SECOND DIVISION

G.R. No. 160506 June 6, 2011

JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO,
ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO
GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, FRANZ DAVID, NESTOR
IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO PASCUAL, ERNESTO CALANAO,
ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR.,
ARNEL ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO,
SANTOS BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA,
ARMANDO VILLAR, EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO
MACABENTE, MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO, ALSTANDO
MONTOS, RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO,
ENRIQUE F. TALLEDO, WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL
BILLONES, ALLAN BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT,
RAUL DULAY, TADEO DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA,
RENATO DELA CRUZ, ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES,
MELCHOR CARDANO, MARIANO NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES,
GERRY C. GATPO, GERMAN N. GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. TOLEDO,
ARNOLD D. LASTONA, PHILIP M. LOZA, MARIO N. CULDAYON, ORLANDO P. JIMENEZ,
FRED P. JIMENEZ, RESTITUTO C. PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ
BUSTENERA, ROBERTO B. CRUZ, ROSEDY O. YORDAN, DENNIS DACASIN, ALEJANDRINO
ABATON, and ORLANDO S. BALANGUE, Petitioners,
vs.
PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents.
D E C I S I O N
DEL CASTILLO, J .:
Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code
establishes an employer-employee relationship between the employer and the employees of the
labor-only contractor.
The instant petition for review assails the March 21, 2003 Decision
1
of the Court of Appeals (CA) in
CA-G.R. SP No. 52082 and its October 20, 2003 Resolution
2
denying the motions for
reconsideration separately filed by petitioners and respondent Procter & Gamble Phils. Inc. (P&G).
The appellate court affirmed the July 27, 1998 Decision of the National Labor Relations Commission
(NLRC), which in turn affirmed the November 29, 1996 Decision
3
of the Labor Arbiter. All these
decisions found Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be
legitimate independent contractors and the employers of the petitioners.
Factual Antecedents
Petitioners worked as merchandisers of 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, more specifically as follows:
Name Date Employed Date Dismissed
1. Joeb M. Aliviado November, 1985 May 5, 1992
2. Arthur Corpuz 1988 March 11, 1993
3. Eric Aliviado 1985 March 11, 1993
4. Monchito Ampeloquio September, 1988 March 11, 1993
5. Abraham Basmayor[, Jr.] 1987 March 11, 1993
6. Jonathan Mateo May, 1988 March 11, 1993
7. Lorenzo Platon 1985 March 11, 1993
8. Jose Fernando Gutierrez 1988 May 5, 1992
9. Estanislao Buenaventura June, 1988 March 11, 1993
10. Lope Salonga 1982 March 11, 1993
11. Franz David 1989 March 11, 1993
12. Nestor Ignacio 1982 March 11, 1993
13. Julio Rey 1989 May 5, 1992
14. Ruben [Vasquez], Jr. 1985 May 5, 1992
15. Maximino Pascual 1990 May 5, 1992
16. Ernesto Calanao[, Jr.] 1987 May 5, 1992
17. Rolando Romasanta 1983 March 11, 1993
18. [Roehl] Agoo 1988 March 11, 1993
19. Bonifacio Ortega 1988 March 11, 1993
20. Arsenio Soriano, Jr. 1985 March 11, 1993
21. Arnel Endaya 1983 March 11, 1993
22. Roberto Enriquez December, 1988 March 11, 1993
23. Nestor [Es]quila 1983 May 5, 1992
24. Ed[g]ardo Quiambao 1989 March 11, 1993
25. Santos Bacalso 1990 March 11, 1993
26. Samson Basco 1984 March 11, 1993
27. Aladino Gregor[e], Jr. 1980 May 5, 1992
28. Edwin Garcia 1987 May 5, 1992
29. Armando Villar 1990 May 5, 1992
30. Emil Tawat 1988 March 11, 1993
31. Mario P. Liongson 1991 May 5, 1992
32. Cresente J. Garcia 1984 March 11, 1993
33. Fernando Macabent[a] 1990 May 5, 1992
34. Melecio Casapao 1987 March 11, 1993
35. Reynaldo Jacaban 1990 May 5, 1992
36. Ferdinand Salvo 1985 May 5, 1992
37. Alstando Montos 1984 March 11, 1993
38. Rainer N. Salvador 1984 May 5, 1992
39. Ramil Reyes 1984 March 11, 1993
40. Pedro G. Roy 1987

41. Leonardo [F]. Talledo 1985 March 11, 1993
42. Enrique [F]. Talledo 1988 March 11, 1993
43. Willie Ortiz 1987 May 5, 1992
44. Ernesto Soyosa 1988 May 5, 1992
45. Romeo Vasquez 1985 March 11, 1993
46. Joel Billones 1987 March 11, 1993
47. Allan Baltazar 1989 March 11, 1993
48. Noli Gabuyo 1991 March 11, 1993
49. Emmanuel E. Laban 1987 May 5, 1992
50. Ramir[o] E. [Pita] 1990 May 5, 1992
51. Raul Dulay 1988 May 5, 1992
52. Tadeo Duran[o] 1988 May 5, 1992
53. Joseph Banico 1988 March 11, 1993
54. Albert Leynes 1990 May 5, 1992
55. Antonio Dacu[m]a 1990 May 5, 1992
56. Renato dela Cruz 1982

57. Romeo Viernes, Jr. 1986

58. El[ia]s Bas[c]o 1989

59. Wilfredo Torres 1986 May 5, 1992
60. Melchor Carda[]o 1991 May 5, 1992
61. [Marino] [Maranion] 1989 May 5, 1992
62. John Sumergido 1987 May 5, 1992
63. Roberto Rosales May, 1987 May 5, 1992
64. Gerry [G]. Gatpo November, 1990 March 11, 1993
65. German N. Guevara May, 1990 March 11, 1993
66. Gilbert Y. Miranda June, 1991 March 11, 1993
67. Rodolfo C. Toledo[, Jr.] May 14, 1991 March 11, 1993
68. Arnold D. [Laspoa] June 1991 March 11, 1993
69. Philip M. Loza March 5, 1992 March 11, 1993
70. Mario N. C[o]ldayon May 14, 1991 March 11, 1993
71. Orlando P. Jimenez November 6, 1992 March 11, 1993
72. Fred P. Jimenez September, 1991 March 11, 1993
73. Restituto C. Pamintuan, Jr. March 5, 1992 March 11, 1993
74. Rolando J. de Andres June, 1991 March 11, 1993
75. Artuz Bustenera[, Jr.] December, 1989 March 11, 1993
76. Roberto B. Cruz May 4, 1990 March 11, 1993
77. Rosedy O. Yordan June, 1991 May 5, 1992
78. Dennis Dacasin May. 1990 May 5, 1992
79. Alejandrino Abaton 1988 May 5, 1992
80. Orlando S. Balangue March, 1989 March 11, 1993
4

They all individually signed employment contracts with either Promm-Gem or SAPS for periods of
more or less five months at a time.
5
They were assigned at different outlets, supermarkets and
stores where they handled all the products of P&G. They received their wages from Promm-Gem or
SAPS.
6

SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such
as habitual absenteeism, dishonesty or changing day-off without prior notice.
7

P&G is principally engaged in the manufacture and production of different consumer and health
products, which it sells on a wholesale basis to various supermarkets and distributors.
8
To enhance
consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem
and SAPS for the promotion and merchandising of its products.
9

In December 1991, petitioners filed a complaint
10
against P&G for regularization, service incentive
leave pay and other benefits with damages. The complaint was later amended
11
to include the matter
of their subsequent dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that
there was no employer-employee relationship between petitioners and P&G. He found that the
selection and engagement of the petitioners, the payment of their wages, the power of dismissal and
control with respect to the means and methods by which their work was accomplished, were all done
and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate
independent job contractors. The dispositive portion of his Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled
cases against respondent Procter & Gamble (Phils.), Inc. for lack of merit.
SO ORDERED.
12

Ruling of the NLRC
Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the
NLRC rendered a Decision
13
disposing as follows:
WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the
decision appealed from AFFIRMED.
SO ORDERED.
14

Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998
Resolution.
15

Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However,
said petition was also denied by the CA which disposed as follows:
WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is
AFFIRMED with the MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay
service incentive leave pay to petitioners.
SO ORDERED.
16

Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition.
Issues
Petitioners now come before us raising the following issues:
I.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A]
REVERSIBLE ERROR WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE
ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN
EXCESS OF JURISDICTION IN RENDERING THE QUESTIONED JUDGMENT WHEN,
OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND ESTABLISH THAT
RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR EMPLOYER AND THAT
THEY WERE ILLEGALLY DISMISSED BY THE FORMER.
II.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A]
REVERSIBLE ERROR WHEN IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS
HAD ACTED WITH GRAVE ABUSE OF DISCRETION WHEN THE LATTER DID NOT FIND
THE PRIVATE RESPONDENTS LIABLE TO THE PETITIONERS FOR PAYMENT OF
ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS LITIGATION COSTS AND
ATTORNEYS FEES.
17

Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether petitioners
were illegally dismissed; and (3) whether petitioners are entitled for payment of actual, moral and
exemplary damages as well as litigation costs and attorneys fees.
Petitioners Arguments
Petitioners insist that they are employees of P&G. They claim that they were recruited by the
salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the
existence of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called re-
alignment program, petitioners were instructed to fill up application forms and report to the agencies
which P&G created.
18

Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its
letter
19
to SAPS dated February 24, 1993, informing the latter that their Merchandising Services
Contract will no longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services
of manpower to their client. They claim that the contractors have neither substantial capital nor tools
and equipment to undertake independent labor contracting. Petitioners insist that since they had
been engaged to perform activities which are necessary or desirable in the usual business or trade
of P&G, then they are its regular employees.
20

Respondents Arguments
On the other hand, P&G points out that the instant petition raises only questions of fact and should
thus be thrown out as the Court is not a trier of facts. It argues that findings of facts of the NLRC,
particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and
conclusive on the Supreme Court.
P&G further argues that there is no employment relationship between it and petitioners. It was
Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid their
salaries; (3) wielded the power of dismissal; and (4) had the power of control over their conduct of
work.
P&G also contends that the Labor Code neither defines nor limits which services or activities may be
validly outsourced. Thus, an employer can farm out any of its activities to an independent contractor,
regardless of whether such activity is peripheral or core in nature. It insists that the determination of
whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of
management prerogative.
At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of
the Comment of Promm-Gem on the petition.
21
Also, although SAPS was impleaded as a party in the
proceedings before the Labor Arbiter and the NLRC, it was no longer impleaded as a party in the
proceedings before the CA.
22
Hence, our pronouncements with regard to SAPS are only for the
purpose of determining the obligations of P&G, if any.
Our Ruling
The petition has merit.
As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies
exercising adjudicative functions, such as the NLRC. Occasionally, however, the Court is
constrained to wade into factual matters when there is insufficient or insubstantial evidence on
record to support those factual findings; or when too much is concluded, inferred or deduced from
the bare or incomplete facts appearing on record.
23
In the present case, we find the need to review
the records to ascertain the facts.
Labor-only contracting and job contracting
In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first
determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. 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, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.
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. (Emphasis and
underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by
Department Order No. 18-02,
24
distinguishes between legitimate and labor-only contracting:
x x x x
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.
x x x x
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 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.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor
Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case
of corporations, tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow 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.
To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits,
supplies or places workers to perform a job, work or service for a principal
25
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) The contractor does not exercise the right to control over the performance of the work of
the contractualemployee. (Underscoring supplied)
In the instant case, the financial statements
26
of Promm-Gem show that it
has authorized capital stock of P1 million and a paid-in capital, or capital available for operations,
of P500,000.00 as of 1990.
27
It also has long term assets worth P432,895.28 and current assets
of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and office space
with a floor area of 870 square meters.
28
It also had under its name three registered vehicles which
were used for its promotional/merchandising business.
29
Promm-Gem also has other clients
30
aside
from P&G.
31
Under the circumstances, we find that Promm-Gem has substantial investment which
relates to the work to be performed. These factors negate the existence of the element specified in
Section 5(i) of DOLE Department Order No. 18-02.
The records also show that Promm-Gem supplied its complainant-workers with the relevant
materials, such as markers, tapes, liners and cutters, necessary for them to perform their work.
Promm-Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already
considered the complainants working under it as its regular, not merely contractual or project,
employees.
32
This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE
Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates
on the part of Promm-Gem bad faith and intent to circumvent labor laws which factors have often
been tipping points that lead the Court to strike down the employment practice or agreement
concerned as contrary to public policy, morals, good customs or public order.
33

Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find
that it is a legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of
only P31,250.00. There is no other evidence presented to show how much its working capital and
assets are. Furthermore, there is no showing of substantial investment in tools, equipment or other
assets.
In Vinoya v. National Labor Relations Commission,
34
the Court held that "[w]ith the current economic
atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be
considered as substantial capital and, as such, PMCI cannot qualify as an independent
contractor."
35
Applying the same rationale to the present case, it is clear that SAPS having a paid-
in capital of only P31,250 - has no substantial capital. SAPS lack of substantial capital is underlined
by the records
36
which show that its payroll for its merchandisers alone for one month would already
total P44,561.00. It had 6-month contracts with P&G.
37
Yet SAPS failed to show that it could
complete the 6-month contracts using its own capital and investment. Its capital is not even sufficient
for one months payroll. 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.
Substantial capital refers to capitalization used in the performance or completion of the job, work or
service contracted out. In the present case, SAPS has failed to show substantial capital.
Furthermore, the petitioners have been charged with the merchandising and promotion of the
products of P&G, an activity that has already been considered by the Court as doubtlessly directly
related to the manufacturing business,
38
which is the principal business of P&G. 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, we find that the former is engaged in
"labor-only contracting".
"Where labor-only contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the labor-only contractor."
39
The statute
establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws.
The contractor is considered merely an agent of the principal employer and the latter is responsible
to the employees of the labor-only contractor as if such employees had been directly employed by
the principal employer.
40

Consequently, the following petitioners, having been recruited and supplied
by SAPS
41
-- which engaged in labor-only contracting -- are considered as the employees of P&G:
Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo,
Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Jr., Rolando
Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez,
Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro
G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry
Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M.
Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr.,
Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S.
Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz,
Romeo Viernes, Jr., Elias Basco and Dennis Dacasin.
The following petitioners, having worked under, and been dismissed by Promm-Gem, are
considered the employees of Promm-Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin
Garcia, Mario P. Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton, Emmanuel A. Laban, Ernesto
Soyosa, Aladino Gregore, Jr., Ramil Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz,
Armando Villar, Jose Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio
Rey, Albert Leynes, Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul
Dulay, Marino Maranion, Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado.
42

Termination of services
We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular
employment, the employer shall not terminate the services of an employee except for a just
43
or
authorized
44
cause.
In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified
the cause of dismissal as grave misconduct and breach of trust, as follows:
x x x x
This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc.
has been terminated. We find your expressed admission, that you considered yourself as an
employee of Procter & Gamble Phils., Inc. and assailing the integrity of the Company as legitimate
and independent promotion firm, is deemed as an act of disloyalty prejudicial to the interests of our
Company: serious misconduct and breach of trust reposed upon you as employee of our Company
which [co]nstitute just cause for the termination of your employment.
x x x x
45

Misconduct has been defined as improper or wrong conduct; the transgression of some established
and definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying
wrongful intent and not mere error of judgment. The misconduct to be serious must be of such grave
and aggravated character and not merely trivial and unimportant.
46
To be a just cause for dismissal,
such 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.
47

