Republic
of the
Supreme
Court
SECOND DIVISION
|
EMMANUEL BABAS, DANILO T.
BANAG, ARTURO V. VILLARIN, SR., EDWIN JAVIER, SANDI BERMEO, REX ALLESA, MAXIMO
SORIANO, JR., ARSENIO ESTORQUE, and FELIXBERTO ANAJAO, Petitioners, - versus - LORENZO SHIPPING
CORPORATION, Respondent. |
G.R.
No. 186091
Present: CARPIO, J.
Chairperson, NACHURA, PERALTA, MENDOZA, JJ. Promulgated: December
15, 2010 |
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Petitioners Emmanuel Babas, Danilo T. Banag, Arturo V.
Villarin, Sr., Edwin Javier, Sandi Bermeo, Rex Allesa, Maximo Soriano, Jr.,
Arsenio Estorque, and Felixberto Anajao appeal by certiorari under
Rule 45 of the Rules of Court the October 10, 2008 Decision[1] of
the Court of Appeals (CA) in CA-G.R. SP. No. 103804, and the January 21, 2009
Resolution,[2] denying
its reconsideration.
Respondent
Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation
engaged in the shipping industry; it owns several equipment necessary for its
business. On September 29, 1997, LSC entered into a General Equipment Maintenance Repair and Management Services Agreement[3] (Agreement) with Best Manpower Services,
Inc. (BMSI). Under the Agreement, BMSI undertook to provide
maintenance and repair services to LSC’s container vans, heavy equipment,
trailer chassis, and generator sets.
BMSI further undertook to provide checkers to inspect all containers
received for loading to and/or unloading from its vessels.
Simultaneous
with the execution of the Agreement,
LSC leased its equipment, tools, and tractors to BMSI.[4] The period of lease was coterminous with the Agreement.
BMSI
then hired petitioners on various dates to work at LSC as checkers, welders,
utility men, clerks, forklift operators, motor pool and machine shop workers,
technicians, trailer drivers, and mechanics. Six
years later, or on May 1, 2003, LSC entered into another contract with BMSI,
this time, a service contract.[5]
In September 2003, petitioners filed
with the Labor Arbiter (LA) a complaint for regularization against LSC and BMSI. On October 1, 2003, LSC terminated the Agreement, effective October 31, 2003. Consequently, petitioners lost their
employment.
BMSI asserted that it is an
independent contractor. It averred that
it was willing to regularize petitioners; however, some of them lacked the
requisite qualifications for the job.
BMSI was willing to reassign petitioners who were willing to accept
reassignment. BMSI denied petitioners’
claim for underpayment of wages and non-payment of 13th month pay
and other benefits.
LSC,
on the other hand, averred that petitioners were employees of BMSI and were
assigned to LSC by virtue of the Agreement. BMSI is an independent job contractor with
substantial capital or investment in the form of tools, equipment, and
machinery necessary in the conduct of its business. The Agreement between LSC and BMSI constituted legitimate job contracting. Thus, petitioners were employees of BMSI and
not of LSC.
After
due proceedings, the LA rendered a decision[6] dismissing
petitioners’ complaint. The LA found
that petitioners were employees of BMSI.
It was BMSI which hired petitioners, paid their wages, and exercised
control over them.
Petitioners
appealed to the National Labor Relations Commission (NLRC), arguing that BMSI was
engaged in labor-only contracting. They
insisted that their employer was LSC.
On
January 16, 2008, the NLRC promulgated its decision.[7] Reversing the LA, the NLRC held:
We find from the records of this case that
respondent BMSI is not engaged in legitimate job contracting.
First,
respondent BMSI has no equipment, no office premises, no capital and no
investments as shown in the Agreement itself which states:
x x x x
VI. RENTAL OF EQUIPMENT
[6.01.] That the CLIENT has several forklifts and truck
tractor, and has offered to the CONTRACTOR the use of the same by way of lease,
the monthly rental of which shall be deducted from the total monthly billings
of the CONTRACTOR for the services covered by this Agreement.
6.02. That the CONTRACTOR has agreed to rent the
CLIENT’s forklifts and truck tractor.
6.03. The parties herein have agreed to execute a Contract of Lease for
the forklifts and truck tractor that will be rented by the CONTRACTOR. (p. 389, Records)
True enough, parties signed a Lease Contract
(p. 392, Records) wherein respondent BMSI leased several excess equipment of
LSC to enable it to discharge its obligation under the Agreement. So without the equipment which respondent
BMSI leased from respondent LSC, the former would not be able to perform its
commitments in the Agreement.
In
Phil. Fuji Xerox Corp. v. NLRC (254 SCRA 294) the Supreme Court held:
x x
x.
