Title

Brotherhood Labor Unity Movement of the Philippines vs. Zamora

Case Decision Date

G.R. No. L-48645 Jan 7, 1987

Workers at SMC's glass factory, dismissed for union activities, were ruled as regular
employees entitled to reinstatement and backwages, affirming employer-employee
relationship.
S CO SO

[ G.R. No. L-48645. January 07, 1987 ]

"BROTHERHOOD" LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO

CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO,
ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINAS, NORBERTO GALANG,
JUANITO NAVARRO, NESTORIO MARCELLANA, TEOFILO B. CACATIAN, RUFO L. EGUIA,
CARLOS SUMOYAN, LAMBERTO RONQUILLO, ANGELITO AMANCIO, DANILO B.
MATIAR, ET AL., PETITIONERS, VS. HON. RONALDO B. ZAMORA, PRESIDENTIAL
ASSISTANT FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT, HON. AMADO G.
INCIONG, UNDERSECRETARY OF LABOR, SAN MIGUEL CORPORATION, GENARO
OLIVES, ENRIQUE CAMAHORT, FEDERICO ONATE, ERNESTO VILLANUEVA, ANTONIO
BOCALING AND GODOFREDO CUETO, RESPONDENTS.

DECISION

GUTIERREZ, JR., J.:

The elemental question in labor law of whether or not an employer-employee relationship

exists between petitioners - members of the "Brotherhood Labor Unit Movement of the
Philippines" (BLUM) and respondent San Miguel Corporation, is the main issue in this
petition. The disputed decision of public respondent Ronaldo Zamora, Presidential
Assistant for Legal Affairs, contains a brief summary of the facts involved:

"1. The records disclose that on July 11, 1969, BLUM filed a complaint with the now defunct
Court of Industrial Relations, charging San Miguel Corporation, and the following officers:
Enrique Camahort, Federico Onate, Feliciano Arceo, Melencio Eugenio, Jr., Ernesto
Villanueva, Antonio Bocaling and Godofredo Cueto of unfair labor practice as set forth in
Section 4 (a), sub-sections (1) and (4) of Republic Act No. 875 and of illegal dismissal. It was
alleged that respondents ordered the individual complainants to disaffiliate from the
complainant union; and that management dismissed the individual complainants when
they insisted on their union membership. "On their part, respondents moved for the
dismissal of the complaint on the grounds that the complainants are not and have never
been employees of respondent company but employees of the independent contractor; that
respondent company has never had control over the means and methods followed by the
independent contractor who enjoyed full authority to hire and control said employees; and
that the individual complainants are barred by estoppel from asserting that they are
employees of respondent company. "While pending with the Court of Industrial Relations
(CIR), pleadings and testimonial and documentary evidences were duly presented,
although the actual hearing was delayed by several postponements. The dispute was taken
over by the National Labor Relations Commission (NLRC) with the decreed abolition of the
CIR and the hearing of the case intransferably commenced on September 8, 1975. "On
February 9, 1976, Labor Arbiter Nestor C. Lim found for complainants which was concurred
in by the NLRC in a decision dated June 28, 1976. The amount of backwages awarded,
however, was reduced by NLRC to the equivalent of one (1) year salary. "On appeal, the
Secretary in a decision dated June 1, 1977, set aside the NLRC ruling, stressing the absence
of an employer-employee relationship as borne out by the records of the case. x x x."

The petitioners strongly argue that there exists an employer-employee relationship

between them and the respondent company and that they were dismissed for unionism, an
act constituting unfair labor practice "for which respondents must be made to answer".

Unrebutted evidence and testimony on record establish that the petitioners are workers
who have been employed at the San Miguel Parola Glass Factory since 1961, averaging
about seven (7) years of service at the time of their termination. They worked as
"cargadores" or "pahinantes" at the SMC Plant loading, unloading, piling or palleting empty
bottles and wooden shells to and from company trucks and warehouses. At times, they
accompanied the company trucks on their delivery routes.

The petitioners first reported for work to Superintendent-in-Charge Camahort. They were
issued gate passes signed by Camahort and were provided by the respondent company
with the tools, equipment and paraphernalia used in the loading, unloading, piling and
hauling operation.

