REPUBLIC v.

ASIAPRO COOPERATIVE 538 SCRA 6596

FACTS. Asiapro, as a cooperative, is composed of owners-members. Its primary objectives are to provide savings and credit facilities and to
develop other livelihood services for its owners-members. In the discharge of the aforesaid primary objectives, respondent cooperative entered into
several Service Contracts with Stanfilco. The owners-members do not receive compensation or wages from the respondent cooperative. Instead,
they receive a share in the service surplus which Asiapro earns from different areas of trade it engages in, such as the income derived from the said
Service Contracts with Stanfilco. In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of Asiapro in Stanfilco
requested the services of the latter to register them with SSS as self-employed and to remit their contributions as such. Petitioner SSS sent a letter
to respondent cooperative informing the latter that based on the Service Contracts it executed with Stanfilco, Asiapro is actually a manpower
contractor supplying employees to Stanfilco and so, it is an employer of its owners-members working with Stanfilco. Thus, Asiapro should register
itself with petitioner SSS as an employer and make the corresponding report and remittance of premium contributions. Despite letters received,
respondent cooperative continuously ignored the demand of petitioner SSS. Respondent cooperative alleges that its owners-members own the
cooperative, thus, no employer-employee relationship can arise between them.
ISSUE. WON an employer-employee relationship exists between Stanfilco and its owner-members.
HELD. YES. an owner-member of a cooperative can be an employee of the latter and an employer-employee relationship can exist between them. a
cooperative acquires juridical personality upon its registration with the Cooperative Development Authority. It has its Board of Directors, which directs
and supervises its business; meaning, its Board of Directors is the one in charge in the conduct and management of its affairs. With that, a
cooperative can be likened to a corporation with a personality separate and distinct from its owners-members. It is true that the Service Contracts
executed between the respondent cooperative and Stanfilco expressly provide that there shall be no employer-employee relationship between the
respondent cooperative and its owners-members. However, the existence of an employer-employee relationship cannot be negated by expressly
repudiating it in a contract, when the terms and surrounding circumstances show otherwise. The employment status of a person is defined and
prescribed by law and not by what the parties say it should be. It is settled that the contracting parties may establish such stipulations, clauses, terms
and conditions as they want, and their agreement would have the force of law between them. However, the agreed terms and conditions must not be
contrary to law, morals, customs, public policy or public order. The Service Contract provision in question must be struck down for being contrary to law and public
policy since it is apparently being used by the respondent cooperative merely to circumvent the compulsory coverage of its employees, who are also its ownersmembers, by the Social Security Law. The four elements in determining the existence of an employer-employee relationship are all present in this
case.
First . It is expressly provided in the Service Contracts that it is the respondent cooperative which has the exclusive discretion in the selection and
engagement of the owners-members as well as its team leaders who will be assigned at Stanfilco.
Second. the weekly stipends or the so-called shares in the service surplus given by the respondent cooperative to its owners-members were in
reality wages, as the same were equivalent to an amount not lower than that prescribed by existing labor laws, rules and regulations, including the
wage order applicable to the area and industry, they are also given to the owners-members as compensation in rendering services to respondent
cooperatives client, Stanfilco.
Third . it is the respondent cooperative which has the power to investigate, discipline and remove the owners-members and its team leaders who
were rendering services at Stanfilco.
Fourth and most importantly, it is the respondent cooperative which has the sole control over the manner and means of performing the services under
the Service Contracts with Stanfilco as well as the means and methods of work. All these clearly prove that, indeed, there is an employer-employee
relationship between the respondent cooperative and its owners-members.

LEGEND HOTEL (MANILA), OLWNED BY TITANIUM CORPORATION AND/OR, NELSON NAPUD, IN HIS CAPACITY AS THE PRESIDENT OF
PETITIONER CORPORATION, PETITIONER,
VS.
HERNANI S. REALUYO, ALSO KNOWN AS JOEY ROA, RESPONDENT.
G.R. No. 153511, July 18, 2012
FACTS:
- This labor case for illegal dismissal involves a pianist employed to perform in the restaurant of a hotel.
- August 9, 1999: Realuyo, whose stage name was Joey R. Roa, filed a complaint for alleged unfair labor practice, constructive illegal
dismissal, and the underpayment/nonpayment of his premium pay for holidays, separation pay, service incentive leave pay, and 13 th month
pay. He prayed for attorneys fees, moral damages of P100,000.00 and exemplary damages for P100,000.00
- Roa averred that he had worked as a pianist at the Legend Hotels Tanglaw Restaurant from September 1992 with an initial rate of
P400.00/night; and that it had increased to P750.00/night. During his employment, he could not choose the time of performance, which had
been fixed from 7:00PM to 10:00pm for three to six times a week.
- July 9, 1999: the management had notified him that as a cost-cutting measure, his services as a pianist would no longer be required
effective July 30, 1999.
- In its defense, petitioner denied the existence of an employer-employee relationship with Roa, insisting that he had been only a talent
engaged to provide live music at Legend Hotels Madison Coffee Shop for three hours/day on two days each week; and stated that the
economic crisis that had hit the country constrained management to dispense with his services.
- December 29,1999: the Labor Arbiter (LA) dismissed the complaint for lack of merit upon finding that the parties had no employeremployee relationship, because Roa was receiving talent fee and not salary, which was reinforced by the fact that Roa received his talent
fee nightly, unlike the regular employees of the hotel who are paid monthly.
- NLRC affirmed the LAs decision on May 31, 2001.
- CA set aside the decision of the NLRC, saying CA failed to take into consideration that in Roas line of work, he was supervised and
controlled by the hotels restaurant manager who at certain times would require him to perform only tagalong songs or music, or wear
barong tagalong to conform with the Filipinana motif of the place and the time of his performance is fixed. As to the status of Roa, he is
considered a regular employee of the hotel since his job was in furtherance of the restaurant business of the hotel. Granting that Roa
was initially a contractual employee, by the sheer length of service he had rendered for the company, he had been converted into a regular
employee.
- CA held that the dismissal was due to retrenchment in order to avoid or minimize business losses, which is recognized by law under Art.
283 of the Labor Code.
ISSUES:
- WON there was employer-employee relationship between the two, and if so,
RULING:
- YES. Employer-employee relationship existed between the parties.
o Roa was undeniably employed as a pianist of the restaurant. The hotel wielded the power of selection at the time it entered into
the service contract dated Sept. 1, 1992 with Roa. The hotel could not seek refuge behind the service contract entered into with
Roa. It is the law that defines and governs an employment relationship, whose terms are not restricted to those fixed in the
written contract, for other factors, like the nature of the work the employee has been called upon to perform, are also considered.
o The law affords protection to an employee, and does not countenance any attempt to subvert its spirit and intent. Any stipulation
in writing can be ignored when the employer utilizes the stipulation to deprive the employee of his security of tenure. The
inequality that characterizes employer-employee relationship generally tips the scales in favor of the employer, such
that the employee is often scarcely provided real and better options.
o The argument that Roa was receiving talent fee and not salary is baseless. There is no denying that the remuneration
denominated as talent fees was fixed on the basis of his talent, skill, and the quality of music he played during the hours of his
performance. Roas remuneration, albeit denominated as talent fees, was still considered as included in the term wage in the
sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration, as per Article 97(f) of
the Labor Code.
o The power of the employer to control the work of the employee is considered the most significant determinant of the existence of
an employer-employee relationship. This is the so-called control test, and is premised on whether the person for whom the
services are performed reserves the right to control both the end achieved and the manner and means used to achieve that end.
o Lastly, petitioner claims that it had no power to dismiss respondent due to his not being even subject to its Code of Discipline,
and that the power to terminate the working relationship was mutually vested in the parties, in that either party might terminate at
will, with or without cause. This claim is contrary to the records. Indeed, the memorandum informing respondent of the
discountinuance of his service because of the financial condition of petitioner showed the latter had the power to dismiss him
from employment.
- NO. Roa was not validly terminated.
o The conclusion that Roas termination was by reason of retrenchment due to an authorized cause under the labor Code is
inevitable.

