G.R. No. 250311 & G.R. No. 250501. January 05, 2022
CONQUEROR INDUSTRIAL PEACE MANAGEMENT COOPERATIVE and SAGARA METRO PLASTICS INDUSTRIAL CORPORATION, Petitioners, vs. JOEY BALINGBING, ET AL., Respondents.

FACTS

Respondents, a group of employees, filed a Complaint for Inspection against Sagara Metro Plastics Industrial Corporation (Sagara) and Conqueror Industrial Peace Management Cooperative (Conqueror) for alleged violation of labor laws, specifically DOLE Department Order No. 18-A, Series of 2011 (DO 18-A-11). Respondents alleged that Conqueror was a mere labor-only contractor and that Sagara was their true employer because: (1) Conqueror was not registered with the DOLE; (2) it had no substantial capital or investment in tools or equipment; and (3) Sagara exercised control and supervision over them. They prayed to be declared regular employees of Sagara.
During inspection, DOLE Compliance Officers noted non-compliance with Sections 6 and 9 of DO 18-A-11, and Conqueror failed to present certain required documents, which it later submitted. Sagara opposed, arguing the issue of employer-employee relationship is evidentiary and cannot be determined by mere inspection. Conqueror asserted it was a legitimate job contractor, submitting its DOLE Certificates of Registration and an audited financial statement showing substantial capitalization. Sagara denied employing respondents, claiming Conqueror deployed them for non-core activities like manual transporting, printing labels, loading goods, and recycling.
The DOLE Regional Director dismissed the complaint, finding Sagara and Conqueror compliant with DO 18-A-11. The Secretary of DOLE affirmed, holding Conqueror proved it had substantial capital and exercised control over respondents’ work. On appeal, the Court of Appeals reversed, finding grave abuse of discretion and holding Conqueror was a labor-only contractor and Sagara the actual employer, considering evidence like Sagara’s monitoring reports and work schedules. Petitioners Conqueror and Sagara filed the present Petitions for Review.

ISSUE

Whether the Court of Appeals erred in reversing the findings of the DOLE Secretary and in ruling that Conqueror is a labor-only contractor and Sagara is the employer of respondents.

RULING

The Supreme Court denied the petitions and affirmed the Decision of the Court of Appeals. The Court held that Conqueror was engaged in labor-only contracting. Under DO 18-A-11, for legitimate job contracting, the contractor must have substantial capital or investment and the service agreement must indicate the contractor’s control over the employees’ work. Labor-only contracting exists when the contractor merely recruits and supplies workers to a principal who exercises control over them.
The Court found Conqueror failed to prove it had substantial capital. While it submitted a 2014 audited financial statement, it did not provide proof of its capitalization for the relevant period when respondents were deployed. Furthermore, the evidence demonstrated that Sagara exercised control over respondents. Documents such as Sagara’s inspection hourly monitoring report, list of employees who did not render overtime, machine operator schedules, and production plans showed Sagara directed the means, methods, and results of respondents’ work. The nature of respondents’ tasks—directly related to Sagara’s manufacturing process—were necessary and desirable to Sagara’s main business, making them regular employees of Sagara. The DOLE Secretary’s findings were not supported by substantial evidence, and the CA correctly reversed them. Thus, Conqueror is a labor-only contractor, and Sagara is the employer of respondents.