Job contracting / Labor-only contracting
DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC. vs.
DIGITEL EMPLOYEES UNION (DEU)
G.R. Nos. 184903, 10 October 2012
FACTS:
Digitel Employees Union and Digitel commenced collective bargaini
ng negotiations which resulted in a bargaining deadlock. On despite
the order of the Labor Secretary to execute a CBA, still, no CBA w
as forged between Digitel and the Union. Some Union members ab
andoned their employment with Digitel. The Union later became do
rmant. 10 years thereafter, Digitel received the President of the Un
ion, a letter containing the list of officers, CBA proposals and groun
d rules. Digitel was reluctant to negotiate with the Union and dema
nded that the latter show compliance with the provisions of the Uni
on’s Constitution and By-
laws on union membership and election of officers.
The faction filed a case for Preventive Mediation before the NCMB b
ased on Digitel’s violation of the duty to bargain. During the pende
ncy, Interactive Technology Solutions, Inc. (I-
tech) was incorporated. Then, Labor Secretary assumed jurisdiction
over the labor dispute.
During the pendency of the controversy, Digitel Service, Inc. (Digis
erv) filed with the DOLE an Establishment Termination Report stati
ng that it will cease its business operation. The closure affected at l
east 100 employees, 42 of whom are members of the herein respo
ndent Union.
ISSUE:
Whether or not an employer commits ULP when it closed down one
of its enterprises resulting to the dismissal of the union members
pending the assumption order of the Secretary of Labor regarding
its duty to bargain.
RULING:
Yes. Bad faith was manifested by the timing of the closure of Digise
rv and the rehiring of some employees to Interactive Technology S
olutions, Inc. (I-
tech), a corporate arm of Digitel. The timing of the creation of I-
tech is dubious. It was incorporated while the labor dispute within
Digitel was pending. I-
tech’s primary purpose was to provide call center/customer contact
service, the same service provided by Digiserv. It conducts its busi
ness inside the Digitel office. The former head of Digiserv is also an
officer of I-
tech. Thus, when Digiserv was closed down, some of the employee
s presumably non-union members were rehired by I-tech.
Thus, the closure of Digiserv pending the existence of an assumpti
on order coupled with the creation of a new corporation performing
similar functions as Digiserv leaves no iota of doubt that the target
of the closure are the union member-
employees. These factual circumstances prove that Digitel terminat
ed the services of the affected employees to defeat their security of
tenure. The termination of service was not a valid retrenchment; it
was an illegal dismissal of employees.
It needs to be mentioned too that the dismissal constitutes an unfa
ir labor practice under Article 248(c) of the Labor Code which refers
to contracting out services or functions being performed by union
members when such will interfere with, restrain or coerce employe
es in the exercise of their rights to self-
organization. At the height of the labor dispute, occasioned by Digit
el’s reluctance to negotiate with the Union, I-
tech was formed to provide, as it did pro
Manila Water Co., vs Pena (2004) G.R. 158255
FACTS:
Petitioner Manila Water Company, Inc. is one of the two private
concessionaires contracted by the Metropolitan Waterworks and
Sewerage System (MWSS) to manage the water distribution
system in the East Zone of Metro Manila.
Under the Concession Agreement, petitioner undertook to absorb
former employees of the MWSS whose names and positions were
in the list furnished by the latter, while the employment of those
not in the list was terminated. Private respondents, being
contractual collectors of the MWSS, were among the 121
employees not included in the list; nevertheless, petitioner
engaged their services without written contract for three months.
Before the end of the three-month contract, the 121 collectors
incorporated the Association Collectors Group, Inc. (ACGI), which
was contracted by petitioner to collect charges for the Balara
Branch. Subsequently, most of the 121 collectors were asked by
the petitioner to transfer to the First Classic Courier Services, a
newly registered corporation. Only private respondents remained
with ACGI.
Private respondents filed a complaint for illegal dismissal and
money claims against petitioner, contending that they were
petitioner’s employees as all the methods and procedures of their
collections were controlled by the latter.
Petitioner on the other hand asserts that private respondents were
employees of ACGI, an independent contractor. It maintained that
it had no control and supervision over private respondents’ manner
of performing their work except as to the results.
