1. Samahang Manggagawa ng Bandolino v.

NLRC

FACTS:
Petitioners are former employees of private respondent Bandolino Shoe
Corporation and members of petitioner union, Samahan ng Manggagawa sa
Bandolino-LMLC. Private respondents German Alcantara, et al. (Aida
Alcantara, and Mimi Alcantara) are the owners and officers of said
corporation.

On June 4, 1990, petitioners Marcial Franco, et. al., were directed to take a
two-week leave because of a strike at Shoemart, Bandolino's biggest
customer. The strike adversely affected private respondents' business,
consequently, petitioners were told by management that, should the
circumstances improve, they would be recalled to work after two weeks. Later
that day, the wife of Marcial, together with three other relatives, had been
dismissed. The reason is allegedly because of Marcial’s refusal to divulge the
names of the organizers and members of the petitioner union. Thereafter, the
other petitioners were likewise informed by the personnel manager of the
termination of their employment and asked to turn in their identification cards.

The petitioners tried to return to work after two weeks but they were refused
entry into the company premises. They then filed a complaint for illegal
dismissal, unfair labor practice, and other monetary claims, such as
underpayment, overtime pay, and holiday pay.

The Labor Arbiter, Potenciano S. Cañizares, Jr., decided the case in favor of
petitioners and ordered the respondents to pay the complainants salary
differential and legal holiday pay. Upon appeal, the NLRC revised the labor
arbiter’s decision. It ruled that except for Jaime Sibug, petitioners were all
piece-rate-workers entitled only to 13th month pay for three years.

ISSUE:
WON the NLRC is correct when it ruled that the complainants, except for
Jaime Sibug, are piece-rate-workers, thus they are not entitled to holiday pay.
YES

RULING:
Petitioners do not dispute the NLRC's finding that, except for Jaime Sibug, the
rest of petitioners are piece-rate workers. Consequently, all petitioners are
entitled to minimum wage and 13th-month pay, but only Jaime Sibug is
entitled to an additional award of holiday pay. All of the petitioners are entitled
to salary differentials, as found by the labor arbiter, and to 13th-month pay, as
ruled by the NLRC. Pursuant to Art. 279 of the Labor Code, as amended by
Republic Act No. 6715, and our ruling in Bustamante v. National Labor
Relations Commission, the petitioners are entitled to full backwages from the
time their compensation was withheld up to the time of their actual
reinstatement or, where reinstatement is no longer possible, to full backwages
up to the time of finality of this decision.
2. Rodriguez v. Park N Ride, Inc., et al.

FACTS:
Rodriguez filed a Complaint for constructive illegal dismissal, non-payment of
service incentive leave pay and 13th month pay, including claims for moral
and exemplary damages and attorney's fees against Park N Ride, Vicest
Phils., Grand Leisure, and the Javier Spouses. Rodriguez alleged that she
was employed on January 30, 1984 as Restaurant Supervisor at Vicest Phils.
Four (4) years later, the restaurant business closed. Rodriguez was
transferred to office work and became an Administrative and Finance
Assistant to Estelita Javier (Estelita). One of Rodriguez's duties was to open
the office in Makati City at 8:00 a.m. daily.

The Javier Spouses established other companies and Rodriguez was also
required to handle the personnel and administrative matters of these
companies without additional compensation. She likewise took care of the
household concerns of the Javier Spouses, such as preparing payrolls of
drivers and helpers, shopping for household needs, and looking after the
spouses' house whenever they travelled abroad.

Sometime in 2000, the Javier Spouses established Park N Ride, a business

that provided terminal parking and leasing. Rodriguez handled the
administrative, finance, and warehousing departments of Park N Ride. She
allegedly worked from 8:00 a.m. to 7:00 p.m., Mondays to Saturdays; was on
call on Sundays; and worked during Christmas and other holidays. She was
deducted an equivalent of two (2) days' wage for every day of absence and
was not paid any service incentive leave pay.

On September 22, 2009, Rodriguez opened the Makati office late because
she first went on her usual ''pamalengke" for the Spouses. Consequently,
Estelita became mad and allegedly told her that if she did not want to continue
with her work, the company could manage without her. On September 26,
2009, Rodriguez wrote the Javier Spouses a letter expressing her gripes at
them. She intimated that they were always finding fault with her to push her to
resign. Subsequently, the Javier Spouses replied to her letter, allegedly
accepting her resignation.

Rodriguez prayed for separation pay in lieu of reinstatement; full back wages;
service incentive leave pay; proportional 13th month pay; moral damages of
₱l00,000.00; exemplary damages of ₱l00,000.00; and attorney's fees.

The Labor Arbiter dismissed Rodriguez’s complaint, but the Javier Spouses
were ordered to pay Rodriguez her proportionate 13th month pay for 2009 in
the amount of ₱l9,892.55. The NLRC granted Rodriguez's appeal and
modified the Labor Arbiter’s decision. It ruled that Rodriguez was illegally
dismissed and awarded her back wages, separation pay, 13th month pay
differentials, moral and exemplary damages, and attorney's fees. However, on
the Javier Spouses' Motion for Reconsideration, the Commission set aside its
decision and reinstated the LA’s decision. On appeal, the Court of Appeals
held that there was no constructive dismissal, but rather Rodriguez voluntarily
resigned from her employment. It ordered private respondents to pay
petitioner Rodriguez, inter alia, service incentive leave pay and 13th month
pay for the years 2006 to 2009. Motion for reconsideration was later denied.

