Sy v. Fairland Knitcraft Co., Inc.
REITERATIONFacts
The Antecedents: A group of workers, hired by Susan de Leon (Susan) as owner/proprietress of Weesan Garments (Weesan), filed complaints for underpayment and/or non-payment of wages, overtime pay, holiday pay, 13th month pay, and other benefits against Susan/Weesan. Subsequently, they amended their complaints to include illegal dismissal and impleaded Fairland Knitcraft Co., Inc. (Fairland) and its manager, Debbie Manduabas, as additional respondents. Weesan filed a report of temporary closure. Procedural History: The Labor Arbiter dismissed the complaint for lack of merit but ordered respondents to pay financial assistance. The National Labor Relations Commission (NLRC) reversed this, declaring the dismissal illegal and ordering reinstatement with backwages, or separation pay, and attorney's fees. Fairland filed a Motion for Reconsideration, questioning the jurisdiction of the labor tribunals over it and denying engagement of counsel. The NLRC denied both motions. Fairland and Susan filed separate Petitions for Certiorari before the Court of Appeals (CA). The CA's First Division initially affirmed the NLRC ruling but later, upon reconsideration, reversed itself and excluded Fairland from the NLRC decision, holding that the labor tribunals did not acquire jurisdiction over Fairland and that Weesan was not a labor-only contractor. The CA's Special Former Special Eighth Division affirmed the NLRC ruling in Susan's petition. The workers appealed the CA's exclusion of Fairland (G.R. No. 182915), and Susan appealed the CA's affirmation of the NLRC ruling (G.R. No. 189658). The Petition: The consolidated petitions before the Supreme Court concern the issues of labor-only contracting, illegal dismissal, and the jurisdiction of labor tribunals over Fairland.
Issue(s)
Whether the labor tribunals acquired jurisdiction over the person of Fairland. Whether Fairland is solidarily liable with Weesan. Whether Weesan is a labor-only contractor. Whether the workers were illegally dismissed. Whether the appeal of the deceased worker, Richon Aparre, was validly given due course. Whether the claims of certain workers against Fairland are barred by prescription.
Ruling
The Supreme Court granted the workers' petition (G.R. No. 182915) and denied Susan's petition (G.R. No. 189658). It reinstated the NLRC decision holding Fairland solidarily liable with Weesan and affirmed the CA's ruling in Susan's case that the workers were illegally dismissed.
Ratio Decidendi
On the jurisdiction over Fairland: The Court held that although Fairland was not served with summons, jurisdiction was acquired through the voluntary appearance of its counsel, Atty. Geronimo. The presumption of authority of counsel to appear, as provided in the NLRC Rules of Procedure and the Rules of Court, was not overcome by Fairland's mere denial or the filing of a disbarment case against the counsel. The CA erred in relying on Article 224 of the Labor Code regarding separate service of decisions, as this provision pertains to the execution of final judgments and not to the computation of appeal periods. Notice to counsel is notice to the party for purposes of appeal, and the NLRC decision became final ten days after receipt by Fairland's counsel. On Fairland's solidary liability: The Court concluded that Fairland is the principal of the labor-only contractor Weesan. This was supported by evidence such as Fairland lending equipment, the lack of proof of Weesan's other clients, and the control Fairland exercised over the workers' activities and movements. As the principal employer, Fairland is solidarily liable with Weesan for the rightful claims of the employees. On Weesan being a labor-only contractor: The Court affirmed the finding that Weesan is a labor-only contractor. This was based on the lack of substantial capital or investment by Weesan, the fact that Fairland furnished sewing machines, and the doubt surrounding the ownership of the work premises. The evidence presented by Susan to prove rental of the premises from De Luxe was found wanting, and the financial statements did not convincingly show payment of factory premises rent. The presumption that a contractor is labor-only unless proven otherwise was not overcome by Weesan. On illegal dismissal: The Court found that the workers were illegally dismissed. Weesan's claim of temporary closure due to serious business losses was not sufficiently proven. The timing of the closure immediately after the filing of complaints, the lack of signatures on filed tax returns and financial statements, and the absence of the mandatory 30-day prior notice to workers cast doubt on the bona fide nature of the closure. Susan/Weesan failed to discharge the burden of proving a lawful cause for termination. On the appeal of Richon Aparre: The Court held that the formal substitution of the deceased worker Richon Aparre was not necessary because his heir, Luzvilla, voluntarily appeared and participated in the proceedings before the NLRC. This voluntary appearance satisfied the requirement of due process, and the NLRC did not err in giving due course to the appeal. On Fairland's claim of prescription: The Court found Fairland's claim of prescription to be without merit. Fairland failed to present evidence to support its assertion of a specific contractual relationship period with Weesan from 1996 to 1997. The letter from Fairland terminating Weesan's services in 2003 contradicted its claim that the relationship ended in 1997.
Main Doctrine
The presumption that a contractor is a labor-only contractor stands unless the contractor overcomes the burden of proving substantial capital, investment, tools, and the like. Furthermore, notice to counsel is notice to the party for purposes of computing the period for appeal from the NLRC to the CA.