Diamond Farms vs. FARMS AGRARIAN REFORM BENEFICIARIES MULTI-PURPOSE COOPERATIVE (DARBMUPCO)
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.
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.
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.
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.