SAN MIGUEL CORPORATION vs ABALLA Case Digest
SAN MIGUEL CORPORATION v. PROSPERO A. ABALLA et al.
461 SCRA 392 (2005)
FACTS: Petitioner San Miguel Corporation (SMC) and Sunflower Multi-Purpose
Cooperative (Sunflower) entered into a one-year Contract of Service and such contract
is renewed on a monthly basis until terminated. Pursuant to this, respondent Prospero
Aballa et al. rendered services to SMC.
After one year of rendering service, Aballa et al., filed a complaint before National Labor
Relations Commission (NLRC) praying that they be declared as regular employees of
SMC. On the other hand, SMC filed before the Department of Labor and Employment
(DOLE) a Notice of Closure due to serious business losses. Hence, the labor arbiter
dismissed the complaint and ruled in favor of SMC. Aballa et al. then appealed before
the NLRC. The NLRC dismissed the appeal finding that Sunflower is an independent
contractor.
On appeal, the Court of Appeals reversed NLRC’s decision on the ground that the
agreement between SMC and Sunflower showed a clear intent to abstain from
establishing an employer-employee relationship.
ISSUE: Whether or not Aballa et al. are employees of SMC
HELD: The test to determine the existence of independent contractorship is whether
one claiming to be an independent contractor has contracted to do the work according
to his own methods and without being subject to the control of the employer, except
only as to the results of the work.
In legitimate labor contracting, the law creates an employer-employee relationship for a
limited purpose, i.e., to ensure that the employees are paid their wages. The principal
employer becomes jointly and severally liable with the job contractor, only for the
payment of the employees’ wages whenever the contractor fails to pay the same. Other
than that, the principal employer is not responsible for any claim made by the
employees.
In labor-only contracting, the statute creates an employer-employee relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The contractor is
considered merely an agent of the principal employer and the latter is responsible to the
employees of the labor-only contractor as if such employees had been directly
employed by the principal employer.
The Contract of Services between SMC and Sunflower shows that the parties clearly
disavowed the existence of an employer-employee relationship between SMC and
private respondents. The language of a contract is not, however, determinative of the
parties’ relationship; rather it is the totality of the facts and surrounding circumstances of
the case. A party cannot dictate, by the mere expedient of a unilateral declaration in a
contract, the character of its business, i.e., whether as labor-only contractor or job
contractor, it being crucial that its character be measured in terms of and determined by
the criteria set by statute. What appears is that Sunflower does not have substantial
capitalization or investment in the form of tools, equipment, machineries, work premises
and other materials to qualify it as an independent contractor. On the other hand, it is
gathered that the lot, building, machineries and all other working tools utilized by Aballa
et al. in carrying out their tasks were owned and provided by SMC.
And from the job description provided by SMC itself, the work assigned to Aballa et al.
was directly related to the aquaculture operations of SMC. As for janitorial and
messengerial services, that they are considered directly related to the principal business
of the employer has been jurisprudentially recognized.
Furthermore, Sunflower 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, SMC, its apparent role having been merely to
recruit persons to work for SMC.
All the foregoing considerations affirm by more than substantial evidence the existence
of an employer-employee relationship between SMC and Aballa et al. Since Aballa et al.
who were engaged in shrimp processing performed tasks usually necessary or
desirable in the aquaculture business of SMC, they should be deemed regular
employees of the latter and as such are entitled to all the benefits and rights
appurtenant to regular employment. They should thus be awarded differential pay
corresponding to the difference between the wages and benefits given them and those
accorded SMC’s other regular employees.
