G.R. No. L-10104 - People vs. Corpuz

Two hundred ninety-one workers filed nine consolidated labor complaints against San Miguel Corporation (SMC) and Maerc Integrated Services, Inc. (MAERC) for illegal dismissal, underpayment of wages, non-payment of service incentive leave, and other benefits covering the period from 25 June to 24 October 1991.
The workers, engaged in bottle washing and segregation at two Mandaue City workplaces (one within the SMC premises and another at a warehouse owned by MAERC), were paid on a per piece basis (or daily for checkers).

SMC entered into a Contract of Services with MAERC on 1 February 1988 which was renewed in March 1989 and provided for an automatic month-to-month renewal after a two-year period, subject to a 30-day notice requirement before termination.
On 15 May 1991, SMC informed MAERC of the termination of their service contract by June 1991, citing the planned phase out of segregation activities due to new labor and cost-saving technologies.
Prior to the contract between SMC and MAERC, many complainants had allegedly already been working for SMC as employees of another contractor, Jopard Services, which was terminated on 31 January 1988.
MAERC admitted recruiting the complainants and placing them in the bottle segregation project; however, both parties disputed whether MAERC was a legitimate job contractor or simply a labor-only contractor used as a shield to avoid SMC’s direct employer liabilities.

Complainants contended that even though they were ostensibly hired by MAERC, the nature and operation of their work were directly related and necessary to SMC’s main business, thus establishing an employer-employee relationship with SMC.
They argued that SMC’s active involvement—evidenced by its control over hiring procedures, supervision through its checkers, and direct payment of benefits (such as overtime, holiday pay, SSS contributions, and 13th month pay)—revealed that the complainants were de facto employees of SMC.
The complainants also contended that errors in the computation of separation benefits and wage differentials occurred, as some names appeared in two separate case records with differing amounts and one complainant was omitted entirely.
The award pursuant to the Labor Arbiter had ordered MAERC to pay separation benefits and had jointly imposed liability on both MAERC and SMC for wage differentials and attorney’s fees, but the complainants sought to review and correct the computation.

The Labor Arbiter rendered a decision on 31 January 1995 declaring MAERC as an independent contractor, dismissing illegal dismissal claims but awarding separation benefits and wage differentials.
The National Labor Relations Commission (NLRC) later ruled on 7 January 1997 that MAERC was in fact a labor-only contractor and that SMC was jointly and severally liable with MAERC.
SMC filed motions before the NLRC and later petitioned for certiorari with this Court; the Court of Appeals denied its petition and affirmed the NLRC decision before the case reached the Supreme Court.

Evidence included various memoranda, service contracts, letters from SMC directing disciplinary measures, minutes of meetings with SMC officials, and the labor rate computation documents.
Detailed computations provided separation pay and wage differentials for each complainant based on the period of employment, but discrepancies (such as duplicate entries and typographical variances) raised issues for recomputation.
The record also showed that additional awards (e.g., attorney’s fees calculated at 10% of wage differentials and an indemnity fee of P2,000.00 per complainant) had been imposed, subject to later modification.

Is MAERC a legitimate job contractor having an independent business, or is it a labor-only contractor functioning merely as an agent for SMC?
Are the complainants the employees of SMC, or are they independently engaged by MAERC through a contractual arrangement?

Given that MAERC was declared a labor-only contractor, should SMC be held jointly and severally liable for all the labor claims (separation benefits, wage differentials, attorney’s fees, and indemnity fees)?
Does the supervisory and control role exercised by SMC over the complainants establish the existence of an employer-employee relationship with SMC?

Were the calculations for separation pay and wage differentials correctly determined despite the occurrence of duplicate and similar entries in the complainants’ list?
How should the Labor Arbiter handle the motion for inclusion/correction in light of omissions and errors noted in the original computation?