Case Summary (G.R. No. 217301)
Factual Background and Relevant Dates
Asprec alleged continuous service beginning January 2001; Bataller alleged commencement in March 2008. CBMI provided janitorial, kitchen, delivery, sanitation, and related services to PPI pursuant to annual Contracts of Services executed in 2000 and repeatedly between 2002 and 2010. An incident involving alleged excess pizza delivery occurred on July 23, 2010. Respondents were suspended beginning August 5, 2010 (preventive suspension for 15 days) and subsequently placed on a “temporary lay-off” or suspended status from August 20, 2010 until February 20, 2011; they were not allowed to return to work thereafter. Respondents filed a Complaint on November 12, 2010 alleging constructive illegal dismissal, illegal suspension, and non‑payment of separation pay.
Procedural History
The LA rendered a decision on June 27, 2011 finding PPI liable as the employer (applying the four‑fold test) and declaring the dismissal illegal, ordering reinstatement and monetary awards. The NLRC, by Resolution dated September 28, 2011, affirmed with modification the LA decision: it held that the respondents were regular employees of CBMI (not PPI), dropped PPI as a party, and ordered CBMI to pay backwages, separation pay, and attorney’s fees. Both parties filed motions for reconsideration which were denied. The CA, on November 15, 2013, denied the petition for certiorari and set aside the NLRC resolutions, reinstating the LA decision — holding CBMI to be a labor‑only contractor and PPI to be the principal employer. The Supreme Court reviewed the matter and issued a final ruling addressing CBMI’s contractor status and the lawfulness of the suspension and lay‑off.
Issues Presented Before the Supreme Court
Whether (1) CBMI is a labor‑only contractor or an independent (legitimate) job contractor; (2) the respondents were illegally dismissed; (3) backwages were improperly awarded; and (4) awards of moral damages, exemplary damages, and attorney’s fees were proper. In practical terms, the dispositive issues reduced to the respondents’ employment status (CBMI or PPI employer) and the legality of their suspension/termination.
Legal Framework on Job Contracting and Labor‑Only Contracting
Article 106 of the Labor Code (as implemented) defines labor‑only contracting as supply of workers by a person who lacks substantial capital or investment and where the supplied workers perform activities directly related to the principal’s main business; such contracting is prohibited. DOLE D.O. No. 18‑02 (Series of 2002) reiterates the prohibition and specifies that legitimate job contracting is permissible when the contractor has substantial capital or investment, runs an independent business, and exercises the right to control the performance of its workers. The DOLE registration of a contractor creates a presumption of legitimacy (regularity), which the party challenging must overcome. The Omnibus Rules Implementing the Labor Code (Rule XIV, Section 4) limit preventive suspension to 30 days unless the employer reinstates the worker or extends suspension only upon payment of wages and benefits during the extension; failure to comply can render the suspension illegal and amount to constructive dismissal. Article 286 (now renumbered) recognizes bona fide temporary suspension of operations (lay‑off) not exceeding six months, but management must act in good faith and comply with statutory notice requirements.
Supreme Court’s Assessment of CBMI’s Status
The Supreme Court found that, on balance, CBMI qualified as an independent legitimate job contractor. Material factors supporting this conclusion included: CBMI’s DOLE Certificate of Registration recognizing it as an independent contractor (valid for the period relevant to the dispute), substantial capital and assets reflected in audited financial statements and paid‑up capital exceeding DOLE’s guideline for “substantial capital,” a long history of independent operations since SEC registration in 1967, and a diverse client base (banks, hospitals, government, US Embassy, universities, malls). The Court emphasized the presumption of regularity in DOLE’s registration and held that the respondents failed to rebut that presumption with convincing evidence that CBMI was a mere labor‑only contractor.
Control, Contracts, and the Right to Control
The Court analyzed contractual arrangements and operational practices. The Contracts of Services between CBMI and PPI expressly obligated CBMI to provide qualified personnel, tools, and equipment; required that CBMI hire, supervise, discipline, and pay its employees; and required CBMI to assign coordinators/supervisors to direct CBMI personnel on site. Later contracts (2009–2010) reinforced that CBMI had “sole authority to control and direct the performance of the details of the work of its employees” and that complaints by PPI were to be addressed to CBMI for disposition. The Court found that CBMI demonstrated the right to control the manner and means of its workers’ performance, paid wages, remitted statutory contributions, conducted briefings and trainings, assigned workplace locations, and exercised disciplinary authority (e.g., initiating investigations and imposing preventive suspension). These factors supported the conclusion that CBMI operated an independent manpower business, not a sham intermediary.
Findings on Employment Relationship
Given CBMI’s registration, capital, independent clientele, contractual terms, payment and personnel controls, and exercise of disciplinary authority, the Court concluded that the respondents were employees of CBMI rather than of PPI. This conclusion differed from the LA’s earlier application of the four‑fold test that had found PPI to be the employer; it aligned more with the NLRC’s finding that CBMI was the employer. The Court treated the factual variance among tribunals as an exceptional circumstance permitting re‑evaluation of the record.
