"Previous declarations that a company is an independent job contractor cannot validly be the basis in concluding its status as such in another case involving a different employee. The totality of the facts and surrounding circumstances, distinct in every case, must be assessed in determining whether an entity is a legitimate job contractor or a labor-only contractor."[1]
We note that the issues presented before us involve factual matters, which are generally beyond the scope of this review. The conflicting findings of the LA, NLRC, and CA, however, give us basis to take cognizance of this case to finally put the issues to rest.[31] Nevertheless, in doing so, we are mindful of the distinct approach in reviewing a CA ruling in labor cases, i.e., our examination is limited to the correctness of the CA's determination of the presence or absence of grave abuse of discretion on the part of the NLRC. When the NLRC ruling has basis in evidence and the applicable law and jurisprudence, no grave abuse of discretion exists for the CA to overturn it.[32]
PPI and CBMI were engaged in the proscribed labor-only contracting
Labor contracting or outsourcing of services is not totally prohibited in our jurisdiction. Articles 106 to 109 of the Labor Code and DOLE DO No. 18-02, Series of 2002[33] and DO No. 18-A, Series of 2011,[34] the implementing rules in force at the time of Conjusta's employment, provide legal basis for service contracting, but also clearly delineate when it is not permitted. Section 4 of DO No. 18-A considers contracting or subcontracting legitimate if all of the following circumstances concur:
(a) The contractor must be registered in accordance with these Rules and carries a distinct and independent business and undertakes to perform the job, work or service on its own responsibility, according to its own manner and method, and free from control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;
(b) The contractor has substantial capital and/or investment; and
(c) The Service Agreement ensures compliance with all the rights and benefits under Labor Laws.
On the other hand, Article 106 of the Labor Code defines the prohibited labor-only contracting, viz.:
Article 106. Contractor or Subcontractor. — x x x
x x x x
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.
Section 5 of DO No. 18-02 further explains the concept of labor-only contracting as follows:
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 job, work or service for a principal, and any of the following elements are present:
i) [t]he 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.
RE: The SUBSTANTIAL CAPITAL OR INVESTMENT
x x x x"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.
RE: The RIGHT TO CONTROL
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.
The latest applicable amendment to the implementing rules under Section 6 of DO No. 18-A enumerates the following elements of labor-only contracting, to wit:
"(a) The contractor does not have substantial capital or investments in the form of tools, equipment, machineries, work premises, among others, and the employees recruited and placed are performing activities which are usually necessary or desirable to the operation of the company, or directly related to the main business of the principal 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; or
(b) The contractor does not exercise the right to control over the performance of the work of the employee.
In fine, the following must be considered in determining whether CBMI is a legitimate job contractor or is engaged in labor-only contracting: (1) registration with the proper government agencies; (2) existence of substantial capital or investment; (3) service agreement that ensures compliance with all the rights and benefits under labor laws; (4) nature of the activities performed by the employees, i.e., if they are usually necessary or desirable to the operation of the principal's company or directly related to the main business of the principal within a definite predetermined period; and (5) the exercise of the right to control the performance of the employees' work.[35]"
Considering these specific conditions or elements, the CA gravely erred when it determined CBMI's character as a legitimate job contractor solely on the basis of the Court's pronouncements in Asprec and Cayetano [e.g. previous case involving the same manpower agency and the principal]. The principle of stare decisis cannot be applied in determining whether one is engaged in the permissible job contracting or otherwise since such characterization should be based on the distinct features of the relationship between the parties, and the totality of the facts and attendant circumstances of each case,[36] measured against the terms of and criteria set by the statute.[37] Specifically, while Asprec and Cayetano also involved PPI and CBMI, the nature of work and treatment of employment of the employees in those cases may be different from Conjusta's. Hence, an independent determination of Conjusta's case is necessary, which was aptly undertaken by the NLRC in this case.
As correctly observed by the NLRC, the only evidence on record to support PPI and CBMI's claim of legitimate job contracting are the certificates of registration, financial statements, and service agreements. But we have consistently ruled that a certificate of registration as an independent contractor is not conclusive evidence of such status. Such registration merely prevents the legal presumption of being a labor-only contractor from arising.[38] The financial statements presented to prove that CBMI has substantial capital likewise do not suffice to classify it as an independent contractor. It is settled that, despite proof of substantial capital, a contractor is still considered engaged in labor-only contracting whenever it is established that the principal actually controls the manner of the employee's work.[39]
Finally, we cannot blindly rely upon the contractual declarations depicting CBMI as a legitimate job contractor. As we have held in Daguinod v. Southgate Foods, Inc.,[40] the true nature of the relationship between the principal, contractor, and employee cannot be dictated by mere expedience of a unilateral declaration in a contract.[41] Thus, we quote with approval the NLRC's assessment on the totality of attendant circumstances vis-à-vis the criteria set by the statute:
We consider several factors in concluding that CBMI was [a] labor-only contract[or].
