the labor code of the philippines - Chan Robles and Associates Law ...

SUPREME COURT
FIRST DIVISION
NAZARIO M. PONCE, FERMIN
ZACATE, JESUS B. RICO, ANICETO B.
ESTO and JOHN GERMAN B.
LIMBAGO,
Petitioners,
-versus- G.R. No. 124643
July 30, 1998
NATIONAL LABOR RELATIONS
COMMISSION, P & R PARTS
MACHINERIES CORPORATION,
FERNANDO RAMILLANO AND/OR
BRGT AGENCY, ALSO KNOWN AS RIZ-
MAN COMPANY, INC.,
Respondents.
D E C I S I O N
RESOLUTION dated September 29, 1998
VITUG, J.:
Petitioners seek, via the remedy of Certiorari under Rule 65, [1] (a) the
reversal of the Decision of 23 August 1995, as well as the subsequent
Resolution of 07 November 1995, of respondent National Labor
Relations Commission (“NLRC”) and (b) the reinstatement of the
Decision, dated 22 September 1994, of the Labor Arbiter.
chanroblespublishingcompany

The five petitioners were daily wage earners taken in by BRGT Agency
(“BRGT”), also known as Riz-Man Co., Inc., and assigned to work by
the latter in P & R Parts and Machineries Corporation (“P & R”), a
company engaged in the business of steel and metal fabrication of
machine spare parts, under the umbrella of a “Job Contract” entered
into by and between the two entities. The nature of work, date of
hiring, and the daily wage of petitioners immediately before the
termination of their employment were indicated to be as hereunder
so stated: chanroblespublishingcompany
NAME NATURE OF DATE EMPLOYED DAILY
WORK
WAGE
NAZARIO PONCE Quality Control, May 15, 1992 P110.00
Bench Section
FERMIN ZACATE Buffing, Bench August 5, 1992 104.00
Section
JESUS RICO Buffing, Bench October 17, 1992 90.00
Section
ANICETO ESTO Assembler November 18, 1992 104.00
Bench Section
JOHN LIMBAGO Lathe Machine September 8, 1992 110.00
Operator
On 09 November 1993, member-workers of “P & R Parts Employees’
Union” declared a strike (the subject matter of a different case,
docketed RAB-IV-6-6720-94-RI, before the Arbitration Branch of the
NLRC). Petitioners were required by P & R, through its Personnel
Manager Ruben Ramillano, to shed light on the incident but, instead
of heeding the request, petitioners allegedly joined the strikers in
sympathy with the latter. chanroblespublishingcompany
Petitioners were dismissed from employment in December of 1993
(Jesus Rico and John Limbago on 13 December 1993; Fermin Zacate
on 17 December 1993 and Aniceto Esto on 22 December 1993) except
for Nazario Ponce whose employment was terminated the month
previous on 26 November 1993 supposedly for sleeping on duty.
Petitioners timely filed their respective complaints against P & R for
illegal dismissal, underpayment of wages, damages and attorney’s

fees. BRGT was ordered impleaded party respondent after P & R had
stated that petitioners should have directed their complaint with that
agency. P & R argued that petitioners were merely assigned to it by
BRGT agency pursuant to a contract of service executed on 22
September 1993 between the two entities. chanroblespublishingcompany
In a decision, dated 22 September 1994, the Labor Arbiter rendered
judgment in favor of petitioners; thus —
“WHEREFORE, premises considered, the following orders are
hereby entered:
“1. Declaring the existence of employer-employee
relationship between herein respondent P & R Parts
& Machineries Corporation and complainants
Nazario Ponce, Fermin Zacate, Jesus Rico, Aniceto
Esto and John Herman Limbago; chanroblespublishingcompany
“2. Declaring the termination of herein complainants
illegal;
“3. Ordering respondent P & R Parts & Machineries
Corporation to reinstate complainants Nazario Ponce,
Fermin Zacate, Jesus Rico, Aniceto Esto and John
Herman Limbago to their former positions with full
status and rights of a (sic) regular employees; chanroblespublishingcompany
“4. Ordering respondent P & R Parts & Machineries
Corporation and impleaded party respondent BRGT
Agency to pay, jointly and severally, unto the
complainants the amount appearing below as and for
payment of their backwages and wage differentials:
“1. Nazario Ponce P35,101.00
“2. Fermin Zacate 35,368.00
“3. Jesus Rico 40,280.00
“4. Aniceto Esto 34,151.00
“5. John Herman (Limbago) 32,226.00
“Total 177,126.00
=======