In other words, in order to constitute serious misconduct which will warrant the dismissal of an
employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or
conduct complained of has violated some established rules or policies. It is equally important and
required that the act or conduct must have been performed with wrongful intent.
48
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.
As such, we find them guilty of only simple misconduct for assailing the integrity of Promm-Gem as a
legitimate and independent promotion firm. A misconduct which is not serious or grave, as that
existing in the instant case, cannot be a valid basis for dismissing an employee.
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. Ordinary breach will not suffice. A
breach of trust is willful if it is done intentionally, knowingly and purposely, without justifiable excuse,
as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.
49

Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that
the employee concerned holds a position of responsibility or of trust and confidence. As such, he
must be invested with confidence on delicate matters, such as custody, handling or care and
protection of the property and assets of the employer. 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.
50
In the instant case, 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.
All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem.
While Promm-Gem had complied with the procedural aspect of due process in terminating the
employment of petitioners-employees, i.e., giving two notices and in between such notices, an
opportunity for the employees to answer and rebut the charges against them, it failed to comply with
the substantive aspect of due process as the acts complained of neither constitute serious
misconduct nor breach of trust. Hence, the dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they were given no written notice of
dismissal. The records show that upon receipt by SAPS of P&Gs letter terminating their
"Merchandising Services Contact" effective March 11, 1993, they in turn verbally informed the
concerned petitioners not to report for work anymore. The concerned petitioners related their
dismissal as follows:
x x x x
5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino
A. Ponce that we should already stop working immediately because that was the order of Procter
and Gamble. According to him he could not do otherwise because Procter and Gamble was the one
paying us. To prove that Procter and Gamble was the one responsible in our dismissal, he showed
to us the letter
51
dated February 24, 1993, x x x
February 24, 1993
Sales and Promotions Services
Armons Bldg., 142 Kamias Road,
Quezon City
Attention: Mr. Saturnino A. Ponce
President & General Manager
Gentlemen:
Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be
renewing our Merchandising Services Contract with your agency.
Please immediately undertake efforts to ensure that your services to the Company will terminate
effective close of business hours of 11 March 1993.
This is without prejudice to whatever obligations you may have to the company under the
abovementioned contract.
Very truly yours,
(Sgd.)
EMMANUEL M. NON
Sales Merchandising III
6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer
allowed to work and we were refused entrance by the security guards posted. According to the
security guards, all merchandisers of Procter and Gamble under S[APS] who filed a case in the
Dept. of Labor are already dismissed as per letter of Procter and Gamble dated February 25, 1993. x
x x
52

Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike
Promm-Gem which dismissed its employees for grave misconduct and breach of trust due to
disloyalty, SAPS dismissed its employees upon the initiation of P&G. It is evident that SAPS does
not carry on its own business because the termination of its contract with P&G automatically meant
for it also the termination of its employees services. It is obvious from its act that SAPS had no other
clients and had no intention of seeking other clients in order to further its merchandising business.
From all indications SAPS, existed to cater solely to the need of P&G for the supply of employees in
the latters merchandising concerns only. Under the circumstances prevailing in the instant case, we
cannot consider SAPS as an independent contractor.
Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the
lawfulness of the dismissal rests with the employer.
53
In termination cases, the burden of proof rests
upon the employer to show that the dismissal is for just and valid cause.
54
In the instant case, P&G
failed to discharge the burden of proving the legality and validity of the dismissals of those
petitioners who are considered its employees. Hence, the dismissals necessarily were not justified
and are therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled to damages. Moral
and exemplary damages are recoverable where the dismissal of an employee was attended by bad
faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals,
good customs or public policy.
55

With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any
oppressive act on the part of the latter, we find no support for the award of 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.
Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed
in bad faith and were compelled to litigate or incur expenses to protect their rights by reason of the
oppressive acts
56
of P&G.
Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges, inclusive of
allowances, and other benefits or their monetary equivalent from the time the compensation was
withheld up to the time of actual reinstatement.
57
Hence, all the petitioners, having been illegally
dismissed are entitled to reinstatement without loss of seniority rights and with full back wages and
other benefits from the time of their illegal dismissal up to the time of their actual reinstatement.1avvphi1
WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of
Appeals in CA-G.R. SP No. 52082 and the Resolution dated October 20, 2003
are REVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and Promm-Gem, Inc.
are ORDERED to reinstate their respective employees immediately without loss of seniority rights
and with full backwages and other benefits from the time of their illegal dismissal up to the time of
their actual reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of those
petitioners considered as its employees, namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio,
Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga,
Franz David, Nestor Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano,
Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando
Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones,
Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo,
Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez,
Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy
O. Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo
Vasquez, Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00 as
moral damages plus ten percent of the total sum as and for attorneys fees.
Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of
this Decision, of petitioners backwages and other benefits; and ten percent of the total sum as and
for attorneys fees as stated above; and for immediate execution.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
WE CONCUR:


FIRST DIVISION
G.R. No. 182018 October 10, 2012
NORKIS TRADING CORPORATION, Petitioner,
vs.
JOAQUIN BUENA VISTA, HENRY FABROA, RICARDO CAPE, BERTULDO TULOD, WILLY
DONDOY ANO and GLEN VILLARASA, Respondents.
D E C I S I O N
REYES, J .:
Before us is a Petition for Review on Certiorari filed by petitioner Norkis Trading Corporation (Norkis
Trading) to assail the Decision
1
dated May 7, 2007 and Resolution
2
dated March 4, 2008 of the Court
of Appeals (CA) in CA-G.R. SP No. 84041.
The Facts
The petition stems from an amended complaint for illegal suspension, illegal dismissal, unfair labor
practice and other monetary claims filed with the National Labor Relations Commission (NLRC) by
herein respondents Joaquin Buenavista (Buenavista), Henry Fabroa (Fabroa), Ricardo Cape (Cape),
Bertuldo Tulod (Tulod), Willy Dondoyano (Dondoyano) and Glen Villariasa (Villariasa) against Norkis
Trading and Panaghiusa sa Kauswagan Multi-Purpose Cooperative (PASAKA). The complaint was
docketed as NLRC-RAB-VII Case No. 09-1402-99.
During the proceedings a quo, herein respondents submitted the following averments:
The respondents were hired by Norkis Trading, a domestic corporation engaged in the business of
manufacturing and marketing of Yamaha motorcycles and multi-purpose vehicles, on separate dates
and for various positions, particularly:
Name Date of Hiring Position
Joaquin Buenavista March 14, 1994 Operator
Henry Fabroa January 5, 1993 Welder
Ricardo Cape January 1993 Welder/Operator
Bertuldo Tulod November 13, 1994 Welder/Assistant Operator
Willy Dondoyano January 1993 Welder
Glen Villariasa February 1993 Welder
3

Although they worked for Norkis Trading as skilled workers assigned in the operation of industrial
and welding machines owned and used by Norkis Trading for its business, they were not treated as
regular employees by Norkis Trading. Instead, they were regarded by Norkis Trading as members of
PASAKA, a cooperative organized under the Cooperative Code of the Philippines, and which was
deemed an independent contractor that merely deployed the respondents to render services for
Norkis Trading.
4
The respondents nonetheless believed that they were regular employees of Norkis
Trading, citing in their Position Paper
5
the following circumstances that allegedly characterized their
employment with the company:
The work of the operators involves operating industrial machines, such as, press machine, hydraulic
machine, and spotweld machine. On the other hand, the welders used the welding machines. The
machines used by complainants herein respondents in their work are all owned by respondent
Norkis Trading herein petitioner and these are installed and located in the working area of the
complainants inside the companys premises.
The complainants produced steel crates which are exported directly by respondent Norkis Trading to
Japan. These crates are used as containers of motorcycle machines and are shipped from Japan
back to respondent Norkis Trading.
The materials and supplies used by complainants in their work are supplied by respondent Norkis
Trading through Benjamin Gulbin, the companys Stockman, upon the request of Tirso Maslog, a
Leadman also employed by respondent Norkis Trading.
Respondent Norkis Trading gave instructions and supervised the work of complainants through
Edwin Ponce and Kiven Alilin, who are both Leadmen, and Rico Cabanas, who is the Production
Supervisor, of the former.
The salaries of complainants are paid inside the premises of respondent Norkis Trading by Dalia
Rojo and Belen Rubio, who are also employees of the said company assigned at the accounting
office.
Despite having served respondent Norkis Trading for many years and performing the same functions
as regular employees, complainants were not accorded regular status. It was made to appear that
complainants are not employees of said company but that of respondent PASAKA.
6

Against the foregoing scenario, the respondents, together with several other complainants,
7
filed on
June 9, 1999 with the Department of Labor and Employment (DOLE) a complaint against Norkis
Trading and PASAKA for labor-only contracting and non-payment of minimum wage and overtime
pay. The complaint was docketed as LSED Case No. RO700-9906-CI-CS-168.
The filing of the complaint for labor-only contracting allegedly led to the suspension of the
respondents membership with PASAKA. On July 22, 1999, they were served by PASAKA with
memoranda charging them with a violation of the rule against commission of acts injurious or
prejudicial to the interest or welfare of the cooperative. The memoranda cited that the respondents
filing of a case against Norkis Trading had greatly prejudiced the interest and welfare of the
cooperative.
8
In their answer
9
to the memoranda, the respondents explained that they merely wanted
to be recognized as regular employees of Norkis Trading. The case records include copies of the
memoranda sent to respondents Buenavista, Fabroa and Dondoyano.
10

On August 16, 1999, the respondents received another set of memoranda from PASAKA, now
charging them with the following violations of the cooperatives rules and regulations: (1) serious
misconduct or willful disobedience of superiors instructions or orders; (2) gross and habitual neglect
of duties by abandoning work without permission; (3) absences without filing leave of absence; and
(4) wasting time or loitering on companys time or leaving their post temporarily without permission
during office hours.
11
Copies of the memoranda
12
sent to Fabroa and Cape form part of the records.
On August 26, 1999, PASAKA informed the respondents of the cooperatives decision to suspend
them for fifteen (15) working days, to be effective from September 1 to 21, 1999, for violation of
PASAKA rules.
The records include copies of the memoranda
13
sent to Fabroa and Cape. The suspension prompted
the respondents to file with the NLRC the complaint for illegal suspension against Norkis Trading
and PASAKA.
The 15-day suspension of the respondents was extended for another period of 15 days, from
September 22, 1999 to October 12, 1999.
14
Copies of PASAKAs separate letters
15
to Buenavista,
Fabroa, Cape and Dondoyano on the cooperatives decision to extend the suspension form part of
the records.
On October 13, 1999, the respondents were to report back to work but during the hearing in their
NLRC case, they were informed by PASAKA that they would be transferred to Norkis Tradings
sister company, Porta Coeli Industrial Corporation (Porta Coeli), as washers of Multicab vehicles.
The respondents opposed the transfer as it would allegedly result in a change of employers, from
Norkis Trading to Porta Coeli. The respondents also believed that the transfer would result in a
demotion since from being skilled workers in Norkis Trading, they would be reduced to being utility
workers.These circumstances made the respondents amend their complaint for illegal suspension,
to include the charges of unfair labor practice, illegal dismissal, damages and attorneys fees.
For their part, both Norkis Trading and PASAKA claimed that the respondents were not employees
of Norkis Trading. They insisted that the respondents were members of PASAKA, which served as
an independent contractor that merely supplied services to Norkis International Co., Inc. (Norkis
International) pursuant to a job contract
16
which PASAKA and Norkis International executed on
January 14, 1999 for 121,500 pieces of F/GF-Series Reinforcement Production. After PASAKA
received reports from its coordinator at Norkis International of the respondents low efficiency and
violation of the cooperatives rules, and after giving said respondents the chance to present their
side, a penalty of suspension was imposed upon them by the cooperative. The illegal suspension
being complained of was then not linked to the respondents employment, but to their membership
with PASAKA.
Norkis Trading stressed that the respondents were deployed by PASAKA to Norkis International, a
company that is entirely separate and distinct from Norkis Trading.
The Ruling of the Labor Arbiter
On June 1, 2000, Labor Arbiter Jose G. Gutierrez (LA Gutierrez) dismissed the complaint via a
Decision
17
with decretal portion that reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered DISMISSING this
case for lack of merit. Complainants herein respondents are however directed to report back to
respondent PASAKA for work assignment within ten (10) days from receipt of this decision.
Likewise, respondent PASAKA is directed to accept the complainants back for work.
SO ORDERED.
18

LA Gutierrez sustained the suspension imposed by PASAKA upon the respondents, taking into
account the offenses that the said respondents were found to have committed. He likewise rejected
the respondents claim of illegal dismissal. He ruled that to begin with, the respondents had failed to
prove with convincing evidence that they were dismissed from employment. The Decision reads in
part:
Before the legality or illegality of a dismissal can be put in issue, the fact of dismissal itself must, first,
be clearly established. In the instant case, We find that complainants herein respondents failed to
prove with convincing evidence the fact that they were dismissed from employment. This
observation is derived from their very own allegation in their position paper. The first paragraph of
page 5 of the complainants position paper clearly shows that they were not yet dismissed from their
employment. The said paragraph states:
"Convinced that the company is bent on terminating their services, complainants amended their
complaint to include the charges of unfair labor practice, illegal dismissal, damages and attorneys
fees."
The truth, as the record would show is that, complainants were only offered another post in order to
save the contractual relations between their cooperative and Norkis Trading as the latter finds the
complainants performance not satisfactory. The complainants took this offer as a demotion
amounting to dismissal. We do not however, agree as their transfer to another post was only the
best option available in order to save the contractual relations between their cooperative (PASAKA)
and Norkis Trading.
19

The allegation of unfair labor practice and claim for monetary awards were likewise rejected by the
LA. Feeling aggrieved, the respondents appealed from the decision of the LA to the NLRC.
In the meantime, DOLE Regional Director Melencio Q. Balanag (Regional Director Balanag) issued
on August 22, 2000 his Order
20
in LSED Case No. RO700-9906-CI-CS-168. Regional Director
Balanag ruled that PASAKA was engaged in labor-only contracting.
21
The other findings in his Order
that are significant to this case are as follows: (1) PASAKA had failed to prove that it had substantial
capital;
22
(2) the machineries, equipment and supplies used by the respondents in the performance
of their duties were all owned by Norkis Trading and not by PASAKA;
23
(3) the respondents
membership with PASAKA as a cooperative was inconsequential to their employment with Norkis
Trading;
24
(4) Norkis Trading and PASAKA failed to prove that their sub-contracting arrangements
were covered by any of the conditions set forth in Section 6 of Department Order No. 10, Series of
1997;
25
(5) Norkis Trading and PASAKA failed to dispute the respondents claim that their work was
supervised by leadmen and production supervisors of Norkis Trading;
26
and (6) Norkis Trading and
PASAKA failed to dispute the respondents allegation that their salaries were paid by employees of
Norkis Trading.
27
Norkis Trading and PASAKA were then declared solidarily liable for the monetary
claims of therein complainants, as provided in the dispositive portion of Regional Director Balanags
Order, to wit:
WHEREFORE, respondent PANAGHIUSA SA KAUSWAGAN MULTIPURPOSE
COOPERATIVEand/or NORKIS TRADING CORPORATION are hereby ORDERED to pay solidarily
the amount ofTHREE HUNDRED THIRTEEN THOUSAND THREE HUNDRED FIFTY-FOUR AND
50/100 ([P]313,354.50) PESOS, Philippine Currency, within ten (10) calendar days from receipt
hereof to herein complainants x x x:
x x x x
SO ORDERED.
28

The respondents informed the NLRC of Regional Director Balanags Order by filing a
Manifestation
29
dated September 11, 2000, attaching thereto a copy of the Order dated August 22,
2000.
It bears mentioning that Regional Director Balanags Order was later affirmed by then DOLE
Secretary Patricia Sto. Tomas (Sec. Sto. Tomas) in her Orders dated February 7, 2002 and October
14, 2002.
30
When the rulings of the DOLE Secretary were appealed before the CA via the petitions
for certiorari docketed as CA-G.R. SP No. 73880 and CA-G.R. SP No. 74619, the CA affirmed the
Orders of the DOLE Secretary.
31
A motion for reconsideration of the CA decision was denied in a
Resolution
32
dated October 9, 2007. The two petitions docketed as G.R. Nos. 180078-79, which
were brought before this Court to question the CAs rulings, were later denied with finality by this
Court in the Resolutions dated December 5, 2007
33
and April 14, 2008.
34

