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[G.R. No. 198783. April 15, 2013.]

ROYAL PLANT WORKERS UNION, petitioner, vs. COCA-COLA BOTTLERS PHILIPPINES, INC.-CEBU PLANT, respondent.

DECISION

MENDOZA, J p:

Assailed in this petition is the May 24, 2011 Decision 1 and the September 2, 2011 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 05200, entitled Coca-Cola Bottlers Philippines, Inc.-Cebu Plant v. Royal Plant Workers Union, which nullified and set aside the June 11, 2010 Decision 3 of the Voluntary Arbitration Panel(Arbitration Committee) in a case involving the removal of chairs in the bottling plant of Coca-Cola Bottlers Philippines, Inc. (CCBPI).

The Factual and Procedural   Antecedents

The factual and procedural antecedents have been accurately recited in the May 24, 2011 CA decision as follows:

Petitioner Coca-Cola Bottlers Philippines, Inc. (CCBPI) is a domestic corporation engaged in the manufacture, sale and distribution of softdrink products. It has several bottling plants all over the country, one of which is located in Cebu City. Under the employ of each bottling plant are bottling operators. In the case of the plant in Cebu City, there are 20 bottling operators who work for its Bottling Line 1 while there are 12-14 bottling operators who man its Bottling Line 2. All of them are male and they are members of herein respondent Royal Plant Workers Union (ROPWU).

The bottling operators work in two shifts. The first shift is from 8 a.m. to 5 p.m. and the second shift is from 5 p.m. up to the time production operations is finished. Thus, the second shift varies and may end beyond eight (8) hours. However, the bottling operators are compensated with overtime pay if the shift extends beyond eight (8) hours. For Bottling Line 1, 10 bottling operators work for each shift while 6 to 7 bottling operators work for each shift for Bottling Line 2.

Each shift has rotations of work time and break time. Prior to September 2008, the rotation is this: after two and a half (2 1/2) hours of work, the bottling operators are given a 30-minute break and this goes on until the shift ends. In September 2008 and up to the present, the rotation has changed and bottling operators are now given a 30-minute break after one and one half (1 1/2) hours of work.

In 1974, the bottling operators of then Bottling Line 2 were provided with chairs upon their request. In 1988, the bottling operators of then Bottling Line 1 followed suit and asked to be provided also with chairs. Their request was likewise granted. Sometime in September 2008, the chairs provided for the operators were removed pursuant to a national directive of petitioner. This directive is in line with the "I Operate, I Maintain, I Clean" program of petitioner for bottling operators, wherein every bottling operator is given the responsibility to keep the machinery and equipment assigned to him clean and safe. The program reinforces the task of bottling operators to constantly move about in the performance of their duties and responsibilities. AcSIDE

With this task of moving constantly to check on the machinery and equipment assigned to him, a bottling operator does not need a chair anymore, hence, petitioner's directive to remove them. Furthermore, CCBPI rationalized that the removal of the chairs is implemented so that the bottling operators will avoid sleeping, thus, prevent injuries to their persons. As bottling operators are working with machines which consist of moving parts, it is imperative that they should not fall asleep as to do so would expose them to hazards and injuries. In addition, sleeping will hamper the efficient flow of operations as the bottling operators would be unable to perform their duties competently.

The bottling operators took issue with the removal of the chairs. Through the representation of herein respondent, they initiated the grievance machinery of the Collective Bargaining Agreement (CBA) in November 2008. Even after exhausting the remedies contained in the grievance machinery, the parties were (still at a deadlock with petitioner still insisting on the removal of the chairs and respondent still against such measure. As such, respondent sent a Notice to Arbitrate, dated 16 July 2009, to petitioner stating its position to submit the issue on the removal of the chairs for arbitration. Nevertheless, before submitting to arbitration the issue, both parties availed of the conciliation/mediation proceedings before the National Conciliation and Mediation Board (NCMB) Regional Branch No. VII. They failed to arrive at an amicable settlement.

Thus, the process of arbitration continued and the parties appointed the chairperson and members of the Arbitration Committee as outlined in the CBA. Petitioner and respondent respectively appointed as members to the Arbitration Committee Mr. Raul A. Kapuno, Jr. and Mr. Luis Ruiz while they both chose Atty. Alice Morada as chairperson thereof. They then executed a Submission Agreement which was accepted by the Arbitration Committee

on 01 October 2009. As contained in the Submission Agreement, the sole issue for arbitration is whether the removal of chairs of the operators assigned at the production/manufacturing line while performing their duties and responsibilities is valid or not.

Both parties submitted their position papers and other subsequent pleadings in amplification of their respective stands. Petitioner argued that the removal of the chairs is valid as it is a legitimate exercise of management prerogative, it does not violate the Labor Code and it does not violate the CBA it contracted with respondent. On the other hand, respondent espoused the contrary view. It contended that the bottling operators have been performing their assigned duties satisfactorily with the presence of the chairs; the removal of the chairs constitutes a violation of the Occupational Health and Safety Standards, the policy of the State to assure the right of workers to just and humane conditions of work as stated in Article 3 of the Labor Code and the Global Workplace Rights Policy.

Ruling of the Arbitration Committee

On June 11, 2010, the Arbitration Committee rendered a decision in favor of the Royal Plant Workers Union (the Union) and against CCBPI, the dispositive portion of which reads, as follows:

Wherefore, the undersigned rules in favor of ROPWU declaring that the removal of the operators chairs is not valid. CCBPI is hereby ordered to restore the same for the use of the operators as before their removal in 2008. 4

The Arbitration Committee ruled, among others, that the use of chairs by the operators had been a company practice for 34 years in Bottling Line 2, from 1974 to 2008, and 20 years in Bottling Line 1, from 1988 to 2008; that the use of the chairs by the operators constituted a company practice favorable to the Union; that it ripened into a benefit after it had been enjoyed by it; that any benefit being enjoyed by the employees could not be reduced, diminished, discontinued, or eliminated by the employer in accordance with Article 100 of the Labor Code, which prohibited the diminution or elimination by the employer of the employees' benefit; and that jurisprudence had not laid down any rule requiring a specific minimum number of years before a benefit would constitute a voluntary company practice which could not be unilaterally withdrawn by the employer.

The Arbitration Committee further stated that, although the removal of the chairs was done in good faith, CCBPI failed to present evidence regarding instances of sleeping while on duty. There were no specific details as to the number of incidents of sleeping on duty, who were involved, when these incidents happened, and what actions were taken. There was no evidence either of any accident or injury in the many years that the bottling operators used chairs. To the Arbitration Committee, it was puzzling why it took 34 and 20 years for CCBPI to be so solicitous of the bottling operators' safety that it removed their chairs so that they would not fall asleep and injure themselves.

Finally, the Arbitration Committee was of the view that, contrary to CCBPI's position, line efficiency was the result of many factors and it could not be attributed solely to one such as the removal of the chairs. SHcDAI

Not contented with the Arbitration Committee's decision, CCBPI filed a petition for review under Rule 43 before the CA.

Ruling of the CA

On May 24, 2011, the CA rendered a contrasting decision which nullified and set aside the decision of the Arbitration Committee. The dispositive portion of the CA decision reads:

WHEREFORE, premises considered, the petition is hereby GRANTED and the Decision, dated 11 June 2010, of the Arbitration Committee in AC389-VII-09-10-2009D is NULLIFIED and SET ASIDE. A new one is entered in its stead SUSTAINING the removal of the chairs of the bottling operators from the manufacturing/production line. 5

The CA held among others, that the removal of the chairs from the manufacturing/production lines by CCBPI is within the province of management prerogatives; that it was part of its inherent right to control and manage its enterprise effectively; and that since it was the employer's discretion to constantly develop measures or means to optimize the efficiency of its employees and to keep its machineries and equipment in the best of conditions, it was only appropriate that it should be given wide latitude in exercising it.

The CA stated that CCBPI complied with the conditions of a valid exercise of a management prerogative when it decided to remove the chairs used by the bottling operators in the manufacturing/production lines. The removal of the chairs was solely motivated by the best intentions for both the Union and CCBPI, in line with the "I Operate, I Maintain, I Clean" program for bottling operators, wherein every bottling operator was given the responsibility to keep the machinery and equipment assigned to him clean and safe. The program would reinforce the task of bottling operators to constantly move about in the performance of their duties and responsibilities. Without the chairs, the bottling operators could efficiently supervise these machineries' operations and maintenance. It would also be beneficial for them because the working time before the break in each rotation for each shift was substantially reduced from two and a half hours (2 1/2) to one and a half hours (1 1/2) before the 30-minute break. This scheme was clearly advantageous to the bottling operators as the number of resting periods was increased. CCBPI had the best intentions in removing the chairs because some bottling operators had the propensity to fall asleep while on the job and sleeping on the job ran the risk of injury exposure and removing them reduced the risk.

The CA added that the decision of CCBPI to remove the chairs was not done for the purpose of defeating or circumventing the rights of its employees under the special laws, the Collective Bargaining Agreement (CBA) or the general principles of justice and fair play. It opined that the principles of justice and fair play were not violated because, when the chairs were removed, there was a commensurate reduction of the working time for each rotation in each shift. The provision of chairs for the bottling operators was never part of the CBAs contracted between the Union and CCBPI. The chairs were not provided as a benefit because such matter was dependent upon the exigencies of the work of the bottling operators. As such, CCBPI could withdraw this provision if it was not necessary in the exigencies of the work, if it was not contributing to the efficiency of the bottling operators or if it would expose them to some hazards. Lastly, the CA explained that the provision of chairs to the bottling operators cannot be covered by Article 100 of the Labor Code on elimination or diminution of benefits because the employee's benefits referred to therein mainly involved monetary considerations or privileges converted to their monetary equivalent.

Disgruntled with the adverse CA decision, the Union has come to this Court praying for its reversal on the following:

GROUNDS

I

THAT WITH DUE RESPECT, THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN HOLDING THAT A PETITION FOR REVIEW UNDER RULE 43 OF THE RULES OF COURT IS THE PROPER REMEDY OF CHALLENGING BEFORE SAID COURT THE DECISION OF THE VOLUNTARY ARBITRATOR OR PANEL OF VOLUNTARY ARBITRATORS UNDER THE LABOR CODE.

II

THAT WITH DUE RESPECT, THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN NULLIFYING AND SETTING ASIDE THE DECISION OF THE PANEL OF VOLUNTARY ARBITRATORS WHICH DECLARED AS NOT VALID THE REMOVAL OF THE CHAIRS OF THE OPERATORS IN THE MANUFACTURING AND/OR PRODUCTION LINE. ADCSEa

In advocacy of its positions, the Union argues that the proper remedy in challenging the decision of the Arbitration Committee before the CA is a petition for certiorariunder Rule 65. The petition for review under Rule 43 resorted to by CCBPI should have been dismissed for being an improper remedy. The Union points out that the parties agreed to submit the unresolved grievance involving the removal of chairs to voluntary arbitration pursuant to the provisions of Article V of the existing CBA. Hence, the assailed decision of the Arbitration Committee is a judgment or final order issued under the Labor Code of the Philippines. Section 2, Rule 43 of the 1997 Rules of Civil Procedure, expressly states that the said rule does not cover cases under the Labor Code of the Philippines. The judgments or final orders of the Voluntary Arbitrator or Panel of Voluntary Arbitrators are governed by the provisions of Articles 260, 261, 262, 262-A, and 262-B of the Labor Code of the Philippines.

On the substantive aspect, the Union argues that there is no connection between CCBPI's "I Operate, I Maintain, I Clean" program and the removal of the chairs because the implementation of the program was in 2006 and the removal of the chairs was done in 2008. The 30-minute break is part of an operator's working hours and does not make any difference. The frequency of the break period is not advantageous to the operators because it cannot compensate for the time they are made to stand throughout their working time. The bottling operators get tired and exhausted after their tour of duty even with chairs around. How much more if the chairs are removed?

The Union, further claims that management prerogatives are not absolute but subject to certain limitations found in law, a collective bargaining agreement, or general principles of fair play and justice. The operators have been performing their assigned duties and responsibilities satisfactorily for thirty (30) years using chairs. There is no record of poor performance because the operators are sitting all the time. There is no single incident when the attention of an operator was called for failure to carry out his assigned tasks. CCBPI has not submitted any evidence to prove that the performance of the operators was poor before the removal of the chairs and that it has improved after the chairs were removed. The presence of chairs for more than 30 years made the operators awake and alert as they could relax from time to time. There are sanctions for those caught sleeping while on duty. Before the removal of the chairs, the efficiency of the operators was much better and there was no recorded accident. After the removal of the chairs, the efficiency of the operators diminished considerably, resulting in the drastic decline of line efficiency.

Finally, the Union asserts that the removal of the chairs constitutes violation of the Occupational Health and Safety Standards, which provide that every company shall keep and maintain its workplace free from hazards that are likely to cause physical harm to the workers or damage to property. The removal of the chairs constitutes a violation of the State policy to assure the right of workers to a just and humane condition of work pursuant to Article 3 of the Labor Code and of CCBPI's Global Workplace Rights Policy. Hence, the unilateral withdrawal, elimination or removal of the chairs, which have been in existence for more than 30 years, constitutes a violation of existing practice.

