SECOND DIVISION
[G.R. No. 224931. September 14, 2016.]
DAVAO CENTRAL CHEMICAL CORPORATION, petitioner, vs. BIENVENIDO TALAVERA, JR., MARLON LAGBAO, ARNEL DELA CERNA, OLIVERIO GENOSAS, MANUEL CHUCA, ARNEL TALAVERA, VERGELIO NOGADAS, FELIX ASUQUE, JR., MELCHOR ARANDILLA, EDUARDO ALEMAN, EFREN VILLA-ABRILLE, DANNY LASCUÑA, SAMUEL LUARDO, JONIE BORJA, ABRAHAM MAMPARO, RENATO YAID, AND ERIC PABLO, respondents.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated 14 September 2016 which reads as follows:
"G.R. No. 224931(Davao Central Chemical Corporation vs. Bienvenido Talavera, Jr., Marlon Lagbao, Arnel Dela Cerna, Oliverio Genosas, Manuel Chuca, Arnel Talavera, Vergelio Nogadas, Felix Asuque, Jr., Melchor Arandilla, Eduardo Aleman, Efren Villa-Abrille, Danny Lascuña, Samuel Luardo, Jonie Borja, Abraham Mamparo, Renato Yaid, and Eric Pablo)
This petition for review on certiorari seeks to reverse and set aside the October 15, 2015 Decision 1 and May 12, 2016 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 05346-MIN, which reversed the April 30, 2012 Resolution 3 of the National Labor Relations Commission (NLRC) in NLRC Case No. MAC-09-012252-2011 which, in turn, set aside the July 28, 2011 Decision 4 of the Labor Arbiter (LA) in NLRC Case No. RAB-XI-12-01203-10.
The Antecedents:
On various dates in December 2010, respondents filed several labor complaints for illegal dismissal, regularization and money claims against Davao Central Chemical Corporation (DCCC) and Jose B. Lumaid Allied Services (JBLAS). They alleged that DCCC was a domestic corporation engaged in the business of manufacturing, producing, supplying, and exporting coconut shell-based carbon products, while JBLAS was a single proprietorship engaged in the business of job contracting; that JBLAS hired them for different positions such as pilers, feeders and baggers and assigned them to DCCC; that they were dismissed from employment on various dates; and that DCCC was their true employer because it controlled and supervised them in all aspects of their work, while JBLAS was a labor-only contractor.
For its part, JBLAS asserted that it was a duly registered legitimate labor contractor with the Department of Labor and Employment (DOLE) as evidenced by its certificate of registration; and that it hired respondents under separate contracts and assigned them to DCCC. In an apparent turnaround, however, JBLAS admitted that it was a labor-only contractor because it had no substantial capital or investment to carry on an independent business.
DCCC countered that it had no employment relationship with respondents; that they were project employees hired by JBLAS, an independent labor contractor and their actual employer; and that the admission of JBLAS did not deserve any credit because it was made only in retaliation for the non-renewal of its service contract. CAacTH
The LA Ruling
In its July 28, 2011 decision, the LA held that respondents were DCCC's regular employees who were illegally dismissed. It explained that it was not shown that JBLAS had substantial capital or investment in the form of tools and equipment necessary for the conduct of its business. The LA added that respondents performed activities directly related to the main business of DCCC. JBLAS being a labor-only contractor, he concluded that respondents were deemed regular employees of DCCC. As such, they enjoyed security of tenure as regular employees and were illegally dismissed when DCCC failed to observe due process in dismissing them.
Consequently, the LA ordered DCCC to reinstate respondents to their former positions without loss of seniority rights and other privileges and to pay their backwages and 13th month pay.
Aggrieved, DCCC elevated an appeal to the NLRC.
The NLRC Ruling
In its April 30, 2012 resolution, the NLRC reversed the July 28, 2011 LA decision and found JBLAS to be a legitimate labor contractor. It pointed out that JBLAS was registered with the DOLE as an independent contractor, as shown by its certificate of registration. The NLRC continued that said certificate enjoyed the presumption of regularity, which respondents failed to overcome. It did not give credence to the admission of JBLAS because it was unsubstantiated and it had an axe to grind against DCCC for not renewing its service contract. Hence, the NLRC declared JBLAS to be respondents' true employer and ordered it to reinstate them to their former positions and pay them their backwages and 13th month pay.
Aggrieved, respondents filed a petition for certiorari before the CA.
The CA Ruling
In its assailed October 15, 2015, decision, the CA set aside the April 30, 2012 NLRC resolution and reinstated the July 28, 2011 LA decision, with the modification that DCCC and JBLAS were declared jointly and severally liable to respondents. It remanded the case to the LA for the updated computation of respondents' backwages and other benefits.
