Title
Philippine Pizza, Inc. vs. Cayetano
Case
G.R. No. 230030
Decision Date
Aug 29, 2018
Workers claimed illegal dismissal, alleging regular employment with Pizza Hut, but Supreme Court ruled CBMI as legitimate contractor; no illegal dismissal, floating status justified.
illegal dismissal
job contractor
labor arbiter

Case Summary (G.R. No. 230030)

Factual Background

The respondents were hired on various dates between 2002 and 2006 by Consolidated Building Maintenance, Inc. (CBMI), a contractor supplying kitchen, delivery, sanitation, and allied services to Philippine Pizza, Inc. for its Pizza Hut branches. Cayetano and Deloso worked as team members/service crew, while Avenido, Gurion, Recto, and Sumbang, Jr. served as delivery riders. Respondents alleged that they had rendered continuous service for periods ranging from seven to eleven years and that they had initially been hired by Philippine Pizza, Inc. but were later transferred to CBMI to avoid regularization. They maintained that despite the transfer they worked under the direct supervision of Pizza Hut managers and used Pizza Hut tools and machines.

Claims and Pleadings

Respondents filed separate complaints for Illegal Dismissal against Philippine Pizza, Inc. and CBMI before the NLRC in several docketed cases. Philippine Pizza, Inc. denied any employer-employee relationship with respondents and averred that it entered into Contracts of Services with CBMI, which performed services in accordance with its own manner and method and retained control over its employees. CBMI admitted that respondents were its employees, confirmed payment of wages and statutory contributions, and asserted that it was a legitimate job contractor possessing substantial capital and a DOLE Certificate of Registration. CBMI explained that it placed respondents on floating status because of a reduced need for services by Pizza Hut and that respondents filed complaints before reassignment could occur.

Labor Arbiter Ruling

The Labor Arbiter (LA) found Philippine Pizza, Inc. and CBMI jointly and severally liable for illegal dismissal in a Decision dated August 30, 2013. The LA concluded that respondents were regular employees of Philippine Pizza, Inc. because they were repeatedly hired to perform work usually necessary and desirable to the main business. The LA observed that CBMI failed to show that it undertook the contract work on its own account despite meeting the substantial capital requirement. The LA also found indicia of control by Philippine Pizza, Inc., including various certifications and training acknowledgments. The LA took judicial notice of the Court’s minute resolution in Philippine Pizza, Inc. v. Noel Matias (G.R. No. 200656, April 16, 2012) as persuasive of a labor-only contracting arrangement.

NLRC Ruling

On appeal, the NLRC reversed and set aside the LA decision in a Decision dated January 28, 2014 and dismissed the complaints. The NLRC ruled that CBMI was a legitimate job contractor, noting its DOLE Certificate of Registration and substantial capital and investments as reflected in corporate documents and audited financial statements. The NLRC gave weight to the disputable presumption of legitimacy arising from DOLE registration. It found that CBMI exercised control and supervision over respondents through deployment of supervisors, and that issuance of Pizza Hut certifications alone did not establish control by Philippine Pizza, Inc. The NLRC further held that stare decisis could not be invoked from the minute resolution relied upon by the LA because that resolution lacked a full statement of facts and legal discussion. The NLRC concluded that respondents’ placement in floating status constituted a temporary lay-off by CBMI in the exercise of management prerogative rather than an illegal dismissal.

Court of Appeals Ruling

The Court of Appeals annuled the NLRC decision and reinstated the LA in a Decision dated March 30, 2016. The CA held that CBMI was engaged in prohibited labor-only contracting with Philippine Pizza, Inc. and applied stare decisis by relying on the Court’s minute resolution in Philippine Pizza, Inc. v. Noel Matias. The CA found insufficient proof that CBMI supervised and evaluated deployed employees or established their working methods. The CA concluded that Philippine Pizza, Inc. exercised control and supervision over the respondents, as evidenced by awards and seminars, and declared respondents to be regular employees of Philippine Pizza, Inc. for service spanning seven to eleven years.

Issues Presented to the Supreme Court

The Supreme Court identified the principal issues as whether the CA correctly relied on the Court’s minute resolution in Philippine Pizza, Inc. v. Noel Matias to conclude that CBMI engaged in labor-only contracting with Philippine Pizza, Inc., and whether the CA correctly ruled that respondents suffered illegal dismissal.

Supreme Court Ruling — Disposition

The petition was granted. The Supreme Court reversed and set aside the CA Decision dated March 30, 2016 and its Resolution dated January 6, 2017. The NLRC Decision dated January 28, 2014 and its Resolution dated April 30, 2014 were reinstated. The Court held that the CA erred in ascribing grave abuse of discretion to the NLRC.

Legal Basis and Reasoning

The Court first clarified the scope of Rule 45 review in labor cases, noting that the Court examines the CA decision for legal correctness and assesses whether the CA correctly determined the presence or absence of grave abuse of discretion in the NLRC ruling. The Court explained that grave abuse of discretion denotes a capricious and whimsical exercise of judgment amounting to an evasion of a positive duty. The Court then found the CA’s reliance on the Court’s minute resolution in Philippine Pizza, Inc. v. Noel Matias misplaced. It reiterated that a minute resolution, while a disposition on the merits, does not bind non-parties where the resolution does not contain a complete statement of facts and legal reasoning. There was no showing that respondents here were parties to or participated in the minute-resolution case or that the subject matters were sufficiently similar to permit invocation of stare decisis.

Independently considering the evidence, the Court found that the NLRC did not gravely abuse its discretion in concluding that CBMI was a legitimate job contractor and the employer of respondents. The Court emphasized that a DOLE Certificate of Registration gives rise to a disputable presumption of legitimacy. The NLRC properly considered corporate documents showing CBMI’s authorized and paid-up capital, and audited financial statements reflecting substantial assets, which demonstrated CBMI’s capacity to carry out its contractual obligations and operational expenses. The Court also accepted evidence that CBMI deployed at least one supervisor to each Pizza Hut branch and submitted affidavits from area coordinators attesting to CBMI’s supervisory and disciplinary practices, attendance monitoring, and communication with CBMI’s Human Resource Department. Documentary Offense Notices and Memoranda corroborated

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