AT A GLANCE:
It was held by the Supreme Court that MMA Competent Manpower & General Services, Inc. is a legitimate job contractor and the true employer of the petitioners. The Supreme Court ruled that the petitioners were not illegally dismissed because they were simply relieved from their client assignment and were just offered reassignment, which they declined. But since there was neither a legal dismissal nor abandonment of work, the petitioners were ordered reinstated by the respondent company without any backwages. It was also settled by the Supreme Court that significant investment in machinery or equipment is not necessary when the contracted service is subsidiary in nature.
MMA Competent Manpower & General Services, Inc. (MMA) is a domestic corporation engaged in the industry of providing human resource and various services to its clients. Two of its clients are respondent Philippine Foremost Milling, Corp. (PFMC) and respondent Amigo Logistics Corp. (Amigo). PFMC is engaged in the business of flour milling and the production of various types of flour and flour-related by-products, while Amigo is engaged in the management and operations of logistical support to its clients, such as warehousing operations, trucking and ship operations, and stock planning.
In July 2003, MMA assigned petitioner Richard Huna Delera at PFMC and Amigo to work as a feed mill bagger. Thereafter, in January 2017, MMA also assigned petitioner Dionell Bandilon Quiling at both companies as a pollard stacker.
In August 24, 2017, PFMC reported to MMA that Quiling intentionally hit and moved the company’s CCTV camera in the pollard loading area. Thereafter, on October 5, 2017, PFMC also reported that Delera threatened the Shift-In-Charge Security Officer. For this, MMA issued notices for petitioners to explain and preventively suspended them from work.
For insufficiency of evidence, MMA eventually absolved Quiling and Delera of the accusations against them. However, PFMC and Amigo requested MMA to relocate petitioners to its other clients.
Consequently, MMA served Notices of Finished Contract to petitioners with respect to their assignment at PFMC and Amigo. However, due to the unavailability of positions within
Metro Manila, MMA temporarily placed petitioners on floating status.
Because of this MMA and petitioners underwent conciliation before the Regional Conciliation and Mediation Board of the Department of Labor and Employment (DOLE), where MMA offered petitioners work assignments in Cavite or Bataan. The petitioners ultimately failed to report for their reassigned posts. Thus, the parties did not reach any settlement.
On April 13, 2018, petitioners filed a Complaint 19 against PFMC, Amigo, and MMA before the Labor Arbiter (LA) for illegal dismissal, with money claims, and damages.
The LA ruled that the petitioners were deemed regular employees of PFMC and that both MMA and PFMC were engaged in a prohibited arrangement of labor-only contracting with the petitioners’ employment.
The NLRC reversed the ruling of the LA and ruled in favor of PFMC and Amigo. The NLRC concluded that as petitioners failed to prove that PFMC or Amigo exercised the power of control over them, they could not have been regular employees of either company. The Court of Appeals affirmed.
From this, the Petitioners elevated the case to the Supreme Court.
The issue lies whether MMA is a legitimate independent contractor and the true employer of petitioners, and whether petitioners were illegally dismissed and entitled to their money claims.
The Supreme Court denied the petition but modified the Court of Appeals’ ruling.
The Court held that all the elements of the four-fold test of an employer-employee relationship are present between MMA and petitioners, which consists of the following elements:
(a) the employer’s selection and engagement of the employee;
(b) the payment of wages;
(c) the power to dismiss; and
(d) the power to control the employee’s conduct, which extends over the means and methods by which the employee must accomplish the work.
Furthermore, the Court found that the petitioners failed to present any substantial evidence to controvert the testimony of the supervisor and coordinator of MMA assigned at PFMC and Amigo. Instead, it was found that the coordinators of MMA supervised its employees, including the petitioners, and implemented company policies.
With this, MMA is found to be a legitimate job contractor and the true employer of petitioners. While MMA did not possess substantial investment in tools or machinery, the Court explained that petitioners’ work as Feed Mill Bagger and Pollard Stacker was ancillary and inherently manual in character, making such investment unnecessary.
On the grounds of illegal dismissal, the petitioners were not dismissed by MMA as they had simply rejected the offers for reassignment by MMA.
There being no dismissal to speak of and MMA having failed to prove or even allege that petitioners were guilty of abandonment, the relationship between them as employer and employees remained.
MMA is then ordered to reinstate petitioners Richard Huna Delera and Dionell Bandilon Quiling to their former status of employment without payment of backwages. Since the employees’ failure to work was neither by their abandonment nor by termination, the burden of economic loss is not shifted to the employer.
Likewise, the Court agreed with the CA and NLRC’s ruling that MMA did not illegally dismiss petitioners from work, and that they were piece rate workers; thus, not entitled to their money claims.
Nevertheless, it was ruled that the petitioners were not entitled to their claim for underpaid wages, 13th month payment, overtime pay, holiday pay, premium pay, service incentive leave pay, and night shift differential pursuant to Article 82 of the Labor Code. The petitioners were workers paid by results and they received a fixed amount of wage after completion of a task.
All in all, a contractor that possesses substantial capital, independently exercises the four-fold test of employment, and performs ancillary or inherently manual services may be considered a legitimate job contractor even without substantial investment in tools, equipment, or machinery when such investment is not ordinarily necessary for the contracted work.
On the other hand, an employee who is merely removed from a client assignment and offered reassignment, but whose employment is neither terminated nor abandoned, is not illegally dismissed. In such a case, the employer must reinstate the employee without payment of backwages.
Read also: Reliefs from Illegal Dismissal: Reinstatement and Backwages
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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