Facts
Nozomi Fortune Services, Inc. was engaged in the business of supplying manpower to companies, including Samsung Electro-Mechanics Phils. Respondent Celestino Naredo and several other workers were hired by Nozomi and assigned to Samsung as production operators between 2003 and 2005.
In 2010, Nozomi allegedly informed the workers that Samsung would absorb them as regular employees if they passed an examination. The workers failed the examination and were later informed that their services were no longer needed. They thereafter submitted resignation letters.
Subsequently, Naredo and the other workers filed a complaint for illegal dismissal and regularization, claiming that Nozomi was merely a labor-only contractor and that Samsung was their true employer.
The Labor Arbiter and the NLRC ruled that Nozomi was a legitimate independent contractor. However, the Court of Appeals reversed and declared Nozomi a labor-only contractor.
ISSUE: Whether Nozomi was a labor-only contractor.
Ruling
YES. The Supreme Court affirmed the ruling of the Court of Appeals that Nozomi was engaged in prohibited labor-only contracting. The Court emphasized that a DOLE Certificate of Registration is not conclusive proof that a contractor is legitimate. According to the Court:
“A DOLE Certificate of Registration, by itself, is not a conclusive proof of legitimacy for a manpower provider.”
The Supreme Court explained that in determining whether a contractor is legitimate, “the totality of the facts and the surrounding circumstances are to be considered.”
The Court found that the service agreement between Nozomi and Samsung merely involved the supply of manpower and did not identify a specific job or undertaking independent from Samsung’s core business. The workers performed activities directly related to Samsung’s principal business as manufacturers of electronic components.
The Court reiterated the distinction between permissible job contracting and labor-only contracting:
“Permissible job contracting involves contracting out of work, job or service, while prohibited labor-only contracting involves the contracting out of only labor.”
The Supreme Court further held that Nozomi failed to establish sufficient independence in performing the contracted work despite its claim of having substantial capital. Accordingly, Samsung was deemed the true employer, while Nozomi was considered merely an agent of Samsung. However, the Court agreed with the finding that Naredo was not illegally dismissed because the records showed that he voluntarily resigned.