Aliviado v. Procter & Gamble Philippines, Inc.

G.R. No. 160506, 614 SCRA 563, March 9, 2010

FACTS:

Petitioners worked as merchandisers of respondent Procter & Gamble Philippines, Inc.

(hereafter, P&G) from various dates, allegedly starting as early as 1982 or as late as June

1991, to either May 5, 1992 or March 11, 1993.

Petitioners signed employment contracts with respondent Promm-Gem, Inc. (Promm-Gem)

and Sales and Promotions Services (SAPS). They were employed for five months at time,

assigned to different stations in supermarkets.

SAPS and Promm-Gem paid petitioners’ wages and imposed disciplinary measures on

petitioners when warranted.

P&G entered into contracts with SAPS and Promm-Gem for the promotion of its products. It

appears that petitioners were assigned to promote P&G’s products.

In December 1991, petitioners filed a complaint for regularization and other money claims

against P&G. The complaint was later amended to include charges of illegal dismissal.

Labor Arbiter: Dismissed the complaint; there was no employer-employee relationship

(EER) between petitioners and P&G, as the former were employed by Promm-Gem and

SAPS.

o Applied the four-fold test for EER:

1. Selection and engagement;

2. Payment of wages;

3. Power of dismissal;

4. Power of control.

o Declared Promm-Gem and SAPS legitimate job contractors.

Petitioners appealed to the NLRC.

NLRC: Dismissed the appeal, affirmed the Labor Arbiter’s Decision. Motion for

reconsideration denied.

Petitioners sought recourse with the Court of Appeals via a petition for certiorari under

Rule 65 of the Rules of Court.

CA: Denied the petition and affirmed the NLRC’s Decision with modification.

o P&G ordered to pay service incentive leave pay to petitioners.

o Petitioners’ motion for reconsideration was denied.

Hence, this petition for review by certiorari under Rule 45 of the Rules of Court.

ISSUES + RATIO:

Whether or not contracting out of a company’s core activities is allowed under the Labor Code and its

Implementing Rules. YES.

To be sure, the Labor Code and its Implementing Rules do not prohibit job contracting. The

law allows contracting arrangements for the performance of specific jobs, works or services.

Indeed, it is management prerogative to farm out any of its activities, regardless of

whether such activity is peripheral or core in nature. However, in order for such

outsourcing to be valid, it must be made to an independent contractor because the current

labor rules expressly prohibit labor-only contracting.

Labor-only contracting exists where the “contractor” merely recruits, supplies or places

workers to perform a job, work or service for a principal. Moreover, any of the following

elements must concur:

o 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

o The contractor does not exercise the right to control over the performance of the

work of the contractual employee.

Whether or not Promm-Gem is engaged in labor-only contracting. NO; it is a legitimate job

contractor.

It has substantial capital, as shown by its financial statements.

o Authorized capital stock – P1 million.

o Paid-in capital – P500,000.

It has substantial investments in the form of warehouses, office spaces, and vehicles.

Promm-Gem has other clients aside from P&G.

Promm-Gem provided its workers with uniforms and materials. The latter were considered

regular employees.

Whether or not SAPS is engaged in labor-only contracting. YES.

It does not have substantial capital—its paid-in capital is only P31,250.

o Monthly payroll already totaled P44,561. Its contracts with P&G were for six-month

periods. Its capital is not even sufficient for one month’s payroll.

o 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.

Neither is there a showing of substantial investment in tools, equipment or other assets.

Furthermore, petitioners’ activities which consisted of merchandising and promotion of

P&G products are directly related to the manufacturing business.

Considering that SAPS has no substantial capital or investment and the workers it recruited

are performing activities which are directly related to the principal business of P&G, the

Court found that SAPS is engaged in “labor-only contracting.”

Whether or not an employer-employee relationship exists between P&G and petitioners. YES.

Where labor-only contracting exits, the law establishes an EER between the employer and

the employees of the “contractor.”

Rationale: to prevent circumvention of labor laws.

The petitioners recruited by SAPS are considered P&G employees. The petitioners who

worked under Promm-Gem are not, since the latter is a legitimate job contractor.

Whether or not petitioners (Promm-Gem employees) were illegally dismissed. YES.

Promm-Gem dismissed petitioners for “grave misconduct and breach of trust” after they

sought regularization from P&G. Promm-Gem claimed that this “assailed the integrity of the

company as a legitimate and independent promotion firm.”

To be a just cause for dismissal, misconduct (a) must be serious; (b) must relate to the

performance of the employee’s duties; and (c) must show that the employee has become

unfit to continue working for the employer.

o In the instant case, petitioners-employees of Promm-Gem may have committed an

error of judgment in claiming to be employees of P&G, but it cannot be said that they

were motivated by any wrongful intent in doing so.

o Thus, petitioners are guilty only of simple misconduct.

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the

willful breach of the trust reposed in the employee by his employer.

o The erring employee must hold a position of responsibility or of trust and

confidence. And, in order to constitute a just cause for dismissal, the act complained

of must be work-related and must show that the employee is unfit to continue to

work for the employer.

o Here, the petitioners-employees of Promm-Gem have not been shown to be

occupying positions of responsibility or of trust and confidence. Neither is there any

evidence to show that they are unfit to continue to work as merchandisers for

Promm-Gem.

Whether or not petitioners (SAPS-P&G employees) were illegally dismissed. YES.

They were not afforded procedural due process (two notice rule). They were merely

verbally informed of the termination of their services.

Petitioners were dismissed upon the initiation of P&G. When the latter did not renew its

contract with SAPS, petitioners’ services were automatically terminated evidently because

SAPS had no other clients.

Whether or not petitioners are entitled to the payment of damages, costs, and attorney’s fees. YES.

With regard to the employees of Promm-Gem, their dismissals were not attended with bad

faith so as to warrant the award of moral and exemplary damages.

As for P&G, the records show that it dismissed its employees through SAPS in a manner

oppressive to labor. The sudden and peremptory barring of the concerned petitioners from

work, and from admission to the work place, after just a one-day verbal notice, and for no

valid cause bellows oppression and utter disregard of the right to due process of the

concerned petitioners. Hence, an award of moral damages is called for.