First, there is want of evidence that CBMI carries on an independent business or undertake[s] the performance of its service contracts according to its own manner and method, free from the control and supervision of PPI. While the various service agreements between PPI and CBMI contained the latter's undertaking for the employees' qualification and training, hiring and payroll, as well as their supervision, discipline, suspension or termination, said clauses are still but empty words that would hardly help PPI's case, in absence of concrete proof that CBMI indeed carries on an independent business. In San Miguel Corporation v. Semillano [637 Phil. 115 (2010)], the Supreme Court instructed, to wit:
"Despite the fact that the service contracts contain stipulations which are earmarks of independent contractorship, they do not make it legally so. The language of a contract is neither determinative nor conclusive of the relationship between the parties. Petitioner SMC and AMPCO cannot dictate, by a declaration in a contract, the character of AMPCO's business, that is, whether as labor-only contractor, or job contractor. AMPCO's character should be measured in terms of, and determined by, the criteria set by statue. At a closer look, AMPCO's actual status and participation regarding respondents' employment clearly belie the contents of the written service contract."Further, in the Polyfoam-RGC International [Corporation, 687 Phil. 173 (2012)], the Supreme Court observed, thus:
"Gramaje did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, Polyfoam, its apparent role having been merely to recruit persons to work for Polyfoam. It is undisputed that respondent had performed his task of packing Polyfoam's foam products in Polyfoam's premises. As to the recruitment of respondent, petitioners were able to establish only that respondents' application was referred to Gramaje, but that is all. Prior to his termination, respondent had been performing the same job in Poly foam's business for almost six (6) years."
Similarly in this case, there is want of evidence that it was CBMI who hired [Conjusta]. In fact, there was no contract of employment showing that [Conjusta] was an employee of CBMI, nor were there records submitted in evidence to show such relationship. It is likewise undisputed that as a messenger, (Conjusta) had been performing his task[s] at PPI's premises for about fourteen (14) years. x x x [A]ll those times, all the tools and equipment which he used in the performance of his work are owned by PPI and the latter's managers and supervisors controlled his work inside the company premises.
x x x x
That PPI exercised the right of control over [Conjusta's] work is clear and unmistakable. Said right to control refers 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.
Second, a perusal of the various contract of services executed between PPI and CBMI, which spanned for several years from 1999 to 2012, would show that CBMI undertook to supply manpower only. Said undertaking, which contained the scope of contracted services which are similarly worded with the other contracts, are hereby reproduced as follows:
"1. CONTRACTED SERVICES
The CONTRACTOR shall render, undertake and perform in the CLIENT's places of business the following services (hereinafter referred to as "Contracted Service"):a. Waitering services
b. Food and kitchen services
c. Rider/Delivery services
d. Sanitation services
e. Warehousing services
f. Commissary Services/Cashiering
g. Other allied services as may be required by the CLIENTThe CONTRACTOR shall deploy its employees at the designated place of operation subject to prior consultation and agreement with the CLIENT."
"I. SCOPE OF SERVICES
The INDEPENDENT CONTRACTOR agrees to provide the following services to the CLIENT at the CLIENT's places of business listed in ANNEX A of the Contract:
i. Kitchen Services
ii. Busing Services
iii. Rider/Delivery Services
iv. Sanitation ServicesThe INDEPENDENT CONTRACTOR shall also provide the tools and equipment necessary for the rendition of said services."
x x x x
"I. SCOPE OF SERVICES
The INDEPENDENT CONTRACTOR agrees to provide the following services to the CLIENT at the CLIENT's places of business listed in ANNEX A of the Contract:
i. Delivery Riders
ii. Commissary drivers
iii. Warehouse service personnelThe INDEPENDENT CONTRACTOR shall also provide the tools and equipment necessary for the rendition of said services."
