Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 186475 June 26, 2013

POSEIDON INTERNATIONAL MARITIME SERVICES, INC., Petitioner,

vs.

TITO R. TAMALA, FELIPE S. SAURIN, JR., ARTEMIO A. BO-OC and JOEL S. FERNANDEZ, Respondents.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari1 the challenge to the September 30, 2008 Decision2
and the February 11, 20093 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 98783. These CA
rulings set aside the December 29, 2006 and February 12, 2007 Resolutions4 of the National Labor
Relations Commission (NLRC) in NLRC CA No. 049479-06. The NLRC, in turn, affirmed in toto the May
2006 Decision5 of the labor arbiter (LA) dismissing the complaint for illegal termination of employment
filed by respondents Tito R. Tamala, Felipe S. Saurin, Jr., Artemio A. Bo-oc and Joel S. Fernandez against
petitioner Poseidon International Maritime Services, Inc. (Poseidon), and its principal, Van Doorn Fishing
Pty, Ltd. (Van Doorn).

The Factual Antecedents

In 2004, Poseidon hired the respondents, in behalf of Van Doorn, to man the fishing vessels of Van Doorn
and those of its partners – Dinko Tuna Farmers Pty. Ltd. (Dinko) and Snappertuna Cv. Lda. (Snappertuna)
- at the coastal and offshore area of Cape Verde Islands. The respondents’ contracting dates, positions,
vessel assignments, duration of the contract, basic monthly salaries, guaranteed overtime pay and
vacation leave pay, as reflected in their approved contracts,6 are summarized below:

Artemio A.

Bo-oc Joel S.

Fernandez Felipe S.

Saurin, Jr. Tito R.

Tamala

Date

Contracted June 1, 2004 June 24, 2004 July 19, 20047 October 20,

2004

PositionThird Engineer Chief Mate Third Engineer Ordinary

Seaman

Vessel

Assignment M/V "Lukoran

DVA" M/V "Lukoran

DVA" M/V "Lukoran

Cetriri" M/V

"Lukoran

DVA"

Contract

Duration Twelve (12)

months Twelve (12)

months Twelve (12)

months Twelve (12)

months

Basic

Monthly

Salary

US$800.00

US$1,120.00

US$800.00

US$280.00

Guaranteed

Overtime

Pay US$240.00/mo US$336.00/mo US$240.00/mo US$84.00/mo

Vacation

Leave Pay US$66.66 US$93.33 US$66.66 US$23.33

The fishing operations for which the respondents were hired started on September 17, 2004. On
November 20, 2004, the operations abruptly stopped and did not resume. On May 25, 2005, before the
respondents disembarked from the vessels, Goran Ekstrom of Snappertuna (the respondents’ immediate
employer on board the fishing vessels) and the respondents executed an agreement (May 25, 2005
agreement) regarding the respondents’ salaries.8 The agreement provided that the respondents would
get the full or 100% of their unpaid salaries for the unexpired portion of their pre-terminated contract in
accordance with Philippine laws. The respective amounts the respondents would receive per the May
25, 2005 agreement are:

Artemio A. Bo-oc US$6,047.99

Joel S. Fernandez US$7,767.90

Felipe S. Saurin, Jr. US$6,647.99

Tito R. Tamala US$7,047.99

On May 26, 2005, however, Poseidon and Van Doorn, with Goran of Snappertuna and Dinko Lukin of
Dinko, entered into another agreement (letter of acceptance) reducing the previously agreed amount to
50% of the respondents’ unpaid salaries (settlement pay) for the unexpired portion of their contract.9
On May 28, 2005, the respondents arrived in Manila. On June 10, 2005, the respondents received the
settlement pay under their letter of acceptance. The respondents then signed a waiver and quitclaim10
and the corresponding cash vouchers.11

On November 16, 2005, the respondents filed a complaint12 before the Labor Arbitration Branch of the
NLRC, National Capital Region for illegal termination of employment with prayer for the payment of their
salaries for the unexpired portion of their contracts; and for non-payment of salaries, overtime pay and
vacation leave pay.13 The respondents also prayed for moral and exemplary damages and attorney’s
fees.

The respondents anchored their claim on their May 25, 2005 agreement with Goran, and contended that
their subsequent execution of the waiver and quitclaim in favor of Poseidon and Van Doorn should not
be given weight nor allowed to serve as a bar to their claim. The respondents alleged that their dire need
for cash for their starving families compelled and unduly influenced their decision to sign their respective
waivers and quitclaims. In addition, the complicated language employed in the document rendered it
highly suspect.

In their position paper,14 Poseidon and Van Doorn argued that the respondents had no cause of action
to collect the remaining 50% of their unpaid wages. To Poseidon and Van Doorn, the respondents’
voluntary and knowing agreement to the settlement pay, which they confirmed when they signed the
waivers and quitclaims, now effectively bars their claim. Poseidon and Van Doorn submitted before the
LA the signed letter of acceptance, the waiver and quitclaim, and the cash vouchers to support their
stance.

In a Decision15 dated May 2006, the LA dismissed the respondents’ complaint for lack of merit, declaring
as valid and binding their waivers and quitclaims. The LA explained that while quitclaims executed by
employees are generally frowned upon and do not bar them from recovering the full measure of what is
legally due, excepted from this rule are the waivers knowingly and voluntarily agreed to by the
employees, such as the waivers assailed by the respondents. Citing jurisprudence, the LA added that the
courts should respect, as the law between the parties, those legitimate waivers and quitclaims that
represent voluntary and reasonable settlement of employees’ claims. In the respondents’ case, this
pronouncement holds more weight, as they understood fully well the contents of their waivers and knew
the consequences of their acts.
The LA did not give probative weight to the May 25, 2005 agreement considering that the entities which
contracted the respondents’ services - Poseidon and Van Doorn – did not actively participate. Moreover,
the LA noted that the respondents’ signed letter of acceptance superseded this agreement. The LA
likewise considered the respondents’ belated filing of the complaint as a mere afterthought.

Finally, the LA dismissed the issue of illegal dismissal, noting that the respondents already abandoned
this issue in their pleadings. The respondents appealed16 the LA’s decision before the NLRC.

The Ruling of the NLRC

By Resolution17 dated December 29, 2006, the NLRC affirmed in toto the LA’s decision. As the LA did,
the NLRC ruled that the respondents’ knowing and voluntary acquiescence to the settlement and their
acceptance of the payments made bind them and effectively bar their claims. The NLRC also regarded
the amounts the respondents received as settlement pay to be reasonable; despite the cessation of the
fishing operations, the respondents were still paid their full wages from December 2004 to January 2005
and 50% of their wages from February 2005 until their repatriation in May 2005.

