Certificate of Registration issued by DOLE recognizes CBMI as an independent contractor and regards the validity of the latter’s registration well within the period relevant to its appeal. It then becomes incumbent upon the other party to rebut the presumption of regularity to prove that CBMI is not a legitimate contractor as determined by the DOLE, which they failed to do.

Consolidated Building Maintenance, Inc. and Sarah Delgado vs. Rolando Asprec, Jr. and Jonalen Bataller

G.R. No. 217301, June 6, 2018

Labor-only contracting; Temporary lay-off; Preventive suspension


CBMI is a corporation engaged in the business of providing janitorial, kitchen, messengerial, elevator maintenance and allied services to various entities. Among CBMI’s clients is Philippine Pizza, Inc.-Pizza Hut (PPI). For PPI, CBMI provides kitchen, delivery, sanitation and other related services pursuant to contracts of services, which are valid for one-year periods. Records reveal that contracts of services were executed between PPI and CBMI in the years 20008 and from 2002 until 2010.

Rolando Asprec, Jr. (Asprec) and Jonalen Bataller (Bataller) (collectively referred to as Asprec, et al.) alleged that they are regular employees of PPI, the former having commenced work as a “Rider” in January 2001 and the latter as “team member/slice cashier” in March 2008, both assigned at PPI’s Pizza Hut, Marcos Highway, Marikina City Branch.

Asprec averred that after the expiration of his contract on November 4, 2001, PPI advised him to go on leave for one (1) month and ten (10) days. Thereafter, he was called for an interview by PPI’ s Area Manager, Rommel Blanco. After passing the same, he was told to proceed to the office of CBMI where he signed a contract. Asprec stated that except for the fact that the payslips were then issued by CBMI, work proceeded as usual with him being assigned at the same branch and performing his usual duties as “Rider/Production Person.”

Bataller had a similar experience. She related that before the expiration of her employment contract, she was informed by Pizza Hut Restaurant Manager Jun Samar that as a precondition for continued employment, she had to “submit first a resignation letter, had to pass through CBMI, and after six months she should go on vacation for one month.” Thereafter, she was interviewed by PPI General Manager Edilberto Garcia. Bataller advanced that after she passed the interview, PPI prepared her documents and then forwarded the same to CBMI. She then resumed employment in December 2008 until July 23, 2010, with her being assigned at the same branch, performing her usual duties, and receiving the same salary.

On the other hand, CBMI posited that Asprec, et al. are its employees. CBMI claimed that Asprec, et al. were investigated based on an Incident Report by PPI’ s Store Manager Karl Clemente of an attempted theft. One Jessie Revilla (Revilla) supposedly delivered an excess of two boxes to PPI’s slice booth at the Light Rail Train (LRT) Santolan, Pasig Station, which Asprec, et al. failed to report.

Anent the incident, Asprec asserted that he has no knowledge of such actions by Revilla and claimed that the same is outside his responsibility as a “production person.” Nonetheless, Asprec claimed that on account of the incident, he has been suspended for eight days and then was eventually dismissed.

On the other hand, Bataller, who was manning the slice booth at the LRT Santolan, Pasig Station on the day of the incident, claimed that when Revilla brought the three boxes of pizza which she ordered, she was busy attending to customers and thus did not notice that there has been an excess in the delivery. Nonetheless, she posited that immediately upon discovery, she called Revilla but the latter was already far from the station and as such could no longer go back. Revilla allegedly went back to get the two extra pizza boxes later that day.

Bataller likewise submitted that she has informed the area manager of the incident, but was thereafter asked to proceed to PPI’s Marcos Highway branch. There, she was interviewed along with Asprec and Revilla, and then told to report to the head office. Starting July 24, 2010, she was allegedly no longer allowed to return to work.

Asprec, et al. filed their Complaint against CBMI, et al. for constructive illegal dismissal, illegal suspension, and non-payment of separation pay.

In their Complaint, Asprec, et al. argued two points: first, that their transfer from PPI to CBMI constituted labor-only contracting and was a mere scheme by PPI to prevent their regularization; and second, that they were illegally dismissed without cause and due process of law. On December 20, 2010, Asprec, et al. amended their Complaint by impleading PPI and including a prayer for reinstatement and payment of moral and exemplary damages and attorney’s fees.

LA Ruling:

The LA rendered a Decision granting Asprec, et al.’s complaint.