Job orders emanated from Camahort. The orders are then transmitted to an assistant-
officer-in-charge. In turn, the assistant informs the warehousemen and checkers regarding
the same. The latter, thereafter, relays said orders to the capatazes or group leaders who
then give orders to the workers as to where, when and what to load, unload, pile, pallet or
clean.
Work in the glass factory was neither regular nor continuous, depending wholly on the
volume of bottles manufactured to be loaded and unloaded, as well as the business activity
of the company. Work did not necessarily mean a full eight (8) hour day for the petitioners.
However, work, at times, exceeded the eight (8) hour day and necessitated work on Sundays
and holidays. For this, they were neither paid overtime nor compensation for work on
Sundays and holidays.

Petitioners were paid every ten (10) days on a piece rate basis, that is, according to the
number of cartons and wooden shells they were able to load, unload, or pile. The group
leader notes down the number or volume of work that each individual worker has
accomplished. This is then made the basis of a report or statement which is compared with
the notes of the checker and warehousemen as to whether or not they tally. Final approval
of report is by officer-in-charge Camahort. The pay check is given to the group leaders for
encashment, distribution, and payment to the petitioners in accordance with payrolls
prepared by said leaders. From the total earnings of the group, the group leader gets a
participation or share of ten (10%) percent plus an additional amount from the earnings of
each individual.

The petitioners worked exclusively at the SMC plant, never having been assigned to other
companies or departments of SMC plant, even when the volume of work was at its
minimum. When any of the glass furnaces suffered a breakdown, making a shutdown
necessary, the petitioners' work was temporarily suspended. Thereafter, the petitioners
would return to work at the glass plant.

Sometime in January, 1969, the petitioner workers numbering one hundred and forty (140)
organized and affiliated themselves with the petitioner union and engaged in union
activities. Believing themselves entitled to overtime and holiday pay, the petitioners
pressed management, airing other grievances such as being paid below the minimum wage
law, in human treatment, being forced to borrow at usurious rates of interest and to buy
raffle tickets, coerced by withholding their salaries, and salary deductions made without
their consent. However, their gripes and grievances were not heeded by the respondents.

On February 6, 1969, the petitioner union filed a notice of strike with the Bureau of Labor
Relations in connection with the dismissal of some of its members who were allegedly
castigated for their union membership and warned that should they persist in continuing
with their union activities they would be dismissed from their jobs. Several conciliation
conferences were scheduled in order to thresh out their differences. On February 12, 1969,
union member Rogelio Dipad was dismissed from work. At the scheduled conference on
February 19, 1969, the complainant union through its officers headed by National President
Artemio Portugal, Sr., presented a letter to the respondent company containing proposals
and/or labor demands together with a request for recognition and collective bargaining.

San Miguel refused to bargain with the petitioner union alleging that the workers are not
their employees.

On February 20, 1969, all the petitioners were dismissed from their jobs and, thereafter,
denied entrance to respondent company's glass factory despite their regularly reporting for
work. A complaint for illegal dismissal and unfair labor practice was filed by the petitioners.

The case reaches us now with the same issues to be resolved as when it had begun.

The question of whether an employer-employee relationship exists in a certain situation

continues to bedevil the courts. Some businessmen try to avoid the bringing about of an
employer-employee relationship in their enterprises because that judidical relation spawns
obligations connected with workmen's compensation, social security, medicare, minimum
wage, termination pay, and unionism. (Mafinco Trading Corporation v. Ople, 70 SCRA 139).

In determining the existence of an employer-employee relationship, the elements that are

generally considered are the following: (a) the selection and engagement of the employee;
(b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to
control the employee with respect to the means and methods by which the work is to be
accomplished. It is the so-called "control test" that is the most important element
(Investment Planning Corp. of the Phils. v. The Social Security System, 21 SCRA 924;
Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople, 131 SCRA 72).

Applying the above criteria, the evidence strongly indicates the existence of an employer-
employee relationship between petitioner workers and respondent San Miguel
Corporation. The respondent asserts that the petitioners are employees of the Guaranteed
Labor Contractor, an independent labor contracting firm.

The facts and evidence on record negate respondent SMC's claim.

