Case Summary (G.R. No. 221043)
Procedural Posture and Relief Sought
Complainants filed for illegal dismissal and regularization before the NLRC, naming Nozomi, its branch manager, Samsung and certain Samsung officers. The Labor Arbiter dismissed the complaint (Jan. 31, 2011). The NLRC affirmed (Oct. 21, 2011) and denied reconsideration (Feb. 29, 2012). Naredo petitioned the Court of Appeals via certiorari (Rule 65); the CA found Nozomi to be a labor-only contractor and Samsung to be the true employer but held there was no illegal dismissal (Decision dated Dec. 10, 2014; Resolution Sept. 3, 2015). Nozomi filed a Petition for Review on Certiorari under Rule 45 before the Supreme Court challenging the CA rulings.
Applicable Law and Governing Constitutional Context
Decision rendered under the 1987 Constitution (applicable because the decision date is after 1990). Relevant statutory and regulatory framework: Labor Code Article 106 (definition and treatment of contractors and labor-only contracting), DOLE registration rules concerning manpower providers, and controlling jurisprudence (including Caballero v. Vikings Commissary, Servflex, and other cited authorities) that articulate the multi-factor inquiry for distinguishing legitimate job contracting from prohibited labor-only contracting, and the importance of the power of control in determining the employer-employee relationship.
Issues Presented
(1) Whether the Court of Appeals correctly found that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in concluding Nozomi was a legitimate job contractor; and (2) whether Nozomi is a labor-only contractor with Samsung as the true employer; (3) whether Naredo was illegally dismissed by Samsung or Nozomi.
Standard of Review and Scope of Supreme Court Review
The Rule 45 petition is limited to determining whether the CA correctly found grave abuse of discretion by the NLRC. Grave abuse exists when findings and conclusions are unsupported by substantial evidence. Although Rule 45 ordinarily confines review to questions of law, the Court may re-examine factual issues when findings of the labor tribunals and the CA conflict; in such instances the Court will reassess the factual record and apply the legal standards anew.
Legal Standard: Labor-Only Contracting versus Legitimate Job Contracting
Under Article 106 and prevailing jurisprudence, labor-only contracting is present when: (1) the contractor supplying workers lacks substantial capital or investment in tools, equipment, machinery, work premises, etc.; and (2) the workers supplied perform tasks directly related to the principal employer’s regular business. A DOLE Certificate of Registration by itself does not conclusively establish legitimate contractor status; it prevents, but does not bar, the presumption of labor-only contracting. For substantial capital, it is not sufficient that the contractor generally has capital—those assets must include tools/equipment actually and directly used in performing the contracted work. The power of control (who directs means and methods of work) is a principal factor in determining the true employer.
Application to Nozomi’s Alleged Substantial Capital and Equipment
Nozomi presented audited financial statements showing significant capitalization and adduced evidence of medical laboratories, diagnostic centers, training facilities, audio-visual centers, finance and EDP centers, and computerized payroll and software development centers. However, the Court applied the “totality of circumstances” and required a showing that such capital and equipment were actually and directly used in the specific service contract with Samsung. The service contract between Nozomi and Samsung covered deployment of manpower for temporary or occasional needs but did not identify particular tools or specialized equipment to be provided by Nozomi for the production tasks at Samsung. Consequently, Nozomi’s general assets and facilities were not shown to be related to, or actually used in, the performance of the specific work for Samsung; therefore Nozomi failed to establish the kind of substantial capital/equipment relevant to permit legitimate job contracting status vis-à-vis that service contract.
Application to Nature of Work and Relation to Samsung’s Business
Naredo’s duties involved operating a stacking machine and performing production tasks integral to Samsung’s core business of producing and exporting microchips. The Court found no serious dispute that the workers’ tasks were directly related to Samsung’s principal business. Additional corroborating facts included Samsung’s absorption “opportunity” offered to the workers and the continuous engagement for more than five years, all of which supported the conclusion that the tasks were not merely sporadic or incidental but formed part of Samsung’s regular business operations.
Application to Control and Employer Status
Control was manifest: Samsung supervisors instructed Naredo on means, methods and specifications of his job; Samsung paid the salary; equipment used in performing the tasks was owned by Samsung; and the engagement was continuous. Given the significant evidence of control ov
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Procedural History
- Petition for Review on Certiorari (Rule 45) filed with the Supreme Court challenging the Court of Appeals (CA) Decision (December 10, 2014) and Resolution (September 3, 2015) in CA-G.R. SP No. 125058.
- The underlying case originated from a complaint for illegal dismissal and regularization filed before the National Labor Relations Commission (NLRC) by respondent Celestino A. Naredo and several others against Nozomi Fortune Services, Inc. (Nozomi), Nozomi’s branch manager Ludy Lasiog, Samsung Electro-Mechanics Phils. (Samsung), its president Jung Soo Lee, and HR manager Anna Roselle Dayday.
- Labor Arbiter rendered a Decision on January 31, 2011 dismissing the complaint for lack of merit.
- NLRC affirmed the Labor Arbiter’s Decision by a Decision dated October 21, 2011 and denied the complainants’ motion for reconsideration in a Resolution dated February 29, 2012.
