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355 Phil. 103


[ G.R. No. 124643, July 30, 1998 ]




Petitioners seek, via the remedy of certiorari under Rule 65,[1] (a) the reversal of the decision of 23 August 1995, as well as the subsequent resolution of 07 November 1995, of respondent National Labor Relations Commission ("NLRC") and (b) the reinstatement of the decision, dated 22 September 1994, of the Labor Arbiter.

The five petitioners were daily wage earners taken in by BRGT Agency (“BRGT”), also known as Riz-Man Co., Inc., and assigned to work by the latter in P & R Parts and Machineries Corporation ("P & R"), a company engaged in the business of steel and metal fabrication of machine spare parts, under the umbrella of a “Job Contract” entered into by and between the two entities. The nature of work, date of hiring, and the daily wage of petitioners immediately before the termination of their employment were indicated to be as hereunder so stated:

Buffing, Bench Section
August 5, 1992
Buffing, Bench Section
October 17, 1992
Assembler Bench Section
November 18, 1992
Lathe Machine Operator
September 8, 1992
On 09 November 1993, member-workers of “P & R Parts Employees' Union” declared a strike (the subject matter of a different case, docketed RAB-IV-6-6720-94-RI, before the Arbitration Branch of the NLRC). Petitioners were required by P & R, through its Personnel Manager Ruben Ramillano, to shed light on the incident but, instead of heeding the request, petitioners allegedly joined the strikers in sympathy with the latter.

Petitioners were dismissed from employment in December of 1993 (Jesus Rico and John Limbago on 13 December 1993; Fermin Zacate on 17 December 1993 and Aniceto Esto on 22 December 1993) except for Nazario Ponce whose employment was terminated the month previous on 26 November 1993 supposedly for sleeping on duty. Petitioners timely filed their respective complaints against P & R for illegal dismissal, underpayment of wages, damages and attorney's fees. BRGT was ordered impleaded party respondent after P & R had stated that petitioners should have directed their complaint with that agency. P & R argued that petitioners were merely assigned to it by BRGT agency pursuant to a contract of service executed on 22 September 1993 between the two entities.

In a decision, dated 22 September 1994, the Labor Arbiter rendered judgment in favor of petitioners; thus -

"WHEREFORE, premises considered, the following orders are hereby entered:

"1.     Declaring the existence of employer-employee relationship between herein respondent P & R Parts & Machineries Corporation and complainants Nazario Ponce, Fermin Zacate, Jesus Rico, Aniceto Esto and John Herman Limbago;

"2.     Declaring the termination of herein complainants illegal;

"3.     Ordering respondent P & R Parts & Machineries Corporation to reinstate complainants Nazario Ponce, Fermin Zacate, Jesus Rico, Aniceto Esto and John Herman Limbago to their former positions with full status and rights of a (sic) regular employees;

"4.     Ordering respondent P & R Parts & Machineries Corporation and impleaded party respondent BRGT Agency to pay, jointly and severally, unto the complainants the amount appearing below as and for payment of their backwages and wage differentials:

“1. Nazario Ponce


“2. Fermin Zacate


“3. Jesus Rico


“4. Aniceto Esto


“5. John Herman (Limbago)




and the amount of P17,712.60 as and for attorney's fees.

"5.     All other claims are hereby dismissed for lack of merit."[2]

Respondent P & R, in its appeal to the NLRC, assailed the findings of the Labor Arbiter particularly on the existence of an employer-employee relationship between P & R and petitioners. P & R insisted that petitioners were employees of BRGT Agency, an independent contractor, pursuant to the latter’s "Job contract" with P & R. This contract provided:



"This contract made and entered into by and between:

"P & R PARTS & MACHINERIES, INC., a Domestic Company duly authorized and existing under and pursuant to Philippine Laws with business address at A. Bonifacio Ave., Cainta, Rizal, represented in this act by Ruben A. Ramillano, Personnel Manager and hereinafter referred to as FIRST PARTY:

