GR No. 164257
July 5, 2010
Facts
AMPCO hired the services of respondents who were assigned to work in San Miguel’s Corporation Bottling Plant (SMC). Respondents performed the following tasks: segregating bottles, removing dirt therefrom, filing them in designated places, loading and unloading the bottles to and from the delivery trucks, and performing other tasks as may be ordered by SMC’s officers.
Subsequently, SMC entered into a Contract of Services with AMPCO designating the latter as the employer of the respondents. As a result, respondents were not able to claim the rights and benefits ordinarily accorded a regular employee of SMC.
Thereafter, respondents filed a complaint for illegal dismissal against AMPCO and SMC. They asserted that they are regular employees of SMC. However, SMC contended that AMPCO is the employer of the respondents, and not SMC. Further, SMC alleged that it was AMPCO that directly paid the respondent’s salaries and remitted their contributions to the SSS.
The Labor Arbiter, the NLRC, and the Court of Appeals ruled against SMC. They contended that SMC is the regular employer of the respondents.
Issue
Whether or not AMPCO is a labor-only contractor which makes SMC the employer of the respondents?
Held
Yes. Under Department Order No. 10, Series of 2017, job contracting is permissible while labor-only contracting is prohibited.
The test to determine the existence of independent contractorship is whether or not the one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work.
On the contrary, a labor-only contractor is one who (1) does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and (2) The workers recruited and placed by such persons are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed (Section 9, DO No. 10, Series of 1997).
“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 (Section 5 of Department Order No. 18-02, Series of 2002).
In this case, AMPCO does not have substantial capital as the Labor Arbiter found that its net income was P59,288.13 and that its cash on hand for is P22,154.80. Moreover, AMPCO’s main business activity is trading, maintaining a store catering to members and the public. Its job contracting with SMC is only a minor activity or sideline. Neither did AMPCO had substantial equipment, tools, machineries, and supplies actually and directly used by it in the performance or completion of the segregation and piling job. Hence, AMPCO is a labor-only contractor.
In addition, in distinguishing between permissible job contracting and prohibited labor-only contracting, the totality of the facts and the surrounding circumstances of the case are to be considered.
Even if the service contracts contain stipulations which are earmarks of independent contractorship, they do not make it legally so. The language of a contract is neither determinative nor conclusive of the relationship between the parties. In other words, the principal and the contractor cannot dictate by contract the character of AMPCO’s business, that is, whether as labor-only contractor, or job contractor.
Moreover, AMPCO’s Certificate of Registration as an Independent Contractor issued by the proper Regional Office of the DOLE is not conclusive evidence of such status. The fact of registration simply prevents the legal presumption of being a mere labor-only contractor from arising.
In view of the foregoing, AMPCO is a labor-only contractor. Thus, petitioner SMC, as principal employer, is solidarily liable with AMPCO, the labor-only contractor, for all the rightful claims of respondents.