Dole Philippines, Inc. vs. Esteva

A final and executory order of the DOLE Secretary or his authorized representatives, rendered in the exercise of quasi-judicial visitorial and enforcement powers, constitutes conclusiveness of judgment binding on the NLRC in subsequent proceedings involving the same parties and the same issue of labor-only contracting. Where the contractor is found to be a labor-only contractor, the principal is deemed the real employer, and workers who have rendered more than one year of service performing activities necessary or desirable to the principal's business are regular employees entitled to reinstatement and backwages upon illegal dismissal.

Dole Philippines, Inc. is a corporation engaged in the production and processing of pineapple for the export market, with its plantation located in Polomolok, South Cotabato. The Cannery Multi-Purpose Cooperative (CAMPCO) was organized under Republic Act No. 6938 (the Cooperative Code of the Philippines) and registered with the Cooperative Development Authority on 6 January 1993; its members lived in communities surrounding Dole's plantation and were relatives of Dole's regular employees. On 17 August 1993, Dole and CAMPCO executed a Service Contract under which CAMPCO undertook to assist Dole in its daily operations and perform odd jobs as assigned, ostensibly as an independent job contractor. The legal framework governing the arrangement consisted of Article 106 of the Labor Code (permitting legitimate job contracting but prohibiting labor-only contracting) and Sections 8 and 9, Rule VIII, Book III of the Implementing Rules, which defined the requisites of permissible job contracting and labor-only contracting, respectively.

Dole Philippines, Inc. is a corporation engaged principally in the production and processing of pineapple for the export market, with its plantation located in Polomolok, South Cotabato. The Cannery Multi-Purpose Cooperative (CAMPCO) was organized under Republic Act No. 6938 and registered with the Cooperative Development Authority on 6 January 1993; its members lived in communities surrounding Dole's plantation and were relatives of Dole's regular employees. On 17 August 1993, Dole and CAMPCO entered into a Service Contract under which CAMPCO, designated as "the Contractor," undertook to assist Dole in its daily operations and perform odd jobs as may be assigned, with the contract stipulating a period of six months from 1 July to 31 December 1993. The contract required CAMPCO to carry on an independent legitimate business, provide all hand tools and equipment necessary, undertake the work on its own account and under its own responsibility free from Dole's control except as to results, and pay the prescribed minimum wage while remitting SSS and Medicare premiums.

Pursuant to the Service Contract, CAMPCO members rendered services to Dole, with the number of workers and type of service depending on Dole's needs at any given time. Although the contract was expressly limited to six months, the parties extended or renewed the arrangement for succeeding years without executing another written contract. It was under these circumstances that respondents came to work for Dole at various times in 1993 and 1994, assigned to Dole's Industrial Department as can processing attendants, feeders of canned pineapple, nata de coco processing attendants, fruit cocktail processing attendants, and similar functions. According to respondents, all tools, implements, and machineries were provided by Dole; training and instructions were given by Dole's personnel before any member was allowed to work; at the job site, Dole's supervisors assigned specific tasks and supervised the workers' efficiency; and respondents were subjected to the same rules and regulations as Dole's regular employees, working alongside them and performing identical functions.

Concomitantly, the Sangguniang Bayan of Polomolok passed Resolution No. 64 on 5 May 1993, calling the attention of then DOLE Secretary Ma. Nieves R. Confessor to the worsening working conditions of Dole's workers and the organization of contractual workers into cooperatives to replace individual labor-only contractors. Acting on the resolution, DOLE Regional Office No. XI organized a Task Force that investigated the alleged labor-only contracting activities of cooperatives in Polomolok. The Task Force submitted a report on 3 June 1993 identifying six cooperatives engaged in labor-only contracting, including CAMPCO. After a conference on 18 August 1993, wherein the cooperatives and Dole were given the opportunity to explain and submit position papers, DOLE Regional Director Henry M. Parel issued an Order on 19 October 1993 declaring CAMPCO and two other cooperatives engaged in labor-only contracting and ordering them to cease and desist. The cooperatives appealed, but DOLE Undersecretary Cresencio B. Trajano, by authority of the DOLE Secretary, dismissed the appeal on 15 September 1994 and affirmed the Regional Director's Order. The Order became final and executory after denial of the motion for reconsideration, although a Writ of Execution was issued only on 27 July 1999, years later, after DOLE was informed that CAMPCO and two other cooperatives continued to operate at Dole despite the cease and desist order.

