358 Phil. 919
"WHEREFORE, premises considered, xxx PAL is hereby ordered to pay the following complainants separation pay at the rate of one month salary for every year of service, thus:On appeal, the National Labor Relations Commission (NLRC) affirmed the labor arbiter’s Decision in this wise:
1.) Manuel F. Parenas - P17,264.75 2.) Daniel Gaco -37,982.45 3.) Rodolfo Siaron -31,076.55 4.) Alfredo C. Montilla -31,076.55 5.) Romulo S. Castro - 27,623.60 6.) Elsa C. Castro - 31,076.55 7.) Marcelo Paragas - 44,888.35 8.) Romulo Parane - 13,411.80 9.) Rafael Sanchez - 31,076.55 10.) Inocencio Alcantara - 51,794.25 11.) Reynaldo Paraiso - 17,264.75 12.) Roberto Geronimo - 58,700.15 13.) Nomer E. Pescante - 24,170.65 14.) Benedicto Santos - 55,247.20 15.) Alberto Tomas - 20,717.70 16.) Bonifacio Bayeta, Jr. - 27,623.60 17.) Danilo Rodriguez - 27,623.60 18.) Carleto de la Cruz - 44,888.35 19.) Rafael Bequio - 20,717.70 20.) Eduardo Sitjar - 20,717.70 21.) Ruben M. Tanseco - 20,717.70 22.) Teodoro K. Discaya - 44,888.35 23.) Ernesto Evardone - 48,341.30 24.) Arnulfo Lavilla - 10,358.85 25.) Glecerio Elabarin - 27,623.60 26.) Marcelino Caneda - 27,623.60 27.) Epifanio Galibo - 20,717.70 28.) Benjamin Gandalera - 58,700.15 29.) Lino B. Dagohoy - 27,623.60 30.) Avelino Mullet - 27,623.60 31.) Jimmy M. Cordero - 20,717.70 32.) Ivanhoe Magno - 41,435.40 33.) Felix V. Catindoy - 24,170.65 34.) Ruben Daluz - 37,982.45 35.) Abenir R. Yarra - 41,435.40 36.) Santiago Cortes Jr. - 24,170.65 37.) Armando P. Lucido - 24,170.65 38.) Alberto Montilla - 34,529.50 39.) Renerio Capon - 17,264.75 40.) Leonardo Barroso - 6,905.90 41.) Ireneo Frondozo - 62,153.10 42.) Dionesio Banares - 24,170.65 43.) Marcelo Marzan - 20,717.70 44.) Alfredo Sta. Maria - 55,247.20 45.) Bernardo Mamaril - 13,811.80 46.) Carlos Delloro - 44,888.35 47.) Alcon de la Torre - 24,170.65 48.) Florentino Pestijo - 24,170.65
"The complaints of Edwin Pilapil, Pedro Bermas, and Orlando Orpiada against Stellar Industrial Services, Inc., are dismissed for lack of merit."
"WHEREFORE, except insofar as Stellar Industrial Services, Inc. is held jointly and severally liable with Philippine Airlines for the payment of complainants’ separation benefits, the Decision appealed from is hereby AFFIRMED."However, acting on the Motions for Reconsideration separately filed by petitioner and STELLAR, the NLRC modified its earlier Decision and ruled:
"WHEREFORE, our July 13, 1994 decision is hereby modified in that the separation pay adjudged in this case is hereby declared to be the sole liability of [Petitioner] Philippine Airlines, Inc."
"Sometime in 1977, PAL, a local air carrier, entered into a service agreement with STELLAR, a domestic corporation engaged, among others, in the business of job contracting janitorial services (PAL and STELLAR’s Agreement, Annex ‘1’ of PAL’s Position Paper, Annex "F", id.).
