CASES PAGESPhilippine Bank of Communications vs NLRC (1986) G.R. L-66598 1Neri vs NLRC (1993) 224 SCRA 717 2Filipinas Synthetic Fiber Corp., vs NLRC (1996) 257 SCRA 336 2Maraquinot vs NLRC (1998) 284 SCRA 539 3Urbanes Jr. vs. Sec. of Labor (2003) GR No. 1227915San Miguel vs Maerc Integrated Services (2003) G.R. 1446275Maraviles Shipyard vs. CA (2003) GR No. 1441346New Golden City Builders vs. CA (2003) GR No. 1547157National Food Authority vs. Maceda Security Agency (2005) GR No. 1634487Abella vs PLDT (2005) G.R. 159469 9San Miguel vs Aballa (2005) G.R. 149011 9Manila Electric Co., vs Benamira (2005) G.R. 145271 11Grandspan Development Corp., vs. Bernardo (2005) GR No. 14146413Acevedo vs. Advanstar Co., (2005) GR No. 15765613Big AA Manufacturer vs. Antonio (2006) GR No. 160854 14DOLE Philppines vs Esteva (2006) G.R. 161115 15San Miguel vs NLRC (2006) G.R. 147566 16Eparwa vs Liceo (2006) G.R. 150402 17Lapanday Agri Development Corp., vs. CA 324 SCRA 3917Escario vs NLRC (2000) G.R. 124055 18Aboitiz vs Dimapatoi (2006) G.R. 14861919GSIS vs NLRC (2006) G.R. 157647 19Republic vs Asiapro Cooperative (2007) G.R. 172101 20Almeda et al., vs Asahi Glass (2008) G.R. 177785 21Sasan, Sr et al, vs NLRC and EPCIB (2008) G.R. 176240 22Purefoods Corp., vs NLRC et al., (2008) G.R. 172241 23Maranaw Hotels and Resort vs CA (2009) G.R. 149660 24Cola-Cola Bottlers Phils., vs Agito et al., (2009) G.R. 179546 25South Davao Development Co. vs Gamo (2009) G.R. 171814 27Traveno et al., vs Bobongon Banana Growers Multi-purpose Coop et al., (2009) G.R. 164205 27Locsin et al., vs. PLDT (2009) GR No. 18525128Aliviado vs Procter and Gamble Phils. Inc., et al (2010) G.R. 160506 28San Miguel Corp. vs. Semillano GR No. 16425729Manila Waters Co. vs. Dalumpines (2010) GR No. 17550130Teng vs. Pahagac (2010) GR No.16970430GSIS vs. NLRC et al., (2010) GR No. 18004531Sy et al., vs. Fairland Knitcraft Co Inc. (2011) GR No. 18965831DBP vs NLRC (1995) G.R. 108031 32Batong Buhay Gold Mines vs Dela Serna (1999) G.R. 86963 33Barayoga vs Asset Privatization Trust (2005) G.R. 160073 35Philippine Airlines vs Zamora (2007) G.R. 166996 35Philippine Airlines vs Philippine Airlines Employees Association (2007) G.R. 142399 37Garcia vs. Phil Air Lines (2009) GR No. 16485639Bank of the Philippine Islands vs NLRC (1989) G.R. 69746-47 39Traders Royal Bank Employees Union vs NLRC (1997) G.R. 120592 41Brahm Industries vs NLRC (1997) G.R. 118853 42Heirs of Aniban vs NLRC (1997) G.R. 155034 43Sapio vs Undaloc Construcion et al., (2008) G.R. 155034 43Atty. Ortiz vs San Miguel Corp., (2008) G.R. 151983-84 43Masmud vs NLRC (2009) G.R. 183385 44Kaisahan at kapatiran ng mga Manggagawa at Kawani sa MWC-East Zone Union vs. MWC (2011) GR 17417945Bernardo vs. NLRC (1999) G.R. 122917 46Philippine Telegraph & Telephone Co vs NLRC (1997) G.R. 118978 47Del Monte Phils vs Velasco (2007) G.R. 153447 47Ultra Villa Food Haus vs, Geniston (1999) G.R. 120473 48Remington Industrial Sales Corp,. vs Castaneda (2007) G.R. 153477 48Co vs. Vargas (2011) GR No. 19516749Tolosa vs NLRC (2008) G.R. 149578 50Phil Global Communications Inc vs de Vera (2005) G.R. 157214 50U-Bix Corp. vs Bandiola (2007) G.R. 157168 51Ocean Builders Construction vs. Sps. Cubacub (2011) GR No. 150898 51ISS Indochina Corp., vs Ferrer (2005) G.R. 156381 52People vs Capt. Gasacao (2005) G.R. 168449 53Acua vs CA (2006) G.R. 159832 53Asian International Manpower Services vs CA (2006) G.R. 169652 54Sim vs. NLRC (2007) G.R. 157376 55Bahia Shipping Services Inc., vs Chua (2008) G.R. 162195 55Masangcay vs Trans-Global Maritime Agency Inc., (2008) G.R. 172800 56Magsaysay Maritime Corp., et al., vs Velasquez, et al., (2008) G.R. 179802 57Serrano vs Gallant Maritime Services et al., (2009) G.R. 167614 59Becmen Service Exporter and Promotion Inc., vs. Sps. Cuaresma (2009) GR Nos. 182978 &184298-9960People vs Domingo (2009) G.R. 181475 61ATCI Overseas Corp. et al., vs. Echin (2010)GR No. 17855161Skippers United Pacific vs. Doza et al., (2012) GR No. 17555862International Management Services vs. Logarta (2012) GR No. 16365762Topic 13 Other Important Labor Provisions

Contracting Arrangement

Philippine Bank of Communications vs. NLRC[146 SCRA 347 December 19, 1986]

Facts:Petitioner Philippine Bank of Communications and the Corporate Executive Search Inc. (CESI) entered into a letter agreement dated January 1976 under which CESI undertook to provide "Tempo[rary] Services" to petitioner consisting of the "temporary services" of eleven (11) messengers. The contract period is described as being "from January 1976 ---- ." The petitioner in truth undertook to pay a "daily service rate of P18," on a per person basis.Ricardo Orpiada was thus assigned to work with the petitioner bank. As such, he rendered services to the bank, within the premises of the bank and alongside other people also rendering services to the bank. There was some question as to when Ricardo Orpiada commenced rendering services to the bank. As noted above, the letter agreement was dated January 1976. However, the position paper submitted by CESI to the National Labor Relations Commission stated that CESI hired Ricardo Orpiada on 25 June 1975 as a Tempo Service employee, and assigned him to work with the petitioner bank "as evidenced by the appointment memo issued to him on 25 June 1975-." Be that as it may, on or about October 1976, the petitioner requested CESI to withdraw Orpiada's assignment because, in the allegation of the bank, Orpiada's services "were no longer needed."

On 29 October 1976, Orpiada instituted a complaint in the Department of Labor (now Ministry of Labor and Employment) against the petitioner for illegal dismissal and failure to pay the 13th month pay provided for in Presidential Decree No. 851. This complaint was docketed as Case No. RO4-10-10184-76-E. After investigation, the Office of the Regional Director, Regional Office No. IV of the Department of Labor, issued an order dismissing Orpiada's complaint for failure of Mr. Orpiada to show the existence of an employer-employee relationship between the bank and himself.

