MARTINEZ, KYRENE EUNICE M.

2017010299
CONTRACTING OUT

1.) Yes. From the time Empire contracted the services of Style, both engaged in labor-only
contracting. As per jurisprudence it was ruled that where any of the following elements is
present, there is labor-only contracting.
 
The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work, or service to be performed and the employees recruited, supplied, or
placed by such contractor or subcontractor are performing activities which are directly related
to the main business of the principal. The contractor does not exercise the right to control over
the performance of the work of the contractual employee. The first element is present herein,
as Style has no substantial capital or investment in engaging in the supply of services contracted
out by Empire which is directly related to the marketing and promotion of its clothing line. The
second element is present as it is inevitable for Empire to direct the activities of the TMRs to
properly market and promote its product line. The subsequent contract of Empire with Wave
did not affect the regular employment of the TMRs with Empire as, through the Marketing
Director of Empire, the TMRs were under the control of Empire. Thus, the five-month
employment contract entered by the TMRs with Wave did not divest them of their regular
employment status with Empire. In addition, such scheme undermined the security of tenure of
the TMRs which is constitutionally guaranteed, hence, the contract of the TMRs with Wave is
void ab initio.

2.) Yes. People Plus is a labor-only-contractor because it is not substantially capitalized. Neither
does it carry on an independent business in which it uses its own investment in the form of
tools, equipment, machineries, or work premises. Hence, it is just an agent or recruiter of
workers who perform work directly related to the trade of Star Crafts. Since both the
essential element and the conforming element of labor-only contracting are present, Star
Crafts becomes the employer of the supplied worker.
As principal, Star Crafts will always be an employer in relation to the workers supplied by its
contractor. Its status as employer is either direct or indirect depending on whether the
contractor is legitimate or not. Thus, even if People Plus were a legitimate job contractor, still
Star Crafts will be treated as a statutory employer for purposes of paying the workers’ unpaid
wages and benefits.

3.) Constant and Able should be held solidarily liable for the unpaid wages and benefits, as well
as backwages and separation pay, based on Article 109 of the Labor Code which provides
that "every employer or indirect employer shall be held responsible with his contractor or
 subcontractor for any violation of any provision of this Code." and should be held solidarily
liable for the unpaid wages and benefits, and should order Constant, as the workers' direct
employer, to be solely liable for the backwages and separation pay. It should be held
solidarily liable for the unpaid wages and benefits and the backwages since these pertain to
labor standard benefits for which the employer and contractor are liable under the law,
while Constant alone – as the actual employer - should be ordered to pay the separation
pay. Lastly Constant and Able should be held solidarily liable for the unpaid wages and
benefits, and Constant should be held liable for their backwages and separation pay unless
Able is shown to have participated with malice or bad faith in the workers' dismissal, in
which case both should be held solidarily liable.

4.) Yes, since Reach-All does does not qualify as independent contractor employer, its clients
being the source of the employees’ salaries.

5.) Yes, their demand is valid. The employees employment period had already exceeded the 1
year period threshold and performs work that are necessary and desirable to the business
of the employer hence should be declared regular employees.

6.) A.) The Service Agreement is valid. The law, Art. 106, does not invalidate an Independent
Contractors Agreement because the Independent Contractor has only one (1) client, or that
the employer of the independent contractor is one of the major owners of the employing
establishment. MMSI, is an independent business, adequately capitalized and assumed all
the responsibilities of a legitimate Independent Contractor.

B.) The employers can file their claims against Jolli- Mac pursuant to Art. 106 of the Labor
Code which reads: “Contractor or subcontractor, 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 employee directly employed by him.

7.) A.) Yes, the stipulation of no employer-employee relationship is binding on labor officials so
long as the stipulation is unambiguous and clearly expressed.

B.) RSC member’s employer is the RSC Cooperative. As per the 4-fold test the elements of
such are all exercised by the Cooperative such as the payment if wages of the members
which and it can be assumed that since they pay the wages, they should also have the
power to control them and dismiss the members as well.
 C.) It is not enough to show substantial capitalization or investment in the form of tools,
equipment, machinery, and work premises. In addition, the following factors have to be
considered: (a) whether the contractor is carrying on an independent business; (b) the
nature and extent of the work; (c) the skill required; (d) the term and duration of the
relationship; (e) the right to assign the performance of specified pieces of work; (f) the
control and supervision of the workers; (g) the power of employer with respect to the
hiring, firing and payment of workers of the contractor; (h) the control and supervision of
the workers; (g) the power of employer with respect to the hiring, firing and payment of
workers of the contractor; (h) the control of the premises; (j) the mode, manner and terms
of payment.

8.) a.) As a rule, the security guards of a private security guard agency are the employees of the
latter and not of the establishment that has entered a contract with the private security guard
agency for security services.  But under the facts in the question, Baron Hotel appear to have
hired the security guards, to have paid their wages, to have the power to promote, suspend or
dismiss the security guards and the power of control over them, namely, the security guards
were under orders of Baron Hotel as regard their employment. Because of the above-
mentioned circumstances, Baron Hotel is the employer of the security guards.

b.) It is lawful for a private security guard agency to place its security guard on a “floating
status” if it has no assignment to give to said security guards. But if the security guards are
placed on a “floating status” for more than six (6) months, the security guards may consider
themselves as having been dismissed.

c.) Yes, the Labor Arbiter may entertain the third-party complaint so long as it is filed within the
period provided for by law.