bank.

There was some question as to when Ricardo Orpiada commenced

Phil. Bank Communications v. NLRC rendering services to the bank. As noted above, the letter agreement was dated
January 1976. However, the position paper submitted by CESI to the National
Person Assigned: BARORO
Labor Relations Commission stated that CESI hired Ricardo Orpiada on 25 June
Docket/SCRA; Date: G.R. No. L-66598. December 19,1986.
1975 as a Tempo Service employee, and assigned him to work with the
Ponente: FELICIANO, J.
petitioner bank "as evidenced by the appointment memo issued to him on 25
Topic: Labor only contracting
June 1975."
3. On or about October 1976, the petitioner requested CESI to withdraw
Doctrine relevant to topic:
Orpiada's assignment because, in the allegation of the bank, Orpiada's services
1. A "labor only contractor" is a mere agent of the employer and the
"were no longer needed."
employees of the former enjoy the status of being as if they were directly
4. Orpiada instituted a complaint in the Department of Labor (now Ministry
employed by the employer.
of Labor and Employment) against the petitioner for illegal dismissal and failure
2. An undertaking by a labor supplier which does not involve performance
to pay the 13th month pay provided for in Presidential Decree No. 851.
of a specific job, but to provide its client with a certain number of people to the
5. Office of the Regional Director, Regional Office No. IV of the
bank to carry out the work of messengers, which is directly related to a bank 's
Department of Labor, issued an order dismissing Orpiada's complaint for failure
operations, makes the labor supplier a mere "labor only contractor" or placement
of Mr. Orpiada to show the existence of an employer-employee relationship
agency.
between the bank and himself.
3. Workers placed in a bank to work as messengers for a contract period
6. Orpiada succeeded in having his complaint certified for compulsory
that is not fixed makes the said messengers acquire the status of permanent
arbitration. During the compulsory arbitration proceedings, CESI was brought
employees of the bank after working in the bank's premises for more than one
into the picture as an additional respondent by the bank. Both the bank and
year.
CESI stoutly maintained that CESI (and not the bank) was the employer of
Orpiada.
FACTS:
7. Labor Arbiter Dogelio rendered a decision: “respondent bank is hereby
1. Petitioner Philippine Bank of Communications and the Corporate
ordered to reinstate complainant to the same or equivalent position with full back
Executive Search Inc. (CESI) entered into a letter agreement dated January
wages and to pay the latter's 13th month pay for the year 1976.”
1976 under which CESI undertook to provide "Tempo[rary] Services" to
8. NLRC promulgated its decision affirming the award of the Labor Arbiter
petitioner consisting of the "temporary services" of eleven (11) messengers. The
9. Petitioner bank maintains that no employer-employee relationship was
contract period is described as being "from January 1976—." The petitioner in
established between itself and Ricardo Orpiada and that Ricardo Orpiada was
truth undertook to pay a "daily service rate of P18," on a per person basis.
an employee of CESI and not of the bank.
2. Attached to the letter agreement was a "List of Messengers assigned at
Philippine Bank of Communications" which list included, as item No. 5 thereof,
ISSUES:
the name of private respondent Ricardo Orpiada. Orpiada was thus assigned to
1. Whether or not an employer-employee relationship existed between the
work with the petitioner bank, he rendered services to the bank, within the
petitioner bank and private respondent Ricardo Orpiada
premises of the bank and alongside other people also rendering services to the

1
2. Whether or not the relationship between petitioner bank and CESI is
one of employer and job (independent) contractor or one of employer and "labor-
only" contractor?
RULING:
1. Yes. Certain factors to be taken into account in determining the
existence of an employer-employee relationship. These factors are: 1) The
selection and engagement of the (putative) employee; 2) The payment of
wages; 3) The power of dismissal; and 4) The power to control the (putative)
employees' conduct, although the latter is the most important element.
In the present case, Orpiada was not previously selected by the bank. Rather,
Orpiada was assigned to work in the bank by CESI. CESI had hired Orpiada
from the outside world precisely for the purpose of assigning or seconding him
to the bank. With respect to the payment of Orpiada's wages, the bank remitted
to CESI amounts corresponding to the "daily service rate" of Orpiada and the
others similarly assigned by CESI to the bank, and CESI paid to Orpiada and
the others the wages pertaining to them. Orpiada was listed in the payroll of
CESI, with CESI deducting amounts representing his Medicare and Social
Security System premiums. Orpiada was hired by CESI specifically for
assignment with the bank and that upon his withdrawal from such assignment
upon request of the bank, Orpiada's employment with CESI was also severed,
until some other client of CESI showed up in the horizon to which Orpiada could
once more be assigned. Orpiada performed his functions within the bank's
premises, and not within the office premises of CESI. As such, Orpiada must
have been subject to at least the same control and supervision that the bank
exercises over any other person physically within its premises and rendering
services to or for the bank, in other words, any employee or staff member of the
bank.
The second ("payment of wages") and third ("power of dismissal") factors
suggest that the relevant relationship was that subsisting between CESI and
Orpiada, a relationship conceded by CESI to be one between employer and
employee. Upon the other hand, the first ("selection and engagement") and
fourth ("control of employee's conduct") factors indicate that some direct
relationship did exist between Orpiada and the bank and that such relationship
may be assimilated to employment. Perhaps the most important circumstance
which emerges from an examination of the facts of the trilateral relationship
between the bank, CESI and Orpiada is that the employer-employee
relationship between CESI and Orpiada was established precisely in
anticipation of, and for the very purpose of making possible, the secondment of
Orpiada to the bank.
2. CESI is a labor-only contractor of petitioner bank.
ART. 106. Contractor or subcontractor.—Whenever an employer enters into a
contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions in this Code. In the event that the
contractor or sub-contractor 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 employees directly employed by him.
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,
equipment, machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities which are directly
related to the principal business 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.
When a contractor fails to pay the wages of his employees in accordance with
the Labor Code, the employer who contracted out the job to the contractor
becomes jointly and severally liable with his contractor to the employees of the
latter "to the extent of the work performed under the contract" as if such
employer were the employer of the contractor's employees. The law itself, in
other words, establishes an employer-employee relationship between the
employer and the job contractor's employees for a limited purpose, i.e., in order
to ensure that the latter get paid the wages due to them. The law holds both the
2
employer and the "labor-only" contractor responsible to the latter's employees
for the more effective safeguarding of the employees' rights under the Labor
Code.
In contrast, job contracting—contracting out a particular job to an independent
contractor: (1) The contractor carries on an independent business and
undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of
his employer or principal in all matters connected with the performance of the
work except as to the results thereof; (2) The contractor has substantial capital
or investment in the form of tools, equipment, machineries, work premises, and
other materials which are necessary in the conduct of his business.
eleven (11) messengers were thus supposed to render "temporary" services for
an indefinite or unstated period of time. Ricardo Orpiada himself was assigned
to the bank's offices from 25 June 1975 and rendered services to the bank until
sometime in October 1976, or a period of about sixteen months. Under the Labor
Code, however, any employee who has rendered at least one year of service,
whether such service is continuous or not, shall be considered a regular
employee.
WHEREFORE, the petition for certiorari is DENIED and the decision
promulgated on 29 December 1983 of the National Labor Relations Commission
is AFFIRMED. The Temporary Restraining Order issued by this Court on 11
April 1984 is hereby lifted. Costs against petitioner. SO ORDERED.

The bank and CESI urge that CESI is not properly regarded as a "labor-only"
contractor upon the ground that CESI is possessed of substantial capital or
investment in the form of office equipment, tools and trained service personnel.
The Court is unable to agree with the bank and CESI on this score. The definition
of "labor-only" contracting in Rule VIII, Book III of the Implementing Rules must
be read in conjunction with the definition of job contracting given in Section 8 of
the same Rules. The undertaking given by CESI in favor of the bank was not
the performance of a specific job. In the present case, the undertaking of CESI
was to provide its client—the bank—with a certain number of persons able to
carry out the work of messengers. Orpiada utilized the premises and office
equipment of the bank and not those of CESI. Messengerial work—the delivery
of documents to designated persons whether within or without the bank
premises—is of course directly related to the day-to-day operations of the bank.
Section 9(2) quoted above does not require for its applicability that the petitioner
must be engaged in the delivery of items as a distinct and separate line of
business. CESI is not a parcel delivery company: as its name indicates, it is a
recruitment and placement corporation placing bodies, as it were, in different
client companies for longer or shorter periods of time.