On February 12, 2007, the NLRC denied18 the respondents’ motion for reconsideration,19 prompting
them to file with the CA a petition for certiorari20 under Rule 65 of the Rules of Court.

The Ruling of the CA

In its September 30, 2008 Decision,21 the CA granted the respondents’ petition and ordered Poseidon
and Van Doorn to pay the respondents the amounts tabulated below, representing the difference
between the amounts they were entitled to receive under the May 25, 2005 agreement and the
amounts that they received as settlement pay:

Artemio A. Bo-oc US$3,705.00

Joel S. Fernandez US$4,633.57

Felipe S. Saurin, Jr. US$4,008.62

Tito R. Tamala US$4,454.20

In setting aside the NLRC’s ruling, the CA considered the waivers and quitclaims invalid and highly
suspicious. The CA noted that the respondents in fact questioned in their pleadings the letter’s due
execution. In contrast with the NLRC, the CA observed that the respondents were coerced and unduly
influenced into accepting the 50% settlement pay and into signing the waivers and quitclaims because of
their financial distress. The CA moreover considered the amounts stated in the May 25, 2005 agreement
with Goran to be more reasonable and in keeping with Section 10 of Republic Act (R.A.) No. 8042 or the
Migrant Workers and Overseas Filipinos Act of 1995.

The CA also pointed out with emphasis that the pre-termination of the respondents’ employment
contract was simply the result of Van Doorn’s decision to stop its operations.

Finally, the CA did not consider the respondents’ complaint as a mere afterthought; the respondents are
precisely given under the Labor Code a three-year prescriptive period to allow them to institute such
actions.

Poseidon filed the present petition after the CA denied its motion for Reconsideration22 in the CA’s
February 11, 2009 Resolution.23

The Petition

Poseidon’s petition argues that the labor tribunals’ findings are not only binding but are fully supported
by evidence. Poseidon contends that the CA’s application of Section 10 of R.A. No. 8042 to justify the
amounts it awarded to the respondents is misplaced, as the respondents never raised the issue of illegal
dismissal before the NLRC and the CA. It claims that the respondents, in assailing the NLRC ruling before
the CA, mainly questioned the validity of the waivers and quitclaims they signed and their binding effect
on them. While the respondents raised the issue of illegal dismissal before the LA, they eventually
abandoned it in their pleadings – a matter the LA even pointed out in her May 2006 Decision.

Poseidon further argues that the NLRC did not exceed its jurisdiction nor gravely abuse its discretion in
deciding the case in its favor, pointing out that the respondents raised issues pertaining to mere errors of
judgment before the CA. Thus, as matters stood, these issues did not call for the grant of a writ of
certiorari as this prerogative writ is limited to the correction of errors of jurisdiction committed through
grave abuse of discretion, not errors of judgment.
Finally, Poseidon maintains that it did not illegally dismiss the respondents. Highlighting the CA’s
observation and the respondents’ own admission in their various pleadings, Poseidon reiterates that it
simply ceased its fishing operations as a business decision in the exercise of its management prerogative.

The Case for the Respondents

The respondents point out in their comment24 that the petition raises questions of fact, which are not
proper for a Rule 45 petition. They likewise point out that the petition did not specifically set forth the
grounds as required under Rule 45 of the Rules of Court. On the merits, and relying on the CA ruling, the
respondents argue that Poseidon dismissed them without a valid cause and without the observance of
due process.

The Issues

At the core of this case are the validity of the respondents’ waivers and quitclaims and the issue of
whether these should bar their claim for unpaid salaries. At the completely legal end is the question of
whether Section 10 of R.A. No. 8042 applies to the respondents’ claim.

The Court’s Ruling

We resolve to partly GRANT the petition.

Preliminary considerations

The settled rule is that a petition for review on certiorari under Rule 45 is limited to the review of
questions of law,25 i.e., to legal errors that the CA may have committed in its decision,26 in contrast with
the review for jurisdictional errors that we undertake in original certiorari actions under Rule 65.27 In
reviewing the legal correctness of a CA decision rendered under Rule 65 of the Rules of Court, we
examine the CA decision from the prism of whether it correctly determined the presence or absence of
grave abuse of discretion in the NLRC decision before it, and not strictly on the basis of whether the
NLRC decision under review is intrinsically correct.28 In other words, we have to be keenly aware that
the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged before it.29

Viewed in this light, we do not re-examine the factual findings of the NLRC and the CA, nor do we
substitute our own judgment for theirs,30 as their findings of fact are generally conclusive on this Court.
We cannot touch on factual questions "except in the course of determining whether the CA correctly
ruled in determining whether or not the NLRC committed grave abuse of discretion in considering and
appreciating the factual [issues before it]."31

On the Merits of the Case

The core issue decided by the tribunals below is the validity of the respondents’ waivers and quitclaims.
The CA set aside the NLRC ruling for grave abuse of discretion; the CA essentially found the waivers and
quitclaims unreasonable and involuntarily executed, and could not have superseded the May 25, 2005
agreement. In doing so, and in giving weight to the May 25, 2005 agreement, the CA found justification
under Section 10 of R.A. No. 8042.

The respondents are not entitled to

the unpaid portion of their salaries

under Section 10 of R.A. No. 8042

The application of Section 10 of R.A. No. 8042 presumes a finding of illegal dismissal. The pertinent
portion of Section 10 of R.A. No. 8042 reads:

SEC. 10. MONEY CLAIMS. – x x x

xxxx

In case of termination of overseas employment without just, valid or authorized cause as defined by law
or contract. [emphasis and italics ours]
A plain reading of this provision readily shows that it applies only to cases of illegal dismissal or dismissal
without any just, authorized or valid cause and finds no application in cases where the overseas Filipino
worker was not illegally dismissed.32 We found the occasion to apply this rule in International
Management Services v. Logarta,33 where we held that Section 10 of R.A. No. 8042 applies only to an
illegally dismissed overseas contract worker or a worker dismissed from overseas employment without
just, valid or authorized cause.34

Whether the respondents in the present case were illegally dismissed is a question we resolve in the
negative for three reasons.

First, the respondents’ references to illegal dismissal in their several pleadings were mere cursory
declarations rather than a definitive demand for redress. The LA’s May 2006 Decision clearly enunciated
this point when she dismissed the respondents’ claim of illegal dismissal "as complainants themselves
have lost interest to pursue the same."35

Second, the respondents, in their motion for reconsideration filed before the NLRC, positively argued
that the fishing operations for which they were hired ceased as a result of the business decision of Van
Doorn and of its partners;36 thus, negating by omission any claim for illegal dismissal.

Third, the CA, in its assailed decision, likewise made the very same inference – that the fishing
operations ceased as a result of a business decision of Van Doorn and of its partners. In other words, the
manner of dismissal was not a contested issue; the records clearly showed that the respondents’
employment was terminated because Van Doorn and its partners simply decided to stop their fishing
operations in the exercise of their management prerogative, which prerogative even our labor laws
recognize.

