Superior Packaging Corporation

vs.

Arnel Balagsay, ET AL.

G.R. NO. 178909, 10 OCT 2012

Nature of Case

Petition for Review (Appeal)

Brief:

This is an appeal of the decision of the CA that the petitioner is solidarily liable with the contractor as the
latter is engaged in Labor only contracting.

Facts:

a. This is the case of a manufacturer charged to be jointly and solidarily liable being the principal of
the respondents’ agency for:
1. Underpayment of wages
2. Non-payment of premium pay for worked rest
3. Overtime pay
4. Non-payment of salary
b. The petitioner engaged the services of Lancer to provide reliever services to its business which
involves the manufacture and sale of commercial and industrial corrugated boxes.
c. The respondents were engaged for 4 months to load, unload and segregate the corrugated
boxes.
d. DOLE conducted an inspections of the petitioner’s premises and found several violations:
1. Non-presentation of payrolls and daily time records
2. Non-submission of annual report of safety organization
3. Medical and accident/illness reports
4. Non- registration of establishment under Rule 1020 of Occupation and Health Standards
5. No Trained first aide
e. DOLE to issue an order in favor of the respondents against the petitioner for failure to appear in
the summary investigation
f. Petitioner and its president were ordered to pay the respondent in the amount of Php840k.
g. Petitioner filed a motion for consideration claiming that respondents are not its employees but of
Lancer and the latter is paid for the services rendered.
h. DOLE denied the motion for the petitioner failure to support its claim that respondents are not its
employees.
Even if they were employed by Lancer, the petitioner still cannot escape liability as per Sec. 13 of
Department Order No. 10 series of 1997 makes a principal jointly and severally liable with the
contractor.
i. Petitioner and the president appeal with the CA and was likewise denied and affirmed DOLE’s
decision with the modification that the president was absolved of any personal liability.
j. Petitioner claimed that no evidence showing the respondents rendered overtime work and worked
on their rest days.
 Likewise, petitioner denied that it is engaged in labor-only contracting and is consequently an
indirect employer.
Petitioner also denied the existence of employee-employer relationship.

Issues of the case:

1. WON Superior Packaging Corporation (petitioner) may be held liable with Lancer Staffing &
Services Network, Inc. for respondents unpaid money claim.
2. WON DOLE acted within its authority.

Actions of the Court:

1. Yes. Lancer was not an independent contractor but was engaged in labor-only contracting and
therefore an indirect employer of the respondents and liable to the latter for their unpaid money
claims.

Finding that a contractor is a labor-only contractor is equivalent to declaring that there is an

employee-employer relationship between the principal and the employees of the supposed
contractor and the latter is considered as a mere agent of the principal.

Labor only contracting – any person who undertakes to supply workers to employer shall be
deemed to be engaged in such where such person:
a. Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premised and other material
b. The workers recruited and placed by such persons are performing activities related to the
principal business or operations of the employer in which workers are habitually employed.

Labor only contracting is prohibited and the person acting as contractor shall be considered
merely as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.

The petitioner likewise failed to produce any written service contract that might serve as proof of
its alleged agreement with Lancer.

In the case at bar, Lancer was clearly has no substantial capital investment for the daily
operations

2. Yes. As it falls within the purview of its visitorial and enforcement power under Art. 128 (b) of the
Labor Code. DOLE has the power to determine the existence of employee-employer relationship
with is merely preliminary, incidental and collateral to the DOLE;s primary function of
enforcing labor standards provisions which is subject to judicial review and NOT by the NLRC.