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(5 pts)

Jolli-Mac Restaurant Company (Jolli-Mac) owns and operates the largest food
chain in the country. It engaged Matiyaga Manpower Services, Inc. (MMSI), a
job contractor registered with the Department of Labor and Employment, to
provide its restaurants the necessary personnel, consisting of cashiers,
motorcycle delivery boys and food servers, in its operations. The Service
Agreement warrants, among others, that MMSI has a paid- up capital of
P2,000,000.00; that it would train and determine the qualification and fitness of
all personnel to be assigned to Jolli- Mac; that it would provide these personnel
with proper Jolli-Mac uniforms; and that it is exclusively responsible to these
personnel for their respective salaries and all other mandatory statutory benefits.

After the contract was signed, it was revealed, based on research conducted,
that MMSI had no other clients except Jolli- Mac, and one of its major owners
was a member of the Board of Directors of Jolli-Mac.

[a] Is the Service Agreement between Jolli-Mac and MMSI legal and valid? Why
or why not? (3%)

No, it is not legal and valid because MMSI is engaged in labor-only contracting.
For one, the workers supplied by MMSI to Jolli-Mac are performing services
which are directly related to the principal business of JolliMac. This is so because
the duties performed by the workers are integral steps in or aspects of the
essential operations of the principal[la (Baguio, et al. v. NLRC, et al., 202 SCRA
465 [1991]; Kimberly Independent Labor Union, etc. v. Drillon, 185 SCRA 190
[1990]. For another, MMSI was organized by JolliMac itself to supply its personnel
requirements (San Miguel Corporation v. MAERC Integrated Services, Inc., et al.,
405 SCRA 579 [2003]).
The Service Agreement is valid. The law, Art. 106, does not invalidate an
Independent Contractors Agreement because an Independent Contractor has
only one (1) client, or that the employer of the independent contractor is one of
the major owners of the employing establishment. MMSI, is an independent
business, adequately capitalized and assumed all the responsibilities of a
legitimate Independent Contractor.
[b] If the cashiers, delivery boys and food servers are not paid their lawful
salaries, including overtime pay, holiday pay, 13th month pay, and service
incentive leave pay, against whom may these workers file their claims? Explain.

They may file their claims against JolliMac. A finding that MMSI is a ―laboronly
contractor is equivalent to declaring there is an employer-employee relationship
between Jolli-Mac and the workers of MMSI (Associated AngloAmerican
Tobacco Corp. v. Clave, 189 SCRA 127 [1990], Industrial Timber Corp. v. NLRC,
169 SCRA 341 [1989]). The liability of Jolii-Mac vis-avis the wokers of MMSI is for a
comprehensive purpose, i.e., not only for the unpaid wages but for all claims
under the Labor
Code and ancillary laws (San Miguel Corp. v. Maerc Integrated Services, Inc., et
el., 405 SCRA 579 [2003]).


The employers can file their claims against Jolli-Mac pursuant to Art. 106 of the
Labor Code which reads: ―Contractor or subcontractor – xxx 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 employee directly employed by him.