SAN MIGUEL CORPORATION VS PROSPERO A. ABALLA

SAN MIGUEL CORPORATION

VS

PROSPERO A. ABALLA
461 SCRA 392 (2005)

The language of a contract disavowing the existence of an employer-employee relationship is not determinative of the parties’ relationship. It is the totality of the facts and surrounding circumstances of the case.

Petitioner San Miguel Corporation (SMC) and Sunflower Multi-Purpose Cooperative (Sunflower) entered into a one-year Contract of Service and such contract is renewed on a monthly basis until terminated. Pursuant to this, respondent Prospero Aballa et al. rendered services to SMC.

After one year of rendering service, Aballa et al., filed a complaint before National Labor Relations Commission (NLRC) praying that they be declared as regular employees of SMC. On the other hand, SMC filed before the Department of Labor and Employment (DOLE) a Notice of Closure due to serious business losses. Hence, the labor arbiter dismissed the complaint and ruled in favor of SMC. Aballa et al. then appealed before the NLRC. The NLRC dismissed the appeal finding that Sunflower is an independent contractor.

On appeal, the Court of Appeals reversed NLRC’s decision on the ground that the agreement between SMC and Sunflower showed a clear intent to abstain from establishing an employer-employee relationship.

ISSUE:
Whether or not Aballa et al. are employees of SMC

HELD:
The test to determine the existence of independent contractorship is whether one claiming to be an independent contractor has contracted to do the work according to his own methods and without being subject to the control of the employer, except only as to the results of the work.

In legitimate labor contracting, the law creates an employer-employee relationship for a limited purpose, i.e., to ensure that the employees are paid their wages. The principal employer becomes jointly and severally liable with the job contractor, only for the payment of the employees’ wages whenever the contractor fails to pay the same. Other than that, the principal employer is not responsible for any claim made by the employees.

In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only contractor as if such employees had been directly employed by the principal employer.

The Contract of Services between SMC and Sunflower shows that the parties clearly disavowed the existence of an employer-employee relationship between SMC and private respondents. The language of a contract is not, however, determinative of the parties’ relationship; rather it is the totality of the facts and surrounding circumstances of the case. A party cannot dictate, by the mere expedient of a unilateral declaration in a contract, the character of its business, i.e., whether as labor-only contractor or job contractor, it being crucial that its character be measured in terms of and determined by the criteria set by statute.

What appears is that Sunflower does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises and other materials to qualify it as an independent contractor. On the other hand, it is gathered that the lot, building, machineries and all other working tools utilized by Aballa et al. in carrying out their tasks were owned and provided by SMC.

And from the job description provided by SMC itself, the work assigned to Aballa et al. was directly related to the aquaculture operations of SMC. As for janitorial and messengerial services, that they are considered directly related to the principal business of the employer has been jurisprudentially recognized.

Furthermore, Sunflower did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, SMC, its apparent role having been merely to recruit persons to work for SMC.

All the foregoing considerations affirm by more than substantial evidence the existence of an employer-employee relationship between SMC and Aballa et al. Since Aballa et al. who were engaged in shrimp processing performed tasks usually necessary or desirable in the aquaculture business of SMC, they should be deemed regular employees of the latter and as such are entitled to all the benefits and rights appurtenant to regular employment. They should thus be awarded differential pay corresponding to the difference between the wages and benefits given them and those accorded SMC’s other regular employees.