"RIZ-MAN COMPANY, INC., a Domestic Company, organized and existing under Philippine Laws, with business address at 2nd Flr. Teruel Bldg., A Bonifacio Ave., Cainta, Rizal represented in this act by MR. REYNALDO MATIAS President and hereinafter referred to as SECOND PARTY:

"W I T N E S S E T H

"That the SECOND PARTY hereby proposes to the FIRST PARTY [to] perform, execute and accomplish[ed] (sic) the hereunder described job contract with the SECOND PARTY Responsible for providing all Manpower required and such accessory equipment necessary and the FIRST PARTY, hereby accepts such proposal subject to the following terms and condition[s] to wit:

"1.            This job contract shall be for a period of Five (5) Months from August 16, 1993 to January 16, 1994 which may be renewed and/or extend[ed] at the option of the FIRST PARTY with notice to be served on the SECOND PARTY unless it is sooner terminated by their party [in writing] at least thirty (30) days prior to the extended terminat[ion] date;

"2.            The SECOND PARTY and the latter's (sic) shall undertake to perform the job schedule mentioned in Annex 'A' hereto attached and made an integral part hereof;

"3.            The FIRST PARTY shall pay the SECOND PARTY, the weekly contract price per piece job accomplished payable on Friday each week;

"4.            No employer-employee relationship shall (exist) between the FIRST PARTY and the latter's staff as regards to the FIRST PARTY. The SECOND PARTY may field the necessary staff on apprenticeship, training and/or such other status, provided that the job herein subject of this contract shall [be] completely accomplished;

"The above provision notwithstanding the FIRST PARTY shall have the right to supervise and advice the SECOND PARTY on quality of job performance being conducted;

"5.            Should the job contract be required to be performed at the premises of the FIRST PARTY, the FIRST PARTY shall provide adequate safe and healthy working conditions to the SECOND PARTY and (the) latter's staff. Such specialized tools and equipment may be provided by the FIRST PARTY;

"6.            Notwithstanding mutual understanding and supervision of the job agreement herein stipulated, no staff personnel of the SECOND PARTY shall be required to perform more than eight (8) hour daily work. Any extension or overtime work shall correspondingly be charged the FIRST PARTY, who shall be benefited by such extension time of such job accomplishment;

"7.            Aside from the stipulation of this agreement, the SECOND PARTY and all persons performing such job under its supervision and control hereby undertake to observe all rules regulations of the FIRST PARTY, including but not limited to quality of job performance, regularity of job output and security and safety;

"8.            The direct control on all job personnel shall be vested on the SECOND PARTY but the FIRST PARTY may assign person or persons to any job not stipulated herein upon notice and with consent of the SECOND PARTY;

"9.            The SECOND PARTY hereby acknowledges and assumes full responsibility for the acts of its staff assigned to the first party, as such, the SECOND PARTY hereby expressly agrees to answer for any damages or liability existing from any acts or acts of its staff while in the performance of their duties to the FIRST PARTY, its official and employees and to third persons;

"10. The SECOND PARTY shall [be] responsible and answerable to its staff in accordance [with] existing laws and such other status rules and regulations. (The) FIRST PARTY shall not [be] liable to the staff and personnel of the SECOND PARTY by virtue of the herein stated job contract. Should the FIRST PARTY be made liable for the SECOND PARTY's failure to comply with the requirements of the laws, rules and regulations, the latter hereby oblig[ates] itself [to] indemnify the FIRST PARTY to the full extent of such liability, including attorney's fees, if any.

"11.          Any breach of the stipulation(s) of this job contract may be a ground for the re(sci)ssion of this agreement, without need of judicial order.

"IN WITNESS WHEREOF, the parties hereunto set their hands, this _____ day of __________, 1993.



Personnel Manager


Operation In Charge"[3]

Respondent NLRC, in its decision of 23 August 1995, disagreed with the Labor Arbiter and curtly explained:
"After an in-depth review of the record taking into consideration, the arguments of the parties to issues above, we find for the appellant P & R Parts Machineries Co.

