SECOND DIVISION

[ G.R. No. 117936-37, May 20, 1998 ]

FRANCISCO U. NAGUSARA, MARQUITO L. PAMILARA, AND
DIOSCORO D. CRUZ, PETITIONERS, VS. THE NATIONAL LABOR
RELATIONS COMMISSION, LORENZO DY AND OTHERS, AND
ISAYAS AMURAO, RESPONDENTS.

DECISION

PUNO, J.:

Petitioners Francisco U. Nagusara,[1] Marquito L. Pamilara and Dioscoro D. Cruz seek

to annul the resolution of the National Labor Relations Commission (NLRC) dated
December 27, 1991 and its order dated September 29, 1994 in NLRC NCR Case No,
12-7287-82 & 12-7481-82.

On December 31, 1982, petitioners filed a complaint against respondent Lorenzo Dy

for illegal dismissal, unfair labor practice and non-payment of overtime pay, legal
holiday pay and premium pay for holiday and rest day.[2] The case was set for hearing
on January 12, January 21 and February 2, 1983.  As respondent Dy failed to appear
on said dates, the evidence for petitioners was received ex parte.  On February 28,
1983, Labor Arbiter Bienvenido V. Hermogenes rendered a decision finding that
petitioners were illegally dismissed and ordered respondent Dy to reinstate them. 
The decision also awarded to petitioners backwages and other money claims. [3]

Respondent Dy failed with the NLRC a “Motion for Reconsideration, Set Aside Decision
and/or Memorandum of Appeal” arguing that: (1) there was no proper service of
summons, (2) there was no employer-employee relationship between him and
petitioners, and (3) petitioners were not entitled to the relief prayed for in the
complaint.[4] On December 27, 1984 , the NLRC set aside the decision and remanded
the case to the Labor Arbiter.[5]

On September 14, 1987, respondent Dy impleaded respondent Isayas Amurao as co-

respondent in accordance with Articles 106, 107 and 109 of the Labor Code.
Respondent Dy alleged that respondent Amurao was the real employer of petitioners
because he was the one who hired them in fulfillment of his obligation to provide
manpower for respondent Dy’s construction project. [6]

On June 29, 1988, Labor Arbiter Felipe T. Garduque II issued a decision holding that
the termination of petitioners’ services was illegal.  It, however, found petitioners’
claim for overtime pay, legal holiday pay and premium pay for holiday and rest day to
be unfounded.[7] The dispositive portion of the decision states:

ACCORDINGLY, respondents Dynasty Steel Works and/or Lorenzo Dy are hereby

ordered to reinstate within ten (10) days from receipt hereof, herein complainants
Francisco Nagasora, Marquito Pamilara and Dioscoro D. Cruz to their former positions
without loss of seniority right and privileges but with one (1) year backwages at
(P45.00, P38.00, P36.00 x 26 days), considering the nature of the business of
respondent (construction business) which may not be continuous, with at least an
additional one (1) month pay as separation pay in case respondent’s business ceased
operation.
All other money claims are hereby dismissed for lack of merit. [8]

On appeal, the NLRC set aside the decision of the Labor Arbiter.  It dismissed the
complaint on the ground that there was no employer-employee relationship between
petitioners and respondent Dy.  It held that respondent Dy was only an indirect
employer of petitioners as they were actually employed by respondent Amurao whom
respondent Dy sub-contracted to provide labor for his construction project.  It also
declared that petitioners were not illegally dismissed. [9] The dispositive portion of the
resolution reads:

WHEREFORE, let the decision appealed from be, as it is hereby, SET ASIDE and
another one ENTERED dismissing the instant cases for lack of merit. [10]

Petitioners filed a motion for reconsideration but it was denied by the NLRC for lack of
merit.[11]

Hence, this petition.

Petitioners and private respondents presented conflicting versions of the

circumstances which led to the severance of petitioners’ employment.

Petitioners alleged that in 1981, they were hired as carpenters by Dynasty Steel
Works owned by respondent Dy. Dynasty was engaged in the business of making
steel frames, windows, doors and other construction works.  It was contracted by
Solmac Marketing to construct its building in Balintawak, Caloocan City.

