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MANILA MEMORIAL PARK CEMETERY v. EZARD D. LLUZ

FACTS:

Petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) and respondent Ward Trading and Services (Ward Trading) entered into a Contract of Services wherein Ward Trading would provide interment and exhumation services to Manila Memorial. Ward Trading assigned respondents to work at Manila Memorial Park, and they were paid P250 per day for working six days a week.

In June 2007, respondents filed a complaint against Manila Memorial, Ward Trading, and their executive vice-president and director in charge for overall operations. The complaints included a request for regularization and collective bargaining agreement benefits. Manila Memorial refused to recognize respondents as regular workers as they were employed by Ward Trading.

Respondents joined the Manila Memorial Park Free Workers Union and sought regularization through the union. However, Manila Memorial rejected the request once again. Subsequently, respondents were dismissed, and they amended their complaint to include a prayer for reinstatement and payment of back wages.

Manila Memorial argued that there was no employer-employee relationship between them and respondents since respondents were the employees of Ward Trading.

The Labor Arbiter dismissed the complaint for lack of employer-employee relationship. On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter's decision and declared respondents as regular employees of Manila Memorial. The NLRC ordered Manila Memorial to pay wage differentials to respondents.

Manila Memorial appealed the NLRC's decision to the Court of Appeals (CA), but the CA affirmed the NLRC's ruling and found the existence of an employer-employee relationship between Manila Memorial and respondents.

The main issue in this case is whether an employer-employee relationship exists between Manila Memorial and respondents for them to be entitled to their claim for wages and other benefits.

ISSUES:

  1. Whether there exists an employer-employee relationship between Manila Memorial and respondents.

  2. Whether Ward Trading qualifies as an independent contractor or a labor-only contractor.

  3. Whether or not the contracting arrangement between Manila Memorial Park Cemetery, Inc. (Manila Memorial) and Ward Trading constitutes labor-only contracting.

  4. Whether or not Manila Memorial should be considered the employer of the contractual employees.

  5. Whether Ward Trading is a labor-only contractor or an independent contractor.

  6. Whether Manila Memorial is the employer of the respondents.

  7. Whether or not the issuance of the warrant of arrest against the accused violates his right to due process.

RULING:

  1. The Court held that there exists an employer-employee relationship between Manila Memorial and respondents. Relevant provisions of the labor law and rules state that in cases of labor-only contracting, where the person supplying workers to an employer does not have substantial capital or investment and the workers are performing activities directly related to the principal business of the employer, the person or intermediary supplying the workers is considered merely as an agent of the employer. The Court found that Ward Trading does not have substantial capital or investment and the workers it supplied were performing activities related to Manila Memorial's business. Therefore, Manila Memorial is considered the employer of respondents.

  2. The Court did not directly address whether Ward Trading qualifies as an independent contractor or a labor-only contractor. The focus of the ruling was on the determination of the employer-employee relationship. However, the Court found that relevant provisions of the labor law and rules distinguish between legitimate contracting and labor-only contracting. It assumed the existence of an employer-employee relationship if labor-only contracting is found to be engaged in. Therefore, by implication, Ward Trading would be considered a labor-only contractor and not an independent contractor based on the findings of the Court.

  3. The Supreme Court held that the contracting arrangement between Manila Memorial and Ward Trading constitutes labor-only contracting. Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work, or service for a principal and any of the following elements are present: (1) the contractor or subcontractor does not have substantial capital or investment related to the job or service, and the employees recruited are performing activities directly related to the principal's main business; or (2) the contractor does not exercise the right to control the performance of the contractual employee's work. In this case, Ward Trading does not have substantial capital or investment in the form of tools, equipment, machinery, work premises, and other materials necessary for the job since Manila Memorial owns the equipment used in the performance of interment and exhumation services. Additionally, Ward Trading does not have the right to use or enjoy the equipment and work premises, as the ownership and control remain with Manila Memorial.

  4. Manila Memorial should be considered the employer of the contractual employees. According to Section 7 of the Department Order No. 174 series of 2017, the principal shall be deemed the employer of the contractual employee in cases of labor-only contracting or when the contracting arrangement falls within the prohibitions provided in Section 6. Since the contracting arrangement between Manila Memorial and Ward Trading constitutes labor-only contracting, Manila Memorial is considered the employer of the contractual employees and shall be solidarity liable with the contractor in case of any violation of the Labor Code.

  5. Ward Trading is considered a labor-only contractor. The Supreme Court held that Ward Trading failed to prove that it had substantial capital, investment, tools, and other assets to perform the work contracted for. Therefore, the presumption that Ward Trading is engaged in labor-only contracting stands.

  6. Manila Memorial is considered the employer of the respondents. Since Ward Trading is a labor-only contractor, the Supreme Court held that Manila Memorial is deemed the employer of the respondents. As regular employees of Manila Memorial, the respondents are entitled to their claims for wages and other benefits.

  7. No, the issuance of the warrant of arrest against the accused does not violate his right to due process.

PRINCIPLES:

  • Factual findings of the Court of Appeals are binding upon the Supreme Court, but there are exceptions when the findings are contrary to those of the trial court or lower administrative body.

  • Article 106 of the Labor Code provides regulations regarding contractor or subcontractor arrangements and the joint and several liability of the employer.

  • Department Order No. 18-02 distinguishes between legitimate contracting and labor-only contracting and assumes the existence of an employer-employee relationship if labor-only contracting is found to be engaged in. It defines "substantial capital or investment" and the "right to control" in relation to labor-only contracting.

  • The right to control is an essential element in determining the existence of an employer-employee relationship. The principal must not only determine the end to be achieved but also the manner and means to be used in reaching that end.

  • Labor-only contracting exists when the contractor or subcontractor recruits, supplies, or places workers to perform a job or service for a principal, and either lacks substantial capital related to the job or service or does not exercise control over the performance of the work.

  • The principal shall be deemed the employer of the contractual employees in cases of labor-only contracting or when the contracting arrangement falls within the prohibitions provided by law. The principal shall be solidarity liable with the contractor for any violation of labor laws.

  • In determining whether a contractor is a labor-only contractor or an independent contractor, the substantial capital, investment, tools, and other assets of the contractor are considered.

  • Failure to register as a contractor with the Department of Labor and Employment gives rise to the presumption that the contractor is engaged in labor-only contracting.

  • In cases where labor-only contracting is established, the principal is deemed the employer of the workers.

Right to due process