Also, the letter agreement itself merely required CESI to furnish the bank with
eleven (11) messengers for "a contract period from January 19, 1976—." The

3
San Miguel Corporation v. Maerc Integrated Services
Person Assigned: BARORO
Docket/SCRA; Date: G.R. No. 144672. July 10, 2003.
Ponente: BELLOSILLO, J.
Topic: Labor only contracting
Doctrine relevant to topic:
1. It is not enough to show substantial capitalization or investment in the
form of tools, equipment, machinery and work premises, etc., to be considered
an independent contractor.
2. In legitimate job contracting, the law creates an employer-employee
relationship for a limited purpose, i.e., to ensure that the employees are paid
their wages. The principal employer becomes jointly and severally liable with the
job contractor only for the payment of the employees’ wages whenever the
contractor fails to pay the same. Other than that, the principal employer is not
responsible for any claim made by the employees. On the other hand, in labor-
only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. 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. The principal
employer therefore becomes solidarity liable with the labor-only contractor for
all the rightful claims of the employees.
FACTS:
1. Brought before this court is a petition seeking for a review of the Court
of Appeals' judgment. The facts are as follows. 291 workers filed complaints
against San Miguel Corporation and Maerc Integrated Services, Inc. for illegal
dismissal, underpayment of wages, non-payment of service incentive leave
pays and other labor standards benefits, and for separation pays from 25 June
to 24 October 1991.
2. Complainants are workers of SMC involved in the washing and
segregating of various kinds of empty bottles used by SMC to sell and distribute
its beer beverages to the consuming public. It appears that SMC entered into a
contract with MAERC, engaging the services of the latter, such contract being
renewed from time to time. They were paid on a per piece or pakiao basis except
for a few who worked as checkers and were paid on daily wage basis.
3. SMC denied liability for the claims and averred that the complainants
were not its employees but of MAERC. When the service contract was
terminated, complainants claimed that SMC stopped them from performing their
jobs; that this was tantamount to their being illegally dismissed by SMC who was
their real employer; and, that MAERC was merely made a tool or a shield by
SMC to avoid its liability under the Labor Code.
4. The Labor Arbiter rendered a decision holding that MAERC was an
independent contractor. He dismissed the complaints for illegal dismissal but
held that MAERC and SMC were jointly and severally liable to pay complainants
their wage differentials.
5. The National Labor Relations Commission (NLRC) ruled in its 7 January
1997 decision that MAERC was a labor-only contractor and that complainants
were employees of SMC but still held SMC to be jointly and severally liable with
MAERC for complainants' separation benefits
6. The Court of Appeals denied the petition and affirmed the decision of
the NLRC.
ISSUES:
1. Whether or not the complainants are employees of SMC or MAERC
2. Whether or not MAERC is a labor-only contractor or an independent
contractor
RULING:
1. The complainants are employees of SMC. In ascertaining an employer-
employee relationship, the ff. factors are considered: (1) the selection and
engagement of employee, (2) the payment of wages, (3) the power of dismissal,
and (4) the power to control an employee’s conduct, which is the most important
factor. In this case, the evidence disclosed that SMC played a large and
indispensable part in the hiring of MAERC’s workers. Majority of the
complainants were already working for SMC when the workers were instructed
to apply for work in MAERC to make it appear that complainants were hired by
4
MAERC. As for the payment of wages, it was revealed that SMC assumed the
responsibility of paying for the mandated overtime, holiday , rest day and 13th
month pay of the workers. As to the power of control, while the contract between
SMC and MAERC provided that SMC has no control or supervision whatsoever
over the conduct of the workers in respect to how they perform their task, there
are indicators that SMC actively supervised the complainants. They also
asserted their right to discipline the workers by recommending the penalty to be
imposed due to infractions committed by some workers. With these facts and
circumstances, the Court thus held that the complainants are employees of
SMC.
2. MAERC is a labor-only contractor. There is job contracting permissible
under the Code if the ff. conditions are met: (1) the contractor carries on an
independent business and undertakes to perform the job, service or task on its
own account, under its own responsibility and according to its own manner and
method free from the control and direction of the principal in all matters
connected with the performance of the work, except as to the results thereof,
and (2) the contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials which are
necessary in the conduct of his business.
In labor-only contracting, the statute creates an employer-employee relationship
for a comprehensive purpose: to prevent a circumvention of labor laws. 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. The principal
employer therefore becomes solidarily liable with the labor-only contractor for all
the rightful claims of the employees.
This distinction between job contractor and labor-only contractor, however, will
not discharge SMC from paying the separation benefits of the workers,
inasmuch as MAERC was shown to be a labor-only contractor; in which case,
petitioner's liability is that of a direct employer and thus solidarily liable with
MAERC. In this case, while MAERC’s investment in the form of buildings, tools
and equipment amounted to more than P4,000,000.00, the court cannot
disregard the fact that it was SMC who required that MAERC undertook such
investment under the understanding that their relationship wpuld be on a long-
term basis. Nor do the court believes that MAERC has an independent business.
Not only was it set-upped to specifically meet the pressing needs of SMC which
was having their labor problems in the segregation division, none of its workers
were also ever assigned to any other establishment.
WHEREFORE, the petition is DENIED. The assailed Decision of the Court of
Appeals dated 28 April 2000 and the Resolution dated 26 July 2000 are
AFFIRMED with MODIFICATION. Respondent Maerc Integrated Services, Inc.
is declared to be a labor- only contractor. Accordingly, both petitioner San
Miguel Corporation and respondent Maerc Integrated Services, Inc., are ordered
to jointly and severally pay complainants (private respondents herein)
separation benefits and wage differentials as may be finally recomputed by the
Labor Arbiter as herein directed, plus attorney’s fees to be computed on the
basis of ten percent (10%) of the amounts which complainants may recover
pursuant to Art. 111 of the Labor Code, as well as an indemnity fee of P2,000.00
to each complainant.
The Labor Arbiter is directed to review and recompute the award of separation
pays and wage differentials due complainants whose names appear twice or
are notably similar, compute the monetary award due to complainant Niel
Zanoria whose name was omitted in the Labor Arbiter’s Decision and
immediately execute the monetary awards as found in the Labor Arbiter’s
computations insofar as those complainants whose entitlement to separation
pay and wage differentials and the amounts thereof are no longer in question.
Costs against petitioner. SO ORDERED.
5
Wack Wack Golf and Country Club v. NLRC
Person Assigned: del Valle
Docket/SCRA; Date: G.R. No. 149793 | 25 April 2005
Ponente: Callejo, Sr. J.
Topic: Labor Only Contracting
Doctrine relevant to topic:
An employee-employer relationship exists between an independent contractor
and its workers.
FACTS:
1. A fire destroyed a large portion of the main clubhouse of Wack Wack
Golf and Country Club, including its kitchen. It filed a notice with DOLE
that it was going to suspend its F&B Department for one month
thereafter. Notices to 54 employees were sent out saying that they need
not report to work starting April 14 but they will still be paid their salaries
up to May 14. Wack Wack told them that they will be informed once full
operations resume.
2. Wack Wack Golf Employees Union found the suspension of operation
of the F&B Department as ARBITRARY, DISCRIMINATORY, and
constitutive of UNION-BUSTING. They filed a notice of strike with
DOLE’s National Conciliation and Mediation Board (NCMB).
3. Wack Wack and the Union entered into an amicable settlement. Wack
Wack offered affected employees, especially those in the F&B a special
separation benefit/ retirement package.
a. One and a half month salary for every year of service, cash
equivalent of unused vacation and sick leave credits,
proportionate 13th month pay
b. Qualified employees will be considered under a priority
basis for employment by concessionaires/ contractors, and
even the Club, upon full resumption of operations, upon
recommendation of the Union. The Club may even persuade an
employee-applicant for availment under the package to remain
on his job, or be assigned to another position.
4. Respondents Dominguez, Cagasan, and Baluyot availed of the
separation package.
5. Wack Wack entered into a Management Contract with Business Staffing
and Management, Inc. (BSMI).
a. BMSI is a Management Service Consultant, which manages
projects that are specialized and technical in character (i.e.
marketing, promotions, operations management)
b. BMSI provide management to Wack Wack for its golf
operations, F&B operation, maintenance of its building, etc.
6. Pursuant to the Agreement, BMSI gave priority to the retired
employees for hiring. Cagasan and Dominguez were hired as project
employees and were issued probationary contracts.
7. BMSI undertook an organizational analysis and manpower evaluation
to streamline its operations. They found Cagasan and Dominguez’s
position redundant and terminated them.
a. Cagasan’s work as a personnel officer were taken cared of by
different management service contractors
b. Dominguez’s work as telephone operator was taken over by
personnel of accounting department
8. Baluyot also applied for the Chief Porter position but that position was
among those recommended to be abolished by BSMI due to
redundancy. He was offered the position of Caddie Master Aide but he
declined. Thus, Baluyot was temporarily accepted as Chief Porter
pending Wack Wack’s approval to abolish the position. BMSI eventually
continued its plan to abolish the Chief Porter Position and Baluyot was
dismissed.
a. Monthly salary was lower. Chief Porter: P12k; Caddie Master
Aide: P5k monthly
9. Cagasan, Domininguez, Baluyot filed an illegal dismissal
complaint. They claimed that they accepted the separation package
upon assurance that they will be given their former work and
assignments once the F&B Department resumes its operations.
6
 10. Respondents argued that the dismissal was because the position was
redundant.
Lower Court/NLRC and Appellate Court Decision
LA: In Dominguez and Cagasan were dismissed for a valid and authorized
cause. Baluyot was illegally dismissed. The caddie master aide and chief porter
position’s functions were the same. It was a means resorted to in order to unduly
sever Baluyot's relationship with BSMI without justifiable cause. [Baluyot no
longer appealed]
NLRC: Wack Wack to reinstate Dominguez and Cagasan. BSMI is a contractor
who merely supplies workers and had nothing to do with the grievance of the
employees with Wack Wack. Wack The latter remains to be the principal
employer and should be the onle liable for their reinstatement and payment of
backwages.
MR was also denied.
CA: Dismissed petition for technical reasons. Wack Wack failed to attach
Affidavit of Service. Verification and Certification against forum shopping was
insufficient. It was executed by a general manager who did not show any proof
of authority.
MR was also denied.
ISSUE/S:
WON Dominguez and Cagasan had cause of action against Wack Wack for
illegal dismissal - NO.
RULING:
[main topic] No, Domingo and Cagasan had no cause of action against
Wack Wack. Their employer is BSMI not Wack Wack. BSMI is an independent
contractor not a labor-only contractor. The employee-employer relationship
is now between BSMI and the workers not Wack Wack and workers.
An independent contractor is one who undertakes “job contracting.”
1. Carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to
his own manner and method, free from the control and direction of
his employer or principal in all matters connected with the performance
of the work except as to the results thereof; and;
2. Has substantial capital or investment in the form of tools,
equipments, machineries, work premises and other materials which are
necessary in the conduct of the business.
BSMI is an independent contractor. It is engaged in the management of projects,
business operations, functions, jobs and other kinds of business ventures, and
has sufficient capital and resources to undertake its principal business. It had
provided management services to various industrial and commercial business
establishments. The Court also cited In re Petition for CertiCcation Election
Among the Regular Rank-and-File Employees Workers of Byron-Jackson (BJ)
Services International Incorporated, Federation of Free Workers (FFW)-Byron
Jackson Services Employees Chapter, wherein it recognized BSMI as an
independent contractor.
In accordance with BSMI’s own recruitment policies, it had the respondents sign
applications for employment, accepting the condition that they were hired by
BMSI as probationary employees only. These contracts were valid for they were
not contrary to law, morals, good customs, public policy. BSMI later terminated
the respondents on the ground of redundancy. This right to hire and fire is
another element of the employer-employee relationship which actually
existed between the respondents and BSMI, and not with Wack Wack.
The Court found that there no longer exists an employer-employee relationship
between Wack Wack and respondents Cagasan and Dominguez. Therefore, the
respondents no longer have a cause of action for illegal dismissal and damages
against Wack Wack. The latter cannot be validly ordered to reinstate the
respondents.
7
On validity of waiver [side topic]
The Court found the waiver signed by the respondents after it agreed to the
separation benefit/ retirement package valid. Given that the respondents held
responsible positions in the company, it was presumed that they understood the
contents of the documents they signed. When a person making the waiver does
so voluntarily with a full understanding and consideration given for the quitclaim
is credible and reasonable, the transaction is valid and binding. Thus, the
quitclaims served as a valid and binding compromise agreement between the
parties.

