G.R. Nos. 173254-55 & 173263, January 13, 2016


Diamond Farms, Inc. (DFI) and Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) entered into a Banana Production and  Purchase  Agreement  (“BPPA”) to grow and cultivate only high grade quality exportable bananas to be sold exclusively to DFI. The BPPA is effective for 10 years. DARBMUPCO  and  DFI  executed  a “Supplemental to Memorandum Agreement” (“SMA”). The SMA stated that  DFI  shall  take  care  of  the  labor  cost  arising  from  the  packaging operation, cable maintenance, irrigation pump and irrigation maintenance that the workers of DARBMUPCO shall conduct for DFI’s account under the BPPA.

DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation under the BPPA because some of its members were  not  willing  to  work. Hence,  to  assist  DARBMUPCO  in  meeting  its production  obligations  under  the  BPPA,  DFI  engaged  the  services of the respondent-contractors, who in turn recruited the respondent-workers.

Respondent  Southern  Philippines  Federation  of Labor  (“SPFL”)—a  legitimate  labor  organization  with  a  local  chapter  in  the awarded plantation—filed a petition for certification election in the Office of the Med-Arbiter in Davao City. SPFL filed the petition on behalf of some 400 workers (the respondent-workers in this petition) “jointly employed by DFI and DARBMUPCO” working in the awarded plantation. DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They claimed, instead, that the respondent-workers are the employees of the respondent-contractors.

Med Arbiter Ruling:

The Med-Arbiter granted the petition for certification election. It directed the conduct of certification election and declared that DARBMUPCO was the employer of the respondent-workers.

SOLE Ruling:

DARBMUPCO  appealed  to  the  Secretary  of  Labor  and  Employment (“SOLE”). The SOLE modified the decision of the Med-Arbiter. The SOLE held that DFI, through its manager and personnel, supervised and directed the performance of the work of the respondent-contractors. The SOLE thus declared DFI as the employer of the respondent-workers. DFI  filed  a  motion  for  reconsideration  which  the  SOLE. DFI elevated the case to the Court of Appeals (“CA”) via a Petition for Certiorari.

CA Ruling:

The CA agreed with the ruling of the SOLE that DFI is the statutory employer of the respondent-workers. It noted that the DFI hired the respondent-contractors, who in turn procured their own men to work in the land owned by DARBMUPCO. Further, DFI admitted that the respondent-contractors worked under the direction and supervision of DFI’s managers and personnel. DFI also paid for the respondent-contractors’ services. The CA said that the fact that the  respondent-workers  worked  in  the  land  owned  by  DARBMUPCO  is immaterial. “Ownership of the land is not one of the four (4) elements generally considered to establish employer-employee relationship.

The CA also ruled that DFI is the true employer of the respondent-workers because the respondent-contractors are not independent contractors. DFI filed a Motion for Reconsideration of the CA Decision which was denied. Hence, the Petition.


Whether or not DFI is the employer of the respondents.

SC Ruling:

The SC denied the petition holding that the case involves job contracting, a labor arrangement expressly allowed by law. As a general  rule,  a  contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that it has the substantial capital, investment, tools and the like.

Based on the conditions for permissible job contracting, the SC ruled that respondent-contractors are labor-only contractors.  There is no evidence showing that respondent-contractors are independent contractors. The respondent-contractors, DFI, and DARBMUPCO did not offer any proof that  respondent-contractors  were  not  engaged  in  labor-only contracting. DFI should have  presented  proof  showing  that  respondent-contractors  carry on  an independent  business  and  have  sufficient  capitalization.

DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims of respondent-contractors that they sent their billing to DFI for payment; and that DFI’s managers and personnel are in close consultation with the respondent-contractors. That  DARBMUPCO  owns  the  awarded  plantation  where  the respondent-contractors and respondent-workers were working is immaterial. This does not change the situation of the parties. As correctly found by the CA, DFI, as the principal, hired the respondent-contractors and the latter, in turn, engaged the services of the respondent-workers.



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