ISSUE:
WON petitioner is entitled to full service incentive leave pay and damages.
YES

RULING:
With respect to service incentive leave pay, the Court of Appeals limited the
award thereof to three (3) years (2006 to 2009) only due to the prescriptive
period under Article 291 of the Labor Code. Private respondents Spouses
Javier employed petitioner Rodriguez for 25 years. Applying the prescriptive
period for money claims under Article 291 of the Labor Code however,
petitioner Rodriguez should only be entitled to the three years' worth of
service incentive pay for the years 2006 to 2009.

However, in applying Article 291 of the Labor Code in light of the service
incentive leave, the Court concluded that the three (3)-year prescriptive period
commences, not at the end of the year when the employee becomes entitled
to the commutation of his service incentive leave, but from the time when the
employer refuses to pay its monetary equivalent after demand of commutation
or upon termination of the employee's services, as the case may be. The
construal of Art. 291, vis-a-vis the rules on service incentive leave, is in
keeping with the rudimentary principle that in the implementation and
interpretation of the provisions of the Labor Code and its implementing
regulations, the workingman's welfare should be the primordial and
paramount consideration. Since petitioner had filed her complaint on October
7, 2009, or a few days after her resignation in September 2009, her claim for
service incentive leave pay has not prescribed. Accordingly, petitioner must
be awarded service incentive leave pay for her entire 25 years of service-from
1984 to 2009-and not only three (3) years' worth (2006 to 2009) as
determined by the Court of Appeals.

3. Gaa v. Court of Appeals

FACTS:
Respondent Europhil Industries Corporation was formerly one of the tenants
in Trinity Building at T.M. Kalaw Street, Manila, while petitioner Rosario A.
Gaa was then the building administrator. Europhil Industries commenced an
action for damages against petitioner "for having perpetrated certain acts that
Europhil Industries considered a trespass upon its rights, namely, cutting of its
electricity, and removing its name from the building directory and gate passes
of its officials and employees". The court rendered judgment in favor of
respondent Europhil Industries, ordering petitioner to pay the former the sum
of P10,000.00 as actual damages, P5,000.00 as moral damages, P5,000.00
as exemplary damages and to pay the costs.

The said decision having become final and executory, a writ of garnishment
was issued pursuant to which the Deputy Sheriff served a Notice of
Garnishment upon El Grande Hotel, where petitioner was then employed,
garnishing her "salary, commission and/or remuneration." Petitioner then filed
with the Court a motion to lift said garnishment on the ground that her
"salaries, commission and, or remuneration are exempted from execution
under Article 1708 of the New Civil Code. Said motion was denied and a
motion for reconsideration was likewise denied.

On appeal, the Court of Appeals in dismissing the petition, held that petitioner
is not a mere laborer as contemplated under Article 1708 as the term laborer
does not apply to one who holds a managerial or supervisory position like that
of petitioner, but only to those "laborers occupying the lower strata."

ISSUE:
WON the CA erred in its interpretation of Article 1708 of the New Civil Code.
NO

RULING:
ART. 1708 provides, “The laborer's wage shall not be subject to execution or
attachment, except for debts incurred for food, shelter, clothing and medical
attendance.”

It is beyond dispute that petitioner is not an ordinary or rank and file laborer
but "a responsibly place employee," of El Grande Hotel, "responsible for
planning, directing, controlling, and coordinating the activities of all
housekeeping personnel" so as to ensure the cleanliness, maintenance and
orderliness of all guest rooms, function rooms, public areas, and the
surroundings of the hotel. Considering the importance of petitioner's function
in El Grande Hotel, it is undeniable that petitioner is occupying a position
equivalent to that of a managerial or supervisory position.

In its broadest sense, the word "laborer" includes everyone who performs any
kind of mental or physical labor, but as commonly and customarily used and
understood, it only applies to one engaged in some form of manual or
physical labor.

Furtheremore, Article 1708 used the word "wages" and not "salary" in relation
to "laborer" when it declared what are to be exempted from attachment and
execution. The term "wages" as distinguished from "salary", applies to the
compensation for manual labor, skilled or unskilled, paid at stated times, and
measured by the day, week, month, or season, while "salary" denotes a
higher degree of employment, or a superior grade of services, and implies a
position of office: by contrast, the term wages " indicates considerable pay for
a lower and less responsible character of employment, while "salary" is
suggestive of a larger and more important service

4. State Marine Corp. v. Cebu Seamen's Association (page 321 in the book)

5. (same with #4)

6. Cebu Institute of Technology v. Ople

FACTS:
This case originated from a Complaint filed against petitioner Cebu Institute of
Technology (CIT) by private respondents, Panfilo Canete, et al., teachers of
CIT, for non-payment of: a) cost of living allowances (COLA) under Pres. Dec.
Nos. 525, 1123, 1614, 1678 and 1713, b) thirteenth (13th) month pay
differentials and c) service incentive leave. According to the CIT, it had paid
the allowances mandated by various decrees but the same had been
integrated in the teacher's hourly rate. It alleged that the payment of COLA by
way of salary increases is in line with PD No. 451. It also claimed that it had
paid thirteenth month pay to its employees and that it was exempt from the
payment of service incentive leave to its teachers who were employed on
contract basis.

