Manco Synthetic Inc.-Employee Labor Union-Organized Labor Union in Line Industries and Agriculture and Manila Cordage Company-Employees Labor Union-Organized Labor Union in Line Industries and Agriculture v. Manila Cordage Company and Manco Synthetics, Inc.
REITERATIONFacts
The Antecedents: This case concerns the employer-employee relationship between Manila Cordage Company (MCC) and Manco Synthetics, Inc. (MSI), and the workers deployed by Worktrusted Manpower Services Cooperative (WMSC) and Alternative Network Resources Unlimited Multi-Purpose Cooperative (ANRUMC). The petitioners, Manco Synthetic Inc.-Employee Labor Union-Organized Labor Union in Line Industries and Agriculture (MSI-ELU-OLALIA) and Manila Cordage Company-Employees Labor Union-Organized Labor Union in Line Industries and Agriculture (MCC-ELU-OLALIA), represent these deployed workers. The underlying dispute arose when MCC and MSI challenged the results of certification elections, asserting that the voters were not their employees but those of independent contractors. Concurrently, a DOLE inspection revealed numerous labor violations, including non-payment of overtime and holiday premiums, failure to present payroll and DTRs, non-remittance of SSS, Philhealth, and Pag-IBIG contributions, non-payment of 13th month pay, and violations related to repeated hiring and contracting out of necessary work, alongside poor working conditions. Procedural History: The Office of the Secretary of the Department of Labor and Employment (DOLE) initially affirmed the findings of the DOLE Regional Director, who had determined that an employer-employee relationship existed and ordered MCC and MSI to pay back wages and other benefits, revoking the registration of WMSC and ANRUMC for labor-only contracting. MCC and MSI appealed this decision to the Court of Appeals (CA), which initially denied their petition. However, upon reconsideration, the CA issued an Amended Decision, setting aside the DOLE Secretary's resolutions and finding no employer-employee relationship, based on the finality of a National Labor Relations Commission (NLRC) decision in an illegal strike case. This Amended Decision was subsequently challenged by the petitioners before the Supreme Court. The Petition: The petitioners seek a review on certiorari of the CA's Amended Decision and Resolution, arguing that the CA erred in applying the doctrine of res judicata based on the NLRC ruling in the illegal strike case. They contend that the CA should have instead given precedence to this Court's prior decision in a related certification election case, which had already established the employer-employee relationship between MCC, MSI, and the deployed workers. The petitioners assert that this Court's ruling in the certification election case, which found WMSC and ANRUMC to be engaged in labor-only contracting and the workers to be regular employees of MCC and MSI, should be controlling. They further argue that the NLRC's finding in the illegal strike case, which was favorable to the workers but based on the absence of an employer-employee relationship, was an obiter dictum and should not preclude a determination based on the established facts and this Court's pronouncements.
Issue(s)
Whether the Court of Appeals (CA) correctly found grave abuse of discretion in the Department of Labor and Employment (DOLE) Secretary's Resolutions that found the presence of an employer-employee relationship between MCC, MSI, and members of MCC-ELU-OLALIA and MSI-ELU-OLALIA. Whether the CA correctly applied the finding of the National Labor Relations Commission (NLRC) in NLRC LAC No. 02-000593-18/NLRC Case No. RAB-IV-02-00209-17L (illegal strike case) to the present controversy, and the related issue of the existence of an employer-employee relationship.
Ruling
The Petition is GRANTED. The October 12, 2020 Amended Decision and the October 26, 2021 Resolution of the Court of Appeals in CA-G.R. SP No. 151257 are REVERSED and SET ASIDE. The August 30, 2019 Decision of the Court of Appeals, and the February 9, 2017 and April 7, 2017 Resolutions of the Office of the Secretary of the Department of Labor and Employment are REINSTATED. Manila Cordage Company and Manco Synthetics, Inc. are DIRECTED to comply with the directives in the August 8, 2016 Order of the DOLE Regional Office No. IV-A, including payment of aggregate amounts for underpayment of SIL pay and illegal wage deductions, and to submit proofs of issuance of notice of regular employment status to the concerned employees.
Ratio Decidendi
On the issue of grave abuse of discretion by the DOLE Secretary: The Supreme Court held that the DOLE Secretary did not commit grave abuse of discretion. The DOLE is empowered under Article 128(b) of the Labor Code to determine the existence of an employer-employee relationship in the exercise of its visitorial and enforcement powers. The DOLE Secretary's Resolutions were based on findings supported by substantial evidence, including the lack of substantial investment by WMSC and ANRUMC in equipment, their role in merely supplying workers for activities directly related to the principal's business, and the principals' exercise of control over the workers. The Court emphasized that the CA should have upheld the DOLE's rulings as they were not tainted with grave abuse of discretion, especially since the NLRC decision, which the CA later relied upon, was rendered a year after the DOLE Secretary's Resolutions. On the CA's application of the NLRC ruling in the illegal strike case and the existence of employer-employee relationship: The Supreme Court found that the CA erred in applying the doctrine of res judicata based on the NLRC Decision in the illegal strike case. Firstly, the Supreme Court had already promulgated its Decision in the certification election case (G.R. Nos. 242495-96) prior to the CA's Amended Decision, which definitively settled the issue of employer-employee relationship in favor of the workers. This Supreme Court ruling reversed the CA's consolidated decision in the certification election case, which the NLRC had cited as a basis. Secondly, the Court noted that even if the Supreme Court's decision was not yet final, the CA should have reviewed its Amended Decision which clearly contradicted the Supreme Court's findings, rather than blindly adhering to the NLRC decision. The Court also invoked the principle that res judicata should not be mechanically applied when it would sacrifice justice, particularly in labor cases where protection to labor is paramount. The Court found that the NLRC's finding of no employer-employee relationship, while favorable to the workers in that specific case, was an obiter dictum as it did not modify the dispositive portion of the Labor Arbiter's decision, and thus, applying it to deny the petitioners' case would be unjust and violate due process. The Supreme Court upheld the consistent findings of the DOLE Regional Director and Secretary that WMSC and ANRUMC were labor-only contractors and that MCC and MSI were the employers of the petitioner unions' members. These findings were consistent with the Supreme Court's own ruling in the certification election case (G.R. Nos. 242495-96), which extensively discussed that the members of the petitioner unions were indeed employees of the respondents. The Court reiterated that a Certificate of Registration is not conclusive evidence of legitimate contractor status, and that the contractors lacked substantial investment in tools and equipment, while their employees used the respondents' machinery. Furthermore, the respondents exercised control over the workers' performance and assigned them to departments performing core functions directly related to the respondents' main business of rope manufacturing. The repeated and continuing need for these functions evidenced their necessity to the business, confirming labor-only contracting.
Main Doctrine
The Supreme Court reiterated that the Department of Labor and Employment (DOLE) possesses ample authority under Article 128(b) of the Labor Code to determine the existence of an employer-employee relationship in the exercise of its visitorial and enforcement powers. The Court also emphasized that the CA erred in applying the doctrine of res judicata based on an NLRC decision in an illegal strike case when a prior Supreme Court decision in a certification election case had already definitively settled the issue of employer-employee relationship between the parties, holding that the contractors were engaged in labor-only contracting and the workers were regular employees of the principals.