Coca-Cola Bottlers Phils., Inc. vs. Agito, 579 SCRA 445, G.R. No. 179546 February 13, 2009

3/15/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 579
G.R. No. 179546. February 13, 2009.*
COCA-COLA BOTTLERS PHILS., INC., petitioner, vs.

ALAN M. AGITO, REGOLO S. OCA III, ERNESTO G.
ALARIAO, JR., ALFONSO PAA, JR., DEMPSTER P. ONG,
URRIQUIA T. ARVIN, GIL H. FRANCISCO, and EDWIN
M. GOLEZ, respondents.
Appeals; While factual findings of the Court of Appeals are

generally binding upon the Supreme Court, an exception to this
rule is when the factual findings of the former are contrary to those
of the trial court, or the lower administrative body.—As a general
rule, factual findings of the Court of Appeals are binding upon the
Supreme Court. One exception to this rule is when the factual
findings of the former are contrary to those of the trial court, or
the lower administrative body, as the case may be. This Court is
obliged to resolve an issue of fact herein due to the incongruent
findings of the Labor Arbiter and the NLRC and those of the
Court of Appeals.
Labor Law; Job Contracting; Labor-Only Contracting; Words
and Phrases; In a legitimate job contract, an employer enters into
a contract with a job contractor for the performance of the former’s
work; In legitimate job contracting, the law creates an employer-
employee relationship between the employer and the contractor’s
employees only for a limited purpose, i.e., to ensure that the
employees are paid their wages; Labor-only contracting is an
arrangement wherein the contractor merely acts as an agent in
recruiting and supplying the principal employer with workers for
the purpose of circumventing labor law provisions setting down the
rights of employees; A finding by appropriate authorities that a
contractor is a “labor-only” contractor establishes an employer-
employee relationship between the principal employer and the
contractor’s employees and the former becomes solidarily liable for
all the rightful claims of the employees.—A legitimate job contract,
wherein an employer enters into a contract with a job contractor
for the performance of the former’s work, is permitted by law.
Thus, the employer-employee relationship between the job
contractor and his employees is maintained. In legitimate job
contracting, the law creates an employer-employee
www.central.com.ph/sfsreader/session/0000017831b818fe02b474fa003600fb002c009e/t/?o=False 1/27
_______________
* THIRD DIVISION.
446
446 SUPREME COURT REPORTS ANNOTATED
Coca-Cola Bottlers Phils., Inc. vs. Agito
relationship between the employer and the contractor’s employees

only for a limited purpose, i.e., to ensure that the employees are
paid their wages. The 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 employer is not responsible for any claim
made by the contractor’s employees. On the other hand, labor-only
contracting is an arrangement wherein the contractor merely acts
as an agent in recruiting and supplying the principal employer
with workers for the purpose of circumventing labor law
provisions setting down the rights of employees. It is not
condoned by law. A finding by the appropriate authorities that a
contractor is a “labor-only” contractor establishes an employer-
employee relationship between the principal employer and the
contractor’s employees and the former becomes solidarily liable
for all the rightful claims of the employees.
Same; Same; Same; Performing activities directly related to
the principal business of the employer is only one of the two
indicators that “labor-only” contracting exists—the other is lack of
substantial capital or investment.—The law clearly establishes an
employer-employee relationship between the principal employer
and the contractor’s employee upon a finding that the contractor
is engaged in “labor-only” contracting. Article 106 of the Labor
Code categorically states: “There is ‘labor-only’ contracting where
the person supplying workers to an employee 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 persons are performing activities
which are directly related to the principal business of such
employer.” Thus, performing activities directly related to the
principal business of the employer is only one of the two
indicators that “labor-only” contracting exists; the other is lack of
substantial capital or investment. The Court finds that both
indicators exist in the case at bar.
Same; Same; Same; The Court does not set an absolute figure for
what it considers substantial capital for an independent job
contractor, but it measures the same against the type of work
which the contractor is obligated to perform for the principal.—

The Court clarifies that although Interserve has an authorized
capital stock amounting to P2,000,000.00, only P625,000.00
thereof was paid up as of 31 December 2001. The Court does not
set an absolute figure
447
VOL. 579, FEBRUARY 13, 2009 447
for what it considers substantial capital for an independent job

contractor, but it measures the same against the type of work
which the contractor is obligated to perform for the principal.
However, this is rendered impossible in this case since the
Contract between petitioner and Interserve does not even specify
the work or the project that needs to be performed or completed
by the latter’s employees, and uses the dubious phrase “tasks and
activities that are considered contractible under existing laws and
regulations.” Even in its pleadings, petitioner carefully sidesteps
identifying or describing the exact nature of the services that
Interserve was obligated to render to petitioner. The importance
of identifying with particularity the work or task which Interserve
was supposed to accomplish for petitioner becomes even more
evident, considering that the Articles of Incorporation of
Interserve states that its primary purpose is to operate, conduct,
and maintain the business of janitorial and allied services. But
respondents were hired as salesmen and leadman for petitioner.
The Court cannot, under such ambiguous circumstances, make a
reasonable determination if Interserve had substantial capital or
investment to undertake the job it was contracting with
petitioner.
Same; Same; Same; Burden of Proof; The contractor, not the
employee, has the burden of proof that it has the substantial
capital, investment, and tool to engage in job contracting.—The
contractor, not the employee, has the burden of proof that it has
the substantial capital, investment, and tool to engage in job
contracting. Although not the contractor itself (since Interserve no
longer appealed the judgment against it by the Labor Arbiter),
said burden of proof herein falls upon petitioner who is invoking
the supposed status of Interserve as an independent job
contractor. Noticeably, petitioner failed to submit evidence to
establish that the service vehicles and equipment of Interserve,
valued at P510,000.00 and P200,000.00, respectively, were
sufficient to carry out its service contract with petitioner.
Certainly, petitioner could have simply provided the courts with
records showing the deliveries that were undertaken by
Interserve for the Lagro area, the type and number of equipment
necessary for such task, and the valuation of such equipment.
Absent evidence which a legally compliant company could have
easily provided, the Court will not presume that Interserve had
sufficient investment in service vehicles and equipment,
especially since respondents’ allegation—that they were using
equipment, such as
448
forklifts and pallets belonging to petitioner, to carry out their jobs

