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[G.R. No. 159668, March 07, 2008]

MANDAUE GALLEON TRADE, INC. and/or GAMALLOSONS TRADERS,INC., Petitioners, vs. VICENTE ANDALES, RESTITUTASOLITANA,[*] ELPIDIO SUELTO, ET AL.,[**] Respondents.[1]

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of

Court assailing the Decision[2]

dated May 21, 2003 and the Amended Decision[3]

dated

August 19, 2003 of the Court of Appeals (CA) in CA-G.R. SP No. 70214.

The facts:

Petitioners Mandaue Galleon Trade, Inc. (MGTI) and Gamallosons Traders,

Inc.[4]

(GTI) are business entities engaged in rattan furniture manufacturing for export,

with principal place of business at Cabangcalan, Mandaue City.

Respondent Vicente Andales[5]

(Andales) filed a complaint with the Labor Arbiter

(LA) against both petitioners for illegal dismissal and non-payment of 13th month pay

and service incentive leave pay. His other co-workers numbering 260 filed a similarcomplaint against petitioner MGTI only.

The complainants alleged that MGTI hired them on various dates as weavers,

grinders, sanders and finishers; sometime in August 1998, workers in the Finishing

Department were told that they would be transferred to a contractor and they were

given Visitor Identification Cards (IDs), while workers in the Weaving Department

were told to look for work elsewhere as the company had no work for them; sometime

in September 1998, workers in the Grinding Department were not allowed to enter the

company premises, while workers in the Sanding Department were told that they

could no longer work since there was no work available; workers who were issued

IDs were allowed to go inside the premises; and they were dismissed without notice

and just cause.

They further alleged that they are regular employees of MGTI because: (a) they

performed their work inside the company premises in Cabangcalan, Mandaue City;

(b) they were issued uniforms by MGTI and were told to strictly follow company

rules and regulations; (c) they were under the supervision of MGTI's foremen, quality

control personnel and checkers; (d) MGTI supplied the materials, designs, tools and

equipment in the production of furniture; (e) MGTI conducts orientations on how the

work was to be done and the safe and efficient use of tools and equipment; (f) MGTI

issues memoranda regarding absences and waste of materials; and (g) MGTI exercises

the power to discipline them.

On the other hand, MGTI denied the existence of employer-employee relationship

with complainants, claiming that they are workers of independent contractors whose

services were engaged temporarily and seasonally when the demands for its products

are high and could not be met by its regular workforce; the independent contractors

recruited and hired the complainants, prepared the payroll and paid their wages,

supervised and directed their work, and had authority to dismiss them. It averred that

due to the economic crisis and internal squabble in the company, the volume of orders

from foreign buyers dived; as a survival measure, management decided to retrench its

employees; and the substantial separation pay paid to retrenched employees caught

the jealous eyes of complainants who caused the filing of the complaint for illegal

dismissal.

On August 23, 1999, the LA rendered a Decision[6]

holding that 183[7]

complainants

are regular piece-rate employees of MGTI since they were made to perform functions

which are necessary to MGTI's rattan furniture manufacturing business; the

independent contractors were not properly identified; the absence of proof that the

independent contractors have work premises of their own, substantial capital or

investment in the form of tools, equipment and machineries make them only labor

contractors; and there was no dismissal but only a claim for separation pay. The LA

ordered petitioners to take back complainants and directed it to pay their 13th month

pay in the total sum of P545,386.43.

Both parties appealed. On April 30, 2001, the National Labor Relations

Commission (NLRC) rendered a Decision[8]

affirming the LA's finding of employer-

employee relationship. It held that labor-only contracting and not job-contracting was

present since the alleged contractors did not have substantial capital in the form of

equipment, machineries and work premises. The NLRC, however, did not agree with

the LA's finding that there was no dismissal. It held that complainants were

constructively dismissed when they were unilaterally transferred to a contractor to

evade payment of separation pay as a result of the retrenchment. Thus, it directed

MGTI to pay complainants separation pay of one month for every year of service

based on the prevailing minimum wage at the time of their dismissal, in addition to

payment of 13th month pay.

Both parties filed separate motions for reconsideration[9]but the NLRC denied them ina Resolution

[10]dated February 12, 2002.

On April 19, 2002, petitioners filed a Petition forCertiorari[11]

with the CA. On May

21, 2003 the CA rendered a Decision[12]

dismissing the petition and affirming the

findings of the NLRC. It held that MGTI is liable to the respondents because the

alleged contractors are not independent contractors but labor-only contractors; that

respondents were constructively dismissed when they were unilaterally transferred to

another contractor; and that the allegation of retrenchment was not proven.

On June 12, 2003, petitioners filed a Motion for Reconsideration.[13]

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On August 19, 2003, the CA rendered an Amended Decision[14]

partially granting the

motion, in this wise:

After taking a second look at the petition and in consonance with Article 283 of the

Labor Code, We are computing the separation pay of the 183 private respondents at

one-half month salary per year of service up to the promulgation of this Amended

Decision.

WHEREFORE, petitioners' motion for reconsideration is PARTIALLY GRANTED.

This Court's decision dated May 21, 2003 is hereby amended. Petitioners are ordered

to pay the 183 respondents their separation pay computed at one-half month salary per

year of service up to the promulgation of this Amended Decision.

SO ORDERED.[15]

On September 16, 2003, petitioners filed with this Court a Motion for Extension of

Time to file a petition for review, which was granted by the Court,[16]

and petitioners

filed herein petition on October 23, 2003.

Meanwhile, on September 24, 2003, respondents filed a Motion for Reconsideration

with the CA assailing the reduction of the separation pay in the Amended

Decision.[17]

On December 9, 2003, the CA issued a Resolution[18]

merely noting the

Motion for Reconsideration filed by respondents on the ground that the case had

already been referred to this Court by way of the present petition.

Respondents then filed with this Court a Petition forCertiorari with Motion to

Consolidate the Petition with the present petition, assailing the August 19, 2003

Amended Decision and December 9, 2003 CA Resolution. Respondents petition,

docketed as G.R. No. 162227, was dismissed in a Resolution[19]

dated April 14, 2004

for failure to attach a clearly legible duplicate original or certified true copy of the

Amended Decision. On August 26, 2004, entry of judgment was made.[20]

In the present petition, petitioners raise the sole issue:

I

WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ANDREVERSIBLE ERROR IN CONSIDERING THE RESPONDENTS AS

EMPLOYEES OF THE PETITIONERS ABSENT THE REQUISITES/ ELEMENTS

IN THE JURISPRUDENCE AS DETERMINATIVE FACTOR IN THE

EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP.[21]

Petitioners submit that respondents are employees of independent contractors who

have their own manpower, tools, equipment and capital; they did not have a hand in

respondents' recruitment and hiring, payment of wages, control and supervision, and

dismissal; and respondents did not have time cards or uniforms, nor were they

subjected to petitioner's company policies.

