OCTOBER 4 LABOR DIGESTS - WAGES

140 SCRA 304- Labor Law – Labor Procedures – Garnishment of Salaries – Salary is not Exempt from
Execution
Remedial Law – Civil Procedure – Limitations on Garnishment
Civil Law – Article 1708 – Wage is Exempt from Execution – Salary versus Wage
In 1976, Rosario Gaa, the building administrator of Trinity Building and manager of the El Grande Hotel lost a
case filed against her by the Europhil Industries Corporation. Gaa was adjudged to pay damages to Europhil.
Eventually, a writ of garnishment was issued upon Gaa’s salary with El Grande Hotel. She now moves for the
quashal of the writ on the ground that the garnishment on her salary is prohibited by Article 1708 of the Civil
Code.
ISSUE: Whether or not salaries may be garnished.
HELD: Yes. Article 1708 of the Civil Code reads:
The laborer’s wage shall not be subject to execution or attachment, except for debts incurred for food,
shelter, clothing and medical attendance.
Gaa’s functions as El Grande Hotel’s manager include “responsible for planning, directing, controlling, and
coordinating the activities of all housekeeping personnel”; “ensure the cleanliness, maintenance and
orderliness of all guest rooms, function rooms, public areas, and the surroundings of the hotel.” Gaa is a
responsibly placed employee and not a mere laborer. As such, Gaa is not receiving a laborer’s wage. She is
receiving salary.
In its broadest sense, the word “laborer” includes everyone who performs any kind of mental or physical labor,
but as commonly and customarily used and understood, it only applies to one engaged in some form of manual
or physical labor. That is the sense in which the courts generally apply the term as applied in exemption acts,
since persons of that class usually look to the reward of a day’s labor for immediate or present support and so
are more in need of the exemption than are other.
Article 1708 used the word “wages” and not “salary” in relation to “laborer” when it declared what are to be
exempted from attachment and execution. The term “wages” as distinguished from “salary”, applies to the
compensation for manual labor, skilled or unskilled, paid at stated times, and measured by the day, week,
month, or season, while “salary” denotes a higher degree of employment, or a superior grade of services, and
implies a position of office: by contrast, the term wages ” indicates considerable pay for a lower and less
responsible character of employment, while “salary” is suggestive of a larger and more important service.
Only wages, according to the law, are exempt from execution. Salaries may be subject to execution.

2
Atok Big Wedge Mutual Benefit Association v Atok Big Wedge Mining Co. Inc (1955)

Atok Big Wedge Mutual Benefit Association v Atok Big Wedge Mining Co. Inc.
GR No. L-7349
July 19, 1955

FACTS:
On September 4, 1950, a demand was submitted to petitioner by respondent union through its officers for
various concessions, among which were:
(a) An increase of P0.50 in wages;
(b) Commutation of sick and vacation leave if not enjoyed during the year;
(c) Various privileges, such as free medical care, medicine, and hospitalization;
(d) Right to a closed shop, check off etc.;
(e) No dismissal without prior just cause and with a prior investigation, etc.

Some of the demands were granted by petitioner and the others were rejected. Hearings were held in the
Court of Industrial Relations. After the hearing, the respondent court rendered a decision fixing the minimum
wage for the laborers at P3.20 without rice ration and 2.65 a day with rice ration, declaring that additional
compensation representing efficiency bonus should not be included as part of the wage, and making the award
effective from September 4, 1950 (the date of the presentation of the original demand, instead of from April 5,
1951, the date of the amended demand).

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Atok Company asked the Court for authority to stop operations & lay off employees and laborers, for the
reason that due to the heavy losses, increased taxes, high cost of materials, negligible quantity of ore deports,
and the enforcement of the Minimum Wage Law, the continued operation of the company and the consequent
lay-off of hundreds of laborers and employees.

The parties reached an agreement on October 29, 1952 after the SC decision which states agreement that the
following facilities heretofore given or actually being given by petitioner to its workers and laborers, and which
constitute as part of their wages, be valued as follows:

Rice ration P.55 per day

Housing facility 40 per day
All other facilities at least 85 per day

It is understood that the said amount of facilities valued at the above mentioned prices, may be charged in full
or partially by the Company against laborer or employee, as they may see fit pursuant to the exigencies of its
operation.

