L A ECOLOGÍA TRANSFORMA NUESTRO ESPACIO FÍSICO Y NO FÍSICO

G.R. 145402, March 14, 2008, Chico-Nazario

Meralco and the private respondent executed a contractwhere the latter would supply the petitioner janitorial services,which include labor, materials, tools and equipment, as well assupervision of its assigned employees, at Meralco’s RockwellThermal Plant in Makati City.The 49 employees lodged a Complaint for illegaldeduction, underpayment, non-payment of

overtime pay, legalholiday pay, premium pay for holiday and rest day and nightdifferentials against the private respondent before the LA. By virtue of RA 6727, the contract between Meralco andthe private respondent was amended to increase the minimumdaily wage per employee. 2 months after the amendment of thecontract, Meralco sent a letter to private respondent informingthem that at the end of business hours of Jan. 31, 1990, it wouldbe terminating contract entered into with the privaterespondents. On the said date, the complainants were pulled outfrom their work. The complainants amended their complaint toinclude the charge of illegal dismissal and to implead Meralco asa party respondent.The LA dismissed the complaint. On appeal, the NLRCaffirmed the decision of the LA with the modification that Meralcowas solidarily liable with the private respondents. The CA on theother hand, modified the Decision of the NLRC and held Meralcoto be solidarily liable with the private respondent for thesatisfaction of the laborer’s separation pay.

ISSUE

Whether Meralco should be liable for the payment of the dismissed laborer’s separation pay

RULING

The CA used Art. 109 of the Labor Code to holdMeralcosolidarily liable with the private respondent as regard tothe payment of separation pay. However, the SC ruled that Art.109 should be read in relation to Art. 106 and 107 of the LC.Thus, an indirect employer can only be held liable with theindependent contractor or subcontractor in the event that thelatter fails to pay the wages of its employees. While it is true thatthe petitioner was the indirect employer of the complainants, itcannot be held liable in the same way as the employer in everyrespect. Meralco may be considered an indirect employer onlyfor purposes of unpaid wages.

MANILA ELECTRIC COMPANY v. ROGELIO BENAMIRA

G.R. No. 145271, July 14, 2005, Austria-Martinez The individual respondents are licensed security guards formerly employed by People’s Security, Inc.

(PSI) and deployed as such at MERALCO’s head office. On November 30, 1990, the security service agreement between PSI and MERALCO was terminated. Thereafter, fifty-six of PSI’s security guards, including herein eight individual respondents, filed a complaint for unpaid monetary benefits against PSI and MERALCO. Meanwhile, the security service agreement between respondent Armed Security &

Detective Agency, Inc., (ASDAI) and MERALCO took effect on December 1, 1990. Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCO’s head office. On July 25, 1992, the security service agreement between respondent Advance Forces Security & Investigation Services, Inc.

(AFSISI) and MERALCO took effect, terminating the previous security service agreement with ASDAI.

Except as to the number of security guards, the amount to be paid the agency, and the effectivity of the agreement, the terms and conditions were substantially identical with the security service agreement with ASDAI. The individual respondents amended their complaint to implead AFSISI as party respondent and to allege that AFSISI terminated their services on August 6, 1992 without notice and just cause and therefore guilty of illegal dismissal. For the first time in appeal before the Court of Appeals, the individual respondents alleged that MERALCO is their employer

ISSUES

1. Whether or not the individual respondents are regular employees of MERALCO

2. Whether or not MERALCO is their employer

3. Whether or not MERALCO can be held solidarily liable with AFSISI

HELD

(1) NO. The individual respondents cannot be considered as regular employees of the MERALCO for, although security services are necessary and desirable to the business of MERALCO, it is not directly related to its principal business and may even be considered unnecessary in the conduct of MERALCO’s principal business, which is the distribution of electricity.

(2) NO. As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard whose behavior, conduct or appearance is not satisfactory, such merely confirms that the power to discipline lies with the agency. It is a standard stipulation in security service agreements that the client may request the replacement of the guards to it.

Service-oriented enterprises, such as the business of providing security services, generally adhere to the business adage that "the customer or client is always right" and, thus, must satisfy the interests, conform to the needs, and cater to the reasonable impositions of its clients.

Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its consent an indication of control. It is simply a security clause designed to prevent the agency from unilaterally removing its security guards from their assigned posts at MERALCO’s premises to the latter’s detriment.

The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its premises is likewise not indicative of control as it is not a unilateral right. The agreement provides that the agency is principally mandated to conduct inspections, without prejudice to MERALCO’s right to conduct its own inspections.