Procedural: verification and certification of non-forum shopping [side

topic]
General manager may sue on behalf of corporation and sign the verification and
certification of non-forum shopping. CA erred when it refused to accept the
requisite proof of authority. The Court held that the subsequent submission of
the requisite documents constituted substantial compliance with procedural
rules.

Dispositive: Petition is granted. Complaints of Cagasan and Domiguez are

dismissed.

8
Aliviado v. Proctor and Gamble Philippines Inc.
Person Assigned: del Valle
Docket/SCRA; Date: G.R. No. 160506 | 06 June 2011
Ponente: del Castillo, J.
Topic: Labor Only Contracting
Doctrine relevant to topic:
1. Labor only contracting exists when any of the two elements is present:
a. 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; OR
b. The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
2. A labor-only contractor is a mere agent of the employer. As its principal, the
latter is still responsible for the workers of the former.
FACTS:
1. The Supreme Court, in a 2010 decision found:
a. Promm-Gem a legitimate contractor
b. Sales and Promotions Services (SAPS) a labor-only contractor,
consequently its employees are employees of P&G
c. SAPS/P&G is guilty of illegal dismissal
d. Petitioners are entitled to reinstatement
e. Dismissed employees of SAPS/P&G are entitled to moral
damages there being bad faith in their dismissal.
2. Both parties filed an MR, which the Court denied. Entry of Judgment
was made.
3. P&G filed a second MR
ISSUE/S:
WON P&G is liable for the employees of SAPS
RULING:
Yes, P&G is liable for the employees of SAPS because the latter is a labor-only
contractor.
Labor only contracting refers to an arrangement wherein the contractor or
subcontractor merely recruits, supplies, or places workers to perform a job for a
principal. As such, it shall only be considered as an agent of the employer. The
employer is still the one responsible for the workers. Labor only contracting is
prohibited under the Omnibus Rules Implementing the Labor Code.
Article 106 of the Labor Code:
There is "labor-only" contracting where:
1) 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
2) The workers recruited are performing activities directly related to
the principal business of employer
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code:
Labor only contracting exists when any of the two elements is present:
1) 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; OR
2) The contractor does not exercise the right to control over the
performance of the work of the contractual employee. [control test]
The 2010 Decision already established that SAPS had no substantial
capitalization and was performing merchandising and promotional activities
which are directly related to P&G's business. Since SAPS already met one of
9
the requirements, the Court found it sufficient to hold that it is a labor-only even confirmed that SAPS regularly checked the attendance of the petitioners,
contractor. Consequently, P&G is considered the employer of SAPS’ monitored their on-site performance, and oversaw their actual day to day work.
employees. SAPS, as the labor-only contractor, is considered a mere agent of As this issue was not raised in P&G’s Memorandum, consequently, such is
the principal (P&G). considered waived or abandoned.

It was found that SAPS only had P31,250 as paid-in capital. There was no P&G also failed to raise the non-feasibility of the petitioners’ prayer for
showing that it had other working capital and assets nor substantial investment reinstatement when it filed for the MR. It only claimed that there is no basis for
in tools or equipment. the reinstatement or backwages because the petitioners are not its employees.
It was only after the 2010 Decision became final and executory that it brought
a. Its capital is not even sufficient to pay for one month payroll - which
this issue to the attention of the Court. Well settled is the rule that issues not
was P44K.
raised during trial cannot be raised for the first on appeal more especially on
b. SAP has a 6-month contract with P&G. Yet it failed to show that it
an MR.
could complete the 6-month contract using its own capital and
investment.
Dispositive:
P&G’s MR was denied with finality.
On illegal dismissal
The Court found that P&G dismissed its employees, through SAPS, in a
Note:
manner that is oppressive to labor. There was only one-day verbal notice, the
Substantial capital refers to capitalization used in the performance or
workers were suddenly barred from work and from admission to work place.
completion of the job, work or service contracted.
They were dismissed for no valid cause and were deprived of due process.
Hence, an award of moral damages is proper.

The Court emphasized that in labor-only contracting, the labor-only

contractor is only an agent of the principal employer. Thus, it is the
principal employer who is responsible for the employees of the labor-
only contractor. The principal is solidarily liable with the labor-only contractor
for all the rightful claims of the employees. Thus, P&G is solidarily liable with
SAPS in paying the illegally dismissed employees moral damages.