Verily, by supplying manpower only, CBMI cannot be considered as an independent contractor. The High Court's observation in Coca-Cola Bottlers Phils. Inc. v. Agito [598 Phil. 909 (2009)] is worthy of mention, viz.:
"As the Court previously observed, the Contract of Services between Interserve and petitioner did not identify the work needed to be performed and the final result required to be accomplished. x x x Interserve did not obligate itself to perform an identifiable job, work, or service for petitioner, but merely bound itself to provide the latter with specific types of employees x x x performing tasks directly related to [petitioner's] principal business."
x x x xThird, the fact that CBMI was registered as an independent contractor with DOLE would not prevent it from becoming [a] labor-only contractor in this case. Once again, in the San Miguel Corporation v. Semillano case, the High Court elucidated, thus:
"Petitioner cannot rely either on AMPCO's Certificate of Registration as an Independent Contractor issued by the proper Regional Office of the DOLE to prove its claim. It is not conclusive evidence of such status. 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."
Fourth, it is without any doubt that [Conjusta's] job as [a] messenger is necessary and vital to PPI's business as the Philippine franchisee of Pizza Hut which requires waitering, food and kitchen services, sanitation, delivery, warehousing, commissary and related services for its various restaurants. Otherwise, [Conjusta] would not have been repeatedly and continuously hired by PPI for fourteen (14) years. It has been held that such repeated and continuing need for the performance of the job is sufficient evidence of the necessity, if not indispensability[,] of the activity. to the business.[42] (Emphasis supplied; citations omitted)Contrastingly, the CA merely made inference from previous cases without reference to the evidence on hand in concluding that CBMI was a legitimate job contractor, and as such was Conjusta's direct employer. We emphasize that the Court has been consistent in ruling that the totality of the facts and the surrounding circumstances of the case must be considered in distinguishing prohibited labor-only contracting from permissible job contracting.[43] In fact, in Cayetano relied upon by the CA, we accentuated the need for an independent consideration of the attending circumstances of a case in determining the legality or illegality of a contractor's undertaking.[44]
Notably, even the LA, which found CBMI to be a legitimate job contractor, ruled that Conjusta is not one of those deployed by CBMI to PPI. The LA ruled that Conjusta is PPI's regular employee since Conjusta started working directly with PPI, continuously did so for 14 years without any intervention from CBMI, and there is no documentary proof that shows any connection between Conjusta and CBMI.[45] Indeed, the element of control is a strong indicator of the nature of a contractor's activity and its relationship with the employee. Whenever it is established, as in this case, that the principal, not the contractor, actually controls the manner of the employee's work, such contractor is considered as engaged in labor-only contracting.[46] Besides, these uniform factual findings of the LA and the NLRC, which are deemed to have acquired expertise in matters within their respective jurisdiction, should not be disturbed and are binding upon the reviewing court, being supported by substantial evidence.[47]
PPI and CBMI are solidarily liable
With the finding that CBMI is a labor-only contractor, it is considered as a mere agent of PPI, which in turn is deemed to be Conjusta's employer.[48] Section 7 of DO No. 18-02 provides:
Section 7. Existence of an employer-employee relationship. — x x xThe principal shall be deemed the employer of the contractual employee in any of the following cases, as declared by a competent authority:
(a) Where there is labor-only contracting; x x x
x x x xConsequently, PPI and CBMI are solidarity liable for Conjusta's illegal dismissal and monetary claims,[49] consistent with our ruling in San Miguel Corporation v. MAERC Integrated Services, Inc.,[50] viz.:
In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for the payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.
On the other hand, in labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarity liable with the labor-only contractor for all the rightful claims of the employees.
This distinction between job contractor and labor-only contractor x x x will not discharge [the principal] from paying the separation benefits of the workers, inasmuch as [the contractor] was shown to be a labor-only contractor; in which case, [the principal's] liability is that of a direct employer and thus solidarity liable with [the contractor].[51]
ACCORDINGLY, the Petition for Review on Certiorari is GRANTED. The Decision dated October 30, 2019 and the Resolution dated March 6, 2020 of the Court of Appeals in CA-G.R. SP No. 158667 are MODIFIED. Consolidated Building Maintenance, Inc. is declared as a labor-only contractor, and PPI Holdings, Inc. is Rico Palic Conjusta's employer. The Decision dated May 31, 2018 and the Resolution dated August 31, 2018 of the National Labor Relations Commission in NLRC LAC No. 01-000394-18 are REINSTATED.
SO ORDERED.
LOPEZ, M., J.
FOOTNOTES
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