CASE DIGEST: Aliviado v. Procter & Gamble

 

JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, et. al., petitioners, vs. PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., respondents
G. R. No. 160506               |              June 6, 2011

 

TOPIC: Contracting and Subcontracting of Labor

FACTS:

On March 9, 2010, the SC rendered a Decision holding that: (a) Promm-Gemm, Inc. (Promm-Gem) is a legitimate independent contractor; (b) Sales and Promotions Services (SAPS) is a labor-only contractor, consequently its employees are considered employees of Procter & Gamble Phils., Inc. (P&G); (c) Promm-Gem is guilty of illegal dismissal; (d) SAPS/P&G is likewise guilty of illegal dismissal; (e) petitioners are entitled to reinstatement; and (f) dismissed employees of SAPS/P&G are entitled to moral damages and attorney’s fees there being bad faith in their dismissal.

Before any of the parties received the notice of Entry of Judgment, P&G filed a Motion to Refer the Case to the Supreme Court En Banc with Second Motion for Reconsideration and Motion for Clarification.

P&G claims that the Court erred in not applying the “four-fold” test, particularly the “control test” in determining whether SAPS is a legitimate independent contractor or a labor-only contractor.

ISSUE:

Whether or not SAPS is a labor-only contractor

RULING:

The applicable rules in determining whether one is a legitimate independent contractor or a labor-only contractor are Article 106 of the Labor Code and Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-02.

According to Article 106, “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.”

On the same vein, Rule VIII-A, ook III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18-02, pertinently provides:

“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 present:

i)                    The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; OR

ii)                   The contractor does not exercise the right to control over the performance of the work of the contractual employee.” 

It can be therefore deduced from the above-provision that labor-only contracting exists when ANY of the two elements is present. The “control test” is merely one of the factors to consider. In the Court’s March 9, 2010 Decision, it was established that SAPS has no substantial capitalization and it was performing merchandising and promotional activities which are directly related to P&G’s business. Since SAPS met one of the requirements, it was enough basis for the Court to hold that it is a labor-only contractor.

As decreed in Coca-Cola Bottlers Phils., Inc. v. Agito:

“The law clearly establishes an employer-employee relationship between the principal employer and the contractor’s employee upon a finding that the contractor is engaged in “labor-only” contracting. Article 106 of the Labor Code categorically states: “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 persons are performing activities which are directly related to the principal business of such employer.” Thus, performing activities directly related to the principal business of the employer is only one of the two indicators that “labor-only” contracting exists; the other is lack of substantial capital or investment.”


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