Job contracting / Labor-only contracting RULING:

DIGITAL TELECOMMUNICATIONS PHILIPPINES, INC. vs.

DIGITEL EMPLOYEES UNION (DEU) Yes. Bad faith was manifested by the timing of the closure of Digise
G.R. Nos. 184903, 10 October 2012 rv and the rehiring of some employees to Interactive Technology S
olutions, Inc. (I-
FACTS: tech), a corporate arm of Digitel. The timing of the creation of I-
tech is dubious. It was incorporated while the labor dispute within
Digitel was pending. I-
Digitel Employees Union and Digitel commenced collective bargaini tech’s primary purpose was to provide call center/customer contact
ng negotiations which resulted in a bargaining deadlock. On despite service, the same service provided by Digiserv. It conducts its busi
the order of the Labor Secretary to execute a CBA, still, no CBA w ness inside the Digitel office. The former head of Digiserv is also an
as forged between Digitel and the Union. Some Union members ab officer of I-
andoned their employment with Digitel. The Union later became do tech. Thus, when Digiserv was closed down, some of the employee
rmant. 10 years thereafter, Digitel received the President of the Un s presumably non-union members were rehired by I-tech.
ion, a letter containing the list of officers, CBA proposals and groun
d rules. Digitel was reluctant to negotiate with the Union and dema
nded that the latter show compliance with the provisions of the Uni Thus, the closure of Digiserv pending the existence of an assumpti
on’s Constitution and By- on order coupled with the creation of a new corporation performing
laws on union membership and election of officers. similar functions as Digiserv leaves no iota of doubt that the target
of the closure are the union member-
employees. These factual circumstances prove that Digitel terminat
The faction filed a case for Preventive Mediation before the NCMB b ed the services of the affected employees to defeat their security of
ased on Digitel’s violation of the duty to bargain. During the pende tenure. The termination of service was not a valid retrenchment; it
ncy, Interactive Technology Solutions, Inc. (I- was an illegal dismissal of employees.
tech) was incorporated. Then, Labor Secretary assumed jurisdiction
over the labor dispute.
It needs to be mentioned too that the dismissal constitutes an unfa
ir labor practice under Article 248(c) of the Labor Code which refers
During the pendency of the controversy, Digitel Service, Inc. (Digis to contracting out services or functions being performed by union
erv) filed with the DOLE an Establishment Termination Report stati members when such will interfere with, restrain or coerce employe
ng that it will cease its business operation. The closure affected at l es in the exercise of their rights to self-
east 100 employees, 42 of whom are members of the herein respo organization. At the height of the labor dispute, occasioned by Digit
ndent Union. el’s reluctance to negotiate with the Union, I-
tech was formed to provide, as it did pro

ISSUE:

Whether or not an employer commits ULP when it closed down one

of its enterprises resulting to the dismissal of the union members
pending the assumption order of the Secretary of Labor regarding
its duty to bargain.
Manila Water Co., vs Pena (2004) G.R. 158255 Petitioner on the other hand asserts that private respondents were
FACTS: employees of ACGI, an independent contractor. It maintained that
Petitioner Manila Water Company, Inc. is one of the two private it had no control and supervision over private respondents’ manner
concessionaires contracted by the Metropolitan Waterworks and of performing their work except as to the results.
Sewerage System (MWSS) to manage the water distribution
system in the East Zone of Metro Manila. Thus, petitioner did not have an employer-employee relationship
with the private respondents, but only a service contractor-client
Under the Concession Agreement, petitioner undertook to absorb relationship with ACGI.
former employees of the MWSS whose names and positions were
in the list furnished by the latter, while the employment of those ISSUE:
not in the list was terminated. Private respondents, being Whether or not ACGI is an independent contractor;
contractual collectors of the MWSS, were among the 121
employees not included in the list; nevertheless, petitioner HELD:
engaged their services without written contract for three months.
ACGI is an independent contractor but a labor- only contractor.
