G.R. No. 227795 February 20, 2019
MARVIN O. DAGUINOD, Petitioner, vs. SOUTHGATE FOODS, INC., represented by MAUREEN O. FERRER and GENERATION ONE RESOURCE SERVICE AND MULTIPURPOSE COOPERATIVE, represented by RESTY CRUZ, Respondents.

FACTS

Petitioner Marvin Daguinod was assigned as counter crew at a Jollibee franchise operated by respondent Southgate Foods, Inc. His assignment was pursuant to a Service Agreement between Southgate and respondent Generation One Resource Service and Multi-Purpose Cooperative, which classified him as a “service provider” and member of the cooperative. On April 10, 2011, a security guard accused Daguinod of a “pass out” transaction. An audit revealed a cash overage of P106.00. He was detained, accused of theft, and compelled to write confession letters under duress. After his release from police custody, he was informed by Generation One that his employment was terminated effective May 13, 2011.
Daguinod filed a complaint for illegal dismissal. The Labor Arbiter ruled in his favor, finding him a regular employee of Southgate and declaring his dismissal illegal. The National Labor Relations Commission reversed, holding that Generation One was his true employer and that he was dismissed for just cause. The Court of Appeals affirmed the NLRC, prompting this petition.

ISSUE

Whether the Court of Appeals erred in affirming the finding that Daguinod was legally dismissed by his employer.

RULING

Yes. The Supreme Court reversed the CA and reinstated the Labor Arbiter’s decision with modification. The legal logic proceeded from two key determinations. First, on the employment relationship, the Court applied the four-fold test and found that Southgate, not Generation One, was Daguinod’s true employer. Southgate controlled his work as counter crew, his duties were necessary to its business, and he was initially its direct hire. The Service Agreement and his cooperative membership were a mere labor-only contracting scheme designed to evade employer liability. Thus, Southgate was his direct employer.
Second, on the validity of dismissal, the Court found no substantial evidence to support the charge of serious misconduct or loss of trust and confidence. The alleged confession letters were extracted under coercive conditions while Daguinod was detained. The cash audit showed an overage, not a shortage. Southgate failed to prove the alleged theft by clear and convincing evidence. Consequently, the dismissal was illegal. Daguinod was entitled to reinstatement, full backwages, and separation pay in lieu of reinstatement. Moral and exemplary damages were also awarded due to the malicious and oppressive manner of his termination.