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L I N G AT E T A L . V.

C O C A - C O L A
BOTTLERS PHILIPPINES, INC. ET
AL.
G . R . N O . 2 0 5 6 8 8 , J U LY 4 , 2 0 1 8 .
REPORT OUTLINE

• Background
• Facts of the Case
• Issues
• Ruling of the Court
• Points of Interest
BACKGROUND
BACKGROUND
Principal

Trilateral
Relationship

Contractor Employee
BACKGROUND
• Section 106 of the Labor Code:
– “xxx
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.”
BACKGROUND
• Section 5 of DOLE Department Order No. 174, Series of 2017 (“DO 174”):
– “Labor-only contracting, which is totally prohibited, refers to an arrangement
where:
(a) i. The contractor or subcontractor does not have substantial capital, or
ii. The contractor or subcontractor does not have investments in the form of
tools, equipment, machineries, supervision, work premises, among others,
and,
iii. 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
BACKGROUND
or
(b) The contractor or subcontractor does not exercise the right to control over
the performance of the work of the employee.”
FACTS OF THE CASE
FACTS OF THE CASE: PETITIONERS
Petitioner Position Date of Hiring Date of Termination
Valentino Lingat Plant Driver (Primary); August 1993 April 2005
Forklift Operator
Aproniano Altoveros Segregator/Mixer January 1996 December 2005

• Petitioners alleged that their employment was continuous, from the date of hiring to
the date of termination. They also alleged that their tasks were “necessary and
desirable in [CCBPI’s] business or trade.”
• They alleged that CCBPI, to avoid having to regularize them, transferred them around
the following agencies:
– Lipercon Services, Inc.
– People Services, Inc.
– Interserve Management and Manpower Resources, Inc.
– Monte Dapples Trading Corporation (Latest Agency; CCBPI’s Co-Defendant/Respondent)
FACTS OF THE CASE: PETITIONERS
• Petitioners further alleged that these agencies were labor-only contractors, as
they did not own any equipment, machinery, and the work premises for
warehousing purposes.
• Instead, they alleged that it was CCBPI who actually owned the same. They also
pointed out that CCBPI’s employees were the ones who directed, controlled,
and supervised their work.
– In view of the totality of these circumstances, Petitioners argued that it should be found
that they are regular employees of CCBPI.
• Finally, Petitioners argue that there was illegal dismissal, as their termination was
without cause and without due process of law.
FACTS OF THE CASE: RESPONDENTS
• CCBPI raised the defense of lack of jurisdiction, alleging the lack of ER-EE
relationship between them and the Petitioners
• CCBPI described its activities as being “engaged in the business of
manufacturing, distributing, and marketing of softdrinks and other beverage
products.” Pursuant thereto, it entered into Warehousing Management
Agreement with MTDC , where the latter would “perform warehousing and
inventory functions” for CCBPI.
• CCBPI refuted Petitioner’s allegation that MDTC lacked capital, alleging that
the latter owned machinery and equipment, and even its own office building.
CCBPI, while admitting that MDTC assigned its employees to CCBPI’s Otis
plant, alleged that MDTC had other clients apart from CCBPI.
FACTS OF THE CASE: RESPONDENTS
• CCBPI also claimed that it only coordinated with MDTC as to the “end
results” of services provided by MDTC. CCBPI also alleged that it was MDTC
who exercised the power of discipline over the employees, including the
petitioners.
• Finally, CCBPI explained that the Warehouse Management Agreement it
entered with MDTC had expired, and no longer renewed the same.
ISSUES AND
RULING OF THE COURT
ANTECEDENT RULINGS

ER-EE Relationship Illegal Dismissal Prescription of


Between Petitioners Claims
and CCBPI
Labor Arbiter ✔ ✔ -
Altoveros: ✘; MDTC
must pay separation pay
NLRC ✘ ✘
Lingat: ✔
✘; MDTC must pay both
CA ✘ ✘ Petitioners their
separation pay
ISSUES

