Escario vs. NLRC

G.R. No. 124055

June 8, 2000

FACTS:

Private respondents California Marketing Co., Inc. (CMC) is a domestic corporation principally engaged in themanufacturing of food products and distribution of such products to wholesalers and retailers. Privaterespondent Donna Louis Advertising and Marketing Associates, Inc. is a duly registered promotionalfirm.Petitioners alleged that they were employed by CMC as merchandisers. They alleged that the hiring,control and supervision of workers and the payment of the salaries were all covered by CMC throughits agent D.L Admark in order CMC to avoid its liability under the law. Petitioners filed a case againstCMC before the labor arbiter for regularization of their employment status.During the pendency of the case, D.L Admark terminated the services of the petitioners. Thecomplaint was amended to include alleged dismissal. CMC filed a motion to implead as partydefendantD.L Admark, the latter filed a motion to intervene. Both motions were granted. CMC deniedbeing petitioners employer while D.L Admark asserted it is the employer of the petitioners.The labor arbiter found petitioners as employees of CMC as they were engaged in activities that arenecessary and desirable in the usual business/trade of CMC. On appeal, the NLRC set aside the laborarbiters decision. But ordered the reinstatement of the petitioners in D.L Admark petitioners filed amotion for consideration before the NLRC which was denied for lack of merit. Hence the petition.

ISSUE:

Whether or not D.L Admark is a labor-only contractor or as independent contractor.

HELD:

The Supreme Court denied the petition.

There is labor-only contracting when the contractor or subcontractor merely recruits, supplies orplaces workers to perform a job, work or service for a principal. In labor only contracting, the followingelements are present:

1.       the person supplying workers to an employer does not have substantial capital or investment in theform of tools, equipment, machineries, wok premise, among other tools

2.       the workers recruited and placed by such person performing activities which are directly related to theprincipal business of the employer.

In contract, there is permissible job contracting when a principal agrees to put out or farm out with acontractor or a subcontractor the performance/completion of a specific job, work or services within adefinite or predetermined period, regardless of whether such job/services is to be performed orcompleted within or outside the premises of the principal. In this arrangement, the followingconditions must concur.

1.       The contractor carries on a distinct and independent business and undertakes the contract work on hisaccount under the responsibility according to his own manual and methods, free from the control anddirection of his employer or principal in all matters connected with the performance of his employerwork except as to the results thereof; and

2.       The contractor has substantial capital / investment which are necessary in the conduct of his business.

The court reiterated that it is not enough to show substantial capitalization on investment. In additionthe following factors need be consideredwhether the contractor is carrying on an independent businessthe nature and extent of the workthe skill requiredthe term and duration of the relationshipthe right to assign the performance of specified pieces of workthe control and supervision of the workersthe power of the employer with respect to the hiring, firing and payment of workers of the contractorthe control of the premises the duty to supply premises, tools, appliances, materials and labormode, manner and terms of payment. Based on the foregoing criteria, the court found that D.L Admark is a legitimate independentcontractor. Applying the four-fold test, D.L Admark was found to be the employer of the petitioners.The Supreme Court affirmed the NLRC’s ruling.