e.
Other related jobs (but not janitorial functions) as may be required and necessary;
1. PHILIPPINE AIRLINES vs LIGAN,
G.R. No. 146408 - February 29, 2008
Ivan Earl Zapanta
NATURE Petition for Certiorari of the Decision of the CA and the NLRC
Petitioner Philippine Airlines, Inc.
Respondents Enrique Ligan, Et al.
Ponente J., Carpio Morales
RECIT READY DIGEST
Philippine Airlines (PAL) entered into an agreement with Synergy whereby the latter undertook
to provide services for the former at the Mactan Station.After a year of work, the respondents
filed a case of regularization. The LA ruled in favor of petitioners, but asked that PAL give
respondents their wages due to them. The NLRC ruled in favor of respondents. The CA affirmed
the decision of the NLRC. And the SC ruled in favor of respondents claiming that they are
regular workers of PAL.
DOCTRINE.
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.
FACTS.
1. [July 15, 1991] Philippine Airlines (PAL) as owner, and Synergy Services Corpora-
tion (Synergy) as Contractor, entered into an agreement whereby the latter undertook
to provide loading, unloading, delivery of baggage and cargo and other related ser-
vices to and from PAL's aircraft at the Mactan Station."
2. The Agreement specified the following "Scope of Services" of Contractor Synergy:
1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unload-
ing and delivery materials, facilities, supplies, equipment and tools for the satisfactory
performance and execution of the following services (the Work):
a. Loading and unloading of baggage and cargo to and from the aircraft;
b. Delivering of baggage from the ramp to the baggage claim area;
c. Picking up of baggage from the baggage sorting area to the designated parked air-
craft;
d. Delivering of cargo unloaded from the flight to cargo terminal;
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CONTRACTOR shall perform and execute the aforementioned Work at the following
areas located at Mactan Station, to wit:
a. Ramp Area
b. Baggage Claim Area
c. Cargo Terminal Area, and
d. Baggage Sorting Area
3. And it expressly provided that Synergy was "an independent contractor and . . .that
there would be no employer-employee relationship between CONTRACTOR and/or
its employees on the one hand, and OWNER, on the other."
4. [March 3, 1992] respondents, who appear to have been assigned by Synergy to peti-
tioner following the execution of the July 15, 1991 Agreement, filed complaints be-
fore the NLRC Regional Office VII at Cebu City against petitioner, Synergy and their
respective officials for underpayment, non-payment of premium pay for holidays, pre-
mium pay for rest days, service incentive leave pay, 13th month pay and allowances,
and for regularization of employment status with petitioner, they claiming to be "per-
forming duties for the benefit of PAL since their job is directly connected with its
business . . . ."
5. On the other hand, respondent Auxtero had initially filed a complaint against peti-
tioner and Synergy and their respective officials for regularization of his employment
status. Later alleging that he was, without valid ground, verbally dismissed, he filed a
complaint against petitioner and Synergy and their respective officials for illegal dis-
missal and reinstatement with full back wages.
6. The Labor Arbiter dismissed the complaints of respondents and found Synergy as an
independent contractor. The LA likewise dismissed respondents claims of regulari-
zation, but granted their money claims.
7. Upon appeal to the NLRC, it vacated and set aside the ruling of the LA. The LA ruled
that Synergy is a labor-only contractor and that the respondents are regular workers
of PAL.
8. PAL filed for a petition for certiorari at the SC, but was remanded to the CA.
9. [September 29, 2000] The CA affirmed the ruling of the NLRC, hence, this appeal.
ISSUE/S and RULING.
1. W/N there is an Employer-Employee relationship between PAL and Respondents - YES
2. W/N Synergy is a labor-only contractor - YES
1. The express provision in the Agreement that Synergy was an independent contractor and there
would be "no employer-employee relationship between Synergy and/or its employees on one
hand, and PAL on the other hand" is not legally binding and conclusive as contractual provisions
are not valid determinants of the existence of such relationship. For it is the totality of the facts
and surrounding circumstances of the case which is determinative of the parties' relationship. It
is clear from the facts that petitioner's managers and supervisors approved respondents' weekly
work assignments and respondents and other regular PAL employees were all referred to as
"station attendants" of the cargo operation and airfreight services of petitioner. More signifi-
cantly, however, is that respondents worked alongside petitioner's regular employees who were
performing identical work. Respondents having performed tasks which are usually necessary
and desirable in the air transportation business of petitioner, they should be deemed its regular
employees and Synergy as a labor-only contractor.
2. The SC laid down the requisites for a labor-only contracting:
For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two "Substantial capital or investment" refers to capital stocks and subscribed capitalization in the
elements to be present is, for convenience, re-quoted: case of corporations, tools, equipment, implements, machineries and work premises, actually
(i) The contractor or subcontractor does not have substantial capital or investment which relates and directly used by the contractor or subcontractor in the performance or completion of the job,
to the job, work or service to be performed and the employees recruited, supplied or placed by work or service contracted out.
such contractor or subcontractor are performing activities which are directly related to the main The "right to control" shall refer to the right reserved to the person for whom the services of the
business of the principal; or contractual workers are performed, to determine not only the end to be achieved, but also the
(ii) The contractor does not exercise the right to control over the performance of the work of the manner and means to be used in reaching that end.
contractual employee.
Even if only one of the two elements are present then, there is labor-only contracting. And while
petitioner claims the Synergy is the one who has control of the respondents, the fact that it was
PAL who arranges the schedule of the respondents rules otherwise.
The SC stated that while petitioner claimed that it was Synergy's supervisors who actually su-
pervised respondents, it failed to present evidence thereon. It did not even identify who were the
Synergy supervisors assigned at the workplace.

DECISION.
Petition DENIED. RESPONDENTS WON. PAL is ordered to (a) accept respondents as
regular employees and pay the wages and benefits due them as regular employees plus
salary differential corresponding to the difference between the wages and benefits given
them and those granted to petitioner's other regular employees of the same rank; and (b)
pay respondent BENEDICTO AUXTERO salary differential; back wages from the time
of his dismissal until the finality of this decision; and separation pay, in lieu of reinstate-
ment, equivalent to one (1) month pay for every year of service until the finality of this
decision.

NOTES.

Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No.
18-02, Series of 2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended)
as follows:
Section 3. Trilateral relationship in contracting arrangements . In legitimate contracting, there
exists a trilateral relationship under which there is a contract for a specific job, work or service
between the principal and the contractor or subcontractor, and a contract of employment
between the contractor or subcontractor and its workers. Hence, there are three parties involved
in these arrangements, the principal which decides to farm out a job or service to a contractor or
subcontractor, the contractor or subcontractor which has the capacity to independently undertake
the performance of the job, work or service, and the contractual workers engaged by the
contractor or subcontractor to accomplish the job, work or service.
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 a job,
work or service for a principal, and any of the following elements are [sic] present:
(i) The 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.
"Substantial capital or investment" and the "right to control" are defined in the same Section 5
of the Department Order as follows:

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