"Clearly, We find grave abuse of discretion on the part of the Labor Arbiter in holding that there was employee-employer relationship between appellees and appellant. The Labor Arbiter should have given respect to the job contract between appellees and respondent BRGT Agency, firstly, because appellees were only hired to work in the painting, rusting and bubbing which job(s) are not necessarily connected with the steel and metal fabrication of appellant. These type(s) of work do not require machine tools as the same can be done by simple hand tools such as brush and scrapers. Secondly, when asked to help appellant to pinpoint the workers who committed (the) act of sabotage, they left their work and join(ed) the strike. This act of appellees could have served as cue that they are not employees, but under an independent contractor.”[4]

The NLRC, consistently with its above ratiocination, declared the company not to have perforce been guilty of illegal dismissal, set aside for lack of merit the decision appealed from, and decreed the dismissal of the complaint of petitioners.

The plea made by petitioners for a reconsideration of the decision was denied in the resolution, dated 07 November 1995, of the NLRC.

In the instant special civil action for certiorari, petitioners ask for a review and reversal of the decision of NLRC. Specifically, petitioners come up with the following “errors” said to have been committed by public respondent:
"I.       Public respondent NLRC acted with grave abuse of discretion tantamount to acting without or in excess of jurisdiction by simply and arbitrarily disregarding evidence before it indicating the existence of employer-employee relationship between petitioners and P & R Parts or misapprehending evidence of such a nature as to compel a contrary conclusion if properly appreciated.

"II.      Public Respondent NLRC erred and gravely abused its discretion when it reversed the Labor Arbiter who had ruled that there is employer-employee relationship between petitioners and P & R Parts, despite that BRGT Agency A.K.A. Riz-Man Company, Inc. has disclaimed any contractual relationship with P & R Parts and had disclaimed the petitioners.

"III.     The public respondent NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction when it reversed the Labor Arbiter who had ruled that P & R Parts illegally dismissed petitioners, despite the fact that with BRGT Agency A.K.A. Riz-Man Company Inc. out of the way because of its denial that it had a contract to supply labor, there could only be but one employer which is P & R Parts which has no legal cause to terminate.”[5]
The questions raised would initially boil down to whether or not an employer-employee relationship has existed between petitioners and respondent P & R, on which issue, the findings of the Labor Arbiter and the NLRC are at complete variance. The NLRC has concluded that BRGT Agency[6] is an independent contractor. On his part, the Labor Arbiter, expressing negatively on the personality and capability of BRGT Agency to be an independent contractor, has so characterized the latter’s agreement with P & R as one of “labor-only contracting” or an act prohibited by Article 106 of the Labor Code.

The Court finds merit in the petition.

Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, an independent contractor is one who undertakes “job contracting,” i.e., a person who (a) carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof, and (b) has substantial capital or investment in the form of tools, equipments, machineries, work premises, and other materials which are necessary in the conduct of the business.[7] Jurisprudential holdings are to the effect that in determining the existence of an independent contractor relationship, several factors might 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.[8]

Section 9(a), Rule VIII, Book III, of the Omnibus Rules Implementing Article 106 of the Labor Code, provides, in turn, that a person who supplies workers to another shall be deemed to be merely engaged in “labor-only contracting,” a disallowed act, (a) when he does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials, and (b) when the workers recruited and placed by him perform activities that relate directly to the principal business or operations of the employer in which the workers are habitually employed. Such supplier of labor is considered merely as an agent or intermediary of the employer who can correspondingly be held responsible to the workers in the same manner and extent as if the latter are directly employed by him.[9]

The Court expresses its concurrence with the Labor Arbiter who, in observance of the above criteria and given the factual settings of the case, has concluded that the agreement between Riz-Man Co., Inc. (BRGT Agency), and P & R was one of “labor-only contracting,” thereby rendering both contractor and employer solidarily liable for the infraction of the Labor Code.