The respondent's position

CCBPI reiterates the ruling of the CA that a petition for review under Rule 43 of the Rules of Court was the proper remedy to question the decision of the Arbitration Committee. It likewise echoes the ruling of the CA that the removal of the chairs was a legitimate exercise of management prerogative that it was done not to harm the bottling operators but for the purpose of optimizing their efficiency and CCBPI's machineries and equipment; and that the exercise of its management prerogative, was done in good faith and not for the purpose of circumventing the alights of the employees under the special laws, the CBA or the general principles of justice and fair play.

The Court's Ruling

The decision in this case rests on the resolution of two basic questions. First, is an appeal to the CA via a petition for review under Rule 43 of the 1997 Rules of Civil Procedure a proper remedy to question the decision of the Arbitration Committee? Second, was the removal of the bottling operators' chairs from CCBPI's production/manufacturing lines a valid exercise of a management prerogative?

The Court sustains the ruling of the CA on both issues.

Regarding the first issue, the Union insists that the CA erred in ruling that the recourse taken by CCBPI in appealing the decision of the Arbitration Committee was proper. It argues that the proper remedy in challenging the decision of the Voluntary Arbitrator before the CA is by filing a petition for certiorari under Rule 65 of the Rules of Court, not a petition for review under Rule 43. TAaEIc

CCBPI counters that the CA was correct in ruling that the recourse it took in appealing the decision of the Arbitration Committee to the CA via a petition for review under Rule 43 of the Rules of Court was proper and in conformity with the rules and prevailing jurisprudence.

A Petition for Reviewunder Rule 43 is theproper remedy

CCBPI is correct. This procedural issue being debated upon is not novel. The Court has already ruled in a number of cases that a decision or award of a voluntary arbitrator is appealable to the CA via a petition for review under Rule 43. The recent case of SamahanngmgaManggagawasa Hyatt (SAMASAH-NUWHRAIN) v. Hon. Voluntary Arbitrator Buenaventura C. Magsalin and Hotel Enterprises of the Philippines 6 reiterated the well-settled doctrine on this issue, to wit:

In the case of SamahanngmgaManggagawasa Hyatt-NUWHRAIN-APL v. Bacungan, 7 we repeated the well-settled rule that a decision or award of a voluntary arbitrator is appealable to the CA via petition for review under Rule 43. We held that:

"The question on the proper recourse to assail a decision of a voluntary arbitrator has already been settled in Luzon Development Bank v. Association of Luzon Development Bank Employees, where the Court held that the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95 (now embodied in Rule 43 of the 1997 Rules of Civil Procedure), just like those of the quasi-judicial agencies, boards and commissions enumerated therein, and consistent with the original purpose to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities.

Subsequently, in Alcantara, Jr. v. Court of Appeals, and Nippon Paint Employees Union-Olalia v. Court of Appeals, the Court reiterated the aforequoted ruling.

In Alcantara, the Court held that notwithstanding Section 2 of Rule 43, the ruling in Luzon Development Bank still stands. The Court explained, thus:

'The provisions may be new to the Rules of Court but it is far from being a new law. Section 2, Rules 42 of the 1997 Rules of Civil Procedure, as presently worded, is nothing more but a reiteration of the exception to the exclusive appellate jurisdiction of the Court of Appeals, as provided for in Section 9, Batas PambansaBlg. 129, as amended by Republic Act No. 7902:

(3)Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees' Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, the provisions of this Act and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.'

The Court took into account this exception in Luzon Development Bank but, nevertheless, held that the decisions of voluntary arbitrators issued pursuant to the Labor Code do not come within its ambit . . . ." aTADcH

Furthermore, Sections 1, 3 and 4, Rule 43 of the 1997 Rules of Civil Procedure, as amended, provide:

"SECTION 1.Scope. — This Rule shall apply to appeals from judgments or final orders of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of or authorized by any quasi-judicial agency in the exercise of its quasi-judicial functions. Among these agencies are the . . ., and voluntary arbitrators authorized by law.

xxxxxxxxx

SEC. 3.Where to appeal. — An appeal under this Rule may be taken to the Court of Appeals within the period and in the manner therein provided, whether the appeal involves questions of fact, of law, or mixed questions of fact and law.

SEC. 4.Period of appeal. — The appeal shall be taken within fifteen (15) days from notice of the award, judgment, final order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the denial of petitioner's motion for new trial or reconsideration duly filed in accordance with the governing law of the court or agency a quo. . . . . (Emphasis supplied.)"

Hence, upon receipt on May 26, 2003 of the Voluntary Arbitrator's Resolution denying petitioner's motion for reconsideration, petitioner should have filed with the CA, within the fifteen (15)-day reglementary period, a petition for review, not a petition for certiorari.

On the second issue, the Union basically claims that the CCBPI's decision to unilaterally remove the operators' chairs from the production/manufacturing lines of its bottling plants is not valid because it violates some fundamental labor policies. According to the Union, such removal constitutes a violation of the 1) Occupational Health and Safety Standards which provide that every worker is entitled to be provided by the employer with appropriate seats, among others; 2) policy of the State to assure the right of workers to a just and humane condition of work as provided for in Article 3 of the Labor Code; 8 3) Global Workplace Rights Policy of CCBPI which provides for a safe and healthy workplace by maintaining a productive workplace and by

minimizing the risk of accident, injury and exposure to health risks; and 4) diminution of benefits provided in Article 100 of the Labor Code. 9

Opposing the Union's argument, CCBPI mainly contends that the removal of the subject chairs is a valid exercise of management prerogative. The management decision to remove the subject chairs was made in good faith and did not intend to defeat or circumvent the rights of the Union under the special laws, the CBA and the general principles of justice and fair play.

Again, the Court agrees with CCBPI on the matter.

A Valid Exercise of Management Prerogative

The Court has held that management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place, and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers, and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be exercised in good faith and with due regard to the rights of labor. 10

In the present controversy, it cannot be denied that CCBPI removed the operators' chairs pursuant to a national directive and in line with its "I Operate, I Maintain, I Clean" program, launched to enable the Union to perform their duties and responsibilities more efficiently. The chairs were not removed indiscriminately. They were carefully studied with due regard to the welfare of the members of the Union. The removal of the chairs was compensated by: a) a reduction of the operating hours of the bottling operators from a two-and-one-half (2 1/2)-hour rotation period to a one-and-a-half (1 1/2) hour rotation period; and b) an increase of thebreak period from 15 to 30 minutes between rotations.

Apparently, the decision to remove the chairs was done with good intentions as CCBPI wanted to avoid instances of operators sleeping on the job while in the performance of their duties and responsibilities and because of the fact that the chairs were not necessary considering that the operators constantly move about while working. In short, the removal of the chairs was designed to increase work efficiency. Hence, CCBPI's exercise of its management prerogative was made in good faith without doing any harm to the workers' rights. cTEICD

The fact that there is no proof of any operator sleeping on the job is of no moment. There is no guarantee that such incident would never happen as sitting on a chair is relaxing. Besides, the operators constantly move about while doing their job. The ultimate purpose is to promote work efficiency.

No Violation of Labor Laws

The rights of the Union under any labor law were not violated. There is no law that requires employers to provide chairs for bottling operators. The CA correctly ruled that the Labor Code, specifically Article 132 11 thereof, only requires employers to provide seats for women. No similar requirement is mandated for men or male workers. It must be stressed that all concerned bottling operators in this case are men.

There was no violation either of the Health, Safety and Social Welfare Benefit provisions under Book IV of the Labor Code of the Philippines. As shown in the foregoing, the removal of the chairs was compensated by the reduction of the working hours and increase in the rest period. The directive did not expose the bottling operators to safety and health hazards.

The Union should not complain too much about standing and moving about for one and one-half (1 1/2) hours because studies show that sitting in workplaces for a long time is hazardous to one's health. The report of VicHealth, Australia, 12 disclosed that "prolonged workplace sitting is an emerging public health and occupational health issue with serious implications for the health of our working population. Importantly, prolonged sitting is a risk factor for poor health and early death, even among those who meet, or exceed, national 13 activity guidelines." In another report, 14 it was written:

Workers needing to spend long periods in a seated position on the job such as taxi drivers, call centre and office workers, are at risk for injury and a variety of adverse health effects.

The most common injuries occur in the muscles, bones, tendons and ligaments, affecting the neck and lower back regions. Prolonged sitting:

•reduces body movement making muscles more likely to pull, cramp or strain when stretched suddenly,

•causes fatigue in the back and neck muscles by slowing the blood supply and puts high tension on the spine, especially in the low back or neck, and

•causes a steady compression on the spinal discs that hinders their nutrition and can contribute to their premature degeneration.

Sedentary employees may also face a gradual deterioration in health if they do not exercise or do not lead an otherwise physically active life. The most common health problems that these employees experience are disorders in blood circulation and injuries affecting their ability to move. Deep Vein Thrombosis (DVT), where a clot forms in a large vein after prolonged sitting (e.g., after a long flight) has also been shown to be a risk.

Workers who spend most of their working time seated may also experience other, less specific adverse health effects. Common effects include decreased fitness, reduced heart and lung efficiency, and digestive problems. Recent research has identified too much sitting as an important part of the physical activity and health equation, and suggests we should focus on the harm caused by daily inactivity such as prolonged sitting.

Associate professor David Dunstan leads a team at the Baker IDI in Melbourne which is specifically researching sitting and physical activity. He has found that people who spend long periods of time seated (more than four hours per day) were at risk of:

•higher blood levels of sugar and fats,

•larger waistlines, and

•higher risk of metabolic syndrome

regardless of how much moderate to vigorous exercise they had.

In addition, people who interrupted their sitting time more often just by standing or with light activities such as housework, shopping, and moving about the office had healthier blood sugar and fat levels, and smaller waistlines than those whose sitting time was not broken up. HcACST

Of course, in this case, if the chairs would be returned, no risks would be involved because of the shorter period of working time. The study was cited just to show that there is a health risk in prolonged sitting.

No Violation of the CBA

The CBA 15 between the Union and CCBPI contains no provision whatsoever requiring the management to provide chairs for the operators in the production/manufacturing line while performing their duties and responsibilities. On the contrary, Section 2 of Article 1 of the CBA expressly provides as follows:

Article I

SCOPE

SECTION 2.Scope of the Agreement. — All the terms and conditions of employment of employees and workers within the appropriate bargaining unit (as defined in Section 1 hereof) are embodied in this Agreement and the same shall govern the relationship between the COMPANY and such employees and/or workers. On the other hand, all such benefits and/or privileges as are not expressly provided for in this Agreement but which are now being accorded, may in the future be accorded, or might have previously been accorded, to the employees and/or workers, shall be deemed as purely voluntary acts on the part of the COMPANY in each case, and the continuance and repetition thereof now or in the future, no matter how long or how often, shall not be construed as establishing an obligation on the part of the COMPANY. It is however understood that any benefits that are agreed upon by and between the COMPANY and the UNION in the Labor-Management Committee Meetings regarding the terms and conditions of employment outside the CBA that have general application to employees who are similarly situated in a Department or in the Plant shall be implemented. [emphasis and underscoring supplied]

As can be gleaned from the aforecited provision, the CBA expressly provides that benefits and/or privileges, not expressly given therein but which are presently being granted by the company and enjoyed by the employees, shall be considered as purely voluntary acts by the management and that the continuance of such benefits and/or privileges, no matter how long or how often, shall not be understood as establishing an obligation on the company's part. Since the matter of the chairs is not expressly stated in the CBA, it is understood that it was a purely voluntary act on the part of CCBPI and the long practice did not convert it into an obligation or a vested right in favor of the Union.

No Violation of the general principlesof justice and fair play

The Court completely agrees with the CA ruling that the removal of the chairs did not violate the general principles of justice and fair play because the bottling operators' working time was considerably reduced from two and a half (2 1/2) hours to just one and a half (1 1/2) hours and the break period, when they could sit down, was increased to 30 minutes between rotations. The bottling operators' new work schedule is certainly advantageous to them because it greatly increases their rest period and significantly decreases their working time. A break time of thirty (30) minutes after working for only one and a half (1 1/2) hours is a just and fair work schedule.

No Violation of Article 100of the Labor Code

The operators' chairs cannot be considered as one of the employee benefits covered in Article 100 16 of the Labor Code. In the Court's view, the term "benefits" mentioned in the non-diminution rule refers to monetary benefits or privileges given to the employee with monetary equivalents. Such benefits or privileges form part of the employees' wage, salary or compensation making them enforceable obligations.

This Court has already decided several cases regarding the non-diminution rule where the benefits or privileges involved in those cases mainly concern monetary considerations or privileges with monetary equivalents. Some of these cases are: Eastern Telecommunication Phils., Inc. v. Eastern Telecoms Employees Union, 17where the case involves the payment of 14th, 15th and 16th month bonuses; Central Azucarera De Tarlac v. Central Azucarera De Tarlac Labor Union-NLU, 18regarding the 13th month pay, legal/special holiday pay, night premium pay and vacation and sick leaves; TSPIC Corp. v. TSPIC Employees Union, 19 regarding salary wage increases; and American Wire and Cable Daily Employees Union vs. American Wire and Cable Company, Inc., 20 involving service awards with cash incentives, premium pay, Christmas party with incidental benefits and promotional increase. CIaASH

In this regard, the Court agrees with the CA when it resolved the matter and wrote:

Let it be stressed that the aforequoted article speaks of non-diminution of supplements and other employee benefits. Supplements are privileges given to an employee which constitute as extra remuneration besides his or her basic ordinary earnings and wages. From this definition, We can only deduce that the other employee benefits spoken of by Article 100 pertain only to those which are susceptible of monetary considerations. Indeed, this could only be the most plausible conclusion because the cases tackling Article 100 involve mainly with monetary considerations or privileges converted to their monetary equivalents.