Before the end of the three-month contract, the 121 collectors First, ACGI does not have substantial capitalization or investment
incorporated the Association Collectors Group, Inc. (ACGI), which in the form of tools, equipment, machineries, work premises, and
was contracted by petitioner to collect charges for the Balara other materials, to qualify as an independent contractor. While it
Branch. Subsequently, most of the 121 collectors were asked by has an authorized capital stock of P1,000,000.00, only P62,500.00
the petitioner to transfer to the First Classic Courier Services, a is actually paid-in, which cannot be considered substantial
newly registered corporation. Only private respondents remained capitalization.
with ACGI.
The 121 collectors subscribed to four shares each and paid only the
Private respondents filed a complaint for illegal dismissal and amount of P625.00 in order to comply with the incorporation
money claims against petitioner, contending that they were requirements. Further, private respondents reported daily to the
petitioner’s employees as all the methods and procedures of their branch office of the petitioner because ACGI has no office or work
collections were controlled by the latter. premises. In fact, the corporate address of ACGI was the residence
of its president, Mr. Herminio D. Peña. Moreover, in dealing with
the consumers, private respondents used the receipts and private respondents, the penalty to be imposed was dictated by
identification cards issued by petitioner. petitioner as shown in the letters it sent to ACGI specifying the
penalties to be meted on the erring private respondents.
Second, the work of the private respondents was directly related to
the principal business or operation of the petitioner. Being in the These are indications that ACGI was not left alone in the
business of providing water to the consumers in the East Zone, the supervision and control of its alleged employees. Consequently, it
collection of the charges therefore by private respondents for the can be concluded that ACGI was not an independent contractor
petitioner can only be categorized as clearly related to, and in the since it did not carry a distinct business free from the control and
pursuit of the latter’s business. supervision of petitioner.

Lastly, ACGI did not carry on an independent business or Under this factual milieu, there is no doubt that ACGI was engaged
undertake the performance of its service contract according to in labor-only contracting, and as such, is considered merely an
its own manner and method, free from the control and supervision agent of the petitioner.
of its principal, petitioner. Prior to private respondents’ alleged
employment with ACGI, they were already working for petitioner, In labor-only contracting, the statute creates anmemployer-
subject to its rules and regulations in regard to the manner and employee relationship for a comprehensive purpose: to prevent a
method of performing their tasks. circumvention of labor laws. The contractor is considered merely an
agent of the principal employer and the latter is responsible to the
This form of control and supervision never changed although they employees of the labor-only contractor as if such employees had
were already under the seeming employ of ACGI. been directly employed by the principal employer. Since ACGI is
only a labor-only contractor, the workers it supplied should be
Petitioner issued memoranda regarding the billing methods and considered as employees of the petitioner.
distribution of books to the collectors; it required private
respondents to report daily and to remit their collections on the
same day to the branch office or to deposit them with Bank of the
Philippine Islands; it monitored strictly their attendance as when a
collector cannot perform his daily collection, he must notify
petitioner or the branch office in the morning of the day that he will
be absent; and although it was ACGI which ultimately disciplined
PCI Automation Center, Inc. vs. NLRC, GR No. 115920, 29 RULING:
January 1996  NO. As Prime is a labor-only contractor, the workers it
FACTS: supplied to the petitioner, including private respondent,
 Philippine Commercial International Bank (PCIB) should be considered employees of the petitioner. The
commenced its Project intended to link all existing computer admissions made by private respondent in his affidavits and
systems within PCIB and its various branches around the position paper that he is a regular employee of Prime are
country. It entered into a Computer Services Agreement not conclusive on this Court as the existence of an
with petitioner PCI Automation Center (PCI-AC) under which employer-employee relationship is a question of law which
petitioner obligated itself to direct, supervise and run the may not be made the subject of stipulation
development of the software of PCIB.  The legitimate job contractor provides services while the
 PCIB agreed to provide the petitioner with encoders and labor-only contractor provides only manpower. The
computer attendants, among others. legitimate job contractor undertakes to perform a specific
 To comply with its obligation to procure manpower for the job for the principal employer while the labor-only
petitioner, PCIB engaged the services of Prime Manpower. contractor merely provides the personnel to work for the
PCIB and Prime entered into an External Job Contract principal employer.