P&G is also liable for attorney’s fees.

Finally, all petitioners having been illegally dismissed, they are entitled to reinstatement

with backwages.

DISPOSITION: Petition granted. Case remanded to Labor Arbiter for computation of backwages

and other benefits.

Aliviado v. Procter & Gamble Philippines, Inc.

(Motion to refer the case to the Supreme Court en banc)

G.R. No. 160506, 650 SCRA 400, June 6, 2011

ISSUE + RATIO:

Whether or not the Court erred in ruling that SAPS is a labor-only contractor. NO.

P&G claims that the Court should have applied the four-fold test, specifically the “control test,” in determining whether SAPS is a legitimate job contractor or a labor-only contractor.

This is incorrect. The “control test” is only one of the ways to determine the existence of labor-only contracting.

Pertinently, Department Order No. 18-02 provides:

Section 5. Prohibition against labor-only contracting. — Labor only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor 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) [T]he contractor does not exercise the right to control over the performance of the work of the

contractual employee. (Emphasis supplied)

In the case at bar, the Court already concluded that (1) SAPS merely recruited workers for

P&G, (2) it did not have substantial capital or investment, and (3) the workers performed

activities directly related to the business of the principal.

Hence, SAPS may be considered a labor-only contractor under D.O. 18-02, Sec. 5 (i).

In Coca-Cola Bottlers Phils., Inc. v. Agito, the Court ruled:

“The law clearly establishes an employer-employee relationship between the principal employer and

the contractor’s employee upon a finding that the contractor is engaged in ‘labor-only’ contracting. Article 106 of the Labor Code categorically states: ‘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 persons are performing activities which are directly related to the principal business of such employer.’ Thus, performing activities directly related to the principal business of the employer is only one of the two indicators that labor-only contracting exists; the other is lack of substantial capital or investment. The Court finds that both indicators exist in the case at bar.” (Emphasis supplied)

DISPOSITION: Judgment affirmed.

42 SCRA 578 – Labor Law – Labor Standards – Regular

Employee – Employer-employee relationship – Four Fold Test Servaña started out as a security for the Agro-Commercial Security Agency (ACSA) since 1987. The agency had a contract with TV network RPN 9.

On the other hand, Television and Production Exponents, Inc (TAPE). is a company in charge of TV programming and was handling shows like Eat Bulaga! Eat Bulaga! was then with RPN 9. In 1995, RPN 9 severed its relations with ACSA. TAPE retained the services of Servaña as a security guard and absorbed him. In 2000, TAPE contracted the services of Sun Shield Security Agency. It then notified Servaña that he is being terminated because he is now a redundant employee. Servaña then filed a case for illegal Dismissal. The Labor Arbiter ruled that Servaña’s dismissal is valid on the ground of redundancy but though he was not illegally dismissed he is still entitled to be paid a separation pay which is amounting to one month pay for every year of service which totals to

P78,000.00. TAPE appealed and argued that Servaña is not entitled to receive separation pay for he is considered as a talent and not as a regular employee; that as such, there is no employee-employer relationship between TAPE and Servaña.

The National Labor Relations Commission ruled in favor of TAPE. It ruled that Servaña is a program employee. Servaña appealed before the Court of Appeals. The Court of Appeals reversed the NLRC and affirmed the LA. The CA further ruled that TAPE and its president Tuviera should pay for nominal damages amounting to P10,000.00.

ISSUE: Whether or not there is an employee-employer relationship existing between TAPE and Servaña.

HELD: Yes. Servaña is a regular employee.

In determining Servaña’s nature of employment, the Supreme Court employed the Four Fold Test:

1. Whether or not employer conducted the selection and engagement of the employee. Servaña was selected and engaged by TAPE when he was absorbed as a “talent” in 1995. He is not really a talent, as termed by TAPE, because he performs an activity which is necessary and desirable to TAPE’s business and that is being a security guard. Further, the primary evidence of him being engaged as an employee is his employee identification card. An identification card is usually provided not just as a security measure but to mainly identify the holder thereof as a bona fide employee of the firm who issues it.

2. Whether or not there is payment of wages to the employee by the employer. Servaña is definitely receiving a fixed amount as monthly compensation. He’s receiving P6,000.00 a month.

3. Whether or not employer has the power to dismiss employee. The Memorandum of Discontinuance issued to Servaña to notify him that he is a redundant employee evidenced TAPE’s power to dismiss Servaña.

4. Whether or not the employer has the power of control over the employee. The bundy cards which showed that Servaña was required to report to work at fixed hours of the day manifested the fact that TAPE does have control over him. Otherwise, Servaña could have reported at any time during the day as he may wish. Therefore, Servaña is entitled to receive a separation pay. On the other hand, the Supreme Court ruled that Tuviera, as president of TAPE, should not be held liable for nominal damages as there was no showing he acted in bad faith in terminating Servaña. Regular Employee Defined: One having been engaged to perform an activity that is necessary and desirable to a company’s business.

ANGELINA FRANCISCO, Petitioner, versus NATIONAL LABOR RELATIONS COMMISSION, KASEI CORPORATION, SEIICHIRO TAKAHASHI, TIMOTEO ACEDO, DELFIN LIZA, IRENE BALLESTEROS, TRINIDAD LIZA and RAMON ESCUETA, Respondents., G.R. No. 170087, 2006 Aug 31.

FACTS:

1995, Petitioner was hired by Kasei Corporation during its incorporation stage. She was designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company. She was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the company.

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any board meeting nor required to do so. She never prepared any legal document and never represented the company as its Corporate Secretary. 1996, petitioner was designated Acting Manager. Petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the BIR, SSS and in the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation.

January 2001, petitioner was replaced by a certain Liza R. Fuentes as Manager. Kasei Corporation reduced her salary, she was not paid her mid-year bonus allegedly because the company was not earning well. On October 2001, petitioner did not receive her salary from the company. She made repeated follow-ups with the company cashier but she was advised that the company was not earning well. Eventually she was informed that she is no longer connected with the company.