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Without a doubt, equating the provision of chairs to the bottling operators as something within the ambit of "benefits" in the context of Article 100 of the Labor Code is unduly stretching the coverage of the law. The interpretations of Article 100 of the Labor Code do not show even with the slightest hint that such provision of chairs for the bottling operators may be sheltered under its mantle. 21

Jurisprudence recognizes the exercise of management prerogatives. Labor laws also discourage interference with an employer's judgment in the conduct of its business. For this reason, the Court often declines to interfere in legitimate business decisions of employers. The law must protect not only the welfare of the employees, but also the right of the employers. 22

WHEREFORE, the petition is DENIED.

SO ORDERED.

Velasco, Jr., Peralta, Abad and Leonen, JJ., concur.

[G.R. No. 145402. March 14, 2008.]

MERALCO INDUSTRIAL ENGINEERING SERVICES CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, OFELIA P. LANDRITO GENERAL SERVICES and/or OFELIA P. LANDRITO, respondents.

D E C I S I O N

CHICO-NAZARIO, J p:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to reverse and set aside (1) the Decision 1of the Court of Appeals in CA-G.R. SP No. 50806, dated 24 April 2000, which modified the Decision 2 of the National Labor Relations Commission (NLRC), dated 30 January 1996 in NLRC NCR CA No. 001737-91 (NLRC NCR Case No. 00-09-04432-89), and thereby held the petitioner solidarily liable with the private respondents for the satisfaction of the separation pay of the latter's employees; and (2) the Resolution 3 of the appellate court, dated 27 September 2000, in the same case which denied the petitioner's Motion for Reconsideration.

Petitioner Meralco Industrial Engineering Services Corporation (MIESCOR) is a corporation duly organized and existing under the laws of the Republic of the Philippines and a client of private respondents. Private respondent Ofelia P. Landrito General Services (OPLGS) is a business firm engaged in providing and rendering general services, such as janitorial and maintenance work to its clients, while private respondent Ofelia P. Landrito is the Proprietor and General Manager of OPLGS.

The factual milieu of the present case is as follows:

On 7 November 1984, petitioner and private respondents executed Contract Order No. 166-84, 4 whereby the latter would supply the petitioner janitorial services, which include labor, materials, tools and equipment, as well as supervision of its assigned employees, at petitioner's Rockwell Thermal Plant in Makati City. Pursuant thereto, private respondents assigned their 49 employees as janitors to petitioner's Rockwell Thermal Plant with a daily wage of P51.50 per employee.

On 20 September 1989, however, the aforesaid 49 employees (complainants) lodged a Complaint for illegal deduction, underpayment, non-payment of overtime pay, legal holiday pay, premium pay for holiday and rest day and night differentials 5 against the private respondents before the Labor Arbiter. The case was docketed as NLRC NCR Case No. 00-09-04432-89.

In view of the enactment of Republic Act No. 6727, 6 the contract between the petitioner and the private respondents was amended 7 for the 10th time on 3 November 1989 to increase the minimum daily wage per employee from P63.55 to P89.00 or P2,670.00 per month. Two months thereafter, or on 2 January 1990, 8petitioner sent a letter to private respondents informing them that effective at the close of business hours on 31 January 1990, petitioner was terminating Contract Order No. 166-84. Accordingly, at the end of the business hours on 31 January 1990, the complainants were pulled out from their work at the petitioner's Rockwell Thermal Plant. Thus, on 27 February 1990, complainants amended their Complaint to include the charge of illegal dismissal and to implead the petitioner as a party respondent therein.

Since the parties failed to settle amicably before the Labor Arbiter, they submitted their respective position papers and other pleadings together with their documentary evidence. Thereafter, a Decision was rendered by the Labor Arbiter on 26 March 1991, dismissing the Complaint against the petitioner for lack of merit, but ordering the private respondents to pay the complainants the total amount of P487,287.07 representing unpaid wages, separation pay and overtime pay; as well as attorney's fees in an amount equivalent to 10% of the award or P48,728.70. All other claims of the complainants against the private respondents were dismissed.9

Feeling aggrieved, private respondents appealed the aforesaid Decision to the NLRC. Private respondents alleged, among other things, that: (1) 48 of the 49 complainants had executed affidavits of desistance and they had never attended any hearing nor given any authority to anyone to file a case on their behalf; (2) the Labor Arbiter erred in not conducting a full-blown

hearing on the case; (3) there is only one complainant in that case who submitted a position paper on his own; (4) the complainants were not constructively dismissed when they were not given assignments within a period of six months, but had abandoned their jobs when they failed to report to another place of assignment; and (5) the petitioner, being the principal, was solidarily liable with the private respondents for failure to make an adjustment on the wages of the complainants. 10 On 28 May 1993, the NLRC issued a Resolution 11 affirming the Decision of the Labor Arbiter dated 26 March 1991 with the modification that the petitioner was solidarily liable with the private respondents, ratiocinating thus:

We, however, disagree with the dismissal of the case against [herein petitioner]. Under Art. 107 12 of the Labor Code of the Philippines, [herein petitioner] is considered an indirect employer and can be held solidarily liable with [private respondents] as an independent contractor. Under Art. 109,   13 for purposes of determining the extent of its liability, [herein petitioner] is considered a direct employer, hence, it is solidarily liable for complainant's ( sic ) wage differentials and unpaid overtime. We find this situation obtaining in this case in view of the failure of [private respondents] to pay in full the labor standard benefits of complainants, in which case liability is limited thereto and does not extend to the establishment of employer-employee relations. 14 [Emphasis supplied]. aHcDEC

Both private respondents and petitioner separately moved for reconsideration of the aforesaid Resolution of the NLRC. In their Motion for Reconsideration, private respondents reiterated that the complainants abandoned their work, so that private respondents should not be liable for separation pay; and that petitioner, not private respondents, should be liable for complainants' other monetary claims, i.e., for wage differentials and unpaid overtime. The petitioner, in its own Motion for Reconsideration, asked that it be excluded from liability. It averred that private respondents should be solely responsible for their acts as it sufficiently paid private respondents all the benefits due the complainants.

On 30 July 1993, the NLRC issued an Order 15 noting that based on the records of the case, the judgment award in the amount of P487,287.07 was secured by a surety bond posted by the private respondents; 16 hence, there was no longer any impediment to the satisfaction of the complainants' claims. Resultantly, the NLRC denied the private respondents' Motion for Reconsideration. The NLRC likewise directed the Labor Arbiter to enforce the monetary award against the private respondents' surety bond and to determine who should finally shoulder the liability therefor. 17

Alleging grave abuse of discretion of the NLRC in its issuance of the Resolution and Order dated 28 May 1993 and 30 July 1993, respectively, private respondents filed before this Court a Petition for Certiorari with prayer for the issuance of a writ of preliminary injunction. The same was docketed as G.R. No. 111506 entitled Ofelia Landrito General Services v. National Labor Relations Commission. The said Petition suspended the proceedings before the Labor Arbiter.

On 23 May 1994, however, this Court issued a Resolution 18 dismissing G.R. No. 111506 for failure of private respondents to sufficiently show that the NLRC had committed grave abuse of discretion in rendering its questioned judgment. This Court's Resolution in G.R. No. 111506 became final and executory on 25 July 1994. 19

As a consequence thereof, the proceedings before the Labor Arbiter resumed with respect to the determination of who should finally shoulder the liability for the monetary awards granted to the complainants, in accordance with the NLRC Order dated 30 July 1993.

On 5 October 1994, the Labor Arbiter issued an Order, 20 which reads:

As can be gleaned from the Resolution dated [28 May 1993], there is that necessity of clarifying the respective liabilities of [herein petitioner] and [herein private respondents] insofar as the judgment award in the total sum of P487,287.07 is concerned.

The judgment award in the total sum of P487,287.07 as contained in the Decision dated [26 March 1991] consists of three (3) parts, as follows:First, the judgment award on the underpayment; Second, the judgment award on separation pay; and Third, the judgment award on the overtime pay.

The question now is: Which of these awards is [petitioner] solidarily liable with [private respondents]? DaIAcC

An examination of the record elicits the finding that [petitioner] is solidarily liable with [private respondents] on the judgment awards on the underpayment and on the non-payment of the overtime pay. . . . . This joint and several liability of the contractor [private respondents] and the principal [petitioner] is mandated by the Labor Code to assure compliance of the provisions therein, including the statutory minimum wage (Art. 99, 21 Labor Code). The contractor-agency is made liable by virtue of his status as direct employer. The principal, on the other hand, is made the indirect employer of the contractor-agency's employees for purposes of paying the employees their wages should the contractor-agency be unable to pay them. This joint and several liability facilitates, if not guarantees, payment of the workers performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987 Constitution.

In sum, the complainants may enforce the judgment award on underpayment and the non-payment of overtime pay against either [private respondents] and/or [petitioner].

 

However, in view of the finding in the Decision that [petitioner] had adjusted its contract price for the janitorial services it contracted with [private respondents] conforming to the provisions of Republic Act No. 6727, should the complainants enforce the judgment on the underpayment and on the non-payment of the overtime pay aginst (sic) [petitioner], the latter can seek reimbursement from the former [meaning (private respondents)], but should the judgment award on the underpayment and on the non-payment of the overtime pay be enforced against [private respondents], the latter cannot seek reimbursement against [petitioner].

The judgment award on separation pay is the sole liability of [private respondents].

WHEREFORE, [petitioner] is jointly and severally liable with [private respondents] in the judgment award on underpayment and on the non-payment of overtime pay. Should the complainants enforce the above judgment award against [petitioner], the latter can seek reimbursement against [private respondents], but should the aforementioned judgment award be enforced against [private respondents], the latter cannot seek reimbursement from the [petitioner].

The judgment award on the payment of separation pay is the sole liability of [private respondents].

Let an alias writ of execution be issued. [Emphasis supplied].

Again, both the private respondents and the petitioner appealed the afore-quoted Order of the Labor Arbiter to the NLRC. On 25 April 1995, the NLRC issued a Resolution 22 affirming the Order dated 5 October 1994 of the Labor Arbiter and dismissing both appeals for non-posting of the appeal or surety bond and/or for utter lack of merit. 23 When the private respondents and the petitioner moved for reconsideration, however, it was granted by the NLRC in its Order 24 dated

27 July 1995. The NLRC thus set aside its Resolution dated 25 April 1995, and directed the private respondents and the petitioner to each post an appeal bond in the amount of P487,287.62 to perfect their respective appeals. 25 Both parties complied. 26

On 30 January 1996, the NLRC rendered a Decision modifying the Order of the Labor Arbiter dated 5 October 1994, the dispositive portion of which reads:

WHEREFORE, the [21 November 1994] appeal of [herein petitioner] is hereby granted. The [5 October 1994] Order of Labor Arbiter Donato G. Quinto, Jr., is modified to the extent that it still held [petitioner] as "jointly and severally liable with [herein private respondents] in the judgment award on underpayment and on the non-payment of overtime pay," our directive being that the Arbiter should now satisfy said labor-standards award, as well as that of the separation pay, exclusively through the surety bond posted by [private respondents]. 27 [Emphasis supplied].

Dissatisfied, private respondents moved for the reconsideration of the foregoing Decision, but it was denied by the NLRC in an Order 28 dated 30 October 1996. This NLRC Order dated 30 October 1996 became final and executory on 29 November 1996.

On 4 December 1996, private respondents filed a Petition for Certiorari 29 before this Court assailing the Decision and the Order of the NLRC dated 30 January 1996 and 30 October 1996, respectively. On 9 December 1998, this Court issued a Resolution 30 referring the case to the Court of Appeals conformably with its ruling in St. Martin Funeral Home v. National Labor Relations Commission. 31 The case was docketed before the appellate court as CA-G.R. SP No. 50806.

The Petition made a sole assignment of error, to wit:

THE HONORABLE COMMISSION GRAVELY ERRED AND GRAVELY ABUSED ITS DISCRETION IN FINDING THAT THE ULTIMATE LIABILITY SHOULD FALL ON THE [HEREIN PRIVATE RESPONDENTS] ALONE, WITHOUT REIMBURSEMENT FROM THE [HEREIN PETITIONER], IN ORDER TO SATISFY THE MONETARY AWARDS OF THE [THEREIN COMPLAINANTS]. 32

After due proceedings, the Court of Appeals rendered the assailed Decision on 24 April 2000, modifying the Decision of the NLRC dated 30 January 1996 and holding the petitioner solidarily liable with the private respondents for the satisfaction of the laborers' separation pay. According to the Court of Appeals:

The [NLRC] adjudged the payment of separation pay to be the sole responsibility of [herein private respondents] because (1) there is no employer-employee relationship between [herein petitioner] and the forty-nine (49) [therein complainants]; (2) the payment of separation pay is not a labor standard benefit. We disagree.

Again, We quote Article 109 of the Labor Code, as amended, viz:

"The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. . ."

