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AVELINO S. ALILIN v. PETRON CORPORATION

FACTS:

The case involves a complaint for illegal dismissal, underpayment of wages, damages, and attorney's fees filed by petitioners against respondent Petron Corporation. Petron is a domestic corporation engaged in the oil business and owns several bulk plants in the country. In 1968, Romualdo D. Gindang Contractor recruited laborers for Petron's Mandaue Bulk Plant. When Romualdo died in 1989, his son Romeo D. Gindang took over the business and continued to provide manpower services to Petron. Petitioners were among those recruited to work in the bulk plant. On June 1, 2000, Petron and Romeo D. Gindang Services (RDG) entered into a contract for services, which was later extended. Petitioners alleged that they were illegally dismissed when their services were terminated due to the expiration of the service contract. They claimed that RDG is a labor-only contractor and that they are regular employees of Petron. RDG corroborated their claim, while Petron argued that RDG is an independent contractor and the real employer of the petitioners.

The primary issue is whether an employer-employee relationship exists between Petron Corporation and the petitioners.

Petron Corporation entered into a contract with respondent Roca Development Group (RDG) for the construction of a power plant. As part of the project, RDG engaged the services of various workers, including the petitioners. Petron issued identification cards to the workers and paid their wages through RDG. However, the petitioners alleged that they were unjustly dismissed by RDG. They filed complaints for illegal dismissal against RDG and Petron. The Labor Arbiter dismissed the complaint against Petron, ruling that there was no employer-employee relationship between Petron and the petitioners. The petitioners appealed to the National Labor Relations Commission (NLRC), which reversed the Labor Arbiter's decision and held Petron jointly and severally liable with RDG. On appeal, the Court of Appeals (CA) set aside the NLRC's decision and reinstated the Labor Arbiter's ruling, finding no employer-employee relationship between Petron and the petitioners. The petitioners then filed a petition for review before the Supreme Court.

ISSUES:

  1. Whether the Court can review the factual issues involved in a case.

  2. Whether the contract between Petron and RDG constitutes labor-only contracting.

  3. Whether RDG is a legitimate contractor or a labor-only contractor.

  4. Whether an employer-employee relationship exists between Petron and the petitioners.

  5. Whether the tasks performed by the petitioners, which are described by the company as "menial works," are necessary and related to the business operations of Petron.

  6. Whether the engagement of petitioners for many years in performing the same tasks indicates that such works were necessary to Petron's business.

  7. Whether the length of service of the petitioners entitles them to become regular employees.

  8. Whether the termination of the petitioners' services on the ground of the expiration of the service contract is valid.

RULING:

  1. The Court can review the factual issues involved in the case due to the conflicting findings of the Labor Arbiter, NLRC, and CA.

  2. The contract between Petron and RDG constitutes labor-only contracting. Petron failed to prove that RDG is an independent contractor.

  3. The Court held that Petron failed to prove that RDG is a legitimate contractor, thus, the presumption that RDG is a labor-only contractor stands. While Petron was able to establish RDG's financial capability as a legitimate contractor at the time of the service contract in 2000, it failed to establish RDG's financial capability when the petitioners actually started to work for Petron in earlier years.

  4. The Court ruled that an employer-employee relationship exists between Petron and the petitioners. Petron's power of control over the petitioners, including the power to transfer employees, set working hours, and impose safety measures, demonstrates the presence of an employer-employee relationship. The presence of an employer-employee relationship is further supported by the fact that Petron selected and engaged the petitioners, paid their salaries, and had the power to dismiss them.

  5. The Court finds that the tasks performed by the petitioners, although described by the company as "menial works," are necessary and related to the business operations of Petron, as they involve the preparation of products that Petron distributes to its consumers.

  6. The engagement of the petitioners for many years in performing the same tasks is a strong indication that such works were necessary to Petron's business.

  7. The length of service of the petitioners entitles them to become regular employees under the Labor Code.

  8. The termination of the petitioners' services on the ground of the expiration of the service contract is not valid as their regular status had already attached to them even before the execution of the service contract in 2000.

PRINCIPLES:

  • The Court does not generally review errors that raise factual questions, but conflicting findings require a review and re-evaluation of factual findings.

  • Labor-only contracting is prohibited under the law and occurs when a contractor or subcontractor merely recruits, supplies, or places workers to perform activities directly related to the principal's business.

  • Permissible job contracting or subcontracting is an arrangement where a principal agrees to farm out a specific job, work, or service to a contractor or subcontractor who operates independently and assumes responsibility for the work.

  • In distinguishing between labor-only contracting and job contracting, the totality of the facts and surrounding circumstances must be considered.

  • The burden of proving that a contractor is legitimate falls on the principal when they claim such a status.

  • The party asserting the existence of an independent contractor relationship has the burden of proving it.

  • The selection and engagement of employees, payment of wages, power of dismissal, and power to control the employee's conduct are the four elements used to determine the existence of an employer-employee relationship.

  • The power to control is the most crucial and determinative factor in establishing an employer-employee relationship.

  • Tasks that may be considered menial and mechanical can still be deemed necessary and related to the business operations of a company.

  • Long-term engagement of individuals in performing certain tasks is an indication of the necessity of such tasks to the employer's business.

  • Length of service can entitle an employee to become a regular employee under the Labor Code.

  • The expiration of a service contract does not constitute a just or authorized cause for the valid dismissal of regular employees.