“BROTHERHOOD” LABOR UNITY MOVEMENT OF THE PHILIPPINES, ANTONIO CASBADILLO, PROSPERO TABLADA, ERNESTO BENGSON, PATRICIO SERRANO, ANTONIO B. BOBIAS, VIRGILIO ECHAS, DOMINGO PARINA…

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
Oñate, 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.