On the other hand, respondents, in their Comment and Memorandum, assail the CA's

Amended Decision which reduced the separation pay from one month to one-half

month, claiming there was no justification to support such order. Moreover, they

contend that they were denied their day in court when the CA did not resolve their

Motion for Reconsideration of the Amended Decision. They aver that since they were

illegally dismissed, they are entitled to backwages and not only separation pay.

The petition is bereft of merit.

Factual findings of quasi-judicial bodies like the NLRC, when adopted and confirmed

by the CA and if supported by substantial evidence, are accorded respect and even

finality by this Court.[22]

The existence of an employer-employee relationship is a

factual matter that will not be delved into by this Court, since only questions of law

may be raised in petitions for review.[23]

The Court has recognized several exceptions

to this rule, such as: (1) when the findings are grounded entirely on speculation,

surmises or conjectures; (2) when the inference made i s manifestly mistaken, absurd

or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is

based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6)

when in making its findings, the CA went beyond the issues of the case, or its findings

are contrary to the admissions of both the appellant and the appellee; (7) when the

findings are contrary to the trial court; (8) when the findings are conclusions without

citation of specific evidence on which they are based; (9) when the facts set forth in

the petition as well as in the petitioners main and reply briefs are not disputed by the

respondent; (10) when the findings of fact are premised on the supposed absence of

evidence and contradicted by the evidence on record; and (11) when the CAmanifestly overlooked certain relevant facts not disputed by the parties, which, if

properly considered, would justify a different conclusion.[24]

None of these

exceptions, however, has been convincingly shown by petitioners to apply in the

present case.

Article 106 of the Labor Code explains the relations which may arise between an

employer, a contractor and the contractors employees thus:

ART. 106. Contractor or subcontractor.Whenever an employer enters into acontract with another person for the performance of the formers work, the employees

of the contractor and of the latters subcontractor, if any, shall be paid in accordance

with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his

employees in accordance with this Code, the employer shall be jointly and severally

liable with his contractor or subcontractor to such employees to the extent of the work

performed under the contract, in the same manner and extent that he is liable to

employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the

contracting out of labor to protect the rights of workers established under this Code. In

so prohibiting or restricting, he may make appropriate distinctions between labor-only

contracting and job contracting as well as differentiations within these types of

contracting and determine who among the parties involved shall be considered the

employer for purposes of this Code, to prevent any violation or circumvention of any

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provision of this Code.

There is labor-only contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,

machineries, work premises, among others, and the workers recruited and placed by

such persons are performing activities which directly related to the principal business

of such employer. In such cases, the person or intermediary shall be considered

merely as an agent of the employer who shall be responsible to the workers in the

same manner and extent as i f the latter were directly employed by him.

The first two paragraphs of Article 106 set the general rule that a principal is

permitted by law to engage the services of a contractor for the performance of a

particular job, but the principal, nevertheless, becomes solidarily liable with the

contractor for the wages of the contractors employees. The third paragraph of Article

106, however, empowers the Secretary of Labor to make distinctions between

permissible job contracting and labor-only contracting, which is a prohibited act

further defined under the last paragraph. 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.[25]

Sections 5 and 7 of the Rules Implementing Articles 106 to 109 of the Labor Code, as

amended[26]

(Implementing Rules), reinforce the rules in determining the existence of

employer-employee relationship between employer, contractor or subcontractor, andthe contractors or subcontractors employee, to wit:

Section 5. Prohi bition against labor-onl y contracting.Labor-only contracting is

hereby declared prohibited. For this purpose, labor-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 followingelements are [is] 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

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.

.

The forgoing provisions shall be without prejudice to the application of Article 248

(C) of the Labor Code, as amended.

Substantial capital or investment refers to 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.

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.

Section 7. Existence of an employer-employee relation ship.The contractor or

subcontractor shall be considered the employer of the contractual employee for

purposes of enforcing the provisions of the Labor Code and other social legislation.

The principal, however, shall be solidarily liable with the contractor in the event of

any violation of any provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the

following cases, as declared by a competent authority:

a. where there is a labor-only contracting; orb. where the contracting arrangement falls within the prohibitions provided in

Section 6 (Prohibitions) hereof.

Thus, based on Article 106 of the Labor Code and Sections 5 and 7 of the

Implementing Rules, labor-only contracting exists when the following criteria are

present: (1) where the contractor or subcontractor supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,

machineries, work premises, among other things; and the workers recruited and

placed by the contractor or subcontractor are performing activities which are directly

related to the principal business of such employer; or (2) where the contractor doesnot exercise the right to control the performance of the work of the contractual

employee.

In the present case, petitioners claim that their contractors are independent

contractors, and, therefore, this case is one of permissible job contracting, is without

basis.

First,respondents work as weavers, grinders, sanders and finishers is directly related

to MGTI's principal business of rattan furniture manufacturing. Where the employees

are tasked to undertake activities usually desirable or necessary in the usual business

of the employer, the contractor is considered as a labor-only contractor and such

employees are considered as regular employees of the employer.[27]

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Second, MGTI was unable to present any proof that its contractors had substantial

capital. There was no evidence pertaining to the contractors' capitalization; nor to their

investment in tools, equipment or implements actually used in the performance or

completion of the job, work, or service that they were contracted to render. The law

casts the burden on the contractor to prove that it has substantial capital, investment,

tools, etc. Employees, on the other hand, need not prove that the contractor does not

have substantial capital, investment, and tools to engage in job-contracting.[28]

Thus, the contractors are labor-only contractors since they do not have substantial

capital or investment which relates to the service performed and respondents

performed activities which were directly related to MGTI's main business. MGTI, the

principal employer, is solidarily liable with the labor-only contractors, for the rightful

claims of the employees. Under this set-up, labor-only contractors are deemed

agents of the principal, MGTI, and the law makes the principal responsible to the

employees of the labor-only contractor as if the principal itself directly hired or

employed the employees. In prohibiting labor-only contracting and creating an

employer-employee relationship between the principal and the supposed contractors

employees, the law intends to prevent employers from circumventing labor laws

intended to protect employees.

Hence, the Court sees no reason to disturb the findings of fact of the NLRC and the

CA.

Respondents' contention that the CA erred in lowering the award of separation pay

from one month to one-half month for every year of service cannot prosper in the

present petition. Whether right or wrong, the decision of the CA on that matter had

long become final and executory with the dismissal of respondents' Petition

forCertiorari, docketed as G.R. No. 162227, assailing the reduction of the award of

separation pay. Entry of judgment was made therein on August 26, 2004; hence, the

reduction of the separation pay is now immutable, beyond the jurisdiction of this

Court to amend, modify or reverse.[29]

Nothing is more settled in the law than that a decision that has acquired finality

becomes immutable and unalterable and may no longer be modified in any respect

even if the modification is meant to correct erroneous conclusions of fact or law andwhether it will be made by the Court that rendered it or by the highest Court of the

land.[30]

The doctrine is founded on considerations of public policy and sound practice

that, at the risk of occasional errors, judgments must become final at some definite

point in time.[31]

The only recognized exceptions to the general rule are the correction of clerical errors,

the so-called nunc pro tunc entries which cause no prejudice to any party, void

judgments, and whenever circumstances transpire after the finality of the decision

rendering its execution unjust and inequitable.[32]

None of the exceptions are present

in the instant case.