Since she was no longer paid her salary, petitioner did not report for work and filed an action for constructive dismissal before the labor arbiter. Private respondents averred that petitioner is not an employee of Kasei Corporation. They alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary. As technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she wanted and that her services were only temporary in nature and dependent on the needs of the corporation.

The Labor Arbiter found that petitioner was illegally dismissed, NLRC affirmed with modification the Decision of the Labor Arbiter. On appeal, CA reversed the NLRC decision. CA denied petitioner’s MR, hence, the present recourse.

ISSUES:

1. WON there was an employer-employee relationship between petitioner and private respondent; and if in the affirmative,

2. Whether petitioner was illegally dismissed.

RULING:

1. Generally, courts have relied on the so-called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee relationship.

There are instances when, aside from the employer’s power to control the employee, economic realities of the employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.

It is better, therefore, to adopt a two-tiered test involving: (1) the employer’s power to control; and (2) the economic realities of the activity or relationship.

The control test means that there is an employer-employee relationship when the person for whom the services are performed reserves the right to control not only the end achieved but also the manner and means used to achieve that end.

There has to be analysis of the totality of economic circumstances of the worker. Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity, such as: (1) the extent to which the services performed are an integral part of the employer’s business; (2) the extent of the worker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree of dependency of the worker upon the employer for his continued employment in that line of business. The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in that line of business

By applying the control test, it can be said that petitioner is an employee of Kasei Corporation because she was under the direct control and supervision of Seiji Kamura, the corporation’s Technical Consultant. She reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant,

Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of engagement. Respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished.

Under the economic reality test, the petitioner can also be said to be an employee of respondent corporation because she had served the company for 6 yrs. before her dismissal, receiving check vouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from. When petitioner was designated General Manager, respondent corporation made a report to the SSS. Petitioner’s membership in the SSS evinces the existence of an employer-employee relationship between petitioner and respondent corporation. The coverage of Social Security Law is predicated on the existence of an employer-employee relationship.

2. The corporation constructively dismissed petitioner when it reduced her. This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal. Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued employment becomes impossible, unreasonable or unlikely; when there is a demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee. Petition is GRANTED.

CHAVEZ VS. NLRC

448 SCRA 478. January 17, 2005

FACTS

The respondent company, Supreme Packaging, Inc. engaged the services of the petitioner, Pedro Chavez, as truck driver. The respondent company furnished the petitioner with a truck. The petitioner expressed to respondent Alvin Lee, respondent company’s plant manager, his desire to avail himself of the benefits that the regular employees were receiving such as overtime pay, nightshift differential pay, and 13th month pay, among others. Although he promised to extend these benefits to the petitioner, respondent Lee failed to actually do so. Petitioner filed a complaint for regularization with the Regional Arbitration Branch. Before the case could be heard, respondent company terminated the services of the petitioner. Consequently, the petitioner filed an amended complaint against the respondents for illegal dismissal, unfair labor practice and non-payment of overtime pay, nightshift differential pay, and 13th month pay, among others. The respondents, for their part, denied the existence of an employer-employee relationship between the respondent company and the petitioner. They averred that the petitioner was an independent contractor as evidenced by the contract of service which he and the respondent company entered into. The relationship of the respondent company and the petitioner was allegedly governed by this contract of service.

The respondents insisted that the petitioner had the sole control over the means and methods by which his work was accomplished. He paid the wages of his helpers and exercised control over them. As such, the petitioner was not entitled to regularization because he was not an employee of the respondent company. The respondents, likewise, maintained that they did not dismiss the petitioner. Rather, the severance of his contractual relation with the

respondent company was due to his violation of the terms and conditions of their contract.

ISSUE:

whether or not there existed an employer-employee relationship between the respondent company and the petitioner.

RULING:

Yes. There was an employer-employee relationship in the case at bar.

The elements to determine the existence of an employment relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the employer’s power to control the employee’s conduct. All the four elements are present in this case.

Of the four elements of the employer-employee relationship, the “control test” is the most important. Although the respondents denied that they exercised control over the manner and methods by which the petitioner accomplished his work, a careful review of the records shows that the latter performed his work as truck driver under the respondents’ supervision and control. Their right of control was manifested by the following attendant circumstances:

1. The truck driven by the petitioner belonged to respondent company;

2. There was an express instruction from the respondents that the truck shall be used exclusively to deliver respondent company’s goods;

3. Respondents directed the petitioner, after completion of each delivery, to park the truck in either of two specific places only, to wit: at its office in Metro Manila at 2320 Osmeña Street, Makati City or at BEPZ, Mariveles, Bataan; and

4. Respondents determined how, where and when the petitioner would perform his task by issuing to him gate passes and routing slips.

These circumstances, to the Court’s mind, prove that the respondents exercised control over the means and methods by which the petitioner accomplished his work as truck driver of the respondent company. The contract of service indubitably established the existence of an employer-employee relationship between the respondent company and the petitioner. It bears stressing that the existence of an employer-employee relationship cannot be negated by expressly repudiating it in a contract and providing therein that the employee is an independent contractor when, as in this case, the facts clearly show otherwise. Indeed, the employment status of a person is defined and prescribed by law and not by what the parties say it should be.

PERPETUAL HELP CREDIT COOPERATIVE, INC. (PHCCI) V. FABURADA

October 8, 2001

By: Aurea I. Gruyal

FACTS:

1 Private respondents Faburada et. al. filed a complaint

against PHCCI for illegal dismissal, premium pay, separation pay, wage differential, moral damages and attorney’s fees.

2 PHCCI filed a motion to dismiss on the ground that noemployeremployee relationship exists since privaterespondents are all members and coowners of thecooperative. Also, private respondents have not exhausted the remedies provided in the coop by laws. PHCCI also filed a supplemental motion to dismiss

alledging that RA 6939, the Cooperative Development Authority Law, requires conciliation or mediation within the cooperative before a resort to judicial proceeding.

3.The Labor Arbiter ruled in favor of the private respondents, holding that the case is impressed with employer-employee relationship and that the laws on cooperatives is subservient to the Labor

Code. The NLRC affirmed.