The appellate court found JBLAS to be a labor-only contractor because it had no substantial capital. It pointed out that JBLAS only had capitalization of P100,000.00, as reflected in its Department of Trade and Industry (DTI) application form, and its certificate of registration with the DOLE. The CA was of the same view that said capital was insufficient to independently sustain its undertakings with DCCC under the service contract as, in fact, the same was barely enough to pay the 15-day wages of its employees. It wrote that the fact that a certificate of registration was issued in favor of JBLAS did not automatically make it an independent labor contractor because said certificate merely prevented the legal presumption of being a labor-only contractor from arising. The CA further noted that there was no showing that JBLAS had sufficient investment in the form of tools, appliances, equipment, materials, or assets. Further, it added that DCCC exercised the power of control over respondents, who performed activities which were usually necessary and desirable to DCCC's business. IAETDc
DCCC moved for reconsideration, but its motion was denied by the CA in its May 12, 2016 resolution.
Hence, this petition raising:
SOLE ISSUE
WHETHER JBLAS WAS A LABOR-ONLY CONTRACTOR.
DCCC argues that even assuming that respondents performed activities which were usually necessary and desirable in its business, the same would not justify the finding that they were its regular employees because they were hired by JBLAS under fixed-term employments. According to it, a fixed term employment is an exception to the rule. It concluded that JBLAS was an independent labor contractor, as evidenced by its certificate of registration with the DOLE.
The Court's Ruling
The petition is bereft of merit.
At the outset, the Court emphasizes that the relevant issue in this case is whether JBLAS is a labor-only contractor. Thus, DCCC's arguments regarding fixed-term employment are irrelevant and have no application to the present case.
A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial capital, investment, tools and the like. Where the principal is the one claiming that the contractor is a legitimate contractor, however, the burden of proving the supposed status of the contractor rests on the principal. 5 A finding that a contractor is a labor-only contractor is equivalent to declaring the principal as the actual employer. 6
The term "substantial capital or investment" in the context of labor contracting refers not only to a contractor's financial capability, but also encompasses the tools, equipment, implements, machineries, and work premises, actually and directly used by the contractor in the performance or completion of job, work or service contracted out. 7
In this case, DCCC cannot rely on JBLAS's certificate of registration as an independent contractor to prove its claim as it is an inconclusive evidence of such status. The fact of registration simply prevents the legal presumption of being a mere labor-only contractor from arising. In distinguishing between permissible job contracting and prohibited labor-only contracting, the totality of the facts and the surrounding circumstances of the case are to be considered. 8
Based on its DTI application form and certificate of registration with the DOLE, JBLAS only has the paltry sum of P100,000.00 as its capital. As aptly pointed out by the CA, this amount is insufficient to independently sustain its undertakings with DCCC under the service contract. Furthermore, DCCC failed to show that JBLAS has sufficient investment in the form of tools, equipment, implements, machineries, and work premises, necessary in the performance or completion of the service contract. DcHSEa
Evidently, JBLAS is a mere labor-only contractor as it miserably failed to meet the standards to be considered as an independent contractor. Neither did it have sufficient capital nor adequate investments necessary for it to be deemed a legitimate job contractor. Consequently, DCCC is deemed to be respondents' actual employer.
In fine, the petition must be denied for lack of merit.
Pursuant to Nacar v. Gallery Frames, 9 however, the Court finds that the award made by the CA should be modified in that the total monetary awards shall earn interest at the rate of 12% per annum from the date the respondents were illegally terminated until June 30, 2013, and 6% per annum from July 1, 2013, until their full satisfaction.
WHEREFORE, the October 15, 2015 Decision and the May 12, 2016 Resolution of the Court of Appeals in CA-G.R. SP No. 05346-MIN are hereby AFFIRMED with MODIFICATION in that the total monetary awards shall earn interest at the rate of 12% per annum from the date that respondents were illegally terminated from work until June 30, 2013, and 6% per annum from July 1, 2013 until their full satisfaction. SaCIDT
SO ORDERED."
Very truly yours,
MA. LOURDES C. PERFECTODivision Clerk of Court
By:
(SGD.) TERESITA AQUINO TUAZONDeputy Division Clerk of Court
Footnotes
1. Penned by Associate Justice Pablito A. Perez with Associate Justice Romulo V. Borja and Associate Justice Oscar V. Badelles, concurring; rollo, pp. 41-60.
2. Penned by Associate Justice Romulo V. Borja with Associate Justice Oscar V. Badelles and Associate Justice Ronaldo B. Martin, concurring; id. at 63-72.
3. Penned by Commissioner Dominador B. Medroso, Jr. with Commissioner Bario-Rod M. Talon and Commissioner Proculo T. Sarmen, concurring; id. at 92-106.
4. Penned by Labor Arbiter Efren B. Cachuela; id. at 78-90.
5. Alilin v. Petron Corporation, G.R. No. 177592, June 9, 2014, 725 SCRA 342.
6. Aboitiz Haulers, Inc. v. Dimapatol, 533 Phil. 566 (2006).
7. W.M. Manufacturing, Inc. v. Dalag, G.R. No. 209418, December 7, 2015.
8. San Miguel Corporation v. Semillano, G.R. No. 164257, July 5, 2010, 623 SCRA 114, 128.
9. 716 Phil. 267 (2013).