The CA Amended Decision cannot be considered by the Court as a void judgment, as

it was rendered by a tribunal with jurisdiction over the subject matter of the

petition.[33]

Neither can respondents complain that they were denied due process of

law since they had the opportunity to be heard when they assailed the reduction of

separation pay in their Petition forCertiorari, G.R. No. 162227, but bungled the same

when they failed to comply with the basic procedural requirements in filing the

petition. Respondents cannot be allowed to resurrect a cause lost thru negligence in

properly pursuing their case.

WHEREFORE, the present petition is DENIED for lack of merit.

SO ORDERED.

G.R. No. 158255 July 8, 2004

MANILA WATER COMPANY, INC.,petitioner,vs.

HERMINIO D. PENA, ESTEBAN B. BALDOZA, JORGE D. CANONIGO, JR.,IKE S. DELFIN, RIZALINO M. INTAL, REY T. MANLEGRO, JOHN L.MARTEJA, MARLON B. MORADA, ALLAN D. ESPINA, EDUARDO ONG,AGNESIO D. QUEBRAL, EDMUNDO B. VICTA, VICTOR C. ZAFARALLA,EDILBERTO C. PINGUL and FEDERICO M. RIVERA, respondents.

D E C I S I O N

YNARES-SANTIAGO, J.:

This petition assails the decision1of the Court of Appeals dated November 29, 2002,

in CA-G.R. SP No. 67134, which reversed the decision of the National Labor

Relations Commission and reinstated the decision of the Labor Arbiter withmodification.

Petitioner Manila Water Company, Inc. is one of the two private concessionaires

contracted by the Metropolitan Waterworks and Sewerage System (MWSS) to

manage the water distribution system in the East Zone of Metro Manila, pursuant to

Republic Act No. 8041, otherwise known as theNational Water Crisis Act of 1995.

Under the Concession Agreement, petitioner undertook to absorb former employees

of the MWSS whose names and positions were in the list furnished by the latter, while

the employment of those not in the list was terminated on the day petitioner took over

the operation of the East Zone, which was on August 1 , 1997. Private respondents,

being contractual collectors of the MWSS, were among the 121 employees not

included in the list; nevertheless, petitioner engaged their services without written

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contract from August 1, 1997 to August 31, 1997. Thereafter, on September 1, 1997,

they signed a three-month contract to perform collection services for eight branches of

petitioner in the East Zone.2

Before the end of the three-month contract, the 121 collectors incorporated the

Association Collectors Group, Inc. (ACGI),3which was contracted by petitioner to

collect charges for the Balara Branch. Subsequently, most of the 121 collectors were

asked by the petitioner to transfer to the First Classic Courier Services, a newly

registered corporation. Only private respondents herein remained with ACGI.

Petitioner continued to transact with ACGI to do its collection needs until February 8,

1999, when petitioner terminated its contract with ACGI.4

Private respondents filed a complaint for illegal dismissal and money claims against

petitioner, contending that they were petitioners employees as all the methods and

procedures of their collections were controlled by the latter.

On the other hand, petitioner asserts that private respondents were employees of

ACGI, an independent contractor. It maintained that it had no control and supervision

over private respondents manner of performing their work except as to the results.

Thus, petitioner did not have an employer-employee relationship with the private

respondents, but only a service contractor-client relationship with ACGI.

On May 31, 2000, Labor Arbiter Eduardo J. Carpio rendered a decision finding the

dismissal of private respondents illegal. He held that private respondents were regular

employees of petitioner not only because the tasks performed by them were controlled

by it but, also, the tasks were obviously necessary and desirable to petitioners

principal business. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered, finding

that complainants were employees of respondent [petitioner herein], that they

were illegally dismissed, and respondent [petitioner herein] is hereby ordered

to pay their separation pay based on the following computed amounts:

HERMINIO D. PENA P15,000.00

ESTEBAN BALDOZA P12,000.00

JORGE D. CANONIGO, JR. P16,000.00

IKE S. DELFIN P12,000.00

RIZALINO M. INTAL P16,000.00

REY T. MANLEGRO P16,000.00

JOHN L. MARTEJA P12,000.00

MARLON B. MORADA P16,000.00

ALLAN D. ESPINA P14,000.00

EDUARDO ONG P15,000.00

AGNESIO D. QUEBRAL P16,000.00

EDMUNDO B. VICTA P13,000.00

VICTOR P. ZAFARALLA P15,000.00

EDILBERTO C. PINGUL P19,500.00

FEDERICO M. RIVERA P15,000.00

TOTAL P222,500.00

Respondent [petitioner herein] is further directed to pay ten (10%) percent of

the total award as attorneys fee or the sum of P22,250.00.

SO ORDERED.5

Both parties appealed to the NLRC, which reversed the decision of the Labor Arbiter

and ruled that the documentary evidence, e.g., letters and memoranda by the petitioner

to ACGI regarding the poor performance of the collectors, did not constitute proof of

control since these documents merely identified the erring collectors; the appropriate

disciplinary actions were left to the corporation to impose.6Further, there was no

evidence showing that the incorporation of ACGI was irregular.

Private respondents filed a petition forcertiorari with the Court of Appeals,

contending that the NLRC acted with grave abuse of discretion amounting to lack or

excess of jurisdiction when it reversed the decision of the Lab or Arbiter.

The Court of Appeals reversed the decision of the NLRC and reinstated with

modification the decision of the Labor Arbiter.7It held that petitioner deliberately

prevented the creation of an employment relationship with the private respondents;

and that ACGI was not an independent contractor. It likewise denied petitioners

motion for reconsideration.8

Hence, this petition for review raising the following errors:

THE HONORABLE COURT OF APPEALS IN RENDERING THE

ASSAILED DECISION AND RESOLUTION COMMITTED GRAVE

REVERSIBLE ERRORS:

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A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO

GIVE DUE COURSE TO RESPONDENTS PETITION FOR

CERTIORARI UNDER RULE 65 OF THE RULES OF COURT,

NOTWITHSTANDING THE ABSENCE OF ANY PROOF OF GRAVE

ABUSE OF DISCRETION ON THE PART OF THE NATIONAL LABOR

RELATIONS COMMISSION WHEN IT RENDERED THE DECISION

ASSAILED BY HEREIN RESPONDENTS.

B. WHEN IT MANIFESTLY OVERLOOKED THE EVIDENCE

PRESENTED BY THE PETITIONER COMPANY AND RULING THAT

THE PETITIONERS DEFENSE OF LACK OF EMPLOYER-EMPLOYEERELATIONS IS WITHOUT MERIT.

C. IN CONCLUDING THAT PETITIONER COMPANY REQUIRED

RESPONDENTS TO INCORPORATE THE ASSOCIATED

COLLECTORS GROUP, INC. ["ACGI"] NOTWITHSTANDING

ABSENCE OF ANY SPECIFIC EVIDENCE IN SUPPORT OF THE

SAME.