Herein public respondent, then Minister of Labor and Employment issued the
assailed Order and held that the basic hourly rate designated in the
Teachers' Program is regarded as the basic hourly rate of teachers exclusive
of the COLA. CIT was ordered to pay its teaching staff the COLA mandated
by various PDs and the SIL from 1978 up to 1981.

ISSUE:
WON the public respondent erred in not declaring that petitioner is exempted
and/or not obliged to pay service incentive leave.

RULING:
Petitioner claims that private respondents are engaged by the school on a
contract basis as shown by the individual teachers contract, hence, they are
not entitled to SIL as they are considered as field personnel.

The phrase "those who are engaged on task or contract basis" should
however, be related with "field personnel " applying the rule on ejusdem
generis that general and unlimited terms are restrained and limited by the
particular terms that they follow. Clearly, petitioner's teaching personnel
cannot be deemed field personnel which refers "to non-agricultural employees
who regularly perform their duties away from the principal place of business or
branch office of the employer and whose actual hours of work in the field
cannot be determined with reasonable certainty. Petitioner's claim that private
respondents are not entitled to the service incentive leave benefit cannot
therefore be sustained.

7. International School Alliance of Educators v. Hon. Quisumbing, et al. (in the

book page 325)

8. TSPCI v. TSPCI Employee Union

FACTS:
TSPIC is engaged in the business of designing, manufacturing, and marketing
integrated circuits to serve the communication, automotive, data processing,
and aerospace industries. Respondent TSPIC Employees Union (FFW)
(Union), on the other hand, is the registered bargaining agent of the rank-and-
file employees of TSPIC. The respondents, Maria Fe Flores, et al., are all
members of the Union.

In 1999, TSPIC and the Union entered into a Collective Bargaining Agreement
(CBA) for the years 2000 to 2004. The CBA included a provision on yearly
salary increases starting January 2000 until January 2002. Consequently, on
January 1, 2000, all the regular rank-and-file employees of TSPIC received a
10% increase in their salary. Accordingly, the following nine (9) respondents
(first group) who were already regular employees received the said increase
in their salary: Maria Fe Flores, Fe Capistrano, Amy Durias, Claire Evelyn
Velez, Janice Olaguir, Jerico Alipit, Glen Batula, Ser John Hernandez, and
Rachel Novillas.

The CBA also provided that employees who acquire regular employment
status within the year but after the effectivity of a particular salary increase
shall receive a proportionate part of the increase upon attainment of their
regular status.

On October 6, 2000, the Regional Tripartite Wage and Productivity Board,

National Capital Region, issued Wage Order No. NCR-08 (WO No. 8) which
raised the daily minimum wage from PhP 223.50 to PhP 250 effective
November 1, 2000. Conformably, the wages of 17 probationary employees,
namely: Nimfa Anilao, Rose Subardiaga, Valerie Carbon, Olivia Edroso,
Maricris Donaire, Analyn Azarcon, Rosalie Ramirez, Julieta Rosete, Janice
Nebre, Nia Andrade, Catherine Yaba, Diomedisa Erni, Mario Salmorin, Loida
Comullo, Marie Ann Delos Santos, Juanita Yana, and Suzette Dulay (second
group), were increased to PhP 250.00. On various dates during the last
quarter of 2000, the above named 17 employees attained regular
employment and received 25% of 10% of their salaries as granted under the
provision on regularization increase under the CBA.

In January 2001, TSPIC implemented the new wage rates as mandated by

the CBA. As a result, the nine employees (first group), who were senior to the
recently regularized employees, received less wages.

A few weeks after the salary increase for the year 2001 became effective,
TSPIC’s Human Resources Department notified 24 employees that due to an
error in the automated payroll system, they were overpaid and the
overpayment would be deducted from their salaries in a staggered basis,
starting February 2001. TSPIC explained that the correction of the erroneous
computation was based on the crediting provision of the CBA. The Union, on
the other hand, asserted that there was no error and the deduction of the
alleged overpayment from employees constituted diminution of pay.

TSPIC and the Union agreed to undergo voluntary arbitration. The arbitrator
held that the unilateral deduction made by TSPIC violated Art. 100 of the
Labor Code. On appeal, the CA dismissed the petition and affirmed in toto the
decision of the voluntary arbitrator.
ISSUE:
WON TSPIC’s decision to deduct the alleged overpayment from the salaries
of the affected members of the Union constitute diminution of benefits in
violation of the Labor Code. NO

RULING:
Diminution of benefits is the unilateral withdrawal by the employer of benefits
already enjoyed by the employees. There is diminution of benefits when it is
shown that: (1) the grant or benefit is founded on a policy or has ripened into
a practice over a long period; (2) the practice is consistent and deliberate; (3)
the practice is not due to error in the construction or application of a doubtful
or difficult question of law; and (4) the diminution or discontinuance is done
unilaterally by the employer.