"Pursuant to their service agreement, which was impliedly renewed year after year, STELLAR hired workers to perform janitorial and maintenance services for PAL. Among those employed were [Complainants] Manuel Parenas, Daniel Gaco, Rodolfo Siaron, Alfredo C. Montilla, Romulo S. Castro, Elsa C. Castro, Marcelo Paragas, Romulo Parane, Rafael Sanchez, Inocencio [Alcantara], Reynaldo Paraiso, Roberto Geronimo, Nomer E. Pescante, Benedicto Santos, Alberto Tomas, Bonifacio Bayeta, Jr., Danilo Rodriguez, Carleto dela Cruz, Rafael Bequio, Eduardo Sitjar, Ruben Tanseco, Teodoro K. Discaya, Ernesto Evardone, Arnulfo Lavilla, Glecerio Elabarin, Marcelino Caneda, Epifanio Galibo, Benjamin Gandelaria, Lino B. Dahohoy, Avelino Mullet, Jimmy M. Cordero, Ivanhoe Magino, Felix B. Catindoy, Ruben Daluz, Abenir Yara, Santiago Co[r]tez, Jr., Armando P. Lucido, Alberto Montilla, Renerio Capon, Leonardo Barrozo, Ireneo Frondozo, Dionesio Banares, Marcelo Marzon, Alfredo Sta. Maria, Bernardo Mamaril, Carlos Delloro, Aldon dela Torre and Florentino Pestido, who were assigned at PAL’s various premises under the supervision of STELLAR’s supervisors/foremen and timekeepers. The workers were also furnished by STELLAR with janitorial supplies, such as vacuum cleaner and polisher (Please see Manuel Parenas’ Contract of Employment with STELLAR, Annex ‘1’ of Annex ‘E’, id.; STELLAR’s Position Paper, pp. 2-5, supra; TSN, May 20, 1993, pp. 15-16 and 19-20).
"On December 31, 1990, the service agreement between PAL and STELLAR expired. PAL then called for [the] bidding of its janitorial requirements. This notwithstanding, STELLAR exerted efforts to maintain its janitorial contract with PAL which, in the meantime, allowed Manuel Parenas and others to work at the PAL’s premises (STELLAR’s Position Paper, pp. 2-5, supra, and Memorandum of Appeal, Annex ‘H’, pp. 3-4, id.; Carlos Callanga’s Affidavit, p. 2, pp. 156-160 Records; Annex ‘2’ of STELLAR’s Position Paper, supra; PAL’s Memorandum of Appeal, p. 2, Annex ‘G’, Petition).
"Subsequently, in a letter dated October 31, 1990, PAL formally informed STELLAR that the service agreement between them would no longer be renewed effective November 16, 1991, since PAL’s janitorial requirements were bidded to three other job contractors (Annex ‘2’ of STELLAR’s Position Paper, supra; PAL’s Memorandum of Appeal, p. 2, supra).
"Alleging that they were illegally dismissed, the aforenamed individual private respondents filed, from January to June 1992, five complaints against PAL and STELLAR for illegal dismissal and for payment of separation pay (Annexes ‘C’, ‘C-1’ to ‘C-19’, id.)."
"(a) [I]n holding that the janitorial service agreement with STELLAR was a labor-only arrangement;The petition raises two main issues. First, whether the individual private respondents are regular employees of PAL. Second, whether petitioner is liable to them for separation pay. The resolution of the first issue involves a determination of (1) whether petitioner was a labor-only contractor; and (2) whether the individual private respondents became regular employees of PAL because they were allowed to continue working for petitioner after the expiration of the service contract.
"(b) [I]n holding that PAL continued with the services of the individual respondents after November 16, 1991, when the janitorial agreement with STELLAR expired; and
"(c) [I]n holding PAL liable for payment of separation pay to the individual respondents."
"ART. 106. Contractor or subcontractor."xxxOn the other hand, permissible job contracting requires the following conditions:
x x 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 persons 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.”
This definition covers any person who undertakes to supply workers to an employer, where such person:
"(1) Does not have substantial capital or investment in the form of tools, equipment, [machinery], work premises and other materials; and
"(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed."
"(1) The contractor 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; andApplying the foregoing provisions to the present case, the Court finds no basis for holding that PAL engaged in labor-only contracting. The true nature of the individual private respondents’ employment is evident from the service agreement between petitioner and STELLAR, which we reproduce hereunder:
"(2) The contractor has substantial capital or investment in the form of tools, equipment, [machinery], work premises, and other materials which are necessary in the conduct of his business."