ISSUE: WON there is an employer-employee relationship between the parties and WON private respondents were regular employees

HELD: YES.

RATIO:

Elements in determining existence of employer-employee relationship:

1) Selection and engagement of the worker or the power to hire

2) The power to dismiss

3) Payment of wages by whatever means

4) Power to control the worker’s conduct The above elements are present here. PHCCI through its Manager Mr. Edilberto Lantaca, Jr. hired respondents as Computer programmer and clerks. They worked regular working hours, were assigned specific duties, were paid regular wages, and made to accomplish regular time records, and worked under the supervision of the manager.

Art. 280, Labor Code comprehends 3 kinds of employees:

1)REGULAR EMPLOYEES or those whose work is necessary or desirable to the usual business of the employer

2)PROJECT EMPLOYEES or those whoseemployment has been fixed for a specificproject or undertaking the completion ortermination of which has been determined at the time of the engagement

of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season

3)CASUAL EMPLOYEES or those who are neither regular nor project employees There are 2 separate instances whereby it can be determined that an employment is regular:

1)If the particular activity performed by the employee is necessary or desirable in the usual business or trade of the employer

2)If the employee has been performing the job for at least a year Private respondents were rendering services necessary to the day-to-day operations of

PHCCI. This alone qualified them as regular employees. Moreover, all of them except one worked with PHCCI for more than 1 year.

That Faburada worked only on a part-time basis does not mean that he is not a regular employee .Regularity of employment is not determined by the number of hours one works but by the nature and length of time one has been in that particular job.

Lakas sa Industriya ng Kapatirang Haligi ng AlyansaPinagbuklad

ng Promo ng Burlingame (LIKHA-PMPB) v.

Burlingame Corporation

Facts:

LIKHA-PMPB filed a petition for certification election before the DOLE which they sought to represent the rankand-file promo employees of Burlingame Corporation. They prayed to be recognized to the CBA agent or in alternative a certification consent election be held among the rank-and-file promo employees. Respondents filed a motion to dismiss and averred that there is no employeremployee relationship between it and the petitioner’s

members. They further alleged that the petitioners are

employees of F. Garil Manpower Services (F. Garil) which

they presented a copy of its contract for manpower

services with F. Garil. Med-Arbiter Parungo dismissed the

petition for the lack of employer-employee relationship.

The petitioners filed the appeal to the secretary of Labor

which ordered the immediate conduct of a certification of

election. A motion for reconsideration was filed by the

respondent but was denied. The respondent filed another

complaint before the CA which reversed the decision of

the Secretary. The petitioners filed a motion for

reconsideration but CA denied and hence this petition.

Issue: Whether or not there is employer-employee

relationship between the petitioners and Burlingame Co.?

W/N F. Garil is an independent contractor or a labor-only

contractor?

Held:

Yes

The “four fold test” will show that respondent is the

employer of the petitioner members. The elements to determine existence of employment relationship: a. the selection and engagement of the employees; b. the payment of wages; c. the power of dismissal; and the employer’s power to control the employee’s conduct. The most important is the control of the employer’s control of the employee’s conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it.

The contractual stipulations between Burlington and F. Garil shows that “any personnel found to be inefficient, troublesome, uncooperative, and not observing the rules and regulations set forth by Burlingame shall be reported to F. Garil and may be replaced upon request.” This circumstance shows that Burlingame has control andsupervision over workers supplied by F. Garil. There is also an implied provision on the replacement of personnel carried upon the request by Burlingame is the power to fire personnel. F. Garil is not an independent contractor since it did not carry a distinct business free from the control and supervision of Burlingame. The contractual stipulation of between Burlingame and personnel provided by F. Garil on the nonexistence of employer-employee relationship has no legal effect because it is contrary to law, morals, good customs, public order or public policy. F.Garil was engage only in laboronly contracting and considered merely as an agent of Burlingame.

Decision: Challenged decision of CA and Resolution is reversed and set aside.The decision of Secretary of Labor is reinstated.

RUGA V. NLRC

FACTS:

Petitioners were the fishermen-crew members of 7/B Sandyman II, one of several fishing vessels owned and operated by private respondent De Guzman Fishing Enterprises which is primarily engaged in the fishing business with port and office at Camaligan, Camarines Sur. Petitioners rendered service aboard said fishing vessel in various capacities, as follows: Alipio Ruga and Jose Parma

patron/pilot; Eladio Calderon, chief engineer; Laurente Bautu, second engineer; Jaime Barbin, master fisherman; Nicanor Francisco, second fisherman; Philip Cervantes and Eleuterio Barbin, fishermen.

For services rendered in the conduct of private respondent's regular business of "trawl" fishing, petitioners were paid on percentage commission basis in cash by one Mrs. Pilar de Guzman, cashier of private respondent. As agreed upon, they received thirteen percent (13%) of the proceeds of the sale of the fish-catch if the total proceeds exceeded the cost of crude oil consumed during the fishing trip, otherwise, they received ten percent (10%) of the total proceeds of the sale. The patron/pilot, chief engineer and master fisherman received a minimum income of P350.00 per week while the assistant engineer, second fisherman, and fisherman-winchman received a minimum income of P260.00 per week.

On September 11, 1983 upon arrival at the fishing port, petitioners were told by Jorge de Guzman, president of private respondent, to proceed to the police station at Camaligan, Camarines Sur, for investigation on the report that they sold some of their fish-catch at midsea to the prejudice of private respondent. Petitioners denied the charge claiming that the same was a countermove to their having formed a labor union and becoming members of Defender of Industrial Agricultural Labor Organizations and General Workers Union (DIALOGWU) on September 3, 1983.

During the investigation, no witnesses were presented to prove the charge against petitioners, and no criminal charges were formally filed against them.

Notwithstanding, private respondent refused to allow petitioners to return to the fishing vessel to resume their work on the same day, September 11, 1983.

On September 22, 1983, petitioners individually filed their complaints for illegal dismissal and non-

payment of 13th month pay, emergency cost of living allowance and service incentive pay, with the then Ministry (now Department) of Labor and Employment, Regional Arbitration Branch No. V, Legaspi City, Albay. They uniformly contended that they were arbitrarily dismissed without being given ample time to look for a new job.