and the amount of P17,712.60 as and for attorney’s
fees.
“5. All other claims are hereby dismissed for lack of
merit.” [2] chanroblespublishingcompany
Respondent P & R, in its appeal to the NLRC, assailed the findings of
the Labor Arbiter particularly on the existence of an employeremployee
relationship between P & R and petitioners. P & R insisted
that petitioners were employees of BRGT Agency, an independent
contractor, pursuant to the latter’s “Job Contract” with P & R. This
contract provided:
“JOB CONTRACT
“KNOW ALL MEN BY THESE PRESENTS:
“This contract made and entered into by and between:
“P & R PARTS & MACHINERIES, INC., a Domestic
Company duly authorized and existing under and
pursuant to Philippine Laws with business address
at A. Bonifacio Ave., Cainta, Rizal, represented in
this act by Ruben A. Ramillano, Personnel Manager
and hereinafter referred to as FIRST PARTY:
“RIZ-MAN COMPANY, INC., a Domestic Company,
organized and existing under Philippine Laws, with
business address at 2 nd Flr. Teruel Bldg., A Bonifacio
Ave., Cainta, Rizal represented in this act by MR.
REYNALDO MATIAS President and hereinafter
referred to as SECOND PARTY: chanroblespublishingcompany
“WITNESSETH
“That the SECOND PARTY hereby proposes to the FIRST
PARTY [to] perform, execute and accomplish[ed] (sic) the
hereunder described job contract with the SECOND PARTY
Responsible for providing all Manpower required and such
accessory equipment necessary and the FIRST PARTY, hereby

accepts such proposal subject to the following terms and
condition[s] to wit: chanroblespublishingcompany
“1. This job contract shall be for a period of Five (5)
Months from August 16, 1993 to January 16, 1994
which may be renewed and/or extend[ed] at the
option of the FIRST PARTY with notice to be served
on the SECOND PARTY unless it is sooner
terminated by their party [in writing] at least thirty
(30) days prior to the extended terminat[ion] date;
“2. The SECOND PARTY and the latter’s (sic) shall
undertake to perform the job schedule mentioned in
Annex ‘A’ hereto attached and made an integral part
hereof;
“3. The FIRST PARTY shall pay the SECOND PARTY, the
weekly contract price per piece job accomplished
payable on Friday each week;
“4. No employer-employee relationship shall (exist)
between the FIRST PARTY and the latter’s staff as
regards to the FIRST PARTY. The SECOND PARTY
may field the necessary staff on apprenticeship,
training and/or such other status, provided that the
job herein subject of this contract shall [be]
completely accomplished;
“The above provision notwithstanding the FIRST PARTY
shall have the right to supervise and advice the
SECOND PARTY on quality of job performance being
conducted; chanroblespublishingcompany
“5. Should the job contract be required to be performed
at the premises of the FIRST PARTY, the FIRST
PARTY shall provide adequate safe and healthy
working conditions to the SECOND PARTY and (the)
latter’s staff. Such specialized tools and equipment
may be provided by the FIRST PARTY;

“6. Notwithstanding mutual understanding and
supervision of the job agreement herein stipulated,
no staff personnel of the SECOND PARTY shall be
required to perform more than eight (8) hour daily
work. Any extension or overtime work shall
correspondingly be charged the FIRST PARTY, who
shall be benefited by such extension time of such job
accomplishment;
“7. Aside from the stipulation of this agreement, the
SECOND PARTY and all persons performing such job
under its supervision and control hereby undertake to
observe all rules (and) regulations of the FIRST
PARTY, including but not limited to quality of job
performance, regularity of job output and security
and safety;
“8. The direct control on all job personnel shall be vested
on the SECOND PARTY but the FIRST PARTY may
assign person or persons to any job not stipulated
herein upon notice and with consent of the SECOND
PARTY; chanroblespublishingcompany
“9. The SECOND PARTY hereby acknowledges and
assumes full responsibility for the acts of its staff
assigned to the first party, as such, the SECOND
PARTY hereby expressly agrees to answer for any
damages or liability existing from any act or acts of its
staff while in the performance of their duties to the
FIRST PARTY, its official and employees and to third
persons;
“10. The SECOND PARTY shall [be] responsible and
answerable to its staff in accordance [with] existing
laws and such other status rules and regulations.
(The) FIRST PARTY shall not [be] liable to the staff
and personnel of the SECOND PARTY by virtue of the
herein stated job contract. Should the FIRST PARTY
be made liable for the SECOND PARTY’s failure to
comply with the requirements of the laws, rules and

