Republic of the Philippines

Department Of Labor and Employment

NATIONAL LABOR RELATIONS COMMISSION
Quezon City

______ DIVISION

DENNIS A. COMMANDANTE,
Complainants- Appellees

NLRC LAC Case No. _____________

(NLRC CASE NO. 03-04616-18)

STARBOARD MANPOWER SERVICES

INC., MANUEL GOROBAT JR./
MICHELLE TAN,
Respondents- Appellant

x--------------------------------------------x

MEMORANDUM APPEAL

COMES NOW the RESPONDENTS-APPELLANT, STARBOARD MANPOWER

SERVICES, INC., through the undersigned counsel and unto this Honorable
Commission most respectfully files this Memorandum Appeal from the Decision
dated 28 December 2018, received by respondent-appellant on 02 April 2019, and
avers:

PREFATORY STATEMENT

This was an action filed by complainants-appellees against, among others,

respondent-appellant STARBOARD MANPOWER SERVICES, INC. [“STARBOARD”
for brevity] for illegal dismissal with claims for non-payment of 13th month pay;
SIL, Separation pay, moral and exemplary damages, and attorney’s fees.

On 28 December 2019, the Hon. Labor Arbiter ZOSIMA C. LAMEYRA, rendered a

decision declaring that complainants-appellees was illegally dismissed by
Starboard and is adjudged by the Hon. Labor Arbiter to pay full backwages,
separation pay, Service incentive leave, and his salary for the period 01-09
December 2017.
 Aggrieved from the foregoing judgement and monetary award of of
backwages and separation pay, respondent-appellants Starboard is now
constrained to appeal the aforesaid decision dated 28 December 2018, as to the
findings of alleged “illegal” dismissal and award of separation pay in lieu of
reinstatement and backwages. Hence, this Appeal.

BRIEF STATEMENT OF FACTS

Respondent-appellant Starboard is an independent contractor duly

incorporated with the Securities and Exchange Commission and registered with
the Department of Labor and Employment under Department Order 174, series of
2017, providing manpower services to its clientele. [Please refer to Annexes “A to
E”, Starboard’s Position Paper]

During the course of its operations, Candy Maker Inc. [“CMI” for brevity]
decided to contract with Starboard to deliver manpower services to augment the
manpower requirements of its business. As such, Service Agreement was entered
into by and between Starboard and CMI. Thereafter, herein complainants-
appellees was deployed by Starboard to the premises of CMI as
coordinator/supervisor to act as the representative of respondent-appellant
Starboard whose primary functions are to submit daily, weekly, and monthly
reports, monitor the DTR records of the employees and evaluate their
performance.

On November 11, 2017, a notice to explain was issued to complainants-

appellees regarding his alleged Negligence/Failure or disobeying to carry-out,
comply official orders and terminating SMSI employee without due process and
approval from the management. [Please refer to Annex “G”, Ibid.]

The notice to explain was rooted on the incident occured wherein an

employe of respondent-appellant named Armando Aguirre deployed as machine
operator in the premises of CMI, got a failing grade in evaluation due to his poor
performance, attitude and attendance. Immediately after the the result of the
evaluation was released, the complainant-appellees informed Aguirre to report
directly in respondent-appellant’s office as it was Management already who will
decide under which client he will be transferred, considering that The Candy
Maker Inc. does not want his services anymore. [Please refer to Paragraph 11,
Complainants-appellees’s Position Paper].

Aguirre instead of reporting to office of respondent-appellant’s office, as

what he instructed to do, Aguirre went directly to the Department of Labor and
Employment (DOLE) and filed a labor complaint against respondent-appellant.
[Please refer to paragraph 12, Ibid.]

Thereafter, respondent-appellant received a summons from DOLE

regarding the labor case filed by Aguire, respondent-appellant was directed to pay
Aguirre the amount of Seven Thousand Pesos (Php7,000.00), which was later
reduced to Three Thousand Five Hundred Pesos (Php3,500.00), as damages for
placing the latter under floating status.

