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Lunes, Agosto 27, 2012

Emmanuel Babas et. al. v Lorenzo Shipping Corporation (G.R. No. 186091)


FACTS:
          Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation engaged in the shipping industry. LSC entered into a General Equipment Maintenance Repair and Management Services Agreement (Agreement) with Best Manpower Services, Inc. (BMSI).  Under the Agreement, BMSI undertook to provide maintenance and repair services to LSC’s container vans, heavy equipment, trailer chassis, and generator sets.  BMSI further undertook to provide checkers to inspect all containers received for loading to and/or unloading from its vessels.

Simultaneous with the execution of the Agreement, LSC leased its equipment, tools, and tractors to BMSI.  The period of lease was coterminous with the Agreement

          BMSI then hired petitioners on various dates to work at LSC as checkers, welders, utility men, clerks, forklift operators, motor pool and machine shop workers, technicians, trailer drivers, and mechanics. 

In September 2003, petitioners filed with the Labor Arbiter (LA) a complaint for regularization against LSC and BMSI.  On October 1, 2003, LSC terminated the Agreement, effective October 31, 2003.  Consequently, petitioners lost their employment.

BMSI asserted that it is an independent contractor.  It averred that it was willing to regularize petitioners; however, some of them lacked the requisite qualifications for the job. LSC averred that petitioners were employees of BMSI and were assigned to LSC by virtue of the Agreement.  BMSI is an independent job contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its business. The Agreement between LSC and BMSI constituted legitimate job contracting. Thus, petitioners were employees of BMSI and not of LSC.

          The Labor Arbiter dismissed petitioners’ complaint on the ground that petitioners were employees of BMSI.  It was BMSI which hired petitioners, paid their wages, and exercised control over them. The NLRC reversed the Labor Arbiter

Issue:
                Whether or not respondent was engaged in labor-only contracting.

Held:
Yes. In De Los Santos v. NLRC, the character of the business, i.e., whether as labor-only contractor or as job contractor, should be measured in terms of, and determined by, the criteria set by statute. The parties cannot dictate by the mere expedience of a unilateral declaration in a contract the character of their business. 

The Court has observed that:
First, petitioners worked at LSC’s premises, and nowhere else. Other than the provisions of the Agreement, there was no showing that it was BMSI which established petitioners’ working procedure and methods, which supervised petitioners in their work, or which evaluated the same. There was absolute lack of evidence that BMSI exercised control over them or their work.

Second, LSC was unable to present proof that BMSI had substantial capital.  There was no proof pertaining to the contractor’s capitalization, nor to its investment in tools, equipment, or implements actually used in the performance or completion of the job, work, or service that it was contracted to render.  What is clear was that the equipment used by BMSI were owned by, and merely rented from, LSC.  

          Third, petitioners performed activities which were directly related to the main business of LSC. The work of petitioners as checkers, welders, utility men, drivers, and mechanics could only be characterized as part of, or at least clearly related to, and in the pursuit of, LSC’s business.

Lastly, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted this finding, thereby bolstering the NLRC finding that BMSI is a labor-only contractor.

The CA erred in considering BMSI’s Certificate of Registration as sufficient proof that it is an independent contractor.  Jurisprudence states that a Certificate of Registration issued by the Department of Labor and Employment is not conclusive evidence of such status. The fact of registration simply prevents the legal presumption of being a mere labor-only contractor from arising. 

*LSC is ordered to reinstate the petitioners to their former positions. Petitioners are declared as regular employees of LSC.

NOTES:
Labor-only contracting  -a prohibited act
-          is an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work, or service for a principal. 
-          Elements:
(a) the contractor or subcontractor does not have substantial capital or investment to actually perform the job, work, or service under its own account and responsibility
(b) the employees recruited, supplied, or placed by such contractor or subcontractor perform activities which are directly related to the main business of the principal.[20]

 Permissible job contracting or subcontracting – an arrangement whereby a principal agrees to put out or farm out with the contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work, or service is to be performed or completed within or outside the premises of the principal.

Conditions: 
(a) The contractor carries on a distinct and independent business and undertakes the contract work on his 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 his work except as to the results thereof;

(b) The contractor has substantial capital or investment; and

(c) The agreement between the principal and the contractor or subcontractor assures the contractual employees' entitlement to all labor and occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits

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