The Ruling of the NLRC
On April 18, 2002, the NLRC rendered its Decision
35
affirming with modification the decision of LA
Gutierrez. It held that the respondents were not illegally suspended from work, as it was their
membership in the cooperative that was suspended after they were found to have violated the
cooperatives rules and regulations. It also declared that the respondents dismissal was not
established by substantial evidence. The NLRC however declared that the LA had no jurisdiction
over the dispute because the respondents were not employees, but members of PASAKA. The
suspension of the respondents as members of PASAKA for alleged violation of the cooperatives
rules and regulations was not a labor dispute, but an intra-corporate dispute.
36
The complaint was
also declared to have been filed against the wrong party because the respondents were found by the
NLRC to have been deployed by PASAKA to Norkis International pursuant to a job contract.
The dispositive portion of the NLRCs Decision reads:
WHEREFORE, the Decision dated June 1, 2000 of the Labor Arbiter is AFFIRMED, with respect to
the DISMISSAL of the complainants herein respondents for lack of merit [sic], but deleting the
portion directing the complainants to report back to respondent PASAKA for work assignment and to
accept them back to work being an internal concern of PASAKA.
SO ORDERED.
37

The respondents motion for reconsideration was denied by the NLRC in a Resolution
38
dated
December 18, 2003. Undaunted, the respondents questioned the NLRCs rulings before the CA via
a petition for certiorari.
The Ruling of the CA
Finding merit in the petition for certiorari, the CA rendered its decision reversing and setting aside
the decision and resolution of the NLRC. The dispositive portion of its Decision dated May 7, 2007
reads:
WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the NLRC, are
hereby REVERSED and SET ASIDE, and a new judgment is hereby rendered ordering the private
respondents to:
(1) Reinstate petitioners to their former positions without loss of seniority rights, and to pay full
backwages inclusive of allowances and their other benefits or their monetary equivalent computed
from the time of illegal dismissal to the time of actual reinstatement; and
(2) Alternatively, if reinstatement is not possible, to pay full backwages inclusive of other benefits or
their monetary equivalent from the time of illegal dismissal until the same is paid in full, and pay
petitioners separation pay equivalent to one months salary for every year of service.
SO ORDERED.
39

The CA rejected the argument of PASAKA and Norkis Trading that by virtue of a job contract
executed on January 14, 1999, the respondents were deployed to Norkis International and not to
Norkis Trading. The CA held:
We are not convinced. Private respondents among them, herein petitioner own evidence belie their
claim.
In its Comment, NORKIS TRADING attached the Payroll Registers for PANAGHIUSA SA
KAUSWAGAN (PASAKA) MULTIPURPOSE COOPERATIVE-NICI Tin Plate covering the payroll
periods "12/28/98-01/07/99" and "01/08/99-01/14/99". Included among the payees therein were the
petitioners herein respondents. x x x Why were petitioners included in said payrolls for said payroll
periods when the supposed Contract with NORKIS INTERNATIONAL was not yet executed?
Apparently, private respondents slipped. Thus, we hold that the much ballyhooed January 14, 1999
Contract between PASAKA and NORKIS INTERNATIONAL, is but a mere afterthought, a
concoction designed by private respondents to evade their obligations to petitioners.
40
(Citations
omitted and emphasis supplied)
The CA also considered Regional Director Balanags finding in LSED Case No. RO700-9906-CI-CS-
168 that PASAKA was engaged in labor-only contracting. In ruling that the respondents were illegally
dismissed, the CA held that Norkis Tradings refusal to accept the respondents back to their former
positions, offering them instead to accept a new assignment as washers of vehicles in its sister
company, was a demotion that amounted to a constructive dismissal.
Norkis Tradings motion for reconsideration was denied by the CA in its Resolution
41
dated March 4,
2008. Hence, this petition.
The Present Petition
The petition is founded on the following grounds:
1) THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS WHEN IT MADE ITS OWN FACTUAL FINDINGS AND DISREGARDED THE
UNIFORM AND CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC,
WHICH MUST BE ACCORDED GREAT WEIGHT, RESPECT AND EVEN FINALITY. IN SO DOING,
THE COURT OF APPEALS EXCEEDED ITS AUTHORITY ON CERTIORARI UNDER RULE 65 OF
THE RULES OF COURT BECAUSE SUCH FACTUAL FINDINGS WERE BASED ON
SPECULATIONS AND NOT ON OTHER EVIDENCES [SIC] ON RECORD.
2) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN
ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT THE NLRC COMMITTED GRAVE
ABUSE OF DISCRETION IN ALLEGEDLY IGNORING THE RULING OF THE REGIONAL
DIRECTOR.
3) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN
ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT PETITIONER IS THE
EMPLOYER OF RESPONDENTS.
4) THE COURT OF APPEALS HAS DETERMINED A QUESTION OF SUBSTANCE NOT IN
ACCORD WITH LAW AND JURISPRUDENCE IN RULING THAT THE RESPONDENTS WERE
CONSTRUCTIVELY DISMISSED CONTRARY TO THE FACTUAL FINDINGS OF THE LABOR
ARBITER AND THE NLRC AND WITHOUT SHOWING ANY EVIDENCE TO OVERTURN SUCH
FINDING OF FACT.
42

The respondents oppose these grounds in their Comment.
43
In support of their arguments, the
respondents submit with their Comment copies of the CAs Decision
44
and Resolution
45
in CA-G.R.
SP No. 73880 and CA-G.R. SP No. 74619, and this Courts Resolutions
46
in G.R. Nos. 180078-79.
This Courts Ruling
The Court resolves to deny the petition.
Factual findings of labor officials
may be examined by the courts
when there is a showing that they
were arrived at arbitrarily or in
disregard of evidence on record.
As regards the first ground, the petitioner questions the CAs reversal of LA Gutierrezs and the
NLRCs rulings, and argues that said rulings should have been accorded great weight and finality by
the appellate court as these were allegedly supported by substantial evidence.
On this matter, the settled rule is that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but
even finality by the courts when supported by substantial evidence, i.e., the amount of relevant
evidence which a reasonable mind might accept as adequate to support a conclusion. We
emphasize, nonetheless, that these findings are not infallible. When there is a showing that they
were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the
courts. The CA can then grant a petition for certiorari if it finds that the NLRC, in its assailed decision
or resolution, has made a factual finding that is not supported by substantial evidence. It is within the
jurisdiction of the CA, whose jurisdiction over labor cases has been expanded to review the findings
of the NLRC.
47

We have thus explained in Cocomangas Hotel Beach Resort v. Visca
48
that the CA can take
cognizance of a petition for certiorari if it finds that the NLRC committed grave abuse of discretion by
capriciously, whimsically, or arbitrarily disregarding evidence which are material to or decisive of the
controversy. The CA cannot make this determination without looking into the evidence presented by
the parties. The appellate court needs to evaluate the materiality or significance of the evidence,
which are alleged to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in
relation to all other evidence on record.
This case falls within the exception to the general rule that findings of fact of labor officials are to be
accorded respect and finality on appeal. As our discussions in the other grounds that are raised in
this petition will demonstrate, the CA has correctly held that the NLRC has disregarded facts and
evidence that are material to the outcome of the respondents case. No error can be ascribed to the
appellate court for making its own assessment of the facts that are significant to the case to
determine the presence or absence of grave abuse of discretion on the part of the NLRC, even if the
CAs findings turn out to be different from the factual findings of both the LA and NLRC.
Norkis Trading is the principal
employer of the respondents,
considering that PASAKA is a mere
labor-only contractor.
The second and third grounds, being interrelated as they both pertain to the CAs finding that an
employer-employee relationship existed between the petitioner and the respondents, shall be
discussed jointly. In its decision, the CA cited the findings of the Regional Director in LSED Case No.
RO700-9906-CI-CS-168 and declared that the NLRC committed a grave abuse of discretion when it
ignored said findings.
The issue of whether or not the respondents shall be regarded as employees of the petitioner hinges
mainly on the question of whether or not PASAKA is a labor-only contractor. 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 perform
activities which are directly related to the main business of the principal. These differentiate it from
permissible or legitimate job contracting or subcontracting, which refers to an arrangement whereby
a principal agrees to put out or farm out with the 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 carries on a distinct and independent business and
partakes the contract work on his account under his own responsibility according to his own manner
and method, free from the control and direction of his employer or principal in all matters connected
with the performance of his work except as to the results thereof; (b) the contractor has substantial
capital or investment; and (c) the agreement between the principal and the 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
welfare benefits.
49

We emphasize that the petitioners arguments against the respondents claim that PASAKA is a
labor-only contractor, which is thus to be regarded as a mere agent of Norkis Trading for which the
respondents rendered service, are already mooted by the finality of this Courts Resolutions dated
December 5, 2007 and April 14, 2008 in G.R. Nos. 180078-79, which stems from the CAs and the
DOLE Secretarys review of the DOLE Regional Directors Order dated August 22, 2000 in LSED
Case No. RO700-9906-CI-CS-168.
To recapitulate, Regional Director Balanag issued on August 22, 2000 its Order
50
in LSED Case No.
RO700-9906-CI-CS-168 and declared PASAKA as a mere labor-only contractor, and Norkis Trading
as the true employer of herein respondents. He explained that PASAKA failed to prove during the
conduct of a summary investigation that the cooperative had substantial capital or investment
sufficient to enable it to perform the functions of an independent contractor. The respondents claim
that the machinery, equipment and supplies they used to perform their duties were owned by Norkis
Trading, and not by PASAKA, was undisputed. While PASAKA reflected in its Statement of Financial
Condition for the year 1996 property and equipment net of accumulated depreciation
at P344,273.02, there was no showing that the properties covered thereby were actually and directly
used in the conduct of PASAKAs business.
51
The DOLE Regional Director explained:
Herein respondents among them, herein petitioner failed to prove that their sub-contracting
arrangements fall under any of the conditions set forth in Sec. 6 of D.O. # 10 S. 1997 to qualify as
permissible contracting or subcontracting as provided for as follows:
Sec. 6. Permissible contracting or subcontracting. Subject to conditions set forth in Sec. 4 (d) and (e)
and Section 5 hereof, the principal may engage the services of a contractor or subcontractor for the
performance of any of the following:
a.) Works or services temporarily or occasionally needed to meet abnormal increase in the demand
of products or services...
b) Works or services temporarily or occasionally needed by the principal for undertakings requiring
expert or highly technical personnel to improve the management or operations of an enterprise;
c) Services temporarily needed for the introduction or promotion of new products...;
d) Works or services not directly related or not integral to main business or operation of the principal
including casual work, janitorial, security, landscaping and messengerial services and work not
related to manufacturing processes in manufacturing establishments.
e) Services involving the public display of manufacturers products...;
f) Specialized works involving the use of some particular, unusual or peculiar skills... and
g) Unless a reliever system is in place among the regular workforce, substitute services for absent
regular employees...
It is therefore evident that herein respondents are engaged in "labor-only" contracting as defined in
Art. 106 of the Labor Code. Furthermore, such contracting/sub-contracting arrangement not only
falls under labor-only contracting but also fails to qualify as legitimate subcontracting as defined
under Sec. 4 par. e of D.O. #10 S. 1997, to wit:
"Sec. 4. Definition of terms.
d)
Subject to the provisions of Sections 6, 7 and 8 of this Rule, contracting or subcontracting shall be
legitimate if the following circumstances concur:
i) 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 to the results thereof;
ii) The contractor or subcontractor has substantial capital or investment; and
iii) The agreement between the principal and contractor or subcontractor assures the contractual
employees entitlement to all labor and occupational and safety and health standards, free exercise
of the right to self-organization, security of tenure and social and welfare benefits."
52
(Emphasis
supplied)
Together with his finding that PASAKA evidently lacked substantial capital or investment required
from legitimate job contractors, Regional Director Balanag ruled that the cooperative failed to dispute
the respondents allegation that officers of Norkis Trading supervised their work and paid their
salaries. In conclusion, PASAKA and Norkis Trading were declared solidarily liable for the monetary
awards made in favor of therein claimants-employees, which included herein respondents. A motion
for reconsideration of the Order was denied by the Regional Director.
Upon appeal, then DOLE Sec. Sto. Tomas affirmed the rulings of Regional Director Balanag. Both
Norkis Trading and PASAKA filed their separate appeals from the orders of the DOLE Secretary to
the CA via the petitions for certiorari docketed as CA-G.R. SP Nos. 73880 and 74619, but said
petitions were dismissed for lack of merit by the CA in its Decision dated May 7, 2007 and
Resolution dated October 9, 2007. The CA held:
This Court agrees with the finding of the DOLE Regional Director, as affirmed by the Secretary of
Labor in her assailed Order, that petitioners among them, herein petitioner were engaged in labor-
only contracting.
First. PASAKA failed to prove that it has substantial capitalization or investment in the form of tools,
equipment, machineries, work premises, among others, to qualify as an independent contractor.
PASAKAs claim that it has machineries and equipment worth P 344,273.02 as reflected in its
Financial Statements and Supplementary Schedules is belied by private respondents among them,
herein respondents evidence which consisted of pictures showing machineries and equipment which
were owned by and located at the premises of petitioner NORKIS TRADING (as earlier noted, some
of the pictures showed some of the private respondents operating said machines). Indeed it makes
one wonder why, if PASAKA indeed had such machineries and equipment worth P 344,273.02,
private respondents were using machineries and equipment owned by and located at the premises
of NORKIS TRADING.
Even granting that indeed PASAKA had machineries and equipment worth P 344,273.02, it was not
shown that said machineries and equipment were actually used in the performance or completion of
the job, work, or service that it was contracted to render under its supposed job contract.
x x x x
Second. PASAKA likewise did not carry out an independent business from NORKIS TRADING.
While PASAKA was issued its Certificate of Registration on July 18, 1991, all it could show to prove
that it carried out an independent business as a job contractor were the Project Contract dated
January 2, 1998 with NORKIS TRADING, and the Project Contract dated December 18, 1998 with
NORKIS INTERNATIONAL. However, as earlier discussed, the Project Contract dated December
18, 1998 with NORKIS INTERNATIONAL is nothing more than an afterthought by the petitioners to
confuse its workers and defeat their rightful claims. The same can be said of the Project Contract
with WICKER and VINE, INC., considering that it was executed only on February 1, 2000. Verily,
said contract was submitted only to strengthen PASAKAs claim that it is a legitimate job contractor.
Third. Private respondents performed activities directly related to the principal business of NORKIS
TRADING. They worked as welders and machine operators engaged in the production of steel
crates which were sent to Japan for use as containers of motorcycles that are then sent back to
NORKIS TRADING. Private respondents functions therefore are directly related and vital to
NORKIS TRADINGs business of manufacturing of Yamaha motorcycles.
All the foregoing considerations affirm by more than substantial evidence that NORKIS TRADING
and PASAKA engaged in labor-only contracting.
53
(Citations omitted and emphasis supplied)
When the case was brought before this Court via the petitions for review on certiorari docketed as
G.R. Nos. 180078-79, we resolved to issue on December 5, 2007 our Resolution dismissing the
appeal for, among other grounds, the failure of Norkis Trading to sufficiently show any reversible
error in the the CA decision. In our Resolution dated April 14, 2008, we denied with finality Norkis
Tradings motion for reconsideration on the ground that no substantial argument and compelling
reason was adduced to warrant a reconsideration of our dismissal of the petition. This Courts
resolutions, affirming the findings of the CA, had then become final and executory.
Applying the doctrine of res judicata, all matters that have been fully resolved with finality by this
Courts dismissal of the appeal that stemmed from Regional Director Balanags Order dated August
22, 2000 in LSED Case No. RO700-9906-CI-CS-168 are already conclusive between the parties.
Res judicata is defined as a matter adjudged; a thing judicially acted upon or decided; a thing or
matter settled by judgment. Under this doctrine, an existing final judgment or decree rendered on the
merits, and without fraud or collusion, by a court of competent jurisdiction, upon any matter within its
jurisdiction, is conclusive of the rights of the parties or their privies, in all other actions or suits in the
same or any other judicial tribunal of concurrent jurisdiction on the points and matters in issue in the
first suit.
To state simply, a final judgment or decree on the merits by a court of competent jurisdiction is
conclusive of the rights of the parties or their privies in all later suits on all points and matters
determined in the former suit.
54

