While the Constitution is committed to the policy of social justice and the protection of the working

class, it should not be expected that every labor dispute will be automatically decided in favor of the
labor. (Amkor Technology Philippines, Inc. vs. Juangco, 512 SCRA 325; Faculty Association of Mapua
Institute of Technology (FAMIT) vs. Court of Appeals, 524 SCRA 709.)

The partiality for labor has not in any way diminished the Court’s belief that justice in every case is for
the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine.
Manila Jockey Club Employees Labor Union-PTGWO vs. Manila jockey Club, Inc. 517 SCRA 707.

There may be cases where the circumstances warrant favoring labor over the interests of management
but never should be the scale be so tilted if the result is an injustice to the employer – justitia nemini
neganda est. (Justice is to be denied to none). Philippine Long Distance Telephone Company, Inc. vs.
Balbastro, 519 SCRA 233

Employers are also accorded rights and privileges to assure their self-determination and independence
and reasonable return of capital, and this mass of privileges comprises the so-called management
prerogatives. (Espina vs. Court of Appeals 519 SCRA 28)

Our laws recognize and respect the exercise by management of certain rights and prerogatives. For this
reason, courts often decline to interfere in legitimate business decisions of employers. In fact, labor laws
discourage interference in the employer’s judgment in the conduct of their business. (Philippine
Industrial Security Agency Corporation vs. Aguinaldo, G.R. No. 149974, June 15, 2005; Mendoza vs. Rural
bank of Lucban, G.R. No. 155421, July 7, 2004)

While the State affords the constitutional blanket of rendering protection to labor, but it must also
protect the right of employers to exercise what are clearly management prerogatives, so long as the
exercise is without grave abuse of discretion. (Patranco North Express, Inc. vs. NLRC, G.R. No. 106516,
September 21, 1999; Palomares vs. NLRC, 277 SCRA 439)

Indeed, labor laws discourage interference with an employer’s judgment in the conduct of his business.
The Labor Code and its implementing rule do not vest in the Labor Arbiters nor in the different divisions
of the NLRC, nor in the courts, managerial authority. Even as the law is solicitous of the welfare of the
employees, it must also protect the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business affairs to achieve its purpose
cannot be denied. (Valiao vs. Court of Appeals, G.R. No. 146621, July 30, 2004)

An employer can regulate, generally without restraint, according to its own discretion and judgment,
every aspect of its business. (Deles, Jr. vs. NLRC, G.R. No. 121348, March 9, 2000; Castillo vs. NLRC, G.R.
No. 104319, June 17, 1999)

This privilege is inherent in the right of employers to control and manage their enterprise effectively.
(Mendoza vs. Rural Bank of Lucban, G. R. No. 155421, 07 July 2004, Tierra International Const. Corp. vs.
NLRC, G.R. No. 101825, 2 April 1996)
Consistently, the Supreme Court has always held that an employer enjoys a wide latitude of discretion in
the promulgation of policies, rules and regulations on work-related activities of the employees. It is
recognized that company policies and regulations, unless shown to be grossly oppressive or contrary to
law, are generally valid and binding on the parties and must be complied with until finally revised or
amended, unilaterally or preferably through negotiation, by competent authority. The High Court almost
always upholds a company’s management prerogatives so long as they are exercised in good faith and
for the advancement of the employer’s interest and not for the purpose of defeating or circumventing
the rights of the employees under special laws or under valid agreements. (Coca-Cola Bottlers, Phils. Vs.
Kapisanan ng Malayang Manggagawa sa Coca-Cola-FFW, G.R. No. 148205, February 28, 2005; Aparnet
Sr. vs. NLRC, 331 SCRA 82)

The law imposes many obligations to the employer such as the grant of just compensation to his
workers, the observance of due process in case of termination of employment, compliance with labor
standards laws and social legislation and the like. In return, the law recognizes the right of management
to expect from its workers not only good performance, adequate work and diligence, but also good
conduct and loyalty. Agabon vs. NLRC, G.R. No. 158693, November 17, 2004; Coca-Cola Bottlers,
Philippines, Inc. vs. NLRC, G.R. No. 82580, April 25, 1989)

The employer’s right to conduct the affairs of his business, according to its own discretion and judgment,
includes the prerogative to instill discipline in its employees and to impose penalties, inclduign dismissal
upon erring employees. This is a management prerogative where the free will of the management to
conduct its own affairs to achieve its purpose takes form.

