G.R. No. 207684 - Philtranco Service Enterprises, Inc. vs. Cual

In February 1997, 7K Corporation (petitioner) entered into a service contract with Universal Janitorial and Allied Services (Universal) in which Universal bound itself to provide drivers at a monthly rate of P4,637.00 per driver.
In March and April 1997, petitioner interviewed Rene A. Corona and Alex B. Catingan (private respondents); Corona started on March 7, 1997, and Catingan on April 11, 1997.

Under the service contract, petitioner remitted the monthly fee for drivers to Universal, while overtime pay for the respondents was handled directly by petitioner.
A controversy arose because the accounting department reduced the respondents’ recorded overtime (up to 70 hours shown on time-cards) to only 20 hours, leading to grievances by the respondents.

After repeated warnings went unheeded, the respondents filed separate complaints before the Labor Arbiter for illegal dismissal, unpaid overtime, salary differentials, and reinstatement with backwages.
The LA rendered a decision on November 20, 1998, declaring Universal as the employer of the respondents, finding their dismissal illegal, and awarding separation pay, backwages (later deleted), holiday pay, 13th month pay (proportional), salary differentials, and attorney’s fees based on the service contract provisions.

Universal appealed to the NLRC, arguing that petitioner was the true employer because:

The NLRC, in its March 30, 1999, Resolution, modified the LA decision by deleting the backwages award, holding that there was no illegal dismissal, but maintained the awards for salary differentials, holiday pay, and proportional 13th month pay.
The NLRC found that Universal was a “labor-only contractor” because it failed to demonstrate substantial capital or investment (in tools, equipment, or machinery), and that the respondents’ work was directly related to petitioner’s business; thus, the principal employer (petitioner) was held solidarily liable with Universal.

Both petitioner and the private respondents filed motions for reconsideration, which the NLRC denied on August 23, 1999.
Petitioner then elevated the matter to the Court of Appeals (CA) by filing a petition for certiorari, challenging the NLRC’s jurisdiction and the modification of the LA decision, alleging that the LA decision had become final and executory with respect to petitioner and the respondents.

The CA dismissed petitioner’s petition on procedural grounds, noting that Universal’s appeal was timely filed, that all parties affected by the LA decision automatically join the appeal, and that petitioner’s late filing (and the nature of the NLRC’s modification) did not warrant reopening the case.
The CA also upheld the determination that Universal was a labor-only contractor, affirming that the contract language could not override statutory criteria in defining the employment relationship.

Whether the NLRC had jurisdiction to decide the appeal despite petitioner and the respondents not having separately appealed the LA decision (which petitioner argued had become final and executory for them).
Whether Universal’s appeal was validly and timely filed.

Whether the NLRC erred in declaring Universal as a labor-only contractor despite the service contract stipulating that Universal was to be the employer of the respondents.
Whether the service contract language controlling the relationship between the parties could overcome the statutory criteria for identifying a labor-only contractor.

Whether petitioner, as the principal employer, could be held jointly and severally liable with Universal for the wage-related claims of the respondents.
Whether the administrative bodies correctly applied the provisions of the Labor Code in imposing such liability.

Whether the NLRC and the CA observed due process by addressing petitioner’s arguments and ensuring that it had a fair opportunity to present its case despite not being the primary appellant in Universal’s appeal.