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MANILA ELECTRIC COMPANY v. ROGELIO BENAMIRA

FACTS:

The individual respondents, who were licensed security guards employed by People's Security, Inc. (PSI), filed a complaint for unpaid monetary benefits against PSI and Manila Electric Company (MERALCO). After the termination of the security service agreement between PSI and MERALCO, a new agreement took effect between Armed Security & Detective Agency, Inc. (ASDAI) and MERALCO, designating ASDAI as the AGENCY and MERALCO as the COMPANY. The AGENCY was responsible for providing security guards and the COMPANY was released from any liability arising from their acts or omissions. The individual respondents were subsequently absorbed by ASDAI and retained at MERALCO's head office. In June 1992, the Labor Arbiter granted a favorable decision to the individual respondents in their complaint for unpaid monetary benefits.

Another case was filed by the same individual respondents, this time against ASDAI and MERALCO, for unpaid monetary benefits. A new security service agreement took effect between Advance Forces Security & Investigation Services, Inc. (AFSISI) and MERALCO, terminating the previous agreement with ASDAI. The individual respondents amended their complaint to include AFSISI as a party respondent, alleging that AFSISI terminated their services without notice and just cause. The individual respondents claimed various unpaid benefits and alleged that AFSISI dismissed one of the security guards without just cause. Labor Arbiter Espiritu held ASDAI and MERALCO jointly and solidarily liable for the individual respondents' monetary claims and dismissed the complaint against AFSISI. The decision was affirmed by the NLRC. The individual respondents then filed a petition for certiorari before the Court.

In another case, the Court of Appeals ruled that MERALCO is the direct employer of the security guards, citing several grounds: the retention of the same individuals when changing security agencies, the use of multiple agencies to evade security of tenure, the necessity and desirability of the guards' services, MERALCO's control over the selection and hiring of guards, the payment of wages through agencies, the weight given to MERALCO's discretion in dismissing guards, and the right to inspect and require replacement of unsatisfactory guards. The CA declared MERALCO as the employer of the guards and ordered their reinstatement and payment of backwages. MERALCO filed a petition for review on certiorari before the Supreme Court challenging the CA's decision.

ISSUES:

  1. A. Whether an employer-employee relationship exists between petitioner Meralco and individual respondents.

  2. B. Whether the individual respondents are regular employees of Meralco.

  3. C. Whether the individual respondents can raise for the first time on appeal the issue that Meralco is their direct employer.

  4. D. Whether Meralco is guilty of illegal dismissal.

  5. E. Whether the individual respondents are entitled to reinstatement into Meralco's workforce.

  6. F. Whether Meralco is entitled to reimbursement from respondent ASDAI for the monetary claims paid to the individual respondents.

  7. Whether the individual respondents are employees of MERALCO or AFSISI.

  8. Whether the Court of Appeals erred in considering the new theory presented by the individual respondents in their memorandum.

  9. Whether the individual respondents are employees of MERALCO or of ASDAI.

  10. Whether ASDAI and AFSISI are "labor-only" contractors or job contractors.

  11. Whether the individual respondents can be considered as regular employees of MERALCO.

  12. Whether AFSISI absorbed the individual respondents into its workforce.

  13. Whether the individual respondents were constructively dismissed by ASDAI.

  14. Whether MERALCO can be held liable for the monetary claims of the individual respondents.

RULING:

  1. A. The Court held that there is no employer-employee relationship between Meralco and the individual respondents. The elements of the "four-fold" test to determine the existence of an employer-employee relationship, such as the power to hire, payment of wages, power to dismiss, and power to control, were not present in this case.

  2. B. The Court ruled that the individual respondents cannot be considered as regular employees of Meralco as their duties as security guards are not necessary in the conduct of Meralco's principal business.

  3. C. The Court held that the individual respondents cannot raise for the first time on appeal the issue that Meralco is their direct employer as it was a denial of due process.

  4. D. The Court ruled that Meralco is not guilty of illegal dismissal as it had no direct hand or participation in the termination of the employment of the individual respondents.

