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REV
GERALD CABALAN, JONALD
CALENTENG, RAMIL CROIJERO,
.JUNREY CABALGUINTO, OSCAR
DA YTO, RUFO DIONOLA, DIONILO
ESMERALDA, BOOTS LADRILLO,
ELIEZER MAGHAMOY, LEO FLORES,
RENATOPAGADORA,REYNALDO
PLAZA, H.OGER SJBNEAO, EDWIN
TONALBA, .JOHN ACHARON,
RAM AS, SALVADOR
ACURATO, JULUIS BASUL, CARLOS
RA YTA, LITO BELANO, ROGER
CASIMIRO, H.ENE CURADA, NESTRO
ESTE, ROMMEL IMPELIOO, ZOlLO
ISLA, JHONIE OGARDO,

POSADAS, ALEXANDER REGPALA,
CHRISTOPHER SAMPIANO, RITCHIE
SANCHES, ROLANDO SORIANO,
ROWELL ANCHETA, RICKY BORDAS,
ANTONIO BEHEN, RONALD
DOMINGO, .JERRY ROLLY
and
ISIDRO SARICNF:,
Respondents.
G.R. No. 178909
Present:
SERENO, C.J..
Chairperson,
LEONARDO-DE CASTRO,
BERSAMlN,
VILLARAMA, JR., and
REYES, .JJ
Promulgated:
'-
1 0 OCT 2012
X------------------------------------------------------------------------------ ----------X
RESOLUTION
Resolution 2 G.R. No. 178909

REYES, J.:

The main issue in this case is whether Superior Packaging
Corporation (petitioner) may be held solidarily liable with Lancer Staffing &
Services Network, Inc. (Lancer) for respondents unpaid money claims.

The facts are undisputed.

The petitioner engaged the services of Lancer to provide reliever
services to its business, which involves the manufacture and sale of
commercial and industrial corrugated boxes. According to petitioner, the
respondents were engaged for four (4) months from February to J une 1998
and their tasks included loading, unloading and segregation of corrugated
boxes.

Pursuant to a complaint filed by the respondents against the petitioner
and its President, Cesar Luz (Luz), for underpayment of wages, non-
payment of premium pay for worked rest, overtime pay and non-payment of
salary, the Department of Labor and Employment (DOLE) conducted an
inspection of the petitioners premises and found several violations, to wit:
(1) non-presentation of payrolls and daily time records; (2) non-submission
of annual report of safety organization; (3) medical and accident/illness
reports; (4) non-registration of establishment under Rule 1020 of
Occupational and Health Standards; and (5) no trained first aide.
1
Due to the
petitioners failure to appear in the summary investigations conducted by the
DOLE, an Order
2
was issued on J une 18, 2003 finding in favor of the
respondents and adopting the computation of the claims submitted.
Petitioner and Luz were ordered, among others, to pay respondents their



1
Rollo, p. 56.
2
Id. at 56-59.
Resolution 3 G.R. No. 178909

total claims in the amount of Eight Hundred Forty Thousand Four Hundred
Sixty-Three Pesos and 38/100 (P840,463.38).
3


They filed a motion for reconsideration on the ground that
respondents are not its employees but of Lancer and that they pay Lancer in
lump sum for the services rendered. The DOLE, however, denied its motion
in its Resolution
4
dated February 16, 2004, ruling that the petitioner failed to
support its claim that the respondents are not its employees, and even
assuming that they were employed by Lancer, the petitioner still cannot
escape liability as Section 13 of the Department Order No. 10, Series of
1997, makes a principal jointly and severally liable with the contractor to
contractual employees to the extent of the work performed when the
contractor fails to pay its employees wages.

Their appeal to the Secretary of DOLE was dismissed per Order
5

dated J uly 30, 2004 and the Order dated J une 18, 2003 and Resolution dated
February 16, 2004 were affirmed.
6
Their motion for reconsideration
likewise having been dismissed by the Secretary of DOLE in an Order dated
J anuary 21, 2005,
7
petitioner and Luz filed a petition for certiorari with the
Court of Appeals (CA).

On November 17, 2006, the CA affirmed the Secretary of DOLEs
orders, with the modification in that Luz was absolved of any personal
liability under the award.
8
The petitioner filed a partial motion for
reconsideration insofar as the finding of solidary liability with Lancer is
concerned but it was denied by the CA in a Resolution
9
dated J uly 10, 2007.