We confirm in this regard that, by law and subject to the State’s corollary right to review its
determination,37 management has the right to regulate the business and control its every aspect.38
Included in this management right is the freedom to close or cease its operations for any reason, as long
as it is done in good faith and the employer faithfully complies with the substantive and procedural
requirements laid down by law and jurisprudence.39 Article 283 of our Labor Code provides:
Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the
employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the [Department of Labor and Employment] at least one (1) month before the intended
date thereof. x x x In case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1)
whole year. [Italics, underscores and emphases ours]

This provision applies in the present case as under the contract the employer and the workers signed
and submitted to the Philippine Overseas Employment Agency (POEA), the Philippine labor law expressly
applies.

This legal reality is reiterated under Section 18-B, paragraph 2,40 in relation with Section 2341 of the
POEA Standard Employment Contract (POEA-SEC) (which is deemed written into every overseas
employment contract) which recognizes the validity of the cessation of the business operations as a valid
ground for the termination of an overseas employment. This recognition is subject to compliance with
the following requisites:

1. The decision to close or cease operations must be bona fide in character;

2. Service of written notice on the affected employees and on the Department of Labor and Employment
(DOLE) at least one (1) month prior to the effectivity of the termination; and

3. Payment to the affected employees of termination or separation pay equivalent to one (1) month pay
or at least one-half (1/2) month pay for every year of service, whichever is higher.42

We are sufficiently convinced, based on the records, that Van Doorn’s termination of the respondents’
employment arising from the cessation of its fishing operations complied with the above requisites and
is thus valid.
We observe that the records of the case do not show that Van Doorn ever intended to defeat the
respondents’ rights under our labor laws when it undertook its decision to close its fishing operations on
November 20, 2004. From this date until six months after, the undertaking was at a complete halt. That
Van Doorn and its partners might have suffered losses during the six-month period is not entirely
remote. Yet, Van Doorn did not immediately repatriate the respondents or hire another group of
seafarers to replace the respondents in a move to resume its fishing operations. Quite the opposite, the
respondents, although they were no longer rendering any service or doing any work, still received their
full salary for November 2004 up to January 2005. In fact, from February 2005 until they were
repatriated to the Philippines in May 2005, the respondents still received wages, albeit half of their
respective basic monthly salary rate. Had Van Doorn intended to stop its fishing operations simply to
terminate the respondents’ employment, it would have immediately repatriated the respondents to the
Philippines soon after, in order that it may hire other seafarers to replace them – a possibility that did
not take place.

Considering therefore the absence of any indication that Van Doorn stopped its fishing operations to
circumvent the protected rights of the respondents, our courts have no basis to question the reason that
might have impelled Van Doorn to reach its closure decision.43

In sum, since Poseidon ceased its fishing operations in the valid exercise of its management prerogative,
Section 10 of R.A. No. 8042 finds no application. Consequently, we find that the CA erroneously imputed
grave abuse of discretion on the part of the NLRC in not applying Section 10 of R.A. No. 8042 and in
awarding the respondents the unpaid portion of their full salaries.

The waivers and quitclaims signed by

the respondents are valid and

binding

We cannot support the CA’s act of giving greater evidentiary weight to the May 25, 2005 agreement over
the respondents’ waivers and quitclaims; not only do we find the latter documents to be reasonable and
duly executed, we also find that they superseded the May 25, 2005 agreement.

Generally, this Court looks with disfavor at quitclaims executed by employees for being contrary to public
policy.44 Where the person making the waiver, however, has done so voluntarily, with a full
understanding of its terms and with the payment of credible and reasonable consideration, we have no
option but to recognize the transaction to be valid and binding.45

We find the requisites for the validity of the respondents’ quitclaim present in this case. We base this
conclusion on the following observations:

First, the respondents acknowledged in their various pleadings, as well as in the very document
denominated as "waiver and quitclaim," that they voluntarily signed the document after receiving the
agreed settlement pay.

Second, the settlement pay is reasonable under the circumstances, especially when contrasted with the
amounts to which they were respectively entitled to receive as termination pay pursuant to Section 23 of
the POEA-SEC and Article 283 of the Labor Code. The comparison of these amounts is tabulated below:

1âwphi1

Settlement Pay Termination Pay

Joel S. Fernandez US$3134.33 US$1120.00

Artemio A. Bo-oc US$2342.37 US$800.00

Felipe S. Saurin, Jr. US$2639.37 US$800.00

Tito R. Tamala US$2593.79 US$280.00

Thus, the respondents undeniably received more than what they were entitled to receive under the law
as a result of the cessation of the fishing operations.

Third, the contents of the waiver and quitclaim are clear, unequivocal and uncomplicated so that the
respondents could fully understand the import of what they were signing and of its consequences.46
Nothing in the records shows that what they received was different from what they signed for.
Fourth, the respondents are mature and intelligent individuals, with college degrees, and are far from
the naive and unlettered individuals they portrayed themselves to be.1âwphi1

Fifth, while the respondents contend that they were coerced and unduly influenced in their decision to
accept the settlement pay and to sign the waivers and quitclaims, the records of the case do not support
this claim. The respondents’ claims that they were in "dire need for cash" and that they would not be
paid anything if they would not sign do not constitute the coercion nor qualify as the undue influence
contemplated by law sufficient to invalidate a waiver and quitclaim,47 particularly in the circumstances
attendant in this case. The records show that the respondents, along with their other fellow seafarers,
served as each other’s witnesses when they agreed and signed their respective waivers and quitclaims.

Sixth, the respondents’ voluntary and knowing conformity to the settlement pay was proved not only by
the waiver and quitclaim, but by the letters of acceptance and the vouchers evidencing payment. With
these documents on record, the burden shifts to the respondents to prove coercion and undue influence
other than through their bare self-serving claims. No such evidence appeared on record at any stage of
the proceedings.

In these lights and in the absence of any evidence showing that fraud, deception or misrepresentation
attended the execution of the waiver and quitclaim, we are sufficiently convinced that a valid transaction
took place. Consequently, we find that the CA erroneously imputed grave abuse of discretion in
misreading the submitted evidence, and in relying on the May 25, 2005 agreement and on Section 10 of
R.A. No. 8042.

