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VOL. 224, JULY 23, 1993 717
Neri vs. National Labor Relations Commission
*
G.R. Nos. 97008-09. July 23, 1993.
VIRGINIA G. NERI and JOSE CABELIN, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION FAR
EAST BANK & TRUST COMPANY (FEBTC) and
BUILDING CARE CORPORATION, respondents.
Labor Law; Building Care Corporation is a highly capitalized
venture and cannot be deemed engaged in “labor-only” contracting.
—Respondent BCC need not prove that it made investments in
the form of tools, equipment, machineries, work premises, among
others, because it has established that it has sufficient
capitalization. The Labor Arbiter and the NLRC both determined
that BCC had a capital stock of P1 million fully subscribed and
paid for. BCC is therefore a highly capitalized venture and cannot
be deemed engaged in “labor-only” contracting.
Same; Same; Factors to be considered in “labor-only”
contracting.—It is well-settled that there is “labor-only”
contracting where: (a) the person supplying workers to an
employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among
others; and, (b) the workers recruited and placed by such person
are performing activities which are directly related to the
principal business of the employer.
Same; Same; Same; BCC cannot be considered a “labor-only”
contractor because it has substantial capital.—Based on the
foregoing, BCC cannot be considered a “labor-only” contractor
because it has substantial capital. While there may be no evidence
that it has investment in the form of tools, equipment,
machineries, work premises, among others, it is enough that it
has substantial capital, as was established before the Labor
Arbiter as well as the NLRC. In other words, the law does not
require both substantial capital and investment in the form of
tools, equipment, machineries, etc. This is clear from the use of
the conjunction “or”.
Same; Same; Same; While the services may be considered
directly related to the principal business of the employer,
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nevertheless, they are not necessary in the conduct of the principal
business of the employer.—Be that as it may, the Court has
already taken judicial notice of the general
_______________
* FIRST DIVISION.
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718 SUPREME COURT REPORTS ANNOTATED
Neri vs. National Labor Relations Commission
practice adopted in several government and private institutions
and industries of hiring independent contractors to perform
special services. These services range from janitorial, security and
even technical or other specific services such as those performed
by petitioners Neri and Cabelin. While these services may be
considered directly related to the principal business of the
employer, nevertheless, they are not necessary in the conduct of
the principal business of the employer.
Same; Same; Same; The status of BCC as an independent
contractor previously confirmed by the Court in Associated Labor
Unions-TUCP v. National Labor Relations Commission.—In fact,
the status of BCC as an independent contractor was previously
confirmed by this Court in Associated Labor Unions-TUCP v.
National Labor Relations Commission.
Same; Same; Same; Same; Under the “right of control” test,
petitioners must still be considered employees of BCC.—Even
assuming ex argumenti that petitioners were performing activities
directly related to the principal business of the bank, under the
“right of control” test they must still be considered employees of
BCC.
PETITION for certiorari of the decision of the National
Labor Relations Commission.
The facts are stated in the opinion of the Court.
R.L. Salcedo & Improso Law Office for petitioners.
Bengzon, Zarraga, Narciso, Cudala, Pecson, Bengzon
& Jimenez for Bldg. Care Corp.
Bautista, Picazo, Buyco, Tan & Fider for respondent
FEBTC.
BELLOSILLO, J.:
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Respondents are sued by two employees of Building Care
Corporation, which provides janitorial and other specific
services to various firms, to compel Far East Bank and
Trust Company to recognize them as its regular employees
and be paid the same wages which its employees receive.
Building Care Corporation (BCC, for brevity), in the
proceedings below, established that it had substantial
capitalization of P1 Million or a stockholders equity of P1.5
Million. Thus the Labor Arbiter ruled that BCC was only
job contracting and that
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Neri vs. National Labor Relations Commission
consequently its employees were not employees of Far East
Bank and Trust Company (FEBTC, for brevity). On appeal,
this factual finding was affirmed by respondent National
Labor Relations Commission (NLRC, for brevity).
Nevertheless, petitioners insist before us that BCC is
engaged in “labor-only” contracting hence, they conclude,
they are employees of respondent FEBTC.
