Philippine Airlines v. Ligan

9/3/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 547
Notes.A wife, by affixing her signature to a Deed of

Sale on the space provided for witnesses, is deemed to have
given her implied consent to the contract of salea wifes
consent to the husbands disposition of conjugal property
does not always have to be explicit or set forth in any
particular document so long as it is shown by acts of the
wife that such consent or approval was indeed given.
(Pelayo vs. Perez, 459 SCRA 475 [2005])
Where the redemption is made under a property regime
governed by the conjugal partnership of gains, Article 109
of the Family Code provides that property acquired by right
of redemption is the exclusive property of the spouses
redeeming the property. (Villegas vs. Lingan, 526 SCRA 63
[2007])
o0o
G.R. No. 146408. February 29, 2008.*

PHILIPPINE AIRLINES, INC., petitioner, vs. ENRIQUE
LIGAN, EMELITO SOCO, ALLAN PANQUE, JOLITO
OLIVEROS, RICHARD GONCER, NONILON PILAPIL,
AQUILINO YBANEZ, BERNABE SANDOVAL, RUEL
GONCER, VIRGILIO P. CAMPOS, JR., ARTHUR M.
CAPIN, RAMEL BERNARDES, LORENZO BUTANAS,
BENSON CARESUSA, JEFFREY LLENOS, ROQUE
PILAPIL, ANTONIO M. PAREJA, CLEMENTE R.
LUMAYNO, NELSON TAMPUS, ROLANDO TUNACAO,
CHERRIE ALEGRES, BENEDICTO AUXTERO,
EDUARDO MAGDADARAUG, NELSON M. DULCE, and
ALLAN BENTUZAL, respondents.
Labor Law; Labor-Only Contracting; Legitimate contracting and

labor-only contracting are defined in Department Order (D.O.) No. 18-02,
series of 2002 (Rules Implementing Articles 106 to 109 of
_______________
* SECOND DIVISION.
http://www.central.com.ph/sfsreader/session/0000015e437aea991081dc79003600fb002c009e/t/?o=False 1/17
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182 SUPREME COURT REPORTS ANNOTATED
547 SCRA 181
the Labor Code, as amended).Legitimate contracting and labor-only

contracting are defined in Department Order (D.O.) No. 18-02, Series of
2002 (Rules Implementing Articles 106 to 109 of the Labor Code, as
amended) as follows: Section 3. Trilateral relationship in contracting
arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work or
service between the principal and the contractor or subcontractor, and a
contract of employment between the contractor or subcontractor and its
workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or
subcontractor, the contractor or subcontractor which has the capacity to
independently undertake the performance of the job, work or service, and
the contractual workers engaged by the contractor or subcontractor to
accomplish the job, work or service. (Emphasis and italics supplied) Section
5. Prohibition against labor-only contracting.Labor-only contracting is
hereby declared prohibited. For this purpose, labor-only contracting shall
refer to an arrangement where the contractor or subcontractor merely
recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are [sic] present: (i) The
contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and
the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; OR (ii) The contractor does not exercise
the right to control over the performance of the work of the contractual
employee. (Emphasis, italics and capitalization supplied)
Same; Same; For labor-only contracting to exist, Section 5 of D.O. No.

18-02 requires any two of the elements to be present.For labor-only
contracting to exist, Section 5 of D.O. No. 18-02 which requires any of two
elements to be present is, for convenience, re-quoted: (i) The contractor or
subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees
recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of
the principal, OR (ii) The contractor does not exercise the right to control
over the performance of the work of the contractual employee. (Emphasis
and
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547 SCRA 181
CAPITALIZATION supplied) Even if only one of the two elements

is present then, there is labor-only contracting.
Same; Same; One who claims to be an independent contractor has to

prove that he contracted to do the work according to his own methods and
without being subject to the employers control except only as to the results.
One who claims to be an independent contractor has to prove that he
contracted to do the work according to his own methods and without being
subject to the employers control except only as to the results.
Same; Same; Respondents having performed tasks which are usually
necessary and desirable in the air transportation business of petitioner, they
should be deemed its regular employees and Synergy as a labor-only
contractor.Respondents having performed tasks which are usually
necessary and desirable in the air transportation business of petitioner, they
contractor. The express provision in the Agreement that Synergy was an
independent contractor and there would be no employer-employee
relationship between [Synergy] and/or its employees on one hand, and
[petitioner] on the other hand is not legally binding and conclusive as
contractual provisions are not valid determinants of the existence of such
relationship. For it is the totality of the facts and surrounding
circumstances of the case which is determinative of the parties
relationship.
PETITION for review on certiorari of a decision of the Court of