Res judicata has two aspects: bar by prior judgment and conclusiveness of judgment as provided
under Section 47(b) and (c), Rule 39, respectively, of the Rules of Court.
55
Under the doctrine of
conclusiveness of judgment, facts and issues actually and directly resolved in a former suit cannot
be raised in any future case between the same parties, even if the latter suit may involve a different
cause of action.
56

Clearly, res judicata in the concept of conclusiveness of judgment has set in. In the proceedings
before the Regional Director and the LA, there were identity of parties and identity of issues,
although the causes of action in the two actions were different. First, herein respondents on the one
hand, and Norkis Trading on the other hand, were all parties in the two cases, being therein
complainants and respondent, respectively. As to the second requisite, the issue of whether
PASAKA was a labor-only contractor which would make Norkis Trading the true employer of the
respondents was the main issue in the two cases, especially since Norkis Trading had been arguing
in both proceedings that it could not be regarded as the herein respondents employer, harping on
the defense that PASAKA was a legitimate job contractor.
Similarly, in Dole Philippines, Inc. v. Esteva,
57
we held that the finding of the DOLE Regional
Director, which had been affirmed by the Undersecretary of Labor, by authority of the Secretary of
Labor, in an Order that has reached finality and which provided that the cooperative Cannery Multi-
Purpose Cooperative (CAMPCO) was engaged in labor-only contracting should bind the NLRC in a
case for illegal dismissal. We ruled:
While the causes of action in the proceedings before the DOLE and the NLRC differ, they are, in
fact, very closely related. The DOLE Regional Office conducted an investigation to determine
whether CAMPCO was violating labor laws, particularly, those on labor-only contracting.
Subsequently, it ruled that CAMPCO was indeed engaging in labor-only contracting activities, and
thereafter ordered to cease and desist from doing so. x x x The matter of whether CAMPCO was a
labor-only contractor was already settled and determined in the DOLE proceedings, which should be
conclusive and binding upon the NLRC. What were left for the determination of the NLRC were the
issues on whether there was illegal dismissal and whether respondents should be regularized.
x x x For the NLRC to ignore the findings of DOLE Regional Director Parel and DOLE
Undersecretary Trajano is an unmistakable and serious undermining of the DOLE officials
authority.
58

The rule on conclusiveness of judgment then now precludes this Court from re-opening the issues
that were already settled with finality in G.R. Nos. 180078-79, which effectively affirmed the CAs
findings that PASAKA was engaged in labor-only contracting, and that Norkis Trading shall be
treated as the employer of the respondents.
In the present petition, Norkis Trading still argues that the NLRC committed no grave abuse of
discretion in ignoring the findings of Regional Director Balanag considering that his Order had not
yet reached finality at the time the NLRC resolved the appeal from the decision of the LA. This
notwithstanding, this Court holds that the CA still committed no error in finding grave abuse of
discretion on the part of the NLRC by the latters utter disregard of the findings of the Regional
Director that Norkis Trading should be considered the employer of herein respondents. As correctly
observed by the CA in the assailed Decision dated May 7, 2007:
Surprisingly, the NLRC failed to consider or even make reference to the said August 22, 2000 Order
of the DOLE Regional Director. Considering the significance of the DOLE Regional Directors
findings, the same cannot just be perfunctorily rejected. For the NLRC to ignore the findings of
DOLE Regional Director is to undermine or disregard of [sic] the visitorial and enforcement power of
the DOLE Secretary and his authorized representatives under Article 128 of the Labor Code, as
amended. It was grave abuse of discretion then on the part of the NLRC to ignore or simply sweep
under the rug the findings of the DOLE Regional Director.
59
(Citation omitted and emphasis ours)
A reading of the NLRCs Resolution
60
dated December 18, 2003 indicates that while it was
confronted with opposing findings of the Regional Director and the LA on the material issue of labor-
only contracting, it failed to even attempt to review thoroughly the matter, look into the records,
reconcile the differing judgments and make its own appreciation of the evidence presented by the
parties. Instead, it simply brushed aside the rulings of the Regional Director, without due
consideration of the circumstance that said labor official had the jurisdiction to rule on the issue
pursuant to the visitorial and enforcement powers of the DOLE Secretary and his duly authorized
representatives under Article 128
61
of the Labor Code.
The rule in appeals in labor cases provides that the CA can grant a petition for certiorari if it finds
that the NLRC, in its assailed decision or resolution, committed grave abuse of discretion by
capriciously, whimsically or arbitrarily disregarding evidence which is material or decisive of the
controversy.
62
Significantly, the Secretary of Labor had already affirmed Regional Director Balanags
Order when the appeal from the LAs rulings was resolved. In the NLRC Resolution dated December
18, 2003, the Commission nonetheless merely held:
The photocopies of the Order of the Honorable Secretary of the Department of Labor and
Employment dated February 7, 2002 and the Order of the Regional Director of the Regional Office of
the Department of Labor and Employment finding the existence of labor-only contracting between
respondent NORKIS [Trading] and respondent PASAKA do not provide sufficient basis to disturb
Our Decision. We are not convinced that the facts and evidence, which are totally distinct from this
case and which were presented in a separate proceedings and before another Office, would be a
sufficient and valid basis to divest the Labor Arbiter a quo of his authority which undoubtedly the law
vests upon him as his exclusive jurisdiction. The jurisdiction conferred by Article 217 of the Labor
Code upon the Labor Arbiter is "original and exclusive", and his authority to hear and decide case[s]
vested upon him is to the exclusion of any other court or quasi-judicial body. By reason of their
training, experience, and expertise, Labor Arbiters are in a better position to resolve controversies,
for which they are conferred original and exclusive jurisdiction by law. Even Article 218 of the Labor
Code does not empower the Regional Director of the Department of Labor and Employment to share
original and exclusive jurisdiction conferred on the Labor Arbiter by Article 217 x x x.
63

Such utter disregard by the NLRC of the findings of the Regional Director and DOLE Secretary
amounts to grave abuse of discretion amounting to lack or excess of jurisdiction. As this Courts
review of the records would confirm, a judicious study of the evidence presented by the parties
would have supported the finding that Norkis Trading should be treated as the respondents true
employer, with PASAKA being merely an agent of said employer. PASAKA failed to sufficiently show
that it had substantial capital or investment in the form of tools, equipment, machineries and work
premises required from legitimate job contractors. The work required from the respondents, being
welders and/or operators of industrial machines, were also directly related to Norkis Tradings
principal business of manufacturing. The job contract supposedly executed by and between
PASAKA and Norkis International in 1999 deserved nil consideration given that the respondents had
claimed early on that they began working for Norkis Trading on various dates from 1993 to 1994.
Moreover, the records confirm that Norkis Trading was still among the clients of PASAKA as of July
1999, as clearly indicated in the memoranda it sent to respondents Buenavista, Fabroa and
Dondoyano on July 22, 1999, which provide:
Please take note that the recent action you have done in filing a case against one of our clients,
Norkis Trading Co., Inc., has greatly prejudiced the interest and welfare of the
Cooperative.
64
(Emphasis ours)
This categorical statement of PASAKA that Norkis Trading was among its clients at the time the
memoranda were issued only further bolsters the respondents claim, and Regional Director
Balanags finding, that said respondents were deployed by PASAKA to Norkis Trading. This also
contradicts petitioners argument that its contract with PASAKA had ended in 1998.
65

Finally, contrary to the insinuations of Norkis Trading, the fact that PASAKA was a duly-registered
cooperative did not preclude the possibility that it was engaged in labor-only contracting, as
confirmed by the findings of the Regional Director. An entity is characterized as a labor-only
contractor based on the elements and guidelines established by law and jurisprudence, judging
primarily on the relationship that the said entity has with the company to which the workers are
deployed, and not on any special arrangement that the entity has with said workers.
Termination of an employment for
no just or authorized cause
amounts to an illegal dismissal.
As to the issue of whether the respondents were illegally dismissed by Norkis Trading, we answer in
the affirmative, although not by constructive dismissal as declared by the CA, but by actual
dismissal.
Where an entity is declared to be a labor-only contractor, the employees supplied by said contractor
to the principal employer become regular employees of the latter. Having gained regular status, the
employees are entitled to security of tenure and can only be dismissed for just or authorized causes
and after they had been afforded due process.
66
Termination of employment without just or
authorized cause and without observing procedural due process is illegal.1wphi 1
In claiming that they were illegally dismissed from their employment, the respondents alleged having
been informed by PASAKA that they would be transferred, upon the behest of Norkis Trading, as
Multicab washers or utility workers to Porta Coeli, a sister company of Norkis Trading. Norkis
Trading does not dispute that such job transfer was relayed by PASAKA unto the respondents,
although the company contends that the transfer was merely an "offer" that did not constitute a
dismissal. It bears mentioning, however, that the respondents were not given any other option by
PASAKA and Norkis Trading but to accede to said transfer. In fact, there is no showing that Norkis
Trading would still willingly accept the respondents to work for the company. Worse, it still
vehemently denies that the respondents had ever worked for it. Again, all defenses of Norkis Trading
that anchor on the alleged lack of employer-employee relationship between it and the respondents
no longer merit any consideration, given that this Courts findings in G.R. Nos. 180078-79 have
become conclusive. Thus, the respondents transfer to Porta Coeli, although relayed to the
respondents by PASAKA was effectively an act of Norkis Trading. Where labor-only contracting
exists, the Labor Code itself establishes an employer-employee relationship between the employer
and the employees of the labor-only contractor. The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered
merely an agent of the principal employer and the latter is responsible to the employees of the labor-
only contractor as if such employees had been directly employed by the principal employer.
67

No further evidence or document should then be required from the respondents to prove such fact of
dismissal, especially since Norkis Trading maintains that it has no duty to admit and treat said
respondents as its employees. Considering that Porta Coeli is an entity separate and distinct from
Norkis Trading, the respondents employment with Norkis Trading was necessarily severed by the
change in work assignment. It then did not even matter whether or not the transfer involved a
demotion in the respondents rank and work functions; the intention to dismiss, and the actual
dismissal of the respondents were sufficiently established.
In the absence of a clear showing that the respondents dismissal was for just or authorized causes,
the termination of the respondents employment was illegal. What may be reasonably deduced from
the records was that Norkis Trading decided on the transfer, after the respondents had earlier filed
their complaint for labor-only contracting against the company. Even Norkis Tradings contention that
the transfer may be deemed a valid exercise of management prerogative is misplaced. First, the
exercise of management prerogative presupposes that the transfer is only for positions within the
business establishment. Second, the exercise of management prerogative by employers is not
absolute, as it is limited by law and the general principles of fair play and justice.
WHEREFORE, premises considered, the petition is DENIED.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice



FIRST DIVISION
G.R. No. 178909 October 10, 2012
SUPERIOR PACKAGING CORPORATION, Petitioner,
vs.
ARNEL BALAGSA Y, ZALDY ALFORGNE, JAIME ANGELES, REY APURA, GERALD
CABALAN, JONALD CALENTENG, RAMIL CROIJERO, JUNREY CABALGUINTO, OSCAR
DAYTO, RUFO DIONOLA, DIONILO ESMERALDA, BOOTS LADRILLO, ELIEZER MAGHAMOY,
LEO FLORES, RENATOPAGADORA,REYNALDO PLAZA, H.OGER SJBNEAO, EDWIN
TONALBA, .JOHN ACHARON, RODERICK RAMAS, SALVADOR ACURATO, JULUIS BASUL,
CARLOS RAYTA, LITO BELANO, ROGER CASIMIRO, RENE CURADA, NESTRO ESTE,
ROMMEL IMPELIOO, ZOILO ISLA, JHONIE OGARDO, EDWIN POSADAS, ALEXANDER
REGPALA, CHRISTOPHER SAMPIANO, RITCHIE SANCHES, ROLANDO SORIANO, ROWELL
ANCHETA, RICKY BORDAS, ANTONIO BEHEN, RONALD DOMINGO, JERRY MORENO,
ROLLY ROSALES, RENATO RESTANO and ISIDRO SARIGNE, Respondents.
R E S O L U T I O N
REYES, J .:
The main issue in this case is whether Superior Packaging Corporation (petitioner) may be held
solidarily liable with Lancer Staffing & Services Network, Inc. (Lancer) for respondents unpaid
money claims.
The facts are undisputed.
The petitioner engaged the services of Lancer to provide reliever services to its business, which
involves the manufacture and sale of commercial and industrial corrugated boxes. According to
petitioner, the respondents were engaged for four (4) months from February to June 1998 and
their tasks included loading, unloading and segregation of corrugated boxes.
Pursuant to a complaint filed by the respondents against the petitioner and its President, Cesar Luz
(Luz), for underpayment of wages, non-payment of premium pay for worked rest, overtime pay and
non-payment of salary, the Department of Labor and Employment (DOLE) conducted an inspection
of the petitioners premises and found several violations, to wit: (1) non-presentation of payrolls and
daily time records; (2) non-submission of annual report of safety organization; (3) medical and
accident/illness reports; (4) non-registration of establishment under Rule 1020 of Occupational and
Health Standards; and (5) no trained first aide
1
Due to the petitioners failure to appear in the
summary investigations conducted by the DOLE, an Order
2
was issued on June 18, 2003 finding in
favor of the respondents and adopting the computation of the claims submitted. Petitioner and Luz
were ordered, among others, to pay respondents their total claims in the amount of Eight Hundred
Forty Thousand Four Hundred Sixty-Three Pesos and 38/100 (P 840,463.38).
3

They filed a motion for reconsideration on the ground that respondents are not its employees but of
Lancer and that they pay Lancer in lump sum for the services rendered. The DOLE, however, denied
its motion in its Resolution
4
dated February 16, 2004, ruling that the petitioner failed to support its
claim that the respondents are not its employees, and even assuming that they were employed by
Lancer, the petitioner still cannot escape liability as Section 13 of the Department Order No. 10,
Series of 1997, makes a principal jointly and severally liable with the contractor to contractual
employees to the extent of the work performed when the contractor fails to pay its employees
wages.
Their appeal to the Secretary of DOLE was dismissed per Order
5
dated July 30, 2004 and the Order
dated June 18, 2003 and Resolution dated February 16, 2004 were affirmed.
6
Their motion for
reconsideration likewise having been dismissed by the Secretary of DOLE in an Order dated
January 21, 2005,
7
petitioner and Luz filed a petition for certiorari with the Court of Appeals (CA).
On November 17, 2006, the CA affirmed the Secretary of DOLEs orders, with the modification in
that Luz was absolved of any personal liability under the award.
8
The petitioner filed a partial motion
for reconsideration insofar as the finding of solidary liability with Lancer is concerned but it was
denied by the CA in a Resolution
9
dated July 10, 2007.
The petitioner is now before the Court on petition for review under Rule 45 of the Rules of Court,
alleging that:
I
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AFFIRMING THE RULING OF THE SECRETARY OF LABOR AND EMPLOYMENT THAT THE
COMPANY IS SOLIDARILY LIABLE WITH THE CONTRACTOR NOTWITHSTANDING THE FACT
THAT:
A. THE COMPANY CANNOT BE HELD SOLIDARILY LIABLE WITH THE CONTRACTOR
FOR THE PENALTY OR SANCTION IMPOSED BY WAY OF "DOUBLE INDEMNITY"
UNDER REPUBLIC ACT NO. 6727.
B. THERE IS NO EVIDENCE TO SHOW THAT PRIVATE RESPONDENTS RENDERED
OVERTIME WORK AND ACTUALLY WORKED ON THEIR RESTDAYS FOR THE
COMPANY FOR THE PERIOD IN QUESTION.
II
THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION IN
AFFIRMING THE FINDINGS OF THE SECRETARY OF LABOR AND EMPLOYMENT THAT THE
CONTRACTOR IS ENGAGED IN LABOR-ONLY CONTRACTING.
10