While some respondents were still working for Dole, others were put on "stay home status" at varying dates in 1994, 1995, and 1996 and were no longer furnished with work thereafter. All respondents had rendered more than one year of service. On 19 December 1996, respondents filed a Complaint with the NLRC for illegal dismissal, regularization, wage differentials, damages, and attorney's fees, asserting that CAMPCO was a labor-only contractor and that they should be considered regular employees of Dole entitled to security of tenure.

• Scope of Certiorari Review: Petitioner argued that the Court of Appeals exceeded its authority under Rule 65 by making its own factual findings and disregarding the uniform factual findings of the Labor Arbiter and the NLRC, which must be accorded great weight and finality; certiorari is confined to issues of jurisdiction or grave abuse of discretion, not errors of judgment.
• Applicability of Department Order No. 10: Petitioner contended that Department Order No. 10, series of 1997, was the applicable regulation and that the arrangement between Dole and CAMPCO qualified as permissible contracting and subcontracting under Section 6 thereof; the Court of Appeals erred in giving retroactive application to Department Order No. 3, series of 2001, which revoked D.O. No. 10, thereby violating the constitutional provision against impairment of contracts and depriving petitioner of due process.
• Binding Effect of DOLE Orders: Petitioner maintained that the Orders of DOLE Regional Director Parel and DOLE Undersecretary Trajano did not constitute res judicata in the NLRC case because Dole was not a real party-in-interest in the DOLE proceedings, and there was no identity of parties.
• Estoppel: Petitioner argued that respondents, as owners-members of CAMPCO, actively represented themselves and warranted that they were engaged in legitimate job contracting, and were thus barred by the equitable principle of estoppel from asserting that they were regular employees of Dole.
• Substantial Capital: Petitioner asserted that CAMPCO had substantial capital — a paid-up capital of ₱4,562,470.25 — sufficient to qualify it as an independent job contractor, and that there was substantial evidence to refute the finding of labor-only contracting.
• Seasonal/Term Employment: Petitioner contended that respondents were seasonal or term employees engaged only for definite periods during peak operations, relying on a prior NLRC ruling involving individual workers hired by Dole before the cooperatives were formed, where such workers were declared seasonal or term employees.

• Labor-Only Contracting: Respondents argued that they should be considered regular employees of Dole because: (1) they performed jobs usually necessary and desirable in Dole's usual business; (2) Dole exercised control over them not only as to results but also as to the manner of performing their tasks; and (3) CAMPCO, a labor-only contractor, was merely a conduit of Dole.
• Finality of DOLE Orders: Respondents presented the Orders of DOLE Regional Director Parel and DOLE Undersecretary Trajano, which had become final and executory, finding CAMPCO to be a labor-only contractor, and argued these should bind the NLRC.
• Illegal Dismissal: Respondents asserted that as regular employees of Dole, they were entitled to security of tenure, and those placed on "stay home status" for more than six months had been constructively and illegally dismissed.
• Wage Differentials, Damages, and Attorney's Fees: Respondents claimed entitlement to wage differentials, moral damages, and attorney's fees.

• Scope of Certiorari Review: Whether the Court of Appeals exceeded its authority under Rule 65 by making its own factual findings and reversing the NLRC.
• Retroactivity of Department Orders: Whether Department Order No. 10, series of 1997, or Department Order No. 3, series of 2001, is the applicable regulation, and whether the latter may be given retroactive application.
• Res Judicata / Conclusiveness of Judgment: Whether the final and executory Orders of DOLE Regional Director Parel and DOLE Undersecretary Trajano finding CAMPCO engaged in labor-only contracting constitute conclusiveness of judgment binding on the NLRC.
• Estoppel: Whether respondents are estopped from asserting they are regular employees of Dole by virtue of their membership in CAMPCO.
• Labor-Only Contracting: Whether CAMPCO was engaged in prohibited labor-only contracting.
• Regular Employment and Illegal Dismissal: Whether respondents are regular employees of Dole and whether Dole is guilty of illegal dismissal.

