Aboitiz Haulers Inc v Monaorai Dimapatoi et. al (G.R. No. 148619)

FACTS:

Petitioner Aboitiz Haulers, Inc. is a domestic corporation principally engaged in the nationwide and overseas forwarding and distribution of cargoes. Private respondents Monaorai Dimapatoi, Cecilia Agawin, Raul Mamate, Emmanuel Guerrero and Gemeniano Bigaw worked as checkers in the Mega Warehouse, which is owned by the petitioner.

Petitioner claims that respondents are not its employees, rather they are the employees of Grigio Security Agency and General Services (Grigio), a manpower agency that supplies security guards, checkers and stuffers. It allegedly entered into a Written Contract of Service with Grigio. By virtue of the aforementioned Written Contract of Service, Grigio supplied petitioner with security guards, checkers and stuffers for petitioner’s Mega Warehouse. The respondents were among the checkers that were assigned to the petitioner’s warehouse.

Petitioner also alleges that the respondents left the warehouse and did not report to work thereafter. As a result of the respondents’ sudden abandonment of their work, there was no orderly and proper turnover of papers and other company property in connection with the termination of the Written Contract for Services.

Respondents, on the other hand, claim that most of them worked as checkers in petitioner’s warehouse even before 1 March 1994. Respondents maintain that during their employment with the petitioner, they were not paid their regular holiday pay, night shift differential, 5-day service incentive leave, and overtime premium. They also averred that illegal deductions were being made on their wages. They also allege that petitioner dismissed them on the pretext that the Written Contract of Service between Grigio and the petitioner had been terminated.

Raul Mamate filed a complaint before the Department of Labor and Employment (DOLE) for nonpayment of wages and other benefits, as well as illegal deductions. The labor arbiter ruled that the complainants’ failure to offer any evidence showing that Grigio had no substantial capital denotes that Grigio was a legitimate independent job contractor.  On appeal, the NLRC affirmed the findings of the labor arbiter.

The Court of Appeals determined that Grigio was not an independent job contractor, despite its claim that it has sufficient capital. After ruling that petitioner was the employer of the respondents, the Court of Appeals resolved that the respondents were illegally dismissed by the petitioner since the latter failed to comply with the procedural requirements of notice and hearing. It affirmed the NLRC and the labor arbiter in deciding that the respondents were not entitled to their claims for payment of holiday pay, night shift differentials, overtime and illegal deductions as these claims were not sufficiently proven.

Issue:

 1. Whether or not Grigio is a "labor-only" contractor

2. Whether the respondents were lawfully dismissed due to abandonment.

HELD:

1. YES. Article 106 of the Labor Code explains the relations which may arise between an employer, a contractor and the contractor’s employees thus:

ART. 106. Contractor or subcontractor. – Whenever an employer enters into a contract with another person for the performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract in the same manner and extent that he is liable to employees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor only contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.

The first two paragraphs of Art. 106 set the general rule that a principal is permitted by law to engage the services of a contractor for the performance of a particular job, but the principal, nevertheless, becomes solidarily liable with the contractor for the wages of the contractor’s employees. The third paragraph empowers the Secretary of Labor to make distinctions between permissible job contracting and "labor-only" contracting. A finding that a contractor is a "labor-only" contractor is equivalent to declaring that there is an employer-employee relationship between the principal and the employees of the supposed contractor, and the "labor-only" contractor is considered as a mere agent of the principal, the real employer.

In the case, the respondents’ work, as warehouse checkers, is directly related to the principal business of the petitioner. Petitioner also exercises the right to control and determines not only the end to be achieved, but also the manner and means to be used in reaching that end. Lastly, petitioner failed to sufficiently prove that Grigio had "substantial capital or investment."

The respondents, as checkers, were employed to check and inspect cargoes, a task which is clearly necessary for the petitioner’s business of forwarding and distributing of cargoes. The petitioner did not dispute the fact that the respondents were hired as checkers as early as 1992. The fact that they were employed before the Written Contract of Services indicates that the respondents’ work was indeed necessary for the petitioner’s business.

Grigio did not undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal. The work activities, work shifts, and schedules of the respondents, including the time allowed for "recess" were set under the Written Contract of Services.

2. NO. Abandonment as a just and valid ground for dismissal requires the deliberate and unjustified refusal of the employee to resume his employment. Mere absence of failure to report for work, after notice to return, is not enough to amount to such abandonment.

 For a valid finding of abandonment, two factors must be present:

(1) the failure to report for work or absence without valid or justifiable reason;

(2) a clear intention to sever employer-employee relationship,

The burden of proof to show that there was unjustified refusal to return to work rests on the employer. Petitioner failed to prove this. Even assuming there was abandonment, petitioner did not comply with the statutory requirement of notice and hearing.

In the present case, the petitioner failed to serve the respondents either of the two notices. Neither did petitioner afford the respondents an opportunity to contest their dismissal. Having failed to establish the requirements of notice and hearing, the dismissal of the respondents is tainted with illegality.

*Petitioner to reinstate respondents with full status and rights of regular employees.