The November 2017 memorandum issued to complainant-appellees was

based on the abovementioned labor case complaint filed by Aguirre and
complainant-appellees was instructed to explain his side on the alleged violation
of termination, the complainant-appellees did not make his written explanation
despite the fact that he is duly notified, the notice to explain was handed to him
personally by Starboard representative Mr. Rene Padual but complainant-
appellees refused to sign and acknowledged his memorandum notice to explain.
[Please refer to Paragraph 15, Complainant-appellees’s Position Paper]

Complainant-appellant’s only explanation was when he explained to

Michelle Tan Assistant Vice President of Starboard that he never terminated
Aguirre’s employment since he has no right and authority to do so him being a
mere employee. The instruction he gave to Aguirre then was to report to
respondent-appellant’s office for proper action after receiving a failing grade in
performance evaluation. [Please refer to Paragraph 14, Complainant-appellees’s
Position Paper]

On 20 November 2017, nine days after the issuance of 11 November 2017

notice to explain memorandum, complainant-still failed to provide his written
explanation regarding the alleged termination issue, hence, waived his right for
the oppurtunity to be heard and accepts all allegations against him as true and
accurate. Complainants-appellees’ only contention is that he never terminated
Aguirre’s employment because he has no right and authority to do so,
respondent-appellant was not convinced of his reason and gave more credit to
the complaint filed by Aguirre to DOLE that he was terminated by the
complainant-appellees.

On the same date, respondent-appellant issued to complainant-appellees a

notice of termination due to loss of trust and confidence as the area
supervisor/coordinator in charge with the proper administration and care of
employees in his area. [Please refer to Annex “H’, Complainant-appellees’s
Position Paper]

ISSUES

The issue upon which this Honorable Commission is called for to resolve
devolves upon the following, viz:

1. Serious errors in the findings of facts where committed by the Hon. Labor
Arbiter which if not corrected would result in a grave injustice to the rights and
interest of the respondent-appellant Starboard Manpower Service, Inc.
2. The Hon. Labor Arbiter seriously erred in finding that subject complainants-
appellees were labor-only contractor.

3. The Hon. Labor Arbiter seriously erred in awarding subject complainants-

appellees, separation pay, backwages and attorney’s fees.

ARGUMENTS

RESPONDENT-APPELLANT WERE NOT

ENGAGED IN PROHIBITED LABOR-
ONLY CONTRACTING

The Hon. Labor Arbiter finds that Starboard is deemed to be a labor-

contractor for the following reasons:

First. Starboard’s DOLE Certificate of Registration does not preclude

a finding that it is a labor-only contractor.

Second. There was no credible and substantial evidence that

Starboard has existing service agreements with other similar clients.
The Billing Statement with Kuya J to prove that Starboard has other
clients that is unverified and unauthenticated deserves scant
consideration. In turn, there is a clear manifestation that Starboard
was established to solely cater to respondent Jentec and none other.

Third. Complainants’ jobs as “Item Handler is usually necessary or

desirable to Jentec’s business. The work of complainant as Item
Handler could only be characterized as part of, or at least clearly
related to, and in the pursuit of, Jentec’s business. Hence, when
complainant was assigned by Starboard to Jentec, respondent
Starboard acted merely as a labor-only contractor.

Fourth. Jentec exercised control and supervision over the

complainant because they determined the means and methods on
how to meet the end result. Such allegation by complainant was not
rebutted by the respondents. Neither did they present any counter
veiling evidence to disprove the same. Hence, this office is inclined to
give credence to such averment of the complainant. Except for the
payment of wages, Starboard has no participation at all with the
work being performed by the complainant. Complainant performed
his job alongside regular employees of Jentec using the tools,
machineries and equipments inside Jentec’s premises.
 Fifth. The stipulations in the Service Agreement that Starboard is an
independent contractor and there is no employer-employee
relationship between Jentec and Starboard’s personnel and that
Starboard is the direct employer of the personnel assigned to Jentec
are not conclusive to establish an employer-employee relationship
between the complainant and Starboard. Jentec cannot place
reliance on the contracts it entered into with Starboard since these
are not determinative of the true nature of the parties’relationship.

Sixth. Starboard’s status as a labor-only contractor is made evident

in their Service Agreement wherein Starboard agreed to assign
personnel in Jentec’s workplace who will naturally comply with
Jentec’s policies, rules and regulations and will be subjected to on-
the spot search by Jentec’s duly authorized guards or security men
on duty every time the assigned personnels enters and leaves
Jentec’s workplace during the entire duration of the agreement.

Seventh. As a general rule, a contractor is presumed to be a labor-

only contractor, unless such contractor overcomes the burden of
proving that it has the substantial capital, investment, tools, and the
like. In this case, Starboard failed to establish that it is a legitimate
contractor as contemplated under the Labor Code. What is apparent
is the fact that Starboard has no substantial capitalization or
investment in the form of tools, equipments, and machineries to
consider it as an independent contractor.