Appeals.
The facts are stated in the opinion of the Court.
Bienvenido T. Jamoralin, Jr. for petitioner.
Manuel P. Legaspi for private respondents.
CARPIO-MORALES,J.:
Petitioner Philippine Airlines as Owner, and Synergy Services

Corporation (Synergy) as Contractor, entered into an Agreement1 on
July 15, 1991 whereby Synergy undertook to
_______________
1 NLRC Records, Vol. I, pp. 168-177.
184

547 SCRA 181
provide loading, unloading, delivery of baggage and cargo

and other related services to and from [petitioner]s aircraft
at the Mactan Station.2
The Agreement specified the following Scope of Services of
Contractor Synergy:
1.2CONTRACTOR shall furnish all the necessary capital, workers,

loading, unloading and delivery materials, facilities, supplies, equipment
and tools for the satisfactory performance and execution of the following
services (the Work):
a.Loading and unloading of baggage and cargo to and from the
aircraft;
b.Delivering of baggage from the ramp to the baggage claim area;
c.Picking up of baggage from the baggage sorting area to the
designated parked aircraft;
d.Delivering of cargo unloaded from the flight to cargo terminal;
e.Other related jobs (but not janitorial functions) as may be required
and necessary;
CONTRACTOR shall perform and execute the aforementioned Work at
the following areas located at Mactan Station, to wit:
a.Ramp Area
b.Baggage Claim Area
c.Cargo Terminal Area, and
d.Baggage Sorting Area3 (Italics supplied)
And it expressly provided that Synergy was an independent

contractor and . . . that there w[ould] be no employer-employee
relationship between CONTRACTOR and/or its employees on the
one hand, and OWNER, on the other.4
_______________
2 Rollo, p. 136.
3 Id., at pp. 136-137.
4 Id., at p. 138.
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547 SCRA 181
On the duration of the Agreement, Section 10 thereof provided:
10. 1Should at any time OWNER find the services herein undertaken
by CONTRACTOR to be unsatisfactory, it shall notify CONTRACTOR
who shall have fifteen (15) days from such notice within which to improve
the services. If CONTRACTOR fails to improve the services under this
Agreement according to OWNERS specifications and standards, OWNER
shall have the right to terminate this Agreement immediately and without
advance notice.
10.2Should CONTRACTOR fail to improve the services within the
period stated above or should CONTRACTOR breach the terms of this
Agreement and fail or refuse to perform the Work in such a manner as will
be consistent with the achievement of the result therein contracted for or in
any other way fail to comply strictly with any terms of this Agreement,
OWNER at its option, shall have the right to terminate this Agreement and
to make other arrangements for having said Work performed and pursuant
thereto shall retain so much of the money held on the Agreement as is
necessary to cover the OWNERs costs and damages, without prejudice to
the right of OWNER to seek resort to the bond furnished by
CONTRACTOR should the money in OWNERs possession be insufficient.
x x x x (Underscoring supplied)
Except for respondent Benedicto Auxtero (Auxtero), the rest of

the respondents, who appear to have been assigned by Synergy to
petitioner following the execution of the July 15, 1991 Agreement,
filed on March 3, 1992 complaints before the NLRC Regional
Office VII at Cebu City against petitioner, Synergy and their
respective officials for underpayment, non-payment of premium pay
for holidays, premium pay for rest days, service incentive leave pay,
13th month pay and allowances, and for regularization of
employment status with petitioner, they claiming to be performing
duties for the benefit of [petitioner] since their job is directly
connected with [its] business x x x.5
_______________
5 Id., at p. 8; NLRC Records, Vol. 1, p. 104.
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547 SCRA 181
Respondent Auxtero had initially filed a complaint against

petitioner and Synergy and their respective officials for
regularization of his employment status. Later alleging
that he was, without valid ground, verbally dismissed, he
filed a complaint against petitioner and Synergy and their
respective officials for illegal dismissal and reinstatement
with full backwages.6
The complaints of respondents were consolidated.
By Decision7 of August 29, 1994, Labor Arbiter Dominador
Almirante found Synergy an independent contractor and dismissed
respondents complaint for regularization against petitioner, but
granted their money claims. The fallo of the decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby

rendered as follows:
(1)Ordering respondents PAL and Synergy jointly and severally to pay
all the complainants herein their 13th month pay and service incentive leave
benefits;
xxxx
(3)Ordering respondent Synergy to pay complainant Benedicto
Auxtero a financial assistance in the amount of P5,000.00.
The awards hereinabove enumerated in the aggregate total amount of
THREE HUNDRED TWENTY-TWO THOUSAND THREE HUNDRED
FIFTY NINE PESOS AND EIGHTY SEVEN CENTAVOS (P322,359.87)
are computed in detail by our Fiscal Examiner which computation is hereto
attached to form part of this decision.
The rest of the claims are hereby ordered dismissed for lack of merit.8
(Underscoring supplied)
On appeal by respondents, the NLRC, Fourth Division, Cebu

City, vacated and set aside the decision of the Labor
_______________
6 Ibid.; Vide also NLRC Records, Vol. 1, p. 151.
7 Rollo, pp. 302-316.
8 Id., at pp. 315-316.
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547 SCRA 181
Arbiter by Decision9 of January 5, 1996, the fallo of which reads:
WHEREFORE, the Decision of the Labor Arbiter Dominador A.

Almirante, dated August 29, 1994, is hereby VACATED and SET ASIDE
and judgment is hereby rendered:
1.Declaring respondent Synergy Services Corporation to be a labor-
only contractor;
2.Ordering respondent Philippine Airlines to accept, as its regular
employees, all the complainants, . . . and to give each of them the salaries,
allowances and other employment benefits and privileges of a regular
employee under the Collective Bargaining Agreement subsisting during the
period of their employment;
xxxx
4.Declaring the dismissal of complainant Benedicto Auxtero to be
illegal and ordering his reinstatement as helper or utility man with
respondent Philippine Airlines, with full backwages, allowances and other
benefits and privileges from the time of his dismissal up to his actual
reinstatement; and
5.Dismissing the appeal of respondent Synergy Services Corporation,

for lack of merit.10 (Emphasis and underscoring supplied)
Only petitioner assailed the NLRC decision via petition for

certiorari before this Court.
By Resolution11 of January 25, 1999, this Court referred the case
to the Court of Appeals for appropriate action and disposition,
conformably with St. Martin Funeral Homes v. National Labor
Relations Commission which was promulgated on September 16,
1998.
_______________
9 Id., at pp. 226-237.

10 Id., at pp. 236-237.
11 CA Rollo, p. 179.
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547 SCRA 181
The appellate court, by Decision of September 29, 2000, affirmed

the Decision of the NLRC.12 Petitioners motion for reconsideration
having been denied by Resolution of December 21, 2000,13 the
present petition was filed, faulting the appellate court
I.
. . . IN UPHOLDING THE NATIONAL LABOR RELATIONS
COMMISSION DECISION WHICH IMPOSED THE RELATIONSHIP OF
EMPLOYER-EMPLOYEE BETWEEN PETITIONER AND THE
RESPONDENTS HEREIN.
II.
. . . IN AFFIRMING THE RULING OF THE NATIONAL LABOR
RELATIONS COMMISSION ORDERING THE REINSTATEMENT OF
RESPONDENT AUXTERO DESPITE THE ABSENCE [OF] ANY
FACTUAL FINDING IN THE DECISION THAT PETITIONER
ILLEGALLY TERMINATED HIS EMPLOYMENT.
III.
. . . [IN ANY EVENT IN] COMMITT[ING] A PATENT AND GRAVE
ERROR IN UPHOLDING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION WHICH COMPELLED THE PETITIONER
TO EMPLOY THE RESPONDENTS AS REGULAR EMPLOYEES DESPITE
THE FACT THAT THEIR SERVICES ARE IN EXCESS OF PETITIONER
COMPANYS OPERATIONAL REQUIREMENTS.14 (Italics supplied)
Petitioner argues that the law does not prohibit an employer

from engaging an independent contractor, like Synergy, which has
substantial capital in carrying on an independent business of

contracting, to perform specific jobs.
_______________
12 Rollo, pp. 7-17. Penned by Associate Justice B.A. Adefuin-De la Cruz and
concurred in by then Presiding Justice Salome Montoya and Associate Justice Renato
Dacudao.
13 Id., at p. 29.
14 Id., at pp. 42-43.
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547 SCRA 181
Petitioner further argues that its contracting out to Synergy

