Escario vs. NLRC

G.R. No. 124055 8 June 2000

Facts: Petitioners are merchandisers of respondent company. They withdraw stocks from the

warehouse , fix the prices, price-tagging, displaying the products and inventory. They were paid

by the company through an agent to avoid liability. They claim that they were under the control

and supervision of the company. They asked for regularization of their status. They were then

given notice of their termination. The company denied any employer-employee relationship. They

claim that they used an agent or independentcontractors to sell the merchandise. The Labor

Arbiter ruled that there was an employer-employee relationship. The NLRC set aside the decision

and said that there was no such relationship. The agent was a legitimate independent contractor.

Issue: Whether or not the petitioners are employees of the company.

Held: The Court ruled that there is no employer-employee relationship and that petitioners are

employees of the agent. The agent is a legitimate independent contractor. Labor-

only contractoroccurs only when the contractor merely recruits, supplies or places workers to

perform a job for a principal. The labor-only contractordoesn’t have substantial capital or

investment and the workers recruited perform activities directly related to the principal business

of the employer. There is permissible contracting only when thecontractor carries an independent

business and undertakes the contract in his own manner and method, free from the control of the

principal and the contractor has substantial capital or investment. The agent, and not the

company, also exercises control over the petitioners. No documents were submitted to prove that

the company exercised control over them. The agent hired the petitioners. The agent also pays

the petitioners, no evidence was submitted showing that it was the company paying them and not

the agent. It was also the agent who terminated their services. By petitioning for regularization,

the petitioners concede that they are not regular employees.