G.R. No. 117936-37 May 20, 1998
FRANCISCO U. NAGUSARA, MARQUITO L. PAMILARA, and DIOSCORO D. CRUZ, petitioners, vs. THE NATIONAL LABOR RELATIONS COMMISSION, LORENZO DY AND OTHERS, and ISAYAS AMURAO, respondents.

FACTS

Petitioners Francisco U. Nagusara, Marquito L. Pamilara, and Dioscoro D. Cruz filed a complaint against respondent Lorenzo Dy (owner of Dynasty Steel Works) for illegal dismissal, unfair labor practice, and non-payment of various monetary benefits. The Labor Arbiter initially ruled in favor of petitioners, ordering reinstatement with backwages. The NLRC set aside this decision and remanded the case. Respondent Dy later impleaded Isayas Amurao as a co-respondent, alleging Amurao was the petitioners’ real employer under a subcontracting agreement to provide manpower for Dy’s construction project at Solmac Marketing. A second Labor Arbiter decision found the dismissal illegal but awarded only one year of backwages and dismissed other monetary claims. The NLRC, on appeal, reversed this decision, dismissing the complaint entirely on the grounds that no employer-employee relationship existed between petitioners and Dy, and that petitioners were not illegally dismissed. Petitioners claimed they were hired by Dynasty Steel Works in 1981, were prohibited from entering the worksite in December 1982 upon Dy’s order, and were told by Amurao (who identified himself as supervisor) that their services were terminated. Respondents Dy and Amurao presented a conflicting version, asserting that petitioners were Amurao’s employees under a subcontract, that they were not dismissed but were transferred after being caught drinking by the building owner, and that they refused the transfer.

ISSUE

The primary issue is whether an employer-employee relationship existed between petitioners and respondent Lorenzo Dy. A secondary issue is whether petitioners were illegally dismissed.

RULING

The Supreme Court ruled that an employer-employee relationship did exist between petitioners and respondent Lorenzo Dy. The Court found the evidence, particularly SSS Premium Certifications showing Dynasty Steel Works declared and paid premiums for petitioners from August 1981 to November 1982, and payroll records, sufficient to prove this relationship. The Court rejected the claim of a legitimate subcontract between Dy and Amurao, finding the subcontract agreement questionable as it was executed months after petitioners began working, and noting inconsistencies in the respondents’ testimonies. The Court held that Amurao was not a legitimate job contractor as he did not carry an independent business with substantial capital or investment, and was likely just an employee of Dy tasked with supervision. The Court also rejected the claim that petitioners were project employees, as there was no evidence they were informed of a specific project’s duration at the time of hiring, and their work as carpenters was necessary to Dy’s construction business, making them regular employees under Article 280 of the Labor Code.
On the issue of illegal dismissal, the Court found petitioners’ dismissal to be illegal. Respondent Dy failed to substantiate the alleged valid cause for dismissal (the drinking incident) with clear and convincing evidence, and did not comply with procedural due process. The proper remedy for illegal dismissal is reinstatement with full backwages. However, since the records showed Dynasty Steel Works ceased operations in May 1985, reinstatement was no longer feasible. Therefore, in lieu of reinstatement, respondent Dy was ordered to pay petitioners separation pay in addition to backwages computed from the time of their dismissal until the date of the company’s closure. The Court affirmed the dismissal of petitioners’ other monetary claims (overtime, holiday pay, etc.) for lack of sufficient evidence. The assailed NLRC resolution and order were set aside.