GR 211015; (June, 2016) (Digest)
G.R. No. 211015 & 213835, June 20, 2016
CAGAYAN ELECTRIC POWER & LIGHT COMPANY, INC. (CEPALCO) AND CEPALCO ENERGY SERVICES CORPORATION (CESCO), PETITIONERS, VS. CEPALCO EMPLOYEE’S LABOR UNION-ASSOCIATED LABOR UNIONS-TRADE UNION CONGRESS OF THE PHILIPPINES (TUCP), RESPONDENT.
FACTS
Respondent CEPALCO Employee’s Labor Union is the certified bargaining agent for CEPALCO’s rank-and-file employees. CEPALCO, an electric power distributor, entered into a Contract for Meter Reading Work with CESCO, a related entity, on February 19, 2007. This led to the relief and replacement of several union members with CESCO workers. The Union filed an unfair labor practice (ULP) complaint, alleging the contracting-out was designed to evade CBA obligations and dissipate union membership, constituting ULP under Article 259(c) of the Labor Code and labor-only contracting. Pending resolution, CEPALCO and CESCO entered into another Contract of Service for warehousing works on January 5, 2010, similarly resulting in the replacement of union members. A second ULP complaint was filed. The Labor Arbiter dismissed both complaints, finding CESCO to be a legitimate independent contractor. The NLRC affirmed. The Union elevated the cases to the Court of Appeals via certiorari.
ISSUE
Whether the Court of Appeals correctly: (1) absolved petitioners of unfair labor practice; and (2) declared that CESCO was engaged in labor-only contracting, making its supplied workers regular employees of CEPALCO.
RULING
The Supreme Court affirmed the CA’s rulings. On the ULP charge, the Court found no substantial evidence that the contracting-out was motivated by anti-union animus or intended to interfere with the employees’ right to self-organization. The mere act of contracting out services, even if they were previously performed by union members, does not per se constitute ULP. The Union failed to prove that the principal purpose was to discriminate against or discourage union membership. The legal logic requires a showing of malicious intent to interfere with union rights, which was not established.
However, the Court upheld the CA’s finding of labor-only contracting. Under Article 106 of the Labor Code, labor-only contracting exists when: (a) the contractor lacks substantial capital or investment; and (b) the workers supplied perform activities directly related to the principal’s main business. The Court found CESCO lacked substantial capital or investment relative to the scale of its operations for CEPALCO. Meter reading and warehousing are indisputably directly related to CEPALCO’s principal business of electric distribution. Consequently, CESCO was deemed a mere agent, and the workers it supplied are considered regular employees of CEPALCO, entitled to the same rights and benefits as if directly hired. The Union, as the certified bargaining agent, had the legal personality to raise this issue as it affected the bargaining unit’s composition and integrity.