GR 50915; (August, 1990) (Digest)
G.R. No. 50915 August 30, 1990
ASSOCIATED ANGLO-AMERICAN TOBACCO CORPORATION, petitioner, vs. HON. JACOBO C. CLAVE, in his capacity as Presidential Executive Assistant, ASSOCIATED FEDERATION OF LABOR (AFL) and its members, namely AMADOR GUARINO, VICENTE MARQUEZ, ALFREDO ENRIQUEZ and NICASIO SAN JUAN, respondents.
FACTS
Petitioner Associated Anglo-American Tobacco Corporation entered into promotional dealership contracts with individuals to sell its cigarettes. These dealers hired private respondents as drivers/helpers but subsequently dismissed them. The respondent union filed a complaint against the corporation and the dealers for unfair labor practice and violations of labor laws. The corporation denied any employer-employee relationship with the dismissed workers, asserting they were solely employees of the independent dealers. The Labor Arbiter ruled in favor of the workers, ordering their reinstatement with backwages, a decision affirmed by the National Labor Relations Commission, the Secretary of Labor, and, on appeal, the Office of the President, which modified the backwages award to six months.
ISSUE
The central issue is whether an employer-employee relationship exists between the petitioner corporation and the private respondents, who were directly hired and paid by the promotional dealers.
RULING
The Supreme Court dismissed the petition, affirming the decision of the Office of the President. The legal logic rests on the application of the “labor-only contracting” doctrine under the Labor Code. The Court examined the nature of the relationship between the corporation and the dealers. The promotional dealers had no substantial capital or investment; the vehicles, fuel, maintenance, and licenses were supplied and paid for by the corporation. The dealers’ work—selling the corporation’s products at prices it fixed—was directly related to the corporation’s principal business and performed entirely within its control and premises during regular six-day workweeks.
These circumstances conclusively established that the dealers were not legitimate independent contractors but were engaged in “labor-only contracting” as defined by law. Under Article 106 of the Labor Code and its implementing rules, a labor-only contractor is considered merely an agent of the principal employer. Consequently, the law itself establishes an employer-employee relationship between the principal (the corporation) and the workers supplied by such a contractor. This legal fiction is designed to prevent circumvention of labor standards and to ensure that the principal employer bears statutory responsibilities toward the workers. Therefore, the corporation was correctly held liable as the direct employer of the respondents. The findings of the labor tribunals and the Office of the President were supported by substantial evidence and constituted a correct application of labor law, devoid of grave abuse of discretion.