  5. E. The Court held that the individual respondents are not entitled to reinstatement into Meralco's workforce as no employer-employee relationship exists between them.

  6. F. The Court ruled that Meralco is entitled to reimbursement from ASDAI for the monetary claims paid to the individual respondents pursuant to the security service agreement.

  7. The Court held that the individual respondents are employees of AFSISI, not MERALCO. The Court emphasized that the individual respondents have consistently advanced the theory that AFSISI is their employer in their pleadings filed in the Labor Arbiter, NLRC, and even in the petition for certiorari in the Court of Appeals. The Court also noted that the individual respondents cannot change their theory on appeal as it would be contrary to the rules of fair play, justice, and due process. Therefore, the Court upheld the finding of the Court of Appeals on this matter.

  8. The Court ruled that the Court of Appeals should not have considered the new theory presented by the individual respondents in their memorandum. The Court cited the fundamental rule of procedure that higher courts are precluded from entertaining matters that were not raised before the proceedings below. The Court emphasized that the individual respondents are bound by their submissions that AFSISI is their employer and should not be allowed to change their theory. Therefore, the Court held that the Court of Appeals erred in considering the new theory presented by the individual respondents.

  9. The individual respondents are employees of ASDAI and not MERALCO.

  10. ASDAI and AFSISI are job contractors.

  11. The individual respondents cannot be considered as regular employees of MERALCO.

  12. There is no evidence to support the claim that AFSISI absorbed the individual respondents into its workforce.

  13. The individual respondents were considered to be constructively dismissed by ASDAI from employment due to their inactivity beyond the six-month period allowed by the Labor Code. Therefore, they should be reinstated.

  14. MERALCO can be held liable for the monetary claims of the individual respondents as an indirect employer. When MERALCO contracted with ASDAI for security services and ASDAI failed to pay the individual respondents, MERALCO became jointly and severally liable for their wages under the Labor Code.

PRINCIPLES:

  • To determine the existence of an employer-employee relationship, the four-fold test is employed, which includes the power to hire, payment of wages, power to dismiss, and power to control.

  • The duties performed by employees must be necessary in the conduct of the principal business of the employer to be considered as regular employees.

  • Raising a new issue for the first time on appeal without raising it before the Labor Arbiter or the NLRC constitutes a denial of due process.

  • An employer can be held liable for illegal dismissal if it has direct hand or participation in the termination of employment.

  • Reinstatement of employees is only granted if an employer-employee relationship exists between the parties.

  • A party may be entitled to reimbursement from another party for the monetary claims paid if there is a provision in the agreement that allows for reimbursement.

  • The existence of an employer-employee relationship is a question of fact within the province of the Court of Appeals.

  • A party cannot take a position contrary to or inconsistent with their pleadings.

  • Higher courts are precluded from entertaining matters not raised during the proceedings below.

  • A change of theory on appeal is objectionable as it is contrary to the rules of fair play, justice, and due process.

  • The agency that recruits, hires, and assigns work to its employees is considered the employer.

  • Where the agency quantifies and pays the wages to which an employee is entitled, and has the power to dismiss the employee, the agency is considered the employer.

  • For the power of control to be present, the person for whom the services are rendered must reserve the right to direct not only the end to be achieved but also the means for reaching such end.

  • Rules which serve as general guidelines towards the achievement of the mutually desired result are not indicative of the power of control.

  • In determining whether a contractor is a "labor-only" contractor or a job contractor, the presence or absence of substantial capital or investments in the form of tools, equipment, machineries, work premises, and other materials necessary in the conduct of the business is a factor to be considered.

  • Security services, although necessary and desirable to a business, may not be directly related to its principal business and may even be considered unnecessary in the conduct of the principal business.

  • When an employer fails to give any assignment to an employee and the inactivity persists beyond the six-month period allowed by the Labor Code, it is considered constructive dismissal.

  • An indirect employer can be held liable for the wages of workers hired by a contractor or subcontractor under Articles 106 and 109 of the Labor Code.

  • The solidary liability of an indirect employer does not preclude the application of Article 1217 of the Civil Code on the right of reimbursement from co-debtors.