Petition denied.

Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a management
prerogative resorted to by employers to avoid ro to minimize business losses. On this matter, Article 283 of the Labor Code
states:
Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment
of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. xxx. In case of retrenchment to prevent losses
and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole
year.
Justifications for retrenchment:
a. The expected losses should be substantial and not merely de minimis in extent;
b. The substantial losses apprehended must be reasonably imminent;
c. The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and
d. The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled must be proved by
sufficient and convincing evidence.
In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the employer. Here,
petitioner did not submit evidence of the losses to its business operations and the economic havoc it would thereby imminently
sustain. It only claimed that Roas termination was due to its present business/financial condition. This bare statement fell short
of the norm to show a valid retrenchment. Hence, there was no valid cause for the retrenchment of respondent. Since the
lapse of time since the retrenchment might have rendered Roas reinstatement to his former job no longer feasible, Legend Hotel
should pay him separation pay at the rate of one month pay for every year of service computed from September 1992 until the
finality of this decision, and full backwages from the time his compensation was withheld until the finality of this decision.

Bitoy Javier (Danilo Javier) v. Fly Ace Corporation and Flordelyn Castillo (2012)
Facts:
1.

Since 2007, Danilo Bitoy Javier was an employee of Fly Ace

Performed various tasks, such as cleaning and arranging the canned items before their delivery, except in instances when he would be
ordered to accompany the company's delivery vehicles, as pahinante
Reported for work M to S from 7AM to 5PM
He wasnt issued an ID and payslips
2. May 6, 2008: He was no longer allowed to enter the premises, upon instruction of Mr. Ong, his superior
As he was begging the security guard to let him enter, he saw Mr. Ong, whom he approached and asked why he was being barred from
entering
Tanungin mo anak mo Mr. Ong
Bitoy discovered that Mr. Ong had been courting his daughter Annalyn; that Annalyn tried to talk to Mr. Ong and convince him to spare
Bitoy from trouble, but he refused; that Mr. Ong then fired Bitoy
3. May 23, 2008: Bitoy filed a complaint with the NLRC for underpayment of salaries and other labor standard benefits
His evidence: affidavit of Bengie Valenzuela, who alleged that Bitoy was a stevedore or pahinante of Fly Ace from Sept. 2007 to Jan. 2008
Fly Ace said it was in the business of importation and sales of groceries
o That Bitoy was contracted by Mr. Ong as extra helper on a pakyaw basis for 5-6 times a month, whenever the vehicle of its contracted
hauler, Milmar Hauling Services, was unavailable;
o Rate was P300 (increased to P325)
o That on April 30, they no longer needed his services
o That Bitoy was not their employee, and there was no illegal dismissal
o Evidence: Agreement with Milmar Hauling Services (the contracted hauler) and copies of acknowledgment receipts evidencing payment
to Javier daily manpower (pakyaw/piece rate pay)
4. LA: Dismissed, Bitoy failed to present proof he was a regular employee of Fly Ace
He has no ID nor any document showing he received benefits accorded to regular employees
Bitoy was contracted on pakiao basis because Fly Ace has a regular hauler to deliver its products
Claim for underpayment of salaries unfounded; payroll presented had Bitoys signature, which, despite not being uniform, appeared to be
his true signature
5. NLRC: Favored Bitoy
LA wrong because it immediately concluded Bitoy as not a regular employee simply because he failed to present proof
That a pakyaw-basis arrangement did not preclude the existence of employer-employee relationship because payment is a method of
compensation, it does not define the essence of the relation It is a mere method of computing compensation, not a basis for determining
the existence or absence of an employer-employee relationship.
Just because the work done was not directly related to the trade or business or the work was considered as extra, it does not follow that
Bitoy is a job contractor, rather than an employee
There was sufficient basis on the existence of an ER-EE relationship
o There was a reasonable connection between the activity performed (as pahinante) in relation to the business or trade of the employer
(importation, sales, delivery of groceries)
o Not an independent contractor because he could not exercise judgment in the delivery of products, he was only a helper
Bitoy is entitled to security of tenure; Fly Ace did not present proof for a valid cause of termination, so it is liable for illegal dismissal,
backwages, and separation pay
6. CA: Annulled the NLRC, reinstated the LA
In an illegal dismissal case, the onus probandi rests on the employer; however, before an illegal dismissal case can prosper, an ER-EE
relationship must first be established
Incumbent upon Bitoy to prove he is an employee, but he failed to discharge this burden
Bitoys failure to present salary vouchers, playslips or other pieces of evidence to bolster his contention
The facts alleged by Bitoy did NOT pass the control test
o He contracted work outside the premises
o He was not required to observe definite hours
o He was not required to report daily
o He was free to accept work elsewhere
7. Appeal to the SC
Issues:
1. WON Bitoy is a regular employee
2. WON he is entitled to his monetary claims
Held:
1.