 Private respondent Hector was hired by Prime and assigned  An employer who engages the services of a bona fide
to petitioner as a data encoder. independent contractor is merely an indirect employer, by
 Prime decided to terminate private respondent’s services operation of law, of his contractor's employees.
after it was informed by the petitioner that his services were
no longer needed in the project.
 Private respondent filed before the NLRC a complaint for
illegal dismissal against Prime and PCI-AC

ISSUE:
 Whether private respondent is an employee of Prime
Just Causes acquire or retain union membership as a condition affecting
employment. There is union shop when all new regular employees are
Herminigildo Inguillo and Zenaida Bergante vs. First Philippine Scales, Inc. required to join the union within a certain period as a condition for their
(FPSI) and/or Amparo Policarpio, manager continued employment. There is maintenance of membership shop when
G.R. No. 165407 (June 5, 2009) employees, who are union members as of the effective date of the
agreement, or who thereafter become members, must maintain union
In 1991, FPSI and First Philippine Scales Industries Labor Union (FPSILU) membership as a condition for continued employment until they are
entered into a Collective Bargaining Agreement (CBA) for a period of five (5) promoted or transferred out of the bargaining unit or the agreement is
years in a document entitled RATIPIKASYON NG KASUNDUAN. Bergante and terminated.[40] A closed-shop, on the other hand, may be defined as an
Inguillo, who were members of FPSILU, signed the said document. enterprise in which, by agreement between the employer and his
employees or their representatives, no person may be employed in any or
Bergante, Inguillo and several FPSI employees joined another union, certain agreed departments of the enterprise unless he or she is, becomes,
the Nagkakaisang Lakas ng Manggagawa (NLM). [The latter] filed with the and, for the duration of the agreement, remains a member in good standing
Department of Labor and Employment (DOLE) an intra-union of a union entirely comprised of or of which the employees in interest are a
dispute against FPSILU and FPSI. Meanwhile, on March 29, 1996, the
part.[
executive board and members of the FPSILU addressed a document dated
March 18, 1996 denominated as “Petisyon” to FPSI's general manager,
Bergante and Inguillo assail the legality of their termination based on the
Amparo Policarpio (Policarpio), seeking the termination of the services of
[several employees, including herein petitioners. This was granted upon by Union Security Clause in the CBA between FPSI and FPSILU. Article II[42] of
FPSI, which terminated, among others, herein petitioners.] the CBA pertains to Union Security and Representatives, which provides:

In their Petition, Bergante and Inguillo assail the legality of their termination “The Company hereby agrees to a UNION SECURITY [CLAUSE] with the following
terms:
based on the Union Security Clause in the CBA between FPSI and FPSILU.
1. All bonafide union members x x x x shall, as a condition to their continued
[(1) Was there a valid ground for termination? employment, maintain their membership with the UNION;
(2) Was there compliance with the procedural due process to the xxx
termination?] 5. Any employee/union member who fails to retain union membership in
good standing may be recommended for suspension or dismissal by the Union
(1) Yes. The Labor Code of the Philippines has several provisions under Directorate and/or FPSILU Executive Council x x x”
which an employee may be validly terminated, namely: (1) just causes
under Article 282; (2) authorized causes under Article 283; (3) termination Verily, the aforesaid provision requires all members to maintain their
due to disease under Article 284; and (4) termination by the employee or membership with FPSILU during the lifetime of the CBA. Failing so, and for
resignation under Article 285. While the said provisions did not mention as any of the causes enumerated therein, the Union Directorate and/or FPSILU
ground the enforcement of the Union Security Clause in the CBA, the Executive Council may recommend to FPSI an employee/union member's
dismissal from employment based on the same is recognized and accepted suspension or dismissal. Records show that Bergante and Inguillo were
in our jurisdiction. former members of FPSILU based on their signatures in the document which
ratified the CBA. It can also be inferred that they disaffiliated from FPSILU
“Union security” is a generic term, which is applied to and comprehends when the CBA was still in force and subsisting, as can be gleaned from the
“closed shop,” “union shop,” “maintenance of membership” or any other documents relative to the intra-union dispute between FPSILU and NLM-
form of agreement which imposes upon employees the obligation to KATIPUNAN. In view of their disaffiliation, as well as other acts allegedly
detrimental to the interest of both FPSILU and FPSI, a “Petisyon” was of the particular acts or omissions for which his dismissal is sought, while
submitted to Policarpio, asking for the termination of the services of the second notice informs the employee of the employer’s decision to
employees who failed to maintain their Union membership. dismiss him. The requirement of a hearing, on the other hand, is complied
with as long as there was an opportunity to be heard, and not necessarily
In terminating the employment of an employee by enforcing the Union that an actual hearing was conducted.
