SECOND DIVISION
[ G.R. No. 146408, February 29, 2008 ]PHILIPPINE AIRLINES v. ENRIQUE LIGAN +
PHILIPPINE AIRLINES, INC., PETITIONER, VS. ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON
CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, AND ALLAN BENTUZAL, RESPONDENTS.
D E C I S I O N
PHILIPPINE AIRLINES v. ENRIQUE LIGAN +
PHILIPPINE AIRLINES, INC., PETITIONER, VS. ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON
CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, AND ALLAN BENTUZAL, RESPONDENTS.
D E C I S I O N
CARPIO MORALES, J.:
Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered into an Agreement [1] on July 15, 1991 whereby Synergy undertook to "provide loading, unloading, delivery of baggage and cargo
and other related services to and from [petitioner] 's aircraft at the Mactan Station."[2]
The Agreement specified the following "Scope of Services" of Contractor Synergy:
On the duration of the Agreement, Section 10 thereof provided:
Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials for regularization of his employment status. Later alleging that he was, without valid ground, verbally dismissed, he filed a complaint against petitioner and Synergy and their respective officials for illegal dismissal and reinstatement with full backwages.[6]
The complaints of respondents were consolidated.
By Decision[7] of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent contractor and dismissed respondents' complaint for regularization against petitioner, but granted their money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:
The rest of the claims are hereby ordered dismissed for lack of merit.[8] (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of the Labor Arbiter by Decision[9] of January 5, 1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is hereby VACATED and SET ASIDE and judgment is hereby rendered:
By Resolution[11] of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate action and disposition, conformably with St. Martin Funeral Homes v. National Labor Relations Commission which was promulgated on September 16, 1998.
The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC.[12] Petitioner's motion for reconsideration having been denied by Resolution of December 21, 2000,[13] the present petition was filed, faulting the appellate court
Petitioner argues that the law does not prohibit an employer from engaging an independent contractor, like Synergy, which has substantial capital in carrying on an independent business of contracting, to perform specific jobs.
Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft cleaning, baggage-handling, etc., which are directly related to its business, does not make respondents its employees.
Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship between petitioner and respondents, viz: selection and engagement of an employee, payment of wages, power of dismissal, and the power to control employee's conduct, is present in the case.[15]
Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had reduced its personnel due to heavy losses as it had in fact terminated its service agreement with Synergy effective June 30, 1998[16] as a cost-saving measure.
The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a legitimate contractor. If Synergy is found to be a mere job-only contractor, respondents could be considered as regular employees of petitioner as Synergy would then be a mere agent of petitioner in which case respondents would be entitled to all the benefits granted to petitioner's regular employees; otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered employees of Synergy.
The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor Code which reads:
Section 3. Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service. (Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where 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 [sic] present:
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work performed by almost all of the respondents loading and unloading of baggage and cargo of passengers is directly related to the main business of petitioner. And the equipment used by respondents as station loaders, such as trailers and conveyors, are owned by petitioner.[17]
Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for Synergy to be considered a legitimate contractor, citing Neri v. National Labor Relations Commission.[18] Petitioner's reliance on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital stock of P1 million fully subscribed and paid for.[19] The corporation's status as independent contractor had in fact been previously confirmed in an earlier case[20] by this Court which found it to be serving, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc."
In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the NLRC that Synergy has a substantial capital to engage in legitimate contracting, it failed to present evidence thereon. As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent SYNERGY has substantial capital, but there is no showing in the records as to how much is that capital. Neither had respondents shown that SYNERGY has such substantial capital. x x x[21] (Underscoring supplied)
It was only after the appellate court rendered its challenged Decision of September 29, 2002 when petitioner, in its Motion for Reconsideration of the decision, sought to prove, for the first time, Synergy's substantial capitalization by attaching photocopies of Synergy's financial statements, e.g., balance sheets, statements of income and retained earnings, marked as "Annexes 'A' 'A-4.'"[22]
More significantly, however, is that respondents worked alongside petitioner's regular employees who were performing identical work.[23] As San Miguel Corporation v. Aballa[24] and Dole Philippines, Inc. v. Esteva, et al.[25] teach, such is an indicium of labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for convenience, re- quoted:
The control test element under the immediately-quoted paragraph (ii), which was not present in the old Implementing Rules (Department Order No. 10, Series of 1997),[26] echoes the prevailing jurisprudential trend[27] elevating such element as a primary determinant of employer-employee relationship in job contracting agreements.