From the foregoing premises made by the Hon. Labor Arbiter a quo,
respondent-appelant respectfully submits its humble disagreement.

Contrary to the first finding made by Hon. Labor Arbiter, Respondent-

appellant respectfully maintain that it is a legitimate contractor because it is
registered with the Department of Labor and Employment as shown by the copy
of its registration certificate under Department Order 174 valid until March 26,
2020 attached herewith as Annex “2”, Registration with DOLE is a concrete proof
that Starboard is a legitimate contractor. In the case of Leo V. Mago vs. Sunpower
Manufacturing, Inc. G.R. No. 210961, January 24, 2018, the Court held that the
contractor is a legitimate and independent contractor given the fact that it is
registered with DOLE. The court ruled that:

“x x x the DOLE certificate of Registration issued in favor of Jobcrest is

presumed to have been issued in the regular performance of official duty. In other
words, the DOLE officer who issued the certificate in favor of Jobcrest is presumed,
unless proven otherwise, to have evaluated the application for registration in
accordance with the applicalble rules and regulations. The practitioners must
overcome the presumption of regularity accorded to the official act of DOLE,
which is no less than the agency primarily tasked with the regulation of job
contracting.”

The Hon. Labor Arbiter’s second finding is that respondent-appellant has no

credible and substantial service agreements with other similar clients and that
there is a clear manifestation that Starboard was established to solely cater to
respondent Jentec and none other. We humbly disagree, as can be gleaned from
the attached notarized copy of Service Agreements of its clients within Clark area
namely Aderans Philippines Inc., Hong Cheon Food Corporation, All Vision
Business Enterprises, and Avanti marked herein as Annex “3” to “6” respectively.
It is clearly established that contrary to the Hon. Labor Arbiter’s finding,
respondent-appellant is not established to solely cater to respondent Jentec but
to numerous clients within the area of North Luzon.

It must be noted that requiring the deployed employees to perform jobs

that are similar to those of regular employees is prohibited under the rules only if
certain conditions are present, such as, the outsourcing of jobs is resorted to in
order to take undue advantage of the economic situation or lack of bargaining
strength of the contractual employees, or to undermine their security of tenure or
basic rights, or circumvent the provisions of regular employment.

The foregoing situations which are sought to be addressed by the

prohibition do not exist in the case of repondent-appellant employees who enjoy
all the rights and benefits of regular employment. Hence, there is no
circumvention of their right to security of tenure or denial of basic labor rights
when they were assigned to perform the services farmed out to respondent-
appellant. In the case of San Miguel Corp. Employees Union-PTGWO v. Hon. Jesus
G. Bersamina, 18 SCRA 110, “the right of employer to exercise an inherent
management prerogative and its best business judgement to determine whether
it should contract out the performance of some of its work to independent
contractors.”

Noted also that the exercise of management prerogative was upheld as

legitimate “ so long as the company’s management prerogatives are execised in
good faith for the advancement of the employer’s interest and not for the
purpose of defeating or circumventing the rights of the employees under special
laws or under valid agreements” (LVN Pictures workers v. LVN, 35 SCRA 634; Phil
American Embroiders v. Embroidery and Garment Workers, 26 SCRA 634; Phil.
Refining co. v. Garcia, 18 SCRA 110.)

It must be noted further that “except as limited by special laws, an

employer is free to regulate, according to its own discretion and judgment, all
aspects of employment, including hiring, work assignment, working methods,
time, place and manner of work, tools to be used, processes to be followed,
supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal and recall of workers
(NLU v. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank v. CIR, 21 CRA
226, 235)

In the fourth finding of the Hon. Labor Arbiter, his finding of violation of
power of control was based on the allegations of the complainant that was not
rebutted by the respondent-appellant, the reason why it is not rebutted is that
the finding is based only on bare allegations of the complainant and without any
concrete evidence on record or sworn statements to back up his claims. This
contention is not factual there being no credible information or facts to support
the allegation of power of control or existence of employer-employee relationship
between Jentec and respondent-appellant’s employees, the same should be
thrown out for being unfounded.

