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Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 172241             November 20, 2008

PUREFOODS CORPORATION (now SAN MIGUEL PUREFOODS COMPANY, INC.), petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION (2^nd Division) and LOLITA NERI, respondents.

D E C I S I O N

TINGA, J.:

This is a Petition for Review of the Decision¹ and Resolution² of the Court of Appeals dated 2 November 2005 and 7 April 2006, respectively, in C.A. G.R. SP No. 65180, which upheld the National Labor Relations Commission's (NLRC) 22 November 2000 decision.³

The antecedents follow.

On 8 June 1992, Lolita Neri (Neri) originally filed a claim⁴ for nonpayment of additional wage increase, regularization, nonpayment of service incentive leave, underpayment of 13^th month pay, and nonpayment of premium pay for holiday and holiday pay against Purefoods Corporation (Purefoods). By 4 July 1992, however, Neri was dismissed from her work as a Deli-Attendant.⁵ Subsequently, or on 13 July 1992, eleven (11) other complainants⁶ joined forces with Neri and together they filed an amended complaint, with Neri charging Purefoods with illegal dismissal.⁷ All the other complainants, save for Neri, were still working for Purefoods at the time of the filing of the amended complaint. On 31 August 1993, Labor Arbiter Arthur L. Amansec declared Neri and the complainants as Purefoods' regular employees; and Neri as having been illegally dismissed and entitled to reinstatement with payment of backwages.⁸ Purefoods filed a partial appeal, praying that the claims of complainants be dismissed for lack of merit, or in the alternative, the case be remanded for formal hearing on the merits and to implead D.L. Admark as a party-respondent.⁹ The NLRC granted the appeal and remanded the case for further hearings on the factual issues.¹⁰

The case was remanded to Labor Arbiter Felipe P. Pati, who, after finding that Neri is not an employee of petitioner, but rather of D.L. Admark, an independent labor contractor, dismissed the complaint on 14 December 1998.¹¹ On 15 March 1999, a memorandum on appeal was nominally filed by all the complainants; however, it was only Neri who verified the same.¹² On 22 November 2000, the NLRC ruled in complainants' favor and reversed and set aside the labor arbiter's decision. According to the NLRC, the pieces of evidence on record established the employer-employee relationship between Purefoods and Neri and the other complainants. It thus ordered Neri's reinstatement and the payment of backwages or of separation pay if reinstatement is not possible.¹³ Purefoods moved for the reconsideration of the decision but its motion was denied for lack of merit.¹⁴ Hence, its recourse to the Court of Appeals via a petition for certiorari.¹⁵

The Court of Appeals, relying on the case of Escario v. NLRC,¹⁶ held that D.L. Admark is a legitimate independent contractor. However, it ruled that complainants are regular employees of Purefoods.¹⁷ Citing Art. 280 of the Labor Code, the appellate court found that complainants were engaged to perform activities which are usually necessary or desirable in the usual business or trade of Purefoods, and that they were under the control and supervision of Purefoods' supervisors, and not of D.L. Admark's. It noted that in the Promotions Agreements between D.L. Admark and Purefoods, there was no mention of the list of D.L. Admark employees who will handle particular promotions for petitioner, and that complainants' periods of employment are not fully covered by the Promotions Agreements.¹⁸

The Court of Appeals pointed out that Purefoods did not present any evidence to support its claim that complainants were employees of D.L. Admark. It likewise failed to implead D.L. Admark, or even present a representative of D.L. Admark who could testify in its favor.¹⁹ Finally, the Court of Appeals ruled that Neri was illegally dismissed, as there was no valid and just cause for terminating her employment and she was not given the requisite notice and hearing.²⁰

Purefoods sought reconsideration²¹ of the decision but its motion was denied on 7 April 2006, with the Court of Appeals making special note of the fact that it was only after it had issued the assailed decision that Purefoods introduced several affidavits in support of its case, particularly on the alleged spuriousness of the documents presented by respondent Neri.²²

In the present petition for review,²³ Purefoods argues that the affidavits it attached to its motion for reconsideration before the Court of Appeals are not evidence presented for the first time, but rather just corroboration, clarification, and/or explanation of what it had advanced in the proceedings below. It likewise claims that the other complainants in this case are not entitled to the avails of the suit because they failed to verify the position paper and the memorandum on appeal. Purefoods maintains that Neri and the complainants are not employees of Purefoods, but of D.L. Admark, an independent job contractor. Thus, it cannot be held liable for illegal dismissal. Finally, it claims that Article 280 of the Labor Code is not applicable in a trilateral relationship involving a principal, an independent job contractor, and the latter's employees.²⁴

This simple issue of determining employer-employee relationship between Purefoods and the complainants has been given differing answers by the lower tribunals, so much so that the Court

will have to look into the factual matters involved. Deeply embedded in our jurisprudence is the rule that the findings of facts of quasi-judicial bodies like the NLRC are accorded great respect and, at times, even finality. There are, however, exceptions, among which is when there is a conflict between the factual findings of the NLRC and the Labor Arbiter.²⁵ Accordingly, this Court must of necessity review the records to determine which findings should be preferred as more conformable to the evidentiary facts.²⁶

There is merit in the petition.