The abovementioned statute speaks of "any violation of any provision of this Code." Thus, the existence or non-existence of employer-employee relationship and whether or not the violation is one of labor standards is immaterial because said provision of law does not make any distinction at all and, therefore, this Court should also refrain from making any distinction. Concomitantly, [herein petitioner] should be jointly and severally liable with [private respondents] for the payment of wage differentials, overtime pay and separation pay of the

[therein complainants]. The joint and several liability imposed to [petitioner] is, again, without prejudice to a claim for reimbursement by [petitioner] against [private respondents] for reasons already discusses (sic).

WHEREFORE, premises studiedly considered, the assailed 30 January 1996 decision of [the NLRC] is hereby modified insofar as [petitioner] should be held solidarily liable with [the private respondents] for the satisfaction of the laborers' separation pay. No pronouncement as to costs. 33[Emphasis supplied].

The petitioner filed a Motion for Reconsideration of the aforesaid Decision but it was denied by the Court of Appeals in a Resolution dated 27 September 2000.

Petitioner now comes before this Court via a Petition for Review on Certiorari, docketed as G.R. No. 145402, raising the sole issue of "whether or not the Honorable Court of Appeals palpably erred when it went beyond the issues of the case as it modified the factual findings of the Labor Arbiter which attained finality after it was affirmed by Public Respondent NLRC and by the Supreme Court which can no longer be disturbed as it became the law of the case." 34

Petitioner argues that in the assailed Decision dated 24 April 2000, the Court of Appeals found that the sole issue for its resolution was whether the ultimate liability to pay the monetary awards in favor of the 49 employees falls on the private respondents without reimbursement from the petitioner. Hence, the appellate court should have limited itself to determining the right of private respondents to still seek reimbursement from petitioner for the monetary awards on the unpaid wages and overtime pay of the complainants.

According to petitioner, the NLRC, in its Resolution dated 28 May 1993, already found that petitioner had fully complied with its salary obligations to the complainants. Petitioner invokes the same NLRC Resolution to support its claim that it was not liable to share with the private respondents in the payment of separation pay to complainants. When private respondents questioned the said NLRC Resolution in a Petition for Certiorari with this Court, docketed as G.R. No. 111506, this Court found that the NLRC did not commit grave abuse of discretion in the issuance thereof and accordingly dismissed private respondents' Petition. Said NLRC Resolution, therefore, has since become final and executory and can no longer be disturbed for it now constitutes the law of the case.

Assuming for the sake of argument that the Court of Appeals can still take cognizance of the issue of petitioner's liability for complainants' separation pay, petitioner asserts that the appellate court seriously erred in concluding that it is jointly and solidarily liable with private respondents for the payment thereof. The payment of separation pay should be the sole responsibility of the private respondents because there was no employer-employee relationship between the petitioner and the complainants, and the payment of separation pay is not a labor standards benefit. IDSaTE

Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court. 35 Indeed, courts must adhere thereto, whether the legal principles laid down were "correct on general principles or not" or "whether the question is right or wrong" because public policy, judicial orderliness and economy require such stability in the final judgments of courts or tribunals of competent jurisdiction. 36

Petitioner's application of the law of the case principle to the case at bar as regards its liability for payment of separation pay is misplaced.

The only matters settled in the 23 May 1994 Resolution of this Court in G.R. No. 111506, which can be regarded as the law of the case, were (1) both the petitioner and the private respondents were jointly and solidarily liable for the judgment awards due the complainants; and (2) the said judgment awards shall be enforced against the surety bond posted by the private respondents. However, the issue as regards the liability of the petitioner for payment of separation pay was yet to be resolved because precisely, the NLRC, in its Order dated 30 July 1993, still directed the Labor Arbiter to make a determination on who should finally shoulder the monetary awards granted to the complainants. And it was only after G.R. No. 111506 was dismissed by this Court that the Labor Arbiter promulgated his Decision dated 5 October 1994, wherein he clarified the respective liabilities of the petitioner and the private respondents for the judgment awards. In his 5 October 1994 Decision, the Labor Arbiter explained that the solidary liability of the petitioner was limited to the monetary awards for wage underpayment and non-payment of overtime pay due the complainants, and it did not, in any way, extend to the payment of separation pay as the same was the sole liability of the private respondents. 

Nonetheless, this Court finds the present Petition meritorious.

The Court of Appeals indeed erred when it ruled that the petitioner was jointly and solidarily liable with the private respondents as regards the payment of separation pay.

The appellate court used as basis Article 109 of the Labor Code, as amended, in holding the petitioner solidarily liable with the private respondents for the payment of separation pay:

ART. 109.Solidary Liability. — The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers. [Emphasis supplied].

However, the afore-quoted provision must be read in conjunction with Articles 106 and 107 of the Labor Code, as amended.

Article 107 of the Labor Code, as amended, defines an indirect employer as "any person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job or project." To ensure that the contractor's employees are paid their appropriate wages, Article 106 of the Labor Code, as amended, provides:

ART. 106.CONTRACTOR OR SUBCONTRACTOR. — . . . .

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. [Emphasis supplied].

Taken together, an indirect employer (as defined by Article 107) can only be held solidarily liable with the independent contractor or subcontractor (as provided under Article 109) in the event that the latter fails to pay the wages of its employees (as described in Article 106).

Hence, while it is true that the petitioner was the indirect employer of the complainants, it cannot be held liable in the same way as the employer in every respect. The petitioner may be considered an indirect employer only for purposes of unpaid wages. As this Court succinctly explained in Philippine Airlines, Inc. v. National Labor Relations Commission: 37

While USSI is an independent contractor under the security service agreement and PAL may be considered an indirect employer, that status did not make PAL the employer of the security guards in every respect. As correctly posited by the Office of the Solicitor General, PAL may be considered an indirect employer only for purposes of unpaid wages since Article 106, which is applicable to the situation contemplated in Section 107, speaks of wages. The concept of indirect employer only relates or refers to the liability for unpaid wages. Read together, Articles 106 and 109 simply mean that the party with whom an independent contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent and for that purpose that the latter is considered a direct employer. The term "wage" is defined in Article 97(f) of the Labor Code as "the remuneration of earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee." aHATDI

Further, there is no question that private respondents are operating as an independent contractor and that the complainants were their employees. There was no employer-employee relationship that existed between the petitioner and the complainants and, thus, the former could not have dismissed the latter from employment. Only private respondents, as the complainants' employer, can terminate their services, and should it be done illegally, be held liable therefor. The only instance when the principal can also be held liable with the independent contractor or subcontractor for the backwages and separation pay of the latter's employees is when there is proof that the principal conspired with the independent contractor or subcontractor in the illegal dismissal of the employees, thus:

The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum wage, because the workers' right to such wage is derived from law. The proposition that payment of back wages and separation pay should be covered by Article 109, which holds an indirect employer solidarily responsible with his contractor or subcontractor for "any violation of any provision of this Code," would have been tenable if there were proof — there was none in this case — that the principal/employer had conspired with the contractor in the acts giving rise to the illegal dismissal. 38

It is the established fact of conspiracy that will tie the principal or indirect employer to the illegal dismissal of the contractor or subcontractor's employees. In the present case, there is no allegation, much less proof presented, that the petitioner conspired with private respondents in the illegal dismissal of the latter's employees; hence, it cannot be held liable for the same.

Neither can the liability for the separation pay of the complainants be extended to the petitioner based on contract. Contract Order No. 166-84 executed between the petitioner and the private respondents contains no provision for separation pay in the event that the petitioner terminates the same. It is basic that a contract is the law between the parties and the stipulations therein, provided that they are not contrary to law, morals, good customs, public order or public policy, shall be binding as between the parties. 39 Hence, if the contract does not provide for such a liability, this Court cannot just read the same into the contract without possibly violating the intention of the parties.

It is also worth noting that although the issue in CA-G.R. SP No. 50806 pertains to private respondents' right to reimbursement from petitioner for the "monetary awards" in favor of the

complainants, they limited their arguments to the monetary awards for underpayment of wages and non-payment of overtime pay, and were conspicuously silent on the monetary award for separation pay. Thus, private respondents' sole liability for the separation pay of their employees should have been deemed settled and already beyond the power of the Court of Appeals to resolve, since it was an issue never raised before it. 40

Although petitioner is not liable for complainants' separation pay, the Court conforms to the consistent findings in the proceedings below that the petitioner is solidarily liable with the private respondents for the judgment awards for underpayment of wages and non-payment of overtime pay.

In this case, however, private respondents had already posted a surety bond in an amount sufficient to cover all the judgment awards due the complainants, including those for underpayment of wages and non-payment of overtime pay. The joint and several liability of the principal with the contractor and subcontractor were enacted to ensure compliance with the provisions of the Labor Code, principally those on statutory minimum wage. This liability facilitates, if not guarantees, payment of the workers' compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution. 41 With private respondents' surety bond, it can therefore be said that the purpose of the Labor Code provision on the solidary liability of the indirect employer is already accomplished since the interest of the complainants are already adequately protected. Consequently, it will be futile to continuously hold the petitioner jointly and solidarily liable with the private respondents for the judgment awards for underpayment of wages and non-payment of overtime pay.

But while this Court had previously ruled that the indirect employer can recover whatever amount it had paid to the employees in accordance with the terms of the service contract between itself and the contractor, 42 the said ruling cannot be applied in reverse to this case as to allow the private respondents (the independent contractor), who paid for the judgment awards in full, to recover from the petitioner (the indirect employer).

Private respondents have nothing more to recover from petitioner.

Petitioner had already handed over to private respondent the wages and other benefits of the complainants. Records reveal that it had complied with complainants' salary increases in accordance with the minimum wage set by Republic Act No. 6727 by faithfully adjusting the contract price for the janitorial services it contracted with private respondents. 43 This is a finding of fact made by the Labor Arbiter, 44 untouched by the NLRC 45 and explicitly affirmed by the Court of Appeals, 46 and which should already bind this Court.

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are completely devoid of support from the evidence on record, or the assailed judgment is based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court. 47

Having already received from petitioner the correct amount of wages and benefits, but having failed to turn them over to the complainants, private respondents should now solely bear the liability for the underpayment of wages and non-payment of the overtime pay.

 

WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The Decision and Resolution of the Court of Appeals dated 24 April 2000 and 27 September 2000, respectively, in CA-G.R. SP No. 50806, are hereby REVERSED AND SET ASIDE. The Decision dated 30 January

1996 of the National Labor Relations Commission in NLRC NCR CA No. 001737-91 (NLRC NCR Case No. 00-09-04432-89) is hereby REINSTATED. No costs.

SO ORDERED.

Ynares-Santiago, Austria-Martinez, Nachura and Reyes, JJ., concur.

G.R. No. 146408             February 29, 2008

PHILIPPINE AIRLINES, INC., petitioner, vs.ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, BENEDICTO AUXTERO, EDUARDO MAGDADARAUG, NELSON M. DULCE, and ALLAN BENTUZAL, respondents.

D E C I S I O N

CARPIO MORALES, J.:

Petitioner Philippine Airlines as Owner, and Synergy Services Corporation (Synergy) as Contractor, entered into an Agreement1 on July 15, 1991 whereby Synergy undertook to "provide loading, unloading, delivery of baggage and cargo and other related services to and from [petitioner]'s aircraft at the Mactan Station."2

The Agreement specified the following "Scope of Services" of Contractor Synergy:

1.2 CONTRACTOR shall furnish all the necessary capital, workers, loading, unloading and deliverymaterials, facilities, supplies, equipment and tools for the satisfactory performance and execution of the following services (the Work):

a. Loading and unloading of baggage and cargo to and from the aircraft;

b. Delivering of baggage from the ramp to the baggage claim area;

c. Picking up of baggage from the baggage sorting area to the designated parked aircraft;

d. Delivering of cargo unloaded from the flight to cargo terminal;

e. Other related jobs (but not janitorial functions) as may be required and necessary;

CONTRACTOR shall perform and execute the aforementioned Work at the following areas located at Mactan Station, to wit:

a. Ramp Area

b. Baggage Claim Area

c. Cargo Terminal Area, and

d. Baggage Sorting Area3 (Underscoring supplied)

And it expressly provided that Synergy was "an independent contractor and . . . that there w[ould] be no employer-employee relationship between CONTRACTOR and/or its employees on the one hand, and OWNER, on the other."4

On the duration of the Agreement, Section 10 thereof provided:

10. 1 Should at any time OWNER find the services herein undertaken by CONTRACTOR to be unsatisfactory, it shall notify CONTRACTOR who shall have fifteen (15) days from such notice within which to improve the services. If CONTRACTOR fails to improve the services under this Agreement according to OWNER'S specifications and standards, OWNER shall have the right to terminate this Agreement immediately and without advance notice.