NO, he is not a regular employee; affirmed CA

2.

Bitoy: Fly Ace has nothing to substantiate that he was engaged on a pakyaw basis; and assuming he was hird on pakyaw basis, it does not
preclude his regular employment; acknowledgement receipts with his signature do not show true nature of employment (relied on Chavez
v. NLRC)
o His tasks as pahinante are related to Fly Airs business
o He was subject to the control and supervision of the company (reported M to S, 7AM to 5PM)
o List of deliverable goods prepared by Fly Ace Bitoy was subject to compliance with company rules
o He was illegally dismissed by Fly Ace
Fly Ace: Bitoy had no substantial evidence to prove ER-EE relationship
o Despite having Milmar Hauling under service contract, they contracted Bitoy as an extra helper or pahinante, on a mere per trip basis
o Bitoy and the company driver would have the vehicle and products in their custody, and when they left company premises, they use their
own means, method, best judgment and discretion (i.e., no control by Fly Ace)
o Claims of employment by Bitoy are BASELESS, and nothing was presented to substantiate this
o Lopez v. Bodega City: In an illegal dismissal case, the burden of proof is upon the complainant w ho claims to be an employee. It is
essential that an employer-employee relationship be proved by substantial evidence
o Bitoy merely offers factual assertions, unsupported by proof
o Bitoy was not subject to Fly Aces control, he performed his work outside the premises, he was not made to report at regular work hours,
he was free to leave any time
SC: Evoked equity jurisdiction to examine the factual issues
The LA and CA found that Bitoys claim of employment is wanting and deficient; the Court is constrained to agree
Bitoy needs to show by substantial evidence (Sec. 10, Rule VII, New Rules of Procedure of the NLRC) that he was indeed an employee
against which he claims illegal dismissal
In sum, the rule of thumb remains: the onus probandi falls on petitioner to establish or substantiate such claim by the requisite quantum of
evidence.32 "Whoever claims entitlement to the benefits provided by law should establish his or her right thereto . . . ." Bitoy failed to
adduce substantial evidence as basis for the grant of relief
All Bitoy presented were self-serving statements showing his activities as employee, but failed to pass the substantiality requirement (as
concluded also by the LA and the CA), from which the SC sees no reason to depart
o Affidavit of Bengie Valenzuela that Bitoy presented was insufficient because all it provided was that he would frequently see Bitoy at the
workplace where he (Bengie) was a stevedore
o SC: Mere presence falls short of proving employment
SC: The burden is on Bitoy to pass the control test
o Bitoy was not able to persuade the Court that the elements exist (no competent proof that he was a regular employee, that Fly Ace paid
wages as an employee, that Fly Ace could dictate what his conduct wuld be while at work)
SC: Fly Ace does not dispute having contracted Javier and paid him on a "per trip" rate as a stevedore, albeit on a pakyaw basis.
o They presented documentary proof acknowledgment receipts
Moot. No need to resolve the second issue.

Obiter: "payment by the piece is just a method of compensation and does not define the essence of the relation."
Payment on a piece-rate basis does not negate regular employment. "The term 'wage' is broadly defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece or commission
basis
Payment by the piece is just a method of compensation and does not define the essence of the relations
Disposition: Petition is DENIEID.

BERNARD TENAZAS v. R. VILLEGAS TAXI TRANSPORT G.R. No. 192998 02 APRIL 2014
FACTS: Bernard Tenazas, Jaime Francisco, and Isidro Endraca filed a co mplaint for illegal dismissal against
R. Villegas Taxi Transpo rt, and/or Ro mualdo Villegas and And y Villegas.
PETITIONERS CLAIM
TENAZAS - Taxi unit was sideswiped by another vehicle (damage = P500); fired after reporting the incident, even threatened w/
physical harm if he was seen on company premises.
FRANCISCO - Dismissed because of the unfounded suspicion that he was organizing a labor union
EDRACA Dismissed after falling short of the required boundary for his taxi unit; fell short because of P700 spent on an urgent
repair
R. VILLEGAS TAXIS CLAIM
TENAZAS - Company admits that Tenazas is an employee regular driver. Tenazas was never terminated; he failed to report back
to work after being told to wait for the release of his taxi (overhauled due to mechanical defects)
FRANCISCO - Company denies that Francisco is an employee
ENDRACA - Company admits that Endraca is an employee spare driver . Endraca could not have been terminated in March 2006
because he stopped reporting for work in July 2003 (but willing to accommodate him again as he was never really dismissed)
Tenazas, Francisco, and Endraca also filed a Motion to Ad mit Additio nal Evidence: (a) Joint Affidavit of the
petitioners; (b) Affidavit of Good Faith of Aloney Rivera (co-driver); (c) pictures of the petitioners wearing co mp any shirts;
(d) Tenazas Certificatio n/Record of Social Security System (SSS) contrib utio ns.
LA: No illegal dismissal because no proof of an overt act of dismissal co mmitted b y R. Villegas Taxi;
Francisco failed to prove he was an emplo yee
NLRC: Reversed LA; the additional evidence sufficiently established the existence of emplo yer -emplo yee
relationship and illegal dismissal ( for all three)
CA: Tenazas and Endraca were indeed emplo yees and were illegally dismissed, but Francisco failed to
establish his relatio nship with the co mpany
ISSUES: WON there was an emp lo yer -emplo yee relationship (re: Francisco) NO
HELD:
The burden of proof rests upon the party who a sserts the affirmative of an issue. As Francisco was claiming to
be an emplo yee o f R. Villegas Taxi, it is incumbent upon him to proffer evidence to prove the existence of the
relationship.
There is no hard and fast rule to establish the elements of em plo yer-emplo yee relatio nship. Any competent and
relevant evidence may be admitted, e.g., identification cards, cash vouchers, social security registration, appointment
letters or emp lo yment co ntracts, payrolls, organization charts, personnel lists.
Francisco failed to present sub stantial evidence to establish the relationship. No documentary evidence
sub mitted, like an attendance lo gbook, payroll, SSS record, or any perso nnel file that depicts his status as an
emplo yee. He could also have at least prese nted his social security records stating his co ntrib utio ns, name and
address of emplo yer ( which Tenazas presented). Another taxi operator, Emmanuel Villegas, also claimed to be
his emplo yer a fact not denied or questioned b y Francisco in any o f his p lead ings. Petition DENIED. SC
agreed with CAs order of reinstatement instead of separation pay. (*Strained relatio ns must be demonstrated
as a fact. In this case, no facts demo nstrated that the relatio ns were so strained as to make reinstatement no
longer a feasible optio n.)

