LabStan 3rd & 4th Meeting

LABSTAN THIRD AND FOURTH MEETING
FIRST COVERAGE:
GENERAL CONCEPT OF THE CASES:
There is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places
workers to perform a job, work or service for a principal and any of the following elements are present:
• 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
• The contractor does not exercise the right to control over the performance of the work of
the contractual employee.
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.
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.
||
CASES:
Serrrano v. NLRC; G.R. No. 117040, January 27, 2000
Facts:
• Serrano, head of the Security Checkers Section of Isetann was served with a letter informing him
of his termination which was effective on the same date on the ground of retrenchment.
• The company phased out the entire security section and planned to engage the services of an
independent security agency instead.
• Serrano filed a complaint for illegal dismissal against Isetann, which was ruled in favor of Serrano.
The Labor Arbiter found that:
o Isetann failed to establish that the retrenchment was resorted to in order to minimize
further losses
o that it failed to use reasonable standards in choosing which employees to terminate
o that it failed to show the security section were inefficient at their jobs
o it also failed to grant Serrano due process when they failed to give a prior notice.
Isetann was ordered to reinstate and pay Serrano full backwages.
• Isetann appealed and the NLRC reversed the Labor Arbiter's decision. The NLRC held that:
o the act of phasing out of the security section and the hiring of an independent security
agency was a legitimate business decision.
o The "reasonable criteria” in the selection of the employees to be terminated did not apply
because all positions in the security section had been abolished|||
Issue:
Whether or not Isetann’s hiring of an independent security agency to replace the security section is a valid
ground for dismissal.
Held:
• YES.
• The Supreme Court based their ruling on Article 283 of the Labor Code where it state states that a
company may terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operations of the
establishment.
• The Court contends that without any proof that the management acted in a malicious or arbitrary
manner, the Court will not interfere with the exercise of its judgment.
• As for the non-service of notice, the Court held that the dismissal will be upheld BUT the employer
must be given sanctions. This ruling was based on the Wenphil doctrine.
• The petition was granted.
W.M. Manufacturing vs. Richard R. Dalag; G.R. No. 209418, December 7, 2015
Facts:
• Golden Rock executed a contract named as "Service Agreement”, where it states that Dalag was a
contractual employee and he shall work for five months from April to September.
• However, on August, Dalag was prevented from entering his work station and was instead escorted
to the locker room to collect his belongings. He took this as an illegal dismissal because the
management did not explain nor give any prior notice.
• Dalag also claimed that his job as a seal machine operator is necessary for the company’s plastic
manufacturing business, which makes him a regular employee. He also alleged that WM and
Golden Rock engaged in a labor-only contracting based on the ff. circumstances:
o that all the equipment, machine and tools that he needed to perform his job were furnished
by WM MFG;
o that the jobs are to be performed at WM MFG's workplace;
o and that he was under the supervision of WM MFG's team leaders and supervisors
• WM’s officers replied that they did not dismiss Dalag. Dalag was the one who abandoned his work.
They showed proof in the form of memos where it showed how Dalag:
o failed to immediately report when the side seal machine broke down
o that he did not report that parts of the machine needed to be repaired, that’s why the damage
worsened
o that he took spare parts of the machines without management's consent||
• Dalag ignored these memos and told them he would no longer return to work. WM informed
Golden Rock, through a letter that they would need a replacement.
• The Labor Arbiter ruled against Dalag. Dalag failed to show any termination letter from his real
employer, which was Golden Rock.
• While the NLRC ruled in favor of Dalag. They ruled that Dalag’s true employer was WM because
Golden Rock was only a labor-only contractor or an agent. But when the case WM and Golden
Rock filed for a MoR, NLRC reversed its decision.
• They showed a Certificate of Registration issued by the DOLE and the service agreement which
served as proof that Golden Rock was a legitimate job contractor.
• The Court applied the four-fold test instead of the control test, and found that Golden Rock paid
Dalag's salaries and wages; it reserved unto itself the power to dismiss Dalag; and that it has sole
control over the exercise of Dalag's employment. |||
• The Court of appeals reversed the NLRC’s decision because Golden Rock’s certificate was not
conclusive evidence that they are an independent contractor, and that without proof that Golden
Rock has substantial capital and that it exercised control over Dalag, the WM and Golden Rock
failed to establish their status.
Issue:
Whether or not WM and Golden Rock were engaged in labor only contracting.
Held:
• YES.
• According to the Court there is "labor-only" contracting if the person supplies workers to an
employer who does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, and the workers recruited by the person performs activities which are
directly related to the principal business of the employer.
• In cases like this, the person is considered an agent of the employer who is responsible for the
workers in the same manner or extent as a direct employer.
American President Lines v. Clave; GR L-51641, June 29, 198
Facts:||
• American President Lines’ one-year contract with the Marine Security Agency for the protection
of its vessels was terminated upon prior notice at the expiration of its term.
• Marine Security Agency hired and assigned the guards who kept watching over the
American President Lines’ vessels. The guards were not known to American, they only
dealt with the agency. American President Lines would pay a sum to the agency who in
turn determined and paid the salary of the individual watchmen.
• A new contract was then executed for the same purpose and period with the Philippine Scout
Veterans Security and Investigation Agency.
• Maritime Security Union protested the termination and filed a complaint against American
President Lines for unfair labor practice. The NLRC found American President Lines to be the
employer of the Maritime Security Union and thus guilty of the charge.
• American President Lines appealed to the Office of the President but it was dismissed, so this
petition for certiorari was filed.
Issue:
Whether or not there existed an employer-employee relationship between American President Lines and
Marine Security Agency.
Held:
• NO.
• The Court held that the agency recruits, hires, and assigns the work of its watchmen. So a
watchman can not perform any security service for the American President Lines unless
the agency hires the watchmen.
• As for the wages, the amount paid is not determined by American President Lines. They
only give a lump sum to the agency and it is the agency that decides how much it pays the
watchman.
• American Pre also does not have any power to dismiss the security guards. They may only
request the agency to change a particular guard, but not dismiss them themselves. This is
proof that the power lies in the hands of the agency.
• Since the American only deals with the agency, and not the individual watchmen, it can be
concluded that American does not exercise any power over the watchmen's conduct.
• Thus the court held that American President Lines could not have committed unfair labor practice
without the existence of an employer-employee relationship.
Aliviado v. Procter & Gample Phils., Inc.; GR No. 160506, March 9, 2010
Facts:
• Petitioners worked as merchandisers of Procter & Gamble. P&G manufactures and produces
different consumer and health products, which it sells on a wholesale basis. They entered into
contracts with Promm-Gem and SAPS for the promotion of its products.
• The petitioners individually signed employment contracts with either Promm-Gem or SAPS for
five months. They were assigned at different outlets, supermarkets and stores where they handled
the products of P&G. They received their wages from Promm-Gem or SAPS.
• SAPS and Promm-Gem was the one who imposed disciplinary measures on absentees, dishonest
merchandisers or those who changed their day-off without prior notice.
• Petitioners claim that when P&G had its re-alignment program, the petitioners were instructed to
fill up application forms and report to the agencies that P&G created.
• Petitioners also claim that P&G instigated their dismissal based on its letter to SAPS dated
informing them that the Merchandising Services Contract will no longer be renewed.
• The petitioners filed a complaint against P&G for regularization, service incentive leave pay and
other benefits with damages, and was later amended to include their dismissal without prior
notice.
• The Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-
employee relationship between petitioners and P&G. He found that the selection and engagement
of the petitioners, the payment of their wages, the power of dismissal and control were all done
and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were
legitimate independent job contractors.|||
• When brought to the NLRC then the CA for MR, it was dismissed.
Issue:
W/N Promm-Gen and SAPS are labor-only contractors.
Held:
• NO.
• The Court first decided if Promm-Gen and SAPS are labor-only contractors.
• The financial statements of Promm-Gem showed that it has a capital stock of P1 million and a paid-
in capital of P500,000.00. It also has long term assets worth P400,000 and current assets of
P700,000.
• Promm-Gem also maintained its own warehouse and office space and has registered vehicles which
were used for its business. Promm-Gem also has other clients aside from P&G. The Court also
founnd that Promm-Gem has substantial investments.
• The records also show that Promm-Gem supplied its workers with the materials for their work and
issued uniforms to them. They also considered the complainants as its regular employees.
• Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.|||
• As for SAPS, it showed that it has a paid-in capital of only P30,000. There is no other evidence
presented to show how much its working capital and assets are. There is is no showing of substantial
investment in tools, equipment or other assets, nor that they have any other client aside from P&G.
• Thus SAPS is considered a labor-only contractor.
CCBPI v. Agito; GR No. 179546, February 13, 2009
Facts:
• Agito and the other respondents alleged that they were salesmen assigned at the Lagro Sales
Office of Coca Cola. They had been employed there for years, but were not regularized. Their
employment was terminated without just cause and due process.
• Coca Cola filed a Motion to Dismiss where it said that the respondents were employees of
Interserve who were only tasked to perform contracted services in accordance with a Contract of
Services executed between Coca Cola and Interserve.
• The Contract covered a period of 5 months, and was allegedly a legitimate job contracting,
because Interserve 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. AcTHCE
• To prove Interserve was an independent contractor, petitioner presented the following pieces of
evidence:
o the Articles of Incorporation of Interserve;
o the Certificate of Registration of Interserve with the Bureau of Internal Revenue;
o the Income Tax Return, with Audited Financial Statements, of Interserve;
o the Certificate of Registration of Interserve as an independent job contractor, issued by
the Department of Labor and Employment (DOLE).
• The Labor Arbiter ruled that the respondents were employees of Interserve, not Coca Cola. The
regular employment does not determine whether an employer-employee relationship existed.
Even though respondents performed activities that were necessary in the usual business of Coca
Cola, the Labor Arbiter held that respondents were not indispensable.
• Aside from the evidences shown, it was also found that Interserve kept the respondents' employee
records, including their Personal Data Sheets; Contracts of Employment; and remittances to the
Social Security System (SSS), Medicare and Pag-ibig Fund.
• Circulars, rules and regulations were not indicative of control.
Issue:
W/N Interserve is a labor-only contractor.
Held:
• YES.
• The Court clarified that although Interserve has an authorized capital stock amounting to
P2,000,000.00, only P600,000.00 was paid up. The Court does not provide an absolute figure as
substantial capital for an independent job contractor. It only measures it based on the type of work
to be performed.
• Such cannot be applied in this case because the Contract between petitioner and Interserve does not
specify what kind of work is to be performed. Even in its pleadings, Coca Cola does not describe
the exact nature of the work. That’s why the Court cannot determine if Interserve had substantial
capital or investment.
• With regards to the service vehicles, the Court said it was not sufficient to meet the demands of
Coca Cola.
• Also, in their contract, Interserve claimed to exercise supervision over the work of its employees,
they failed to show that they had representatives who actually supervised the respondents in the
work premises.
• Also, in the Contract, Interserve guaranteed to Coca Cola that they would provide relievers or
replacements in case of absences. However, according the Court, an independent job contractor is
only answerable for the results of the work done.
• As for the Certificate, the Court gives it no merit because in the Article of Incorporation, it only
included janitorial services. Not the delivery and distribution of the Coca Cola products which the
respondents were doing.
• Thus, InterServe was a labor-only contractor and Coca Cola were the true employees of the
respondents.
Philippine Fuji Xerox Corp. v. NLRC; GR 111501, March 5, 1996
Facts:
• Fuji Xerox entered into an agreement with Skillpower, Inc. for supply of workers to operate copy
machines of Fuji Xerox. Pedro Garado was assigned as a key operator at Fuji Xerox's branch at
Buendia.
• Garado went on leave and his work was taken over by a substitute. When he returned, he found out
that over 600 copies were spoiled. He tried to talk to a service technician of Fuji Xerox into stopping
the meter of the machine to avoid being blamed. But the technician refused Garado's request.
• When Fuji Xerox found out about the incident, it reported the matter to Skillpower, Inc, and the
day after, Skillpower, Inc. suspended Garado while waiting for his explanation. Garado filed a
complaint for illegal dismissal.
• The Labor Arbiter dismissed Garado’s complaint because it found that Garado was an employee
of Skillpower, Inc., and that he had merely been assigned by Skillpower, Inc. to Fuji Xerox.
• The NLRC found that Garado was an employee of petitioner Fuji Xerox. Although Skillpower, Inc.
had substantial capital assets, the copier machines which Garado operated belonged to Fuji Xerox.
• Also, even though it was Skillpower, Inc. who suspended Garado, Skillpower did so merely
because Fuji Xerox asked them to. The NLRC found that Garado worked under the control and
supervision of Fuji Xerox, who even paid his salaries, and that Skillpower was merely a paymaster-
agent of Fuji Xerox.
• The NLRC held that Skillpower, Inc. was a labor-only contractor and Garado should be deemed to
have been directly employed by Fuji Xerox.
Issue:
W/N Skillpower, Inc. was a labor-only contractor.
Held:
• YES.
• The Court found that even though Garado was employed by Skillpower to provide his services to
Fuji Xerox, he had never been assigned to any other company and worked exclusively for Fuji
Xerox.
• The fact that Skillpower had other clients is immaterial. What’s important is that Garado never
worked for any other clients but Fuji. Even though the agreement stated that Garado’s work was
temporary, he remaind working at Fuji for 7 consecutive years.
• The contract Garado signed stating that he was a contractual worker of Fuji Xerox and his main
employer was Skillpower was not appreciated by the Court, because it was only an attempt to
circumvent the law.
• Based on a series of letters regarding administrative matters, the Court inferred that Fuji Xerox
played a role in the dismissal of Garado, thus Fuji Xerox had disciplinary authority over Garado.
• Fuji Xerox also argues that Skillpower, Inc. had typewriters and service vehicles of their own. But
these typewriters and vehicles have no direct relationship to the job contracted, which is operation
copier machines and offering copying services to the public. Skillpower should provide their own
copying machines to Garado and the other copiers, but that wasn’t the case. All they did was supply
manpower to Fuji Xerox.
• The tools, equipment, machineries, work premises, and other materials which are necessary in the
conduct of his business must be directly related to the service it is being contracted to render.
• Thus, the Court held that Skillpower is a labor-only contractor.
Vinoya v. NLRC; GR No. 126586, February 2, 2000
Facts:
• Alexander Vinoya applied and was accepted by Regent as a sales representative and was given a
company identification card. He reported daily to the office of Regent in Pasig. He was assigned to
various supermarkets and grocery stores where he booked sales orders and collected payments.
• Vinoya was required to have a bond of P200.00 every month as security deposit to guarantee the
performance of his duties. He contends that he was under the direct control and supervision of the
plant manager and senior salesman of Regent.
• He was transferred by Regent to Peninsula Manpower Company which was an agency that provided
RFC with additional contractual workers pursuant to a contract for the supply of manpower
services. After his transfer to Peninsula, Vinoya was allegedly reassigned to RFC as sales
representative.
• He was informed by personnel manager of Regent that his services were terminated and was asked
to surrender his ID card. Petitioner was told that his dismissal was due to the expiration of the
Contract of Service between Regent and Peninsula.
• Vinoya claimed that he was dismissed from employment without any notice. He filed a case against
RFC before the Labor Arbiter for illegal dismissal and non-payment of 13th month pay.|
• Regent claimed there was no employer-employee relationship between them. Vinoya was an
employee of Peninsula who was allegedly an independent contractor. Regent showed an
employment contract to prove his claim.
• The ID given to Vinoya was merely for recognition and the bond was needed to ensure the turnover.
The control and supervision they exercised over Vinoya was in coordination with Peninsula.
• They claimed Vinoya was not terminated, the contract of employment between Peninsula and
Regent merely expired.
• The Labor Arbiter ruled in favor of Vinoya, and that Regent was the true employer of Vinoya based
on the ff. findings:
o Petitioner was originally with RFC and was merely transferred to PMCI to be deployed as
an agency worker and then subsequently reassigned to RFC as sales representative;
o RFC had direct control and supervision over petitioner;
o RFC actually paid for the wages of petitioner although coursed through PMCI;
o Petitioner was terminated per instruction of RFC.|||
• The NLRC reversed the decision, ruling that Peninsula was an independent contractor.
Issue:
Whether Peninsula Manpower Company is a labor-only contractor.
Held:
• Vinoya was an employee of Regent Food Corp. and Skillpower was a labor-only contractor.
• The Court ruled that it is not enough to show substantial capitalization or investment in the form of
tools, equipment, machineries and work premises to be considered as an independent contractor.
• Several factors might be considered is whether:
o the contractor is carrying on an independent business;
o the nature and extent of the work;
o the skill required;
o the term and duration of the relationship;
o the right to assign the performance of specified pieces of work;
o the control and supervision of the workers;
o the power of the employer with respect to the hiring, firing and payment of the workers of
the contractor;
o the control of the premises;
o the duty to supply premises, tools, appliances, materials and labor; and the mode, manner
and terms of payment. |||
• The Court found that :
o PMCI does not have substantial capitalization or investment in the form of tools,
equipment, machineries, work premises, among others, to qualify as an independent
contractor.
o PMCI did not carry on an independent business nor did it undertake the performance of its
contract according to its own manner and method, free from the control and supervision of
its principal, RFC.|||
o PMCI was not engaged to perform a specific and special job or service, which is one of the
strong indicators that an entity is an independent contractor.
San Miguel Corp. vs. MAERC Integrated Systems. G.R. No. 144672; July 10, 2003
Facts:
• 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.
• The workers alleged that they were hired by San Miguel Corporation (SMC) through its agent or
intermediary Maerc Integrated Services, Inc. (MAERC) to work in two (2) designated workplaces
in Mandaue City: one, inside the SMC premises at the Mandaue Container Services, and another,
in the Philphos Warehouse owned by MAERC.
• They washed and segregated various kinds of empty bottles used by SMC to sell and distribute its
beer beverages to the consuming public. 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.
• Complainants alleged that before SMC contracted the services of MAERC a majority of them had
already been working for SMC under the guise of being employees of another contractor, Jopard
Services, until the services of the latter were terminated.
• SMC denied liability for the claims and averred that the complainants were not its employees but
of MAERC, an independent contractor whose primary corporate purpose was to engage in the
business of cleaning, receiving, sorting, classifying, glass and metal containers.
• SMC informed MAERC of the termination of their service contract and cited its plans to phase out
its segregation activities due to the installation of labor and cost-saving devices.
• When the service contract was terminated, the workers claimed that SMC stopped them from
performing their jobs and it was tantamount to an illegal dismissal by SMC who was their real
employer and that MAERC was merely a tool or a shield by SMC to avoid liability.
• MAERC admitted that it recruited the complainants and placed them in the bottle segregation
project of SMC but maintained that it was only conveniently used by SMC as an intermediary to
avoid its obligations and responsibilities towards the workers.
• The Labor Arbiter rendered a decision holding that MAERC was an independent contractor. He
dismissed the complaints for illegal dismissal but ordered MAERC to pay complainants' separation
benefits. MAERC and SMC were also ordered to jointly and severally pay complainants their wage
differentials and pay attorney's fees in the amount.
• The NLRC ruled that MAERC was a labor-only contractor and that complainants were employees
of SMC. The NLRC regardless of whether MAERC was a job contractor or a labor-only contractor,
SMC was still solidarily liable with MAERC for the unpaid obligations.
Issue:
Whether or not San Miguel Corp. is solidarily liable with MAERC.
Held:
• YES.
• MAERC displayed the characteristics of a labor-only contractor. MAERC's investments in the form
of buildings, tools and equipment amounted to more than P4 Million but it was SMC which required
MAERC to undertake such investments under the understanding that the business relationship
between petitioner and MAERC would be on a long term basis. MAERC was also set up to
specifically meet the needs of SMC which was then having labor problems in its segregation
division. None of MAERC’s workers was also ever assigned to any other establishment, thus
convincing us that it was created solely to service the needs of SMC.
• 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.|||
• MAERC was found to be labor-only contractor and SMC’s liability is that of a direct employer and
thus solidarily liable with MAERC.
||
DIGITEL v. DEU; G.R. No. 184903-04, October 10, 2012
Facts:
• Digitel Employees Union (Union) became the exclusive bargaining agent of all rank and file
employees of Digitel by virtue of a certificate election. The Union and Digitel then made a
collective bargaining negotiations which resulted in a bargaining deadlock. The Union threatened
to go on strike, but then Labor Secretary assumed jurisdiction over the dispute and eventually
directed the parties to execute a collective bargaining agreement
• No CBA was actually made and some union members left Digitel, and the union was no longer
active.
• Ten years later, Digitel received a letter from the President of the union, which contained the list
of officers, CBA proposals and the ground rules. Digitel was reluctant to negotiate with the Union
and demanded that the they show compliance with the provisions of the Union's Constitution and
By-laws on union membership and election of officers.
• The Union filed a case for Preventive Mediation before the National Conciliation and Mediation
Board based on Digitel's violation of the duty to bargain, then filed a notice of strike.
• During the pendency of the case, Digiserv, filed with the Department of Labor and Employment
(DOLE) an Establishment Termination Report stating that it will cease its business operation. The
union once again filed another Notice of Strike for union busting, illegal lock-out, and violation of
the assumption order. A
• Digitel filed a petition with the Bureau of Labor Relations (BLR) seeking cancellation of the
Union's registration on the following grounds:
o failure to file the required reports from 1994-2004;
o misrepresentation of its alleged officers;
o membership of the Union is composed of rank and file, supervisory and managerial
employees;
o substantial number of union members are not Digitel employees.
• The petition was dismissed based on lack of sufficient evidence to prove misrepresentation and the
mixing of employees.
• The Secretary of Labor ordered a compulsory arbitration before the NLRC for unfair labor practice
against Digitel, but it was dismissed by the NLRC, but charged Digitel with illegal dismissal of
some of the union members.
• The Court of Appeals upheld the Secretary of Labor's Order for Digitel to commence CBA
negotiations with the Union and emphasized that the pendency of a petition for the cancellation of
a union's registration does not bar the holding of negotiations for a CBA.
• The Court of Appeals then maintained that Digiserv is engaged in labor-only contracting and that
its employees are actually employees of Digitel.
• Digitel argued that Digiserv is a legitimate contractor. Digitel asserts that the affected employees
are registered with the Social Security System, Pag-ibig, Bureau of Internal Revenue and
PhilHealth with Digiserv as their employer. Digitel further contends that assuming that the affected
Digiserv employees are employees of Digitel, they were validly dismissed on the ground of closure
of a department or a part of Digitel's business operation.|||
Issue:
W/N Digiserv is a legitimate contractor.

