Shoppers Gain Supermart v. NLRC

G.R. No. 110731 (July 26, 1996)

Shoppers Gain Supermart must provide benefits for unlawfully terminated employees, SC rules.

Facts:

The case involves 34 private respondents who were employed in various capacities at Shoppers Gain Supermart (SGS) from 1982 to 1990. They were hired through three manpower agencies under "labor only" contracts. In December 1990, due to the non-renewal of its lease, SGS terminated its contracts with these agencies and applied for business retirement. While SGS paid separation benefits to its regular employees, it did not provide any benefits to the private respondents, asserting that no employer-employee relationship existed between them.

The private respondents filed a complaint for illegal dismissal. The labor arbiter ruled in their favor, finding that SGS was guilty of labor-only contracting and that an employer-employee relationship existed. The arbiter ordered SGS and the manpower agencies to pay the respondents back wages, separation pay, underpayment of wages, and attorney's fees. The National Labor Relations Commission (NLRC) affirmed the labor arbiter's decision with modifications.

Legal Issues:

  1. Whether an employer-employee relationship existed between SGS and the private respondents.
  2. Whether the private respondents were illegally dismissed.
  3. Whether the NLRC erred in affirming that Pablito Esmas was not paid his separation pay.
  4. Whether the NLRC erred in holding SGS liable for back wages, separation pay, underpayment, and attorney's fees.
  5. Whether the individual petitioners (James Tan, Jerry Tan, and Jack Tan) could be held jointly and severally liable with SGS for the monetary obligations.

Arguments:

  • Petitioners' Arguments:

    • SGS contended that the private respondents were employees of the manpower agencies, which had control over their hiring, payment, and discipline. They argued that the existence of an employer-employee relationship should be determined by the four elements of employment: selection and engagement, payment of wages, power of dismissal, and control over conduct.
    • They cited the case of Singer Sewing Machine Company vs. Drilon, arguing that the nature of the work performed does not automatically establish an employment relationship.

  • Respondents' Arguments:

    • The private respondents argued that the manpower agencies were "labor only" contractors, which meant that SGS was their direct employer. They pointed out that their work was integral to SGS's operations and that they had been under the control and supervision of SGS.
    • They emphasized that the labor arbiter's findings were supported by law, particularly Articles 106 and 107 of the Labor Code, which define labor-only contracting and the responsibilities of employers.

Court's Decision and Legal Reasoning:

The Supreme Court upheld the NLRC's decision, affirming the existence of an employer-employee relationship between SGS and the private respondents. The Court reasoned that the manpower agencies acted merely as agents of SGS, which had direct control over the respondents' work. The Court emphasized that the nature of the work performed by the respondents was essential to SGS's business operations, and their long-term employment indicated a regular employment status.

The Court also addressed the issue of illegal dismissal, noting that while SGS's closure was a just cause for termination, the company failed to comply with the due process requirements of providing written notice to the employees and the Department of Labor and Employment at least one month prior to termination. The mere posting of a notice on a bulletin board was insufficient.

Regarding the non-payment of separation pay to Pablito Esmas, the Court clarified that the NLRC's affirmation of the labor arbiter's decision was sufficient, as the NLRC adopted the findings of the labor arbiter.

Finally, the Court ruled that the individual petitioners could be held jointly and severally liable for the monetary obligations, especially since the corporation had been dissolved.

Significant Legal Principles Established:

  1. The determination of an employer-employee relationship can be influenced by the nature of the work performed and the control exercised by the employer, particularly in cases of labor-only contracting.
  2. Employers must comply with due process requirements when terminating employees, including providing written notice at least one month prior to termination.
  3. Joint and several liability can be imposed on corporate officers for non-payment of wages and benefits, especially in cases where the corporation has been dissolved.