SUPREME COURT SAYS: PLDT WORKERS PERFORMING INSTALLATION, REPAIR, AND MAINTENANCE OF SERVICE LINES HOLD REGULAR EMPLOYMENT STATUS

(The case of Manggagawa sa Komunikasyon ng Pilipinas vs. PLDT, Inc.
G.R. No. 244695, 244752, 245294, February 14, 2024)

Photo from PLDT website

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The Supreme Court clarified the legality of labor contracting and mandated the regularization of certain employees of PLDT, Inc. (PLDT). 

 

According to the Decision, labor contracting itself is not deemed illegal. Merely subcontracting specific tasks does not automatically make the subcontractors’ employees direct employees of the principal company, in this case, PLDT.

 

However, the Court recognized a specific group of PLDT workers whose roles are directly tied to the company’s core operations. These employees, engaged in the installation, repair, and maintenance services of PLDT lines, were deemed essential to PLDT’s business operations. As such, the Court mandated their regularization to ensure they receive fair treatment and benefits commensurate with their contributions.

Doctrine of the case:

 

Labor contracting is not illegal per se. The fact that PLDT had contracted out specific jobs, works, or services does not automatically mean that the contractors’ employees are the direct employees of PLDT. However, PLDT workers engaged in installation, repair, and maintenance services of PLDT lines need to be regularized because they perform tasks that are necessary and desirable and directly related to the business of PLDT.

 

Facts: 

 

Petitioner PLDT is a corporation engaged in the telecommunications business. For its operation, it engaged the services of several contractors and sub-contractors to provide services in various areas or phases of its operations. Petitioner MKP, on the other hand, was the exclusive bargaining agent of PLDT’s rank-and-file employees.

 

To settle the dispute that arose from the negotiation of the collective bargaining agreement between PLDT and MKP, the intervention of the Department of Labor and Employment (DOLE) was sought, and the parties agreed to have a ”Special Assessment and Visit of Establishment” (SAVE) conducted in PLDT to assess, validate, and verify PLDT, including its contractors/subcontractors, compliance to Department Order 18-A, s. 2011, on-the-job training and other training-in-employment practices, working arrangements and compliance with general labor standards and occupational safety and health standards.

 

During the inspection, the DOLE Assessment Team interviewed a total of–1,104 PLDT employees and contracted workers, as well as 37 contractors’ representatives from several offices of PLDT in the National Capital Region. The focus of the interview was PLDT’s contracting activities and practices.

 

During a conference held on December 5, 2016, the DOLE Assessment Team presented its Report on the Special Assessment and Visit of the Philippine Long Distance Telephone Company (SAVE Report). In the SAVE Report, the DOLE Assessment Team enumerated their preliminary findings of PLDT’s and its contractor’s violation of DOLE Department Order No. 18-A, Series of 2011 (DO 18-.A). Among other things, the DOLE Assessment Team reported matters that tend to establish that PLDT and its contractors are engaged in labor-only contracting. In particular, the interviews of the workers intimated that PLDT exercised control and supervision over them.

 

The contractors were summoned and given copies of the Notice of Results pertaining to each of them. They were also asked to provide documents of their compliance with the labor standards provisions they allegedly violated. The contractors provided proof of payment as well as documentation and affidavits to challenge the finding that they were labor-only contractors.

 

Worth noting that on April 19, 2017, Sec. Bello announced during a press.briefing that he “will order the regularization of 10,000 workers under contracting and subcontracting arrangement but are performing jobs that are related to PLDT business.

 

Order issued by the DOLE-NCR Regional Director

 

The Regional Director found PLDT and its contractors solidarily liable to pay the unpaid monetary benefits of the contractors’ workers amounting to PHP 78,699,983.71. The contractors found to be engaged in labor-only contracting were ordered to cease and desist from further engaging in contracting activities; and the license of those with existing DO 18-A registration was revoked. Finally, PLDT was ordered to regularize and include in its payroll, the workers of the declared labor-only contractors.