egulations, the latter hereby oblig[ates] itself [to]
indemnify the FIRST PARTY to the full extent of such
liability, including attorney’s fees, if any. chanroblespublishingcompany
“11. Any breach of the stipulation(s) of this job contract
may be a ground for the re(sci)ssion of this
agreement, without need of judicial order.
“IN WITNESS WHEREOF, the parties hereunto set their hands,
this ___ day of _________, 1993.
P & R PARTS MACHINERIES, INC.
FIRST PARTY
By.
(SGD)
RUBEN RAMILLANO
Personnel Manager
RIZMAN SERVICES, INC.
SECOND PARTY
By:
(SGD)
CENIN M. CAMARILLO
Operation In Charge” [3]
Respondent NLRC, in its decision of 23 August 1995, disagreed with
the Labor Arbiter and curtly explained:
“After an in-depth review of the record taking into
consideration, the arguments of the parties to issues above, we
find for the appellant P & R Parts Machineries Co. chanroblespublishingcompany
“Clearly, We find grave abuse of discretion on the part of the
Labor Arbiter in holding that there was employee-employer
relationship between appellees and appellant. The Labor
Arbiter should have given respect to the job contract between
appellees and respondent BRGT Agency, firstly, because
appellees were only hired to work in the painting, rusting and

ubbing which job(s) are not necessarily connected with the
steel and metal fabrication of appellant. These type(s) of work
do not require machine tools as the same can be done by simple
hand tools such as brush and scrapers. Secondly, when asked to
help appellant to pinpoint the workers who committed (the) act
of sabotage, they left their work and join(ed) the strike. This act
of appellees could have served as cue that they are not
employees, but under an independent contractor.” [4] chanroblespublishingcompany
The NLRC, consistently with its above ratiocination, declared the
company not to have perforce been guilty of illegal dismissal, set
aside for lack of merit the decision appealed from, and decreed the
dismissal of the complaint of petitioners.
The plea made by petitioners for a reconsideration of the decision was
denied in the resolution, dated 07 November 1995, of the NLRC.
In the instant special civil action for certiorari, petitioners ask for a
review and reversal of the decision of NLRC. Specifically, petitioners
come up with the following “errors” said to have been committed by
public respondent: chanroblespublishingcompany
“I. Public respondent NLRC acted with grave abuse of
discretion tantamount to acting without or in excess of
jurisdiction by simply and arbitrarily disregarding evidence
before it indicating the existence of employer-employee
relationship between petitioners and P & R Parts or
misapprehending evidence of such a nature as to compel a
contrary conclusion if properly appreciated.
chanroblespublishingcompany
“II. Public respondent NLRC erred and gravely abused its
discretion when it reversed the Labor Arbiter who had
ruled that there is employer-employee relationship between
petitioners and P & R Parts, despite that BRGT Agency
A.K.A. Riz-Man Company, Inc. has disclaimed any
contractual relationship with P & R Parts and had
disclaimed the petitioners. chanroblespublishingcompany
“III. The public respondent NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction when

it reversed the Labor Arbiter who had ruled that P & R
Parts illegally dismissed petitioners, despite the fact that
with BRGT Agency A.K.A. Riz-Man Company Inc. out of
the way because of its denial that it had a contract to supply
labor, there could only be but one employer which is P & R
Parts which has no legal cause to terminate.” [5] chanroblespublishingcompany
The questions raised would initially boil down to whether or not an
employer-employee relationship has existed between petitioners and
respondent P & R, on which issue, the findings of the Labor Arbiter
and the NLRC are at complete variance. The NLRC has concluded
that BRGT Agency [6] is an independent contractor. On his part, the
Labor Arbiter, expressing negatively on the personality and capability
of BRGT Agency to be an independent contractor, has so
characterized the latter’s agreement with P & R as one of “labor-only
contracting” or an act prohibited by Article 106 of the Labor Code.
The Court finds merit in the petition.
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, equipment, machineries, work
premises, and other materials which are necessary in the conduct of
the business. [7] Jurisprudential holdings are to the effect that in
determining the existence of an independent contractor relationship,
several factors might 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. [8] chanroblespublishingcompany
Section 9(a), Rule VIII, Book III, of the Omnibus Rules Implementing
Article 106 of the Labor Code, provides, in turn, that a person who
supplies workers to another shall be deemed to be merely engaged in
“labor-only contracting,” a disallowed act, (a) when he does not have
substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials, and (b) when the
workers recruited and placed by him perform activities that relate
directly to the principal business or operations of the employer in
which the workers are habitually employed. Such supplier of labor is
considered merely as an agent or intermediary of the employer who
can correspondingly be held responsible to the workers in the same
manner and extent as if the latter are directly employed by him. [9]
The Court expresses its concurrence with the Labor Arbiter who, in
observance of the above criteria and given the factual settings of the
case, has concluded that the agreement between Riz-Man Co., Inc.
(BRGT Agency), and P & R was one of “labor-only contracting,”
thereby rendering both contractor and employer solidarily liable for
the infraction of the Labor Code. chanroblespublishingcompany
It would indeed appear that BRGT Agency was not so licensed to
operate as an independent contractor nor was it properly bonded in
connection with its job contract with P & R. No substantial evidence
was given to indicate that BRGT Agency had been possessed of
substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; or that it had its
own work methods; or that it carried on business operations separate
and distinct from that it had with private respondent P & R. BRGT
Agency’s role apparently had been merely to get persons or employees
to work for P & R Parts under the latter’s control and supervision. [10]
Petitioners were never given work assignment at any place other than
at the work premises of P & R. Petitioners were required to observe all
rules and regulations of P & R pertaining, among other things, to the
quality of job performance, regularity of job output and security and
safety on the job. The nature of work performed by each of the
petitioners — buffing, quality control, assembler, and lathe machine
operation — hardly were said to be directly unrelated to private

