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FIRST PHILIPPINE INDUSTRIAL CORPORATION v. RAQUEL M. CALIMBAS

FACTS:

The case involves a dispute between the petitioners, Raquel Calimbas and Luisa Mahilom, and the private respondent, First Philippine Industrial Corporation (FPIC). The petitioners were engaged by De Guzman Manpower Services (DGMS) to perform secretarial and clerical jobs for FPIC. FPIC and DGMS entered into a Contract of Special Services, wherein DGMS agreed to undertake some aspects of building and grounds maintenance and provide clerical and utility services for FPIC. The Contract stated that there would be no employer-employee relationship between FPIC and DGMS, and DGMS would be responsible for providing competent personnel and equipment.

The petitioners were assigned by DGMS to render services to FPIC. However, on June 21, 2001, FPIC informed the petitioners that their services would no longer be needed due to a study conducted by an outside consultant. DGMS also notified the petitioners that their work assignments in FPIC were no longer available. The petitioners then signed quitclaims, releasing DGMS from any claims, and received monetary sums.

Despite signing the quitclaims, the petitioners filed a complaint against FPIC for illegal dismissal and for the collection of monetary benefits, damages, and attorney's fees. They claimed that they were regular employees of FPIC and were dismissed without cause. The case was filed with the Labor Arbiter, where they failed to reach a settlement during three mandatory conferences. The petitioners argued in their position paper that they were regular employees of FPIC and provided necessary services to the company.

The petitioners in this case were former security guards, messengers, and janitors hired by respondent First Philippine Industrial Corporation (FPIC). They were initially hired by De Guzman Manpower Services (DGMS) and assigned to FPIC to render services. The petitioners claimed that DGMS was merely an agent of FPIC and that they were illegally dismissed when they were relieved from their work assignments without valid reasons. They argued that their real employer was FPIC and that DGMS engaged in prohibited labor-only contracting. The petitioners asserted that DGMS did not have substantial capital or investment and that they used office equipment and materials owned by FPIC. They also claimed that they were under the control and supervision of FPIC's managerial employees. FPIC, on the other hand, argued that there was no employer-employee relationship between them and the petitioners and that their true employer was DGMS. FPIC maintained that the petitioners received their wages and benefits from DGMS and executed quitclaims in favor of DGMS. The Labor Arbiter ruled in favor of the petitioners, declaring their dismissal illegal and ordering their reinstatement, payment of backwages, and attorney's fees. FPIC appealed to the National Labor Relations Commission (NLRC), which initially dismissed the appeal but later reversed its decision and declared that FPIC was not the employer of the petitioners. The NLRC set aside the Labor Arbiter's decision and absolved FPIC from any liability.

ISSUES:

  1. Whether respondents are employees of petitioner.

  2. Whether respondents were lawfully dismissed from their employment.

  3. Whether there is an employer-employee relationship between the petitioner and respondents.

  4. Whether the respondents were lawfully dismissed from their employment.

  5. Whether the dismissal of the workers complied with procedural and substantive due process.

  6. Whether the petitioners established a valid or just cause for the termination of services of the respondents.

RULING:

  1. The Court of Appeals found that respondents are employees of petitioner.

  2. The Court of Appeals held that respondents were unlawfully dismissed from their employment.

  3. Yes, there is an employer-employee relationship between the petitioner and respondents. The Supreme Court sustained the findings of the CA that respondents are petitioner's employees and that the supplying of workers by DGMS constituted labor-only contracting. DGMS did not have substantial capital or investment and the workers recruited were performing activities directly related to the principal business of the petitioner. Therefore, DGMS is considered merely an agent of the petitioner and the latter is responsible to the workers in the same manner as if they were directly employed.

  4. No, the respondents were not lawfully dismissed from their employment. The Supreme Court ruled that an employer may not justifiably dismiss an employee without complying with the requirements of due process. In this case, the petitioner failed to provide the respondents with the required notice and hearing before terminating their employment. Therefore, the terminations were unlawful.

  5. The dismissal of the workers failed to comply with procedural due process. The employer did not provide the employees with two written notices, one apprising them of the specific acts or omissions leading to their dismissal and another informing them of the employer's decision to terminate their employment. Additionally, the workers were not given an opportunity to be heard and contest the legality of their dismissal.

  6. The petitioners failed to establish a valid or just cause for the termination of the respondents' services, as required by the Labor Code. As such, the dismissal of the respondents was deemed illegal.

PRINCIPLES:

  • Article 106 of the Labor Code provides that the employees of a contractor or subcontractor shall be paid in accordance with the provisions of the Labor Code.

  • The Secretary of Labor has the authority to restrict or prohibit the contracting-out of labor to protect the rights of workers.

  • "Labor-only" contracting exists when the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, etc.

  • In cases where a person supplies workers to an employer without substantial capital or investment and the workers perform activities directly related to the principal business of the employer, the person supplying the workers is considered merely an agent of the employer and the latter is responsible to the workers as if they were directly employed.

  • Labor-only contracting, where a person supplies workers to an employer without substantial capital or investment and the workers perform activities directly related to the principal business of the employer, is prohibited and the person acting as contractor is considered an agent or intermediary of the employer.

  • An employer may not lawfully dismiss an employee without due process, which includes providing the employee with notice and an opportunity to be heard.

  • To be considered valid, a worker's dismissal must comply with both procedural and substantive due process.

  • Procedural due process in dismissal cases requires the employer to provide the employee with two written notices, as well as an opportunity to be heard before the final decision of termination.

  • Substantive due process requires that the dismissal be made under a just or authorized cause under the Labor Code.

  • Failure to comply with the requirements of termination of employment under the Labor Code renders the dismissal illegal.

  • In cases of illegal dismissal, the employee is entitled to reinstatement without loss of seniority rights, and other privileges, as well as backwages and other benefits computed from the time their compensation was withheld up to the time of their actual reinstatement.

  • In cases where reinstatement is no longer feasible, the employee is entitled to separation pay equivalent to one month salary for every year of service.