PBCOM v NLRC [G.R. No.
L-66598, December 19, 1986]
Petitioners: PHILIPPINE BANK OF COMMUNICATIONS
Respondents: THE NATIONAL LABOR RELATIONS COMMISSION, HONORABLE ARBITER TEODORICO L.
DOGELIO, and RICARDO ORPIADA
● PBCOM and the Corporate Executive Search Inc. (CESI) entered into a letter agreement
○ CESI undertook to provide "Tempo[rary] Services" to PBCOM consisting of the "temporary
services" of 11 messengers
○ Contract period: "from January 1976 — ."
○ PBCOM undertook to pay a "daily service rate of P18," on a per person basis
○ Attached was a list of messengers assigned to PBCOM
■ Private respondent Ricardo Orpiada was in this list
● PBCOM requested CESI to withdraw Orpiada's assignment because his services "were no longer
needed."
● Orpiada instituted a complaint against PBCOM for illegal dismissal and money claims
● The Regional Director dismissed his complaint for failure to show the existence of an employer-
employee relationship between himself and PBCOM
● Despite this order, Orpiada’s complaint was certified for compulsory arbitration, where CESI was
brought in as an additional respondent by PBCOM
● PBCOM & CESI: CESI is Orpiada’s employer
● LA & NLRC: PBCOM is Orpiada’s employer
Issue #1 in W/N an employer-employee Ruling: Yes. CESI was engaged in labor only
relationship existed between PBCOM and Orpiada contracting, as such, Orpiada is PBCOM’s
employee.
• The extent to which the parties were successful in realizing their intent [to refrain from
constituting an employer- employee relationship between the bank and the persons assigned
or seconded to it] is … dependent upon applicable law and not merely upon the terms of their
contract.
[SC cited the 4 Fold Test]
• As applied to the case:
• Selection
• CESI had hired Orpiada from the outside world precisely for the purpose of assigning or
seconding him to the bank.
• Wages
• the bank remitted to CESI amounts corresponding to the "daily service rate" of Orpiada and the
others similarly assigned by CESI to the bank, and CESI paid to Orpiada and the others the wages
pertaining to them.
• it seems safe to assume that CESI had required some amount in excess of the wages paid by
CESI to Orpiada and the others to cover its own overhead expenses and provide some
contribution to profit.
PBCOM v NLRC [G.R. No. L-66598, December 19, 1986]
• Orpiada was listed in the payroll of CESI, with CESI deducting amounts representing his Medicare
and Social Security System premiums.
• Dismissal
• it appears clear that Orpiada was hired by CESI specifically for assignment with the bank and
that upon his withdrawal from such assignment upon request of the bank, Orpiada's employment
with CESI was also severed, until some other client of CESI showed up in the horizon to which
Orpiada could once more be assigned.
• Control
• Orpiada performed his functions within the bank's premises, and not within the office premises
of CESI. As such, Orpiada must have been subject to at least the same control and supervision
that the bank exercises over any other person physically within its premises and rendering
services to or for the bank, in other words, any employee or staff member of the bank.
• It seems unreasonable to suppose that the bank would have allowed Orpiada and the other
persons assigned to the bank by CESI to remain within the bank's premises and there render
services to the bank, without subjecting them to a substantial measure of control and
supervision, whether in respect of the manner in which they discharged their functions, or in
respect of the end results of their functions or activities, or both.
• Application of the above factors in the specific context of this case appears to yield mixed
results
o The second ("payment of wages") and third ("power of dismissal") factors suggest that
[there is an employer-employee relationship between CESI and Orpiada]
o The first ("selection and engagement") and fourth ("control of employee's conduct")
factors indicate that some direct relationship did exist between Orpiada and the bank and
that such relationship may be assimilated to employment.
Relationship between PBCOM and CESI
• GR: the employees of the contractor remain the contractor's employees and his alone.
• EXP: when a contractor fails to pay the wages of his employees in accordance with the Labor
Code, the employer who contracted out the job to the contractor becomes jointly and severally
liable with his contractor to the employees of the latter "to the extent of the work performed under
the contract" as if such employer were the employer of the contractor's employees.
o The law itself, in other words, establishes an employer-employee relationship between
the employer and the job contractor's employees for a limited purpose, i.e., in order to
ensure that the latter get paid the wages due to them.
• A similar situation obtains where there is "labor only" contracting.
o The employer is made by the statute responsible to the employees of the "labor only"
contractor as if such employees had been directly employed by the employer.
o The law in effect holds both the employer and the "labor-only" contractor responsible to
the latter's employees for the more effective safeguarding of the employees' rights under
the Labor Code.
PBCOM & CESI: CESI is not properly regarded as a "labor-only" contractor
• Ground: CESI is possessed of substantial capital or investment in the form of office equipment,
tools and trained service personnel.
PBCOM v NLRC [G.R. No. L-66598, December 19, 1986]
• Rule:
Section 9 of Rule VIII of Book III entitled "Conditions of Employment," of the Omnibus Rules
Implementing the Labor Code:
• Labor-only contracting. — (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:
• xxx
• (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
workers are habitually employed.
• (b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the same manner and extent as
if the latter were directly employed by him.
• xxx
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 own 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
o (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. (Emphasis supplied)
• The definition of "labor-only" contracting in Rule VIII, Book III of the Implementing Rules must be
read in conjunction with the definition of job contracting given in Section 8 of the same Rules.
• The undertaking given by CESI … was to provide its client — the bank — with a certain number of
persons able to carry out the work of messengers.
o Messengerial work — the delivery of documents to designated persons whether within
or without the bank premises — is of course directly related to the day-to-day operations
of the bank.
• Section 9(2) … does not require for its applicability that the petitioner must be engaged in the
delivery of items as a distinct and separate line of business.
• CESI is not a parcel delivery company as its name indicates, it is a recruitment and placement
corporation placing bodies, as it were, in different client companies for longer or shorter periods
of time
There is nothing illegal about hiring persons to carry out "a specific project or undertaking the completion
or termination of which [was] determined at the time of the engagement of [the] employee, or where the
work or service to be performed is seasonal in nature and the employment is for the duration of the
season" (Article 281, Labor Code).
• The letter agreement itself, however, merely required CESI to furnish the bank with eleven (11)
messengers for "temporary" services for an indefinite or unstated period of time.
• Ricardo Orpiada himself was assigned [for] a period of about sixteen months.
PBCOM v NLRC [G.R. No. L-66598, December 19, 1986]
o Under the Labor Code, however, any employee who has rendered at least one year of
service, whether such service is continuous or not, shall be considered a regular
employee (Article 281, Second paragraph).
• Assuming, therefore, that Orpiada could properly be regarded as a casual (as distinguished from
a regular) employee of the bank, he became entitled to be regarded as a regular employee of
the bank as soon as he had completed one year of service to the bank.
in the circumstances of this case, CESI was engaged in "labor- only" contracting vis-a-vis PBCOM and
in respect of Ricardo Orpiada. PBCOM is liable to Orpiada as if Orpiada had been directly employed not
only by CESI but also by the bank
