Title
Coca Cola Bottlers Phils., Inc. vs. National Labor Relations Commission
Case
G.R. No. 120466
Decision Date
May 17, 1999
A janitor hired by an independent contractor (BJS) for Coca-Cola sought regularization, claiming employment with Coca-Cola. The Supreme Court ruled no employer-employee relationship existed, affirming BJS as the legitimate employer and ordering wage differentials.
janitor
illegal dismissal
underpayment of wages
A

Case Summary (G.R. No. 120466)

Factual Background

COCA COLA’s 7 April 1986 contract with BJS expressly identified BJS as an independent contractor tasked with maintaining and sanitizing specified areas within COCA COLA’s premises. The contract described daily and weekly cleaning and sanitation obligations, required BJS to supply the necessary utensils, equipment, and supervision, and limited COCA COLA’s responsibility to providing materials in minor repair situations for which repairs were “free of charge.” The arrangement contemplated the continued renewal of similar service contracts annually, continuing until about May 1994.

In 26 October 1989, COCA COLA hired Canonicato as a casual employee and assigned him as a substitute in its bottling crew for absent employees. After COCA COLA terminated his casual employment in April 1990, COCA COLA later availed of his services as a painter for contractual projects lasting from fifteen (15) to thirty (30) days.

On 1 April 1991, BJS hired Canonicato as a janitor and assigned him to COCA COLA because of his familiarity with COCA COLA’s premises. On 5 and 7 March 1992, Canonicato started painting COCA COLA’s facilities. The painting assignments continued for several months in scattered intervals, with work performed “for a few days every time,” until around 6 to 25 June 1993, as reflected in the records.

Canonicato later pressed for regularization. He claimed that other BJS employees who had previously worked for COCA COLA and filed a complaint were regularized through a compromise agreement. Armed with that information, he filed a complaint on 8 June 1993 against COCA COLA to the Labor Arbiter, docketed as RAB Case No. 06-06-10337-93.

After starting the grievance, Canonicato ceased reporting to his COCA COLA assignment without notifying BJS beginning 29 June 1993. On 15 July 1993, he sent his sister, Rowena, to collect his salary from BJS. BJS released the salary but instructed Rowena to tell Canonicato to report for work. Canonicato later alleged that he had been barred from entering COCA COLA’s premises on either 14 or 15 July 1993, and he met with BJS’s proprietress, Gloria Lacson, who offered him assignments in other firms, which he refused.

On 23 July 1993, Canonicato amended his complaint against COCA COLA, shifting the grounds to illegal dismissal and underpayment of wages, and including BJS as a co-respondent. On 28 September 1993, BJS sent him a letter directing him to report for work within three (3) days from receipt or otherwise be considered to have abandoned his job.

Labor Arbiter’s Decision (28 April 1994)

The Labor Arbiter ruled that there was no employer-employee relationship between COCA COLA and Canonicato. The Labor Arbiter found that BJS was Canonicato’s real employer and that BJS was a legitimate job contractor. On that basis, the Labor Arbiter treated COCA COLA’s liability for salary or wage differentials as solidary under pars. 1 and 2 of Art. 106, Labor Code, given the contractor setting.

Despite dismissing the claims grounded on the absence of an employer-employee relationship, the Labor Arbiter awarded to Canonicato wage differentials of P2,776.80 and 13th month pay of P1,068.00, plus attorney’s fees of P384.48 representing ten (10%) percent. The Labor Arbiter ordered COCA COLA and BJS to deposit P4,429.28 with the Department of Labor Regional Arbitration Branch Office within ten (10) days. All other claims of Canonicato against COCA COLA were dismissed for lack of employer-employee relationship, and the complaint for illegal dismissal and other claims were dismissed for lack of merit.

NLRC Proceedings and Decision (3 January 1995; Denial of Motion for Reconsideration)

On appeal, the NLRC reversed the Labor Arbiter’s finding on the employer-employee relationship. It accepted Canonicato’s position that his janitorial work with BJS was the same work he performed while still a casual employee of COCA COLA. The NLRC concluded that Canonicato’s janitorial services were “necessary or desirable” in COCA COLA’s usual trade or business.

Applying Art. 280 of the Labor Code, the NLRC declared that Canonicato was a regular employee of COCA COLA. It ordered reinstatement and the payment of back wages in the amount of P18,105.10.

COCA COLA sought reconsideration, but the NLRC denied the motion on 26 May 1995 for lack of merit.

