GR 148490; (November, 2006) (Digest)
G.R. No. 148490 ; November 22, 2006
7K CORPORATION, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, RENE A. CORONA, and ALEX B. CATINGAN, Respondents.
FACTS
Petitioner 7K Corporation entered into a service contract with Universal Janitorial and Allied Services, wherein Universal bound itself to provide drivers to 7K. Private respondents Rene Corona and Alex Catingan were interviewed by 7K and subsequently commenced work as drivers. Pursuant to the contract, 7K paid Universal a monthly sum per driver, but 7K directly paid the private respondents for overtime work. A dispute arose when the overtime pay computed by 7K’s accounting department was less than the hours reflected on the respondents’ time cards.
Private respondents filed complaints for illegal dismissal and monetary claims against both Universal and 7K. The Labor Arbiter ruled that Universal was the sole employer, citing the contract which stated Universal retained control and assumed all employer responsibilities. The Arbiter declared the dismissal illegal and awarded backwages and separation pay, holding only Universal liable.
ISSUE
Whether the National Labor Relations Commission correctly held 7K Corporation solidarily liable with Universal Janitorial for the monetary claims of the employees.
RULING
Yes. The Supreme Court affirmed the NLRC ruling. The NLRC correctly characterized Universal as a labor-only contractor. The determination hinged on Universal’s failure to prove it possessed substantial capital or investment in tools, equipment, or machinery. Without such proof, Universal is deemed merely an agent of the principal, 7K Corporation. In labor-only contracting, the law establishes an employer-employee relationship between the principal and the workers supplied by the contractor.
Consequently, under Articles 106 and 109 of the Labor Code, the principal employer is jointly and severally liable with the labor-only contractor for all the rightful claims of the employees. This solidary liability ensures the workers’ protection and guarantees the satisfaction of their valid monetary awards. The Court found no merit in 7K’s procedural arguments, upholding the NLRC’s authority to modify the Labor Arbiter’s decision on appeal to correctly apply substantive labor law on contractual relationships and liability. The award of backwages was correctly deleted due to insufficient proof of illegal dismissal, but the solidary liability for other monetary claims was sustained.