such relationship.
DOCTRINE: Contractual provisions are not valid determinants of the
existence of an employer-employee relationship to evade the liability of a
labor-only contracting arrangement. It is the totality of the facts and
surrounding circumstances of the case which is determinative of
the parties’ relationship.
1. On 15 July 1991, Philippines Airlines (“owner”) and Synergy Services
Corporation (“contractor”), entered into an Agreement whereby
Synergy undertook to provide loading, unloading, delivery of
baggage and cargo and other related services to and from
petitioner’s aircraft at the Mactan Station.
2. The Agreement contained the following provisions:
- Sec. 1.2. The CONTRACTOR shall furnish all the necessary
capital, workers, loading, unloading, and delivery materials,
facilities, supplies, equipment and tools for the satisfactory
performance and execution of the services.
- Sec. 6. xxx CONTRACTOR shall require all its workers,
employees, suppliers, and visitors to comply with the OWNER’s
rules, regulations, procedures and directives relative to the
safety and security of OWNER’s premises, properties and
operations xxx OWNER may require CONTRACTOR to dismiss
immediately any person employed by therein by CONTRACTOR
who in CONTRACTOR’s mind is incompetent/misconducts
himself/ does not comply with the OWNER’s instructions.
- It id expressly stated in the Agreement that Synergy is an
independent contractor and no employer-employee relationship
between Synergy and/or its employees on one hand, and
Philippine Airlines on the other hand.
3. Except for Auxtero, the rest of the respondents have been assigned
by Synergy to petitioner following the execution of the Agreement.
On 3 March 1992, they filed complaints before the NLRC against
petitioner, Synergy and their respective officials for underpayment,
non-payment of premium pay for holidays and rest days, service
incentive pay, 13th month pay and allowances, and regularization.
Respondents claim they performed duties for the benefit of the
petitioner since their job is directly related to its business.
- Not relevant but just in case she asks: Respondent Auextero
filed an illegal dismissal case against PAL and Synergy. The
Court deemed it wise to consolidate both cases.
4. Labor Arbiter dismissed the complaint. NLRC reversed, and declared
Synergy Services Corporation as a labor-only contractor. It ordered
PAL to accept all the complainants as its regular employees. CA
affirmed.
5. Petitioner argues before the SC the following:
a) Mere compliance with substantial capital requirement
suffices to be considered a legitimate contractor;
b) The law does not prohibit an employer from enganging an
 independent contract like Synergy, which has substantial
capital in carrying on an independent business of contracting
to perform specific jobs;
c) Its contracting out to Synergy various services like janitorial,
aircraft cleaning, baggage-handling, which are directly
related to its business, does not make respondents
employees.
ISSUES: 1. Whether Synergy is a labor-only contractor or a legitimate
contractor? Synergy is a labor-only contractor.
RULING:
1. According to Art. 106 of the LC, labor-only contracting is present when
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 perfoming activities which are directly related to the principal
busness 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.
Art. 106 is supplemented by Sec. 5 of D.O. No. 18-2, Series of 2002 (see
updated version, D.O. No. 174, Series of 2017). It provides labor-only
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies, or places woekers to perform a job,
work, service for a principal, and any of the following elements are present:
a) The contractor/subcontractor does not have substantial capital or
investment which relates to the job to be performed and the
employees recruited and the employers recruited, supplied or placed
by such contractor/subcontractor are performing activities which are
directly related to the main business of the principal;
OR
b) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
Even if only of one of the elements is present, there is labor contracting.
Under the control test element (b), one who claims to be an independent
contractor has to prove that he contracted to do the work according to his
own methods and without being subject to the employer’s control except only
as to the results.
2. Applying the first element, petitioner asserts that Synergy has substantial
capital to engage in legitimate contracting, it failed to present evidence
thereon. The respondents were placed to work alongside petitioner’s regular
employees, which is an indicium of labor-only contracting. The NLRC also
found that petitioner’s managers and supervisors approved respondents’
weekly work assignments, and referred to respondents and other regular
PAL employees as “station attendants”.
For the second element, petitioner insists that it was Synergy’s supervisors
who actually supervised respondents. The Court noted it likewise failed to
present evidence thereon, and did not even bother to identify the supervisors
assigned to monitor the respondents. The Agreement itself does not lend
support to petitioner’s claim. (See Sec. 6 of the Agreement above)
It is clear respondents perfomed tasks which are usually necessary and
desirable in the air transportation business of petitioner, they should be
deemed its regular employees and Synergy as a labor-only contractor. Since
respondents are considered regular employees, they acquired security of
tenure. As such, they could only be dismissed by petitioner, the real
employer, on the basis of just cause and observance of due process.
3. The express provision in the Agreement that Synergy was an independent
contractor and there would be no employer-employee relationship between
Synergy and its employees and PAL is not legally binding. Contractual
provisions are not valid determinants of the existence of an employer-
employee relationship to evade the liability of a labor-only contracting
arrangement. It is the totality of the facts and surrounding
circumstances of the case which is determinative of the parties’
relationship.