On P&G’s claim that the petitioners were never assigned to them by

SAPS and as such they cannot be declared employees of P&G
This is without merit. In previous pleadings, the petitioners have already
alleged that they were employees of P&G through its own agents and
salesman. P&G never rebutted this allegation. In fact, in its Comment, P&G

10
First Philippine Industrial Corp v. Calimbas
Person Assigned: Magbanua
G.R. No. 179256; July 10, 2013
Ponente: Peralta, J.
Topic: Labor-Only Contracting
Doctrine relevant to topic: The test to determine the existence of independent
contractorship is whether one claiming to be an independent contractor has
contracted to do the work according to his own methods and without being
subjected to the control of the employer, except only to the results of the work.
FACTS:
1. FPIC is a domestic corporation primarily engaged in the transportation
of petroleum products by pipeline. On the other hand, Raquel Calimbas
and Luisa Mahilom were engaged by De Guzman Manpower Services
(DGMS) to perform secretarial and clerical jobs for FPIC.
2. In 1993, FPIC entered into a Contract of Special Services with DGMS
wherein DGMS agreed to undertake some aspects of building and
grounds maintenance at FPIC’s premises, offices and facilities, as well
as to provide clerical and other utility services as may be required from
time to time by FPIC. The pertinent portions of the contract are as
follows:
a. FPIC shall pay DGMS a contract price for services rendered
based on individual timesheets. DGMS shall bill FPIC on a
semi-monthly basis.
b. DGMS shall undertake projects only if covered by an approved
Project Contract which FPIC will issue when the need arises.
The Project Contract shall indicate the scope of work, duration,
and the manpower required. The composition of the workers to
be assigned shall be agreed upon by both parties.
c. DGMS shall assign competent personne. FPIC shall have the
right to request for replacement if observed to be non-
productive or unsafe. DGMS shall also replace the personnel if
confirmed by its own investigation and findings.
d. DGMS shall provide the maintenance equipment and tools
necessary.
e. DGMS shall be liable for loss and/or damage to FPIC’s property
if caused by willful act or negligence of DGMS’ personnel.
f. There shall be no employer-employee relationship between
FPIC and DGMS, and the person/s who DGMS may assign to
perform the services called for. No authority has been conferred
by FPIC to DGMS to hire any person in behalf of FPIC.
3. Pursuant to said contract, Calimbas and Mahilom were engaged by
DGMS to render services in 1996. Calimbas was assigned as a
department secretary at the Technical Services Department, while
Mahilom served as a clerk at the Money Movement Section of the
Finance Department.
4. In 2001, FPIC then informed Calimbas and Mahilom that they would no
longer be needed as a result of the “Pace-Setting” Study conducted by
a consultant. They were informed that their work assignments would no
longer be available, citing the termination of the Project Contract as the
main reason.
5. Calimbas and Mahilom signed quitclaims, releasing and discharging
DGMS from whatever claims they might have against it.
6. Petitioners filed a complaint against FPIC for illegal dismissal.
FPIC’s arguments:
1. There is no employer-employee relationship between them and the
respondents.
2. The true employer was DGMS because both respondents were hired
by said company and that they received their wages and benefits from
them.
3. Respondents executed a quitclaim, thus the termination is valid and
lawful.
Calimbas and Mahilom’s arguments:
11
 1. They were regular employees of FPIC for having served for almost five
years, rendering services which were usually necessary or desirable in
the usual business or trade of FPIC.
2. They were illegally dismissed without valid reason.
3. FPIC is their real employer, and that DGMS was its mere agent for
having been engaged in prohibited labor-only contracting.
4. DGMS never exercised control over them in all matters related to the
performance of their work. In fact, DGMS never maintained any
representative to supervise them.
5. DGMS had no substantial capital (only P75,000) and did not have any
investment by way of tools, equipment, machines, etc.
Labor Arbiter: Respondents were regular employees of FPIC and that they were
illegally dismissed.
NLRC: Upheld the decision of the LA, but reversed it upon MR. Based on the
Project contract, respondents are employees of DGMS, and DGMS is an
independent contractor. Furthermore, DGMS is not a labor-only contracting
entity. The fact that it had only a capitalization of P75,000 does not
necessarily make it a labor-only contractor since it was shown that it had
adequate resources, directly or indirectly, in the performance of
completion of the job, work or service contracted out to enable it to
exercise control, supervision, or direction over its employees in all
aspects of work.
CA: Reversed the decision.
ISSUE/S:
1. W/N respondents are employees of the petitioner
2. W/N DGMS is a labor-only contracting entity
3. W/N the respondents were illegally dismissed
RULING:
YES. Calimbas and Mahilom are employees of FPIC, and DGMS is engaged in
labor-only contracting.
Art. 106 of the labor code provides that “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, equipment, machineries, work premises,
among others, and the workers recruited and placed by such person are
performing activities which are directly related to the principal business 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.”
Furthermore, labor-only contracting was also defined in DOLE Department
Order No. 10, S. 1997.
First, DGMS’ actual paid-in capital in the amount of P75,000 could not be
considered as substantial capital essential to carry out its business as an
independent job contractor. It also had no substantial equipment in the form of
tools, equipment and machinery. Respondents were using office equipment and
materials owned by FPIC.
Second, FPIC exercised the power of control and supervision of respondents.
The daily time records were countersigned by the officials of FPIC. Moreover,
the fact that DGMS did not assign any representative to supervise over
respondents’ work prove that DGMS was not their employer. The test to
determine the existence of independent contractorship is whether one
claiming to be an independent contractor has contracted to do the work
according to his own methods and without being subjected to the control
of the employer, except only to the results of the work. In this alone, FPIC
cannot claim that DGMS was an independent job contractor.
Thus, an employer-employee relationship exists between FPIC and the
respondents.
12
Finally, the Court held that the respondents were illegally dismissed because
there was no valid or just cause for the termination. They also did not comply
with the requirement of notifying respondents of the acts which led to their
termination.