3
Id. at 59.
4
Id. at 69-71.
5
Id. at 87-90.
6
Rollo, p. 90.
7
Id. at 99-101.
8
Id. at 147-148.
9
Penned by Associate J ustice Rosalinda Asuncion-Vicente, with Associate J ustices J ose L. Sabio,
J r. and Ramon M. Bato, J r., concurring; id. at 157-160.
Resolution 4 G.R. No. 178909

The petitioner is now before the Court on petition for review under
Rule 45 of the Rules of Court, alleging that:

I

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY
ABUSED ITS DISCRETION IN AFFIRMING THE RULING OF THE
SECRETARY OF LABOR AND EMPLOYMENT THAT THE
COMPANY IS SOLIDARILY LIABLE WITH THE CONTRACTOR
NOTWITHSTANDING THE FACT THAT:

A. THE COMPANY CANNOT BE HELD SOLIDARILY
LIABLE WITH THE CONTRACTOR FOR THE PENALTY OR
SANCTION IMPOSED BY WAY OF DOUBLE INDEMNITY
UNDER REPUBLIC ACT NO. 6727.

B. THERE IS NO EVIDENCE TO SHOW THAT PRIVATE
RESPONDENTS RENDERED OVERTIME WORK AND
ACTUALLY WORKED ON THEIR RESTDAYS FOR THE
COMPANY FOR THE PERIOD IN QUESTION[.]

II

THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY
ABUSED ITS DISCRETION IN AFFIRMING THE FINDINGS OF THE
SECRETARY OF LABOR AND EMPLOYMENT THAT THE
CONTRACTOR IS ENGAGED IN LABOR-ONLY CONTRACTING.
10



On the first ground, the petitioner argues that the DOLE erred in
doubling respondents underpayment of wages and regular holiday pay
under Republic Act No. 6727 (Wage Rationalization Act) inasmuch as the
solidary liability of a principal does not extend to a punitive award against a
contractor.
11
The petitioner also contends that there is no evidence showing
that the respondents rendered overtime work and that they actually worked
on their rest days for them to be entitled to such pay.
12


On the second ground, the petitioner objects to the finding that it is
engaged in labor-only contracting and is consequently an indirect employer,
considering that it is beyond the visitorial and enforcement power of the

10
Id. at 10.
11
Id. at 11-12.
12
Id. at 14-17.
Resolution 5 G.R. No. 178909

DOLE to make such conclusion. According to the petitioner, such
conclusion may be made only upon consideration of evidentiary matters and
cannot be determined solely through a labor inspection.
13
The petitioner also
refutes respondents alleged belated argument that the latter are its
employees.
14


The petition is bereft of merit.

To begin with, the Court will not resolve or dwell on the petitioners
argument on the doubling of respondents underpayment of wages and
regular holiday pay by the DOLE for the simple reason that this is the first
time that the petitioner raised such contention. From its pleadings filed in
the DOLE and all the way up to the CA, the petitioner never questioned nor
discussed such issue. It is only now before the Court that the petitioner
belatedly presented such argument. It is well-settled that points of law,
theories, issues and arguments not brought to the attention of the lower
court, administrative agency or quasi-judicial body need not be considered
by a reviewing court, as they cannot be raised for the first time at that late
stage.
15
To consider the alleged facts and arguments raised belatedly would
amount to trampling on the basic principles of fair play, justice and due
process.
16


With regard to the contention that there is no evidence to support the
finding that the respondents rendered overtime work and that they worked
on their rest day, the resolution of this argument requires a review of the
factual findings and the evidence presented, which this Court will not do.
This Court is not a trier of facts and this applies with greater force in labor



13
Id. at 17-18.
14
Id. at 184-186.
15
Besana v. Mayor, G.R. No. 153837, J uly 21, 2010, 625 SCRA 203, 214.
16
Madrid v. Mapoy, G.R. No. 150887, August 14, 2009, 596 SCRA 14, 28.
Resolution 6 G.R. No. 178909

cases.
17
Hence, where the factual findings of the labor tribunals or agencies
conform to, and are affirmed by, the CA, the same are accorded respect
and finality, and are binding upon this Court.
18


Petitioner also questions the authority of the DOLE to make a finding
of an employer-employee relationship concomitant to its visitorial and
enforcement power. The Court notes at this juncture that the petitioner,
again, did not raise this question in the proceedings before the DOLE. At
best, what the petitioner raised was the sufficiency of evidence proving the
existence of an employer-employee relationship and it was only in its
petition for certiorari with the CA that the petitioner sought to have this
matter addressed. The CA should have refrained from resolving said matter
as the petitioner was deemed to have waived such argument and was
estopped from raising the same.
19