Security Clause, the employer needs only to determine and prove that: (1)
the union security clause is applicable; (2) the union is requesting for the In the present case, the required two notices that must be given to herein
enforcement of the union security provision in the CBA; and (3) there is petitioners Bergante and Inguillo were lacking. Respondents, however, aver
sufficient evidence to support the union's decision to expel the employee that they had furnished the employees concerned, including petitioners,
from the union or company. All the requisites have been sufficiently met with a copy of FPSILU's “Petisyon.” While the “Petisyon” enumerated the
and FPSI was justified in enforcing the Union Security Clause. several grounds that would justify the termination of the employees
mentioned therein, yet such document is only a recommendation by
The stipulations in the CBA authorizing the dismissal of employees are of the Union upon which the employer may base its decision. It cannot be
equal import as the statutory provisions on dismissal under the Labor Code, considered a notice of termination. A perusal of each of [the grounds stated
since a CBA is the law between the company and the Union, and compliance therein] leads Us to conclude that what was stated were general
therewith is mandated by the express policy to give protection to labor. descriptions, which in no way would enable the employees to intelligently
In Caltex Refinery Employees Association (CREA) v. Brillantes, the Court prepare their explanation and defenses.
expounded on the effectiveness of union security clause when it held that it
is one intended to strengthen the contracting union and to protect it from Policarpio's allegations are self-serving. Except for her claim as stated in
the fickleness or perfidy of its own members. For without such safeguards, the respondent's Position Paper, nowhere from the records can We find
group solidarity becomes uncertain; the union becomes gradually weakened that Bergante and Inguillo were accorded the opportunity to present
and increasingly vulnerable to company machinations. In this security evidence in support of their defenses. Policarpio relied heavily on the
clause lies the strength of the union during the enforcement of the “Petisyon” of FPSILU. She failed to convince Us that during the dialogue,
collective bargaining agreement. It is this clause that provides labor with she was able to ascertain the validity of the charges mentioned in the
substantial power in collective bargaining. “Petisyon.” In her futile attempt to prove compliance with the procedural
requirement, she reiterated that the objective of the dialogue was to
provide the employees “the opportunity to receive the act of grace of FPSI
(2) No. Nonetheless, while We uphold dismissal pursuant to a union security by giving them an amount equivalent to one-half (½) month of their salary
clause, the same is not without a condition or restriction. The enforcement for every year of service.” We are not convinced. We cannot even
of union security clauses is authorized by law, provided such enforcement is consider the demand and counter-offer for the payment of the employees
not characterized by arbitrariness, and always with due process. There are as an amicable settlement between the parties because what took place
two (2) aspects which characterize the concept of due process under the was merely a discussion only of the amount which the employees are willing
Labor Code: one is substantive––whether the termination of employment to accept and the amount which the respondents are willing to give. Such
was based on the provisions of the Labor Code or in accordance with the non-compliance is also corroborated by Bergante and Inguillo in their
prevailing jurisprudence; the other is procedural - the manner in which the pleadings denouncing their unjustified dismissal. In fine, We hold that the
dismissal was effected. dialogue is not tantamount to the hearing or conference prescribed by
law.
Procedural due process in the dismissal of employees requires notice and
hearing. The employer must furnish the employee two written notices
before termination may be effected. The first notice apprises the employee
G.R. No. 168081, October 17, 2008 discriminated as those similarly situated were not treated the
ARMANDO G. YRASUEGUI, petitioners, vs. PHILIPPINE same.