Thus, petitioner did not have an employer-employee relationship
with the private respondents, but only a service contractor-client
relationship with ACGI.
ISSUE:
Whether or not ACGI is an independent contractor;
HELD:
ACGI is an independent contractor but a labor- only contractor.
First, ACGI does not have substantial capitalization or investment
in the form of tools, equipment, machineries, work premises, and
other materials, to qualify as an independent contractor. While it
has an authorized capital stock of P1,000,000.00, only P62,500.00
is actually paid-in, which cannot be considered substantial
capitalization.
The 121 collectors subscribed to four shares each and paid only the
amount of P625.00 in order to comply with the incorporation
requirements. Further, private respondents reported daily to the
branch office of the petitioner because ACGI has no office or work
premises. In fact, the corporate address of ACGI was the residence
of its president, Mr. Herminio D. Peña. Moreover, in dealing with
the consumers, private respondents used the receipts and
identification cards issued by petitioner.
Second, the work of the private respondents was directly related to
the principal business or operation of the petitioner. Being in the
business of providing water to the consumers in the East Zone, the
collection of the charges therefore by private respondents for the
petitioner can only be categorized as clearly related to, and in the
pursuit of the latter’s business.
Lastly, ACGI 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, petitioner. Prior to private respondents’ alleged
employment with ACGI, they were already working for petitioner,
subject to its rules and regulations in regard to the manner and
method of performing their tasks.
This form of control and supervision never changed although they
were already under the seeming employ of ACGI.
Petitioner issued memoranda regarding the billing methods and
distribution of books to the collectors; it required private
respondents to report daily and to remit their collections on the
same day to the branch office or to deposit them with Bank of the
Philippine Islands; it monitored strictly their attendance as when a
collector cannot perform his daily collection, he must notify
petitioner or the branch office in the morning of the day that he will
be absent; and although it was ACGI which ultimately disciplined
private respondents, the penalty to be imposed was dictated by
petitioner as shown in the letters it sent to ACGI specifying the
penalties to be meted on the erring private respondents.
These are indications that ACGI was not left alone in the
supervision and control of its alleged employees. Consequently, it
can be concluded that ACGI was not an independent contractor
since it did not carry a distinct business free from the control and
supervision of petitioner.
Under this factual milieu, there is no doubt that ACGI was engaged
in labor-only contracting, and as such, is considered merely an
agent of the petitioner.
In labor-only contracting, the statute creates anmemployer-
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. Since ACGI is
only a labor-only contractor, the workers it supplied should be
considered as employees of the petitioner.
PCI Automation Center, Inc. vs. NLRC, GR No. 115920, 29
January 1996
FACTS:
 Philippine Commercial International Bank (PCIB)
commenced its Project intended to link all existing computer
systems within PCIB and its various branches around the
country. It entered into a Computer Services Agreement
with petitioner PCI Automation Center (PCI-AC) under which
petitioner obligated itself to direct, supervise and run the
development of the software of PCIB.
 PCIB agreed to provide the petitioner with encoders and
computer attendants, among others.
 To comply with its obligation to procure manpower for the
petitioner, PCIB engaged the services of Prime Manpower.
PCIB and Prime entered into an External Job Contract
 Private respondent Hector was hired by Prime and assigned
to petitioner as a data encoder.
 Prime decided to terminate private respondent’s services
after it was informed by the petitioner that his services were
no longer needed in the project.
 Private respondent filed before the NLRC a complaint for
illegal dismissal against Prime and PCI-AC
ISSUE:
 Whether private respondent is an employee of Prime
RULING:
 NO. As Prime is a labor-only contractor, the workers it
supplied to the petitioner, including private respondent,
should be considered employees of the petitioner. The
admissions made by private respondent in his affidavits and
position paper that he is a regular employee of Prime are
not conclusive on this Court as the existence of an
employer-employee relationship is a question of law which
may not be made the subject of stipulation
 The legitimate job contractor provides services while the
labor-only contractor provides only manpower. The
legitimate job contractor undertakes to perform a specific
job for the principal employer while the labor-only
contractor merely provides the personnel to work for the
principal employer.