—was uncontroverted.
Same; Same; Same; Power of Control; An employer is a labor-
only contractor where it does not exercise the right to control the
performance of the work of its employees.—It is also apparent that
Interserve is a labor-only contractor under Section 5(ii) of the
Rules Implementing Articles 106-109 of the Labor Code, as
amended, since it did not exercise the right to control the
performance of the work of respondents. The lack of control of
Interserve over the respondents can be gleaned from the Contract
of Services between Interserve (as the CONTRACTOR) and
petitioner (as the CLIENT).
Same; Same; Same; The power to recommend penalties or
dismiss workers is the strongest indication of a company’s right of
control as direct employer.—Also significant was the right of
petitioner under paragraph 2 of the Contract to “request the
replacement of the CONTRACTOR’S personnel.” True, this right
was conveniently qualified by the phrase “if from its judgment,
the jobs or the projects being done could not be completed within
the time specified or that the quality of the desired result is not
being achieved,” but such qualification was rendered meaningless
by the fact that the Contract did not stipulate what work or job
the personnel needed to complete, the time for its completion, or
the results desired. The said provision left a gap which could
enable petitioner to demand the removal or replacement of any
employee in the guise of his or her inability to complete a project
in time or to deliver the desired result. The power to recommend
penalties or dismiss workers is the strongest indication of a
company’s right of control as direct employer.
Same; Same; Same; An independent job contractor, who is
answerable to the principal only for the results of a certain work,
job, or service need not guarantee to said principal the daily
attendance of the workers assigned to the latter.—Paragraph 4 of
the same Contract, in which Interserve warranted to petitioner

that the former would provide relievers and replacements in case
of absences of its personnel, raises another red flag. An
independent job contractor, who is answerable to the principal
only for the results of a certain work, job, or service need not
guarantee to said principal the daily attendance of the workers
assigned to the latter. An independent job contractor would surely
have the discretion over the pace at which
449
VOL. 579, FEBRUARY 13, 2009 449
the work is performed, the number of employees required to

complete the same, and the work schedule which its employees
need to follow.
PETITION for review on certiorari of a decision of the

Court of Appeals.
The facts are stated in the opinion of the Court.
De La Rosa & Nograles for petitioner.
Armando San Antonio for respondents.
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule
45 of the Rules of Court, assailing the Decision1 dated 19
February 2007, promulgated by the Court of Appeals in
CA-G.R. SP No. 85320, reversing the Resolution2 rendered
on 30 October 2003 by the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 036494-03. The
Court of Appeals, in its assailed Decision, declared that
respondents Alan M. Agito, Regolo S. Oca III, Ernesto G.
Alariao, Jr., Alfonso Paa, Jr., Dempster P. Ong, Urriquia T.
Arvin, Gil H. Francisco, and Edwin M. Golez were regular
employees of petitioner Coca-Cola Bottlers Phils., Inc.; and
that Interserve Management & Manpower Resources, Inc.
(Interserve) was a labor-only contractor, whose presence
was intended merely to preclude respondents from
acquiring tenurial security.
Petitioner is a domestic corporation duly registered with
the Securities and Exchange Commission (SEC) and
engaged in manufacturing, bottling and distributing soft
drink beverages and other allied products.
_______________
1 Penned by Associate Justice Rosalinda Asuncion-Vicente with

Associate Justices Elvi John S. Asuncion and Enrico M. Lanzanas,
concurring. Rollo, pp. 57-69.
2 Rollo, pp. 152-157.
450

On 15 April 2002, respondents filed before the NLRC

two complaints against petitioner, Interserve, Peerless
Integrated Services, Inc., Better Builders, Inc., and
Excellent Partners, Inc. for reinstatement with backwages,
regularization, nonpayment of 13th month pay, and
damages. The two cases, docketed as NLRC NCR Case No.
04-02345-2002 and NLRC NCR Case No. 05-03137-02,
were consolidated.
Respondents alleged in their Position Paper that they
were salesmen assigned at the Lagro Sales Office of
petitioner. They had been in the employ of petitioner for
years, but were not regularized. Their employment was
terminated on 8 April 2002 without just cause and due
process. However, they failed to state the reason/s for filing
a complaint against Interserve; Peerless Integrated
Services, Inc.; Better Builders, Inc.; and Excellent
Partners, Inc.3
Petitioner filed its Position Paper (with Motion to
Dismiss),4 where it averred that respondents were
employees of Interserve who were tasked to perform
contracted services in accordance with the provisions of the
Contract of Services5 executed between petitioner and
Interserve on 23 March 2002. Said Contract between
petitioner and Interserve, covering the period of 1 April
2002 to 30 September 2002, constituted legitimate job
contracting, given that the latter was a bona fide
independent contractor with substantial capital or
investment in the form of tools, equipment, and machinery
necessary in the conduct of its business.
To prove the status of Interserve as an independent
contractor, petitioner presented the following pieces of
evidence: (1) the Articles of Incorporation of Interserve;6 (2)
the Certificate of Registration of Interserve with the
Bureau of Internal
_______________
3 Id., at pp. 236-242.
4 CA Rollo, pp. 55-69.

5 Id., at pp. 71-76.
6 Id., at pp. 78-87.
451
VOL. 579, FEBRUARY 13, 2009 451

Revenue;7 (3) the Income Tax Return, with Audited

Financial Statements, of Interserve for 2001;8 and (4) the
Certificate of Registration of Interserve as an independent
job contractor, issued by the Department of Labor and
Employment (DOLE).9
As a result, petitioner asserted that respondents were
employees of Interserve, since it was the latter which hired
them, paid their wages, and supervised their work, as
proven by: (1) respondents’ Personal Data Files in the
records of Interserve;10 (2) respondents’ Contract of
Temporary Employment with Interserve;11 and (3) the
payroll records of Interserve.12
Petitioner, thus, sought the dismissal of respondents’
complaint against it on the ground that the Labor Arbiter
did not acquire jurisdiction over the same in the absence of
an employer-employee relationship between petitioner and
the respondents.13
In a Decision dated 28 May 2003, the Labor Arbiter
found that respondents were employees of Interserve and
not of petitioner. She reasoned that the standard put forth
in Article 280 of the Labor Code for determining regular
employment (i.e., that the employee is performing activities
that are necessary and desirable in the usual business of
the employer) was
_______________
7 Id., at p. 88.
8 Id., at pp. 89-93.
9 Id., at p. 131.
10 Id., at pp. 94, 97, 100, 103, 106, 109. Only six Personal Data Files
were attached to the Position Paper. Personal Data Files of two of the
respondents, Alfonso Paa, Jr. and Edwin Golez, were not submitted.
11 Id., at pp. 95-96, 98-99, 101-102, 104-405, 107-108, 110-111. Only six
Contracts of Temporary Employment were attached to the Position Paper.
The Contracts for Temporary Employment of two of the respondents,
Alfonso Paa, Jr. and Edwin Golez, were not submitted.
12 Id., at pp. 112-130.
13 Id., at pp. 66-69.
452

