G.R. No. 97008 -09 July 23, 1993
Virginia G. Neri and Jose Cabelin, petitioners, vs. National Labor Relations Commission, Far East Bank & Trust Company (FEBTC) and Building Care Corporation, respondents.

FACTS

Petitioners Virginia G. Neri and Jose Cabelin were hired by respondent Building Care Corporation (BCC), a corporation engaged in providing janitorial, maintenance, and other specific services to client firms. They were assigned to work at the Cagayan de Oro City Branch of respondent Far East Bank and Trust Company (FEBTC)—Neri as a radio/telex operator and Cabelin initially as a janitor, later promoted to messenger. Petitioners filed a complaint to compel FEBTC to recognize them as its regular employees and to pay them the wage differential between what BCC paid them and what FEBTC employees received. The Labor Arbiter dismissed the complaint, finding BCC to be a legitimate independent contractor with substantial capitalization, thus making petitioners employees of BCC, not FEBTC. The National Labor Relations Commission (NLRC) affirmed this decision. Petitioners appealed to the Supreme Court, contending that BCC was engaged in “labor-only” contracting, making them employees of FEBTC by operation of law.

ISSUE

Whether or not Building Care Corporation (BCC) is a “labor-only” contractor, thereby making petitioners regular employees of Far East Bank and Trust Company (FEBTC).

RULING

No. The Supreme Court dismissed the petition, upholding the findings of the Labor Arbiter and the NLRC that BCC is a legitimate independent contractor and not a “labor-only” contractor. The Court ruled that for “labor-only” contracting to exist, two conditions must concur under Article 106 of the Labor Code: (a) the person supplying workers lacks substantial capital or investment; and (b) the workers perform activities directly related to the principal business of the employer. The Court found that BCC had substantial capital, with a fully paid capital stock of P1 million. The use of the disjunctive “or” in the law means that having substantial capital alone is sufficient to negate “labor-only” contracting; it is not required to also have investment in tools, equipment, or work premises. Furthermore, the Court noted that BCC maintained supervision and control over petitioners—they were hired by BCC, reported in BCC uniforms, filed leaves with BCC, and were paid by BCC. While FEBTC issued guidelines for the end-result of Neri’s work, this did not constitute control over the means and methods of how the work was performed. The Court also distinguished the case from Philippine Bank of Communications v. NLRC, as BCC was a highly capitalized venture performing specific services under its own manner and method, free from the control of FEBTC except as to the results. Therefore, petitioners remained regular employees of BCC, not FEBTC.