G.R. No. 158956 April 24, 2009
ILIGAN CEMENT CORPORATION, Petitioner, vs. ILIASCOR EMPLOYEES AND WORKERS UNION – SOUTHERN PHILIPPINES FEDERATION OF LABOR (IEWU-SPFL), AND ITS OFFICERS AND MEMBERS, HEADED BY CLEMENTINO DENSING, PRESIDENT, ET AL., Respondents.

FACTS

Petitioner Iligan Cement Corporation (ICC) is a corporation with plant offices in Iligan City. Iligan Industrial and Agency Services Corporation (ILIASCOR) was its accredited job contractor providing stevedoring and arrastre services at its private pier. Respondent Union (IEWU-SPFL) was the certified bargaining representative of ILIASCOR’s workers. In November 1999, Blue Circle Philippines, Inc. took over ICC’s management and decided to bid out the pier services. ILIASCOR lost the bidding to Luzon Visayas Mindanao Arrastre and Stevedoring, Inc. (LVMASI). ILIASCOR paid the individual respondents separation pay of half-month pay per year of service, contrary to the one-month pay stipulated in their Collective Bargaining Agreement (CBA). The contract with LVMASI was not perfected as LVMASI was a dormant corporation. To avoid hampering operations, ICC issued a service order to Vedali General Services (Vedali), another accredited service agency. On August 2, 2000, Vedali fielded stevedores, including the individual respondents, who were engaged by ICC’s Packhouse Manager Alex Sagario. Vedali later billed ICC for these services. On November 15, 2000, ICC entered into a stevedoring contract with Northern Mindanao Industrial and Port Services Corporation (NMIPSC), which then took over the stevedoring duties. The individual respondents filed complaints with the NLRC for declaration as regular employees of ICC, payment of separation pay differentials from ILIASCOR, and illegal dismissal. The Labor Arbiter dismissed the complaint, ruling ICC was not the employer. The NLRC reversed, declaring respondents as regular employees of ICC from August 2 to November 15, 2000, and that their dismissal was illegal. It ordered ICC to pay separation pay and full backwages but held ICC not liable for the separation pay differential from ILIASCOR. The Court of Appeals dismissed ICC’s petition for certiorari and denied its motion for reconsideration.

ISSUE

Whether the Court of Appeals erred in affirming the NLRC’s decision that the individual respondents were regular employees of ICC and were illegally dismissed.

RULING

The Supreme Court denied the petition and affirmed the assailed Court of Appeals Resolutions. The Court held that the individual respondents were regular employees of ICC during the period they were engaged through Vedali. Vedali was a labor-only contractor, as it did not have substantial capital or investment, and the stevedoring work performed was directly related to ICC’s main business. ICC’s Packhouse Manager directly hired and supervised the respondents. As a labor-only contractor, Vedali is considered merely an agent of ICC, making ICC the direct employer. The termination of respondents’ services upon NMIPSC’s takeover constituted illegal dismissal due to lack of just cause and due process. ICC is liable for reinstatement or separation pay and full backwages. However, the Court upheld the NLRC’s ruling that ICC is not liable for the separation pay differential claim against ILIASCOR, as that claim arises from the CBA between the respondents and ILIASCOR, to which ICC was not a party. Liability for unpaid wages of a contractor’s employees under Article 106 of the Labor Code does not extend to separation pay, which is a consequence of severance of employment.