Almirante: Labor-only contracting

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By Dominador Almirante

Labor case Digest

Saturday, January 11, 2014

ON March 29, 1993, petitioner First Philippine Industrial Corp. (FPIC) entered into a Contract of Special Services with De Guzman Manpower Services (DGMS), where the latter agreed to undertake some aspects of building and grounds maintenance at FPIC’s premises, offices and facilities, as well as to provide clerical and other utility services as may be required from time to time by FPIC.

Pursuant to that contract, respondents Raquel Calimbas and Luisa Mahilom were engaged by the DGMS to render services to FPIC. Calimbas was assigned as a department secretary at the Technical Services Department beginning June 3, 1996, while respondent Mahilom served as a clerk at the Money Movement Section of the Finance Division starting Feb. 13, 1996. On June 21, 2001, petitioner FPIC informed the respondents that their services would no longer be needed on July 31, 2001 as a result of the “Pace-Setting” Study. Accordingly, DGMS formally notified both respondents that their respective work assignments in FPIC were no longer available to them effective July 31, 2001.

On Aug. 3, 2001, respondents Calimbas and Mahilom signed quitclaims, releasing and discharging DGMS from whatever claims they might have against them by virtue of their past employment upon receipt of the sums of P17,343.10 and P23,459.14, respectively.


On Aug. 16, 2001, respondents filed a complaint against FPIC for illegal dismissal, and for money claims, damages and attorney’s fees alleging that they were regular employees of petitioner FPIC after serving almost five years, and that they were dismissed without cause.

Did the complaint prosper?

The Supreme Court ruling: Yes.

The Court sustained the findings of the Court of Appeals (CA) that respondents are petitioner’s employees and that DGMS is engaged in labor-only contracting.

First, in Vinoya v. National Labor Relations Commission, 381 Phil. 460, 475-476 (200), the Court categorically stated that the actual paid-in capital of P75,000 could not be considered as substantial capital. Thus, DGMS’s actual paid-in capital in the amount of P75,000 does not constitute substantial capital essential to carry out its business as an independent job contractor. In spite of its bare assertion that the Vinoya case does not apply in the present case, DGMS has not shown any serious and cogent reason to disregard the ruling in the aforementioned case. Records likewise reveal that DGMS has no substantial equipment in the form of tools, equipment and machinery. As a matter of fact, respondents were using office equipment and materials owned by petitioner while they were rendering their services at its offices.

Second, petitioner exercised the power of control and supervision over the respondents. As aptly observed by the CA, “the daily time records of respondents even had to be countersigned by the officials of petitioner to check whether they had worked during the hours declared therein.

Furthermore, the fact that DGMS did not assign representatives to supervise over respondents’ work in petitioner’s company tends to disprove the independence of DGMS. It is axiomatic that 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 subjected to the control of the employer, except only to the results of the work. Obviously, on this score alone, petitioner cannot rightly claim that DGMS was an independent job contractor inasmuch as respondents were subjected to the control and supervision of petitioner while they were performing their jobs.”

Third, also worth stressing are the points highlighted by respondents: (1) Respondents worked only at petitioner’s offices for an uninterrupted period of five years, occupying the same position at the same department under the supervision of company officials; (2) Three weeks ahead of the termination letters issued by DGMS, petitioner’s HR Manager Lorna Young notified respondents, in a closed-door meeting, that their services to the company would be terminated by July 31, 2001; (3) In the termination letters prepared by DGMS, it was even stressed that the said termination letters will formalize the verbal notice given by petitioner’s HR Administration personnel; (4) The direct superiors of respondents were managerial employees of petitioner, and had direct control over all the work-related activities of the latter.

This control included the supervision of respondents’ performance of their work and their compliance with petitioner’s company policies and procedures. DGMS, on the other hand, never maintained any representative at the petitioner’s office to oversee the work of respondents (First Philippine Industrial Corporation vs. Raquel M. Calimbas and Luisa P. Mahilom, G.R. No. 179256, July 10, 2013).

(Almirante is a former labor arbiter)

Published in the Sun.Star Cebu newspaper on January 12, 2014.


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