Alba vs. Espinosa, et al.

Construction workers who are continuously rehired by the same employer for the same tasks, and whose tasks are vital, necessary, and indispensable to the employer's usual business or trade, are regular employees, not project employees or independent contractors. The mere fact that work is time-bound or project-based does not automatically characterize workers as project employees; the nature of the work and the continuity of rehiring are determinative. The employer bears the burden of proving that a worker is an independent contractor rather than a regular employee.

Petitioner Romeo Alba owned and operated Alba Construction, a business engaged in small-scale construction projects, including house repairs and renovations, for clients in residential villages within Metro Manila and nearby provinces. The respondents were workers whom Alba pooled for his various construction projects. The dispute implicates the Labor Code's provisions on security of tenure, particularly the distinction between regular employees, project employees, and independent contractors, as well as statutory monetary benefits including 13th month pay under Presidential Decree No. 851 and service incentive leave pay under Article 95 of the Labor Code.

Romeo Alba owned and operated Alba Construction, which undertook small-scale construction projects for house repairs and renovations in residential villages within Metro Manila and nearby provinces. Two groups of workers filed complaints against Alba and Alba Construction. The first complaint, NLRC NCR Case No. 06-07959-14, was filed by Conrado Gabe Espinosa, Eusebio Mojica, Jaime Ocfemia, Jr., Remy Diama, Ross Florencio, Jr., Gerry U. Milo, Rodolfo Benoza, Rolando Benoza, Marcelino Macindo, Nikko Benosa, Felix Taperla, Landirico Taperla, Arturo Nebrida, Jr., and Bongbong Delumpines. The second complaint, NLRC NCR Case No. 06-07960-14, was filed by Nilo Abrencillo, Freddie Abrencillo, Robert Manimtiin, Ronaldo Hernandez, Jr., William Janer, Ronie Tuparan, Samuel Nabas, Eufrecino B. Jemina, Ruben Caleza, Hermel Caringal, Phamer Mandeoya, Alexander Barbacena, Roily Abrencillo, Rene Barbacena, Jr., Jolito Cabillo, and Roger Nebrida.

The respondents alleged that on various dates, Alba hired them as construction workers for his projects. They claimed to be regular employees paid different wage rates ranging from P350.00 to P500.00 a day, but were deprived of statutorily-mandated benefits such as overtime pay, 13th month pay, holiday pay, and service incentive leave pay. On different dates in 2013, some of the respondents confronted Alba regarding their benefits, which allegedly resulted in their dismissal. In 2014, the other respondents again questioned Alba about non-payment of benefits. Alba allegedly took it against them, treating them harshly by shouting at them at the job site and finding ways to extend their working hours. This prompted the respondents to seek the assistance of media personality Raffy Tulfo in his Radyo Singko Program. Tulfo personally called Alba, who was reminded to pay the respondents their full benefits. When the respondents reported back for work the following day, they were informed of their dismissal.

For his defense, Alba argued that the respondents could not be deemed his regular employees. He claimed to be a mere "mamamakyaw" who pooled a team of skilled and semi-skilled carpenters and masons for specific projects that usually lasted from one to two weeks. He claimed the respondents were paid daily wages ranging from P600.00 to P1,000.00, could take on projects with their own clients after Alba's projects terminated, and for succeeding projects, Alba would only take in workers who were still available. Alba presented certifications from clients indicating that the latter directly paid the salaries of the workers, and argued that the respondents used their own tools and received instructions from either the architect or foreman engaged by the project owner. To disprove Alba's claim, the respondents presented gate passes issued by the villages where Alba had construction projects, which indicated that Alba was a "contractor."

The Labor Arbiter dismissed the complaints, finding no employer-employee relationship based on the direct payment of wages by project owners, the respondents' use of their own tools and methodology, and their receipt of instructions from architects or foremen. The NLRC partly granted the respondents' appeal, affirming the dismissal of Conrado's complaint because he admitted being employed as a tanod in Barangay Almanza Dos, Las Piñas City, and Jaime, Jr.'s complaint because Alba engaged him as an independent excavation contractor. As to the remaining respondents, the NLRC found that the four-fold test was satisfied, that they were regular employees continuously rehired for several years performing tasks necessary and indispensable to Alba's business, and that they were illegally dismissed. The NLRC ordered Alba to pay reinstatement and backwages, moral and exemplary damages of P200,000.00, 13th month pay for the last three years, SIL pay, and attorney's fees, totaling P16,125,574.61. The CA affirmed, and Alba filed the present petition.

• Lack of Employer-Employee Relationship: Alba argued that the respondents could not be deemed his regular employees because he was a mere "mamamakyaw" who pooled skilled and semi-skilled workers for specific projects lasting one to two weeks, and the workers could take on projects with their own clients after Alba's projects terminated.

• Independent Contractorship: Alba maintained that the respondents were independent contractors because they used their own tools at work, received instructions from either the architect or foreman engaged by the project owner, and their wages were paid directly by the project owners, as shown by certifications from clients.

• Project Employment: Alba asserted that the respondents were project employees whose employment was co-terminous with specific projects, not regular employees.