13
Alilin v. Petron Corporation
Person Assigned: Magbanua
G.R. No. 177592; June 9, 2014
Ponente: Del Castillo, J.
Topic: Labor-Only Contracting
Doctrine relevant to topic: A contractor is presumed to be a labor-only
contractor, unless it proves that it has the substantial capital, investment, tools
and the like. However, were the principal is the one claiming that the contractor
is a legitimate contractor, the burden of proving the supposed status of the
contractor rests on the principal.
FACTS:
1. Petron is a domestic corporation engaged in the oil business. It owns
several bulk plants in the country for receiving, storing, and distributing
its petroleum products.
2. In 1968, Romualdo D. Gindang Contractor, which was owned and
operated by Romualdo Gindang, started recruiting laborers for fielding
to Petron’s Mandaue Bulk Plant. When Romualdo died in 1989, his son
Romeo, through Romeo D. Gindang Services (RDG), took over the
business and continued to provide manpower services to Petron.
3. Petitioners were among those recruited by Romualdo and Romeo to
work in the premises of the said bulk plant.
4. Petron and RDG entered into a Contract for Services for the period of
June 1, 2000 to May 31, 2002, whereby RDG undertook to provide
Petron with janitorial, maintenance, tanker receiving, packaging and
other utility services in its Mandaue Bulk Plant. The contract was
extended until September 2002, but upon expiration thereof, no further
renewal was done.
5. Petitioners filed a complaint for illegal dismissal against Petron and
RDG, alleging that they were barred from continuing their services.
Petitioners’ arguments:
1. They claimed that RDG is a labor-only contractor, which merely acted
as an agent of Petron, their true employer.
2. Their jobs, which are directly related to Petron’s business, entailed them
to work inside the premises of Petron using required equipment and
tools furnished by i
3. They were subject to Petron’s supervision.
4. They asserted that their dismissal in view of the expiration of the
contract was illegal because they are regular employees.
Respondent’s arguments:
1. RDG is an independent contractor and the real employer of the
petitioners.
2. It was RDG which hired and selected petitioners, paid their salaries and
wages, and directly supervised their work.
3. Petron cannot be held liable for illegal dismissal because it is not the
employer.
RDG’s arguments:
1. Petitioners are regular employees of Petron.
2. Denied liability over the claim of illegal dismissal and that Petron cannot
capitalize on the service contract to escape liability.
Labor Arbiter: Ruled that petitioners are regular employees of Petron. It merely
utilized RDG in its attempt to hide the existence of employer-employee
relationship between it and the petitioners and avoid liability under labor laws. It
further held that the petitioners were illegally dismissed without just or
authorized cause.
NLRC: Affirmed the decision of the LA.
CA: Reversed the decision. There is no employer-employee relationship
between the parties. RDG hired, selected, and employed the petitioners and
paid their wages. It also found RDG to be an independent labor contractor with
sufficient capitalization and investment as shown by its financial statement for
year-end 2000. In addition, the works for which RDG was contracted to provide
14
were menial which were neither directly related nor sensitive and critical to
Petron’s principal business.
ISSUE:
1. W/N RDG is a legitimate job contractor
2. W/N there is an employer-employee relationship between the parties as
to make Petron liable for illegal dismissal
RULING:
1. NO. Under DOLE Department Order No. 10, S. 1997, Labor-only
contracting, a prohibited arrangement, is an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers
to perform a job, work or service for a principal and the following
elements are present:
a. The contractor or subcontractor does not have substantial
capital or investment to actually perform the job, work or service
under its own account and responsibility; and
b. 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.
Permissible job contracting, on the other hand, refers to an arrangement
whereby a principal agrees to farm out with a contractor or subcontractor the
performance of a specific job, work, or service within a definite or predetermined
period, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal. Under this
arrangement, the following conditions must be met:
a. The contractor carries on a distinct and independent business and
undertakes the contract work on his account under his own
responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters
connected with the performance of his work except as to the results
thereof;
b. The contractor has substantial capital or investment; and
c. The agreement between the principal and contractor assures the
contractual employees’ entitlement to all labor and occupational safety
and health standards, free exercise of the right to self-organization,
security of tenure, and social welfare benefits.
In distinguishing between prohibited labor-only contracting and permissible job
contracting, the totality of the facts and the surrounding circumstances of the
case shall be considered. Generally, the contractor is presumed to be a
labor-only contractor, unless such contractor overcomes the burden of
proving that it has the substantial capital, investment, tools, and the like.
However, where the principal is the one claiming that the contractor is a
legitimate contractor, said principal has the burden of proof. It is thus incumbent
upon Petron to prove that RDG is an independent contractor.
However, Petron failed to discharge this burden of proof. While the financial
statements of RDG for the years 1999 to 2001 establish that it has sufficient
working capital, Petron failed to adduce evidence that RDG had sufficient capital
when petitioners started working in Petron which ranges from 1968 to 1993.
Thus RDG is presumed to be a mere labor-only contractor.
2. YES. There was an employer-employee relationship between the
petitioners and Petron. The Court adhered to the four-fold test and
found that all elements are present in this case, especially the power to
control. Petron could order petitioners to do work outside of their regular
job. Petitioners were also required to report for work everyday at the
bulk plant, observe an 8-5 work schedule, and wear proper uniform and
safety helmets.
Finally, the petitioners also attained a regular status as employees of Petron.
While the jobs performed by the petitioners are menial (tanker receiving, barge
loading, sounding, gauging, warehousing, mixing, painting, carpentry, driving,
gasul filling, and other utility works), they are nevertheless necessary and
related to Petron’s business operations. If not for these tasks, Petron’s products
will not reach the consumers in their proper state.
15
Thus, Petron could not terminate their services on the pretext that the service
contract has already expired. This does not constitute a just or authorized cause
for a valid dismissal.

16
Manila Memorial Park Cemetery, Inc. v. Lluz
Person Assigned: Aniwer
G.R. No. 208451; February 3, 2016
Ponente: Carpio, J.
Topic: Labor only contracting
Doctrine relevant to topic:
To determine whether a labor-contracting exists when the contractor or
subcontractor recruits to perform a job for a principal, Sec. 5 of the IRR states
that the ff elements are present:
1. 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; or
2. The contractor does not exercise the right to control the performance of
the work of the contractual employee.
FACTS:
1. Manila Memorial entered into a Contract of Services with Ward Trading.
Under the contract, Ward Trading is an independent contractor which
will render interment and exhumation services for Manila Memorial.
2. Ward Trading assigned respondents Lluz, et. al. to perform such
services for Manila Memorial. They are paid 250 per day and work 6
days a week for 8 hours daily.
3. Respondent filed a complaint for regularization and CBA benefits
against Manila Memorial, several of its officers, and Ward Trading.
4. They filed an amended complaint including illegal dismissal,
underpayment of 13th month pay, and attorney’s fees.
5. Respondents alleged that they asked Manila Memorial to consider them
as regular workers within the appropriate bargaining unit established in
the CBA by Manila Memorial and its union.
6. Manila Memorial refused because they are employed by Ward Trading,
an independent labor contractor.
7. They thereafter joined the union, and the union asked Manila Memorial
for their regularization, but it was denied.
8. Respondents then filed a complaint. After the complaint was filed, they
were subsequently dismissed.
9. Manila Memorial sought to dismiss the complaint because there was no
employer-employee relationship between them, arguing that the
respondents were employees of Ward Trading.
The LA dismissed the complaint. It argued that the complaint failed to prove the
existence of an employer-employee relationship.
The NLRC reversed the findings of the LA. It ruled that Ward trading was a labor-
only contractor and an agent of Manila Memorial.
The CA affirmed the NLRC ruling.
ISSUE/S:
W/N an employer-employee relationship exists between Manila Memorial and
respondents which entitles the respondents the reliefs they sought for.
RULING:
YES. It is stated in Art. 106 of the Labor Code that there is “labor-only”
contracting where the person supplying has substantial capital or investment,
and the workers recruited and placed by such person are performing activities
which are directly related to the principal business of the employer. In such
cases, the person or intermediary shall be considered merely as an agent of the
employer.
The IRR of Arts. 106-109 of the Labor Code assumes the existence of an
employer-employee relationship in legitimate and labor-only contracting. Sec. 3
talks about legitimate contracting, while Sec. 5 prohibits labor-contracting. Sec.
7 states that the principal shall be deemed the employer of the contractual
employee where there is labor-only contracting.
17
To determine whether a labor-contracting exists when the contractor or
subcontractor recruits to perform a job for a principal, Sec. 5 of the IRR states
that the ff elements are present:
3. 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; or
4. The contractor does not exercise the right to control the performance of
the work of the contractual employee.
In this case, the Court found that Ward trading does not have substantial capital
or investment, since Manila Memorial owns the equipment used by the
respondents. The Contract of Services also shows that Manila Memorial owns
the equipment, which it intends to sell to Ward Trading at some future time.
However, there was no evidence adduced to prove that the sale actually took
place. Hence, the equipment used by the respondents are not owned by Ward
Trading, rather it was owned by Manila Memorial.
Moreover, the Court found that the difference in the value of the equipment in
the total amount of 1.4M can be glaringly seen in Ward Trading’s financial
statements for the year 2006 when compared to its 2005 financial statements.
The financial statement of Ward Trading as of 2005 shows that it had assets in
the amount of 441k and property and equipment with a net book value of 86k,
while in 2006, it had assets in the amount of 57k and property and equipment
with a net book value of 1.4M. Clearly, it could not have raised a capital of 1.4M
from its income alone without the inclusion of the equipment owned by Manila
Memorial.
The Court also found that Ward Trading is subject to Manila Memorial’s control.
The contract provides that while Ward trading is in charge of supervision over
the respondents, Manila Memorial has the option to take over if the services
performed by respondents are unsatisfactory.
Lastly, while Ward Trading has a license to engage in its business in Las Piñas,
it is not valid in Paranaque where the respondents are assigned. Under Sec. of
the IRR, failure to register gives the presumption that the contractor is engaged
in labor-only contracting.

