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Palscon advises: Avoid manpower cooperatives

Friday, November 10, 2006

Companies intending to hire workers for any length of time are advised to deal only with legitimate service providers, not manpower cooperatives, to avoid being penalized for violations of the Labor Code and other laws.

This was the advice given yesterday by lawyer Giovanni H. Melgar, president of the 57-member Philippine Association of Local Service Contractors (PALSCON), following the promulgation of court decisions ordering companies hiring workers from so-called "manpower cooperatives" to pay damages to the concerned workers for violations of the Labor Code.

Melgar said such circumvention of the law can prove "very costly" to a company hiring workers from a "manpower cooperative" which is into labor-only business that lacks the authority and capacity to supply workers to a client firm.

To avoid inconvenience and costly litigation, Melgar said, companies should hire workers only from legitimate service providers complying with the Labor Code and other measures protecting workers, and not from manpower cooperatives.

He cited the "landmark decision" of the Supreme Court in G.R. No. 149011, San Miguel Corp. vs. Aballa et al., which ruled that the 97 workers supplied by the Sunflower Multi-Purpose Cooperative to the SMC Bacolod Shrimp Processing Plant were SMC employees and as such are entitled to corresponding damages, amounting to at least P100,000 each.

The high court's Third Division also ordered SMC and Sunflower to jointly and severally pay each worker a differential pay and separation pay.

The 97 workers were hired in 1993. In July 1995, they filed a complaint with the National Labor Relations Commission, praying to be declared as employees of SMC, with claims for recovery of all benefits and privileges enjoyed by SMC rank and file employees.

On September 10, 1995, the workers were told by their SMC supervisor that they would no longer report the following day as the plant would be closing its operations.

On February 7, 2001, the Court of Appeals reversed the labor arbiter and NLRC decisions, and ordered the SMC to grant workers separation pay and other benefits.

The Supreme Court subsequently affirmed the CA decision and ordered SMC and Sunflower to pay the damages.

The SC noted that Sunflower "did not cater to the clients other than SMC, and with the closure of SMC's shrimp processing plant, Sunflower likewise ceased to exist."

The decision cited Article 106 of Labor Code: "There is labor-only contracting where the person supplying workers to an employer does not have substantial capital or investment... and the workers recruited and placed by such person are performing activities which are directly related to the principal business of the employer."

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