Petron Corp. v.

Caberte
G.R. No. 182255, June 15, 2015
Castillo, J.

Facts:
Petron is a domestic corporation engaged in the manufacture and distribution of petroleum
products. Pursuant to the nature of its business, it maintains and operates several bulk tanks all over the
country. One of which is located in Bacolod where the respondents were hired as utility, maintenance and
LPG assistance workers in various dates from 1979 to 1998.

In 1996, Petron engaged the service of ABC Contracting Services as a contractor to provide utility
and maintenance services to its Bacolod bulk tanks. In 1999, the contract between Petron and ABC was
terminated which led to the dismissal of the respondents. Thus, they filed a complaint for illegal dismissal
contending that ABC was a mere labor-only contractor which had no substantial capital and investment,
and had no control over the manner and method on how they accomplished their work. Thus, Petron is
their true employer. Petron countered their contention saying that ABC was an independent contractor
which supplied the needed manpower for the maintenance and utility of its bulk plant.

The Labor Arbiter and the NLRC both decided in favour of Petron stating that ABC was a legitimate
independent contractor and thus, the employer of the respondents. The CA reversed the judgment of the
NLRC and ordered the reinstatement of the respondents.

Issue:
Whether or not ABC Contracting Services was a labor-only contractor of Petron.

Ruling:
The law presumes a contractor to be a labor-only contractor and the employees are not expected
to prove the negative fact that the contractor is a labor-only contractor. Thus, to overcome this
presumption, Petron has the burden of proving and must establish that ABC is not a labor-only contractor
but a legitimate independent contractor.

Under the law and jurisprudence, a contractor is deemed to be a labor-only contractor if the
following elements are present: (i) the contractor does not have substantial capital or investment to
actually perform the job, work or service under its own account and responsibility; and (ii) the employees
recruited, supplied or placed by such contractor are performing activities which are directly related to the
main business of the principal.

In this case, Petron failed to show that ABC had substantial capital or investment and that
respondents were performing activities which were not directly related to Petron’s principal business. The
documentary evidence presented by Petron were not conclusive evidence of ABC’s financial capacity to
operate and perform their business independently, including the performance bond posted by ABC. It
was also shown that ABC does not own basic tools, equipment and machineries, and work premises
needed to carry out their worker’s job. Moreover, the Court found that the work rendered by the
respondents were directly related or necessary and desirable to the main business of Petron for they are
vital as they are in the manufacture and distribution of petroleum products. Petron’s power of control
over the work of the respondents was also found by the Court through its supervision over their work in
handling LPG products.

Therefore, considering Petron’s failure to overcome the presumption, the Court declared ABC as
a mere labor-only contractor and in finding that a contractor is a ‘labor-only’ contractor, it is equivalent
that there is an employer-employee relationship between the principal and the employees of the
supposed contractor, and the ‘labor-only’ contractor is considered as a mere agent of the principal, the
real employer. Accordingly in this case, Petron is declared to be the true employer of respondents who
are considered regular employees in view of the fact that they have been regularly performing activities
which are necessary and desirable to the usual business of Petron for a number of years.