BROADWAY MOTORS, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND VICENTE APOLINARIO, RESPONDENTS.

By virtue of a written undated “Work Contract”,^[1]
private respondent Vicente Apolinario, sometime in
March 1967, began work as an auto painter in the premises of petitioner
Broadway Motors, Inc. located at 1232 United Nations
Avenue, Metro Manila.  The contract was signed by Vicente Apolinario as “Contractor” and Mr. Johnny L. Chieng, Parts and Service Operations Manager of petitioner
Corporation.  Apolinario
worked as an auto painter for a period of eighteen (18) years, until 23 January 1985 when he was barred
from entering the premises of petitioner Corporation, and his relationship with
it effectively terminated, because of his alleged involvement in a fist-fight
with the shop superintendent of Broadway Motors the day before.

On 21 February 1985,
Apolinario commenced an action for illegal dismissal
with the National Capital Region Arbitration Branch of the National Labor
Relations Commission (NLRC).  In his
Complaint, which was docketed as NLRC Case No. 2-587-85, Apolinario
sought recovery from petitioner Corporation of (1) separation pay in the amount
of P66,676.95, on the basis of an alleged monthly income of P7,408.55, (2)
moral damages of P50,000.00, and (3) attorney’s fees of P10,000.00.

In a Decision^[2]
dated 7 January 1986, the Labor Arbiter dismissed the complaint upon the ground
that under the Work Contract and an “Addendum to Work Contract” dated
28 April 1984,^[3] Apolinario, having supplied the workers — himself included
— who performed the auto painting jobs for petitioner Corporation, was a mere
contractor and could not, therefore, be considered as the latter’s
employee.  From this decision, Apolinario interposed an appeal to the NLRC.

On 4 February 1987,
public respondent NLRC rendered a Decision,^[4]
the dispositive portion of which reads:

“WHEREFORE, the Decision appealed from is reversed and a new
judgment entered ordering the respondent to pay complainant separation pay in
the sum of FORTY FIVE THOUSAND (P45,000.00) PESOS plus 10% thereof as and for
attorney’s fees.

SO ORDERED.”

In reversing the decision of the Labor
Arbiter, public respondent NLRC found that a valid and binding
employer-employee relationship had existed between petitioner Corporation and Apolinario.  Since Apolinario was dismissed without any investigation having
been previously conducted by petitioner Corporation to ascertain his participation
in the fist-fight within company premises, his dismissal was, accordingly,
declared illegal by public respondent NLRC for non-compliance with the
requirements of procedural due process.

After a careful scrutiny of the records of this case, the Court
considers that petitioner Corporation has not sufficiently shown that
respondent NLRC had acted with grave abuse of discretion, or without or in
excess of jurisdiction in rendering its decision dated 4 February 1987.

Four factors are generally considered in determining the
existence of an employer-employee relationship, namely:  (a) the manner of selection and engagement of
the putative employee; (b) the mode of payment of wages; (c) the presence or
absence of a power of dismissal; and (d) the presence or absence of a power to
control the putative employee’s conduct. 
It is this latter factor, the so-called “control test”, which
is the most important criterion in such determination.^[5]
The record shows that Apolinario was hired directly
by petitioner Corporation to work in the latter’s auto repair shop as an auto
painter, which fact is evidenced by the undated Work Contract executed between Apolinario and petitioner Corporation through its
authorized representative.  That
petitioner corporation reserved unto itself the power of dismissal is evident
from the fact that petitioner Corporation unilaterally undertook to terminate Apolinario’s relationships with itself.

Upon the other hand, it appears that Apolinario
and his men (designated in the Work Contract as “Contract Workers”)
were compensated for the jobs they performed in lump sum payments described as
“payment for subcontract painting” or other repair job, from which
amounts an unexplained “three percent (3%) of fifteen percent (15%) withholding
tax” was deducted.  It further
appears that Apolinario invoiced, under the
designation of “VM Automotive Repair Service”, to petitioner
Corporation the salaries of his “Contract Workers” on which amounts,
a three percent (3%) “sales tax” was added.  The “Work Contract” also provided
that Broadway Motors would negotiate only with Apolinario
on any work order, and would refrain from dealing with any member of Apolinario’s group of “Contract Workers.”^[6]

Turning to the power to control Apolinario’s
conduct, it appears from the stipulations of the Work Contract that Apolinario and his “Contract Workers” were
required not only to keep regular working hours, but to render overtime service
as well, when such was necessitated either by the volume or immediacy of the
work.^[7]
They were not allowed to negotiate with customers regarding the performance of
any additional work beyond that which had been authorized by petitioner
Corporation.^[8]
Any defect in the workmanship of their jobs was subject to correction by
petitioner Corporation’s designated supervisors and inspectors even as the work
was still in progress, and not just after the same had already been completed.^[9]
Furthermore, Apolinario and his men were expressly
required to abide by petitioner Corporation’s regulations and policies,
“particularly on the wearing of uniforms and identification cards”,
which ID cards had to be worn at all times while within the work premises.  Apolinario’s
“casual workers” were additionally required to deposit their ID cards
with petitioner Corporation’s security guard at the end of the working day.^[10]
In other words, Apolinario and his “Contract
Workers” were under the direct control and supervision of the supervisors
and managers of petitioner Corporation from the very moment they entered the
work premises at the beginning of the working day, all throughout the
performance of their duties for the day, until shop closing time.

Petitioner Corporation urges that Apolinario
was not its own employee but, rather, an independent contractor who conducted
his own separate business under the trade name of “VM Automotive Repair
Service” and had his own “Contract Workers”.