• No. The Court held that Digiserv is a labor-only contractor.

• There was no proof that Digiserv had substantial investment in the form of capital, equipment or
tools. Digiserv's authorized capital stock of P1,000,000.00 was not considered substantial. Only
Two P250,000.00 of the authorized capital stock had been subscribed and only P62,500.00 had
been paid up. There was no increase in capitalization for the last 10 years.|||
• In the Amended Articles of Incorporation, it was stated that the primary purpose of Digiserv is to
provide manpower services. The Court held that the legitimate job contractor provides services
while the labor-only contractor provides manpower only. The legitimate job contractor undertakes
to perform a specific job for the principal employer while the labor-only contractor merely provides
the personnel to work for the principal employer.
• Considering that Digiserv has been found to be engaged in labor-only contracting, the dismissed
employees are deemed employees of Digitel.|||
• Section 7 of the IRR held that labor-only contracting would give rise to:
o the creation of an employer-employee relationship between the principal and the
employees of the contractor or sub-contractor;
o the solidary liability of the principal and the contractor to the employees in the event of
any violation of the Labor Code.
• Digitel is considered the principal employer of respondent employees.
Fonterra Brands Phils. Inc. vs. Largado; G.R. No. 205300, March 18, 2015
Facts:
• Fonterra Brands Phils., Inc. contracted the services of Zytron Marketing and Promotions Corp. for
the marketing and promotion of its milk and dairy products. Zytron provided Fonterra with trade
merchandising representatives, including respondents Largado, for three years.
• Fonterra sent Zytron a letter terminating its promotions contract. Fonterra then entered into an
agreement for manpower supply with A.C. Sicat Marketing and Promotional Services. Largado
submitted a job application with A.C. Sicat, which hired them for a term of five (5) months.
• When respondents' 5-month contracts with A.C. Sicat were about to expire, they allegedly sought
renewal but were refused. This prompted respondents to file complaints for illegal dismissal,
regularization, non-payment of service incentive leave and 13th month pay, and actual and moral
damages, against petitioner, Zytron, and A.C. Sicat.
• The Labor Arbiter dismissed the complaint and ruled that:
o respondents were not illegally dismissed. They were the ones who refused to renew their
contract and that they voluntarily complied with the requirements to claim their
corresponding monetary benefits;
o they were consecutively employed by Zytron and A.C. Sicat, not by Fonterra.
• The NLRC affirmed the Labor Arbiters decision, but the Court of Appeals assailed their decision
based on the ground that A.C. Sicat satisfies the requirements for a legitimate job contracting, but
Zytron does not because:
o Zytron's paid-in capital of P250,000 cannot be considered as substantial capital;
o its Certificate of Registration was issued by the DOLE months after respondents' supposed
employment ended;
o its claim that it has the necessary tools and equipment for its business is unsubstantiated.
Therefore, according to the CA, respondents were Fonterra's employees.
Issue:
Whether or not Zytron and A.C. Sicat are labor-only contractors.
Held:
• Yes. Zytron is a labor-only contractor; No. A.C. Sicat is not a labor-only contractor.
• Sicat was able to prove its status as a legitimate job contractor for having presented the following
evidence, to wit:
o Certificate of Business Registration;
o Certificate of Registration with the Bureau of Internal Revenue;
o Mayor's Permit;
o Certificate of Membership with the Social Security System;
o Certificate of Registration with the Department of Labor and Employment;
o Company Profile; and
o Certifications issued by its clients.
• A.C. Sicat has substantial capital, having assets totaling P5,926,155. In its agreement with Fonterra,
it is clearly set forth that A.C. Sicat shall be liable for the wages and salaries of its employees or
workers, including benefits, premiums, and protection due them, as well as remittance to the proper
government entities of all withholding taxes, Social Security Service, and Medicare premiums, in
accordance with relevant laws.
• Court also held that Fonterra's issuance of Merchandising Guidelines, stock monitoring and
inventory forms, and promo mechanics, for compliance and use of A.C. Sicat's employees assigned
to them, does not establish that Fonterra exercises control over A.C. Sicat. |
Manila Memorial Park Cemetery, Inc. v. Lluz; G.R. No. 208451, February 3, 2016
Facts:
• Manila Memorial Park Cemetery, Inc. entered into a Contract of Services with Ward Trading and
Services (Ward Trading). The Contract of Services provided that Ward Trading, as an
independent contractor, will render interment and exhumation services and other related work to
Manila Memorial.
• Among those assigned by Ward Trading to perform services at the Manila Memorial Park were
respondent Lluz. They worked six days a week for eight hours daily and were paid P250 per day.
• The respondents filed a Complaint for regularization and Collective Bargaining Agreement
benefits against Manila Memorial, then amended the complaint to include illegal dismissal,
underpayment of 13th month pay, and payment of attorney's fees. SDHTEC
• Respondents alleged that they asked Manila Memorial to consider them as regular workers but
Manila Memorial refused the request since respondents were employed by Ward Trading, an
independent labor contractor. Thereafter, respondents joined the MMP Union. The MMP Union,
on behalf of respondents, sought their regularization which Manila Memorial again declined.
• Subsequently, respondents were dismissed by Manila Memorial. Thus, respondents amended the
complaint to include the prayer for their reinstatement and payment of back wages.
• Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since
there was no employer-employee relationship. Manila Memorial argued that respondents were
the employees of Ward Trading.
• Labor Arbiter dismissed the complaint for failing to prove the existence of an employer-employee
relationship. But the NLRC reversed the Labor Arbiter's findings. The NLRC ruled that Ward
Trading was a labor-only contractor and an agent of Manila Memorial. The Court of Appeal
affirmed the ruling of the NLRC.
Issue:
Whether or not Ward Trading was a labor-only contractor.
Held:
• Yes.
• The Court found that Ward Trading does not have substantial capital or investment in the form of
tools, equipment, machinery, work premises and other materials since it is Manila Memorial which
owns the equipment used in the performance of work needed for interment and exhumation
services.|||
• The pertinent provision in the Contract of Services which shows that Manila Memorial owns the
equipment was a form of sale, but the sale was merely a regular business transaction between two
parties. Manila Memorial did not present any evidence to show that the sale actually pushed through
or that payments were made by Ward Trading to prove the transaction.
• The Contract of Service also provides that the COMPANY reserves the right to rent all
or any of the Ward’s equipment in the event the COMPANY requires its use.
• This is proof that Ward does not have an absolute right to use or enjoy the equipment.
This means Ward is not the owner of the equipment worth P1,400,000.00 that is being
used in the performance of the services contracted out.
• The Service Contract also states that the company will provide the area to store the
equipment and materials, and the office space for Ward’s staff and personnel. Even the
work premises used by Ward in the performance of the services contracted out is owned
by Manila Memorial.
• While Ward has a Certificate of Business Name Registration issued by the Department of Trade
and Industry, it expressly states that it is not a license to engage in any kind of business, and that it
is valid only at Las Piñas City. Not in Parañaque City, where Ward assigned Lluz and the other to
perform interment services it contracted with respondent Manila Memorial.
• Failing to register as a contractor gives rise to the presumption that one is engaged in labor-only
contracting unless the contractor overcomes the burden of proving that it has substantial capital,
investment, tools and the like, which Manila Memorial failed to do.
Quintanar v. CCBPI; G.R. No. 210565, June 28, 2016
Facts:
• The petitioners are former employees directly hired by Coca-Cola and assigned as regular
Route Helpers under the direct supervision of the Route Sales Supervisors. Their duties
consist of distributing bottled Coca-Cola products to the stores and customers in their
assigned areas/routes, and they were paid salaries and commissions at the average of
P3,000.00 per month.
• After working for quite some time as directly-hired employees of Coca-Cola, they were
transferred as agency workers to the Lipercon Services, Inc., People's Services, Inc.,
ROMAC, and Interserve Management and Manpower Resources, Inc.
• Petitioners allege that the Department of Labor and Employment (DOLE) conducted an
inspection of Coca-Cola to determine whether it is complying with the various mandated
labor standards, and they were declared to be regular employees of Coca-Cola, thus they
made claims for underpayment of their 13th month pay, emergency cost of living
allowance (ECOLA), and other claims.
• As soon as Coca Cola learned of the filing of the claims with DOLE, they were dismissed.
Their claims were later settled by the, but the settlement allegedly did not include the
issues on reinstatement and payment of CBA benefits. Thus, they filed their complaint
for illegal dismissal.
• Coca-Cola denies employer-employee relationship with the petitioners and said that with whom it
has a service agreement was the true employer. Interserve is engaged in the business of rendering
substitute or reliever delivery services to Coca Cola, particularly, the delivery of softdrinks and
beverage products.
• It is allegedly free from the control and direction of CCBPI in all matters connected with the
performance of the work, except as to the results thereof,. Interserve is allegedly highly capitalized
with a total of P21,658,220.26 and with total assets of P27,509,716.32.|||
• The Labor Arbiter ruled in favor of the petitioners (who were complainants at that time), that they
were simply employees of Coca-Cola who were "seconded" to Interserve.|||The NLRC affirmed the
LA’s ruling, but the Court of Appeals reversed the decision.
• The CA agreed with the contention of Coca-Cola that it was Interserve who exercised the power of
selection and engagement over the petitioners considering that the latter applied for their jobs and
went through the pre-employment processes of Interserve. The petitioners' contracts of employment
and personal data sheets were filed with Interserve and it stipulated that Interserve had the sole
power to assign them temporarily as relievers for absent employees of their clients. The CA also
noted that the petitioners had been working for other agencies before they were hired by
Interserve.|||
• The CA also gave credence to the position of Coca-Cola that it was Interserve who paid the
petitioners' salaries and took into consideration Interserve's admission that they had to sever the
petitioners' from their contractual employment because its contract with Coca-Cola expired and
there was no demand for relievers from its other clients. The CA equated this with Interserve's
exercise of its power to fire the petitioners.
• CA also considered view that it was Interserve which exercised the power of control. Interserve
exercised the power of control, monitoring the petitioners' attendance, providing them with their
assignments to the delivery trucks of Coca-Cola, and making sure that they were able to make
their deliveries.
• The CA concluded that Interserve was a legitimate independent contractor. It noted that the said
agency was registered with the Department of Labor and Employment (DOLE) as an independent
contractor which had provided delivery services for other beverage products of its clients, and had
shown that it had substantial capitalization and owned properties and equipment that were used in
the conduct of its business operations. The CA was, thus, convinced that Interserve ran its own
business, separate and distinct from Coca-Cola. ||
Issue:
Whether or not Interserve was a legitimate independent contractor.

