Case Digest: Industrial Timber Corporation v. NLRC, G.R. No. 83616, January 20, 1989

  Labor Law | Appeal 

• A contract was signed between petitioner Industrial Timber Corporation (ITC) and ADD Technical and Labor Service Consultancy to run and manage ITC's plywood plant for one year.
• Private respondents Concordia Dos Pueblos and Lolita Sanchez were employed by ITC.
• The workers and employees of ITC staged a strike and a Memorandum of Agreement was signed stating that all employees after the probationary period shall be considered as regular employees.
• Petitioners admitted almost all of the striking workers, back to work, except private respondents leading to a complaint for illegal dismissal.
• Labor Arbiter: Ruled in favor of private respondents, ordering reinstatement and payment of backwages, benefits, and damages.
• NLRC: Upheld the decision, stating that ITC violated the Memorandum of Agreement.
• Petitioners contested that private respondents were not their employees but were hired and paid by ADD Technical and Labor Service Consultancy.

WoN NLRC ruling should be reversed. NO

It is the petitioners contention that private respondents had no employment relationship since the latter were hired and paid by ADD Technical and Labor Service Consultancy, and thus, the right to dismiss them belonged to the said employer, but not to the petitioners. If ever petitioners terminated private respondents' employment, such termination was done according to law.

In maintaining their position, petitioners posit the theory that the Memorandum of Agreement entered into by petitioners and the striking workers on April 26, 1986 shows that petitioners never agreed to absorb and consider the private respondents as their employees. Petitioners averred that it was the clear intent of the striking employees and petitioners to treat the employees in Butuan Logs and Stanply differently from that of the contract workers provided by Engineer Dosdos in that the employees in Butuan Logs and Stanply were to be absorbed and considered as employees of petitioners while private respondents as contract workers, were still to be hired giving them top priority and preference since their names appeared in the list appended to the agreement.

On the other hand, it is private respondents' trenchant claim that they are employees of petitioner ITC and that the present issue involves questions of fact which have been ruled upon by Arbiter Solamo and the NLRC. The NLRC ruled that private respondents were employees of ITC and that the former's findings are supported by substantial evidence. Private respondents also submit that the findings of fact made by Arbiter Solamo must be appreciated with greater weight since he had the opportunity to observe the demeanor of the witnesses.

A judicious review of the records of this case convinces this Court that there is no merit in the arguments of petitioners. No cogent reason exists why the findings of fact made by the labor arbiter to the effect that an employer-employee relationship existed between the parties should be reversed. The findings of fact of quasi-judicial bodies are generally binding on the courts.  The question of whether or not an employer-employee relationship existed between the parties is a question of fact. 

However, this Court has never hesitated to exercise its corrective powers and to reverse administrative decisions in the following cases: (1) the conclusion is a finding grounded on speculations, surmises and conjectures; (2) the inferences made are manifestly mistaken, absurd, or impossible; (3) there is a grave abuse of discretion; (4) there is a misapprehension of facts; (5) the court in arriving at its findings went beyond the issues of the case and the same are contrary to the admissions of the parties or the evidence presented; (6) where respondent commission has sustained irregular procedures and through the invocation of summary methods, including rules on appeal, has affirmed an order which tolerates a violation of due process and (7) where the rights of a party were prejudiced because the administrative findings, conclusions or decision were in violation of constitutional provisions, in excess of statutory authority, or jurisdiction, made upon irregular procedure, vitiated by fraud, imposition or mistake, not supported by substantial evidence adduced at the hearing or contained in the records or disclosed to the parties, or arbitrary, or capricious. 

None of the abovementioned grounds are present which would warrant a reversal of the findings made by respondent Commission that an employer-employee relationship existed between the parties concerned.

Granting, arguendo, that private respondents were employed by Engineer Dosdos, petitioners would still be liable to private respondents since the indices of a "labor only" contracting situation will apply to the present case. "Labor-only" contracting is defined in Section 9, Rule VIII, Book III of the Omnibus Rules. Implementing the Labor Code in the following terms:

Sec. 9. Labor-only contracting. — (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and

(2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the employer who shall be responsible to the worker in the same manner and extent as if the latter were directly employed by him.

x x x x x x x x x. 

The legal effect of a finding that a contractor is not a true independent contractor or "job contractor" but merely a "labor-only" contractor was expounded upon in Philippine Bank of Communications vs. NLRC to wit:

... The labor-only' contractor i.e., 'the person or intermediary is considered 'merely as an agent of the employer.' The employer is made by the statute responsible to the employees of the labor-only' contractor as if such employees had been directly employed by the employer. Thus, where 'labor-only' contracting exists in a given case, the statute itself implies or establishes an employer-employee relationship between the employer (the owner of the project) and the employees of the 'labor-only' contractor, this time for a comprehensive purpose: 'employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.' The law in effect holds both the employer and the 'labor-only' contractor responsible to the latter's employees for the more effective safeguarding of the employees' rights under the Labor Code.'

Hence, a finding that a contractor is a "labor-only" contractor is equivalent to a finding that there exists an employer-employee relationship between the owner of the project and the employees of the 'labor only contractor since that relationship is defined and prescribed by the law itself.

Prescinding from the foregoing, the ineluctable conclusion is that an employer-employee relationship existed between petitioner and private respondents. Engineer Dosdos had no substantial capital investment in the form of tools, equipment, machineries, work premises and other materials since the plywood plant and panels were all supplied by petitioner. Likewise, the activities undertaken by the contractor were petitioners' business.

Coming now to the second sub-issue, petitioners allege that they did file a position paper albeit late in this case refuting therein the claims of the private respondents. However, petitioners filed the said position paper on January 13, 1987 with the District Labor Office at Butuan City and not in the office of the labor arbiter in Cagayan de Oro City which was then handling the cases. The said position paper also contained a quitclaim wherein private respondents allegedly admitted that they were workers/employees of ADD Technical and Labor Services and that for a consideration, the employees signed on May 17, 1986, quitclaims forever discharging and releasing petitioners from any and all claims arising from any source, particularly from their employment.

Petitioners state that even if they filed their position paper belatedly, proceedings before the respondent Commission are not governed by the technical rules on evidence applied in courts of law. Furthermore, private respondents supposedly benefited from the quitclaim and received their separation pay as such, they cannot be allowed to repudiate the authenticity of the quitclaim deed after benefiting from it.

On the other hand, respondents state that this petition should not be given due course since petitioners failed to seasonably file their position paper with the District Labor Office. Furthermore, they state that the signatures appearing on the quitclaim deed are dubious in character and that the said signatures are either forged or signed under certain anomalous circumstances.

At the onset, this Court was predisposed to dismiss the petition since ITC's position paper containing the quitclaim was filed much too late. However, there appears to be a waiver. It is noted that the NLRC resolution stated that the record also shows that complainants (herein private respondents) signed quitclaim deeds and received their separation pay. The private respondents even filed a rejoinder traversing petitioners' late position paper with respect to the issue on the quitclaim.

The determination of the validity of the quitclaim is essential towards a just determination of this case. The Labor Arbiter should have conducted a hearing to determine the veracity of the denials of the private respondents rather than resolve these intricate issues based wholly on the position paper of private respondents.

The appraisal of the situation by the NLRC and the Labor Arbiter lacks precision, giving rise to an ambiguity that lends plausibility to the present proceeding. As there are matters regarding the quitclaim that still need to be clarified, equity calls for a remand of the instant case to the NLRC for an ascertainment in greater detail of the circumstances surrounding the execution of the quitclaim.

Certiorari to that extent lies. So this Court rules.

There will be an element of unfairness at this stage if this Court will disregard the quitclaim and thus enable private respondents to unjustly benefit if indeed they signed the quitclaim. What is vital and indispensable then is a determination of the validity of the quitclaim.

WHEREFORE, the assailed resolution of the respondent National Labor Relations Commission is AFFIRMED only as to the finding that petitioner is the employer of private respondents. The case is REMANDED to the National Labor Relation Commission for an inquiry with deliberate dispatch on the validity of the quitclaim. The restraining order issued by the Court is made permanent. No pronouncement as to costs