ISSUE/S:

Whether or not the fishermen-crew members of the trawl fishing vessel 7/B Sandyman II are employees of its owner-operator, De Guzman Fishing Enterprises, and if so, whether or not they were illegally dismissed from their employment.

HELD:

YES

We have consistently ruled that in determining the existence of an employer-employee relationship, the elements that are generally considered are the following (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished. The employment relation arises from contract of hire, express or implied. In the absence of hiring, no actual employer-employee relation could exist.

From the four (4) elements mentioned, We have generally relied on the so-called right-of-control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end. The test calls merely for the existence of the right to control the manner of doing the work, not the actual exercise of the right.

The case of Pajarillo vs. SSS, supra, invoked by the public respondent as authority for the ruling that a “joint fishing venture” existed between private respondent and petitioners is not applicable in the instant case. There is neither right of control nor actual exercise of such right on the part of the boat-owners in the Pajarillo case, where the Court found

that the pilots therein are not under the orders of the boat-owners as regards their employment; that they go out to sea not upon directions of the boat-owners, but upon their own volition as to when, how long and where to go fishing; that the boat-owners do not in any way control the crew-members with whom the former have no relationship whatsoever; that they simply join every trip for which the pilots allow them, without any reference to the owners of the vessel; and that they only share in their own catch produced by their own efforts.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The questioned resolution of the National Labor Relations Commission dated May 30, 1985 is hereby REVERSED and SET ASIDE. Private respondent is ordered to reinstate petitioners to their former positions or any equivalent positions with 3-year backwages and other monetary benefits under the law. No pronouncement as to costs.

SAN MIGUEL CORPORATION v. PROSPERO ABALLA

G.R. No. 149011 June 28, 2005

Ponente: CARPIO-MORALES, J.:

FACTS: Petitioner San Miguel Corporation (SMC) and Sunflower Multi-Purpose Cooperative (Sunflower) entered into a one-year Contract of Service and such contract is renewed on a monthly basis until terminated. Pursuant to this, respondent Prospero Aballa rendered services to SMC.

After one year of service, Aballa filed a complaint before NLRC praying that they be declared as regular employees of SMC. On the other hand, SMC filed before the DOLE a Notice of Closure due to serious business losses. Hence, the labor arbiter dismissed the complaint and ruled in favor of SMC. Aballa then appealed before the NLRC. The NLRC dismissed the appeal finding that Sunflower is an independent contractor.

On appeal, the Court of Appeals reversed NLRC·s decision on the ground that the agreement between SMC and Sunflower showed a clear intent to abstain

from establishing an employer-employee relationship.

ISSUE: Whether or not Aballa and other employees of Sunflower are employees of SMC?

HELD: The test to determine the existence 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 legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, to ensure that the employees are paid their wages. The principal 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 principal employer is not responsible for any claim made by the employees. 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 Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee relationship between SMC and private respondents. The language of a contract is not, however, determinative of the parties· relationship; rather it is the totality of the facts and surrounding circumstances of the case. A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, whether as labor-only contractor or job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute. What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises and other materials to qualify it as an independent contractor.

On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by Aballa et al. in carrying out their tasks were owned and provided by SMC.

And from the job description provided by SMC itself, the work assigned to Aballa et al. was directly related to the aquaculture operations of SMC. As for janitorial and messengerial services, that they are considered directly related to the principal business of the employer has been jurisprudentially recognized. Furthermore, Sunflower 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, SMC, its apparent role having been merely to recruit persons to work for SMC.

All the foregoing considerations affirm by more than substantial evidence the existence of an employer- employee relationship between SMC and Aballa. Since Aballa who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture business of SMC, they should be deemed regular employees of the latter and as such are entitled to all the benefits and rights appurtenant to regular employment. They should thus be awarded differential pay corresponding to the difference between the wages and benefits given them and those accorded SMC·s other regular employees.

EPARWA SECURITY AND JANITORIAL SERVICES VS LICEO DE CAGAYAN UNIVERSITY

CARPIO,

FACTS:

On 1 December 1997, Eparwa and LDCU, through their representatives, entered into a Contract for Security Services which states that LCDU undertakes to pay P5,000 per guard, in consideration of their services.

On 21 December 1998, 11 security guards whom Eparwa assigned to LDCU filed a complaint before the NLRC against both Eparwa and LDCU for underpayment of salary, legal holiday pay, 13th month pay, rest day, service incentive leave, night shift differential, overtime pay, and payment for attorney’s fees.

LDCU made a cross-claim and prayed that Eparwa should reimburse LDCU for any payment to the security guards.

LA found that the security guards are entitled to wage differentials and premium for holiday and rest day work. The Labor Arbiter also held Eparwa and LDCU solidarily liable pursuant to Article 109 of the Labor Code.

The NLRC held Eparwa and LDCU solidarily liable for the wage differentials and premium for holiday and rest day work but did not require Eparwa to reimburse LDCU for its payments to the security guards. Upon an MR, the NLRC declared that although Eparwa and LDCU are solidarily liable to the security guards for the monetary award, LDCU alone is ultimately liable.

The CA reinstated the Labor Arbiter’s decision. The appellate court also allowed LDCU to claim reimbursement from Eparwa.

ISSUE:

Is LDCU alone ultimately liable to the security guards for the wage differentials and premium for holiday and rest day pay? - YES

HELD:

This Court’s ruling in Eagle Security Agency, Inc. v. NLRC[12] squarely applies to the present case. In Eagle, we ruled that

This joint and several liability of the contractor and the principal is mandated by the Labor Code to assure compliance of the provisions therein including the statutory minimum wage. The contractor is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractor’s employees for purposes of paying the employees their wages should the contractor be unable to pay them.

In the case at bar, it is beyond dispute that the security guards are the employees of EAGLE. That they were assigned to guard the premises of PTSI pursuant to the latter’s contract with EAGLE and that neither of these two entities paid their wage and allowance increases under the subject wage orders are also admitted.