 An employer who engages the services of a bona fide
independent contractor is merely an indirect employer, by
operation of law, of his contractor's employees.
Just Causes
Herminigildo Inguillo and Zenaida Bergante vs. First Philippine Scales, Inc.
(FPSI) and/or Amparo Policarpio, manager
G.R. No. 165407 (June 5, 2009)
In 1991, FPSI and First Philippine Scales Industries Labor Union (FPSILU)
entered into a Collective Bargaining Agreement (CBA) for a period of five (5)
years in a document entitled RATIPIKASYON NG KASUNDUAN. Bergante and
Inguillo, who were members of FPSILU, signed the said document.
Bergante, Inguillo and several FPSI employees joined another union,
the Nagkakaisang Lakas ng Manggagawa (NLM). [The latter] filed with the
Department of Labor and Employment (DOLE) an intra-union
dispute against FPSILU and FPSI. Meanwhile, on March 29, 1996, the
executive board and members of the FPSILU addressed a document dated
March 18, 1996 denominated as “Petisyon” to FPSI's general manager,
Amparo Policarpio (Policarpio), seeking the termination of the services of
[several employees, including herein petitioners. This was granted upon by
FPSI, which terminated, among others, herein petitioners.]
In their Petition, Bergante and Inguillo assail the legality of their termination
based on the Union Security Clause in the CBA between FPSI and FPSILU.
[(1) Was there a valid ground for termination?
(2) Was there compliance with the procedural due process to the
termination?]
(1) Yes. The Labor Code of the Philippines has several provisions under
which an employee may be validly terminated, namely: (1) just causes
under Article 282; (2) authorized causes under Article 283; (3) termination
due to disease under Article 284; and (4) termination by the employee or
resignation under Article 285. While the said provisions did not mention as
ground the enforcement of the Union Security Clause in the CBA, the
dismissal from employment based on the same is recognized and accepted
in our jurisdiction.
“Union security” is a generic term, which is applied to and comprehends
“closed shop,” “union shop,” “maintenance of membership” or any other
form of agreement which imposes upon employees the obligation to
acquire or retain union membership as a condition affecting
employment. There is union shop when all new regular employees are
required to join the union within a certain period as a condition for their
continued employment. There is maintenance of membership shop when
employees, who are union members as of the effective date of the
agreement, or who thereafter become members, must maintain union
membership as a condition for continued employment until they are
promoted or transferred out of the bargaining unit or the agreement is
terminated.[40] A closed-shop, on the other hand, may be defined as an
enterprise in which, by agreement between the employer and his
employees or their representatives, no person may be employed in any or
certain agreed departments of the enterprise unless he or she is, becomes,
and, for the duration of the agreement, remains a member in good standing
of a union entirely comprised of or of which the employees in interest are a
part.[
Bergante and Inguillo assail the legality of their termination based on the
Union Security Clause in the CBA between FPSI and FPSILU. Article II[42] of
the CBA pertains to Union Security and Representatives, which provides:
“The Company hereby agrees to a UNION SECURITY [CLAUSE] with the following
terms:
1. All bonafide union members x x x x shall, as a condition to their continued
employment, maintain their membership with the UNION;
xxx
5. Any employee/union member who fails to retain union membership in
good standing may be recommended for suspension or dismissal by the Union
Directorate and/or FPSILU Executive Council x x x”
Verily, the aforesaid provision requires all members to maintain their
membership with FPSILU during the lifetime of the CBA. Failing so, and for
any of the causes enumerated therein, the Union Directorate and/or FPSILU
Executive Council may recommend to FPSI an employee/union member's
suspension or dismissal. Records show that Bergante and Inguillo were
former members of FPSILU based on their signatures in the document which
ratified the CBA. It can also be inferred that they disaffiliated from FPSILU
when the CBA was still in force and subsisting, as can be gleaned from the
documents relative to the intra-union dispute between FPSILU and NLM-
KATIPUNAN. In view of their disaffiliation, as well as other acts allegedly
detrimental to the interest of both FPSILU and FPSI, a “Petisyon” was
submitted to Policarpio, asking for the termination of the services of
employees who failed to maintain their Union membership.