As correctly pointed out by TSPIC, the overpayment of its employees was a

result of an error. This error was immediately rectified by TSPIC upon its
discovery. The Court have ruled before that an erroneously granted benefit
may be withdrawn without violating the prohibition against non-diminution of
benefits.

Hence, any amount given to the employees in excess of what they were
entitled to may be legally deducted by TSPIC from the employees’ salaries. It
was also compassionate and fair that TSPIC deducted the overpayment in
installments over a period of 12 months starting from the date of the initial
deduction to lessen the burden on the overpaid employees. TSPIC, in turn,
must refund to individual respondents any amount deducted from their
salaries which was in excess of what TSPIC is legally allowed to deduct from
the salaries.

9. Sevilla Trading Co. v. Semana

FACTS:
For two to three years prior to 1999, petitioner Sevilla Trading Company
(Sevilla Trading, for short), a domestic corporation engaged in trading
business, organized and existing under Philippine laws, added to the base
figure, in its computation of the 13th-month pay of its employees, the amount
of other benefits received by the employees which are beyond the basic pay.
These benefits included:

(a) Overtime premium for regular overtime, legal and special holidays;
(b) Legal holiday pay, premium pay for special holidays;
(c) Night premium;
(d) Bereavement leave pay;
(e) Union leave pay;
(f) Maternity leave pay;
(g) Paternity leave pay;
(h) Company vacation and sick leave pay; and
(i) Cash conversion of unused company vacation and sick leave.
Petitioner claimed that it entrusted the preparation of the payroll to its office
staff, including the computation and payment of the 13th-month pay and other
benefits. When it changed its person in charge of the payroll in the process of
computerizing its payroll, and after audit was conducted, it allegedly
discovered the error of including non-basic pay or other benefits in the base
figure used in the computation of the 13th-month pay of its employees.
Petitioner then effected a change in the computation of the thirteenth month
pay, now excluding the benefits. Hence, the new computation reduced the
employees’ thirteenth month pay.

The parties failed to resolve the issue in the grievance machinery which led
them to submit the issue to respondent Accredited Voluntary Arbitrator Tomas
E. Semana (A.V.A. Semana, for short).

A.V.A. Semana decided in favor of the Union. It ordered the company to

include all the benefits in the computation of the 13th-month pay. On appeal,
the CA dismissed the petition.

ISSUE:
WON A.V.A Semana committed grave abuse of discretion in its decision. NO

RULING:
The Court held that the decision of A.V.A. Semana is sound, valid, and in
accord with law and jurisprudence. A.V.A. Semana is correct in holding that
petitioner’s stance of mistake or error in the computation of the thirteenth
month pay is unmeritorious. Petitioner’s submission of financial statements
every year requires the services of a certified public accountant to audit its
finances. It is quite impossible to suggest that they have discovered the
alleged error in the payroll only in 1999. Also, petitioner failed to adduce any
other relevant evidence to support its contention. Aside from its bare claim of
mistake or error in the computation of the thirteenth month pay, petitioner
merely appended to its petition a copy of the 1997-2002 Collective Bargaining
Agreement and an alleged "corrected" computation of the thirteenth month
pay. There was no explanation whatsoever why its inclusion of non-basic
benefits in the base figure in the computation of their 13th-month pay in the
prior years was made by mistake, despite the clarity of statute and
jurisprudence at that time.

When petitioner Sevilla Trading still included over the years non-basic
benefits of its employees, such as maternity leave pay, cash equivalent of
unused vacation and sick leave, among others in the computation of the 13th-
month pay, this may only be construed as a voluntary act on its part. Putting
the blame on the petitioner’s payroll personnel is inexcusable.

A company practice favorable to the employees had indeed been established

and the payments made pursuant thereto, ripened into benefits enjoyed by
them. And any benefit and supplement being enjoyed by the employees
cannot be reduced, diminished, discontinued or eliminated by the employer,
by virtue of Sec. 10 of the Rules and Regulations Implementing P.D. No. 851,
and Art. 100 of the Labor Code of the Philippines which prohibit the diminution
or elimination by the employer of the employees’ existing benefits.

10. Metrobank v. Chiok

FACTS:
Respondent Wilfred N. Chiok had been engaged in dollar trading for several
years. He usually buys dollars from Gonzalo B. Nuguid at the exchange rate
prevailing on the date of the sale. Chiok pays Nuguid either in cash or
manager’s check, to be picked up by the latter or deposited in the latter’s bank
account. For this purpose, Chiok maintained accounts with petitioners
Metropolitan Bank and Trust Company (Metrobank) and Global Business
Bank, Inc. (Global Bank), the latter being then referred to as the Asian
Banking Corporation (Asian Bank). Chiok likewise entered into a Bills
Purchase Line Agreement (BPLA) with Asian Bank. Under the BPLA, checks
drawn in favor of, or negotiated to, Chiok may be purchased by Asian Bank.
Upon such purchase, Chiok receives a discounted cash equivalent of the
amount of the check earlier than the normal clearing period.

