CA reverses DOLE, says PLDT, Miescor not involved in labor-only contracting practice

The Court of Appeals has reversed Labor Secretary Silvestre Bello III's rulings that found the Philippine Long Distance Telephone Company (PLDT) and its  line installation and cable maintenance contractor engaged in labor-only contracting.

Meralco Industrial Engineering Services Corporation (MIESCOR), the contractor, on Monday won a case that challenged a Department of Labor and Employment (DOLE) order for it to pay 279 workers P2.3 million in converted service incentive leaves and refunded deductions for tools and uniform.

PLDT won another labor case last August when the CA blocked the DOLE from implementing an order for the telco to regularize its contractual employees.

The PLDT-MIESCOR case stemmed from the DOLE's findings that the contractor's employees were not being paid their service incentive leaves nor provided paternity leaves.

It was also found that employees were meted unauthorized deductions for tools and uniform.

This prompted a DOLE regional director, later upheld by Bello, to declare the companies engaged in labor-only contractor activities.

In the new decision, the CA's 17th Division disagreed with the DOLE's conclusion that MIESCOR employees performing the same functions as PLDT employees indicated labor-only contracting.

The court said the Labor Code allowed contracting arrangements for the performance of specific jobs and did not specify the kind of work that may be contracted out.

While a DOLE order tightens rules on regulating contracting and subcontracting, the "mere administrative issuance" "must not also create any distinction that will have the effect of broadening or amending the legislative intent," the court said.

It was this order, DO 174, that served as the basis for a DOLE regional director's conclusion that labor-only contracting is present in the PLDT-MIESCOR case.

Moreover, the CA said the DOLE erred when it zeroed in on MIESCOR's alleged lack of power of control over its employees when there was another indicator for labor-only contracting, as defined by a department order that came before DO 174 and originally prohibited the practice.

The other indicator is the contractor lacking substantial capital or investments in the form of tools, equipment, machinery, work premises and others, and the workers performing tasks necessary to the company's operation, or directly related to the business of the principal.

This factor was "simply glossed over" by the DOLE, the CA said.

"With respect to the element of control, we rule that the Regional Director was not able to amply demonstrate the lack thereof," it added.

Aside from ruling against DOLE, the CA also held that findings of labor standard violations in the case should have been referred to the Philippine Contractors Accreditation Board (PCAB) for appropriate action.

As an engineering and construction company accredited by the PCAB, MIESCOR's services for PLDT should have been covered by DO 19, series of 1993, or the Guidelines Governing the Employment of Workers in the Construction Industry, and not DO 174, the CA ruled.

The decision was written by Associate Justice Ma. Luisa Quijano-Padilla, with concurrences from Associate Justices Elihu Ybañez and Germano Francisco Legaspi. —NB, GMA News