The only criterion to guide the exercise of its management prerogative is that the policies, rules and
regulations on work related activities of the employees must always be fair and reasonable and the
corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of
infraction. (St. Michael’s Institute vs. Santos, G.R. No. 145280, December 4, 2001; Consolidated Food
Corporation vs. NLRC, 315 SCRA 129)

The prerogative of an employer to prescribe reasonable rules and regulation necessary or proper for the
conduct of its business and to provide certain disciplinary measures in order to implement said rules,
and to assure that the same would be complied with has been recognized in this jurisdiction. ( Phimco
Industries, Inc. vs. NLRC, G.R. No. 118041, June 11, 1997)

Management may lawfully impose appropriate penalties to erring workers pursuant to existing company
rules and regulations. (Philippine Airlines Inc. vs. NLRC, 337 SCRA 286)

Infractions committed by an employee should merit only the corresponding sanction demanded by the
circumstances. The penalty must be commensurate with the act, conduct, or omission imputed to the
employee and imposed in connection with the employer’s disciplinary authority. Farrol vs. Court of
Appeals, G.R. No. 133259, February 10, 2000)

A’Prime Security Services inc. vs. NLRC, G.R. No. 170320, January 19, 2000, one-month suspension to an
employee who is caught sleeping on post.
It was certainly within the employer’s prerogative to impose upon the employee what it considered the
appropriate penalty based on the existing company rules and regulations.

The twin requirements of notice and hearing constitute essential elements of the statutory process, and
neither of this elements can be eliminated without running afoul of the procedural mandate. (Cruz vs.
Coca-Cola Bottlers Philippines, Inc. G.R. NO. 165586, June 15, 2005; Condo Suite Club Travel, Inc. vs.
NLRC, G.R. No. 125671, January 28, 2000)

Job Contracting

There is job contracting permissible under the Labor Code 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 the control and direction of his
employer or principal in all matters connected with the performance of
the work except as to the results thereof;
2. The contractor has substantial capital or investment in the form of tool,
equipment, machineries, work premises and other materials which are
necessary in the conduct of the business. Section 8, Rule VIII, Book III,
Rules to implement the Labor Code, Philippine School of Business
Administration PSBA- Manila, NLRC, et. Al. G.R. No. 114143, August 28,
1996 Guarin et al vs NLRC, G.R. No. 86010, October 3 1989

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. AFP Mutual Benefit
Association Inc. vs NLRC, G.R. No. 102199, January 28, 1997

No Labor contractor shall engage in any actitivty unless the following

conditions are met:

The labor contractor must be duly licensed by the appropriate Regional

Office of the Department of Labor and Employment;

There should be a written contract between the labor contractor and his
client employer that will ensure the employees at least the minimum labor
standards and benefits provided by existing laws. (Section 3, Rule VIII-A,
Book III, Rules to implement the Labor Code.)

Permissible job contracting as distinguished from labor-only contracting has

been judicially recognized as valid by the Supreme Court.
The Supreme Court categorically declared that it has already taken judicial
notice of the general practice adopted in several government and private
institutions and industries, of hiring independent contractors to perform
special services. These services ranges from janitorial, security and even
technical or other specific services susch as those performed by petitioners.
While these services may be considered directly related to the principal
business of the employer. Filipinas Synthetic Fiber Corporation (FILSYN) vs
NLRC, G.R. No. 113347, June 14, 1997; Neri et. Al. vs. NLRC G.R. No.
97008-09, July 23, 1999.

What is prohibited is only the contracting out of work directly related to the
business or operation of the employer during the existence of a labor
dispute. (Section 4, Rule VIII-A Book III, rules to Implement the Labor
Code.