PEOPLES BROADCASTING (BOMBO RADYO PHILS.) VS. SECRETARY OF LABOR G.R. No. 179652, May 8, 2009
FACTS: Jandeleon Juezan (Juezan) filed a complaint before the DOLE against Bombo Radyo Phils. (Bombo Radyo) for illegal deduction, nonpayment of service incentive leave, 13th month pay, premium pay for holiday and rest day and illegal diminution of benefits, delayed payment of
wages and non-coverage of SSS, PAG-IBIG and Philhealth. On the basis of the complaint, the DOLE conducted a plant level inspection. The Labor
Inspector in his report wrote,
Management representative informed that (Juezan) complainant is a drama talent hired on a per drama participation basis hence no
employer-employer relationship existed between them. As proof of this, management presented photocopies of cash vouchers, billing
statement, employments of specific undertaking, etc. The management has no control of the talent if he ventures into another contract with
other broadcasting industries.
The DOLE Regional Director issued an order ruling that Juezan is an employee of Bombo Radyo, and that Juezan is entitled to his money claims.
Bombo Radyo sought reconsideration claiming that the Regional Director gave credence to the documents offered by Juezan without examining the
originals, but at the same time the Regional Director missed or failed to consider Bombo Radyos evidence. The motion for reconsideration was
denied. On appeal, the Acting DOLE Secretary dismissed the appeal on the ground that Bombo Radyo did not post a cash or surety bond and
instead submitted a Deed of Assignment of Bank Deposit.
Bombo Radyo elevated the case to the Court of Appeals, claiming that it was denied due process when the DOLE Secretary disregarded the
evidence it presented and failed to give it the opportunity to refute the claims of Juezan. It maintained that no employer-employee relationship had
ever existed between it and Juezan because it was the drama directors and producers who paid, supervised and disciplined him. It also added that
the case was beyond the DOLEs jurisdiction because Juezans claim exceeded P5,000.
The Court of Appeals held that the DOLE Secretary had the power to order and enforce compliance with labor standard laws irrespective of the
amount of individual claims because the limitation imposed by Art. 29 of the Labor Code had been repealed by R.A. 7730.
Bombo Radyo argues that the NLRC (not the DOLE Secretary) has jurisdiction over Juezans claim, in view of Arts. 217 and 128 of the Labor Code.
It adds that the Court of Appeals committed grave abuse of discretion when it dismissed their appeal without delving on the issue of employeremployee relationship.
ISSUE: Whether or not the Secretary of Labor has the power to determine the existence of an employer-employee relationship.
HELD: NO. Art. 128 (b) of the Labor Code, as amended by R.A. 7730 reads:
Notwithstanding the provisions of Articles 129 and 217 of this Code to the contrary, and in cases where the relationship of employer-employee
still exists, the Secretary of Labor and Employment or his duly authorized representatives shall have the power to issue compliance orders to
give effect to the labor standards provisions of this Code and other labor legislation based on the findings of labor employment and
enforcement officers or industrial safety engineers made in the course of inspection.
The provision is explicit that the visitorial and enforcement power of the DOLE comes into play only in cases when the relationship of employeremployee still exists. This clause signifies that the employer-employee relationship must have existed even before the emergence of the
controversy. Necessarily, the DOLEs power does not apply in two instances, namely: (i) where the employer-employee relationship has ceased; and
(ii) where no such relationship has ever existed.
The first situation is categorically covered by Sec. 3, Rule 11 of the Rules on the Disposition of Labor Standards Cases issued by the DOLE
Secretary. It reads:
Where employer-employee relationship no longer exists by reason of the fact that it has already been severed, claims for payment of monetary
benefits fall within the exclusive and original jurisdiction of the labor arbiters. Accordingly, if on the face of the complaint, it can be ascertained
that employer-employee relationship no longer exists, the case, whether accompanied by an allegation of illegal dismissal, shall immediately
be endorsed by the Regional Director to the appropriate branch of the National Labor Relations Commission (NLRC).
The law accords a prerogative to the NLRC over the claim when the employer-employee relationship has terminated or such relationship has not
arisen at all. The existence of an employer-employee relationship is a matter which is not easily determinable from an ordinary inspection because
the elements of such a relationship are not verifiable from a mere ocular examination. The intricacies and implications of an employer-employee
relationship demand that the level of scrutiny should be far above the superficial. While documents, particularly documents found in the employers
office are the primary source materials, what may prove decisive are factors related to the history of the employers business operations, its current
state as well as accepted contemporary practices in the industry. More often than not, the question of employer-employee relationship becomes a
battle of evidence, the determination of which should be comprehensive and intensive and therefore best left to the specialized quasi-judicial body of
the NLRC.

It can be assumed that the DOLE in the exercise of its visitorial and enforcement power somehow has to make a determination of the existence of an
employer-employee relationship. However, such determination cannot be coextensive with the visitorial and enforcement power itself. Such is
merely preliminary, incidental and collateral to the DOLEs primary function of enforcing labor standards provisions. The determination of the
existence of employer-employee relationship is still primarily lodged with the NLRC. This is the meaning of the clause in cases where the
relationship of employer-employee still exists in Art. 128 (b).
Thus, before the DOLE may exercise its powers under Art. 128, two important questions must be resolved: (i) Does the employer-employee
relationship still exist, or alternatively, was there ever an employer-employee relationship to speak of; and (ii) Are there violations of the Labor Code
or of any labor law?
The existence of an employer-employee relationship is a statutory prerequisite to and a limitation on the power of the Secretary of Labor, one which
the legislative branch is entitled to impose. The rationale underlying this limitation is to eliminate the prospect of competing conclusions of the
Secretary of Labor and the NLRC. If the Secretary of Labor proceeds to exercise his visitorial and enforcement powers absent the first requisite, his
office confers jurisdiction on itself which it cannot otherwise acquire.
Nevertheless, a mere assertion of absence of employer-employee relationship does not deprive the DOLE of jurisdiction over the claim. At least a
prima facie showing of such absence of relationship, as in this case, is needed to preclude the DOLE from the exercise of its power. Without a doubt,
Bombo Radyo, since the inception of this case had been consistent in maintaining that Juezan is not its employee. A preliminary determination,
based on the evidence offered and noted by the Labor Inspector during the inspection as well as submitted during the proceedings before the
Regional Director puts in genuine doubt the existence of employer-employee relationship. From that point on, the prudent recourse on the part of the
DOLE should have been to refer Juezan to the NLRC for the proper dispensation of his claims. Furthermore, even the evidence relied on by the
Regional Director in his order are mere self-serving declarations of Juezan, and hence cannot be relied upon as proof of employer-employee
relationship.

