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 (Alaska) San Pedro, Laguna plant. They were originally members of Asiapro Multipurpose Cooperative (Asiapro), with respondents Bate, Combite, and Oliver later transferring to 5S Manpower Services (5S). Through Joint Operating Agreements, Asiapro and 5S provided personnel to perform auxiliary functions at the plant. The respondents’ assignments were terminated on various dates in 2013. 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 National Labor Relations Commission 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. Alaska and Asiapro filed these consolidated petitions.

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 a labor-only contractor. 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. Consequently, respondents Paez and Medrano, who remained Asiapro members, were not Alaska’s employees, and their dismissal claims were against Asiapro alone. In contrast, respondents Bate, Combite, and Oliver, supplied by the labor-only contractor 5S, were deemed regular employees of Alaska. Since their termination was due to the expiration of the service agreement between Alaska and 5S, and not for a just or authorized cause, they were illegally dismissed. Alaska and 5S were held solidarily liable for their backwages and separation pay.