10.2 Should CONTRACTOR fail to improve the services within the period stated above or should CONTRACTOR breach the terms of this Agreement and fail or refuse to perform the Work in such a manner as will be consistent with the achievement of the result therein contracted for or in any other way fail to comply strictly with any terms of this Agreement, OWNER at its option, shall have the right to terminate this Agreement and to make other arrangements for having said Work performed and pursuant thereto shall retain so much of the money held on the Agreement as is necessary to cover the OWNER's costs and damages, without prejudice to the right of OWNER to seek resort to the bond furnished by CONTRACTOR should the money in OWNER's possession be insufficient.

x xxx (Underscoring supplied)

Except for respondent BenedictoAuxtero (Auxtero), the rest of the respondents, who appear to have been assigned by Synergy to petitioner following the execution of the July 15, 1991 Agreement, filed on March 3, 1992 complaints before the NLRC Regional Office VII at Cebu City against petitioner, Synergy and their respective officials for underpayment, non-payment of premium pay for holidays, premium pay for rest days, service incentiveleave pay, 13 th   month pay and allowances, and for regularization of employment status with petitioner, they claiming to be "performing duties for the benefit of [petitioner] since their job is directly connected with [its] business x x x."5

Respondent Auxtero had initially filed a complaint against petitioner and Synergy and their respective officials for regularization of his employment status. Later alleging that he was, without valid ground, verbally dismissed, he filed a complaint against petitioner and Synergy and their respective officials for illegal dismissal and reinstatement with full backwages.6

The complaints of respondents were consolidated.

By Decision7 of August 29, 1994, Labor Arbiter Dominador Almirante found Synergy an independent contractor and dismissed respondents' complaint for regularization against petitioner, but granted their money claims. The fallo of the decision reads:

WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:

(1) Ordering respondents PAL and Synergy jointly and severally to pay all the complainants herein their 13th month pay and service incentive leave benefits;

x xxx

(3) Ordering respondent Synergy to pay complainant BenedictoAuxtero a financial assistance in the amount of P5,000.00.

The awards hereinabove enumerated in the aggregate total amount of THREE HUNDRED TWENTY-TWO THOUSAND THREE HUNDRED FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS (P322,359.87) are computed in detail by our Fiscal Examiner which computation is hereto attached to form part of this decision.

The rest of the claims are hereby ordered dismissed for lack of merit.8 (Underscoring supplied)

On appeal by respondents, the NLRC, Fourth Division, Cebu City, vacated and set aside the decision of the Labor Arbiter by Decision9 of January 5, 1996, the fallo of which reads:

WHEREFORE, the Decision of the Labor Arbiter Dominador A. Almirante, dated August 29, 1994, is hereby VACATED and SET ASIDE and judgment is hereby rendered:

1. Declaring respondent Synergy Services Corporation to be a 'labor-only' contractor;

2. Ordering respondent   Philippine Airlines   to accept, as its regular employees , all the complainants, . . . and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the Collective Bargaining Agreement subsisting during the period of their employment;

x xxx

4. Declaring the dismissal of complainant BenedictoAuxtero to be illegal and ordering his reinstatementas helper or utility man with respondent Philippine Airlines, with full backwages, allowances and other benefits and privileges from the time of his dismissal up to his actual reinstatement; and

5. Dismissing the appeal of respondent Synergy Services Corporation, for lack of merit.10 (Emphasis and underscoring supplied)

Only petitioner assailed the NLRC decision via petition for certiorari before this Court.

By Resolution11 of January 25, 1999, this Court referred the case to the Court of Appeals for appropriate action and disposition, conformably with St. Martin Funeral Homes v. National Labor Relations Commission which was promulgated on September 16, 1998.

The appellate court, by Decision of September 29, 2000, affirmed the Decision of the NLRC.12 Petitioner's motion for reconsideration having been denied by Resolution of December 21, 2000,13 the present petition was filed, faulting the appellate court

I.

. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS COMMISSION DECISION WHICH IMPOSED THE RELATIONSHIP OF EMPLOYER-EMPLOYEE BETWEEN PETITIONER AND THE RESPONDENTS HEREIN.

II.

. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR RELATIONS COMMISSION ORDERING THE REINSTATEMENT OF RESPONDENT AUXTERO DESPITE THE

ABSENCE [OF] ANY FACTUAL FINDING IN THE DECISION THAT PETITIONER ILLEGALLY TERMINATED HIS EMPLOYMENT.

III.

. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE ERROR IN UPHOLDING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH COMPELLED THE  PETITIONER TO EMPLOY THE RESPONDENTS AS REGULAR EMPLOYEES DESPITE THE FACT THAT THEIR SERVICES ARE IN EXCESS OF PETITIONER COMPANY'S OPERATIONAL REQUIREMENTS.14 (Underscoring supplied)

Petitioner argues that the law does not prohibit an employer from engaging an independent contractor, like Synergy, which has substantial capital in carrying on an independent business of contracting, to perform specific jobs.

Petitioner further argues that its contracting out to Synergy various services like janitorial, aircraft cleaning, baggage-handling, etc., which are directly related to its business, does not make respondents its employees.

Petitioner furthermore argues that none of the four (4) elements of an employer-employee relationship between petitioner and respondents, viz: selection and engagement of an employee, payment of wages, power of dismissal, and the power to control employee's conduct, is present in the case.15

Finally, petitioner avers that reinstatement of respondents had been rendered impossible because it had reduced its personnel due to heavy losses as it had in fact terminated its service agreement with Synergy effective June 30, 199816 as a cost-saving measure.

The decision of the case hinges on a determination of whether Synergy is a mere job-only contractor or a legitimate contractor. If Synergy is found to be a mere job-only contractor, respondents could be considered as regular employees of petitioner as Synergy would then be a mere agent of petitioner in which case respondents would be entitled to all the benefits granted to petitioner's regular employees; otherwise, if Synergy is found to be a legitimate contractor, respondents' claims against petitioner must fail as they would then be considered employees of Synergy.

The statutory basis of legitimate contracting or subcontracting is provided in Article 106 of the Labor Code which reads:

ART. 106. CONTRACTOR OR SUBCONTRACTOR. - Whenever an employer enters into a contract with another person for the performance of the former's work, the employees of the contractor and of the latter's 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 the 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, capitalization and underscoring supplied)

Legitimate contracting and labor-only contracting are defined in Department Order (D.O.) No. 18-02, Series of 2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as amended) as follows:

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. (Emphasis and underscoring supplied)

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 [ sic ] 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. (Emphasis, underscoring and capitalization supplied)

"Substantial capital or investment" and the "right to control" are defined in the same Section 5 of the Department Order as follows:

"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. (Emphasis and underscoring supplied)

From the records of the case, it is gathered that the work performed by almost all of the respondents - loading and unloading of baggage and cargo of passengers - is directly related to the main business of petitioner. And the equipment used by respondents as station loaders, such as trailers and conveyors, are owned by petitioner.17

Petitioner asserts, however, that mere compliance with substantial capital requirement suffices for Synergy to be considered a legitimate contractor, citing Neri v. National Labor Relations Commission.18 Petitioner's reliance on said case is misplaced.

In Neri, the Labor Arbiter and the NLRC both determined that Building Care Corporation had a capital stock of P1 million fully subscribed and paid for.19 The corporation's status as independent contractor had in fact been previously confirmed in an earlier case20 by this Court which found it to be serving, among others, a university, an international bank, a big local bank, a hospital center, government agencies, etc."

In stark contrast to the case at bar, while petitioner steadfastly asserted before the Labor Arbiter and the NLRC that Synergy has a substantial capital to engage in legitimate contracting, it failed to present evidence thereon. As the NLRC held:

The decision of the Labor Arbiter merely mentioned on page 5 of his decision that respondent SYNERGY has substantial capital, but there is no showing in the records as to how much is that capital. Neither had respondents shown that SYNERGY has such substantial capital. x x x21 (Underscoring supplied)

It was only after the appellate court rendered its challenged Decision of September 29, 2002 when petitioner, in its Motion for Reconsideration of the decision, sought to prove, for the first time, Synergy's substantial capitalization by attaching photocopies of Synergy's financial statements, e.g., balance sheets, statements of income and retained earnings, marked as "Annexes 'A' - 'A-4.'"22

More significantly, however, is that respondents worked alongside petitioner's regular employees who were performing identical work.23 As San Miguel Corporation v. Aballa24 and Dole Philippines, Inc. v. Esteva, et al.25teach, such is an indicium of labor-only contracting.

For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two elements to be present is, for convenience, re-quoted:

(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. (Emphasis and CAPITALIZATION supplied)

Even if only one of the two elements is present then, there is labor-only contracting.

The control test element under the immediately-quoted paragraph (ii), which was not present in the old Implementing Rules (Department Order No. 10, Series of 1997),26 echoes the prevailing jurisprudential trend27elevating such element as a primary determinant of employer-employee relationship in job contracting agreements.

One who claims to be an independent contractor has to prove that he contracted to do the work according to his own methods and without being subject to the employer's control except only as to the results.28

While petitioner claimed that it was Synergy's supervisors who actually supervised respondents, it failed to present evidence thereon. It did not even identify who were the Synergy supervisors assigned at the workplace.

Even the parties' Agreement does not lend support to petitioner's claim, thus:

Section 6. Qualified and Experienced Worker: Owner's Right to Dismiss Workers.

CONTRACTOR shall employ capable and experienced workers and foremen to carry out the loading, unloading and delivery Work as well as provide all equipment, loading, unloading and delivery equipment, materials, supplies and tools necessary for the performance of the Work. CONTRACTOR shall upon OWNER'S request furnish the latter with information regarding the qualifications of the former's workers, to prove their capability and experience. Contractor shall require all its workers, employees, suppliers and visitors to comply with OWNER'S rules, regulations, procedures and directives relative to the safety and security of OWNER'S premises, properties and operations. For this purpose, CONTRACTOR shall furnish its employees and workers identification cards to be countersigned by OWNER and uniforms to be approved by OWNER. OWNER may require CONTRACTOR to dismiss immediately and prohibit entry into OWNER'S premises of any person employed therein by CONTRACTOR who in OWNER'S opinion is incompetent or misconducts himself or does not comply with OWNER'S reasonable instructions and requests regarding security, safety and other matters and such person shall not again be employed to perform the services hereunder without OWNER'S permission.29 (Underscoring partly in the original and partly supplied; emphasis supplied)

Petitioner in fact admitted that it fixes the work schedule of respondents as their work was dependent on the frequency of plane arrivals.30 And as the NLRC found, petitioner's managers and supervisors approved respondents' weekly work assignments and respondents and other regular PAL employees were all referred to as "station attendants" of the cargo operation and airfreight services of petitioner.31

Respondents having performed tasks which are usually necessary and desirable in the air transportation business of petitioner, they should be deemed its regular employees and Synergy as a labor-only contractor.32

The express provision in the Agreement that Synergy was an independent contractor and there would be "no employer-employee relationship between [Synergy] and/or its employees on one hand, and [petitioner] on the other hand" is not legally binding and conclusive as contractual provisions are not valid determinants of the existence of such relationship. For it is the totality of the facts and surrounding circumstances of the case33 which is determinative of the parties' relationship.

Respecting the dismissal on November 15, 199234 of Auxtero, a regular employee of petitioner who had been working as utility man/helper since November 1988, it is not legally justified for want of just or authorized cause therefor and for non-compliance with procedural due process. Petitioner's claim that he abandoned his work does not persuade.35 The elements of abandonment being (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship manifested by some overt acts,36 the onus probandi lies with petitioner which, however, failed to discharge the same.

Auxtero, having been declared to be a regular employee of petitioner, and found to be illegally dismissed from employment, should be entitled to salary differential37 from the time he rendered one year of service until his dismissal, reinstatement plus backwages until the finality of this decision.38 In view, however, of the long period of time39 that had elapsed since his dismissal on November 15, 1992, it would be appropriate to award separation pay of one (1) month salary for each year of service, in lieu of reinstatement.40

As regards the remaining respondents, the Court affirms the ruling of both the NLRC and the appellate court, ordering petitioner to accept them as its regular employees and to give each of them the salaries, allowances and other employment benefits and privileges of a regular employee under the pertinent Collective Bargaining Agreement.

Petitioner claims, however, that it has become impossible for it to comply with the orders of the NLRC and the Court of Appeals, for during the pendency of this case, it was forced to reduce its personnel due to heavy losses caused by economic crisis and the pilots' strike of June 5, 1998.41 Hence, there are no available positions where respondents could be placed.

And petitioner informs that "the employment contracts of all if not most of the respondents . . . were terminated by Synergy effective 30 June 1998 when petitioner terminated its contract with Synergy."42

Other than its bare allegations, petitioner presented nothing to substantiate its impossibility of compliance. In fact, petitioner waived this defense by failing to raise it in its Memorandum filed on June 14, 1999 before the Court of Appeals.43 Further, the notice of termination in 1998 was in disregard of a subsisting temporary restraining order44 to preserve the status quo, issued by this Court in 1996 before it referred the case to the Court of Appeals in January 1999. So as to thwart the attempt to subvert the implementation of the assailed decision, respondents are deemed to be continuously employed by petitioner, for purposes of computing the wages and benefits due respondents.

Finally, it must be stressed that respondents, having been declared to be regular employees of petitioner, Synergy being a mere agent of the latter, had acquired security of tenure. As such, they could only be dismissed by petitioner, the real employer, on the basis of just or authorized cause, and with observance of procedural due process.

WHEREFORE, the Court of Appeals Decision of September 29, 2000 is AFFIRMED with MODIFICATION.

