G.R. No. 217301. June 06, 2018.
CONSOLIDATED BUILDING MAINTENANCE, INC. AND SARAH DELGADO, PETITIONERS, VS. ROLANDO ASPREC, JR. AND JONALEN BATALLER, RESPONDENTS.

FACTS

Respondents Rolando Asprec, Jr. and Jonalen Bataller were originally hired by Philippine Pizza, Inc. (PPI) for its Pizza Hut branch. After the expiration of their initial contracts, they were instructed to resign from PPI and were subsequently re-hired through petitioner Consolidated Building Maintenance, Inc. (CBMI), a service contractor for PPI. They performed identical duties at the same branch. Following an incident involving an alleged delivery discrepancy in July 2010, they were investigated and subsequently dismissed. They filed a complaint for illegal dismissal against CBMI and PPI, arguing the arrangement was a labor-only contracting scheme designed to prevent regularization and that their dismissal was without cause and due process.
The Labor Arbiter ruled in favor of the respondents, declaring them regular employees of PPI, finding the CBMI-PPI arrangement to be labor-only contracting, and holding both solidarily liable for illegal dismissal. The National Labor Relations Commission (NLRC) affirmed but modified the award. The Court of Appeals upheld the Labor Arbiter’s decision. Petitioners CBMI and its manager elevated the case to the Supreme Court via a petition for review on certiorari.

ISSUE

Whether the Court of Appeals erred in affirming the finding that the respondents were illegally dismissed and that CBMI and PPI are engaged in labor-only contracting, making them solidarily liable as employers.

RULING

The Supreme Court denied the petition and affirmed the lower court’s rulings. On the issue of employment relationship, the Court applied the four-fold test and the “right-of-control” test, which is the most determinative indicator. The records showed that PPI, through its managers, exercised control over the respondents’ work performance, including their assignments, duties, and disciplinary actions. The fact that the respondents performed tasks directly related to PPI’s main business—pizza production and delivery—was decisive. This established that the respondents were regular employees of PPI, not of CBMI.
Consequently, the arrangement was correctly deemed labor-only contracting. CBMI, as the contractor, did not possess substantial capital or investment. It merely supplied workers to PPI, which exercised control over them. Under Department Order No. 18-02, such an arrangement makes the contractor (CBMI) and the principal (PPI) jointly and solidarily liable to the employees. As the respondents were regular employees of PPI, their dismissal was illegal. PPI failed to prove a just or authorized cause for termination and did not observe procedural due process. Therefore, the solidary liability imposed by the Labor Arbiter for reinstatement, backwages, and damages was proper. The petition lacked merit.