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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