GR No.

113347 / June 141, 1996

Filipinas Synthetic Fiber Corporation (FILSYN) v. National Labor Relations Commission
(NLRC), Labor Arbiter Voltaire A. Balitaan, Felipe Loterte, and De Lima Trading & General
Services

Facts:
FILSYN was a domestic corporation engaged in the manufacturing of polyester fiber. It
contracted the service of De Lima for the performance of specific janitorial services in its plant in
Laguna. Felipe Loterte was the one deployed to take care of the plants and maintain general
cleanliness around the premises. Later Loterte filed complaint against FILSYN and De Lima,
alternatively, for illegal dismissal, underpayment of wages, non-payment of legal holiday pay,
service incentive leave pay and 13th month pay. Both the Labor Arbiter and the NLRC held that
Loterte was a regular employee and declared that FILSYN was the real employer and De Lima
was a mere labor contractor. Thus, FILSYN was the one liable for the money claims. Hence, the
appeal.

Issue:
Whether or not an employer-employee relationship did exist between FILSYN and Loterte.

Held:
No, an employer-employee relationship did not exist between FILSYN and Loterte. The latter
was rather an employee of De Lima which was an independent contractor rather than a labor-
only contracting. Under the Labor Code, two elements must exist for finding a labor-only
contracting: a) 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 b)
the workers recruited and placed by such persons are performing activities directly related to the
principal business of such employer. These two elements did not exist in this case of De Lima. It
was found to be duly registered with the Securities and Exchange Commission with a
substantial capitalization and was actually a highly capitalized venture. As to Loterte, the
janitorial services he performed may be directly related to the principal business of FILSYN but
nevertheless, not necessary in its operation. They were merely incidental thereto and without
which the production and company sales will not suffer. De Lima, being an independent
contractor, no employer-employee relationship exists between FILSYN and Loterte. However,
FILSYN remains to be jointly and severally liable with De Lima for the money claims of Loterte
as the Labor Code provides that every employer or indirect employer shall be held responsible
with the contractor or subcontractor for the violation of the Code and that for purposes of
determining the civil liability, they shall be considered as direct employer.