G.R. No. 182255 , June 15, 2015
PETRON CORPORATION, Petitioner, vs. ARMZ CABERTE, ANTONIO CABERTE, JR., MICHAEL SERVICIO, ARIEL DEVELOS, ADOLFO GESTUPA, ARCHIE PONTERAS, ARNOLD BLANCO, DANTE MARIANO, VIRGILIO GALOROSA, and CAMILO TE, Respondents.

FACTS

Petron Corporation (Petron) is engaged in the manufacture and distribution of petroleum products. Respondents were hired between 1979 and 1998 to work at Petron’s Bacolod Bulk Plant as LPG fillers, maintenance crew, warehousemen, utility workers, and tanker receiving crew. From 1996 to 1999, Petron entered into service contracts with ABC Contracting Services (ABC), owned by Antonio B. Caberte, Sr., for utility, maintenance, and LPG assistance services at the plant. Respondents were supplied by ABC to perform these services.
On July 2, 1999, respondents filed complaints for illegal dismissal and monetary claims against Petron, ABC, and Caberte, Sr., alleging that ABC was a labor-only contractor, that Petron was their true employer, and that they were dismissed without cause when Petron barred them from the plant after the service contracts expired. Petron argued that ABC was a legitimate independent contractor with substantial capital, that it had no direct control over respondents, and that respondents were ABC’s employees.
The Labor Arbiter dismissed the complaints against Petron, ruling that ABC was an independent contractor and that the cessation of its contract was a force majeure justifying dismissal, but awarded separation pay. The NLRC affirmed this decision. The Court of Appeals reversed, holding that ABC was a labor-only contractor, making respondents regular employees of Petron, and declared their dismissal illegal.

ISSUE

Whether ABC Contracting Services is a legitimate independent contractor or a labor-only contractor, thereby determining if respondents are regular employees of Petron entitled to reinstatement and backwages.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Court of Appeals’ decision. ABC is a labor-only contractor, and respondents are regular employees of Petron.
The Court held that for a contractor to be considered legitimate, it must possess substantial capital or investment, and the service performed must be independent and not directly related to the principal’s main business. Here, ABC lacked substantial capital or investment in tools, equipment, and work premises directly used for the contracted job. The work performed by respondents—maintenance, utility, and LPG assistance—was directly related to Petron’s business of storing and distributing petroleum products, which is necessary and desirable to its trade. Moreover, Petron exercised control over respondents’ work, particularly in safety measures due to the hazardous nature of the products, indicating an employer-employee relationship.
Since ABC was a labor-only contractor, Petron, as the principal, is deemed the employer of respondents under Article 106 of the Labor Code. Respondents, having performed tasks for Petron for years, attained regular employment status. Their dismissal without just or authorized cause and without due process constituted illegal dismissal. They are entitled to reinstatement without loss of seniority rights, full backwages, allowances, and other benefits from the time of dismissal until actual reinstatement, or separation pay if reinstatement is not feasible, plus attorney’s fees.