Held:
• NO.
• The Court clarified that although Interserve has an authorized capital stock amounting to
P2,000,000.00, only P600,000.00 was paid up. The Court does not provide an absolute figure as
substantial capital for an independent job contractor. It only measures it based on the type of work
to be performed.
• Such cannot be applied in this case because the Contract between petitioner and Interserve does not
specify what kind of work is to be performed. Even in its pleadings, Coca Cola does not describe
the exact nature of the work. That’s why the Court cannot determine if Interserve had substantial
capital or investment.
• With regards to the service vehicles, the Court said it was not sufficient to meet the demands of
Coca Cola.
• Also, in their contract, Interserve claimed to exercise supervision over the work of its employees,
they failed to show that they had representatives who actually supervised the respondents in the
work premises.
• Also, in the Contract, Interserve guaranteed to Coca Cola that they would provide relievers or
replacements in case of absences. However, according the Court, an independent job contractor is
only answerable for the results of the work done.
• As for the Certificate, the Court gives it no merit because in the Article of Incorporation, it only
included janitorial services. Not the delivery and distribution of the Coca Cola products which the
respondents were doing.
• Thus, InterServe was a labor-only contractor and Coca Cola were the true employees of the
respondents.
DOLE DEPARTMENT ORDER NO. 174-17

RULES IMPLEMENTING ARTICLES 106 TO 109 OF THE LABOR CODE, AS AMENDED
Salient provisions:
• SECTION 2. Coverage.
o These Rules shall apply to all parties in an arrangement where employer-employee
relationship exists.
o Contractors and subcontractors referred to in these Rules are prohibited from engaging
in recruitment and placement activities as defined in Article 13 (b) of the Labor Code,
whether local or overseas employment.
• SECTION 3. Definition of Terms.

o The following terms, as used in these Rules, shall mean:
o "Bond" — refers to the bond under Article 108 of the Labor Code that the
principal may require from the contractor to be posted equal to the
cost of labor under contract.
o "Cabo" — refers to a person or group of persons or to a labor group which,
under the guise of a labor organization, cooperative or any entity, supplies
workers to an employer, with or without any monetary or other consideration,
whether in the capacity of an agent of the employer or as an ostensible
independent contractor.
o "Contracting" or "Subcontracting" — refers to an arrangement whereby a
principal agrees to farm out to a contractor the performance or completion of a
specific job or work within a definite or predetermined period,
regardless of whether such job or work is to be performed or completed within
or outside the premises of the principal.
o "Contractor" — refers to any person or entity engaged in a legitimate
contracting or subcontracting arrangement providing services for a specific job
or undertaking farmed out by principal under a Service Agreement.
o "Contractor's employee" — refers to employee of the contractor hired to
perform or complete a job or work farmed out by the principal pursuant to a
Service Agreement with the latter.
o f) "In-house agency" — refers to a contractor which is owned, managed, or
controlled directly or indirectly by the principal or one where the principal
owns/represents any share of stock, and which operates solely or mainly for
the principal.
o g) "In-house cooperative" — refers to a cooperative which is managed, or
controlled directly or indirectly by the principal or one where the principal or
any of its officers owns/represents any equity or interest, and which operates
solely or mainly for the principal.
o h) "Labor-only contracting" — refers to arrangement where the contractor
or subcontractor merely recruits, supplies or places workers to perform a job
or work for a principal, and the elements enumerated in Section 5 hereunder
are present.
o i) "Principal" — refers to any natural or juridical entity, whether an
employer or not, who puts out or farms out a job or work to a contractor.
o "Service Agreement" — refers to the contract between the
principal and contractor containing the terms and conditions governing the
performance or completion of a specific job or work being farmed out for a
definite or predetermined period.
o "Solidary liability" — refers to the liability of the principal, pursuant to the
provision of Article 109 of the Labor Code, as direct employer together with
the contractor for any violation of any provision of the Labor Code.
o It also refers to the liability of the principal, in the same manner and extent
that he/she is liable to his/her direct employees, to the extent of the work
performed under the contract when the contractor fails to pay the
waged of his/her employees, as provided in Article 106 of the Labor Code, as
amended.
o l) "Substantial capital" — refers to paid-up capital
stock/shares at least Five Million Pesos (P5,000,000.00) in the
case of corporations, partnerships and cooperatives; in the case of single
proprietorship, a net worth of at least Five Million Pesos (P5,000,000.00).
• SECTION 5. Absolute Prohibition against Labor-only Contracting.

o Labor-only contracting, which is totally prohibited, refers to an arrangement where:
§ The contractor or subcontractor does not have substantial capital, or
• The contractor or subcontractor does not have investments in the
form of tools, equipment, machineries, supervision, work premises,
among others, and
• The contractor's or subcontractor's employees recruited and placed are
performing activities which are directly related to the main business
operation of the principal; or
§ The contractor or subcontractor does not exercise the right to control over the
performance of the work of the employee.
• SECTION 6. Other Illicit Forms of Employment Arrangements.

o In addition to Section 5 of these Rules, the following are hereby declared prohibited for
being contrary to law or public policy:
§ When the principal farms out work to a "Cabo".
§ Contracting out of job or work through an in-house agency.
§ Contracting out of job or work through an in-house cooperative which merely
supplies workers to the principal.
§ Contracting out of a job or work by reason of a strike or lockout whether actual
or imminent.
§ Contracting out of a job or work being performed by union members and such
will interfere with, restrain or coerce employees in the exercise of their rights to
self-organization as provided in Article 259 of the Labor Code, as amended.
§ Requiring the contractor's/subcontractor's employees to perform functions which
are currently being performed by the regular employees of the principal.
§ Requiring the contractor's/subcontractor's employees to sign, as a precondition
to employment or continued employment, an antedated resignation letter; a
blank payroll; a waiver of labor standards including minimum wages and social
or welfare benefits; or a quitclaim releasing the principal or contractor from
liability as to payment of future claims; or require the employee to become
member of a cooperative.
§ Repeated hiring by the contractor/subcontractor of employees under
an employment contract of short duration.
§ Requiring employees under a contracting/subcontracting arrangement to sign a
contract fixing the period of employment to a term shorter than the term of the
Service Agreement, unless the contract is divisible into phases for which
substantially different skills are required and this is made known to the
employee at the time of engagement.
§ Such other practices, schemes or employment arrangements designed to
circumvent the right of workers to security of tenure.
• SECTION 7. When Principal is Deemed the Direct Employer of the Contractor's or

Subcontractor's Employees.
o In the event that there is a finding that the contractor or subcontractor is engaged in labor-
only contracting under Section 5 and other illicit forms of employment arrangements
under Section 6 of these Rules, the principal shall be deemed the direct employer of the
contractor's or subcontractor's employees.
• SECTION 8. Permissible Contracting or Subcontracting Arrangements.

o Notwithstanding Sections 5 and 6 hereof, contracting or subcontracting shall only be
allowed if all the following circumstances concur:
§ The contractor or subcontractor is engaged in a distinct and independent
business and undertakes to perform the job or work on its own responsibility,
according to its own manner and method;
§ The contractor or subcontractor has substantial capital to carry out the job
farmed out by the principal on his account, manner and method, investment in
the form of tools, equipment, machinery and supervision;
§ In performing the work farmed out, the contractor or subcontractor is free from
the control and/or direction of the principal in all matters connected with the
performance of the work except as to the result thereto; and
§ The Service Agreement ensures compliance with all the rights and benefits for
all the employees of the contractor or subcontractor under the labor laws.
• SECTION 9. Solidary Liability.

o In the event of violation of any provision of the Labor Code, including the failure to
pay wages, there exists a solidary liability on the part of the principal and the
contractor for purposes of enforcing the provisions of the Labor Code and other social
legislations, to the extent of the work performed under the employment contract.
• SECTION 10. Rights of Contractor's/Subcontractor's Employees.

o All contractor's/subcontractor's employees, shall be entitled to
security of tenure and all the rights and privileges as provided for in the Labor Code,
as amended, to include the following:
§ Safe and healthful working conditions;
§ Labor standards such as but not limited to service incentive leave, rest days,
overtime pay, holiday pay, 13th month pay, and separation pay;
§ Retirement benefits under the SSS or retirement plans of the
contractor/subcontractor, whichever is higher;
§ Social security and welfare benefits; and
§ Self-organization, collective bargaining and peaceful concerted activities
including the right to strike.
• SECTION 11. Required Contracts under These Rules.

o Employment contract between the contractor/subcontractor and its employees.
Notwithstanding any oral or written stipulations to the contrary, the contract between
the contractor/subcontractor and its employees shall be governed by the
provisions of Articles 294 and 295 of the Labor Code, as amended, including the
provisions on general labor standards. It shall include the following stipulations:
§ The specific description of the job or work to be performed by the
employee; and
§ The place of work and terms and condition of employment, including a
statement of the wage rate applicable to the individual employee.
o The contractor/subcontractor shall inform the employee of the foregoing stipulations
in writing on or before the first day of his/her employment.
o Service Agreement between the principal and the contractor. The Service Agreement
shall include the following:
o The specific description of the job or work being subcontracted, including its
term or duration;
o The place of work and terms and conditions governing the contracting
arrangement, to include the agreed amount of the contracted job or work as
well as the standard administrative fee of not less than ten percent (10%) of the
total contract cost; and
o A provision on the issuance of the bond/s as defined in Section 3 (a) renewable
every year.
• SECTION 12. Effect of Violation of the Provisions on the Rights of Contractor's