The respondents are entitled to

nominal damages for failure of Van

Doorn to observe the procedural

requisites for the termination of

employment under Article 283 of the

Labor Code

As a final note, we observe that while Van Doorn has a just and valid cause to terminate the
respondents’ employment, it failed to meet the requisite procedural safeguards provided under Article
283 of the Labor Code. In the termination of employment under Article 283, Van Doorn, as the employer,
is required to serve a written notice to the respondents and to the DOLE of the intended termination of
employment at least one month prior to the cessation of its fishing operations. Poseidon could have
easily filed this notice, in the way it represented Van Doorn in its dealings in the Philippines. While this
omission does not affect the validity of the termination of employment, it subjects the employer to the
payment of indemnity in the form of nominal damages.48

Consistent with our ruling in Jaka Food Processing Corporation v. Pacot,49 we deem it proper to award
the respondents nominal damages in the amount of ₱30,000.00 as indemnity for the violation of the
required statutory procedures. Poseidon shall be solidarily liable to the respondents for the payment of
these damages.50

WHEREFORE, in view of these considerations, we hereby GRANT in PART the petition and accordingly
REVERSE and SET ASIDE the Decision dated September 30, 2008 and the Resolution dated February 11,
2009 of the Court of Appeals in CA-G.R. SP No. 98783. We REINSTATE the Resolution dated December 29,
2006 of the National Labor Relations Commission with the MODIFICATION that petitioner Poseidon
International Maritime Services, Inc. is ordered to pay each of the respondents nominal damages in the
amount of ₱30,000.00. Costs against the respondents.

SO ORDERED.

Footnotes

1 Petition for review on certiorari dated March 5, 2009 and filed on March 6, 2009 under Rule 45 of the
1997 Rules of Civil Procedure; rollo, pp. 3-14.

2 Penned by Associate Justice Isaias Dicdican, and concurred in by Associate Justices Juan Q. Enriquez, Jr.
and Marlene Gonzales-Sison; id. at 20-30.

3 Id. at 32-33.
4 Penned by Commissioner Gregorio 0. Bilog III; id. at 86-94 and 112-113 respectively.

5 Penned by Labor Arbiter Fe Supcriaso-Cellan; id. at 58-66.

6 CA rollo, pp. 30-33.

7 Per the petition, respondent Felipe Saurin, Jr. was contracted on October 20, 2004; rollo, p. 6.

8 CA rollo, pp. 54, 56, 58 and 61.

9 Letter of Acceptance executed on May 26, 2005; id. at 71.

10 Id. at 168-169.

11 Id. at 164-167.

12 Id. at 34-35.

13 Respondents’ Position Paper filed before the LA; rollo, pp. 34-46.

14 Poseidon’s position paper filed before the LA; id. at 51-55.

15 Supra note 5.
16 Memorandum on Appeal; rollo, pp. 67-80.

17 Supra note 4.

18 Ibid.

19 Rollo, pp. 96-105.

20 Id. at 115-127.

21 Supra note 2.

22 Rollo, pp. 141-148.

23 Supra note 3.

24 Rollo, pp. 196-203.

25 See Genuino Ice Company, Inc. v. Magpantay, 526 Phil. 170, 178 (20006); and Luna v. Allado
Construction Co., Inc., G.R. No. 175251, May 30, 2011, 649 SCRA 262, 272.

26 See Wensha Spa Center, Inc. v. Yung, G.R. No. 185122, August 16, 2010, 628 SCRA 311, 320.

27 Montoya v. Transmed Manila Corporation, G.R. No. 183329, August 27, 2009, 597 SCRA 334, 342-343.
28 Ibid.; and Career Philippines Shipmanagement, Inc., et al. v. Salvador T. Serna, G.R. No. 172086,
December 3, 2012.

29 Career Philippines Shipmanagement, Inc., et al. v. Salvador T. Serna, supra, citing Montoya v.
Transmed Manila Corporation, supra note 27, at 342-343.

30 Career Philippines Shipmanagement, Inc., et al. v. Salvador T. Serna, supra.

31 Montoya v. Transmed Manila Corporation, supra note 27, at 344.

32 See International Management Services v. Logarta, G.R. No. 163657, April 18, 2012, 670 SCRA 22, 36-
37. See also Sadagnot v. Reinier Pacific International Shipping, Inc., 556 Phil. 252, 262 (2007); and Dela
Rosa v. Michaelmar Philippines, Inc., G.R. No. 182262, April 13, 2011, 648 SCRA 721, 731.

33 Supra.

34 Id. at 36.

35 Rollo, p. 63.

36 Id. at 97.

37 Espina v. Court of Appeals, 548 Phil. 255, 272 (2007).

38 See United Laboratories, Inc. v. Domingo, G.R. No. 186209, September 21, 2011, 658 SCRA 159, 175;
and Tinio v. Court of Appeals, G.R. No. 171764, June 8, 2007, 524 SCRA 533, 540.
39 See Espina v. Court of Appeals, supra note 37, at 273-274.

40 SECTION 18. TERMINATION OF EMPLOYMENT

xxxx

B. The employment of the seafarer is also terminated when the seafarer arrives at the point of hire for
any of the following reasons:

xxxx

2. When the seafarer signs-off due to shipwreck, ship’s sale, lay-up of vessel, discontinuance of voyage or
change of vessel principal in accordance with Sections 22, 23 and 26 of this Contract. [italics and
emphases ours]

41 SECTION 23. TERMINATION DUE TO VESSEL SALE, LAY-UP OR DISCONTINUANCE OF VOYAGE

Where the vessel is sold, laid up, or the voyage is discontinued necessitating the termination of
employment before the date indicated in the Contract, the seafarer shall be entitled to earned wages,
repatriation at employer’s cost and one (1) month basic wage as termination pay, unless arrangements
have been made for the seafarer to join another vessel belonging to the same principal to complete his
contract which case the seafarer shall be entitled to basic wages until the date of joining the other
vessel. [Italics and underscore and emphasis ours]

42 Ramirez v. Mar Fishing Co., Inc., G.R. No. 168208, June 13, 2012, 672 SCRA 136, 144-145; and

Marc II Marketing, Inc. v. Joson, G.R. No. 171993, December 12, 2011, 662 SCRA 35, 59-60.
43 See Marc II Marketing, Inc. v. Joson, supra, at 59; and Nippon Housing Phil., Inc. v. Leynes, G.R. No.
177816, August 3, 2011, 655 SCRA 77, 89.

44 Ison v. Crewserve, Inc., G.R. No. 173951, April 16, 2012, 669 SCRA 481, 497; Aujero v. Philippine
Communications Satellite Corporation, G.R. No. 193484, January 18, 2012, 663 SCRA 467, 483; and
Goodrich Manufacturing Corporation v. Ativo, G.R. No. 188002, February 1, 2010, 611 SCRA 261, 266.

45 Ison v. Crewserve, Inc., supra, at 497-498. See also Plastimer Industrial Corporation v. Gopo, G.R. No.
183390, February 16, 2011, 643 SCRA 502, 511; Goodrich Manufacturing Corporation v. Ativo, supra, at
266, citing Periquet v. National Labor Relations Commission, G.R. No. 91298, June 22, 1990, 186 SCRA
724; and Aujero v. Philippine Communications Satellite Corporation, supra, at 482-483.

