G.R. No.

186114

CHEVRON (PHILS.), INC., Petitioner

vs.
VITALIANO C. GALIT SJS AND SONS CONSTRUCTION CORPORATION and MR. REYNALDO SALOMON, Respondents

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal and setting aside of the
Decision  and Resolution  of the Court of Appeals (CA), dated December 8, 2008 and January 20, 2009., respectively, in CA-GR. SP
1 2

No. 104713. The assailed CA

Decision reversed and set aside the Decision dateq January 31, 2008 and the Resolution dated May 27, 2008 of the National Labor
Relations Commission (NLRC), Second Division in NLRC NCR (Case No.) 00-03-02399-06 (CA No. 051468-07), while the questioned
CA Resolution denied petitioner's Motion for Reconsideration.

The factual and.procedural antecedents of the case are as follows:

On March 20, 2006, herein respondent (Gal it) filed against Caltex Philippines, Inc., now Chevron (Phils.), Inc., SJS and Sons
Construction Corporation (SJS), and its president, Reynaldo Salomon (Salomon),  a Complaint  for illegal dismissal,
3 4

underpayment/non-payment of 13th month pay, separation pay and emergency cost of living allowance. The Complaint was filed with
the NLRC National Capital Region, North Sector Branch in Quezon City.

In his Position Paper,  Galit alleged that: he is a regular and permanent employee of Chevron since 1982, having been assigned at the
5

company's Pandacan depot; he is an "all-around employee" whose job consists of cleaning the premises of the depot, changing
malfunctioning oil gaskets, transferring oil from containers and other tasks that management would assign to him; in the performance
of his duties, he was directly under the control and supervision of Chevron supervisors; on January 15, 2005, he was verbally
informed that his employment is terminated but was promised that he will be reinstated soon; for several months, he followed up his
reinstatement but was not given back his job.

In its Position Paper,  SJS claimed that: it is a corhpany which was established in 1993 and was engaged in the business of providing
6

manpower to its clients on a "per project/contract" basis; Galit was hired by SJS in 1993 as a project employee and was assigned to
Chevron, as a janitor, based on a contract between the two companies; contrary to Galit's allegation, he started working for SJS only
in 1993; the manpower contract between SJS and Chevron eventually ended on November 30, .2004 which resulted in the severance
of Galit's employment; SJS finally closed its business operations in December 2004; it retired from doing business in Manila on
January 21, 2005; Galit was paid separation pay of Pll,000.00.

On the other hand, petitioner contended in its Position Paper with Motion to Dismiss  that: it entered into two (2) contracts for.
7

Janitorial services with SJS from May 1, 2001 to April 30, 2003 and from June 1, 2003 to June 1, 2004; under these contracts, SJS
undertook to "assign such number of its employees, upon prior.agreement with [petitioner], as would be sufficient to fully and
effectively render the wdrk and services undertaken" and to "supply the equipment, tools and materials, which shall, by all means, be
effective and efficient, at its own expense, necessary for the performance" of.janitorial services; Galit, who was employed by SJS, was
assigned to petitioner's Pandacan depot as a janitor; his wages and all employment benefits were paid by SJS; he was subject to the
supervision, discipline and control of SJS; on November 30, 2004,. the extended contract between petitioner and SJS expired;
subsequently, a new contract for janitorial services was awarded by petitioner to another independent contractor; petitioner was
surprised that Galit filed an action impleading it; despite several conferences, the parties were not able to arrive at an amicable
settlement.

On October 31, 2006, the Labor Arbiter (LA) assigned to the case rendered a Decision,  the dispositive portion of which reads as
8

follows:

WHEREFORE, judgment is, hereby rendered DISMISSING the Complaint against respondent Chevron for lack of jurisdiction, and
against

respondents SJS and Reynaldo Salomon for lack of merit. For equity and compassionate consideration, however, respondent SJS is
hereby ordered to pay the complainant a separation pay at the rate of a half-month salary for every year of service that the
complainant had with respondent SJS.

SO ORDERED. 9

The LA found that SJS is a legitimate contractor and that it was Galit's employer, not petitioner. The LA dismissed Galit's complaint for
illegal dismissal against petitioner for lack of jurisdiction on the ground that there was no employer-employee relationship between
petitioner and Galit. The LA likewise dismissed the complaint against SJS and Salomon for lack of merit on the basis of his finding that
Galit's employment with SJS simply expired as a result of the completion of the project for which he was engaged.

Aggrieved, herein respondent filed an appeal  with the NLRC.

