BADGES OF A LABOR-ONLY CONTRACTOR

BADGES OF A LABOR-ONLY CONTRACTOR
SECOND DIVISION SAN MIGUEL CORPORATION, -vs- VICENTE B. SEMILLANO, et.al. G.R. No. 164257 July 5, 2010 MENDOZA, J.: this petition for review on certiorari.

AMPCO hired Vicente et al on different dates assigned to work in SMC’s Bottling Plant situated at Brgy. Granada Sta. Fe, Bacolod City, in order to perform the following tasks:
segregating bottles
removing dirt
filing them in designated places
loading and unloading bottles to and from the delivery trucks,and
performing other tasks as ordered by SMC’s officers.
They were required to work inside the SMC premises using SMC’s equipment. They rendered service with SMC for more than 6 months.

Subsequently, SMC entered into a Contract of Services with AMPCO designating the latter as the employer of Vicente, et al. Vicente et al. failed to claim the rights & benefits ordinarily accorded a regular SMC employee. They were not paid their 13th month pay. On June 6, 1995, they were not allowed to enter the SMC premises as the AMPCO project manager told them to wait for further instructions from SMC’s supervisor. Unfortunately, Vicente et al. never heard from SMC. They filed a COMPLAINT FOR ILLEGAL DISMISSAL

ISSUE: is AM PCO a legitimate job contractor?

DOLE Department Order No. 10, Series of 1997 provides:

Sec. 8. Job contracting. – There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business.

Sec. 9. Labor-only contracting. – (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person:
1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such persons are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the workers.

Section 5 of Department Order No. 18-02 (Series of 2002) of the Rules Implementing Articles 106 to 109 of the Labor Code provides:

“Substantial capital or investment” refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements, machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job work or service contracted out. (emphasis supplied)

The "right to control" shall refer to the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end.

The test to determine the existence of independent contractorship is whether or not the one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work.

The following would indicate the existence of an independent & permissible contractor relationship: whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of a specified piece of work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply the premises, tools, appliances, materials, and labor; and the mode, manner and terms of payment.

Although the service contracts show indications of such, there is no independent contractorship. SMC and AMPCO cannot dictate, by a declaration in a contract, the character of AMPCO’s business. AMPCO’s actual status and participation belie the contents of the written service contract.

AMPCO’s Certificate of DOLE Registration as an Independent Contractor is not conclusive evidence. Registration simply prevents the legal presumption of being a mere labor-only contractor from arising. The totality of facts and circumstances must be considered.

Respondent performed activities which directly related to petitioner’s main line of business. Petitioner is primarily engaged in manufacturing and marketing of beer products, and respondents’ work of segregating and cleaning bottles is unarguably an important part of its manufacturing and marketing process.

SMC, as principal employer, is solidarily liable with AMPCO, the labor-only contractor. AMPCO, as the "labor-only" contractor, is deemed an agent of SMC. The law makes the principal responsible over the employees of the "labor-only" contractor as if the principal itself directly hired the employees.