Ma. Angelica R.

de Guzman
2011

September 3,

Labor Standards- Atty. Natividad Roma

Parties and Case No.

Petitioner:
Lakas sa Industriya
ng kapatirang haligi
ng Alyansapinagbuklod ng
manggagawang
promo ng
Burlingame
Respondent
(Principal):
Burlingame Corp.
Contractor:
F. Garil
GR No.162833

Is there jobonly
contracting or
labor-only
contracting?
There is Laboronly
contracting in
this case.

Reason

Resolution of the Supreme Court

F. Garil does not have substantial capitalization or

investment in the form of tools, equipment,
machineries, work premises, and other materials,
to qualify as an independent contractor. No proof
was adduced to show F. Garils capitalization.
The work of the promo-girls was directly related to
the principal business or operation of Burlingame.
Marketing and selling of products is an essential
activity to the main business of the principal.
F. Garil 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, Burlingame.

Under this circumstance, there is no doubt that F.

Garil was engaged in labor-only contracting, and
as such, is considered merely an agent of
Burlingame. In labor-only contracting, the law
creates an employer-employee relationship 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.21
Since F. Garil is a labor-only contractor, the
workers it supplied should be considered as
employees of Burlingame in the eyes of the law.
WHEREFORE, the challenged Decision of the
Court of Appeals dated August 29, 2003 and the
Resolution dated March 15, 2004 denying the
motion for reconsideration are REVERSED and
SET ASIDE. The decision of the Secretary of Labor

and Employment ordering the holding of a

certification election among the rank-and-file
promo employees of Burlingame is reinstated.
Petitioner
(Principal):
Philippine Airlines
Inc.
Respondent:
Manuel Asuncion et
al.
Contractor:
Stellar
GR No. 125792

There is jobonly
contracting in
this case.

The agreement clearly indicates that an employeeemployer 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, (2) the payment of
wages, (3) the power of dismissal, and (4) the
power to control the employee's conduct.
Aside from these stipulations in the service
agreement, other pieces of evidence support the
conclusion that STELLAR, not PAL, was the
employer of the individual private respondents. A
contract of employment existed between STELLAR
and the individual private respondents, proving
that it was said corporation which hired them. It
was also STELLAR which dismissed them. They
worked under STELLAR's own supervisors.
STELLAR even had its own collective bargaining
agreement with its employees, including the
individual private respondents. Moreover, PAL had
no power of control and dismissal over them.
STELLAR claims that it falls under the definition of
an independent job contractor. Thus, it alleges that
it has sufficient capital in the form of tools and

The main business of STELLAR is the supply of

manpower to perform janitorial services for its
clients, and the individual private respondents
were janitors engaged to perform activities that
were necessary and desirable to STELLAR's
enterprise. In this case, we hold that the
individual private respondents were STELLAR's
regular employees, and there was no valid cause
for their dismissal.
WHEREFORE, the petition is hereby GRANTED.
The assailed Decision and Resolution are SET
ASIDE insofar as they held PAL liable for
separation pay. The July 13, 1994 Decision is
however reinstated insofar as it ORDERED
STELLAR liable for such award.

equipment, like vacuum cleaners and polishers,

and substantial capitalization as proven by its
financial statements. Further, STELLAR has clients
other than petitioner, like San Miguel Corporation,
Hongkong and Shanghai Bank, Eveready, Benguet
Management Corporation and Japan Airlines.
Petitioner:
Jang Lim et al.
Respondent
(Principal): Timex
Sawmill and/or
Cotabato
Timberland
Company Inc.

There is Laboronly
contracting in
this case.

Teddy Arabi has no capital of his own in the form

of equipment, tools, machineries and materials in
undertaking sawing, milling, piling, bundling and
clearing work for CTCI. Activities rendered by
employees are necessary to CTCI's plywood
manufacturing and wood processing business
operations. Teddy Arabi's work premises are also
the sawmill premises operated by CTCI and the
equipment and tools utilized in Teddy Arabi's
undertaking actually belonged to CTCI which
allegedly "lent" the same to him. Teddy Arabi is
only a "labor-only" contractor.
It clearly appears that Arabi is a mere agent of
CTCI. His only job is to recruit and hire manpower
as needed. Arabi is definitely not an independent
contractor. Therefore, it is not Arabi but CTCI which
is responsible to petitioners who must be deemed
employed not by Arabi but by the company.

