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A Contractor is Presumed as Labor-Only Contractor

14 Apr

A Contractor is Presumed as Labor-Only Contractor

By Labor Law 25 Comments

Diamond Farms, Inc. (DFI) and Diamond Farms Agrarian Reform Beneficiaries Multi-Purpose Cooperative (DARBMUPCO) entered into a Banana Production and Purchase Agreement (“BPPA”) to grow and cultivate only high grade quality exportable bananas to be sold exclusively to DFI.

The BPPA is effective for 10 years. DARBMUPCO and DFI executed a “Supplemental to Memorandum Agreement” (“SMA”). The SMA stated that DFI shall take care of the labor cost arising from the packaging operation, cable maintenance, irrigation pump and irrigation maintenance that the workers of DARBMUPCO shall conduct for DFI’s account under the BPPA.

DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation under the BPPA because some of its members were not willing to work. Hence, to assist DARBMUPCO in meeting its production obligations under the BPPA, DFI engaged the services of the respondent-contractors, who in turn recruited the respondent-workers.

Respondent Southern Philippines Federation of Labor (“SPFL”)—a legitimate labor organization with a local chapter in the awarded plantation—filed a petition for certification election in the Office of the Med-Arbiter in Davao City. SPFL filed the petition on behalf of some 400 workers (the respondent-workers in this petition) “jointly employed by DFI and DARBMUPCO” working in the awarded plantation. DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They claimed, instead, that the respondent-workers are the employees of the respondent-contractors. Hence, this case.

The Supreme Court held that as a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that it has the substantial capital, investment, tools and the like.

Based on the conditions for permissible job contracting, the SC ruled that respondent-contractors are labor-only contractors. There is no evidence showing that respondent-contractors are independent contractors. The respondent-contractors, DFI, and DARBMUPCO did not offer any proof that respondent-contractors were not engaged in labor-only contracting. DFI should have presented proof showing that respondent-contractors carry on an independent business and have sufficient capitalization.

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DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims of respondent-contractors that they sent their billing to DFI for payment; and that DFI’s managers and personnel are in close consultation with the respondent-contractors.

That DARBMUPCO owns the awarded plantation where the respondent-contractors and respondent-workers were working is immaterial. This does not change the situation of the parties. As correctly found by the CA, DFI, as the principal, hired the respondent-contractors and the latter, in turn, engaged the services of the respondent-workers.

D.O. 174-17 superseded D.O. 18-A. Implementation of D.O. 174-17.

[Diamond Farms vs. FARMS AGRARIAN REFORM BENEFICIARIES MULTI-PURPOSE COOPERATIVE (DARBMUPCO), G.R. Nos. 173254-55 & 173263, January 13, 2016]

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