On the first ground, the petitioner argues that the DOLE erred in doubling respondents
underpayment of wages and regular holiday pay under Republic Act No. 6727 (Wage Rationalization
Act) inasmuch as the solidary liability of a principal does not extend to a punitive award against a
contractor.
11
The petitioner also contends that there is no evidence showing that the respondents
rendered overtime work and that they actually worked on their rest days for them to be entitled to
such pay.
12

On the second ground, the petitioner objects to the finding that it is engaged in labor-only contracting
and is consequently an indirect employer, considering that it is beyond the visitorial and enforcement
power of the DOLE to make such conclusion. According to the petitioner, such
conclusion may be made only upon consideration of evidentiary matters and cannot be determined
solely through a labor inspection.
13
The petitioner also refutes respondents alleged belated
argument that the latter are its employees.
14

The petition is bereft of merit.
To begin with, the Court will not resolve or dwell on the petitioners argument on the doubling of
respondents underpayment of wages and regular holiday pay by the DOLE for the simple reason
that this is the first time that the petitioner raised such contention. From its pleadings filed in the
DOLE and all the way up to the CA, the petitioner never questioned nor discussed such issue. It is
only now before the Court that the petitioner belatedly presented such argument. It is well-settled
that points of law, theories, issues and arguments not brought to the attention of the lower court,
administrative agency or quasi-judicial body need not be considered by a reviewing court, as they
cannot be raised for the first time at that late stage.
15
To consider the alleged facts and arguments
raised belatedly would amount to trampling on the basic principles of fair play, justice and due
process.
16

With regard to the contention that there is no evidence to support the finding that the respondents
rendered overtime work and that they worked on their rest day, the resolution of this argument
requires a review of the factual findings and the evidence presented, which this Court will not do.
This Court is not a trier of facts and this applies with greater force in labor cases.
17
Hence, where the
factual findings of the labor tribunals or agencies conform to, and are affirmed by, the CA, the same
are accorded respect and finality, and are binding upon this Court.
18

Petitioner also questions the authority of the DOLE to make a finding of an employer-employee
relationship concomitant to its visitorial and enforcement power. The Court notes at this juncture that
the petitioner, again, did not raise this question in the proceedings before the DOLE. At best, what
the petitioner raised was the sufficiency of evidence proving the existence of an employer-employee
relationship and it was only in its petition for certiorariwith the CA that the petitioner sought to have
this matter addressed. The CA should have refrained from resolving said matter as the petitioner
was deemed to have waived such argument and was estopped from raising the same.
19

At any rate, such argument lacks merit. The DOLE clearly acted within its authority when it
determined the existence of an employer-employee relationship between the petitioner and
respondents as it falls within the purview of its visitorial and enforcement power under Article 128(b)
of the Labor Code, which provides:
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 Secretary or his duly authorized representative shall issue writs of execution to the
appropriate authority for the enforcement of their orders, except in cases where the employer
contests the findings of the labor employment and enforcement officer and raises issues supported
by documentary proofs which were not considered in the course of inspection.
In Peoples Broadcasting (Bombo Radyo Phils., Inc.) v. Secretary of the Department of Labor and
Employment,
20
the Court stated that 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. Such determination, however, is merely preliminary, incidental and collateral
to the DOLEs primary function of enforcing labor standards provisions. Such power was further
explained recently by the Court in its Resolution
21
dated March 6, 2012 issued in Peoples
Broadcasting, viz:
The determination of the existence of an employer-employee relationship by the DOLE must be
respected. The expanded visitorial and enforcement power of the DOLE granted by RA 7730 would
be rendered nugatory if the alleged employer could, by the simple expedient of disputing the
employer-employee relationship, force the referral of the matter to the NLRC. The Court issued the
declaration that at least a prima facie showing of the absence of an employer-employee relationship
be made to oust the DOLE of jurisdiction. But it is precisely the DOLE that will be faced with that
evidence, and it is the DOLE that will weigh it, to see if the same does successfully refute the
existence of an employer-employee relationship.
x x x x
x x x The power of the DOLE to determine the existence of an employer-employee relationship need
not necessarily result in an affirmative finding.1wphi1 The DOLE may well make the determination that no
employer-employee relationship exists, thus divesting itself of jurisdiction over the case. It must not
be precluded from being able to reach its own conclusions, not by the parties, and certainly not by
this Court.
Under Art. 128(b) of the Labor Code, as amended by RA 7730, the DOLE is fully empowered to
make a determination as to the existence of an employer-employee relationship in the exercise of its
visitorial and enforcement power, subject to judicial review, not review by the NLRC.
22

Also, the existence of an employer-employee relationship is ultimately a question of fact.
23
The
determination made in this case by the DOLE, albeit provisional, and as affirmed by the Secretary of
DOLE and the CA is beyond the ambit of a petition for review on certiorari.
24

The Court now comes to the issue regarding the nature of the relationship between the petitioner
and respondents, and the consequent liability of the petitioner to the respondents under the latters
claim.
It was the consistent conclusion of the DOLE and the CA that Lancer was not an independent
contractor but was engaged in "labor-only contracting"; hence, the petitioner was considered an
indirect employer of respondents and liable to the latter for their unpaid money claims.
At the time of the respondents employment in 1998, the applicable regulation was DOLE
Department Order No. 10, Series of 1997.
25
Under said Department Order, labor-only contracting
was defined as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer
shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are directly
related to the principal business or operations of the employer in which workers are habitually
employed.
Labor-only contracting is prohibited and the person acting as contractor shall be considered merely
as an agent or intermediary 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.
26

According to the CA, the totality of the facts and surrounding circumstances of this case point to
such conclusion. The Court agrees.
The ratio of Lancers authorized capital stock of P 400,000.00 as against its subscribed and paid-up
capital stock of P 25,000.00 shows the inadequacy of its capital investment necessary to maintain its
day-to-day operations. And while the Court does not set an absolute figure for what it considers
substantial capital for an independent job contractor, it measures the same against the type of work
which the contractor is obligated to perform for the principal.
27
Moreover, the nature of respondents
work was directly related to the petitioners business. The marked disparity between the petitioners
actual capitalization (P 25,000.00) and the resources needed to maintain its business, i.e., "to
establish, operate and manage a personnel service company which will conduct and undertake
services for the use of offices, stores, commercial and industrial services of all kinds," supports the
finding that Lancer was, indeed, a labor-only contractor. Aside from these is the undisputed fact that
the petitioner failed to produce any written service contract that might serve as proof of its alleged
agreement with Lancer.
28

Finally, a finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is
an employer-employee relationship between the principal and the employees of the supposed
contractor, and the "labor only" contractor is considered as a mere agent of the principal, the real
employer.
29
The former becomes solidarily liable for all the rightful claims of the employees.
30
The
petitioner therefore, being the principal employer and Lancer, being the labor-only contractor, are
solidarily liable for respondents unpaid money claims.
WHEREFORE, the petition for review is DENIED.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice


SECOND DIVISION
G.R. No. 168120 January 25, 2012
MANSION PRINTING CENTER and CLEMENT CHENG, Petitioners,
vs.
DIOSDADO BITARA, JR. Respondent.
D E C I S I O N
PEREZ, J .:
Before us is a petition for review on certiorari seeking to reverse and set aside the issuances of the
Court of Appeals in CA-GR. SP No. 70965, to wit: (a) the Decision
1
dated 18 March 2004 granting
the petition for certiorariunder Rule 65 of herein respondent Diosdado Bitara, Jr.; and (b) the
Resolution
2
dated 10 May 2005 denying the petitioners Motion for Reconsideration of the Decision.
The assailed decision of the Court of Appeals reversed the findings of the National Labor Relations
Commission
3
and the Labor Arbiter
4
that respondent was validly dismissed from the service.
The Antecedents
Petitioner Mansion Printing Center is a single proprietorship registered under the name of its
president and co-petitioner Clement Cheng. It is engaged in the printing of quality self-adhesive
labels, brochures, posters, stickers, packaging and the like.
5

Sometime in August 1998, petitioners engaged the services of respondent as a helper (kargador).
Respondent was later promoted as the companys sole driver tasked to pick-up raw materials for the
printing business, collect account receivables and deliver the products to the clients within the
delivery schedules.
6

Petitioners aver that the timely delivery of the products to the clients is one of the foremost
considerations material to the operation of the business.
7
It being so, they closely monitored the
attendance of respondent. They noted his habitual tardiness and absenteeism.
Thus, as early as 23 June 1999, petitioners issued a Memorandum
8
requiring respondent to submit a
written explanation why no administrative sanction should be imposed on him for his habitual
tardiness.
Several months after, respondents attention on the matter was again called to which he replied:
29 NOV. 1999
MR. CLEMENT CHENG
SIR:
I UNDERSTAND MY TARDINESS WHATEVER REASON I HAVE AFFECTS SOMEHOW THE
DELIVERY SCHEDULE OF THE COMPANY, THUS DISCIPLINARY ACTION WERE IMPOSED TO
ME BY THE MANAGEMENT. AND ON THIS END, ACCEPT MY APOLOGIES AND REST
ASSURED THAT I WILL COME ON TIME (ON OR BEFORE 8:30 AM) AND WILLINGNESS TO
EXTEND MY SERVICE AS A COMPANY DRIVER. WHATEVER HELP NEEDED. (sic)
RESPECTFULLY YOURS,
(SGD.) DIOSDADO BITARA, JR.
9

Despite respondents undertaking to report on time, however, he continued to disregard attendance
policies. His weekly time record for the first quarter of the year 2000
10
revealed that he came late
nineteen (19) times out of the forty-seven (47) times he reported for work. He also incurred nineteen
(19) absences out of the sixty-six (66) working days during the quarter. His absences without prior
notice and approval from March 11-16, 2000 were considered to be the most serious infraction of
all
11
because of its adverse effect on business operations.
Consequently, Davis Cheng, General Manager of the company and son of petitioner Cheng, issued
on 17 March 2000 another Memorandum
12
(Notice to Explain) requiring respondent to explain why
his services should not be terminated. He personally handed the Notice to Explain to respondent but
the latter, after reading the directive, refused to acknowledge receipt thereof.
13
He did not submit any
explanation and, thereafter, never reported for work.
On 21 March 2000, Davis Cheng personally served another Memorandum
14
(Notice of Termination)
upon him informing him that the company found him grossly negligent of his duties, for which
reason, his services were terminated effective 1 April 2000.
On even date, respondent met with the management requesting for reconsideration of his
termination from the service. However, after hearing his position, the management decided to
implement the 21 March 2000 Memorandum. Nevertheless, the management, out of generosity,
offered respondent financial assistance in the amount of P6,110.00 equivalent to his one month
salary. Respondent demanded that he be given the amount equivalent to two (2) months salary but
the management declined as it believed it would, in effect, reward respondent for being negligent of
his duties.
15

On 27 April 2000, respondent filed a complaint
16
for illegal dismissal against the petitioners before
the Labor Arbiter. He prayed for his reinstatement and for the payment of full backwages, legal
holiday pay, service incentive leave pay, damages and attorneys fees.
17

In his Position Paper
18
filed with the Labor Arbiter, respondent claimed that he took a leave of
absence from March 17-23, 2000
19
due to an urgent family problem. He returned to work on 24
March 2000
20
but Davis Cheng allegedly refused him admission because of his unauthorized
absences.
21
On 1 April 2000, respondent was summoned by Davis Cheng who introduced him to a
lawyer, who, in turn, informed him that he will no longer be admitted to work because of his 5-day
unauthorized absences. Respondent explained that he was compelled to immediately leave for the
province on 17 March 2000
22
due to the urgency of the matter and his wife informed the office that
he will be absent for a week. The management found his explanation unacceptable and offered him
an amount equivalent to his one (1) month salary as separation pay but respondent refused the offer
because he wanted to keep the job.
23
In his Reply to Respondents Position Paper,
24
however,
respondent averred that he rejected the offer because he wanted an amount equivalent to one and a
half months pay.
On 21 December 2000, the Labor Arbiter dismissed the complaint for lack of merit.
25

On appeal to the National Labor Relations Commission (hereinafter referred to as the Commission),
the findings of the Labor Arbiter was AFFIRMED en toto. Thus, in its Resolution of 29 June 2001 in
NLRC NCR CA No. 027871-01, the Commission declared:
Upon Our review of the record of the case, We perceive no abuse of discretion as to compel a
reversal. Appellant failed to adduce convincing evidence to show that the Labor Arbiter in rendering
the assailed decision has acted in a manner inconsistent with the criteria set forth in the foregoing
pronouncement.
Neither are we persuaded to disturb the factual findings of the Labor Arbiter a quo. The material
facts as found are all in accordance with the evidence presented during the hearing as shown by the
record.
WHEREFORE, finding no cogent reason to modify, alter, much less reverse the decision appealed
from, the same is AFFIRMED en toto and the instant appeal DISMISSED for lack of merit.
26

It likewise denied respondents Motion for Reconsideration of the Resolution on 21 February 2002.
27

Before the Court of Appeals, respondent sought the annulment of the Commissions Resolution
dated 29 June 2001 and Order dated 21 February 2002 on the ground that they were rendered with
grave abuse of discretion and/or without or in excess of jurisdiction.
28

The Court of Appeals found for the respondent and reversed the findings of the Commission. The
dispositive portion of its Decision dated 18 March 2004 reads:
WHEREFORE, the petition is GRANTED. In lieu of the assailed Resolution and Order of the
respondent NLRC, a NEW DECISION is hereby rendered declaring petitioner Diosdado Bitara, Jr. to
have been Illegally Dismissed and, thus, entitled to the following:
1. Reinstatement or if no longer feasible, Separation Pay to be computed from the
commencement of his employment in August 1988 up to the time of his termination on April
1, 2000, including his imputed service from April 1, 2000 until the finality of this decision,
based on the salary rate prevailing at the said finality;
2. Backwages, inclusive of allowances and other benefits, computed from April 1, 2000 up to
the finality of this decision, without qualification or deduction; and
3. 5-day Service Incentive Leave Pay for every year of service from the commencement of his
employment in August 1988 up to its termination on April 1, 2000.
29

On 10 May 2005, the Court of Appeals denied respondents Motion for Reconsideration of the
decision for lack of merit.
30