Accordingly, on 2 April 1984, the bank filed the present petition for certiorari with this Court seeking to annul and set aside (a) the decision of respondent Labor Arbiter Dogelio dated 12 September 1977 in Labor Case No. RB-IV-1118-77 and (b) the decision of the NLRC promulgated on 29 December 1983 affirming with some modifications the decision of the Labor Arbiter. This Court granted a temporary restraining order on 11 April 1984.

Issue:Whether or not the relationship is one of employer and job (independent) contractor or one of employer and "labor-only" contractor.

SC Ruling: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.

Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters into a contract with a contractor for the performance of work for the employer, does not thereby create an employer-employee relationship between himself and the employees of the contractor. Thus, the employees of the contractor remain the contractor's employees and his alone. Nonetheless, when a contractor fails to pay the wages of his employees in accordance with the Labor Code, the employer who contracted out the job to the contractor becomes jointly and severally liable with his contractor to the employees of the latter "to the extent of the work performed under the contract" as if such employer were the employer of the contractor's employees. The law itself, in other words, establishes an employer-employee relationship between the employer and the job contractor's employees for a limited purpose, i.e., in order to ensure that the latter get paid the wages due to them.

A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor ---- i.e. "the person or intermediary" ---- is considered "merely as an agent of the employer." The employer is made by the statute responsible to the employees of the "labor only" contractor as if such employees had been directly employed by the employer. Thus, where "labor only" contracting exists in a given case, the statute itself implies or establishes an employer-employee relationship between the employer (the owner of the project) and the employees of the "labor only" contractor, this time for a comprehensive purpose: "employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code." The law in effect holds both the employer and the "labor-only" contractor responsible to the latter's employees for the more effective safeguarding of the employees' rights under the Labor Code.

The definition of "labor-only" contracting in Rule VIII, Book III of the Implementing Rules must be read in conjunction with the definition of job contracting given in Section 8 of the same Rules. The undertaking given by CESI in favor of the bank was not the performance of a specific job ---- for instance, the carriage and delivery of documents and parcels to the addresses thereof. There appear to be many companies today which perform this discrete service, companies with their own personnel who pick up documents and packages from the offices of a client or customer, and who deliver such materials utilizing their own delivery vans or motorcycles to the addresses. In the present case, the undertaking of CESI was to provide its client ---- the bank ---- with a certain number of persons able to carry out the work of messengers. Such undertaking of CESI was complied with when the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada utilized the premises and office equipment of the bank and not those of CESI. Messengerial work ---- the delivery of documents to designated persons whether within or without the bank premises ---- is of course directly related to the day-to-day operations of the bank. Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged in the delivery of items as a distinct and separate line of business.

Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and placement corporation placing bodies, as it were, in different client companies for longer or shorter periods of time. It is this factor that, to our mind, distinguishes this case from American President Lines v. Clave et al., 114 SCRA 826 (1982) if indeed such distinguishing way is needed.We hold that, in the circumstances of this case, CESI was engaged in "labor-only" contracting vis-a-vis the petitioner bank and in respect of Ricardo Orpiada, and that consequently, the petitioner bank is liable to Orpiada as if Orpiada had been directly employed not only by CESI but also by the bank. It may well be that the bank may in turn proceed against CESI to obtain reimbursement of, or some contribution to, the amounts which the bank will have to pay to Orpiada; but this it is not necessary to determine here.

The petition for certiorari is denied and the decision promulgated on 29 December 1983 of the National Labor Relations Commission is affirmed.

Virginia G. Neri vs. National Labor Relations Commission, et al.[224 SCRA 717 July 23, 1993]

Facts:Respondents are sued by two employees of Building Care Corporation, which provides janitorial and other specific services to various firms, to compel Far Bast Bank and Trust Company to recognize them as its regular employees and be paid the same wages which its employees receive.Building Care Corporation (BCC, for brevity), in the proceedings below, established that it had substantial capitalization of P1 Million or a stockholders equity of P1.5 Million. Thus the Labor Arbiter ruled that BCC was only job contracting and that consequently its employees were not employees of Far East Bank and Trust Company (FEBTC, for brevity). on appeal, this factual finding was affirmed by respondent National Labor Relations Commission (NLRC, for brevity). Nevertheless, petitioners insist before us that BCC is engaged in "labor-only" contracting hence, they conclude, they are employees of respondent FEBTC.On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration Branch No. 10 of the Department of Labor and Employment to compel the bank to accept them as regular employees and for it to pay the differential between the wages being paid them by BCC and those received by FEBTC employees with similar length of service.

Issue:Whether or not BCC is only a job contracting company, hence petitioners are not regular employees of FEBTC.SC Ruling:We cannot sustain the petition.Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others, because it has established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and paid for. BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting.It is well-settled that there is "labor-only" contracting where: (a) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others; and, (b) the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer.Article 106 of the Labor Code defines "labor-only" contracting thus Art. 106. Contractor or subcontractor. . . . . 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 by such persons are performing activities which are directly related to the principal business of such employer . . . . (emphasis supplied).Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial capital. While there may be no evidence that it has investment in the form of tools, equipment, machineries, work premises, among others, it is enough that it has substantial capital, as was established before the Labor Arbiter as well as the NLRC. In other words, the law does not require both substantial capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the conjunction "or". If the intention was to require the contractor to prove that he has both capital and the requisite investment, then the conjunction "and" should have been used. But, having established that it has substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that it does not fall within the purview of "labor-only" contracting. There is even no need for it to refute petitioners' contention that the activities they perform are directly related to the principal business of respondent bank.Even assuming ex argumenti that petitioners were performing activities directly related to the principal business of the bank, under the "right of control" test they must still be considered employees of BCC. In the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions as a radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by FEBTC was actually the end-result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end-result was achieved. It did not, however, tell Neri how the radio/telex machine should be operated.More importantly, under the terms and conditions of the contract, it was BCC alone which had the power to reassign petitioners. Their deployment to FEBTC was not subject to the bank's acceptance. Cabelin was promoted to messenger because the FEBTC branch manager promised BCC that two (2) additional janitors would be hired from the company if the promotion was to be effected. Furthermore, BCC was to be paid in lump sum unlike in the situation in Philippine Bank of Communications where the contractor, CESI, was to be paid at a daily rate on a per person basis. And, the contract therein stipulated that the CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and Cabelin were to perform specific special services. Consequently, petitioners cannot be held to be employees of FEBTC as BCC "carries an independent business" and undertaken the performance of its contract with various clients according to its "own manner and method, free from the control and supervision" of its principals in all matters "except as to the results thereof."The Petition for Certiorari is dismissed.