The existence of an independent contractor relationship is generally established by the

following criteria: "whether or not the contractor is carrying on an independent business;
the nature and extent of the work; the skill required; the term and duration of the
relationship; the right to assign the performance of a specified piece of work; the control
and supervision of the work to another; the employer's power with respect to the hiring,
firing and payment of the contractor's workers; the control of the premises; the duty to
supply the premises tools, appliances, materials and labor; and the mode, manner and
terms of payment (56 CJS Master and Servant, Sec. 3(2), 46; See also 27 AM. Jur.
Independent Contractor, Sec. 5, 485 and Anne., 75 ALR 7260727).

None of the above criteria exists in the case at bar.

Highly unusual and suspect is the absence of a written contract to specify the performance
of a specified piece of work, the nature and extent of the work and the term and duration of
the relationship. The records fail to show that a large commercial outfit, such as the San
Miguel Corporation, entered into mere oral agreements of employment or labor contracting
where the same would involve considerable expenses and dealings with a large number of
workers over a long period of time. Despite respondent company's allegations not an iota of
evidence was offered to prove the same or its particulars. Such failure makes respondent
SMC's stand subject to serious doubts.

Uncontroverted is the fact that for an average of seven (7) years, each of the petitioners had
worked continuously and exclusively for the respondent company's shipping and
warehousing department. Considering the length of time that the petitioners have worked
with the respondent company, there is justification to conclude that they were engaged to
perform activities necessary or desirable in the usual business or trade of the respondent,
and the petitioners are, therefore regular employees (Phil. Fishing Boat Officers and
Engineers Union v. Court of Industrial Relations, 112 SCRA 159 and RJL Martinez Fishing
Corporation v. National Labor Relations Commission, 127 SCRA 454).

As we have found in RJL Martinez Fishing Corporation v. National Labor Relations

Commission, (supra):

"x x x [T]he employer-employee relationship between the parties herein is not co-
terminous with each loading and unloading job. As earlier shown, respondents are engaged
in the business of fishing. For this purpose, they have a fleet of fishing vessels. Under this
situation, respondents' activity of catching fish is a continuous process and could hardly be
considered as seasonal in nature. So that the activities performed by herein complainants,
i.e. unloading the catch of tuna fish from respondents' vessels and then loading the same to
refrigerated vans, are necessary or desirable in the business of respondents. This
circumstance makes the employment of complainants a regular one, in the sense that it
does not depend on any specific project or seasonable activity. (NLRC Decision, p. 94,
Rollo)."

so is it with petitioners in the case at bar. In fact, despite past shutdowns of the glass plant
for repairs, the petitioners, thereafter, promptly returned to their jobs, never having been
replaced, or assigned elsewhere until the present controversy arose. The term of the
petitioners' employment appears indefinite. The Continuity and habituality of petitioners'
work bolsters their claim of employee status vis-a-vis respondent company.

Even under the assumption that a contract of employment had indeed been executed
between respondent SMC and the alleged labor contractor, respondent's case will,
nevertheless, fail.

Section 8, Rule VIII, Book III of the Implementing Rules of the Labor Code provides:

"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 "
(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."

We find that Guaranteed and Reliable Labor contractors have neither substantial capital nor
investment to qualify as an independent contractor under the law. The premises, tools,
equipment and paraphernalia used by the petitioners in their jobs are admittedly all
supplied by respondent company. It is only the manpower or labor force which the alleged
contractors supply, suggesting the existence of a "labor-only" contracting scheme
prohibited by law (Article 106, 109 of the Labor Code; Section 9(b), Rule VIII, Book III,
Implementing Rules and Regulations of the Labor Code). In fact, even the alleged
contractor's office, which consists of a space at respondent company's warehouse, table,
chair, typewriter and cabinet, are provided for by respondent SMC. It is therefore clear that
the alleged contractors have no capital outlay involved in the conduct of its business, in the
maintenance thereof or in the payment of its workers' salaries.

The payment of the workers' wages is a critical factor in determining the actuality of an
employer-employee relationship whether between respondent company and petitioners or
between the alleged independent contractor and petitioners. It is important to emphasize
that in a truly independent contractor-contractee relationship, the fees are paid directly to
the manpower agency in lump sum without indicating or implying that the basis of such
lump sum is the salary per worker multiplied by the number of workers assigned to the
company. This is the rule in Social Security System v. Court of Appeals (39 SCRA 629, 635).