The scourge of exploitation of labor, as shown by

numerous petitions before us, remains pervasive.
It is imperative for all government agencies
concerned to exert all-out efforts to prevent any
further violation or circumvention of the
provisions of the Labor Code through deceptive
devices and malpractices. Unscrupulous
employers could not be allowed to hide behind
labor-only contracting in order to escape the just
claims of their workers and other employees.
WHEREFORE, the challenged resolutions dated
October 23, 1995 and January 16, 1996,
rendered by the NLRC in NLRC CA No. M-00254395 are hereby SET ASIDE, and the decision of the
Labor Arbiter of the NLRC Regional Arbitration
Branch No. 09, Zamboanga City, promulgated on
May 17, 1995, in NLRC Case No. RAB-09-1-000284-94 is hereby REINSTATED.

There is jobonly
contracting in

In this case, the relationship between Rosewood

Processing Inc. and Veterans Philippine Scout
Security Agency was governed by a Contract of

In all these cases, however, the liability of the

security agency is without question, as it did not
appeal from the Decisions of the labor arbiter

Contractor:
Teddy Arabi
GR No. 124630

Petitioner
(Principal):
Rosewood

Processing Inc.

this case.

Respondent:
Napoleon Mamon et
al.
Contractor: Veterans
Philippine Scout
Security Agency
GR No. 116476-84

Petitioner
(Principal):
Philippine Fuji Xerox
Corp.
Respondent:
Pedro Garado,
Pambansang kilusan
ng paggawa,
(Kilusan-TUCP) et.al

There is Laboronly
contracting in
this case.

Guard Services. Veterans provided Rosewood

Processing Inc. with employees whose job is
different from the main business of Rosewood,
since they are merely security guards of the latter.
Employees get their salaries from Veterans and
they were under control and supervision of
Veterans which is evident by the fact that some of
the respondents were transferred to Veterans
other clients.
Nothwithstanding the service contract between
Rosewood and the security agency, the former is
still solidarily liable to the employees, who were
not privy to the said contract pursuant to Art. 106,
107 and 108 of the Labor Code. However, the
indirect employers liability to the contractors
employees extends only to the period during
which they were working for the petitioner.
From 1980 to 1984 Garado worked exclusively for
Fuji Xerox. By 1984, he was already a member of
the union which petitioned the company for his
regularization. Indeed, he was recruited by
Skillpower, Inc. solely for assignment to Fuji Xerox
to work in the latter's Xerox Copier Project. Garado
was never assigned to any other client of
Skillpower, Inc. In fact, although under the
agreement Skillpower, Inc. was supposed to
provide only "temporary" services, Skillpower, Inc.
actually supplied Fuji Xerox the labor which the

and Respondent Commission.

WHEREFORE, the petition is partially GRANTED.
The assailed Decision is hereby MODIFIED, such
that petitioner, with the Security agency, is
solidarily liable to PAY the complainants only
wage differentials during the period that the
complainants were actually under its employ, as
above detailed. Petitioner is EXONERATED from
the payment of back wages and separation pay.
The temporary restraining order issued earlier is
LIFTED, but the petitioner is deemed liable only
for the aforementioned wage differentials, which
Respondent Commission is required to
RECOMPUTE within fifteen days from the finality
of this Decision.

Skillpower, Inc. is, therefore, a "labor-only"

contractor and Garado is not its employee. No
grave abuse of discretion can thus be imputed to
the NLRC for declaring petitioner Fuji Xerox guilty
of illegal dismissal of private respondent.
ACCORDINGLY, the petition for certiorari is
DISMISSED for lack of merit.

Contractor:
Skillpower Inc.

latter needed for its Xerox Copier Project for seven

(7) years, from 1977 to 1984.

GR No. 111501

The fact is that Skillpower, Inc. did not have

copying machines of its own. What it did was
simply to supply manpower to Fuji Xerox. The
phrase "substantial capital and investment in the
form of tools, equipment, machineries, work
premises, and other materials which are necessary
in the conduct of his business," in the
Implementing Rules clearly contemplates tools,
equipment, etc., which are directly related to the
service it is being contracted to render. One who
does not have an independent business for
undertaking the job contracted for is just an agent
of the employer.
ACGI does not have substantial capitalization or
investment in the form of tools, equipment,
machineries, work premises, and other materials,
to qualify as an independent contractor. While it
has an authorized capital stock of P1,000,000.00,
only P62,500.00 is actually paid-in, which cannot
be considered substantial capitalization.
Herminio Pena et al.reported daily to the branch
office of Manila Water Co. Inc. because ACGI has
no office or work premises. In fact, the corporate
address of ACGI was the residence of its president,
Mr. Herminio D. Pea. Moreover, in dealing with
the consumers, private respondents used the

Petitioner
(Principal):
Manila Water Co.
Inc.
Respondent:
Herminio Pena et.al.
Contractor:
Association
Collectors Group
Inc. (ACGI)

There is Laboronly
contracting in
this case.