Filipinas Synthetic Fiber Corporation vs. NLRC, et al.[257 SCRA 336 June 14, 1996]Facts:On 4 April 1991 FILSYN, a domestic corporation engaged in the manufacture of polyester fiber, contracted with De Lima Trading and General Services (DE LIMA) for the performance of specific janitorial services Pursuant to the agreement Felipe Loterte, among others, was deployed at FILSYN to take care of the plants and maintain general cleanliness around the premises.On 24 February 1992 Loterte sued FILSYN and DE LIMA as alternative defendants for illegal dismissal, underpayment of wages, non-payment of legal holiday pay, service incentive leave pay and 13th month pay alleging that he was first assigned to perform janitorial work at FILSYN in 1981 by the La Saga General Services; that the La Saga was changed to DE LIMA on August 1991; that when a movement to demand increased wages and 13th month pay arose among the workers on December 1991 he was accused by a certain Dodie La Flores of having posted in the bulletin board at FILSYN an article attributing to management a secret understanding to block the demand; and, for denying responsibility, his gate pass was unceremoniously cancelled on 6 February 1992 and he was subsequently dismissed.Loterte was classified by the Labor Arbiter as a regular employee on the ground that he performed tasks usually necessary or desirable in the main business of FILSYN for more than ten (10) years or since 1981. FILSYN was declared to be the real employer of Loterte and DE LIMA as a mere labor contractor. Hence, FILSYN was adjudged liable for Loterte's reinstatement, payment of salary differentials and back wages and other benefits. Hence, this petition for certiorari by FILSYN.

Issue: Whether or not there exists an employer-employee relationship between FILSYN and private respondent Felipe Loterte.

SC Ruling: DE LIMA is an independent job contractor, therefore no direct employer-employee relationship exists between petitioner FILSYN and private respondent Felipe Loterte. The relationship between petitioner Filipinas Synthetic Fiber Corporation (FILSYN) and private respondent De Lima Trading and General Services (DE LIMA) is one of job contractorship.Under the Labor Code, two (2) elements must exist for a finding of labor-only contracting: (a) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and (b) the workers recruited and placed by such persons are performing activities directly related to the principal business of such employer.These two (2) elements do not exist in the instant case. As pointed out by petitioner, private respondent DE LIMA is a going concern duly registered with the Securities and Exchange Commission with substantial capitalization of P1,600,000.00, P400,000.00 of which is actually subscribed. Hence, it cannot be considered as engaged in labor-only contracting being a highly capitalized venture. Moreover, while the janitorial services performed by Felipe Loterte pursuant to the agreement between FILSYN and DE LIMA may be considered directly related to the principal business of FILSYN which is the manufacture of polyester fiber, nevertheless, they are not necessary in its operation. On the contrary, they are merely incidental thereto, as opposed to being integral, without which production and company sales will not suffer. Judicial notice has already been taken of the general practice in private as well as in government institutions and industries of hiring janitorial services on an independent contractor basis. Respondent De Lima Trading and General Services (DE LIMA) are ordered to reinstate private respondent FELIPE LOTERTE to his former position or its equivalent without loss of seniority rights. And private respondent De Lima Trading and General Services (DE LIMA) is ordered jointly and severally with petitioner Filipinas Synthetic Fiber Corporation (FILSYN) to pay private respondent FELIPE LOTERTE hi salary differentials, 13th month pay, service incentive leave pay, and backwages without prejudice to FILSYN seeking reimbursement from DE LIMA for whatever amount the former may pay or have paid the latter.Alejandro Maraguinot, JR. and Paulino Enero vs. NLRC[284 SCRA 539 January 22, 1998]

Facts:Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989 as part of the filming crew with a salary of P375.00 per week. In June 1991, he was promoted to the rank of Electrician with a weekly salary of P475.00, which was increased to P593.00 in September 1991.Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member of the shooting crew with a weekly salary of P375.00, which was increased to P425.00 in May 1991, then to P475.00 on 21 December 1991.Petitioners tasks consisted of loading, unloading and arranging movie equipment in the shooting area as instructed by the cameraman, returning the equipment to Viva Films warehouse, assisting in the fixing of the lighting system, and performing other tasks that the cameraman and/or director may assign.Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs. Alejandria Cesario, to facilitate their request that private respondents adjust their salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase their salary only if they signed a blank employment contract. Private respondents assert that they contract persons called producers -- also referred to as associate producers -- to produce or make movies for private respondents; and contend that petitioners are project employees of the associate producers who, in turn, act as independent contractors. As such, there is no employer-employee relationship between petitioners and private respondents.The Labor Arbiter in his decision of December 30, 1993 declared that petitioners were illegally dismissed. Private respondents were ordered to reinstate petitioners. On appeal to the NLRC, the latter reversed the Labor arbiters decision. It concluded the circumstances indicated that petitioners were project employees.Hence, the present petition for certiorari. Petitioners claimed that the NLRC committed grave abuse of discretion amounting to lack of jurisdiction in: 1) finding that petitioners were project employees 2) ruling that petitioners were not illegally dismissed 3) reversing the decision of the Labor Arbiter.

Issue:Whether or not an employer-employee relationship existed between petitioners and private respondents or any one of private respondents. If there was none, then this petition has no merit; conversely, if the relationship existed, then petitioners could have been unjustly dismissed.

SC Ruling:The associate producers here are not job contractors. Respondents insist that petitioners are project employees of associate producers who, in turn, act as independent contractors. It is settled that the contracting out of labor is allowed only in case of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code describes permissible job contracting in this wise:Sec. 8. Job contracting. -- There is job contracting permissible under the Code if the following conditions are met:(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof;(2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business.

Assuming that the associate producers are job contractors, they must then be engaged in the business of making motion pictures. As such, and to be a job contractor under the preceding description, associate producers must have tools, equipment, machinery, work premises, and other materials necessary to make motion pictures. However, the associate producers here have none of these. Private respondents evidence reveals that the movie-making equipment are supplied to the producers and owned by VIVA. These include generators, cables and wooden platforms, cameras and shooting equipment; in fact, VIVA likewise owns the trucks used to transport the equipment. It is thus clear that the associate producer merely leases the equipment from VIVA.If private respondents insist that their associate producers are labor contractors, then these producers can only be labor-only contractors, defined by the Labor Code as follows:Art. 106. Contractor or subcontractor.-- x x xThere is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.

A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code:Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person:(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed. (b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the workers.