not determinative of the issue of whether an employer-

employee relationship existed between petitioner and
respondents. While respondents performed activities that
were necessary and desirable in the usual business or trade
of petitioner, the Labor Arbiter underscored that
respondents’ functions were not indispensable to the
principal business of petitioner, which was manufacturing
and bottling soft drink beverages and similar products.
The Labor Arbiter placed considerable weight on the fact
that Interserve was registered with the DOLE as an
independent job contractor, with total assets amounting to
P1,439,785.00 as of 31 December 2001. It was Interserve
that kept and maintained respondents’ employee records,
including their Personal Data Sheets; Contracts of
Employment; and remittances to the Social Securities
System (SSS), Medicare and Pag-ibig Fund, thus, further
supporting the Labor Arbiter’s finding that respondents
were employees of Interserve. She ruled that the circulars,
rules and regulations which petitioner issued from time to
time to respondents were not indicative of control as to
make the latter its employees.
Nevertheless, the Labor Arbiter directed Interserve to
pay respondents their pro-rated 13th month benefits for
the period of January 2002 until April 2002.14
In the end, the Labor Arbiter decreed:
“WHEREFORE, judgment is hereby rendered finding that

[herein respondents] are employees of [herein petitioner]
INTERSERVE MANAGEMENT & MANPOWER RESOURCES,
INC. Concomitantly, respondent Interserve is further ordered to
pay [respondents] their pro-rated 13th month pay.
The complaints against COCA-COLA BOTTLERS PHILS.,
INC. is DISMISMMED for lack of merit.
In like manner the complaints against PEERLESS
INTEGRATED SERVICES, INC., BETTER BUILDING INC. and
EX-
_______________
14 Rollo, pp. 134-149.
453
VOL. 579, FEBRUARY 13, 2009 453

CELLENT PARTNERS COOPERATIVE are DISMISSED for

failure of complainants to pursue against them.
Other claims are dismissed for lack of merit.
The computation of the Computation and Examination Unit,
this Commission if (sic) made part of this Decision.”15
Unsatisfied with the foregoing Decision of the Labor

Arbiter, respondents filed an appeal with the NLRC,
docketed as NLRC NCR CA No. 036494-03.
In their Memorandum of Appeal,16 respondents
maintained that contrary to the finding of the Labor
Arbiter, their work was indispensable to the principal
business of petitioner. Respondents supported their claim
with copies of the Delivery Agreement17 between petitioner
and TRMD Incorporated, stating that petitioner was
“engaged in the manufacture, distribution and sale of soft
drinks and other related products with various plants and
sales offices and warehouses located all over the
Philippines.” Moreover, petitioner supplied the tools and
equipment used by respondents in their jobs such as
forklifts, pallet, etc. Respondents were also required to
work in the warehouses, sales offices, and plants of
petitioner. Respondents pointed out that, in contrast,
Interserve did not own trucks, pallets cartillas, or any
other equipment necessary in the sale of Coca-Cola
products.
Respondents further averred in their Memorandum of
Appeal that petitioner exercised control over workers
supplied by various contractors. Respondents cited as an
example the case of Raul Arenajo (Arenajo), who, just like
them, worked for petitioner, but was made to appear as an
employee of the contractor Peerless Integrated Services,
Inc. As proof of control by petitioner, respondents
submitted copies of: (1) a Memorandum18 dated 11 August
1998 issued by Vicente Dy
_______________
15 Id., at pp. 149-150.

16 CA Rollo, pp. 150-170.
17 Id., at p. 186.
18 Id., at p. 193.
454

(Dy), a supervisor of petitioner, addressed to Arenajo,

suspending the latter from work until he explained his
disrespectful acts toward the supervisor who caught him
sleeping during work hours; (2) a Memorandum19 dated 12
August 1998 again issued by Dy to Arenajo, informing the
latter that the company had taken a more lenient and
tolerant position regarding his offense despite having found
cause for his dismissal; (3) Memorandum20 issued by Dy to
the personnel of Peerless Integrated Services, Inc.,
requiring the latter to present their timely request for
leave or medical certificates for their absences; (4)
Personnel Workers Schedules,21 prepared by RB Chua,
another supervisor of petitioner; (5) Daily Sales Monitoring
Report prepared by petitioner;22 and (6) the Conventional
Route System Proposed Set-up of petitioner.23
The NLRC, in a Resolution dated 30 October 2003,
affirmed the Labor Arbiter’s Decision dated 28 May 2003
and pronounced that no employer-employee relationship
existed between petitioner and respondents. It reiterated
the findings of the Labor Arbiter that Interserve was an
independent contractor as evidenced by its substantial
assets and registration with the DOLE. In addition, it was
Interserve which hired and paid respondents’ wages, as
well as paid and remitted their SSS, Medicare, and Pag-
Ibig contributions. Respondents likewise failed to convince
the NLRC that the instructions issued and trainings
conducted by petitioner proved that petitioner exercised
control over respondents as their employer.24 The
dispositive part of the NLRC Resolution states:25
“WHEREFORE, the instant appeal is hereby DISMISSED for

lack of merit. However, respondent Interserve Management &
Man-
_______________
19 Id., at p. 194.
20 Id., at p. 195.
21 Id., at pp. 201-202.
22 Id., at p. 196.
23 Id., at p. 197.
24 Rollo, pp. 152-156.
25 Id., at p. 156.
455
VOL. 579, FEBRUARY 13, 2009 455