Notably, private respondents performed activities

which were necessary or desirable to its principal
trade or business. Thus, they were regular
employees of petitioner, regardless of whether
the engagement was merely an accommodation
of their request. As such regular employees,
private respondents are entitled to security of
tenure which may not be circumvented by mere
stipulation in a subsequent contract that their
employment is one with a fixed period.
Under Article 279 of the Labor Code, an
employee who is unjustly dismissed from work is
entitled to reinstatement without loss of seniority

GR No. 158255

Petitioner:
Joeb Aliviado et al.

As to PrommGem, there is

receipts and identification cards issued by Manila

Water Co.
The work of the private respondents was directly
related to the principal business or operation of
the petitioner. Being in the business of providing
water to the consumers in the East Zone, the
collection of the charges therefore by private
respondents for the petitioner can only be
categorized as clearly related to, and in the pursuit
of the latters business.
ACGI 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.
Prior to private respondents alleged employment
with ACGI, they were already working for Manila
Water, subject to its rules and regulations in
regard to the manner and method of performing
their tasks. e pursuit of the latters business. It can
be concluded that ACGI was not an independent
contractor since it did not carry a distinct business
free from the control and supervision of Manila
Water.

rights and other privileges, and to his full

backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent
computed from the time his compensation was
withheld from him up to the time of his actual
reinstatement. However, if reinstatement is no
longer possible, the employer has the alternative
of paying the employee his separation pay in lieu
of reinstatement.25
However, private respondents are entitled to
attorneys fees as they were compelled to litigate
with petitioners and incur expenses to enforce
and protect their interests.27 The award by the
Labor Arbiter of P22,250.00 as attorneys fees to
private respondents, being reasonable, is
sustained.
WHEREFORE, in view of the foregoing, the
decision of the Court of Appeals dated November
29, 2002, in CA-G.R. SP No. 67134, reversing the
decision of the National Labor Relations
Commission and reinstating the decision of the
Labor Arbiter is AFFIRMED with the
MODIFICATION that the awards of P10,000.00 as
moral damages and P5,000.00 as exemplary
damages are DELETED for lack of evidentiary
basis.

As regards to Promm-Gem, it has authorized

capital stock of P1 million and a paid-in capital, or

Under circumstances, the Supreme court held

that Promm the -Gem has substantial investment

Job-only
contracting.

Respondent
(Principal): Procter &
Gamble
As to SAPS,
there is LaborContractors:
only
Promm-Gem and
contracting in
SAPS
this case.
GR No. 160506

capital available for operations, of P500,000.00 as

of 1990. It also has long term assets worth
P432,895.28 and current assets of P719,042.32.
It maintained its own warehouse and office space
with a floor area of 870 square meters. It also had
under its name three registered vehicles which
were used for its promotional/merchandising
business.
Promm-Gem also has other clients aside from
P&G. The records also show that Promm-Gem
supplied its complainant-workers with the relevant
materials, such as markers, tapes, liners and
cutters, necessary for them to perform their work.
Promm-Gem also issued uniforms to them.
It already considered the complainants working
under it as its regular, not merely contractual or
project, employees. This circumstance negates the
existence of element (ii) as stated in Section 5 of
DOLE Department Order No. 18-02, which speaks
of contractual employees. This, furthermore,
negates on the part of Promm-Gem bad faith
and intent to circumvent labor laws which factors
have often been tipping points that lead the Court
to strike down the employment practice or
agreement concerned as contrary to public policy,
morals, good customs or public order.
With SAPS on the other hand, It is clear that SAPS
having a paid-in capital of only P31,250 - has no
substantial capital. SAPS lack of substantial

which relates to the work to be performed. These

factors negate the existence of the element
specified in Section 5(i) of DOLE Department
Order No. 18-02.
Under the circumstances prevailing in the instant
case, the court cannot consider SAPS as an
independent contractor.
WHEREFORE, the petition is GRANTED. Procter &
Gamble Phils., Inc. and Promm-Gem, Inc. are
ORDERED to reinstate their respective
employees immediately without loss of seniority
rights and with full backwages and other benefits
from the time of their illegal dismissal up to the
time of their actual reinstatement. Procter &
Gamble Phils., Inc. is further ORDERED to pay
each of those petitioners considered as its
employees, namely Arthur Corpuz, Eric Aliviado,
Monchito Ampeloquio, Abraham Basmayor, Jr.,
Jonathan Mateo, Lorenzo Platon, Estanislao
Buenaventura, Lope Salonga, Franz David, Nestor
Ignacio, Rolando Romasanta, Roehl Agoo,
Bonifacio Ortega, Arsenio Soriano, Jr., Arnel
Endaya, Roberto Enriquez, Edgardo Quiambao,
Santos Bacalso, Samson Basco, Alstando Montos,
Rainer N. Salvador, Pedro G. Roy, Leonardo F.
Talledo, Enrique F. Talledo, Joel Billones, Allan
Baltazar, Noli Gabuyo, Gerry Gatpo, German
Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo, Jr.,
Arnold D. Laspoa, Philip M. Loza, Mario N.