various services like janitorial, aircraft cleaning, baggage-handling,
etc., which are directly related to its business, does not make
respondents its employees.
Petitioner furthermore argues that none of the four (4) elements
of an employer-employee relationship between petitioner and
respondents, viz: selection and engagement of an employee, payment
of wages, power of dismissal, and the power to control employees
conduct, is present in the case.15
Finally, petitioner avers that reinstatement of respondents had
been rendered impossible because it had reduced its personnel due to
heavy losses as it had in fact terminated its service agreement with
Synergy effective June 30, 199816 as a cost-saving measure.
The decision of the case hinges on a determination of whether
Synergy is a mere job-only contractor or a legitimate contractor. If
Synergy is found to be a mere job-only contractor, respondents
could be considered as regular employees of petitioner as Synergy
would then be a mere agent of petitioner in which case respondents
would be entitled to all the benefits granted to petitioners regular
employees; otherwise, if Synergy is found to be a legitimate
contractor, respondents claims against petitioner must fail as they
would then be considered employees of Synergy.
The statutory basis of legitimate contracting or subcontracting is
provided in Article 106 of the Labor Code which reads:
ART.106.CONTRACTOR OR SUBCONTRACTOR.Whenever an
employer enters into a contract with another person for the performance of
the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this
Code.
_______________
15 Id., at pp. 47-49.

16 Id., at p. 52.
190

547 SCRA 181
In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers
established under the Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting
as well as differentiations within these types of contracting and determine
who among the parties involved shall be considered the employer for
purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is labor-only contracting where the person supplying workers to
an employer does not have substantial capital or investment in the form
of tools, equipment, machineries, work premises, among others, AND
the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such
employer. In such cases, the person or intermediary shall be considered
merely as an agent of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly
employed by him. (Emphasis, capitalization and underscoring supplied)
Legitimate contracting and labor-only contracting are defined in

Department Order (D.O.) No. 18-02, Series of 2002 (Rules
Implementing Articles 106 to 109 of the Labor Code, as amended)
as follows:
Section3.Trilateral relationship in contracting arrangements.In

legitimate contracting, there exists a trilateral relationship under which
there is a contract for a specific job, work or service between the principal
and the contractor or subcontractor, and a contract of employment between
the contractor or subcontractor and its workers. Hence, there are three
parties involved in these arrangements, the principal which decides to farm
out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the
performance
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547 SCRA 181
of the job, work or service, and the contractual workers engaged by the
contractor or subcontractor to accomplish the job, work or service.
(Emphasis and underscoring supplied)
Section5. Prohibition against labor-only contracting.Labor-only
contracting is hereby declared prohibited. For this purpose, labor-only
contracting shall refer to an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job,
work or service for a principal, and any of the following elements are [sic]
present:
(i)The contractor or subcontractor does not have substantial capital
or investment which relates to the job, work or service to be performed and
main business of the principal; OR
(ii)The contractor does not exercise the right to control over the
performance of the work of the contractual employee. (Emphasis,
underscoring and capitalization supplied)
Substantial capital or investment and the right to control are

defined in the same Section 5 of the Department Order as follows:
Substantial capital or investment refers to capital stocks and

subscribed capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly used by
the contractor or subcontractor in the performance or completion of the job,
work or service contracted out.
The right to control shall refer to 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 to be used in
reaching that end. (Emphasis and underscoring supplied)
From the records of the case, it is gathered that the work

performed by almost all of the respondentsloading and unloading
of baggage and cargo of passengersis directly related to the main
business of petitioner. And the equipment
192

547 SCRA 181
used by respondents as station loaders, such as trailers and

conveyors, are owned by petitioner.17
Petitioner asserts, however, that mere compliance with
substantial capital requirement suffices for Synergy to be considered
a legitimate contractor, citing Neri v. National Labor Relations
Commission.18 Petitioners reliance on said case is misplaced.
In Neri, the Labor Arbiter and the NLRC both determined that
Building Care Corporation had a capital stock of P1 million fully
subscribed and paid for.19 The corporations status as independent
contractor had in fact been previously confirmed in an earlier case20
by this Court which found it to be serving, among others, a
university, an international bank, a big local bank, a hospital center,
government agencies, etc.
In stark contrast to the case at bar, while petitioner steadfastly
asserted before the Labor Arbiter and the NLRC that Synergy has a
substantial capital to engage in legitimate contracting, it failed to
present evidence thereon. As the NLRC held:
The decision of the Labor Arbiter merely mentioned on page 5 of his

decision that respondent SYNERGY has substantial capital, but there is no
showing in the records as to how much is that capital. Neither had
respondents shown that SYNERGY has such substantial capital. x x x21
(Underscoring supplied)
It was only after the appellate court rendered its challenged