The Court agrees with Purefoods' argument that Art. 280 of the Labor Code²⁷ finds no application in a trilateral relationship involving a principal, an independent job contractor, and the latter's employees. Indeed, the Court has ruled that said provision is not the yardstick for determining the existence of an employment relationship because it merely distinguishes between two kinds of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits, to join or form a union, or to security of tenure; it does not apply where the existence of an employment relationship is in dispute.²⁸ It is therefore erroneous on the part of the Court of Appeals to rely on Art. 280 in determining whether an employer-employee relationship exists between respondent Neri and Purefoods.

Permissible job contracting or subcontracting refers to 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.²⁹ In this arrangement, the following conditions must be met: (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 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.³⁰

To support its position that respondent is not its employee, Purefoods relies on the following: (i) the Promotions Agreements³¹ it entered into with D.L. Admark; (ii) Department Order No. 10 (Series of 1997)³² which defines legitimate contracting or subcontracting; and (iii) Escario v. NLRC³³ wherein the Court declared D.L. Admark as a legitimate labor contractor.

On the other hand, early on, Neri and the rest of the complainants admitted that they worked for petitioner through D.L. Admark.³⁴ However, they also averred that they were under the control and supervision of petitioner's employees–salesmen, poultry sales managers, deli supervisors–who give them work orders and to whom they submit weekly inventory reports and monthly competitive sales report. In support of these statements, Neri appended several documents (various Identification Cards, Certification from Rustan's Supermarkets stating that respondent Neri is from Purefoods, Memoranda to respondent Neri written by a supervisor from

Purefoods, letters from Purefoods area sales managers introducing complainants as Purefoods Merchandisers).³⁵ Purefoods, meanwhile, claims that these documents must be taken in the context of the performance of the service contracted out–promotion of its products.³⁶

In the first place, D.L. Admark's status as a legitimate independent contractor has already been established in Escario v. NLRC.³⁷ In the said case, complainants, through D.L. Admark, worked as merchandisers for California Manufacturing Corporation (CMC). They filed a case before the labor arbiter for the regularization of their employment status with CMC, and while the case was pending, D.L. Admark sent termination letters to complainants. The complainants thereafter amended their complaint to include illegal dismissal. The Court considered the following circumstances as tending to establish D.L. Admark's status as a legitimate job contractor:

1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional, advertising, marketing and merchandising activities.

2) The service contract between CMC and D.L. Admark clearly provides that the agreement is for the supply of sales promoting merchandising services rather than one of manpower placement.

3) D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions, marketing and merchandising. It had several merchandising contracts with companies like Purefoods, Corona Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the publication business as evidenced by its magazine the "Phenomenon."

4) It had its own capital assets to carry out its promotion business. It then had current assets amounting to P6 million and is therefore a highly capitalized venture. It had an authorized capital stock of P500,000.00. It owned several motor vehicles and other tools, materials and equipment to service its clients. It paid rentals of P30,020 for the office space it occupied.³⁸

Moreover, applying the four-fold test used in determining employer-employee relationship, the Court found that: the employees therein were selected and hired by D.L. Admark; D.L. Admark paid their salaries, as evidenced by the payroll prepared by D.L. Admark and sample contribution forms; D.L. Admark had the power of dismissal as it admitted that it was the one who terminated the employment of the employees; and finally, it was D.L. Admark who exercised control and supervision over the employees.³⁹

Furthermore, it is evident from the Promotions Agreements entered into by Purefoods that D.L. Admark is a legitimate labor contractor. A sample agreement reads in part:

WHEREAS, The FIRST PARTY is engaged in the general promotion business;

WHEREAS, The SECOND PARTY will launch its "Handog sa Graduates" promotion project;

WHEREAS, The FIRST PARTY has offered its services to the SECOND PARTY, in connection with the said promotion project, and the latter has accepted the said offer;

NOW, THEREFORE, for and in consideration of the foregoing premises, and of the mutual convenience between them, the parties have agreed as follows:

1. The FIRST PARTY shall handle and implement the "Handog sa Graduates" promotion project of the SECOND PARTY, said project to last from February 1, 1992 to July 31, 1992.

2. The FIRST PARTY shall indemnify the SECOND PARTY for any loss or damage to the latter's properties, if such loss or damage is due to the fault or negligence of the FIRST PARTY or its agents or employees.