46 Supra note 11.

47 See Aujero v. Philippine Communications Satellite Corporation, supra note 44, at 483-484.

48 International Management Services v. Logarta, supra note 32, at 37; and Marc II Marketing, Inc. v.
Joson, supra note 42, at 62.

49 494 Phil. 114, 120-122 (2005).

50 Pursuant to R.A. No. 8042, Section 10.

G.R. No. 210961, January 24, 2018

LEO V. MAGO AND LEILANIE E. COLOBONG, Petitioners, v. SUN POWER MANUFACTURING LIMITED,
Respondent.

DECISION

REYES, JR., J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, seeking the review of the
Decision2 dated October 8, 2013 and Resolution3 dated January 13, 2014 of the Court of Appeals (CA) in
CA-G.R. SP No. 131059. In these assailed issuances, the CA reversed the decision4 of the National Labor
Relations Commission (NLRC) declaring Leo V. Mago (Leo) and Leilanie E. Colobong (Leilanie)
(petitioners) as employees of Sunpower Philippines Manufacturing Limited (Sunpower) and
consequently, holding that Jobcrest Manufacturing, Incorporated (Jobcrest) was a labor-only contractor.
The NLRC in turn reversed the ruling5 of the labor arbiter (LA) dismissing the petitioners' complaint for
illegal dismissal.

Factual Antecedents

The petitioners are former employees of Jobcrest, a corporation duly organized under existing laws of
the Philippines, engaged in the business of contracting management consultancy and services.6 Jobcrest
was licensed by the Department of Labor and Employment (DOLE) through Certificate of Registration No.
NCR-MUNTA-64209-0910-087-R.7 During the time material to this case, the petitioners' co-habited
together.8

On October 10, 2008, Jobcrest and Sunpower entered into a Service Contract Agreement, in which
Jobcrest undertook to provide business process services for Sunpower, a corporation principally engaged
in the business of manufacturing automotive computer and other electronic parts.9 Jobcrest then
trained its employees, including the petitioners, for purposes of their engagement in Sunpower.10 After
the satisfactory completion of this training, the petitioners were assigned to Sunpower's plant in Laguna
Technopark. Leo was tasked as a Production Operator in the Coinstacking Station on July 25, 2009,11
while Leilanie was assigned as a Production Operator, tasked with final visual inspection in the Packaging
Station on June 27, 2009.12 Jobcrest's On-site Supervisor, Allan Dimayuga (Allan), supervised the
petitioners during their assignment with Sunpower.13

It was alleged that sometime in October 2011, Sunpower conducted an operational alignment, which
affected some of the services supplied by Jobcrest. Sunpower decided to terminate the
Coinstacking/Material Handling segment and the Visual Inspection segment.14 Meanwhile, Leo and
Leilanie were respectively on paternity and maternity leave because Leilanie was due to give birth to
their common child.15

When Leo reported for work to formally file his paternity leave, Allan purportedly informed Leo that his
employment was terminated due to his absences. Leo, however, further alleged that he was asked to
report to Jobcrest on December 14, 2011 for his assignment to Sunpower.16 In their defense, both
Jobcrest and Allan denied terminating Leo's employment from Jobcrest.17

Leo complied with the directive to go to Jobcrest's office on December 14, 2011. While he was there,
Jobcrest's Human Resource Manager, Noel J. Pagtalunan (Noel), served Leo with a "Notice of Admin
Charge/Explanation Slip."18 The notice stated that Leo violated the Jobcrest policy against falsification or
tampering because he failed to disclose his relationship with Leilanie. Leo denied the charges and
explained that he already filed a complaint for illegal dismissal with the NLRC.19

Leilanie, on the other hand, alleged that when she reported for work at Jobcrest on November 29, 2011,
she was informed by one of the Jobcrest personnel that she will be transferred to another client
company. She was likewise provided a referral slip for a medical examination, pursuant to her new
assignment.20

Instead of complying with Jobcrest's directives, Leo and Leilanie filed a complaint for illegal dismissal and
regularization on December 15, 2011, with the NLRC Regional Arbitration Branch No. IV. Leo alleged that
he was dismissed on October 30, 2011, while Leilanie alleged that she was dismissed from employment
on December 4, 2011.21 Despite the filing of the complaint, Leilanie returned to Jobcrest on December
16, 2011, where she was served with a similar "Notice of Admin Charge/Explanation Slip," requiring her
to explain why she failed to disclose her co-habitation status with Leo.22
During the mandatory conference, Jobcrest clarified that the petitioners were not dismissed from
employment and offered to accept them when they report back to work. The petitioners refused and
insisted that they were regular employees of Sunpower, not Jobcrest.23

There being no amicable settlement of the matter among the parties, they proceeded to file their
respective position papers.24

Ruling of the LA

In a Decision25 dated July 3, 2012, the LA held that Jobcrest is a legitimate independent contractor and
the petitioners' statutory employer:

WHEREFORE, premises considered, the complaint for illegal dismissal against [Sunpower] and Dwight
Deato is DISMISSED for lack of employer-employee relationship. [Jobcrest] is declared as the statutory
employer and is ordered to reinstate complainants sans backwages to substantially equivalent positions
within ten (10) days from receipt hereof.

SO ORDERED.26

The LA found the capital of Jobcrest substantial enough to comply with the requirements for an
independent contractor, and that Jobcrest exercised control over the petitioners' work.27 The LA likewise
rejected the petitioners' claim that they were illegally dismissed, ruling that the petitioners failed to
establish the fact of dismissal itself.28

Jobcrest partially appealed the LA's Decision dated July 3, 2012. Among its arguments is the assertion
that the petitioners refused to be reinstated. Hence, they were considered constructively resigned from
their employment with Jobcrest, especially because they obtained a job somewhere else. As an
alternative relief, Jobcrest prayed that it be directed to pay the petitioners' separation pay instead of
reinstating them to their former positions.29
The petitioners, on the other hand, attributed serious error on the LA for ruling against their
complaint.30

Ruling of the NLRC

The NLRC reversed the LA's findings in its Decision31 dated April 24, 2013 and ruled favorably for the
petitioners, viz.:

WHEREFORE, the decision appealed from is hereby SET ASIDE and a NEW ONE ENTERED declaring that
[the petitioners] are regular employees of respondent [Sunpower], respondent [Jobcrest] being a mere
labor-only contractor that [petitioners] were illegally dismissed; hence, respondent [Sunpower] is hereby
ordered to reinstate them to their former position with full backwages, from the time they were refused
to work on October 31, 2011 until reinstated, within ten (10) days from notice plus 10% of the total
monetary awards as and for attorney's fees.