Decision of September 29, 2002 when petitioner, in its Motion for
Reconsideration of the decision, sought to prove,
_______________
17 Id., at p. 184.
18 G.R. Nos. 97008-09, July 23, 1993, 224 SCRA 717.
19 Id., at p. 720.
20 Citing Associated Labor Unions-TUCP v. National Labor Relations
Commission, G.R. No. 101784, October 21, 1991, Third Division, Minute Resolution.
21 Rollo, p. 285.
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547 SCRA 181
for the first time, Synergys substantial capitalization by

attaching photocopies of Synergys financial statements,
e.g., balance sheets, statements of income and retained
earnings, marked as Annexes A A-4.22
More significantly, however, is that respondents worked
alongside petitioners regular employees who were performing
identical work.23 As San Miguel Corporation v. Aballa24 and Dole
Philippines, Inc. v. Esteva, et al.25 teach, such is an indicium of
labor-only contracting.
For labor-only contracting to exist, Section 5 of D.O. No. 18-02
which requires any of two elements to be present is, for
convenience, re-quoted:
(i)The contractor or subcontractor does not have substantial capital

or investment which relates to the job, work or service to be performed and
main business of the principal, OR
_______________
22 Vide Petitioners Motion for Reconsideration of CA Decision of September 29, 2000, id.,
at pp. 425-450.
23 Id., at pp. 348-349; Vide NLRC Records, Vol. 1, pp. 105 and 223; Position Papers for
Petitioner, NLRC Records, Vol. 1, pp. 83-92 and pp. 156-167; Affidavit of Benedicto A.
Auxtero, NLRC Records, Vol. 1, p. 185; Memorandum for petitioner, NLRC Records, Vol. 1,
pp. 206-216.
24 G.R. No. 149011, June 28, 2005, 461 SCRA 392, 425. This Court held:
xxxx
More. Private respondents had been working in the aqua processing plant inside the
SMC compound alongside regular SMC shrimp processing workers performing
identical jobs under the same SMC supervisors. This circumstance is another indicium
of the existence of a labor-only contractorship.
x x x x (Italics supplied)
25 G.R. No. 161115, November 30, 2006, 509 SCRA 332.
194

547 SCRA 181
(ii)The contractor does not exercise the right to control over the
performance of the work of the contractual employee. (Emphasis and
CAPITALIZATION supplied)
Even if only one of the two elements is present then, there is

labor-only contracting.
The control test element under the immediately-quoted paragraph
(ii), which was not present in the old Implementing Rules
(Department Order No. 10, Series of 1997),26 echoes the prevailing
jurisprudential trend27 elevating such element as a primary
determinant of employer-employee relationship in job contracting
agreements.
One who claims to be an independent contractor has to prove that
he contracted to do the work according to his own
_______________
26 Section 4(f) of Rule VIII-A of the Implementing Rules of Book III, as added by
Department Order No. 10, Series of 1997, merely provides:
(f) Labor-only contracting prohibited under this Rule is an arrangement where
the contractor or subcontractor merely recruits, supplies or places workers to perform
a job, work or service for a principal, and the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or
investment to actually perform the job, work or service under its own account
and responsibility; and
(ii) The employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the main
business of the principal.
27 Vide Neri v. National Labor Relations Commission, supra note 18; Aurora
Land Projects Corp. v. National Labor Relations Commission, 334 Phil. 44, 48; 266
SCRA 48, 60 (1997); Escario v. National Labor Relations Commission, G.R. No.
124055, June 8, 2000, 333 SCRA 257; Vinoya v. National Labor Relations
Commission, G.R. No. 126586, February 2, 2000, 324 SCRA 469; National Power
Corporation v. Court of Appeals, G.R. No. 119121, August 14, 1998, 294 SCRA 209.
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547 SCRA 181
methods and without being subject to the employers control except

only as to the results.28
While petitioner claimed that it was Synergys supervisors who
actually supervised respondents, it failed to present evidence
thereon. It did not even identify who were the Synergy supervisors
assigned at the workplace.
Even the parties Agreement does not lend support to petitioners
claim, thus:
Section6.Qualified and Experienced Worker: Owners Right to

