Republic of the
POLYFOAM-RGC INTERNATIONAL, CORPORATION and PRECILLA A. GRAMAJE,
- versus -
G.R. No. 172349
PERALTA, J., Acting Chairperson,*
June 13, 2012
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioners Polyfoam-RGC International Corporation (Polyfoam) and Precilla A. Gramaje (Gramaje) against respondent Edgardo Concepcion assailing the Court of Appeals (CA) Decision dated December 19, 2005 and Resolution dated April 25, 2006 in CA-G.R. SP No. 83696. The assailed decision reversed the National Labor Relations Commissions (NLRCs) Decision dated May 7, 2003 in NLRC NCR CA No. 030622-02, while the assailed resolution denied petitioners and respondents motions for reconsideration.
The factual and procedural antecedents follow:
February 8, 2000, respondent filed a Complaint
for illegal dismissal, non-payment of wages, premium pay for rest day, separation
pay, service incentive leave pay, 13th month pay, damages, and attorneys
fees against Polyfoam and Ms. Natividad Cheng (Cheng). Respondent alleged that he was hired by
Polyfoam as an all-around factory worker and served as such for almost six
In their Position Paper, Polyfoam and Cheng insisted that the NLRC has no jurisdiction over the case, because respondent was not their employee. They likewise contended that respondents money claims had already prescribed. Finally, they fault respondent for including Cheng as a party-defendant, considering that she is not even a director of the company.
In her Position Paper, Gramaje claimed that P.A. Gramaje Employment Services (PAGES) is a legitimate job contractor who provided some manpower needs of Polyfoam. It was alleged that respondent was hired as packer and assigned to Polyfoam, charged with packing the latters finished foam products. She argued, however, that respondent was not dismissed from employment, rather, he simply stopped reporting for work.
WHEREFORE, premises considered, judgment is hereby rendered finding complainant to have been illegally dismissed and respondents Polyfoam-RGC International Corporation, P.A. Gramaje Employment Services/Precilla A. Gramaje are ordered to pay complainant jointly and severally the following:
2). Backwages - 157,041.38
3). 13th Month Pay - 17,407.00
4). Moral Damages - 5,000.00
5). Exemplary Damages - 5,000.00
6). Attorneys fees - ___ 23,644.83
All other claims are denied for lack of factual basis.
The Labor Arbiter found respondent to
have been illegally dismissed from employment and thus is entitled to full
backwages inclusive of allowances. In
lieu of reinstatement, the LA awarded respondent separation pay of one month
salary for every year of service from
On appeal by petitioners, the NLRC modified the LA decision by exonerating Polyfoam from liability for respondents claim for separation pay and deleting the awards of backwages, 13th month pay, damages, and attorneys fees. The dispositive portion of the decision reads:
WHEREFORE, the appealed decision is modified in that the complaint against
respondent-appellant Polyfoam-RGC International Corp. is dismissed. However,
respondent-intervenor-appellant P.A. Gramaje Employment Services is hereby
ordered to pay complainant separation pay of one (1) month salary for every
year of service reckoned from April 21, 1996 up to the rendition of this
decision, or the sum of
The awards of backwages, 13th month pay, damages, and attorneys fees are set aside.
The NLRC found Gramaje to be an independent contractor who contracted the packaging aspect of the finished foam products of Polyfoam. Pursuant to said contract, Gramajes employees, including respondent, were assigned to Polyfoam but remained under the control and supervision of Gramaje. It likewise concluded that Gramaje had its own office equipment, tools, and substantial capital and, in fact, supplied the plastic containers and carton boxes used by her employees in performing their duties. The Commission also found sufficient evidence to prove that Gramaje paid respondents wages and benefits and reported the latter to the Social Security System (SSS) as a covered employee. As to whether there was illegal dismissal, the NLRC answered in the negative, since respondent was not notified that he had been dismissed nor was he prevented from returning to his work. The NLRC found Gramaje liable for claiming that respondent abandoned his job. Reinstatement, however, could not be decreed because of the strained relations between the parties; hence, the award of separation pay. But the NLRC refused to award backwages. The award of moral and exemplary damages was likewise deleted for lack of evidence.