• W/N there was ER-EE relationship between the Petitioners and CCBPI?
– W/N there was legitimate labor contracting in this case?
• W/N there was illegal dismissal of the Petitioners?
RULING OF THE COURT
• SC: Petition is impressed with merit.
• Petitioners are regular employees of CCBPI
– Mixing and segregating, as well as loading and bringing of CCBPI’s products is
reasonably connected to the latter’s business.
– Continued employment of the Petitioners for the same activities also establishes
this relationship.
• There is no legitimate labor contracting.
– CCBPI’s hiring of MDTC for warehousing services is reasonably connected to its
business, which is not merely manufacturing, but also distribution and sale.
– Substantial capital alone is not enough. The work of the employee must also be
directly related to the work that the contractor is required to perform for the
principal. In this case, Petitioners’ work corresponds to the principal, not the
contractor.
RULING OF THE COURT
• Petitioners were illegally dismissed
– The expiration of the Warehouse Management Agreement between CCBPI and
MDTC was neither a justified nor an authorized cause for termination.
– There was also no observance of due process.
• CCBPI and MDTC jointly liable for payment of the proper benefits.
POINTS OF
INTEREST
ELEMENTS OF LABOR-ONLY
CONTRACTING
• Citing Quintanar v. Coca-Cola Bottlers, Philippines, Inc. [G.R. No. 210565, June 28, 2016],
the Court stated:
Moreover, we disagree with the CA when it heavily relied on MDTC's alleged substantial capital
in order to conclude that it was an independent labor contractor.
To note, in Quintanar v. Coca-Cola Bottlers, Philippines, Inc., the Court ruled that "the
possession of substantial capital is only one element.“ To determine whether a person or entity
is indeed a legitimate labor contractor, it is necessary to prove not only substantial
capital or investment in tools, equipment, work premises, among others, but also that the
work of the employee is directly related to the work that contractor is required to
perform for the principal. Evidently, the latter requirement is wanting in the case at bench.
(emphasis supplied)
ELEMENTS OF LABOR-ONLY
CONTRACTING
• In Quintanar, the Court, in turn cites Aliviado et al. v. Procter & Gamble Philippines, Inc. et
al. and ruled:
In this case, the appellate court considered the evidence of Interserve that it was registered
with the DOLE as independent contractor and that it had a total capitalization of
P27,509,716.32 and machineries and equipment worth P12,538859.55.62 As stated above,
however, the possession of substantial capital is only one element. Labor-only
contracting exists when any of the two elements is present. Thus, even if the Court
would indulge Coca-Cola and admit that Interserve had more than sufficient capital or
investment in the form of tools, equipment, machineries, work premises, still, it cannot be
denied that the petitioners were performing activities which were directly related to the
principal business of such employer. (emphasis supplied)
ELEMENTS OF LABOR-ONLY
CONTRACTING
• In Aliviado, it should be noted that how the Court listed the elements of labor-only
contracting
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. (emphasis supplied)
EXPIRATION OF SERVICE
AGREEMENTS
• Section 13 of D.O. 174 specifically deals with the effects of the expiration of service
agreements:
– “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 Service Agreement,
whichever is higher, without prejudice 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 termination of employment of the
contractor’s/subcontractor’s employees who are regular employees of the latter.”
(emphasis supplied)
REINSTATEMENT VS. SEPARATION
PAY: PRACTICALITY AS STANDARD
• Citing Bank of Lubao v. Manabat [G.R. 188722, February 1, 2012] the Court here
“[deemed] it more practical and [that it] would serve the best interest of parties to
award separation pay to petitioners, in lieu of reinstatement.”
• However, in Bank of Lubao, practicality as a standard was not discussed. In fact, the
Court in Bank of Lubao instead identifies 2 requirements before the doctrine of strained
relations, which authorizes the payment of separation pay in lieu of reinstatement, may
be applied:
– “In such cases, it should be proved that the employee concerned occupies a position
where he enjoys the trust and confidence of his employer; and that it is likely that if
reinstated, an atmosphere of antipathy and antagonism may be generated as to
adversely affect the efficiency and productivity of the employee concerned.”