Manila Water Company v. Dalumpines

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision1 dated September 12, 2006 and the Resolution2 dated November 17, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 94909. The facts of the case are as follows: By virtue of Republic Act No. 8041, otherwise known as the "National Water Crisis Act of 1995," the Metropolitan Waterworks and Sewerage System (MWSS) was given the authority to enter into concession agreements allowing the private sector in its operations.

Petitioner Manila Water Company, Inc. (Manila Water) was one of two private concessionaires contracted by the MWSS to manage the water distribution system in the east zone of Metro Manila. The east service area included the following towns and cities: Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati, parts of Quezon City and Manila, Angono, Antipolo, Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong, Pililla, Rodriguez, Tanay, Taytay, Teresa, and San Mateo.3 Under the concession agreement, Manila Water undertook to absorb the regular employees of MWSS listed by the latter effective August 1, 1997. Individual respondents, with the exception of Moises Zapatero (Zapatero) and Edgar Pamoraga (Pamoraga), were among the one hundred twenty-one (121) employees not included in the list of employees to be absorbed by Manila Water.

Nevertheless, Manila Water engaged their services without written contract from August 1, 1997 to August 31, 1997.4 On September 1, 1997, individual respondents signed a three (3)-month contract to perform collection services on commission basis for Manila Water's branches in the east zone.5 On November 21, 1997, before the expiration of the contract of services, the 121 bill collectors formed a corporation duly registered with the Securities and Exchange Commission (SEC) as the "Association Collector's Group, Inc." (ACGI). ACGI was one of the entities engaged by Manila Water for its courier service.

However, Manila Water contracted ACGI for collection services only in its Balara Branch.6 In December 1997, Manila Water entered into a service agreement with respondent First Classic Courier Services, Inc. (FCCSI) also for its courier needs. The service agreements between Manila Water and FCCSI covered the periods 1997 to 1999 and 2000 to 2002.7 Earlier, in a memorandum dated November 28, 1997, FCCSI gave a deadline for the bill collectors who were members of ACGI to submit applications and letters of intent to transfer to FCCSI. The individual respondents in this case were among the bill collectors who joined FCCSI and were hired effective December 1, 1997.8 On various dates between May and October 2002, individual respondents were terminated from employment.

Manila Water no longer renewed its contract with FCCSI because it decided to implement a "collectorless" scheme whereby Manila Water customers would instead remit payments through "Bayad Centers."9 The aggrieved bill collectors individually filed complaints for illegal dismissal, unfair labor practice, damages, and attorney's fees, with prayer for reinstatement and backwages against petitioner Manila Water and respondent FCCSI.

The complaints were consolidated and jointly heard.10 Respondent bill collectors alleged that their employment under Manila Water had four (4) stages: (a) from August 1, 1997 to August 31, 1997; (b) from September 1, 1997 to November 30, 1997; (c) in November 1997 when FCCSI was incorporated; and (d) after November 1977 when FCCSI came in. While in MWSS, and thereafter in Manila Water and FCCSI, respondent bill collectors were made to perform the following functions: (1) delivery of bills to customers; (2) collection of payments from customers; and (3) delivery of disconnection notice to customers. They were also allowed to effect disconnection and were given tools for this purpose.11 Respondent bill collectors averred that when Manila Water issued their individual contracts of service for three months in September 1997, there was already an attempt to make it appear that respondent bill collectors were not its employees but independent contractors.

Respondent bill collectors stressed that they could not qualify as independent contractors because they did not have an independent business of their own, tools, equipment, and capitalization, but were purely dependent on the wages they earned from Manila Water, which was termed as "commission."12 Respondent bill collectors alleged that Manila Water had complete supervision over their work and their collections, which they had to remit daily to the former. They also maintained that the incorporation of ACGI did not mean that they were not employees of Manila Water. Furthermore, they alleged that they suffered injustice when Manila Water imposed upon them the work set-up that caused them to be emotionally depressed because those who were not assigned to the Balara Branch under Manila Water's contract with ACGI were forced to join FCCSI to retain their employment.

They argued that the entry of FCCSI did not change the employer-employee relationship of respondent bill collectors with Manila Water.13 Respondent bill collectors insisted that they remained employees of Manila Water even after the entry of FCCSI. The latter did not qualify as a legitimate labor contractor since it had no substantial capital. FCCSI only had a paid-up capital of one hundred thousand pesos (₱100,000.00), out of the four hundred thousand pesos (₱400,000.00) authorized capital.

FCCSI relied mainly on what Manila Water would pay, from which it deducted an agency fee, and it had no other clients on collection. They were forced to transfer to FCCSI when their service contracts with Manila Water was about to expire on November 30, 1997. FCCSI was engaged in labor-only contracting which is prohibited by law.14 Respondent bill collectors averred that even under the four-fold test of employer-employee relationship, it appeared that Manila Water was their true employer based on the following circumstances: (1) it was Manila Water who engaged their services as bill collectors when it took over the operations of the east zone from MWSS on August 1, 1997; (2) it was Manila Water which paid their wages in the form of commissions every fifteenth (15th) and thirtieth (30th)15 Respondent FCCSI, on the other hand, claimed that it is an independent contractor engaged in the business of providing messengerial or courier services, and it fulfills the criteria set forth under Department Order No. 10, Series of 1997.16 It was issued a certificate of registration by the Department of Labor and Employment (DOLE) as an independent contractor.