Neither are said associate producers labor only contractors. As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an available group of free-lance workers which includes the complainants Maraguinot and Enero. And in their Memorandum, private respondents declared that the associate producer hires the services of... 6) camera crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc.... This clearly showed that the associate producers did not supply the workers required by the movie project.The relationship between VIVA and its producers seems to be that of agency. VIVA is the direct employer of petitioners. The relationship between VIVA and its producers or associate producers seems to be that of agency, as the latter make movies on behalf of VIVA, whose business is to make movies. As such, the employment relationship between petitioners and producers is actually one between petitioners and VIVA, with the latter being the direct employer.The employer-employee relationship between petitioners and VIVA can further be established by the control test. While four elements are usually considered in determining the existence of an employment relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employers power to control the employees conduct, the most important element is the employers control of the employees conduct, not only as to the result of the work to be done but also as to the means and methods to accomplish the same. These four elements are present here.VIVAs control is evident in its mandate that the end result must be a quality film acceptable to the company. The means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be finished within schedule without exceeding the budget, and additional expenses must be justified; certain scenes are subject to change to suit the taste of the company; and the Supervising Producer, the eyes and ears of VIVA and del Rosario, intervenes in the movie-making process by assisting the associate producer in solving problems encountered in making the film.It may not be validly argued then that petitioners are actually subject to the movie directors control, and not VIVAs direction. The director merely instructs petitioners on how to better comply with VIVAs requirements to ensure that a quality film is completed within schedule and without exceeding the budget. At bottom, the director is akin to a supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on the employer.Aside from control, the element of selection and engagement is likewise present in the instant case and exercised by VIVA. A sample appointment slip offered by private respondents to prove that members of the shooting crew except the driver are project employees of the Independent Producers.Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired the crew members; moreover, it is VIVAs corporate name which appears on the heading of the appointment slip. What likewise tells against VIVA is that it paid petitioners salaries as evidenced by vouchers, containing VIVAs letterhead, for that purpose.Petitioners are regular employees, not merely project employees. They were illegally dismissed. It may not be ignored, however, that private respondents expressly admitted that petitioners were part of a work pool; and, while petitioners were initially hired possibly as project employees, they had attained the status of regular employees in view of VIVAs conduct.A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:1) There is a continuous rehiring of project employees even after cessation of a project; and2) The tasks performed by the alleged project employee are vital, necessary and indispensable to the usual business or trade of the employer.However, the length of time during which the employee was continuously re-hired is not controlling, but merely serves as a badge of regular employment.In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three (3) years and worked on at least twenty-three (23) projects. Moreover, as petitioners tasks involved, among other chores, the loading, unloading and arranging of movie equipment in the shooting area as instructed by the cameramen, returning the equipment to the Viva Films warehouse, and assisting in the fixing of the lighting system, it may not be gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of the employer. As regards the underscored phrase, it has been held that this is ascertained by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety.The Courts ruling here is meant precisely to give life to the constitutional policy of strengthening the labor sector, but, we stress, not at the expense of management. Lest it be misunderstood, this ruling does not mean that simply because an employee is a project or work pool employee even outside the construction industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a project or work pool employee has been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise would allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department Order No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees who have already gained the status of regular employees by the employers conduct.In closing then, as petitioners had already gained the status of regular employees, their dismissal was unwarranted, for the cause invoked by private respondents for petitioners dismissal, viz., completion of project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners are now entitled to back wages and reinstatement, without loss of seniority rights and other benefits that may have accrued. Nevertheless, following the principles of suspension of work and no pay between the end of one project and the start of a new one, in computing petitioners back wages, the amounts corresponding to what could have been earned during the periods from the date petitioners were dismissed until their reinstatement when petitioners respective Shooting Units were not undertaking any movie projects, should be deducted.The instant petition is GRANTED.

Urbanes Jr. vs Sec. of Labor[GR No. 122791, February 19, 2003]

Facts:

Petitioner Placido O. Urbanes, Jr., doing business under the name and style of Catalina Security Agency, entered into an agreementto provide security services to respondent Social Security System (SSS). During the effectivity of the agreement, petitioner, by letter of May 16, 1994,requested the SSS for the upward adjustment of their contract rate in view of Wage Order No. NCR-03 which was issued by the Regional Tripartite Wages and Productivity Board-NCR pursuant to Republic Act 6727 otherwise known as the Wage Rationalization Act.On June 24, 1994, petitioner pulled out his agency's services from the premises of the SSS and another security agency, Jaguar, took over.On June 29, 1994, petitioner filed a complaintwith the DOLE-NCR against the SSS seeking the implementation of Wage Order No. NCR-03.The Regional Director of the DOLE-NCR rendered judgment in favor of the petitioner. SSS appealed to the Secretary of Labor. The Secretary of Labor set aside the order of the Regional Director and the Secretary held petitioner's security agency "JOINTLY AND SEVERALLY liable for wage differentials, the amount of which should be paid DIRECTLY to the security guards concerned.

Issue: Whether or not the Secretary of Labor have jurisdiction to review appeals from decisions of the Regional Directors in complaints filed under Article 129 of the Labor Code

Ruling:In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security guards,the relief sought has to do with the enforcement of the contract between him and the SSS which was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil dispute, the proper forum for the resolution of which is the civil courts.But even assumingarguendothat petitioner's complaint were filed with the proper forum, for lack of cause of action it must be dismissed.Articles 106, 107 and 109 of the Labor Code provide:ART. 106.CONTRACTOR OR SUBCONTRACTOR. Whenever an employer enters into 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 wage of his employeesin accordance with this Code,the employer shall be jointly and severally liable with his contractor or subcontractorto 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.xxx xxx xxx (Emphasis and underscoring)ART. 107.INDIRECT EMPLOYER. The provisions of the immediately preceding Article shall likewise apply to 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.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.In fine, the liability of the SSS to reimburse petitioner arises only if and when petitioner pays his employee-security guards "the increases" mandated by Wage Order No. NCR-03.The records do not show that petitioner has paid the mandated increases to the security guards. The security guards in fact have filed a complaintwith the NLRC against petitioner relative to, among other things, underpayment of wages.

San Miguel Corporation vs. Maerc Integrated Services, Inc., et al.[GR No. 144672 July 10, 2003]

Facts:Brought before this court is a petition seeking for a review of the Court of Appeals' judgment. The facts are as follows. 291 workers filed complaints against San Miguel Corporation and Maerc Integrated Services, Inc. for illegal dismissal, underpayment of wages, non-payment of service incentive leave pays and other labor standards benefits, and for separation pays from 25 June to 24 October 1991. The complainants alleged that they were hired by SMC through its agent or intermediary Maerc. They were paid on a per piece or pakiao basis except for a few who worked as checkers and were paid on daily wage basis.SMC denied liability for the claims and averred that the complainants were not its employees but of MAERC. When the service contract was terminated, complainants claimed that SMC stopped them from performing their jobs; that this was tantamount to their being illegally dismissed by SMC who was their real employer; and, that MAERC was merely made a tool or a shield by SMC to avoid its liability under the Labor Code.On 31 January 1995 the Labor Arbiter rendered a decision holding that MAERC was an independent contractor. He dismissed the complaints for illegal dismissal but held that MAERC and SMC were jointly and severally liable to pay complainants their wage differentials. The National Labor Relations Commission (NLRC) ruled in its 7 January 1997 decision that MAERC was a labor-only contractor and that complainants were employees of SMC but still held SMC to be jointly and severally liable with MAERC for complainants' separation benefits. On 28 April 2000 the Court of Appeals denied the petition and affirmed the decision of the NLRC.

Issue:Whether or not the complainants are employees of petitioner SMC or of respondent MAERC.