As a matter of fact, to clearly show that the respondent-appellant has the

right to wield the power of control, there is a stationary supervisor deployed by
respondent-appellant to the premises of Jentec Tarlac to whose primary duty is to
supervise the means and methods how to conduct the work of deployed
employees . In this connection, respondent-appellant submits copies of the
employment contract, job description, route sheet and attendance sheet
attached and marked herewith as annexes “10” to “12” of its stationary
coordinator in charge of the deployed employees in the premises of Jentec Tarlac

We humbly disagree on the findings that respondent-appellants employees

work alongside regular employees of Jentec constitute labor-only contracting. The
strict and literal interpretation of Section 6 (f) of D.O. 174 on contracting out of
regular functions will make an impression that as long as the functions are
currently being performed by regular employees, they can no longer be
outsourced to contractors regardless of the good faith of the company and the
presence of any business exigencies that may justify one’s resort to contracting.

This interpretation will contradict the Supreme Court’s ruling in De Ocampo

v. National Labor Relations Commission,
This Court upheld the termination of employment of three mechanics
in a transportation company and their replacement by a company rendering
maintenance and repair services. It held:

In contracting the services of Gemac Machineries, as part of the companys

cost-saving program, the services rendered by the mechanics became
redundant and superfluous, and therefore properly terminable. The
company merely exercised its business judgment or management
prerogative. And in the absence of any proof that the management abused
its discretion or acted in a malicious or arbitrary manner, the court will not
interfere with the exercise of such prerogative.
 In Asian Alcohol Corporation v. National Labor Relations Commission,

The Court likewise upheld the termination of employment of water

pump tenders and their replacement by independent contractors. It ruled
that an employers good faith in implementing a redundancy program is not
necessarily put in doubt by the availment of the services of an independent
contractor to replace the services of the terminated employees to promote
economy and efficiency.

These cases tells us that it is a valid exercise of management prerogative to

avail the services of an independent contractor to promote economy and
efficiency in the business regardless of whether the activity to be contracted out
is directly related to the main line of business of the Principal or same functions as
the regular employees of the Principal. A contractor may still be deemed
legitimate and not labor-only contractor if it has substantial capitalization and
exercise control over its employees, which in this case has clearly been complied
by respondent-appelant.

The amended articles of respondent-appellant indicating that its

capitalization was increased to P3,000,000.00 was released by Securities and
Exchange Commission on year 2012. As can be gleaned in the Audited Financial
Statement for the year end 2017 and General Information Sheet for year 2019
attached and marked herein as annexes “7” to “8”, respondent-appellant has
increased its paid-up capital to P7,500,900 starting from the year 2017 which is
also the year when it renew its registration from DO 18-A to DO 1, indicating
clearly that it is more than sufficiently capitalized and is an independent
contractor.

As earlier stated, respondent-appellant has consistently exercised direct

supervision and control over its workers and employees, including complainants
herein. The existence of respondent-appellant Supervisors and team leaders at
Jentec’s premises, the payment of wages by respondent Starboard, as well as the
fact that respondent Starboard is responsible for assigning or re-assigning its
manpower personnel from one company to another clearly shows that it
exercises the power of control and supervision over its employees. Furthermore,
Jentec is not involved in disciplining of any of repondent respondent-appellant’s
employees. Any concern or problem encountered by jentec is coursed through
respondent Starboard’s owner, management, supervisors or representatives.

Thus it is clear from the foregoing that respondent-appellant carries on an

independent business as a legitimate job contractor.

A contractor is said to be engaged in labor-only contracting if it does not

have substantial capitalization or investment in the form of tools, equipment,
machinery and the like.
 In Neri v. NLRC G.R. Nos. 97008-09, 23 July 1993, the Supreme Court has
ruled that “the law does not require both substantial capital and investment in
the form of tools, machineries, etc. This is clear from the use of conjunction “or.”
If the intention was to require the contractor to prove that he has both capital
and the requisite investment, the conjunction “and” should have been used.” In
the said case, the contractor proved that it has P1 million capitalization and
therefore, it was considered as “a highly capitalized venture and cannot be
deemed engaged in labor only contracting.”

In the present case, respondent-appellant has more than sufficient

capitalization to be considered as substantial for purposes of being recognized as
an independent and legitimate contractor. It has adequate investment in the form
of tools and equipment that are necessary in the performance of its obligations to
the company under their contract for services [Please refer to Annexes “2 to 3”,
Starboard Rejoinder Paper]. Respondent Starboard has satisfactorily shown that
it has subtantial capital and investment through its and Audited Financial
Statement and General Information Sheet, it is shown that it has an authorized
capital stock of Seventy-Five Million Pesos (Php75,000,000.00), which is more
than sufficient proof of its substantial capitalization.