18
Mago v. Sunpower
Person Assigned: Aniwer
G.R. No. 210961; January 24, 2018
Ponente: Reyes, Jr., J.
Topic: Labor only contracting
Doctrine relevant to topic:
Art. 106 of the Labor Code and its IRR, the DOLE-DO No. 18-02, states the
elements of labor-only contractor:
1. 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; or
2. The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
Hence, a legitimate contractor has a substantial capital or investment, and must
carry a distinct and independent business free from the control of the principal.
FACTS:
1. Mago and Colobong (petitioners) are former employees of Jobcrest, a
corporation engaged in the business of contracting management
consultancy and services, and are cohabiting together.
2. Jobcrest and Sunpower entered into a Service Contract Agreement, in
which Jobcrest undertook to provide business process services for
Sunpower.
3. Sunpower is engaged in the business of manufacturing automotive
computers and other electronic parts.
4. Jobcrest trained petitioners for the purposes of their engagement in
Sunpower. After their training, petitioners were assigned to Sunpower’s
plant in Laguna Technopark.
a. Mago is assigned as a Production Operator in the Coinstacking
Station, while Colobong is assigned as the same, tasked to do
visual inspection in the Packaging Station.
b. Dimayuga was their supervisor.
5. When Sunpower conducted an operational alignment, it decided to
terminate the Coinstacking/Material handling segment and the Visual
Inspection segment. This happened when petitioners were on paternity
and maternity leave because Colobong was to give birth to their child.
6. When Mago reported for work, Dimayuga informed him that he was
terminated due to his absences. However, he was asked to report to
Jobcrest for his assignment to Sunpower. Jobcrest and Dimayuga later
denied terminating Mago from Jobcrest.
7. When Mago reported to the office of Jobcrest, he was served with a
Notice of Admin Charge/Explanation alleging that Mago violated the
Jobcrest policy against falsification and tampering because he failed to
disclose his relationship with Colobong.
8. Lelanie alleged, on the other hand, that when she reported back to work
she was informed that she will be transferred to another client company.
9. Instead of completing with the directives, petitioners filed a complaint
for illegal dismissal and regularization against Sunpower with the NLRC.
Despite the filing of the complaint, Colobong reported to work and she
was also served a Notice of Charge, requiring her to explain why she
did not disclose her relationship with Mago.
10. During the mandatory conference, Jobcrest clarified that they were not
dismissed and offered to accept them when they report back to work.
Petitioner, however, insisted that they were regular employees of
Sunpower, and not Jobcrest.3
11. LA held that Jobcrest is a legitimate independent contractor and
petitioners and Sunpower have no employer-employee relationship with
each other. Hence, it dismissed the complaint.
12. The NLRC reversed the LA ruling. It argued that
a. the contract between Jobcrest and Sunpower was for supply of
manpower. The tools and equipment were accounted for by
19
 Sunpower, which contradicted the claim that Jobcrest has the
required capital for a legitimate contractor.
b. It also disagreed that Jobcrest exercised control over the
petitioners because it was the employees of Sunpower who
supervised petitioners’ work.
13. The CA reversed the ruling of the NLRC. It argued that
a. Sunpower had overcome the presumption that Jobcrest was a
labor-only contractor because of its DOLE Certificate of
Registration which carries the presumption of regularity.
b. The contract states that the services was for the performance
of various business process services.
c. It also held that Jobcrest has substantial capital. Hence, it is not
necessary to prove that it has investment in the form of tools
and equipment.
d. It also held that there is an employer-employee relationship
between petitioners and Jobcrest under the four-fold test.
e. And that the supervision by the employees of Sunpower was
necessary and allowable under the circumstances.
ISSUE/S:
W/N Jobcrest is a labor-only contractor.
RULING:
NO. Art. 106 of the Labor Code and its IRR, the DOLE-DO No. 18-02, states the
elements of labor-only contractor:
3. 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; or
4. The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
Hence, a legitimate contractor has a substantial capital or investment, and must
carry a distinct and independent business free from the control of the principal.
The Court also added that the principal and the contractor must assure the labor
and occupational safety and health standards, the free exercise of the right to
self-organization, security of tenure and social welfare benefits.
Moreover, job contracting or subcontracting as permissible when the principal
agrees to farm out the performance of a specific job, work or service to the
contractor, for a definite or predetermined period of time, regardless of whether
such job, work, or service is to be performed or completed within or outside the
premises of the principal.
The Court also noted that the presumption that Jobcrest is a labor-only
contractor is not operative since petitioners did not dispute that Jobcrest is not
a duly-registered contractor. The Certification also does not create a
presumption that Jobcrest is a legitimate and independent contractor, but
creates the presumption that it has been issued regularly.
Jobcrest has substantial capital
The IRR provides that substantial capital or investment is defined as capital
soticks and subscribed capitalization, tools, equipment, etc. used by the
contractor or subcontractor in the performance of a job contracted out. In case
of corporations, substantial capital resorts to paid-up capital stocks of at least
PhP 3M.
In this case, the records show that Jobcrest had an authorized capital stock of
PhP 8M, 2M of which was subscribed, and a paid-up capital stock of 500k. In
2011, the paid up capital stock of Jobcrest increased to 8M, more than the
required capital under the DOLE-DO.
Moreover, it had an office, possessed numerous assets, and continuously
earned profit. Hence, Jobcrest carried its own business independent from and
distinctly outside the control of its principals.
To note, as it was stated earlier, a legitimate business has a substantial capital
OR investment. Since it was already found that Jobcrest has substantial capital,
the first element of a labor-only contractor is NOT present.
Suncrest does not control the manner how the petitioners work
Under the DOLE-DO, the right to control refers to the right reserved to the
person for whom the services of contractual workers are performed, to
determine how the end is to be achieved, and the manner and means to be used
20
to reach that end. In other words, the contractor must perform according to its which nullified the National Labor Relations Commission's Decision dated April
own manner and method, free from the control and supervision of the principal. 24, 2013 and Resolution dated May 28, 2013, and reinstated the Labor Arbiter's
In this case, when Jobcrest conducted a training and certification program, the Decision dated July 3, 2012. No costs.
petitioners reported directly to the designated Jobcrest trainer. Jobcrest’s
Operations manager testified that operational control over Jobcrest employees
was exercised to make sure that they conform to the specifications of the service
agreements with its clients. Jobcrest managers and supervisors were assigned
to Sunpower to oversee the accomplishment of work, and that they have
administrative control over Jobcrest employees to monitor their attendance, and
their observance of the rules and regulations.
This is corroborated by the statement of Mago saying that he reported to
Dimayuga, the Jobcrest supervisor, and the statement of Colobong that she
reported to Jobcrest and she was served a notice of admin charge. These are
indications that Jobcrest has control over petitioners’ work.

OTHER NOTES:
Petitioners were regular employees of Jobcrest applying the four-fold test.
1. The petitioners themselves admit that they were hired by Jobcrest. In
their subsequent engagement to Sunpower, it was Jobcrest that
selected and trained the petitioners.
2. Despite their assignment to Sunpower, Jobcrest paid the petitioners'
wages, including their contributions to the Social Security System
(SSS), Philippine Health Insurance Corporation (Philhealth), and Home
Development Mutual Fund (HDMF, also known as Pag-IBIG).
3. The power to discipline the petitioners was also retained by Jobcrest,
as evidenced by the "Notice of Admin Charge/Explanation Slip"
furnished the petitioners through Jobcrest's Human Resource
department.
4. (Power of control over the employee’s conduct is discussed above)

Dispositive:
WHEREFORE, premises considered, the present petition is hereby DENIED for
lack of merit. The Court of Appeals' Decision dated October 8, 2013 and
Resolution dated January 13, 2014 in CA-G.R. SP No. 131059 are AFFIRMED,