One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employer's control except only as to the results.[28]
While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the workplace.
Even the parties' Agreement does not lend support to petitioner's claim, thus:
Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.
CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading, unloading and delivery Work as well as provide all equipment, loading, unloading and delivery equipment, materials, supplies and tools necessary for the performance of the Work. CONTRACTOR shall upon OWNER'S request furnish the latter with information regarding the qualifications of the former's workers, to prove their capability and experience. Contractor shall require all its workers, employees, suppliers and visitors to comply with OWNER'S rules, regulations, procedures and directives relative to the safety and security of OWNER'S premises, properties and operations. For this purpose, CONTRACTOR shall furnish its employees and workers identification cards to be countersigned by OWNER and uniforms to be approved by OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit entry into OWNER'S premises of any person employed therein by CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not comply with OWNER'S reasonable instructions and requests regarding security, safety and other matters and such person shall not again be employed to perform the services hereunder without OWNER'S permission.[29] (Underscoring partly in the original and partly supplied; emphasis supplied)
Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of plane arrivals.[30] And as the NLRC found, petitioner's managers and supervisors approved respondents' weekly work assignments and respondents and other regular PAL employees were all referred to as "station attendants" of the cargo operation and airfreight services of petitioner.[31]
Respondents having performed tasks which are usually necessary and desirable in the air transportation business of petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.[32]
The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship. For it is the totality of the facts and surrounding circumstances of the case[33] which is determinative of the parties' relationship.
Respecting the dismissal on November 15, 1992[34] of Auxtero, a regular employee of petitioner who had been working as utility man/helper since November 1988, it is not legally justified for want of just or authorized cause therefor and for non-compliance with procedural due process. Petitioner's claim that he abandoned his work does not persuade.[35] The elements of abandonment being (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship manifested by some overt acts,[36] the onus probandi lies with petitioner which, however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed from employment, should be entitled to salary differential[37] from the time he rendered one year of service until his dismissal, reinstatement plus backwages until the finality of this decision.[38] In view, however, of the long period of time[39] that had elapsed since his dismissal on November 15, 1992, it would be appropriate to award separation pay of one (1) month salary for each year of service, in lieu of reinstatement.[40]
As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate court, ordering petitioner to accept them as its regular employees and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the pertinent Collective Bargaining Agreement.
Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC and the Court of Appeals, for during the pendency of this case, it was forced to reduce its personnel due to heavy losses caused by economic crisis and the pilots' strike of June 5, 1998.[41] Hence, there are no available positions where respondents could be placed.
And petitioner informs that "the employment contracts of all if not most of the respondents . . . were terminated by Synergy effective 30 June 1998 when petitioner terminated its contract with Synergy."[42]
Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In fact, petitioner waived this defense by failing to raise it in its Memorandum filed on June 14, 1999 before the Court of Appeals.[43] Further, the notice of termination in 1998 was in disregard of a subsisting temporary restraining order[44] to preserve the status quo, issued by this Court in 1996 before it referred the case to the Court of Appeals in January 1999. So as to thwart the attempt to subvert the implementation of the assailed decision, respondents are deemed to be continuously employed by petitioner, for purposes of computing the wages and benefits due respondents.
Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner, Synergy being a mere agent of the latter, had acquired security of tenure. As such, they could only be dismissed by petitioner, the real employer, on the basis of just or authorized cause, and with observance of procedural due process.
WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
SO ORDERED.
Carpio (Acting Chairperson), Azcuna, Tinga and Velasco, Jr. JJ., concur.
Quisumbing (Chairperson), On official leave per Special Order No. 485 dated February 14, 2008.
[1] NLRC records, Vol. I, pp. 168-177.
[2] Rollo, p. 136.
[3] Id. at 136-137.
[4] Id. at 138.
[5] Id. at 8; NLRC records, Vol. 1, p. 104.
[6] Ibid.; vide also NLRC records, Vol. 1, p. 151.
[7] Rollo, pp. 302-316.
[8] Id. at 315-316.
[9] Id. at 226-237.
[10] Id. at 236-237.