Employees and Required Contracts.
o A finding of violation of either Sections 10 or 11 hereof, shall render the principal the
direct employer of the employees of the contractor or subcontractor, pursuant to
Article 109 of the Labor Code, as amended.
• SECTION 13. Effect of Termination of Employment.The termination of employment of the

contractor's/subcontractor's employee prior to the expiration of the Service Agreement shall
be governed by Articles 297, 298 and 299 of the Labor Code.
o In case the termination of employment is caused by the pre-termination of the Service
Agreement not due to authorized causes under Article 298, the right of the
contractor's/subcontractor's employee to unpaid wages and other unpaid benefits
including unremitted legal mandatory contributions, e.g., SSS, PhilHealth, Pag-IBIG,
ECC, shall be borne by the party at fault, without prejudice to the solidary
liability of the parties to the Service Agreement.
o Where the termination results from the expiration of the Service Agreement, or from
the completion of the phase of the job or work for which the employee is engaged, the
latter may opt to wait for re-employment within three (3) months to resign and transfer
to another contractor-employer. Failure of the contractor to provide
new employment for the employee shall entitle the latter to payment of separation
benefits as may be provided by law or the Service Agreement, whichever is higher,
without prejudice to his/her entitlement to completion bonuses or other emoluments,
including retirement benefits whenever applicable. The mere expiration of the Service
Agreement shall not be deemed as a termination of employment of the
contractor's/subcontractor's employees who are regular employees of the latter.
• SECTION 14. Mandatory Registration and Registry of Legitimate Contractors.

o Consistent with the authority of the Secretary of Labor and Employment to restrict or
prohibit the contracting out of labor to protect the rights of workers, it shall be
mandatory for all persons or entities acting as contractors to register with the Regional
Office of the Department of Labor and Employment (DOLE) where it principally
operates.
o Failure to register shall give rise to the presumption that the contractor is engaged
in labor-only contracting.
o Accordingly, the registration system, governing contracting
arrangements and implemented by the Regional Offices of the DOLE is hereby
established, with the Bureau of Working Conditions (BWC) as the central registry.
• SECTION 20. Validity of Certificate of Registration.

o The contractor shall be deemed registered only on the date of issuance of its
Certificate of Registration.
o The Certificate of Registration shall be effective for two (2) years, unless cancelled after
due process. The same shall be valid in the region where it is registered.
o In case the contractor has Service Agreements or operates outside the jurisdiction of the
Regional Office where it is registered, it shall request a duly authenticated copy ofits
Certificate of Registration from the registering Regional Office and submit the same to
the DOLE Regional Office where it seeks to operate together with a copy of its Service
Agreement/s in the area, for purposes of monitoring compliance with these Rules.
• SECTION 23. Grounds for Cancellation of Registration.

o The Regional Director shall, upon a verified complaint, cancel or revoke the
registration of a contractor after due process, based on any of the following grounds:
§ Misrepresentation of facts in the application;
§ Submission of falsified or tampered application or supporting documents to
the application for registration;
§ Non-submission of Service Agreement between the principal and the
contractor when required to do so;
§ Non-submission of the required semi-annual report as provided in Section 22
(Semi-Annual reporting) thereof;
§ Final findings that the contractor has engaged in labor-only contracting and/or
other illicit forms of employment arrangements as provided in Section 6
hereof;
§ Non-compliance with labor standards and working conditions;
§ Findings of violation of Section 10 (Rights of contractor's
employees), and Section 11 (Required contracts);
§ Non-compliance with SSS, the HDMF, Pag-IBIG, PhilHealth, and ECC Laws;
§ Collecting any fees not authorized by law and other applicable
rules and regulations; and
§ Violations of any provisions of the Labor Code.
• SECTION 26. Effects of Cancellation of Registration.

o A final Order of cancellation shall divest the contractor of its legitimate status to
engage in contracting/subcontracting.
o Such Order of cancellation shall be a ground to deny registration an application for
renewal of registration to a contractor under the Rules.
o No contractor whose registration is cancelled under these Rules or any of its officers
shall be allowed to operate, and apply for new registration as contractor under either
the same or different name.
o The cancellation of the registration of the contractor for engaging in labor-only
contracting or for violation of any of the provisions of these Rules involving a
particular service agreement will not, however, impair the validity of existing
legitimate job-contracting arrangements the contractor may have entered into with
other principal prior to the cancellation of its registration. Any valid and subsisting
Service Agreement shall be respected until its expiration; thereafter, contracting with
a delisted contractor shall make the principal direct employer of all employees under
the Service Agreement pursuant to Articles 106 and 109 of the Labor Code, as
amended.
• SECTION 33. Contracting or Subcontracting in the Construction and Other Industries.

o Contracting or subcontracting arrangements in the Construction Industry, under the
licensing coverage of the Philippine Construction Accreditation Board (PCAB), shall
not be covered by the provisions of these Rules and shall continue to be governed
by Department Order No. 19, Series of 1993 (Guidelines Governing
the Employment of Workers in the Construction Industry) and Department Order No.
13, Series of 1998 (Guidelines Governing the Occupational Safety and Health in the
Construction Industry); and DOLE-DPWH-DILG-DTI and PCAB
Memorandum of Agreement-Joint Administrative Order No. 1, Series of 2011 (on
coordination and harmonization of policies and programs on occupational
safety and health in the construction industry).
o In industries covered by a separate regulation of the DOLE or other government
agency, contracting therein shall be governed by these Rules unless expressly provided
otherwise.
• SECTION 34. Prohibition on DOLE Officials or Employees.

o Any official or employee of the DOLE or its attached agencies is prohibited from
engaging or having any interest in any contracting or subcontracting business.
DOLE Department Circular 01-17
Clarifying the applicability of Department Order No. 174, Series of 2017
Salient provisions:
• Non-Applicability of D.O. No. 174

o applies only to trilateral relationship which characterizes contracting or subcontracting
arrangement. It does not contemplate to cover information technology-enabled services
involving an entire specific business process such as
§ Business Process Outsourcing
§ Knowledge Process Outsourcing
§ Legal Process Outsourcing
§ IT Infrastructure Outsourcing
§ Application Development
§ Hardware and/or Software Support
§ Medical Transcription
§ Animation Services
§ Back Office Operations/Support
• III Applicability/Non-Applicability to Construction Industry

o Contracting or subcontracting arrangements in the construction industry under the
licensing coverage of the Philippine Contractors Accreditation Board (PCAB) shall be
governed by Department Order No 19, Series of 1993 (Guidelines Governing the
Employment of Workers in the Construction Industry), Department Order No. 13, Series
of 1998 (Guidelines Governing the Occupational Safety and Health in the Construction
Industry); and DOLE-DPWH-DILG-DTI and PCAB Memorandum of Agreement-Joint
Administrative Order No 1, Series of 2011 on coordination and harmonization of policies
and programs on occupational safety and health in the construction industry.
• Section 2, Subparagraph 2.5 of Department Order No. 19, Series of 1993, provides:
o Contracting and subcontracting
§ The practice of contracting out certain phases of a construction project is
recognized by law, particularly wage legislations and wage orders, and by industry
practices. The Labor Code and its Implementing Regulations allowing the
contracting out of jobs under certain conditions. Where such job contracting is
permissible, the construction workers are generally considered as employees of the
contractor or subcontractor, as the case may be, subject to Article 109 of the Labor
Code, as amended.'
• Applicability/Non-Applicabffily of D.O. No. 174, Series of 2017, to Private Security Agencies

o Except for the registration requirements as provided for In D.O. No. 174, Series of 2017,
contracting or subcontracting arrangements in the private security industry shall be
governed by Department Order No. 150, Series of 2018 (Revised Guidelines Governing
the Employment and Worldng Conditions of Security Guards and other Private Security
Personnel in the Private Security Industry).
• Non-Applicability of D.O. No.174, Series of 2017, to Other Contractual Relationships

o D.O. No. 174, Series of 2017, apples only to bilateral relationship which characterizes
contracting or subcontracting arrangement. It does not contemplate to cover contractual
relationships such as in contract of sale or purchase, contract of lease, contract of carriage,
contract growing/growership agreement, toll manufacturing, contract of management,
operation and maintenance and such other contracts governed by the Civil Code of the
Philippines and other special laws.
o D.O. No. 174, Seri. of 2017 does not also cover the contracting out of job or work to a
professional, or individual with unique skills and talents who himself or herself performs
the job or work for the principal.
DOLE DEPARTMENT ORDER NO. 150-16

REVISED GUIDELINES GOVERNING THE EMPLOYMENT AND WORKING
CONDITIONS OF SECURITY GUARDS AND OTHER PRIVATE SECURITY PERSONNEL IN THE
PRIVATE SECURITY INDUSTRY
Salient provisions:
• SECTION 2. Definition of Terms.
o As used herein, the following terms shall mean:
§ "Bond" refers to the bond under Article 108 of the Labor Code, as amended,
that the principal may require from the contractor to be posted equal to the
cost of labor under contract.
§ "Duty Detail Order" refers to a written order/schedule/assignment issued to a
security guard and other private security personnel by a superior officer, usually
the private security agency or branch manager or operation's officer, for the
performance of security and/or detective service duty/ies.
§ "Net Financial Contracting Capacity (NFCC)" refers to the formula to
determine the financial capacity of the contractor to carry out the job, work, or
services sought to be undertaken under a Service Agreement. NFCC is current
assets minus current liabilities multiplied by K, which stands for contract
duration equivalent to: ten (10) for one year or less; fifteen (15) for more than
one (1) year up to two (2) years; and twenty (20) for more than two (2) years,
minus the value of all outstanding or ongoing projects including contracts to be
started.
§ "Philippine National Police (PNP), Civil Security Group (CSG)-Supervisory
Office for Security Investigation Agencies
(SOSIA and Firearms and Explosives Division (FED)" refers to the agencies
charged with the implementation of Republic Act No. 5487.
§ "Principal" refers to any individual, company, cooperative, or establishment,
including government agencies and government-owned and controlled-
corporations, who or which puts out or farms out a security and/or detective job,
service, or work to a private Security Service Contractor.
§ "Private Security Personnel" refers to natural persons, including private
detectives, security consultants and security officers, employed by private
security agency or firm, to render security and/or detective services.
§ "Right to Control" refers to the right reserved to the Security Service Contractor
to determine not only the end to be achieved as required by the principal, but
also the manner and means to be used in reaching that end within the limits of the
law.
§ "Security Guard" refers to any person who offers or renders personal service to
watch or secure a residence, business establishment, building, compound, any
other area or property; or inspects, monitors, or performs body checks or
searches of individuals or baggage and other forms of security inspection.
§ "Security Service Contractor (SSC)" is synonymous with Private Security
Agency (PSA) which refers to any person, association, partnership, firm, or
private corporation engaged in contracting, recruitment, training, furnishing, or
posting of security guard and other private security personnel to individuals,
corporations, offices andorganizations, whether private or public, for their
security needs as the Philippine National Police (PNP) may approve.
§ "Service Agreement" refers to the contract between the principal and the
SSC/PSA containing the terms and conditions governing the performance or
completion ofsecurity service, job, or work being farmed out for a definite or
predetermined period.
§ "Solidary Liability" refers to the liability of the principal, in the same
manner and extent that he/she is liable to his/her direct employees, to the
extent of the work performed under the contract when the SSC/PSA fails to pay
the wages of his/her employees, as provided for in Article
106 of the Labor Code,as amended.
§ "Total Contract Cost" refers to the payment of wage and wage-related benefits
including social welfare benefits of security guards and other private security
personnel in conformity with the Standard
Computation of the Department of Labor and Employment using the form
prescribed in this Guidelines.
§ "Trilateral Relationship" refers to the relationship in contracting or
subcontracting arrangement where there is a contract for a specific security job,
work, or service between the principal and the SSC/PSA, and a
contract of employment between the latter and its security guards. There are
three (3) parties involved in these arrangements: the principal who decides to
farm out a security job, work, or service to a security service contractor; the
SSC/PSA who has the capacity to independently undertake the
performance of the security job, work, or service; and the security
guards and other private security personnel engaged by the SSC/PSA to
accomplish the security job, work, or service.
• SECTION 3. Employment Status.

o Employer-Employee Relationship.
§ The SSC/PSA is the employer of its security guards and other private security
personnel on duty detail to a principal or client under a Service Agreement.
o Probationary Employment.
§ The probationary period of newly-hired security guard and other private security
personnel in the private security industry shall not exceed six (6) months. While
engaged on probationary basis, their services may be terminated for failure to
meet reasonable standards or criteria made known by the SSC/PSA to the
security guards and other private security personnel at the time of their
engagement or for any just cause contained in the probationary contract.
o Regular Employment.
§ Any security guard or other private security personnel who is allowed to work
after the probationary period or in the absence of a valid probationary contract
shall be considered a regular employee. Security guards and other private
security personnel affected by repeated hiring-firing-rehiring scheme for short
periods of time, the aggregate duration of which is at least six (6) months, shall
be considered regular employees.
• SECTION 4. Service Agreements.

o The SSC/PSA and/or the principal shall produce or submit the original copy of the
Service Agreement when directed to do so by the Regional Director or his/her duly
authorized representative. The Service Agreement must conform to
the DOLE Standard Computation and Standard Service Agreement, as provided for
under this Guidelines. The Service Agreement shall stipulate, among others:
§ The specific description of the kind or nature of security job, work, or service
being subcontracted;
§ The place of work and terms and conditions governing the contracting
arrangement which shall include the agreed amount of the security services to
be rendered and the standard administrative fee of not less than twenty percent
(20%) of the total contract cost;
§ The basic equipment to be provided by the SSC/PSA which shall be as follows:
• For every two (2) security guards and other private security
personnel, one (1) handgun as prescribed by R.A. 5487; but in no case
shall a security guard be posted without a firearm, unless required
otherwise by the client; and
• One (1) handheld radio; provided that, if the principal requires more
than these basic equipment, it shall be shouldered by the principal.
§ An "automatic crediting provision" which shall immediately give effect to the
common provision in wage orders that prescribed increases in wage
rates and other wage-related benefits of security guards and other private
security personnel shall be borne by the principals or clients of the
SSC/PSAs and the Service Agreements shall be deemed amended
accordingly;
§ Provisions which shall ensure that the principal and the SSC/PSA shall uphold
the rights and provide all the benefits of security guards and other private
security personnel under the Labor Code, as amended, and other existing
laws, and that violation of which will render the service contractor ineligible
to participate in any bidding and the principal ineligible to engage the
services of such SSC/PSA;
§ A provision on the NFCC of the SSC/PSA, which must be equal to the total
contract cost per month, provided that posting of the corresponding bond shall
be required only when the NFCC is less than the total contract cost;
§ An undertaking that the SSC/PSA shall directly remit monthly the employers'
share and employees' contribution to the Social Security System (SSS),
Employees' Compensation Commission (ECC), Philippine Health Insurance
Corporation (PhilHealth), and Home Development Mutual Fund (Pag-
IBIG); and
§ An undertaking that the expenses for any training required by the principal or
other government instrumentalities, in addition to those required by the PNP,
shall be shouldered by the principal.
• SECTION 5. Employment Contracts.

