NERI vs NLRC

Petitioners Virginia G. Neri and Jose Cabelin were hired by BCC, a

corporation engaged in providing technical, maintenance, engineering,
housekeeping, security and other specific services to its clientele.
-They were assigned to work in the Cagayan de Oro City Branch of
respondent FEBTC with Neri as radio/telex operator and Cabelin as
janitor, before being promoted to messenger on 1 April 1989.
On 28 June 1989, petitioners instituted complaints against FEBTC and
BCC to compel Far East 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.
Labor Arbiter: held that BCC was an independent contractor as it had
proved that it has substantial capital hence, Neri and Cabelin were
employees of BCC and not of the Far East Bank.
Neri and Cabelins contention:
1. They contend that BCC in engaged in "labor-only" contracting
because it failed to adduce evidence purporting to show that it invested
in the form of tools, equipment, machineries, work premises and other
materials which are necessary in the conduct of its business.
2. That they perform duties which are directly related to the principal
business or operation of FEBTC ( a characteristic of labor only
contracting)
3. If the definition of "labor-only" contracting is to be read in
conjunction with job contracting,

then the only logical conclusion is that
BCC is a "labor only" contractor. Consequently, they must be deemed
employees of respondent bank by operation of law since BCC is merely
an agent of FEBTC following the doctrine laid down in Philippine Bank of
Communications v. National Labor Relations Commission

where it was
ruled that where "labor-only" contracting exists, the Labor Code itself
establishes an employer-employee relationship between the employer
and the employees of the "labor-only" contractor; hence, FEBTC should
be considered the employer of petitioners who are deemed its
employees through its agent, "labor-only" contractor BCC.
ISSUE: Whether or not BCC is engaged in a labor-only contracting. NO, it
is an INDEPENDENT CONTRACTOR.
RULING:
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 relatedto the principal business of the
employer.
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 of Php 1.5M. BCC is
therefore a highly capitalized venture and cannot be deemed engaged in
labor-only contracting.
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.
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" instead of and. 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. On the other hand, the Court has already taken
judicial notice of the general practice adopted in several government
and private institutions and industries of hiring independent contractors
to perform special services. These services range from janitorial, security
and even technical or other specific services such as those performed by
petitioners Neri and Cabelin. While these services may be considered
directly related to the principal business of the employer,
nevertheless, they are not necessary in the conduct of the
principal business of the employer.





















TABAS vs CALIFORNIA
-Petitioners Tabas et al were, prior to their stint with California,
employees of Livi Manpower Services, Inc. (Livi), which subsequently
assigned them to work as "promotional merchandisers" for the former
firm pursuant to a manpower supply agreement.
The agreement provided that California
a. "has no control or supervisions whatsoever over [Livi's]
workers with respect to how they accomplish their work or perform
[Californias] obligation";
b. the Livi "is an independent contractor and nothing herein
contained shall be construed as creating between [California] and [Livi] .
. . the relationship of principal[-]agent or employer[-]employee';
c. that "it is hereby agreed that it is the sole responsibility of
[Livi] to comply with all existing as well as future laws, rules and
regulations pertinent to employment of labor"
d. and that "[California] is free and harmless from any liability
arising from such laws or from any accident that may befall workers and
employees of [Livi] while in the performance of their duties for
[California].
7
-They signed a 6 month contract, which was renewed upon expiration.
Unlike regular California employees, who received not less than
P2,823.00 a month (with benefits), they received P38.56 plus P15.00 in
allowance daily.
-The petitioners now allege that they had become regular California
employees and demand similar benefits. They likewise filed a complaint
for illegal dismissal against California since they refused to rehire them.
Californias contention:
1. It is not the petitioners' employer
2. that the "retrenchment" had been forced by business losses as well as
expiration of contracts.
3. That the petitioners themselves admitted that they were LIVIs direct
employees
4. That they have been hired on a temporal or seasonal basis
Labor Arbiter: ruled that there was no ER-EE relationship between
California and the Petitioners.
ISSUE: WON California is liable against the petitioners. YES!
RULING:
California is liable BY OPERATION OF LAW (Either or Both shoulder
liability)
Notwithstanding the absence of a direct employer-employee
relationship between the employer in whose favor work had been
contracted out by a "labor-only" contractor, and the employees, the
former has the responsibility, together with the "labor-only"
contractor, for any valid labor claims, by operation of law.
The reason, is that the "labor-only" contractor is considered "merely an
agent of the employer,"

and liability must be shouldered by either one
or shared by both.
In the case at bar, Livi performs "manpower services", meaning to say, it
contracts out labor in favor of clients. We hold that it is one( a labor
only) notwithstanding its vehement claims to the contrary, and
notwithstanding the provision of the contract that it is "an independent
contractor."

The nature of one's business is not determined by self-serving
appellations one attaches thereto but by the tests provided by statute
and prevailing case law.

The bare fact that Livi maintains a separate line of business does not
extinguish the equal fact that it has provided California with workers to
pursue the latter's own business. In this connection, we do not agree
that the petitioners had been made to perform activities 'which are not
directly related to the general business of manufacturing,"
California's purported "principal operation activity. " The petitioner's
had been charged with "merchandizing [sic] promotion or sale of the
products of [California] in the different sales outlets in Metro Manila
including task and occational [sic] price tagging," an activity that is
doubtless, an integral part of the manufacturing business. It is not, then,
as if Livi had served as its (California's) promotions or sales arm or agent,
or otherwise, rendered a piece of work it (California) could not have
itself done; Livi, as a placement agency, had simply supplied it with the
manpower necessary to carry out its (California's) merchandising
activities, using its (California's) premises and equipment.

What is LIVIs or Californias liability?
The records show that the petitioners had been given an initial six-
month contract, renewed for another six months.
Accordingly, under Article 281 of the Code, they had become regular
employees-of-California-and had acquired a secure tenure. Hence, they
cannot be separated without due process of law.
California should be warned that retrenchment of workers, unless
clearly warranted, has serious consequences not only on the State's
initiatives to maintain a stable employment record for the country, but
more so, on the workingman himself, amid an environment that is
desperately scarce in jobs.