Philippine Airlines, Inc. v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: Philippine Airlines, Inc. (PAL) entered into a service agreement with Stellar Industrial Services, Inc. (STELLAR) for janitorial and maintenance services. STELLAR hired workers, including the individual private respondents, to perform these services for PAL. The service agreement was renewed annually until its expiration on December 31, 1990. PAL subsequently informed STELLAR that the agreement would not be renewed. The individual private respondents filed complaints for illegal dismissal and separation pay against PAL and STELLAR. Procedural History: Labor Arbiter Manuel P. Asuncion ordered PAL to pay the complainants separation pay. The National Labor Relations Commission (NLRC) initially affirmed the Labor Arbiter's decision, holding PAL jointly and severally liable with STELLAR. Upon reconsideration, the NLRC modified its decision, declaring PAL solely liable for the separation pay, finding that PAL engaged in labor-only contracting and continued to employ the respondents after the service contract expired. The Petition: PAL filed a special civil action for certiorari, seeking to nullify the NLRC's decision and resolution, arguing that the NLRC committed grave abuse of discretion in holding PAL liable for separation pay.
Issue(s)
Whether an employer-employee relationship existed between PAL and the individual private respondents. Whether PAL is liable for separation pay to the individual private respondents.
Ruling
The petition is granted. The assailed Decision and Resolution of the NLRC are set aside insofar as they held PAL liable for separation pay. The July 13, 1994 Decision is reinstated insofar as it ordered STELLAR liable for such award.
Ratio Decidendi
On the existence of an employer-employee relationship between PAL and the individual private respondents: The Court held that no employer-employee relationship existed between PAL and the individual private respondents. The service agreement between PAL and STELLAR clearly established STELLAR as an independent job contractor. STELLAR possessed the earmarks of an employer, including the power of selection and engagement, payment of wages, power of dismissal, and power to control the employees' conduct. STELLAR also had substantial capital, tools, equipment, and other clients, demonstrating it undertook the contract on its own account and responsibility. The Court found that PAL engaged in permissible job contracting, not labor-only contracting. The fact that the individual private respondents continued working at PAL's premises after the service contract expired did not create an employer-employee relationship with PAL, as there was no transfer of business ownership to trigger the successor-employer doctrine. The Court agreed with the solicitor general that the service agreement was impliedly renewed until PAL's janitorial requirements were bid out to other contractors, explaining the continued work at PAL's premises. On PAL's liability for separation pay: Since no employer-employee relationship existed between PAL and the individual private respondents, PAL cannot be held liable for separation pay. The Court reiterated that in legitimate job contracting, the principal is responsible to the contractor's employees only for the proper payment of wages. The liability for separation pay rests solely with the contractor, STELLAR. The Court found STELLAR's argument that the respondents were project employees to be unfounded, as the service agreement was repeatedly renewed and the employees were engaged for thirteen consecutive years, indicating regular employment with STELLAR. Therefore, the dismissal of the individual private respondents by STELLAR was without just and valid cause, making STELLAR liable for separation pay.
Main Doctrine
In legitimate job contracting, an independent contractor undertakes to perform work on its own account, under its own responsibility and according to its own manner and method, free from the control and direction of the principal. No employment relationship arises between its employees and the principal. Consequently, the said employees can claim separation pay only from the independent contractor, and not from the principal.