The Supreme Court (SC) has ordered the regularization of employees of PLDT engaged in installation, repair, and maintenance services of PLDT lines.
In a decision penned by associate justice Rodil V. Zalameda, the SC’s First Division dismissed the consolidated petitions for review on certiorari filed by Manggagawa sa Komunikasyon ng Pilipinas, PLDT, and Silvestre Bello Ill, in his capacity as then secretary of the Department of Labor and Employment (DOLE).
The petitions assailed the rulings the Court of Appeals (CA) affirming, with substantial modifications, the resolutions issued by Bello finding labor violations by PLDT and its contractor.
PLDT, a corporation engaged in the telecommunications business, engaged the services of several contractors and sub-contractors to provide services in various areas or phases of its operations.
Following a “Special Assessment and Visit of Establishment” conducted by DOLE in PLDT, a report by the DOLE Assessment Team found, among others, that PLDT and its contractors engaged in labor-only contracting.
Based on a finding of control exercised by PLDT, it was recommended that PLDT should regularize contractual employees performing jobs that are directly related to their business.
PLDT was also declared solidarily liable with the contractors to pay the unpaid monetary benefits of the contractors’ workers.
Bello thus ordered the following:
- 7,416 workers of the contractors that were declared as labor-only contractors were deemed as regular employees of PLDT from the time of their initial deployment. PLDT was to include them in its payroll of regular employees.
- The registration of the declared labor-only contractors was to be cancelled after the conduct of cancellation proceedings.
- Contractors and PLDT were to solidarily pay the unpaid monetary benefits of the contractual employees amounting to P66,348,369.68.
- Contractors that were able to show proof of compliance with Department Order (DO) No. 18-A implementing Articles 106 to 109 of the Labor Code were declared as legitimate contractors.
- Contractors who were able to show sufficient proof of full or partial payment of the unpaid monetary benefits of their workers had their monetary liability either deleted or reduced.
Bello subsequently issued another resolution reducing PLDT’s and the contractors’ total monetary liability to P51,801,729.80. The number of employees regularized was also reduced to 7,344.
On appeal to the CA, the CA upheld the jurisdiction of the DOLE-National Capital Region Regional Director and Bello to determine the existence of employer-employee relationship, which, according to the CA, is a condition sine qua non in the exercise of their visitorial and enforcement power.
The CA also agreed with Bello’s ruling to prohibit PLDT from contracting out activities, services, jobs, or functions that are usually necessary and desirable in the usual course of its business.
The CA held that individuals deployed by contractors performing installation, repair, and maintenance services of PLDT lines should be considered regular employees of PLDT.
The appellate court, however, reversed Bello’s ruling on the regularization of the following groups of workers of the contractors:
- Those performing janitorial, maintenance, security, and messengerial services;
- Medical services provider of PLDT;
- Individuals who render professional services;
- Contractual workers engaged in information technology-based services; and
- Employees engaged in sales who are paid on commission basis.
In affirming the rulings of the CA, the SC clarified that labor contracting is not per se illegal, following Article 106 of the Labor Code expressly allowing an employer to engage in legitimate labor contracting, which the DOLE implements through DO 18-A and DO 174-2017.
An employer is not necessarily engaged in labor-only contracting whenever it farms out specific jobs, works, or services, stressed the court.
Reiterating its 2010 ruling in Aliviado v. Procter & Gamble Phils, Inc. the SC held that it is management prerogative to farm out any of its activities, regardless of whether such activity is peripheral or core in nature.
For such outsourcing to be valid, it must be made to an independent contractor because the current labor rules expressly prohibit labor-only contracting.
There is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a principal and any of the following elements are present:
- The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or
- The contractor does not exercise the right to control over the performance of the work of the contractual employee.
Thus, the fact that PLDT had contracted out specific jobs, works, or services does not automatically mean that the contractors’ employees are the direct employees of PLDT.
However, the SC found that the employees engaged in installation, repair, and maintenance services of PLDT lines are performing work directly related to PLDT’s telecommunication business.
Under Article 295 of the Labor Code, what determines regular employment is the reasonable connection between work performed by the employee and the usual business or trade of the employer.
“It cannot be denied that without the work performed by these employees, PLDT would not be able to carry-on its business and deliver the services it promised its consumers,” the SC ruled.
As the regularization of these employees entails factual consequences that cannot be determined by the court, the case was remanded to the regional director for proper identification, review, and determination of the factual issues.
The SC also remanded to the regional director the correct computation of monetary awards arising from the solidary liability of PLDT and the contractor.
The regional director was thus ordered to:
- Review and properly determine the effects of the regularization of the workers performing installation, repair, and maintenance services;
- Review, compute, and properly determine, the monetary award on the labor standards violation, to which petitioner PLDT, and the concerned contractors are solidarily liable; and
- To conduct further appropriate proceedings, consistent with the decision.
