**Facts:** Dole Philippines, Inc. (Petitioner) engaged in a Service Contract with Cannery Multi-Purpose Cooperative (CAMPCO), which was deemed a labor-only contractor by the Department of Labor and Employment (DOLE). The contract, amounting to Php 220,000, outlined that CAMPCO would assist Dole in its operations and perform odd jobs as needed. Despite the stated independence in the contract, the reality of the arrangement showed signs of labor-only contracting, notably CAMPCO’s lack of substantial capital or investment and its workers performing duties directly related to Dole’s principal business. This setup prompted an investigation by DOLE after a resolution from the Sangguniang Bayan of Polomolok, South Cotabato, pointing towards deteriorating work conditions and the use of cooperatives for contracting work. DOLE’s Task Force found CAMPCO to be a labor-only contractor. Despite orders issued by DOLE’s Regional Director and subsequently affirmed by DOLE’s Undersecretary to cease labor-only contracting activities, Dole and CAMPCO continued their relationship. Aggrieved CAMPCO members, led by Medel Esteva, filed a complaint with the National Labor Relations Commission (NLRC) for illegal dismissal, seeking regularization and other claims. The labor arbiter ruled in favor of Dole, but upon review, the Court of Appeals reversed the decision, recognizing CAMPCO as a labor-only contractor and deeming Dole the actual employer thus holding it responsible for illegal dismissal and ordering reinstatement and back wages for affected workers.
**Issues:**
1. Whether CAMPCO engaged in labor-only contracting thereby making Dole Philippines, Inc. the actual employer of the respondents.
2. Whether the respondents are considered regular employees of Dole Philippines, Inc.
3. Whether the respondents were illegally dismissed.
4. The legal effect of DOLE’s orders declaring CAMPCO a labor-only contractor.
**Court’s Decision:** The Supreme Court upheld the Court of Appeals’ decision declaring that CAMPCO was engaged in labor-only contracting, making Dole the actual employer. It emphasized that CAMPCO lacked substantial capital and investment and its members were performing tasks directly related to Dole’s principal business. This situation categorizes CAMPCO’s members, including the respondents, as regular employees of Dole, entitled to security of tenure. The Court found that placing some respondents on “stay home status” and not providing them work for more than six months constituted constructive and illegal dismissal.
**Doctrine:** In cases of labor-only contracting, where the contractor has no substantial capital or investment and the employees recruited are performing activities which are directly related to the principal business of the employer, the employer is deemed the actual employer of the workers supplied by the contractor.
**Class Notes:**
– **Labor-Only Contracting vs. Job Contracting:** Labor-only contracting exists when the contractor has no substantial capital, investment, and the workers are performing duties necessary to the business of the employer, making the employer the actual employer. In contrast, job contracting is permissible if the contractor has the substantial capital or investment and undertakes an independent business.
– **Regular Employment:** Employment is regular if the work is usually necessary or desirable to the main business of the employer, regardless of any agreement stating otherwise.
– **Illegal Dismissal:** Any termination of employment without just or authorized cause as provided by law, and without proper procedural due process.
– **Security of Tenure:** Workers cannot be dismissed unless for just cause and after due process.
**Historical Background:** The case highlights the judicial scrutiny on labor-only contracting, reflecting the balance between business operational efficiency and protection of labor rights. It underscores the Philippine labor law’s prohibitions against labor-only contracting practices and emphasizes the importance of ensuring fair labor practices and the protection of workers’ rights to security of tenure and fair wages.
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