 

Ruling of Sec. Bello

 

In summary, the Sec. Bello ordered the following:

 

1. Seven thousand four hundred sixteen workers of the contractors that were declared as labor-only contractors were deemed as regular employees of PLDT from the time of their initial deployment. PLDT was ordered to include them in its payroll of regular employees.
2. The DO 18–A registration of the declared labor-only contractors was ordered to be canceled after the conduct· of cancellation proceedings.
3. Contractors and. PLDT were ordered to solidarily pay the unpaid monetary benefits of the contractors’ employees amounting to PHP66,348,369.68.
4. Contractors that were able to show proof of compliance with DO 18-A were declared as legitimate contractors.
5. Contractors who were able to show sufficient proof of full or partial payment of the unpaid monetary benefits of their workers had their monetary liability either deleted or reduced.

 

On April 24, 2018, Sec. Bello issued another resolution acting upon the motions for reconsideration filed by PLDT and l\1KP. Sec. Bello further reduced PLDT’s and the contractors’ total monetary liability to PHP 51 801 729.80. The number of employees regularized was also reduced to 7,344.

 

Aggrieved with Sec. Bello’s ruling, PLDT filed a Petition for Certiorari before the CA.

 

Ruling of the Court of Appeals

 

1. Ordered the regularization of individuals performing functions and jobs that are usually necessary and desirable in the usual course of the business of the petitioner PLDT, Inc., specifically, as regards the installation, repair and maintenance of PLDT communication lines. 
2. Sets Aside the resolution that there was labor-only contracting of the following functions/jobs/services, viz:
   1. janitorial services, messengerial, and clerical services;
   2. information technology (IT) firms and services;
   3. IT support services, both hardware and software; and applications development;
   4. backoffice support and office operations;
   5. business process outsourcing or call centers;
   6. sales; and;
   7. medical, dental, engineering and other professional services.

 

Issue:

 

G.R. No. 244695

 

1. MKP alleges that CA failed to consider the totality of the circumstances of every contractor’s contracting agreement with PLDT, and instead, sweepingly categorized them as either labor-only or legitimate contracting, based only on their contracted-out services.
2. MKP claims that the CA erred in holding that the specific group of contracted workers that perform work not “directly related to the core activities” of PLDT, such as janitors, and security guards, among others, cannot be regularized by PLDT.
3. MKP asserts that the CA made the correct ruling, albeit, hinged on the wrong legal basis, when it declared as regular employees of PLDT workers of contractors engaged in the installation, repair, and maintenance of telephone or data lines.
4. MKP also found as an error the appellate court’s declaration that sales workers of PLDT’s contractors are outside the coverage of DO 18-A. 
5. MKP claims that the CA “should not have exempted contractors of PLDT providing information technology-enabled services and sales agents from the coverage of DO 18-A.

 

G.R. No. 244752

 

1. PLDT asserts that the CA erred in upholding the regularization of the contractors’ workers performing installation, repair, and maintenance services.
2. PLDT also points out that the work performed by the workers concerned are construction-related activities that are, not only distinct from PLDT’s telecommunication business, but also excluded from the coverage of DO 174-2017.
3. PLDT also assails the CA’s pronouncement that Sec. Bello can determine the existence of employer-employee relationship in the exercise of his visitorial and enforcement powers.

 

G.R. No. 245294

 

1. Sec. Bello argues that the CA’s ruling should have been limited to the determination of whether he committed grave of abuse of discretion.
2. Sec. Bello surmises that there is nothing legally objectionable about the fact that his decision was applied to 7,344 employees even if the number of workers interviewed was not more than 1,000.
3. The finding that PLDT was. engaged in labor-only contracting, according to Sec. Bello, is strongly supported by the fact that PLDT was exercising control over the workers of the contractors.
4. PLDT and its contractors committed several violations of DO 18-A that also effectively accorded regular status to the workers.
5. Sec. Bello contends that he based his award not only on the interviews of the. workers but also on the several pieces of evidence presented during the entire SAVE proceedings.
6. Sec. Bello. belies the findings that he deprived PLDT of its right to due process, and that his ruling failed to distinctly state the facts and law on which it was based.

Ruling:

 

THE SUPREME COURT SUSTAINED THE DECISION OF THE COUT OF APPEALS AND, THUS, DISMISSED THE CONSOLIDATED PETITIONS.

