Case Summary (G.R. No. 161115)
Key Dates
• 5 May 1993 – Municipal resolution triggers DOLE investigation
• 17 August 1993 – Service Contract executed between Dole and CAMPCO (six-month term)
• 19 October 1993 – DOLE Regional Director’s cease-and-desist Order declaring labor-only contracting
• 15 September 1994 – DOLE Undersecretary affirms the Regional Order; becomes final
• 19 December 1996 – Respondents file complaint for illegal dismissal with the NLRC
• 11 June 1999 – Labor Arbiter rules in favor of Dole under Department Order No. 10, series of 1997
• 29 February 2000 – NLRC affirms Labor Arbiter; finds CAMPCO a valid contractor
• 20 May 2002 – Court of Appeals sets aside NLRC; holds CAMPCO a labor-only contractor
• 27 November 2003 – CA Amended Decision orders Dole guilty of illegal dismissal and to reinstate respondents
• 30 November 2006 – Supreme Court decision under review
Applicable Law
• 1987 Philippine Constitution (decision after 1990)
• Labor Code of the Philippines, Articles 106 and 128 (as amended)
• Book III, Rule VIII, Sections 8 and 9 of the 1976 Implementing Rules (pre-1997)
• DOLE Department Order No. 10, series of 1997 (amending Books III & VI IRR)
• DOLE Department Order No. 3, series of 2001 (revoking DOLE 10, 1997)
• Republic Act No. 6938 (Cooperative Code)
Service Contract with CAMPCO
In August 1993 Dole and CAMPCO executed a six-month Service Contract. CAMPCO was to “assist the Company in its daily operations” and “perform odd jobs” on a per-job payment basis. The contract required CAMPCO to carry on an independent business, supply its own tools and equipment, and perform work “free from the control and direction of the Company in all matters connected with the performance of the work except as to the result thereof.” Despite the initial term, the parties continued the arrangement without a new written contract.
DOLE Investigation and Cease-and-Desist Orders
Acting on a municipal resolution and Task Force report alleging labor-only contracting by cooperatives supplying Dole, DOLE Regional Office XI conducted inspection and hearings. On 19 October 1993, Regional Director Parel found CAMPCO lacked substantial capital and performed activities directly related to Dole’s principal business. He declared CAMPCO engaged in prohibited labor-only contracting and ordered it to cease and desist. On appeal, Undersecretary Trajano, by authority of the DOLE Secretary, affirmed the Order on 15 September 1994 under Articles 106 and 128 of the Labor Code. No further relief was sought; the Order became final and executory.
Initial NLRC Proceedings and Position Papers
Respondents, CAMPCO members who had worked for Dole since 1993–1994 and rendered more than one year of service, filed a complaint with the NLRC on 19 December 1996 alleging:
- They were regular employees of Dole because (a) their tasks were usually necessary to Dole’s business; (b) Dole controlled both the manner and result of their work; and (c) CAMPCO was merely a labor-only contractor.
- Those placed on “stay home status” for over six months were constructively and illegally dismissed, entitling them to reinstatement, backwages, wage differentials, damages, and attorney’s fees.
Dole submitted that it had previously engaged individual workers on fixed-period contracts (upheld by a 1995 NLRC decision as valid “term employment”). Facing recurring labor-law challenges, Dole engaged cooperatives like CAMPCO for permissible job contracting. Dole asserted CAMPCO was a bona fide multi-million-peso enterprise, independently conducting contracting business under the 1997 DOLE 10 rules; respondents, as CAMPCO members, were bound by CAMPCO’s representation of legitimacy.
Department Orders No. 10 (1997) and No. 3 (2001)
DOLE Department Order No. 10, effective 22 June 1997, re-defined permissible contracting categories (including temporary augmentation for peak demand) and maintained that labor-only contracting remained prohibited. It also clarified that the contractor is the employer of contractual employees (absent certain exceptions). DOLE Order No. 3 (29 May 2001) revoked DOLE 10, reiterating the prohibition of labor-only contracting and narrowing permissible contracting categories. Neither Order expressly provided for retroactive application.
Labor Arbiter and NLRC Rulings
On 11 June 1999 the Labor Arbiter, applying DOLE 10 (which post-dated the events), held CAMPCO had substantial capital, performed independent contracting tasks, and was free from Dole’s control over daily methods; accordingly, it could not be deemed a labor-only contractor. Under Section 12 of DOLE 10, respondents were CAMPCO employees—not Dole’s—and their illegal dismissal and wage claims were dismissed.
On 29 February 2000 the NLRC, invoking res judicata and the DOLE 10 definition, affirmed the Labor Arbiter. It held CAMPCO qualified as a job contractor (having at least substantial capital or investment) and that DOLE 10 did not alter the finality of the 1994 DOLE Orders.