21
Consolidated Building Maintenance, Inc. v. Asprec
Person Assigned: Rafael Bulagas
Docket/SCRA; Date: G.R. No. 217301. June 6, 2018.
Ponente: REYES, JR., J
Topic: Labor Only Contracting
Doctrine relevant to topic:
Labor-only contracting is defined by Article 106 of the Labor Code of the
Philippines, as an arrangement where a person, who does not have
substantial capital or investment, supplies workers to an employer to
perform activities which are directly related to the principal business of
such employer. Furthermore, jurisprudence instructs that the existence of an
independent contract relationship may be indicated by several factors, viz.:
[S]uch as, but not necessarily confined to, whether the contractor was carrying
on an independent business; the nature and extent of the work; the skill required;
the term and duration of the relationship; the right to assign the performance of
specified pieces of work; the control and supervision of the workers; the power
of the employer with respect to the hiring, firing and payment of the workers of
the contractor; the control of the premises; the duty to supply premises, tools,
appliances, materials and labor; and the mode, manner and terms of payment.
FACTS:
1. CBMI is a corporation engaged in the business of providing
janitorial, kitchen, messengerial, elevator maintenance and allied
services to various entities. Among CBMI’s clients is Philippine
Pizza, Inc.-Pizza Hut (PPI). For PPI, CBMI provides kitchen,
delivery, sanitation and other related services pursuant to contracts
of services, which are valid for one-year periods.
2. Rolando Asprec, Jr. (Asprec) and Jonalen Bataller (Bataller)
(collectively referred to as the respondents) alleged that they
are regular employees of PPI, the former having commenced
work as a “Rider” in January 2001 and the latter as “team
member/slice cashier” in March 2008, both assigned at PPI’s
Pizza Hut, Marcos Highway, Marikina City Branch.
3. In his Sinumpaang Salaysay, Asprec averred that after the
expiration of his contract on November 4, 2001, PPI advised
him to go on leave for one (1) month and ten (10) days.
Thereafter, he was called for an interview by PPI’s Area
Manager, Rommel Blanco. After passing the same, he was told
to proceed to the office of CBMI where he signed a contract.
Asprec stated that except for the fact that the payslips were then
issued by CBMI, work proceeded as usual with him being assigned
at the same branch and performing his usual duties as
“Rider/Production Person.”
4. Bataller had a similar experience as she narrated in her
Sinumpaang Salaysay. She related that before the expiration
of her employment contract, she was informed by Pizza Hut
Restaurant Manager Jun Samar that as a precondition for
continued employment, she had to “submit first a resignation
letter, had to pass through CBMI, and after six months she should
go on vacation for one month.” Thereafter, she was interviewed by
PPI General Manager Edilberto Garcia. Bataller advanced that after
she passed the interview, PPI prepared her documents and then
forwarded the same to CBMI. She then resumed employment in
December 2008 until July 23, 2010, with her being assigned at
the same branch, performing her usual duties, and receiving
the same salary.
5. On the other hand, CBMI posited that the respondents are its
employees. CBMI claimed that the respondents were investigated
based on an Incident Report by PPI’s Store Manager Karl Clemente
of an attempted theft on July 23, 2010. On which date, one Jessie
Revilla (Revilla) supposedly delivered an excess of two boxes
to PPI’s slice booth at the Light Rail Train (LRT) Santolan, Pasig
Station, which the respondents failed to report.
6. Anent the incident, Asprec asserted that he has no knowledge of
such actions by Revilla and claimed that the same is outside his
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 responsibility as a “production person.” Nonetheless, Asprec
claimed that on account of the incident, he has been suspended
for eight days and then was eventually dismissed.
7. On the other hand, Bataller, who was manning the slice booth at
the LRT Santolan, Pasig Station on the day of the incident, claimed
that when Revilla brought the three boxes of pizza which she
ordered, she was busy attending to customers and thus did not
notice that there has been an excess in the delivery. Nonetheless,
she posited that immediately upon discovery, she called Revilla but
the latter was already far from the station and as such could no
longer go back. Revilla allegedly went back to get the two extra
pizza boxes later that day.
8. Bataller likewise submitted that she has informed the area manager
of the incident, but was thereafter asked to proceed to PPI’s Marcos
Highway branch. There, she was interviewed along with Asprec and
Revilla, and then told to report to the head office. Starting July 24,
2010, she was allegedly no longer allowed to return to work.
9. On November 12, 2010, the respondents filed their Complaint
against the petitioners for constructive illegal dismissal, illegal
suspension, and nonpayment of separation pay.
10. In their Complaint, the respondents argued two points: first, that
their transfer from PPI to CBMI constituted labor-only
contracting and was a mere scheme by PPI to prevent their
regularization; and second, that they were illegally dismissed
without cause and due process of law.
11. On December 20, 2010, the respondents amended their Complaint
by impleading PPI and including a prayer for reinstatement and
payment of moral and exemplary damages and attorney’s fees
Ruling of LA
The LA rendered a Decision granting respondents’ complaint
- Reinstatement, pay backwages, moral damages, exemplary
damages, and attorney’s fees
- LA applied the four-fold test
- respondents are employees of PPI
- the arrangement between CBMI and PPI constitutes labor-only
contracting
- imposed upon them solidary liability for the respondents’ claim
- respondents have been illegally dismissed
Ruling of the NLRC
NLRC rendered its Resolution affirming with modification the LA’s Decision:
- appeal filed by PPI is GRANTED and DROPPED as party to the
case
- NLRC held that the respondents are regular employees of CBMI
- NLRC relied heavily on the employment contract and CBMI’s
admission of the respondents’ employment
Ruling of the CA
CA rendered the herein assailed Decision denying the petition for certiorari:
- The assailed Resolutions of [NLRC] are SET ASIDE. The Decision
of the [LA] is REINSTATED.
- NLRC erred in dropping PPI as a party to the case, as contrary to
its findings, CBMI failed to prove that it was an independent
contractor, or was engaged in permissible job contracting.
- considering that the respondents performed tasks which are
necessary and desirable to the usual trade or business of PPI, and
use tools and equipment of the latter in their work, the CA
concluded that CBMI falls under the definition of a “labor-only
contractor,” which is prohibited under Article 106 of the Labor
Code.
ISSUE/S:
1. Whether or not it is a labor-only contractor or an independent contractor
– Independent contractor
23
2. Whether or not the respondents have been illegally dismissed and as such
entitled to their monetary claims – Yes, illegally dismissed and entitled to money
claims.
RULING:
1. Labor-only contracting is defined by Article 106 of the Labor
Code of the Philippines, as an arrangement where a person, who
does not have substantial capital or investment, supplies workers
to an employer to perform activities which are directly related to the
principal business of such employer.
2. The pertinent Department Order (DO) implementing the aforecited
provision of the Labor Code is DOLE DO No. 18-02, Series of 2002,
the regulation in force at the time the respondents were hired and
assigned to PPI.
3. DO No. 18-02 reiterates the prohibition against labor-only
contracting
4. From the foregoing, it is clear that job contracting is not
absolutely prohibited. Indeed, an employer is allowed to farm out
the performance or completion of a specific job, work or service,
within a definite or specified period, and regardless of whether the
said task is to be performed or completed within or outside its
premises. Job contracting is deemed legitimate and
permissible when the contractor has substantial capital or
investment, and runs a business that is independent and free
from control by the principal.Further, in Norkis Trading Co., Inc.
v. Gnilo, it is required that “the agreement between the principal and
the contractor or subcontractor assures the contractual employees’
entitlement to all labor and occupational safety and health
standards, free exercise of the right to self-organization, security
of tenure, and social welfare benefits.” The absence of any of
these elements results in a finding that the contractor is
engaged in labor-only contracting.
5. It is not disputed that CBMI is a duly licensed labor contractor
by the DOLE. It then becomes incumbent upon the respondents to
rebut the presumption of regularity to prove that CBMI is not a
legitimate contractor as determined by the DOLE, which they
failed to do.
6. The Court finds that CBMI has established compliance with the
requirements of legitimate job contracting previously cited.
7. CBMI has substantial capital to maintain its manpower business.
From the evidence adduced by CBMI, it is also clear that it runs a
business independent from the PPI. Based on its registration with
the Securities and Exchange Commission (SEC), CBMI has been
in existence since 1967; and has since provided a variety of
services to entities in various fields, such as banking, hospitals, and
even government institutions.
8. Above all, CBMI maintains the “right of control” over the
respondents. For purposes of determining whether a job contractor
is engaged in legitimate contracting or prohibited labor-only
contracting, DO No. 18-02, defines the “right of control” as: [T]he
right reserved to the person for whom the services of the contractual
workers are performed, to determine not only the end to be
achieved, but also the manner and means in achieving that end.
9. In this case, the “Contract of Services” between CBMI and PPI
for the year 2000, imposes upon the former the obligation to
provide not only the necessary personnel to perform “kitchen,
busing, rider/delivery, and sanitation services” but as well to
provide tools and equipment necessary for the rendition of
such services. Also, it is understood under the agreement that
24
 upon deployment, the personnel are already qualified and
possessed of the necessary skills for their assigned tasks.
10. Without necessarily touching on the respondents’ status prior to
their employment with CBMI, in the instant controversy, the
petitioners’ control over the respondents is manifested by the
fact that they wield and exercise the following powers over
them: “selection and engagement, payment of wages,
dismissal, and control over the employees’ conduct.”
17. To the Court, CBMI’s claim that the suspension falls under Article
11. Pursuant to its power of supervision over the respondents, CBMI
initiated the investigation and on the basis thereof imposed upon
the respondents preventive suspension from August 5 to 19, 2010.
18. The said conclusion is bolstered by the fact that other than its bare
12. However, as correctly noted by the NLRC, the extension of the
period of suspension by the CBMI is unwarranted under the
attendant circumstances.
13. Section 4, Rule XIV of the Omnibus Rules Implementing the Labor
Code is explicit in that the period of preventive suspension should
not exceed 30 days, after which, the employee must be reinstated
and paid the wages and other benefits due.
16. When a “lay-off” is permanent, it amounts to dismissal. However,
when the same is temporary, it is regarded as a mere suspension
of the employment status of the employee.98 Notably, while the
Court recognizes lay-off as an exercise of management
prerogative, jurisprudence requires that the same must be
attended by good faith and that notice must be given to the
employees concerned and the DOLE at least one (1) month prior
to the intended date of lay-off or retrenchment.
286 of the Labor Code is a mere afterthought to justify its
extension of respondents’ period of preventive suspension.
allegation, CBMI failed to adduce evidence to prove that there
has indeed been a reduction in the demand of PPI for the
services it provides. Likewise, PPI, despite having all the
opportunity to do so, did not corroborate CBMI’s submission. In
addition, CBMI also failed to comply with the mandatory one-
month notice requirement.

