G.R. No. 237277 & 237317, November 27, 2019
Alaska Milk Corporation and Asiapro Multipurpose Cooperative, Petitioners, vs. Ruben P. Paez, Florentino M. Combite, Jr., Sonny O. Bate, Ryan R. Medrano, and John Bryan S. Oliver, Respondents.

FACTS

The respondents worked as production helpers at Alaska Milk Corporation’s San Pedro, Laguna plant. They were originally members of Asiapro Multipurpose Cooperative, with some later transferring to 5S Manpower Services. Both cooperatives had Joint Operating Agreements with Alaska to provide personnel for “auxiliary functions.” The respondents’ tasks included preparing raw materials, operating machinery, monitoring defective products, and packaging finished milk. In 2013, their assignments were terminated. They filed consolidated complaints for illegal dismissal, regularization, and money claims. The Labor Arbiter dismissed the complaints, finding Asiapro and 5S to be legitimate independent contractors exercising control over the respondents, who were thus not Alaska’s employees. The NLRC affirmed this decision. The Court of Appeals reversed, ruling that Asiapro and 5S were engaged in labor-only contracting, the respondents were regular employees of Alaska, and they were illegally dismissed.

ISSUE

The core issue is whether the respondents were illegally dismissed, which depends on whether Asiapro and 5S are engaged in labor-only contracting or are legitimate job contractors.

RULING

The Supreme Court modified the CA decision. It held that Asiapro is a legitimate independent contractor, but 5S is engaged in labor-only contracting. The Court found that Asiapro possessed substantial capital, as evidenced by its financial statements showing assets over P100 million and paid-up capital over P25 million, and it exercised control over its members through coordinators. However, 5S failed to prove it had substantial capital or investment. Furthermore, the work performed by the respondents—post-production activities directly related to Alaska’s main business of manufacturing dairy products—was necessary and desirable to Alaska’s operations. Consequently, for respondents Bate, Combite, and Oliver (who were under 5S), a labor-only contracting arrangement existed, making Alaska their statutory employer. Their dismissal, without just or authorized cause and due process, was illegal. For respondents Paez and Medrano (who were under Asiapro), no employer-employee relationship with Alaska was established, as Asiapro was a legitimate contractor; thus, their complaints against Alaska had no merit. The solidary liability was adjusted accordingly: Alaska and 5S are solidarily liable to Bate, Combite, and Oliver for backwages and separation pay. Asiapro is solely liable to Paez and Medrano for any claims arising from their membership.