The Supreme Court partially granted the petition of Alvin G. Carpio and reversed the Court of Appeals (CA) ruling insofar as it upheld the legality of his dismissal. The Court found respondents Great Value Management and Services Corporation and Green Era Biotech Corp. liable for the illegal dismissal of Carpio and ordered them to reinstate him to his former position without loss of privileges and seniority, but without any right to backwages.
The Case
The case originated from a complaint for illegal dismissal, underpayment of salaries/wages, non-payment of service incentive pay, and 13th month pay, unfair labor practices, damages, and attorney's fees filed by Carpio against respondents Green Era Biotech Corp., Johnson Li, Great Value Management, and Ninay P. Rile.
According to Carpio, he started working with Green Era Biotech on April 26, 2015 as Production Utility, a position directly related and usually desirable to the usual business of his employer. He claimed he was summarily and illegally dismissed without any valid ground on May 21, 2018. Carpio argued that he is a regular employee of Green Era Biotech, and that Great Value is engaged in prohibited labor-only contracting.
Great Value and Rile explained that Great Value is a service provider registered with the Department of Labor and Employment (DOLE) and that it has been supplying manpower to Green Era Biotech since 2016. They alleged that Carpio was hired as a probationary employee and deployed to Green Era Biotech as a Utility Helper for a fixed period of six months. They claimed Carpio was validly dismissed due to gross and habitual neglect of duty and serious misconduct because of his absences without permission, and that they complied with the twin notice requirement.
Green Era Biotech alleged that Carpio was hired under a Service Contract with Great Value as a utility worker and argued that Great Value is a legitimate labor contractor and Carpio's employer.
In a Decision dated June 27, 2019, the Labor Arbiter dismissed Carpio's complaint for illegal dismissal for lack of merit but ordered Great Value to indemnify Carpio PHP 30,000.00 as nominal damages for violating his right to procedural due process, plus 13th month pay and Service Incentive Leave Pay. The National Labor Relations Commission (NLRC) and the CA affirmed that Carpio was not illegally dismissed.
The Issue
The Court examined whether Great Value was a legitimate job contractor or engaged in prohibited labor-only contracting, and the consequences of that finding on the liability of the respondents for Carpio's dismissal.
The Ruling
The Court upheld the NLRC's finding that Great Value is a labor-only contractor. It ruled that with such finding, Great Value and Green Era Biotech are solidarily liable for the monetary awards in Carpio's favor.
The Court ruled that respondents Li and Rile are not liable to pay Carpio his separation pay, should reinstatement no longer be possible, stating that as a general rule corporate officers should not be held solidarily liable with the corporation for separation pay.
The dispositive portion states: "ACCORDINGLY, the Petition for Review on Certiorari is PARTIALLY GRANTED. The Decision, dated May 30, 2022, and the Resolution, dated September 8, 2022, of the Court of Appeals in CA-G.R. SP No. 167132 are REVERSED insofar as they uphold the legality of the dismissal of Alvin G. Carpio." The Court ordered the two corporations to reinstate Carpio without backwages, and should reinstatement no longer be possible, declared them jointly and solidarily liable to pay separation pay equivalent to one month pay for every year of service from April 26, 2015 up to the date of finality of the Decision. They were also ordered to pay nominal damages equivalent to PHP 30,000.00, with the total monetary award earning legal interest at 6% per annum from finality until fully paid. The case was remanded to the Labor Arbiter for computation.
By the Numbers
- April 26, 2015 — date Carpio said he started working with Green Era Biotech
- May 21, 2018 — date Carpio claimed he was illegally dismissed
- June 28, 2017 — date Great Value's Certificate of Registration was issued
- January 1, 2017 — date Great Value claims Carpio was hired
- PHP 30,000.00 — nominal damages ordered paid
- 6% per annum — legal interest on the total monetary award from finality until fully paid
- One month pay for every year of service — basis of separation pay should reinstatement no longer be possible
The Court's Reasoning
The Court held that a contractor's Certificate of Registration is not conclusive proof of its legitimacy; it merely prevents the automatic presumption of labor-only contracting and gives rise to a disputable presumption of legitimacy. The Court noted that Great Value's Certificate of Registration was issued only on June 28, 2017, and that even assuming Carpio commenced employment on January 1, 2017, Great Value was not yet registered with the DOLE at the time of his hiring, so no presumption of legitimate contracting arises.
The Court further found that Great Value failed to establish either the existence of substantial capital or any investment in tools, equipment, machineries, or other implements actually used by Carpio. The Certificate of Approval of Increase of Capital Stock and the Treasurer's Affidavit were both issued in 2014 and do not show whether it possessed substantial capital in 2017. Taken together with the circumstances that Green Era Biotech was Great Value's sole client and that no work implements were provided, these facts led to the conclusion that Great Value is a labor-only contractor.
Citing Department Order No. 18A, series of 2011, the Court explained that a finding of labor-only contracting renders the principal jointly and severally liable with the contractor to the latter's employees, with the principal becoming the direct employer. Finding no reason to disregard the separate personality of Great Value and Green Era Biotech, the Court held Li and Rile should not be held solidarily liable for the monetary award in favor of Carpio.
Source: Supreme Court Decision, G.R. No. 267217 (Formerly UDK No. 17695), Third Division. The decision was concurred in by Associate Justice Alfredo Benjamin S. Caguioa as Chairperson and certified by Chief Justice Alexander G. Gesmundo.
This report summarizes a public Supreme Court decision and is not legal advice.