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Jul 2, 2016

G.R. No. 177592
June 9, 2014


Alilin, et al. are laborers hired by Romualdo D. Gindang Contractor and RDG to work in the premises of Petron's bulk plant. Their dates of hiring range from 1968 to 1993. In 2000, Petron and RDG entered into a Contract of Services for the period June 1, 2000 to May 31, 2002 whereby RDG undertook to provide Petron with janitorial, maintenance, tanker receiving, packaging and other utility services in its Mandaue Bulk Plant. This contract was extended on July 31, 2002 and further extended until September 30, 2002. Upon expiration, no further extension was made. Thus, on October 16, 2002, Alilin, et al. were barred from continuing their services with Petron.

Hence, the filing of a complaint for illegal dismissal, etc. against Petron, claiming to be the latter's regular employees. Petron, on the other hand, alleges that they are employees of RDG, an independent contractor. It presented the following pieces of evidence: (1) RDG's Certificate of Registration of Business Name issued by DTI; (2) RDG's Certificate of Registration issued by DOLE; (3) Contractor's Pre-Qualification Statement; (4) Conflict of Interest Statement signed by Romeo Gindang as manager of RDG; (5) RDG's Audited Financial Statements for the years 1998, 1999 and 2000; (6) RDG's Mayor's Permit for the years 2000 and 2001; (7) RDG's Certificate of Accreditation issued by DTI; (8) performance bond and insurance policy; (9) SSS Online Inquiry System Employee Contributions and Employee Static Information; and (10) Romeo's affidavit stating that he had paid the salaries of his employees assigned to Petron.

LA found against Petron and ruled that Alilin, et al. are its regular employees because their jobs were directly related to Petron's business operations; they worked under the supervision of Petron's foreman; they were using Petron's tools and equipment in the performance of their works. NLRC affirmed the ruling. However, CA reversed the ruling and found RDG to be a legitimate contractor.

ISSUE: Whether or not RDG is a legitimate contractor


Petron failed to discharge the burden of proving that RDG is a legitimate contractor. Hence, the presumption that RDG is a labor-only contractor stands.

The audited financial statements and other financial documents of RDG for the years 1999 to 2001 establish that it does have sufficient working capital to meet the requirements of its service contract. In fact, the financial evaluation conducted by Petron of RDG's financial statements for years 1998-2000 showed RDG to have a maximum financial capability of Php4.807 Million as of December 1998, and PHp1.611 Million as of December 2000. Petron was able to establish RDG's sufficient capitalization when it entered into the service contract in 2000. The Court stresses though that this determination of RDG's status as an independent contractor is only with respect to its financial capability for the period covered by the financial and other documents presented. In other words, the evidence adduced merely proves that RDG was financially qualified as a legitimate contractor but only with respect to its last service contract with Petron in the year 2000.

As may be recalled, petitioners have rendered work for Petron for a long period of time even before the service contract was executed in 2000. The respective dates on which petitioners claim to have started working for Petron, as well as the fact that they have rendered continuous service to it until October 16, 2002, when they were prevented from entering the premises of Petron's Mandaue Bulk Plant, were not at all disputed by Petron. In fact, Petron even recognized that some of the petitioners were initially fielded by Romualdo Gindang, the father of Romeo, through RDG's precursor, Romualdo D. Gindang Contractor, while the others were provided by Romeo himself when he took over the business of his father in 1989. Hence, while Petron was able to establish that RDG was financially capable as a legitimate contractor at the time of the execution of the service contract in 2000, it nevertheless failed to establish the financial capability of RDG at the time when petitioners actually started to work for Petron in 1968, 1979, 1981, 1987, 1990, 1992 and 1993.

Petron's power of control over petitioners exists in this case

The facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not detract from the conclusion that there exists an employer-employee relationship between the parties due to Petron's power of control over petitioners. One manifestation of the power of control is the power to transfer employees from one work assignment to another. Here, Petron could order petitioners to work outside of their regular "maintenance/utility" job. Also, petitioners were required to report for work every day at the bulk plant, observe an 8:00 a.m. to 5:00 p.m. daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety and security measures being implemented within the bulk plant. All these imply control. In an industry where safety is of paramount concern, control and supervision over sensitive operations, such as those performed by the petitioners, are inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and flammable which, if mishandled or not properly attended to, may cause serious injuries and damage to property and the environment. Naturally, supervision by Petron is essential in every aspect of its product handling in order not to compromise the integrity, quality and safety of the products that it distributes to the consuming public.

Petitioners already attained regular status as employees of Petron

Petitioners were given various work assignments such as tanker receiving, barge loading, sounding, gauging, warehousing, mixing, painting, carpentry, driving, gasul filling and other utility works. Petron refers to these work assignments as menial works which could be performed by any able-bodied individual. The Court finds, however, that while the jobs performed by petitioners may be menial and mechanical, they are nevertheless necessary and related to Petron's business operations. If not for these tasks, Petron's products will not reach the consumers in their proper state. Indeed, petitioners' roles were vital inasmuch as they involve the preparation of the products that Petron will distribute to its consumers.

Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to petitioners, the Court notes the undisputed fact that for many years, it was the same able-bodied individuals (petitioners) who performed the tasks for Petron. The engagement of petitioners for the same works for a long period of time is a strong indication that such works were indeed necessary to Petron's business. In view of these, and considering further that petitioners' length of service entitles them to become regular employees under the Labor Code, petitioners are deemed by law to have already attained the status as Petitioner's regular employees. As such, Petron could not terminate their services on the pretext that the service contract it entered with RDG has already lasped.

  • The principal who alleges that the contractor is a legitimate one has the burden of proving permissible contracting
  • For a contractor to be considered a legitimate one, it must have substantial capitalization for the entire duration that the contractor's employees were assigned at the principal's premises


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