CASE DIGEST: Daguinod v. Southgate Foods Inc.


MARVIN O. DAGUINOD, petitioner, v. SOUTHGATE FOODS INC., represented by MAUREEN O. FERRER and GENERATION ONE RESOURCE SERVICE AND MULTIPURPOSE COOPERATIVE: represented by RESTY CRUZ, respondents
G.R. No. 227795                |              February 20, 2019

 

TOPIC: Contract and Subcontracting of Labor

FACTS:

Petitioner Marvin Daguinod was assigned as counter crew/cashier of Jollibee Alphaland pursuant to a Service Agreement that Generation One Resource Service and Multi-Purpose Cooperative will provide “specified non-core functions and operational activities” for the franchise operator Southgate Foods, Inc’s Jollibee Alphaland branch.

Daguinod also executed a Service Contract with Generation One which stated that Generation One was contracted by Southgate to perform “specified peripheral and support services.” In the Service Contract, Daguinod was referred to as a service provider and member of Generation One cooperative. The specific work responsibilities to be performed by Daguinod were left blank. The period of Daguinod’s services was stated as “beginning Sept. 9, 2010 until the end of the project.”

To become a member of Generation One, Daguinod was required to pay a membership fee of P250.00 and participate in “capital build-up and savings program” which obligated him to acquire 150 paid-up share in Generation One, valued at P1,500.00. Prior to his employment/membership in Generation One cooperative, Daguinod was employed directly bu Southgate as counter crew.

On April 10, 2011, Daguinod was accused of theft and was then dismissed.

ISSUES:

Whether Generation One is a legitimate labor contractor

RULING:

Generation One is not a legitimate labor contract, thus, Daguinod is a regular employee of Southgate.

Under Section 4(a) of DO 18-02, legitimate labor contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. The “principal” refers to any employer who puts out or farms out a job service or work to a contractor or subcontractor.

Meanwhile, labor-only contracting is prohibited and defined under Section 5 of DO 18-02. When there is labor-only contracting, Section 7 of DO 18-02 states that the principal shall be deemed the employer of the contractual employee.

In Garden of Memories Park and Life Plan, Inc. v. NLRC, the Court said that in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employer’s power with respect to the hiring, firing and payment of the contractor’s workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.

On the other hand, there is labor-only contracting where: (a) 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 (b) the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer.

Based on this, one of the factors in determining whether there is a labor-only contracting is the nature of the employee’s job; whether the work he performs is necessary and desirable to the business.

In this particular case, Daguinod was assigned to perform cash control activities which entails gathering of orders and assembling food on the tray for dine-in customers or for take-out. As cashier, Daguinod was also tasked to receive payments and give change. These tasks are undoubtedly necessary and desirable for a business like that of Jollibee. It is not merely a non-core or peripheral activity as Generation One and Southgate claim. These circumstance lead to no other conclusion than that Daguinod was a regular employee of Southgate and that Generation One was a mere agent of Southgate.

The ownership of substantial capital in the form of tools, equipment, machineries, work premises, and other properties, by the contractor is another factor in establishing whether it is legitimate. Generation One submitted only one Income Tax Return for the year  December 2010 but did not submit any Audited Financial Statements to show its assets, liabilities, and equity. It only submitted notes to the AFS for the year ended 2010 which does not show a complete picture of its financial standing. In fine, the documents submitted are insufficient to prove that Generation One possesses substantial capital to be considered a legitimate labor contractor.

Generation One cannot rely either on their Certificate of Registration as an Independent Contractor issued by the DOLE. In San Miguel Corporation v. Semillano, the Court ruled that it is not a conclusive evidence of being a legitimate labor contractor. The fact of registration simply prevents the legal presumption of being a mere labor-only contractor from arising. In distinguishing between permissible job contracting and prohibited labor-only contracting, the totality of the facts and the surrounding circumstances of the case are to be considered.

A perusal of Daguinod’s Service Contract shows that the specific work responsibilities were unspecified, leaving the “other requirements to perform the services to be part of the orientation at the designated place of assignment,” thus, suggesting that the right to determine not only the end to be achieved, but also the manner and means to achieve that end, was reposed in Southgate. Consequently, Southgate shall be deemed as the direct employer of Daguinod.


 

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