10

On January 31, 2008, the NLRC rendered its Decision  and disposed as follows:
11

WHEREFORE, premises considered, the decision under review is hereby, MODIFIED.

Respondent SJS and Sons Construction Corporation is ordered to pay the complainant, severance compensation, at the rate of one
(1) month salary for every year of service. In all other respects, the appealed decision so stands as AFFIRMED.

SO ORDERED. 12

The NLRC affirmed the findings. of the LA that SJS was a legitimate job contractor and that it was Galit's employer. However, the
NLRC found that Galit was a regular, and not a project employee, of SJS, whose employment was effectively terminated when SJS
ceased to operate.

Herein respondent filed a Motion for Reconsideration,  but the NLRC denied it in its Resolution  dated May 27, 2008.
13 14

Respondent then filed a petition for certiorari with the CA assailing the above NLRC Decision and Resolution.

On December 8, 2008, the CA promulgated its assailed Decision, the dispositive portion of which reads, thus:

WHEREFORE, premises considered, the petition is GRANTED.

The Decision dated January 31, 2008 and the Resolution dated May 27, 2008 of the NLRC, Second Division in NLRC NCR [Case
No.] 00-03-02399-06 (CA No. 051468-07) are REVERSED and SET ASIDE.

Judgment is rendered declaring private respondent Chevron Phils. guilty of illegal dismissal and ordering petitioner Galit's
reinstatement without loss of seniority rights and other privileges and payment of his full backwages, inclusive of allowances and to
other benefits or their monetary equivalents computed from the time compensation was withheld up to the time of actual
reinstatement. Private respondent Chevron Phils. is also hereby ordered to pay 10% of the amount due petitioner Galit as attorney's
fees.

SO ORDERED. 15

Contrary to the. findings of the LA and the NLRC, the CA held that SJS was a labor-only contractor, that petitioner is Galit's actual
employer and that the latter was unjustly dismissed from his employment.

Herein petitioner filed a motion, for reconsideration, but the CA denied it in its Resolution dated January 20, 2009.

Hence, the present petition for review on certiorari based on the following grounds:

I.

WITH ALL DUE RESPECT, THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING
THAT .THE DISMISSAL OF RESPONDENT WAS ILLEGAL CONSIDERING THAT:

A. THE FINDINGS OF FACT OF THE LABOR ARBITER A QUO AND THE NATIONAL LABOR RELATIONS
COMMISSION ARE ALREADY BINDING UPON THE HONORABLE COURT OF APPEALS.

B. THERE IS NO . EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE COMPANY AND

RESPONDENT HEREIN.

C. PETITIONER SJS IS A . LEGITIMATE INDEPENDENT CONTRACTOR.

II.

CONSIDERING THAT THERE IS NO EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE COMPANY

'AND RESPONDENT HEREIN, THE HONORABLE COURT OF APPEALS' AWARD OF REINSTATEMENT,
BACKWAGES, AND ATTORNEY'S FEES AGAINST THE COMPANY HAS NO LEGAL BASIS. 16

On September 19, 2012, this Court issued a Resolution  directing petitioner to implead SJS as party-respondent on the ground that it
17

is an indispensable party without whom no final determination can be had of this case.

In a Motion  dated November 21, 2012, petitioner manifested its compliance with this Court's September 19, 2012 Resolution. In
18

addition, it prayed that Salomon be also impleade'd as party-respondent.

Acting orr petitioner's above Motion, this Court issued another Resolution  on June 19, 2013, stating that SJS and Salomon are
19

impleaded as parties-respondents and are required to comment on the petition for review on certiorari.

However, despite due notice sent to SJS and Salomon at their last known addresses, copies of the above Resolution were returned
unserved. Hence, on October 20, 2014, the Court, acting on Galit's plea for early resolution of the case, promulgated a
Resolution  resolving to dispense with the filing by SJS and 'Salomon of their respective comments.
20

The Court will, thus, proceed to resolve the instant petition.

At the outset, the Court notes that the first ground raised by petitioner consists of factual issues. It is settled that this Court is not a trier
of facts, and this applies with greater force in labor cases.  Corollary thereto, this Court has held in. a number of cases that factual
21

findings of administrative or quasi-judicial bodies, which are deemed to ha;ye acquired expertise in matters within their respective
jurisdictioJ1:S, are generally accorded not only respect but even finality, and bind the Court when supported by substantial
evidence.  However, it is equally settled that the.foregoing principles admit of certain exceptions, to wit: (1) the findings are grounded
22

entirely on speculation, surmises or conjectures; (2) the inference made is manifestly mistaken, absurd or impossible; (3) there is
grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) in
making its findings, the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both
appellant and appellee; (7) the findings are contrary to those of the trial court; (8) the findings are conclusions without citation of
specific evidence on which they are based; (9) the facts set forth in the petition, as well as in petitioners main and reply briefs, are not
disputed by respondent; (10) the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence
on record; and (11) the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion.  In the instant case, the Court gives due course to the instant petition considering that
23

the findings of fact and conclusions of law of the LA and the NLRC differ from those of the CA.