Smart Communications vs Astorga 542 scra 153 (2007)

FACTS:
Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) on May 8, 1997 as District Sales
Manager of the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD).As District Sales Manager, Astorga enjoyed additional
benefits, namely, annual performance incentive equivalent to 30% of her annual gross salary, a group life and hospitalization insurance coverage,
and a car plan in the amount of P455,000.00.On May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value of
the Honda Civic Sedan which was given to her under the companys car plan program, or to surrender the same to the company for proper
disposition.
Astorga, however, failed and refused to do either, thus prompting SMART to file a suit for replevin with the Regional Trial Court of Makati (RTC) on
August 10, 1998.In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was made known to
the employees on February 27, 1998.Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a
joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and
marketing work, SMART abolished the CSMG/FSD, Astorgas division. SNMI agreed to absorb the CSMG personnel who would be recommended
by SMART.SMART then conducted a performanceevaluation of CSMG personnel and those who garnered the highest ratings were favorably
recommended to SNMI. Astorga landedlast in the performance evaluation, thus, she was not recommended by SMART. SMART offered her a
supervisory position in theCustomer Care Dept but she refused the offer.On March 3, 1998, SMART issued a memorandum advising Astorga of the
termination of her employment on ground of redundancy,effective April 3, 1998. Astorga received it on March 16, 1998.The termination of her
employment prompted Astorga to file a Complaint for illegal dismissal, non-payment of salaries and otherbenefits with prayer for moral and
exemplary damages against SMART. She claimed that abolishing CSMG and, consequently,terminating her employment was illegal for it violated
her right to security of tenure.
ISSUE:
Whether the dismissal of Astorga be valid or illegal.
Whether or not the RTC has no jurisdiction over the complaint for recovery of a car which Astorga acquired as part of her employeebenefit.
HELD:
Astorga is declared validly dismissed. Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an
employee. Redundancy in an employers personnel force necessarily or even ordinarily refers to duplication of work. The characterization of an
employees services as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of business judgment onthe part of the
employer. An employer is not precluded from adopting a new policy conducive to a more economical and effective management even if it is not
experiencing economic reverses. Neither does the law require that the employer should suffer financial losses before he can terminate the services
of the employee on the ground of redundancy. But while tilting the scales of justice in favor of workers, the fundamental law also guarantees the right
of the employer to reasonable returns for his investment. In this light, we must acknowledge the prerogative of the employer to adopt such measures
as will promote greater efficiency, reduce overhead costs and enhance prospects of economic gains, albeit always within the framework of existing
laws. However, SMART failed to comply with the mandated one (1) month notice prior to termination. The record is clear that Astorga received the
notice of termination only on March 16, 1998 or less than a month prior to its effectively on April 3, 1998. Likewise, the Department of Labor and
Employment was notified of the redundancy program only on March 6, 1998.Article 283 of the Labor Code clearly provides: Art.283. Closure of
establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment
at least one (1) month before the intended date thereof x x x. The RTC rightfully assumed jurisdiction over the suit and acted well within its discretion
in denying Astorgas motion to dismiss. SMARTs demand for payment of the market value of the car or, in the alternative, the surrender of the car, is
not a labor, but a civil, dispute. It involves the relationship of debtor and creditor rather than employee-employer relations. As such, the dispute falls
within the jurisdiction of the regular courts. Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary
relief sought therein is the return of the property in specie wrongfully detained by another person. It is an ordinary statutory proceeding to adjudicate
rights to the title or possession of personal property. The question of whether or not a party has the right of possession over the property involved
and if so, whether or not the adverse party has wrongfully taken and detained said property as to require its return to plaintiff, is outside the pale of
competence of a labor tribunal and beyond the field of specialization of Labor Arbiters

DOMONDON VS. NLRC 471 SCRA 559

FACTS:Petitioner Roberto Domondon filed a complaint before the Regional Arbitration Branch of the NLRC against private
respondent Van Melle Phils., Inc. (VMPI) and its President and General Manager, private respondent Niels H.B. Have. He claimed illegal
dismissal and prayed for reinstatement, payment of full backwages inclusive of allowances, 14 th month pay, sick and vacation leaves, share in
the profits, moral and exemplary damages and attorneys fees.
Endaya was transferred to China and was replaced by private respondent Have. According to petitioner, respondent Have immediately set a
one-on-one meeting with him and requested his courtesy resignation. Petitioner refused to resign and life got difficult for him. His decisions
were always questioned by private respondent Have. He was subjected to verbal abuse. His competence was undermined by baseless and
derogatory memos, which lay the bases for his removal from the company. He also did not receive his 14th month pay.[7]
Private respondent Have informed petitioner that things would get more difficult for him if he does not resign. Private respondent Have offered
financial assistance if petitioner would leave peacefully but the offer must be accepted immediately or it would be withdrawn. Thus, petitioner
signed a ready-made resignation letter without deliberation and evaluation of the consequences.
Private respondents claimed that he voluntarily resigned.The initial agreement of the parties was that petitioner would be extended a
soft-landing financial assistance in the amount of P300,000.00 on top of his accrued benefits at the time of the effectivity of his resignation.
However, petitioner later changed his mind. He requested that he be allowed to keep the car assigned to him in lieu of the financial assistance.
However, company policy prohibits transfer of ownership of property without valuable consideration. Thus, the parties agreed that petitioner
shall still be extended the P300,000.00 financial support, which he shall use to pay for the subject car.
Private respondents made a counterclaim involving the transfer of ownership of a company car to petitioner. They maintain that he failed
to pay for the car in accordance with their agreement.

