Case Summary (G.R. No. 220617)
Key Dates
• July 6, 2012 – Respondents file amended complaint for illegal dismissal before the NLRC.
• December 28, 2012 – Labor Arbiter dismisses illegal dismissal claim but awards nominal damages and attorney’s fees.
• May 30, 2013 – NLRC reverses Labor Arbiter, grants separation pay (½ month per year of service), nominal damages (₱30,000 each), and attorney’s fees; holds ODSI a labor-only contractor and NPI jointly liable.
• August 30, 2013 – NLRC denies motions for reconsideration.
• March 26, 2015 – Court of Appeals (CA) affirms NLRC decision.
• September 17, 2015 – CA denies reconsideration.
• January 30, 2017 – Supreme Court decision under the 1987 Constitution.
Applicable Law
• 1987 Philippine Constitution
• Labor Code provisions on contractualization and due process in administrative proceedings
• Civil Code principles on distribution contracts and independent business operations
Facts
Respondents were engaged by ODSI to sell NPI products in assigned territories. They sought recognition as regular NPI employees. NPI directed them to sign employment contracts with ODSI; upon refusal, they were terminated following ODSI’s closure of its Nestlé distributorship. Respondents claimed illegal dismissal, separation pay, nominal damages, and attorney’s fees, arguing that ODSI was a labor-only contractor of NPI.
Procedural History
- Labor Arbiter: Dismissed illegal dismissal, awarded nominal damages and attorney’s fees against both ODSI and NPI for failure to give 30-day notice.
- NLRC: Reversed, granted separation pay and nominal damages, held ODSI a labor-only contractor and NPI jointly liable.
- CA: Affirmed NLRC.
- Supreme Court: Granted certiorari on due process and labor-only contracting issues.
Issue
- Was NPI deprived of due process by the labor tribunals?
- Is ODSI a labor-only contractor of NPI, making NPI the respondents’ true employer and jointly liable?
Ruling on Due Process
Under administrative due process standards, a formal trial‐type hearing is not required. Notice of charges and a reasonable opportunity to respond suffice. NPI received the amended complaint, pleadings, and NLRC resolution by courier, yet chose not to participate. Any procedural defect was cured by NPI’s motions for reconsideration before the NLRC and CA. The Supreme Court held that NPI was accorded due process.
Ruling on Labor-Only Contractor Status
The Distributorship Agreement is a sale‐and‐resale contract:
• NPI sold products to ODSI at discounted prices; ODSI resold them through its own personnel.
• Marketing guidelines (sales targets, tra
Case Syllabus (G.R. No. 220617)
Facts of the Case
- Respondents (Puedan, Limbo, Avila, Aquino, Miranda, Alave, Dimaya, Delos Reyes, Cordova, Barruga, Cordova Jr., Languisan, Villapando, Remolin, Macatalad, Gamurot, Bawag, Abellera, Guatno) filed an amended complaint on July 6, 2012 against Ocho de Septiembre, Inc. (ODSI) and Nestle Philippines, Inc. (NPI) for illegal dismissal, damages, and attorney’s fees.
- They alleged that ODSI and NPI engaged them as salesmen for NPI products in assigned territories, but refused to regularize them as NPI employees and insisted that they sign employment contracts with ODSI.
- When respondents declined, both companies terminated their services without just or authorized cause.
- Respondents maintained that ODSI was a labor-only contractor and that NPI, as the true employer, should be held liable.
Distributorship Agreement Between ODSI and NPI
- ODSI contracted with NPI under a “Distributorship Agreement” to buy, distribute, and resell NPI Grocery Retail Products.
- Key provisions required ODSI to:
- Assign a dedicated sales force exclusively handling NPI products.
- Resell products obtained solely from NPI and cover assigned outlets.
- Meet mutually agreed sales, reach, and distribution targets.
- Provide its own facilities, resources, warehousing, inventory management, and transportation at its expense.
- Allow NPI to offer suggestions, promotional support, and include new NPI products under the agreement.
Labor Arbiter Decision
- The Labor Arbiter dismissed the illegal dismissal claim for lack of merit, finding respondents failed to prove they were NPI employees and that ODSI legitimately closed its operations due to business losses.
- Despite dismissal of the substantive claim, the Arbiter awarded respondents nominal damages totaling ₱235,728 and attorney’s fees at ten percent of monetary awards, holding both ODSI and NPI jointly liable for failure to give thirty-day notice.
NLRC Decision
- On appeal, the