G.R. Nos. 246760-61 and 246764-65, December 09, 2020
SERMAN COOPERATIVE and WYETH PHILIPPINES, INC., PETITIONERS, VS. ANNALYN E. MONTARDE, ET AL., RESPONDENTS.

FACTS

Wyeth Philippines, Inc. (Wyeth), a nutritional products manufacturer, engaged the services of Serman Cooperative (Serman) through successive service agreements for the provision of production helpers. Respondents were members of Serman deployed to Wyeth under individual contracts of service co-terminous with the principal service agreement. The last agreement was set to expire on January 31, 2014. The respondents were separated from service upon this expiration. One group (Montarde Group) had their access cards confiscated, while another group (Pontipedra Group) was issued a notice to explain for an alleged infraction but were ultimately not allowed to return.
The respondents filed complaints for illegal dismissal and regularization against both Serman and Wyeth. The Labor Arbiter dismissed the complaints, finding Serman a legitimate independent contractor and the termination lawful due to contract expiration. The National Labor Relations Commission (NLRC) reversed this, declaring the respondents as regular employees of Wyeth, finding the job contracting arrangement a labor-only contracting scheme designed to prevent regularization. The Court of Appeals affirmed the NLRC’s decision.

ISSUE

Whether the Court of Appeals erred in affirming the NLRC’s ruling that Serman was engaged in labor-only contracting, making Wyeth the statutory employer of the respondents, and that the respondents were illegally dismissed.

RULING

The Supreme Court granted the petitions, reversed the Court of Appeals, and reinstated the Labor Arbiter’s decision dismissing the complaints. The Court held that Serman was a legitimate job contractor, not engaged in labor-only contracting. The legal logic centered on the application of the “four-fold test” and the statutory criteria for independent contracting.
First, the Court found that Serman, as a duly registered cooperative, possessed substantial capital and assets. It provided its own tools and equipment to perform the contracted services for Wyeth. The respondents were members of the cooperative, and their compensation, including statutory benefits, was shouldered by Serman. These facts demonstrated that Serman was an independent entity carrying on a distinct business.
Second, the Court ruled that Wyeth’s conduct of orientation seminars for the deployed workers regarding plant safety and hygiene was a reasonable exercise of its inherent right to ensure product quality and did not constitute the control over the means and methods of work that would indicate an employer-employee relationship. The control retained by Wyeth was merely over the result, not the manner of achieving it. Consequently, no employer-employee relationship existed between Wyeth and the respondents; their employer was Serman.
Finally, regarding dismissal, the termination resulted from the lawful expiration of the fixed-term service agreement between Serman and Wyeth, to which the respondents’ individual contracts were co-extensive. For the Pontipedra Group, the notice to explain was rendered moot by the impending contract expiry. Thus, there was no illegal dismissal. The respondents’ recourse, if any, concerning their membership in Serman Cooperative, was not a matter for labor arbitration.