Hence, the instant petition.
31

Issue
The core issue in this case is whether or not the Court of Appeals correctly found that the
Commission acted without and/or in excess of jurisdiction and with grave abuse of discretion
amounting to lack or excess of jurisdiction (a) in upholding the termination of respondents
employment and (b) in affirming the denial of his claim for non-payment of holiday pay, service
incentive leave pay, moral and exemplary damages.
Our Ruling
The petition is meritorious.
The special civil action for certiorari seeks to correct errors of jurisdiction and not errors of
judgment.
32

xxx The raison detre for the rule is when a court exercises its jurisdiction, an error committed
while so engaged does not deprive it of the jurisdiction being exercised when the error is
committed. If it did, every error committed by a court would deprive it of its jurisdiction and every
erroneous judgment would be a void judgment. xxx Hence, where the issue or question involved
affects the wisdom or legal soundness of the decision not the jurisdiction of the court to
render said decision the same is beyond the province of a special civil action for certiorari.
xxx
33

xxx [J]udicial review does not go as far as to evaluate the sufficiency of evidence upon which the
Labor Arbiter and NLRC based their determinations, the inquiry being limited essentially to whether
or not said public respondents had acted without or in excess of its jurisdiction or with grave abuse
of discretion.
34
The said rule directs us to merely determine whether there is basis established on
record to support the findings of a tribunal and such findings meet the required quantum of proof,
which in this case, is substantial evidence. Our deference to the expertise acquired by quasi-judicial
agencies and the limited scope granted to us in the exercise of certiorarijurisdiction restrain us from
going so far as to probe into the correctness of a tribunals evaluation of evidence, unless there is
palpable mistake and complete disregard thereof in which case certiorari would be proper.
35

It is on the alleged lack of substantial evidence that the Court of Appeals found for the respondents,
thereby reversing the decision of the Commission.
We hold otherwise.
Upon examination of the documents presented by the parties, we are convinced that the finding of
facts on which the conclusions of the Commission and the Labor Arbiter were based was actually
supported by substantial evidence "that amount of relevant evidence as a reasonable mind might
accept as adequate to support a conclusion, even if other minds, equally reasonable, might
conceivably opine otherwise."
36
(Emphasis supplied.)
I
In order to validly dismiss an employee, the employer is required to observe both substantive and
procedural aspects the termination of employment must be based on a just or authorized cause of
dismissal and the dismissal must be effected after due notice and hearing.
37

Substantive Due Process
We cannot agree with the Court of Appeals that the sole basis of the termination of respondents
employment was his absences from March 11-16, 2000.
Indeed, the Notice to Explain
38
clearly stated:
We are seriously considering your termination from service, and for this reason you are
directed to submit a written explanation, within seventy-two hours from your receipt of this
notice, why you should not be terminated from service for failure to report for work without verbal
or written notice or permission on March 11, 13, 14, 15 and 16, 2000. xxx (Emphasis supplied.)
To give full meaning and substance to the Notice to Explain, however, the paragraph should be read
together with its preceding paragraph, to wit:
We have time and again, verbally and formally, called your attention to your negligence from
your tardiness and your frequent absences without any notice but still, you remain to ignore
our reminder.As you know, we are in need of a regular driver and your action greatly affected the
operation of our company.(Emphasis supplied.)
Necessarily, he was considered for termination of employment because of his previous infractions
capped by his recent unauthorized absences from March 11-16, 2000.
That the recent absences were unauthorized were satisfactorily established by petitioners. Two (2)
employees of the company belied the claim of respondents wife Mary Ann Bitara that she called the
office on 11 March 2000, and, through a certain Delia, as allegedly later identified by respondent,
informed petitioners that her husband would take a leave of absence for a week because he went to
the province.
39

Delia Abalos, a "binder/finisher" of the company, stated in her Affidavit that she never received a call
from respondent nor his wife regarding his absences from March 11-16 and 17-23 during the month
of March 2000.
40
On the other hand, Ritchie Distor, a messenger of the company, narrated in his
Affidavit that, upon instruction of the Management, he went to respondents house on 13 March 2000
to require him to report for work. Instead of relaying the message to him, as respondent would have
it, the wife informed him that respondent had already left the house but that she did not know where
he was going.
41

The Court of Appeals relied heavily on our ruling in Stellar Industrial Services, Inc. vs. NLRC,
42
which
is not on all fours with the present case. In that case, the employer dismissed respondent for non-
observance of company rules and regulations. On the basis of the facts presented, this Court
honored the questioned medical certificate justifying the absences he incurred. It further ratiocinated:
xxx [P]rivate respondents absences, as already discussed, were incurred with due notice and
compliance with company rules and he had not thereby committed a "similar offense" as those he
had committed in the past [to wit: gambling, for which he was preventively suspended; habitual
tardiness for which he received several warnings; and violation of company rules for carrying three
sacks of rice, for which he was required to explain.] xxx To refer to those earlier violations as added
grounds for dismissing him is doubly unfair to private respondent.
43
(Emphasis supplied.)
In the present case, however, petitioners have repeatedly called the attention of respondent
concerning his habitual tardiness. The Memorandum dated 23 June 1999 of petitioner Cheng
required him to explain his tardiness. Also in connection with a similar infraction, respondent even
wrote petitioner Cheng a letter dated 29 November 1999 where he admitted that his tardiness has
affected the delivery schedules of the company, offered an apology, and undertook to henceforth
report for duty on time. Despite this undertaking, he continued to either absent himself from work or
report late during the first quarter of 2000.
We, therefore, agree with the Labor Arbiters findings, to wit:
The imputed absence and tardiness of the complainant are documented. He faltered on his
attendance 38 times of the 66 working days. His last absences on 11, 13, 14, 15 and 16 March 2000
were undertaken without even notice/permission from management. These attendance
delinquencies may be characterized as habitual and are sufficient justifications to terminate the
complainants employment.
44

On this score, Valiao v. Court of Appeals
45
is instructive:
xxx It bears stressing that petitioners absences and tardiness were not isolated incidents but
manifested a pattern of habituality. xxx The totality of infractions or the number of violations
committed during the period of employment shall be considered in determining the penalty to be
imposed upon an erring employee. The offenses committed by him should not be taken singly and
separately but in their totality. Fitness for continued employment cannot be compartmentalized into
tight little cubicles of aspects of character, conduct, and ability separate and independent of each
other.
46

There is likewise no merit in the observation of the Court of Appeals that the petitioners themselves
are not certain of the official time of their employees after pointing out the seeming inconsistencies
between the statement of the petitioners that "there is no need for written rules since even the
[respondent] is aware that his job starts from 8 am to 5 pm"
47
and its Memorandum of 23 June 1999,
where it was mentioned that respondents official time was from 8:30 a.m. to 5:30 p.m. On the
contrary, it was clearly stated in the Memorandum that the Management adjusted his official time
from 8:00 a.m. to 5:00 p.m. to 8:30 a.m. to 5:30 p.m. to hopefully solve the problem on his
tardiness.
48

Neither is there basis to hold that the company tolerates the offsetting of undertime with overtime
services. The Weekly Time Record relied upon by respondent does not conclusively confirm the
alleged practice.
In Valiao,
49
we defined gross negligence as "want of care in the performance of ones
duties"
50
and habitual neglect as "repeated failure to perform ones duties for a period of time,
depending upon the circumstances."
51
These are not overly technical terms, which, in the first place,
are expressly sanctioned by the Labor Code of the Philippines, to wit:
ART. 282. Termination by employer. - An employer may terminate an employment for any of the
following causes:
(a) xxx
(b) Gross and habitual neglect by the employee of his duties;
xxx
Clearly, even in the absence of a written company rule defining gross and habitual neglect of duties,
respondents omissions qualify as such warranting his dismissal from the service.
We cannot simply tolerate injustice to employers if only to protect the welfare of undeserving
employees. As aptly put by then Associate Justice Leonardo A. Quisumbing:
Needless to say, so irresponsible an employee like petitioner does not deserve a place in the
workplace, and it is within the managements prerogative xxx to terminate his employment. Even as
the law is solicitous of the welfare of employees, it must also protect the rights of an employer to
exercise what are clearly management prerogatives. As long as the companys exercise of those
rights and prerogative is in good faith to advance its interest and not for the purpose of defeating or
circumventing the rights of employees under the laws or valid agreements, such exercise will be
upheld.
52

And, in the words of then Associate Justice Ma. Alicia Austria-Martinez in Philippine Long Distance
and Telephone Company, Inc. v. Balbastro:
53

While it is true that compassion and human consideration should guide the disposition of cases
involving termination of employment since it affects one's source or means of livelihood, it should not
be overlooked that the benefits accorded to labor do not include compelling an employer to retain
the services of an employee who has been shown to be a gross liability to the employer. The law in
protecting the rights of the employees authorizes neither oppression nor self-destruction of the
employer.
54
It should be made clear that when the law tilts the scale of justice in favor of labor, it is
but a recognition of the inherent economic inequality between labor and management. The intent is
to balance the scale of justice; to put the two parties on relatively equal positions. There may be
cases where the circumstances warrant favoring labor over the interests of management but never
should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda
est (Justice is to be denied to none).
55

Procedural Due Process
Procedural due process entails compliance with the two-notice rule in dismissing an employee, to
wit: (1) the employer must inform the employee of the specific acts or omissions for which his
dismissal is sought; and (2) after the employee has been given the opportunity to be heard, the
employer must inform him of the decision to terminate his employment.
56

Respondent claimed that he was denied due process because the company did not observe the two-
notice rule. He maintained that the Notice of Explanation and the Notice of Termination, both of
which he allegedly refused to sign, were never served upon him.
57

The Court of Appeals favored respondent and ruled in this wise:
Furthermore, We believe that private respondents failed to afford petitioner due process. The
allegation of private respondents that petitioner refused to sign the memoranda dated March 17 and
21, 2000 despite receipt thereof is not only lame but also implausible. First, the said allegation is
self-serving and unsubstantiated. Second, a prudent employer would simply not accept such mere
refusal, but would exert effort to observe the mandatory requirement of due process. We cannot
accept the self-serving claim of respondents that petitioner refused to sign both memoranda.
Otherwise, We would be allowing employers to do away with the mandatory twin-notice rule in the
termination of employees. We find more credible the claim of petitioner that he was illegally
dismissed onApril 1, 2000 when the lawyer of the company informed him, without prior notice and in
derogation of his right to due process, of his termination by offering him a 1-month salary as
separation pay. The petitioners immediate filing of a complaint for illegal dismissal on April 27, 2000
reinforced Our belief that petitioner was illegally dismissed and was denied due
process.
58
(Emphasis in the original.)
We rule otherwise.
In Bughaw v. Treasure Island Industrial Corporation,
59
this Court, in verifying the veracity of the
allegation that respondent refused to receive the Notice of Termination, essentially looked for the
following: (1) affidavit of service stating the reason for failure to serve the notice upon the recipient;
and (2) a notation to that effect, which shall be written on the notice itself.
60
Thus:
xxx Bare and vague allegations as to the manner of service and the circumstances surrounding the
same would not suffice. A mere copy of the notice of termination allegedly sent by respondent to
petitioner, without proof of receipt, or in the very least, actual service thereof upon petitioner, does
not constitute substantial evidence. It was unilaterally prepared by the petitioner and, thus, evidently
self-serving and insufficient to convince even an unreasonable mind.
61

Davis Cheng, on the other hand, did both. First, he indicated in the notices the notation that
respondent "refused to sign" together with the corresponding dates of service. Second, he executed
an Affidavit dated 29 July 2000 stating that: (1) he is the General Manager of the company; (2) he
personally served each notice upon respondent, when respondent went to the office/factory on 17
March 2000 and 21 March 2000, respectively; and (3) on both occasions, after reading the contents
of the memoranda, respondent refused to acknowledge receipt thereof. We are, thus, convinced that
the notices have been validly served.
Premises considered, we find that respondent was accorded both substantive and procedural due
process.
II
As to respondents monetary claims, petitioners did not deny respondents entitlement to service
incentive leave pay as, indeed, it is indisputable that he is entitled thereto. In Fernandez v.
NLRC,
62
this Court elucidated:
The clear policy of the Labor Code is to grant service incentive leave pay to workers in all
establishments, subject to a few exceptions. Section 2, Rule V, Book III of the Implementing Rules
and Regulations
63
provides that "[e]very employee who has rendered at least one year of service
shall be entitled to a yearly service incentive leave of five days with pay." Service incentive leave is a
right which accrues to every employee who has served "within 12 months, whether continuous or
broken reckoned from the date the employee started working, including authorized absences and
paid regular holidays unless the working days in the establishment as a matter of practice or policy,
or that provided in the employment contracts, is less than 12 months, in which case said period shall
be considered as one year."
64
It is also "commutable to its money equivalent if not used or exhausted
at the end of the year."
65
In other words, an employee who has served for one year is entitled to
it. He may use it as leave days or he may collect its monetary value. xxx
66
(Emphasis supplied.)
Be that as it may, petitioners failed to establish by evidence that respondent had already used the
service incentive leave when he incurred numerous absences notwithstanding that employers have
complete control over the records of the company so much so that they could easily show payment
of monetary claims against them by merely presenting vouchers or payrolls,
67
or any document
showing the off-setting of the payment of service incentive leave with the absences, as
acknowledged by the absentee, if such is the company policy. Petitioners presented none.
We thus quote with approval the findings of the Court of Appeals on the following:
[P]rivate respondents bear the burden to prove that employees have received these benefits in
accordance with law. It is incumbent upon the employer to present the necessary documents to
prove such claim. Although private respondents labored to show that they paid petitioner his holiday
pay, no similar effort was shown with regard to his service incentive leave pay. We do not agree with
the Labor Arbiters conclusion that petitioners service incentive leave pay has been used up by his
numerous absences, there being no proof to that effect.
68

As to the payment of holiday pay, we are convinced that respondent had already received the same
based on the cash vouchers on record.1avvphil
Accordingly, we affirm the ruling of the National Labor Relations Commission that the dismissal was
valid. However, respondent shall be entitled to the money equivalent of the five-day service incentive
leave pay for every year of service from the commencement of his employment in August 1988 up to
its termination on 1 April 2000. The Labor Arbiter shall compute the corresponding amount.
WHEREFORE, the Resolution dated 29 June 2001 and the Order dated 21 February 2002 of the
National Labor Relations Commission in NLRC NCR CASE No. 027871-01 are
hereby REINSTATED with the MODIFICATION that petitioners are ORDERED to pay respondent
the money equivalent of the five-day service incentive leave for every year of service covering his
employment period from August 1988 to 1 April 2000. This case is herebyREMANDED to the Labor
Arbiter for the computation of respondents service incentive leave pay.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice







