JOB CONTRACTING; In legitimate job contracting, there exists no employer-employee

relation between the principal and the worker cupplied by a job contractor. The principal
is considered employer of the job contractors employees only for the payment of wages but
not for separation pay.
FACTS: Petitioner PAL entered into a service agreement with Stellar, a domestic corporation engaged in
the business of job contracting janitorial services. Pursuant to this agreement, Stellar hired workers to
perform janitorial and maintenance services for PAL, to which Parenas and the 47 other private
respondents belong. The latters works were under the supervision of Stellars supervisors/foremen and
timekeepers. They were also furnished by Stellar with janitorial supplies such as vacuum cleaners and
polishers. When said contract expired in 1990, PAL called for the bidding of its janitorial requirements.
Subsequently PAL informed Stellar that the service agreement would not be renewed since janitorial
services were bidded to other job contractors. Alleging that they were illegally dismissed, the private
respondents filed with the NLRC complaints against PAL for illegal dismissal and for payment of
separation pay. NLRC held PAL liable for the payment of separation pay. Hence this appeal.

ISSUE: Whether or not PAL should be held liable for the payment of separation pay.

HELD: It is evident that there was permissible job contracting for the entire duration of the employment
of private respondents. In fact, Stellar claims that it fails under the definition of an independent job
contractor. This being the case, employer employee relationship never existed between PAL and private
respondents. In legitimate job contracting, no employer-employee relation exists between the principal
and the jdb contractors employees. The principal (PAL) is responsible to the job contractors employees
only for the payment of wages and not separation pay. [Philippine Airlines lnc. vs. NLRC et a!, G.R. No.
125792, November 9, 1998 --First Division: Panganiban, J.]