SO ORDERED.32

According to the NLRC, the contract between Jobcrest and Sunpower was for the sole supply of
manpower. The tools and equipment for the performance of the work were for the account of Sunpower,
which supposedly contradicted the claim that Jobcrest has the required capital for a legitimate
contractor.33 The NLRC also disagreed that Jobcrest exercised control over the petitioners and likewise
gave more credence to the petitioners' sworn statements, which narrate that Sunpower employees
allegedly supervised their work.34 Lastly, on the basis of the "Notice of Administrative
Charge/Explanation Slip" furnished to the petitioners, the NLRC reversed the LA's ruling and held that
the petitioners were illegally dismissed from employment.35

Sunpower moved for the reconsideration of the NLRC's Decision dated April 24, 2013.36 Unconvinced,
the NLRC denied this motion in its Resolution37 dated May 28, 2013 as follows:

WHEREFORE, the instant Motion for Reconsideration is hereby DENIED for lack of merit.
No further motion of this nature shall be entertained.

SO ORDERED.38

As a result of the NLRC's ruling, Sunpower filed a petition for certiorari with the CA, with a prayer for the
issuance of an injunctive writ.39 Sunpower attributed grave abuse of discretion, amounting to lack or
excess of jurisdiction, on the NLRC for holding that the petitioners were regular employees of Sunpower
despite evidence to the contrary.40 Sunpower also disagreed that Jobcrest is a labor-only contractor, and
further submitted that the NLRC misinterpreted its Service Contract Agreement with Jobcrest.41

Ruling of the CA

In a Decision42 dated October 8, 2013, the CA granted Sunpower's petition for certiorari and enjoined
the implementation of the assailed NLRC ruling:

WHEREFORE, premises considered, the Petition is GRANTED. The Decision dated 24 April 2013 and
Resolution dated 28 May 2013 of the [NLRC] (Second Division) in NLRC-LAC No. 09-002582-12; NLRC
RAB-IV-12-01978-11-B are NULLIFIED. All the respondents and/or persons acting for and on their behalf
are ENJOINED from enforcing or implementing the same. The Decision dated 03 July 2012 of LA Renell
Joseph R. Dela Cruz is hereby REINSTATED. No pronouncement as to costs.

SO ORDERED.43

The CA ruled that Sunpower was able to overcome the presumption that Jobcrest was a labor-only
contractor, especially considering that the DOLE Certificate of Registration issued in favor of Jobcrest
carries the presumption of regularity. In contrast with the NLRC ruling, the CA found that the Service
Contract Agreement between Sunpower and Jobcrest specifically stated the job or task contracted out by
stating that it was for the performance of various business process services.44 The CA also held that
Jobcrest has substantial capital and as such, it was no longer necessary to prove that it has investment in
the form of tools, equipment, machinery, and work premises.45
Also, the CA found that there is an employer-employee relationship between Jobcrest and the
petitioners under the four-fold test. The CA appreciated the affidavits of Jobcrest employees, as well as
the sworn statements of Sunpower employees who the petitioners claim to supervise their work. In
these statements, the Sunpower employees categorically denied under oath that they supervised the
manner of the petitioners' work. Taken together with other pieces of evidence, the CA ruled that there
was no employer-employee relationship between Sunpower and the petitioners. Finally, the CA held that
any form of supervision, which Sunpower exercised over the results of the petitioners' work, was
necessary and allowable under the circumstances.46

Consequently, the CA rejected the claim that the petitioners were illegally dismissed from employment,
especially in light of Jobcrest's earlier offer to accept the petitioners' return to work.47

Following their receipt of the CA's Decision dated October 8, 2013, the petitioners filed their Motions for
Reconsideration and to Investigate the Reviewer Who Recommended the Palpably Erroneous
Decision.48 The CA firmly denied these motions in its Resolution49 dated January 13, 2014 for failure to
raise any substantial argument that would warrant the reconsideration of its decision:

WHEREFORE, premises considered, the Motions for Reconsideration and to Investigate the Reviewer
Who Recommended the Palpably Erroneous Decision are DENIED for sheer lack of merit.

SO ORDERED.50

The petitioners are now before this Court, seeking to reverse and set aside the CA's issuances, and to
reinstate the NLRC's decision.51 The petitioners insist that Jobcrest is a labor-only contractor, and that
the DOLE Certificate of Registration is not conclusive of Jobcrest's legitimate status as a contractor.52
They further argue that, aside from lacking substantial capital, Jobcrest only supplied manpower to
Sunpower.53 These services, the petitioners allege, are directly related and necessary to Sunpower's
business.54

Furthermore, the petitioners submit that it was Sunpower that controlled their work. They refute the
evidentiary weight and value of the sworn statements of Jobcrest and Sunpower employees.55 The
petitioners assert that the NLRC was correct in ruling that Sunpower was their statutory employer, and in
ordering their reinstatement with payment of full backwages and attorney's fees.56 The petitioners thus
pray that this Court reverse and set aside the Decision dated October 8, 2013 and Resolution dated
January 13, 2014 of the CA.57

Ruling of the Court

The Court resolves to deny the petition.

Jobcrest is a legitimate and independent contractor.

Article 106 of the Labor Code defines labor-only contracting as a situation "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."58

DOLE Department Order (DO) No. 18-02, the regulation in force at the time of the petitioners'
assignment to Sunpower, reiterated the language of the Labor Code:

Section 5. Prohibition against labor-only contracting. x x x [L]abor-only contracting shall refer to an

arrangement where the contractor or subcontractor merely recruits, supplies or places workers to
perform a job, work or service for a principal, and any of the following elements are present:

i)

The contractor or subcontractor does not have substantial capital or investment which relates to the job,
work or service to be performed and 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;
or

ii)

the contractor does not exercise the right to control over the performance of the work of the contractual
employee.
Thus, in order to become a legitimate contractor, the contractor must have substantial capital or
investment, and must carry a distinct and independent business free from the control of the principal. In
addition, the Court requires the agreement between the principal and the contractor or subcontractor to
assure 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.59

Furthermore, the Court considers job contracting or subcontracting as permissible when the principal
agrees to farm out the performance of a specific job, work or service to the contractor, for a definite or
predetermined period of time, regardless of whether such job, work, or service is to be performed or
completed within or outside the premises of the principal.60 Ordinarily, a contractor is presumed to be a
labor-only contractor, unless the contractor is able to discharge the burden of overcoming this
presumption. In cases when it's the principal claiming the legitimacy of the contractor, then the burden
is borne by the principal.61

Preliminarily, the Court finds that there is no such burden resting on either Sunpower or Jobcrest in this
case. It is true that Sunpower maintained its position that Jobcrest is a legitimate and independent
contractor.62 But since the petitioners do not dispute that Jobcrest was a duly-registered contractor
under Section 11 of DOLE DO No. 18-02,63 there is no operative presumption that Jobcrest is a labor-
only contractor.64

Conversely, the fact of registration with DOLE does not necessarily create a presumption that Jobcrest is
a legitimate and independent contractor. The Court emphasizes, however, that the DOLE Certificate of
Registration issued in favor of Jobcrest is presumed to have been issued in the regular performance of
official duty.65 In other words, the DOLE officer who issued the certificate in favor of Jobcrest is
presumed, unless proven otherwise, to have evaluated the application for registration in accordance
with the applicable rules and regulations.66 The petitioners must overcome the presumption of
regularity accorded to the official act of DOLE, which is no less than the agency primarily tasked with the
regulation of job contracting.67

For the reasons discussed below, the Court is constrained to give more weight to the substantiated
allegations of Sunpower, as opposed to the unfounded self-serving accusations of the petitioners.