• Scope of Certiorari Review: No. The Court of Appeals did not exceed its authority; where the NLRC's findings contradict those of the Labor Arbiter, or where grave abuse of discretion is alleged by capricious disregard of material evidence, the appellate court may look into the records and re-examine the questioned findings.
• Retroactivity of Department Orders: Department Order No. 10, series of 1997, cannot be applied retroactively to the acts complained of, which occurred from 1993 to 1996; the prevailing rules during that period were Article 106 of the Labor Code and Sections 8 and 9, Rule VIII, Book III of the Implementing Rules. No statute or regulation shall be given retroactive effect unless explicitly stated.
• Res Judicata / Conclusiveness of Judgment: Yes. The final and executory DOLE orders constitute conclusiveness of judgment, binding on the NLRC, as the same parties participated in both proceedings and the matter of whether CAMPCO was a labor-only contractor was already directly and actually determined.
• Estoppel: No. Petitioner does not come with clean hands; it encouraged and helped establish CAMPCO, participated in the DOLE proceedings, and continued the prohibited arrangement even after the cease and desist order, precluding equitable relief.
• Labor-Only Contracting: Yes. CAMPCO was engaged in labor-only contracting: it lacked substantial capital at inception (only ₱6,600.00 paid-up capital), did not carry on an independent business, was subject to Dole's control, was not engaged to perform a specific and special job, and its members performed activities directly related to Dole's principal business.
• Regular Employment and Illegal Dismissal: Yes. Respondents are regular employees of Dole, having performed for over one year activities necessary and desirable to Dole's business; those placed on "stay home status" for more than six months were constructively and illegally dismissed.

• Scope of Certiorari Review: While certiorari under Rule 65 is generally confined to issues of jurisdiction or grave abuse of discretion, the Court of Appeals may look into the evidence when grave abuse of discretion is alleged to consist of capricious or whimsical disregard of material or decisive evidence. The Court of Appeals could not determine whether the NLRC arbitrarily disregarded evidence without examining the record in relation to all other evidence. Moreover, where the NLRC's findings contradict those of the Labor Arbiter, the reviewing court is constrained to delve into factual matters to arrive at a just decision. The Court found no error in the Court of Appeals making an independent factual determination and reversing the NLRC on that basis.

• Retroactivity of Department Orders: The acts complained of occurred from 1993 to 1996, before the issuance of both Department Order No. 10 (1997) and Department Order No. 3 (2001). The basic rule is that no statute, rule, or regulation shall be given retroactive effect unless explicitly stated. Since neither department order contained a provision expressly allowing retroactive application, the prevailing rules during the relevant period were Article 106 of the Labor Code and Sections 8 and 9, Rule VIII, Book III of the Implementing Rules, which were the very provisions under which DOLE Regional Director Parel and DOLE Undersecretary Trajano issued their orders. Petitioner's reliance on D.O. No. 10 was misplaced, and the Court of Appeals' citation of D.O. No. 3 was unnecessary; the original Labor Code provisions and implementing rules sufficed.

• Res Judicata / Conclusiveness of Judgment: The visitorial and enforcement power of the DOLE Secretary under Article 128 of the Labor Code is quasi-judicial in nature. Decisions and orders of administrative agencies rendered pursuant to quasi-judicial authority, upon finality, have the force and binding effect of a final judgment within the purview of res judicata. The second concept of res judicata — conclusiveness of judgment — applies because there is identity of parties (CAMPCO participated in the DOLE proceedings on behalf of its members, and Dole participated by submitting a position paper and intervening through its Senior Legal Officer) but no identity of cause of action. The matter of whether CAMPCO was a labor-only contractor was directly and actually controverted and determined in the DOLE proceedings, and was conclusive and binding upon the NLRC. What remained for the NLRC to determine were only the issues of illegal dismissal and regularization. For the NLRC to ignore the DOLE findings would undermine the DOLE officials' authority under Article 128.

• Estoppel: A cooperative, once registered with the CDA, attains a juridical personality separate and distinct from its members, akin to the doctrine of corporate fiction. Piercing this veil is an equitable remedy available only where the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime, or where the entity is a mere alter ego. The maxims of equity require that he who seeks equity must do equity and come with clean hands. Petitioner does not come with clean hands: it encouraged and helped establish CAMPCO and the other cooperatives precisely to render services to it; it participated in the DOLE proceedings and could not claim ignorance of the findings; and it continued the prohibited arrangement even after the cease and desist order. If petitioner were truly defrauded, the logical recourse would have been to void the Service Contract, not to continue it for years.