o Status of Employment.
§ Notwithstanding any oral or written stipulations to the contrary, the contract
between the SSC/PSA and its security guards and other private security
personnel shall be governed by the provisions of Articles 294 (formerly
279) and 295 (formerly 280) of the Labor Code, as renumbered. The SSC/PSA
shall provide his/her security guards and other private security personnel a
copy of the employment contract duly signed by the parties, which shall contain
the terms and conditions ofe mployment, such as those provided under Section
7 hereof.
o Contents of Duty Detail Order.
§ For every assignment of security guards and other private security personnel to
a principal, the Duty Detail Order shall contain the following, among others:
• Name, address, and telephone number of agency;
• Issue serial number and date of the Duty Detail Order;
• Complete name and designation of grantee;
• Purpose;
• Inclusive dates of detail;
• Firearms description and license number;
• Authorized uniform to be used;
• Other specific instructions or remarks; and
• Signature and designation of issuing officer.
• SECTION 6. Rights of Security Guards and Other Private Security Personnel.

o All security guards and other private security personnel, whether deployed or assigned
as reliever, seasonal, week-ender, or temporary, shall be entitled to all the
rights and privileges as provided for in the Labor Code, as amended, which shall include
the following:
§ Safe and healthful working conditions;
§ Labor standards such as but not limited to service incentive leave, premium pay,
overtime pay, holiday pay, night shift differential, 13th month
pay, and separation pay as may be provided in the Service Agreement or under
the Labor Code,as amended;
§ Retirement benefits under Republic Act No. 7641, Republic Act No. 1161, as
amended by Republic Act No. 8282, and retirement plans of the security service
contractor, if any;
§ Social security and welfare benefits;
§ Right to self-organization and collective bargaining, subject to the
provisions of existing laws; and
§ Security of tenure.
• SECTION 7. Terms and Conditions of Employment.

o Requirements for Pre-employment and Continued Employment.
§ The security guards and other private security personnel in the employ of any
SSC/PSA or firm should be duly licensed and must have passed the
physical and neuro-psychiatric examination and drug test required by the PNP
for pre-employment and for continued employment. Expenses for these
examinations and test shall be shouldered by the security guards.
§ Any additional test may be required at the expense of the requesting party.
o Obligations of Government Agencies.
§ Government agencies or instrumentalities engaging security services from
SSC/PSA shall comply with all labor standards and shall require the submission,
among other requirements and as part of the bid, an undertaking from the
SSC/PSA to pay their security guards and other private security personnel the
prescribed benefits.
o Entitlement to Minimum Wage.
§ Unless a higher minimum wage is agreed upon by the parties, the security
guards and other private security personnel shall be entitled to receive a
salary of not less than the minimum wage rate prescribed for non-agricultural
sector or industry in the region where he/she is assigned, regardless of the
nature of business of the principal.
o Transfer of Assignment.
§ In case of transfer, the wage rate most favorable to the security guards and other
private security personnel shall apply. Thus, transfer of security guards and other
private security personnel to areas outside the region of the domicile or head
office of the SSC/PSA shall not result to reduction of the wage rate being
enjoyed by the security guards and other private security personnel prior to such
transfer. Transfer to an area or region with higher wage rate shall render the
higher rate the applicable wage rate for the transferred security guards and other
private security personnel.
o Statutory Benefits.
§ Security guards and other private security personnel are entitled to not less than
the following benefits depending on the working hours, work
shift and workdays and other analogous conditions, which benefits should be
included in the cost distribution in the Service Agreement:
• Basic salary for all actual workdays and for the twelve (12) regular
holidays (as holiday pay) which must not be lower than the minimum
wage rates described in Subsection 7.3, to be computed by using the
factors recommended herein. Whenever work is rendered on a regular
holiday, an additional pay of one hundred percent (100%) of the
minimum wage rate should be paid;
• Allowance in addition to the basic salary, if prescribed by the applicable
Regional Wage Order;
• Premium pay of thirty percent (30%) of the daily rate for work on
special days or on rest days, which is increased to fifty percent (50%)
whenever work is performed coinciding the rest days and special days;
• Overtime pay for work rendered in excess of eight (8) hours a day,
equivalent to at least twenty-five percent (25%) of the regular hourly
rate on ordinary days andthirty percent (30%) of the hourly rate on
regular holidays, special days and rest days;
• Night shift differential equivalent to ten percent (10%) of the regular
hourly rate for work rendered between 10:00 p.m. and 6:00 a.m. of the
following day;
• Five (5) days service incentive leave for every year of service which
benefits can be availed of during days of absence and, if not used, are
convertible into its cash equivalent. A proportionate leave benefit per
month may be derived by dividing five (5) days by twelve (12) months
multiplied by the current daily rate;
• Maternity leave as provided for under Republic Act No. 1161, as
amended by Republic Act No. 8282, otherwise known as the "Social
Security Law," for female security guards and other private security
personnel who are unable to work due to childbirth or miscarriage, up to
the first four (4) deliveries or miscarriages;
• Paternity leave of seven (7) days with full pay for male security
guards and other private security personnel under Republic Act No.
8187, otherwise known as the "Paternity Leave Act of 1996," which
shall be granted after the delivery, without prejudice to an employer's
policy of allowing the employee to avail of the benefit before or during
the delivery. The paternity leave with pay is granted for the first four
deliveries, including miscarriages, of the male employee's lawful wife
with whom he is cohabiting;
• Parental leave of seven (7) days every year for solo parents security
guards and other private security personnel who are left alone with the
responsibility ofparenthood as defined under Republic Act No. 8972,
otherwise known as the "Solo Parents' Welfare Act of 2000";
• Leave for Victims of Violence Against Women and their
Children of ten (10) days for qualified victim-female security
guards and other private security personnel under Republic Act No.
9262, otherwise known as "Anti-Violence Against Women and Their
Children Act of 2004";
• Special Leave for Women of not more than two (2) months with full pay
based on her gross monthly compensation following surgery caused by
gynecological disorders, under Republic Act No. 9710, otherwise
known as "The Magna Carta of Women";
• 13th month pay which is one-twelfth (1/12) of the total basic salary
earned within a calendar year;
• Separation Pay if the termination of employment is for authorized cause
as provided by law and as enumerated below:
• One-half (1/2)-month pay per year of service, but guaranteed to one (1)
month pay if separation is due to:
o Retrenchment or reduction of personnel effected by
management to prevent serious losses;
o Closure or cessation of operation of an establishment not due to
serious losses or financial reverses;
o Illness or disease not curable within a period of six (6)
months and continued employment is prohibited by law or
prejudicial to the employee's health or that of his/her co-
employees; or
o Lack of service assignment for a continuous period of six (6)
months.
• One (1) month pay per year of service if separation is due to:
o Installation of labor-saving device, such as
replacement of employees by equipment/machinery;
o Redundancy, as when the position has been found to be a
surplusage or unnecessary in the operation of the agency;
o Impossible reinstatement of the employee to his/her former
position or to a substantially equivalent position for reasons not
attributable to the fault of the employer, as when the
reinstatement ordered by a competent authority cannot be
implemented due to closure or cessation ofoperations of the
establishment/security service contractor, or the position to
which the employee is to be reinstated no longer exists and there
is no substantially equivalent position to which he/she can be
assigned;
o Lack of service assignment by reason of age.
§ Benefits under the Employees Compensation Program pursuant to Presidential
Decree 626;
§ PhilHealth benefits under Republic Act No. 7875, as amended by Republic Act
No. 9241;
§ Social Security benefits under Republic Act No. 1161, as amended by Republic
Act No. 8282;
§ Safe and healthful working conditions as provided in the Occupational
Safety and Health Standards;
§ Retirement pay granted under Republic Act No. 7641 to any security
guard and other private security personnel which shall be billable monthly to the
principal or client of the SSC/PSA.
o The fund shall be administered and maintained by a trust company bank, investment
house, pre-need company, or corporation duly authorized to perform trust function
exclusively for collective investment or re-investment of certain money received in its
capacity as trustee, or similar arrangement as may be agreed upon in accordance with
law.
o The SSC/PSA may establish a retirement plan for the payment of the retirement
benefits of its security guards or other private security personnel. From this a Retirement
Trust Fund (RTF) shall be created out of contributions from the principal.
o The trust fund agreement shall be executed by and between the SSC/PSA as trustor and a
trust entity as trustee in favor of security guards or other private security personnel
employed by the trustor. The trust entity as trustee shall administer the retirement
plan and manage the trust fund in accordance with the retirement plan agreed upon by
the SSC/PSA and its security guards or other private security personnel.
o The SSC/PSA may also register with the Securities and Exchange Commission (SEC), a
non-stock Retirement Fund Company (RFC) owned and managed by its members who
are officers, employees, security guards, or other private security personnel. The RFC
shall manage and reinvest the retirement fund, and shall pay the retirement benefits of its
members upon his/her retirement.
o As such, any payment for retirement benefits collected in advance from the principal
shall immediately be deposited by the SSC/PSA or trustor to the trustee or retirement
fund company in favor of the security guard and other private security personnel as
benefit upon retirement; and
o Other benefits granted by law, individual or collective agreement, or company policy or
practice.
• SECTION 8. Deductions from Salary.

o No deduction shall be made from the salary of the security guards and other private
security personnel, except for:
§ SSS contribution;
§ Pag-IBIG contribution;
§ PhilHealth contribution;
§ Withholding tax from income, provided a proper withholding tax receipt is
issued to the employee before the filing of income tax return every year.
§ Union dues, if authorized in writing;
§ Agency fees which may be collected from employees who are not
members of the bargaining agent but accept benefits under the collective
bargaining agreement (CBA); and
§ Other deduction as may be authorized in writing by the security guard and other
private security personnel for payment to a third person and the employer agrees
to do so, provided that the latter does not receive any pecuniary benefit, directly
or indirectly, from the transaction.
o These deductions should be reflected in the payroll by the SSC/PSA.
o In case an SSC/PSA requires its security guard and other private security personnel to post
a bond for use of firearms and other paraphernalia, such may only be imposed once. The
amount of the bond should not be more than five percent (5%) of the amount of the firearm
issued to the security guard and other private security personnel. The said cash bond, less
the cost of damage or loss of firearms or paraphernalia due to the fault of the security
guard, shall be refunded to the security guards and other private security personnel within
fifteen (15) calendar days from severance of employment.
o Pursuant to Labor Advisory No. 11, Series of 2014, deductions or requiring cash deposits
from employees to answer for reimbursement of loss or damage on tools, materials, or
equipment supplied by the employer is allowed in private security agencies as a
recognized and reasonable industry practice given the nature of the service or business.
o However, for deductions of such nature to be valid, the following conditions must be
observed:
o The employee concerned is clearly shown to be responsible for the loss or damage;
o The employee is given reasonable opportunity to show cause why the deduction
should not be made;
o The amount of such deduction is fair and reasonable and shall not exceed the
actual loss or damage; and
o The deduction from the wages of the employee does not exceed twenty percent
(20%) of the employee's wages in a week.
• SECTION 9. Liability and Responsibilities of Security Service Contractors/Private Security

Agencies and Principals.
o Solidary Liability. — The SSC/PSA and its principal or client shall be
jointly and solidarily liable with each other in any of the following circumstances:
§ When the SSC/PSA fails to pay the wages of its security guards and other
private security personnel, the principal or client shall be considered the "indirect
employer" and shall be jointly and severally liable with the SSC/PSA to the
extent of the work performed by such security guards and other private security
personnel under the Service Agreement, in the same manner and extent that the
principal is liable to its direct employees.
§ If there are wage increases or adjustments after the execution of the Service
Agreement, the prescribed increases in the wage rates of security
guards and other private security personnel shall be borne by the
principal and the Service Agreement shall be deemed amended accordingly. In
the event that the principal fails to pay the prescribed increases, the SSC/PSA
shall be jointly and solidarily liable with the principal.
§ The immediate recourse of security guards and other private security personnel
for payment of wage increase before litigation is with their employer, the
SSC/PSA. To enable the SSC/PSA to comply with the new rates, the
consideration paid by the principal for the security guards' wages has to be
adjusted in conformity with the mandated wage increase.
§ When the SSC/PSA is found to be engaged in labor-only contracting, the
principal shall be jointly and solidarily liable with it in the same manner that the
principal is liable to employees directly hired by him/her.
§ When the SSC/PSA is found to be an in-house agency, the principal shall be the
direct employer of the security guards and/or other private security personnel
deployed with it.
§ When a violation of the relevant provisions of the Labor Code, as amended, has
been established by the DOLE Secretary or his/her duly authorized
representative in the exercise of his/her enforcement power, the principal shall
be deemed solidarily liable with the SSC/PSA to the extent of accrued
wage and wage-related benefits that the latter may owe to its security
guards and other private security personnel in the following instances:
• When the certificate of registration of the SSC/PSA is cancelled,
revoked, or not renewed by the competent authority; or
• When the contract between the principal and the SSC/PSA is pre-
terminated for reasons not attributable to the fault of the latter.
• SECTION 10. Right to Security of Tenure and Due Process.