ISSUE: WON Labor Arbiter has jurisdiction to hear and decide the question on the transfer of ownership of the car assigned to petitioner.

HELD: YES. , the transfer of the ownership of the company car to petitioner is connected with his resignation and arose out of the parties employeremployee relations. Accordingly, private respondents claim for damages falls within the jurisdiction of the Labor Arbiter.

[G.R. No. 141093. February 20, 2001]

PRUDENTIAL BANK and TRUST COMPANY, petitioner, vs. CLARITA T. REYES, respondent.
GONZAGA-REYES, J.:
Facts: Clarita Tan Reyes filed against Prudential Bank and Trust Company (the Bank) before the labor arbiter a complaint for illegal suspension and
illegal dismissal with prayer for moral and exemplary damages, gratuity, fringe benefits and attorneys fees Prior to her dismissal, private respondent
Reyes held the position of Assistant Vice President in the foreign department of the Bank, tasked with the duties, among others, to collect checks
drawn against overseas banks payable in foreign currency and to ensure the collection of foreign bills or checks purchased, including the signing of
transmittal letters covering the same.
The auditors of the Bank discovered that two checks, No. 011728-7232-146, in the amount of US$109,650.00, and No. 011730-7232-146, in the
amount of US$115,000.00, received by the Bank on April 6, 1989, drawn by the Sanford Trading against Hongkong and Shanghai Banking
Corporation, Jurong Branch, Singapore, in favor of Filipinas Tyrom, were not sent out for collection to Hongkong Shanghai Banking Corporation on
the alleged order of the complainant until the said checks became stale.
The Bank created a committee to investigate the findings of the auditors involving the two checks which were not collected and became stale.
After a review of the Committees findings, the Board of Directors of the Bank resolved not to re-elect complainant any longer to the position of
assistant president pursuant to the Banks By-laws.
On July 19, 1991, complainant was informed of her termination of employment from the Bank by Senior Vice President Benedicto L. Santos.
Judgment was rendered by Labor Arbiter Cornelio L. Linsangan finding the dismissal of complainant to be without factual and legal basis and
ordering the respondent bank to pay her back wages for three (3) years in the amount of P540,000.00 (P15,000.00 x 36 mos.). In lieu of
reinstatement, the respondent is also ordered to pay complainant separation pay equivalent to one month salary for every year of service, in the
amount of P420,000.00 (P15,000 x 28 mos.). In addition, the respondent should also pay complainant profit sharing and unpaid fringe
benefits. Attorneys fees equivalent to ten (10%) percent of the total award should likewise be paid by respondent.
Issues:1) whether the NLRC has jurisdiction over the complaint for illegal dismissal;
(2) whether complainant Reyes was illegally dismissed; and
(3) whether the amount of back wages awarded was proper.
Held: 1) Petitioner Bank can no longer raise the issue of jurisdiction under the principle of estoppel. The Bank participated in the proceedings from
start to finish. It filed its position paper with the Labor Arbiter. When the decision of the Labor Arbiter was adverse to it, the Bank appealed to the
NLRC. When the NLRC decided in its favor, the bank said nothing about jurisdiction. Even before the Court of Appeals, it never questioned the
proceedings on the ground of lack of jurisdiction. It was only when the Court of Appeals ruled in favor of private respondent did it raise the issue of
jurisdiction. The Bank actively participated in the proceedings before the Labor Arbiter, the NLRC and the Court of Appeals. While it is true that
jurisdiction over the subject matter of a case may be raised at any time of the proceedings, this rule presupposes that laches or estoppel has not
supervened. In this regard, Baaga vs. Commission on the Settlement of Land Problems,[11] is most enlightening. The Court therein stated:
This Court has time and again frowned upon the undesirable practice of a party submitting his case for decision and then accepting the judgment,
only if favorable, and attacking it for lack of jurisdiction when adverse. Here, the principle of estoppel lies. Hence, a party may be estopped or
barred from raising the question of jurisdiction for the first time in a petition before the Supreme Court when it failed to do so in the early stages of the
proceedings.
2) Upon this point, the rule that proof beyond reasonable doubt is not required to terminate an employee on the charge of loss of confidence and that
it is sufficient that there is some basis for such loss of confidence, is not absolute. The right of an employer to dismiss employees on the ground that
it has lost its trust and confidence in him must not be exercised arbitrarily and without just cause. For loss of trust and confidence to be valid ground
for an employees dismissal, it must be substantial and not arbitrary, and must be founded on clearly established facts sufficient to warrant the
employees separation from work (Labor vs. NLRC, 248 SCRA 183).

After painstakingly examining the testimonies of Ms. Joven and respondents other witnesses this Office finds the evidence still wanting in proof of
complainants guilt.
There are other factors that constrain this Office to doubt even more the legality of complainants dismissal based on the first ground stated in the
letter of dismissal. The non-release of the dollar checks was reported to top management sometime on 15 November 1989 when complainant,
accompanied by Supervisor Dante Castor and Analiza Castillo, reported the matter to Vice President Santos. And yet, it was only on 08 March
1991, after a lapse of sixteen (16) months from the time the non-release of the checks was reported to the Vice President, that complainant was
issued a memorandum directing her to submit an explanation. And it took the bank another four (4) months before it dismissed complainant.
The delayed action taken by respondent against complainant lends credence to the assertion of the latter that her dismissal was a mere retaliation to
the criminal complaints she filed against the banks top officials.
3) Jurisprudence is clear on the amount of backwages recoverable in cases of illegal dismissal. Employees illegally dismissed prior to the effectivity
of Republic Act No. 6715 on March 21, 1989 are entitled to backwages up to three (3) years without deduction or qualification, while those illegally
dismissed after are granted full backwages inclusive of allowances and other benefits or their monetary equivalent from the time their actual
compensation was withheld from them up to the time of their actual reinstatement. [20] Considering that private respondent was terminated on July 19,
1991, she is entitled to full backwages from the time her actual compensation was withheld from her (which, as a rule, is from the time of her illegal
dismissal) up to the finality of this judgment (instead of reinstatement) considering that reinstatement is no longer feasible as correctly pointed out by
the Court of Appeals on account of the strained relations brought about by the litigation in this case. Since reinstatement is no longer viable, she is
also entitled to separation pay equivalent to one (1) month salary for every year of service. [21] Lastly, since private respondent was compelled to file
an action for illegal dismissal with the labor arbiter, she is likewise entitled to attorneys fees[22] at the rate above-mentioned. There is no room to
argue, as the Bank does here, that its liability should be mitigated on account of its good faith and that private respondent is not entirely
blameless. There is no showing that private respondent is partly at fault or that the Bank acted in good faith in terminating an employee of twentyeight years. In any event, Article 279 of Republic Act No. 6715[23] clearly and plainly provides for full backwages to illegally dismissed employees

Real vs. Sangu Phils. Inc.