power Resources, Inc., is hereby ordered to pay the [herein

respondents] their pro-rated 13th month pay.”
Aggrieved once more, respondents sought recourse with

the Court of Appeals by filing a Petition for Certiorari
under Rule 65, docketed as CA-G.R. SP No. 85320.
The Court of Appeals promulgated its Decision on 9
February 2007, reversing the NLRC Resolution dated 30
October 2003. The appellate court ruled that Interserve
was a labor-only contractor, with insufficient capital and
investments for the services which it was contracted to
perform. With only P510,000.00 invested in its service
vehicles and P200,000.00 in its machineries and
equipment, Interserve would be hard-pressed to meet the
demands of daily soft drink deliveries of petitioner in the
Lagro area. The Court of Appeals concluded that the
respondents used the equipment, tools, and facilities of
petitioner in the day-to-day sales operations.
Additionally, the Court of Appeals determined that
petitioner had effective control over the means and method
of respondents’ work as evidenced by the Daily Sales
Monitoring Report, the Conventional Route System
Proposed Set-up, and the memoranda issued by the
supervisor of petitioner addressed to workers, who, like
respondents, were supposedly supplied by contractors. The
appellate court deemed that the respondents, who were
tasked to deliver, distribute, and sell Coca-Cola products,
carried out functions directly related and necessary to the
main business of petitioner. The appellate court finally
noted that certain provisions of the Contract of Service
between petitioner and Interserve suggested that the
latter’s undertaking did not involve a specific job, but
rather the supply of manpower.
The decretal portion of the Decision of the Court of
Appeals reads:26

_______________
26 Id., at pp. 57-68.

456

“WHEREFORE, the petition is GRANTED. The assailed

Resolutions of public respondent NLRC are REVERSED and SET
ASIDE. The case is remanded to the NLRC for further
proceedings.”
Petitioner filed a Motion for Reconsideration, which the

Court of Appeals denied in a Resolution, dated 31 August
2007.27
Hence, the present Petition, in which the following
issues are raised:28
I
WHETHER OR NOT THE COURT OF APPEALS ACTED IN
ACCORDANCE WITH EVIDENCE ON RECORD, APPLICABLE
LAWS AND ESTABLISHED JURISPRUDENCE WHEN IT
RULED THAT INTERSERVE IS A LABOR-ONLY
CONTRACTOR;
II
WHETHER OR NOT THE COURT OF APPEALS ACTED IN
ACCORDANCE WITH APPLICABLE LAWS AND
ESTABLISHED JURISPRUDENCE WHEN IT CONCLUDED
THAT RESPONDENTS PERFORMED WORK NECESSARY
AND DESIRABLE TO THE BUSINESS OF [PETITIONER];
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED
SERIOUS ERROR WHEN IT DECLARED THAT
RESPONDENTS WERE EMPLOYEES OF [PETITIONER],
EVEN ABSENT THE FOUR ELEMENTS INDICATIVE OF AN
EMPLOYMENT RELATIONSHIP; AND
IV
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY
ERRED WHEN IT CONCLUDED THAT INTERSERVE WAS
ENGAGED BY [PETITIONER] TO SUPPLY MANPOWER
ONLY.
The Court ascertains that the fundamental issue in this

case is whether Interserve is a legitimate job contractor.
Only
_______________
27 CA Rollo, pp. 456-457.

28 Rollo, p. 330.
457
VOL. 579, FEBRUARY 13, 2009 457

by resolving such issue will the Court be able to determine

whether an employer-employee relationship exists between
petitioner and the respondents. To settle the same issue,
however, the Court must necessarily review the factual
findings of the Court of Appeals and look into the evidence
presented by the parties on record.
As a general rule, factual findings of the Court of
Appeals are binding upon the Supreme Court. One
exception to this rule is when the factual findings of the
former are contrary to those of the trial court, or the lower
administrative body, as the case may be. This Court is
obliged to resolve an issue of fact herein due to the
incongruent findings of the Labor Arbiter and the NLRC
and those of the Court of Appeals.29
The relations which may arise in a situation, where
there is an employer, a contractor, and employees of the
contractor, are identified and distinguished under Article
106 of the Labor Code:
“Article 106. Contractor or subcontractor.—Whenever an

employer enters into a contract with another person for the
perfor-mance 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 of this Code.
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 employees directly employed by him.
The Secretary of Labor may, by appropriate regulations,
restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so prohibiting or
restriction, he may make appropriate distinctions between labor-
only contracting and job contracting as well as differentiations
within these types of contracting and determine who among the
parties involved shall
_______________
29 Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. v. Puente, G.R.

No. 153832, 18 March 2005, 453 SCRA 820, 826.
458

be considered the employer for purposes of this Code, to prevent

any violation or circumvention of any provision of this Code.
There is “labor-only” contracting where the person supplying
workers to an employee 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 persons 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.”
The afore-quoted provision recognizes two possible

relations among the parties: (1) the permitted legitimate
job contract, or (2) the prohibited labor-only contracting.
A legitimate job contract, wherein an employer enters
into a contract with a job contractor for the performance of
the former’s work, is permitted by law. Thus, the employer-
employee relationship between the job contractor and his
employees is maintained. In legitimate job contracting, the
law creates an employer-employee relationship between the
employer and the contractor’s employees only for a limited
purpose, i.e., to ensure that the employees are paid their
wages. The 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 employer is not responsible for
any claim made by the contractor’s employees.30
On the other hand, labor-only contracting is an
arrangement wherein the contractor merely acts as an
agent in recruiting and supplying the principal employer
with workers for the purpose of circumventing labor law
provisions setting down the rights of employees. It is not
condoned by law. A finding by the appropriate authorities
that a contractor is a
_______________
30 San Miguel Corporation v. MAERC Integrated Services, Inc., 453

Phil. 543, 566-567; 405 SCRA 579, 596 (2003).
459
VOL. 579, FEBRUARY 13, 2009 459

“labor-only” contractor establishes an employer-

employee relationship between the principal employer and
the contractor’s employees and the former becomes
solidarily liable for all the rightful claims of the
employees.31
Section 5 of the Rules Implementing Articles 106-109 of
the Labor Code, as amended, provides the guidelines in
determining whether labor-only contracting exists:
“Section 5. Prohibition against labor-only contracting.