Lawfulness of the Suspension, Lay‑off, and Dismissal
Although CBMI was found to be the proper employer, the Supreme Court set aside the CA’s finding that the dismissal was illegal because of labor‑only contracting. Instead, the Court focused on the legality of CBMI’s disciplinary measures and extended suspension. The LA had imposed a preventive suspension from August 5 to 19, 2010 (15 days); CBMI thereafter placed the respondents on a “temporary lay‑off” status from August 20, 2010 until February 20, 2011. The Court found that CBMI’s extension of the preventive suspension exceeded the 30‑day limit in the Omnibus Rules without restoring the workers or paying wages during the extension, and without concluding the investigation in the required time. CBMI’s attempt to characterize the extended suspension as a bona fide temporary lay‑off under Article 286 was rejected: the notices invoked both reduced client needs and the incident under investigation but did not establish a genuine reduction in demand; CBMI failed to produce evidence of the asserted reduction in PPI’s need; CBMI also failed to show compliance with the one‑month notice requirement to employees and to DOLE; and PPI did not corroborate CBMI’s asserted business downturn. The Court concluded that the extended suspension was unlawful and amounted to constructive dismissal entitling respondents to monetary relief.
Remedies, Awards, and Disposition
The Supreme Court partly granted the petition: it reversed the CA decision and reinstated the NLRC Resolution insofar as it held CBMI liable for the respondents’ monetary claims. The effect is that CBMI — as the recognized employer — was ordered to satisfy the NLRC’s awards (backwages computed from August 20, 2010 to finality of the decision, separation pay equivalent to one month’s
Case Syllabus (G.R. No. 217301)
Case Citation and Procedural Posture
- G.R. No. 217301, Decision dated June 06, 2018; reported at 832 Phil. 630, Second Division.
- Petition for review on certiorari under Rule 45 seeking to annul and set aside:
- Court of Appeals Decision in CA-G.R. SP No. 123429 dated November 15, 2013, and
- Court of Appeals Resolution dated March 4, 2015 denying reconsideration.
- The CA had denied the petitioners’ certiorari petition and reinstated the Labor Arbiter’s Decision dated June 27, 2011.
- The Supreme Court partially granted the Rule 45 petition, reversed the CA decision, and reinstated the NLRC Resolution dated September 28, 2011 insofar as it holds Consolidated Building Maintenance, Inc. (CBMI) liable for the respondents’ money claims; awarded interest at 6% per annum from finality of the Decision until fully paid.
- Concurring: Carpio (Chairperson), Peralta, Perlas-Bernabe, and Caguioa, JJ.
Parties and Nature of Dispute
- Petitioners:
- Consolidated Building Maintenance, Inc. (CBMI) — corporate manpower/maintenance contractor providing janitorial, kitchen, messengerial, elevator maintenance and allied services to various entities, including Philippine Pizza, Inc. — Pizza Hut (PPI).
- Sarah Delgado — CBMI’s Human Resource Manager.
- Respondents:
- Rolando Asprec, Jr. — alleged former Rider/Production Person originally employed at PPI’s Pizza Hut Marcos Highway, Marikina City Branch.
- Jonalen Bataller — alleged former Team Member / Slice Cashier at same PPI branch.
- Nature of claims: constructive illegal dismissal, illegal suspension, and non-payment of separation pay; respondents alleged that transfer from PPI to CBMI constituted labor-only contracting and that their dismissal lacked cause and due process; petitioners denied and maintained respondents were CBMI employees and disciplined/dismissed for just cause.
Antecedent Facts — Employment Relationship and Contracts
- CBMI provided services to PPI under successive Contracts of Services: year 2000; and from 2002 through 2010.
- Asprec’s account (Sinumpaang Salaysay, Feb. 8, 2011):
- Commenced work in January 2001 as “Rider.”
- After expiration of contract on Nov. 4, 2001, PPI advised leave; later he was interviewed by PPI Area Manager Rommel Blanco, then told to proceed to CBMI office where he signed a contract; thereafter payslips issued by CBMI but he remained at same branch performing same duties.
- Bataller’s account (Sinumpaang Salaysay, Feb. 8, 2011):
- Began in March 2008 as “team member/slice cashier.”
- Before contract expiry, PPI Restaurant Manager required resignation and processing through CBMI as precondition for continued employment; after interview and forwarding of documents to CBMI she resumed employment Dec. 2008 until July 23, 2010 at same branch, same duties and same salary.
- CBMI’s position: respondents were its employees; respondents were investigated based on an Incident Report by PPI Store Manager Karl Clemente for an attempted theft on July 23, 2010 involving delivery by one Jessie Revilla; respondents allegedly failed to report excess deliveries and were suspended then dismissed.
Incident, Administrative Action and Complaint
- Incident date: July 23, 2010 — attempted/claimed excess delivery of pizza boxes.