Petitioners Virginia G. Neri and Jose Cabelin applied for
positions with, and were hired by, respondent BCC, a
corporation engaged in providing technical, maintenance,
engineering, housekeeping, security and other specific
services to its clientele. They were assigned to work in the
Cagayan de Oro City Branch of respondent FEBTC on 1
May 1979 and 1 August 1980, respectively, Neri as
radio/telex operator and Cabelin as janitor, before being
promoted to messenger on 1 April 1989.
On 28 June 1989, petitioners instituted complaints
against FEBTC and BCC before Regional Arbitration
Branch No. 10 of the Department of Labor and
Employment to compel the bank to accept them as regular
employees and for it to pay the differential between the
wages being paid them by BCC and those received by
FEBTC employees with similar length of service.
On 16 November 1989, the Labor 1
Arbiter dismissed the
complaint for lack of merit. Respondent BCC was
considered an independent contractor because it proved it
had substantial capital. Thus, petitioners were held to be
regular employees of BCC, not FEBTC. The dismissal was
appealed to NLRC which 2
on 28 September 1990 affirmed
the decision on appeal. On 22 October
3
1990, NLRC denied
reconsideration of its affirmance, prompting petitioners to
seek redress from this Court.
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Petitioners vehemently contend that BCC is engaged in
“labor-only” contracting because it failed to adduce
evidence purporting to show that it invested in the form of
tools, equipment, machineries, work premises and other
materials which are necessary in the conduct of its
business. Moreover, petitioners argue that they perform
duties which are directly related to the principal business
or operation of FEBTC. If the definition of “labor-
_______________
1 Annex “7”, Petition; Rollo, pp. 38-55.
2 Annex “5”, Petition; Rollo, pp. 17-25.
3 Annex “9”, Petition; Rollo, pp. 62-64.
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720 SUPREME COURT REPORTS ANNOTATED
Neri vs. National Labor Relations Commission
4
only” contracting
5
is to be read in conjunction with job
contracting, then the only logical conclusion is that BCC is
a “labor-only” contractor. Consequently, they must be
deemed employees of respondent bank by operation of law
since BCC is merely an agent of FEBTC following the
doctrine laid down in Philippine Bank of6 Communications
v. National Labor Relations Commission where we ruled
that where “labor-only” contracting exists, the Labor Code
itself establishes an employer-employee relationship
between the employer and the employees of the “labor-only”
contractor; hence, FEBTC should be considered the
employer of petitioners who are deemed its employees
through its agent, “labor-only” contractor BCC.
We cannot sustain the petition.
Respondent BCC need not prove that it made
investments in the form of tools, equipment, machineries,
work premises, among others, because it has established
that it has sufficient capitalization. The Labor Arbiter and
the NLRC both determined that BCC had7 a capital stock of
P1 million fully subscribed and paid for. BCC is therefore
a highly capitalized venture and cannot be
_______________
4 Sec. 9. Labor-only contracting.—Any person who undertakes to supply
workers to an employer shall be deemed to be engaged in labor-only
contracting where such person: (1) Does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises
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and other materials; and (2) The workers recruited and placed by such
person are performing activities which are directly related to the principal
business or operations of the employer in which the workers are
habitually employed (Rule VIII, Book III, Implementing Rules of the
Labor Code).
5 Sec 8. Job contracting.—There is job-contracting permissible under
the Code if the following conditions are met: (1) The contractor carries on
an 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 the work except as to the
results thereof; and (2) The contractor has substantial capital or
investment in the form of tools, equipment, machineries, work premises
and other materials which are necessary in the conduct of his business.
6 G.R. No. 66598, 19 December 1986, 146 SCRA 347.
7 NLRC Resolution, 28 September 1990, p. 15; Rollo, p. 53, and Labor
Arbiter Decision, 16 November 1989, p. 7; Rollo, p. 24.
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VOL. 224, JULY 23, 1993 721
Neri vs. National Labor Relations Commission
deemed engaged in “labor-only” contracting.
