Servflex, Inc. v. Urera
REITERATIONFacts
The Antecedents: Respondents Lovelynn M. Urera, Sherryl I. Cabrera, Precious C. Palanca, and Joco Jim L. Sevilla filed a complaint against Philippine Long Distance Telephone Company (PLDT), Servflex, Inc. (petitioner), and their respective officers. The respondents alleged they were hired by PLDT but referred to petitioner, which then deployed them back to PLDT. They claimed petitioner was a labor-only contractor, making them regular employees of PLDT, and sought regularization, back pay, moral and exemplary damages, and attorney's fees. PLDT and petitioner countered that petitioner was a legitimate job contractor and that the respondents were its regular employees, not PLDT's. Procedural History: The Labor Arbiter (LA) ruled in favor of the respondents, declaring Servflex, Inc. a labor-only contractor and PLDT the principal employer, ordering them to pay jointly and severally. The National Labor Relations Commission (NLRC) reversed this decision, finding Servflex, Inc. to be a legitimate job contractor and the employer of the respondents. The Court of Appeals (CA) granted a petition for certiorari, reinstating the LA's decision and ordering PLDT and Servflex, Inc. to pay the respondents. The CA denied motions for reconsideration filed by Servflex, Inc. and PLDT. The Petition: Servflex, Inc. filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the CA's decision and resolution. The petitioner argued that its Certificate of Registration proves it is a legitimate job contractor and that its employees independently perform contracted work. The petitioner contended that it possesses substantial capital and tools, provides manpower services to various clients, and exercises control over its employees, including hiring, payment, and supervision. The respondents countered that the registration is not conclusive proof, that PLDT exercised control over their work, and that petitioner failed to demonstrate its own control over their performance.
Issue(s)
Whether the Court of Appeals erred in finding grave abuse of discretion on the part of the National Labor Relations Commission in reversing the Labor Arbiter's Decision. Whether petitioner Servflex, Inc. is a legitimate job contractor or a labor-only contractor; and whether respondents Lovelynn M. Urera, Sherryl I. Cabrera, Precious C. Palanca, and Joco Jim L. Sevilla are regular employees of petitioner Servflex, Inc. or Philippine Long Distance Telephone Company (PLDT). Whether PLDT exercised control over the respondents.
Ruling
The petition is denied. The Decision dated July 5, 2018, and the Resolution dated April 1, 2019, of the Court of Appeals in CA-G.R. SP No. 148586 are affirmed with modification that all monetary awards shall earn interest at the rate of 6% per annum from the finality of the Decision until full payment.
Ratio Decidendi
On the issue of grave abuse of discretion by the NLRC: The Court found that the CA did not err in finding that the NLRC committed grave abuse of discretion. Grave abuse of discretion occurs when the NLRC's findings and conclusions are not supported by substantial evidence, meaning there is not enough relevant evidence that a reasonable mind would accept to justify a conclusion. The NLRC's reversal of the LA's findings, which were based on substantial evidence, without sufficient basis, warranted the CA's intervention through a petition for certiorari. The Court emphasized that in a Rule 45 review of labor cases, the Supreme Court examines whether the CA correctly determined the presence or absence of grave abuse of discretion by the NLRC. On whether petitioner is a labor-only contractor; and on the status of the respondents: The Court reiterated the definition of labor-only contracting, which involves an intermediary that does not have substantial capital or investment and deploys workers to perform tasks directly necessary to the principal employer's business. The Court found that petitioner did not specify any tools or equipment it owned and supplied to respondents, and PLDT provided the necessary tools and premises. Furthermore, the tasks performed by respondents as Database Engineers were central and necessary to PLDT's business, indicating that PLDT was the employer. The CA's observation that respondents' duties were not different from PLDT's regular employees in the Technical Group further supported this conclusion. The Court clarified that a certificate of registration with the DOLE is not conclusive proof of legitimacy as an independent contractor. It only prevents the presumption of labor-only contracting from arising. In this case, the presumption did not prevail due to overwhelming evidence supporting the conclusion that petitioner was a mere labor-only contractor. The Court concluded that the NLRC's ruling was not supported by substantial evidence, and petitioner and PLDT were engaged in labor-only contracting, making them jointly and severally liable. On the element of control: The Court found no clear showing that petitioner had the power of control over respondents. Right of control is the ability to determine not only the end to be achieved but also the manner and means to be used. The evidence showed that PLDT exercised control, as respondents were required to work on PLDT's premises, follow PLDT's work schedules, and directly received orders from PLDT managers and section heads via email. PLDT also provided trainings and seminars intended for respondents' work development, indicating PLDT's control over their career development and competence. The stipulation in the contract of service that petitioner had the right of control was deemed untenable, especially since respondents began working for PLDT even before the contract's execution, and petitioner failed to prove it exercised supervision.
Main Doctrine
A contractor is engaged in labor-only contracting if it does not possess substantial capital or investment and the workers it deploys perform tasks directly related to the principal employer's business. In such cases, the contractor is deemed an agent of the principal, making the principal responsible for the workers as if it directly hired them. Registration with the DOLE as an independent contractor is not conclusive proof of legitimacy.