G.R. No. 127238 August 25, 1998
Coca-Cola Bottlers, Phils., Inc., petitioner, vs. Delfin Hingpit, Gabriel Francisco, Jr., Cecilio Pinar, Jr., Abundio Balatero, Narito Manluluyo, Secero Zamora, Medardo Gabines, Enrique Bangalao, Julito Apat, Sotero Pandan, Nelson Umali, and the National Labor Relations Commission, respondents.

FACTS

Petitioner Coca-Cola Bottlers, Phils., Inc. (COCA-COLA) maintained a bottling plant in Tagbilaran City. It entered into contracts for manpower supply: first with Pioneer Multi-Services Co. (PIONEER) on May 28, 1983, and later with Lipercon Services, Inc. (LIPERCON) on December 17, 1988. Eleven individuals filed seven separate cases against COCA-COLA (and in some instances, against PIONEER and LIPERCON) before the Regional Arbitration Branch of the NLRC in Cebu City, claiming illegal dismissal and various monetary benefits. The complainants, except Delfin Hingpit and Gabriel Francisco, were originally recruited by PIONEER and detailed to COCA-COLA’s Tagbilaran plant. They were later absorbed by LIPERCON when it replaced PIONEER. Hingpit was directly recruited by LIPERCON in 1984 and later hired by COCA-COLA on a probationary basis in 1988, but his services were terminated after he failed qualifying exams and submitted a false police clearance. Francisco worked for San Miguel Corporation and later through PIONEER and LIPERCON until his separation in 1988. The Executive Labor Arbiter consolidated the cases and ruled that PIONEER was a labor-only contractor, but LIPERCON was a legitimate independent contractor. The Arbiter found that when LIPERCON took over, the complainants (except Hingpit) were already regular employees of COCA-COLA, and their transfer constituted illegal termination. COCA-COLA was ordered to pay separation pay. The complainants appealed, and the NLRC modified the decision, ordering COCA-COLA to pay full back wages and other benefits and to reinstate the complainants. COCA-COLA filed this certiorari petition.

ISSUE

The primary issue is whether COCA-COLA is liable for illegal dismissal and obligated to reinstate the complainants and pay back wages, considering the finding that LIPERCON was a legitimate independent contractor and the complainants had signed quitclaims upon discharge from LIPERCON.

RULING

The Supreme Court GRANTED the petition, NULLIFIED and SET ASIDE the NLRC Decision, and REINSTATED and AFFIRMED the Decision of the Executive Labor Arbiter with modification. The Court held that LIPERCON was a legitimate independent contractor, not a labor-only contractor, as it had substantial capital, exercised control over its employees, and performed its own functions. The complainants (except Hingpit) were employees of LIPERCON, not of COCA-COLA. Their dismissal was effected by LIPERCON, and they had signed quitclaims and releases, which they did not refute. Therefore, COCA-COLA, as principal, could not be held liable for illegal dismissal under Articles 106 and 107 of the Labor Code, as the legitimate contractor (LIPERCON) was the direct employer. However, the Court sustained the Arbiter’s finding that when LIPERCON replaced PIONEER, the complainants (except Hingpit) had already attained regular status through years of service under PIONEER, which was a labor-only contractor, making COCA-COLA their employer at that point. Their severance at that time was illegal, warranting separation pay. Reinstatement and full back wages were not warranted. The complaint of Delfin Hingpit was dismissed for lack of merit, as his probationary employment with COCA-COLA was validly terminated for just cause.