ALPS Transporation vs.

Rodriguez
698 SCRA 357, June 13, 2013

DOCTRINE: A sole proprietorship does not possess a juridical personality

separate and distinct from that of the owner of the enterprise. Thus, the
owner has unlimited personal liability for all the debts and obligations of the
business, and it is against him that a decision for illegal dismissal is to be
enforced.

FACTS: Rodriguez, a driver by trade, entered into an employement contract

with Contract Tours, who assigned him to work for ALPS, a bus company,
and a sole proprietorship owned by Alfredo Perez. Rodrigues was found to
have been collecting bus fares without issuing the corresponding ticket to
passengers. He was terminated so the case went to court. Rodriguez
believed that he was terminated without due process of law, because the
twin requirements of notice and hearing were not present. The Supreme
Court agreed. Now, the Supreme Court is tasked with determining who will
pay Rodriguez’s backwages.

ISSUE: Who should pay Rodriguez’s backwages?

a. Contract Tours, because they entered into the employment contract
with Rodriguez
b. ALPS, because it is the bus company that Rodriguez was assigned to
work under
c. Alfredo Perez because he is the sole proprietor of ALPS

Ans: C.

RATIO: Why wasn’t Contract Tours liable? Because CT was deemed to be a

labor-only contractor, which is illegal.1 The rule is that the labor-only
contractor (CT) will be considered the agent of the principal (ALPS). More
importantly, the principal is responsible to the contractor’s (CT) employees
in the same manner and to the same extent as if the bus company directly
employed them. Thus, ALPS is considered to be the direct employer, while
CT is merely the agent of ALPS.

If ALPS is the employer, why does Alfredo, and not ALPS, have to pay? A
sole proprietorship does not possess a juridical personality separate
and distinct from that of the owner of the enterprise. Thus, the
1
Labor-Only Contracting - The contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal. For example, Henry & Co. (L.O. Contractor)
hires people to work under Coke (the principal) so that when the employees are fired, they will go
after Henry & Co. for separation pay, but in the end, Henry & Co. doesn’t have any money at all. Coke
is able to escape paying separation pay and the employees are left penniless. (p.s. this is a very basic
explanation only.)
owner has unlimited personal liability for all the debts and
obligations of the business, and it is against him that a decision for
illegal dismissal is to be enforced. Since ALPS Transportation is a sole
proprietorship owned by Alfredo Perez, it is he who must be held liable for
the payment of backwages to Rodriguez.