G.R. No. 177592 June 9, 2014
AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO GINDANG, ALLAN SUNGAHID, MAXIMO LEE, JOSE G. MORATO, REX GABILAN, AND EUGEMA L. LAURENTE, Petitioners, vs. PETRON CORPORATION, Respondent.

FACTS

Petron Corporation (Petron), engaged in the oil business, contracted the services of Romeo D. Gindang Services (RDG) to provide janitorial, maintenance, tanker receiving, packaging, and other utility services at its Mandaue Bulk Plant under a Contract for Services from June 1, 2000, to May 31, 2002, with extensions until September 30, 2002. The petitioners were recruited by Romualdo D. Gindang Contractor (later succeeded by RDG) and worked at the bulk plant performing duties such as utility worker, tanker receiver, barge loader, warehouseman, mixer, telephone operator, and forklift driver. Upon the expiration of the service contract without renewal, petitioners were barred from work on October 16, 2002. They filed complaints for illegal dismissal against Petron and RDG, claiming RDG was a labor-only contractor and that they were regular employees of Petron, performing tasks necessary and desirable to its business, using its tools and equipment, and under its supervision. Petron argued RDG was an independent contractor and the petitioners’ real employer, presenting RDG’s certificates of registration, financial statements, and other documents to prove its independent status. The Labor Arbiter and the National Labor Relations Commission (NLRC) ruled in favor of the petitioners, declaring them regular employees of Petron and ordering their reinstatement with backwages and separation pay. The Court of Appeals reversed this decision, finding no employer-employee relationship between Petron and the petitioners and declaring RDG a legitimate independent contractor.

ISSUE

Whether an employer-employee relationship existed between Petron and the petitioners, making Petron liable for illegal dismissal.

RULING

No. The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The Court held that for an employer-employee relationship to exist, four elements must concur: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) power of control over the employee’s conduct, with control being the most important element. The burden of proving the relationship lies with the party asserting it. In this case, the petitioners failed to substantiate their claim that Petron exercised control over the means and methods of their work. Evidence showed that RDG, not Petron, hired the petitioners, paid their wages, and supervised their work through its own personnel. Petron’s right to impose rules for the governance of its premises and to ensure the contracted results were achieved did not equate to the control necessary to establish an employment relationship. Furthermore, the Court found that RDG was a legitimate independent contractor, not a labor-only contractor. Petron successfully presented proof that RDG had substantial capital, as evidenced by its audited financial statements showing a net worth sufficient to qualify as such under the law. The petitioners’ tasks (janitorial, maintenance, etc.) were not directly related to Petron’s principal business of manufacturing and marketing petroleum products. Since RDG was a legitimate contractor and the petitioners’ employer, their dismissal due to the lawful termination of the service contract between Petron and RDG was valid. Petron, as the principal, had no employer-employee relationship with the petitioners and thus could not be held liable for illegal dismissal.