G.R. No. 172241 November 20, 2008
PUREFOODS CORPORATION (now SAN MIGUEL PUREFOODS COMPANY, INC.), petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and LOLITA NERI, respondents.

FACTS

On June 8, 1992, Lolita Neri filed a claim against Purefoods Corporation for various monetary benefits. She was dismissed on July 4, 1992. On July 13, 1992, eleven other complainants joined her in an amended complaint, with Neri charging illegal dismissal. On August 31, 1993, Labor Arbiter Arthur L. Amansec declared Neri and the complainants as regular employees of Purefoods and Neri as illegally dismissed. Purefoods filed a partial appeal, and the NLRC remanded the case for further hearings. Labor Arbiter Felipe P. Pati, after rehearing, dismissed the complaint on December 14, 1998, finding Neri was an employee of D.L. Admark, an independent labor contractor, not Purefoods. A memorandum on appeal was filed by all complainants on March 15, 1999, but only Neri verified it. On November 22, 2000, the NLRC reversed the Labor Arbiter, ruling an employer-employee relationship existed between Purefoods and the complainants, ordered Neri’s reinstatement with backwages, and granted separation pay if reinstatement was not possible. The Court of Appeals upheld the NLRC decision, finding complainants were regular employees of Purefoods under its control and supervision, and that Neri was illegally dismissed. Purefoods filed the present petition.

ISSUE

Whether an employer-employee relationship existed between Purefoods Corporation and Lolita Neri (and the other complainants), making Purefoods liable for illegal dismissal.

RULING

No. The Supreme Court ruled that no employer-employee relationship existed between Purefoods and Lolita Neri. The Court found that D.L. Admark was a legitimate independent contractor, and Neri was its employee. The Court held that Article 280 of the Labor Code, which defines regular and casual employment, is not applicable for determining the existence of an employment relationship in a trilateral setting involving a principal and an independent contractor. The Court applied the four-fold test and the conditions for permissible job contracting. It noted that D.L. Admark’s status as a legitimate independent contractor was established in the prior case of Escario v. NLRC, which found D.L. Admark had substantial capital, was engaged in distinct business activities, and exercised control over its employees. The Promotions Agreements between Purefoods and D.L. Admark indicated a service contract for promotional activities. The Court also found that Neri admitted she applied with and was hired by D.L. Admark, not Purefoods. The affidavits and documents Neri presented to show Purefoods’ control were deemed to be within the context of the service contract for product promotion. The Court further noted that the other complainants, aside from Neri, failed to perfect their appeal as they did not verify the memorandum on appeal. The decision of the Court of Appeals was reversed and set aside.