G.R. No. 114143 - Philippine School of Business Administration vs. National Labor Relations Commission

Cunanan and Ramos were initially engaged in 1981 as carpenter and plumber, respectively, to carry out maintenance, renovation, remodeling, and repair works of the school building and its facilities.

The petitioner utilized a job-contracting arrangement wherein maintenance work was performed by an intermediary.
Private respondents later found themselves associated with Gayren Maintenance Specialist (“GAYREN”), a purported independent contractor purportedly engaged by PSBA.
Despite being placed under GAYREN, Cunanan and Ramos continued to receive direct supervision, direction, and wages from PSBA.

On April 6, 1989, private respondents (with the support of the union) filed a complaint before the Labor Arbiter alleging issues such as non-payment of service incentive leave pay, 13th month pay, and legal holiday benefits.
An additional allegation of illegal dismissal was raised, contending that their termination was without just cause.

Gayren Maintenance Specialist argued that Cunanan and Ramos were its employees on a temporary basis from April 17, 1988, to April 5, 1989, having been selected, hired, and engaged in maintenance and repair work under its control.
Private respondents, however, maintained that they were regular employees of PSBA since 1981 even during their stint under Gayren, as evidenced by:

On July 18, 1990, the Labor Arbiter dismissed the complaint on the grounds of lack of merit regarding claims for unfair labor practice and illegal dismissal, as well as related claims for reinstatement, backwages, damages, and attorney’s fees.

The private respondents appealed the Labor Arbiter’s decision to the NLRC, which, on August 31, 1993, reversed the initial decision and found in favor of the respondents, awarding appropriate remedies.

Evidence from the records indicated that even during their period under Gayren, the employment relationship was characterized by direct control and supervision by PSBA.
The alleged engagement by job contractors (Fernando Galeno and later GAYREN) did not demonstrate the requisite independent business features (such as substantial capital, tools, equipment, or work premises) necessary for a bona fide independent contractor relationship.

The dismissal of the respondents, who had rendered services for approximately seven years, was executed on the pretext of an absence of a project requiring their services.
Such ground was not recognized as a just or authorized cause for termination under the Labor Code, thereby rendering the dismissal illegal.

Whether Cunanan and Ramos were regular employees of PSBA-Manila or merely engaged under a labor-only contracting arrangement.
Whether the engagement with job contractors, lacking substantial capital and independence, amounted to a mere labor-only contracting, thereby creating an employer-employee relationship directly with PSBA.
Whether the dismissal of private respondents was legally justified given their status as regular employees with the right to security of tenure.
Whether the awarding of damages, particularly moral and exemplary damages, was justified under the evidence presented.