The phrase “substantial capital and investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary
in the conduct of his business,” in the Implementing Rules clearly contemplates
tools, equipment, etc., which are directly related to the service it is being
contracted to render. One who does
not have an independent business for undertaking the job contracted for is just
an agent of the employer. (underscoring ours)
Second,
respondent BMSI has no independent business or activity or job to perform in
respondent LSC free from the control of respondent LSC except as to the results
thereof. In view of the absence of such
independent business or activity or job to be performed by respondent BMSI in
respondent LSC [petitioners] performed work that was necessary and desirable to
the main business of respondent LSC. Respondents were not able to refute the
allegations of [petitioners] that they performed the same work that the regular
workers of LSC performed and they stood side by side with regular employees of
respondent LSC performing the same work.
Necessarily, the control on the manner and method of doing the work was
exercised by respondent LSC and not by respondent BMSI since the latter had no
business of its own to perform in respondent LSC.
Lastly,
respondent BMSI has no other client but respondent LSC. If respondent BMSI were a going concern, it
would have other clients to which to assign [petitioners] after its Agreement
with LSC expired. Since there is only
one client, respondent LSC, it is easy to conclude that respondent BMSI is a
mere supplier of labor.
After
concluding that respondent BMSI is engaged in prohibited labor-only
contracting, respondent LSC became the employer of [petitioners] pursuant to DO
18-02.
[Petitioners]
therefore should be reinstated to their former positions or equivalent
positions in respondent LSC as regular employees with full backwages and other
benefits without loss of seniority rights from October 31, 2003, when they lost
their jobs, until actual reinstatement (Vinoya v. NLRC, 324 SCRA 469). If
reinstatement is not feasible, [petitioners] then should be paid separation pay
of one month pay for every year of service or a fraction of six months to be
considered as one year, in addition to full backwages.
Concerning
[petitioners’] prayer to be paid wage differentials and benefits under the CBA,
We have no doubt that [petitioners] would be entitled to them if they are
covered by the said CBA. For this
purpose, [petitioners] should first enlist themselves as union members if they
so desire, or pay agency fee.
Furthermore, only [petitioners] who signed the appeal memorandum are
covered by this Decision. As regards the
other complainants who did not sign the appeal, the Decision of the Labor
Arbiter dismissing this case became final and executory.[8]
The NLRC disposed thus:
WHEREFORE, the appeal of [petitioners] is
GRANTED. The Decision of the Labor
Arbiter is hereby REVERSED, and a NEW ONE rendered finding respondent Best
Manpower Services, Inc. is engaged in prohibited labor-only-contracting and
finding respondent Lorenzo Shipping Corp. as the employer of the following
[petitioners]:
1.
Emmanuel
B. Babas
2.
Danilo
Banag
3.
Edwin L.
Javier
4.
Rex
Allesa
5.
Arturo
Villarin, [Sr.]
6.
Felixberto
C. Anajao
7.
Arsenio
Estorque
8.
Maximo
N. Soriano, Jr.
9.
Sandi G.
Bermeo
Consequently,
respondent Lorenzo Shipping Corp. is ordered to reinstate [petitioners] to
their former positions as regular employees and pay their wage differentials
and benefits under the CBA.
If
reinstatement is not feasible, both respondents Lorenzo Shipping Corp. and Best
Manpower Services are adjudged jointly and solidarily to pay [petitioners]
separation pay of one month for every year of service, a fraction of six months
to be considered as one year.
In
addition, respondent LSC and BMSI are solidarily liable to pay [petitioners’]
full backwages from October 31, 2003 until actual reinstatement or, if
reinstatement is not feasible, until finality of this Decision.
Respondent
LSC and respondent BMSI are likewise adjudged to be solidarily liable for
attorney’s fees equivalent to ten (10%) of the total monetary award.
x x x x
SO
ORDERED.[9]
LSC
went to the CA via certiorari. On October 10, 2008, the CA rendered the now
challenged Decision,[10]
reversing the NLRC. In holding that BMSI
was an independent contractor, the CA relied on the provisions
of the Agreement, wherein BMSI
warranted that it is an independent contractor, with adequate capital,
expertise, knowledge, equipment, and personnel necessary for the services
rendered to LSC. According to the CA, the
fact that BMSI entered into a contract of lease with LSC did not ipso facto make BMSI a labor-only
contractor; on the contrary, it proved that BMSI had substantial capital. The CA was of the view that the law only
required substantial capital or investment. Since BMSI had substantial
capital, as shown by its ability to pay rents to LSC, then it qualified as an
independent contractor. It added that even under the control test, BMSI would
be the real employer of petitioners, since it had assumed the entire charge and
control of petitioners’ services. The CA further held that BMSI’s Certificate
of Registration as an independent contractor was sufficient proof that it was
an independent contractor. Hence, the CA
absolved LSC from liability and instead held BMSI as employer of petitioners.
