G.R. No. 68786 July 21, 1989
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. HONORABLE NATIONAL LABOR RELATIONS COMMISSION, EDILBERTO SALAYON, ET AL., and CONSOLIDATED SUGAR CORPORATION OF THE PHILIPPINES, respondents.

FACTS

The Development Bank of the Philippines (DBP) foreclosed on and acquired a sugar mill-refinery from CAREBI. After the foreclosure, CAREBI continued operations until it ceased and laid off its employees without paying separation benefits. Subsequently, former CAREBI officers formed the Consolidated Sugar Corporation (CSC). DBP entered into a management contract with CSC to operate the mill. Under this contract, CSC managed operations, handled revenues, and paid expenses, while DBP funded rehabilitation, approved budgets, and designated comptrollers. The contract also stipulated that CSC would hold DBP free from any liabilities arising from the operation. CSC recalled the laid-off CAREBI employees to work. When DBP later terminated the management contract, a group of employees filed a complaint for unpaid wages and separation pay against both DBP and CSC.

ISSUE

The primary issue is whether DBP, as the foreclosing bank and owner of the mill operating under a management contract with CSC, became the employer of the respondent workers, thereby assuming liability for their unpaid wages and separation pay.

RULING

The Supreme Court ruled that DBP is not the employer of the workers and is not liable for their claims. The Court emphasized the four-fold test for establishing an employer-employee relationship: selection and engagement, payment of wages, power of dismissal, and most importantly, the power of control over the employee’s conduct. The management contract clearly designated CSC as the operator responsible for the management and control of the business. CSC exercised direct control over the workers’ performance and methods of work. DBP’s involvement was limited to financial oversight and approval of budgets, which does not equate to the control necessary to establish an employment relationship. The contractual stipulation that CSC would hold DBP harmless from operational liabilities further reinforced this separation. The Court also rejected the NLRC’s finding that DBP stepped into the shoes of CAREBI, noting that a transferee assumes an employer’s liabilities only if it expressly agrees to do so or if the sale is in bad faith, neither of which was present. Therefore, the complaint against DBP was dismissed, with liability properly belonging to CSC as the direct employer.