- Respondents’ account of incident:
- Asprec: denied knowledge, claimed outside his responsibility as a production person; suspended for eight days then dismissed.
- Bataller: manning slice booth; busy attending customers; only later discovered excess, called Revilla who had already left; Revilla returned later that day; Bataller informed area manager; asked to proceed to Marcos Highway branch; interviewed with Asprec and Revilla; told to report to head office; from July 24, 2010 she was not allowed to return to work.
- Administrative response by CBMI:
- Incident Report prepared by PPI Store Manager and submitted to CBMI.
- CBMI initiated investigation and imposed preventive suspension (Aug. 5–19, 2010); subsequently respondents placed on “temporary lay-off status” from Aug. 20, 2010 to Feb. 20, 2011 per notices citing reduced client need and incident.
- Procedural filings:
- Complaint for constructive illegal dismissal, illegal suspension, and non-payment of separation pay filed by respondents on Nov. 12, 2010.
- Amended Complaint filed Dec. 20, 2010 impleading PPI and praying for reinstatement, moral and exemplary damages, and attorney’s fees.
Labor Arbiter (LA) Decision (June 27, 2011)
- LA granted respondents’ complaint in the following terms:
- Ordered respondents reinstated to former positions without loss of seniority.
- Ordered payment to each respondent of backwages from July 26, 2010 up to date of actual reinstatement (as of the LA decision figures indicated: P121,000.00 and P100,000.00 — as reflected in the LA dispositive paragraph).
- Awarded moral damages of P121,000.00 and P100,000.00 each (as appearing within the LA wording), exemplary damages of P50,000.00 each, plus 10% of total awards as attorney’s fees.
- Dismissed other claims for lack of merit.
- LA’s legal findings:
- Applied four-fold test and found respondents to be employees of PPI; held arrangement between CBMI and PPI constituted labor-only contracting.
- Imposed solidary liability on CBMI and PPI for respondents’ claims.
- Placed burden on PPI (as employer/principal) to prove just cause and procedural due process for dismissal — finding PPI failed to do so; concluded dismissal illegal.
NLRC Resolution (September 28, 2011)
- NLRC’s disposition:
- Granted PPI’s appeal to be dropped as party to the case.
- Dismissed CBMI’s appeal.
- Ordered CBMI (the petitioners) to pay respondents:
- Backwages computed from August 20, 2010 up to finality of the decision;
- Separation pay equivalent to one month’s pay for every year of service;
- Attorney’s fees equivalent to 10% of the total judgment award.
- NLRC’s legal findings:
- Contrary to LA, NLRC held respondents were regular employees of CBMI (not PPI).
- Relied heavily on employment contracts and CBMI’s admission of employment to conclude CBMI as employer.
- Because no allegation of underpayment/non-payment of wages, NLRC ordered PPI dropped from the case.
- Subsequent NLRC action:
- Motions for partial reconsideration by both sides denied by NLRC Resolution dated Nov. 29, 2011.
Court of Appeals (CA) Decision (November 15, 2013) and Resolution (March 4, 2015)
- CA ruling:
- Denied the petition for certiorari filed by the petitioners; set aside the NLRC Resolutions and reinstated the LA Decision.
- Held NLRC erred in dropping PPI as a party; concluded CBMI failed to prove independent contractor status or permissible job contracting.
- Applied totality of circumstances test: found PPI — not CBMI — exercised discretion and control over manner and methods of respondents’ work.
- Found respondents performed tasks directly necessary and desirable to PPI’s usual trade/business and used PPI’s tools/equipment — concluding CBMI was a “labor-only contractor” prohibited under Article 106 of the Labor Code.
- Deemed CBMI an agent of PPI and held PPI solidarily liable with CBMI; as agent of PPI, petitioners required to prove just cause for dismissal but failed; therefore dismissal was illegal and respondents were entitled to monetary claims.
- Petitioners’ motion for reconsideration denied by CA Resolution dated Mar. 4, 2015.
Issues Presented to the Supreme Court
- Petitioners’ principal issues: I. Whether the CA gravely erred in holding CBMI is a labor-only contractor. II. Whether the CA gravely erred in holding that the respondents were illegally dismissed. III. Whether the CA gravely erred in awarding backwages in favor of respondents. IV. Whether the CA gravely erred in awarding moral damages, exemplary damages, and attorney’s fees to respondents.
- Restated by the Court: principally whether the respondents are employees of CBMI and whether respondents were illegally dismissed and entitled to monetary claims.
Supreme Court: Standard of Review and Preliminary Observations
- Acknowledged that status of contractor/employee are questions of fact ordinarily not proper for Rule 45 review; however, where factual findings conflict between LA/CA and NLRC, an exception allows the Supreme Court to re-evaluate the evidence on record.
- Held petition to be partly meritorious.
- The Court framed the resolution of the first issue to hinge on whether CBMI was a labor-only contractor or