Aggrieved, respondent elevated the
case to the CA in a special civil action for certiorari under Rule 65 of the Rules of Court. On
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The assailed Decision of the
National Labor Relations Commission, First Division dated
The CA agreed with the LAs conclusion that Gramaje is not a legitimate job contractor but only a labor-only contractor because of the following: (1) Gramaje failed to present its Audited Financial Statement that would have shown its financial standing and ownership of equipment, machineries, and tools necessary to run her own business; (2) Gramaje failed to present a single copy of the purported contract with Polyfoam as to the packaging aspect of the latters business; (3) Gramajes licenses supposedly issued by the DOLE appeared to be spurious. (4) Gramaje was not registered with DOLE as a private recruitment agency; and (5) Gramaje presented only one (1) SSS Quarterly Collection List whose authenticity is doubtful. The CA noted that petitioners are represented by only one law firm though they made it appear that they were represented by different lawyers. These circumstances, says the CA, give rise to the suspicion that the creation or establishment of Gramaje was just a scheme designed to evade the obligation inherent in an employer-employee relationship. Thus, respondent was indeed Polyfoams employee. This relationship was specifically shown by Polyfoams exercise of supervision over the work of respondent; the furnishing of a copy of Polyfoams Mga Alituntunin at Karampatang Parusa to serve as respondents guide in the performance of his duty; the length of time that respondent had performed activities necessary for Polyfoams business; and Polyfoams act of directly firing respondent. Finally, the appellate court affirmed the LAs findings of illegal dismissal as respondent was dismissed from the service without cause and due process. Consequently, separation pay in lieu of reinstatement was awarded. The CA quoted with approval the LA conclusions on the award of respondents other money claims.
Petitioners now come before the Court in this petition for review on certiorari based on the following assigned errors:
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE PETITION FOR CERTIORARI FILED BY HEREIN RESPONDENT CONSIDERING THE FACT THAT IT WAS CLEARLY FILED OUT OF TIME, HAVING BEEN FILED ON THE 77TH DAY FROM RECEIPT BY HEREIN RESPONDENT OF THE RESOLUTION OF THE NLRC DENYING HIS MOTION FOR RECONSIDERATION.
THE COURT OF APPEALS
ERRED IN NOT UPHOLDING THE DECISION OF THE NLRC AND ITS FINDINGS THAT A)
THE COURT OF APPEALS ERRED IN REINSTATING THE DECISION OF THE LABOR ARBITER MARITA PADOLINA AWARDING RESPONDENT CONCEPCION BACKWAGES, MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.
There are three issues for resolution, to wit: (1) whether or not Gramaje is an independent job contractor; (2) whether or not an employer-employee relationship exists between Polyfoam and respondent; and (3) whether or not respondent was illegally dismissed from employment.
Gramaje is a Labor-Only
Article 106 of the Labor Code explains the relations which may arise between an employer, a contractor, and the contractors employees, thus:
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 and Employment 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.
In Sasan, Sr. v. National Labor Relations Commission 4th Division, the Court distinguished permissible job contracting or subcontracting from labor-only contracting, to wit:
Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out to a contractor or subcontractor the performance or completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of the principal. A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
contractor or subcontractor carries on a distinct and independent business and
undertakes to perform the job, work or service on its own account and under its
own responsibility according to its own manner and method, and free from the
control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof;
(b) The contractor or subcontractor has substantial capital or investment; and
(c) The agreement between the principal and contractor or subcontractor assures the contractual employees entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social and welfare benefits.
In contrast, labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a principal. In labor-only contracting, the following elements are present:
(a) The contractor or subcontractor does not have
substantial capital or investment to actually perform the job, work or service
under its own account and responsibility; and
(b) The employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal.
