G.R. No. 194765 - Marsman and Co., Inc. vs. Sta. Rita

Marsman & Company, Inc. is a domestic corporation engaged in the distribution and sale of pharmaceutical and consumer products.
Marsman later acquired Metro Drug Distribution, Inc., which eventually became Consumer Products Distribution Services, Inc. (CPDSI), its operating company.
The corporate reorganization led to a distinction between Marsman functioning as a holding company and CPDSI as the main operating company.

Sta. Rita was initially hired by Marsman as a warehouse helper on November 16, 1993, under a fixed-term contract.
After the expiration of his initial contract, he was rehired on a probationary basis starting April 18, 1994, and later confirmed as a regular employee on September 18, 1994 with corresponding salary adjustments.
Sta. Rita became a member of the Marsman Employees Union (MEU), the recognized sole and exclusive bargaining representative of Marsman’s non-managerial employees.

In July 1995, Marsman purchased Metro Drug and later, in June 1996, entered into a Memorandum of Agreement (MOA) with the union.

The MOA acknowledged the transfer of Marsman’s office, sales, and warehouse personnel to Metro Drug/CPDSI.
It stipulated the continuation of employee benefits, recognition of tenure, and the preservation of the bargaining unit’s rights under the existing Collective Bargaining Agreement (CBA).

The integration was reinforced when the employees’ service records were carried over and their employment terms maintained despite the transfer.
Alongside the integration, Marsman continued to negotiate matters regarding employee representation and pending grievances with the union, as provided by the MOA.

As part of the transition, Sta. Rita was assigned to various warehouses including the CPDSI facility and later, to EAC-Libis Warehouse under a “cross-training program” arrangement.
When CPDSI contracted out logistic services to EAC Distributors, it ultimately assumed responsibility for employing the warehouse personnel.
A letter dated January 14, 2000, issued by CPDSI’s Vice-President and General Manager, Michael Leo T. Luna, notified Sta. Rita of the termination of his services due to redundancy, following the termination of EAC’s lease agreement with the warehouse owner.
CPDSI reported the redundancy to the Department of Labor and Employment (DOLE) in a subsequent letter dated January 17, 2000.

Sta. Rita filed a complaint with the National Labor Relations Commission (NLRC) on January 25, 2000, alleging illegal dismissal without just or authorized cause and lack of procedural due process.
Marsman moved to dismiss the case on the ground that at the time of dismissal, Sta. Rita had already transferred his employment to CPDSI, evidenced by work assignments, adherence to CPDSI’s operational rules, and receipt of salaries under CPDSI’s name.

The Labor Arbiter initially found Marsman guilty of illegal dismissal, basing his decision on Marsman’s actions and the integrated employment arrangement.
The NLRC reversed the Labor Arbiter’s decision, holding that there was no employer-employee relationship between Marsman and Sta. Rita since Sta. Rita had become an employee of CPDSI.
The Court of Appeals (CA) reversed the NLRC’s decision; it held that Sta. Rita’s refusal to sign the MOA indicated that his employment remained with Marsman, and thus, he was illegally dismissed by Marsman.
Marsman then petitioned for review on certiorari before the Supreme Court, challenging the CA’s ruling by asserting that the alleged employer-employee relationship did not exist, and that the transfer of employees was properly effected.

Whether an employer-employee relationship existed between Marsman and Sta. Rita at the time of Sta. Rita’s dismissal.

The determination hinged on the application of the four-fold test, which examines:

Whether the integration through the MOA automatically transferred Sta. Rita’s employment relationship from Marsman to CPDSI or merely constituted a change in work assignment.

Whether the labor tribunal had jurisdiction to hear the illegal dismissal complaint given Marsman’s assertion that Sta. Rita had become a CPDSI employee.
The effect of the corporate reorganization and the separate but related corporate personalities of Marsman and CPDSI on the dispute.

Whether the MOA and the subsequent actions (issuance of company IDs, leave forms, and work assignments) adequately demonstrated a transfer of personnel and employment obligations to CPDSI.
Whether Sta. Rita’s refusal to sign the MOA could be considered conclusive evidence that his employment remained with Marsman.