Aliviado et al vs P&G G.R. No.

160506 March 9, 2010

1. Workers of SAPS are employee of P&G

Petitioners worked as merchandisers of P&G. They all individually

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

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor
Code, as amended by Department Order No. 18-02, distinguishes
between legitimate and labor-only contracting:

SAPS and Promm-Gem imposed disciplinary measures on erring

merchandisers for reasons such as habitual absenteeism,
dishonesty or changing day-off without prior notice.
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. 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.

There is labor-only contracting when 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) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.

In December 1991, petitioners filed a complaint against P&G for

regularization, service incentive leave pay and other benefits with
damages. The complaint was later amended to include the matter
of their subsequent dismissal.

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.

On November 29, 1996, the Labor Arbiter dismissed the

complaint for lack of merit and ruled that there was no employeremployee 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 PrommGem/SAPS. He further found that Promm-Gem and SAPS were
legitimate independent job contractors. Both NLRC and CA agreed
with the decision.

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, 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.

Issues: (1) whether P&G is the employer of petitioners; and (2)

whether petitioners were illegally dismissed
Ruling:

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.