SC: Lack of equipment not automatically labor-only contracting

The Supreme Court (SC) clarified that a contractor’s lack of tools, equipment, or machinery does not automatically constitute prohibited labor-only contracting in cases where the contracted work does not require them.

In a 21-page decision, the SC Third Division found that MMA Competent Manpower and General Services, a domestic corporation engaged in providing human resources and various services to its clients and backed by substantial capital, was a legitimate labor contractor despite lacking equipment.

Citing its ruling in Conqueror Industrial Peace Management Cooperative v. Balingbing, the SC said the law does not require a contractor to possess both substantial capital and investment in the form of tools, equipment, or machinery.

The High Court said the ruling clarified that the absence of investment in equipment does not automatically render a contractor a labor-only contractor.

The SC also cited Nozomi Fortune Services v. Naredo, where it held that substantial investment in the form of tools or equipment is required only when the contracted job necessitates them to prevent mere manpower supply in core business functions.

“What is determinative is that MMA has substantial capital, operates as an independent contractor, and exercises the four-fold test of employment over petitioners, thereby meeting the requisites of legitimate job contracting under the law,” the SC said.

According to the SC, the case stemmed from a petition for alleged illegal dismissal filed by two individuals against MMA.

MMA placed the petitioners on floating status after two of its clients requested their reassignment. The company later offered to reassign them to Cavite and Bataan.

However, the petitioners declined and filed a complaint for illegal dismissal, claiming that MMA was a labor-only contractor and that they were regular employees of its clients.

The National Labor Relations Commission (NLRC) and the Court of Appeals (CA) later ruled that MMA was a legitimate job contractor.

The High Court affirmed the rulings.

The SC also said the petitioners were neither illegally dismissed nor guilty of abandonment.

“As the CA and the NLRC aptly found, ‘petitioners were not dismissed by MMA… they had simply rejected the offers for reassignment by MMA.’ Indubitably, MMA could not have dismissed petitioners from work,” it said.

The SC said the petitioners may return to work but are not entitled to back wages.

The decision, penned by Associate Justice Henri Jean Paul Inting, was promulgated in November 2025 and made public in May 2026.—MCG, GMA News