On July 5, 1995, Asian Bank "bills purchased" Security Bank & Trust
Company (SBTC) Manager’s Check in the amount of ₱25,500,000.00 issued
in the name of Chiok, and credited the same amount to the latter’s Savings
Account. On the same day, Asian Bank issued two (2) Manager’s Check(MC)
with the aggregate amount of Php 18.5 million upon Chiok’s instruction which
was debited from his account. Likewise upon Chiok’s application, Metrobank
issued one (1) Cashier’s Check (CC) in the amount of Php 7.6 million in the
name of Gonzalo Bernardo. Chiok then deposited the three checks (2 Asian
Bank MC and 1 Metrobank CC) in Niguid’s account with Far East Bank and
Trust Company(FEBTC), a predecessor-in-interest of BPI.

Nuguid was supposed to deliver US$1,022,288.50,4 the dollar equivalent of

the three checks as agreed upon, in the afternoon of the same day. Nuguid,
however, failed to do so, prompting Chiok to request that payment on the
three checks be stopped.

Chiok then filed a Complaint for damages with application for ex parte
restraining order and/or preliminary injunction with the Regional Trial Court
(RTC) of Quezon City against the spouses Gonzalo and Marinella Nuguid,
and the depositary banks, Asian Bank and Metrobank. The RTC held, among
others, Global Bank and Metrobank liable for attorney’s fees equivalent to 5%
of the total amount due them, while the spouses Nuguid were held solidarily
liable for said fees. On appeal, the CA modified the order by the RTC for
Global Bank and Metrobank to pay Chiok. The Court of Appeals held that
Chiok’s cause of action against Global Bank is limited to the proceeds of the
two manager’s checks. As regards Metrobank, it was ordered to pay Chiok
the value of the cashier’s check in the amount of ₱7,613,000.00. While the
Spouses Nuguid are ordered to pay attorney’s fees equivalent to 5% of the
total amount due to Chiok from both depository banks, as well as the costs of
suit.
ISSUE:

RULING:

11. Polyfoam-RGC International Corp., et al. v. Concepcion

FACTS:
On February 8, 2000, respondent filed a Complaint for illegal dismissal and for
monetary claims, (non-payment of wages, premium pay for rest day,
separation pay, service incentive leave pay, 13th month pay, damages, and
attorney’s fees) against Polyfoam and Ms. Natividad Cheng (Cheng).
Respondent alleged that he was hired by Polyfoam as an “all-around” factory
worker and served as such for almost six years. Later, he allegedly
discovered that his time card was not in the rack and was later informed by
the security guard that he could no longer punch his time card. When he
protested to his supervisor, the latter allegedly told him that the management
decided to dismiss him due to an infraction of a company rule. Cheng, the
company’s manager, also refused to face him. Respondent’s counsel later
wrote a letter to Polyfoam’s manager requesting that respondent be re-
admitted to work, but the request remained unheeded prompting the latter to
file the complaint for illegal dismissal.

On April 28, 2000, Gramaje filed a Motion for Intervention claiming to be the
real employer of respondent. On the other hand, Polyfoam and Cheng filed a
Motion to Dismiss on the grounds that the NLRC has no jurisdiction over the
case, because of the absence of employer-employee relationship between
Polyfoam and respondent.

Gramaje claimed that P.A. Gramaje Employment Services (PAGES) is a

legitimate job contractor who provided some manpower needs of Polyfoam. It
was alleged that respondent was hired as “packer” and assigned to Polyfoam,
charged with packing the latter’s finished foam products. She argued,
however, that respondent was not dismissed from employment, rather, he
simply stopped reporting for work.

Labor Arbiter (LA) Marita V. Padolina rendered a Decision finding respondent

to have been illegally dismissed from employment and holding Polyfoam and
Gramaje/PAGES solidarily liable for respondent’s money claims. The LA held,
among others, that petitioners are solidarily liable to respondent for the latter’s
money claims, considering that Gramaje (the contractor) was not enrolled as
private employment agency in the registry of the Regional Office of the
Department of Labor and Employment (DOLE) and considering further that
respondent performed a job directly related to the main business of Polyfoam.

On appeal by petitioners, the NLRC modified the LA decision by exonerating

Polyfoam from liability for respondent’s claim. It found Gramaje to be an
independent contractor who contracted the packaging aspect of the finished
foam products of Polyfoam. Pursuant to said contract, Gramaje’s employees,
including respondent, were assigned to Polyfoam but remained under the
control and supervision of Gramaje. It likewise concluded that Gramaje had
its own office equipment, tools, and substantial capital and, in fact, supplied
the plastic containers and carton boxes used by her employees in performing
their duties.