3. There shall be no employer-employee relationship between the FIRST PARTY or its agents or employees and the SECOND PARTY.

4. In consideration for the services to be rendered by the FIRST PARTY to the SECOND PARTY, the latter shall pay the former the amount of Two Million Six Hundred Fifty Two Thousand pesos only (P2,652,000.00) payable as follows:

x x x⁴⁰

The agreements confirm that D.L. Admark is an independent contractor which Purefoods had engaged to supply general promotion services, and not mere manpower services, to it. The provisions expressly permit D.L. Admark to handle and implement Purefoods' project, and categorically state that there shall be no employer-employee relationship between D.L. Admark's employees and Purefoods. While it may be true that complainants were required to submit regular reports and were introduced as Purefoods merchandisers, these are not enough to establish Purefoods' control over them. Even if the report requirements are somehow considered as control measures, they were imposed only to ensure the effectiveness of the promotion services rendered by D.L. Admark. It would be a rare contract of service that gives untrammelled freedom to the party hired and eschews any intervention whatsoever in his performance of the engagement.⁴¹ Indeed, it would be foolhardy for any company to completely give the reins and totally ignore the operations it has contracted out.

Significantly, the pieces of evidence submitted by Neri do not support her claim of having been a regular employee of Purefoods. We note that two "Statement of Earnings and Deductions"⁴² were issued for the same period, December 1989, and in one "Statement," someone deliberately erased the notation "January 1997," thereby casting doubt on the authenticity of the said documents. Even the identification cards⁴³ presented by Neri are neither binding on Purefoods nor even indicative of her claimed employee status of Purefoods, issued as they were by the supermarkets concerned and not by Purefoods itself. Moreover, the check voucher issued by Purefoods marked "IN PAYMENT OF DL ADMARK DELI ATTENDANTS 12.00 PESOS ADJUSTMENT JAN 30, 1991 TO JUNE 22, 1992,"⁴⁴ signed and received by Neri, is proof that Purefoods never considered Neri as its own employee, but rather as one of D.L. Admark's deli attendants.

We also note that Neri herself admitted in her Sinumpaang Salaysay and in the hearings that she applied with D.L. Admark⁴⁵ and that she worked for Purefoods through D.L. Admark.⁴⁶ Neri was aware from the start that D.L. Admark was her employer and not Purefoods. She had kept her contract with D.L. Admark, and inquired about her employment status with D.L. Admark. It was D.L. Admark, as her employer, which had the final say in, and which actually effected, her termination.

Purefoods argues that the Court of Appeals erred in denying the affidavits it attached to its motion for reconsideration on the ground that these were presented for the first time, and additionally states that the affidavits are just corroboration, clarification and/or explanation of what it had already argued in its previous pleadings. The point is not pivotal.⁴⁷ After all, there is no need for such supporting affidavits. Purefoods had already disputed the authenticity and veracity of the pieces of evidence presented by Neri in the earlier proceedings, plausibly and successfully as it turned out ultimately. Verily, this Court earlier debunked the documents as not sufficient to establish the purported employer-employee relationship.

On to another matter. We agree with Purefoods that it is only Neri who could have been entitled to the avails of the suit, if at all. While there are twelve complainants in the amended complaint, only seven (7) out of the twelve (12) had verified it.⁴⁸ Thereafter, when the case was remanded to the labor arbiter for further proceedings, it was only Neri who verified the memorandum on appeal. It was also only Neri who presented evidence and testified during the hearings conducted by the labor arbiter. This is most evident in Neri's Formal

Offer of Exhibits for Complainant⁴⁹ wherein the only pieces of evidence offered were the position paper, her Sinumpaang Salaysay, her signature, a copy of the Collective Bargaining Agreement, and a computation of her claims. Significantly, all of the exhibits were offered to support Neri's claims only; there was no mention of the other complainants. It being very clear that it was only Neri who had participated in the appeal and presented evidence, the NLRC erred in including the other complainants as prevailing parties in its decision. Otherwise stated, considering that it is only Neri who had appealed the case and participated in the proceedings up to the present petition, it is only she who should be entitled to the avails of this suit, if any should be due.

In view of the foregoing, we hold that Neri is not an employee of Purefoods, but that of D.L. Admark. In the absence of employer-employee relations between Neri and Purefoods, the complaint for illegal dismissal and other monetary claims must fail.

WHEREFORE, the Petition is GRANTED. The Decision and Resolution of the Court of Appeals dated 2 November 2005 and 7 April 2006, respectively, in C.A. G.R. SP No. 65180 are REVERSED

and SET ASIDE. Respondent Neris' complaint docketed as NLRC NCR Case No. 00-06-03149-92 is DISMISSED.

SO ORDERED.