D. IN FINDING PETITIONER COMPANY GUILTY OF BAD FAITH

NOTWITHSTANDING ABSENCE OF ANY SPECIFIC EVIDENCE IN

SUPPORT OF THE SAME, AND AWARDING MORAL ANDEXEMPLARY DAMAGES TO HEREIN RESPONDENTS.

9

The pivotal issue to be resolved in this petition is whether or not there exists an

employer-employee relationship between petitioner and private respondents.

Corollary thereto is the issue of whether or not private respondents were illegally

dismissed by petitioner.

The issue of whether or not an employer-employee relationship exists in a given case

is essentially a question of fact.10

As a rule, the Supreme Court is not a trier of facts,

and this applies with greater force in labor cases. Hence, factual findings of quasi-

judicial bodies like the NLRC, particularly when they coincide with those of the

Labor Arbiter and if supported by substantial evidence, are accorded respect and evenfinality by this Court.

11However, a disharmony between the factual findings of the

Labor Arbiter and the National Labor Relations Commission opens the door to a

review thereof by this Court. Factual findings of administrative agencies are not

infallible and will be set aside when they fail the test of arbitrariness. Moreover, when

the findings of the National Labor Relations Commission contradict with those of the

labor arbiter, this Court, in the exercise of its equity jurisdiction, may look into the

records of the case and reexamine the questioned findings.12

The resolution of the foregoing issues initially boils down to a determination of the

true status of ACGI, i.e., whether it is an independent contractor or a labor-only

contractor.

Petitioner asserts that ACGI, a duly organized corporation primarily engaged in

collection services, is an independent contractor which entered into a service contract

for the collection of petitioners accounts starting November 30, 1997 until the early

part of February 1999. Thus, it has no employment relationship with private

respondents, being employees of ACGI.

The existence of an employment relationship between petitioner and private

respondents cannot be negated by simply alleging that the latter are employees of

ACGI as an independent contractor, it being crucial that ACGIs status, whether as

"labor-only contractor" or "independent contractor", be measured in terms of and

determined by the criteria set by statute.

The case ofDe los Santos v. NLRC13

succinctly enunciates this statutory criteria

Job contracting is permissible only if the following conditions are met: 1) the

contractor carries on an independent business and undertakes the contract

work on his own 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 the work except as

to the results thereof; and 2) the contractor has substantial capital or

investment in the form of tools, equipment, machineries, work premises, and

other materials which are necessary in the conduct of the business.

"Labor-only contracting" as defined in Section 5, Department Order No. 18-02, Rules

Implementing Articles 106-109 of the Labor Code14

refers to an arrangement where

the contractor or subcontractor merely recruits, supplies or places workers to perform

job, work or service for a principal, and any of the following elements is 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.

Given the above criteria, we agree with the Labor Arbiter that ACGI was not an

independent contractor.

First, ACGI does not have substantial capitalization or investment in the form of

tools, equipment, machineries, work premises, and other materials, to qualify as an

independent contractor. While it has an authorized capital stock of P1,000,000.00,

only P62,500.00 is actually paid-in, which cannot be considered substantial

capitalization. The 121 collectors subscribed to four shares each and paid only theamount of P625.00 in order to comply with the incorporation requirements.

15Further,

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private respondents reported daily to the branch office of the petitioner because ACGI

has no office or work premises. In fact, the corporate address of ACGI was the

residence of its president, Mr. Herminio D. Pea.16

Moreover, in dealing with the

consumers, private respondents used the receipts and identification cards issued by

petitioner.17

Second, the work of the private respondents was directly related to the principal

business or operation of the petitioner. Being in the business of providing water to the

consumers in the East Zone, the collection of the charges therefor by private

respondents for the petitioner can only be categorized as clearly related to, and in the

pursuit of the latters business.

Lastly, ACGI did not carry on an independent business or undertake the performance

of its service contract according to its own manner and method, free from the control

and supervision of its principal, petitioner. Prior to private respondents alleged

employment with ACGI, they were already working for petitioner, subject to its rules

and regulations in regard to the manner and method of performing their tasks. This

form of control and supervision never changed although they were already under the

seeming employ of ACGI. Petitioner issued memoranda regarding the billing methods

and distribution of books to the collectors;18

it required private respondents to report

daily and to remit their collections on the same day to the branch office or to deposit

them with Bank of the Philippine Islands; it monitored strictly their attendance aswhen a collector cannot perform his daily collection, he must notify petitioner or the

branch office in the morning of the day that he will be absent; and although it was

ACGI which ultimately disciplined private respondents, the penalty to be imposed

was dictated by petitioner as shown in the letters it sent to ACGI specifying the

penalties to be meted on the erring private respondents.19

These are indications that

ACGI was not left alone in the supervision and control of its alleged employees.

Consequently, it can be concluded that ACGI was not an independent contractor since

it did not carry a distinct business free from the control and supervision of petitioner.

Under this factual milieu, there is no doubt that ACGI was engaged in labor-only

contracting, and as such, is considered merely an agent of the petitioner. In labor-only

contracting, the statute creates an employer-employee relationship for acomprehensive purpose: to prevent a circumvention of labor laws. The contractor is

considered merely an agent of the principal employer and the latter is responsible to

the employees of the labor-only contractor as if such employees had been directly

employed by the principal employer.20

Since ACGI is only a labor-only contractor, the

workers it supplied should be considered as employees of the petitioner.

Even the "four-fold test" will show that petitioner is the employer of private

respondents. The elements to determine the existence of an employment relationshipare: (a) the selection and engagement of the employee; (b) the payment of wages; (c)

the power of dismissal; and (d) the employers power to control the employees

conduct. The most important element is the employers control of the employees

conduct, not only as to the result of the work to be done, but also as to the means and

methods to accomplish it.21

We agree with the Labor Arbiter that in the three stages of private respondents

services with the petitioner, i.e., (1) from August 1, 1997 to August 31, 1997; (2) from

September 1, 1997 to November 30, 1997; and (3) from December 1, 1997 to

February 8, 1999, the latter exercised control and supervision over the formers

conduct.

Petitioner contends that the employment of private respondents from August 1, 1997to August 30, 1997 was only temporary and done to accommodate their request to be

absorbed since petitioner was still undergoing a transition period. It was only when its

business became settled that petitioner employed private respondents for a fixed term

of three months.

Although petitioner was not obliged to absorb the private respondents, by engaging

their services, paying their wages in the form of commission, subjecting them to its

rules and imposing punishment in case of breach thereof, and controlling not only the

end result but the manner of achieving the same as well, an employment relationship

existed between them.

Notably, private respondents performed activities which were necessary or desirableto its principal trade or business. Thus, they were regular employees of petitioner,

regardless of whether the engagement was merely an accommodation of their request,

pursuant to Article 280 of the Labor Code which reads:

The provisions ofwritten agreement to the contrary notwithstanding andregardless of the oral agreement of the parties, an employment shall bedeemed to be regular where the employee has been engaged to perform

activities which are usually necessary or desirable in the usual business or

trade of the employer, except where the employment has been fixed for a

specific project or undertaking the completion or termination of which has

been determined at the time of the engagement of the employee or where the

work or services to be performed is seasonal in nature and the employment isfor the duration of the season.

