36. CEPALCO v. CEPALCO Employees Labor Union (KARA) 3.

3. the tools and equipment utilized by CESCO in the meter reading

June 20, 2016 | Perlas-Bernabe, J. | Independent and Labor-Only activities are owned by CEPALCO, emphasizing the fact that CESCO
Contractors has no basic equipment to carry out the service contracted out by
CEPALCO.
PETITIONER: CAGAYAN ELECTRIC POWER & LIGHT 4. records are devoid of evidence to prove that the work undertaken was
COMPANY, INC. (CEPALCO) and CEPALCO ENERGY SERVICES made under the sole control and supervision of CESCO. Instead, as
CORPORATION (CESCO), formerly CEPALCO ENERGY SERVICES noted by the CA, it was CEPALCO that established the working
& TRADING CORPORATION (CESTCO) procedure and methods and supervised CESCO's workers in their
RESPONDENTS: CEPALCO EMPLOYEE'S LABOR UNION- tasks
ASSOCIATED LABOR UNIONS-TRADE UNION CONGRESS OF
THE PHILIPPINES (TUCP) Whether contracting out of activities or services being performed by union
members constitute ULP? NO. because respondent was not able to present
SUMMARY: This involves two cases. First case involves a Contract for any evidence to show that such arrangements violated CEPALCO's
meter reading work between CEPALCO (electric company) and CESCO workers' right to self-organization, which, as above-mentioned, constitutes
(contractor). The second case involves another contract between the same the core of ULP.
parties but for warehousing works. The two cases are similar wherein the
employees and union members of CEPALCO were replaced by employees DOCTRINE: Under Article 106 of the Labor Code, as amended, labor-
of CESCO. So the Union filed a complaint against the petitioners for only contracting is an arrangement where the contractor, who does not
unfair labor practices. The Union alleged that it was CEPALCO’s have substantial capital or investment in the form of tools, equipment,
intention was to evade its responsibilities under the Collective Bargaining machineries, work premises, among others, supplies workers to an
Agreement (CBA) and labor laws, and that it would ultimately result in employer and the workers recruited are performing activities which are
the dissipation of respondent's membership in CEPALCO. It further directly related to the principal business of such employer. There are two
averred that for engaging in labor-only contracting, the workers placed by elements:
CESCO must be deemed regular rank-and-file employees of CEPALCO, 1. Contractor does not have substantial capital or investment which
and that the Contract be declared null and void. Petitioners averred that relates to the job, work or service to be performed and the
CESCO is an independent job contractor and that the contracting out of employees recruited, supplied or placed by such contractor or
the such services did not interfere with CEPALCO's regular workers' right subcontractor are performing activities which are directly related
to self-organize. Whether or not CESCO engaged in labor-only to the main business of the principal;
contracting and that its employees are actually the regular employees of 2. contractor does not exercise the right to control over the
CEPALCO? YES. petitioners failed to show that CESCO has substantial performance of the work of the contractual employee
capital or investment which relates to the job, work or service to be
performed Labor-only contracting is considered as a form of ULP when the same is
1. there is no available document to show CESCO's authorized capital devised by the employer to "interfere with, restrain or coerce employees in
stock at the time of the contracting out of CEPALCO's meter reading the exercise of their rights to self-organization."
activities to CESCO
2. the list of CESCO's office equipment, furniture and fixtures, and In Bankard, Inc. v. NLRC: The Court has ruled that the prohibited acts
vehicles offered in evidence by petitioners does not satisfy the considered as ULP relate to the workers' right to self-organization and to
requirement that they could have been used in the performance of the the observance of a CBA. It refers to "acts that violate the workers' right to
specific work contracted out organize." Without that element, the acts, even if unfair, are not ULP.
FACTS: 6. LA dismissed. It held that CESCO carries on an independent
1. Respondent is the duly certified bargaining representative of business of contracting services and that CESCO has an authorized
CEPALCO's regular rank-and-file employees. On the other hand, capital stock of P100,000,000.00, as well as equipment and
CEPALCO is a domestic corporation engaged in electric
materials necessary to carry out its business. As an independent
distribution in Cagayan de Oro and other municipalities in
Misamis Oriental; while CESCO is a business entity engaged in contractor, CESCO is the statutory employer of the workers it
trading and services. supplied to CEPALCO pursuant to their contract. Thus, there is no
2. CEPALCO and CESCO (petitioners) entered into a Contract for factual basis to say that CEPALCO committed ULP as there can be
Meter Reading Work where CESCO undertook to perform no splitting or erosion of the existing rank-and-file bargaining unit
CEPALCO's meter reading activities. As a result, several that negates interference with the exercise of CEPALCO workers'
employees and union members of CEPALCO were relieved, right to self-organize.