Thus, the primordial question that confronts the Court is whether there existed an employer-employee relationship between petitioner
and Galit, and whether the former ·is liable to the latter for the termination of his employment. Corollary to this, is the issue of whether
or not SJS is an independent contractor or a labor only contractor.

To ascertain the existence of an employer-employee relationship, jurisprudence has invariably adhered to the four-fold test, to wit: (1)
the selection and engagement of the employee; (2) the payment of wages; (3)

the power of dismissal; and (4) the power to control the employee's conduct, or the so-called "control test."  Of these four, the last one
24

is the most important.  The so-called "control test" is commonly regarded as the most crucial and determinative indicator of the
25

presence or absence of an employer-employee relationship.  Under the control test, an employer-employee relationship exists where
26

the person for whom the services are performed reserves the right to contrpl. not only the end achieved, but also the manner and
means to be used in reaching that end. 27

In the instant case, the true nature of Galit's employment is evident from the Job Contract between petitioner and SJS, pertinent
portions of which are reproduced hereunder:

xxxx

1.1 The CONTRACTOR [SJS] shall provide the following specific services to the COMPANY [petitioner]:

xxxx

1. Scooping of slop of oil water separator

2. Cleaning of truck parking area/drum storage area and pier

xxxx

4.1 In the fulfillment of its obligations to the COMPANY, the CONTRACTOR shall select and hire its workers. The CONTRACTOR
alone shall be responsible for the payment of their wages and other employment benefits and likewise for the safeguarding of their
health and safety in accordance with existing laws and regulations. Likewise, the CONTRACTOR shall be responsible for the
discipline and/or dismissal of these workers.

4.2 The CONTRACTOR shall retain the right to control the manner and the means of performing the work, with the COMPANY having
the control or direction only as to the results to be accomplished.

xxxx

4.4 It is understood that, for the above reasons, these workers shall be considered as the employees of the CONTRACTOR. Under no
circumstances, shall these workers be deemed directly or indirectly as the employees of the COMPANY.

xxxx

5.1 The CONTRACTOR shall maintain efficient and effective discipline over any and all employees it may utilize in performing its
obligations under this CONTRACT. x x x

5.2 The COMPANY shall in no manner be arrnwerable or accountable for any incident or injury which may occur to any worker or
personnel of.the CONTRACTOR during the time and consequent upon the performance of the work and services under this
Agreement, nor for any injury, loss or damage arising from fault, negligence or carelessness of the CONTRACTOR or anyone of its
workers to any person or persons or to his or their property; and the CONTRACTOR covenants and agrees to assume, as it does
hereby assume, all liabilities for any such injury, loss or damage and to make the COMPANY free and blameless therefrom.x x x

5.3. The CONTRACTOR shall be responsible for any loss or damage that may be incurred upon the products, properties and
installations of the COMPANY during the effectivity of this Contract which are due to the unreasonable or negligent act of the
CONTRACTOR, its agents or its workers.

xxxx
6.1 The CONTRACTOR shall at its own expense maintain with a reputable insurance company, acceptable to the CQMPANY, a
comprehensive liability insurance in the amount required by the COMPANY to cover claims for bodily injury, death or property damage
caused to any person or persons by an act or omission of the CONTRACTOR or any of its employees, agents or representatives.

xxxx

x x x [T]he CONTRACTOR agrees and undertakes:

xxxx

b. To submit satisfactory proof to the COMPANY that it has registered its persqnnel/workers assigned to perform the work and
services herein required with the Social Security System, Medicare and other appropriate agencies for purposes of the Labor Code as
well as other laws, decrees, rules and regulations.

c. To pay the wages or salaries of its personnel/workers as well as benefits, premia and protection in accordance with the provisions
of the Labor Code and other applicable laws, decrees, rules and regulations promulgated by competent authority. x x x

d. To assign such number of its employees, upon prior agreement with the COMPANY, as would be sufficient to fully and effectively
render the work and services herein undertaken. x x x

e. To supply the equipment, tools and materials, which shall, by all means, be effective and efficient, at its own expense, necessary
for the performance of the services under this Contract. 28

The foregoing provisions of the Job Contract between petitioner and SJS demonstrate that the fatter possessed the following
earmarks of an employer, to wit: (1) the power of selection and engagement of employees, under Sections 4.1 and 6.l(d); (2) the
payment of wages, under Sections 4.1 and 6.l(c); (3) the power to discipline and dismiss, under" Section 4.1; and,

(4) the power to control the employee's conduct, under Sections 4.1, 4.2, and 5.1.

