G.R. No. 124630 February 19, 1999
JANG LIM, WILFREDO MARIGA, AMIL MAULANA, ROLANDO SANTOS, MARCIANO VICTORIANO, JR., SHERILYN TAUPAN, BADO DELASANTOS, CELSO ARANETA, FELIX BAGUIO, ANECETO LAS PINAS, VICENTE ESCALICAS, NESTOR VARONA, RAZEL TAUPAN, VICENTE WONG, CARLOS BABIGA, BENJAMIN ESTRELLADO, ZALDYVAR JUAINI, ROGER MOSTERO, FLORANTE AMIS, AUGUSTO REYES, JR., VICTORIA GOMEZ, MURSIDE HADJIROL, SANDRA SINCAY, MINDA LATIP, HAN AMMANG, EDISON SINCAY, TITING ARASAD, OMAR BAYAN, MARITESS VERDON, ABRAHAM BAYAN, RODELYN DEL ROSARIO, JEFFERSON SINCAY, SAGGA SALIAN, CHERRY EMMANG, BANNING ELIAS, TESSIE BAIT-IT, ELECIO PARADAZ, JR., MOID SAHIRON, EDDIE ELIAS, ESMERALDA DOBLE, ADAYAN SUKARNO, MYLA MOSTERO, ALLAN PABLAN, MAHADUM MOHAMMAD, JUN SALCEDO, BRANDO DIAZ, ROLANDO MONTEJO, ABS TAPSI, JAKARTA SUBA, WENCESLAO ALAYAN, CONSTANCIO CATIVIDA, RESTIA GOMEZ, NUKKIYA SERVANDI, SANDY SINCAY, JAHIRIN MAULANA, MARIAM DARIS, ALCY SAJIIN, NURSIDA LAMAHAN, RAHIM BAYAN, SALSON IBBOH, BAUSANA SALIAN, JIMMYLITO AYCO, MARIBETH LIMBA, TATAH DE LA CRUZ, JALSUM IBBOH, ENDANG TONDO, NURALYN YARTE, TATAH SOLOMON, LACAYA ABUTAN, CHELTON EMMANG, BOY SAHIPA, EDDIE CADION, ARMANDO DE LA CRUZ, SUSAN ARABEJO, TATAH JOSE, AMELIA DEGARBIS, JOHN OKOY LUDITHA TALBOBO, DARWESA SALCEDO, HUSSEIN AMMANG, IBRAHIM ELIAS, MARRY SADJAIL, KEMELDE OKOY, ELIZA PARAGAS, MAULAY TAUPAN, RUDY SERVANDI, NURMINE SALAPUDDIN, RODRIGUEZ ITURALDE, RAMON ITURALDE, HENRY ITURALDE, SONNY BOY DELLERA, SATURNINO ITURALDE, SAMMY ABDURAJIK, USAY SAHIPA and KALBI BAYAN, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION, and TIMEX SAWMILL and/or COTABATO TIMBERLAND COMPANY, INC., with MELCHOR BORBON as Administrative Manager, respondents.

FACTS

Petitioners were regular workers initially hired by M & S Company, a sister company of respondent Cotabato Timberland Co. Inc. (CTCI), for milling and piling works at EX-ARANETA. When EX-ARANETA closed, the sawmill operation was transferred to TIMEX SAWMILL, a subsidiary of CTCI, in July 1989. Petitioners were recruited by Teddy Arabi, who was hired by CTCI to recruit additional workers due to an abnormal rise in demand for plywood and lumber products. Arabi had no office, equipment, tools, or capital of his own; CTCI provided the tools, equipment, and office space. Petitioners’ work activities, schedules, and shifts were set and supervised by CTCI personnel, including checkers, yard masters, clerks, auditors, foremen, and supervisors. They were paid a daily wage by Arabi, starting at P35.00 in July 1989 and increased to P50.00 in April 1990, with no other labor standard benefits. Arabi also acted as an “enforcer” for CTCI to dissuade workers from claiming benefits. After a group of workers filed a complaint with the DOLE in May 1994, CTCI settled with them but made it appear Arabi was the employer. Subsequently, petitioners were barred from entering the CTCI premises on July 31, 1994, effectively terminating their employment without notice or due process. They filed complaints for illegal dismissal and monetary claims. The Labor Arbiter ruled in their favor, but the NLRC reversed the decision, dismissing the complaints. Petitioners then filed the instant petition.

ISSUE

Whether the National Labor Relations Commission committed grave abuse of discretion in reversing the Labor Arbiter’s decision and dismissing petitioners’ complaints for illegal dismissal and monetary claims.

RULING

Yes. The Supreme Court granted the petition, set aside the NLRC resolutions, and reinstated the Labor Arbiter’s decision. The Court found that Teddy Arabi was a labor-only contractor, not an independent contractor. The elements of labor-only contracting were present: (1) the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others; and (2) the workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer. Arabi had no substantial capital or investment; CTCI provided the tools, equipment, and work premises. Furthermore, the work performed by petitioners—milling, piling, and bundling of logs or sawn lumber—was directly related to CTCI’s principal business of plywood and veneer production. Since Arabi was a labor-only contractor, CTCI, as the principal employer, was responsible to petitioners as if it directly employed them. Therefore, petitioners were regular employees of CTCI, and their dismissal without just cause and without due process was illegal. The NLRC’s reversal of the Labor Arbiter’s decision constituted grave abuse of discretion.