[11] CA rollo, p. 179.
[12] Rollo, pp. 7-17. Penned by Associate Justice B.A. Adefuin-De la Cruz and concurred in by then Presiding Justice Salome Montoya and Associate Justice Renato Dacudao.
[13] Id. at 29.
[14] Id. at 42-43.
[15] Id. at 47-49.
[16] Id. at 52.
[17] Id. at 184.
[18] G.R. Nos. 97008-09, July 23, 1993, 224 SCRA 717.
[19] Id. at 720.
[20] Citing Associated Labor Unions-TUCP v. National Labor Relations Commission, G.R. No. 101784, October 21, 1991, Third Division, Minute Resolution.
[21] Rollo, p. 285.
[22] Vide Petitioner's Motion for Reconsideration of CA Decision of September 29, 2000, id. at 425-450.
[23] Id. at 348-349; vide NLRC records, Vol. 1, pp. 105 and 223; Position Papers for Petitioner, NLRC records, Vol. 1, pp. 83-92 and pp. 156-167; Affidavit of Benedicto A. Auxtero, NLRC records, Vol. 1, p. 185; Memorandum for petitioner, NLRC records, Vol. 1, pp. 206-216.
[24] G.R. No. 149011, June 28, 2005, 461 SCRA 392, 425. This Court held:
[26] Section 4(f) of Rule VIII-A of the Implementing Rules of Book III, as added by Department Order No. 10, Series of 1997, merely provides:
(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and the following elements are present:
[28] Acevedo v. Advanstar Company, Inc., G.R. No. 157656, November 11, 2005, 474 SCRA 656, 668 citing New Golden City Builders and Development Corporation v. Court of Appeals, 463 Phil. 821 (2003); San Miguel Corporation v. Aballa, supra note 24 at 421.
[29] Rollo, p. 170.
[30] NLRC records, Vol. 1, p. 6.
[31] Id. at 477.
[32] Aboitiz Haulers, Inc. v. Dimapatoi, G.R. No. 148619, September 19, 2006, 502 SCRA 271, 287 citing Guinnux Interiors, Inc. v. National Labor Relations Commission, 339 Phil. 75, 78-79 (1997); Manila Water Company Inc. v. Peña, G.R. No. 158255, July 8, 2004, 434 SCRA 53, 60-61.
[33] San Miguel Corporation v. Aballa, supra note 24 at 422-423 (citation omitted).
[34] NLRC records, Vol. 1, p. 185.
[35] Floren Hotel v. National Labor Relations Commission, G.R. No. 155264, May 6, 2005, 458 SCRA 128, 144; Masagana Concrete Products v. NLRC, 372 Phil. 459 (1999).
[36] Northwest Tourism Corp. v. Court of Appeals, Former Special Third Division, G.R. No. 150591, June 27, 2005, 461 SCRA 298, 309; ACD Investigation Security Agency, Inc. v. Daquera, G.R. No. 147473, March 30, 2004, 426 SCRA 494; Premier Development Bank v. NLRC, 354 Phil. 851 (1998).
[37] Vide Cinderella Marketing Corporation v. NLRC, 353 Phil. 284 (1998); ABS-CBN Broadcasting Corporation v. Nazareno, G.R. No. 164156, September 2006, 503 SCRA 204; Kimberly-Clark (Phils.), Inc., v. Secretary of Labor, G.R. No. 156668, November 23, 2007 for jurisprudence on regularization differential.
[38] Star Paper Corporation v. Espiritu, G.R. No. 154006, November 2, 2006, 506 SCRA 556, 568; Tan v. Lagrama, G.R. No. 151228, August 15, 2002, 387 SCRA 393, 406; Prudential Bank and Trust Co. v. Reyes, G.R. No. 141093, February 20, 2001, 352 SCRA 316, 332.
[39] Gold City Integrated Port Service, Inc. v. National Labor Relations Commission, G.R. No. 103560, July 6, 1995, 245 SCRA 627, 641; Panday v. National Labor Relations Commission, G.R. No. 67664, May 20, 1992, 209 SCRA 122.
[40] Northwest Tourism Corp. v. Court of Appeals, Former Special Third Division, G.R. No. 150591, June 27, 2005, 461 SCRA 298, 311; F.F. Marine Corporation v. National Labor Relations Commission, Second Division, G.R. No. 152039, April 8, 2005, 455 SCRA 154, 174.