(3) YES. The fact that there is no actual and direct employer-employee relationship between MERALCO and the individual respondents does not exonerate MERALCO from liability as to the monetary claims of the individual respondents. When MERALCO contracted for security services with ASDAI as the security agency that hired individual respondents to work as guards for it, MERALCO became an indirect employer of individual respondents pursuant to Article 107 of the Labor Code. When ASDAI as contractor failed to pay the individual respondents, MERALCO as principal becomes jointly and severally liable for the individual respondents’ wages, under Articles 106 and 109 of the Labor Code

ASDAI is held liable by virtue of its status as direct employer, while MERALCO is deemed the indirect employer of the individual respondents for the purpose of paying their wages in the event of failure of ASDAI to pay them. This statutory scheme gives the workers the ample protection consonant with labor and social justice provisions of the 1987 Constitution. However, this is without prejudice to the right of reimbursement.

DOLE PHILIPPINES vs. ESTEVA G.R. No. 161115, November 30, 2006

Doctrine: CAMPCO, the alleged contractor, did not carry out an independent business from petitioner. It was precisely established to render services to petitioner to augment its workforce during peak seasons. Petitionerwas its only client. Even as CAMPCO had its own office and office equipment, these were mainly usedfor administrative purposes;

the tools, machineries, and equipment actually used by CAMPCOmembers when rendering services to the petitioner belonged to the latter. This is indicative of a labor-only contracting.

Dole Philippines and CAMPCO entered into a Service Agreement. Respondents argued that they should be considered regular employees of petitioner given that:

1.they were performing jobs that were usually necessary and desirable in the usual business of petitioner; 2. petitioner exercised control over respondents, not only as to the results, but also as tothe manner by which they performed their assigned tasks; and 3. CAMPCO, a labor-only contractor,was merely a conduit of petitioner. As regular employees of petitioner, respondents asserted that theywere entitled to security of tenure and those placed on “stay home status” for more than six monthshad been constructively and illegally dismissed.

ISSUE

Whether or not CAMPCO is a legitimate contractor and if no, whether or not DOLE is liable as direct employer RULING

NO. CAMPCO was a labor-only contractor and, thus, petitioner is the real

employer of the respondents, with CAMPCO acting only as the agent or intermediary of petitioner. In 1993, when CAMPCO wasestablished and the Service Contract between petitioner and CAMPCO was entered into, CAMPCO onlyhad P6,600.00 paid-up capital, which could hardly be considered substantial.

(Refer to the Doctrine mentioned above, which is a stronger indication about the labor-only contracting) ALVIADO v. PROCTER & GAMBLE PHILS., INC.

G.R. No. 160506, March 9, 2010, Del Castillo

Petitioners worked as merchandisers of P&G. They all individually signed employment contracts with either Promm-Gem or SAPS for periods of more or less five months at a time.They were assigned at different outlets, supermarkets and stores where they handled all the products of P&G. They received their wages from Promm-Gem or SAPS. Subsequently, petitioners filed a complaint against P&G for regularization, service incentive leave pay and other benefits with damages. The complaint was later amendedto include the matter of their subsequent dismissal. The Labor Arbiter dismissed the complaint for lack of merit and ruled that there was no employer-employee relationship between petitioners and P&G. He found that the selection and engagement of the petitioners, the payment of their wages, the power of dismissal and control with respect to the means and methods by which their work was accomplished, were all done and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate independent job contractors. On appeal to the NLRC, it affirmed the decision of the LA.

ISSUE

Whether or not the respondent is the employer of the petitioner.

HELD

In order to determine whether P&G is the employer of petitioners, it is necessary to first determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors. 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. The Court held that Promm-Gem cannot be regarded as labor-only contractor but a legitimate independent contractor because the financial statement of Promm-Gem shows that it has authorized capital stock of P1 million and a paid-in capital, or capital available for operations, of P500,000.00 as of 1990.

On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of only P31,

250.00. There is no other evidence presented to show how much its working capital and assets are.

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 held that SAPS is engaged in "labor-only contracting". 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.

TEMIC AUTOMOTIVE PHILIPPINES, INC. v. TEMIC AUTOMOTIVE PHILIPPINES, INC. EMPLOYEES UNION-FFW

G.R. No. 186965, December 23, 2009, Brion

Since 1998, the petitioner contracts out some of the work in the warehouse department, specifically those in the receiving and finished goods sections, to three independent service providers or forwarders. These forwarders also have their own employees who hold the positions of clerk, material handler, system encoder and general clerk.

This outsourcing arrangement gave rise to a union grievance on the issue of the scope and coverage of the collective bargaining unit, specifically to the question of whether or not the functions of the forwarders employees are functions being performed by the regular rank-and-file employees covered by the bargaining unit. The union thus demanded that the forwarders' employees be absorbed into the petitioner's regular employee force and be given positions within the bargaining unit. The petitioner, on the other hand, on the premise that the contracting arrangement with the forwarders is a valid exercise of its management prerogative

ISSUE

1. Whether or not the company validly contracted out or outsourced the services involving forwarding, packing, loading and clerical activities related thereto.