A. The extent of the Court’s judicial review of labor cases vis-à-vis the scope of the Court of Appeal’s certiorari review of the decisions of the Secretary of Labor and the labor tribunals

 

The CA did not err in finding grave abuse of discretion on the part of Sec. Bello in issuing his assailed Resolutions. As will be discussed, the CA correctly ruled that the Resolutions of Sec. Bello were not supported by substantial evidence.

 

B. The Secretary of Labor, in the exercise of its visitorial and enforcement power, may determine the existence of the employer-employee relationship.

 

Indispensable to the DOLE’s exercise of such power is the existence of an actual employer-employee relationship between the parties. 

 

The DOLE has the authority to rule on the existence of an employer-employee relationship between the parties, considering that such relationship is a condition precedent for the exercise of its visitorial and enforcement power.

 

C. Labor contracting is not illegal per se

 

The fact that PLDT had contracted out specific jobs, works., or services does not

automatically mean that the contractors’ employees are the direct employees of PLDT.

 

Indeed, Article 106 of the Labor Code expressly allows an employer to engage in legitimate labor contracting, which the DOLE implements through DO 18-A and DO 174-2017. An employer is not necessarily engaged in labor-only contracting whenever it farms out specific jobs, works, or services.

D. Secretary Bello committed grave abuse of discretion in issuing the assailed resolutions.

 

We agree with the appellate court that the ruling of the Regional Director was highly conjectural as it was based mainly on anecdotal evidence, i.e, the interviews conducted by the labor law compliance officers of not more than a thousand individuals, which figure also includes regular PLDT employees, but the results of which were made to apply to at least 7,3444 employees. According to the CA, the interviews do not constitute substantial evidence to prove the existence of employer-employee relationships or labor-only contracting.

E. The evidence relied upon by Sec. Bello failed to establish, among others, labor-only contracting and other illicit forms of employment arrangements.

 

Here, Sec: Bello’s finding of control allegedly exercised by PLDT was largely based. on the interviews of the workers, and supported by the service agreements, “Technical Protocols” attached to some of the service agreements between PLDT and the contractors, as well as other employment documents. Sec. Bello also anchored on these interviews his findings of other violations, such as the contractors’ alleged practice of repeatedly hiring workers for short contracts. We agree with the CA that these pieces of are not substantial to establish these allegations.

 

Indeed, the Court already warned about the dangers of utilizing anecdotal evidence to support factual conclusions.

 

Finally, the Court notes that in his resolution, Sec. Bello also indicated the contractors’ alleged commission of other illegal forms of employment arrangements. Among those highlighted were the practice of repeatedly hiring workers for short periods, and contractors’ workers performing work already performed by regular employees. Nevertheless, these findings suffer the same evidentiary defect as they are based largely, if not exclusively, from the interviews of the workers. Therefore, there is also no substantial evidence to sustain said findings.

F. The guidelines allegedly proving PLDT’s control over the means and methods of performing work are, in fact, directed towards the company’s desired results.

 

The Court is also in accord with the CA’s pronouncements that Sec. Bello mistook PLDT’s exercise of its power to control the results with control as to the means and methods of achieving the said results. Indeed, the validation of results and quality, checking of the final output, the use of Technical Protocols and Implementing Guidelines, the outline of the “General Scope of Work”, product training and knowledge, and evaluation of the contractors were all erroneously considered to be “means and methods control”.

It has been held that not all form of control could make the principal and contractor liable for labor-only contracting.

G. There is no merit in PLDT’s claim that those engaged in installation, repair, and maintenance services of PLDT liens may be considered as “project” or “seasonal” employees.

 

The Court, nevertheless, sustains the CA’s findings that the workers engaged in installation, repair, and maintenance services of PLDT lines need to be regularized because they perform tasks that are necessary and desirable and directly related to the business of PLDT.

In conclusion, the engagement of contractors’ employees does not automatically make them employees of PLDT. However, it found that employees engaged in installation, repair, and maintenance services directly related to PLDT’s business warrant regularization.

 

PREVIOUS: Davidson Go vs. Spouses Henry and Janet Ko (G.R. No. 253355, November 8, 2023)

 

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