This was approved by the Court on December 26, 1952.

Later, another case was decided involving the 2 parties giving the employees minimum cash wage of 3.45 a
day with rice ration or 4.00 without rice ration.

ISSUES:
(1) Which of the two decisions would prevail? The agreement or the subsequent decision giving the
employees minimum case wage?, and;
WON the Agreement of October 29, 1952 from the minimum daily wage of P4 would be a waiver of the
minimum wage fixed by the law and hence null and void, since RA 602 sec. 20 provides that “no agreement or
contract, oral or written, to accept a lower wage or less than any other under this Act, shall be valid”.
(2) WON additional compensation should be paid by the Company to its workers for work rendered on
Sundays and holidays which should be based on the minimum wage of 4.00 and not on the cash portion which
is 2.20. [Currently the company pays additional compensation of 50% based on the 2.20 wage]

HELD:
(1) The Agreement subsists.

An agreement to deduct certain facilities received by the laborers from their employer is not a waiver of the
minimum wage fixed by the law. Wage includes the fair and reasonable value as determined by the Secretary
of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee (Sec 2 of
RA 602).

Thus, the law permits the deduction of such facilities from the laborer’s minimum wage of P4, as long as their
value is “fair and reasonable”

(2) NO. The Company is correct.

Section 4 of the Commonwealth Act No. 444 (Eight Hour Labor Law) provides:
No person, firm, or corporations... shall compel an employee or laborer to work during Sundays and holidays,
unless he is paid an additional sum of at least 25% of his regular remuneration.
Thus, the Company even pays the laborers higher wage than the minimum. Thus, no law is violated.
OTHER NOTES:

DIFFERENCE BETWEEN A SUPPLEMENT and FACILITY

(1) Supplements, defined – extra remuneration or special privileges or benefits given to or received by the
laborers over and above their ordinary earnings or wages [vacation and holidays not worked; paid sick leave or
maternity leave; overtime rate in excess of what is required by law; sick, pension, retirement and death

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benefits; profit sharing; family allowances; Christmas, war risk and cost of living bonuses or other bonuses
other than those paid as a reward for extra output or time spent on the job].

(2) Facilities, defined – items of expense necessary for laborer’s and his family’s existence and subsistence,
so that by express provision of the law, they form part of the wage and when furnished by the employer are
deductible therefrom since if they are not so furnished, the laborer would spend and pay for them just the
same.