capital is underlined by the records36 which show

that its payroll for its merchandisers alone for one
month would already total P44,561.00.
It had 6-month contracts with P&G. Yet SAPS failed
to show that it could complete the 6-month
contracts using its own capital and investment. Its
capital is not even sufficient for one months
payroll. SAPS failed to show that its paid-in capital
of P31,250.00 is sufficient for the period required
for it to generate its needed revenue to sustain its
operations independently. In the present case,
SAPS has failed to show substantial capital.
Considering that SAPS has no substantial capital or
investment and the workers it recruited are
performing activities which are directly related to
the principal business of P&G, we find that the
former is engaged in "labor-only contracting".
SAPS dismissed its employees upon the initiation
of P&G. It is evident that SAPS does not carry on
its own business because the termination of its
contract with P&G automatically meant for it also
the termination of its employees services.
SAPS had no other clients and had no intention of
seeking other clients in order to further its
merchandising business. From all indications SAPS,

Coldayon, Orlando P. Jimenez, Fred P. Jimenez,

Restituto C. Pamintuan, Jr., Rolando J. De Andres,
Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O.
Yordan, Orlando S. Balangue, Emil Tawat,
Cresente J. Garcia, Melencio Casapao, Romeo
Vasquez, Renato dela Cruz, Romeo Viernes, Jr.,
Elias Basco and Dennis Dacasin, P25,000.00 as
moral damages plus ten percent of the total sum
as and for attorneys fees.

existed to cater solely to the need of P&G for the

supply of employees in the latters merchandising
concerns only.
Petitioner:
Alexander Vinoya
Respondent
(Principal): Regent
Food Corporation
Contractor:
Peninsula Manpower
Company Inc.
GR No. 126586

There is laboronly
contracting in
this case.

PMCI does not have substantial capitalization or

investment in the form of tools, equipment,
machineries, work premises, among others, to
qualify as an independent contractor. While it has
an authorized capital stock of P1,000,000.00, only
P75,000.00 is actually paid-in, which, cannot be
considered as substantial capitalization.
It did not carry a distinct business free from the
control and supervision of RFC. The workers
assigned by PMCI to RFC were under the control
and supervision of the latter.
The work of petitioner as sales representative is
directly related to the business of RFC. Being in
the business of food manufacturing and sales, it is
necessary for RFC to hire a sales representative
like petitioner to take charge of booking its sales
orders and collecting payments for such. Thus, the
work of petitioner as sales representative in RFC
can only be categorized as clearly related to, and
in the pursuit of the latter's business.The
enumeration of the workers as provided into the
Contract of Service entered into by RFC and PMCI
do not include sales representative to be assigned
in RFC. This only shows that petitioner was never
intended to be a part of those to be contracted

The undertaking of PMCI did not involve the

performance of a specific job, but rather the
supply of manpower only, PMCI clearly conducted
itself as labor-only contractor.
WHEREFORE, the petition is GRANTED. The
decision of the NLRC, dated 21 June 1996, as well
as its resolution, promulgated on 20 August
1996, are ANNULLED and SET ASIDE. The
decision of the Labor Arbiter, rendered on 15
June 1994, is hereby REINSTATED and AFFIRMED.

out.
Petitioner
(Principal):
Mariveles shipyard
Corp.
Respondent: Luis
Regondola et.al
Contractor: Longest
Force Investigation
and Security Agency
GR No. 144134

There is jobonly
contracting in
this case.

In this case, when petitioner contracted for

security services with Longest Force as the
security agency that hired private respondents to
work as guards for the shipyard corporation,
petitioner became an indirect employer of private
respondents pursuant to Article 107. Following
Article 106, when the agency as contractor failed
to pay the guards, the corporation as principal
becomes jointly and severally liable for the guards
wages. This is mandated by the Labor Code to
ensure compliance with its provisions, including
payment of statutory minimum wage. The security
agency is held liable by virtue of its status as
direct employer, while the corporation is deemed
the indirect employer of the guards for the
purpose of paying their wages in the event of
failure of the agency to pay them.

WHEREFORE, the Resolution of the Court of

Appeals in CA-G.R. SP No. 55416 is AFFIRMED
with MODIFICATION. Petitioner and Longest Force
are held liable jointly and severally for
underpayment of wages and overtime pay of the
security guards, without prejudice to petitioners
right of reimbursement from Longest Force
Investigation and Security Agency, Inc. The
amounts payable to complaining security guards,
herein private respondents, by way of total
backwages and attorneys fees are hereby set at
P3,926,100.40 and P392,610.04, respectively.