RENATO REAL, Petitioner, vs. SANGU PHILIPPINES, INC. and/ or KIICHI ABE, Respondents. G.R. No. 168757
January 19, 2011
DEL CASTILLO, J.:
FACTS:
Renato Real was the Manager of respondent corporation Sangu Philippines, Inc. which is engaged in the business of providing manpower for
general services. He filed a complaint for illegal dismissal against the respondents stating that he was neither notified of the Board meeting during
which his removal was discussed nor was he formally charged with any infraction.
Respondents, on the other hand, said that Real committed gross acts of misconduct detrimental to the company since 2000. The LA declared
petitioner as having been illegally dismissed. Sangu appealed to NLRC and established petitioners status as a stockholder and as a corporate
officer and hence, his action against respondent corporation is an intra-corporate controversy over which the Labor Arbiter has no jurisdiction. NLRC
modified the LAs decision. On appeal, the CA affirmed the decision of NLRC.
Hence, this petition.
ISSUE: WON petitioners complaint for illegal dismissal constitutes an intra-corporate controversy.
RULING:
To determine whether a case involves an intra-corporate controversy, and is to be heard and decided by the branches of the RTC specifically
designated by the Court to try and decide such cases, two elements must concur: (a) the status or relationship of the parties, and (2) the nature of
the question that is the subject of their controversy.

The first element requires that the controversy must arise out of intra-corporate or partnership relations between any or all of the parties and the
corporation x x . The second element requires that the dispute among the parties be intrinsically connected with the regulation of the corporation. If
the nature of the controversy involves matters that are purely civil in character, necessarily, the case does not involve an intra-corporate controversy.

Guided by this recent jurisprudence, we thus find no merit in respondents contention that the fact alone that petitioner is a stockholder and director
of respondent corporation automatically classifies this case as an intra-corporate controversy. To reiterate, not all conflicts between the stockholders
and the corporation are classified as intra-corporate. There are other factors to consider in determining whether the dispute involves corporate
matters as to consider them as intra-corporate controversies.

Aliviado v. Procter & Gamble Philippines, Inc.

G.R. No. 160506, 614 SCRA 563, March 9, 2010

FACTS:

Petitioners worked as merchandisers of respondent Procter & Gamble Philippines, Inc. (hereafter, P&G) from various dates, allegedly
starting as early as 1982 or as late as June 1991, to either May 5, 1992 or March 11, 1993.
Petitioners signed employment contracts with respondent Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS).
They were employed for five months at time, assigned to different stations in supermarkets.
SAPS and Promm-Gem paid petitioners wages and imposed disciplinary measures on petitioners when warranted.
P&G entered into contracts with SAPS and Promm-Gem for the promotion of its products. It appears that petitioners were assigned to
promote P&Gs products.
In December 1991, petitioners filed a complaint for regularization and other money claims against P&G. The complaint was later amended
to include charges of illegal dismissal.
Labor Arbiter: Dismissed the complaint; there was no employer-employee relationship (EER) between petitioners and P&G, as the former
were employed by Promm-Gem and SAPS.
o Applied the four-fold test for EER:
1. Selection and engagement;
2. Payment of wages;
3. Power of dismissal;
4. Power of control.
o Declared Promm-Gem and SAPS legitimate job contractors.
Petitioners appealed to the NLRC.
NLRC: Dismissed the appeal, affirmed the Labor Arbiters Decision. Motion for reconsideration denied.
Petitioners sought recourse with the Court of Appeals via a petition for certiorari under Rule 65 of the Rules of Court.
CA: Denied the petition and affirmed the NLRCs Decision with modification.
o P&G ordered to pay service incentive leave pay to petitioners.
o Petitioners motion for reconsideration was denied.
Hence, this petition for review by certiorari under Rule 45 of the Rules of Court.

ISSUES + RATIO:

Whether or not contracting out of a companys core activities is allowed under the Labor Code and its Implementing Rules. YES.

To be sure, the Labor Code and its Implementing Rules do not prohibit job contracting. The law allows contracting arrangements for the
performance of specific jobs, works or services.
Indeed, it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in
nature. However, in order for such outsourcing to be valid, it must be made to an independent contractor because the current labor rules
expressly prohibit labor-only contracting.
Labor-only contracting exists where the contractor merely recruits, supplies or places workers to perform a job, work or service for a
principal. Moreover, any of the following elements must concur:
o 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
o The contractor does not exercise the right to control over the performance of the work of the contractual employee.

Whether or not Promm-Gem is engaged in labor-only contracting. NO; it is a legitimate job contractor.

It has substantial capital, as shown by its financial statements.

o Authorized capital stock P1 million.
o Paid-in capital P500,000.
It has substantial investments in the form of warehouses, office spaces, and vehicles.
Promm-Gem has other clients aside from P&G.
Promm-Gem provided its workers with uniforms and materials. The latter were considered regular employees.

Whether or not SAPS is engaged in labor-only contracting. YES.

It does not have substantial capitalits paid-in capital is only P31,250.

o Monthly payroll already totaled P44,561. Its contracts with P&G were for six-month periods. Its capital is not even sufficient for
one months payroll.
o 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.
Neither is there a showing of substantial investment in tools, equipment or other assets.
Furthermore, petitioners activities which consisted of merchandising and promotion of P&G products are directly related to the
manufacturing business.
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, the Court found that SAPS is engaged in labor-only contracting.

Whether or not an employer-employee relationship exists between P&G and petitioners. YES.