It is well-settled that there is “labor-only” contracting
where: (a) the person supplying workers to an employer
does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises, among
others; and, (b) the workers recruited and placed by such
person are performing activities which are 8
directly related
to the principal business of the employer.
Article 106 of the Labor Code defines “labor-only”
contracting thus—
Art. 106. Contractor or subcontractor.—x x x x There is “labor-
only” contracting where the person supplying workers to an
employer does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises, among
others, and the workers recruited by such persons are performing
activities which are directly related to the principal business of
such employer x x x x (italics supplied).
Based on the foregoing, BCC cannot be considered a “labor-
only” contractor because it has substantial capital. While
there may be no evidence that it has investment in the
form of tools, equipment, machineries, work premises,
among others, it is enough that it has substantial capital,
as was established before the Labor Arbiter as well as the
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NLRC. In other words, the law does not require both
substantial capital and investment in the form of tools,
equipment, machineries, etc. This is clear from the use of
the conjunction “or”. If the intention was to require the
contractor to prove that he has both capital and the
requisite investment, then the conjunction “and” should
have been used. But, having established that it has
substantial capital, it was no longer necessary for BCC to
further adduce evidence to prove that it does not fall within
the purview of “labor-only” contracting. There is even no
need for it to refute petitioners’ contention that the
activities they perform are directly related to the principal
business of respondent bank.
Be that as it may, the Court has already taken judicial
notice
_______________
8 Baguio v. National Labor Relations Commission, G.R. Nos. 79004-08,
4 October 1991, 202 SCRA 465.
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722 SUPREME COURT REPORTS ANNOTATED
Neri vs. National Labor Relations Commission
of the general practice adopted in several government and
private institutions and industries of hiring9
independent
contractors to perform 10
special 11
services. These services
range from janitorial, security and even technical or
other specific services such as those performed by
petitioners Neri and Cabelin. While these services may be
considered12 directly related to the principal business of the
employer, nevertheless, they are not necessary in the
conduct of the principal business of the employer.
In fact, the status of BCC as an independent contractor
was previously confirmed by this Court in Associated Labor 13
Unions-TUCP v. National Labor Relations Commission,
where we held thus—
The public respondent ruled that the complainants are not
employees of the bank but of the company contracted to serve the
bank. Building Care Corporation is a big firm which services,
among others, a university, an international bank, a big local
bank, a hospital center, government agencies, etc. It is a qualified
independent contractor. The public respondent correctly ruled
against petitioner’s contentions x x x x (Italics supplied).
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Even assuming ex argumenti that petitioners were
performing activities directly related to the principal
business of the bank, under the “right of control” test they
must still be considered employees of BCC. In the case of
petitioner Neri, it is admitted that FEBTC issued a job
description which detailed her functions as a radio/telex
operator. However, a cursory reading of the job description
shows that what was sought to be controlled
_______________
9 See Kimberly Independent Labor Union for Solidarity, Activism and
Nationalism-Organized Labor Association v. Drilon, G.R. No. 78791, 9
May 1990, 185 SCRA 191.
10 Rhone-Poulenc Agrochemicals Philippines, Inc. v. National Labor
Relations Commission, G.R. Nos. 102633-35, 19 January 1993.
11 Shipside, Inc. v. National Labor Relations Commission, G.R. No.
50358, 2 November 1982, 118 SCRA 99.
12 See Guarin v. National Labor Relations Commission, G.R. No. 86010,
3 October 1989, 178 SCRA 267.
13 G.R. No. 101784, 21 October 1991, Third Division, Minute
Resolution.
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VOL. 224, JULY 23, 1993 723
Neri vs. National Labor Relations Commission
by FEBTC was actually the end-result of the task, e.g., that
the daily incoming and outgoing telegraphic transfer of
funds received and relayed by her, respectively, tallies with
that of the register. The guidelines were laid down merely
to ensure that the desired end-result was achieved. It did
not, however, tell Neri how the radio/telex
14
machine should
be operated. In the Shipside case. was ruled—
x x x x If in the course of private respondents’ work (referring to
the workers), SHIPSIDE occasionally issued instructions to them,
that alone does not in the least detract from the fact that only
STEVE-DORES is the employer of the private respondents, for in
legal contemplation, such instructions carry no more weight than
mere requests, the privity of contract being between SHIPSIDE
and STEVEDORES x x x x
Besides, petitioners do not deny that they were selected
and hired by BCC before being assigned to work in the
Cagayan de Oro Branch of FEBTC. BCC likewise
acknowledges that petitioners are its employees. The
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record is replete with evidence disclosing that BCC
maintained supervision and control over petitioners
through its Housekeeping and Special Services Division:
petitioners reported for work wearing the prescribed
uniform of BCC; leaves of absence were filed directly
15
with
BCC; and, salaries were drawn only from BCC.