The alleged independent contractors in the case at bar were paid a lump sum representing
only the salaries the workers were entitled to, arrived at by adding the salaries of each
worker which depend on the volume of work they had accomplished individually. These
are based on payrolls, reports or statements prepared by the workers' group leader,
warehousemen and checkers, where they note down the number of cartons, wooden shells
and bottles each worker was able to load, unload, pile or pallet and see whether they tally.
The amount paid by respondent company to the alleged independent contractor considers
no business expenses or capital outlay of the latter. Nor is the profit or gain of the alleged
contractor in the conduct of its business provided for as an amount over and above the
workers' wages. Instead, the alleged contractor receives a percentage from the total
earnings of all the workers plus an additional amount corresponding to a percentage of the
earnings of each individual worker, which, perhaps, accounts for the petitioners' charge of
unauthorized deductions from their salaries by the respondents.

Anent the argument that the petitioners are not employees as they worked on piece basis,
we merely have to cite our rulings in Dy Keh Beng v. International Labor and Marine Union
of the Philippines (90 SCRA 161), as follows:

"'[C]ircumstances must be construed to determine indeed if payment by the piece is just a

method of compensation and does not define the essence of the relation. Units of time ...
and units of work are in establishments like respondent (sic) just yardsticks whereby to
determine rate of compensation, to be applied whenever agreed upon. We cannot construe
payment by the piece where work is done in such an establishment so as to put the worker
completely at liberty to turn him out and take in another at pleasure.'"

Article 106 of the Labor Code provides the legal effect of a labor-only contracting scheme, to
wit:

"x x x the person or intermediary shall be considered merely as an agent 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."

Firmly establishing respondent SMC's role as employer is the control exercised by it over
the petitioners that is, control in the means and methods/manner by which petitioners are
to go about their work, as well as in disciplinary measures imposed by it.

Because of the nature of the petitioners' work as cargadores or pahinantes, supervision as

to the means and manner of performing the same is practically nil. For, how many ways are
there to load and unload bottles and wooden shells? The mere concern of both respondent
SMC and the alleged contractor is that the job of having the bottles and wooden shells
brought to and from the warehouse be done. More evident and pronounced is respondent
company's right to control in the discipline of petitioners. Documentary evidence
presented by the petitioners establish respondent SMC's right to impose disciplinary
measures for violations or infractions of its rules and regulations as well as its right to
recommend transfers and dismissals of the piece workers. The inter-office memoranda
submitted in evidence prove the company's control over the petitioners. That respondent
SMC has the power to recommend penalties or dismissal of the piece workers, even as to
Abner Bungay who is alleged by SMC to be a representative of the alleged labor contractor,
is the strongest indication of respondent company's right of control over the petitioners as
direct employer. There is no evidence to show that the alleged labor contractor had such
right of control or much less had been there to supervise or deal with the petitioners.

The petitioners were dismissed allegedly because of the shutdown of the glass
manufacturing plant. Respondent company would have us believe that this was a case of
retrenchment due to the closure or cessation of operations of the establishment or
undertaking. But such is not the case here. The respondent's shutdown was merely
temporary, one of its furnaces needing repair. Operations continued after such repairs, but
the petitioners had already been refused entry to the premises and dismissed from
respondent's service. New workers manned their positions. It is apparent that the closure
of respondent's warehouse was merely a ploy to get rid of the petitioners, who were then
agitating the respondent company for benefits, reforms and collective bargaining as a
union. There is no showing that petitioners had been remiss in their obligations and
inefficient in their jos to warrant their separation.

As to the charge of unfair labor practice because of SMC's refusal to bargain with the
petitioners, it is clear that the respondent company had an existing collective bargaining
agreement with the IBM union which is the recognized collective bargaining representative
at the respondent's glass plant.

There being a recognized bargaining representative of all employees at the company's glass
plant, the petitioners cannot merely form a union and demand bargaining. The Labor Code
provides the proper procedure for the recognition of unions as sole bargaining
representatives. This must be followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED. The San Miguel
Corporation is hereby ordered to REINSTATE petitioners, with three (3) years backwages.
However, where reinstatement is no longer possible, the respondent SMC is ordered to pay
the petitioners separation pay equivalent to one (1) month pay for every year of service.

SO ORDERED.

Feria, (Chairman), Fernan, Alampay, and Paras, JJ., concur.