As such regular employees, private respondents are entitled to security of tenure

which may not be circumvented by mere stipulation in a subsequent contract that their

employment is one with a fixed period. While this Court has upheld the legality of

fixed-term employment, where from the circumstances it is apparent that the periods

have been imposed to preclude acquisition of tenurial security by the employee, they

should be struck down or disregarded as contrary to public policy and morals.22

In the case at bar, we find that the term fixed in the subsequent contract was used to

defeat the tenurial security which private respondents already enjoy. Thus, we concur

with the Labor Arbiter, as affirmed by the Court of Appeals, when it held that:

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The next question if whether, with respect to the period, the individual

contracts are valid. Not all contracts of employment fixing a period are

invalid. Under Article 280, the evil sought to be prevented is singled out:

agreements entered into precisely to circumvent security of tenure. It has no

application where a fixed period of employment was agreed upon knowingly

and voluntarily by the parties, without any force, duress or improper pressure

being brought upon the employee and absent any circumstances vitiating his

consent, or where it satisfactorily appears that the employer and employee

dealt with each other on more or less terms with no moral dominance

whatever being exercised by the former over the latter. That is the doctrine in

Brent School, Inc. v. Zamora, 181 SCRA 702. The individual contracts inquestion were prepared by MWC in the form of the letter addressed to

complainants. The letter-contract is dated September 1, 1997, when

complainants were already working for MWC as collectors. With their

employment as their means of survival, there was no room then for

complainants to disagree with the presented letter-contracts. Their choice

then was not to negotiate for the terms of the contract but to lose or not to

lose their employmentemployment which they already had at that time.

The choice is obvious, as what they did, to sign the ready made letter-

contract to retain their employment, and survive. It is a defiance of the

teaching in Brent School, Inc. v. Zamora if this Office rules that the

individual contracts in question are valid, so, in deference to Brent School

ruling, this Office rules they are null and void.23

In view of the foregoing, we hold that an employment relationship exists between

petitioner and private respondents. We now proceed to ascertain whether private

respondents were dismissed in accordance with law.

As private respondents employer, petitioner has the burden of proving that the

dismissal was for a cause allowed under the law and that they were afforded

procedural due process.24

Petitioner failed to discharge this burden by substantial

evidence as it maintained the defense that it was not the employer of private

respondents. Having established that the schemes employed by petitioner were

devious attempts to defeat the tenurial rights of private respondents and that it failed

to comply with the requirements of termination under the Labor Code, the dismissal

of the private respondent is tainted with illegality.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from

work is entitled to reinstatement without loss of seniority rights and other privileges,

and to his full backwages, inclusive of allowances, and to his other benefits or their

monetary equivalent computed from the time his compensation was withheld from

him up to the time of his actual reinstatement. However, if reinstatement is no longer

possible, the employer has the alternative of paying the employee his separation pay

in lieu of reinstatement.25

This Court however cannot sustain the award of moral and exemplary damages in

favor of private respondents. Such an award cannot be justified solely upon the

premise that the employer dismissed his employee without just cause or due process.

Additional facts must be pleaded and proved to warrant the grant of moral damages

under the Civil Code. The act of dismissal must be attended with bad faith, or fraud,

or was oppressive to labor or done in a manner contrary to morals, good customs or

public policy and, of course, that social humiliation, wounded feelings, or grave

anxiety resulted therefrom. Similarly, exemplary damages are recoverable only when

the dismissal was effected in a wanton, oppressive or malevolent manner.26

Those

circumstances have not been adequately established.

However, private respondents are entitled to attorneys fees as they were compelled to

litigate with petitioners and incur expenses to enforce and protect their interests.27

The

award by the Labor Arbiterof P22,250.00 as attorneys fees to private respondents,

being reasonable, is sustained.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals datedNovember 29, 2002, in CA-G.R. SP No. 67134, reversing the decision of the National

Labor Relations Commission and reinstating the decision of the Labor Arbiter is

AFFIRMED with the MODIFICATION that the awards of P10,000.00 as moral

damages and P5,000.00 as exemplary damages are DELETED for lack of evidentiary

basis.

SO ORDERED.

[G.R. No. 149011. June 28, 2005]

SAN MIGUEL CORPORATION, petitioner, vs. PROSPERO A. ABALLA,BONNY J. ABARING, EDWIN M. ADLA-ON, ALVIN C. ALCALDE,

CELANIO D. ARROLLADO, EDDIE A. ARROLLADO, REYNALDOT. ASONG, RENE A. ASPERA, JOEL D. BALATERIA, JOSEPH D.BALATERIA, JOSE JOLLEN BALLADOS, WILFREDO B. BASAS,EDWIN E. BEATINGO, SONNY V. BERONDO, CHRISTOPHER D.BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUECABALIDA, DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD,RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO C.CALVEZ, PANCHO CAETE, JUNNY CASTEL, JUDY S. CELESTE,ROMEO CHUA, DANILO COBRA, ARMANDO C. DEDOYCO, JOEYR. DELA CRUZ, JOHN D. DELFIN, RENELITO P. DEON, ARNEL C.DE PEDRO, ORLANDO DERDER, CLIFFORD A. DESPI, RAMIE A.DESPI, SR., VICTOR A. DESPI, ROLANDO L. DINGLE, ANTONIO

D. DOLORFINO, LARRY DUMA-OP, NOEL DUMOL, CHITO L.

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DUNGOG, RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RICE. GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDOJ. JIMENEZ, ROBERTLY Y. HOFILEA, ROBERTO HOFILEA,VICENTE INDENCIO, JONATHAN T. INVENTOR, PETER PAUL T.INVENTOR, JOEBERT G. LAGARTO, RENATO LAMINA, ALVINLAS POBRES, ALBERT LAS POBRES, LEONARD LEMONCHITO,JERRY LIM, JOSE COLLY S. LUCERO, ROBERTO E. MARTIL,HERNANDO MATILLANO, VICENTE M. MATILLANO, TANNY C.MENDOZA, WILLIAM P. NAVARRO, WILSON P. NAVARRO, LEOA. OLVIDO, ROBERTO G. OTERO, BIENVENIDO C.

PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY PALANOG,BERNIE O. PILLO, ALBERTO O. PILLO, JOE-MARIE S. PUGNA,EDWIN G. RIBON, RAUL A. RUBIO, HENRY S. SAMILLANO,EDGAR SANTIAGO, ROLAND B. SANTILLANA, ROLDAN V.SAYAM, JOSEPH S. SAYSON, RENE SUARNABA, ELMARTABLIGAN, JERRY D. TALITE, OSCAR TALITE, WINIFREDOTALITE, CAMILO N. TEMPOROSA, JOSE TEMPOROSA, RANDYTINGALA, TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISEA. TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E.VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the COURTOF APPEALS, respondents.

