G.R. Nos. 92777-78; March 13, 1991
ISAGANI ECAL, ET AL., Represented by ISAGANI ECAL, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, JIMMY MATCHUKA AND HI-LINE TIMBER, INC., respondents.

FACTS

Petitioners, a group of workers, filed consolidated complaints for illegal dismissal and money claims against Hi-Line Timber, Inc. and its foreman. They alleged regular employment, performing tasks from 7:00 AM to 7:00 PM, and claimed denial of statutory benefits. Private respondent Hi-Line denied an employer-employee relationship, contending petitioner Isagani Ecal was an independent contractor who hired the other petitioners after his own resignation from the company. The Labor Arbiter and the NLRC dismissed the complaints, finding no employer-employee relationship based on company payrolls, affidavits from company personnel, and Ecal’s resignation letter stating his intent to work as a contractor.

ISSUE

The primary issue is whether an employer-employee relationship existed between petitioners and Hi-Line Timber, Inc., or if Isagani Ecal was a legitimate independent contractor.

RULING

The Supreme Court reversed the NLRC, finding that an employer-employee relationship existed and that Ecal was engaged in labor-only contracting. The Court applied the four-fold test: (1) selection and engagement; (2) payment of wages; (3) power of dismissal; and (4) power of control. It found that Hi-Line provided the tools and materials, the work was directly related to its principal business of timber processing, and the company’s security guards enforced the dismissal. The lump sum payments to Ecal did not negate the relationship, as he merely acted as a paymaster. The Court held Ecal was a labor-only contractor, lacking substantial capital or investment, making Hi-Line the direct employer. Consequently, petitioners were illegally dismissed. They were deemed regular employees entitled to reinstatement and three years of backwages without deductions. The case was remanded to the Labor Arbiter for computation of unpaid benefits.