As a matter of fact, Neri even secured a certification
from BCC on 16 May 1986 that she was employed by the
latter. On the other hand, on 24 May 1988, Cabelin filed a
complaint for underpayment of wages, non-integration of
salary adjustments mandated by Wage Orders 16
Nos. 5 & 6
and R.A. 6640 as well as for illegal deduction against BCC
alone which was provisionally dismissed on 19 August 1988
upon Cabelin’s
17
manifestation that his money claim was
negligible.
More importantly, under the terms and conditions of the
________________
14 See Note 11 at p. 106.
15 NLRC Resolution, 28 September 1990, p. 15; Rollo, p. 53, and Labor
Arbiter Decision, 16 November 1989, p. 7; Rollo, p. 24.
16 Solicitor General’s Comment, p. 6; Rollo, p. 231.
17 Id.
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Neri vs. National Labor Relations Commission
contract, it was BCC alone which had the power to reassign
petitioners. Their deployment to FEBTC was not subject to
the bank’s acceptance. Cabelin was promoted to messenger
because the FEBTC branch manager promised BCC that
two (2) additional janitors would be hired from the 18
company if the promotion was to be effected.
Furthermore, BCC was to be paid in lump sum unlike in 19
the situation in Philippine Bank of Communications
where the contractor, CESI, was to be paid at a daily rate
on a per person basis. And, the contract therein stipulated
that the CESI was merely to provide manpower that would
render temporary services. In the case at bar, Neri and
Cabelin were to perform specific special services.
Consequently, petitioners cannot be held to be employees of
FEBTC as BCC “carries an independent business” and
undertakes the performance of its contract with various
clients according to its “own manner and method, free from
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the control and supervision” of its20
principals in all matters
“except as to the results thereof.
Indeed, the facts in Philippine Bank of Communications
do not square with those of the instant case. Therein, the
Court ruled that CESI was a “labor-only” contractor
because upholding the contract between the contractor and
the bank would in effect permit employers to avoid the
necessity of hiring regular or permanent employees and
would enable them to keep their employees indefinitely on
a temporary or casual basis, thus denying them security of
tenure in their jobs. This of course violates the Labor Code.
BCC has not committed any violation. Also, the former case
was for illegal dismissal; this case, on the other hand, is for
conversion of employment status so that petitioners can
receive the same salary being given to regular employees of
FEBTC. But, as herein determined, petitioners are not
regular employees of FEBTC but of BCC. At any rate, the
finding that BCC is a qualified independent contractor
precludes us from applying the Philippine Bank of
Communications doctrine to the instant petition.
__________________
18 Id., p. 7, citing Letter, Annex “7-A”, Records, p. 241.
19 See Note 6.
20 Sec. 8, Rule VIII, Book III, Implementing Rules of the Labor Code.
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People vs. Abordo
The determination of employer-employee
21
relationship
involves factual findings. Absent any grave abuse of
discretion, and we find none in the case before us, we are
bound by the findings of the Labor Arbiter as affirmed by
respondent NLRC.
IN VIEW OF THE FOREGOING, the Petition for
Certiorari is DISMISSED.
SO ORDERED.
Cruz (Chairman), Griño-Aquino, Davide, Jr. and
Quiason, JJ., concur.
Petition dismissed.
Note.—The determining factor of the status of
complainantpetitioner or any worker is the nature of the
work performed by the latter and the place where he
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performed his assignment (Magante vs. National Labor
Relations Commission, 185 SCRA 21).
——o0o——
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