• Labor-Only Contracting: Even apart from the conclusiveness of the DOLE orders, an independent review of the evidence confirms that CAMPCO was a labor-only contractor. First, CAMPCO had only ₱6,600.00 paid-up capital at its establishment in 1993, which could hardly be considered substantial; its later multi-million assets were amassed through continued defiance of the DOLE orders. Second, CAMPCO did not carry on an independent business from Dole; it was established precisely to render services to Dole, which was its only client. Third, Dole exercised control over CAMPCO members: they had to undergo training provided by Dole's personnel, Dole determined and prepared work assignments, and members worked alongside regular employees performing identical jobs — a recognized indicium of labor-only contractorship. Fourth, CAMPCO was not engaged to perform a specific and special job or service but merely to assist in daily operations and perform odd jobs, functioning as a recruitment agency. Fifth, the activities performed by CAMPCO members — can processing attendant, feeder of canned pineapple, nata de coco processing attendant, fruit cocktail processing attendant — were directly related and vital to Dole's pineapple production and processing business.

• Regular Employment and Illegal Dismissal: Under Article 280 of the Labor Code, an employment is deemed regular where the employee has been engaged to perform activities usually necessary and desirable in the usual business or trade of the employer. The primary standard is the reasonable connection between the activity performed and the employer's usual business. Respondents performed functions necessary and desirable to Dole's pineapple production business, alongside regular employees, and all rendered more than one year of service — a claim Dole failed to rebut. Petitioner's argument that respondents were seasonal or term employees failed because, unlike the prior case involving individual workers, the CAMPCO members were not informed at the time of engagement that their employment was for a limited period; no individual contracts were executed with them, and the Service Contract's six-month term was not renewed in writing. As regular employees, respondents were entitled to security of tenure and could only be dismissed for just or authorized causes with procedural due process. Placing respondents on "stay home status" for more than six months constituted constructive and illegal dismissal.

• Conclusiveness of Judgment (second aspect of res judicata) — Where between the first case wherein judgment is rendered and the second case wherein such judgment is invoked, there is identity of parties but no identity of cause of action, the judgment is conclusive in the second case only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein. Applied here: the DOLE orders finding CAMPCO a labor-only contractor were conclusive on the NLRC because the same parties participated in both proceedings and the labor-only contracting issue was directly adjudicated.

• Finality of Administrative Quasi-Judicial Orders — Decisions and orders of administrative agencies rendered pursuant to their quasi-judicial authority, upon finality, have the force and binding effect of a final judgment within the purview of res judicata. The rule applies as well to the judicial and quasi-judicial acts of public, executive, or administrative officers and boards acting within their jurisdiction. Applied here: the final and executory orders of DOLE Regional Director Parel and DOLE Undersecretary Trajano, issued under the visitorial and enforcement power of Article 128, bound the NLRC.

• Labor-Only Contracting — Under Section 9, Rule VIII, Book III of the Implementing Rules, a person undertakes labor-only contracting where: (1) the person 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 are performing activities directly related to the principal business or operations of the employer. The person acting as contractor is considered merely an agent or intermediary of the employer, who shall be responsible to the workers as if directly employed. Applied here: CAMPCO met both elements — it lacked substantial capital at inception and its members performed activities directly related to Dole's pineapple business.

• Regular Employment (Article 280, Labor Code) — The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee and the usual business or trade of the employer. The test is whether the activity is usually necessary or desirable. If the employee has performed the job for at least one year, even if intermittent, the law deems the repeated and continuing need as sufficient evidence of the necessity or indispensability of the activity. Applied here: respondents performed functions necessary and desirable to Dole's pineapple business for over one year, establishing regular employment.

• Prospectivity of Laws and Regulations — No statute, decree, ordinance, rule, or regulation shall be given retroactive effect unless explicitly stated. Applied here: Department Orders No. 10 and No. 3 could not be applied retroactively to acts occurring from 1993 to 1996.

• Doctrine of Corporate/Juridical Personality (Cooperatives) — A cooperative, upon registration with the CDA, attains a juridical personality separate and distinct from its members, analogous to the corporate fiction. Piercing this veil is an equitable remedy available only where the fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. Applied here: Dole could not invoke estoppel against individual CAMPCO members because CAMPCO had a separate juridical personality, and Dole did not come with clean hands.

• "The decisions and orders of administrative agencies, rendered pursuant to their quasi-judicial authority, have upon their finality, the force and binding effect of a final judgment within the purview of the doctrine of res judicata." — This passage articulates the ratio decidendi that final DOLE orders issued under quasi-judicial visitorial powers bind the NLRC under the doctrine of conclusiveness of judgment.

• "The second concept of res judicata, conclusiveness of judgment, is the one applicable to the case at bar." — This identifies the specific aspect of res judicata applied, distinguishing it from bar by prior judgment due to the absence of identity of cause of action.