[41] Rollo, p. 53.
[42] Id. at 54; vide Annexes "B" "B-12" inclusive, pp. 453-465.
[43] Vide rollo, pp. 382-396.
[44] Rollo, pp. 327-341.
The Agreement specified the following "Scope of Services" of Contractor Synergy:
CONTRACTOR shall perform and execute the aforementioned Work at the following areas located at Mactan Station, to wit:
- Loading and unloading of baggage and cargo to and from the aircraft;
- Delivering of baggage from the ramp to the baggage claim area;
- Picking up of baggage from the baggage sorting area to the designated parked aircraft;
- Delivering of cargo unloaded from the flight to cargo terminal;
- Other related jobs (but not janitorial functions) as may be required and necessary;
And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no employer-employee relationship between CONTRACTOR and/or its employees on the one hand, and OWNER, on the other."[4]
- Ramp Area
- Baggage Claim Area
- Cargo Terminal Area, and
- Baggage Sorting Area[3] (Underscoring supplied)
On the duration of the Agreement, Section 10 thereof provided:
Except for respondent Benedicto Auxtero (Auxtero), the rest of the respondents, who appear to have been assigned by Synergy to petitioner following the execution of the July 15, 1991 Agreement, filed on March 3, 1992 complaints before the NLRC Regional Office VII at Cebu City against petitioner, Synergy and their respective officials for underpayment, non-payment of premium pay for holidays, premium pay for rest days, service incentive leave pay, 13th month pay and allowances, and for regularization of employment status with petitioner, they claiming to be "performing duties for the benefit of [petitioner] since their job is directly connected with [its] business x x x."[5]
10.1 10.2
x x x x (Underscoring supplied)
Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials for regularization of his employment status. Later alleging that he was, without valid ground, verbally dismissed, he filed a complaint against petitioner and Synergy and their respective officials for illegal dismissal and reinstatement with full backwages.[6]
The complaints of respondents were consolidated.
By Decision[7] of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent contractor and dismissed respondents' complaint for regularization against petitioner, but granted their money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:
The awards hereinabove enumerated in the aggregate total amount of THREE HUNDRED TWENTY-TWO THOUSAND THREE HUNDRED FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS (P322,359.87) are computed in detail by our Fiscal Examiner which computation is hereto attached to form part of this decision.
(1) (3) Ordering respondent Synergy to pay complainant Benedicto Auxtero a financial assistance in the amount of P5,000.00.
The rest of the claims are hereby ordered dismissed for lack of merit.[8] (Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of the Labor Arbiter by Decision[9] of January 5, 1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is hereby VACATED and SET ASIDE and judgment is hereby rendered:
Only petitioner assailed the NLRC decision via petition for certiorari before this Court.
- Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor;
- Ordering respondent Philippine Airlines to accept, as its regular employees, all the complainants, . . . and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the Collective Bargaining Agreement subsisting during the period of their employment;
x x x x
- Declaring the dismissal of complainant Benedicto Auxtero to be illegal and ordering his reinstatement as helper or utility man with respondent Philippine Airlines, with full backwages, allowances and other benefits and privileges from the time of his dismissal up to his actual reinstatement; and
- Dismissing the appeal of respondent Synergy Services Corporation, for lack of merit.[10] (Emphasis and underscoring supplied)
By Resolution[11] of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate action and disposition, conformably with St. Martin Funeral Homes v. National Labor Relations Commission which was promulgated on September 16, 1998.
The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC.[12] Petitioner's motion for reconsideration having been denied by Resolution of December 21, 2000,[13] the present petition was filed, faulting the appellate court
I.
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION DECISION WHICH IMPOSED THE RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN PETITIONER AND THE RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS COMMISSION ORDERING THE REINSTATEMENT OF RESPONDENT AUXTERO DESPITE THE ABSENCE [OF] ANY FACTUAL FINDING IN THE DECISION THAT PETITIONER ILLEGALLY TERMINATED HIS EMPLOYMENT.