espondent P & R’s business of steel and metal fabrication of machine
spare parts.
From the view of the Court, the NLRC, given the circumstances, did
commit grave abuse of discretion when it completely discarded the
findings of the Labor Arbiter. chanroblespublishingcompany
The question next arises. Did P & R have a valid ground to terminate
the employment of petitioners
The claim of P & R that petitioners had joined the strikers after
refusing to shed light on the alleged sabotage committed by the
strikers was not adequately shown. Certainly, the mere expression of
compassion or sympathy by petitioners and sharing a merienda with,
or doling out a few pesos to, the striking workers could scarcely be a
legal cause for dismissal. As regards Nazario Ponce who was allegedly
caught sleeping on the job, no investigation appears to have been duly
conducted to warrant his outright dismissal. The burden of proving
just cause, as well as the proper observance of due process, to warrant
the dismissal of an employee would fall on an employer seeking to
pursue that extreme measure against the former. Unfortunately for P
& R, it was unable to properly discharge that burden. chanroblespublishingcompany
WHEREFORE, the writ of certiorari prayed for is GRANTED. The
decision of the NLRC, dated 23 August 1995, and its subsequent
Resolution of 07 November 1995 are ANNULLED and SET ASIDE.
The Decision, dated 22 September 1994, of the Labor Arbiter is
thereby REINSTATED and AFFIRMED. chanroblespublishingcompany
SO ORDERED.
chanroblespublishingcompany
Davide, Jr., Bellosillo, Panganiban and Quisumbing, JJ.,
concur. chanroblespublishingcompany
chanroblespublishingcompany
[1] Rules of Court.
[2] Rollo, p. 72. chanroblespublishingcompany
[3] Rollo, pp. 61-62. chanroblespublishingcompany
[4] Rollo, pp. 32-33. chanroblespublishingcompany
[5] Rollo, pp. 15-16. chanroblespublishingcompany

[6] In its pleadings before the Arbiter and the NLRC, BRGT Agency has
admitted that Riz-Man Co., Inc., and BRGT Agency, are one and the same
entity, and it has also failed as well to object to the references, allegations
and statements made by petitioners and the Arbiter that BRGT Agency and
Riz-Man Co, Inc., are one and the same entity. Its disclaimer at this stage of
the proceeding cannot be countenanced. chanroblespublishingcompany
[7] See Associated Anglo-American Tobacco Corporation vs. Clave, 189 SCRA
127; Villuga vs. NLRC, 225 SCRA 537; Mafinco Trading Corporation vs.
Ople, et al., 70 SCRA 139; Phil. Mfg. Co. vs. Geronimo and Garcia, 96 Phil.
276. chanroblespublishingcompany
[8] See Sandigan Savings & Loan Bank vs. NLRC, 254 SCRA 126; Aboitiz
Shipping Emp. Assn. vs. NLRC, 186 SCRA 825; Ruga vs. NLRC, 181 SCRA
266; Brotherhood Labor Unity Movement of the Phils., et al. vs. Zamora, et
al., 147 SCRA 49; Mafinco Trading Corp. vs. Ople, supra. chanroblespublishingcompany
[9] Baguio vs. NLRC, 202 SCRA 465; Ecal, et al. vs. NLRC, 195 SCRA 224;
Singer Sewing Machine Co. vs. Drilon, 193 SCRA 270; Associated Anglo-
American Tobacco Corp. vs. Clave, supra. chanroblespublishingcompany
[10] It might be noteworthy that private respondent BRGT Agency disclaimed, in
its 29 October 1994 Appeal and Memorandum, not only the contractual
relationship with private respondent P & R, but also the supervision and
control over petitioners. chanroblespublishingcompany