SC Ruling:Evidence discloses that petitioner played a large and indispensable part in the hiring of MAERC's workers. It also appears that majority of the complainants had already been working for SMC long before the signing of the service contract between SMC and MAERC in 1988.In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The principal employer therefore becomes solidarily liable with the labor-only contractor for all the rightful claims of the employees.This distinction between job contractor and labor-only contractor, however, will not discharge SMC from paying the separation benefits of the workers, inasmuch as MAERC was shown to be a labor-only contractor; in which case, petitioner's liability is that of a direct employer and thus solidarily liable with MAERC.Respondent Maerc Integrated Services, Inc. is declared to be a labor-only contractor. Accordingly, both petitioner San Miguel Corporation and respondent Maerc Integrated Services, Inc., are ordered to jointly and severally pay complainants (private respondents herein) separation benefits and wage differentials as may be finally recomputed by the Labor Arbiter as herein directed, plus attorney's fees to be computed on the basis of ten percent (10%) of the amounts which complainants may recover pursuant to Art. 111 of the Labor Code, as well as an indemnity fee of P2,000.00 to each complainant.

Mariveles Shipyard vs. CA [GR No. 144134, November 11, 2003]

Facts:Petitioner Mariveles Shipyard Corporation engaged the services of Longest Force Investigation and Security Agency, Inc. (hereinafter, "Longest Force") to render security services at its premises. Pursuant to their agreement, Longest Force deployed its security guards, the private respondents herein, at the petitioner's shipyard in Mariveles, Bataan.According to petitioner, it religiously complied with the terms of the security contract with Longest Force, promptly paying its bills and the contract rates of the latter. However, it found the services being rendered by the assigned guards unsatisfactory and inadequate, causing it to terminate its contract with Longest Force on April 1995.Longest Force, in turn, terminated the employment of the security guards it had deployed at petitioner's shipyard.On September 2, 1996, private respondents filed a case for illegal dismissal, underpayment of wages pursuant to the PNPSOSIA-PADPAO rates, non-payment of overtime pay, premium pay for holiday and rest day, service incentive leave pay, 13th month pay and attorney's fees, against both Longest Force and petitioner, before the Labor Arbiter. Docketed as NLRC NCR Case No. 00-09-005440-96-A, the case sought the guards' reinstatement with full backwages and without loss of seniority rights.Petitioner Corporation sought before the Court of Appeals the nullification of the decision of the NLRC which affirmed the Labor Arbiter's decision finding it jointly and severally liable with the Longest Force Investigation and Security Agency, Inc. for the underpayment of wages and overtime pay due to the latter's security guards, private respondents herein, deployed at the petitioner's shipyard in Mariveles, Bataan. Petitioner denied any liability, arguing that it had religiously and promptly paid the compensation of the security guards as stipulated under the contract with the security agency. The Court of Appeals dismissed outright petitioner's petition forcertiorariand its subsequent motion for reconsideration, due to a defective certificate of non-forum shopping and non-submission of the required documents to accompany said petition. The appellate court found that the verification and certification on non-forum shopping was signed not by the duly authorized officer of petitioner, but by its counsel.Issues:(1) Was it error for the Court of Appeals to sustain its order of dismissal of petitioner's special civil action for certiorari, notwithstanding subsequent compliance with the requirements under the Rules of Court by the petitioner? (2) Did the appellate court err in not holding that petitioner was denied due process of law by the NLRC? (3) Did the appellate court grievously err in finding petitioner jointly and severally liable with Longest Force for the payment of wage differentials and overtime pay owing to the private respondents?Ruling:1. It is settled that the requirement in the Rules that the certification of non-forum shopping should be executed and signed by the plaintiff or the principal means that counsel cannot sign said certification unless clothed with special authority to do so.The reason for this is that the plaintiff or principal knows better than anyone else whether a petition has previously been filed involving the same case or substantially the same issues. Hence, a certification signed by counsel alone is defective and constitutes a valid cause for dismissal of the petition.In the case of natural persons, the Rule requires the parties themselves to sign the certificate of non-forum shopping. However, in the case of the corporations, the physical act of signing may be performed, on behalf of the corporate entity, only by specifically authorized individuals for the simple reason that corporations, as artificial persons, cannot personally do the task themselves. In this case, not only was the originally appended certification signed by counsel, but in its motion for reconsideration, still petitioner utterly failed to show that Ms. Rosanna Ignacio, its Personnel Manager who signed the verification and certification of non-forum shopping attached thereto, was duly authorized for this purpose. It cannot be gainsaid that obedience to the requirements of procedural rule is needed if we are to expect fair results therefrom. Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal construction. Thus, on this point, no error could be validly attributed to respondent Court of Appeals. It did not err in dismissing the petition for non-compliance with the requirements governing the certification of non-forum shopping.2. Well settled is the rule that the essence of due process is simply an opportunity to be heard, or, as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of. Not all cases require a trial-type hearing. The requirement of due process in labor cases before a Labor Arbiter is satisfied when the parties are given the opportunity to submit their position papers to which they are supposed to attach all the supporting documents or documentary evidence that would prove their respective claims, in the event the Labor Arbiter determines that no formal hearing would be conducted or that such hearing was not necessary. In any event, as found by the NLRC, petitioner was given ample opportunity to present its side in several hearings conducted before the Labor Arbiter and in the position papers and other supporting documents that it had submitted. We find that such opportunity more than satisfies the requirement of due process in labor cases.3. Petitioner's liability is joint and several with that of Longest Force, pursuant to Articles 106, 107 and 109 of the Labor Code which provide as follows: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.xxx xxx xxxART. 107.INDIRECT EMPLOYER. The provisions of the immediately preceding Article shall likewise apply to 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.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.Petitioner cannot evade its liability by claiming that it had religiously paid the compensation of guards as stipulated under the contract with the security agency. Labor standards are enacted by the legislature to alleviate the plight of workers whose wages barely meet the spiraling costs of their basic needs. Labor laws are considered written in every contract. Stipulations in violation thereof are considered null.

New Golden City Builders vs. CA [GR No.154715, December 11, 2003]

Facts:Petitioner entered into a construction contract with Prince David Development Corporation. Petitioner engaged the services of Nilo Layno Builders to do the specialized concrete works, forms works and steel rebars works. Pursuant to the contract, Nilo Layno Builders hired private respondents to perform work at the project. After the completion of the phase for which Nilo Layno Builders was contracted, private respondents filed a complaint against petitioner and its president for unfair labor practice, non-payment of 13th month pay, service incentive leave, illegal dismissal and severance pay, in lieu of reinstatement. The Labor Arbiter ruled in favor of respondents, but dismissed the charges for illegal dismissal including their prayers for backwages and unfair labor practice and other monetary claims except their 13th month pay and service incentive leave pay. It was also found that Nilo Layno Builders was a labor-only-contractor, thus private respondents were deemed employees of the petitioner. Both parties appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter's decision with modification that private respondents were illegally dismissed. Since petitioner's motion for reconsideration was denied, it instituted a special civil action forcertiorariwith the Court of Appeals, but the latter denied the same.Issue:Whether Nilo Layno Builders was an "independent contractor" or a "labor-only" contractorRuling:Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, an independent contractor is one who undertakes "job contracting,"i.e., a person who: (a) carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (b) has substantial capital or investment in the form of tools, equipments, machineries, work premises, and other materials which are necessary in the conduct of the business. Jurisprudential holdings are to the effect that in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.Nilo Layno Builders is a duly licensed labor contractor carrying on an independent business for a specialized work that involves the use of some particular, unusual and peculiar skills and expertise, like concrete works, form works and steel rebars works. As a licensed labor contractor, it complied with the conditions set forth inSection 5, Rule VII-A, Book III, Rules to Implement the Labor Code, among others, proof of financial capability and list of equipment, tools, machineries and implements to be used in the business. Further, it entered into a written contract with the petitioner, a requirement underSection 3, Rule VII-A, Book III, Rules to Implement the Labor Code to assure the employees of the minimum labor standards and benefits provided by existing laws.The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only to the results of the work.This is exactly the situation obtaining in the case at bar. Nilo Layno Builders hired its own employees, the private respondents, to do specialized work in the Prince David Project of the petitioner. The means and methods adopted by the private respondents were directed by Nilo Layno Builders except that, from time to time, the engineers of the petitioner visited the site to check whether the work was in accord with the plans and specifications of the principal. As admitted by Nilo G. Layno, he undertook the contract work on his own account and responsibility, free from interference from any other persons, except as to the results; that he was the one paying the salaries of private respondents; and that as employer of the private respondents, he had the power to terminate or dismiss them for just and valid cause. Indubitably, the Court finds that Nilo Layno Builders maintained effective supervision and control over the private complainants.