On November 25, 1982, petitioners went to the Social Security System (SSS) office
to inquire about their benefits under the system.  They were informed that they were
not reported as employees either by Dynasty or by respondent Dy. Petitioners filed a
complaint against Dynasty and respondent Dy for violation of SSS laws and
regulations.

On December 20, 1982, petitioners were prohibited from entering the work site at the
Solmac compound.  The security guard showed them an order/notice dated December
18, 1982 issued by respondent Dy instructing him not to allow petitioners to enter the
premises as they were already dismissed from work.  Petitioners sought the help of
P/Cpl. Alexander Licuan of the Caloocan Police Department. P/Cpl. Licuan
accompanied petitioners to the work site and inquired about the reason for the
prohibition.  Respondent Amurao who introduced himself as supervisor told P/Cpl.
Licuan that petitioners’ services were terminated upon the order of respondent Dy.

Traversing petitioners’ allegations, respondent Dy claimed in his comment that

petitioners were not his employees but that of respondent Amurao whom he sub-
contracted to provide manpower for his construction project at the Solmac building.

Respondent Dy also denied that he terminated the services of petitioners.  He alleged

that sometime in December 1982, the owner of Solmac building caught petitioners
drinking inside the company premises.  Because of this, the owner sought the
dismissal or transfer of petitioners.  Heeding the owner’s demand, respondent
Amurao transferred petitioners to another project.  Petitioners refused and instead
filed a complaint for illegal dismissal against respondent Dy.

Respondent Amurao also filed his own comment stating that he and respondent Dy
entered into a sub-contracting agreement whereby he undertook to supply the
manpower for respondent Dy’s construction project at Solmac building. To comply
with his obligation, respondent Amurao engaged the services of about thirty men
which include petitioners. Respondent Amurao stated that he had complete discretion
in the selection, hiring and dismissal of said workers; that he had direct controls and
supervision over the performance of their work; and that any complaint against them
were coursed through him.

Respondent Amurao, however, submitted that petitioners were project employees. 

Hence, they were no longer entitled to reinstatement because the project for which
they were hired as long been completed.

Before we resolve the issue of illegal dismissal, it is first necessary to determine

whether petitioners were employees of respondent Dy.

The records reveal that there existed an employer-employee relationship between

petitioners and respondent Dy.  The individual Premium Certifications issued by the
SSS on April 11, 1983 show that Dynasty Steel Works declared petitioners as its
employees for the purpose of paying their premium.  Dynasty paid petitioners’
premium from August 1981 to November 1982. [12] Also, the payroll of Dynasty
included petitioners.[13] These pieces of evidence sufficiently prove that petitioners
were employees of respondent Dy.  It would be preposterous for respondent Dy to
report petitioners as employees of Dynasty, pay their SSS premium as well as their
wages if it were not true that they were his employees.

Private respondents would like to make it appear that petitioners were employees of
respondent Amurao who was supposedly sub-contracted by respondent Dy to provide
labor for his construction project at Solmac.  Such assertion, however, does not
deserve credence because as observed by the Labor Arbiter:

x x x (T)his Office is inclined to believe the claim of complainants that they were
employees of respondent and not Isayas Amurao.

Firstly, the alleged subcontract between respondent (Dy) and Isayas Amurao is
questionable since the same was dated June 8, 1982, and was conformed by (sic)
respondent Lorenzo Dy on June 11, 1982, around eight (8) months after
complainants had started working in September or October, 1981.

Secondly, the sworn statements and testimonies of respondent Lorenzo Dy and his
witness, Isayas Amurao submitted and declared during the hearing of this case 
contain full of (sic) inconsistencies affecting their stand.  The affidavits of the other
complainants Pozon, Garcia and Lizarondo do not also deserve weight considering the
fact that the same contradict their previous Sinumpaang Salaysay attached to their
position paper.

