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PHILIPPINE SUPREME
COURT
DECISIONS
NEW GOLDEN CITY
BUILDERS
G.R.
No.
154715
-versus- COURT OF APPEALS,
NATIONAL LABOR RELATIONS COMMISSION,
D E C I S I O N YNARES-SANTIAGO, J.:chanroblesvirtuallawlibrary This is a Petition for Review under Rule 45 of the Rules of Court seeking the reversal of the Decision[1] of the Court of Appeals dated February 28, 2002, in CA-G.R. SP No. 65577, which dismissed the petition on the ground that there was no grave abuse of discretion on the part of the public respondent National Labor Relations Commission (NLRC) in ordering petitioner to reinstate private respondents and to pay their full backwages from the dates of their dismissal to the dates of their reinstatement. chanrobles virtuallaw libraryred The antecedent facts are as follows:chanroblesvirtuallawlibrary On April 4, 1995, Petitioner New Golden City Builders and Development Corporation, a corporation engaged in the construction business, entered into a construction contract with Prince David Development Corporation for the construction of a 17-storey office and residential condominium building along Katipunan Road, Loyola Heights, Quezon City, Metro Manila.[2]chanrobles virtuallaw libraryred Petitioner engaged the services of Nilo Layno Builders to do the specialized "concrete works, form works and steel rebars works", in consideration of the total contract price of P5 Million. Pursuant to the contract, Nilo Layno Builders hired private respondents to perform work at the project. After the completion of the phase for which Nilo Layno Builders was contracted sometime in 1996, private respondents filed a complaint case against petitioner and its president, Manuel Sy, with the Arbitration Branch of the NLRC for "unfair labor practice, non-payment of 13th month pay, non-payment of 5 days service incentive leave, illegal dismissal and severance pay in lieu of reinstatement."chanrobles virtuallaw libraryred On August 30, 1999, Labor Arbiter Felipe Garduque rendered a decision finding that Nilo Layno Builders was a labor-only-contractor; thus, private respondents were deemed employees of the petitioner. The dispositive portion of the decision reads:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
Both parties appealed the decision of the Labor Arbiter to the NLRC. Petitioner maintained that Nilo Layno Builders was an independent contractor and that private respondents were not its employees. On the other hand, private respondents claimed that the Labor Arbiter erred in finding that they were not illegally dismissed and not entitle to recover monetary claims like premium pay for rest days, regular holidays and special holidays.chanrobles virtuallaw libraryred On March 19, 2001, the NLRC affirmed with modification the Labor Arbiter's decision. As modified, the NLRC held that private respondents were illegally dismissed and ordered petitioner to reinstate them and to pay their full backwages. The dispositive portion of the decision reads:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
Since petitioner's motion for a reconsideration of the decision was denied in the resolution 5 of May 10, 2001, it instituted a special civil action for certiorari with the Court of Appeals, alleging that the NLRC gravely abused its discretion in totally discarding uncontroverted evidence and in relying merely on conjectures and assumptions not supported by facts. On February 29, 2002, the Court of Appeals rendered judgment as follows:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
Hence, this petition for review, raising the following arguments:chanroblesvirtuallawlibrary
Inextricably intertwined in the resolution of this instant petition is the determination of the issues of whether Nilo Layno Builders was an "independent contractor" or a "labor-only" contractor; and whether there existed an employer-employee relationship between petitioner and private respondents.chanrobles virtuallaw libraryred In their Comment, private respondents contend that the issues presented by the petitioner were clearly factual in nature and, thus, should not be entertained by this Court.[8]chanrobles virtuallaw libraryred Prefatorily, while the issue of labor-only contracting may involve some factual considerations, the existence of an employer-employee relation is nonetheless a question of law. Thus, it falls squarely within the ambit of this Court's judicial review.[9]chanrobles virtuallaw libraryred The Court finds partial merit in the petition. Under Section 8, Rule VIII, Book III, of the Omnibus Rules Implementing the Labor Code, an independent contractor is one who undertakes "job contracting," i.e., a person who: (a) carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (b) has substantial capital or investment in the form of tools, equipments, machineries, work premises, and other materials which are necessary in the conduct of the business. Jurisprudential holdings are to the effect that in determining the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether or not the contractor is carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship; the right to assign the performance of specified pieces of work; the control and supervision of the work to another; the employer's power with respect to the hiring, firing and payment of the contractor's workers; the control of the premises; the duty to supply premises, tools, appliances, materials and labor; and the mode, manner and terms of payment.[10]chanrobles virtuallaw libraryred Juxtaposing this provision vis-à-vis the facts of this case, we are convinced that Nilo Layno Builders is undertaking permissible labor or job contracting. Nilo Layno Builders is a duly licensed labor contractor carrying on an independent business for a specialized work that involves the use of some particular, unusual and peculiar skills and expertise, like concrete works, form works and steel rebars works. As a licensed labor contractor, it complied with the conditions set forth in Section 5, Rule VII-A, Book III, Rules to Implement the Labor Code, among others, proof of financial capability and list of equipment, tools, machineries and implements to be used in the business. Further, it entered into a written contract with the petitioner, a requirement under Section 3, Rule VII-A, Book III, Rules to Implement the Labor Code to assure the employees of the minimum labor standards and benefits provided by existing laws.chanrobles virtuallaw libraryred The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only to the results of the work.chanrobles virtuallaw libraryred This is exactly the situation obtaining in the case at bar. Nilo Layno Builders hired its own employees, the private respondents, to do specialized work in the Prince David Project of the petitioner. The means and methods adopted by the private respondents were directed by Nilo Layno Builders except that, from time to time, the engineers of the petitioner visited the site to check whether the work was in accord with the plans and specifications of the principal. As admitted by Nilo G. Layno, he undertook the contract work on his own account and responsibility, free from interference from any other persons, except as to the results; that he was the one paying the salaries of private respondents; and that as employer of the private respondents, he had the power to terminate or dismiss them for just and valid cause.[11] Indubitably, the Court finds that Nilo Layno Builders maintained effective supervision and control over the private complainants.cralaw:red Thus, it was plain conjecture on the part of the Labor Arbiter, the NLRC and the Court of Appeals to conclude that Nilo Layno Builders was a labor-only contractor merely because it does not have investment in the form of tools or machineries. They failed to appreciate the fact that Nilo Layno Builders had substantial capitalization for it did not only provide labor to do the specified project and pay their wages, but it furnished the materials to be used in the construction.[12] In Neri v. NLRC,[13] we held that the labor contractor which sufficiently proved that it had substantial capital was not engaged in labor-only contracting. Thus:chanrobles virtual law library
Anent the second issue, we hold that there existed an employer-employee relationship between petitioner and private respondents albeit for a limited purpose. In legitimate job contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor only for the payment of the employees' wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.[15]chanrobles virtuallaw libraryred From the foregoing disquisition, the petitioner did not, as it could not, illegally dismissed the private complainants. Hence, it could not be held liable for backwages and separation pay.[16] Nevertheless, it is jointly and severally liable with Nilo Layno Builders for the private complainants' wages, in the same manner and extent that it is liable to its direct employees. The pertinent provisions of the Labor Code read:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
In the case of Rosewood Processing, Inc. v. NLRC,[17] it was held:chanroblesvirtuallawlibrary
WHEREFORE, in view of the foregoing, the petition is PARTLY GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 65577 is MODIFIED. Petitioner is ABSOLVED from liability for the payment of backwages to private respondents. However, he is ORDERED to pay, jointly and severally with Nilo Layno Builders, private complainants' Service Incentive Leave Pay and 13th Month Pay.chanrobles virtuallaw libraryred SO ORDERED. chanrobles virtuallaw libraryred Davide, Jr., C.J., Panganiban,
Carpio and Azcuna, JJ., concur.chanrobles virtuallaw libraryred
Endnotes:chanroblesvirtuallawlibrary
[1]
Penned by Justice Bienvenido L. Reyes and concurred in by Justices Ma.
Alicia Austria-Martinez (now Associate Justice of the Supreme Court)
and
Justice Roberto A. Barrios.
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