The solidary liability of PTSI and EAGLE, however, does not preclude the right of reimbursement from his co-debtor by the one who paid. It is with respect to this right of reimbursement that petitioners can find support in the aforecited contractual stipulation and Wage Order provision.

The Wage Orders are explicit that payment of the increases are “to be borne” by the principal or client. “To be borne”, however, does not mean that the principal, PTSI in this case, would directly pay the security guards the wage and allowance increases because there is no privity of contract between them. The security guards’ contractual relationship is with their immediate employer, EAGLE. As an employer, EAGLE is tasked, among others, with the payment of their wages.

On the other hand, there existed a contractual agreement between PTSI and EAGLE wherein the former availed of the security services provided by

the latter. In return, the security agency collects from its client payment for its security services. This payment covers the wages for the security guards and also expenses for their supervision and training, the guards’ bonds, firearms with ammunitions, uniforms and other equipments, accessories, tools, materials and supplies necessary for the maintenance of a security force.

Premises considered, the security guards’ immediate recourse for the payment of the increases is with their direct employer, EAGLE. However, in order for the security agency to comply with the new wage and allowance rates it has to pay the security guards, the Wage Orders made specific provision to amend existing contracts for security services by allowing the adjustment of the consideration paid by the principal to the security agency concerned. What the Wage Orders require, therefore, is the amendment of the contract as to the consideration to cover the service contractor’s payment of the increases mandated. In the end, therefore, ultimate liability for the payment of the increases rests with the principal.

In view of the foregoing, the security guards should claim the amount of the increases from EAGLE. Under the Labor Code, in case the agency fails to pay them the amounts claimed, PTSI should be held solidarily liable with EAGLE. Should EAGLE pay, it can claim an adjustment from PTSI for an increase in consideration to cover the increases payable to the security guards.

However, in the instant case, the contract for security services had already expired without being amended consonant with the Wage Orders. It is also apparent from a reading of a record that EAGLE does not now demand from PTSI any adjustment in the contract price and its main concern is freeing itself from liability. Given these peculiar circumstances, if PTSI pays the security guards, it cannot claim reimbursement from EAGLE. But in case it is EAGLE that pays them, the latter can claim reimbursement from PTSI in lieu of an adjustment, considering that the contract had expired and had not been renewed.

For the security guards, the actual source of the payment of their wage differentials and premium for holiday and rest day work does not matter as long as they are paid. This is the import of Eparwa and LDCU’s solidary liability. Creditors, such as the security guards, may collect from anyone of the solidary debtors. Solidary liability does not mean that, as between themselves, two solidary debtors are liable for only half of the payment.

LDCU’s ultimate liability comes into play because of the expiration of the Contract for Security Services. There is no privity of contract between the security guards and LDCU, but LDCU’s liability to the security guards remains because of Articles 106, 107 and 109 of the Labor Code. Eparwa is already precluded from asking LDCU for an adjustment in the contract price because of the expiration of the contract, but Eparwa’s liability to the security guards remains because of their employer-employee relationship. In lieu of an adjustment in the contract price, Eparwa may claim reimbursement from LDCU for any payment it may make to the security guards. However, LDCU cannot claim any reimbursement from Eparwa for any payment it may make to the security guards.

COCA COLA BOTTLERS PHILS., INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and RAMON B. CANONICATO, respondents.

D E C I S I O N

BELLOSILLO, J.:

This petition for certiorari under Rule 65 of the Revised Rules of Court assails the 3 January 1995 decision[1] of the National Labor Relations Commission (NLRC) holding that private respondent Ramon B. Canonicato is a regular employee of petitioner Coca Cola Bottlers Phils. Inc. (COCA COLA) entitled to reinstatement and back wages. The NLRC reversed the decision of the Labor Arbiter of 28 April 1994[2] which declared that no employer-employee relationship existed between COCA COLA and

Canonicato thereby foreclosing entitlement to reinstatement and back wages.

On 7 April 1986 COCA COLA entered into a contract of janitorial services with Bacolod Janitorial Services (BJS) stipulating[3] among others -

That the First Party (COCA COLA) desires to engage the services of the Second Party (BJS), as an Independent Contractor, to perform and provide for the maintenance, sanitation and cleaning services for the areas hereinbelow mentioned, all located within the aforesaid building of the First Party x x x x

1. The scope of work of the Second Party includes all floors, walls, doors, vertical and horizontal areas, ceiling, all windows, glass surfaces, partitions, furniture, fixtures and other interiors within the aforestated covered areas.

2. Except holidays which are rest days, the Second Party will undertake daily the following: 1) Sweeping, damp-mopping, spot scrubbing and polishing of floors; 2) Cleaning, sanitizing and disinfecting agents to be used on commodes, urinals and washbasins, water spots on chrome and other fixtures to be checked; 3) Cleaning of glass surfaces, windows and glass partitions that require daily attention; 4) Cleaning and dusting of horizontal and vertical surfaces; 5) Cleaning of fixtures, counters, panels and sills; 6) Clean, pick-up cigarette butts from sandburns and ashtrays and trash receptacles; 7) Trash and rubbish disposal and burning.

In addition, the Second Party will also do the following once a week, to wit: 1) Cleaning, waxing and polishing of lobbies and offices; 2) Washing of windows, glasses that require cleaning; 3) Thorough disinfecting and cleaning of toilets and washrooms.

3. The Second Party shall supply the necessary utensils, equipment and supervision, and it shall only employ the services of fifteen (15) honest, reliable, carefully screened, cooperative and trained personnel, who are in good faith, in the performance of its herein undertaking x x x x

4. The Second Party hereby guarantees against unsatisfactory workmanship. Minor repair of comfort rooms are free of charge provided the First Party will supply the necessary materials for such repairs at its expense. As may be necessary, the Second Party shall also report on such part or areas of the premises covered by this contract which may require repairs from time to time x x x (italics supplied).