Lastly the other documentary evidences (sic) presented by complainants mostly

relating to SSS outweigh those of respondent. [14]

We find that the supposed sub-contract between respondent Dy and respondent

Amurao was merely a subterfuge to avoid respondent Dy’s obligations to petitioners. 
The records show that respondent Amurao was not  a legitimate job contractor
engaged in the business of contracting out services to clients.  A legitimate job
contractor is one who:  (1) 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 (2) has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct
of his business.[15] Respondent Amurao did not satisfy both requirements.  It appears,
instead, that respondent Amurao was also an employee of respondent Dy who was
tasked to screen and to supervise the workers at respondent Dy’s construction
project at Solmac.  It is clear from the foregoing that petitioners were employees of
respondent Dy.

We reject respondent Amurao’s submission that petitioners were project employees. 

The principal test for determining whether an employee is a project employee or a
regular employee is whether or not the project employee was assigned to carry out a
specific project or undertaking, the duration and scope of which were specified at the
time the employee was engaged for that project. [16] In the case at bar, it does not
appear that respondent Dy informed petitioners at the time of their engagement
about the specific project or undertaking for which they were hired, as well as the
duration and scope of such project. [17] Besides, the records show that petitioners, as
carpenters, were performing activities necessary or desirable in respondent Dy’s
business of making steel frames, windows, doors and other construction works.
Petitioners should therefore be considered as regular employees under Article 280 of
the Labor Code which states:

Art. 280. Regular and Casual Employment. -- The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined at
the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the
season.

xxx                                           xxx                                    xxx

We now go to the main issue of whether petitioners were illegally dismissed.

Respondent Dy stated in his comment that petitioners were not dismissed from work. 
Petitioners were allegedly caught by the owner of Solmac Marketing having a drinking
spree inside the compound.  Hence, respondent Amurao allegedly decided to transfer
petitioners to another project, but petitioners opposed the transfer and filed a
complaint for illegal dismissal against respondent Dy.

We are not convinced.  Respondent Dy’s allegation is self-serving and not supported
by substantial evidence.  In termination cases, the employer has the burden of
proving that there was just cause for the employee’s dismissal. [18] In this case,
respondent Dy merely presented his own affidavit and that of respondent Amurao
stating that petitioners were drinking within the premises by the owner of Solmac. 
He did not present any other witness to substantiate the statements contained in the
affidavits.  He did not even present as witness the owner of Solmac Marketing who
allegedly caught petitioners drinking inside the compound.

Dismissal is the ultimate penalty that can be meted to an employee.  For dismissal to
be legal, it must be based on just cause which must be supported by clear and
convincing evidence.[19] Respondent Dy failed to adduce clear and convincing evidence
to support the legality of petitioners’ dismissal.

Finally, we go to the reliefs that should be accorded to petitioners.

As a rule, employees who are illegally dismissed are entitled to backwages and
reinstatement to their former position without loss of seniority rights.  There are
instances, however, where reinstatements is no longer viable as where the business
of the employer has closed, or where the relations between the employer and the
employee have been so severely strained that it is not advisable to order
reinstatement, or where the employee decides not to be reinstated.  In such events,
the employer will instead be ordered to pay separation pay. [20]

The records shows that Dynasty Steel Works ceased operating in May 1985. [21] The
closure of Dynasty rendered impossible the reinstatement of petitioners.  Hence, in
lieu of reinstatement, respondent Dy should pay petitioners their separation pay in
addition to their backwages computed from the time of their separation until the date
of Dynasty’s closure.[22]

All the other money claims of petitioners are dismissed for lack of sufficient evidence
to support the same.  We note the finding of Labor Arbiter Garduque:

With respect to the claim of overtime, the same has not been established by clear
and convincing evidence, and not even included  in the computation of the then socio
economic staff of this office, and in the first decision dated February 28, 1993.

The remaining claims of legal holiday pay and premium pay for holiday and rest day
cannot also be granted although unrefuted by respondent but from Annex “H” to
complainants’ reply/comment to respondent’s position paper, it discloses that
complainants only worked up to six (6) days in a week. [23]

We find no cogent reason to disturb such finding as it is sustained by the evidence on

record.

IN VIEW WHEREOF, the assailed resolution and order of the NLRC are SET ASIDE. 
Private respondent Lorenzo Dy is hereby ordered to pay petitioners their SEPARATION
PAY and BACKWAGES.  No cost.

SO ORDERED.