III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN UPHOLDING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH COMPELLED THE PETITIONER TO EMPLOY THE RESPONDENTS AS REGULAR EMPLOYEES DESPITE THE FACT THAT THEIR SERVICES ARE IN EXCESS OF PETITIONER COMPANY'S OPERATIONAL REQUIREMENTS.[14] (Underscoring supplied)
Petitioner argues that the law does not prohibit an employer from engaging an independent contractor, like Synergy, which has substantial capital in carrying on an independent business of contracting, to perform specific jobs.
Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft cleaning, baggage-handling, etc., which are directly related to its business, does not make respondents its employees.
Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship between petitioner and respondents, viz: selection and engagement of an employee, payment of wages, power of dismissal, and the power to control employee's conduct, is present in the case.[15]
Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had reduced its personnel due to heavy losses as it had in fact terminated its service agreement with Synergy effective June 30, 1998[16] as a cost-saving measure.
The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a legitimate contractor. If Synergy is found to be a mere job-only contractor, respondents could be considered as regular employees of petitioner as Synergy would then be a mere agent of petitioner in which case respondents would be entitled to all the benefits granted to petitioner's regular employees; otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered employees of Synergy.
The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor Code which reads:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02, Series of 2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended) as follows:
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
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. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (Emphasis, capitalization and underscoring supplied)
Section 3. Trilateral relationship in contracting arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service. (Emphasis and underscoring supplied)
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where 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 [sic] present:
"Substantial capital or investment" and the "right to control" are defined in the same Section 5 of the Department Order as follows:
(i) (ii)
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work or service contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work performed by almost all of the respondents loading and unloading of baggage and cargo of passengers is directly related to the main business of petitioner. And the equipment used by respondents as station loaders, such as trailers and conveyors, are owned by petitioner.[17]
Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for Synergy to be considered a legitimate contractor, citing Neri v. National Labor Relations Commission.[18] Petitioner's reliance on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital stock of P1 million fully subscribed and paid for.[19] The corporation's status as independent contractor had in fact been previously confirmed in an earlier case[20] by this Court which found it to be serving, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc."
In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the NLRC that Synergy has a substantial capital to engage in legitimate contracting, it failed to present evidence thereon. As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent SYNERGY has substantial capital, but there is no showing in the records as to how much is that capital. Neither had respondents shown that SYNERGY has such substantial capital. x x x[21] (Underscoring supplied)
It was only after the appellate court rendered its challenged Decision of September 29, 2002 when petitioner, in its Motion for Reconsideration of the decision, sought to prove, for the first time, Synergy's substantial capitalization by attaching photocopies of Synergy's financial statements, e.g., balance sheets, statements of income and retained earnings, marked as "Annexes 'A' 'A-4.'"[22]
More significantly, however, is that respondents worked alongside petitioner's regular employees who were performing identical work.[23] As San Miguel Corporation v. Aballa[24] and Dole Philippines, Inc. v. Esteva, et al.[25] teach, such is an indicium of labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for convenience, re- quoted:
Even if only one of the two elements is present then, there is labor-only contracting.
(i) (ii)
The control test element under the immediately-quoted paragraph (ii), which was not present in the old Implementing Rules (Department Order No. 10, Series of 1997),[26] echoes the prevailing jurisprudential trend[27] elevating such element as a primary determinant of employer-employee relationship in job contracting agreements.
One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employer's control except only as to the results.[28]
While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the workplace.
Even the parties' Agreement does not lend support to petitioner's claim, thus:
Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.
CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading, unloading and delivery Work as well as provide all equipment, loading, unloading and delivery equipment, materials, supplies and tools necessary for the performance of the Work. CONTRACTOR shall upon OWNER'S request furnish the latter with information regarding the qualifications of the former's workers, to prove their capability and experience. Contractor shall require all its workers, employees, suppliers and visitors to comply with OWNER'S rules, regulations, procedures and directives relative to the safety and security of OWNER'S premises, properties and operations. For this purpose, CONTRACTOR shall furnish its employees and workers identification cards to be countersigned by OWNER and uniforms to be approved by OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit entry into OWNER'S premises of any person employed therein by CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not comply with OWNER'S reasonable instructions and requests regarding security, safety and other matters and such person shall not again be employed to perform the services hereunder without OWNER'S permission.[29] (Underscoring partly in the original and partly supplied; emphasis supplied)
Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of plane arrivals.[30] And as the NLRC found, petitioner's managers and supervisors approved respondents' weekly work assignments and respondents and other regular PAL employees were all referred to as "station attendants" of the cargo operation and airfreight services of petitioner.[31]
Respondents having performed tasks which are usually necessary and desirable in the air transportation business of petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.[32]
The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship. For it is the totality of the facts and surrounding circumstances of the case[33] which is determinative of the parties' relationship.