In sum, it is respectfully submitted that the Honorable Labor Arbiter a quo,

with due respect, gravely erred in declaring that the respondent-appellant were
declared a labor-only contractor, and awarding herein complainant separation
pay in lieu of reinstatement, backwages, and attorney’s fees which are contrary to
the facts and law.

APPEAL BOND

For purposes of this appeal, respondent-appellant is positing the required

bond equivalent to the total award of TWO HUNDRED SIXTEEN THOUSAND NINE
HUNDRED FIFTY THREE PESOS AND FORTY TWO CENTAVOS (P216,953.42), in the
form of a surety bond covering the whole judgment award as shown by Visayan
Surety Bond attached herewith as Annex “9”, together with the
originals/certified true copies of the following documents attached to the said
Surety Bond, viz: [1] Joint-Declaration under Oath by respondent-appellant, its
counsel and bonding company attesting that the bond posted is genuine and shall
be in effect until final disposition of the case, [2] Indemnity Agreement between
employer-appellant and bonding company, [3] Proof of Security Deposit or
Collateral securing the bond, [4] Certificate of Authority from the Insurance
Commission, [5] Certificate of Registration from the Securities and Exchange
Commission, [6] Notarized Board Resolution or Secretary’s Certificate from the
Supreme Court, and [7] Notarized Board Resolution or Secretary’s Certificate from
the bonding company showing its authorized signatures and their specimen
signatures.
 PRAYER

WHEREFORE, premises considered, it is respectfully and earnestly prayed

of this Honorable Office that after due consideration, a Decision be rendered
SETTING ASIDE the Decision dated 27 February 2019, by altogether declaring the
DISMISSAL of the above-entitled cases against respondent-appellant STARBOARD
MANPOWER SERVICES, INC., for utter lack of merit.

Other reliefs and remedies available under the premises are equally being
prayed for.

March 29, 2019, City of Parañaque, Philippines.

BRENDA PAMINTUAN
for the Respondent-Appellant
STARBOARD MANPOWER SERVICES, INC.
32A BUSINESS PARK PHILEXCEL CLARK
PAMPANGGA

The undersigned is authorized by the respondent-appellant company thru

attached secretary certificate herein due to lack of available counsel to sign the
appeal memorandum at the time of the filing of this appeal memorandum.

VERIFICATION / CERTIFICATION

I, BRENDA PAMINTUAN., of legal age, Filipino, after having been sworn to in

accordance with law, hereby depose and say – That:

1. I am the duly representative of Starboard Manpower Services Inc., the

respondent-appellant in the above-entitled case.

2. I have been authorized to cause, as I have caused, the preparation and

filing of ths Memorandum Appeal on behalf of respondent Company.
3. I have read and understood the contents of the foregoing Position Paper
and I attest the allegations therein are true and correct of my personal knowledge
and/or based on authentic documents.

4. I have not commenced any other complaint, action or proceeding involving

the same issue/s in any other Court, Tribunal or Agency, and that to the best of
my knowledge, no such complaint, action or proceeding is pending in any other
Court, Tribunal or Agency; and

5. If I should learn that a similar action or proceeding has been filed or is

pending before any other Court, Tribunal or Agency, I will notify the Honorable
Court within Five (5) days thereof.

IN WITNESS WHEREOF, I have hereunto set my hand and affix my signature

this 2nd day of April 2019, in City of _______________ Philippines.

BRENDA PAMINTUAN
Affiant

SUBSRIBED AND SWORN TO before me on this ___ day of ________ 2019, in

_____________, Philippines, affiant exhibiting to me his/her TIN
_____________________.

Notary Public

Doc. No. ___________

Page No. ___________
Book No. ___________
Series of ___________.

EXPLANATION

A copy of the foregoing MEMORANDUM OF APPEAL was sent to the

complainants-appellees and their representative, by way of registered mail, due
to time constraint, distance and lack of personnel to serve it personally. A copy
hereof, was however, personally served upon this Honorable Commission.

BRENDA PAMINTUAN

Cc:
MR. JOHN CARLO D. CASTRO
Suizo Red Cross Village,
2301 Tarlac City