G.R. No. 230030 . August 29, 2018.
PHILIPPINE PIZZA, INC., PETITIONER, V. JENNY PORRAS CAYETANO, ET AL., RESPONDENTS.

FACTS

Respondents were hired by Consolidated Building Maintenance, Inc. (CBMI), a contractor providing services to petitioner Philippine Pizza, Inc.’s (PPI) Pizza Hut restaurants. They worked as service crew and delivery riders for periods ranging from seven to eleven years. Respondents filed complaints for illegal dismissal against both PPI and CBMI, alleging they were regular employees of PPI. They contended they were under the direct supervision of Pizza Hut managers, used its tools, and were initially hired by PPI before being transferred to CBMI to circumvent regular status. PPI denied an employer-employee relationship, asserting it had a legitimate service contract with CBMI, which exercised control over respondents. CBMI admitted employing respondents, paying their wages and benefits, and claimed it was a legitimate contractor forced to place respondents on floating status due to PPI’s reduced service requirements.
The Labor Arbiter ruled in favor of respondents, finding them to be regular employees of PPI and declaring a labor-only contracting arrangement, holding PPI and CBMI jointly and severally liable for illegal dismissal. The National Labor Relations Commission (NLRC) reversed this, upholding CBMI as a legitimate contractor and finding no employer-employee relationship with PPI. The Court of Appeals then reinstated the Labor Arbiter’s decision, agreeing that CBMI was engaged in labor-only contracting.

ISSUE

Whether the Court of Appeals erred in finding that an employer-employee relationship existed between PPI and the respondents, thereby holding PPI jointly and severally liable for illegal dismissal.

RULING

The Supreme Court granted the petition and reversed the Court of Appeals. The legal logic centered on the established criteria for determining legitimate job contracting versus labor-only contracting. For a contractor to be considered legitimate, it must possess substantial capital or investment and the employees must be performing activities which are not directly related to the principal’s main business. The Court found that CBMI sufficiently proved its status as a legitimate independent contractor. It presented proof of substantial paid-up capital, a Certificate of Registration from the Department of Labor and Employment, and its own tools, equipment, and supervisors who managed the respondents’ performance, attendance, and discipline.
Crucially, the Court held that the tasks performed by the respondents—such as kitchen work, delivery, and sanitation—were not directly related to PPI’s main business of pizza restaurant operations. These were merely ancillary and support activities. The certifications issued by Pizza Hut to respondents for good performance were not conclusive proof of PPI’s control over the means and methods of their work; such recognition is distinct from the power of control that establishes an employment relationship. Since CBMI was a legitimate contractor, it was the sole employer of the respondents. Consequently, PPI could not be held jointly and severally liable for the dismissal. The case was remanded to the NLRC to determine the propriety of the respondents’ placement on floating status by their true employer, CBMI.