D E C I S I O N

CARPIO-MORALES, J.:

Petitioner San Miguel Corporation (SMC), represented by its Assistant Vice

President and Visayas Area Manager for Aquaculture Operations Leopoldo S. Titular,

and Sunflower Multi-Purpose Cooperative (Sunflower), represented by the Chairman

of its Board of Directors Roy G. Asong, entered into a one-year Contract of

Services[1]

commencing on January 1, 1993, to be renewed on a month to month basis

until terminated by either party. The pertinent provisions of the contract read:

1. The cooperative agrees and undertakes to perform and/or provide for the

company, on a non-exclusive basis for a period of one year the following services for

the Bacolod Shrimp Processing Plant:

A. Messengerial/Janitorial

B. Shrimp Harvesting/Receiving

C. Sanitation/Washing/Cold Storage[2]

2. To carry out the undertaking specified in the immediately preceding

paragraph, the cooperative shall employ the necessary personnel and provide adequate

equipment, materials, tools and apparatus, to efficiently, fully and speedily

accomplish the work and services undertaken by the cooperative. xxx

3. In consideration of the above undertaking the company expressly agrees to pay

the cooperative the following rates per activity:

A. Messengerial/Janitorial Monthly Fixed Service Charge of: Nineteen Thousand Five

Hundred Pesos Only (P19,500.00)

B. Harvesting/Shrimp Receiving.Piece rate of P0.34/kg. Or P100.00 minimum per

person/activity whichever is higher, with provisions as follows:

P25.00 Fixed Fee per personAdditional meal allowance P15.00 every meal time in

case harvest duration exceeds one meal.

This will be pre-set every harvest based on harvest

plan approved by the Senior Buyer.

C. Sanitation/Washing and Cold Storage P125.00/person for 3 shifts.

One-half of the payment for all services rendered shall be payable on the fifteenth and

the other half, on the end of each month. The cooperative shall pay taxes, fees, dues

and other impositions that shall become due as a result of this contract.

The cooperative shall have the entire charge, control and supervision of the work and

services herein agreed upon. xxx

4. There is no employer-employee relationship between the company and the

cooperative, or the cooperative and any of its members, or the company and any

members of the cooperative. The cooperative is an association of self-employed

members, an independent contractor, and an entrepreneur. It is subject to the control

and direction of the company only as to the result to be accomplished by the work or

services herein specified, and not as to the work herein contracted. The cooperative

and its members recognize that it is taking a business risk in accepting a fixed service

fee to provide the services contracted for and its realization of profit or loss from its

undertaking, in relation to all its other undertakings, will depend on how efficiently itdeploys and fields its members and how they perform the work and manage its

operations.

5. The cooperative shall, whenever possible, maintain and keep under its control

the premises where the work under this contract shall be performed.

6. The cooperative shall have exclusive discretion in the selection, engagement

and discharge of its member-workers or otherwise in the direction and control

thereof. The determination of the wages, salaries and compensation of the member-

workers of the cooperative shall be within its full control. It is further understood that

the cooperative is an independent contractor, and as such, the cooperative agrees to

comply with all the requirements of all pertinent laws and ordinances, rules and

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regulations. Although it is understood and agreed between the parties hereto that the

cooperative, in the performance of its obligations, is subject to the control or direction

of the company merely as a (sic) result to be accomplished by the work or services

herein specified, and not as to the means and methods of accomplishing such result,

the cooperative hereby warrants that it will perform such work or services in such

manner as will be consistent with the achievement of the result herein contracted for.

xxx

8. The cooperative undertakes to pay the wages or salaries of its member-workers,as well as all benefits, premiums and protection in accordance with the provisions of

the labor code, cooperative code and other applicable laws and decrees and the rules

and regulations promulgated by competent authorities, assuming all responsibility

therefor.

The cooperative further undertakes to submit to the company within the first ten (10)

days of every month, a statement made, signed and sworn to by its duly authorized

representative before a notary public or other officer authorized by law to administer

oaths, to the effect that the cooperative has paid all wages or salaries due to its

employees or personnel for services rendered by them during the month immediately

preceding, including overtime, if any, and that such payments were all in accordance

with the requirements of law.

xxx

12. Unless sooner terminated for the reasons stated in paragraph 9 this contract

shall be for a period of one (1) year commencing on January 1, 1993. Thereafter, this

Contract will be deemed renewed on a month-to-month basis until terminated by

either party by sending a written notice to the other at least thirty (30) days prior to the

intended date of termination.

xxx[3]

(Underscoring supplied)

Pursuant to the contract, Sunflower engaged private respondents to, as they did,

render services at SMCs Bacolod Shrimp Processing Plant at Sta. Fe, Bacolod

City. The contract was deemed renewed by the parties every month after its

expiration on January 1, 1994 and private respondents continued to perform their

tasks until September 11, 1995.

In July 1995, private respondents filed a complaint before the NLRC, Regional

Arbitration Branch No. VI, Bacolod City, praying to be declared as regular employees

of SMC, with claims for recovery of a ll benefits and privileges enjoyed by SMC rank

and file employees.

Private respondents subsequently filed on September 25, 1995 an Amended

Complaint

[4]

to include illegal dismissal as additional cause of action following

SMCs closure of its Bacolod Shrimp Processing Plant on September 15,

1995[5]

which resulted in the termination of their services.

SMC filed a Motion for Leave to File Attached Third Party Complaint[6]

dated

November 27, 1995 to implead Sunflower as Third Party Defendant which was, by

Order[7]

of December 11, 1995, granted by Labor Arbiter Ray Alan T. Drilon.

In the meantime, on September 30, 1996, SMC filed before the Regional Office

at Iloilo City of the Department of Labor and Employment (DOLE) a Notice of

Closure[8]

of its aquaculture operations effective on even date, citing serious business

losses.

By Decision of September 23, 1997, Labor Arbiter Drilon dismissed private

respondents complaint for lack of merit, ratiocinating as follows:

We sustain the stand of the respondent SMC that it could properly exercise

its management prerogative to contract out the preparation and processing aspects of

its aquaculture operations. Judicial notice has already been taken regarding the

general practice adopted in government and private institutions and industries of

hiring independent contractors to perform special services. xxx

xxx

Indeed, the law allows job contracting. Job contracting is permissible under the Labor

Code under specific conditions and we do not see how this activity could not be

legally undertaken by an independent service cooperative like the third-party

respondent herein.

There is no basis to the demand for regularization simply on the theory that

complainants performed activities which are necessary and desirable in the business

of respondent. It has been held that the definition of regular employees as those who

perform activities which are necessary and desirable for the business of the employer

is not always determinative because any agreement may provide for one (1) party to

render services for and in behalf of another for a consideration even without being

hired as an employee.

The charge of the complainants that third-party respondent is a mere labor-only

contractor is a sweeping generalization and completely unsubstantiated. xxx In the

absence of clear and convincing evidence showing that third-party respondent acted

merely as a labor only contractor, we are firmly convinced of the legitimacy and the

integrity of its service contract with respondent SMC.