Labor-only contracting is hereby declared prohibited. For this
purpose, labor-only contracting shall refer to an arrangement
where the contractor or subcontractor merely recruits, supplies, or
places workers to perform a job, work or service for a principal,
and any of the following elements are [is] present:
i) 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
ii) The contractor does not exercise the right to control the
performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the
application of Article 248(C) of the Labor Code, as amended.
“Substantial capital or investment” refers to capital stocks and
subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the
performance or completion of the job, work, or service contracted
out.
The “right to control” shall refer to the right reversed 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 to be used in reaching that end.”
(Emphasis supplied.)
When there is labor-only contracting, Section 7 of the

same implementing rules, describes the consequences
thereof:

_______________
31 Id., at p. 567; p. 596.
460

“Section 7. Existence of an employer-employee relationship.—

The contractor or subcontractor shall be considered the employer
of the contractual employee for purposes of enforcing the
provisions of the Labor Code and other social legislation. The
principal, however, shall be solidarily liable with the contractor in
the event of any violation of any provision of the Labor Code,
including the failure to pay wages.
The principal shall be deemed the employer of the contractual
employee in any of the following case, as declared by a competent
authority:
a. where there is labor-only contracting; or
b. where the contracting arrangement falls within the
prohibitions provided in Section 6 (Prohibitions) hereof.”
According to the foregoing provision, labor-only

contracting would give rise to: (1) the creation of an
employer-employee relationship between the principal and
the employees of the contractor or sub-contractor; and (2)
the solidary liability of the principal and the contractor to
the employees in the event of any violation of the Labor
Code.
Petitioner argues that there could not have been labor-
only contracting, since respondents did not perform
activities that were indispensable to petitioner’s principal
business. And, even assuming that they did, such fact alone
does not establish an employer-employee relationship
between petitioner and the respondents, since respondents
were unable to show that petitioner exercised the power to
select and hire them, pay their wages, dismiss them, and
control their conduct.
The argument of petitioner is untenable.
The law clearly establishes an employer-employee
relationship between the principal employer and the
contractor’s employee upon a finding that the contractor is
engaged in “labor-only” contracting. Article 106 of the
Labor Code categorically states: “There is ‘labor-only’
contracting where the person supplying workers to an
employee does not have substantial capital or investment
in the form of tools, equipment, machineries, work
premises, among others, and the workers
461
VOL. 579, FEBRUARY 13, 2009 461

recruited and placed by such persons are performing

activities which are directly related to the principal
business of such employer.” Thus, performing activities
directly related to the principal business of the employer is
only one of the two indicators that “labor-only” contracting
exists; the other is lack of substantial capital or
investment. The Court finds that both indicators exist in
the case at bar.
Respondents worked for petitioner as salesmen, with the
exception of respondent Gil Francisco whose job was
designated as leadman. In the Delivery Agreement32
between petitioner and TRMD Incorporated, it is stated
that petitioner is engaged in the manufacture, distribution
and sale of softdrinks and other related products. The work
of respondents, constituting distribution and sale of Coca-
Cola products, is clearly indispensable to the principal
business of petitioner. The repeated re-hiring of some of the
respondents supports this finding.33 Petitioner also does
not contradict respondents’ allegations that the former has
Sales Departments and Sales Offices in its various offices,
plants, and warehouses; and that petitioner hires Regional
Sales Supervisors and District Sales
_______________
32 Rollo, p. 199.
33 Based on respondents’ Personal Data files, which were kept by
Interserve, respondent Regolo Oca worked in Coca-Cola in September
2000 as a salesman and his contract was renewed three more times until
he was dismissed in April 2002. Respondent Ernesto Alario worked in
Coca-Cola in October 2001, and his contract was renewed one more time
before his dismissal in April 2002. Respondent Gil Francisco worked in
Coca-cola as a Driver on August 1998 and later on as leadman in
December 1998, and his contract was renewed until he was dismissed in
April 2002. Respondent Arvin Urquia worked as a salesman in Coca-Cola
in October 2001, and his contract was renewed in February 2002 until he
was dismissed in April 2002. Lastly, respondent Alan Agito worked in
Coca-Cola as salesman in May 2002, and his contract was renewed until
he was dismissed in April 2002. (CA Rollo, pp. 94, 97, 100, 103, 106, and
109.)
462

Supervisors who supervise and control the salesmen and

sales route helpers.34
As to the supposed substantial capital and investment

required of an independent job contractor, petitioner calls
the attention of the Court to the authorized capital stock of
Interserve amounting to P2,000,000.00.35 It cites as
authority Filipinas Synthetic Fiber Corp. v. National Labor
Relations Commission36 and Frondozo v. National Labor
Relations Commission,37 where the contractors’ authorized
capital stock of P1,600,000.00 and P2,000,000.00,
respectively, were considered substantial for the purpose of
concluding that they were legitimate job contractors.
Petitioner also refers to Neri v. National Labor Relations
Commission38 where it was held that a contractor ceases to
be a labor-only contractor by having substantial capital
alone, without investment in tools and equipment.
This Court is unconvinced.
At the outset, the Court clarifies that although
Interserve has an authorized capital stock amounting to
P2,000,000.00, only P625,000.00 thereof was paid up as of
31 December 2001. The Court does not set an absolute
figure for what it considers substantial capital for an
independent job contractor, but it measures the same
against the type of work which the contractor is obligated
to perform for the principal. However, this is rendered
impossible in this case since the Contract between
petitioner and Interserve does not even specify the work or
the project that needs to be performed or completed by the
latter’s employees, and uses the dubious phrase “tasks and
activities that are considered contractible under existing
laws and regulations.” Even in its pleadings, petitioner
care-
_______________
34 Rollo, p. 283.
35 Id., at pp. 331-338.
36 327 Phil. 144; 257 SCRA 334 (1996).
37 CA-G.R. SP No. 102442, 30 May 2008.
38 G.R. Nos. 97008-09, 23 July 1993, 224 SCRA 717.
463
VOL. 579, FEBRUARY 13, 2009 463

fully sidesteps identifying or describing the exact nature of

the services that Interserve was obligated to render to
petitioner. The importance of identifying with particularity
the work or task which Interserve was supposed to
accomplish for petitioner becomes even more evident,

considering that the Articles of Incorporation of Interserve
states that its primary purpose is to operate, conduct, and
maintain the business of janitorial and allied services.39
But respondents were hired as salesmen and leadman for
petitioner. The Court cannot, under such ambiguous
circumstances, make a reasonable determination if
Interserve had substantial capital or investment to
undertake the job it was contracting with petitioner.
Petitioner cannot seek refuge in Neri v. National Labor
Relations Commission. Unlike in Neri, petitioner was
unable to prove in the instant case that Interserve had
substantial capitalization to be an independent job
contractor. In San Miguel Corporation v. MAERC
Integrated Services, Inc.,40 therein petitioner San Miguel
Corporation similarly invoked Neri, but was rebuffed by
the Court based on the following ratiocination:41
“Petitioner also ascribes as error the failure of the Court of