• Monetary Claims: Alba disputed the order to pay monetary claims totaling P16,125,574.61, arguing that since no employer-employee relationship existed, he was not liable for the claimed benefits and damages.

• Regular Employment: The respondents argued that they were Alba's regular employees who were paid different wage rates ranging from P350.00 to P500.00 a day but were deprived of statutorily-mandated benefits such as overtime pay, 13th month pay, holiday pay, and service incentive leave pay.

• Retaliatory Dismissal: The respondents alleged that they were dismissed after confronting Alba about their benefits, and after seeking the assistance of media personality Raffy Tulfo, who personally called Alba to remind him to pay the respondents their full benefits.

• Evidence of Contractor Status: To disprove Alba's claim that he was a mere "mamamakyaw," the respondents presented gate passes issued by the villages where Alba had construction projects, which indicated that Alba was a "contractor."

• Employer-Employee Relationship: Whether an employer-employee relationship existed between Alba and the respondents.

• Regular Employment: Whether the respondents were regular employees, as opposed to project employees or independent contractors.

• Illegal Dismissal: Whether the respondents were illegally dismissed when Alba ceased assigning them work.

• Monetary Claims: Whether Alba was liable for 13th month pay, SIL pay, moral and exemplary damages, and attorney's fees.

• Employer-Employee Relationship: Yes. The four-fold test was satisfied: Alba selected and engaged the workers, admitted paying their daily wages, had the power to dismiss them by dropping them from assignments, and exercised control over their conduct at the job site.

• Regular Employment: Yes. The respondents were regular employees because they were continuously rehired for several years and performed tasks that were vital, necessary, and indispensable to Alba's construction business, which was the core of his trade.

• Illegal Dismissal: Yes. Alba failed to prove that the termination was founded on any just or valid cause and failed to satisfy the demands of due process for an employee's termination; the burden was on Alba to prove the dismissal was legal.

• Monetary Claims: Yes. Alba was liable for 13th month pay under Presidential Decree No. 851, SIL pay under Article 95 of the Labor Code, moral and exemplary damages of P200,000.00, and attorney's fees equivalent to 10 percent of the final judgment award, totaling P16,125,574.61.

• Employer-Employee Relationship: The Court applied the four-fold test from South East International Rattan, Inc., et al. vs. Coming: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) power to control the employee's conduct. Alba admitted selecting and engaging the workers for his pool and determining which projects they were assigned to. His payment of wages was established by his plain admission that he paid daily fees ranging from P600.00 to P1,000.00. The certifications he presented to dispute direct payment deserved nil consideration because the requirements for valid notarization were not satisfied — proof of each affiant's identity was not indicated in the jurat. The arrangement on clients' direct payment was a mere concession to facilitate payment, with Alba ultimately bearing liability. On the control test, the Court cited Gapayao vs. Fulo, et al. that the control test merely calls for the existence of the right to control, not necessarily its exercise. Alba possessed and freely exercised this power: he frequented work sites, reprimanded idle or sluggish workers, and controlled the time they had to stay at work. Instructions from a foreman or architect did not negate his control, as such directives were understandably limited.

• Regular Employment: The Court applied the doctrine from DM. Consunji, Inc., et al. vs. Jamin: once a project or work pool employee has been (1) continuously, as opposed to intermittently, rehired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee. As construction workers, the respondents performed tasks crucial and necessary in Alba's business — their work was the core of his trade. Most respondents were employed beginning in the 1990s to 2006, and one employee, Samuel, began working for Alba in 1982. The Court cited Chua vs. CA that an employment ceases to be co-terminus with specific projects when the employee is continuously rehired due to the demands of the employer's business and re-engaged for many more projects without interruption. Alba's allegation that the respondents were independent contractors was not substantiated; the test of independent contractorship is whether one has contracted to do the work according to his own methods without being subject to the control of the employer. The burden was on Alba to prove independent contractor status, which he failed to discharge.

• Illegal Dismissal: The burden was on Alba to prove that the dismissal was legal, a matter he miserably failed to establish. There were no adequate explanations as to why the respondents ceased obtaining assignments. In view of the illegal dismissal, the respondents were rightfully entitled to reinstatement and backwages, or separation pay in case of strained relations.

• Monetary Claims: Article 95 of the Labor Code provides that every employee who has rendered at least one year of service shall be entitled to a yearly SIL of five days with pay. The respondents derived their right to 13th month pay from Presidential Decree No. 851. After the respondents alleged non-payment, it became incumbent upon Alba to prove payment of the statutory monetary benefits, which he failed to do. The award of P200,000.00 as total moral and exemplary damages was reasonable, as the dismissal was a retaliatory action after employees asked for their benefits — an act oppressive to labor displaying wanton exercise of authority. Attorney's fees were sanctioned because the employees were illegally dismissed in bad faith and compelled to litigate to protect their rights.

• Four-Fold Test for Employer-Employee Relationship — The existence of an employer-employee relationship is determined by: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct, or the "control test." Substantial evidence — that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion — is sufficient to establish the relationship. In this case, all four elements were satisfied, particularly the control test, as Alba exercised authority over the workers' conduct, reprimanded them, and controlled their working hours.