Licensing of Labor Contractors

The Secretary of Labor and Employment through the Regional Office shall
issue to qualified applicants the labor contractos license in accordance with
the guidelines prescribed for the purpose.

Licensing requirements which entails strict requirements such as:

1. Articles of Incorporation with minimum capitalization

2. Proof of financial capability
3. Clearance of officers and partners before the NBI, BIR, and DOLE
4. Organizational Structure
5. Proposed Master Contract
6. Payment of authorized fees
7. Posting of bonds\
8. Proof of ownership of office space
9. List of equipments (Section 5, Rule VIII-A, Book III, Rules to
Implement the Labor Code)

Monitoring of Labor contracting activities

The Regional office of the Department of Labor and Employment shall ensure
effective monitoring of all labor contracting activities through the inspectoral
system. Violations of the provisions of the implementing rules and other
regulations and law on labor contracting except those involving unfair labor
practices and work stoppages shall be treated as labor standards violations.
The labor contractor shall submit to the Regional Office not later than every
tenth day of the month a list of all its workers, the clients to which they are
respectively assigned, and the dates of assignment and termination of
contract employment. Section 6, Rule VIII-A, Book III, Rules to Implement
the Labor Code.

In legitimate job contracting, no employer-employee relationship exists

between the employees of the job contractor and the principal employer.
Even then, the principal employer becomes jointly and severally liable with
the job contractor for the payment of the wages whenever the contractor
fails to pay the same. In such case, the law creates an employer employee
relationship between the principal employer and the job contractor’s
employees for a limited purpose, that is, to ensure that the employees are
paid their wages. Other than the payment of wages, the principal employer
is not responsible for any claim made by the employees. (PCI Automation
Center, Inc. vs NLRC, G.R. No. 115920, January 29, 1996; Ecal vs NLRC,
G.R. No. 92777-78, march 13, 1991)

The difference between prescription and laches was elaborated in Nielsen & Co., Inc. vs. Lepanto
Consolidated Mining Co., L-21601, 17 December 1966, 18 SCRA p. 1040, as follows:

Appellee is correct in its contention that the defense of laches applies independently of
prescription. Laches is different from the statute of limitations. Prescription is concerned with
the fact of delay, whereas laches is concerned with the effect of delay. Prescription is a
matter of time; laches is principally a question of inequity of permitting a claim to be
enforced, this inequity being founded on some change in the condition of the property or the
relation of the parties. Prescription is statutory; laches is not. Laches applies in equity,
whereas prescription applies at law. Prescription is based on fixed time laches is not, (30
C.J.S., p. 522. See also Pomeroy's Equity Jurisprudence, Vol. 2, 5th ed., p. 177) (18 SCRA
1053).

Laches is defined as the failure to assert a right for an unreasonable and

unexplained length of time, warranting a presumption that the party entitled
to assert it has either abandoned or declined to assert it. Regalado vs G.,
514 SCRA 616; Republic vs Unimex Micro-Electronics GmBH, 518 SCRA 19

By reason of plaintiff’s long inaction and inexcusable neglect, he should be

barred from asserting his claim at all, because to allow him to do so would
be inequitable and unjust to the defendant.

The doctrine of laches or stale demands is based upon grounds of public

policy which requires, for the peace of society , the discouragement of stale
claims and unlike the statute of limitations is not merely a question of time
but is principally a question of the inequity or unfairness of permitting a right
or claim to be enforced or asserted. United Overseas bank (formerly
Westmont Bank) vs Ros, 529 SCRA 334.
It is not just the lapse of time or delay that constitutes laches – the essence
of laches is the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, through diligence, could or should have
been done earlier, thus giving rise to a presumption that the party entitled
to assert it had either abandoned or declined to assert it; unless the reasons
of inequitable proportions are adduced, a delay within the prescriptive period
is sanctioned by law and is not to be considered delay that would bar relief.
LICOMCEN, Incorporated vs Foundation Specialist, Inc. 531 SCRA 705.