The Parties’ Contentions Before the Supreme Court

COCA COLA raised multiple errors. It challenged the NLRC’s determination that janitorial services were necessary and desirable for COCA COLA’s business, its reliance on Art. 280 to resolve whether an employment relationship existed, and its consequent declaration that an employer-employee relationship existed despite its acceptance that BJS was a legitimate job contractor. COCA COLA also contended that Canonicato’s short period of casual work was an improper basis for regularization. Finally, it assailed the reinstatement order and the award of back wages limited to six months.

The petition ultimately argued that the NLRC misapplied Art. 280 because that provision does not control when the threshold question is whether an employer-employee relationship exists at all, and that the facts showed that BJS—not COCA COLA—possessed the characteristics of employment.

Legal Basis and Reasoning of the Supreme Court

The Supreme Court granted the petition and sustained COCA COLA’s position. It acknowledged that findings of fact of administrative agencies generally receive respect and are not reviewed. It nevertheless found an exception because the NLRC and the Labor Arbiter made contradictory findings, warranting review.

The Court first noted the internal inconsistency in the NLRC’s disposition. The NLRC held that janitorial services were necessary and desirable to COCA COLA’s trade. The Supreme Court held that this position conflicted with Kimberly Independent Labor Union v. Drilon (G.R. No. 78791, 9 May 1990), where the Court took judicial notice that institutions hire janitorial services on an “independent contractor basis,” and treated them as unnecessary for the employer’s principal business, assuming the independent contractor is legitimate. The Court emphasized that such judicial notice becomes relevant when the issue shifts from the existence of an employment bond to only the question of whether employment is regular or casual.

The Court then stressed that in this case, the real controversy was not regularity versus casualness but the existence of an employer-employee relationship. That issue was generated by Canonicato’s effort for regularization and COCA COLA’s denial of the existence of such relationship. The Court found it erroneous for the NLRC to apply Art. 280 to determine whether an employment relationship existed. It aligned this ruling with Singer Sewing Machine Company v. Drilon (G.R. No. 91307, 24 January 1991), which clarified that the “desirable and necessary” test is not determinative when determining employer-employee relationship, since agreements may call for services for a consideration without hiring the worker as an employee. Art. 280, the Court held, distinguishes between regular and casual employees for benefits and security of tenure purposes, but does not apply where the existence of an employment relationship is in dispute.

In assessing employer-employee relationship, the Court applied the factors consistently used in determining employment: (a) selection and engagement of the employee; (b) payment of wages; (c) power to dismiss; and (d) power to control the employee’s conduct. It found that all these indicia were present in the relationship between BJS and Canonicato, not in the relationship between Canonicato and COCA COLA.

The Court agreed with the Solicitor-General’s manifestation that Canonicato’s selection and engagement were done by BJS. It pointed to Canonicato’s own application documents to BJS showing that he acknowledged BJS as the hiring entity. It also found that BJS paid his wages, as evidenced by the arrangement where Canonicato sent his sister to BJS with authorization to receive his pay. It further held that BJS exercised the power of dismissal and that BJS assigned and reassigned janitors to clients as it saw fit.

On the most significant factor—the power to control—the Court recognized COCA COLA’s interest only in the result of the work, not the manner of performance. It held that while COCA COLA’s supervisors could provide suggestions based on desired outcomes, this did not negate BJS’s overall supervision over the totality of performance. The Court treated BJS’s control over janitorial work as the governing authority in the contractor relationship.

Canonicato disputed BJS’s control by asserting that his employment with COCA COLA continued uninterrupted because his duties before and after his application for regularization were essentially the same, involving maintenance and painting within COCA COLA’s facilities. He relied on Labor Utilization Reports submitted by COCA COLA to show his painting assignments. The Court found those reports non-determinative of the nature of the employment relationship and concluded that they did not detract from BJS’s real authority. It scrutinized the reports and found that painting jobs occurred sporadically—in a few days within a month and only for a few months in a year—contradicting Canonicato’s claim that he was assigned specifically to paint throughout the year. The Court instead found that the sporadic painting tasks fit the contractor explanation: BJS assigned him, under the janitorial service contract, to maintain and sanitize COCA COLA’s premises pursuant to its contracted undertaking.

Finally, the Court noted that the NLRC did not disturb, and therefore upheld, the Labor Arbiter’s finding that BJS was a legitimate job contractor. The Supreme Court held that BJS met the legal requirements for legitimacy as a job contractor under jurisprudence: it had the ability to carry on an independent business an

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