The
fallo of the CA Decision reads:
WHEREFORE, premises considered, the instant petition
is GRANTED and the assailed decision
and resolution of public respondent NLRC are REVERSED and SET ASIDE. Consequently, the decision of the Labor
Arbiter dated September 29, 2004 is REINSTATED.
SO ORDERED.[11]
Petitioners filed a motion for
reconsideration, but the CA denied it on January 21, 2009.[12]
Hence, this appeal by petitioners, positing
that:
THE HONORABLE COURT OF APPEALS ERRED IN
IGNORING THE CLEAR EVIDENCE OF RECORD THAT RESPONDENT WAS ENGAGED IN LABOR-ONLY
CONTRACTING TO DEFEAT PETITIONERS’ RIGHT TO SECURITY OF TENURE.[13]
Before resolving the petition, we
note that only seven (7) of the nine petitioners signed the Verification and Certification.[14] Petitioners Maximo Soriano, Jr. (Soriano) and
Felixberto Anajao (Anajao) did not sign the Verification
and Certification, because they could no longer be located by their
co-petitioners.[15]
In
Thus, we dismiss the petition insofar
as petitioners Soriano and Anajao are concerned.
Petitioners vigorously insist that
they were employees of LSC; and that BMSI is not an independent contractor, but
a labor-only contractor. LSC, on the
other hand, maintains that BMSI is an independent contractor, with adequate
capital and investment. LSC capitalizes
on the ratiocination made by the CA.
In declaring BMSI as an independent
contractor, the CA, in the challenged Decision, heavily relied on the provisions
of the Agreement, wherein BMSI
declared that it was an independent contractor, with substantial capital and
investment.
De Los Santos v. NLRC[18] instructed us that the character of
the business, i.e., whether as
labor-only contractor or as job contractor, should
be measured in terms of, and
determined by, the criteria set by statute. The parties cannot dictate by the mere
expedience of a unilateral declaration in a contract the character of their business.
In San Miguel Corporation v. Vicente B. Semillano, Nelson Mondejas, Jovito Remada, Alilgilan
Multi-Purpose Coop (AMPCO), and Merlyn N. Policarpio,[19]
this Court explained:
Despite the fact that the service contracts
contain stipulations which are earmarks of independent contractorship, they do
not make it legally so. The language of a contract is neither
determinative nor conclusive of the relationship between the parties.
Petitioner SMC and AMPCO cannot dictate, by a declaration in a contract, the
character of AMPCO's business, that is, whether as labor-only
contractor, or job contractor. AMPCO's
character should be measured in terms of, and determined by, the criteria set
by statute.
Thus, in distinguishing between prohibited
labor-only contracting and permissible job
contracting, the totality of the facts and the surrounding circumstances of the
case are to be considered.
Labor-only contracting, a prohibited act, is an arrangement where the contractor or
subcontractor merely recruits, supplies, or places workers to perform a job,
work, or service for a principal. 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 perform
activities which are directly related to the main business of the principal.[20]
On the other hand, permissible 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. [21]
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 undertakes 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.[22]
Given the above standards, we sustain
the petitioners’ contention that BMSI is engaged in labor-only
contracting.
First, petitioners
worked at LSC’s premises, and nowhere else. Other than the provisions of the Agreement, there was no showing that it
was BMSI which established petitioners’ working procedure and methods, which
supervised petitioners in their work, or which evaluated the same. There was
absolute lack of evidence that BMSI exercised control over them or their work,
except for the fact that petitioners were hired by BMSI.
Second, LSC was
unable to present proof that BMSI had substantial capital. The record before us is bereft of any proof
pertaining to the contractor’s capitalization, nor to its investment in tools,
equipment, or implements actually used in the performance or completion of the
job, work, or service that it was contracted to render. What is clear was that the equipment used by
BMSI were owned by, and merely rented from, LSC.
In Mandaue Galleon Trade, Inc. v. Andales,[23] we
held:
The law casts the burden on the contractor to
prove that it has substantial capital, investment, tools, etc.
Employees, on the other hand, need not prove that the contractor does not have
substantial capital, investment, and tools to engage in job-contracting.
Third, petitioners performed activities
which were directly related to the main business of LSC. The work of petitioners
as checkers, welders, utility men, drivers, and mechanics could only be characterized
as part of, or at least clearly related to, and in the pursuit of, LSC’s
business. Logically, when petitioners were assigned by BMSI to LSC, BMSI acted
merely as a labor-only contractor.
Lastly, as found
by the NLRC, BMSI had no other client except for LSC, and neither BMSI nor LSC
refuted this finding, thereby bolstering the NLRC finding that BMSI is a
labor-only contractor.
