Title
Parayday vs. Shogun Shipping Co., Inc.
Case
G.R. No. 204555
Decision Date
Jul 6, 2020
Two welders alleged illegal dismissal, underpayment, and lack of benefits after years of regular employment and workplace injury; Supreme Court ruled them regular employees, affirmed illegal dismissal, and granted reinstatement and backwages.
illegal dismissal
reinstatement
backwages
A

Case Summary (G.R. No. 204555)

Factual Background

Petitioners alleged they worked as fitters/welders for Oceanview/VRC Lighterage Co., Inc. and VRC/Oceanview Shipbuilders Co., Inc., performing welding, fitting, and repair tasks on barges. They claimed continuous service, payment at a daily rate of P350.00, issuance of handwritten payslips or Time Keeper’s Reports, and denial of overtime, holiday, SIL, and 13th month pay. Sometime in 2003, petitioners alleged Oceanview changed its corporate name to Shogun Ships and that they continued in Shogun Ships’ employ until a verbal dismissal on May 1, 2008. Petitioners sustained third degree burns in an explosion on May 11, 2006 on the barge M/T Daniela Natividad, were hospitalized, and received medical assistance and salary resumption while on and immediately after hospitalization. Respondent denied a regular employer-employee relationship with petitioners, asserted that Shogun Ships was incorporated in November 2002 and is distinct from Oceanview, and maintained petitioners were occasional helpers engaged on a per-need basis by regular employees.

Labor Arbiter Proceedings and Ruling

Labor Arbiter Eduardo G. Magno issued a decision dated April 27, 2009 ordering reinstatement of petitioners without loss of seniority and awarding backwages of P108,150.00 to each petitioner from time of dismissal until full reinstatement. The Labor Arbiter found petitioners to be regular employees on the grounds that they performed tasks necessary and desirable to respondent’s business and had rendered more than one year of service at the time of dismissal. The Arbiter also ruled that respondent failed to prove just or authorized cause and did not accord procedural due process. Claims for underpayment of wages, other benefits, damages, and attorney’s fees were denied for lack of factual basis.

NLRC Ruling

On appeal, the NLRC, in its August 28, 2009 Decision, dismissed respondent’s appeal and affirmed the Labor Arbiter. The NLRC relied on petitioners’ allegations that they returned to work after the May 11, 2006 incident and that they had rendered in excess of one year of service by the time of the alleged dismissal on May 1, 2008. The NLRC considered the repeated and continuing need for petitioners’ services as evidence of the necessity of their functions and thus of their regular employment status. The NLRC also discounted respondent’s affidavits as biased and found respondent failed to establish just cause or due process for dismissal.

Court of Appeals Ruling

Respondent secured relief from the Court of Appeals. In its May 11, 2012 Decision, the CA granted respondent’s petition for certiorari, set aside the NLRC Decision of August 28, 2009 and the NLRC Resolution of October 27, 2009, and dismissed the complaint. The CA applied the four‑fold test—selection and engagement, payment of wages, power of dismissal, and power to control—and found petitioners failed to adduce substantial evidence of those elements. The CA gave no credence to the Time Keeper’s Reports for lack of proof of genuineness and due execution, found no proof of continuous employment, and declined to pierce the veil of corporate fiction because Oceanview had not been impleaded and the CA was without jurisdiction to do so in the absence of a full‑blown trial and proper pleading and proof.

Issues Presented

The controlling issues presented were whether petitioners were regular employees of Shogun Ships and, if so, whether petitioners were validly dismissed. Petitioners also complained of the CA’s treatment of evidentiary material, its reliance on respondent’s assertions, its refusal to pierce the corporate veil, its exercise of certiorari jurisdiction, and service on counsel.

Supreme Court Disposition

The Supreme Court granted petitioners’ Rule 45 petition for review on certiorari. The Court reversed and set aside the CA’s May 11, 2012 Decision and November 19, 2012 Resolution. The Court reinstated and affirmed the NLRC Decision of August 28, 2009 and its October 27, 2009 Resolution. The case was remanded to the Labor Arbiter for recomputation of petitioners’ full backwages.

Legal Basis and Reasoning — Jurisdictional and Evidentiary Thresholds

The Court acknowledged that the existence of an employer-employee relationship is essentially a question of fact and that as a rule Rule 45 does not entertain pure factual disputes. The Court, however, exercised authority to review facts because of the conflict between factual findings of the Labor Arbiter and the NLRC on one hand and those of the CA on the other. The Court agreed with the CA that Oceanview and Shogun Ships are separate juridical persons and applied the general doctrine of separate juridical personality; it declined to allow piercing the veil of corporate fiction because Oceanview was never impleaded, never validly served, and the necessary factual predicates for piercing were not properly pleaded or proved before the tribunals. The Court cited authority that the doctrine may not be used to confer jurisdiction over a non‑impleaded party.

Legal Basis and Reasoning — Existence of Employer‑Employee Relationship

The Court applied the four‑fold test as the controlling standard to determine employment status. It rejected reliance on Art. 295 as dispositive of the existence of an employer-employee relationship where that relationship is disputed, noting that Art. 295 pertains to classification between regular and casual employees for benefits and is not a standalone test for the existence of the relationship. The Court reviewed the evidentiary record and found that, while petitioners’ Oceanview ID and Certificate of Employment had no probative value as against Shogun Ships, other allegations and admissions in the record by respondent were uncontroverted. Respondent did not deny that petitioners worked on the Shogun barge on May 11, 2006, that Shogun Ships provided medical assistance and paid salaries after hospitalization, that petitioners worked until alleged verbal dismissal on May 1, 2008, and that petitioners were called in to perform repairs and were compensated. Under Rule 8, Section 11, of the Rules of Court, allegations not specifically denied are deemed admitted. The Court held that the employer’s power to control may be inferred from the circumstances; the control test requires only the right to control the manner of performing work and not the actual exercise of that right. Working alongside regular employees and taking orders from Shogun engineers supported an inference of the employer’s right to control. Considering the nature of the duties, the repeated need for welding and repair, and the fact that petitioners worked for more than one year in relation to the activity, the Court concluded petitioners were regular employees of Shogun Ships.

Legal Basis and Reasoning — Illegality of Dismissal and Burden of Proof

Having found petitioners to be regular employees, the Court turned to the legality of dismissal. It reiterated the well‑established principle that dismissal of a regular employee is justified only for just or authorized causes and after due process. The employer bears the burden of proving both just cause and that due process was observed. The Court found respondent failed to meet that burden. The record showed no notice of termination or observance of procedural due process; petitioners were verbally dismissed. The Court therefore concluded the dismissal was illegal and that remedies of reinstatement and backwages were warrant

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