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;
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