3
Chavez vs NLRC, Supreme Packaging Inc, and Alvin Lee
GR No. 146530 January 17, 2005
Facts:
 The respondent company, Supreme Packaging Inc., is in the business of manufacturing cartons and other
packaging materials for export and distribution.
 The petitioner, Pedro Chavez, was a truck driver (from October 25, 1984) tasked to deliver the respondent
company’s products to its various customers.
 The respondent furnished petitioner with a truck that all deliveries were made in accordance with the
routing slips issued by the respondent company indicating the order, time and urgency of delivery.
 On 1992, the petitioner expressed his desire to avail the benefits that a regular employee were receiving
such as overtime pay, nightshift differential pay, and 13th month pay, among others but nothing was
complied.
 On February 20, 1995, petitioner filed a complaint for regularization with the Regional Arbitration Branch
No. III of NLRC in San Fernando, Pampanga. Before the case could be heard, respondent terminated the
services of the petitioner.
 Hence, the petitioner filed an amended complaint for illegal dismissal, unfair labor practice and non-
payment of overtime pay, nightshift differential, and 13th month pay, among others.
Issue: Whether there exists an employer-employee relationship?
Held:
 Yes an employer-employee do exist. The elements to determine the existence of an employment
relationship are: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the
power of dismissal; and (4) the employer’s power to control the employee’s conduct. The most important
element is the employer’s control of the employee’s conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it. First. Undeniably, it was the respondents
who engaged the services of the petitioner without the intervention of a third party. Second. Wages are
defined as “remuneration or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece or commission basis, or other method of calculating the
same, which is payable by an employer to an employee under a written or unwritten contract of
employment for work done or to be done, or for service rendered or to be rendered. The petitioner is paid
on a per trip basis is not significant. This is merely a method of computing compensation. Third. The
respondent’s power to dismiss the petitioner was inherent in the fact that they engaged the services of the
petitioner as truck driver. They exercised this power by terminating the petitioner’s services albeit in the
guise of severance of contractual relation due allegedly to the latter’s breach of his contractual obligation.
Fourth. Compared to an employee, an independent contractor is one who 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, 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. Hence
while an independent contractor enjoys independence and freedom from the control and supervision of his
principal. An employee is subject to the employer’s power to control the means and methods by which the
employee’s work is to be performed and accomplished. A careful review of the records shows that the
latter performed his work under the respondents’ supervision and control. The existence of an employer-
employee relationship cannot be negated by expressly repudiating it in a contract and providing therein
that the employee is an independent contractor when the facts clearly show otherwise. Employment status
is defined by law and not by what the parties say it should be.
4
Marcos, et. al. vs. NLRC AND Insular Life Assurance (1995) FACTS:
Petitioners herein have served respondent Insular for more than 20 years in multiples of five (20-30 years).
They were terminated due to redundancy and thus were given special redundancy benefits. But they
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were denied their service awards
which was set apart from the redundancy fund. They were made to sign a quit claim, which they complied, but
they still submitted a letter of protest. They inquired from the DOLE-LS on the validity of the denial of their
service awards, to which DOLE decided in their favour. The service awards
were part of the Employee’s Manual and were therefore
company policies. The award was earned on the anniversary date. Even if the employees were separated from
service before the anniversary date, they were still entitled to the material benefits of the award. However,
respondent still refused to pay this. On its 80
th
anniversary, the company approved an anniversary equivalent of one-month salary to its employees. The
petitioners alleged that they were entitled to this.
The LA ruled in petitioners’ favour, but NLRC reversed this,
upholding the validity of the quitclaim they signed
voluntarily
.
ISSUE:
W/N the quitclaim was invalid and if so, petitioners would be entitled to their service award.
HELD:

Release and Quitclaim INVALID, petitioners were ENTITLED to the service awards.
A deed of release or quitclaim cannot bar an employee from demanding payment to which he is entitled.
Quitclaims are against public policy and are therefore null and void. The Court does not believe that petitioners
signed the Release and Quitclaim voluntarily, as the subsequent submission of a letter of protest and the
inquiry before the NLRC contradicted their willingness to execute the quitclaim. The special redundancy
package could not have covered the
service awards, and respondent’s actions estopped it from
claiming such. Service awards are not bonuses. They are stated in the Employees Manual, which is
contractual in nature therefor the law between the parties. It is company policy and has been in practice by the
company.