assigned in Floating positions, and replaced with CESCO workers, 7. NLRC affirmed. MR was denied. Hence a petition for certiorari
prompting respondent to file a complaint for Unfair Labor Practice was filed before the CA. (First case)
(ULP) against petitioners 8. Pending resolution of the first case, CEPALCO and CESCO
3. Respondent alleged that it was CEPALCO’s intention was to evade entered into another Contract of Service, this time for the
its responsibilities under the Collective Bargaining Agreement warehousing works of CEPALCO. Alleging that three (3) union
(CBA) and labor laws, and that it would ultimately result in the members who were assigned at the warehouse of the logistics
dissipation of respondent's membership in CEPALCO. department were transferred to other positions and departments
4. Respondent claimed that CEPALCO's act of contracting out without their conformity and, eventually, were replaced by workers
services, which used to be part of the functions of the regular union recruited by CESCO, respondent filed another complaint for ULP
members, is violative of Article 259 (c) of the Labor Code, as against petitioners, similarly decrying that CEPALCO was
amended, governing ULP of employers. It further averred that for engaged in labor-only contracting and, thus, committed ULP
engaging in labor-only contracting, the workers placed by CESCO 9. LA dismissed. NLRC dismissed (applying res judicata).
must be deemed regular rank-and-file employees of CEPALCO, 10. CA in both cases found that CESCO was in labor-only contracting
and that the Contract for Meter Reading Work be declared null and thus, the workers hired by CESCO pursuant to the service contract
void for the meter-reading activities and warehouse works were
5. Petitioners averred that CESCO is an independent job contractor declared regular employees of CEPALCO.
and that the contracting out of the meter-reading services did not 11. However, the CA found no substantial evidence that CEPALCO
interfere with CEPALCO's regular workers' right to self-organize, was engaged in ULP, there being no showing that CEPALCO was
denying that none of respondent's members was put on Floating motivated by ill will, bad faith or malice, or that it was aimed at
status. Moreover, they argued that the case is only a labor interfering with its employees' right to self-organize.
standards issue, and that respondent is not the proper party to raise
the issue regarding the status of CESCO's employees and, hence, ISSUE:
cannot seek that the latter be declared as CEPALCO's regular 1. Whether CESCO engaged in labor-only contracting and that its
employees. employees are actually the regular employees of CEPALCO? YES.
 2. Whether contracting out of activities or services being performed i. the tools and equipment utilized by CESCO in
by union members constitute ULP? NO. the meter reading activities are owned by
HELD: CEPALCO, emphasizing the fact that CESCO
1. Under Article 106 of the Labor Code, as amended, labor-only has no basic equipment to carry out the service
contracting is an arrangement where the contractor, who does not contracted out by CEPALCO.
have substantial capital or investment in the form of tools, 4. records are devoid of evidence to prove that the work
equipment, machineries, work premises, among others, supplies undertaken was made under the sole control and
workers to an employer and the workers recruited are performing supervision of CESCO. Instead, as noted by the CA, it
activities which are directly related to the principal business of was CEPALCO that established the working procedure
such employer. There are two elements: and methods and supervised CESCO's workers in their
1. Contractor does not have substantial capital or investment tasks
which relates to the job, work or service to be performed 5. The Court, similar to the CA and the labor tribunals, finds that
and the employees recruited, supplied or placed by such CEPALCO's contracting arrangements with CESCO did not
contractor or subcontractor are performing activities amount to ULP. This is because respondent was not able to present
which are directly related to the main business of the any evidence to show that such arrangements violated CEPALCO's
principal; workers' right to self-organization, which, as above-mentioned,
2. contractor does not exercise the right to control over the constitutes the core of ULP. Records do not show that this finding
performance of the work of the contractual employee was further appealed by respondent. Thus, the complaints filed by
2. Labor-only contracting is considered as a form of ULP when the respondent should be dismissed with finality.
same is devised by the employer to "interfere with, restrain or 6. The Court also observes that while respondent did ask for the
coerce employees in the exercise of their rights to self- nullification of the subject contracts between petitioners, and even
organization." sought that the employees provided by CESCO to CEPALCO be
3. In Bankard, Inc. v. NLRC: The Court has ruled that the prohibited declared as the latter's own employees, petitioners correctly argue
acts considered as ULP relate to the workers' right to self- that respondent is not a real party-in-interest and hence, had no
organization and to the observance of a CBA. It refers to "acts that legal standing insofar as these matters are concerned. This is
violate the workers' right to organize." Without that element, the because respondent failed to demonstrate how it stands to be
acts, even if unfair, are not ULP. benefited or injured by a judgment on the same, or that any
4. In these cases, the Court agrees with the CA that CEPALCO was personal or direct injury would be sustained by it if these reliefs
engaged in labor-only contracting were not granted.
1. petitioners failed to show that CESCO has substantial
capital or investment which relates to the job, work or
service to be performed
2. there is no available document to show CESCO's
authorized capital stock at the time of the contracting out
of CEPALCO's meter reading activities to CESCO
3. the list of CESCO's office equipment, furniture and
fixtures, and vehicles offered in evidence by petitioners
does not satisfy the requirement that they could have been
used in the performance of the specific work contracted
out