At any rate, such argument lacks merit. The DOLE clearly acted
within its authority when it determined the existence of an employer-
employee relationship between the petitioner and respondents as it falls
within the purview of its visitorial and enforcement power under Article
128(b) of the Labor Code, which provides:

Notwithstanding the provisions of Articles 129 and 217 of this Code to the
contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give
effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection.
The Secretary or his duly authorized representative shall issue writs of
execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of

17
New City Builders, Inc. v. NLRC, 499 Phil. 207, 211-212 (2005), citing Manila Water Co., Inc. v.
Pena, 478 Phil. 68, 77 (2004).
18
C.F. Sharp Crew Management, Inc. v. Espanol, Jr., G.R. No. 155903, September 14, 2007, 533
SCRA 424, 440.
19
Catholic Vicariate, Baguio City v. Sto. Tomas, G.R. No. 167334, March 7, 2008, 548 SCRA 31,
39.
Resolution 7 G.R. No. 178909

inspection.


In Peoples Broadcasting (Bombo Radyo Phils., Inc.) v. Secretary of
the Department of Labor and Employment,
20
the Court stated that it can be
assumed that the DOLE in the exercise of its visitorial and enforcement
power somehow has to make a determination of the existence of an
employer-employee relationship. Such determination, however, is merely
preliminary, incidental and collateral to the DOLEs primary function
of enforcing labor standards provisions. Such power was further
explained recently by the Court in its Resolution
21
dated March 6, 2012
issued in Peoples Broadcasting, viz:

The determination of the existence of an employer-employee
relationship by the DOLE must be respected. The expanded visitorial and
enforcement power of the DOLE granted by RA 7730 would be rendered
nugatory if the alleged employer could, by the simple expedient of
disputing the employer-employee relationship, force the referral of the
matter to the NLRC. The Court issued the declaration that at least a prima
facie showing of the absence of an employer-employee relationship be
made to oust the DOLE of jurisdiction. But it is precisely the DOLE that
will be faced with that evidence, and it is the DOLE that will weigh it, to
see if the same does successfully refute the existence of an employer-
employee relationship.

x x x x

x x x [T]he power of the DOLE to determine the existence of an
employer-employee relationship need not necessarily result in an
affirmative finding. The DOLE may well make the determination that no
employer-employee relationship exists, thus divesting itself of jurisdiction
over the case. It must not be precluded from being able to reach its own
conclusions, not by the parties, and certainly not by this Court.

Under Art. 128(b) of the Labor Code, as amended by RA 7730, the
DOLE is fully empowered to make a determination as to the existence of
an employer-employee relationship in the exercise of its visitorial and
enforcement power, subject to judicial review, not review by the NLRC.
22


Also, the existence of an employer-employee relationship is


20
G.R. No. 179652, May 8, 2009, 587 SCRA 724.
21
Peoples Broadcasting Service (Bombo Radyo Phils., Inc.) v. The Secretary of the Department of
Labor and Employment, the Regional Director, DOLE Region VII, and Jandeleon Juezan, G.R. No.
179652, March 6, 2012.
22
Id.
Resolution 8 G.R. No. 178909

ultimately a question of fact.
23
The determination made in this case by the
DOLE, albeit provisional, and as affirmed by the Secretary of DOLE and the
CA is beyond the ambit of a petition for review on certiorari.
24


The Court now comes to the issue regarding the nature of the
relationship between the petitioner and respondents, and the consequent
liability of the petitioner to the respondents under the latters claim.

It was the consistent conclusion of the DOLE and the CA that Lancer
was not an independent contractor but was engaged in labor-only
contracting; hence, the petitioner was considered an indirect employer of
respondents and liable to the latter for their unpaid money claims.