The indices of an owner-independent contractor relationship are
set out in Section 8 of Rule VIII, Book III of the Omnibus Rules Implementing
the Labor Code.  Section 8 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.”
(Underscoring supplied.)

“Job contracting” must be distinguished from
“labor-only” contracting. 
“Labor-only” contracting is defined in Section 9 of Rule VIII,
Book III of the Omnibus Rules Implementing the Labor Code, in the following
terms:

“Sec. 9.  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:

(1)    
Does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises 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 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.

x  x  x                        x  x  x               x 
x  x.”

(Underscoring supplied.)

The legal effect of a finding that a contractor was not a true
independent contractor or “job contractor” but, rather, merely a
“labor-only” contractor was explained in Philippine Bank of
Communications v. National Labor Relations Commission, et al.:^[11]

“x 
x  x The ‘labor-only’ contractor – i.e. ‘the person or
intermediary’ – is considered ‘merely as an agent of the employer.’ The
employer is made by the statute responsible to the employees of the ‘labor
only’ contractor as if such employee had been directly employed by the
employer.  Thus, where ‘labor
only’ contracting exists in a given case, the statute itself implies or
establishes an employer-employee relationship between the employer (the owner
of the project) and the employees of the ‘labor only’ contractor, this time
for a comprehensive purpose: 
’employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.’ 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.” (Underscoring supplied.)

Thus, a finding that a contractor was a
“labor-only” contractor is equivalent to a finding that an
employer-employee relationship existed between the owner and the
“labor-only” contractor including the latter’s “Contract
Workers”, that relationship being attributed by the law itself.  Petitioner Corporation’s defense thus compels
us to examine still further the relationship between itself and private
respondent Apolinario in terms of the above indices
of contracting — “job” or “labor-only”.

We note firstly that, under the Work Contract, Apolinario supplied only “labor and supervision (over
his “Contract Workers”) in the performance of automotive body
painting work which the company (i.e., Broadway Motors) may from time to time,
award to him under (the) contract”.^[12] Apolinario also undertook to “hire and bring in
additional workers as may be required by the company, to handle additional work
load or to accelerate or facilitate completion of work in process.”^[13]
Petitioner Corporation supplied all the tools, equipment, machinery and
materials necessary for Apolinario to carry out his
assigned painting jobs, which painting jobs were executed by Apolinario and his men within the premises owned and
maintained by petitioner Corporation. 
The control and direction exercised by petitioner Corporation over the
work done by Apolinario and his “Contract
Workers” was well-nigh complete, as indicated earlier.  There was, furthermore, no evidence adduced
by petitioner Corporation to show that Apolinario had
substantial capital investment in “VM Automotive Repair Service” or
that “VM Automotive Repair Service” carried on, in its own premises,
a car repair business operation separate and distinct from that engaged in by
petitioner Corporation, an operation the tools or equipment of which were owned
by Apolinario and the customers of which were not
customers of Broadway Motors.  What the
evidence of record reveals is that the alleged “Contract Work”
carried out by Apolinario and his “Contract
Workers”, excepting overtime work, was performed during regular working
hours six (6) days in a week, which circumstance must have made it virtually
impossible for them to carry on any additional and independent auto painting
business outside the premises of Broadway Motors.  Finally, Apolinario
and his men were engaged in the performance of a line of work — automobile
painting — which was directly related to, if not an integral part altogether
of the regular business operations of petitioner Corporation — i.e., that of
an automotive repair shop.

We conclude that while there is present in the relationship
between petitioner Corporation and private respondent some factors suggestive of
an owner-independent contractor relationship (e.g., the manner of payment of
compensation to Apolinario and his “Contract
Workers”), many other factors are present which demonstrate that that
relationship is properly characterized as one of employer-employee.  We conclude, further, that the same factors
indicate the existence of a “labor-only” contracting arrangement
between petitioner Corporation on the one hand as owner, and upon the other
hand, Apolinario as “labor-only” contractor
and his “Contract Workers”. 
Thus, an employer-employee relationship must be held to have existed
between petitioner Corporation and private respondent, whether considered as a
result of the contractual arrangements between them or as a result of the
operation of the Labor Code (at least from 1974 onwards) and its Implementing
Rules.  It follows, finally, that the
ruling of public respondent NLRC that petitioner Corporation and private
respondent were employer and employee, respectively, cannot be regarded as
constituting a grave abuse of discretion or as rendered without or in excess of
jurisdiction.

 In respect of public
respondent NLRC’s finding that Apolinario
was dismissed without any opportunity to present his side on the charge against
him of participating in the fist-fight with petitioner Corporation’s shop
superintendent, no compelling reason has been shown by the petitioner
Corporation why we should overturn such finding of fact.

WHEREFORE, the Petition for Certiorari is
DISMISSED.  The decision of the public
respondent National Labor Relations Commission dated 4 February 1987 is hereby AFFIRMED.  Costs against the petitioner.

SO ORDERED.

Fernan, (Chairman), Gutierrez, Jr., Bidin, and Cortes,
JJ., concur.

^[1] Rollo, pp. 18-19.

^[2] Id.,
pp. 43-50.

^[3] Id.,
p. 69.

^[4] Id.,
pp. 57-64.

^[5]
Philippine Bank of Communications vs. National Labor Relations
Commission, 146 SCRA 347 [1986].

^[6]
Work Contract, par. 3.

^[7] Id.,
par. 5-c.

^[8] Id.,
par. 5-e.

^[9] Id.,
par. 5-a.

^[10] Id.,
par. 5-h.

^[11]
146 SCRA 347, 356 (1986).

^[12] Id.,
par. 1.

^[13] Id.,
par. 5-g.