"1. The CONTRACTOR [STELLAR] undertakes to provide the following cleaning and janitorial maintenance services.The foregoing agreement clearly indicates that an employee-employer relation existed between the individual private respondents and STELLAR, not PAL. The provisions of the agreement demonstrate that STELLAR possessed these earmarks of an employer: (1) the power of selection and engagement of employees (Stipulation Nos. 1, 4, 7 and 8), (2) the payment of wages (Stipulation Nos. 5, 6, 7 and 8), (3) the power of dismissal, and (4) the power to control the employee’s conduct (Stipulation No. 8).
(a) Dusting and/or damp-wiping of other vertical and horizontal surfaces that require daily attention;
(b) Sweeping and mopping of floors;
(c) Polishing and spot-scrubbing of [illegible];
(d) Dusting, damp-wiping and polishing of [furniture], counters, xxx and other office fixtures;
(e) Emptying and cleaning of ash trays;
(f) Cleaning and disinfecting of toilets and washrooms;
(g) Cleaning of inside windows, glasses, surfaces, [partitions], etc.;
(h) On-the-job supervision.
"2. The CONTRACTOR shall provide sufficient personnel, equipments [sic], supplies, and materials to carry out the undertakings; specified in the preceding paragraph, except that water and electricity consumption shall be for the account of the OWNER. The CONTRACTOR expressly represents that to adequately and suitably comply with the undertakings under paragraph 1 of this Agreement, the CONTRACTOR shall assign at least eight (8) employees, six (6) days a week except Legal Holidays, to the OWNER’s premises to perform the work undertaken by the CONTRACTOR under this Agreement. To comply with such minimum requirements, the CONTRACTOR shall at all times be ready with relievers and/or replacements to ensure continuous and uninterrupted work in case of absences of each assigned employee.
"(3) The equipment, materials and supplies to be used by the CONTRACTOR in connection with its aforesaid undertakings shall be of high quality and shall not cause any damage to OWNER’s premises and properties or cause any injury or annoyance to the persons working or present in the premises. The OWNER shall place at the disposal of the CONTRACTOR a suitable storage space with lock and key for the safekeeping of the cleaning equipment and materials which the xxx CONTRACTOR shall use in connection with its undertakings in xxx Agreement.
"4. The CONTRACTOR warrants that the persons it shall employ to perform the work subject to this Agreement shall be honest, reliable, carefully screened, trained, cooperative, and in possession of health certificates and police clearances; they will be neat, presentable in appearance, attired in identifying uniforms and provided with identification cards. The uniforms and identification cards shall be at the expense of the CONTRACTOR.
"5. In consideration of the services to be rendered by the CONTRACTOR, the OWNER shall pay to the CONTRACTOR the sum of PESOS: THREE THOUSAND EIGHT HUNDRED FORTY (P3,840.00) per month in Philippine Currency, payable in two equal payments on the 15th and end of each month without necessity of demand. In the event that the minimum wage rate shall be increased by the operation of law, there shall be a corresponding automatic increase in the consideration of the contract price to be paid by the OWNER to the CONTRACTOR in consideration of the latter’s services.
"6. In case the OWNER shall require the CONTRACTOR to perform the work provided under paragraph 1 hereof in excess of eight hours on: (1) any regular working day, the OWNER shall pay the CONTRACTOR an additional amount to be computed in the following manner:
x x x x x x x x x
"7. It is agreed that no authority has been conferred upon the CONTRACTOR by the OWNER to hire any person on behalf of the latter and that each person employed or hired by the CONTRACTOR in carrying out its part of this Agreement shall be paid by the CONTRACTOR, and that no such person employed or hired shall be deemed [an] employee or agent of the OWNER.
"8. It is furthermore agreed that the CONTRACTOR shall select, engage and discharge its employees and shall have direct xxx control [of their] services. The CONTRACTOR shall likewise have absolute prerogative to determine the rate of wages or salaries of the employees.
"9. It is further agreed that the CONTRACTOR shall comply with all the requirements of laws, decrees, municipal ordinances, and regulations including but not limited to payment of State Insurance Fund, Medicare contributions, SSS contributions, and the Withholding Taxes of its employees.
"10. This agreement shall be for a period of one (1) year from May 1, 1977 to April 30, 1978 and [illegible]."