The test 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 San Miguel Corporation v. Semillano, the Court laid down the criteria in determining the existence of an independent and permissible contractor relationship, to wit:
x x x [W]hether 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 a specified piece of work; the control and supervision of the work to another; the employers power with respect to the hiring, firing and payment of the contractors workers; the control of the premises; the duty to supply the premises, tools, appliances, materials, and labor; and the mode, manner and terms of payment.
Simply put, the totality of the facts and the surrounding circumstances of the case are to be considered. Each case must be determined by its own facts and all the features of the relationship are to be considered.
Applying the foregoing tests, we agree with the CAs conclusion that Gramaje is not an independent job contractor, but a labor-only contractor.
First, Gramaje has no substantial capital or investment. The presumption is that a contractor is a labor-only contractor unless he overcomes the burden of proving that it has substantial capital, investment, tools, and the like. The employee should not be expected to prove the negative fact that the contractor does not have substantial capital, investment and tools to engage in job-contracting.
Gramaje claimed that it has substantial capital of its own as well as investment in its office, equipment and tools. She pointed out that she furnished the plastic containers and carton boxes used in carrying out the function of packing the mattresses of Polyfoam. She added that she had placed in Polyfoams workplace ten (10) sealing machines, twenty (20) hand trucks, and two (2) forklifts to enable respondent and the other employees of Gramaje assigned at Polyfoam to perform their job. Finally, she explained that she had her own office with her own staff. However, aside from her own bare statement, neither Gramaje nor Polyfoam presented evidence showing Gramajes ownership of the equipment and machineries used in the performance of the alleged contracted job. Considering that these machineries are found in Polyfoams premises, there can be no other logical conclusion but that the tools and equipment utilized by Gramaje and her employees are owned by Polyfoam. Neither did Polyfoam nor Gramaje show that the latter had clients other than the former. Since petitioners failed to adduce evidence that Gramaje had any substantial capital, investment or assets to perform the work contracted for, the presumption that Gramaje is a labor-only contractor stands.
Second, Gramaje 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, Polyfoam, its apparent role having been merely to recruit persons to work for Polyfoam. It is undisputed that respondent had performed his task of packing Polyfoams foam products in Polyfoams premises. As to the recruitment of respondent, petitioners were able to establish only that respondents application was referred to Gramaje, but that is all. Prior to his termination, respondent had been performing the same job in Polyfoams business for almost six (6) years. He was even furnished a copy of Polyfoams Mga Alituntunin at Karampatang Parusa, which embodied Polyfoams rules on attendance, the manner of performing the employees duties, ethical standards, cleanliness, health, safety, peace and order. These rules carried with them the corresponding penalties in case of violation.
While it is true that petitioners submitted the Affidavit of Polyfoams supervisor Victor Abadia, claiming that the latter did not exercise supervision over respondent because the latter was not Polyfoams but Gramajes employee, said Affidavit is insufficient to prove such claim. Petitioners should have presented the person who they claim to have exercised supervision over respondent and their alleged other employees assigned to Polyfoam. It was never established that Gramaje took entire charge, control and supervision of the work and service agreed upon. And as aptly observed by the CA, it is likewise highly unusual and suspect as to the absence of a written contract specifying the performance of a specified service, the nature and extent of the service or work to be done and the term and duration of the relationship.
An Employer-Employee Relationship Exists
Between Respondent and Polyfoam
A finding that a contractor is a labor-only contractor, as opposed to permissible job contracting, is equivalent to declaring that there is an employer-employee relationship between the principal and the employees of the supposed contractor, and the labor-only contractor is considered as a mere agent of the principal, the real employer. In this case, Polyfoam is the principal employer and Gramaje is the labor-only contractor. Polyfoam and Gramaje are, therefore, solidarily liable for the rightful claims of respondent.
