Republic of the Philippines

COURT OF APPEALS
Cebu City
NINETEENTH DIVISION
SM SHOEMART EMPLOYEES UNION UMP,
JUANA PAGAPONG, WARLITA BRAGAT, and
JOSEFINA SITOY,
Petitioners,
-versus- C.A.

SP

UDK-

No.

_____________
NATIONAL LABOR RELATIONS COMMISSION,
SM SHOEMART INCORPORATED and JERRY
PAGS,
Respondents.
X----------------------------------------/

MEMORANDUM
(For the Respondents)
COMES NOW RESPONDENTS, through undersigned
counsels most respectfully unto this Honorable Court state:
Prefatory Statement:
By way of reminder, let it be echoed:
The law does not prohibit contractualization perse.
What it prohibits is the evils of LABOR ONLY
CONTRACTING.

Permissible job contracting or subcontracting

refers to an arrangement whereby a principal agrees to
put out or farm out to a contractor or subcontractor the
performance or completion of a specific job, work or
service within a definite or predetermined period,
regardless of whether such job, work or service is to be
performed or completed within or outside the premises
of the principal. A person is considered engaged in
legitimate job contracting or subcontracting if the
following conditions concur:
(a)
The contractor or subcontractor carries on a
distinct and independent business and undertakes to
perform the job, work or service on its own account and
under its own responsibility according to its own
manner and method, and free from the control and
direction of the principal in all matters connected with
the performance of the work except as to the results
thereof;
(b) The contractor or subcontractor
substantial capital or investment; and

has

(c) The agreement between the principal and

contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational
safety and health standards, free exercise of the right
to self-organization, security of tenure, and social and
welfare benefits.
In contrast, labor-only contracting, a prohibited
act, is an arrangement where the contractor or
subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a
principal.
In labor-only contracting, the following
elements are present:

(a)
The contractor or subcontractor does not
have substantial capital or investment to actually
perform the job, work or service under its own account
and responsibility; and
(b) 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. Sasan, Sr. v. National
Labor Relations Commission 4th Division, G.R.
No. 176240, October 17, 2008, 569 SCRA 670.
I. STATEMENT OF THE CASE:
This is an action for Petition for Certiorari Under Rule 65
filed by the Petitioners assailing that the National Labor
Relations Commission Seventh (7th) Division gravely abuse
its discretion on finding that the Respondents are not guilty
of illegal dismissal, unfair labor practice and non-payment of
money claims.
The action stems from the decision of SM Inc., in not
renewing the contract between JP Manpower wherein the
latter supplied work force for the former. The petitioners are
employees of JP Manpower and assigned at SM Inc.
On March 27, 2016, the Honorable Labor Arbiter
rendered decision in the foregoing case dismissing the
complaint with the following fallo:
"WHEREFORE, judgment is hereby rendered: (1)
finding
the
respondents
SM
SHOEMART
INCORPORATION AND JERRY and PAGS and JP
Manpower Agency not guilty of illegal dismissal.
SO ORDERED.

Petitioners elevated the case to the NLRC 7 th Division.

However, the Honorable Commission rendered decision last
May 27, 2016 AFFIRMING IN TOTO the March 27, 2016
decision of the Honorable Labor Arbiter, with the following
dispositive portion:
"WHEREFORE, premises considered, the assailed
decision is hereby affirmed in toto.
SO ORDERED.
After which, the Petitioners filed a timely motion for
reconsideration with the Commission but it was DENIED. The
resolution of the Commission dated June 17, 2016 in its
dispositive portion states:
WHEREFORE, premises considered, the motion
for reconsideration filed by the Apellants is DENIED for
lack of merit.
SO ORDERED.
Not being contented with the decision of the NLRC 7 th
Division, the Petitioners filed Petition for Certiorari Under
Rule 65. Hence this case.
II. STATEMENT OF THE CASE:
A. The Parties:
1. SHOEMART EMPLOYEES UNION UMP is a legitimate
labor organization of rank and file employees of SM
SHOEMART INC., registered with the Department Labor and
Employment. Such union is not a certified collective
bargaining agent of the Private Respondent Company
because it did not win in any certification election filed. Much

more the SM Inc. has no Collective Bargaining Agreement

with them and thus, it is not a proper party in this case;
2. Petitioners JUANA PAGAPONG, WARLITA BRAGAT, and
JOSEFINA SITOY, Filipino, of legal age, all are married and a
residents of 69-A Junquera St., Cebu City, 69-B Jakosalem St.,
Brgy. Kamagayan, Cebu City and 69 C Infinity, Gorordo
Avenue, Cebu City respectively;
3. SM SHOEMART INC. is a corporation duly established
in accordance with law, engage in the business as
department store and supermarket for whole sale and retail,
operating all over the Philippines, managed by its General
Manager JERRY PAGS, with principal address at 4/F, SM City,
Mabolo Cebu City;
B. Antecedents of the Case:
4. JP Manpower Agency is a registered Labor Contractor
under D.O. 18-A of the Department of Labor and
Employment Regional VII. It has a substantial capital of
P5,000.000.00 as represented in its paid up capital as
indicated in their articles of incorporation;
5. SM Inc. and JP Manpower, entered into a service
contract agreement sometime in 2013 for deployment of
employees for the former with a duration of two years;
6. SM Inc. does not exercise control over the employees
of JP Manpower. The latter has its own supervisor. The only
thing that SM Inc. intervenes with the employees of JP is on
ensuring that they will be on time on its work in order to
sacrifice the operation of the Principal;
7. The employees of JP Manpower were paid in
accordance with the Labor Code. As part of the contract
between the Agency and the Principal, as a condition, the
Agency (which is JP Manpower) should give its employees

not below what is provided in the Labor Code in order that

SM Inc. will not be bound as solidary liable based on Art. 106
-109 of the Labor Code and D.O. 18 A of the Department of
Labor and Employment;
8. On 2015, the service contract agreement between
SM Inc. and JP Manpower expired. SM Inc. decided not to
renew the contract with JP Manpower as an exercise of the
prerogative as the Principal;
9. As a result, the employees of JP Manpower were also
removed from SM Inc;