Upon appeal by the respondent to the CA, the latter agreed with the LA’s
conclusion that Gramaje is not a legitimate job contractor because of the
following: (1) Gramaje failed to present its Audited Financial Statement that
would have shown its financial standing and ownership of equipment,
machineries, and tools necessary to run her own business; (2) Gramaje failed
to present a single copy of the purported contract with Polyfoam as to the
packaging aspect of the latter’s business; (3) Gramaje’s licenses supposedly
issued by the DOLE appeared to be spurious; (4) Gramaje was not registered
with DOLE as a private recruitment agency and (5) Gramaje presented only
one (1) SSS Quarterly Collection List whose authenticity is doubtful. Thus,
respondent was indeed Polyfoam’s employee.

ISSUE:
WON Gramaje is an independent job contractor. No

RULING:
Gramaje is a Labor-Only Contractor said the Court. Permissible job contracting
or subcontracting refers to an arrangement whereby a principal agrees to put out or
farm out to a contractor or subcontractor the performance or completion of a
specific job, work or service within a definite or predetermined period, regardless of
whether such job, work or service is to be performed or completed within or outside
the premises of the principal.

In Sasan, Sr. v. National Labor Relations Commission 4th Division, the Court
distinguished permissible job contracting or subcontracting from “labor-only”
contracting, to wit:

A person is considered engaged in legitimate job contracting or

subcontracting if the following conditions concur:

(a) The contractor or subcontractor carries on a distinct and

independent business and undertakes to perform the job, work or
service on its own account and under its own responsibility according
to its own manner and method, and free from the control and direction
of the principal in all matters connected with the performance of the
work except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or
investment; and
(c) The agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to all
labor and occupational safety and health standards, free exercise of
the right to self-organization, security of tenure, and social and welfare
benefits.
 In contrast, in labor-only contracting, the following elements are
present:

(a) The contractor or subcontractor does not have substantial capital or

investment to actually perform the job, work or service under its own
account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal.

The test of independent contractorship is “whether one claiming to be an

independent contractor has contracted to do the work according to his own
methods and without being subject to the control of the employer, except only
as to the results of the work.” In San Miguel Corporation v. Semillano, the
Court laid down the criteria in determining the existence of an independent
and permissible contractor relationship, to wit:

x x x [W]hether or not the contractor is carrying on an independent business;

the nature and extent of the work; the skill required; the term and duration of
the relationship; the right to assign the performance of a specified piece of
work; the control and supervision of the work to another; the employer’s
power with respect to the hiring, firing and payment of the contractor’s
workers; the control of the premises; the duty to supply the premises, tools,
appliances, materials, and labor; and the mode, manner and terms of
payment.

Applying the foregoing tests, the Court agreed with the CA’s conclusion that
Gramaje is not an independent job contractor, but a “labor-only” contractor.
First, Gramaje has no substantial capital or investment. Second, Gramaje did
not carry on an independent business or undertake the performance of its
service contract according to its own manner and method, free from the
control and supervision of its principal, Polyfoam, its apparent role having
been merely to recruit persons to work for Polyfoam.

12. Aliviado, et al. v. Procter and Gamble Phils., Inc., et al.

FACTS:
Petitioners worked as merchandisers of Procter & Gamble Phils. Inc. (P&G)
from various dates and they all individually signed employment contracts with
either Promm-Gem or Sales and Promotions Services (SAPS) for periods of
more or less five months at a time. They were assigned at different outlets,
supermarkets and stores where they handled all the products of P&G.They
received their wages from Promm-Gem or SAPS. SAPS and Promm-Gem
imposed disciplinary measures on erring merchandisers for reasons such as
habitual absenteeism, dishonesty or changing day-off without prior notice.

P&G is principally engaged in the manufacture and production of different

consumer and health products, which it sells on a wholesale basis to various
supermarkets and distributors. To enhance consumer awareness and
acceptance of the products, P&G entered into contracts with Promm-Gem and
SAPS for the promotion and merchandising of its products. Petitioners filed a
complaint against P&G for regularization, service incentive leave pay and
other benefits with damages.

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 with respect to the means and
methods by which their work was accomplished, were all done and exercised
by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were
legitimate independent job contractors.

On appeal, the NLRC affirmed the LA’s decision. Later, the CA likewise
denied appeal and affirmed the previous decision.

ISSUE:
WON Promm-Gem and SAPS were legitimate independent job contractors.

RULING:
To emphasize, 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:

i) The contractor or subcontractor does not have substantial capital or

investment which relates to the job, work or service to be performed
and the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; or
ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.

In the instant case, the financial statements of Promm-Gem show that it has
authorized capital stock of P1 million and a paid-in capital, or capital available
for operations, of P500,000.00 as of 1990. It also has long term assets worth
P432,895.28 and current assets of P719,042.32. Promm-Gem has also
proven that it maintained its own warehouse and office space with a floor area
of 870 square meters. It also had under its name three registered vehicles
which were used for its promotional/merchandising business. Promm-Gem
also has other clients aside from P&G. Under the circumstances, we find that
Promm-Gem has substantial investment which relates to the work to be
performed. These factors negate the existence of the element specified in
Section 5(i) of DOLE Department Order No. 18-02.