Every year thereafter a service contract was entered into between the parties under similar terms and conditions until about May 1994.[4]

On 26 October 1989 COCA COLA hired private respondent Ramon Canonicato as a casual employee and assigned him to the bottling crew as a substitute for absent employees. In April 1990 COCA COLA terminated Canonicato's casual employment. Later that year COCA COLA availed of Canonicato's services, this time as a painter in contractual projects which lasted from fifteen (15) to thirty (30) days.[5]

On 1 April 1991 Canonicato was hired as a janitor by BJS[6] which assigned him to COCA COLA considering his familiarity with its premises. On 5 and 7 March 1992 Canonicato started painting the facilities of COCA COLA and continued doing so several months thereafter or so for a few days every time until 6 to 25 June 1993.[7]

Goaded by information that COCA COLA employed previous BJS employees who filed a complaint against the company for regularization pursuant to a compromise agreement,[8] Canonicato submitted a similar complaint against COCA COLA to the Labor Arbiter on 8 June 1993.[9] The complaint was docketed as RAB Case No. 06-06-10337-93.

Without notifying BJS, Canonicato no longer reported to his COCA COLA assignment starting 29 June 1993. On 15 July 1993 he sent his sister Rowena to collect his salary from BJS.[10] BJS released his salary but advised Rowena to tell Canonicato to report for work. Claiming that he was barred from entering the premises of COCA COLA on either 14 or 15 July 1993, Canonicato met with the proprietress of BJS, Gloria Lacson, who offered him assignments in other firms which he however refused.[11]

On 23 July 1993 Canonicato amended his complaint against COCA COLA by citing instead as grounds therefor illegal dismissal and underpayment of wages. He included BJS therein as a co-respondent.[12] On 28 September 1993 BJS sent him a letter advising him to report for work within three (3) days from receipt, otherwise, he would be considered to have abandoned his job.[13]

On 28 April 1994 the Labor Arbiter ruled that: (a) there was no employer-employee relationship between COCA COLA and Ramon Canonicato because BJS was Canonicato's real employer; (b) BJS was a legitimate job contractor, hence, any liability of COCA COLA as to Canonicato's salary or wage differentials was solidary with BJS in accordance with pars. 1 and 2 of Art. 106, Labor Code; (c) COCA COLA and BJS must jointly and severally pay Canonicato his wage differentials amounting to P2,776.80 and his 13th month salary of P1,068.00, including ten (10%) percent attorney's fees in the sum of P384.48. The Labor Arbiter also ordered that all other claims by Canonicato against COCA COLA be dismissed for lack

of employer-employee relationship; that the complaint for illegal dismissal as well as all the other claims be likewise dismissed for lack of merit; and that COCA COLA and BJS deposit P4,429.28 with the Department of Labor Regional Arbitration Branch Office within ten (10) days from receipt of the decision.[14]

The NLRC rejected on appeal the decision of the Labor Arbiter on the ground that the janitorial services of Canonicato were found to be necessary or desirable in the usual business or trade of COCA COLA. The NLRC accepted Canonicato's proposition that his work with the BJS was the same as what he did while still a casual employee of COCA COLA. In so holding the NLRC applied Art. 280 of the Labor Code and declared that Canonicato was a regular employee of COCA COLA and entitled to reinstatement and payment of P18,105.10 in back wages.[15]

On 26 May 1995 the NLRC denied COCA COLA's motion for reconsideration for lack of merit.[16] Hence, this petition, assigning as errors: (a) NLRC's finding that janitorial services were necessary and desirable in COCA COLA's trade and business; (b) NLRC's application of Art. 280 of the Labor Code in resolving the issue of whether an employment relationship existed between the parties; (c) NLRC's ruling that there was an employer-employee relationship between petitioner and Canonicato despite its virtual affirmance that BJS was a legitimate job contractor; (d) NLRC's declaration that Canonicato was a regular employee of petitioner although he had rendered the company only five (5) months of casual employment; and, (e) NLRC's order directing the reinstatement of Canonicato and the payment to him of six (6) months back wages.[17]

We find good cause to sustain petitioner. Findings of fact of administrative offices are generally accorded respect by us and no longer reviewed for the reason

that such factual findings are considered to be within their field of expertise. Exception however is made, as in this case, when the NLRC and the Labor Arbiter made contradictory findings.

We perceive at the outset the disposition of the NLRC that janitorial services are necessary and desirable to the trade or business of petitioner COCA COLA. But this is inconsistent with our pronouncement in Kimberly Independent Labor Union v. Drilon[18] where the Court took judicial notice of the practice adopted in several government and private institutions and industries of hiring janitorial services on an "independent contractor basis." In this respect, although janitorial services may be considered directly related to the principal business of an employer, as with every business, we deemed them unnecessary in the conduct of the employer's principal business.[19]

This judicial notice, of course, rests on the assumption that the independent contractor is a legitimate job contractor so that there can be no doubt as to the existence of an employer-employee relationship between contractor and the worker. In this situation, the only pertinent question that may arise will no longer deal with whether there exists an employment bond but whether the employee may be considered regular or casual as to deserve the application of Art. 280 of the Labor Code.

It is an altogether different matter when the very existence of an employment relationship is in question. This was the issue generated by Canonicato's application for regularization of his employment with COCA COLA and the subsequent denial by the latter of an employer-employee relationship with the applicant. It was error therefore for the NLRC to apply Art. 280 of the Labor Code in determining the existence of an employment relationship of the parties herein,

especially in light of our explicit holding in Singer Sewing Machine Company v. Drilon[20] that -

x x x x [t]he definition that regular employees are those who perform activities which are desirable and necessary for the business of the employer is not determinative in this case. Any agreement may provide that one party shall render services for and in behalf of another for a consideration (no matter how necessary for the latter's business) even without being hired as an employee. This is precisely true in the case of an independent contractorship as well as in an agency agreement. The Court agrees with the petitioner's argument that Article 280 is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure. Article 280 does not apply where the existence of an employment relationship is in dispute.