It was incorporated and registered with the SEC in November 1995. It was duly registered with the Department of Transportation and Communication (DOTC) and the Office of the Mayor of Makati City for authority to operate. It has sufficient capital in the form of tools, equipment, and machinery as attested to by the Postal Regulation Committee of the DOTC after conducting an ocular inspection.

It provides similar services to Philippine Long Distance Telephone Company, Smart Telecommunications, Inc., and Home Cable, Inc. Under the terms and conditions of its service agreement with Manila Water, FCCSI has the power to hire, assign, discipline, or dismiss its own employees, as well as control the means and methods of accomplishing the assigned tasks, and it pays the wages of the employees.17 The termination of employment of respondent bill collectors upon the expiration of FCCSI's contract with Manila Water did not mean the automatic termination or suspension of the employer-employee relationship between FCCSI and respondent bill collectors. Their termination after their six (6) month floating status, which was allowed by law, was due to the non-renewal of FCCSI's agreement with Manila Water and its inability to enter into a similar contract requiring the skills of respondent bill collectors.18 Petitioner Manila Water, for its part, denied that there was an employer-employee relationship between its company and respondent bill collectors.

Based on the agreement between FCCSI and Manila Water, respondent bill collectors are the employees of the former, as it is the former that has the right to select/hire, discipline, supervise, and control. FCCSI has a separate and distinct legal personality from Manila Water, and it was duly registered as an independent contractor before the DOLE.19 Petitioner further claimed that individual service contracts signed by respondent bill collectors for a 3-month period with Manila Water were valid and legal. The fact that the duration of the engagement was stated on the face of the contract dispels any bad faith on the part of the company.

Fixed term contracts are allowed by law. Furthermore, respondent bill collectors' allegation that the incorporation of ACGI was made as a condition of their continued employment was unfounded. They transferred to FCCSI on their own volition.20 Petitioner Manila Water also averred that, under its organizational structure, there was no regular plantilla position of bill collector, which was the main reason why respondent bill collectors were not included in the list of MWSS employees absorbed by the company.

The company's out-sourcing of courier needs to an independent contractor was valid and legal. On September 27, 2004, the Labor Arbiter (LA) rendered a decision,21 the dispositive portion of which reads:

WHEREFORE, premises considered, the complaints against respondent Manila Water Company, Inc. is dismissed for lack of jurisdiction due to want of employer-employee relationship. Respondent First Classic Courier Services is hereby ordered to pay complainants separation pay equivalent to one (1) month pay for every year of service, to wit: 1. JOSE P. DALUMPINES - - - - - - - - ₱36,400.00 2. SUSANO MIRANDA - - - - - - - - - ₱36,400.00 3. EDGAR PAMORAGA - - - - - - - - - ₱29,120.00 4. ARTHUR G. LAVISTI - - - - - - - - - ₱36,400.00 5. BENJAMIN TALAVERA, JR. - - - - ₱36,400.00 6. JOSE S.A. SIERRA - - - - - - - - - - - ₱36,400.00 7. MELITANTE D. CASTRO - - - - - - ₱36,400.00 8. BERNARDO S. MEDINA - - - - - - - ₱36,400.00 9. MELENCIO BAONGUIS - - - - - - - ₱36,400.00 10. NONITO V. FERNANDEZ - - - - - - ₱36,400.00 11. LEGARTO ESTEBAN - - - - - - - - - ₱36,400.00 12. ROMEO B. CASTALONE - - - - - - ₱36,400.00 13. RAMON C. REYES - - - - - - - - - - - ₱36,400.00 14. MOISES L. ZAPATERO - - - - - - - - ₱29,120.00 15. JOSE T. AGUILAR - - - - - - - - - - - ₱36,400.00 16. ARNULFO T. JAMISON - - - - - - - ₱36,400.00 17. ANGEL C. GARCIA - - - - - - - - - - - ₱36,400.00 18. JOSE TEODY P. VELASCO - - - - - ₱36,400.00 19. AUGUSTUS J. TANDOC - - - - - - - ₱36,400.00 20. EMMANUEL L. CAPIT - - - - - - - - ₱36,400.00 21. WILLIAM AGANON - - - - - - - - - - ₱87,360.00 22. ROBERTO S. DAGDAG - - - - - - - - ₱36,400.00 23 MIGUEL J. LOPEZ - - - - - - - - - - - - ₱36,400.00 24. GEORGE CABRERA - - - - - - - - - - ₱36,400.00 25. BORROMEO ARMAN - - - - - - - - - ₱36,400.00 26. RONITO R. FRIAS - - - - - - - - - - - - ₱36,400.00 27. ANTONIO A. VERGARA - - - - - - - ₱36,400.00 28. RANDY T. CORTIGUERRA - - - - - ₱36,400.00