"Our taking cognizance of the fact that PAL, despite the expiration of its contract with Stellar on December 31, 1990 continued with the service of some of the complainants ‘as late as 1991’, should have been enough notice for them to refute this fact come [the] xxx motion for reconsideration.In its Comment, NLRC, citing Loadstar Shipping Co., Inc. v. Gallo, defended its position on the ground that judicial review by this Court does not include appreciation of the evidence, but is confined only to issues of jurisdiction or grave abuse of discretion.
"But again, perusing PAL’s motion for reconsideration, we note that xxx it never refuted the finding below that it continued employing the complainants after its service contract with Stellar expired. We thus cannot but hold on to our view that PAL should be answerable to the separation pay awarded below not only for its engaging in a labor-only contract with Stellar but more importantly for its continued employment of complainants after its service contract with Stellar (the argued employer of complainants) expired."
"xxx [T]he records and evidence show that the janitorial service contract between PAL and Stellar expired on December 31, 1990, and not on November 16, 1991 [as stated in the October 31, 1990 letter of the petitioner].Both contentions are untenable. First, while the issue of labor-only contracting may involve some factual considerations, the existence of an employer-employee relation is nonetheless a question of law. Thus, it falls squarely within the ambit of this Court’s judicial review. Second, individual private respondents’ invocation of the successor-employer doctrine is not warranted. This doctrine involves a transfer of ownership of the business to a new employer. Where the change of ownership is in bad faith or is used to defeat the rights of labor, the successor-employer is deemed to have absorbed the employees and is held liable for the transgressions of his or her predecessor. Petitioner, however did not become the successor-employer of the individual private respondents when the service contract expired. There was no transfer of the business of STELLAR in this particular case. The separate undertakings of petitioner and STELLAR continued even after the expiration of the service contract and the dismissal of individual private respondents.
xxx xxx xxx
"As a consequence of petitioner’s letter and upon knowledge of the termination of [the] janitorial service contract, respondent Stellar formally notified each of the [complainants] that their individual employment contract likewise be terminated effective November 16, 1991. Furthermore, it has been expressly and uniformly stated in each of [complainants’] employment contract that their services would last upon the termination of the janitorial service contract between PAL and Stellar which was of course supposedly on December 31, 1990. By working up to the time of the final termination which is November 16, 1991, from December 31, 1990, private respondents became direct employees of PAL.
xxx xxx xxx
"Petitioner’s continued employment of [complainants] inspite of the expiration of the janitorial contract is an implied absorption to the point of making them its regular employees and making illegal their subsequent termination from service. xxxx As held by the Supreme Court, employees absorbed by [a] successor employer enjoy the continuity of their employment status and their rights and privileges (International Container Terminal Services, Inc. vs. NLRC, G.R. N[o]. 982950-99, April 10, 1996, citing the case of Sumandi vs. Leogardo, et al., G.R. N[o]. 67635, January 17, 1985). xxx."
"xxx What actually happened was that PAL and STELLAR impliedly renewed, as they had previously done before, their service agreement until PAL’s janitorial requirements were bidded to other job contractors. This explains why the individual private respondents remained working at PAL’s premises even after December 31, 1990."From the foregoing disquisition, it is evident that petitioner was engaged in permissible job contracting and that the individual private respondents, for the entire duration of their employ, were employees not of petitioner but of STELLAR. In legitimate job contracting, no employer-employee relation exists between the principal and the job contractor’s employees. The principal is responsible to the job contractor’s employees only for the proper payment of wages. But in labor-only contracting, an employer-employee relation is created by law between the principal and the labor-only contractor’s employees, such that the former is responsible to such employees, as if he or she had directly employed them. Besides, the Court has already taken judicial notice of the general practice adopted in several government and private institutions of securing janitorial services on an independent contractor basis.
"1. The EMPLOYER hereby contracts the services of the EMPLOYEE to work as Janitor-CPD at the project of the EMPLOYER with PAL.In order to avoid liability for separation pay, STELLAR argues that it terminated the services of the individual private respondents for a just and valid cause: the completion of a specific project. Thus, they are not entitled to separation pay.
2. It is expressly agreed and understood that the work of the EMPLOYEE shall last only during and shall in no case extend beyond the period fixed for the duration of the contract between the EMPLOYER and PAL covering the project to which the EMPLOYEE is assigned as specified in the second ‘WHEREAS’ hereof. Upon the expiration of said contract the employment of the said employee is deemed automatically terminated without further notice."