It would indeed appear that BRGT Agency was not so licensed to operate as an independent contractor nor was it properly bonded in connection with its job contract with P & R. No substantial evidence was given to indicate that BRGT Agency had been possessed of substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; or that it had its own work methods; or that it carried on business operations separate and distinct from that it had with private respondent P & R. BRGT Agency’s role apparently had been merely to get persons or employees to work for P & R Parts under the latter’s control and supervision.[10] Petitioners were never given work assignment at any place other than at the work premises of P & R. Petitioners were required to observe all rules and regulations of P & R pertaining, among other things, to the quality of job performance, regularity of job output and security and safety on the job. The nature of work performed by each of the petitioners – buffing, quality control, assembler, and lathe machine operation - hardly were said to be directly unrelated to private respondent P & R’s business of steel and metal fabrication of machine spare parts.

From the view of the Court, the NLRC, given the circumstances, did commit grave abuse of discretion when it completely discarded the findings of the Labor Arbiter.

The question next arises. Did P & R have a valid ground to terminate the employment of petitioners?

The claim of P & R that petitioners had joined the strikers after refusing to shed light on the alleged sabotage committed by the strikers was not adequately shown. Certainly, the mere expression of compassion or sympathy by petitioners and sharing a merienda with, or doling out a few pesos to, the striking workers could scarcely be a legal cause for dismissal. As regards Nazario Ponce who was allegedly caught sleeping on the job, no investigation appears to have been duly conducted to warrant his outright dismissal. The burden of proving just cause, as well as the proper observance of due process, to warrant the dismissal of an employee would fall on an employer seeking to pursue that extreme measure against the former. Unfortunately for P & R, it was unable to properly discharge that burden.

WHEREFORE, the writ of certiorari prayed for is GRANTED. The decision of the NLRC, dated 23 August 1995, and its subsequent resolution of 07 November 1995 are ANNULLED and SET ASIDE. The decision, dated 22 September 1994, of the Labor Arbiter is thereby REINSTATED and AFFIRMED.

Davide, Jr., (Chairman), Bellosillo, Panganiban, and Quisumbing, JJ., concur.

[1] Rules of Court.

[2] Rollo, p. 72.

[3] Rollo, pp. 61-62.

[4] Rollo, pp. 32-33.

[5] Rollo, pp. 15-16.

[6] In its pleadings before the Arbiter and the NLRC, BRGT Agency has admitted that Riz-Man Co., Inc., and BRGT Agency, are one and the same entity, and it has also failed as well to object to the references, allegations and statements made by petitioners and the Arbiter that BRGT Agency and Riz-Man Co., Inc., are one and the same entity. Its disclaimer at this stage of the proceeding cannot be countenanced.

[7] See Associated Anglo-American Tobacco Corporation vs. Clave, 189 SCRA 127; Villuga vs. NLRC, 225 SCRA 537; Mafinco Trading Corporation vs. Ople, et al., 70 SCRA 139; Phil. Mfg. Co. vs. Geronimo and Garcia, 96 Phil. 276.

[8] See Sandigan Savings & Loan Bank vs. NLRC, 254 SCRA 126; Aboitiz Shipping Emp. Assn. vs. NLRC, 186 SCRA 825; Ruga vs. NLRC, 181 SCRA 266; Brotherhood Labor Unity Movement of the Phils., et al. vs. Zamora, et al., 147 SCRA 49; Mafinco Trading Corp. vs. Ople, supra.

[9] Baguio vs. NLRC, 202 SCRA 465; Ecal, et al. vs. NLRC, 195 SCRA 224; Singer Sewing Machine Co. vs. Drilon, 193 SCRA 270; Associated Anglo-American Tobacco Corp. vs. Clave, supra.

[10] It might be noteworthy that private respondent BRGT Agency disclaimed, in its 29 October 1994 Appeal and Memorandum, not only the contractual relationship with private respondent P & R, but also the supervision and control over petitioners.

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