5
SEVILLA TRADING COMPANY, Petitioner, vs. A.V.A. TOMAS E. SEMANA, SEVILLA TRADING
WORKERS UNIONSUPER, Respondents.
G.R. No. 152456 : April 28, 2004
FACTS:
On appeal is the Decision of the Court of Appeals (CA) sustaining the sustaining the Decision of
Accredited Voluntary Arbitrator Tomas E. Semana.
For two to three years prior to 1999, petitioner Sevilla Trading Company (Petitioner), a domestic
corporation engaged in trading business, organized and existing under Philippine laws, added to the base
figure, in its computation of the 13th-month pay of its employees, the amount of other benefits received by the
employees which are beyond the basic pay.
Petitioner claimed that it entrusted the preparation of the payroll to its office staff, including the
computation and payment of the 13th-month pay and other benefits.When it changed its person in charge of
the payroll in the process of computerizing its payroll, and after audit was conducted, it allegedly discovered
the error of including non-basic pay or other benefits in the base figure used in the computation of the 13th-
month pay of its employees.It cited the Rules and Regulations Implementing P.D. No. 851 which stated:
“Basic salary shall include all remunerations or earnings paid by an employer to an employee
for services rendered but may not include cost-of-living allowances granted pursuant to P.D. No. 525 or
Letter of Instruction No. 174, profit-sharing payments, and all allowances and monetary benefits which
are not considered or integrated as part of the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.”
Petitioner then effected a change in the computation of the thirteenth month pay, as follows:
13th-month pay = net basic pay
Hence, the new computation reduced the employees thirteenth month pay.The daily piece-rate workers
represented by private respondent Sevilla Trading Workers Union SUPER (Union, for short), a duly organized
and registered union, through the Grievance Machinery in their Collective Bargaining Agreement, contested
the new computation and reduction of their thirteenth month pay.The parties failed to resolve the issue.
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 The Union alleged that petitioner violated the rule prohibiting the elimination or diminution of employees
benefits as provided for in Art. 100 of the Labor Code, as amended.They claimed that paid leaves, like sick
leave, vacation leave, paternity leave, union leave, bereavement leave, holiday pay and other leaves with pay
in the CBA should be included in the base figure in the computation of their 13th-month pay.
ISSUE:
WONa voluntary act of the employerwhich was favorable to the employees though not conforming to law, has
ripened into a practice and therefore can be withdrawn, reduced, diminished, discontinued or eliminated?
HELD:
NO. As such the SC affirms the decision of the Accredited Voluntary Arbitrator Tomas E. Semana granting to
pay corresponding back wages to all covered and entitled employees arising from the exclusion of said
benefits in the computation of 13th-month pay.
RATIO DECIDENDI:
With regard to the length of time the company practice should have been exercised to constitute voluntary
employer practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not
laid down any rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits
Corporation vs. Associated Labor Unions, the company practice lasted for six (6) years. In another case,
Davao Integrated Port Stevedoring Services vs. Abarquez, the employer, for three (3) years and nine (9)
months, approved the commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its
intermittent workers. While in Tiangco vs. Leogardo, Jr. the employer carried on the practice of giving a fixed
monthly emergency allowance from November 1976 to February 1980, or three (3) years and four (4) months.
In all these cases, this Court held that the grant of these benefits has ripened into company practice or
policy which cannot be peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept the
practice of including non-basic benefits such as paid leaves for unused sick leave and vacation leave in the
computation of their 13th-month pay for at least two (2) years. This, we rule likewise constitutes voluntary
employer practice which cannot be unilaterally withdrawn by the employer without violating Art. 100 of
the Labor Code.

6
DAVAO INTEGRATED PORT STEVEDORING SERVICES, petitioner, vs. RUBEN V. ABARQUEZ, at. al.,
respondents
GR No. 102132
March 19, 1993
FACTS:
Petitioner and private respondent, THE ASSOCIATION OF TRADE UNIONS (ATU-TUCP), entered into a CBA
providing for 2 sections on sick leave with pay benefits which apply to both the regular non-intermittent workers
or those workers who render a daily eight-hour service to the company as governed by Section 1, Article VIII of
the 1989 CBA, and the intermittent field workers who are members of the regular labor pool and the present
regular extra labor pool, as governed by Sec. 3 thereof.
Sec. 1, however, of said CBA had a proviso that only those regular workers of the company whose work are
not intermittent, are entitled to the commutation of sick leave privilege.A proviso not found in Sec. 3. This
caused the new assistant manager to discontinue the commutation of the unenjoyed portion of the sick leave
with pay benefits of the intermittent workers or its conversion to cash.
The Union objected and brought the matter for voluntary arbitration before the National Conciliation and
Mediation Board with respondent Abarquez acting as voluntary arbitrator who later issued an award in favor of
the Union. Hence, the instant petition.
ISSUE:
WON intermittent(irregular) workers are entitled to commutation of their
unenjoyed sick leave with pay benefits.
HELD:
Yes.
The CBA has two (2) sections on sick leave with pay benefits which apply to two (2) distinct classes of workers
in petitioner’s company, namely: (1) the regular non-intermittent workers or those workers who render a daily
eight-hour service to the company and (2) intermittent field workers who are members of the regular labor pool
and the present regular extra labor pool.
Sick leave benefits, like other economic benefits stipulated in the CBA such as maternity leave and vacation
leave benefits, among others, are by their nature, intended to be replacements for regular income which
otherwise would not be earned because an employee is not working during the period of said leaves. They are
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non-contributory in nature, in the sense that the employees contribute nothing to the operation of the benefits.
By their nature, upon agreement of the parties, they are intended to alleviate the economic condition of the
workers.
***Notes: Petitioner-company is of the mistaken notion that since the privilege of commutation or conversion to
cash of the unenjoyed portion of the sick leave with pay benefits is found in Section 1, Article VIII, only the
regular non-intermittent workers and no other can avail of the said privilege because of the proviso found in the
last sentence thereof.