Respecting the dismissal on November 15, 1992[34] of Auxtero, a regular employee of petitioner who had been working as utility man/helper since November 1988, it is not legally justified for want of just or authorized cause therefor and for non-compliance with procedural due process. Petitioner's claim that he abandoned his work does not persuade.[35] The elements of abandonment being (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship manifested by some overt acts,[36] the onus probandi lies with petitioner which, however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed from employment, should be entitled to salary differential[37] from the time he rendered one year of service until his dismissal, reinstatement plus backwages until the finality of this decision.[38] In view, however, of the long period of time[39] that had elapsed since his dismissal on November 15, 1992, it would be appropriate to award separation pay of one (1) month salary for each year of service, in lieu of reinstatement.[40]
As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate court, ordering petitioner to accept them as its regular employees and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the pertinent Collective Bargaining Agreement.
Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC and the Court of Appeals, for during the pendency of this case, it was forced to reduce its personnel due to heavy losses caused by economic crisis and the pilots' strike of June 5, 1998.[41] Hence, there are no available positions where respondents could be placed.
And petitioner informs that "the employment contracts of all if not most of the respondents . . . were terminated by Synergy effective 30 June 1998 when petitioner terminated its contract with Synergy."[42]
Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In fact, petitioner waived this defense by failing to raise it in its Memorandum filed on June 14, 1999 before the Court of Appeals.[43] Further, the notice of termination in 1998 was in disregard of a subsisting temporary restraining order[44] to preserve the status quo, issued by this Court in 1996 before it referred the case to the Court of Appeals in January 1999. So as to thwart the attempt to subvert the implementation of the assailed decision, respondents are deemed to be continuously employed by petitioner, for purposes of computing the wages and benefits due respondents.
Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner, Synergy being a mere agent of the latter, had acquired security of tenure. As such, they could only be dismissed by petitioner, the real employer, on the basis of just or authorized cause, and with observance of procedural due process.
WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
There being no data from which this Court may determine the monetary liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for that purpose.
(a) (b)
SO ORDERED.
Carpio (Acting Chairperson), Azcuna, Tinga and Velasco, Jr. JJ., concur.
Quisumbing (Chairperson), On official leave per Special Order No. 485 dated February 14, 2008.
[1] NLRC records, Vol. I, pp. 168-177.
[2] Rollo, p. 136.
[3] Id. at 136-137.
[4] Id. at 138.
[5] Id. at 8; NLRC records, Vol. 1, p. 104.
[6] Ibid.; vide also NLRC records, Vol. 1, p. 151.
[7] Rollo, pp. 302-316.
[8] Id. at 315-316.
[9] Id. at 226-237.
[10] Id. at 236-237.
[11] CA rollo, p. 179.
[12] Rollo, pp. 7-17. Penned by Associate Justice B.A. Adefuin-De la Cruz and concurred in by then Presiding Justice Salome Montoya and Associate Justice Renato Dacudao.
[13] Id. at 29.
[14] Id. at 42-43.
[15] Id. at 47-49.
[16] Id. at 52.
[17] Id. at 184.
[18] G.R. Nos. 97008-09, July 23, 1993, 224 SCRA 717.
[19] Id. at 720.
[20] Citing Associated Labor Unions-TUCP v. National Labor Relations Commission, G.R. No. 101784, October 21, 1991, Third Division, Minute Resolution.
[21] Rollo, p. 285.
[22] Vide Petitioner's Motion for Reconsideration of CA Decision of September 29, 2000, id. at 425-450.
[23] Id. at 348-349; vide NLRC records, Vol. 1, pp. 105 and 223; Position Papers for Petitioner, NLRC records, Vol. 1, pp. 83-92 and pp. 156-167; Affidavit of Benedicto A. Auxtero, NLRC records, Vol. 1, p. 185; Memorandum for petitioner, NLRC records, Vol. 1, pp. 206-216.