- Complainants sought certiorari relief from the CA. The CA: (a) upheld no illegal dismissal but (b) declared Nozomi a labor-only contractor and Samsung the true employer (Decision dated December 10, 2014); denied Nozomi’s Partial Motion for Reconsideration (Resolution dated September 3, 2015).
- Nozomi filed the present Rule 45 petition; the Supreme Court issued its Decision on July 31, 2024.
Factual Background
- Nozomi, a manpower business, hired complainants and assigned them to Samsung on various dates between 2003 and 2005 as production operators for electronic components manufactured by Samsung.
- In May 2010, Nozomi’s branch manager Ludy Lasiog informed complainants that Samsung would absorb them as regular employees if they passed Samsung’s examination; the complainants did not pass and Samsung notified them their services were no longer needed.
- On July 15, 2010, complainants tendered handwritten voluntary resignation letters citing various personal reasons.
- Approximately one month after resignation, complainants instituted a complaint for illegal dismissal and regularization before the NLRC.
- Complainants alleged they were actually regular employees of Samsung because: (a) they had worked for more than a year; (b) their tasks were necessary and desirable to Samsung’s usual business; (c) Nozomi lacked substantial capital and the equipment used belonged to Samsung; and (d) Samsung controlled and supervised them while Nozomi merely paid wages.
- Nozomi asserted it was registered with the Department of Labor and Employment (DOLE) as an independent job contractor, operated medical laboratory and diagnostic services for employees, owned training facilities, had service agreements with several companies including Samsung, and had substantial capital to finance operations.
- Samsung contended complainants were Nozomi’s employees assigned to Samsung pursuant to a service contract when Samsung was short of regular employees.
Claims and Allegations
- Complainants’ core claims:
- Illegal dismissal.
- Entitlement to regularization as Samsung’s regular employees.
- Monetary claims attendant to illegal dismissal and regular employment.
- Nozomi’s defenses:
- Legitimate independent job contractor registered with DOLE.
- Possession of substantial capital and various business facilities (medical labs, training centers, EDP centers, payroll/software development centers).
- Contractual deployment of manpower pursuant to service agreements.
- Samsung’s defense:
- Denied liability and maintained that complainants were Nozomi’s employees assigned under service contract.
Evidence in the Record
- Service Contract between Nozomi and Samsung (Rollo, p. 310) defining the scope of works/services for which Nozomi would provide manpower.
- Complainants’ handwritten resignation letters dated July 15, 2010 (Rollo, pp. 370–371).
- Nozomi’s audited financial statements for 2009 showing net income of PHP 991,413,266.00 and other corporate assets (Rollo, p. 344; Rollo, p. 342).
- Nozomi’s DOLE Certificate of Registration (referenced in parties’ contentions and decisions).
- Position Papers of the parties: Nozomi’s Position Paper (Rollo, p. 46), Samsung’s Position Paper (Rollo, p. 279), Complainants’ Position Paper (Rollo, p. 253).
- CA, NLRC, and Labor Arbiter decisions and resolutions as part of the appellate record.
Labor Arbiter’s Findings and Rationale
- Labor Arbiter Robert A. Jerez (NLRC Regional Arbitration Branch No. IV, Calamba City) dismissed the complaint for lack of merit in his January 31, 2011 Decision.
- Findings supporting Nozomi’s status as legitimate independent contractor:
- Nozomi was duly registered with DOLE, enjoying a presumption of legitimacy as an independent job contractor.
- Evidence of substantial capital and operations, including a 2009 audited net income of PHP 991,413,266.00.
- Existence of medical laboratories, diagnostic centers, training facilities, audio-visual centers, finance and EDP centers, and fully computerized payroll and software development centers.
- Nozomi maintained separate offices in client companies to monitor and supervise its detailed employees.
- On employer identity:
- Nozomi hired complainants, paid their wages, exercised power to discipline and terminate, and controlled means and methods of work — thus, complainants were Nozomi’s regular employees.
- On dismissal:
- Labor Arbiter concluded complainants voluntarily resigned; complainants failed to prove dismissal before shifting burden to employer to prove just cause.
- Monetary claims were dismissed as baseless.
NLRC Decision and Rationale
- NLRC First Division, penned by Commissioner Perlita B. Velasco with concurrence of Presiding Commissioner Gerardo C. Nograles (Commissioner Romeo L. Go took no part), issued a Decision on October 21, 2011 affirming the Labor Arbiter.
- NLRC held:
- The Labor Arbiter’s conclusions were supported by evidence on record.
- Application of the fourfold test established Nozomi as complainants’ employer.
- Nozomi proved its status as a legitimate job contractor in this case and in nine other decided cases.
- Complainants failed to prove illegal dismissal and entitlement to monetary claims.
- NLRC denied complainants’ motion for reconsideration (Resolution dated February 29, 2012).
Court of Appeals Decision and Rationale
- The CA (Special Fourth Division) rendered a Decision dated December 10, 2014 (Associate Justice Edwin D. Sorongon, concurred by Associate Justices Marlene Gonzales-Sison and Elihu A. Ybañez).
- CA rulings:
- Upheld that Naredo was not illegally dismissed (agreed he had voluntarily resigned).
- Contrary to Labor Arbiter and NLRC, declared Nozomi a labor-only contractor and Samsung as the true employer.
- CA’s basis for declaring labor-only contracting:
- The service contract between Nozomi and Samsung was defective because it provided only for deployment of ma