In terminating the employment of an employee by enforcing the Union
Security Clause, the employer needs only to determine and prove that: (1)
the union security clause is applicable; (2) the union is requesting for the
enforcement of the union security provision in the CBA; and (3) there is
sufficient evidence to support the union's decision to expel the employee
from the union or company. All the requisites have been sufficiently met
and FPSI was justified in enforcing the Union Security Clause.
The stipulations in the CBA authorizing the dismissal of employees are of
equal import as the statutory provisions on dismissal under the Labor Code,
since a CBA is the law between the company and the Union, and compliance
therewith is mandated by the express policy to give protection to labor.
In Caltex Refinery Employees Association (CREA) v. Brillantes, the Court
expounded on the effectiveness of union security clause when it held that it
is one intended to strengthen the contracting union and to protect it from
the fickleness or perfidy of its own members. For without such safeguards,
group solidarity becomes uncertain; the union becomes gradually weakened
and increasingly vulnerable to company machinations. In this security
clause lies the strength of the union during the enforcement of the
collective bargaining agreement. It is this clause that provides labor with
substantial power in collective bargaining.
(2) No. Nonetheless, while We uphold dismissal pursuant to a union security
clause, the same is not without a condition or restriction. The enforcement
of union security clauses is authorized by law, provided such enforcement is
not characterized by arbitrariness, and always with due process. There are
two (2) aspects which characterize the concept of due process under the
Labor Code: one is substantive––whether the termination of employment
was based on the provisions of the Labor Code or in accordance with the
prevailing jurisprudence; the other is procedural - the manner in which the
dismissal was effected.
Procedural due process in the dismissal of employees requires notice and
hearing. The employer must furnish the employee two written notices
before termination may be effected. The first notice apprises the employee
of the particular acts or omissions for which his dismissal is sought, while
the second notice informs the employee of the employer’s decision to
dismiss him. The requirement of a hearing, on the other hand, is complied
with as long as there was an opportunity to be heard, and not necessarily
that an actual hearing was conducted.
In the present case, the required two notices that must be given to herein
petitioners Bergante and Inguillo were lacking. Respondents, however, aver
that they had furnished the employees concerned, including petitioners,
with a copy of FPSILU's “Petisyon.” While the “Petisyon” enumerated the
several grounds that would justify the termination of the employees
mentioned therein, yet such document is only a recommendation by
the Union upon which the employer may base its decision. It cannot be
considered a notice of termination. A perusal of each of [the grounds stated
therein] leads Us to conclude that what was stated were general
descriptions, which in no way would enable the employees to intelligently
prepare their explanation and defenses.
Policarpio's allegations are self-serving. Except for her claim as stated in
the respondent's Position Paper, nowhere from the records can We find
that Bergante and Inguillo were accorded the opportunity to present
evidence in support of their defenses. Policarpio relied heavily on the
“Petisyon” of FPSILU. She failed to convince Us that during the dialogue,
she was able to ascertain the validity of the charges mentioned in the
“Petisyon.” In her futile attempt to prove compliance with the procedural
requirement, she reiterated that the objective of the dialogue was to
provide the employees “the opportunity to receive the act of grace of FPSI
by giving them an amount equivalent to one-half (½) month of their salary
for every year of service.” We are not convinced. We cannot even
consider the demand and counter-offer for the payment of the employees
as an amicable settlement between the parties because what took place
was merely a discussion only of the amount which the employees are willing
to accept and the amount which the respondents are willing to give. Such
non-compliance is also corroborated by Bergante and Inguillo in their
pleadings denouncing their unjustified dismissal. In fine, We hold that the
dialogue is not tantamount to the hearing or conference prescribed by
law.
G.R. No. 168081, October 17, 2008
ARMANDO G. YRASUEGUI, petitioners, vs. PHILIPPINE
AIRLINES, INC., respondents.
FACTS: THIS case portrays the peculiar story of an international
flight steward who was dismissed because of his failure to adhere
to the weight standards of the airline company.
The proper weight for a man of his height and body structure is
from 147 to 166 pounds, the ideal weight being 166 pounds, as
mandated by the Cabin and Crew Administration Manual of PAL.