• Control Test — The power of the employer to control the work of the employee is the most significant determinant of the existence of an employer-employee relationship. 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. Alba possessed this right to control and had in fact freely exercised it over the respondents.

• Regular Employment of Project or Work Pool Employees — Once a project or work pool employee has been: (1) continuously, as opposed to intermittently, rehired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee. The respondents satisfied both requisites, having been continuously rehired for years and performing construction tasks that were the core of Alba's business.

• Test of Independent Contractorship — The test 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. A legitimate job contractor carries on a distinct and independent business and undertakes to perform the job according to its own manner and method, free from the control and direction of the principal. The burden is on the employer to prove that a person whose services it pays for is an independent contractor rather than a regular employee.

• "To ascertain the existence of an employer-employee relationship[,] jurisprudence has invariably adhered to the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power to control the employee's conduct, or the so-called 'control test.' In resolving the issue of whether such relationship exists in a given case, substantial evidence - that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion - is sufficient." — This passage from South East International Rattan, Inc., et al. vs. Coming states the canonical formulation of the four-fold test applied by the Court to establish the employer-employee relationship between Alba and the respondents.

• "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 by the employee. It is enough that the former has a right to wield the power." — This passage from Gapayao vs. Fulo, et al. clarifies that the control test requires only the right to control, not its actual exercise, which was crucial in finding that Alba possessed the power to control the respondents.

• "[O]nce a project or work pool employee has been: (1) continuously, as opposed to intermittently, rehired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee." — This passage from DM. Consunji, Inc., et al. vs. Jamin states the controlling doctrine for determining regular employment of project or work pool employees, which the Court applied to find the respondents were regular employees.

• "[A]n employment ceases to be co-terminus with specific projects when the employee is continuously rehired due to the demands of the employer's business and re-engaged for many more projects without interruption." — This passage from Chua vs. CA supports the finding that the respondents' employment was regular despite the project-based nature of Alba's construction business.

• South East International Rattan, Inc., et al. vs. Coming, 729 Phil. 298 (2014) — Controlling precedent cited for the four-fold test in determining the existence of an employer-employee relationship and the substantial evidence standard.

• Gapayao vs. Fulo, et al., 711 Phil. 179 (2013) — Followed for the proposition that the control test merely requires the existence of the right to control, not its actual exercise.

• DM. Consunji, Inc., et al. vs. Jamin, 686 Phil. 220 (2012) — Followed for the doctrine that continuously rehired project employees performing tasks vital to the employer's business are deemed regular employees.

• Television and Production Exponents, Inc. and/or Tuviera vs. Servaña, 566 Phil. 564 (2008) — Cited for the indicators of a legitimate job contractor or subcontractor, including possession of substantial capital or investment and freedom from the control of the principal.

• Chua vs. CA, 483 Phil. 126 (2004) — Followed for the principle that employment ceases to be co-terminus with specific projects when the employee is continuously rehired due to the demands of the employer's business.

• Polyfoam-RGC International Corporation, et al. vs. Conception, 687 Phil. 137 (2012) — Cited for the test of independent contractorship.

• Fuji Television Network, Inc. vs. Espiritu, 749 Phil. 388 (2014) — Cited for the rule that the burden is on the employer to prove that a person whose services it pays for is an independent contractor rather than a regular employee.

• Atok Big Wedge Company, Inc. vs. Gison, 670 Phil. 615 (2011) — Cited for the proposition that the control test is the most important and crucial among the four tests.

• Aliling vs. Feliciano, et al., 686 Phil. 889 (2012) — Cited in support of the entitlement of illegally dismissed employees to reinstatement and backwages, or separation pay in case of strained relations.

• Pepsi Cola Products Philippines, Inc., et al. vs. Santos, 574 Phil. 400 (2008) — Cited for the rule that attorney's fees are sanctioned when an employee is illegally dismissed in bad faith and is compelled to litigate to protect his rights.

• Article 95, Labor Code — Provides that every employee who has rendered at least one year of service shall be entitled to a yearly service incentive leave of five days with pay. The Court applied this provision to award SIL pay to the respondents, excluding Nilo Abrencillo, who worked as a personal driver and was not entitled to the benefit.

• Article 82, Labor Code — Excludes certain employees from the coverage of the service incentive leave benefit. The Court noted this provision in affirming the NLRC's denial of Nilo's SIL pay claim because he worked as a personal driver.

• Presidential Decree No. 851 (13th Month Pay Law), as amended — Grants employees the right to 13th month pay. The Court applied this law to award 13th month pay computed from the last three years, as Alba failed to prove payment of the statutory monetary benefits.

• Rule 45, Rules of Court — Governs Petitions for Review on Certiorari to the Supreme Court. The petition was filed under this rule, and the Court found no cogent reason to disturb the CA's ruling.

Velasco, Jr. (Chairperson), Bersamin, Jardeleza, and Tijam, JJ., concurred.