Delay for a prolonged period of time can result in loss of rights and actions;
according to settled jurisprudence, “laches” means the failure or neglect for
an unreasonable and unexplained length of time, to do that which-by the
exercise of due diligence-could or should have been done earlier. Estate of
the Late Encarnacion Vda. De Panlilio vs Dizon, 536 SCRA 445

Permissible job contracting or subcontracting refers to an arrangement whereby a principal

agrees to put out or farm out with the 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.29 In this arrangement, the following conditions must be
met: (a) the contractor carries on a distinct and independent business and undertakes the
contract work on his account under his own responsibility according to his own manner and
method, free from the control and direction of his employer or principal in all matters
connected with the performance of his work except as to the results thereof; (b) the
contractor has substantial capital or investment; and (c) the agreement between the
principal and contractor or subcontractor assures the contractual employees' entitlement to
all labor and occupational safety and health standards, free exercise of the right to self-
organization, security of tenure, and social welfare benefits. 30

The Court considered the following circumstances as tending to establish D.L. Admark's
status as a legitimate job contractor:

1) The SEC registration certificate of D.L. Admark states that it is a firm

engaged in promotional, advertising, marketing and merchandising activities.

2) The service contract between CMC and D.L. Admark clearly provides that
the agreement is for the supply of sales promoting merchandising services
rather than one of manpower placement.

3) D.L. Admark was actually engaged in several activities, such as

advertising, publication, promotions, marketing and merchandising. It had
several merchandising contracts with companies like Purefoods, Corona
Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the
publication business as evidenced by its magazine the "Phenomenon."

4) It had its own capital assets to carry out its promotion business. It then had
current assets amounting to P6 million and is therefore a highly capitalized
 venture. It had an authorized capital stock of P500,000.00. It owned several
motor vehicles and other tools, materials and equipment to service its clients.
It paid rentals of P30,020 for the office space it occupied.38

Moreover, applying the four-fold test used in determining employer-employee relationship,

the Court found that: the employees therein were selected and hired by D.L. Admark; D.L.
Admark paid their salaries, as evidenced by the payroll prepared by D.L. Admark and
sample contribution forms; D.L. Admark had the power of dismissal as it admitted that it was
the one who terminated the employment of the employees; and finally, it was D.L. Admark
who exercised control and supervision over the employees. 39

G.R. No. 172241             November 20, 2008

PUREFOODS CORPORATION (now SAN MIGUEL PUREFOODS COMPANY, INC.),

petitioner
vs.
NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and LOLITA NERI,
respondents.

Department of Labor and Employment (DOLE) Department Order No. 10, Series of 1997, defines
"job contracting" and "labor-only contracting" as follows:

Sec. 8. Job contracting. – There is job contracting permissible under the Code 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 the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and

(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business.

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 persons 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 workers in the same manner and extent as if the latter were directly
employed by him.
 (c) For cases not falling under this Article, the Secretary of Labor shall determine through
appropriate orders whether or not the contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating needs of the employer and
the rights of the workers involved. In such case, he may prescribe conditions and restrictions
to insure the protection and welfare of the workers.

Section 5 of Department Order No. 18-02 (Series of 2002) of the Rules Implementing Articles 106 to
109 of the Labor Code further provides that:

"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. (emphasis supplied)

The "right to control" shall refer 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.

The test to determine the existence of independent contractorship is whether or not the 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. 15

The existence of an independent and permissible contractor relationship is generally established by

the following criteria: whether or not the contractor is carrying on an independent business; the
nature and extent of the work; the skill required; the term and duration of the relationship; the right to
assign the performance of a specified piece of work; the control and supervision of the work to
another; the employer's power with respect to the hiring, firing and payment of the contractor's
workers; the control of the premises; the duty to supply the premises, tools, appliances, materials,
and labor; and the mode, manner and terms of payment. 16

Although there may be indications of an independent contractor arrangement between petitioner and
AMPCO, the most determinant of factors exists which indicate otherwise.

G.R. No. 164257               July 5, 2010

SAN MIGUEL CORPORATION, Petitioner,

vs.
VICENTE B. SEMILLANO, NELSON MONDEJAR, JOVITO REMADA, ALILGILAN MULTI-
PURPOSE COOP (AMPCO) and MERLYN V. POLIDARIO, Respondents.