Appeals to apply the ruling in Neri v. NLRC. In that case, it was
held that the law did not require one to possess both substantial
capital and investment in the form of tools, equipment,
machinery, work premises, among others, to be considered a job
contractor. The second condition to establish permissible job
contracting was sufficiently met if one possessed either attribute.
Accordingly, petitioner alleged that the appellate court and the
NLRC erred when they declared MAERC a labor-only contractor
despite the finding that MAERC had investments amounting to
P4,608,080.00 consisting of buildings, machinery and equipment.
However, in Vinoya v. NLRC, we clarified that it was not
enough to show substantial capitalization or investment in the
form
_______________
39 CA Rollo, p. 78.
40 Supra note 30.
41 Id., at pp. 564-566; pp. 594-595.
464

of tools, equipment, machinery and work premises, etc., to be

considered an independent contractor. In fact, jurisprudential
holdings were to the effect that in determining the existence of an
independent contractor relationship, several factors may be
considered, such 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.
In Neri, the Court considered not only the fact that respondent
Building Care Corporation (BCC) had substantial capitalization
but noted that BBC carried on an independent business and
performed its contract according to its own manner and method,
free from the control and supervision of its principal in all matters
except as to the results thereof. The Court likewise mentioned
that the employees of BCC were engaged to perform specific
special services for their principal. The status of BCC had also
been passed upon by the Court in a previous case where it was
found to be a qualified job contractor because it was a “big firm
which services among others, a university, an international bank,
a big local bank, a hospital center, government agencies, etc.”
Furthermore, there were only two (2) complainants in that case
who were not only selected and hired by the contractor before
being assigned to work in the Cagayan de Oro branch of FEBTC
but the Court also found that the contractor maintained effective
supervision and control over them.”
Thus, in San Miguel Corporation, the investment of

MAERC, the contractor therein, in the form of buildings,
tools, and equipment of more than P4,000,000.00 did not
impress the Court, which still declared MAERC to be a
labor-only contractor. In another case, Dole Philippines,
Inc. v. Esteva,42 the Court did not recognize the contractor
therein as a legitimate job contractor, despite its paid-up
capital of over
_______________
42 G.R. No. 161115, 30 November 2006, 509 SCRA 332, 353 and 377.
465
VOL. 579, FEBRUARY 13, 2009 465

P4,000,000.00, in the absence of substantial investment in

tools and equipment used in the services it was rendering.
Insisting that Interserve had substantial investment,

petitioner assails, for being purely speculative, the finding
of the Court of Appeals that the service vehicles and
equipment of Interserve, with the values of P510,000.00
and P200,000.00, respectively, could not have met the
demands of the Coca-Cola deliveries in the Lagro area.
Yet again, petitioner fails to persuade.
The contractor, not the employee, has the burden of
proof that it has the substantial capital, investment, and
tool to engage in job contracting.43 Although not the
contractor itself (since Interserve no longer appealed the
judgment against it by the Labor Arbiter), said burden of
proof herein falls upon petitioner who is invoking the
supposed status of Interserve as an independent job
contractor. Noticeably, petitioner failed to submit evidence
to establish that the service vehicles and equipment of
Interserve, valued at P510,000.00 and P200,000.00,
respectively, were sufficient to carry out its service contract
with petitioner. Certainly, petitioner could have simply
provided the courts with records showing the deliveries
that were undertaken by Interserve for the Lagro area, the
type and number of equipment necessary for such task, and
the valuation of such equipment. Absent evidence which a
legally compliant company could have easily provided, the
Court will not presume that Interserve had sufficient
investment in service vehicles and equipment, especially
since respondents’ allegation—that they were using
equipment, such as forklifts and pallets belonging to
petitioner, to carry out their jobs—was uncontroverted.
_______________
43 Aboitiz Haulers, Inc. v. Dimapatoi, G.R. No. 148619, 19 September

2006, 502 SCRA 271, 289; Guarin v. National Labor Relations
Commission, G.R. No. 86010, 3 October 1989, 178 SCRA 267, 273.
466

In sum, Interserve did not have substantial capital or

investment in the form of tools, equipment, machineries,
and work premises; and respondents, its supposed
employees, performed work which was directly related to
the principal business of petitioner. It is, thus, evident that
Interserve falls under the definition of a “labor-only”
contractor, under Article 106 of the Labor Code; as well as
Section 5(i) of the Rules Implementing Articles 106-109 of

the Labor Code, as amended.
The Court, however, does not stop at this finding. It is
also apparent that Interserve is a labor-only contractor
under Section 5(ii)44 of the Rules Implementing Articles
106-109 of the Labor Code, as amended, since it did not
exercise the right to control the performance of the work of
respondents.
The lack of control of Interserve over the respondents
can be gleaned from the Contract of Services between
Interserve
_______________
44 According to Section 5 of the Rules Implementing Articles 106-109,

as amended:
Section 5. Prohibition against labor-only contracting.—Labor-only
contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies, or places workers to perform a
job, work or service for a principal, and any of the following elements
are [is] present:
i) 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
ii) The contractor does not exercise the right to control the
performance of the work of the contractual employee.
The use of the words “any” and “or” in the foregoing provision means
that the elements of labor-only contracting identified therein need not
exist concurrently. The existence of one element is sufficient to establish
labor-only contracting.
467
VOL. 579, FEBRUARY 13, 2009 467

