Case Summary (G.R. No. 160506)
Procedural History
The Labor Arbiter dismissed petitioners’ complaint against P&G for lack of an employer-employee relationship. The NLRC and Court of Appeals affirmed, with the CA awarding only service incentive leave pay. Petitioners elevated the case to the Supreme Court via petition for review on certiorari.
Issues Presented
- Whether P&G is the employer of petitioners
- Whether petitioners were illegally dismissed
- Whether petitioners are entitled to actual, moral and exemplary damages, litigation costs and attorney’s fees
Legal Framework on Contracting Arrangements
– Legitimate job contracting: trilateral relationship where a contractor with substantial capital, tools and independent capacity hires its own workers to perform a specific job for the principal.
– Labor-only contracting (prohibited): occurs if the contractor lacks substantial capital or investment in tools/equipment/work premises and recruits workers to perform activities directly related to the principal’s main business, or if the contractor does not exercise control over the workers’ performance. In such cases, the principal is deemed the employer of the contractor’s workers.
Analysis of Promm-Gem’s Status as Independent Contractor
Promm-Gem demonstrated a paid-in capital of ₱500,000, long-term and current assets, its own warehouse (870 sqm), three registered vehicles and multiple clients beyond P&G. It provided tools, uniforms and equipment, treated its merchandisers as regular employees and exercised control over their work methods. These factors satisfy substantial capital and control elements, negating labor-only contracting.
Analysis of SAPS’s Status as Labor-Only Contractor
SAPS had a paid-in capital of only ₱31,250 and failed to show substantial assets or independent clientele. Its monthly payroll for merchandisers alone exceeded its capitalization, and its sole client was P&G. It merely recruited and supplied workers to perform P&G-related merchandising—activities directly related to P&G’s core business—without meaningful capital or control. These criteria establish labor-only contracting.
Employer-Employee Relationship Established
– Promm-Gem’s merchandisers: employees of Promm-Gem, not P&G.
– SAPS’s merchandisers: employees of P&G by operation of law (labor-only contracting).
Legality of Dismissals
Promm-Gem dismissed its merchandisers for “grave misconduct and breach of trust” based solely on their claim of being P&G employees. This conduct, at most simple misconduct or inadvertent assertion, lacked wrongful intent and did not involve positions of special trust; thus, the dismissals lacked substantive cause and were illegal despite procedural due process.
SAPS (and by extension P&G) dismissed merchandisers abruptly upon P&G’s non-renewal notice, providing only a one-day verbal warning and barring them from the workplace. This unilateral termination, without valid cause or procedural safeguards, violated security of tenure and is illegal.
Entitlement to Relief and Damages
Under Article 279, illegally dismissed employees are entitled to reinstatement without loss of seniority, full back
Case Syllabus (G.R. No. 160506)
Procedural History
- Petition for review filed in the Supreme Court assailing:
- March 21, 2003 Decision of the Court of Appeals (CA-G.R. SP No. 52082)
- October 20, 2003 Resolution denying motions for reconsideration.
- CA affirmed July 27, 1998 Decision of the National Labor Relations Commission (NLRC).
- NLRC had affirmed November 29, 1996 Decision of the Labor Arbiter.
- All lower bodies found Promm-Gem, Inc. and Sales and Promotions Services (SAPS) to be legitimate independent contractors and petitioners’ employers.
Facts
- Petitioners worked as merchandisers of Procter & Gamble Philippines, Inc. (P&G) from as early as 1982 up to May 5, 1992 or March 11, 1993.
- They signed five-month employment contracts with either Promm-Gem or SAPS, renewed multiple times.
- Assignments: Various outlets, supermarkets and stores handling P&G products.
- Wages paid by Promm-Gem or SAPS; disciplinary measures imposed by these agencies.
- P&G engaged Promm-Gem and SAPS to promote and merchandise its consumer and health products.
- December 1991: Petitioners filed complaint against P&G for regularization, service incentive leave pay, benefits and damages.
- Complaint amended to include illegal dismissal.
Labor Arbiter’s Decision
- Dismissed petitioners’ complaint for lack of merit.
- Held no employer-employee relationship between petitioners and P&G.
- Found selection, engagement, wage payment, dismissal power and control exercised by Promm-Gem/SAPS.
- Ruled Promm-Gem and SAPS as legitimate independent contractors.
NLRC’s Decision
- July 27, 1998: Dismissed petitioners’ appeal and affirmed Labor Arbiter.
- November 19, 1998: Denied petitioners’ motion for reconsideration.
Court of Appeals’ Decision
- Denied petitioners’ certiorari petition for grave abuse of discretion.
- Affirmed NLRC Decision with modification ordering P&G to pay service incentive leave pay.
- Denied subsequent motion for reconsideration.
Issues before the Supreme Court
- Whether P&G is the employer of petitioners.
- Whether petitioners were illegally dismissed.
- Whether petitioners are entitled to actual, moral and exemplary damages, litigation costs, and attorney’s fees.
Petitioners’ Arguments
- Recruited and engaged by P&G salesmen prior to formation of Promm-Gem/SAPS.
- Directed to report and app