PAL vs. Stellar JOB CONTRACTING - Independent Contractor

Geling, Ma. Kristiana M. 3HR1 PHILIPPINE AIRLINES, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION [G.R. No. 125792. November 9, 1998] FACTS Petitioner PAL entered into a service agreement with Stellar, a domestic corporation engaged in the business of job contracting janitorial services. Pursuant to this agreement, Stellar hired workers to perform janitorial and maintenance services for PAL, to which Parenas and the 47 other private respondents belong. The latter’s works were under the supervision of Stellar’s supervisors and timekeepers. They were also furnished by Stellar with janitorial supplies such as vacuum cleaners and polishers. The contract expired in 1990. PAL called for the bidding of its janitorial requirements. But PAL informed Stellar that the service agreement would not be renewed since janitorial services were bidded to other job contractors. Alleging that they were illegally dismissed, the private respondents filed with the NLRC complaints against PAL for illegal dismissal and for payment of separation pay. NLRC held PAL liable for the payment of separation pay. ISSUE: 1. Whether or not the individual respondents are regular employees of PAL 2. Whether or not PAL should be held liable for the payment of separation pay. 3. Whether or not the individual private respondents was a labor-only contractor 4. Whether the individual private respondents became regular employees of PAL because they are allowed to continue working for petitioner after the expiration of the service contract RULING 1. No. The main business of STELLAR is the supply of manpower to perform janitorial services for its clients, and the individual respondents were janitors engaged to perform activities that were necessary and desirable to STELLAR’s enterprise. The individual respondents were STELLAR’s regular employees, and there was no valid cause for their dismissal. It’s STELLAR’s regular employees not PAL. 2. No. It is evident that there was permissible job contracting for the entire duration of the employment of private respondents. In fact, Stellar claims that it fails under the definition of an independent job contractor. This being the case, employer— employee relationship never existed between PAL and private respondents. In legitimate job contracting, no employer-employee relation exists between the principal and the jdb contractor’s employees. The principal (PAL) is responsible to the job contractor’s employees only for the payment of wages and not separation pay. JOB CONTRACTING; In legitimate job contracting, there exists no employer-employee relation between the principal and the worker cupplied by a job contractor. The principal is considered employer of the job contractor’s employees only for the payment of wages but not for separation pay. 3. Art. 106 Contractor or Subcontractor. 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 persons 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. 4.

Yes. Petitioners continued employment of [complainants] inspite of the expiration of the janitorial contract is an implied absorption to the point of making them its regular employees and making illegal their subsequent termination from service.