(as the CONTRACTOR) and petitioner (as the CLIENT),

pertinent portions of which are reproduced below:
“WHEREAS, the CONTRACTOR is engaged in the business,

among others, of performing and/or undertaking, managing for
consideration, varied projects, jobs and other related
management-oriented services;
WHEREAS, the CONTRACTOR warrants that it has the
necessary capital, expertise, technical know-how and a team of
professional management group and personnel to undertake and

assume the responsibility to carry out the above mentioned
project and services;
WHEREAS, the CLIENT is desirous of utilizing the services
and facilities of the CONTRACTOR for emergency needs, rush
jobs, peak product loads, temporary, seasonal and other special
project requirements the extent that the available work of the
CLIENT can properly be done by an independent CONTRACTOR
permissible under existing laws and regulations;
WHEREAS, the CONTRACTOR has offered to perform specific
jobs/works at the CLIENT as stated heretofore, under the terms
and conditions herein stated, and the CLIENT has accepted the
offer.
NOW THEREFORE, for and in consideration of the foregoing
premises and of the mutual covenants and stipulations
hereinafter set forth, the parties have hereto have stated and the
CLIENT has accepted the offer:
1. The CONTRACTOR agrees and undertakes to perform
and/or provide for the CLIENT, on a non-exclusive basis for tasks
or activities that are considered contractible under existing laws
and regulations, as may be needed by the CLIENT from time to
time.
2. To carry out the undertakings specified in the immediately
preceding paragraph, the CONTRACTOR shall employ the
necessary personnel like Route Helpers, Salesmen, Drivers,
Clericals, Encoders & PD who are at least Technical/Vocational
courses graduates provided with adequate uniforms and
appropriate identification cards, who are warranted by the
CONTRACTOR to be so trained as to efficiently, fully and
speedily accomplish the work and services undertaken herein by
the CONTRACTOR. The CONTRACTOR represents that its
personnel shall be in such number as will be sufficient to cope
with the requirements of the services and work
468

herein undertaken and that such personnel shall be physically fit,

of good moral character and has not been convicted of any crime.
The CLIENT, however, may request for the replacement of the
CONTRACTOR’S personnel if from its judgment, the jobs or the
projects being done could not be completed within the time
specified or that the quality of the desired result is not being
achieved.
3. It is agreed and understood that the CONTRACTOR’S
personnel will comply with CLIENT, CLIENT’S policies, rules
and regulations and will be subjected on-the-spot search by

CLIENT, CLIENT’S duly authorized guards or security men on
duty every time the assigned personnel enter and leave the
premises during the entire duration of this agreement.
4. The CONTRACTOR further warrants to make available at
times relievers and/or replacements to ensure continuous and
uninterrupted service as in the case of absences of any personnel
above mentioned, and to exercise the necessary and due
supervision over the work of its personnel.”45
Paragraph 3 of the Contract specified that the personnel

of contractor Interserve, which included the respondents,
would comply with “CLIENT” as well as “CLIENT’s
policies, rules and regulations.” It even required Interserve
personnel to subject themselves to on-the-spot searches by
petitioner or its duly authorized guards or security men on
duty every time the said personnel entered and left the
premises of petitioner. Said paragraph explicitly
established the control of petitioner over the conduct of
respondents. Although under paragraph 4 of the same
Contract, Interserve warranted that it would exercise the
necessary and due supervision of the work of its personnel,
there is a dearth of evidence to demonstrate the extent or
degree of supervision exercised by Interserve over
respondents or the manner in which it was actually
exercised. There is even no showing that Interserve had
representatives who supervised respondents’ work while
they were in the premises of petitioner.
_______________
45 Rollo, pp. 74-75.
469
VOL. 579, FEBRUARY 13, 2009 469

Also significant was the right of petitioner under

paragraph 2 of the Contract to “request the replacement of
the CONTRACTOR’S personnel.” True, this right was
conveniently qualified by the phrase “if from its judgment,
the jobs or the projects being done could not be completed
within the time specified or that the quality of the desired
result is not being achieved,” but such qualification was
rendered meaningless by the fact that the Contract did not
stipulate what work or job the personnel needed to
complete, the time for its completion, or the results desired.
The said provision left a gap which could enable petitioner

to demand the removal or replacement of any employee in
the guise of his or her inability to complete a project in time
or to deliver the desired result. The power to recommend
penalties or dismiss workers is the strongest indication of a
company’s right of control as direct employer.46
Paragraph 4 of the same Contract, in which Interserve
warranted to petitioner that the former would provide
relievers and replacements in case of absences of its
personnel, raises another red flag. An independent job
contractor, who is answerable to the principal only for the
results of a certain work, job, or service need not guarantee
to said principal the daily attendance of the workers
assigned to the latter. An independent job contractor would
surely have the discretion over the pace at which the work
is performed, the number of employees required to
complete the same, and the work schedule which its
employees need to follow.
As the Court previously observed, the Contract of
Services between Interserve and petitioner did not identify
the work needed to be performed and the final result
required to be accomplished. Instead, the Contract
specified the type of workers Interserve must provide
petitioner (“Route Helpers, Salesmen, Drivers, Clericals,
Encoders & PD”) and their
_______________
46 Brotherhood Labor Unity Movement of the Philippines v. Zamora,

G.R. No. L-48645, 7 January 1987, 147 SCRA 49, 59.
470

qualifications (technical/vocational course graduates,

physically fit, of good moral character, and have not been
convicted of any crime). The Contract also states that, “to
carry out the undertakings specified in the immediately
preceding paragraph, the CONTRACTOR shall employ the
necessary personnel,” thus, acknowledging that Interserve
did not yet have in its employ the personnel needed by
petitioner and would still pick out such personnel based on
the criteria provided by petitioner. In other words,
Interserve did not obligate itself to perform an identifiable
job, work, or service for petitioner, but merely bound itself
to provide the latter with specific types of employees. These
contractual provisions strongly indicated that Interserve