Petitioner PHILIPPINE AIRLINES, INC. is ordered to:

(a) accept respondents ENRIQUE LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD GONCER, NONILON PILAPIL, AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M. CAPIN, RAMEL BERNARDES, LORENZO BUTANAS, BENSON CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL, ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE ALEGRES, EDUARDO MAGDADARAUG, NELSON M. DULCE and ALLAN BENTUZAL as its regular employees in their same or substantially equivalent positions, and pay the wages and benefits due them as regular employees plus salary differential corresponding to the difference between the wages and benefits given them and those granted to petitioner's other regular employees of the same rank; and

(b) pay respondent BENEDICTO AUXTERO salary differential; backwages from the time of his dismissal until the finality of this decision; and separation pay, in lieu of reinstatement, equivalent to one (1) month pay for every year of service until the finality of this decision.

There being no data from which this Court may determine the monetary liabilities of petitioner, the case is REMANDED to the Labor Arbiter solely for that purpose.

SO ORDERED.

[G.R. No. 177785. September 3, 2008.]

RANDY ALMEDA, EDWIN M. AUDENCIAL, NOLIE D. RAMIREZ, ERNESTO M. CALICAGAN and REYNALDO M. CALICAGAN, petitioners,vs. ASAHI GLASS PHILIPPINES, INC., respondent.

D E C I S I O N

CHICO-NAZARIO, J p:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, filed by petitioners Randy Almeda, Edwin Audencial, Nolie Ramirez, Ernesto Calicagan and Reynaldo Calicagan, seeking to reverse and set aside the Decision 1 dated 10 November 2006 and the Resolution 2 dated 27 April 2007 of the Court of Appeals in CA-G.R. SP No. 93291. The appellate court reversed and set aside the Decision dated 29 June 2005 and Resolution dated 24 November 2005 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 039768-04 finding respondent Asahi Glass Philippines, Inc. jointly and severally liable with San Sebastian Allied Services, Inc. (SSASI) for illegal dismissal, and ordering both respondent and SSASI to reinstate petitioners to their former positions and to pay their backwages from 2 December 2002 up to the date of their actual reinstatement. Instead, the Court of Appeals reinstated the Decision dated 18 February 2004 of the Labor Arbiter dismissing petitioners' complaint for illegal dismissal against respondent and SSASI, but ordering the payment of separation benefits to petitioners. THIcCA

The present Petition arose from a complaint for illegal dismissal with claims for moral and exemplary damages and attorney's fees filed by petitioners against respondent and SSASI.

In their Complaint 3 filed before the Labor Arbiter, petitioners alleged that respondent (a domestic corporation engaged in the business of glass manufacturing) and SSASI (a labor-only contractor) entered into a service contract on 5 March 2002 whereby the latter undertook to provide the former with the necessary manpower for its operations. Pursuant to such a contract, SSASI employed petitioners Randy Almeda, Edwin Audencial, Nolie Ramirez and Ernesto Calicagan as glass cutters, and petitioner Reynaldo Calicagan as Quality Controller, 4 all assigned to work for respondent. Petitioners worked for respondent for periods ranging from three to 11 years. 5 On 1 December 2002, respondent terminated its service contract with SSASI, which in turn, terminated the employment of petitioners on the same date. Believing that SSASI was a labor-only contractor, and having continuously worked as glass cutters and quality controllers for the respondent — functions which are directly related to its main line of business as glass manufacturer — for three to 11 years, petitioners asserted that they should be considered regular employees of the respondent; and that their dismissal from employment without the benefit of due process of law was unlawful. In support of their complaint, petitioners submitted a copy of their work schedule to show that they were under the direct control of the respondent which dictated the time and manner of performing their jobs. STaAcC

Respondent, on the other hand, refuted petitioners' allegations that they were its regular employees. Instead, respondent claimed that petitioners were employees of SSASI and were merely assigned by SSASI to work for respondent to perform intermittent services pursuant to an Accreditation Agreement, dated 5 March 2002, the validity of which was never assailed by the petitioners. Respondent contested petitioners' contention that they were performing functions that were directly related to respondent's main business since petitioners were simply tasked to do mirror cutting, an activity occasionally performed upon a customer's order. Respondent likewise denied exercising control over petitioners and asserted that such was wielded by SSASI. Finally, respondent maintained that SSASI was engaged in legitimate job contracting and was licensed by the Department of Labor and Employment (DOLE) to engage in such activity as shown in its Certificate of Registration.6 Respondent presented before the Labor Arbiter copies of the Opinion dated 18 February 2003 of DOLE Secretary Patricia Sto. Tomas authorizing respondent to contract out certain activities not necessary or desirable to the business of the company; and the Opinion dated 10 July 2003 of DOLE Bureau of Labor Relations (DOLE-BLR) Director Hans Leo Cacdac allowing respondent to contract out even services that were not directly related to its main line of business.

SSASI, for its part, claimed that it was a duly registered independent contractor as evidenced by the Certificate of Registration issued by the DOLE on 3 January 2003. SSASI averred that it was the one who hired petitioners and assigned them to work for respondent on occasions that the latter's work force could not meet the demands of its customers. Eventually, however, respondent ceased to give job orders to SSASI, constraining the latter to terminate petitioners' employment. aSHAIC

On 18 February 2004, the Labor Arbiter promulgated his Decision 7 finding that respondent submitted overwhelming documentary evidence to refute the bare allegations of the petitioners and accordingly dismissing the complaint for lack of merit. However, he also ordered the payment of separation benefits to petitioners. The Labor Arbiter thus decreed:

WHEREFORE, premises considered, judgment is hereby rendered declaring that the instant case should be, as it is hereby DISMISSED for lack of merit. However, the respondent San Sebastian Allied Services, Inc. is hereby ordered to pay the [herein petitioners] Edwin M. Audencial, Reynaldo Calicagan, Randy Almeda, Nolie D. Ramirez and Ernesto Calicagan their respective separation benefits in the following specified amounts:

(1)Edwin AudencialP41,327.00

(2)Reynaldo M. Calicagan15,860.00

(3)Randy V. Almeda45,084.00

(4)Nolie Ramirez15,028.00

(5)Ernesto Calicagan22,542.00

All other claims are dismissed.

On appeal, the NLRC reversed the afore-quoted Decision of the Labor Arbiter, giving more evidentiary weight to petitioners' testimonies. It appeared to the NLRC that SSASI was engaged in labor-only contracting since it did not have substantial capital and investment in the form of tools, equipment and machineries. The petitioners were recruited and assigned by SSASI to respondent as glass cutters, positions which were directly related to respondent's principal business of glass manufacturing. In light of the factual circumstances of the case, the NLRC declared that petitioners were employees of respondent and not of SSASI. Hence, the NLRC ruled in its Decision 8 dated 29 June 2005: cSTDIC

WHEREFORE, the decision appealed from is hereby VACATED and SET ASIDE. [Herein respondent] and [SSASI] are hereby ordered to: (1) reinstate the [herein petitioners] to their former position as glass cutters; and (2) pay [petitioners'] full backwages from December 2, 2002 up to the date of their actual reinstatement. The liability of [respondent] and [SSASI] for [petitioners'] backwages is further declared to be joint and several.

Only respondent moved for the reconsideration of the foregoing NLRC Decision. Respondent prayed that the NLRC vacate its previous finding that SSASI was a labor-only contractor and that it was guilty of the illegal dismissal of petitioners. In a Resolution 9 dated 24 November 2005, the NLRC denied the Motion for Reconsideration of respondent for lack of compelling justification to modify, alter or reverse its earlier Decision. TaSEHC

This prompted respondent to elevate its case to the Court of Appeals by the filing of a Petition for Certiorari with Application for the Issuance of Temporary Restraining Order (TRO), 10 alleging that the NLRC abused its discretion in ignoring the established facts and legal principles fully substantiated by the documentary evidence on record and legal opinions of labor officials, and in giving more credence to the empty allegations advanced by petitioners.

To prevent the execution of the Decision dated 25 June 2005 and Resolution dated 24 November 2005 of the NLRC, respondent included in its Petition a prayer for the issuance of a TRO, which it reiterated in a motion filed on 29 August 2006. Acting on respondent's motion, the Court of Appeals issued a TRO on 11 September 2006 enjoining the NLRC from enforcing its 25 June 2005 Decision and 24 November 2005 Resolution. 11

On 10 November 2006, the Court of Appeals rendered a Decision granting respondent's Petition for Certiorari and reversing the NLRC Decision dated 25 June 2005. The appellate court found merit in respondent's argument that the NLRC gravely abused its discretion in not finding that there was a legitimate job contracting between respondent and SSASI. SSASI is a legitimate job contractor as proven by its Certificate of Registration issued by the DOLE. Respondent entered into a valid service contract with SSASI, by virtue of which petitioners were assigned by SSASI to work for respondent. The service contract itself, which was duly approved by the DOLE, defined the relationship between SSASI and petitioners as one of employer-employees. It was SSASI which exercised the power of control over petitioners. Petitioners were merely allowed to work at respondent's premises for reasons of efficiency. Moreover, it was SSASI, not respondent, who terminated petitioners' services. The fallo of the Decision of the Court of Appeals state:

WHEREFORE, premises considered, the petition is GRANTED and [NLRC's] assailed 29 June 2005 Decision is, accordingly, REVERSED and SET ASIDE. In lieu thereof, the 18 February 2004 Decision rendered in the case by Labor Arbiter Francisco A. Robles is REINSTATED. 12

The Court of Appeals denied petitioners' Motion for Reconsideration in a Resolution dated 27 April 2007.

Hence, petitioners come before this Court via the instant Petition for Review on Certiorari assailing the 10 November 2006 Decision and 27 April 2007 Resolution of the Court of Appeals based on the following assignment of errors: EACTSH

 

I.

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REVERSING THE FINDING OF THE NLRC THAT RESPONDENT COMPANY IS ENGAGED IN LABOR-ONLY CONTRACTING.

II.

THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REVERSING THE RULING OF THE NLRC THAT SAN SEBASTIAN ALLIED SERVICES, INC. IS MERELY RESPONDENT'S AGENT AND RESPONDENT IS PETITIONERS' REAL EMPLOYER. TcSaHC

III.

THE COURT OF APPEALS COMMITTED AN ERROR IN DISMISSING PETITIONERS' COMPLAINT FOR ILLEGAL DISMISSAL.

It is apparent to this Court that the judicious resolution of the Petition at bar hinges on two elemental issues: (1) whether petitioners were employees of respondent; and (2) if they were, whether they were illegally dismissed. aETASc

Respondent adamantly insists that petitioners were not its employees but those of SSASI, a legitimate job contractor duly licensed by the DOLE to undertake job contracting activities. The job performed by petitioners were not directly related to respondent's primary venture as flat glass manufacturer, for they were assigned to the mirroring line to perform glass cutting on occasions when the employees of respondent could not comply with the market's intermittent increased demand. And even if petitioners were working at respondent's premises, it was SSASI which effectively supervised the manner and method petitioners performed their jobs, except as to the result thereof.

The Court would only be able to deem petitioners as employees of respondent if it is established that SSASI was a labor-only contractor, and not a legitimate job contractor or subcontractor. ISADET

Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out to a contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. 13 A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:

(a)The contractor or subcontractor carries on a distinct and independent business and undertakes to perform the job, work or service on its own account and under its own responsibility according to its own manner and method, and free from the control and direction of the principal in all matters connected with the performance of the work except as to the results thereof;

(b)The contractor or subcontractor has substantial capital or investment; and

(c)The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits. 14

On the other hand, labor-only contracting, a prohibited act, is an arrangement in which the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. 15 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; cDTHIE

(b)The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal. 16

In labor-only contracting, the statutes create an employer-employee relationship for a comprehensive purpose: to prevent circumvention of labor laws. The contractor is considered as merely the agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees are directly employed by the principal employer. 17 Therefore, if SSASI was a labor-only contractor, then respondent shall be considered as the employer of petitioners who must bear the liability for the dismissal of the latter, if any.

An important element of legitimate job contracting is that the contractor has substantial capital or investment, which respondent failed to prove. There is a dearth of evidence to prove that SSASI possessed substantial capital or investment when respondent began contractual relations with it more than a decade before 2003. Respondent's bare allegations, without supporting proof that SSASI had substantial capital or investment, do not sway this Court. The Court did not find a single financial statement or record to attest to the economic status and financial capacity of SSASI to venture into and sustain its own business independent from petitioner. DSacAE

Furthermore, the Court is unconvinced by respondent's argument that petitioners were performing jobs that were not directly related to respondent's main line of business. Respondent is engaged in glass manufacturing. One of the petitioners served as a quality controller, while the rest were glass cutters. The only excuse offered by respondent — that petitioners' services were required only when there was an increase in the market's demand with which respondent could not cope — only prove even more that the services rendered by petitioners were indeed part of the main business of respondent. It would mean that petitioners supplemented the regular workforce when the latter could not comply with the market's demand; necessarily, therefore, petitioners performed the same functions as the regular workforce. Even respondent's claim that petitioners' services were required only intermittently, depending on the market, deserves scant credit. The indispensability of petitioners' services was fortified by the length and continuity of their performance, lasting for periods ranging from three to 11 years.