National Food Authority (NFA) vs. Masada Security Agency, Inc.[G.R. No. 163448 March 08, 2005]

Facts:On September 17, 1996, MASADA Security Agency, Inc., entered into a one year contract to provide security services to the various offices, warehouses and installations of NFA within the scope of the NFA Region I, comprised of the provinces of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte. Upon the expiration of said contract, the parties extended the effectivity thereof on a monthly basis under same terms and condition.Meanwhile, the Regional Tripartite Wages and Productivity Board issued several wage orders mandating increases in the daily wage rate. Accordingly, respondent requested NFA for a corresponding upward adjustment in the monthly contract rate consisting of the increases in the daily minimum wage of the security guards as well as the corresponding raise in their overtime pay, holiday pay, 13th month pay, holiday and rest day pay. It also claimed increases in Social Security System (SSS) and Pag-ibig premiums as well as in the administrative costs and margin. NFA, however, granted the request only with respect to the increase in the daily wage by multiplying the amount of the mandated increase by 30 days and denied the same with respect to the adjustments in the other benefits and remunerations computed on the basis of the daily wage.Respondent sought the intervention of the Office of the Regional Director, Regional Office No. I, La Union, as Chairman of the Regional Tripartite Wages and Productivity Board and the DOLE Secretary through the Executive Director of the National Wages and Productivity Commission. Despite the advisory of said offices sustaining the claim of respondent that the increase mandated by Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is not limited to the daily pay, NFA maintained its stance that it is not liable to pay the corresponding adjustments in the wage related benefits of respondents security guards.

Issue: Whether or not the liability of principals in service contracts under Section 6 of RA 6727 and the wage orders issued by the Regional Tripartite Wages and Productivity Board is limited only to the increment in the minimum wage.

SC Ruling:RA 6727, created the National Wages and Productivity Commission (NWPC), vested, inter alia, with the power to prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels; and the Regional Tripartite Wages and Productivity Boards (RTWPB) which, among others, determine and fix the minimum wage rates applicable in their respective region, provinces, or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the NWPC. Pursuant to its wage fixing authority, the RTWPB issue wage orders which set the daily minimum wage rates.Payment of the increases in the wage rate of workers is ordinarily shouldered by the employer. Section 6 of RA 6727, however, expressly lodged said obligation to the principals or indirect employers in construction projects and establishments providing security, janitorial and similar services. Substantially the same provision is incorporated in the wage orders issued by the RTWPB. Section 6 of RA 6727, provides:SEC. 6. In the case of contracts for construction projects and for security, janitorial and similar services, the prescribed increases in the wage rates of the workers shall be borne by the principals or clients of the construction/service contractors and the contract shall be deemed amended accordingly. In the event, however, that the principal or client fails to pay the prescribed wage rates, the construction/service contractor shall be jointly and severally liable with his principal or client. (Emphasis supplied)NFA claims that its additional liability under the aforecited provision is limited only to the payment of the increment in the statutory minimum wage rate, i.e., the rate for a regular eight (8) hour work day. In construing the word wage in Section 6 of RA 6727, reference must be had to Section 4 (a) of the same Act. It states:SEC. 4. (a) Upon the effectivity of this Act, the statutory minimum wage rates for all workers and employees in the private sector, whether agricultural or non-agricultural, shall be increased by twenty-five pesos (P25) per day (Emphasis supplied)The term wage as used in Section 6 of RA 6727 pertains to no other than the statutory minimum wage which is defined under the Rules Implementing RA 6727 as the lowest wage rate fixed by law that an employer can pay his worker. The basis thereof under Section 7 of the same Rules is the normal working hours, which shall not exceed eight hours a day. Hence, the prescribed increases or the additional liability to be borne by the principal under Section 6 of RA 6727 is the increment or amount added to the remuneration of an employee for an 8-hour work.Expresio unius est exclusio alterius. Where a statute, by its terms, is expressly limited to certain matters, it may not, by interpretation or construction, be extended to others. Since the increase in wage referred to in Section 6 pertains to the statutory minimum wage as defined herein, principals in service contracts cannot be made to pay the corresponding wage increase in the overtime pay, night shift differential, holiday and rest day pay, premium pay and other benefits granted to workers. While basis of said remuneration and benefits is the statutory minimum wage, the law cannot be unduly expanded as to include those not stated in the subject provision.The settled rule in statutory construction is that if the statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without interpretation. This plain meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute. Verba legis non est recedendum, or from the words of a statute there should be no departure.At any rate, the interest of the employees will not be adversely affected if the obligation of principals under the subject provision will be limited to the increase in the statutory minimum wage. This is so because all remuneration and benefits other than the increased statutory minimum wage would be shouldered and paid by the employer or service contractor to the workers concerned. Thus, in the end, all allowances and benefits as computed under the increased rate mandated by RA 6727 and the wage orders will be received by the workers.Moreover, the law secures the welfare of the workers by imposing a solidary liability on principals and the service contractors. Under the second sentence of Section 6 of RA 6727, in the event that the principal or client fails to pay the prescribed wage rates, the service contractor shall be held solidarily liable with the former. Likewise, Articles 106, 107 and 109 of the Labor Code provides:ART. 106. Contractor or Subcontractor. Whenever an employer enters into contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wage 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.ART. 107. Indirect Employer. The provisions of the immediately preceding Article shall likewise apply to 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.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.

Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into stipulations increasing the liability of the principal. So long as the minimum obligation of the principal, i.e., payment of the increased statutory minimum wage is complied with, the Wage Rationalization Act is not violated.In the instant case, Article IV.4 of the service contract provides:IV.4. In the event of a legislated increase in the minimum wage of security guards and/or in the PADPAO rate, the AGENCY may negotiate for an adjustment in the contract price. Any adjustment shall be applicable only to the increment, based on published and circulated rates and not on mere certification.

