GR No. 177592
June 9, 2014
Facts
RDG is a contractor who recruits laborers for fielding to Petron’s Mandaue Bulk Plant. Petitioners were some of the laborers recruited by RDG to work for Petron.
The Contract for Services entered into by Petron and RDG was never renewed. As a consequence, petitioners were barred from continuing their services. Therefore, they filed a complaint for illegal dismissal, underpayment of wages, damages and attorney’s fees against Petron and RDG.
Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the latter is a labor-only contractor, which merely acted as an agent of Petron, their true employer.
RDG corroborated petitioners’ claim that they are regular employees of Petron. It alleged that Petron directly supervised their activities and they performed jobs necessary and desirable to Petron’s business. Petron provided petitioners with supplies, tools and equipment used in their jobs; and that petitioners’ workplace since the start of their employment was at Petron’s bulk plant in Mandaue City. RDG denied liability over petitioners’ claim of illegal dismissal and further argued that Petron cannot capitalize on the service contract to escape liability.
On the contrary, Petron maintained that RDG is an independent contractor and the real employer of the petitioners. It was RDG which hired and selected petitioners, paid their salaries and wages, and directly supervised their work. Attesting to these were two former employees of RDG and Petron’s Mandaue Terminal Superintendent whose joint affidavit and affidavit, respectively, were submitted by Petron.
The Labor Arbiter and the NLRC ruled that petitioners are regular employees of Petron. On the other hand, the Court of Appeals ruled otherwise and further held that RDG is an independent labor contractor.
Issue
Whether or not RDG is an independent labor contractor.
Held
No.
DOLE Department Order No. 10, series of 1997 provides that “[p]ermissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to farm out with a contractor or subcontractor the performance of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work or, service is to be performed or completed within or outside the premises of the principal. Under this arrangement, the following conditions must be met: (a) the contractor carries on a distinct and independent business and undertakes the contract work on his account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of his work except as to the results thereof; (b) the contractor has substantial capital or investment; and © the agreement between the principal and contractor or subcontractor assures the contractual employees’ entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits.” On the other hans, labor-only contractingis a prohibited act, defined as “supplying workers to an employer who 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.”
Generally, the contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that it has the substantial capital, investment, tools and the like. However, where the principal is the one claiming that the contractor is a legitimate contractor, as in the present case, said principal has the burden of proving that supposed status.
In this case, it is thus incumbent upon Petron, and not upon petitioners as Petron insists, to prove that RDG is an independent contractor. Petron failed to discharge the burden of proving that RDG is a legitimate contractor. While Petron was able to establish that RDG was financially capable as a legitimate contractor at the time of the execution of the service contract in 2000, it nevertheless failed to establish the financial capability of RDG at the time when petitioners actually started to work for Petron in 1968, 1979, 1981, 1987, 1990, 1992 and 1993.
Hence, the presumption that RDG is a labor-only contractor stands. Otherwise stated, the presumption that RDG is a labor-only contractor stands due to the failure of Petron to discharge the burden of proving the contrary.