Jobcrest has substantial capital.

The law and the relevant regulatory rules require the contractor to have substantial capital or
investment, in order to be considered a legitimate and independent contractor. Substantial capital or
investment was defined in DOLE DO No. 18-02 as "capital stocks and subscribed capitalization in the case
of corporations, tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out." DOLE initially did not provide a specific amount as to what constitutes substantial
capital. It later on specified in its subsequent issuance, DOLE DO No. 18-A, series of 2011, that
substantial capital refers to paid-up capital stocks/shares of at least Php 3,000,000.00 in the case of
corporations.68 Despite prescribing a threshold amount under DO No. 18-A, certificates of registration
issued under DO No. 18-02, such as that of Jobcrest, remained valid until its expiration.69

The records show that as early as the proceedings before the LA, Jobcrest established that it had an
authorized capital stock of Php 8,000,000.00, Php 2,000,000.00 of which was subscribed, and a paid-up
capital stock of Php 500,000.00, in full compliance with Section 13 of the Corporation Code.70 For the
year ended December 31, 2011, the paid-up capital of Jobcrest increased to Php 8,000,000.00,71 notably
more than the required capital under DOLE DO No. 18-A.72

The balance sheet submitted by Jobcrest for the year ending on December 31, 2010 also reveals that its
total assets for the year 2009 amounted to Php 11,280,597.94, and Php 16,825,271.30 for the year 2010,
which were comprised of office furniture, fixtures and equipment, land, building, and motor vehicles,
among others.73 As of December 31, 2012, the total assets for the years 2011 and 2012 also increased
to Php 35,631,498.58 and Php 42,603,167.16, respectively.74

Evidently, Jobcrest had substantial capital to perform the business process services it provided
Sunpower. It has its own office, to which the petitioners admittedly reported to, possessed numerous
assets for the conduct of its business, and even continuously earned profit as a result.75 The Court can
therefore reasonably conclude from Jobcrest's financial statements that it carried its own business
independent from and distinctly outside the control of its principals.

The petitioners argue that the amount of substantial capital is irrelevant because Sunpower provided the
tools and owned the work premises. These supposedly negate the claim that Jobcrest has substantial
capital.76 The Court does not agree with the petitioners.

DOLE DO No. 18-02 and DO No. 18-A, as well as Article 106 of the Labor Code itself, all use the
conjunctive term "or" in prescribing that the contractor should have substantial capital or investment.
Having established that Jobcrest had substantial capital, it is unnecessary for this Court to determine
whether it had sufficient investment in the form of tools, equipment, machinery and work premises.

In Neri v. NLRC,77 the Court rejected the same argument put forward by the petitioners, arid ruled that
proof of either substantial capital or investment is sufficient for purposes of determining whether the
first element of labor-only contracting is absent:

Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial
capital. 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, as was established
before the Labor Arbiter as well as the NLRC. In other words, 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". If the intention was to require the contractor to prove that he has both capital and the
requisite investment, then the conjunction "and" should have been used. But, 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.78 (Emphasis Ours)

The agreement between Jobcrest and Sunpower also complied with the statutory requirement of
ensuring the observance of the contractual employees' rights under the law. Specifically, paragraph 7 of
the Service Contract Agreement obligates Jobcrest to observe all laws, rules and regulations pertaining
to the employment of its employees.79

Suncrest does not control the manner by which the petitioners accomplished their work.

In most cases, despite proof of substantial capital, the Court declared a contractor as a labor-only
contractor whenever it is established that the principal—not the alleged legitimate contractor—actually
controls the manner of the employees' work.80 The element of control was defined under DOLE DO No.
18-02 as:

The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.81
In other words, the contractor should undertake the performance of the services under its contract
according to its own manner and method, free from the control and supervision of the principal.82
Otherwise, the contractor is deemed an illegitimate or labor-only contractor.

The control over the employees' performance of the work is, as the Court ruled in some cases, usually
manifested through the power to hire, fire, and pay the contractor's employees,83 the power to
discipline the employees and impose the corresponding penalty,84 and more importantly, the actual
supervision of the employees' performance.85 On this point, the petitioners claim that Sunpower
employees supervised their work while in the premises of Sunpower's own plant. They also disclaim the
affidavits of Sunpower employees, which denied exercising any form of supervision over the
petitioners,86 by alleging that these are self-serving assertions. The petitioners also refute the veracity of
the sworn statements of Jobcrest's employees.87

Upon review of the records, the Court finds that the evidence clearly points to Jobcrest as the entity that
exercised control over the petitioners' work with Sunpower. Upon the petitioners' assignment to
Sunpower, Jobcrest conducted a training and certification program, during which time, the petitioners
reported directly to the designated Jobcrest trainer.88 The affidavit of Jobcrest's Operations Manager,
Kathy T. Morales (Kathy), states that operational control over Jobcrest employees was exercised to make
sure that they conform to the quantity and time specifications of the service agreements with Jobcrest's
clients. She narrated that manager and shift supervisors were assigned to the premises of Sunpower,
with the task to oversee the accomplishment of the target volume of work. She also mentioned that
there is administrative control over Jobcrest employees because they monitor the employees'
attendance and punctuality, and the employees' observance of other rules and regulations.89

The affidavit of Kathy was markedly corroborated by the sworn statement of Jobcrest's On-site
Supervisor, Allan, in which he affirmed that he directly supervised the petitioners while they were
stationed in Sunpower. He also confirmed that during this period, he issued several memoranda to the
petitioners for violating rules and regulations, and provided their hourly output performance
assessment, which "determine[s] their fitness to continue their employment with Jobcrest."90

The petitioners' very own sworn statements further establish this point. In his statement, Leo averred
that when he reported for work to file his application for paternity leave, he reported to Allan, Jobcrest's
supervisor, who then approved his leave application. He likewise narrated that it was Jobcrest's Human
Resource Manager, Noel, who informed Leo about the disciplinary charge against him for allegedly
violating the Jobcrest Code of Conduct.91
The same conclusion holds for Leilanie. In her statement, Leilanie narrated that she reported for work to
the Jobcrest office on November 29, 2011 after giving birth to her second child. She also alleged in her
affidavit that similar to Leo, it was Noel who informed her of the disciplinary action against her, through
the service of a copy of the "Notice of Admin Charge/Explanation Slip."92

Notably, other documentary evidence plainly show that Leo's paternity leave application was indeed
filed with Jobcrest,93 and the respective notices of disciplinary action against the petitioners were
prepared and signed by the Jobcrest Human Resource Manager.94 These are clear indications that
Jobcrest exercised control over the petitioners' work.

