Philippine Fuji Xerox Corp. v. NLRC

G.R. No. 111501 (March 5, 1996)

Pedro Garado was deemed an employee of Fuji Xerox, illegally dismissed, per Supreme Court ruling.

Facts:

Petitioner Philippine Fuji Xerox Corporation (Fuji Xerox) entered into an agreement with Skillpower, Inc. on May 6, 1977, wherein Skillpower, Inc. was to supply workers to operate copier machines as part of Fuji Xerox's "Xerox Copier Project." Private respondent Pedro Garado was assigned as a key operator at Fuji Xerox's branch in Buendia, Makati, Metro Manila, starting in February 1980.

In February 1983, Garado went on leave, and upon his return in March, he discovered a spoilage of over 600 copies. Concerned about potential blame for the spoilage, he attempted to persuade a service technician to stop the machine's meter, which led to Fuji Xerox reporting the incident to Skillpower, Inc. Subsequently, Skillpower, Inc. suspended Garado and requested an explanation.

Garado filed a complaint for illegal dismissal. The Labor Arbiter ruled that Garado was an employee of Skillpower, Inc., not Fuji Xerox, and dismissed the complaint. The Arbiter noted that Garado had applied for work with Skillpower, received salaries from Fuji Xerox, and that Skillpower exercised control over his work.

On appeal, the National Labor Relations Commission (NLRC) reversed the Arbiter's decision, finding Garado to be an employee of Fuji Xerox and ruling that his dismissal was illegal. The NLRC concluded that Skillpower, Inc. acted merely as a labor-only contractor and that Garado was under the control and supervision of Fuji Xerox.

Legal Issues:

The primary legal issue was whether Pedro Garado was an employee of Fuji Xerox or Skillpower, Inc. The resolution of this issue would determine the legality of Garado's dismissal and the corresponding obligations of Fuji Xerox regarding his employment status.

Arguments:

Petitioners' Arguments (Fuji Xerox):

  1. Garado was recruited by Skillpower, Inc. and was its employee.
  2. The work performed by Garado was not essential to Fuji Xerox's business operations.
  3. Garado's salaries and benefits were paid by Skillpower, Inc.
  4. Skillpower, Inc. exercised control over Garado's work.
  5. Skillpower, Inc. was a highly-capitalized independent contractor.

Respondents' Arguments (Garado and NLRC):

  1. Garado had been exclusively assigned to Fuji Xerox since 1980 and was effectively under its control.
  2. The Xerox Copier Project, while not directly profit-generating, was integral to Fuji Xerox's business image and operations.
  3. The disciplinary actions taken against Garado were initiated by Fuji Xerox, indicating its control over the employment relationship.
  4. Skillpower, Inc. was a labor-only contractor, and Garado should be considered a direct employee of Fuji Xerox.

Court's Decision and Legal Reasoning:

The Supreme Court upheld the NLRC's decision, affirming that Garado was indeed an employee of Fuji Xerox. The Court reasoned that:

  1. Control and Supervision: The nature of the employment relationship is determined by the degree of control exercised by the employer. The Court found that Fuji Xerox exercised significant control over Garado's work, despite the contractual arrangement with Skillpower, Inc.

  2. Labor-Only Contracting: The Court emphasized that Skillpower, Inc. was a labor-only contractor as it did not have substantial capital or investment in the tools necessary for the work performed. The services provided by Garado were directly related to Fuji Xerox's business, which negated Skillpower's claim of being an independent contractor.

  3. Security of Tenure: The Court highlighted the importance of security of tenure for employees, stating that the arrangement between Fuji Xerox and Skillpower, Inc. was a means to circumvent labor laws designed to protect workers' rights.

  4. Nature of Work: The Court rejected the argument that the work performed by Garado was not essential to Fuji Xerox's business, noting that the Xerox Copier Project contributed to the company's reputation and customer relations.

The Court ultimately dismissed Fuji Xerox's petition for certiorari, affirming the NLRC's order for Garado's reinstatement and back wages.

Significant Legal Principles Established:

  1. The determination of an employer-employee relationship is based on the control exercised over the worker, regardless of contractual labels.
  2. Labor-only contracting is prohibited when the contractor does not have substantial capital or investment in the tools necessary for the work performed.
  3. Employers cannot evade their responsibilities to employees by using third-party contractors to supply labor for work integral to their business operations.