o Security guards and other private security personnel shall enjoy security of tenure in
their employment as provided by law. Their services can only be terminated for just or
authorized causes after due process.
o For termination of employment based on just causes as defined in Article 297 (formerly
282) of the Labor Code, as renumbered, the requirement of two written notices served
on the employee shall be in accordance with the following:
§ The first written notice should contain:
• The specific causes or grounds for termination;
• Detailed narration of the facts and circumstances that will serve as basis
for the charge against the security guard and other private security
personnel. A general description of the charge will not suffice;
• The company rule, if any, that is violated and/or the ground under
Article 297 (formerly 282) of the Labor Code, as renumbered, that is
being charged against the security guard and other private security
personnel; and
• A directive that the security guard and other private security personnel
is given an opportunity to submit a written explanation within five (5)
calendar days from receipt of the first written notice.
§ After serving the first notice, the employer should afford the security
guard and other private security personnel ample opportunity to be heard and to
defend himself/herself with the assistance of his/her representative if he/she so
desires, as provided in Article 292 (b) (formerly 277) of the Labor Code,as
renumbered.
o "Ample opportunity to be heard" means any meaningful opportunity
(verbal or written) given to the security guard and other private security
personnel to answer the charges against him/her and submit evidence in
support of his/her defense, whether in a hearing, conference, or some other
fair, just, andcreasonable way. A formal hearing or conference becomes
mandatory only:
§ when requested by the security guard and other private security
personnel in writing;
§ substantial evidentiary disputes exist;
§ a company rule or practice requires it; or
§ when similar circumstances justify it.
o After determining that termination of employment is justified, the SSC/PSA shall serve the
security guard and other private security personnel a second written notice, the
notice of termination, indicating that:
o all circumstances involving the charge against the security guard and other private
security personnel have been considered; and
o the grounds have been established to justify the severance of his/her employment.
o The foregoing notices shall be served on the security guard and private security personnel's last
known address.
o Termination for just cause as stated in Article 297 (formerly 282) of the Labor Code, as
renumbered, does not entitle the security guard and other private security personnel to separation
pay, unless otherwise provided in the employer's policy, individual contract, or collective
agreement.
o For termination of employment based on authorized causes, as defined in Articles 298 and 299
(formerly 283 and 284 of the Labor Code, as renumbered), the requirement of due process shall
be deemed complied upon service of a written notice to the security guard and other private
security personnel and to the appropriate DOLE Regional Office at least thirty (30) days before
the effectivity of the termination, specifying the ground(s) for termination.
o If the termination is brought about by the completion of the contract, no prior notice is required.
o If the termination is brought about by the failure of a probationary security guards and other
private security personnel to meet the reasonable standards of the SSC/PSA, which was made
known to the security guard and other private security personnel at the time of employment, it
shall be sufficient that a written notice is served upon the security guard and other private security
personnel within a reasonable time prior to the expiration of the probationary period.
o The termination of employment of security guards and other private security personnel prior to
the expiration of the Service Agreement shall be governed by Articles 297, 298, and 299
(formerly 282, 283, and 284 of the Labor Code, as renumbered)
o In case the termination of employment is caused by the pre-termination of the Service
Agreement not due to any authorized cause under Article 298 (formerly 283), the right of the
security guard and other private security personnel to accrued and unpaid wages and other wage-
related benefits, including unremitted legal mandatory contributions such as SSS, PhilHealth,
Pag-IBIG, and ECC, shall be borne by the party at fault, without prejudice to the solidary
liability of the parties to the Service Agreement.
o No security guard and other private security personnel can be placed in a work pool or on
reserved status in any of the following situations:
a. after expiration of a service contract, if there are other principals where he/she can be
assigned;
b. as a measure to constructively dismiss the security guard; and
c. as an act of retaliation for filing any complaint against the employer for
violation of labor laws, among others.
o If after a period of six (6) months, the SSC/PSA cannot provide work or give an assignment to
the reserved security guard, the latter can be separated from service and shall be entitled to
separation pay as described in Subsection 7.5 (m) hereof. An assignment of the security
guard and other private security personnel as a reliever for less than one-month shall not be
considered as an interruption of the six (6) months period.
o Preventive Suspension.
o Subject to the constitutional rights of the workers to security of tenure and the right to
be protected against dismissal except for a just and authorized cause and without
prejudice to the notice requirement under Article 297 (formerly
282) of the Labor Code, as renumbered, security guards and other private security
personnel may be preventively suspended if their continued employment poses a
serious and imminent threat to life or property of the SSC/PSA, its principal, or the co-
workers of security guards and other private security personnel.
o No preventive suspension shall last longer than thirty (30) days. The SSC/PSA shall
thereafter reinstate the security guard and other private security personnel to his/her
former position or it may extend the period of suspension, provided that during the
period of extension, the SSC/PSA shall pay the wages and other benefits due the
security guard and other private security personnel.
Provisions under the Labor Code:
Article 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 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 and Employment 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 restricting, 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 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 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.
Article 107. Indirect employer.
® The provisions of the immediately preceding article shall likewise apply to any person, partnership,
association or corporation which, not being an employer, contracts with an independent contractor
for the performance of any work, task, job or project.
Article 108. Posting of bond.
® An employer or indirect employer may require the contractor or subcontractor to furnish a bond
equal to the cost of labor under contract, on condition that the bond will answer for the wages due
the employees should the contractor or subcontractor, as the case may be, fail to pay the same.
Article 109. Solidary liability.
® The provisions of existing laws to the contrary notwithstanding, every employer or indirect
employer shall be held responsible with his contractor or subcontractor for any violation of any
provision of this Code. For purposes of determining the extent of their civil liability under this
Chapter, they shall be considered as direct employers.
SECOND COVERAGE:
Philippine Bank of Communications v. NLRC (146 SCRA 347)
FACTS:
• Philippine Bank of Communications and the Corporate Executive Search Inc. entered into a letter
agreement which CESI undertook to provide temporary services of eleven (11) messengers. The
contract period is described as being "from January 1976 — ." The petitioner undertook to pay a
"daily service rate of P18," on a per person basis.
• Ricardo Orpiada was assigned to work with the bank. He rendered services to the bank, within
the premises of the bank and alongside other people also rendering services to the bank. In
October 1976, the bank requested CESI to withdraw Orpiada's assignment because his services
were no longer needed.
• Orpiada instituted a complaint in the Department of Labor against the bank for illegal dismissal
and failure to pay the 13th month pay. After investigation, the Department of Labor dismissed
Orpiada's complaint for failure to show the existence of an employer-employee relationship
between the bank and Orpiada.
• During the compulsory arbitration proceedings, CESI was brought into the picture as an
additional respondent by the bank. Both the bank and CESI stoutly maintained that CESI (and
not the bank) was the employer of Orpiada.
• |||The Labor Arbiter ruled in favor of Orpiada, but the bank maintained their position that there
exists no employer-employee relationship between them and Orpiada, so the case was brought to
the NLRC. However, six years after, the case has not been resolved, hence the present petition.
ISSUE:
Whether or not there exists an employee-employer relationship between Orpiada and Philippine Bank of
Communications.
Whether or not Orpiada was a regular employee of Philippine Bank of Communications.
RULING:
• The Court used the four-fold rule to determine the existence of employer-employee relationship
between Orpiada and PBC. The factors considered in the four-fold test are the selection and
engagement of employees, payment of wages, power of dismissal, and power of control.
• For the factor of selection and engagement, the Court found that Orpiada was not previously
selected by the bank but was only assigned to work in the bank by CESI. The selection of Orpiada
by CESI was subject to the acceptance of the bank.
• For the payment of Orpiada's wages, the bank remitted the "daily service rate" of Orpiada to
CESI. The bank alleged that Orpiada did not appear in its payroll, and the Labor Arbiter found
that Orpiada was actually listed in the payroll of CESI.
• For the power of dismissal, the Court noted that the bank requested CESI to withdraw Orpiada's
assignment and which CESI obliged to do. Upon such withdrawal from his assignment with the
bank, Orpiada was also terminated by CESI. It appeared that 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.
• For the power to control, the Court pointed out that Orpiada performed his functions within the
bank's premises, and not within the office premises of CESI. Orpiada must have been subject to
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, like an employee or staff
member of the bank.
• The payment of wages and power of dismissal factors suggest that the there was an employee-
employer relationship between CESI and Orpiada. On the other hand, selection and engagement
and control of employee's conduct factors indicate that some direct relationship did exist between
Orpiada and the bank.
• The employer-employee relationship between CESI and Orpiada was established for the purpose
of the secondment of Orpiada to the bank. This made the Court question the nature of the
relationship of the bank and CESI was not a parcel delivery company, but a recruitment and
placement corporation placing people in different client companies; essentially a labor-only
contractor.
• The Court also emphasized that the 11 messengers were supposed to render "temporary" services
for an indefinite or unstated period of time. Under the Labor Code, any employee who has
rendered at least one year of service, whether such service is continuous or not, shall be
considered a regular employee. Orpiada was entitled to be regarded as a regular employee of the
bank as soon as he had completed one year of service to the bank.
Neri v. NLRC (224 SCRA 717)
FACTS:
• Neri and Cabelin applied for positions with, and were hired by Building Care Corporation, a
corporation engaged in providing technical maintenance, engineering, housekeeping, security
and other specific services. They were assigned to work in the Cagayan De Oro City Branch of
Far East Bank and Trust Company, with Neri as radio/telex operator and Cabelin as janitor,
before being promoted to messenger.
• Neri and Cabelin instituted complaints against FEBTC and BCC to compel the bank to recognize
them as regular employees and be paid the same wages that regular employees with similar length
of service receive.
• BCC established that it had substantial capitalization of P1 Million or a stockholders equity of
P1.5 Million. Thus the Labor Arbiter ruled that BCC was a job contractor and that its employees
were not employees of Far East Bank and Trust Company. This factual finding was affirmed by
National Labor Relations Commission. But petitioners insist that Building Care is engaged in
"labor-only" contracting and they are employees of Far East Bank.
• Petitioners contend that BCC failed to adduce evidence purporting to show that it invested in the
form of tools, equipment, machineries, work premises and other materials which are necessary
in the conduct of its business. Petitioners also argued that they perform duties which are directly
related to the principal business or operation of FEBTC. Consequently, they must be deemed
employees of respondent bank by operation of law since BCC is merely an agent of FEBTC
following the doctrine that where "labor-only" contracting exists, the Labor Code itself
establishes an employer-employee relationship between the employer and the employees of the
"labor-only" contractor; hence, FEBTC should be considered the employer of petitioners who are
deemed its employees through its agent, "labor-only" contractor BCC.
ISSUE:
Whether or not Building Care Corporation is engaged in labor-only contracting.
RULING:
• NO.
• BCC does not need to prove that it made investments in the form of tools, equipment,
machineries, work premises, among others, because it has established that it has sufficient
capitalization. BCC is therefore a highly capitalized venture and cannot be deemed engaged in
"labor-only" contracting.
• It is well-settled that there is "labor-only" contracting where: (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
person are performing activities which are directly related to the principal business of the
employer.
• While there may be no evidence that it has investment in the form of tools, equipment,
machineries, work premises, among others, it is enough that it has substantial capital. In other
words, the law does not require both substantial capital and investment in the form of tools,
equipment, machineries, etc. This is clear from the use of the conjunction "or".
• Petition was dismissed.
Philippine Telegraph & Telephone Co. v. NLRC (272 SCRA 596)
FACTS:
• Grace de Guzman was initially hired by Philippine Telegraph & Telephone Co. as a reliever,
specifically as a "Supernumerary Project Worker," for a fixed period of five months. Under the
Reliever Agreement, her employment was to be immediately terminated upon expiration of the
agreed period. Thereafter, private respondent' s services as reliever were again engaged by
petitioner and pursuant to their Reliever Agreement, her services were again terminated. LibLex
• Private respondent was once more asked to join petitioner company as a probationary employee for
150 days. In the job application form, she indicated in the portion for civil status therein that she
was single although she had contracted marriage a few months earlier.
• She had made the same representation in the two successive reliever agreements. When Philippine
Telegraph learned about this, its branch supervisor sent a memorandum requiring her to explain the
discrepancy. In that memorandum, she was reminded about the company's policy of not accepting
married women for employment.
• De Guzman stated that she was not aware of Philippine Telegraph’s policy regarding married
women at the time, and that all along she had not deliberately hidden her true civil status. Philippine
Telegraph was unconvinced and dismissed De Guzman from the company. De Guzman filed a
complaint for illegal dismissal, coupled with a claim for non-payment of cost of living allowances
(COLA).
• The Labor Arbiter ruled that De Guzman was illegally dismissed by Philippine Telegraph. The
labor arbiter said that the ground relied upon by Philippine Telegraph in dismissing De Guzman
was insufficient, and that she had been discriminated against on account of her having contracted
marriage in violation of company rules.
• The NLRC upheld the labor arbiter and ruled that De Guzman had been the subject of an unjust
and unlawful discrimination by Philippine Telegraph. The decision was modified with the
qualification that De Guzman deserved to be suspended for three months in view of the dishonest
nature of her acts which should not be condoned.
ISSUE:
Whether the dismissal of De Guzman because of her marital status was justified.
RULING:
• NO.
• The Court cited the Bible and the Constitution regarding the role of women in nation-building
and commands the State to ensure, at all times, the fundamental equality before the law of women
and men. It also cited the Constitutional provision which requires the State to afford full
protection to labor and to promote full employment and equality of employment opportunities for
all, including an assurance of entitlement to tenurial security of all workers. Similarly, Section 14
of Article XIII mandates that the State shall protect working women through provisions for
opportunities that would enable them to reach their full potential.|||
• The Court also pointed out that our country was a signatory to the United Nations Convention on
the Elimination of All Forms of Discrimination Against Women (CEDAW).
• Republic Act No. 6727 explicitly prohibits discrimination against women with respect to terms and
conditions of employment, promotion, and training opportunities; Republic Act No. 7192, also
known as the "Women in Development and Nation Building Act," which affords women equal
opportunities with men to act and to enter into contracts, and for appointment, admission, training,
graduation, and commissioning in all military or similar schools of the Armed Forces of the
Philippines and the Philippine National Police; Republic Act No. 7322 increasing the maternity
benefits granted to women in the private sector; Republic Act No. 7877which outlaws and punishes
sexual harassment in the workplace and in the education and training environment; and Republic
Act No. 8042, or the "Migrant Workers and Overseas Filipinos Act of 1995," which prescribes as
a matter of policy, inter alia, the deployment of migrant workers, with emphasis on women, only
in countries where their rights are secure. Likewise, it would not be amiss to point out that in the
Family Code, women's rights in the field of civil law have been greatly enhanced and expanded.
• In the Labor Code, provisions governing the rights of women workers are found in Articles 130 to
138 thereof. Article 130 involves the right against particular kinds of night work while Article 132
ensures the right of women to be provided with facilities and standards which the Secretary of
Labor may establish to ensure their health and safety. For purposes of labor and social legislation,
a woman working in a nightclub, cocktail lounge, massage clinic, bar or other similar
establishments shall be considered as an employee under Article 138.
• Article 135, on the other hand, recognizes a woman' s right against discrimination with respect to
terms and conditions of employment on account simply of sex. Finally, and this brings us to the
issue at hand, Article 136 explicitly prohibits discrimination merely by reason of the marriage of a
female employee.
• The government abhors any stipulation or policy in the nature of that adopted by Philippine
Telegraph. The Labor Code states:
o "ART. 136. Stipulation against marriage.— It shall be unlawful for an employer
to require as a condition of employment or continuation of employment that a
woman shall not get married, or to stipulate expressly or tacitly that upon getting
married, a woman employee shall be deemed resigned or separated, or to actually
dismiss, discharge, discriminate or otherwise prejudice a woman employee merely
by reason of marriage."
• ||| Petition was dismissed.
Apex Mining Company, Inc. v. NLRC (196 SCRA 251)
FACTS:
• Sinclitica Candido was employed by Apex Mining Company, Inc. to perform laundry services at
its staff house located at Masara, Maco, Davao del Norte. In the beginning, she was paid on a
piece rate basis. However, she was started to be paid on a monthly basis at P250.00 a month
which was ultimately increased to P575.00 a month.
• While she was hanging her laundry, she accidentally slipped and hit her back on a stone. She
reported the accident to her immediate supervisor and to the personnel officer. As a result of the
accident she was not able to continue with her work. She was permitted to go on leave for
medication. De la Rosa offered her the amount of P2,000.00 which was eventually increased to
P5,000.00 to persuade her to quit her job, but she refused the offer and preferred to return to
work. But Apex did not allow her to return to work and dismissed her.
• Candido filed a request for assistance with the Department of Labor and Employment and the
Labor Arbiter ruled in her favor, ordering Apex to pay her 55, 160 pesos.
• However, Candido was not satisfied so she appealed to the NLRC, who dismissed the appeal and
affirmed the Labor Arbiter’s decision.
ISSUE:
Whether Candido was a mere household helper or a regular employee.
RULING:
• Candido is a regular employee.
• "The term 'househelper' as used herein is synonymous to the term 'domestic servant' and
shall refer to any person, whether male or female, who renders services in and about the
employer's home and which services are usually necessary or desirable for the maintenance
and enjoyment thereof, and ministers exclusively to the personal comfort and enjoyment
of the employer's family."
• The definition cannot be interpreted to include househelp or laundry women working in
staffhouses of a company, like petitioner who attends to the needs of the company's guest and
other persons availing of said facilities. The criteria is the personal comfort and enjoyment of the
family of the employer in the home of said employer.
• While it may be true that the nature of the work of a househelper, domestic servant or
laundrywoman in a home or in a company staffhouse may be similar in nature, the difference in
their circumstances is that in the former instance they are actually serving the family while in the
latter case, whether it is a corporation or a single proprietorship engaged in business or industry
or any other agricultural or similar pursuit, service is being rendered in the staffhouses or within
the premises of the business of the employer. In such instance, they are employees of the company
or employer in the business concerned entitled to the privileges of a regular employee.
• The Court ruled that mere fact that the househelper or domestic servant is working within the
premises of the business of the employer and in relation to or in connection with its business, as
in its staffhouses for its guest or even for its officers and employees, warrants the conclusion that
such househelper or domestic servant is and should be considered as a regular employee of the
employer and not as a mere family househelper or domestic servant.
• Petitioner denies having illegally dismissed private respondent and maintains that respondent
abandoned her work. This argument notwithstanding, there is enough evidence to show that
because of an accident which took place while private respondent was performing her laundry
services, she was not able to work and was ultimately separated from the service. She is,
therefore, entitled to appropriate relief as a regular employee of Apex.
Brent School v. Zamora 181 SCRA 702 [1990]
FACTS:
• Doroteo R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly
compensation of P20,000.00. The contract fixed a specific term of (5) years. Subsidiary