THIRD DIVISION
G.R. No. 160278 February 8, 2012
GARDEN OF MEMORIES PARK and LIFE PLAN, INC. and PAULINA T. REQUIO, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, SECOND DIVISION, LABOR ARBITER FELIPE
T. GARDUQUE II and HILARIA CRUZ, Respondents.
D E C I S I O N
MENDOZA, J .:
This is a petition for review under Rule 45 of the Rules of Court seeking nullification of the June 11,
2003 Decision
1
and October 16, 2003 Resolution
2
of the Court of Appeals (CA), in CA-G.R. SP No.
64569, which affirmed the December 29, 2000 Decision
3
of the National Labor Relations
Commission (NLRC). The NLRC agreed with the Labor Arbiter (L.A.) in finding that petitioner
Garden of Memories Memorial Park and Life Plan, Inc.(Garden of Memories) was the employer of
respondent Hilaria Cruz (Cruz), and that Garden of Memories and petitioner Paulina
Requio (Requio), were jointly and severally liable for the money claims of Cruz.
The Facts
Petitioner Garden of Memories is engaged in the business of operating a memorial park situated at
Calsadang Bago, Pateros, Metro-Manila and selling memorial Plan and services.
Respondent Cruz, on the other hand, worked at the Garden of Memories Memorial Park as a utility
worker from August 1991 until her termination in February 1998.
On March 13, 1998, Cruz filed a complaint
4
for illegal dismissal, underpayment of wages, non-
inclusion in the Social Security Services, and non-payment of legal/special holiday, premium pay for
rest day, 13th month pay and service incentive leave pay against Garden of Memories before the
Department of Labor and Employment(DOLE).
Upon motion of Garden of Memories, Requio was impleaded as respondent on the alleged ground
that she was its service contractor and the employer of Cruz.
In her position paper,
5
Cruz averred that she worked as a utility worker of Garden of Memories with a
salary ofP115.00 per day. As a utility worker, she was in charge, among others, of the cleaning and
maintenance of the ground facilities of the memorial park. Sometime in February 1998, she had a
misunderstanding with a co-worker named Adoracion Requio regarding the use of a garden water
hose. When the misunderstanding came to the knowledge of Requio, the latter instructed them to
go home and not to return anymore. After three (3) days, Cruz reported for work but she was told
that she had been replaced by another worker. She immediately reported the matter of her
replacement to the personnel manager of Garden of Memories and manifested her protest.
Cruz argued that as a regular employee of the Garden of Memories, she could not be terminated
without just or valid cause. Also, her dismissal was violative of due process as she was not afforded
the opportunity to explain her side before her employment was terminated.
Cruz further claimed that as a result of her illegal dismissal, she suffered sleepless nights, serious
anxiety and mental anguish.
In its Answer,
6
Garden of Memories denied liability for the claims of Cruz and asserted that she was
not its employee but that of Requio, its independent service contractor, who maintained the park for
a contract price. It insisted that there was no employer-employee relationship between them
because she was employed by its service contractor, Victoriana Requio (Victoriana), who was later
succeeded by her daughter, Paulina, when she (Victoriana) got sick. Garden of Memories claimed
that Requio was a service contractor who carried an independent business and undertook the
contract of work on her own account, under her own responsibility and according to her own manner
and method, except as to the results thereof.
In her defense, Requio prayed for the dismissal of the complaint stating that it was Victoriana, her
mother, who hired Cruz, and she merely took over the supervision and management of the workers
of the memorial park when her mother got ill. She claimed that the ownership of the business was
never transferred to her.
Requio further stated that Cruz was not dismissed from her employment but that she abandoned
her work.
7

On October 27, 1999, the LA ruled that Requio was not an independent contractor but a labor-only
contractor and that her defense that Cruz abandoned her work was negated by the filing of the
present case.
8
The LA declared both Garden of Memories and Requio, jointly and severally, liable
for the monetary claims of Cruz, the dispositive portion of the decision reads:
WHEREFORE, premises considered, respondents Garden of Memories Memorial [P]ark and Life
Plan, Inc. and/or Paulina Requio are hereby ordered to jointly and severally pay within ten (10)
days from receipt hereof, the herein complainant Hilaria Cruz, the sums of P 72,072 (P 198 x 26
days x 14 months pay), representing her eight (8) months separation pay and six (6) months
backwages; P 42,138.46, as salary differential; P 2,475.00, as service incentive leave pay;
and P 12,870.00 as 13th month pay, for three (3) years, or a total sum of P129,555.46, plus ten
percent attorneys fee.
Complainants other claims including her prayer for damages are hereby denied for lack of concrete
evidence.
SO ORDERED.
9

Garden of Memories and Requio appealed the decision to the NLRC. In its December 29, 2000
Decision, the NLRC affirmed the ruling of the LA, stating that Requio had no substantial capital or
investments in the form of tools, equipment, machineries, and work premises, among others, for her
to qualify as an independent contractor. It declared the dismissal of Cruz illegal reasoning out that
there could be no abandonment of work on her part since Garden of Memories and Requio failed to
prove that there was a deliberate and unjustified refusal on the part of the employee to go back to
work and resume her employment.
Garden of Memories moved for a reconsideration of the NLRC decision but it was denied for lack of
merit.
10

Consequently, Garden of Memories and Requio filed before the CA a petition for certiorari under
Rule 65 of the Rules of Court. In its June 11, 2003 Decision, the CA dismissed the petition and
affirmed the NLRC decision. Hence, this petition, where they asserted that:
The Public Respondents National Labor Relations Commission and Court of Appeals committed
serious error, gravely abused their discretion and acted in excess of jurisdiction when they failed to
consider the provisions of Section 6 (d) of Department Order No. 10, Series of 1997, by the
Department of Labor and Employment, and then rendered their respective erroneous rulings that:
I
PETITIONER PAULINA REQUIO IS ENGAGED IN LABOR-ONLY CONTRACTING.
II
THERE EXISTS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN RESPONDENT
CRUZ AND PETITIONER GARDEN OF MEMORIES.
III
RESPONDENT HILARIA CRUZ DID NOT ABANDON HER WORK.
IV
THERE IS [NO] BASIS IN GRANTING THE MONETARY AWARDS IN FAVOR OF THE
RESPONDENT CRUZ DESPITE THE ABSENCE OF A CLEAR PRONOUNCEMENT
REGARDING THE LEGALITY OR ILLEGALITY OF HER DISMISSAL.
11

The petitioners aver that Requio is the employer of Cruz as she (Requio) is a legitimate
independent contractor providing maintenance work in the memorial park such as sweeping,
weeding and watering of the lawns. They insist that there was no employer-employee relationship
between Garden of Memories and Cruz. They claim that there was a service contract between
Garden of Memories and Requio for the latter to provide maintenance work for the former and that
the "power of control," the most important element in determining the presence of such a relationship
was missing. Furthermore, Garden of Memories alleges that it did not participate in the selection or
dismissal of Requios employees.
As to the issue of dismissal, the petitioners denied the same and insist that Cruz willfully and actually
abandoned her work. They argue that Cruzs utterances "HINDI KO KAILANGAN ANG
TRABAHO" and "HINDI KO KAILANGAN MAGTRABAHO AT HINDI KO KAILANGAN MAKI-USAP
KAY PAULINA REQUIO," manifested her belligerence and disinterest in her work and that her
unexplained absences later only showed that she had no intention of returning to work.
The Court finds no merit in the petition.
At the outset, it must be stressed that the jurisdiction of this Court in a petition for review
on certiorari under Rule 45 of the Rules of Court is limited to reviewing errors of law, not of fact. This
is in line with the well-entrenched doctrine that the Court is not a trier of facts, and this is strictly
adhered to in labor cases.
12
Factual findings of labor officials, who are deemed to have acquired
expertise in matters within their respective jurisdictions, are generally accorded not only respect but
even finality, and bind the Court when supported by substantial evidence. Particularly when passed
upon and upheld by the CA, they are binding and conclusive upon the Court and will not normally be
disturbed.
13
This is because it is not the function of this Court to analyze or weigh all over again the
evidence already considered in the proceedings below; or reevaluate the credibility of witnesses; or
substitute the findings of fact of an administrative tribunal which has expertise in its special field.
14

In the present case, the LA, the NLRC, and the CA are one in declaring that petitioner Requio was
not a legitimate contractor. Echoing the decision of the LA and the NLRC, the CA reasoned out that
Requio was not a licensed contractor and had no substantial capital or investment in the form of
tool, equipment and work premises, among others.
Section 106 of the Labor Code on contracting and subcontracting provides:
Article 106. Contractor or subcontractor. - 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.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.
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 latter were directly employed by him.[Underscoring provided]
In the same vein, Sections 8 and 9, DOLE Department Order No. 10, Series of 1997, state that:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following
conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on
his own account under his own responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer
shall be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are
directly related to the principal business or operations of the employer in which workers are
habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary 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.
(c) For cases not falling under this Article, the Secretary of Labor shall determine
through appropriate orders whether or not the contracting out of labor is permissible
in the light of the circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the protection and welfare of the
workers."
On the matter of labor-only contracting, Section 5 of Rule VIII-A of the Omnibus Rules Implementing
the Labor Code, provides:
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 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 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.
X x x x
Thus, in determining the existence of an independent contractor relationship, several factors
may be considered, such as, but not necessarily confined to, whether or not the contractor is
carrying on an independent business; the nature and extent of the work; the skill required;
the term and duration of the relationship; the right to assign the performance of specified
pieces of work; the control and supervision of the work to another; the employers power with
respect to the hiring, firing and payment of the contractors workers; the control of the
premises; the duty to supply premises, tools, appliances, materials and labor; and the mode,
manner and terms of payment.
15

On the other hand, there is labor-only contracting where: (a) 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 (b) the workers recruited and placed by such
person are performing activities which are directly related to the principal business of the employer.
16

The Court finds no compelling reason to deviate from the findings of the tribunals below. Both the
capitalization requirement and the power of control on the part of Requio are wanting.
Generally, the presumption is that the contractor is a labor-only contracting unless such contractor
overcomes the burden of proving that it has the substantial capital, investment, tools and the
like.
17
In the present case, though Garden of Memories is not the contractor, it has the burden of
proving that Requio has sufficient capital or investment since it is claiming the supposed status of
Requio as independent contractor.
18
Garden of Memories, however, failed to adduce evidence
purporting to show that Requio had sufficient capitalization. Neither did it show that she invested in
the form of tools, equipment, machineries, work premises and other materials which are necessary
in the completion of the service contract.
Furthermore, Requio was not a licensed contractor. Her explanation that her business was a mere
livelihood program akin to a cottage industry provided by Garden of Memories as part of its
contribution to the upliftment of the underprivileged residing near the memorial park proves that her
capital investment was not substantial. Substantial capital or investment refers to capital stocks and
subscribed capitalization in the case of corporations, tools, equipment, implements, machineries,
and work premises, actually and directly used by the contractor or subcontractor in the performance
or completion of the job, work or service contracted out.
19
Obviously, Requio is a labor-only
contractor.
Another determinant factor that classifies petitioner Requio as a labor-only contractor was her
failure to exercise the right to control the performance of the work of Cruz. This can be gleaned from
the Service Contract Agreement
20
between Garden of Memories and Requio, to wit:
x x x x
NOW THEREFORE, premises considered, the parties hereto have hereunto agreed on the following
terms and conditions:
1. That the Contractor shall undertake the maintenance of the above-mentioned works in
strict compliance with and subject to all the requirements and standards of GMMPLPI.
2. Likewise, the Contractor shall perform all other works that may from time to time be
designated by GMMPLPI thru its authorized representatives, which work is similar in nature
to the responsibilities of a regular employee with a similar function.
3. The contract price for the labor to be furnished or the service to be rendered shall be
THIRTY-FIVE THOUSAND (P 35,000.00) PESOS per calendar month, payable as follows:
(a) Eight Thousand Seven Hundred Fifty Thousand (P 8,750.00) Pesos payable on
every 7th, 15th, 23rd and 30th of the month.
4. The period of this Contract shall be for Three (3) months from Feb 1, April 30, 1998 and
renewable at the option of the Management.
5. It is expressly recognized that this contract was forged for the purpose of supplying the
necessary maintenance work and in no way shall the same be interpreted to have created an
employer-employee relationship.
Xxxx [Underscoring supplied]
The requirement of the law in determining the existence of independent contractorship is that the
contractor should undertake the work on his own account, under his own responsibility, according to
his own manner and method, free from the control and direction of the employer except as to the
results thereof.
21
In this case, however, the Service Contract Agreement clearly indicates that
Requio has no discretion to determine the means and manner by which the work is performed.
Rather, the work should be in strict compliance with, and subject to, all requirements and standards
of Garden of Memories.
Under these circumstances, there is no doubt that Requio is engaged in labor-only contracting, and
is considered merely an agent of Garden of Memories. As such, the workers she supplies should be
considered as employees of Garden of Memories. Consequently, the latter, as principal employer, is
responsible to the employees of the labor-only contractor as if such employees have been directly
employed by it.
22

Notably, Cruz was hired as a utility worker tasked to clean, sweep and water the lawn of the
memorial park. She performed activities which were necessary or desirable to its principal trade or
business. Thus, she was a regular employee of Garden of Memories and cannot be dismissed
except for just and authorized causes.
23

Moreover, the Court agrees with the findings of the tribunals below that respondent Cruz did not
abandon her work but was illegally dismissed.
As the employer, Garden of Memories has the burden of proof to show the employee's deliberate
and unjustified refusal to resume his employment without any intention of returning.
24
For
abandonment to exist, two factors must be present: (1) the failure to report for work or absence
without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship,
with the second element as the more determinative factor being manifested by some overt acts.
25
It
has been said that abandonment of position cannot be lightly inferred, much less legally presumed
from certain equivocal acts.
26
Mere absence is not sufficient.
27

In this case, no such intention to abandon her work can be discerned from the actuations of Cruz.
Neither were there overt acts which could be considered manifestations of her desire to truly
abandon her work. On the contrary, her reporting to the personnel manager that she had been
replaced and the immediate filing of the complaint before the DOLE demonstrated a desire on her
part to continue her employment with Garden of Memories. As correctly pointed out by the CA, the
filing of the case for illegal dismissal negated the allegation of abandonment.
WHEREFORE, the petition is DENIED. The June 11, 2003 Decision of the Court of Appeals in CA-
G.R. SP No. 64569 and its October 16, 2003 Resolution are hereby AFFIRMED.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice





SECOND DIVISION
G.R. No. 192514 April 18, 2012
D.M. CONSUNJI, INC. and/or DAVID M. CONSUNJI, Petitioners,
vs.
ESTELITO L. JAMIN, Respondent.
D E C I S I O N
BRION, J .:
We resolve the present appeal
1
from the decision
2
dated February 26, 2010 and the
resolution
3
dated June 3, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 100099.
The Antecedents
On December 17, 1968, petitioner D.M. Consunji, Inc. (DMCI), a construction company, hired
respondent Estelito L. Jamin as a laborer. Sometime in 1975, Jamin became a helper carpenter.
Since his initial hiring, Jamins employment contract had been renewed a number of times.
4
On
March 20, 1999, his work at DMCI was terminated due to the completion of the SM Manila project.
This termination marked the end of his employment with DMCI as he was not rehired again.
On April 5, 1999, Jamin filed a complaint
5
for illegal dismissal, with several money claims (including
attorneys fees), against DMCI and its President/General Manager, David M. Consunji. Jamin
alleged that DMCI terminated his employment without a just and authorized cause at a time when he
was already 55 years old and had no independent source of livelihood. He claimed that he rendered
service to DMCI continuously for almost 31 years. In addition to the schedule of projects (where he
was assigned) submitted by DMCI to the labor arbiter,
6
he alleged that he worked for three other
DMCI projects: Twin Towers, Ritz Towers, from July 29, 1980 to June 12, 1982; New Istana Project,
B.S.B. Brunei, from June 23, 1982 to February 16, 1984; and New Istana Project, B.S.B. Brunei,
from January 24, 1986 to May 25, 1986.
DMCI denied liability. It argued that it hired Jamin on a project-to-project basis, from the start of his
engagement in 1968 until the completion of its SM Manila project on March 20, 1999 where Jamin
last worked. With the completion of the project, it terminated Jamins employment. It alleged that it
submitted a report to the Department of Labor and Employment (DOLE) everytime it terminated
Jamins services.
The Compulsory Arbitration Rulings
In a decision dated May 27, 2002,
7
Labor Arbiter Francisco A. Robles dismissed the complaint for
lack of merit. He sustained DMCIs position that Jamin was a project employee whose services had
been terminated due to the completion of the project where he was assigned. The labor arbiter
added that everytime DMCI rehired Jamin, it entered into a contract of employment with him.
Moreover, upon completion of the phase of the project for which Jamin was hired or upon completion
of the project itself, the company served a notice of termination to him and a termination report to the
DOLE Regional Office. The labor arbiter also noted that Jamin had to file an application if he wanted
to be re-hired.
On appeal by Jamin, the National Labor Relations Commission (NLRC), in its decision of April 18,
2007,
8
dismissed the appeal and affirmed the labor arbiters finding that Jamin was a project
employee. Jamin moved for reconsideration, but the NLRC denied the motion in a resolution dated
May 30, 2007.
9
Jamin sought relief from the CA through a petition for certiorari under Rule 65 of the
Rules of Court.
The CA Decision
On February 26, 2010, the CA Special Fourth Division rendered the disputed decision
10
reversing the
compulsory arbitration rulings. It held that Jamin was a regular employee. It based its conclusion on:
(1) Jamins repeated and successive rehiring in DMCIs various projects; and (2) the nature of his
work in the projects he was performing activities necessary or desirable in DMCIs construction
business. Invoking the Courts ruling in an earlier case,
11
the CA declared that the pattern of Jamins
rehiring and the recurring need for his services are sufficient evidence of the necessity and
indispensability of such services to DMCIs business or trade, a key indicator of regular employment.
It opined that although Jamin started as a project employee, the circumstances of his employment
made it regular or, at the very least, has ripened into a regular employment.
The CA considered the project employment contracts Jamin entered into with DMCI for almost 31
years not definitive of his actual status in the company. It stressed that the existence of such
contracts is not always conclusive of a workers employment status as this Court explained in
Liganza v. RBL Shipyard Corporation, et al.
12
It found added support from Integrated Contractor and
Plumbing Works, Inc. v. NLRC,
13
where the Court said that while there were several employment
contracts between the worker and the employer, in all of them, the worker performed tasks which
were usually necessary or desirable in the usual business or trade of the employer and, a review of
the workers assignments showed that he belonged to a work pool, making his employment regular.
Contrary to DMCIs submission and the labor arbiters findings, the CA noted that DMCI failed to
submit a report to the DOLE Regional Office everytime Jamins employment was terminated, as
required by DOLE Policy Instructions No. 20. The CA opined that DMCIs failure to submit the
reports to the DOLE is an indication that Jamin was not a project employee. It further noted that
DOLE Department Order No. 19, Series of 1993, which superseded DOLE Policy Instructions No.
20, provides that the termination report is one of the indicators of project employment.
14