Dismiss Workers.
CONTRACTOR shall employ capable and experienced workers and
foremen to carry out the loading, unloading and delivery Work as well as
provide all equipment, loading, unloading and delivery equipment,
materials, supplies and tools necessary for the performance of the Work.
CONTRACTOR shall upon OWNERS request furnish the latter with
information regarding the qualifications of the formers workers, to prove
their capability and experience. Contractor shall require all its workers,
employees, suppliers and visitors to comply with OWNERS rules,
regulations, procedures and directives relative to the safety and security
of OWNERS premises, properties and operations. For this purpose,
CONTRACTOR shall furnish its employees and workers identification
cards to be countersigned by OWNER and uniforms to be approved by
OWNER. OWNER may require CONTRACTOR to dismiss
immediately and prohibit entry into OWNERS premises of any person
employed therein by CONTRACTOR who in OWNERS opinion is
incompetent or misconducts himself or does not comply with
OWNERS reasonable instructions and requests regarding security, safety
and other matters and such person shall not again be employed to perform
the services hereunder without OWNERS
_______________
28 Acevedo v. Advanstar Company, Inc., G.R. No. 157656, November 11, 2005, 474 SCRA
656, 668 citing New Golden City Builders and Development Corporation v. Court of Appeals,
463 Phil. 821; 418 SCRA 411 (2003); San Miguel Corporation v. Aballa, supra note 24 at p.
421.
196

547 SCRA 181
permission.29 (Underscoring partly in the original and partly supplied;

emphasis supplied)
Petitioner in fact admitted that it fixes the work schedule of

respondents as their work was dependent on the frequency of plane
arrivals.30 And as the NLRC found, petitioners managers and
supervisors approved respondents weekly work assignments and
respondents and other regular PAL employees were all referred to as
station attendants of the cargo operation and airfreight services of
petitioner.31
Respondents having performed tasks which are usually necessary
and desirable in the air transportation business of petitioner, they
contractor.32
The express provision in the Agreement that Synergy was an
independent contractor and there would be no employer-employee
relationship between [Synergy] and/or its employees on one hand,
and [petitioner] on the other hand is not legally binding and
conclusive as contractual provisions are not valid determinants of
the existence of such relationship. For it is the totality of the facts
and surrounding circumstances of the case33 which is
determinative of the parties relationship.
Respecting the dismissal on November 15, 199234 of Auxtero, a
regular employee of petitioner who had been working
_______________
29 Rollo, p. 170.
30 NLRC Records, Vol. 1, p. 6.
31 Id., at p. 477.
32 Aboitiz Haulers, Inc. v. Dimapatoi, G.R. No. 148619, September 19, 2006, 502
SCRA 271, 287 citing Guinnux Interiors, Inc. v. National Labor Relations
Commission, 339 Phil. 75, 78-79; 272 SCRA 689, 694 (1997); Manila Water
Company Inc. v. Pea, G.R. No. 158255, July 8, 2004, 434 SCRA 53, 60-61.
33 San Miguel Corporation v. Aballa, supra note 24 at pp. 422-423 (citation

omitted).
34NLRC Records, Vol. 1, p. 185.
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547 SCRA 181
as utility man/helper since November 1988, it is not legally