agreements dated March 15, 1973, August 28, 1973, and September 14, 1974 reiterated the same
terms and conditions, including the expiry date.
• Three months before the expiration of the stipulated period, Alegre was given a copy of the report
filed by Brent School with the Department of Labor advising of the termination of his services.
The stated ground for the termination was "completion of contract, expiration of the definite
period of employment." Alegre accepted the amount of P3,177.71, and signed a receipt therefor
containing the phrase, "in full payment of services for the period May 16, to July 17, 1976 as full
payment of contract."
• Upon investigation of the Labor Conciliator, Alegre protested the announced termination of his
employment. He argued that although his contract did stipulate that the same would terminate on
July 17, 1976, since his services were necessary and desirable in the usual business of his
employer, and his employment had lasted for five years, he had acquired the status of a regular
employee and could not be removed except for valid cause.
• The Regional Director considered Brent School's report as an application for clearance to
terminate employment, not a report of termination, and accepting the recommendation of the
Labor Conciliator, refused to give such clearance and instead required the reinstatement of
Alegre, as a "permanent employee”.
• Brent School filed a motion for reconsideration. The Regional Director denied the motion and
forwarded the case to the Secretary of Labor for review. The latter sustained the Regional
Director. Brent appealed to the Office of the President. But it was dismissed for lack of merit
and affirmed the Labor Secretary's ruling that Alegre was a permanent employee who could not
be dismissed except for just cause, and expiration of the employment contract was not one of the
just causes provided in the Labor Code for termination of services.
ISSUE:
Whether or not Alegre’s termination was legal.
RULING:
• The employment contract between Brent School and Alegre was executed on July 18, 1971, at a
time when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed,
the Code did not come into effect until November 1, 1974, some three years after the perfection
of the employment contract, and rights and obligations thereunder had arisen and been mutually
observed and enforced.
• At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the
validity of term employment. It was impliedly but nonetheless clearly recognized by the
Termination Pay Law, R.A. 1787. There was, to repeat, clear albeit implied recognition of the
licitness of term employment. RA 1787 enumerated just causes for terminating an
employment without a definite period, either by the employer or by the employee without
incurring any liability.
• It is plain then that when the employment contract was signed between Brent School and Alegre
on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation fixing the
duration. The status of legitimacy continued to be enjoyed by fixed-period employment contracts
under the Labor Code (Presidential Decree No. 442), which went into effect on November 1,
1974.
• Alegre's employment was terminated upon the expiration of his last contract with Brent School
on July 16, 1976 without the necessity of any notice. The advance written advice given the
Department of Labor with copy to said petitioner was a mere reminder of the impending
expiration of his contract, not a letter of termination, nor an application for clearance to terminate
which needed the approval of the Department of Labor to make the termination of his services
effective.
• The decision of the court a quo was reversed, Alegre’s employment was considered lawfully
terminated by reason of expiration of the agreed period
Cielo v. NLRC 193 SCRA 410 [1991]
FACTS:
• Cielo was a truck driver who claimed he was illegally dismissed by Henry Lei Trucking
Company, a trucking business as a hauler of cattle, crops and other cargo for the Philippine
Packing Corporation. The Labor Arbiter ruled in favor of him and ordered his reinstatement with
back wages, but the NLRC reversed the decision and held that the petitioner's employment had
expired under a valid contract.
• Henry Lei moved to dismiss on the ground that the petition was filed sixty-eight days after service
of the challenged decision on the petitioner, hence late. The motion was untenable because under
Rule 65 it may be instituted within a reasonable period, which the Court has consistently reckoned
at three months.
• The Solicitor General defended Henry Lei and agreed that the contract between the petitioner and
the private respondent was a binding agreement not contrary to law, morals or public policy. The
Cielo’s services could be legally terminated upon the expiration of the period agreed upon, which
was only six months. The petitioner could therefore not complain that he had been illegally
dismissed.
ISSUE:
Whether or not the fixing of the period in Cielo’s contract was licit.
RULING:
• NO.
• The Court found from the records that all the drivers of the private respondent have been hired
on a fixed contract basis. Henry Lei merely filled in the blanks with the corresponding data, such
as the driver's name and address, the amount received by him, and the date of the document. Each
driver was paid through individual vouchers rather than a common payroll.
• The Court contended that the purpose behind these individual contracts was to evade the
application of the labor laws by making it appear that the drivers of the trucking company were
not its regular employees.
• Under these arrangements, the Henry Lei hoped to be able to terminate the services of the drivers
without the inhibitions of the Labor Code. All it had to do was refuse to renew the agreements,
which, significantly, were uniformly limited to a six-month period. No cause had to be
established because such renewal was subject to the discretion of the parties. Henry Lei did not
even have to wait for the expiration of the contract because it was provided that it could be "earlier
terminated at the option of either party." Henry Lei could also prevent the drivers from becoming
regular employees and be entitled to other statutory requirements.
• The Court affirmed the factual finding of the Labor Arbiter that the Cielo was a regular employee
of the Henry Lei. The work of Cielo was not seasonal nor is it limited to a single undertaking or
operation. Even if ostensibly hired for a fixed period, the petitioner should be considered a regular
employee of the private respondent. The Court cited the ruling in Brent v. Zamora, where from
the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial
security by the employee, they should be struck down or disregarded as contrary to public policy,
morals.
• The petition was granted.
Purefoods Corp. v NLRC (283 SCRA 133)
FACTS:
• 906 workers were hired by Pure Foods Corporation to work for a fixed period of five months at its
tuna cannery plant in General Santos City. After the expiration of their contracts of employment,
their services were terminated. They executed a "Release and Quitclaim" stating that they had no
claim whatsoever against the Pure Foods.
• The workers filed a complaint for illegal dismissal against Pure Foods and its plant manager.
• The Labor Arbiter dismissed the complaint on the ground that the private respondents were mere
contractual workers, and not regular employees; hence, they could not avail of the law on security
of tenure. The termination of their services by reason of the expiration of their contracts of
employment was justified.
• The Labor Arbiter also pointed out that by executing a "Release and Quitclaim," the private
respondents had waived and relinquished whatever right they might have against the
petitioner. LLjur
• The workers appealed to the NLRC eho affirmed the Labor Arbiter's decision. However, on the
workers’ motion for reconsideration, the NLRC rendered another decision vacating and setting
aside its decision and held that the private respondents and their co-complainants were regular
employees.
• It declared that the contract of employment was a scheme to stifle the workers ‘right to security of
tenure and should therefore be struck down and disregarded for being contrary to law, public policy,
and morals. Hence, their dismissal on account of the expiration of their respective contracts was
illegal.
• Pure Foods submits that the workers are now estopped from questioning their separation from
petitioner's employ in view of their express conformity with the five-month duration of their
employment contracts.
• They also claimed that it fell within the exception provided in Article 280 of the Labor Code
which reads:
o "Except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of
the employee."
• Moreover, the first paragraph of the said article must be read and interpreted in conjunction with
the proviso in the second paragraph, which reads:
o "Provided that any employee who has rendered at least one year of service, whether such
service is continuous or broken, shall be considered a regular employee with respect to
the activity in which he is employed . . ."
• In the instant case, the private respondents were employed for a period of five months only. In
any event, private respondents' prayer for reinstatement is well within the purview of the "Release
and Quitclaim" they had executed wherein they unconditionally released the petitioner from any
and all other claims which might have arisen from their past employment with the petitioner.
• The workers argued that contracts with a specific period of employment may be given legal effect
provided that they are not intended to circumvent the constitutional guarantee on security of tenure.
They submit that the practice of the petitioner in hiring workers to work for a fixed duration of five
months only to replace them with other workers of the same employment duration was apparently
to prevent the regularization of these so-called "casuals," which is a clear circumvention of the law
on security of tenure.
ISSUE:
Whether or not the fixing of terms in the workers’ contract is licit.
RULING:
• NO.
• The Court held that the workers’ activities were necessary and desirable in petitioner's business or
trade. They could not be regarded as having been hired only for a specific project or undertaking.
• The term "specific project or undertaking" under Article 280 of the Labor Code contemplates an
activity which is not commonly or habitually performed or such type of work which is not done on
a daily basis but only for a specific duration of time or until completion; the services employed are
then necessary and desirable in the employer's usual business only for the period of time it takes to
complete the project.
• The fact that the petitioner repeatedly and continuously hired workers to do the same kind of work
as that performed by those whose contracts had expired negates petitioner's contention that those
workers were hired for a specific project or undertaking only.
• Now on the validity of private respondents' five-month contracts of employment. In the leading
case of Brent School, Inc. v. Zamora, the Court upheld the legality of fixed-term employment. It
ruled that the decisive determinant in term employment should not be the activities that the
employee is called upon to perform but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship.
• But, this Court went on to say that where from the circumstances it is apparent that the periods have
been imposed to preclude acquisition of tenurial security by the employee, they should be struck
down or disregarded as contrary to public policy and morals.
• Brent also laid down the criteria under which term employment cannot be said to be in
circumvention of the law on security of tenure, which were not present in this case:
o The fixed period of employment was knowingly and voluntarily agreed upon by
the parties without any force, duress, or improper pressure being brought to bear
upon the employee and absent any other circumstances vitiating his consent; or
o It satisfactorily appears that the employer and the employee dealt with each other
on more or less equal terms with no moral dominance exercised by the former or
the latter.
• The scheme of Pure Foods was designed to prevent the private respondents and the other "casual"
employees from attaining the status of a regular employee. It was a clear circumvention of the
employees' right to security of tenure and to other benefits like minimum wage, cost-of-living
allowance, sick leave, holiday pay, and 13th month pay.
• The five-month period specified in private respondents' employment contracts having been
imposed precisely to circumvent the constitutional guarantee on security of tenure should be struck
down or disregarded as contrary to public policy or morals.
• The execution of Pure Foods of a "Release and Quitclaim" did not preclude them from questioning
the termination of their services. Generally, quitclaims by laborers are frowned upon as contrary to
public policy and are held to be ineffective to bar recovery for the full measure of the workers'
rights. The reason for the rule is that the employer and the employee do not stand on the same
footing.
• The petition was dismissed.
Servidad v. NLRC (305 SCRA 49) [1999]
FACTS:
• Joaquin T. Servidad was employed by INNODATA as a "Data Control Clerk", under a contract of
employment Section 2 of which was effective for a period of 1 year, unless sooner terminated.
• For a period of six (6) months, the Servidad shall be contractual during which the Innodata
can terminate his services by serving written notice to that effect. Such termination shall
be immediate, or at whatever date within the six-month period as innodate may determine.
• If Innodata continue his employment beyond November 10, 1994, Servidad shall become
a regular employee. If the Servidad fails to demonstrate the ability to master his task during
the first six months he can be placed on probation for another six (6) months after which
he will be evaluated for promotion as a regular employee.
• After working for six (6) months, Servidad was made to sign a three-month probationary
employment and later, an extended three-month probationary employment. The petitioner was
given an overall rating of 100% and 98% in the work evaluations conducted by the company. In
another evaluation, petitioner received a rating of 98.5% given by the private respondent.
• However, Servidad was dismissed from the service on the ground of alleged termination of contract
of employment, which prompted Servidad to institute a case for illegal dismissal.
• The Labor Arbiter ruled for Servidad, but NLRC reversed the decision, declaring that the contract
was for a fixed term and therefore, the dismissal of Servidad was valid.
ISSUE:
Whether the fixed period in Servidad’s contract was licit.
RULING:
• NO.
• The contract in question is for a fixed term. However, said contract provides for two periods. The
first period was for six months terminable at the option of private respondent, while the second
period was also for six months but probationary in character. In both cases, the private respondent
did not specify the criteria for the termination or retention of the services of petitioner. Such a
wide leeway for the determination of the tenure of an employee during a one year period of
employment is violative of the right of the employee against unwarranted dismissal.
• Article 1377 of the Civil Code provides:
o The interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity."
• The Court contends that if the contract was really for a fixed term, the Innodate should not have
been given the discretion to dismiss the petitioner during the one year period of employment for
reasons other than the just and authorized causes under the Labor Code. Settled is the rule that an
employer can terminate the services of an employee only for valid and just causes which must be
shown by clear and convincing evidence.|||
• The Court said that the language of the contract in dispute is a double-bladed scheme to block the
acquisition of the employee of tenurial security. The two options provided was to either terminate
the employee by reason of expiration of contract, or to use "failure to meet work standards" as the
ground for the employee's dismissal. In either case, the tenor of the contract jeopardizes the right
of the worker to security of tenure guaranteed by the Constitution.|||
• The petition was granted. The decision of the NLRC is reversed and set aside.
Joeb M. Alviado v. Procter & Gamble Phils., G.R. No. 160506, March 9, 2010
FACTS:
• Petitioners worked as merchandisers of Procter & Gamble. P&G manufactures and produces
different consumer and health products, which it sells on a wholesale basis. They entered into
contracts with Promm-Gem and SAPS for the promotion of its products.
• The petitioners individually signed employment contracts with either Promm-Gem or SAPS for
five months. They were assigned at different outlets, supermarkets and stores where they handled
the products of P&G. They received their wages from Promm-Gem or SAPS.
• SAPS and Promm-Gem was the one who imposed disciplinary measures on absentees, dishonest
merchandisers or those who changed their day-off without prior notice.
• Petitioners claim that when P&G had its re-alignment program, the petitioners were instructed to
fill up application forms and report to the agencies that P&G created.
• Petitioners also claim that P&G instigated their dismissal based on its letter to SAPS dated
informing them that the Merchandising Services Contract will no longer be renewed.
• The petitioners filed a complaint against P&G for regularization, service incentive leave pay and
other benefits with damages, and was later amended to include their dismissal without prior
notice.
• The Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-
employee relationship between petitioners and P&G. He found that the selection and engagement
of the petitioners, the payment of their wages, the power of dismissal and control were all done
and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were
legitimate independent job contractors.|||
• When brought to the NLRC then the CA for MR, it was dismissed.
ISSUE:
W/N Promm-Gen and SAPS are labor-only contractors.
RULING:
• NO.
• The Court first decided if Promm-Gen and SAPS are labor-only contractors.
• The financial statements of Promm-Gem showed that it has a capital stock of P1 million and a paid-
in capital of P500,000.00. It also has long term assets worth P400,000 and current assets of
P700,000.
• Promm-Gem also maintained its own warehouse and office space and has registered vehicles which
were used for its business. Promm-Gem also has other clients aside from P&G. The Court also
founnd that Promm-Gem has substantial investments.
• The records also show that Promm-Gem supplied its workers with the materials for their work and
issued uniforms to them. They also considered the complainants as its regular employees.
• Promm-Gem cannot be considered as a labor-only contractor. We find that it is a legitimate
independent contractor.|||
• As for SAPS, it showed that it has a paid-in capital of only P30,000. There is no other evidence
presented to show how much its working capital and assets are. There is is no showing of substantial
investment in tools, equipment or other assets, nor that they have any other client aside from P&G.
• Thus SAPS is considered a labor-only contractor.
KINDS OF EMPLOYMENT
I. REGULAR
• these employees refer to those who are hired for the business activities deemed
necessary in the employer's usual business. They are the ones who enjoy tenure
security as it is guaranteed by the Constitution. A regular employee cannot simply be
terminated unless due to Just and Authorized causes according to the law.
• when an employee performs activities that are usually necessary or desirable in the
usual business or trade of the employer. They enjoy the benefit of security of tenure
provided by the Philippine Constitution and cannot be terminated for causes other
than those provided by law and only after due process is given to them.
• However, some employers can require their new employees to undergo probationary
employment before they can be qualified for regular employment. Although
probationary employment is not a formal type of employment in the Philippines, it is
widely practiced to help employers observe the skills, competence, and performance
of new employees and determine if they are able to meet the reasonable standards to
become permanent employees.
II. CASUAL
• this type of employee is hired for business activities which are deemed incidental to
the business.
• when an employee performs work that is not usually necessary or primarily related to
the employer’s business or trade. The definite period of employment should be made
known to the employee at the time they started rendering service.
• If the employee has rendered service for at least one (1) year in the same company,
whether the casual employment is continuous or not, they shall be considered a
regular employee with respect to the activity they are employed and will continue
rendering service while such activity exists.
III. PROBATIONARY
• workers will not be automatically regularized once hired as they will be placed on
probationary status for 6 months. After the probationary period, the employee's
performance will be evaluated if they are qualified for regularization.
• Under Article 281 of the Labor Code of the Philippines, the maximum length of
probationary employment shall be six (6) months, and is counted from the date an
employee started working. When the employment is not terminated after the six-
month probationary period, it shall then be considered regular employment. It is
important to note that the employer must notify the employee of the probationary
period and the standards they must satisfy on or before the end of the probationary
employment. If the employee is not properly notified of the arrangement, then they
are prescribed by law to be classified as a regular employee from the time they
started working for the company.
IV. PROJECT
• an employee hired for a specific project is considered as a project employee. Before
an employee can be hired as a project employee, the company must specify the length
and scope of the work.
• A project employee may acquire the status of a regular employee when they are
continuously rehired after the completion of the project or when the tasks they
perform are vital, necessary, and indispensable to the usual business or trade of the
employer.
V. SEASONAL
• workers who are hired for business activities which require additional manpower and
are temporarily laid off during off season are called casual employees.
• This type is common practice to Retail, Food and Beverage, Hospitality and other
related industries as augmentation to their workforce to cover for the demand during
peak seasons.
• A common practice for some employers is to hire “regular seasonal employees” who
are called to work during peak seasons (e.g. Christmas season) and are temporarily
suspended during off-seasons. These employees are not separated from service but
are only considered on Leave of Absence (LOA) without pay until re-employed.
VI. FIXED-TERM
• this type of employee also refers to fixed-term employee because their services are
needed for a specific period only.
• when the employee renders service for a definite period of time and the employment
contract must be terminated after such period expires. This type of employment is
determined not by the activities that the employee is expected to perform but by the
commencement and termination of the employment relationship.
• Fixed-term employment is highly regulated and is subject to the following criteria:
o be voluntarily and knowingly agreed upon by the parties without any force,
duress or improper pressure being brought to bear upon the employee and
absent any vices of consent; or
o it satisfactorily appears that the employer and the employee dealt with each
other on more or less equal terms with no dominance exercised by the former
over the latter.
VII. PIECE-RATE
• workers who are paid on the basis of the number of units produced.
• piece-rate basis are those who are paid a standard amount for every piece or unit of
work produced that is more or less regularly replicated without regard to the time
spend in producing each piece or unit.
VIII. SECURITY GUARDS