More importantly, the Court finds that the crucial element of control over petitioners rested in respondent. The power of control refers to the authority of the employer to control the employee not only with regard to the result of work to be done, but also to the means and methods by which the work is to be accomplished. It should be borne in mind that the power of control refers merely to the existence of the power and not to the actual exercise thereof. It is not essential for the employer to actually supervise the performance of duties of the employee; it is enough that the former has a right to wield the power. 18

In the instant case, petitioners worked at the respondent's premises, and nowhere else. Petitioners followed the work schedule prepared by respondent. They were required to observe all rules and regulations of the respondent pertaining to, among other things, the quality of job performance, regularity of job output, and the manner and method of accomplishing the jobs. Obscurity hounds respondent's argument that even if petitioners were working under its roof, it was still SSASI which exercised control over the manner in which they accomplished their work. There was no showing that it was SSASI who established petitioners' working procedure and methods, or who supervised petitioners in their work, or who evaluated the same. Other than being the one who hired petitioners, there was absolute lack of evidence that SSASI exercised control over them or their work. ScTCIE

The fact that it was SSASI which dismissed petitioners from employment is irrelevant. It is hardly proof of control, since it was demonstrated only at the end of petitioners' employment. What is more, the dismissal of petitioners by SSASI was a mere result of the termination by respondent of its contractual relations with SSASI.

Despite respondent's disavowal of the existence of an employer-employee relationship between it and petitioners and its unyielding insistence that petitioners were employees of SSASI, the totality of the facts and the surrounding circumstances of the case convey otherwise. SSASI is a

labor-only contractor; hence, it is considered as the agent of respondent. Respondent is deemed by law as the employer of petitioners. Surely, respondent cannot expect this Court to sustain its stance and accord full evidentiary weight to the documentary evidence belatedly procured in its vain attempt to evade liability as petitioners' employer.

The Certificate of Registration presented by respondent to buttress its position that SSASI is a duly registered job contractor is of little significance, considering that it were issued only on 3 January 2003. There is no further proof that prior to said date, SSASI had already registered with and had been recognized by the DOLE as a job contractor. cIECaS

Verily, the Certificate of Registration of SSASI, instead of supporting respondent's case, only served to raise more doubts. The timing of the registration of SSASI is highly suspicious. It is important to note that SSASI was already providing respondent with workers, including petitioners, long before SSASI was registered with the DOLE as a job contractor. Some of the petitioners were hired by SSASI and made to work for respondent for 11 years. Petitioners were also dismissed from service only a month prior to the issuance of the Certificate of Registration of SSASI. Neither respondent nor SSASI exerted any effort to explain the reason for the belated registration with the DOLE by SSASI as a purported job contractor. It may be safely discerned from the surrounding circumstances that the Certificate of Registration of SSASI was merely secured in order to blanket the previous relations between SSASI and respondent with legality.

Moreover, the Certificate of Registration issued by the DOLE recognized that SSASI was a legitimate job contractor only as of the date of its issuance, 3 January 2003. There is no basis whatsoever to give the said Certificate any retroactive effect. The Certificate can only be used as reference by persons who would consider the services offered by SSASI subsequent to its issuance. Respondent, who entered into contractual relations with SSASI way before the said Certificate, cannot claim that it relied thereon. SDECAI

 

Hence, the status of SSASI as a job contractor previous to its registration with the DOLE on 3 January 2003 is still refutable. It can only be determined upon an evaluation of its activities as contractor prior to the issuance of its Certificate of Registration.

For the same reasons, this Court cannot give much weight to the Opinions dated 18 February 2003 and 10 July 2003 of DOLE Secretary Sto. Tomas and DOLE-BLR Director Cacdac, respectively, allowing respondent to contract out certain services. The said Opinions were noticeably issued only after the hiring and termination of petitioners. And, although the Opinions allow respondent to contract out certain services, they do not necessarily prove that the services respondent contracted to SSASI were actually among those it was allowed to contract out; or that SSASI was a legitimate job contractor, thus, relieving respondent of any liability for the dismissal of petitioners by SSASI.

Equally unavailing is respondent's stance that its relationship with petitioners should be governed by the Accreditation Agreement stipulating that petitioners were to remain employees of SSASI and shall not become regular employees of the respondent. To permit respondent to disguise the true nature of its transactions with SSASI by the terms of its contract, for the purpose of evading its liabilities under the law, would seriously impair the administration of justice. A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor or as job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute. 19

Having established that respondent was petitioners' employer, the Court now proceeds to determining whether petitioners were dismissed in accordance with law.

Article 280 of the Labor Code, as amended, reads —

ART. 280.Regular and Casual Employment. — The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where 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 or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. DaEATc

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

This Court expounded on the afore-quoted provision, thus —

The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. . . . The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists. 20

In the instant Petition, the Court has already declared that petitioners' employment as quality controllers and glass cutters are directly related to the usual business or trade of respondent as a glass manufacturer. Respondent would have wanted this Court to believe that petitioners' employment was dependent on the increased market demand. However, bearing in mind that petitioners have worked for respondent for not less than three years and as much as 11 years, which respondent did not refute, then petitioners' continued employment clearly demonstrates its continuing necessity and indispensability to the business of respondent, raising their employment to regular status. Thus, having gained regular status, petitioners were entitled to security of tenure and could only be dismissed on just or authorized causes and after they had been accorded due process. 21

As petitioners' employer, respondent has the burden of proving that the dismissal was for a cause allowed under the law, and that they were afforded procedural due process. 22 However, respondent failed to discharge this burden with substantial evidence as it noticeably narrowed its defense to the denial of any employer-employee relationship between it and petitioners. DaScCH

The sole reason given for the dismissal of petitioners by SSASI was the termination of its service contract with respondent. But since SSASI was a labor-only contractor, and petitioners were to be deemed the employees of respondent, then the said reason would not constitute a just or authorized cause 23 for petitioners' dismissal. It would then appear that petitioners were summarily dismissed based on the afore-cited reason, without compliance with the procedural due process for notice and hearing.

Herein petitioners, having been unjustly dismissed from work, are entitled to reinstatement without loss of seniority rights and other privileges and to full back wages, inclusive of allowances, and to other benefits or their monetary equivalents computed from the time

compensation was withheld up to the time of actual reinstatement. 24 Their earnings elsewhere during the periods of their illegal dismissal shall not be deducted therefrom. 25

WHEREFORE, premises considered, the instant Petition is GRANTED. The Decision dated 10 November 2006 and Resolution dated 27 April 2007 of the Court of Appeals in CA-G.R. SP No. 93291 are REVERSED and SET ASIDE. The Decision dated 29 June 2005 of the National Labor Relations Commission in NLRC-NCR CA No. 039768-04 is thereby REINSTATED. Let the records of this case be remanded to the Computation and Examination Unit of the NLRC for the proper computation of subject money claims as above-discussed. No costs. STcEaI

SO ORDERED.

Ynares-Santiago, Austria-Martinez, Nachura and Reyes, JJ., concur.

[G.R. No. 168537. December 11, 2008.]

DAMIAN AKLAN, JUANITO AMIDO, REYNALDO BATICA, RAMIL BAUTISTA, WELARD BAUTISTA, MAMERTO BRIGOLI, ELMER CABOTEJA, JOEL CAMMAYO, WELFREDO CARIO, RODOLFO CINCO, ARWEN DABLO, RUBEN DE CASTRO, ROMEO DEL ROSARIO, RODERICK DELA CRUZ, ALEX DELA VEGA, JOAN ERICO DUMALAGAN, JULITO DURIAN, JOSELITO DUYANEN, REX FARNACIO, ROLANDO FELIZARDO, EFREN FERNANDEZ, BERNARDO GALLOGO, EDUARDO GARCIA, REX IGNACIO, DANIEL JAMISOLA, NOEL JANER, RAQUEL JANER, ROWAN JANER, CONSORCIO LIÑAN, BERNARD MACARAEG, DARIO MACARAEG, JESUS MACARAEG, EDGARDO MAHAGUAY, IRENEO ODIAMAR, ALEXIS OLIVAR, ARNEL OLIVAR, EDUARDO PEREMNE, ALAN QUILES, JOSEPH QUILES, RHONNEL RODIL, RONALDO SALVADOR, RAMIL SANTIAGO, FRANCIS SUPRINO, REXES SUPRINO, RODRIGO SUPRINO, RONALD SUPRINO, EDUARDO TIONGSON, petitioners, vs. SAN MIGUEL CORPORATION, BMA PHILASIA, INC., and ARLENE EUSEBIO,respondents.

D E C I S I O N

REYES, R.T., J p:

WE tackle in this labor case the dichotomy between impermissible labor-only contracting and legitimate job contracting.

This is a review on certiorari of the Decision 1 of the Court of Appeals (CA) upholding that of the National Labor Relations Commission (NLRC), finding the dismissal of petitioners justified. HcISTE

The Facts

Respondent BMA Philasia, Inc. (BMA) is a domestic corporation engaged in the business of transporting and hauling of cargoes, goods, and commodities of all kinds. Respondent Arlene Eusebio is the president of BMA.

Petitioners, numbering forty-seven (47) in all, are the former employees of respondent BMA at respondent San Miguel Corporation's (SMC) warehouse in Pasig City. They were hired under fixed-term contracts beginning October 1999.

On July 31, 2001, a number of petitioners went to the Department of Labor and Employment (DOLE) District Office to file a complaint against BMA and Eusebio for underpayment of wages and non-payment of premium pay for rest day, 13th month pay, and service incentive leave pay. 2

On August 14, 2001, petitioner Elmer Caboteja was charged with insubordination and disrespect to superior, failure to properly perform his job assignment, and unauthorized change of schedule. He was directed to submit his written explanation within forty-eight (48) hours. On August 17, 2001, Caboteja was terminated for the offenses of disregard of company rules and regulations and rude attitude to supervisors. On August 27, 2001, he filed a complaint for illegal dismissal against BMA. 3

On various dates thereafter, BMA agreed to a settlement with some of the complainants in the case 4 for underpayment of wages. 5 Eleven of the present petitioners executed quitclaims and releases in favor of BMA and Eusebio in the presence of DOLE district officers. BMA refused to settle the claim of other complainants.

On September 13, 2001, petitioners Joan EricoDumalagan and Ronaldo Salvador were also terminated for failure to perform their job responsibilities. On September 17, 2001, Dumalagan and Salvador filed complaints for illegal dismissal against BMA. 6 DIEACH

On October 18, 2001, petitioners held a picket at the warehouse premises to protest BMA's refusal to pay the claim for underpayment of the rest of the workers. This picket disrupted the business operations of private respondents, prompting BMA to terminate their services. Subsequently, petitioners filed separate complaints against BMA, Eusebio, and SMC for illegal dismissal. 7 All the complaints for illegal dismissal were consolidated.

Petitioners alleged that they were illegally dismissed after filing a complaint for underpayment of wages and non-payment of benefits before the DOLE; they were terminated after staging a peaceful picket to protest the non-payment of their claims. According to them, BMA is a labor-only contractor. SMC was not only the owner of the warehouse and equipment used by BMA, it was their true employer. The manner and means by which they performed their work were controlled by SMC through its Sales Logistic Coordinator who was overseeing their performance everyday.

Private respondents BMA and Eusebio countered that petitioners Caboteja, Dumalagan, and Salvador were validly and justly dismissed. They were among the eleven who already signed quitclaims and releases before the DOLE district office after receiving an amount in settlement of their claims. As for the rest of petitioners (36 complainants), there was no illegal dismissal to speak of. Said employees simultaneously did not go back to work for no apparent reason on October 18, 2001.

Private respondent SMC maintained that it had no employer-employee relationship with petitioners who were hired and supervised exclusively by BMA pursuant to a warehousing and delivery agreement in consideration of a fixed monthly fee. SMC argued that BMA is a legitimate and independent contractor, duly registered with the Securities and Exchange Commission (SEC) as a separate and distinct corporation with substantial capitalization, investment, equipment, and tools. It submitted documentary evidence proving that BMA engaged the services of petitioners, paid for their wages and benefits, and exercised exclusive control and supervision over them.

SMC showed that under their contract, BMA provided delivery trucks, drivers, and helpers in the storage and distribution of SMC products. On a day-to-day basis, after the routes were made by SMC salesmen, they would book the orders they obtained. In turn, BMA's Schedular Planner, detailed at the Pasig Warehouse, downloaded these booked orders from the computer and processed the necessary documents to be forwarded to the Warehouse Checker, also an employee of BMA. SMC contended that petitioners were dismissed by BMA for staging a two-hour strike without complying with the mandatory requirements for a valid strike. As a result, BMA had to come up with ways and means in order to avoid the disruption of delivery operations. SECHIA

Labor Arbiter and NLRC Dispositions

After due hearings, Labor Arbiter Veneranda C. Guerrero found respondent BMA liable for illegal dismissal and ordered the reinstatement of petitioners. She ruled that the evidence presented duly established that BMA was a legitimate independent contractor and the actual employer of petitioners. Its failure, however, to comply with the registration and reportorial requirements of the DOLE rendered SMC, its principal, directly liable to the claims of petitioners. 8 Thus, BMA and SMC were found jointly and severally liable for the payment of petitioners' backwages and money claims. The dispositive part of the Arbiter ruling runs in this wise:

WHEREFORE, all the foregoing considered, judgment is hereby rendered finding respondent BMA Philasia, Inc., liable for illegal dismissal. Accordingly, is it hereby ordered to reinstate all of the complainants to their previous positions, and to pay jointly and severally with respondent San Miguel the complainants' backwages reckoned from the time of their illegal dismissal up to their actual/payroll reinstatement, the aggregate amount of which as of this date amounts to SEVEN MILLION FIVE HUNDRED EIGHTEEN THOUSAND TWO HUNDRED FIFTY-TWO AND 89/100 PESOS (P7,518,252.89). In addition respondents are solidarily held liable to pay the complainants' Daniel Jamisola, Rodolfo Cinco, Eduardo Garcia, Dario Macaraeg, Romeo Del Rosario, Alan Quiles, Joseph Quiles, Ronald Suprino, Rolando Felizardo, Efren Fernandez, Damian Aklan, Welard Bautista, Rodrigo Suprino, Noel Janer, Jesus Macaraeg, Reynaldo Batica, RhonnelRodil, Eduardo Peremne, MamertoBrigoli, IreneoOdiamar, Rex Ignacio, Edgardo Mahaguay, Reyes Suprino, Rodrigo Dela Cruz, Ramil Bautista, Francis Suprino, Eduardo Tiongson, Joel Cammayo, ArwenDablo, Alex Dela Vega, Bernard Gallogo, Rex Farnacio, Ruben de Castro, Rowan Janer, Raquel Janer, and Bernardo Macaraeg their salary differentials, service incentive leave pay and 13th month pay in the aggregate amount of ONE MILLION TWO HUNDRED FIFTY-SIX THOUSAND THREE HUNDRED SIXTY-SIX and 80/100 PESOS (P1,256,366.80).