• "Petitioner does not come before this Court with clean hands. It is not an innocent party in this controversy." — This passage underpins the rejection of the estoppel argument, anchoring the ruling in the equitable maxims that he who seeks equity must do equity and come with clean hands.

• "Since there is no provision at all in the DOLE department orders that expressly allowed their retroactive application, then the general rule should be followed, and the said orders should be applied only prospectively." — This states the Court's application of the prospectivity principle to DOLE department orders, foreclosing petitioner's reliance on D.O. No. 10.

• St. Martin Funeral Home vs. NLRC, 356 Phil. 811 (1998) — Controlling precedent establishing that the proper mode of judicial review over NLRC decisions is a petition for certiorari under Rule 65, with strict observance of the hierarchy of courts.
• Zarate vs. Olegario, 331 Phil. 278 (1996) — Followed for the proposition that certiorari review of NLRC decisions is confined to issues of jurisdiction or grave abuse of discretion, not errors of judgment.
• Garcia vs. National Labor Relations Commission, G.R. No. 147427, 7 February 2005 — Followed for the principle that where the NLRC's findings contradict those of the Labor Arbiter, the reviewing court may delve into factual matters.
• Traders Royal Bank vs. Court of Appeals, 336 Phil. 15 (1997) — Followed for the guidelines on piercing the corporate veil, applied by analogy to the cooperative's separate juridical personality.
• Hacienda Fatima vs. National Federation of Sugarcane Workers Food and General Trade — Followed by the Court of Appeals for the rule that employees performing seasonal work are excluded from regular employment only if employed for the duration of one season; the Supreme Court relied on this to hold that respondents, employed for more than one season, were regular employees.
• De Leon vs. National Labor Relations Commission, G.R. No. 70705, 21 August 1989 — Followed for the standard of determining regular employment under Article 280 of the Labor Code.
• San Miguel Corporation vs. Aballa, G.R. No. 149011, 28 June 2005 — Followed for the proposition that workers performing identical jobs alongside regular employees within the employer's premises is an indicium of labor-only contractorship.
• Brent School, Inc. vs. Zamora & Alegre, G.R. No. 48494, 5 February 1990 — Cited (via the Labor Arbiter's decision) as the leading case on the validity of fixed-period employment; distinguished by the Supreme Court because respondents were not informed of any fixed period at the time of engagement.

• Article 106, Labor Code — Permits legitimate job contracting but prohibits labor-only contracting; authorizes the Secretary of Labor to restrict or prohibit contracting out of labor and to distinguish between labor-only contracting and job contracting. Applied to determine whether CAMPCO was a legitimate job contractor or a labor-only contractor.
• Article 128, Labor Code (as amended by R.A. No. 7730) — Confers visitorial and enforcement powers on the DOLE Secretary and authorized representatives, including the power to issue compliance orders and writs of execution; provides that it is unlawful to obstruct such orders. Applied to uphold the quasi-judicial authority of DOLE Regional Director Parel and Undersecretary Trajano.
• Sections 8 and 9, Rule VIII, Book III, Omnibus Rules Implementing the Labor Code — Section 8 defines permissible job contracting (contractor carries on an independent business, has substantial capital, and is free from the principal's control except as to results); Section 9 defines and prohibits labor-only contracting (contractor lacks substantial capital and workers perform activities directly related to the principal's business). Applied as the prevailing rules during the period 1993–1996 to determine CAMPCO's status.
• Article 280, Labor Code — Defines regular and casual employment; an employment is regular where the employee performs activities usually necessary and desirable in the employer's usual business, except for specific projects or seasonal work for the duration of the season; any employee rendering at least one year of service is considered regular. Applied to determine that respondents were regular employees of Dole.
• Section 4(7), Republic Act No. 6938 (Cooperative Code of the Philippines) — Provides that a cooperative registered with the CDA attains a juridical personality separate and distinct from its members. Applied to reject petitioner's estoppel argument against individual CAMPCO members.
• Department Order No. 10, series of 1997 — Amended the implementing rules of Books III and VI of the Labor Code and identified permissible contracting arrangements. Held not applicable because it was issued after the acts complained of and could not be applied retroactively.
• Department Order No. 3, series of 2001 — Revoked Department Order No. 10 and reiterated the prohibition on labor-only contracting. Held not applicable for the same prospectivity reasons.

Chief Justice Artemio V. Panganiban (Chairperson), Associate Justice Consuelo Ynares-Santiago, Associate Justice Ma. Alicia Austria-Martinez, and Associate Justice Romeo J. Callejo, Sr. concurred.