Having found Jamin to be a regular employee, the CA declared his dismissal illegal as it was without
a valid cause and without due process. It found that DMCI failed to provide Jamin the required notice
before he was dismissed. Accordingly, the CA ordered Jamins immediate reinstatement with
backwages, and without loss of seniority rights and other benefits.
DMCI moved for reconsideration, but the CA denied the motion in its resolution of June 3,
2010.
15
DMCI is now before the Court through a petition for review on certiorari under Rule 45 of the
Rules of Court.
16

The Petition
DMCI seeks a reversal of the CA rulings on the ground that the appellate court committed a grave
error in annulling the decisions of the labor arbiter and the NLRC. It presents the following
arguments:
1. The CA misapplied the phrase "usually necessary or desirable in the usual business or
trade of the employer" when it considered Jamin a regular employee. The definition of a
regular employee under Article 280 of the Labor Code does not apply to project employment
or "employment which has been fixed for a specific project," as interpreted by the Supreme
Court in Fernandez v. National Labor Relations Commission
17
and D.M. Consunji, Inc. v.
NLRC.
18
It maintains the same project employment methodology in its business operations
and it cannot understand why a different ruling or treatment would be handed down in the
present case.
2. There is no work pool in DMCIs roster of project employees. The CA erred in insinuating
that Jamin belonged to a work pool when it cited Integrated Contractor and Plumbing Works,
Inc. ruling.
19
At any rate, Jamin presented no evidence to prove his membership in any work
pool at DMCI.
3. The CA misinterpreted the rules requiring the submission of termination of employment
reports to the DOLE. While the report is an indicator of project employment, as noted by the
CA, it is only one of several indicators under the rules.
20
In any event, the CA penalized
DMCI for a few lapses in its submission of reports to the DOLE with a "very rigid application
of the rule despite the almost unanimous proofs surrounding the circumstances of private
respondent being a project employee as shown by petitioners documentary evidence."
21

4. The CA erred in holding that Jamin was dismissed without due process for its failure to
serve him notice prior to the termination of his employment. As Jamin was not dismissed for
cause, there was no need to furnish him a written notice of the grounds for the dismissal and
neither is there a need for a hearing. When there is no more job for Jamin because of the
completion of the project, DMCI, under the law, has the right to terminate his employment
without incurring any liability. Pursuant to the rules implementing the Labor Code,
22
if the
termination is brought about by the completion of the contract or phase thereof, no prior
notice is required.
Finally, DMCI objects to the CAs reversal of the findings of the labor arbiter and the NLRC in the
absence of a showing that the labor authorities committed a grave abuse of discretion or that
evidence had been disregarded or that their rulings had been arrived at arbitrarily.
The Case for Jamin
In his Comment (to the Petition),
23
Jamin prays that the petition be denied for having been filed out of
time and for lack of merit.
He claims, in support of his plea for the petitions outright dismissal, that DMCI received a copy of
the CA decision (dated February 26, 2010) on March 4, 2010, as stated by DMCI itself in its motion
for reconsideration of the decision.
24
Since DMCI filed the motion with the CA on March 22, 2010, it
is obvious, Jamin stresses, that the motion was filed three days beyond the 15-day reglementary
period, the last day of which fell on March 19, 2010. He maintains that for this reason, the CAs
February 26, 2010 decision had become final and executory, as he argued before the CA in his
Comment and Opposition (to DMCIs Motion for Reconsideration).
25

On the merits of the case, Jamin submits that the CA committed no error in nullifying the rulings of
the labor arbiter and the NLRC. He contends that DMCI misread this Courts rulings in Fernandez v.
National Labor Relations Commission, et al.
26
and D.M. Consunji, Inc. v. NLRC,
27
cited to support its
position that Jamin was a project employee.
Jamin argues that in Fernandez, the Court explained that the proviso in the second paragraph of
Article 280 of the Labor Code relates only to casual employees who shall be considered regular
employees if they have rendered at least one year of service, whether such service is continuous or
broken. He further argues that in Fernandez, the Court held that inasmuch as the documentary
evidence clearly showed gaps of a month or months between the hiring of Ricardo Fernandez in the
numerous projects where he was assigned, it was the Courts conclusion that Fernandez had not
continuously worked for the company but only intermittently as he was hired solely for specific
projects.
28
Also, in Fernandez, the Court affirmed its rulings in earlier cases that "the failure of the
employer to report to the [nearest] employment office the termination of workers everytime a project
is completed proves that the employees are not project employees."
29

Jamin further explains that in the D.M. Consunji, Inc. case, the company deliberately omitted
portions of the Courts ruling stating that the complainants were not claiming that they were regular
employees; rather, they were questioning the termination of their employment before the completion
of the project at the Cebu Super Block, without just cause and due process.
30

In the matter of termination reports to the DOLE, Jamin disputes DMCIs submission that it
committed only few lapses in the reportorial requirement. He maintains that even the NLRC noted
that there were no termination reports with the DOLE Regional Office after every completion of a
phase of work, although the NLRC considered that the report is required only for statistical purposes.
He, therefore, contends that the CA committed no error in holding that DMCIs failure to submit
reports to the DOLE was an indication that he was not a project employee.
Finally, Jamin argues that as a regular employee of DMCI for almost 31 years, the termination of his
employment was without just cause and due process.
The Courts Ruling
The procedural issue
Was DMCIs appeal filed out of time, as Jamin claims, and should have been dismissed outright?
The records support Jamins submission on the issue.
DMCI received its copy of the February 26, 2010 CA decision on March 4, 2010 (a Thursday), as
indicated in its motion for reconsideration of the decision itself,
31
not on March 5, 2010 (a Friday), as
stated in the present petition.
32
The deadline for the filing of the motion for reconsideration was on
March 19, 2010 (15 days from receipt of copy of the decision), but it was filed only on March 22,
2010 or three days late. Clearly, the motion for reconsideration was filed out of time, thereby
rendering the CA decision final and executory.
Necessarily, DMCIs petition for review on certiorari is also late as it had only fifteen (15) days from
notice of the CA decision to file the petition or the denial of its motion for reconsideration filed in due
time.
33
The reckoning date is March 4, 2010, since DMCIs motion for reconsideration was not filed in
due time. We see no point in exercising liberality and disregarding the late filing as we did in Orozco
v. Fifth Division of the Court of Appeals,
34
where we ruled that "[t]echnicality should not be allowed to
stand in the way of equitably and completely resolving the rights and obligations of the parties." The
petition lacks merit for its failure to show that the CA committed any reversible error or grave abuse
of discretion when it reversed the findings of the labor arbiter and the NLRC.
As earlier mentioned, Jamin worked for DMCI for almost 31 years, initially as a laborer and, for the
most part, as a carpenter. Through all those years, DMCI treated him as a project employee, so that
he never obtained tenure. On the surface and at first glance, DMCI appears to be correct. Jamin
entered into a contract of employment (actually an appointment paper to which he signified his
conformity) with DMCI either as a field worker, a temporary worker, a casual employee, or a project
employee everytime DMCI needed his services and a termination of employment paper was served
on him upon completion of every project or phase of the project where he worked.
35
DMCI would
then submit termination of employment reports to the DOLE, containing the names of a number of
employees including Jamin.
36
The NLRC and the CA would later on say, however, that DMCI failed
to submit termination reports to the DOLE.
The CA pierced the cover of Jamins project employment contract and declared him a regular
employee who had been dismissed without cause and without notice. To reiterate, the CAs findings
were based on: (1) Jamins repeated and successive engagements in DMCIs construction projects,
and (2) Jamins performance of activities necessary or desirable in DMCIs usual trade or business.
We agree with the CA. In Liganza v. RBL Shipyard Corporation,
37
the Court held that "[a]ssuming,
without granting[,] that [the] petitioner was initially hired for specific projects or undertakings, the
repeated re-hiring and continuing need for his services for over eight (8) years have undeniably
made him a regular employee." We find the Liganza ruling squarely applicable to this case,
considering that for almost 31 years, DMCI had repeatedly, continuously and successively engaged
Jamins services since he was hired on December 17, 1968 or for a total of 38 times 35 as shown
by the schedule of projects submitted by DMCI to the labor arbiter
38
and three more projects or
engagements added by Jamin, which he claimed DMCI intentionally did not include in its schedule
so as to make it appear that there were wide gaps in his engagements. One of the three projects
was local, the Ritz Towers,
39
from July 29, 1980 to June 12, 1982, while the other two were overseas
the New Istana Project in Brunei, Darussalam, from June 23, 1982 to February 16, 1984;
40
and
again, the New Istana Project, from January 24, 1986 to May 25, 1986.
41

We reviewed Jamins employment contracts as the CA did and we noted that while the contracts
indeed show that Jamin had been engaged as a project employee, there was an almost unbroken
string of Jamins rehiring from December 17, 1968 up to the termination of his employment on March
20, 1999. While the history of Jamins employment (schedule of projects)
42
relied upon by DMCI
shows a gap of almost four years in his employment for the period between July 28, 1980 (the
supposed completion date of the Midtown Plaza project) and June 13, 1984 (the start of the IRRI
Dorm IV project), the gap was caused by the companys omission of the three projects above
mentioned.
For not disclosing that there had been other projects where DMCI engaged his services, Jamin
accuses the company of suppressing vital evidence that supports his contention that he rendered
service in the companys construction projects continuously and repeatedly for more than three
decades. The non-disclosure might not have constituted suppression of evidence it could just
have been overlooked by the company but the oversight is unfair to Jamin as the non-inclusion of
the three projects gives the impression that there were substantial gaps not only of several months
but years in his employment with DMCI.
Thus, as Jamin explains, the Ritz Tower Project (July 29, 1980 to June 12, 1982) and the New
Istana Project (June 23, 1982 to February 16, 1984) would explain the gap between the Midtown
Plaza project (September 3, 1979 to July 28, 1980) and the IRRI Dorm IV project (June 13, 1984 to
March 12, 1985) and the other New Istana Project (January 24, 1986 to May 25, 1986) would
explain the gap between P. 516 Hanger (September 13, 1985 to January 23, 1986) and P. 516 Maint
(May 26, 1986 to November 18, 1987).
To reiterate, Jamins employment history with DMCI stands out for his continuous, repeated and
successive rehiring in the companys construction projects. In all the 38 projects where DMCI
engaged Jamins services, the tasks he performed as a carpenter were indisputably necessary and
desirable in DMCIs construction business. He might not have been a member of a work pool as
DMCI insisted that it does not maintain a work pool, but his continuous rehiring and the nature of his
work unmistakably made him a regular employee. In Maraguinot, Jr. v. NLRC,
43
the Court held that
once a project or work pool employee has been: (1) continuously, as opposed to intermittently,
rehired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital,
necessary and indispensable to the usual business or trade of the employer, then the employee
must be deemed a regular employee.
Further, as we stressed in Liganza,
44
"[r]espondent capitalizes on our ruling in D.M. Consunji, Inc. v.
NLRC which reiterates the rule that the length of service of a project employee is not the controlling
test of employment tenure but whether or not the employment has been fixed for a specific project
or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee."
"Surely, length of time is not the controlling test for project employment. Nevertheless, it is vital in
determining if the employee was hired for a specific undertaking or tasked to perform functions vital,
necessary and indispensable to the usual business or trade of the employer. Here, [private]
respondent had been a project employee several times over. His employment ceased to be
coterminous with specific projects when he was repeatedly re-hired due to the demands of
petitioners business."
45
Without doubt, Jamins case fits squarely into the employment situation just
quoted.
The termination reports
With our ruling that Jamin had been a regular employee, the issue of whether DMCI submitted
termination of employment reports, pursuant to Policy Instructions No. 20 (Undated
46
), as
superseded by DOLE Department Order No. 19 (series of 1993), has become academic. DOLE
Policy Instructions No. 20 provides in part:
Project employees are not entitled to termination pay if they are terminated as a result of the
completion of the project or any phase thereof in which they are employed, regardless of the number
of projects in which they have been employed by a particular construction company. Moreover, the
company is not required to obtain a clearance from the Secretary of Labor in connection with such
termination. What is required of the company is a report to the nearest Public Employment Office for
statistical purposes.
47

To set the records straight, DMCI indeed submitted reports to the DOLE but as pointed out by
Jamin, the submissions started only in 1992.
48
DMCI explained that it submitted the earlier reports
(1982), but it lost and never recovered the reports. It reconstituted the lost reports and submitted
them to the DOLE in October 1992; thus, the dates appearing in the reports.
49

Is David M. Consunji, DMCIs
President/General Manager, liable
for Jamins dismissal?
While there is no question that the company is liable for Jamins dismissal, we note that the CA
made no pronouncement on whether DMCIs President/General Manager, a co-petitioner with the
company, is also liable.
50
Neither had the parties brought the matter up to the CA nor with this Court.
As there is no express finding of Mr. Consunjis involvement in Jamins dismissal, we deem it proper
to absolve him of liability in this case.
As a final point, it is well to reiterate a cautionary statement we made in Maraguinot,
51
thus:
At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a
duty to re-hire a project employee even after completion of the project for which he was hired. The
import of this decision is not to impose a positive and sweeping obligation upon the employer to re-
hire project employees. What this decision merely accomplishes is a judicial recognition of the
employment status of a project or work pool employee in accordance with what is fait accompli, i.e.,
the continuous re-hiring by the employer of project or work pool employees who perform tasks
necessary or desirable to the employers usual business or trade.
In sum, we deny the present appeal for having been filed late and for lack of any reversible
error.1wphi1 We see no point in extending any liberality by disregarding the late filing as the petition lacks
merit.
WHEREFORE, premises considered, the petition is hereby DENIED for late filing and for lack of
merit. The decision dated February 26, 2010 and the resolution dated June 3, 2010 of the Court of
Appeals are AFFIRMED. Petitioner David M. Consunji is absolved of liability in this case.
SO ORDERED.
ARTURO D. BRION
Associate Justice