justified for want of just or authorized cause therefor and
for non-compliance with procedural due process.
Petitioners claim that he abandoned his work does not
persuade.35 The elements of abandonment being (1) the failure to
report for work or absence without valid or justifiable reason, and
(2) a clear intention to sever the employer-employee relationship
manifested by some overt acts,36 the onus probandi lies with
petitioner which, however, failed to discharge the same.
Auxtero, having been declared to be a regular employee of
petitioner, and found to be illegally dismissed from employment,
should be entitled to salary differential37 from the time he rendered
one year of service until his dismissal, reinstatement plus backwages
until the finality of this decision.38 In view, however, of the long
period of time39 that had elapsed
_______________
35Floren Hotel v. National Labor Relations Commission, G.R. No. 155264, May
6, 2005, 458 SCRA 128, 144; Masagana Concrete Products v. National Labor
Relations Commission, 372 Phil. 459; 313 SCRA 576 (1999).
36Northwest Tourism Corp. v. Court of Appeals, Former Special Third Division,
G.R. No. 150591, June 27, 2005, 461 SCRA 298, 309; ACD Investigation Security
Agency, Inc. v. Daquera, G.R. No. 147473, March 30, 2004, 426 SCRA 494; Premier
Development Bank v. National Labor Relations Commission, 354 Phil. 851; 293
SCRA 49 (1998).
37 Vide Cinderella Marketing Corporation v. National Labor Relations
Commission, 353 Phil. 284; 291 SCRA 91 (1998); ABS-CBN Broadcasting
Corporation v. Nazareno, G.R. No. 164156, September 2006, 503 SCRA 204;
Kimberly-Clark (Phils.), Inc. v. Secretary of Labor, G.R. No. 156668, 538 SCRA 353,
November 23, 2007 for jurisprudence on regularization differential.
38Star Paper Corporation v. Espiritu, G.R. No. 154006, November 2, 2006, 506
SCRA 556, 568; Tan v. Lagrama, G.R. No. 151228, August 15, 2002, 387 SCRA 393,
406; Prudential Bank and Trust Co. v. Reyes, G.R. No. 141093, February 20, 2001,
352 SCRA 316, 332.
39 Gold City Integrated Port Service, Inc. v. National Labor Relations
Commission, G.R. No. 103560, July 6, 1995, 245 SCRA 627,
198

547 SCRA 181
since his dismissal on November 15, 1992, it would be

appropriate to award separation pay of one (1) month
salary for each year of service, in lieu of reinstatement.40
As regards the remaining respondents, the Court affirms the
ruling of both the NLRC and the appellate court, ordering petitioner
to accept them as its regular employees and to give each of them the
salaries, allowances and other employment benefits and privileges of
a regular employee under the pertinent Collective Bargaining
Agreement.
Petitioner claims, however, that it has become impossible for it to
comply with the orders of the NLRC and the Court of Appeals, for
during the pendency of this case, it was forced to reduce its
personnel due to heavy losses caused by economic crisis and the
pilots strike of June 5, 1998.41 Hence, there are no available
positions where respondents could be placed.
And petitioner informs that the employment contracts of all if
not most of the respondents . . . were terminated by Synergy
effective 30 June 1998 when petitioner terminated its contract with
Synergy.42
Other than its bare allegations, petitioner presented nothing to
substantiate its impossibility of compliance. In fact, petitioner
waived this defense by failing to raise it in its Memorandum filed on
June 14, 1999 before the Court of Appeals.43 Further, the notice of
termination in 1998 was in disregard of a subsisting temporary
restraining order44 to preserve the status quo, issued by this Court in
1996 before it
_______________
641; Panday v. National Labor Relations Commission, G.R. No. 67664, May 20,
1992, 209 SCRA 122.
40 Northwest Tourism Corp. v. Court of Appeals, Former Special Third Division,

G.R. No. 150591, June 27, 2005, 461 SCRA 298, 311; F.F. Marine Corporation v.
National Labor Relations Commission, Second Division, G.R. No. 152039, April 8,
2005, 455 SCRA 154, 174.
41 Rollo, p. 53.
42 Id., at p. 54; Vide Annexes BB-12 inclusive, pp. 453-465.
43 Vide Rollo, pp. 382-396.
44 Rollo, pp. 327-341.
199
VOL. 547, FEBRUARY 29, 2008 199

547 SCRA 181
referred the case to the Court of Appeals in January 1999. So as to

thwart the attempt to subvert the implementation of the assailed
decision, respondents are deemed to be continuously employed by
petitioner, for purposes of computing the wages and benefits due
respondents.
Finally, it must be stressed that respondents, having been
declared to be regular employees of petitioner, Synergy being a mere
agent of the latter, had acquired security of tenure. As such, they
could only be dismissed by petitioner, the real employer, on the basis
of just or authorized cause, and with observance of procedural due
process.
WHEREFORE, the Court of Appeals Decision of September 29,
2000 is AFFIRMED with MODIFICATION.
Petitioner PHILIPPINE AIRLINES, INC. is ordered to:
(a) accept respondents ENRIQUE LIGAN, EMELITO
SOCO, ALLAN PANQUE, JOLITO OLIVEROS, RICHARD
GONCER, NONILON PILAPIL, AQUILINO YBANEZ,
BERNABE SANDOVAL, RUEL GONCER, VIRGILIO P.
CAMPOS, JR., ARTHUR M. CAPIN, RAMEL
BERNARDES, LORENZO BUTANAS, BENSON
CARESUSA, JEFFREY LLENOS, ROQUE PILAPIL,
ANTONIO M. PAREJA, CLEMENTE R. LUMAYNO,
NELSON TAMPUS, ROLANDO TUNACAO, CHERRIE
ALEGRES, EDUARDO MAGDADARAUG, NELSON M.
DULCE and ALLAN BENTUZAL as its regular employees in
their same or substantially equivalent positions, and pay the
wages and benefits due them as regular employees plus
salary differential corresponding to the difference between
the wages and benefits given them and those granted to
petitioners other regular employees of the same rank; and
(b)pay respondent BENEDICTO AUXTERO salary
differential; backwages from the time of his dismissal until
the finality of this decision; and separation pay, in lieu of
reinstatement, equivalent to one (1) month pay for every year
of service until the finality of this decision.
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9/3/2017 SUPREME COURT REPORTS ANNOTATED VOLUME 547