Respondent was Illegally Dismissed
stated that on
The LA gave credence to respondents narration of the circumstances of the case. Said conclusion was affirmed by the CA. We find no reason to depart from such findings.
Abandonment cannot be inferred from the actuations of respondent. When he discovered that his time card was off the rack, he immediately inquired from his supervisor. He later sought the assistance of his counsel, who wrote a letter addressed to Polyfoam requesting that he be re-admitted to work. When said request was not acted upon, he filed the instant illegal dismissal case. These circumstances clearly negate the intention to abandon his work.
Petitioners failed to show any valid or authorized cause under the Labor Code which allowed it to terminate the services of respondent. Neither was it shown that respondent was given ample opportunity to contest the legality of his dismissal. No notice of termination was given to him. Clearly, respondent was not afforded due process. Having failed to establish compliance with the requirements of termination of employment under the Labor Code, the dismissal of respondent was tainted with illegality. Consequently, respondent is entitled to reinstatement without loss of seniority rights, and other privileges and to his full backwages inclusive of allowances and to his other benefits or their monetary equivalent computed from the time his compensation was withheld up to the time of his actual reinstatement. However, if reinstatement is no longer feasible as in this case, separation pay equivalent to one month salary for every year of service shall be awarded as an alternative. Thus, the CA is correct in affirming the LAs award of separation pay with full backwages and other monetary benefits.
WHEREFORE, premises considered, the petition is hereby DENIED.
The Court of
Appeals Decision dated
DIOSDADO M. PERALTA
ROBERTO A. ABAD
MARTIN S. VILLARAMA JOSE CATRAL MENDOZA
Associate Justice Associate Justice
ESTELA M. PERLAS-BERNABE
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.
DIOSDADO M. PERALTA
Third Division, Acting Chairperson
I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)
* Per Special Order No. 1228 dated June 6, 2012.
** Designated Acting Member in lieu of Associate Justice Presbitero J. Velasco, Jr., per Special Order No. 1229 dated June 6, 2012.
 Penned by Associate Justice Regalado E. Maambong, with Associate Justices Rodrigo V. Cosico and Lucenito N. Tagle, concurring; rollo, pp. 33-63.
 Id. at 65-66.
 Penned by Commissioner Vicente S.E. Veloso, with Presiding Commissioner Roy V. Seeres concurring; CA rollo, pp. 49-61.
 CA rollo, p. 66.
 Rollo, pp. 123-124.
 Id. at 75.
 Id. at 163-170; Note that Precilla Gramaje filed the Motion for Intervention, but the named intervenor in the Position Paper is P.A. Gramaje Employment Services.
 CA rollo, p. 166.
 Rollo, p. 136.
 Supra note 1.
 Rollo, pp. 62-63.
 G.R. No. 176240, October 17, 2008, 569 SCRA 670.
 Sasan, Sr. v. National Labor Relations Commission 4th Division, supra, at 689-690. (Citations omitted.)
 San Miguel Corporation v. Aballa, G.R. No. 149011, June 28, 2005, 461 SCRA 392, 421.
 G.R. No. 164257,
 San Miguel Corporation v. Semillano, supra, at 124; Sasan, Sr. v. National Labor Relations Commission 4th Division, supra note 41, at 691.
 Sasan, Sr. v. National Labor Relations Commission 4th Division, supra note 41, at 691.
Corporation v. National Labor Relations Commission, G.R. No. 148490,
 CA rollo, p. 211.
 7K Corporation v. National Labor Relations Commission, supra note 47.
 See: San Miguel Corporation v. Aballa, supra note 43, at 425.
 CA rollo, pp. 186-191.
 Rollo, p. 58.
v. San Miguel Corporation, G.R. No. 168537,
 7K Corporation v. National Labor Relations Commission, supra note 47.
 See Iligan Cement Corporation v. ILIASCOR Employees and Workers
AA Manufacturer v. Antonio, G.R. No. 160854,