The LA applied the four-fold test and ruled that Asprec, et al. are employees of PPI Consequently, the LA held that the arrangement between CBMI and PPI constitutes labor-only contracting and imposed upon them solidary liability for Asprec, et al.’ claim. The LA ruled that as the employer, the burden is upon PPI to prove that the dismissal was based on a just cause and that there has been compliance with procedural due process, which it failed to do. Thus, the LA concluded that Asprec, et al. have been illegally dismissed.

With this ruling, CBMI, et al. and PPI appealed to the NLRC.

NLRC Ruling:

The NLRC rendered its Resolution affirming with modification the LA’s Decision.

In contrast with the finding of the LA, the NLRC held that Asprec, et al. are regular employees of CBMI. In so ruling, the NLRC relied heavily on the employment contract and CBMI’ s admission of Asprec, et al.’ employment. In this regard, and considering that there is no allegation of under payment or non-payment of wages, the NLRC ordered PPI to be dropped from the case.

The NLRC dropped PPI as party to the case. CBMI’s appeal was dismissed. CBMI, et al. were ordered to pay Asprec, et al. backwages, separation pay and attorney’s fees.

Both CBMI, et al. and Asprec, et al. filed their respective motions for partial reconsideration but they were denied by the NLRC. The parties herein separately filed their appeal via petitions for certiorari with the CA.

CA Ruling:

The CA denied the petition for certiorari.

The CA held that the NLRC erred in dropping PPI as a party to the case, as contrary to its findings, CBMI failed to prove that it was an independent contractor, or was engaged in permissible job contracting.

According to the CA, the totality of the circumstances surrounding the case established that it was PPI and not CBMI which has the discretion and control over the manner and method by which Asprec, et al.’ works are to be accomplished. Furthermore, considering that Asprec, et al. performed tasks which are necessary and desirable to the usual trade or business of PPI, and use tools and equipment of the latter in their work, the CA concluded that CBMI falls under the definition of a “labor only contractor,” which is prohibited under Article 106 of the Labor Code.

As agent of PPI, the CA ruled that it is incumbent upon CBMI, et al. to prove that the dismissal was for a just and valid cause which it failed to do, accordingly, the CA concluded that the dismissal is illegal and Asprec, et al. are entitled to their money claims.

CBMI, et al. sought a reconsideration but the CA denied it.


Whether or not a contractor which is a holder of a Certificate of Registration under D.O. 18-A is considered labor-only contractor

Whether or not the preventive suspension in the guise of temporary lay-off can validly extend beyond 30 days

SC Ruling:

The SC found the petition partly meritorious.

The Court sustained CBMI’s position that it is an independent contractor.

Job contracting is not absolutely prohibited. Indeed, an employer is allowed to farm out the performance or completion of a specific job, work or service, within a definite or specified period, and regardless of whether the said task is to be performed or completed within or outside its premises. Job contracting is deemed legitimate and permissible when the contractor has substantial capital or investment, and runs a business that is independent and free from control by the principal.

The absence of registration merely gives rise to the presumption that the contractor is engaged in labor-only contracting. Conversely, in the absence of evidence to the contrary, flowing from the presumption of regularity in the performance of official functions, the existence of registration in favor of a contractor is a strong badge of legitimacy in favor of the contractor.

It is not disputed that CBMI is a duly licensed labor contractor by the DOLE. As the primary agency tasked to regulate job contracting, DOLE is presumed to have acted in accordance with its mandate and after due evaluation of rules and regulations in its registration of CBMI. The Certificate of Registration issued by DOLE recognizes CBMI as an independent contractor as of February 13, 2008, and regards the validity of the latter’s registration as such until February 14, 2011, well within the period relevant to its appeal. In this light, it then becomes incumbent upon Asprec, et al. to rebut the presumption of regularity to prove that CBMI is not a legitimate contractor as determined by the DOLE, which they failed to do.

Above all, CBMI maintains the “right of control” over Asprec, et al. For purposes of determining whether a job contractor is engaged in legitimate contracting or prohibited labor-only contracting, DO No. 18-02, defines the “right of control” as the right reserved to the person for whom the services of the contractual workers are performed, to determine not only the end to be achieved, but also the manner and means in achieving that end.

From these, it can readily be inferred that the element of control that is determinative of an employer-relationship “does not merely relate to the mutually desirable result intended by the contractual relationship; they must have the nature of dictating the means and methods to be employed in attaining the result.