As to SJS' power of selection and engagement, Galit himself admitted in his own affidavit that it was SJS which assigned him to work
at Chevron's Pandacan depot.  As such, there is no question that it was SJS which selected and engaged Galit as its employee.
29

With respect to the payment of wages, the Court finds no error in the findings of the LA that Galit admitted that it was SJS which paid
his wages.

While Galit claims that petitioner was the one which actually paid his wages and that SJS was merely used as a conduit, Galit failed to
present evidence to this effect. Galit, likewise, failed to present sufficient proof to back up his claim that it was petitioner, and not SJS,
which actually paid his SSS, Philhealth and Pag-IBIG premiums. Ori the contrary, it is.unlikely that SJS would report Galit as its
worker, pay his SSS, Philhealth and Pag-IBIG premiums, as w~ll as his wages, if it were not true that he was indeed its employee.  In 30

the same manner, the Quitclaim and Release,  which was

31

undisputedly signed by Galit, acknowledging receipt of his separation pay from SJS, is an indirect admission or recognition of the fact
that the latter was indeed his employer. Again, it would be unlikely for SJS to pay Galit his separation pay if it is not the latter's
employer.

Galit also did not dispute the fact that he was dismissed from employment by reason of the termination of the service contract
between SJS and petitioner.  In other words, it was not petitioner which ended his employment. He was dismissed therefrom because
1âwphi1

petitioner no longer renewed its contract with SJS and that the latter subsequently ceased to operate.

Anent the power of control, the Court again finds no cogent reason to depart from the findings of the NLRC that in case of matters that
needed to be addressed with respect to employee performance, petitioner dealt directly with SJS and not with the employee
concerned. In any event, it is settled that such power merely calls for the existence of the right to control and not necessarily the
exercise thereof. In the present case, the Job Contract between petitioner and SJS clearly provided that. SJS "shall retain the right to
control the manner and the means of performing the work, with [petitioner] having the control or direction only as to the results to be
accomplished." 32

In addition, it would bear to point out that contrary to the ruling of the CA, the work performed by Galit, which is the "scooping of slop
of oil water separator,"  has no direct relation to petitioner's business, which is the importation, refining and manufacture of petroleum
33

products. The Court defers to the findings of both the LA and the NLRC that the job performed by Galit, which essentially consists of
janitorial services, may be incidental or desirable to petitioner's main activity but it is not necessary and directly related to it.

As to whether or not SJS is an independent contractor, jurisprudence has invariably ruled that an independent contractor 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, and 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.  This embodies what has long been jurisprudentially recognized as the control test, as
34

discussed above. In the instant case, SJS presented evidence to show that it had an independent business by paying business taxes
and fees and that it was registered as an employer with the Social Security System. Moreover, there was no evidence to show that
SJS and its employees were ever subject to the control of petitioner. On the contrary, as shown above, SJS possessed the right to
control its employees' manner and means of performing their work, including herein respondent Galit.

As to its capital, there is no dispute that SJS generated an income of ₱1,523,575.81 for the year 2004.  In Neri v. National Labor
35

Relations Commission,  this Court held that a business venture which had a capitalization of ₱1,000,000.00 was considered as highly
36

capitalized and cannot be deemed engaged in labor-only contracting. In the present case, while SJS' income of more than
₱1,500,000.00 was not shown to be equivalent to its authorized capital stock, such income is an indication of how much capital was
put into its business to generate such amount of revenue. Thus, the Court finds no sufficient reason to disturb the findings of the LA
and the NLRC that SJS had substantial capital.

WHEREFORE, the instant petition is GRANTED. The assailed Decision and Resolution of the Court of Appeals, dated December 8,
2008 and January 20, 2009, respectively, are REVERSED and SET ASIDE. The Decision of the National Labor Relations
Commission, dated January 31, 2008 in NLRC NCR [Case No.] 00-03-02399-06 (CA No. 051468-07) is REINSTATED.

SO ORDERED.

DIOSDADO M. PERALTA *

Associate Justice