7
RTG Construction vs. Facto, G.R. No. 163872, December 21, 2009

Emmanuel Babas et. al. v Lorenzo Shipping Corporation (G.R. No. 186091)

FACTS:
Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation engaged in the shipping
industry. LSC entered into a General Equipment Maintenance Repair and Management Services Agreement
(Agreement) with Best Manpower Services, Inc. (BMSI). Under the Agreement, BMSI undertook to provide
maintenance and repair services to LSC’s container vans, heavy equipment, trailer chassis, and generator
sets. BMSI further undertook to provide checkers to inspect all containers received for loading to and/or
unloading from its vessels.

Simultaneous with the execution of the Agreement, LSC leased its equipment, tools, and tractors to BMSI.
The period of lease was coterminous with the Agreement.

BMSI then hired petitioners on various dates to work at LSC as checkers, welders, utility men, clerks,
forklift operators, motor pool and machine shop workers, technicians, trailer drivers, and mechanics.

In September 2003, petitioners filed with the Labor Arbiter (LA) a complaint for regularization against LSC and
BMSI. On October 1, 2003, LSC terminated the Agreement, effective October 31, 2003. Consequently,
petitioners lost their employment.

BMSI asserted that it is an independent contractor. It averred that it was willing to regularize petitioners;
however, some of them lacked the requisite qualifications for the job. LSC averred that petitioners were
employees of BMSI and were assigned to LSC by virtue of the Agreement. BMSI is an independent job
contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in
the conduct of its business. The Agreement between LSC and BMSI constituted legitimate job contracting.
Thus, petitioners were employees of BMSI and not of LSC.

The Labor Arbiter dismissed petitioners’ complaint on the ground that petitioners were employees of
BMSI. It was BMSI which hired petitioners, paid their wages, and exercised control over them. The NLRC
reversed the Labor Arbiter

Issue:
Whether or not respondent was engaged in labor-only contracting.

Held:
Yes. In De Los Santos v. NLRC, the character of the business, i.e., whether as labor-only contractor or as job
contractor, should be measured in terms of, and determined by, the criteria set by statute. The parties cannot
dictate by the mere expedience of a unilateral declaration in a contract the character of their business.

The Court has observed that:

First, petitioners worked at LSC’s premises, and nowhere else. Other than the provisions of the Agreement,
there was no showing that it was BMSI which established petitioners’ working procedure and methods, which
supervised petitioners in their work, or which evaluated the same. There was absolute lack of evidence that
BMSI exercised control over them or their work.
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Second, LSC was unable to present proof that BMSI had substantial capital. There was no proof pertaining to
the contractor’s capitalization, nor to its investment in tools, equipment, or implements actually used in the
performance or completion of the job, work, or service that it was contracted to render. What is clear was that
the equipment used by BMSI were owned by, and merely rented from, LSC.

Third, petitioners performed activities which were directly related to the main business of LSC. The work
of petitioners as checkers, welders, utility men, drivers, and mechanics could only be characterized as part of,
or at least clearly related to, and in the pursuit of, LSC’s business.

Lastly, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted this finding, thereby
bolstering the NLRC finding that BMSI is a labor-only contractor.

The CA erred in considering BMSI’s Certificate of Registration as sufficient proof that it is an independent
contractor. Jurisprudence states that a Certificate of Registration issued by the Department of Labor and
Employment is not conclusive evidence of such status. The fact of registration simply prevents the legal
presumption of being a mere labor-only contractor from arising.

*LSC is ordered to reinstate the petitioners to their former positions. Petitioners are declared as regular
employees of LSC.

NOTES:
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.
- Elements:
(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
(b) the employees recruited, supplied, or placed by such contractor or subcontractor perform activities which
are directly related to the main business of the principal.[20]

Permissible job contracting or subcontracting – an arrangement whereby a principal agrees to put out or farm
out with the 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.