In 1984, the weight problem started, which prompted PAL to send
him to an extended vacation until November 1985. He was allowed
to return to work once he lost all the excess weight. But the
problem recurred. He again went on leave without pay from
October 17, 1988 to February 1989.
Despite the lapse of a ninety-day period given him to reach his
ideal weight, petitioner remained overweight. On January 3, 1990,
he was informed of the PAL decision for him to remain grounded
until such time that he satisfactorily complies with the weight
standards. Again, he was directed to report every two weeks for
weight checks, which he failed to comply with.
On April 17, 1990, petitioner was formally warned that a repeated
refusal to report for weight check would be dealt with accordingly.
He was given another set of weight check dates, which he did not
report to.
On November 13, 1992, PAL finally served petitioner a Notice of
Administrative Charge for violation of company standards on
weight requirements. Petitioner insists that he is being
discriminated as those similarly situated were not treated the
same.
On June 15, 1993, petitioner was formally informed by PAL that
due to his inability to attain his ideal weight, “and considering the
utmost leniency” extended to him “which spanned a period
covering a total of almost five (5) years,” his services were
considered terminated “effective immediately.”
LABOR ARBITER: held that the weight standards of PAL are
reasonable in view of the nature of the job of petitioner. However,
the weight standards need not be complied with under pain of
dismissal since his weight did not hamper the performance of his
duties.
NLRC affirmed.
CA: the weight standards of PAL are reasonable. Thus, petitioner
was legally dismissed because he repeatedly failed to meet the
prescribed weight standards. It is obvious that the issue of
discrimination was only invoked by petitioner for purposes of
escaping the result of his dismissal for being overweight.
ISSUE: WON he was validly dismissed.
HELD: YES
A reading of the weight standards of PAL would lead to no other
conclusion than that they constitute a continuing qualification of an
employee in order to keep the job. The dismissal of the employee
would thus fall under Article 282(e) of the Labor Code.
In the case at bar, the evidence on record militates against
petitioner’s claims that obesity is a disease. That he was able to
reduce his weight from 1984 to 1992 clearly shows that it is
possible for him to lose weight given the proper attitude, inherent quality reasonably necessary for satisfactory job
determination, and self-discipline. Indeed, during the clarificatory performance.”
hearing on December 8, 1992, petitioner himself claimed that The business of PAL is air transportation. As such, it has committed
“[t]he issue is could I bring my weight down to ideal weight which itself to safely transport its passengers. In order to achieve this, it
is 172, then the answer is yes. I can do it now.” must necessarily rely on its employees, most particularly the cabin
Petitioner has only himself to blame. He could have easily availed flight deck crew who are on board the aircraft. The weight
the assistance of the company physician, per the advice of PAL. standards of PAL should be viewed as imposing strict norms of
In fine, We hold that the obesity of petitioner, when placed in the discipline upon its employees.
context of his work as flight attendant, becomes an analogous The primary objective of PAL in the imposition of the weight
cause under Article 282(e) of the Labor Code that justifies his standards for cabin crew is flight safety.
dismissal from the service. His obesity may not be unintended, but Separation pay, however, should be awarded in favor of the
is nonetheless voluntary. As the CA correctly puts it, employee as an act of social justice or based on equity. This is so
“[v]oluntariness basically means that the just cause is solely because his dismissal is not for serious misconduct. Neither is it
attributable to the employee without any external force influencing reflective of his moral character.
or controlling his actions. This element runs through all just causes
under Article 282, whether they be in the nature of a wrongful
action or omission. Gross and habitual neglect, a recognized just
cause, is considered voluntary although it lacks the element of
intent found in Article 282(a), (c), and (d).”
NOTES:
The dismissal of petitioner can be predicated on the bona fide
occupational qualification defense. Employment in particular jobs
may not be limited to persons of a particular sex, religion, or
national origin unless the employer can show that sex, religion, or
national origin is an actual qualification for performing the job. The
qualification is called a bona fide occupational qualification (BFOQ).
In short, the test of reasonableness of the company policy is used
because it is parallel to BFOQ. BFOQ is valid “provided it reflects an