The fact that the petitioners were working within the premises of Sunpower, by itself, does not negate
Jobcrest's control over the means, method, and result of the petitioners' work.95 Job contracting is
permissible "whether such job, work, or service is to be performed or completed within or outside the
premises of the principal"96 for as long as the elements of a labor-only contractor are not present. Since
Jobcrest was a provider of business process services, its employees would necessarily work within the
premises of its client companies in order for Jobcrest to perform its contractual undertaking. Mere
physical presence in Sunpower's plant does not necessarily mean that Sunpower controlled the means
and method of the petitioners' work. The petitioners, despite working in Sunpower's plant for most of
the time, admit that whenever they file their leave application, or whenever required by their
supervisors in Jobcrest, they report to the Jobcrest office. Designated on-site supervisors from Jobcrest
were the ones who oversaw the performance of the employees' work within the premises of Sunpower.

Besides, while the Court repeatedly recognizes that there are employers who abuse the system of
subcontracting, we also acknowledge that contracts for services does not necessarily provide
"untrammeled freedom" to the contractor in undertaking the engagement.97 What is important, as
incontrovertibly established in this case, is that the principal's right to control is limited to the results of
the work of the contractor's employees.

The petitioners were regular employees of Jobcrest.

The four-fold test is the established standard for determining the existence of an employer-employee
relationship:98 (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the power of control over the employee's conduct. Of the four elements, the
power of control is the most important.99 Having found that Jobcrest exercised control over the
petitioners' work, the Court is constrained to determine whether the petitioners were regular employees
of Jobcrest by virtue of the three other elements of the four-fold test.

The petitioners themselves admit that they were hired by Jobcrest.100 In their subsequent engagement
to Sunpower, it was Jobcrest that selected and trained the petitioners.101 Despite their assignment to
Sunpower, Jobcrest paid the petitioners' wages, including their contributions to the Social Security
System (SSS), Philippine Health Insurance Corporation (Philhealth), and Home Development Mutual Fund
(HDMF, also known as Pag-IBIG).102 The power to discipline the petitioners was also retained by
Jobcrest, as evidenced by the "Notice of Admin Charge/Explanation Slip" furnished the petitioners
through Jobcrest's Human Resource department.103

The Court further notes that on December 27, 2010 and January 25, 2011, Leilanie and Leo were
respectively confirmed as regular employees of Jobcrest.104 Jobcrest did not even deny that the
petitioners were their regular employees. Consequently, the petitioners cannot be terminated from
employment without just or authorized cause.105

A review of the petitioners' repeated submissions reveals that while they claim to have been illegally
dismissed from employment,106 Jobcrest actually intended to assign Leo again to Sunpower, and
provide Leilanie with another engagement with a different client company. The petitioners all admitted
to these facts in their sworn statement, heavily quoted in their position paper filed with the LA:107

41.

Noong December 14, 2011, ako [Leo Mago] ay tinawagan sa aking cellular phone ng nagpakilalang Julie
at taga HR ng JOBCREST at ang sabi sa akin ay magreport umano ako sa opisina upang ipadala sa
SUNPOWER;

xxxx

44.

Noong November 29, 2011, ako [Leilani Colobong] ay nagreport sa JOBCREST at aking nakausap ang isa
sa staff ng JOBCREST na hindi ko alam ang pangalan at ang sabi niya sa akin ay ililipat umano ako sa
kompanyang FIRST SUMIDEN dahil hindi na umano ako pwedeng m[a]gtrabaho sa SUNPOWER na hindi
niya sinabi kung anu ang dahilan;

45.

Noong December 1, 2011, ako ay bumalik sa JOBCREST at ako ay binigyan nila ng referral para
magpamedical para sa aking bagong requirements diumano sa aking bagong trabaho sa FIRST SUMIDEN
dahil hindi na talaga umano ako tatanggapin sa SUNPOWER sa aking pagbabalik trabaho ng December 4,
2011 na hindi naman niya sinabi kung anu ang dahilan; Kalakip nito ang nas[a]bing referral slip bilang
Exhibit "S"108 (Emphasis Ours)

It was also uncontroverted that Jobcrest offered to accept the petitioners' return to work, but they
refused this offer during the mandatory conference.109 Clearly, the petitioners were not illegally
dismissed, much less terminated from their employment. There is nothing on record that established the
dismissal of the petitioners in the first place.

In MZR Industries, et al. v. Colambot,110 the employee claimed to have been illegally dismissed through
a verbal directive. The employer denied this and alleged waiting for the employee to report for work,
only to later find out that a complaint for illegal dismissal was filed against them. The Court recognized
that while the employer is generally required to establish the legality of the employee's termination, the
employee should first establish the fact of dismissal from service. Failing such, as in this case, the Court
cannot rule that the employee was illegally dismissed.

The "Notice of Admin Charge/Explanation Slip" is also insufficient proof of the petitioners' termination
from employment. The notice merely required the petitioners to explain whether they violated
Jobcrest's Code of Conduct. No penalty was imposed on the petitioners yet when they were furnished
with a copy of the notices.111 In fact, Jobcrest was unable to take the appropriate action on the charge,
considering that the petitioners immediately filed their complaint for illegal dismissal with the NLRC the
following day, or on December 15, 2011.112

All things considered, Sunpower is not the statutory employer of the petitioners. The circumstances
obtaining in this case, as supported by the evidence on record, establish that Jobcrest was a legitimate
and independent contractor. There is no reason for this Court to depart from the CA's findings.
WHEREFORE, premises considered, the present petition is hereby DENIED for lack of merit. The Court of
Appeals' Decision dated October 8, 2013 and Resolution dated January 13, 2014 in CA-G.R. SP No.
131059 are AFFIRMED, which nullified the National Labor Relations Commission's Decision dated April
24, 2013 and Resolution dated May 28, 2013, and reinstated the Labor Arbiter's Decision dated July 3,
2012. No costs.

SO ORDERED.

Carpio (Chairperson), Peralta, Perlas-Bernabe, and Caguioa, JJ., concur.

Endnotes: