There Is No Employer-Employee Relationship Under An Arrangement Whereby A Principal

Agrees To Put Out Or Farm Out With A Contractor Or Subcontractor The Performance Or
Completion Of A Specific Job, Work Or Service Within A Definite Or Predetermined Period,
Regardless Of Whether Such Job, Work Or Service Is To Be Performed Or Completed Within
Or Outside The Premises Of the Principal

THIRD DIVISION, G.R. NO. 185345, SEPTEMBER 10, 2014,RONNIE L. ABING, PETITIONER, VS.
NATIONAL LABOR RELATIONS COMMISSION, ALLIED BANKING CORPORATION,
FACILITATORS GENERAL SERVICES AND MARILAG BUSINESS AND INDUSTRIAL
MANAGEMENT SERVICES, INC., RESPONDENTS
The Facts:
Ronnie Abing (petitioner) applied for employment with Allied Banking Corporation, but was instructed
to report to Marilag Business and Industrial Management Services Inc (Marilag), which had a service
contract with Allied Bank. He filled up an application form with Marilag, passed its exam, and was told
to report to Allied Banks legal department, where he was assigned to perform various tasks, and
issued an Allied Bank ID as its contractual employee. At the termination of Marilags service contract
with Allied Bank, Ronnie was instructed to report to the new service provider, Facilitators General
Services Inc. (FGSI), where he again filled up an application form and told to report to Allied Bank. In
October, 2003, Allied Bank terminated its services with FGSI and Ronnie was told to stop reporting for
work at Allied Banks main office by October 17, 2003. Claiming that he was illegally terminated by
Allied Bank which is his employer, Ronnie filed a complaint for illegal dismissal against the bank,
averring that Allied Banks service contracts with Marilag and FGSI were mere schemes to keep him
a contractual employee and prevent his regularisation, despite the fact that he had served the bank
for many years and performed duties which were necessary and desirable to the business of Allied
Bank. Allied Bank denied liability, pointing to Marilag and FGSI as Ronnies employers under their
service agreement; not being its employee, the bank could not have dismissed Ronnie. Marilag
manifested that Ronnie executed a quitclaim in its favour when its service contract with Allied Bak
was terminated; by then, Ronnie had resumed reporting to the bank. FGSI, on the other hand
claimed that it is a legitimate independent job contractor. When its service contract with Allied Bank
was terminated, Ronnie was re-assigned to another workplace, but he refused to be re-assigned,
insisting on continuing his employment with Allied Bank. The CA affirmed the NLRC decision finding
that FGSI is a legitimate job contractor pursuant to Section 4(a) of Department Order No. 18-02 of the
Department of Labor and Employment (DOLE). Thus, Ronnie filed the instant appeal before the
Supreme Court to assail the CA ruling.
The Issue:
Whether or not Ronnie is an employee of Allied Bank.
The Ruling:
The petition is devoid of merit.
It is settled that a review of the decision of the CA in a labor case under Rule 45 of the Rules of Court
is limited only to a review of errors of law imputed to the CA. We reiterate what was elucidated in Bani
Rural Bank, Inc. v. De Guzman1 that:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the
review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the
review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from the prism of whether it correctly determined
the presence or absence of grave abuse of discretion in the NLRC decision before it, not on the basis
of whether the NLRC decision on the merits of the case was correct. In other words, we have to be
keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. This is the approach that should be basic in a Rule 45 review of a CA ruling in a
labor case. In question form, the question to ask is: Did the CA correctly determine whether the NLRC
committed grave abuse of discretion in ruling on the case?2(Emphasis supplied)
In the instant case, the Court finds no reversible error with the decision of the CA in dismissing the
petition for certiorari filed before it. The CA correctly held that the respondent NLRC committed no
arbitrary and despotic exercise of its discretion amounting to lack or excess of jurisdiction when it
ruled that FGSI is an independent job contractor and that the petitioner is an employee thereof. The
LA, NLRC and the CA all found that FGSI is a legitimate job contractor and that the petitioner was an
employee of FGSI when he was terminated upon the expiration of its service contract with Allied
Bank. Section 4(a) of Department Order No. 18-02 issued by the DOLE, cited by the CA, defines
legitimate labor contracting or subcontracting as an arrangement whereby a principal agrees to put
out or farm out with a contractor or subcontractor the performance or completion of a specific job,
work or service within a definite or predetermined period, regardless of whether such job, work or
service is to be performed or completed within or outside the premises of the principal. Under such an
arrangement, no employer-employee relationship is created between the principal and the contractual
worker, who is actually the employee of the contractor.3
On the other hand, labor-only contracting as defined by Article 106 of the Labor Code occurs when
any of the following circumstances occurs: first,the contractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the employees recruited,
supplied or placed by the contractor are performing activities which are directly related to the principal
business of the employer; or second, the contractor does not exercise the right to control the
performance of the work of the employee. Such an arrangement is prohibited and consequently, the
law deems the principal as the employer of the contractual employee.4
Before FGSI entered into a service contract with Allied Bank in September 2002, it had been doing
business as a personnel and manpower agency for 20 years since its incorporation with the
Securities and Exchange Commission on April 17, 1980. Its service contract with Allied Bank
expressly provides that it shall provide Allied Banks main office with janitorial and maintenance
personnel who shall remain as FGSIs employees. Moreover, FGSI serviced not only Allied Bank but
had similar service contracts with other companies, such as Asian Development Bank, Bank of the
Philippine Islands, United Coconut Planters Bank, Kenny Rogers and Fortune Tobacco. The CA took
note that it has its own investment in tools and equipment used to provide janitorial services.5
Applying the four-fold test used in determining an employer-employee relationship, which are: (1) the
selection and engagement of employee; (2) the payment of wages; (3) the power of dismissal; and (4)
the power to control the employees conduct,6 the LA, the NLRC and the CA are all in agreement that
these elements are possessed by FGSI.
As to the employers power of selection and engagement, it was FGSI which hired the petitioner and
assigned him to work at Allied Bank. In his Employment Agreement and Manifestation dated
September 1, 2002, the petitioner explicitly acknowledged that he was hired by FGSI, and in his
position paper he also admitted that it was FGSI which instructed him to report to Allied Bank.7
As to the payment of wages, the petitioner collected his pay and benefits from FGSI. In his Quitclaim
and Release dated October 28, 2003, he also acknowledged the release and payment of all his
monetary benefits by FGSI.8 In Lacuesta v. Ateneo de Manila University9 cited by the CA, it was held
that unless it is shown that the quitclaim or waiver was wangled from an unsuspecting or gullible
person, or the terms of the settlement are unconscionable in its face, the courts shall not step in to
annul the same.10 The CA found the said circumstances are not at all present in the instant case.
As to the power of dismissal, by signing the quitclaim, the petitioner acknowledged that it was FGSI
which hired him and had the power to terminate his services. Also in the petitioners employment
agreement, he bound himself to inform FGSI if and when he was transferring to another agency, even
as he also acknowledged the right of FGSI to terminate him in case of any violation of its rules and
regulations.
As to the power of control or supervision over the petitioner, FGSI through its Personnel Officer
Marysol Gongona regularly visited Allied Banks premises for this very purpose. It also had the power
to reassign the petitioner to other clients. Apparently, the petitioner wanted to stay on with Allied Bank
which was no longer possible because of the termination of FGSFs service contract with the bank.
FGSI tried to reassign the petitioner to another client, but he opted instead to end his employment
with FGSI and thus collected his 13th month pay and service incentive leave pay.11
Finally, Marilag and FGSI have been for decades in business as janitorial/messengerial service
and/or manpower recruitment companies. The petitioner in his petition mostly described his tasks in
Allied Bank as those of a messenger or runner, with clerical functions assigned to him from time to
time, such as skip tracer, checker and verifier of properties, and receiving clerk/vault keeper. But
without a clear and full description of his actual tasks as well as his alleged promotions in the banks
plantilla, we are unable to determine if, to the extent that he performed these tasks, they are usually
necessary or desirable in Allied Banks banking business. Evidently, the petitioners other tasks were
in relation to his general assignment in the legal department of Allied Bank as messenger. All told, the
petitioner is clearly not an employee of Allied Bank and his complaint for illegal dismissal filed against
the respondents has no merit.
WHEREFORE, premises considered, the instant petition is hereby DENIED.
SO ORDERED.
REYES, J.:
Velasco, Jr., (Chairperson), Peralta, Villarama, Jr., Reyes, and Jardeleza, JJ., concur.