The records also show that Promm-Gem supplied its complainant-workers

with the relevant materials, such as markers, tapes, liners and cutters,
necessary for them to perform their work. Promm-Gem also issued uniforms
to them. It is also relevant to mention that Promm-Gem already considered
the complainants working under it as its regular, not merely contractual or
project, employees. This circumstance negates the existence of element (ii)
as stated in Section 5 of DOLE Department Order No. 18-02, which speaks of
contractual employees. This, furthermore, negates on the part of Promm-Gem
bad faith and intent to circumvent labor laws which factors have often been
tipping points that lead the Court to strike down the employment practice or
agreement concerned as contrary to public policy, morals, good customs or
public order.

Under the circumstances, Promm-Gem cannot be considered as a labor-only

contractor. The Court found that it is a legitimate independent contractor.
Thus, the some of the petitioners having worked under, and been dismissed
by Promm-Gem, are considered the employees of Promm-Gem, not of P&G.

As regards SAPS, the Articles of Incorporation of SAPS shows that it has a

paid-in capital of only P31,250.00. There is no other evidence presented to
show how much its working capital and assets are. Furthermore, there is no
showing of substantial investment in tools, equipment or other assets.
Applying the same rationale in Vinoya v. National Labor Relations
Commission to the present case, it is clear that SAPS having a paid-in capital
of only P31,250 - has no substantial capital. SAPS lack of substantial capital
is underlined by the records which show that its payroll for its merchandisers
alone for one month would already total P44,561.00. It had 6-month contracts
with P&G. Yet SAPS failed to show that it could complete the 6-month
contracts using its own capital and investment. Its capital is not even sufficient
for one months payroll. SAPS failed to show that its paid-in capital of
P31,250.00 is sufficient for the period required for it to generate its needed
revenue to sustain its operations independently. Substantial capital refers to
capitalization used in the performance or completion of the job, work or
service contracted out. In the present case, SAPS has failed to show
substantial capital. Consequently, the other petitioners, having been recruited
and supplied by SAPS -- which engaged in labor-only contracting -- are
considered as the employees of P&G.

13. Petron Corporation v. Caberte

FACTS:
Petron is a domestic corporation engaged in the manufacture and distribution
to the general public of various petroleum products. In pursuance of its
business, Petron owns and operates several bulk plants in the country for
receiving, storing and distributing its products.

On various dates from 1979 to 1998, respondents were hired to work at

Petron’s Bacolod Bulk Plant in San Patricio, Bacolod City, Negros Occidental
as LPG/Gasul fillers, maintenance crew, warehousemen, utility workers and
tanker receiving crew.

For the periods from March 1, 1996 to February 28, 1999 and November 1,
1996 to June 30, 1999, Petron and ABC, a labor contracting business owned
and operated by Caberte Sr., entered into a Contract for Services and a
Contract for LPG Assistance Services. Under both service contracts, ABC
undertook to provide utility and maintenance services to Petron in its Bacolod
Bulk Plant.

Respondents Caberte, et. al., filed before the Labor Arbiter a Complaint for
illegal dismissal and other monetary claims against Petron, ABC and Caberte
Sr. Respondents averred that even before Petron engaged ABC as contractor
in 1996, most of them had already been working for Petron for years.
However, every time Petron engages a new contractor, it would designate
such new contractor as their employer. Despite such arrangement, Petron
exercised control and supervision over their work, the performance of which is
necessary and desirable in its usual trade and business. Respondents added
that ABC is a mere labor-only contractor which had no substantial capital and
investment, and had no control over the manner and method on how they
accomplished their work. Thus, Petron is their true employer.

On the other hand, Petron asserted that ABC is an independent contractor

which supplied the needed manpower for the maintenance of its bulk handling
premises and offices, as well as for tanker assistance in the receiving and re-
filling of its LPG products; that among the workers supplied by ABC were
respondents, except Caberte Jr., who does not appear to be one of those
assigned by ABC to work for it; that it has no direct control and supervision
over respondents who were tasked to perform work required by the service
contracts it entered into with ABC; and, that it cannot allow the continuous
employment of respondents beyond the expiration of the contracts with ABC.

LA Acosta held that ABC is an independent contractor that has substantial

capital and that respondents were its employees. On appeal, the NLRC
affirmed the ruling of the Labor Arbiter. Upon appeal to the CA, it ruled that
ABC is engaged in labor-only contracting because: first, it did not have
substantial capital or investment in the form of tools, equipment, implements,
machineries and work premises, actually and directly used in the performance
or completion of the job it contracted out from Petron; second, the work
assigned to respondents were directly related to Petron’s business; and, third,
the nature of Petron’s business requires it to exercise control over the
performance of respondents’ work. Consequently, the CA declared
respondents as Petron’s regular employees.