Where labor-only contracting exits, the law establishes an EER between the employer and the employees of the contractor.
Rationale: to prevent circumvention of labor laws.
The petitioners recruited by SAPS are considered P&G employees. The petitioners who worked under Promm-Gem are not, since the
latter is a legitimate job contractor.

Whether or not petitioners (Promm-Gem employees) were illegally dismissed. YES.

Promm-Gem dismissed petitioners for grave misconduct and breach of trust after they sought regularization from P&G. Promm-Gem
claimed that this assailed the integrity of the company as a legitimate and independent promotion firm.
To be a just cause for dismissal, misconduct (a) must be serious; (b) must relate to the performance of the employees duties; and (c) must
show that the employee has become unfit to continue working for the employer.
o In the instant case, petitioners-employees of Promm-Gem may have committed an error of judgment in claiming to be employees
of P&G, but it cannot be said that they were motivated by any wrongful intent in doing so.
o Thus, petitioners are guilty only of simple misconduct.
Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful breach of the trust reposed in the
employee by his employer.
o The erring employee must hold a position of responsibility or of trust and confidence. And, in order to constitute a just cause for
dismissal, the act complained of must be work-related and must show that the employee is unfit to continue to work for the
employer.
o Here, the petitioners-employees of Promm-Gem have not been shown to be occupying positions of responsibility or of trust and
confidence. Neither is there any evidence to show that they are unfit to continue to work as merchandisers for Promm-Gem.

Whether or not petitioners (SAPS-P&G employees) were illegally dismissed. YES.

They were not afforded procedural due process (two notice rule). They were merely verbally informed of the termination of their services.
Petitioners were dismissed upon the initiation of P&G. When the latter did not renew its contract with SAPS, petitioners services were
automatically terminated evidently because SAPS had no other clients.

Whether or not petitioners are entitled to the payment of damages, costs, and attorneys fees. YES.

With regard to the employees of Promm-Gem, their dismissals were not attended with bad faith so as to warrant the award of moral and
exemplary damages.
As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive to labor. The sudden and peremptory
barring of the concerned petitioners from work, and from admission to the work place, after just a one-day verbal notice, and for no valid

cause bellows oppression and utter disregard of the right to due process of the concerned petitioners. Hence, an award of moral damages
is called for.
P&G is also liable for attorneys fees.
Finally, all petitioners having been illegally dismissed, they are entitled to reinstatement with backwages.

DISPOSITION: Petition granted. Case remanded to Labor Arbiter for computation of backwages and other benefits.

Aliviado v. Procter & Gamble Philippines, Inc.

(Motion to refer the case to the Supreme Court en banc)
G.R. No. 160506, 650 SCRA 400, June 6, 2011

ISSUE + RATIO:

Whether or not the Court erred in ruling that SAPS is a labor-only contractor. NO.

P&G claims that the Court should have applied the four-fold test, specifically the control test, in determining whether SAPS is a legitimate
job contractor or a labor-only contractor.
This is incorrect. The control test is only one of the ways to determine the existence of labor-only contracting.
Pertinently, Department Order No. 18-02 provides:
Section 5. Prohibition against labor-only contracting. Labor only contracting is hereby declared prohibited. For this purpose, laboronly 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 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) [T]he contractor does not exercise the right to control over the performance of the work of the contractual employee. (Emphasis
supplied)

In the case at bar, the Court already concluded that (1) SAPS merely recruited workers for P&G, (2) it did not have substantial capital or
investment, and (3) the workers performed activities directly related to the business of the principal.
Hence, SAPS may be considered a labor-only contractor under D.O. 18-02, Sec. 5 (i).
In Coca-Cola Bottlers Phils., Inc. v. Agito, the Court ruled:
The law clearly establishes an employer-employee relationship between the principal employer and the contractors employee upon a
finding that the contractor is engaged in labor-only contracting. Article 106 of the Labor Code categorically states: 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. Thus, performing activities directly related to the principal
business of the employer is only one of the two indicators that labor-only contracting exists; the other is lack of substantial
capital or investment. The Court finds that both indicators exist in the case at bar. (Emphasis supplied)

DISPOSITION: Judgment affirmed.

COCA COLA BOTTLERS INC v. DELA CRUZ

G.R. No. 184977

Where the contractors were merely suppliers of labor, the contracted personnel, engaged in component functions in the main business of the
company under the latters supervision and control, cannot but be regular company employees.

FACTS: Respondents Dela Cruz et.al. filed complaints for regularization with money claims against Coca-Cola Bottlers. The respondents alleged
they are route helpers who go from the Coca- Cola sales offices or plants to customer outlets, and doing such, their jobs are necessary and
desirable in its main business. They further alleged that they worked under the control and supervision of the companys supervisors who
prepared their work schedules and assignments. They argued that the petitioners contracts of services with Peerless and Excellent are in the
nature of labor - only contracts prohibited by law since Peerless and Excellent did not have sufficient capital or investment to provide services to
the petitioner. Coca-cola, the petitioner, contended that it entered into contracts of services with Peerless and Excellent Partners to provide allied
services and that the contractors shall pay the salaries of all personnel assigned to the petitioner. It claimed that its main business is softdrinks
manufacturing and the respondents tasks of sale and distribution are not part of the manufacturing process. The petitioner posited that there is no
employer-employee relationship between the company and the respondents and the complaints should be dismissed for lack of jurisdiction. The
labor arbiter and the NLRC dismissed the case. CA reversed the decision and denied the motion for reconsideration. Thus this petition.

ISSUE:
W/N Excellent and Peerless were independent labor contractors or labor - only contractors.

HELD: Article 106 which provides: Whenever, an employer enters into a contract with another person for the performance of the formers work, the
employees of the contractor and of the latters subcontractor shall be paid in accordance with the provisions of this Code
.xxx
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 alter were directly employed by him. The CA noted
that both the contracts for Peerless and the Excellent show that their obligation was solely to provide the company with the services of contractual
employees, and nothing more. Peerless and Excellent were mere suppliers of labor who had no sufficient capitalization and equipment to
undertake sales and distribution of softdrinks as independent activities separate from the manufacture of softdrinks, and who had no control and
supervision over the contracted personnel. They are therefore labor-only contractors. Consequently, the contracted personnel, engaged in
component functions in the main business of the company under the latters supervision and control, cannot but be regular company employees