[24] G.R. No. 149011, June 28, 2005, 461 SCRA 392, 425. This Court held:
[25] G.R. No. 161115, November 30, 2006, 509 SCRA 332.x x x x
More. Private respondents had been working in the aqua processing plant inside the SMC compound alongside regular SMC shrimp processing workers performing identical jobs under the same SMC supervisors. This circumstance is another indicium of the existence of a labor-only contractorship.
x x x x (Underscoring supplied)
[26] Section 4(f) of Rule VIII-A of the Implementing Rules of Book III, as added by Department Order No. 10, Series of 1997, merely provides:
(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and the following elements are present:
[27] Vide Neri v. National Labor Relations Commission, supra note 18; Aurora Land Projects Corp. v. National Labor Relations Commission, 334 Phil. 44, 48 (1997); Escario v. National Labor Relations Commission, G.R. No. 124055, June 8, 2000, 333 SCRA 257; Vinoya v. National Labor Relations Commission, G.R. No. 126586, February 2, 2000, 324 SCRA 469; National Power Corporation v. Court of Appeals, G.R. No. 119121, August 14, 1998, 294 SCRA 209.
(i) (ii)
[28] Acevedo v. Advanstar Company, Inc., G.R. No. 157656, November 11, 2005, 474 SCRA 656, 668 citing New Golden City Builders and Development Corporation v. Court of Appeals, 463 Phil. 821 (2003); San Miguel Corporation v. Aballa, supra note 24 at 421.
[29] Rollo, p. 170.
[30] NLRC records, Vol. 1, p. 6.
[31] Id. at 477.
[32] Aboitiz Haulers, Inc. v. Dimapatoi, G.R. No. 148619, September 19, 2006, 502 SCRA 271, 287 citing Guinnux Interiors, Inc. v. National Labor Relations Commission, 339 Phil. 75, 78-79 (1997); Manila Water Company Inc. v. Peña, G.R. No. 158255, July 8, 2004, 434 SCRA 53, 60-61.
[33] San Miguel Corporation v. Aballa, supra note 24 at 422-423 (citation omitted).
[34] NLRC records, Vol. 1, p. 185.
[35] Floren Hotel v. National Labor Relations Commission, G.R. No. 155264, May 6, 2005, 458 SCRA 128, 144; Masagana Concrete Products v. NLRC, 372 Phil. 459 (1999).
[36] Northwest Tourism Corp. v. Court of Appeals, Former Special Third Division, G.R. No. 150591, June 27, 2005, 461 SCRA 298, 309; ACD Investigation Security Agency, Inc. v. Daquera, G.R. No. 147473, March 30, 2004, 426 SCRA 494; Premier Development Bank v. NLRC, 354 Phil. 851 (1998).
[37] Vide Cinderella Marketing Corporation v. NLRC, 353 Phil. 284 (1998); ABS-CBN Broadcasting Corporation v. Nazareno, G.R. No. 164156, September 2006, 503 SCRA 204; Kimberly-Clark (Phils.), Inc., v. Secretary of Labor, G.R. No. 156668, November 23, 2007 for jurisprudence on regularization differential.
[38] Star Paper Corporation v. Espiritu, G.R. No. 154006, November 2, 2006, 506 SCRA 556, 568; Tan v. Lagrama, G.R. No. 151228, August 15, 2002, 387 SCRA 393, 406; Prudential Bank and Trust Co. v. Reyes, G.R. No. 141093, February 20, 2001, 352 SCRA 316, 332.
[39] Gold City Integrated Port Service, Inc. v. National Labor Relations Commission, G.R. No. 103560, July 6, 1995, 245 SCRA 627, 641; Panday v. National Labor Relations Commission, G.R. No. 67664, May 20, 1992, 209 SCRA 122.
[40] Northwest Tourism Corp. v. Court of Appeals, Former Special Third Division, G.R. No. 150591, June 27, 2005, 461 SCRA 298, 311; F.F. Marine Corporation v. National Labor Relations Commission, Second Division, G.R. No. 152039, April 8, 2005, 455 SCRA 154, 174.
[41] Rollo, p. 53.
[42] Id. at 54; vide Annexes "B" "B-12" inclusive, pp. 453-465.
[43] Vide rollo, pp. 382-396.
[44] Rollo, pp. 327-341.