The CA erred in considering BMSI’s
Certificate of Registration as sufficient proof that it is an independent contractor. In San
Miguel Corporation v. Vicente B. Semillano, Nelson Mondejas, Jovito Remada,
Alilgilan Multi-Purpose Coop (AMPCO), and Merlyn N. Policarpio,[24] we held that a Certificate of
Registration issued by the Department of Labor and Employment is not conclusive
evidence of such status. The fact of registration simply prevents the legal
presumption of being a mere labor-only contractor from arising.[25]
Indubitably, BMSI can only be
classified as a labor-only contractor. The
CA, therefore, erred when it ruled otherwise. Consequently, the workers that
BMSI supplied to LSC became regular employees of the latter.[26] Having gained regular status, petitioners
were entitled to security of tenure and could only be dismissed for just or
authorized causes and after they had been accorded due process.
Petitioners lost their employment
when LSC terminated its Agreement
with BMSI. However, the termination of
LSC’s Agreement with BMSI cannot be
considered a just or an authorized cause
for petitioners’ dismissal. In Almeda v. Asahi Glass
The sole reason given for the dismissal of
petitioners by SSASI was the termination of its service contract with respondent.
But since SSASI was a labor-only contractor, and petitioners were to be deemed
the employees of respondent, then the said reason would not constitute a just
or authorized cause for petitioners’ dismissal. It would then appear that
petitioners were summarily dismissed based on the aforecited reason, without
compliance with the procedural due process for notice and hearing.
Herein petitioners, having been unjustly
dismissed from work, are entitled to reinstatement without loss of seniority
rights and other privileges and to full back wages, inclusive of allowances,
and to other benefits or their monetary equivalents computed from the time
compensation was withheld up to the time of actual reinstatement. Their earnings elsewhere during the periods of
their illegal dismissal shall not be deducted therefrom.
Accordingly, we hold that
the NLRC committed no grave abuse of discretion in its decision. Conversely, the CA committed a reversible
error when it set aside the NLRC ruling.
WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court
of Appeals in CA-G.R. SP. No. 103804 are REVERSED and SET ASIDE. Petitioners Emmanuel Babas, Danilo T. Banag,
Arturo V. Villarin, Sr., Edwin Javier, Sandi Bermeo, Rex Allesa, and Arsenio
Estorque are declared regular employees of Lorenzo Shipping Corporation. Further,
LSC is ordered to reinstate the seven petitioners to their former position
without loss of seniority rights and other privileges, and to pay full backwages, inclusive of
allowances, and other benefits or their monetary equivalent, computed from the
time compensation was withheld up to the time of actual reinstatement.
No pronouncement as to costs.
SO ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate
Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate
Justice
Chairperson
|
DIOSDADO M. PERALTA Associate
Justice |
MARIANO C. Associate
Justice |
JOSE CATRAL
Associate
Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision had
been reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
ANTONIO T. CARPIO
Associate
Justice
Chairperson,
Second Division
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution
and the Division Chairperson's Attestation, I certify that the conclusions in
the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.
RENATO
C. CORONA
Chief Justice
*
Additional member in lieu of
Associate Justice Roberto A. Abad per Raffle dated December 15, 2010.
[1] Penned by Associate Justice Marlene Gonzales-Sison, with Associate Justices Juan Q. Enriquez, Jr. and Isaias P. Dicdican, concurring; rollo, pp. 34-49.
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]
[10] Supra note 1.
[11]
[12] Supra note 2.
[13] Rollo, p. 21.
[14]
[15] See Compliance; id. at 335-336.
[16] G.R. Nos. 158786 & 158789, October 19, 2007, 537 SCRA 171, 198-199.
[17] 392 Phil. 596, 603-604 (2000).
[18] 423 Phil. 1020, 1032 (2001).
[19] G.R. No. 164257, July 5, 2010.
[20] Iligan Cement Corporation v. ILIASCOR Employees and Workers Union-Southern Philippines Federation of Labor (IEWU-SPFL), G.R. No. 158956, April 24, 2009, 586 SCRA 449, 464-465.
[21] Purefoods Corporation (now San Miguel Purefoods Company, Inc.) v. National Labor Relations Commission, G.R. No. 172241, November 20, 2008, 571 SCRA 406, 413.
[22] Vinoya v. National Labor Relations Commission, 381 Phil. 460, 472-473 (2000).
[23] G.R.
No. 159668, March 7, 2008, 548 SCRA 17, 28.
[24] Supra note 19.
[25]
[26] See PCI Automation Center Inc. v. NLRC, 322 Phil. 536 (1996).
[27] G.R. No. 177785, September 3, 2008, 564 SCRA 115, 132-134.