In the same vein, the closure of the Bacolod Shrimp Processing Plant was a

management decision purely dictated by economic factors which was (sic) mainly

serious business losses. The law recognizes the right of the employer to close his

business or cease his operations for bonafide reasons, as much as it recognizes the

right of the employer to terminate the employment of any employee due to closure or

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cessation of business operations, unless the closing is for the purpose of

circumventing the provisions of the law on security of tenure. The decision of

respondent SMC to close its Bacolod Shrimp Processing Plant, due to serious business

losses which has (sic) clearly been established, is a management prerogative which

could hardly be interfered with.

xxx The closure did affect the regular employees and workers of the Bacolod

Processing Plant, who were accordingly terminated following the legal requisites

prescribed by law. The closure, however, in so far as the complainants are concerned,

resulted in the termination of SMCs service contract with their

cooperative xxx[9](Underscoring supplied)

Private respondents appealed to the NLRC.

By Decision of December 29, 1998, the NLRC dismissed the appeal for lack of

merit, it finding that third party respondent Sunflower was an independent

contractor in light of its observation that [i]n all the activities of private respondents,

they were under the actual direction, control and supervision of third party respondent

Sunflower, as well as the payment of wages, and power of dismissal.[10]

Private respondents Motion for Reconsideration[11]

having been denied by the

NLRC for lack of merit by Resolution of September 10, 1999, they filed a petition for

certiorari[12]

before the Court of Appeals (CA).

Before the CA, SMC filed a Motion to Dismiss[13]

private respondents petition

for non-compliance with the Rules on Civil Procedure and failure to show grave abuse

of discretion on the part of the NLRC.

SMC subsequently filed its Comment[14]

to the petition on March 30, 2000.

By Decision of February 7, 2001, the appellate court reversed the NLRCdecision and accordingly found for private respondents, disposing as follows:

WHEREFORE, the petition is GRANTED. Accordingly, judgment is hereby

RENDERED: (1) REVERSING and SETTING ASIDE both the 29 December 1998

decision and 10 September 1999 resolution of the National Labor RelationsCommission (NLRC), Fourth Division, Cebu City in NLRC Case No. V-0361-97 as

well as the 23 September 1997 decision of the labor arbiter in RAB Case No. 06-07-

10316-95; (2) ORDERING the respondent, San Miguel Corporation, to GRANT

petitioners: (a) separation pay in accordance with the computation given to the regular

SMC employees working at its Bacolod Shrimp Processing Plant with full backwages,

inclusive of allowances and other benefits or their monetary equivalent, from 11

September 1995, the time their actual compensation was withheld from them, up to

the time of the finality of this decision; (b)differentials pays (sic) effective as of and

from the time petitioners acquired regular employment status pursuant to the

disquisition mentioned above, and all such other and further benefits as provided by

applicable collective bargaining agreement(s) or other relations, or by law, beginning

such time up to their termination from employment on 11 September 1995; and

ORDERING private respondent SMC to PAY unto the

petitioners attorneys fees equivalent to ten (10%) percent of the total award.

No pronouncement as to costs.

SO ORDERED.[15]

(Underscoring supplied)

Justifying its reversal of the findings of the labor arbiter and the NLRC, the

appellate court reasoned:

Although the terms of the non-exclusive contract of service between SMC and

[Sunflower] showed a clear intent to abstain from establishing an employer-employee

relationship between SMC and [Sunflower] or the latters members, the extent to

which the parties successfully realized this intent in the light of the applicable law is

the controlling factor in determining the real and actual relationship between or

among the parties.

xxx

With respect to the power to control petitioners conduct, it appears that petitioners

were under the direct control and supervision of SMC supervisors both as to the

manner they performed their functions and as to the end results thereof. It was only

after petitioners lodged a complaint to have their status declared as regular employees

of SMC that certain members of [Sunflower] began to countersign petitioners daily

time records to make it appear that they (petitioners) were under the control and

supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx

Even without these instances indicative of control by SMC over the petitioners, it is

safe to assume that SMC would never have allowed the petitioners to work within its

premises, using its own facilities, equipment and tools, alongside SMC employees

discharging similar or identical activities unless it exercised a substantial degree of

control and supervision over the petitioners not only as to the manner they performed

their functions but also as to the end results of such functions.

xxx

xxx it becomes apparent that [Sunflower] and the petitioners do not qualify as

independent contractors. [Sunflower] and the petitioners did not have substantial

capital or investment in the form of tools, equipment, implements, work premises, et

cetera necessary to actually perform the service under their own account,

responsibility, and method. The only work premises maintained by [Sunflower]

was a small office within the confines of a small carinderia or refreshment parlor

owned by the mother of its chair, Roy Asong; the only equipment it owned was a

typewriter (rollo, pp. 525-525) and, the only assets it provided SMC were the bare

bodies of its members, the petitioners herein(rollo, p. 523).

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In addition, as shown earlier, petitioners, who worked inside the premises of SMC,

were under the control and supervision of SMC both as to the manner and method indischarging their functions and as to the results thereof.

Besides, it should be taken into account that the activities undertaken by the

petitioners as cleaners, janitors, messengers and shrimp harvesters, packers and

handlers weredirectly related to the aquaculture business of SMC (See Guarin vs.

NLRC, 198 SCRA 267, 273). This is confirmed by the renewal of the service contract

from January 1993 to September 1995, a period of close to three (3) years .

Moreover, the petitioners here numbering ninety seven (97), by itself, is a

considerable workforce and raises the suspicion that the non-exclusive service

contract between SMC and [Sunflower] was designed to evade the obligations

inherent in an employer-employee relationship (SeeRhone-Poulenc Agrochemicals

Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).

Equally suspicious is the fact that the notary public who signed the by-laws of[Sunflower] and its [Sunflower] retained counsel are both partners of the localcounsel of SMC (rollo, p. 9).

xxx

With these observations, no other logical conclusion can be reached except

that [Sunflower] acted as an agent of SMC, facilitating the manpower requirements of

the latter, the real employer of the petitioners. We simply cannot allow these two

entities through the convenience of a non-exclusive service contract to stipulate on the

existence of employer-employee relation. Such existence is a question of law which

cannot be made the subject of agreement to the detriment of the petitioners (Tabas vs.

California Manufacturing, Inc., 169 SCRA 497, 500).

xxx

There being a finding of labor-only contracting, liability must be shouldered eitherby SMC or [Sunflower] or shared by both (See Tabas vs. California Manufacturing,

Inc.,supra, p. 502). SMC however should be held solelyliable for[Sunflower] became non-existent with the closure of the aquaculture business ofSMC.

Furthermore, since the closure of the aquaculture operations of SMC appears to be

valid, reinstatement is no longer feasible. Consistent with the pronouncement

inBustamante, et al., vs. NLRC, G.R. No. 111651, 28 November 1996, petitioners are

thus entitled to separation pay (in the computation similar to those given to regular

SMC employees at its Bacolod Shrimp Processing Plant) with full backwages,

inclusive of allowances and other benefits or their monetary equivalent, from the time

their actual compensation was withheld from them up to the time of the finality ofthis decision. This is without prejudice to differentials pays (sic) effective as of and

from the time petitioners acquired regular employment status pursuant to the

discussion mentioned above, and all such other and further benefits as provided by

applicable collective bargaining agreement(s) or other relations, or by law, beginning

such time up to their termination from employment on 11 September

1995.[16]

(Emphasis and underscoring supplied)

SMCs Motion for Reconsideration[17]

having been denied for lack of merit by

Resolution of July 11, 2001, it comes before this Court via the present petition for

review on certiorari assigning to the CA the following errors:

I

THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE COURSE AND

GRANTING RESPONDENTS PATENTLY DEFECTIVE PETITION FOR

CERTIORARI. IN DOING SO, THE COURT OF APPEALS DEPARTED FROM

THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS.

