PCI Automation Center, Inc. v. NLRC

G.R. No. 115920 (January 29, 1996)

PCI Automation Center's appeal on Hector Santelices' dismissal ruled joint liability with Prime Manpower.

Facts:

In 1985, the Philippine Commercial International Bank (PCIB) initiated its 4th GL Environment Conversion Project, aimed at integrating its computer systems across various branches. To facilitate this, PCIB entered into a Computer Services Agreement with PCI Automation Center, Inc. (PCI-AC), which was responsible for overseeing the development of the necessary software and systems. As part of this arrangement, PCIB engaged Prime Manpower Resources Development, Inc. (Prime) to supply personnel, including data encoders and computer attendants.

On September 20, 1985, Hector Santelices was hired by Prime and assigned to PCI-AC as a data encoder for the project. However, on March 18, 1991, Prime terminated Santelices' services, citing that his position was no longer needed. In response, Santelices filed a complaint for illegal dismissal against both Prime and PCI-AC before the National Labor Relations Commission (NLRC).

The Labor Arbiter ruled in favor of Santelices, declaring his dismissal illegal and ordering his reinstatement or, alternatively, the payment of separation pay. The Arbiter also awarded back wages, moral damages, exemplary damages, and attorney's fees. Prime and PCI-AC appealed the decision to the NLRC, which affirmed the Arbiter's ruling but removed the awards for moral and exemplary damages and attorney's fees.

During the appeal, Prime paid Santelices a portion of his separation pay, and he waived his right to reinstatement. PCI-AC subsequently filed a petition for certiorari, arguing that the NLRC had acted with grave abuse of discretion by disregarding evidence that Santelices was not illegally dismissed.

Legal Issues:

  1. Was Santelices' dismissal illegal, and did the NLRC err in affirming the Labor Arbiter's decision?
  2. Should PCI-AC be held solidarily liable for the monetary claims of Santelices, given the nature of the employment relationship?

Arguments:

  • Petitioner (PCI-AC): PCI-AC contended that Santelices was a project employee whose services were validly terminated upon the completion of the project phase he was assigned to. They argued that the project was completed on March 15, 1991, and thus, there was no basis for his continued employment. PCI-AC also claimed that it was not Santelices' employer, as he was employed by Prime, and therefore should not be held liable for his claims.

  • Respondent (Santelices and NLRC): Santelices maintained that his dismissal was illegal, as the project for which he was hired was still ongoing at the time of his termination. The NLRC supported this view, emphasizing that the evidence presented showed that the project was not completed, and thus, there was no valid ground for his dismissal. Furthermore, the NLRC argued that PCI-AC, as the principal employer, was solidarily liable for the claims of Santelices due to the nature of the contracting arrangement.

Court's Decision and Legal Reasoning:

The Supreme Court dismissed PCI-AC's petition, affirming the NLRC's decision. The Court found that the evidence supported the NLRC's conclusion that Santelices' dismissal was illegal, as the project was still ongoing at the time of his termination. The testimony of a key witness indicated that the work assigned to Santelices was still in progress, contradicting PCI-AC's claim of project completion.

Regarding the issue of liability, the Court ruled that PCI-AC was solidarily liable with Prime for Santelices' claims. The Court clarified that under Article 106 of the Labor Code, a principal employer is responsible for the employees of a contractor if the contractor fails to pay wages. The Court determined that Prime was a labor-only contractor, as it merely supplied personnel to PCI-AC without substantial capital or investment in the project. Consequently, PCI-AC was deemed to have an employer-employee relationship with Santelices, making it liable for his claims.

Significant Legal Principles Established:

  1. Illegal Dismissal: The Court reaffirmed that an employee's dismissal is illegal if there is no valid ground for termination, particularly when the project for which the employee was hired is still ongoing.

  2. Solidary Liability of Principal Employers: The ruling emphasized the principle that a principal employer can be held solidarily liable for the claims of employees supplied by a labor contractor, especially when the contractor is deemed a labor-only contractor.

  3. Distinction Between Job Contracting and Labor-Only Contracting: The decision clarified the legal distinctions between legitimate job contracting and labor-only contracting, with implications for the employer-employee relationship and liability for employee claims.