Conditions:
(a) The contractor carries on a distinct and independent business and undertakes the contract work on his
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 his work except as to the
results thereof;

(b) The contractor has substantial capital or investment; and

(c) The agreement between the principal and the 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 welfare benefits.

9
SUPERIOR PACKAGING CORPORATION vs. BALAGSA et al.,
G.R. No. 178909 October 10, 2012

Facts:
The petitioner engaged the services of Lancer to provide reliever services to its business, which
involves the manufacture and sale of commercial and industrial corrugated boxes. Pursuant to a complaint filed
by the respondents against the petitioner and its President, Cesar Luz (Luz), for underpayment of wages, non-
payment of premium pay for worked rest, overtime pay and non-payment of salary, the Department of Labor
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and Employment (DOLE) conducted an inspection of the petitioner’s premises and found several violations.
Petitioner and Luz were ordered, among others, to pay respondents their total claims in the amount of Eight
Hundred Forty Thousand Four Hundred Sixty-Three Pesos and 38/100 (P 840,463.38).
They filed a motion for reconsideration on the ground that respondents are not its employees but of
Lancer and that they pay Lancer in lump sum for the services rendered.
DOLE, its motion in its Resolution4 dated February 16, 2004, ruling that the petitioner failed to support
its claim that the respondents are not its employees, and even assuming that they were employed by Lancer,
the petitioner still cannot escape liability as Section 13 of the Department Order No. 10, Series of 1997, makes
a principal jointly and severally liable with the contractor to contractual employees to the extent of the work
performed when the contractor fails to pay its employees’ wages.
The CA affirmed the Secretary of DOLE’s orders, with the modification in that Luz was absolved of any
personal liability under the award.8 The petitioner filed a partial motion for reconsideration insofar as the finding
of solidary liability with Lancer is concerned but it was denied by the CA.
Hence, this petition.

Issue:
Whether Superior Packaging Corporation (petitioner) may be held solidarily liable with Lancer Staffing
& Services Network, Inc. (Lancer) for respondents’ unpaid money claims.

Ruling:
It was the consistent conclusion of the DOLE and the CA that Lancer was not an independent
contractor but was engaged in "labor-only contracting"; hence, the petitioner was considered an indirect
employer of respondents and liable to the latter for their unpaid money claims.
At the time of the respondents’ employment in 1998, the applicable regulation was DOLE Department Order
No. 10, Series of 1997.25 Under said Department Order, labor-only contracting was defined as follows:
Sec. 9. Labor-only contracting. – (a) Any person who undertakes to supply workers to an employer shall be
deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are directly related to the
principal business or operations of the employer in which workers are habitually employed.
Labor-only contracting is prohibited and the person acting as contractor shall be considered merely as
an agent or intermediary 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.
According to the CA, the totality of the facts and surrounding circumstances of this case point to such
conclusion. The Court agrees.
The ratio of Lancer’s authorized capital stock of P 400,000.00 as against its subscribed and paid-up
capital stock of P 25,000.00 shows the inadequacy of its capital investment necessary to maintain its
day-to-day operations. And while the Court does not set an absolute figure for what it considers
substantial capital for an independent job contractor, it measures the same against the type of work
which the contractor is obligated to perform for the principal. Moreover, the nature of respondents’ work
was directly related to the petitioner’s business. The marked disparity between the petitioner’s actual
capitalization (P 25,000.00) and the resources needed to maintain its business, i.e., "to establish, operate and
manage a personnel service company which will conduct and undertake services for the use of offices, stores,
commercial and industrial services of all kinds," supports the finding that Lancer was, indeed, a labor-only
contractor. Aside from these is the undisputed fact that the petitioner failed to produce any written service
contract that might serve as proof of its alleged agreement with Lancer.
Finally, a finding that a contractor is a "labor-only" contractor 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. The
former becomes solidarily liable for all the rightful claims of the employees. The petitioner therefore, being
the principal employer and Lancer, being the labor-only contractor, are solidarily liable for
respondents’ unpaid money claims.

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