14. Succinctly, respondents have been under preventive suspension

for more than the maximum period allowed by law, without any word
as to the result of the investigation, and without having been
reinstated to their former or to a substantially equivalent position,
which thus renders the period of extended suspension illegal.

15. According to CBMI, the placing of respondents in a “floating status”

due to unavailability of work has long been recognized as a valid
exercise of management prerogative. In support thereof, CBMI cites
Article 28695 of the Labor Code, to wit: ART. 286. When
employment not deemed terminated.

25
Philippine Pizza, Inc. v. Cayetano
Person Assigned: BULAGAS
Docket/SCRA; Date: G.R. No. 230030. August 29, 2018.
Ponente: PERLAS-BERNABE, J.
Topic: Labor only contracting
Doctrine relevant to topic:
1. Although not a conclusive proof of legitimacy, the Certificate of
Registration nonetheless prevents the presumption of labor-only
contracting from arising. It gives rise to a disputable presumption that the
contractor's operations are legitimate.
2. The existence of the element of control can also be inferred from
Consolidated Building Maintenance, Inc.’s (CBMI’s) act of subjecting
respondents to disciplinary sanctions for violations of company rules and
regulations as evidenced by the various Offense Notices and Memoranda
issued to them.
FACTS:
1. On various dates, respondents Cayetano, Avenido, Gurion, Recto,
Sumbag, Jr., and Deloso (respondents) were hired by CBMI, a job contractor
which provides kitchen, delivery, sanitation, and allied services to Philippine
Pizza Inc.'s (PPI) Pizza Hut chain of restaurants (Pizza Hut), and were thereafter
deployed to the various branches of the latter. Cayetano and Deloso worked as
team members/service crew, while Avenido, Gurion, Recto, and Sumbang, Jr.
served as delivery riders.
2. Respondents alleged that they rendered work for Pizza Hut, ranging
from seven (7) to eleven (11) years, hence, they were regular employees of PPI
and not of CBMI. They claimed to have been initially hired by PPI but were
subsequently transferred to CBMI so as to prevent them from attaining their
regular employment status. Despite the said transfer, however, they were still
under the direct supervision of the managers of Pizza Hut and had been using
its tools and machines for work.
3. Thus, respondents, along with several others, filed separate complaints
for Illegal Dismissal against PPI and CBMI, before the NLRC.
4. For its part, PPI denied any employer-employee relationship with
respondents, averring that it entered into several Contracts of Services with
CBMI to perform janitorial, bussing, kitchen, table service, cashiering,
warehousing, delivery, and allied services in PPI's favor. It also contended that
respondents were assigned to various branches of Pizza Hut and were
performing tasks in accordance with CBMI's manner and method, free from the
direction and control of PPI.
5. On the other hand, CBMI admitted that respondents were its
employees, and that it paid their wages and remitted their SSS, PhilHealth, and
Pag-IBIG contributions. It insisted that it is a legitimate job contractor, as it
possesses substantial capital and a Department of Labor and Employment
(DOLE) Certificate of Registration; undertakes a business separate and distinct
from that of PPI based on its Articles of Incorporation; and more importantly,
retained and exercised the right of control over respondents. Moreover, CBMI
explained that it had no choice but to recall, and subsequently, place
respondents in floating status, considering that PPI had reduced its need for
services in some Pizza Hut branches. Lastly, CBMI maintained that before it had
the opportunity to re-assign respondents, the latter already filed their complaints.
6. LA ruled for respondents, holding that respondents were regular
employees of PPI and not of CBMI.
7. NLRC reversed, holding that CBMI is an independent contractor.
8. CA reinstated the LA decision. The LA and CA took judicial notice of the
case of Philippine Pizza, Inc. v. Noel Matias (Philippine Pizza, Inc.), which
involved a similar complaint for illegal dismissal filed by a delivery rider of Pizza
Hut. In the said case, the Court disregarded the separate personalities of PPI
and CBMI, holding that they were engaged in a prohibited labor-only contracting
arrangement.
ISSUE:
Whether or not CBMI is engaged in a prohibited labor-only contracting
arrangement with PPI
RULING:
26
No. CBMI is a legitimate job contractor, and consequently, the employer of
respondents. CBMI is presumed to have complied with all the requirements of a
legitimate job contractor, considering the Certificates of Registration47 issued
to it by the DOLE. Although not a conclusive proof of legitimacy, the certification
nonetheless prevents the presumption of labor-only contracting from arising. It
gives rise to a disputable presumption that the contractor’s operations are
legitimate.
CBMI has substantial capital and investment. Based on CBMI’s 2012
General Information Sheet, it has an authorized capital stock in the amount of
P10,000,000.00 and subscribed capital stock in the amount of P5,000,000.00,
P3,500,000.00 of which had already been paid up. Additionally, its audited
financial statements show that it has considerable current and non-current
assets amounting to P85,518,832.00. Taken together, CBMI has substantial
capital to properly carry out its obligations with PPI, as well as to sufficiently
cover its own operational expenses. The NLRC correctly gave credence to
CBMI’s claim that it retained control over respondents, as shown by the
deployment of at least one (1) CBMI supervisor in each Pizza Hut branch to
regularly oversee, monitor, and supervise the employees’ attendance and
performance. This claim was further substantiated by CBMI’s area coordinators,
who admitted in their Affidavits51 that: (a) they oversee, monitor, and ensure
CBMI employees’ compliance with company policies, rules, and regulations
whichever Pizza Hut branch they may be assigned; (b) they are responsible for
ensuring that CBMI employees perform their tasks and functions in the manner
that CBMI mandates; (c) they regularly visit and monitor each area of
deployment; (d) they track and confirm the attendance and punctuality of CBMI
employees; and (e) they constantly inform CBMI’s Human Resource
Department (HRD) Manager of any company violations committed by the
employees.
Furthermore, the existence of the element of control can also be inferred from
CBMI’s act of subjecting respondents to disciplinary sanctions for violations of
company rules and regulations as evidenced by the various Offense Notices
and Memoranda52 issued to them. Additionally, records show that CBMI
employed measures to ensure the observance of due process before subjecting
respondents to disciplinary action.
No employer-employee relationship exists between PPI and respondents,
and that the latter were employees of CBMI. Records reveal that respondents
applied for work with CBMI and were consequently selected and hired by the
latter, CBMI paid their wages remitted/paid their SSS, PhilHealth, and Pag-IBIG
contributions, CBMI also exercised the power of discipline and control over
them. From all indications, the Court finds that CBMI is a legitimate job
contractor, and thus, the employer of respondents.
As to the issue of illegal dismissal, respondents were not illegally dismissed
from work. Records show that while PPI denied the existence of an employer-
employee relationship with respondents, CBMI actually acknowledged that
respondents were its employees. CBMI likewise presented proof that it duly
informed respondents of their impending layoff, yet they immediately filed the
complaints before it had the chance to redeploy them. On the other hand,
respondents did not even refute CBMI’s claim that they were informed of its
decision to place them in floating status pending their redeployment. As such,
respondents could not have been illegally terminated from work, for they were
placed in a temporary layoff status when they prematurely filed the complaints.
There being no dismissal to speak of, respondents were thus not illegally
dismissed by CBMI, their actual employer.
WHEREFORE, the petition is GRANTED. The Decision dated March 30, 2016
and the Resolution dated January 6, 2017 rendered by the Court of Appeals in
C.A.-G.R. S.P. No. 136333 are hereby REVERSED and SET ASIDE.
Accordingly, the Decision dated January 28, 2014 and the Resolution dated
April 30, 2014 of the National Labor Relations Commission in NLRC-NCR Nos.
04-05060-13, 05-06931-13, 05-07363-13, 05-07941-13, and 06-08125-13 are
REINSTATED.
SO ORDERED.
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