Notes.A wife, by affixing her signature to a Deed of

G.R. No. 146408. February 29, 2008.*

Labor Law; Labor-Only Contracting; Legitimate contracting and

182 SUPREME COURT REPORTS ANNOTATED

547 SCRA 181

the Labor Code, as amended).Legitimate contracting and labor-only

Same; Same; For labor-only contracting to exist, Section 5 of D.O. No.

VOL. 547, FEBRUARY 29, 2008 183

547 SCRA 181

CAPITALIZATION supplied) Even if only one of the two elements

Same; Same; One who claims to be an independent contractor has to

PETITION for review on certiorari of a decision of the Court of

Petitioner Philippine Airlines as Owner, and Synergy Services

1 NLRC Records, Vol. I, pp. 168-177.

184 SUPREME COURT REPORTS ANNOTATED

provide loading, unloading, delivery of baggage and cargo

1.2CONTRACTOR shall furnish all the necessary capital, workers,

And it expressly provided that Synergy was an independent

VOL. 547, FEBRUARY 29, 2008 185

On the duration of the Agreement, Section 10 thereof provided:

Except for respondent Benedicto Auxtero (Auxtero), the rest of

186 SUPREME COURT REPORTS ANNOTATED

Respondent Auxtero had initially filed a complaint against

WHEREFORE, foregoing premises considered, judgment is hereby

On appeal by respondents, the NLRC, Fourth Division, Cebu

VOL. 547, FEBRUARY 29, 2008 187

Arbiter by Decision9 of January 5, 1996, the fallo of which reads:

WHEREFORE, the Decision of the Labor Arbiter Dominador A.

5.Dismissing the appeal of respondent Synergy Services Corporation,

Only petitioner assailed the NLRC decision via petition for

9 Id., at pp. 226-237.

188 SUPREME COURT REPORTS ANNOTATED

The appellate court, by Decision of September 29, 2000, affirmed

Petitioner argues that the law does not prohibit an employer

substantial capital in carrying on an independent business of

VOL. 547, FEBRUARY 29, 2008 189

Petitioner further argues that its contracting out to Synergy

15 Id., at pp. 47-49.

190 SUPREME COURT REPORTS ANNOTATED

Legitimate contracting and labor-only contracting are defined in

Section3.Trilateral relationship in contracting arrangements.In

VOL. 547, FEBRUARY 29, 2008 191

547 SCRA 181

Substantial capital or investment and the right to control are

Substantial capital or investment refers to capital stocks and

From the records of the case, it is gathered that the work

192 SUPREME COURT REPORTS ANNOTATED

used by respondents as station loaders, such as trailers and

The decision of the Labor Arbiter merely mentioned on page 5 of his

It was only after the appellate court rendered its challenged

VOL. 547, FEBRUARY 29, 2008 193

for the first time, Synergys substantial capitalization by

(i)The contractor or subcontractor does not have substantial capital

194 SUPREME COURT REPORTS ANNOTATED

Even if only one of the two elements is present then, there is

VOL. 547, FEBRUARY 29, 2008 195

methods and without being subject to the employers control except

Section6.Qualified and Experienced Worker: Owners Right to

196 SUPREME COURT REPORTS ANNOTATED

permission.29 (Underscoring partly in the original and partly supplied;

Petitioner in fact admitted that it fixes the work schedule of

33 San Miguel Corporation v. Aballa, supra note 24 at pp. 422-423 (citation