Court of Appeals Findings
In May 2002 the Court of Appeals granted respondents’ certiorari petition, finding that:
• Substantial capital alone does not suffice to establish an independent contractor; CAMPCO did not carry on a truly independent business or perform a specific service separate from Dole’s direction.
• CAMPCO members worked under Dole’s procedures, tools, supervision, and on tasks identical to regular employees—hallmarks of labor-only contracting.
• CAMPCO participated fully in the DOLE proceedings; the final DOLE Orders were binding and conclusively established the labor-only contracting violation.
• DOLE 10 was revoked by DOLE 3 in 2001 and could not retroactively legitimize CAMPCO.
• CAMPCO was a labor-only contractor; Dole was the real employer and had illegally dismissed respondents by not hiring them after their seasonal terms expired.
The CA held respondents were regular employees because they performed activities usually necessary to Dole’s business and served for more than one season. It ordered Dole to reinstate respondents with backwages from 19 December 1996, but denied damages and attorney’s fees.
Supreme Court Ruling on Certiorari Jurisdiction
Under Rule 65, certiorari corrects jurisdictional errors or grave abuse of discretion, not mere factual or legal errors. The Court of Appeals properly re-examined evidence to determine whether the NLRC had capriciously ignored the final DOLE Orders, a matter raising grave abuse.
Application of Applicable Law on Contracting
Since all relevant acts occurred between 1993 and 1996, the pre-1997 Implementing Rules (Book III, Rule VIII, Sections 8 and 9) governed:
• Job contracting requires an independent business, substantial capital, and freedom from principal’s control over methods.
• Labor-only contracting arises when the contractor lacks substantial capital and supplies workers for activities directly related to the principal business.
DOLE Orders in 1993–1994 were issued under Article 128’s quasi-judicial enforcement power and remain binding as final administrative judgments with res judicata effect.
Res Judicata of DOLE Orders
The final and executory DOLE Orders declaring CAMPCO a labor-only contractor are quasi-judicial determinations binding on s
Case Syllabus (G.R. No. 161115)
Facts of the Case
- Dole Philippines, Inc. (“petitioner”) is a corporation organized under Philippine law, principally engaged in pineapple production and processing for export, with a plantation in Polomolok, South Cotabato.
- Respondents, numbering 87 and represented by Medel Esteva, are members of the Cannery Multi-Purpose Cooperative (CAMPCO), registered with the Cooperative Development Authority on 6 January 1993.
- On 17 August 1993, petitioner and CAMPCO entered into a six-month Service Contract (1 July–31 December 1993), by which CAMPCO was to “assist the Company in its daily operations” and “perform odd jobs,” paid on a per-job basis, under CAMPCO’s own responsibility, methods and capital.
- Despite the written term, the parties continued their arrangement in subsequent years without executing a new written contract.
- CAMPCO members lived around petitioner’s plantation, used petitioner’s fixed equipment, underwent petitioner-prescribed training, and performed tasks directly related to pineapple processing alongside regular employees.
DOLE Investigation and Quasi-Judicial Orders
- On 5 May 1993, the Sangguniang Bayan of Polomolok passed Resolution No. 64 requesting DOLE attention to alleged labor-only contracting by cooperatives supplying workers to petitioner.
- DOLE Regional Office No. XI formed a Task Force; on 24 May 1993 petitioner denied engaging in labor-only contracting and defended CAMPCO’s legitimacy.
- On 3 June 1993 the Task Force reported six cooperatives, including CAMPCO, as engaging in labor-only contracting under Section 9, Rule VIII, Book III of the Labor Code’s Implementing Rules.
- In a conference on 18 August 1993 cooperatives and petitioner submitted position papers; on 19 October 1993 Regional Director Henry M. Parel issued a Cease-and-Desist Order declaring CAMPCO a prohibited labor-only contractor.
- CAMPCO and two other cooperatives appealed; on 15 September 1994 DOLE Undersecretary Trajano, by authority of the Secretary, dismissed the appeal, affirmed the regional order, and made it final and executory under Articles 106 and 128 of the Labor Code.
NLRC Proceedings and Labor Arbiter Ruling
- Respondents filed a Complaint for illegal dismissal, regularization, wage differentials, damages, and attorney’s fees before the NLRC on 19 December 1996, alleging that CAMPCO was a labor-only contractor and that petitioner was their real employer.
- Respondents claimed lack of CAMPCO capital; tools, machinery and training were provided by petitioner; petitioner controlled work methods and site; some respondents were placed on “stay home status” for more than six months, amounting to illegal dismissal.
- Petitioner denied employer-employee relation, citing prior NLRC and Labor Arbiter rulings (June 1994 and March 1995) that its term-employment of individual workers as seasonal hires was lawful, and invoked Department Order No. 10-97 to classify CAMPCO as a permissible job contractor.
- On 11 June 1999 the Labor Arbiter Noel A. Magbanua