G.R. No.

230030, August 29, 2018

PHILIPPINE PIZZA, INC., Petitioner, v. JENNY PORRAS* CAYETANO, RIZALDO G.

AVENIDO, PEE JAY T. GURION, RUMEL A. RECTO, ROGELIO T. SUMBANG, JR.,
AND JIMMY J. DELOSO, RESPONDENTS, Respondents.

The Facts

On various dates,7 respondents were hired as team members/service crew and

delivery riders, by CBMI, a job contractor which provides kitchen, delivery,
sanitation, and allied services to PPI's8  Pizza Hut chain of restaurants (Pizza
Hut),9 and were thereafter deployed to the various branches of the latter.

Respondents alleged that they rendered work for Pizza Hut, ranging from seven (7) to
eleven (11) years, hence, they were regular employees of PPI and not of CBMI.

They claimed to have been initially hired by PPI but were subsequently
transferred to CBMI so as to prevent them from attaining their regular
employment status.

Despite the said transfer, however, they were still under the direct supervision of
the managers of Pizza Hut and had been using its tools and machines for
work.

For its part, PPI denied any employer-employee relationship with respondents,
averring that it entered into several Contracts of Services 14 with CBMI.

It also contended that respondents were assigned to various branches of Pizza

Hut and were performing tasks in accordance with CBMI's manner and
method, free from the direction and control of PPI.

On the other hand, CBMI admitted that respondents were its employees, and
that it paid their wages and remitted their govt mandatory contributions. It
insisted that it is a legitimate job contractor and retained and exercised the
right of control over respondents.

Moreover, CBMI explained that it had no choice but to recall, and subsequently,
place respondents in floating status, considering that PPI had reduced its need
for services in some Pizza Hut branches. Lastly, CBMI maintained that before it
had the opportunity to re-assign respondents, the latter already filed their
complaints.21

The LA's Ruling

the LA found PPI and CBMI jointly and severally liable for illegal dismissal,

The LA ruled that respondents were regular employees of PPI and not of CBMI, as they were repeatedly hired to perform work that
was usually necessary and desirable to the main business of PPI. It observed that while CBMI was able to establish compliance with
the substantial capital requirement, it failed to show that it undertook the contract work on its own account. On the other hand, it
found that PPI exercised control over respondents through the numerous certifications issued to them, e.g., for delivering
hospitality behavior, for demonstrating skills and knowledge in the areas of cooking, for having completed training, for being an
outstanding rider, and for exemplary performance.24

The NLRC's Ruling

the NLRC reversed and set aside the LA's Decision and dismissed the
complaints for lack of merit. The NLRC found that CBMI is a legitimate job
contractor, as it has sufficient capital and investment to properly carry out its
obligation with PPI, as well as adequate funds to cover its operational expenses. It
also observed that CBMI is presumed to have complied with all the requirements of a
legitimate job contractor in light of the Certificate of Registration issued by the DOLE.30

The CA's Ruling

the CA annulled and set aside the NLRC ruling, and accordingly, reinstated the
LA's ruling.37 In holding PPI and CBMI jointly and severally liable to respondents, the CA applied the principle
of stare decisis, relying on the Court's ruling in Philippine Pizza, Inc. that CBMI is engaged in prohibited labor-only
contracting and thus, PPI is the principal employer of respondents.

The Issues Before the Court

The issues to be resolved by the Court are whether or not the CA: (a) correctly that
CBMI is engaged in a prohibited labor-only contracting arrangement with PPI;

The Court's Ruling

The petition is meritorious.