In the same vein, paragraph 3 of NFA Memorandum AO-98-03- states:3. For purposes of wage adjustments, consider only the rate based on the wage Order issued by the Regional Tripartite Wage Productivity Board (RTWPB). Unless otherwise provided in the Wage Order issued by the RTWPB, the wage adjustment shall be limited to the increment in the legislated minimum wage;

The parties therefore acknowledged the application to their contract of the wage orders issued by the RTWPB pursuant to RA 6727. There being no assumption by NFA of a greater liability than that mandated by Section 6 of the Act, its obligation is limited to the payment of the increased statutory minimum wage rates which, as admitted by respondent, had already been satisfied by NFA.[33] Under Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment. Having discharged its obligation to respondent, NFA no longer have a duty that will give rise to a correlative legal right of respondent. The latters complaint for collection of remuneration and benefits other than the increased minimum wage rate, should therefore be dismissed for lack of cause of action.

Zaldy G. Abella, et al vs. Philippine Long Distance Telephone Company, et al.[G.R. No. 159469 June 8, 2005]

Facts:Respondent PSI entered into an agreement with the PLDT to provide the latter with such number of qualified uniformed and properly armed security guards for the purpose of guarding and protecting PLDTs installations and properties from theft, pilferage, intentional damage, trespass or other unlawful acts. Under the agreement, it was expressly provided that there shall be no employer-employee relationship between the PLDT and the security guards, which may be supplied to it by PSI, and that the latter shall have the entire charge, control and supervision over the work and services of the supplied security guards. It was likewise stipulated therein that PSI shall also have the exclusive authority to select, engage, and discharge its security guards, with full control over their wages, salaries or compensation.Consequently, respondent PSI deployed security guards to the PLDT. PLDTs Security Division interviewed these security guards and asked them to fill out personal data sheets. Those who did not meet the height requirements were sent back by PLDT to PSI.On 05 June 1995, sixty-five security guards supplied by respondent PSI filed a Complaint for regularization against the PLDT with the Labor Arbiter. The Complaint alleged inter alia that petitioner security guards have been employed by the company through the years commencing from 1982 and that all of them served PLDT directly for more than 1 year, that PSI acted as the middleman in the payment of the minimum pay to the security guards, but no premium for work rendered beyond eight hours was paid to them nor were they paid their 13th month pay, and that they should be considered as regular employees by the latter with compensation and benefits equivalent to ordinary rank-and-file employees of the same job grade.Issue: Whether or not employer-employee relationship exists between the security guards and PLDT.

SC Ruling:Testimonies during the trial reveal that interviews and evaluation were conducted by PLDT to ensure that the standards it set are met by the security guards. In fact, PLDT rarely failed to accept security guards referred to by PSI but on account of height deficiency. The referral is nothing but for possible assignment in a designated client which has the inherent prerogative to accept and reject the assignee for justifiable grounds or even arbitrarily. We are thus convinced that the employer-employee relationship is deemed perfected even before the posting of the complainants with the PLDT, as assignment only comes after employment.Here, the security guards which PSI had assigned to PLDT are already the formers employees prior to assignment and if the assigned guards to PLDT are rejected by PLDT for reasons germane to the security agreement, then the rejected or terminated guard may still be assigned to other clients of PSI. Therefore, the evidence as it stands is at odds with petitioners assertion that PSI is an in-house agency of PLDT so as to call for a piercing of veil of corporate identity.The delinquency reports merely served as justifiable, not arbitrary, basis for PLDT to demand replacement of guards found to have committed infractions while on their tours of duty at PLDTs premises.As a case in point, manufacturing companies usually hold suppliers conferences to integrate their suppliers corporate goals and visions with their own so that the manufacturing companies are ensured of the quality and timing of their supplies of materials or services, as the case may be. It is therefore not surprising that PLDT would demand that security guards assigned to its premises undergo seminars and trainings on certain areas of concern which are unique to PLDT, and also to assign their own security personnel and supervisors to monitor the performance of the security guards as part of the companys internal check, monitoring and control system in order to rate whether the security agency it hired is performing at par with PLDTs set standards.While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. The partiality for labor has not in any way diminished our belief that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.Petition is denied and the resolution of the Court of Appeals is affirmed.

San Miguel Corporation vs. Prospero A. Aballa, et al.[G.R. No. 149011 June 28, 2005]

Facts:Petitioner San Miguel Corporation, Visayas Area Manager for Aquaculture Operations and Sunflower Multi-Purpose Cooperative entered into a one-year Contract of Services commencing on January 1, 1993, to be renewed on a month to month basis until terminated by either party.Pursuant to the contract, Sunflower engaged private respondents to, as they did, render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod City. The contract was deemed renewed by the parties every month after its expiration on January 1, 1994 and private respondents continued to perform their tasks until September 11, 1995.In July 1995, private respondents filed a complaint before the NLRC, Regional Arbitration Branch No. VI, Bacolod City, praying to be declared as regular employees of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank and file employees.Private respondents subsequently filed on September 25, 1995 an Amended Complaint to include illegal dismissal as additional cause of action following SMCs closure of its Bacolod Shrimp Processing Plant on September 15, 1995 which resulted in the termination of their services.SMC filed a Motion for Leave to File Attached Third Party Complaint dated November 27, 1995 to implead Sunflower as Third Party Defendant which was, by Order of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon. In the meantime, on September 30, 1996, SMC filed before the Regional Office at Iloilo City of the Department of Labor and Employment a Notice of Closure of its aquaculture operations effective on even date, citing serious business losses.

Issues: 1. Whether or not Sunflower is a labor-only contractor.2. Whether or not Sunflower is liable, with San Miguel Corporation, for the claims of private respondents.

SC Ruling:Article 106 of the Labor Code provides:ART. 106. Contractor or subcontracting. Whenever an employer enters into a contract with another person for the performance of the formers work, the employees of the contractor and of the latters subcontractor, if any shall be paid in accordance with the provisions of this Code.In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him.The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under 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.

Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by Department Order No. 18, distinguishes between legitimate and labor-only contracting: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.Section 5. Prohibition against labor-only contracting. Labor-only contracting Sis hereby declared prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal, and any of the following elements are present:i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal, orii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.

The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work. In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer. The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee relationship between SMC and private respondents. The language of a contract is not, however, determinative of the parties relationship; rather it is the totality of the facts and surrounding circumstances of the case. 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 job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute. From the job description provided by SMC itself, the work assigned to private respondents was directly related to the aquaculture operations of SMC, which formed an integral part of the shrimp processing operations of SMC. As for janitorial and messengerial services, that they are considered directly related to the principal business of the employer has been jurisprudentially recognized.Sunflower did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC.All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee relationship between SMC and private respondents. Since private respondents who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture business of SMC, they should be deemed regular employees of the latter and as such are entitled to all the benefits and rights appurtenant to regular employment. They should thus be awarded differential pay corresponding to the difference between the wages and benefits given them and those accorded SMCs other regular employees.Those performing janitorial and messengerial services however acquired regular status only after rendering one-year service pursuant to Article 280 of the Labor Code. Although janitorial and messengerial services are considered directly related to the aquaculture business of SMC, they are deemed unnecessary in the conduct of its principal business; hence, the distinction.The law of course provides for two kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to the activity in which they are employed.