was merely a recruiting and manpower agency providing
petitioner with workers performing tasks directly related to
the latter’s principal business.
The certification issued by the DOLE stating that
Interserve is an independent job contractor does not sway
this Court to take it at face value, since the primary
purpose stated in the Articles of Incorporation47 of
Interserve is misleading. According to its Articles of
Incorporation, the principal business of Interserve is to
provide janitorial and allied services. The delivery and
distribution of Coca-Cola products, the work for which
respondents were employed and assigned to petitioner,
were in no way allied to janitorial services. While the
DOLE may have found that the capital and/or investments
in tools and equipment of Interserve were sufficient for an
independent contractor for janitorial services, this does not
mean that such capital and/or investments were likewise
sufficient to maintain an independent contracting business
for the delivery and distribution of Coca-Cola products.
With the finding that Interserve was engaged in
prohibited labor-only contracting, petitioner shall be
deemed the true employer of respondents. As regular
employees of petitioner,
_______________
47 CA Rollo, p. 78.
471
VOL. 579, FEBRUARY 13, 2009 471

respondents cannot be dismissed except for just or

authorized causes, none of which were alleged or proven to
exist in this case, the only defense of petitioner against the
charge of illegal dismissal being that respondents were not
its employees. Records also failed to show that petitioner
afforded respondents the twin requirements of procedural
due process, i.e., notice and hearing, prior to their
dismissal. Respondents were not served notices informing
them of the particular acts for which their dismissal was
sought. Nor were they required to give their side regarding
the charges made against them. Certainly, the respondents’
dismissal was not carried out in accordance with law and,
therefore, illegal.48
Given that respondents were illegally dismissed by

petitioner, they are entitled to reinstatement, full
backwages, inclusive of allowances, and to their other
benefits or the monetary equivalents thereof computed
from the time their compensations were withheld from
them up to the time of their actual reinstatement, as
mandated under Article 279 of the Labor Code.
IN VIEW OF THE FOREGOING, the instant Petition is
DENIED. The Court AFFIRMS WITH MODIFICATION
the Decision dated 19 February 2007 of the Court of
Appeals in CA-G.R. SP No. 85320. The Court DECLARES
that respondents were illegally dismissed and, accordingly,
ORDERS petitioner to reinstate them without loss of
seniority rights, and to pay them full back wages computed
from the time their compensation was withheld up to their
actual reinstatement. Costs against the petitioner.
_______________
48 Abesco Construction and Development Corporation v. Ramirez, G.R.

No. 141168, 10 April 2006, 487 SCRA 9, 15; Grandspan Development
Corporation v. Bernardo, G.R. No. 141464, 21 September 2005, 470 SCRA
461, 470; Raycor Aircontrol Systems, Inc. v. National Labor Relations
Commission, 330 Phil. 306, 334; 261 SCRA 589, 613 (1996).
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Coca-Cola Bottlers Phils., Inc. vs. Agito, 579 SCRA 445, G.R. No. 179546 February 13, 2009

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Coca-Cola Bottlers Phils., Inc. vs. Agito, 579 SCRA 445, G.R. No. 179546 February 13, 2009

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3/15/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 579

G.R. No. 179546. February 13, 2009.*

COCA-COLA BOTTLERS PHILS., INC., petitioner, vs.

Appeals; While factual findings of the Court of Appeals are

446 SUPREME COURT REPORTS ANNOTATED

Coca-Cola Bottlers Phils., Inc. vs. Agito

relationship between the employer and the contractor’s employees

which the contractor is obligated to perform for the principal.—

VOL. 579, FEBRUARY 13, 2009 447

Coca-Cola Bottlers Phils., Inc. vs. Agito

for what it considers substantial capital for an independent job

448 SUPREME COURT REPORTS ANNOTATED

Coca-Cola Bottlers Phils., Inc. vs. Agito

forklifts and pallets belonging to petitioner, to carry out their jobs

the same Contract, in which Interserve warranted to petitioner

VOL. 579, FEBRUARY 13, 2009 449

Coca-Cola Bottlers Phils., Inc. vs. Agito

the work is performed, the number of employees required to

PETITION for review on certiorari of a decision of the

1 Penned by Associate Justice Rosalinda Asuncion-Vicente with

450 SUPREME COURT REPORTS ANNOTATED

On 15 April 2002, respondents filed before the NLRC

3 Id., at pp. 236-242.

4 CA Rollo, pp. 55-69.

VOL. 579, FEBRUARY 13, 2009 451

Revenue;7 (3) the Income Tax Return, with Audited

452 SUPREME COURT REPORTS ANNOTATED

not determinative of the issue of whether an employer-

“WHEREFORE, judgment is hereby rendered finding that

14 Rollo, pp. 134-149.

VOL. 579, FEBRUARY 13, 2009 453

CELLENT PARTNERS COOPERATIVE are DISMISSED for

Unsatisfied with the foregoing Decision of the Labor

15 Id., at pp. 149-150.

454 SUPREME COURT REPORTS ANNOTATED

Coca-Cola Bottlers Phils., Inc. vs. Agito

(Dy), a supervisor of petitioner, addressed to Arenajo,

“WHEREFORE, the instant appeal is hereby DISMISSED for

VOL. 579, FEBRUARY 13, 2009 455

Coca-Cola Bottlers Phils., Inc. vs. Agito

power Resources, Inc., is hereby ordered to pay the [herein

Aggrieved once more, respondents sought recourse with

26 Id., at pp. 57-68.

456 SUPREME COURT REPORTS ANNOTATED

“WHEREFORE, the petition is GRANTED. The assailed

Petitioner filed a Motion for Reconsideration, which the

The Court ascertains that the fundamental issue in this

27 CA Rollo, pp. 456-457.

VOL. 579, FEBRUARY 13, 2009 457

by resolving such issue will the Court be able to determine

“Article 106. Contractor or subcontractor.—Whenever an

29 Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. v. Puente, G.R.

458 SUPREME COURT REPORTS ANNOTATED

be considered the employer for purposes of this Code, to prevent

The afore-quoted provision recognizes two possible

30 San Miguel Corporation v. MAERC Integrated Services, Inc., 453

VOL. 579, FEBRUARY 13, 2009 459

“labor-only” contractor establishes an employer-

“Section 5. Prohibition against labor-only contracting.

When there is labor-only contracting, Section 7 of the

31 Id., at p. 567; p. 596.

460 SUPREME COURT REPORTS ANNOTATED

“Section 7. Existence of an employer-employee relationship.—