In determining the existence of an employer-employee relationship it is necessary to determine whether the following factors are present: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power to dismiss; and, (d) the power to control the employee's conduct.[21] Notably, these are all found in the relationship between BJS and Canonicato and not between Canonicato and petitioner COCA COLA. As the Solicitor-General manifested[22]-

In the instant case, the selection and engagement of the janitors for petitioner were done by BJS. The application form and letter submitted by private respondent (Canonicato) to BJS show that he acknowledged the fact that it was BJS who did the hiring and not petitioner x x x x

BJS paid the wages of private respondent, as evidenced by the fact that on July 15, 1993, private respondent sent his sister to BJS with a note authorizing her to receive his pay.

Power of dismissal is also exercised by BJS and not petitioner. BJS is the one that assigns the janitors to its clients and transfers them when it sees fit. Since BJS is the one who engages their services, then it only follows that it also has the power to dismiss them when justified under the circumstances.

Lastly, BJS has the power to control the conduct of the janitors. The supervisors of petitioner, being interested in the result of the work of the janitors, also gives suggestions as to the performance of the janitors, but this does not mean that BJS has no control over them. The interest of petitioner is only with respect to the result of their work. On the other hand, BJS oversees the totality of their performance.

The power of the employer to control the work of the employee is said to be the most the most significant determinant. Canonicato disputed this power of BJS over him by asserting that his employment with COCA COLA was not interrupted by his application with BJS since his duties before and after he applied for regularization were the same, involving as they did, working in the maintenance department and doing painting tasks within its facilities. Canonicato cited the Labor Utilization Reports of COCA COLA showing his painting assignments. These reports, however, are not expressive of the true nature of the relationship between Canonicato and COCA COLA; neither do they detract from the fact that BJS exercised real authority over Canonicato as its employee.

Moreover, a closer scrutiny of the reports reveals that the painting jobs were performed by Canonicato sporadically, either in a few days within a month and only for a few months in a year.[23] This infrequency or irregularity of assignments countervails Canonicatos submission that he was assigned specifically to undertake the task of painting the whole year round. If anything, it hews closely to the assertion of BJS that it assigned Canonicato to these

jobs to maintain and sanitize the premises of petitioner COCA COLA pursuant to its contract of services with the company.[24]

It is clear from these established circumstances that NLRC should have recognized BJS as the employer of Canonicato and not COCA COLA. This is demanded by the fact that it did not disturb, and therefore it upheld, the finding of the Labor Arbiter that BJS was truly a legitimate job-contractor and could by itself hire its own employees. The Commission could not have reached any other legitimate conclusion considering that BJS satisfied all the requirements of a job-contractor under the law, namely, (a) the ability to carry on an independent business and undertake the contract work on its own account under its own responsibility according to its manner and method, free from the control and direction of its principal or client in all matters connected with the performance of the work except as to the results thereof; and, (b) the substantial capital or investment in the form of tools, equipment, machinery, work premises, and other materials which are necessary in the conduct of its business.[25]

It is to be noted that COCA COLA is not the only client of BJS which has its roster of clients like San Miguel Corporation, Distileria Bago Incorporated, University of Negros Occidental-Recolletos, University of St. La Salle, Riverside College, College Assurance Plan Phil., Inc., and Negros Consolidated Farmers Association, Inc.[26] This is proof enough that BJS has the capability to carry on its business of janitorial services with big establishments aside from petitioner and has sufficient capital or materials necessary therefor.[27] All told, there being no employer-employee relationship between Canonicato and COCA COLA, the latter cannot be validly ordered to reinstate the former and pay him back wages.

WHEREFORE, the petition is GRANTED. The NLRC decision of 3 January 1995 declaring Ramon B. Canonicato a regular employee of petitioner Coca Cola Bottlers Phils., Inc., entitled to reinstatement and back wages is REVERSED and SET ASIDE. The

decision of the Labor Arbiter of 28 April 1994 finding no employer-employee relationship between petitioner and private respondent but directing petitioner Coca Cola Bottlers Phils., Inc., instead and Bacolod Janitorial Services to pay jointly and severally Ramon B. Canonicato P2,776.80 as wage differentials, P1,068.00 as 13th month pay and P384.48 as attorney's fees, is REINSTATED.

SO ORDERED.

San Miguel vs NLRC (2006) G.R. 147566

Facts:

On 16 October 1990, Rafael M. Maliksi filed a complaint against the San Miguel Corporation-Magnolia Division, herein referred to as SMC and Philippine Software Services and Education Center herein referred to as PHILSSEC to compel the said respondents to recognize him as a regular employee. He amended the complaint on 12 November 1990 to include the charge of illegal dismissal because his services were terminated on 31 October 1990.

The complainant's employment record indicates that he rendered service with Lipercon Services from 1 April 1981 to February 1982 as budget head assigned to SMC-Beer Division, then from July 1983 to April 1985 with Skillpower, Inc., as accounting clerk assigned to SMC-Magnolia Division, then from October 1988 to 1989 also with Skillpower, Inc. as acting clerk assigned to SMC-Magnolia Finance, and from October 1989 to 31 October 1990 with PHILSSEC assigned to Magnolia Finance as accounting clerk. The complainant considered himself as an employee of SMC-Magnolia. Lipercon Services, Skillpower, Inc. and PHILSSEC are labor-only contractors and any one of which had never been his employer. His dismissal, according to him, was in retaliation for his filing of the complaint for regularization in service. His dismissal was illegal there being no just cause for the action. He was not accorded due process neither was his dismissal reported to the Department of Labor and Employment.

PHILSSEC disclaimed liability. As an entity catering (sic) computer systems and program for business enterprises, it has contracted with SMC-Magnolia to computerize the latter's manual accounting reporting systems of its provincial sales. PHILSSEC then conducted a three phase analysis of SMC-Magnolia set up: first the computer needs of the firm was (sic) determined; then, the development of computer systems or program suitable; and, finally, set up the systems and train the employees to operate the same. In all these phases, PHILSSEC uses its computer system and technology and provided the necessary manpower to compliment the transfer of the technology to SMC-Magnolia. Complainant Maliksi was one of those employed by PHILSSEC whose principal function was the manual control of data needed during the computerization. Like all assigned to the project, the complainant's work was controlled by PHILSSEC supervisors, his salary paid by the agency and he reported directly to PHILSSEC. The computerization