As for those of private respondents who were engaged in janitorial and messengerial tasks, they fall under the second category and are thus entitled to differential pay and benefits extended to other SMC regular employees from the day immediately following their first year of service. Absent any evidence showing that Sunflower has been dissolved in accordance with law, pursuant to Rule VIII-A, Section 19 of the Omnibus Rules Implementing the Labor Code, Sunflower is held solidarily liable with SMC for all the rightful claims of private respondents.The petition is denied andthe assailed decision dated February 7, 2001 and resolution dated July 11, 2001 of the Court of Appeals is affirmed with modification.

Manila Electric Company vs. Rogelio Benamira, et al.[G.R. No. 145271 July 14, 2005]

Facts:The individual respondents are licensed security guards formerly employed by Peoples Security, Inc. and deployed as such at MERALCOs head office in Ortigas Avenue, Pasig, Metro Manila. On Nov. 30, 1990, the security service agreement between PSI and MERALCO was terminated.Immediately thereafter, 56 of PSIs security guards, including herein eight individual respondents, filed a complaint for unpaid monetary benefits against PSI and MERALCO.Meanwhile, the security service agreement between respondent Armed Security & Detective Agency, Inc., (ASDAI) and MERALCO took effect on Dec. 1, 1990. Subsequently, the individual respondents were absorbed by ASDAI and retained at MERALCOs head office.On June 29, 1992, the labor arbiter rendered a decision in favor of the former PSI security guards, including the individual respondents.Less than a month later, the individual respondents filed another complaint for unpaid monetary benefits, this time against ASDAI and MERALCO.On July 25, 1992, the security service agreement between respondent Advance Forces Security & Investigation Services, Inc. (AFSISI) and MERALCO took effect, terminating the previous security service agreement with ASDAI.Except as to the number of security guards, the amount to be paid the agency, and the effectivity of the agreement, the terms and conditions were substantially identical with the security service agreement with ASDAI. The individual respondents amended their complaint to implead AFSISI as party respondent. They then again amended their complaint to allege that AFSISI terminated their services on August 6, 1992 without notice and just cause and therefore guilty of illegal dismissal. The individual respondents alleged that: MERALCO and ASDAI never paid their overtime pay, service incentive leave pay, premium pay for Sundays and Holidays, P50.00 monthly uniform allowance and underpaid their 13th month pay; on July 24, 1992, when the security service agreement of ASDAI was terminated and AFSISI took over the security functions of the former on July 25, 1992, respondent security guard Benamira was no longer given any work assignment when AFSISI learned that the former has a pending case against PSI, in effect, dismissing him from the service without just cause; and, the rest of the individual respondents were absorbed by AFSISI but were not given any assignments, thereby dismissing them from the service without just cause. ASDAI denied in general terms any liability for the claims of the individual respondents, claiming that there is nothing due them in connection with their services.On the other hand, MERALCO denied liability on the ground of lack of employer-employee relationship with individual respondents. It averred that the individual respondents are the employees of the security agencies it contracted for security services; and that it has no existing liability for the individual respondents claims since said security agencies have been fully paid for their services per their respective security service agreement.For its part, AFSISI asserted that: it is not liable for illegal dismissal since it did not absorb or hire the individual respondents, the latter were merely hold-over guards from ASDAI; it is not obliged to employ or absorb the security guards of the agency it replaced since there is no provision in its security service agreement with MERALCO or in law requiring it to absorb and hire the guards of ASDAI as it has its own guards duly trained to service its various clients.

SC Ruling:At the outset, we note that the individual respondents never alleged in their complaint in the Labor Arbiter, in their appeal in the NLRC and even in their petition for certiorari in the CA that MERALCO was their employer. They have always advanced the theory that AFSISI is their employer. A perusal of the records shows it was only in their Memorandum in the CA that this thesis was presented and discussed for the first time. We cannot ignore the fact that this position of individual respondents runs contrary to their earlier submission in their pleadings filed in the Labor Arbiter, NLRC and even in the petition for certiorari in the CA that AFSISI is their employer and liable for their termination. As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants and to indicate fairly the nature of the claims or defenses of both parties, a party cannot subsequently take a position contrary to, or inconsistent, with his pleadings.Moreover, it is a fundamental rule of procedure that higher courts are precluded from entertaining matters neither alleged in the pleadings nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal. The individual respondents are bound by their submissions that AFSISI is their employer and they should not be permitted to change their theory. Such a change of theory cannot be tolerated on appeal, not due to the strict application of procedural rules but as a matter of fairness. A change of theory on appeal is objectionable because it is contrary to the rules of fair play, justice and due process. Thus, the CA should not have considered the new theory offered by the individual respondents in their memorandum.In this case, the terms and conditions embodied in the security service agreement between MERALCO and ASDAI expressly recognized ASDAI as the employer of individual respondents. Under the security service agreement, it was ASDAI which (a) selected, engaged or hired and discharged the security guards; (b) assigned them to MERALCO according to the number agreed upon; (c) provided the uniform, firearms and ammunition, nightsticks, flashlights, raincoats and other paraphernalia of the security guards; (d) paid them salaries or wages; and, (e) disciplined and supervised them or principally controlled their conduct. The agreement even explicitly provided that [n]othing herein contained shall be understood to make the security guards under this Agreement, employees of the COMPANY, it being clearly understood that such security guards shall be considered as they are, employees of the AGENCY alone. Clearly, the individual respondents are the employees of ASDAI.As to the provision in the agreement that MERALCO reserved the right to seek replacement of any guard whose behavior, conduct or appearance is not satisfactory, such merely confirms that the power to discipline lies with the agency. It is a standard stipulation in security service agreements that the client may request the replacement of the guards to it. Service-oriented enterprises, such as the business of providing security services, generally adhere to the business adage that the customer or client is always right and, thus, must satisfy the interests, conform to the needs, and cater to the reasonable impositions of its clients.Neither is the stipulation that the agency cannot pull out any security guard from MERALCO without its consent an indication of control. It is simply a security clause designed to prevent the agency from unilaterally removing its security guards from their assigned posts at MERALCOs premises to the latters detriment. The clause that MERALCO has the right at all times to inspect the guards of the agency detailed in its premises is likewise not indicative of control as it is not a unilateral right. The agreement provides that the agency is principally mandated to conduct inspections, without prejudice to MERALCOs right to conduct its own inspections. Needless to stress, for the power of control to be present, the person for whom the services are rendered must reserve the right to direct not only the end to be achieved but also the means for reaching such end. Not all rules imposed by the hiring party on the hired party indicate that the latter is an employee of the former. Rules which serve as general guidelines towards the achievement of the mutually desired result are not indicative of the power of control.The security service agreements in the present case provided that all specific instructions by MERALCO relating to the discharge by the security guards of their duties shall be directed to the agency and not directly to the individual respondents. The individual respondents failed to show that the rules of MERALCO controlled their performance. Moreover, ASDAI and AFSISI are not labor-only contractors. There is labor only contract when the person acting as contractor is considered merely as an agent or intermediary of the principal who is responsible to the workers in the same manner and to the same extent as if they had been directly employed by him. On the other hand, job (independent) contracting is present if the following conditions are met: (a) the contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except to the result thereo