Learn more about job contracting under D.O. 174: Get a copy of Labor Code of the Philippines 2018 Edition

The contract of service, while of itself is not determinative of the relationship between the parties, nonetheless provides useful leads into the relationship between the principal on the one hand, and the job contractor on the other. In this case, the “Contract of Services” between CBMI and PPI for the year 2000, imposes upon the former the obligation to provide not only the necessary personnel to perform “kitchen, busing, rider/delivery, and sanitation services” but as well to provide tools and equipment necessary for the rendition of such services. Also, it is understood under the agreement that upon deployment, the personnel are already qualified and possessed of the necessary skills for their assigned tasks.

For the year 2009 and 2010, the Contract of Services further detailed these provisions, in that the contract provided that CBMI has the “sole authority to control and direct the performance of the details of the work of its employees.” Further, that any complaints or reports regarding the performance, misconduct, or negligence of the persons so deployed shall be made in writing and addressed by PPI to CBMI, the latter having the sole authority to discipline its employees.

CBMI, et al.’s control over Asprec, et al. is manifested by the fact that they wield and exercise the following powers over them: “selection and engagement, payment of wages, dismissal, and control over the employees’ conduct.” It is indisputable from Asprec, et al.’s employment contracts that they were hired by CBMI. It was also the latter who assigned Asprec, et al. at PPI’ s Marcos Highway Branch after they were briefed of company policies and their duties. It is also CBMI who pays Asprec, et al. their salaries, and remits premiums to PhilHealth and Social Security System.

The nature of CBMI’s agreement with PPI requires the former to assign employees to perform specific services for the latter. CBMI deploys employees already equipped of the skills based on the specific service demanded by PPI to be accomplished. Ultimately, the training necessary to acquire the skills essential to perform the duties of a rider for Asprec, and as a team member for Bataller, have been provided for by CBMI. Simply, the manner in which Asprec, et al. perform their task are all dictated by CBMI, the sole concern of PPI being the result, i.e., what and how many items are to be produced and where to deliver the same. Noteworthy, CBMI maintains the sole power to determine Asprec, et al.’ place of assignment and their transfer from one work assignment to another. CBMI’ s manner of deployment and its choice as to who will be assigned for a specific task or location does not require the approval or acceptance of PPL.

CBMI maintains the power to discipline Asprec, et al. In accordance with the terms of the 2010 Contract of Services, an Incident Report was prepared by PPI’s Store Manager who then submitted the same to CBMI. Pursuant to its power of supervision over Asprec, et al., CBMI initiated the investigation and on the basis thereof imposed upon Asprec, et al. preventive suspension. It may not be amiss to point out that Asprec, et al.’s participation in these proceedings is indicative of their recognition of CBMI’s disciplinary authority over them.

All these, without doubt indicate that CBMI possesses the power of control over Asprec, et al.; which in tum supports the conclusion that CBMI carries a business independent of PPL.

The extension of the period of suspension by the CBMI is unwarranted under the attendant circumstances. Section 4, Rule XIV of the Omnibus Rules Implementing the Labor Code is explicit in that the period of preventive suspension should not exceed 30 days, after which, the employee must be reinstated and paid the wages and other benefits due.

After the conduct of administrative hearing, Asprec, et al. have been suspended by CBMI for a period of 15 days or from August 5 to 19, 2010. Thereafter, allegedly due to the reduced need of PPI and on account of the incident subject of investigation, Asprec, et al. have been placed on “temporary-lay-off status” for a period of six months or from August 20, 2010 until February 20, 2011.

Learn more about bonafide suspension of operations and employee termination in Guide to Valid Dismissal of Employees Second Edition

Succinctly, Asprec, et al. have been under preventive suspension for more than the maximum period allowed by law, without any word as to the result of the investigation, and without having been reinstated to their former or to a substantially equivalent position, which thus renders the period of extended suspension illegal. It bears to stress albeit at the risk of repetition, the Omnibus Rules Implementing the Labor Code requires that the employer act within the 30-day period of preventive suspension by concluding the investigation either by absolving Asprec, et al. of the charges or meting corresponding penalty if liable. Otherwise, the employer must reinstate the employee, or extend the period of suspension provided the employee’s wages and benefits are paid in the interim. Failure by the employer to comply with these, the preventive suspension is deemed illegal as it amounts to a constructive dismissal.

CBMI’s claim that the suspension falls under Article 286 of the Labor Code is a mere afterthought to justify its extension of Asprec, et al.’s period of preventive suspension. For one, the equivocal wording of the notice evinces the real reason behind the extended period of suspension, i.e., the attempted stealing incident.

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