AIRLINES, INC., respondents. On June 15, 1993, petitioner was formally informed by PAL that
due to his inability to attain his ideal weight, “and considering the
FACTS: THIS case portrays the peculiar story of an international utmost leniency” extended to him “which spanned a period
flight steward who was dismissed because of his failure to adhere covering a total of almost five (5) years,” his services were
to the weight standards of the airline company. considered terminated “effective immediately.”
The proper weight for a man of his height and body structure is LABOR ARBITER: held that the weight standards of PAL are
from 147 to 166 pounds, the ideal weight being 166 pounds, as reasonable in view of the nature of the job of petitioner. However,
mandated by the Cabin and Crew Administration Manual of PAL. the weight standards need not be complied with under pain of
In 1984, the weight problem started, which prompted PAL to send dismissal since his weight did not hamper the performance of his
him to an extended vacation until November 1985. He was allowed duties.
to return to work once he lost all the excess weight. But the NLRC affirmed.
problem recurred. He again went on leave without pay from CA: the weight standards of PAL are reasonable. Thus, petitioner
October 17, 1988 to February 1989. was legally dismissed because he repeatedly failed to meet the
Despite the lapse of a ninety-day period given him to reach his prescribed weight standards. It is obvious that the issue of
ideal weight, petitioner remained overweight. On January 3, 1990, discrimination was only invoked by petitioner for purposes of
he was informed of the PAL decision for him to remain grounded escaping the result of his dismissal for being overweight.
until such time that he satisfactorily complies with the weight
standards. Again, he was directed to report every two weeks for ISSUE: WON he was validly dismissed.
weight checks, which he failed to comply with.
On April 17, 1990, petitioner was formally warned that a repeated HELD: YES
refusal to report for weight check would be dealt with accordingly. A reading of the weight standards of PAL would lead to no other
He was given another set of weight check dates, which he did not conclusion than that they constitute a continuing qualification of an
report to. employee in order to keep the job. The dismissal of the employee
On November 13, 1992, PAL finally served petitioner a Notice of would thus fall under Article 282(e) of the Labor Code.
Administrative Charge for violation of company standards on In the case at bar, the evidence on record militates against
weight requirements. Petitioner insists that he is being petitioner’s claims that obesity is a disease. That he was able to
reduce his weight from 1984 to 1992 clearly shows that it is
possible for him to lose weight given the proper attitude, inherent quality reasonably necessary for satisfactory job
determination, and self-discipline. Indeed, during the clarificatory performance.”
hearing on December 8, 1992, petitioner himself claimed that The business of PAL is air transportation. As such, it has committed
“[t]he issue is could I bring my weight down to ideal weight which itself to safely transport its passengers. In order to achieve this, it
is 172, then the answer is yes. I can do it now.” must necessarily rely on its employees, most particularly the cabin
Petitioner has only himself to blame. He could have easily availed flight deck crew who are on board the aircraft. The weight
the assistance of the company physician, per the advice of PAL. standards of PAL should be viewed as imposing strict norms of
In fine, We hold that the obesity of petitioner, when placed in the discipline upon its employees.
context of his work as flight attendant, becomes an analogous The primary objective of PAL in the imposition of the weight
cause under Article 282(e) of the Labor Code that justifies his standards for cabin crew is flight safety.
dismissal from the service. His obesity may not be unintended, but Separation pay, however, should be awarded in favor of the
is nonetheless voluntary. As the CA correctly puts it, employee as an act of social justice or based on equity. This is so
“[v]oluntariness basically means that the just cause is solely because his dismissal is not for serious misconduct. Neither is it
attributable to the employee without any external force influencing reflective of his moral character.
or controlling his actions. This element runs through all just causes
under Article 282, whether they be in the nature of a wrongful
action or omission. Gross and habitual neglect, a recognized just
cause, is considered voluntary although it lacks the element of
intent found in Article 282(a), (c), and (d).”
NOTES:
The dismissal of petitioner can be predicated on the bona fide
occupational qualification defense. Employment in particular jobs
may not be limited to persons of a particular sex, religion, or
national origin unless the employer can show that sex, religion, or
national origin is an actual qualification for performing the job. The
qualification is called a bona fide occupational qualification (BFOQ).
In short, the test of reasonableness of the company policy is used
because it is parallel to BFOQ. BFOQ is valid “provided it reflects an