Respondents are further assessed the amount equivalent to ten percent (10%) of the total award, as and for attorney's fees.

The computation of the complainants' individually adjudged benefits shall form part of this Decision as Annex "A" hereof.

All other claims are DISMISSED for lack of merit.

SO ORDERED. 9 (Emphasis supplied)

Respondents appealed the decision of the Labor Arbiter to the NLRC. On December 19, 2003, the NLRC reversed the Labor Arbiter disposition and ruled that there was no illegal dismissal. The fallo of the NLRC decision reads: TEIHDa

WHEREFORE, in view of all the foregoing, the appealed decision of the Labor Arbiter is hereby REVERSED and SET ASIDE and a new decision is hereby rendered finding that there was no illegal dismissal committed by respondents, hence, no liability for backwages. However, complainants are awarded their salary differentials, service incentive leave pay and 13th month pay except for the year 2000 in the aggregate amount of ONE MILLION

TWO HUNDRED FIFTY-SIX THOUSAND THREE HUNDRED SIXTY-SIX AND 80/100 (P1,256,366.80) and 10% ATTORNEY's FEES based on the salary differentials, SILP and 13th month pay.

SO ORDERED. 10

The NLRC found that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for just and valid causes. They were given the opportunity to explain their sides. As for the quitclaims previously executed by the other petitioners, the NLRC ruled that these were sufficient basis to release respondent BMA from liability.

With respect to the first and second assigned errors, the records show that complainants Elmer Caboteja, Erico "Jojo" Dumalagan and Ronaldo Salvador were separated from their jobs for just and valid causes and after they were given the chance to explain their sides. Copies of memoranda were served upon them advising their violation of company rules and regulations and rude attitude and disrespect to superiors and disrespect to superiors in the case of Caboteja and failure to perform duties and responsibilities in the case of Dumalagan and Salvador. They were asked to explain and finding their explanations unacceptable, respondents dismissed them. Hence, they are not entitled to separation pay. TCSEcI

 

As regards the other complainants, there is no showing that they were illegally dismissed from their jobs by BMA. They have not given details on to whom they reported for work, who barred them from entering the respondents' premises and from working, in so many words how they were told that they were already dismissed. The only evident fact is that they just stopped reporting for work beginning October 18, 2001 without informing BMA why there were doing so. Their claim that they were not allowed by the respondents to return to their work is hard to believe. Why should the respondents terminate simultaneously the services of the complainants and completely paralyze respondents' business operation, particularly their service contract with SMC? Complainants have not shown any reason which would compel the respondents to resort to mass dismissal. On the other hand, complainants have strong reason to paralyze respondents' operation in order to force compliance to their demands.

xxxxxxxxx

In fact, the records of this case also disclose that during the mandatory conciliation proceedings, BMA urged these complainants to go back to work, but may refused to do so. Obviously, their refusal to go back to their work was a deliberate move to force respondents to give in to their demands. Considering this refusal, it is not hard to believe that complainants were not dismissed but rather they refused to work in order to paralyze respondents' operations and force them to give in to complainants' demands. 11 (Emphasis supplied)

CA Disposition

Aggrieved, petitioners filed a Rule 65 petition with the CA. The following grounds were interposed: (1) that the NLRC gravely abused its discretion in holding that Caboteja, Dumalagan, and Salvador were validly dismissed; (2) that the other petitioners were not dismissed but were guilty of abandonment; and (3) that the quitclaims executed by eleven of the petitioners barred the complaint for illegal dismissal. 12

On April, 15, 2005, the CA denied the petition, affirming in full the NLRC disposition, thus:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and accordingly DISMISSED, for lack of merit. The assailed Decision dated December 19,

2003 and Resolution dated July 20, 2004 of the National Labor Relations Commission in the consolidated cases, NLRC Case No. CN 08-04522-01-CA No. 036856-03 (NLRC NCR North Sector Case Nos. 08-04522-2001, 09-04941-2001, 00-11-05023-2001, 00-11-05969-2001, 11-01-00450-2002, 02-00934-2002, 12-06288-2001, and 12-06320-2001), are hereby AFFIRMED and UPHELD.

No pronouncement as to costs.

SO ORDERED. 13

In ruling against petitioners, the CA found that the NLRC committed no reversible error or grave abuse of discretion in ruling that petitioners were not illegally dismissed but actually refused to report back to work after staging a surprise stoppage that paralyzed respondent BMA's business operations at the Pasig warehouse on October 18, 2001.

Issues

Undaunted, petitioners resorted to this review on certiorari, anchored on the following grounds:

The CA committed a serious legal error in not ruling that respondent San Miguel Corporation (principal of respondent BMA Philasia), and respondent Arlene Eusebio, (president and owner of respondent BMA Philasia) are all solidarily liable for petitioners' money claims.

The CA committed a serious legal error in ruling that the quitclaims executed by eleven (11) of the petitioners, in relation to their claims for underpayment of wages before the DOLE, also barred their subsequent complaint for illegal dismissal, despite the fact that the said complaint was not yet in existence at the time the quitclaims were executed.

The CA committed a serious legal error in refusing to hold that respondent San Miguel Corporation was petitioners' real employer despite the fact that respondent BMA Philasia was not duly registered with the DOLE and caused the workers to perform tasks directly related to the business of respondent San Miguel Corporation and under the latter's supervision.

The CA committed a legal error and acted with grave abuse of discretion in holding that petitioners Elmer Caboteja, Joan EricoDumalagan, and Ronaldo Salvador were not illegally dismissed from their jobs, despite a previous ruling of the Labor Arbiter to the contrary.

The CA committed a serious legal error in not awarding damages, at the very least, to petitioners Joan EricoDumalagan, and Ronaldo Salvador for violation of their right to due process. EHaASD

The CA seriously committed an error of law in holding that the rest of the petitioners abandoned their jobs and were not dismissed therefrom, contrary to the findings of the Labor Arbiter who heard the case. 14 (Underscoring supplied)

Our Ruling

Petitioners argue mainly that their employer is, in fact, respondent SMC, not respondent BMA. They contend that BMA is a labor-only contractor and SMC, as their true employer, should be held directly liable for their money claims.

A finding that a contractor is a "labor-only" contractor, as opposed to permissible job contracting, 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. 15

Both the Labor Arbiter and the NLRC found that the employment contracts of petitioners duly prove that an employer-employee relationship existed between petitioners and BMA. We hasten to add that the existence of an employer-employee relationship is ultimately a question of fact and the findings by the Labor Arbiter and the NLRC on that score shall be accorded not only respect but even finality when supported by ample evidence. 16

In its ruling, the NLRC considered the following elements to determine the existence of an employer-employee relationship: (1) the selection and engagement of the workers; (2) power of dismissal; (3) the payment of wages by whatever means; and (4) the power to control the worker's conduct. 17 All four elements were found by the NLRC to be vested in BMA. This NLRC finding was affirmed by the CA: HCITDc

. . . It is the BMA which actually conducts the hauling, storage, handling, transporting, and delivery operations of SMC's products pursuant to their warehousing and Delivery Agreement. BMA itself hires and supervises its own workers to carry out the aforesaid business activities. Apart from the fact that it was BMA which paid for the wages and benefits, as well as SSS contributions of petitioners, it was also the management of BMA which directly supervised and imposed disciplinary actions on the basis of established rules and regulations of the company. The documentary evidence consisting of numerous memos throughout the period of petitioners' employment leaves no doubt in the mind of this Court that petitioners are only too aware of who is their true employer. Petitioners received daily instructions on their tasks form BMA management, particularly, private respondent Arlene C. Eusebio, and whenever they committed lapses or offenses in connection with their work, it was to said officer that they submitted compliance such as written explanations, and brought matters connected with their specific responsibilities. 18

The employer-employee relationship between BMA and petitioners is not tarnished by the absence of registration with DOLE as an independent job contractor on the part of BMA. The absence of registration only gives rise to the presumption that the contractor is engaged in labor-only contracting, a presumption that respondent BMA ably refuted.

Thus, We find no grave abuse of discretion in the CA observation that respondent BMA is the true employer of petitioners who should be held directly liable for their claims. Likewise, no grave abuse of discretion can be ascribed to the CA when it ruled that illegal dismissal was absent.

The records fully disclose that petitioners Caboteja, Dumalagan, and Salvador were separated from their jobs for just and valid causes. Caboteja was cited for violation of company rules and regulations and disrespectful conduct. Dumalagan and Salvador were investigated for failure to perform duties and responsibilities. After their explanations were found unacceptable, they were accordingly dismissed.

As for the other petitioners, they contend that they were illegally dismissed when respondent BMA barred them from entering the work premises and from performing their work. Both the NLRC and the CA found that petitioners failed to substantiate this contention. Rather, what was shown in the records was that they simply stopped reporting for work starting October 18, 2001 when they staged a picket. The CA observation along this line is worth restating: HaAIES

. . . petitioners failed to substantiate their claim that they had been prevented from entering the work premises after staging a "picket" on October 18, 2001 to further press their demands for payment of their money claims. At this time, the labor standards case was already pending with the DOLE District Office and petitioners could have availed of said proceedings with the intervention of DOLE officials. Instead, however, they resorted to an illegal stoppage of work that paralyzed the business operations of BMA. As aptly noted

by the NLRC, there is simply no probable or logical reason for private respondent BMA to simultaneously dismiss its workers that will disrupt business operations at the warehouse. Under the factual circumstances, it clearly appears that petitioners refused to report back to their work in order to force their employer BMA to give in to their immediate demand for the salary differentials and unpaid benefits subject of their complaint with the DOLE. Hence, BMA cannot be held liable for illegal dismissal.

While it is true that the defense of abandonment may not be given credence or is negated by the immediate filing of illegal dismissal cases by the affected employees, records clearly reveal that as of October 18, 2001, petitioners without justifiable cause failed and refused to report back to their work. Their claim of having been prevented from entering the work premises was not given due weight for no particulars was even alleged by them in their report back to their jobs, who prevented their entry to the company premises and details as to what steps they took to bring the matter to the attention of DOLE District Office wherein their complaint for labor standards violation was already pending. 19 (Emphasis supplied) 

Moreover, eleven of petitioners contend that their quitclaims should not be considered as a bar to their complaint for illegal dismissal because that complaint was not yet in existence at the time the quitclaims were executed. That the quitclaims were executed voluntarily is not denied by petitioners. They, however, contend that the quitclaims should be construed as limited to the money claims in connection with the first labor standards complaint 20 they had filed before the DOLE district office.

Unless there is a showing that the employee signed involuntarily or under duress, quitclaims and releases are upheld by this Court as the law between the parties. 21 If the agreement was voluntarily entered into by the employee, with full understanding of what he was doing, and represents a reasonable settlement of the claims of the employee, it is binding on the parties and may not be later disowned simply because of a change of mind. 22 In the case under review, the quitclaims and releases signed by petitioners stated: HIAEcT

That for and in consideration of the sum of FIFTY-THREE THOUSAND PESOS (P53,000.00) 23 in settlement of my/our claim/s as financial assistance and/or gratuitously given by my/our employer receipt of which is hereby acknowledge to my/our complete and full satisfaction, I/we hereby release and discharge the above respondent and/or its officers from any and all claims by way of wages, overtime pay, differential pay, or otherwise as may be due me/us incident to my/our past employment with said establishment. I/we hereby state further that I/we have no more claim, right or action of whatsoever nature whether past, present or contingent against the said respondent and/or its officers. 24 (Emphasis supplied)

As correctly observed by the NLRC, the language employed by the above quitclaims and releases indicates in no uncertain terms that petitioners voluntarily and freely acknowledged receipt of full satisfaction of all claims against respondents. Thus, the quitclaims effectively barred petitioners from questioning their dismissal.

Social justice must be founded on the recognition of the necessity of interdependence among diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life. 25 While labor should be protected at all times, this protection must not be at the expense of capital.

WHEREFORE, the petition is DENIED and the assailed Decision of the Court of Appeals AFFIRMED. EaIcAS

SO ORDERED.

Puno, C.J., * Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur.