10 Manila Water v. Dalumpines
10 Manila Water v. Dalumpines
10 Manila Water v. Dalumpines
SO ORDERED.
_______________
* SECOND DIVISION.
77
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 1/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
conditions of work, security of tenure, self-organization, and collective
bargaining; “Contracting” or “subcontracting” refers to an arrangement
whereby a principal agrees to put out or farm out with a contractor or
subcontractor the performance or completion of a specific job, work, or
service within a definite or predetermined period, regardless of whether
such job, work, or service is to be performed or completed within or outside
the premises of the principal.—“Contracting” or “subcontracting” refers to
an arrangement whereby a principal agrees to put out or farm out with a
contractor or subcontractor the performance or completion of a specific job,
work, or service within a definite or predetermined period, regardless of
whether such job, work, or service is to be performed or completed within
or outside the premises of the principal. Contracting and subcontracting
arrangements are expressly allowed by law but are subject to regulation for
the promotion of employment and the observance of the rights of workers to
just and humane conditions of work, security of tenure, self-organization,
and collective bargaining. In legitimate contracting, the trilateral
relationship between the parties in these arrangements involves the principal
which decides to farm out a job or service to a contractor or subcontractor,
which has the capacity to independently undertake the performance of the
job, work, or service, and the contractual workers engaged by the contractor
or subcontractor to accomplish the job, work, or service.
Same; Same; Same; Same; 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 person are
performing activities which are directly related to the principal business of
the 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 to the same extent as if the latter were directly
employed by him.—Job contracting is permissible only if the following
conditions are met: 1) the contractor carries on an independent business and
undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from
78
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 2/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
Same; Same; Same; Same; “Substantial capital or investment” refers to
capital stocks and subscribed capitalization in the case of corporations,
tools, equipment, implements, machineries, and work premises, actually and
directly used by the contractor or subcontractor in the performance or
completion of the job, work, or service contracted out; The “right to
control” refers to the right reserved to the person for whom the services of
the contractual workers are performed, to determine not only the end to be
achieved, but also the manner and means to be used in reaching that end.—
Department Order No. 18-02, Series of 2002, enunciates that labor-only
contracting refers to an arrangement where the contractor or subcontractor
merely recruits, supplies, or places workers to perform a job, work, or
service for a principal, and any of the following elements are present: (i) the
contractor or subcontractor does not have substantial capital or investment
which relates to the job, work, or service to be performed and the employees
recruited, supplied, or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the
principal; or (ii) the contractor does not exercise the right to control the
performance of the work of the contractual employee. “Substantial capital
or investment” refers to capital stocks and subscribed capitalization in the
case of corporations, tools, equipment, implements, machineries, and work
premises, actually and directly used by the contractor or subcontractor in the
performance or completion of the job, work, or
79
service contracted out. The “right to control” refers to the right reserved to
the person for whom the services of the contractual workers are performed,
to determine not only the end to be achieved, but also the manner and means
to be used in reaching that end.
Same; Same; Same; Employer-Employee Relationship; Four-Fold Test.
—Based on the four-fold test of employer-employee relationship, Manila
Water emerges as the employer of respondent collectors. The elements to
determine the existence of an employment relationship are: (a) the selection
and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employer’s power to control the employee’s
conduct. The most important of these elements is the employer’s control of
the employee’s conduct, not only as to the result of the work to be done, but
also as to the means and methods to accomplish it.
Same; Same; Same; Same; The primary standard of determining regular
employment is the reasonable connection between the particular activity
performed by the employee in relation to the usual business or trade of the
employer.—Respondent bill collectors are, therefore, employees of
petitioner Manila Water. It cannot be denied that the tasks performed by
respondent bill collectors are directly related to the principal business or
trade of Manila Water. Payments made by the subscribers are the lifeblood
of the company, and the respondent bill collectors are the ones who collect
these payments. The primary standard of determining regular employment is
the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. In this
case, the connection is obvious when we consider the nature of the work
performed and its relation to the scheme of the particular business or trade
in its entirety. Finally, the repeated and continuing need for the performance
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 3/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
of the job is sufficient evidence of the necessity, if not indispensability of
the activity to the business.
80
NACHURA,** J.:
Before the Court is a petition for review on certiorari under Rule
45 of the Rules of Court, assailing the Decision1 dated September
12, 2006 and the Resolution2 dated November 17, 2006 of the Court
of Appeals (CA) in CA-G.R. SP No. 94909.
The facts of the case are as follows:
By virtue of Republic Act No. 8041, otherwise known as the
“National Water Crisis Act of 1995,” the Metropolitan Waterworks
and Sewerage System (MWSS) was given the authority to enter into
concession agreements allowing the private sector in its operations.
Petitioner Manila Water Company, Inc. (Manila Water) was one of
two private concessionaires contracted by the MWSS to manage the
water distribution system in the east zone of Metro Manila. The east
service area included the following towns and cities: Mandaluyong,
Marikina, Pasig, Pateros, San Juan, Taguig, Makati, parts of Quezon
City and Manila, Angono, Antipolo, Baras, Binangonan, Cainta,
Cardona, Jala-Jala, Morong, Pililla, Rodriguez, Tanay, Taytay,
Teresa, and San Mateo.3
Under the concession agreement, Manila Water undertook to
absorb the regular employees of MWSS listed by the latter effective
August 1, 1997. Individual respondents, with the exception of
Moises Zapatero (Zapatero) and Edgar Pamoraga (Pamoraga), were
among the one hundred twenty-one (121)
_______________
** In lieu of Associate Justice Antonio T. Carpio per Special Order No. 898 dated
September 28, 2010.
1 Penned by Associate Justice Martin S. Villarama, Jr. (now a member of this
Court), with Associate Justices Lucas P. Bersamin (now a member of this Court) and
Monina Arevalo-Zenarosa, concurring; Rollo, pp. 572-603.
2 Id., at p. 637.
3 Id., at p. 573.
81
_______________
4 Id.
5 Id.
6 Id., at pp. 294-295, 573.
7 Id., at p. 295.
8 Id., at pp. 295, 574.
82
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 5/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
were made to perform the following functions: (1) delivery of bills
to customers; (2) collection of payments from customers; and (3)
delivery of disconnection notice to customers. They were also
allowed to effect disconnection and were given tools for this
purpose.11
Respondent bill collectors averred that when Manila Water issued
their individual contracts of service for three months in September
1997, there was already an attempt to make it appear that respondent
bill collectors were not its employees but independent contractors.
Respondent bill collectors stressed that they could not qualify as
independent contractors because they did not have an independent
business of their own, tools, equipment, and capitalization, but were
purely dependent on the wages they earned from Manila Water,
which was termed as “commission.”12
Respondent bill collectors alleged that Manila Water had
complete supervision over their work and their collections, which
they had to remit daily to the former. They also maintained that the
incorporation of ACGI did not mean that they
_______________
9 Id., at p. 574.
10 Id., at pp. 292, 575.
11 Id., at p. 575.
12 Id.
83
_______________
13 Id.
14 Id., at pp. 575-576.
84
Manila Water, stating that the same was “issued in connection with
his termination of contract as Contract Collector of Manila Water
Company”; and (4) their work as bill collectors was clearly related
to the principal business of Manila Water.15
Respondent FCCSI, on the other hand, claimed that it is an
independent contractor engaged in the business of providing
messengerial or courier services, and it fulfills the criteria set forth
under Department Order No. 10, Series of 1997.16 It was issued a
certificate of registration by the Department of Labor and
Employment (DOLE) as an independent contractor. It was
incorporated and registered with the SEC in November 1995. It was
duly registered with the Department of Transportation and
Communication (DOTC) and the Office of the Mayor of Makati City
for authority to operate. It has sufficient capital in the form of tools,
equipment, and machinery as attested to by the Postal Regulation
Committee of the DOTC after conducting an ocular inspection. It
provides similar services to Philippine Long Distance Telephone
Company, Smart Telecommunications, Inc., and Home Cable, Inc.
Under the terms and conditions of its service agreement with Manila
Water, FCCSI has the power to hire, assign, discipline, or dismiss its
own employees, as well as control the means and methods of
accomplishing the assigned tasks, and it pays the wages of the
employees.17
The termination of employment of respondent bill collectors
upon the expiration of FCCSI’s contract with Manila Water did not
mean the automatic termination or suspension of the employer-
employee relationship between FCCSI and respondent bill
collectors. Their termination after their six (6) month
_______________
15 Id., at p. 576.
16 Department Order No. 10, Series of 1997, otherwise known as the rules
implementing Article 106 to 109 of Book III of the Labor Code, was revoked by
Department Order No. 03, Series of 2001. The new department order continued to
prohibit labor-only contracting.
17 Rollo, pp. 576-577.
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 7/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
85
floating status, which was allowed by law, was due to the non-
renewal of FCCSI’s agreement with Manila Water and its inability to
enter into a similar contract requiring the skills of respondent bill
collectors.18
Petitioner Manila Water, for its part, denied that there was an
employer-employee relationship between its company and
respondent bill collectors. Based on the agreement between FCCSI
and Manila Water, respondent bill collectors are the employees of
the former, as it is the former that has the right to select/hire,
discipline, supervise, and control. FCCSI has a separate and distinct
legal personality from Manila Water, and it was duly registered as an
independent contractor before the DOLE.19
Petitioner further claimed that individual service contracts signed
by respondent bill collectors for a 3-month period with Manila
Water were valid and legal. The fact that the duration of the
engagement was stated on the face of the contract dispels any bad
faith on the part of the company. Fixed term contracts are allowed by
law. Furthermore, respondent bill collectors’ allegation that the
incorporation of ACGI was made as a condition of their continued
employment was unfounded. They transferred to FCCSI on their
own volition.20
Petitioner Manila Water also averred that, under its
organizational structure, there was no regular plantilla position of
bill collector, which was the main reason why respondent bill
collectors were not included in the list of MWSS employees
absorbed by the company. The company’s out-sourcing of courier
needs to an independent contractor was valid and legal.
_______________
18 Id., at p. 577.
19 Id.
20 Id.
86
_______________
87
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 9/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
declaring the petitioners as employees of private respondent Manila Water
Company, Inc., and their termination as bill collectors as illegal; and (b)
ordering private respondent Manila Water Company, Inc. to pay the
petitioners separation pay equivalent to one (1) month for every year of
service. In addition, private respondent Manila Water Company, Inc. is
liable to pay ten percent (10%) of the total amount awarded as attorney’s
fees.
No pronouncement as to costs.
_______________
88
SO ORDERED.”25
_______________
25 Id., at p. 602.
26 478 Phil. 68; 434 SCRA 53 (2004).
27 Rollo, p. 799.
28 Department Order No. 18-02, Series of 2002, Sec. 4(a).
89
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 10/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
VOL. 632, OCTOBER 4, 2010 89
Manila Water Company, Inc. vs. Dalumpines
_______________
90
_______________
91
92
_______________
93
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 13/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
VOL. 632, OCTOBER 4, 2010 93
Manila Water Company, Inc. vs. Dalumpines
_______________
38 Id.
39 Id.
94
The similarity between the instant case and Peña is very evident.
First, the work set-up between the respondent contractor FCCSI and
respondent bill collectors is the same as in Peña. Respondent bill
collectors were individually hired by the contractor, but were under
the direct control and supervision of the concessionaire. Second,
they performed the same function of courier and bill collection
services. Third, the element of control exercised by Manila Water
over respondent bill collectors is essentially the same as in Peña,
manifested in the following circumstances, viz.: (a) respondent bill
collectors reported daily to the branch offices of Manila Water to
remit their collections with the specified monthly targets and comply
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 14/16
8/13/2019 SUPREME COURT REPORTS ANNOTATED VOLUME 632
with the collection reporting procedures prescribed by the latter; (b)
respondent bill collectors, except for Pamoraga and Zapatero, were
among the 121 collectors who incorporated ACGI; (c) Manila Water
continued to pay their wages in the form of commissions even after
the employees alleged transfer to FCCSI. Manila Water paid the
respondent bill collectors their individual commissions, and the
lump sum paid by Manila Water to FCCSI merely represented the
agency fee; and (d) the certification or individual clearances issued
by Manila Water to respondent bill collectors upon the termination
of the service contract with FCCSI. The certification stated that
respondents were contract collectors of Manila Water and not of
FCCSI. Thus, this Court agrees with the findings of the CA that if,
indeed, FCCSI was the true employer of the bill collectors, it should
have been the one to issue the certification or individual clearances.
It should be remembered that the control test merely calls for the
existence of the right to control, and not necessarily the exercise
thereof. It is not essential that the employer actually supervises the
performance of duties of the employee. It is enough that the former
has a right to wield the power.40
_______________
95
poration v. National Labor Relations Commission, 314 Phil. 838, 842; 244 SCRA
797, 800-801 (1995).
41 Lopez v. Metropolitan Waterworks and Sewerage System, supra note 35, at pp.
433, 453.
*** Additional member in lieu of Associate Justice Antonio T. Carpio per Special
Order No. 897 dated September 28, 2010.
**** Additional member in lieu of Associate Justice Roberto A. Abad per Special
Order No. 903 dated September 28, 2010.
www.central.com.ph/sfsreader/session/0000016c8ba853a7dc49b2fa003600fb002c009e/t/?o=False 16/16