Facts:

The case involves a Petition for Review on Certiorari filed by Allied Banking Corporation (now merged with Philippine National Bank) against Reynold Calumpang, challenging the decisions of the Court of Appeals (CA) and the National Labor Relations Commission (NLRC) regarding Calumpang's alleged illegal dismissal. The events unfold primarily between September 28, 2003, when Calumpang was hired as a janitor by Race Cleaners, Inc. (RCI), and the subsequent legal proceedings over his dismissal.

Calumpang was assigned to the Bank’s Tanjay City Branch, performing janitorial work and errands, including deliveries of statements and checks. Petitioner alleged that Calumpang took excessive time on errands, as it was discovered that during these periods, he was operating a pedicab and borrowing money from clients of the Branch. Consequently, the Bank's Branch Head, Mr. Oscar Infante, informed Calumpang that his services were no longer required.

Dissatisfied with his dismissal, Calu

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Facts:

Background and Parties Involved

• Petitioner Allied Banking Corporation (now merged with Philippine National Bank) entered into a Service Agreement with Race Cleaners, Inc. (RCI), a company engaged in janitorial and manpower services.
• The Service Agreement explicitly stated that no employer-employee relationship existed between the Bank and the employees of RCI.
• Respondent Reynold Calumpang was hired on September 28, 2003 by RCI as a janitor and assigned to the Bank’s Tanjay City Branch.

Nature of Employment and Assigned Duties

• Respondent’s tasks included janitorial work and messengerial/errand services for the Branch.
• His duties required him to leave the Branch for errand runs such as delivering bank documents, statements, checks for clearing, and mailing letters.
• The Bank noted that his absence tended to be prolonged, eventually revealing that during these periods, he was also plying his pedicab and ferrying passengers.

Allegations Against Respondent and Grounds for Termination

• The Bank discovered that respondent was engaging in unauthorized activities during his work hours, including operating a pedicab business and borrowing money from the bank’s clients.
• Based on these observations and the client complaints received by Branch Manager Mr. Oscar Infante, the Bank decided to relieve respondent of his duties.
• Petitioner argued that this decision to replace respondent was pursuant to its contractual right under the Service Agreement and not an act constituting dismissal.

Claims and Position of the Parties

• Respondent, dissatisfied with his relief from duty, filed a complaint before the NLRC, asserting he was a regular employee of the Bank, not merely an RCI employee.

- He contended that he received a salary, was under direct supervision of the Branch Manager, and that the Bank exercised control over his work and dismissal. - He argued that the four-fold test of employer-employee relationship was met, including direct payment of wages and the power to terminate his services. - Respondent was clearly hired by RCI, and the Service Agreement between the Bank and RCI excluded any employer-employee relationship with the Bank. - The misconduct observed (prolonged absences, plying a pedicab, borrowing money) justified the decision to replace him. - Their decision fell within their contractual prerogative to seek his replacement without constituting an act of dismissal.

Procedural History and Lower Court Rulings

• Labor Arbiter Decision (March 28, 2006)

- Declared respondent an employee of the Bank. - Ruled that his dismissal was illegal due to the failure to observe due process. - Ordered his reinstatement with backwages or, alternatively, separation pay. - Affirmed the Labor Arbiter’s findings, emphasizing elements such as direct wage payments and supervision that established the employer-employee relationship. - Rejected petitioner’s assertion of a mere contractual relationship with RCI. - Confirmed respondent’s illegal dismissal due to the lack of procedural due process. - Upheld the NLRC ruling declaring respondent was an employee of the Bank due to RCI being recognized as a labor-only contractor. - Applied the independent contractor test to conclude that the nature of respondent’s work was integral to the Bank’s operations. - Found that petitioner’s dismissal of respondent, though substantively based on misconduct, was procedurally deficient because no proper notice or opportunity to be heard was given. - Ordered recomputation of backwages and separation pay by the Labor Arbiter. - Petitioner elevated the matter arguing that the CA erred in:

Issue:

Whether the CA erred in declaring that RCI is a labor-only contractor.

• Petitioner questioned the evidence and basis for classifying RCI under labor-only contracting despite its alleged capitalization and control over its employees.

Whether the CA erred in finding that there exists an employer-employee relationship between the Bank and respondent.

• The issue revolved around whether the direct control, wage payment, and power to terminate, all evidenced by the Bank’s actions, established an employment relationship notwithstanding the Service Agreement.

Whether the CA erred in (i) declaring that respondent had been illegally dismissed and (ii) granting his monetary claims.

• In particular, the determination focused on whether petitioner’s grounds for termination were substantively valid and whether the procedural due process requirements in dismissal were observed.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)