• The security guards and similar personnel in the employ of any private security
agency or company should be duly licensed and must have passed the physical and
neuro-psychiatric examinations required by the PNP.
IX. FLOATING STATUS

• an employee placed on a floating status means that he/she is temporarily suspended,
temporarily laid-off or temporarily retrenched from employment.
• Since the suspension, lay-off or retrenchment is only temporary in nature, the
employee is not terminated from employment and remains to be an employee of the
company.
• Article 301. When employment not deemed terminated.- The bonafide suspension of
the operation of a business or undertaking for a period not exceeding six (6) months,
or the fulfillment by the employee of a military or civic duty shall not terminate
employment. In all such cases, the employer shall reinstate the employee to his
former position without loss of seniority rights if he indicates his desire to resume his
work not later than one (1) month from the resumption of operations of his employer
or from his relief from the military or civic duty.
• To be valid, the following requisites must be complied with:
o (1) There must be a bonafide suspension of operations or undertaking;
o (2) The period of suspension must not exceed six (6) months
o (3) The suspension must be done in good faith with clear proof of the need to
suspend operations or undertaking;
o (4) One month prior notice to the concerned employees and DOLE.
• The employee will not be entitled to receive any salary or financial benefit from the
company during the entire floating status. The principle of “no work, no pay” shall be
applied.
• after the six-month (or 12-month as per DO No. 215), the employer must do either of
the following:
o (1) Recall the employee to work in his former position or if no longer
available, to an equivalent position; or
o (2) If there is no equivalent position, terminate the employment on the
ground of redundancy or retrenchment, but subject to payment of separation
pay in favor of the employee.
• If an employee remains in floating status after the allowed period of up to 12 months
(as per DO No. 215), the employer may be held liable for illegal dismissal of the
employee. Once declared by DOLE NLRC as illegally dismissed, the employee shall
be entitled to be reinstated to his former position without loss of seniority rights
PLUS payment of backwages from the time of his dismissal up to his actual
reinstatement. On top of that, the employee may be entitled to receive moral and
exemplary damages and even attorney’s fees.
ART. 280. Regular and Casual Employment.— The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be
regular where the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and
his employment shall continue while such actually exists.
The foregoing contemplates four (4) kinds of employees: (a) regular employees or those who have been
“engaged to perform activities which are usually necessary or desirable in the usual business or trade of
the employer”; (b) project employees or those “whose employment has been fixed for a specific project
or undertaking[,] the completion or termination of which has been determined at the time of the
engagement of the employee”; (c) seasonal employees or those who work or perform services which are
seasonal in nature, and the employment is for the duration of the season; and (d) casual employees or
those who are not regular, project, or seasonal employees. Jurisprudence has added a fifth kind— a fixed-
term employee.

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LABSTAN THIRD AND FOURTH MEETING

Serrrano v. NLRC; G.R. No. 117040, January 27, 2000

American President Lines v. Clave; GR L-51641, June 29, 198

W/N Promm-Gen and SAPS are labor-only contractors.

CCBPI v. Agito; GR No. 179546, February 13, 2009

W/N Interserve is a labor-only contractor.

Philippine Fuji Xerox Corp. v. NLRC; GR 111501, March 5, 1996

W/N Skillpower, Inc. was a labor-only contractor.

Vinoya v. NLRC; GR No. 126586, February 2, 2000

Whether Peninsula Manpower Company is a labor-only contractor.

Whether or not San Miguel Corp. is solidarily liable with MAERC.

DIGITEL v. DEU; G.R. No. 184903-04, October 10, 2012

W/N Digiserv is a legitimate contractor.

• No. The Court held that Digiserv is a labor-only contractor.

Whether or not Zytron and A.C. Sicat are labor-only contractors.

Whether or not Ward Trading was a labor-only contractor.

Quintanar v. CCBPI; G.R. No. 210565, June 28, 2016

Whether or not Interserve was a legitimate independent contractor.

DOLE DEPARTMENT ORDER NO. 174-17

• SECTION 3. Definition of Terms.

• SECTION 5. Absolute Prohibition against Labor-only Contracting.

• SECTION 6. Other Illicit Forms of Employment Arrangements.

• SECTION 7. When Principal is Deemed the Direct Employer of the Contractor's or

• SECTION 8. Permissible Contracting or Subcontracting Arrangements.

• SECTION 9. Solidary Liability.

• SECTION 10. Rights of Contractor's/Subcontractor's Employees.

• SECTION 11. Required Contracts under These Rules.

• SECTION 12. Effect of Violation of the Provisions on the Rights of Contractor's

• SECTION 13. Effect of Termination of Employment.The termination of employment of the

• SECTION 14. Mandatory Registration and Registry of Legitimate Contractors.

• SECTION 20. Validity of Certificate of Registration.

• SECTION 23. Grounds for Cancellation of Registration.

• SECTION 26. Effects of Cancellation of Registration.

• SECTION 33. Contracting or Subcontracting in the Construction and Other Industries.

• SECTION 34. Prohibition on DOLE Officials or Employees.

DOLE Department Circular 01-17

Clarifying the applicability of Department Order No. 174, Series of 2017

• Non-Applicability of D.O. No. 174

• III Applicability/Non-Applicability to Construction Industry

• Applicability/Non-Applicabffily of D.O. No. 174, Series of 2017, to Private Security Agencies

• Non-Applicability of D.O. No.174, Series of 2017, to Other Contractual Relationships

DOLE DEPARTMENT ORDER NO. 150-16

• SECTION 3. Employment Status.

• SECTION 4. Service Agreements.

• SECTION 5. Employment Contracts.

• SECTION 6. Rights of Security Guards and Other Private Security Personnel.

• SECTION 7. Terms and Conditions of Employment.

• SECTION 8. Deductions from Salary.

• SECTION 9. Liability and Responsibilities of Security Service Contractors/Private Security

• SECTION 10. Right to Security of Tenure and Due Process.

Provisions under the Labor Code:

Article 106. Contractor or subcontractor.

Article 107. Indirect employer.

Article 108. Posting of bond.

Article 109. Solidary liability.

Philippine Bank of Communications v. NLRC (146 SCRA 347)

Neri v. NLRC (224 SCRA 717)

Philippine Telegraph & Telephone Co. v. NLRC (272 SCRA 596)

Brent School v. Zamora 181 SCRA 702 [1990]

Cielo v. NLRC 193 SCRA 410 [1991]

Purefoods Corp. v NLRC (283 SCRA 133)

Servidad v. NLRC (305 SCRA 49) [1999]

W/N Promm-Gen and SAPS are labor-only contractors.

VIII. SECURITY GUARDS

LabStan 3rd & 4th Meeting

LabStan 3rd & 4th Meeting