At the time of the respondents employment in 1998, the applicable
regulation was DOLE Department Order No. 10, Series of 1997.
25
Under
said Department Order, labor-only contracting was defined as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to
supply workers to an employer shall be deemed to be engaged in labor-
only contracting where such person:
(1) Does not have substantial capital or investment in the
form of tools, equipment, machineries, work premises and
other materials; and
(2) The workers recruited and placed by such persons are
performing activities which are directly related to the


23
Supra note 19, at 38, citing Manila Water Co., Inc. v. Pena, 478 Phil. 68, 77 (2004).
24
Id.
25
DOLE Department Order No. 10 was subsequently revoked by Department Order No. 03 (Series
of 2001) entitled, Revoking Department Order No. 10, Series of 1997, and Continuing to Prohibit Labor-
only Contracting. Finally, the DOLE issued Department Order No. 18- 02 (Series of 2002), implementing
Articles 106 to 109 of the Labor Code, as amended, which defines labor-only contracting, as follows:
Section 5. Prohibition against labor-only contracting. x x x x For this purpose, labor-
only contracting shall refer to an arrangement where the contractor or subcontractor
merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied
or placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or
ii) the contractor does not exercise the right to control over the performance of the work
of the contractual employee.
Resolution 9 G.R. No. 178909

principal business or operations of the employer in which
workers are habitually employed.


Labor-only contracting is prohibited and the person acting as contractor
shall be considered merely as an agent or intermediary of the employer who
shall be responsible to the workers in the same manner and extent as if the
latter were directly employed by him.
26


According to the CA, the totality of the facts and surrounding
circumstances of this case point to such conclusion. The Court agrees.

The ratio of Lancers authorized capital stock of P400,000.00 as
against its subscribed and paid-up capital stock of P25,000.00 shows the
inadequacy of its capital investment necessary to maintain its day-to-day
operations. And while the Court does not set an absolute figure for what it
considers substantial capital for an independent job contractor, it measures
the same against the type of work which the contractor is obligated to
perform for the principal.
27
Moreover, the nature of respondents work was
directly related to the petitioners business. The marked disparity between
the petitioners actual capitalization (P25,000.00) and the resources needed
to maintain its business, i.e., to establish, operate and manage a personnel
service company which will conduct and undertake services for the use of
offices, stores, commercial and industrial services of all kinds, supports the
finding that Lancer was, indeed, a labor-only contractor. Aside from these is


26
Section 9(b), DOLE Department Order No. 10 (Series of 1997) states that labor-only contracting
is prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of
the employer who shall be responsible to the workers in the same manner and extent as if the latter were
directly employed by him. Section 19, DOLE Department Order No. 18- 02, meanwhile, provides:
x x x The principal shall be deemed as the direct employer of the contractual
employees and therefore, solidarily liable with the contractor or subcontractor for
whatever monetary claims the contractual employees may have against the former in the
case of violations as provided for in Sections 5 (Labor-Only contracting), 6
(Prohibitions), 8 (Rights of Contractual Employees) and 16 (Delisting) of these Rules. In
addition, the principal shall also be solidarily liable in case the contract between the
principal and contractor or subcontractor is preterminated for reasons not attributable to
the fault of the contractor or subcontractor.
27
Coca-Cola Bottlers Phils., Inc. v. Agito, G.R. No. 179546, February 13, 2009, 579 SCRA 445,
462.
Resolution 10 G.R. No. 178909
the undisputed fact that the petitioner failed to produce any written service
contract that might serve as proof of its alleged agreement with Lanccr.n
Finally, a finding that a contractor is a "labor-only" contractor is
equivalent t() declaring that there is an employer-employee relationship
betv,'ecn the principal and the employees of the supposed contractor, and the
"labor-only" contractor is considered as a mere agent of the principal, the
real employcr.
2
l) The former becomes solidarily liable for all the rightful
claims of the employees?) The petitioner therefore, being the principal
employer and Lancer, being the labor-only contractor, arc solidarily liable
for respondents' unp<1id money claims.
WHERF:FORE, the petition for review is DENIED.
SO ORDF:RED.
/
BIENVENIDO L. REYES
~ - Associate Justice
WE CONCUR:
MARIA LOURDES P. A. SERENO
Chief Justice
. Chairperson
~ l l ~ v ~
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
- - - - - - ~ - - ~ - - - - - - - ~
!?olio. pp. 13il-140.
!'OL l Fin;\ 1-RG(' Internal iona!t. ( .'oncef7i.:ion. G. R. No. 172349. J unc 13, 20 12.
,\'an Miguel ( 'mpnruf ion \'. Semi!/ a no, G.!{. No. 16f25 7, .l u ly 5. 20 I 0. 623 SC F i\ l 14. 129.
Resolution 11 G.R. No. 178909
~ V i u A n ~
Associate Ju 1ce
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, I certify that
the conclusions in the above Resolution had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.
MARIA LOURDES P. A. SERENO
Chief Justice