ISSUE:
WON ABC is an independent contractor. No

RULING:
Permissible or legitimate job contracting or subcontracting "refers to an
arrangement whereby a principal agrees to put out or farm out with the
contractor or subcontractor the performance or completion of a specific job,
work, or service within a definite or predetermined period, regardless of
whether such job, work, or service is to be performed or completed within or
outside the premises of the principal. A person is considered engaged in
legitimate job contracting or subcontracting if the following conditions concur:
(a) the contractor carries on a distinct and independent business and partakes
the contract work on his account under his own responsibility according to his
own manner and method, free from the control and direction of his employer
or principal in all matters connected with the performance of his work except
as to the results thereof; (b) the contractor has substantial capital or
investment; and (c) the agreement between the principal and the contractor or
subcontractor assures the contractual employees’ entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social welfare benefits."

To restate, a contractor is deemed to be a labor-only contractor if the following

elements are present: (i) the contractor does not have substantial capital or
investment to actually perform the job, work or service under its own account
and responsibility; and (ii) the employees recruited, supplied or placed by
such contractor are performing activities which are directly related to the main
business of the principal. Conversely, in proving that ABC is not a labor-only
contractor, it is incumbent upon Petron to show that ABC has substantial
capital or investment and that respondents were performing activities which
were not directly related to Petron’s principal business.

To show that ABC has substantial capital or investment, Petron submitted,

among others, ABC’s BIR Certificate of Registration, VAT Return, BIR
Confirmation Receipt, TIN, Individual Income Tax Return, Mayor’s Permit and
DTI Certificate of Registration. However, the Court observes that these
documents are not conclusive evidence of ABC’s financial capability. At most,
they merely show that ABC is engaged in business and licensed by the
appropriate government agencies.

As for the financial statements presented, it appears that only the audited
financial statements of ABC for the years 1992, 1993 and 1994 were
submitted. As aptly observed by the CA, these documents cannot be given
much credence considering that the service contracts between Petron and
ABC commenced in 1996 and ended in 1999. However, no audited financial
statements for the years material to this case (1996, 1997, 1998 and 1999)
were submitted.

Neither does the performance bond taken out by ABC serve as significant
evidence of its substantial capital. If at all, the bond was a convenient smoke
screen to disguise the real nature of ABC’s employment as an agent of
Petron.

14. Development Bank of the Philippines v. NLRC

FACTS:
On 21 March 1977 private respondent Leonor A. Ang started employment as
Executive Secretary with Tropical Philippines Wood Industries, Inc. (TPWII), a
corporation engaged in the manufacture and sale of veneer, plywood and
sawdust panel boards. In 1982 she was promoted to the position of Personnel
Officer.
In September 1983 petitioner Development Bank of the Philippines, as
mortgagee of TPWII, foreclosed its plant facilities and equipment.
Nevertheless TPWII continued its business operations interrupted only by
brief shutdowns for the purpose of servicing its plant facilities and equipment.
In January 1986 petitioner took possession of the foreclosed properties. From
then on the company ceased its operations. As a consequence private
respondent was verbally terminated from the service.

Aggrieved by the termination of her employment, private respondent filed with

the Labor Arbiter a complaint for monetary claims (separation pay, 13th month
pay, vacation and sick leave pay, salaries and allowances) against TPWII, its
General Manager, and petitioner.

After hearing the Labor Arbiter found TPWII primarily liable to private
respondent for her separation pay and vacation and sick leave pay. The
General Manager was absolved of any liability. But with respect to petitioner,
it was held subsidiarily liable in the event the company failed to satisfy the
judgment. The Labor Arbiter rationalized that the right of an employee to be
paid benefits due him from the properties of his employer is superior to the
right of the latter's mortgage, citing this Court's resolution in PNB v. Delta
Motor Workers Union. On appeal, NLRC affirmed the LA’s decision.

ISSUE:
WON declaration of bankruptcy or judicial liquidation is required before the
worker's preference may be invoked under Art. 110 of the Labor Code. Yes

RULING:
Art. 110, which was amended by R.A. 6715 effective 21 March 1989, now
reads:

Art. 110. Worker preference in case of bankruptcy. — In the event of

bankruptcy or liquidation of an employer's business, his workers shall
enjoy first preference as regards their unpaid wages and other
monetary claims, any provision of law to the contrary notwithstanding.
Such unpaid wages and monetary claims shall be paid in full before the
claims of the Government and other creditors may be paid.

Obviously, the amendment expanded the concept of "worker preference" to

cover not only unpaid wages but also other monetary claims to which even
claims of the Government must be deemed subordinate. The Rules and
Regulations Implementing R.A. 6715, approved 24 May 1989, also amended
the corresponding implementing rule, and now reads:

Sec. 10. Payment of wages and other monetary claims in case of

bankruptcy. — In case of bankruptcy or liquidation of the employer's
business, the unpaid wages and other monetary claims of the
employees shall be given first preference and shall be paid in full
before the claims of government and other creditors may be paid.
Although the terms "declaration" (of bankruptcy) or "judicial" (liquidation) have
been notably eliminated, still in Development Bank of the Philippines v. NLRC,
this Court did not alter its original position that the right to preference given to
workers under Art. 110 cannot exist in any effective way prior to the time of its
presentation in distribution proceedings.