DANTE O. TINGA
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING Associate Justice Chairperson
CONCHITA CARPIO MORALES Associate Justice	PRESBITERO J. VELASCO, JR. Associate Justice
ARTURO D. BRION Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNO
Chief Justice

Footnotes

¹ Rollo, pp. 77-97; Penned by Associate Justice Celia C. Librea-Leagogo, with Associate Justices Renato C. Dacudao and Lucas P. Bersamin, concurring.

² Id. at 100-102.

³ Id. at 126-144.

⁴ Docketed as NLRC NCR Case No. 00-06-03149-92.

⁵ Per complainants' Position Paper; rollo, pp. 175-184.

⁶ NLRC records, Vol. 1, p. 11; Felix Quinsanos, Marciano M. Bane, Emeterio Dizon, Jr., Ronaldo Caduboy, Solores Marange, Jose Alvin Javier, Ferdie Cruz, Isabel Agapulco, Petronila Saculo, Ferdinand Leonardo and Claudine C. Guevarra. Amended Complaint.

⁷ The complaint also asks for the additional relief of full backwages from the time of Neri's dismissal up to the date of actual reinstatement. Amended Complaint; id.

⁸ Id. at 210-219.

⁹ Id. at 222-233.

¹⁰ NLRC Resolution dated 23 June 1995; id. at 409-414.

¹¹ Rollo, pp. 103-111.

¹² Id. at 112-125-a.

¹³ Id. at 126-144.

¹⁴ Resolution dated 22 January 2001; id. at 155.

¹⁵ Id. at 156-170.

¹⁶ Id. at 91.

¹⁷ Id. at 93-94.

¹⁸ Id. at 95

¹⁹ Id. at 96.

²⁰ Id.

²¹ Id. at 172-174.

²² Id. at 100-102.

²³ Id. at 2-76.

²⁴ Id. at 20-21.

²⁵ Atlas Fertilizer Corporation v. NLRC, G.R. No. 120030, 17 June 1997, 273 SCRA 549, 557.

²⁶ Casimiro v. Stern Real Estate, Inc., G.R. No. 162233, 10 March 2006, 484 SCRA 463.

²⁷ Art. 280. Regular and Casual Employment.–The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one (1) year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

²⁸ Coca-Cola Bottlers Phils., Inc. v. NLRC, 366 Phil. 581, 590 (1999).

²⁹ Acevedo v. Advanstar Company, Inc., G.R. No. 157656, 11 November 2005, 474 SCRA 656, 667; See also Section 6 of Department Order No. 10 ( Series of 1997)

³⁰ Department of Labor and Employment, Department Order No. 10, Section 4 (d) (i-iii)).

³¹ Rollo, p. 350-374.

³² Amending the Rules Implementing Books III and VI of the Labor Code as Amended, promulgated on 30 May 1997.

³³ 388 Phil. 929 (2000).

³⁴ Affidavits of respondent and other employees; rollo, pp. 190-197.

³⁵ NLRC records, Vol. 1, pp. 175-187.

³⁶ Rollo, p. 56.

³⁷ Supra note 33.

³⁸ 388 Phil. 929, 939-940 (2000).

³⁹ 388 Phil. 929, 940-941 (2000).

⁴⁰ The other Promotions Agreements are similarly written, except for the name of the project, amount involved and the dates covered.

⁴¹ Insular Life Assurance Co., Ltd. v. NLRC, G.R. No. 84484, 15 November 1989, 179 SCRA 459, 464-465.

⁴² NLRC Records, pp. 605-606.

⁴³ Id. at 608.

⁴⁴ Id. at 607.

⁴⁵ See Neri's testimony during the hearing before the labor arbiter; TSN dated 18 February 1998; NLRC records, Vol. 1, pp. 548-549:

ATTY. SASING: What do you mean yes, did you apply with Purefoods?

WITNESS: No, I did not.

ATTY. SASING : As a matter of fact you applied with what you called an agency?

WITNESS: Yes.

ATTY. SASING: And this agency is what you in your Sinumpaang Salaysay are Admark Agency?

WITNESS: Yes.

ATTY. SASING: And it was with this agency that you submit your vacations and all documents, bonds?

WITNESS: Yes.

.

⁴⁶Rollo, pp. 190-191; In her Sinumpaang Salaysay, Neri stated that:

1. Na ako ay namasukan sa Purefoods Corporation sa pamamagitan ng Admark Agency noong Setyembre 1986 at ang unang naging trabaho ko ay bilang isang Poultry Merchandiser;

⁴⁷ Cansino v. Court of Appeals, 456 Phil. 686 (2003).

⁴⁸ Emeterio Dizon, Jr., Marciano Bane, Lolita Neri, Ronaldo Caloboy, Felix Quinsanos, Claudine Guevarra, and Jose Alvin J. Javier; rollo, p. 184.

⁴⁹ NLRC records, Vol. 1, p. 584.

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