G.R. Nos. 254596-97. November 24, 2021
LESTHER S. BARRETTO, RONN VINCENT H. AREVALO, RICHARD IRISH O. TOMINEZ, ANDY L. VALDEMOR, ROLAND QUEZON, RYAN RAPH B. VICTORIA, AND JOEY A. HERNANDEZ, PETITIONERS, VS. AMBER GOLDEN POT RESTAURANT, RHODA FERNANDEZ, AND ABLEBODIES MANPOWER SERVICES, INC., RESPONDENTS.

FACTS

Petitioners were hired as riders by respondent Amber Golden Pot Restaurant (Amber) on various dates from 2010 to 2014. On April 30, 2016, Amber entered into a Project Agreement with respondent Ablebodies Manpower Services, Inc. (AMSI), wherein AMSI would provide workers to Amber. Petitioners claimed they were illegally dismissed on May 19, 2017, without cause and due process, and that some were forced to sign resignation letters. They filed a complaint for illegal dismissal and monetary claims. Respondents argued that Amber had no employer-employee relationship with petitioners, that AMSI was a legitimate labor contractor and the petitioners’ direct employer, and that the dismissal was due to the expiration of the Project Agreement and petitioners’ failure in a performance evaluation and timekeeping violations. The Labor Arbiter (LA) ruled in favor of petitioners, declaring them illegally dismissed, finding AMSI to be engaged in labor-only contracting, and holding Amber solidarily liable for monetary awards including backwages and refund of illegal deductions. The National Labor Relations Commission (NLRC) affirmed the LA’s decision. The Court of Appeals (CA) reversed, finding that AMSI was a legitimate job contractor and that petitioners were not illegally dismissed but were validly terminated for just causes (neglect of duty and willful disobedience) after due process.

ISSUE

Whether the Court of Appeals erred in reversing the NLRC and LA decisions, specifically on: (1) the finding that AMSI was a legitimate job contractor and not engaged in labor-only contracting; and (2) the finding that petitioners were validly dismissed for just causes.

RULING

The Supreme Court granted the petition, reversed the CA Decision and Resolution, and reinstated the NLRC Decision which affirmed the LA’s ruling.
1. On Labor-Only Contracting: The Court held that AMSI was engaged in labor-only contracting. AMSI failed to prove it had substantial capital or investment. Its paid-up capital of P500,000.00 was insufficient. Furthermore, the petitioners, as delivery riders, performed activities that were directly related and necessary to the main business of Amber, a restaurant. The delivery of food is an integral part of a restaurant’s operations. Therefore, Amber was the petitioners’ true employer, and AMSI was merely a labor-only contractor. The existence of a Certificate of Registration does not conclusively prove legitimate job contracting.
2. On Illegal Dismissal: The Court found that petitioners were illegally dismissed. Respondents failed to prove by substantial evidence the alleged just causes for termination (neglect of duty and willful disobedience). The performance evaluation reports and notices of violation were unsubstantiated and lacked detail. The requirement of due process was not complied with; the notices to explain were generic and the hearings were conducted perfunctorily without giving petitioners a real opportunity to defend themselves. The termination based on the expiration of the Project Agreement was invalid as petitioners were regular employees of Amber.
3. On Liability: Amber, as the principal employer, is solidarily liable with AMSI, the labor-only contractor, for all the monetary awards granted to the petitioners by the Labor Arbiter, including backwages, 13th month pay, service incentive leave pay, refund of illegal deductions, and attorney’s fees.