II

THE COURT OF APPEALS GRAVELY ERRED IN RECOGNIZING ALL THE

RESPONDENTS AS COMPLAINANTS IN THE CASE BEFORE THE LABOR

ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED THIS CASE INA MANNER NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE

DECISIONS OF THE SUPREME COURT.

III

THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT

RESPONDENTS ARE EMPLOYEES OF SMC.

IV

THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG (sic) THAT

RESPONDENTS ARE NOT ENTITLED TO ANY RELIEF. THE CLOSURE OF

THE BACOLOD SHRIMP PROCESSING PLANT WAS DUE TO SERIOUS

BUSINESS LOSSES.[18]

(Underscoring supplied)

SMC bewails the failure of the appellate court to outrightly dismiss the petition

for certiorari as only three out of the ninety seven named petitioners signed the

verification and certification against forum-shopping.

While the general rule is that the certificate of non-forum shopping must be

signed by all the plaintiffs or petitioners in a case and the signature of only one of

them is insufficient,[19]

this Court has stressed that the rules on forum shopping, which

were designed to promote and facilitate the orderly administration of justice, should

not be interpreted with such absolute literalness as to subvert its own ultimate and

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legitimate objective.[20]

Strict compliance with the provisions regarding the certificate

of non-forum shopping merely underscores its mandatory nature in that the

certification cannot be altogether dispensed with or its requirements completely

disregarded.[21]

It does not, however, thereby interdict substantial compliance with its

provisions under justifiable circumstances.[22]

Thus in the recent case ofHLC Construction and Development Corporation v.

Emily Homes Subdivision Homeowners Association,[23]

this Court held:

Respondents (who were plaintiffs in the trial court) filed the complaint against

petitioners as a group, represented by their homeowners association president whowas likewise one of the plaintiffs, Mr. Samaon M. Buat. Respondents raised onecause of action which was the breach of contractual obligations and payment of

damages. They shared a common interest in the subject matter of the case, being the

aggrieved residents of the poorly constructed and developed Emily Homes

Subdivision. Due to the collective nature of the case, there was no doubt that Mr.

Samaon M. Buat could validly sign the certificate of non-forum shopping in behalf of

all his co-plaintiffs. In cases therefore where it ishighly impractical to require all the

plaintiffs to sign the certificate of non-forum shopping, it is sufficient, in order not to

defeat the ends of justice, for one of the plaintiffs, acting as representative, to sign the

certificate provided that xxx the plaintiffs share a common interest in the subjectmatter of the case or filed the case as a collective, raising only one common

cause of action or defense.[24]

(Emphasis and underscoring supplied)

Given the collective nature of the petition filed before the appellate court by

herein private respondents, raising one common cause of action against SMC, the

execution by private respondents Winifredo Talite, Renelito Deon and Jose

Temporosa in behalf of all the other private respondents of the certificate of non-

forum shopping constitutes substantial compliance with the Rules.[25]

That the three

indeed represented their co-petitioners before the appellate court is, as it correctly

found, subsequently proven to be true as shown by the signatures of the majority of

the petitioners appearing in their memorandum filed before Us.[26]

Additionally, the merits of the substantive aspects of the case may also be

deemed as special circumstance or compelling reason to take cognizance of apetition although the certification against forum shopping was not executed and

signed by all of the petitioners.[27]

SMC goes on to argue that the petition filed before the CA is fatally defective as

it was not accompanied by copies of all pleadings and documents relevant and

pertinent thereto in contravention of Section 1, Rule 65 of the Rules of Court.[28]

This Court is not persuaded. The records show that private respondents

appended the following documents to their petition before the appellate court: the

September 23, 1997 Decision of the Labor Arbiter,[29]

their Notice of Appeal with

Appeal Memorandum dated October 16, 1997 filed before the NLRC,[30]

the

December 29, 1998 NLRC Decision,[31]

their Motion for Reconsideration dated March

26, 1999 filed with the NLRC[32]

and the September 10, 1999 NLRC Resolution.[33]

It bears stressing at any rate that it is the appellate court which ultimately

determines if the supporting documents are sufficient to make out a prima

facie case.[34]

It discerns whether on the basis of what have been submitted it could

already judiciously determine the merits of the petition.[35]

In the case at bar, the CA

found that the petition was adequately supported by relevant and pertinent

documents.

At all events, this Court has allowed a liberal construction of the rule on the

accomplishment of a certificate of non-forum shopping in the following cases: (1)

where a rigid application will result in manifest failure or miscarriage of justice; (2)

where the interest of substantial justice will be served; (3) where the resolution of themotion is addressed solely to the sound and judicious discretion of the court; and (4)

where the injustice to the adverse party is not commensurate with the degree of his

thoughtlessness in not complying with the procedure prescribed.[36]

Rules of procedure should indeed be viewed as mere tools designed to facilitate

the attainment of justice. Their strict and rigid application, which would result in

technicalities that tend to frustrate rather than promote substantial justice, must always

be eschewed.[37]

SMC further argues that the appellate court exceeded its jurisdiction in reversing

the decisions of the labor arbiter and the NLRC as findings of facts of quasi-judicial

bodies like the NLRC are accorded great respect and finality, and that this principle

acquires greater weight and application in the case at bar as the labor arbiter and theNLRC have the same factual findings.

The general rule, no doubt, is that findings of facts of an administrative agency

which has acquired expertise in the particular field of its endeavor are accorded great

weight on appeal.[38]

The rule is not absolute and admits of certain well-recognized

exceptions, however. Thus, when the findings of fact of the labor arbiter and the

NLRC are not supported by substantial evidence or their judgment was based on a

misapprehension of facts, the appellate court may make an independent evaluation of

the facts of the case.[39]

SMC further faults the appellate court in giving due course to private

respondents petition despite the fact that the complaint filed before the labor arb iter

was signed and verified only by private respondent Winifredo Talite; that privaterespondents position paper

[40]was verified by only six

[41]out of the ninety seven

complainants; and that their Joint-Affidavit[42]

was executed only by twelve[43]

of the

complainants.

Specifically with respect to the Joint-Affidavit of private respondents, SMC

asserts that it should not have been considered by the appellate court in establishing

the claims of those who did not sign the same, citing this Courts ruling inSouthern

Cotabato Development and Construction, Inc. v. NLRC.[44]

SMCs position does not lie.

A perusal of the complaint shows that the ninety seven complainants were being

represented by their counsel of choice. Thus the first sentence of their complaint

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