Manila Water Co. vs. Peña, et al.

,
G.R. No. 158255, July 8, 2004

Facts:

When MWSS contracted with Manila Water Co. to manage the water distribution system in Metro
Manila East Zone, the MWC absorbed some MWSS employees. But 121 contractual collectors of
MWSS were not absorbed but retained on contractual basis only. A few months later these
collectors formed the Association Collectors Group, Inc., (ACGI) which MWC contracted to collect
water charges. When the contract was terminated after fourteen months, the collectors filed a
complaint of illegal dismissal against MWC which, for its part, argued that the employer was
ACGI, not MWC.

Issue: Is ACGI a legitimate contractor?

Rulings:

No, it is not a job contractor. It is a labor-only contractor and the collectors have remained
employees of MWC because the latter has not relinquished control over them. The court noted
that, first, ACGI had no substantial capital in investment in tools, equipment, etc. to qualify as an
independent contractor; secondly, the work was directly related to the principal business or
operation of MWC; lastly, ACGI did not carry on an independent business or undertake the
performance of its service contract according to its own manner and method, free from MWC’s
control and supervision. MWC continued to issue memoranda on billing methods and distribution
of books to the collectors; it required the workers to report daily and MWC monitored strictly their
attendance. Although ACGI would ultimately discipline the erring workers, MWC would dictate
what penalty to impose. Considering the facts, the court concluded that ACGI was not an
independent contractor.