2. Whether or not the functions of the forwarders employees are functions being performed by regular rank-and-file employees covered by the bargaining unit

HELD

YES. In Meralco v. Quisumbing, we joined this universal recognition of outsourcing as a legitimate activity when we held that a company can determine in its best judgment whether it should contract out a part of its work for as long as the employer is motivated by good faith; the contracting is not for purposes of circumventing the law; and does not involve or be the result of malicious or arbitrary action. Our own examination of the agreement shows that the forwarding arrangement complies with the requirements of Article 106[26] of the Labor Code and

its implementing rules. To reiterate, no evidence or argument questions the company’s basic objective of achieving greater economy and efficiency of operations. This, to our mind, goes a long way to negate the presence of bad faith. No evidence likewise stands before us showing that the outsourcing has resulted in a reduction of work hours or the splitting of the bargaining unit effects that under the implementing rules of Article 106 of the Labor Code can make a contracting arrangement illegal.

NO. It is in the appreciation of these forwarder services as one whole package of inter-related services that we discern a basic misunderstanding that results in the error of equating the functions of the forwarders employees with those of regular rank-and-file employees of the company. A clerical job, for example, may similarly involve typing and paper pushing activities and may be done on the same company products that the forwarders employees and company employees may work on, but these similarities do not necessarily mean that all these employees work for the company. The regular company employees, to be sure, work for the company under its supervision and control, but forwarder employees work for the forwarder in the forwarders own operation that is itself a contracted work from the company. The company controls its employees in the means, method and results of their work, in the same manner that the forwarder controls its own employees in the means, manner and results of their work. Complications and confusion result because the company at the same time controls the forwarder in the results of the latter’s work, without controlling however the means and manner of the forwarder employees work.

COCA-COLA BOTTLERS PHILS., INC. vs. ALAN M.

AGITO, et al

GR No. 179546, February 13, 2009

Petitioner (Coke) is a domestic corporation engaged in manufacturing, bottling and distributing soft drink beverages and other allied products. Respondents were salesmen assigned at Coke Lagro Sales Office for years but were not regularized. Coke averred that respondents were employees of Interserve who were tasked to perform contracted services in accordance with the provisions of the Contract of Services executed between Coke and Interserve on 23 March 2002. Said Contract constituted legitimate job contracting, given that the latter was a bona fide independent contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its business.

To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence: (1) the Articles of Incorporation of Interserve;

(2) the Certificate of Registration of Interserve with the Bureau of Internal Revenue; (3) the Income Tax Return, with Audited Financial Statements, of

Interserve for 2001; and (4) the Certificate of Registration of Interserve as an independent job contractor, issued by the Department of Labor and Employment (DOLE).

As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them, paid their wages, and supervised their work, as proven by: (1) respondents’ Personal Data Files in the records of Interserve; (2) respondents’

Contract of Temporary Employment with Interserve;

and (3) the payroll records of Interserve.

ISSUES

1. Whether or not Inteserve is a labor-only contractor;

2. Whether or not an employer-employee relationship exists between petitioner Coca-Cola Bottlers Phils. Inc.

and respondents.

HELD

1. Yes. In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work premises; and respondents, its supposed employees, performed work which was directly related to the principal business of petitioner. It is, thus, evident that Interserve falls under the definition of a “labor-only” contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the Rules Implementing Articles 106-109 of the Labor Code, as amended. It is also apparent that Interserve is a labor-only contractor under Section 5(ii) of the Rules Implementing Articles 106-109 of the Labor Code, as amended, since it did not exercise the right to control the performance of the work of respondents.

2. Yes. With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer of respondents. As regular employees of petitioner, respondents cannot be dismissed except for just or authorized causes, none of which were alleged or proven to exist in this case, the only defense of petitioner against the charge of illegal dismissal being that respondents were not its employees.

SMART COMMUNICATIONS vs. ASTORGA G.R. No. 148132, January 28, 2008, Nachura

Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD). SMART launched an organizational realignment to achieve more efficient operations. Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated

(SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Astorgas division. Despite the abolition of the CSMG/FSD, Astorga continued reporting for work.

SMART issued a memorandum advising Astorga of the termination of her employment on ground of redundancy. Astorga states that the justification advanced by SMART is not true because there was no compelling economic reason for redundancy.

ISSUE

Whether or not the cause for Astorga’s dismissal is valid

RULING

Yes. Contrary to her claim, an employer is not precluded from adopting a new policy conducive to a more economical and effective management even if it is not experiencing economic reverses. Neither does the law require that the employer should suffer financial losses before he can terminate the services of the employee on the ground of redundancy.

Supreme Court agreed with the CA that the organizational realignment introduced by SMART, which culminated in the abolition of CSMG/FSD and termination of Astorgas employment was an honest effort to make SMARTs sales and marketing departments more efficient and competitive. As the CA had taken pains to elucidate:

x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization undertaken by SMART is for no purpose other than its declared objective as a labor and cost savings device. Indeed, this Court finds no fault in SMARTs

x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization undertaken by SMART is for no purpose other than its declared objective as a labor and cost savings device. Indeed, this Court finds no fault in SMARTs