CBMI is a legitimate job contractor, and consequently, the employer of respondents. As

the NLRC aptly pointed out, CBMI is presumed to have complied with all the
requirements of a legitimate job contractor, considering the Certificates of
Registration47  issued to it by the DOLE. Although not a conclusive proof of legitimacy,
the certification nonetheless prevents the presumption of labor-only contracting from
arising. It gives rise to a disputable presumption that the contractor's operations are
legitimate.48

The NLRC was also correct in holding that CBMI has substantial capital and
investment. Based on CBMI's 2012 General Information Sheet,49 it has an authorized
capital stock in the amount of P10,000,000.00 and subscribed capital stock in the
amount of P5,000,000.00, P3,500,000.00 of which had already been paid-up.
Additionally, its audited financial statements50 show that it has considerable current
and non-current assets amounting to P85,518,832.00. Taken together, CBMI has
substantial capital to properly carry out its obligations with PPI, as well as to
sufficiently cover its own operational expenses.

More importantly, the NLRC correctly gave credence to CBMI's claim that it
retained control over respondents.
CBMI supervisor in each Pizza Hut branch to regularly oversee, monitor, and
supervise the employees' attendance and performance. This claim was further
substantiated by CBMI's area coordinators, who admitted in their Affidavits51 that:

(a) they oversee, monitor, and ensure CBMI employees' compliance with company
policies, rules, and regulations whichever Pizza Hut branch they may be assigned;

(b) they are responsible for ensuring that CBMI employees perform their tasks and
functions in the manner that CBMI mandates;

(c) they regularly visit and monitor each area of deployment;

(d) they track and confirm the attendance and punctuality of CBMI employees; and

(e) they constantly inform CBMI's Human Resource Department (HRD) Manager of
any company violations committed by the employees.

Furthermore, the existence of the element of control can also be inferred from
CBMI's act of subjecting respondents to disciplinary sanctions for violations of
company rules and regulations as evidenced by the various Offense Notices and
Memoranda52 issued to them. Additionally, records show that CBMI employed measures
to ensure the observance of due process before subjecting respondents to disciplinary
action. In fact, CBMI's HRD Manager, Sarah G. Delgado, attested in her Affidavit  that one of her duties is to make sure that due process is equally
53

afforded to all erring CBMI employees before a disciplinary action is imposed upon them.

Lastly, the NLRC correctly found that no employer-employee relationship exists

between PPI and respondents, and that the latter were employees of CBMI.
Records reveal that

1. respondents applied for work with CBMI and were consequently selected and
hired by the latter.54 
2. They were then required by CBMI to attend orientations and seminars
wherein respondents were apprised of the working conditions, basic
customer service, basic good grooming, and company rules and regulations.
3. CBMI paid their wages56  and remitted/paid their SSS, PhilHealth, and Pag-
IBIG contributions.57 
4. CBMI also exercised the power of discipline and control over them as
discussed in the preceding paragraphs.

From all indications, the Court finds that CBMI is a legitimate job contractor,
and thus, the employer of respondents.

As to the issue of illegal dismissal, the Court agrees with the finding of the NLRC that respondents were not illegally dismissed from work. Records show
that while PPI denied the existence of an employer-employee relationship with respondents, CBMI actually acknowledged that respondents were its
employees. CBMI likewise presented proof that it duly informed respondents of their impending lay-off, yet they immediately filed the complaints before it
had the chance to re-deploy them.58 On the other hand, respondents did not even refute CBMI's claim that they were informed of its decision to place
them in floating status pending their re-deployment. As such, respondents could not have been illegally terminated from work, for they were placed in a
temporary lay-off status when they prematurely filed the complaints. 59 There being no dismissal to speak of, respondents were thus not illegally
dismissed by CBMI, their actual employer.

WHEREFORE, the petition is GRANTED. The Decision dated March 30, 2016 and the
Resolution dated January 6, 2017 rendered by the Court of Appeals in CA-G.R. SP No.
136333 are hereby REVERSED and SET ASIDE. Accordingly, the Decision dated
January 28, 2014 and the Resolution dated April 30, 2014 of the National Labor
Relations Commission in NLRC-NCR Nos. 04-05060-13, 05-06931-13, 05-07363-13,
05-07941-13, and 06-08125-13 are REINSTATED.

SO ORDERED.