Case Digest: Manila Water Co Inc v. Pena, G.R. No. 158255, July 8, 2004

  • The government-owned Metropolitan Waterworks and Sewerage System (MWSS) contracted the Manila Water Company (MWC) to manage the water distribution system in Metro Manila East Zone.
  • he MWC absorbed some MWSS employees, but not the 121 collectors who were retained by MWC on contractual basis only. 
  • These collectors formed the Association Collectors Group, Inc., (ACGI) with which MWC entered into a contract to collect water charges. The the contract was terminated after about 14 months. 
  • The collectors filed a complaint of illegal dismissal against MWC, which, for its part, argued that the employer was ACGI not MWC. 

WoN ACGI a legitimate contractor? NO

It is a labor-only contractor applying the definition in D.O. No. 18-02 (now D.O. No. 18-A).

The court noted that:

  1. ACGI does not have substantial capitalization or investment in the form of tools, equipment, etc., to qualify as an independent contractor.
  2. The work of the private respondents was directly related to the principal business or operation of MWC.
  3. ACGI did not carry on an independent business or undertake the performance of its service contract according to its own manner and method, free from the control and supervision of its principal, MWC.

MWC continued to issue memoranda on billing methods and distribution of books to the collectors; it required the workers to report daily; and MWC monitored strictly their attendance. Although ACGI would ultimately discipline the erring workers, MWC will dictate what penalty to impose.

Considering the facts, the court concluded that ACGI was not an independent contractor. The court rejected MWC's argument that the former employees had become independent contractors.


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