2.1  Supreme Court Decision G.R. No. 244695 – Manggagawa sa Komunikasyon ng Pilipinas v. PLDT, promulgated on 14 February 2024

In this case, the Supreme Court had occasion to emphasize the distinction between labor-only contracting and legitimate contracting, as well as remind public respondent Secretary of Labor that substantial evidence is required to prove the existence of labor-only contracting. On the other hand, it is the burden of the employer to prove likewise with substantial evidence the existence of seasonal or fixed-term employment, otherwise the employees shall be deemed regular.

PLDT is a corporation engaged in the telecommunications business. It engaged the services of several contractors and sub-contractors to provide services in various areas of its operation. MKP was the exclusive bargaining agent of PLDT’s rank-and-file employees.

An Assessment Team from the Department of Labor and Employment conducted interviews of PLDT’s employees with regard to the company’s contracting activities and practices. The Assessment Team found that PLDT and its contractors are engaged in labor-only contracting, in violation of DOLE Department Order No. 18-A (D.O. 18-A).

The Regional Director of DOLE issued an Order finding that PLDT violated the prohibition against labor-only contracting, which is a labor standards violation within the visitorial and enforcement powers of the DOLE. Further, the legal consequence of labor-only contracting is the regularization by the principal of the employees of the labor-only contractor. Thus, PLDT and its contractors were held solidarily liable for the monetary benefits due to the contractors’ workers amounting to more than 78 Million Pesos. PLDT was further ordered to regularize said workers, while the contractors were ordered to cease and desist from said activities and those with existing DO 18-A registration were revoked.

On appeal to the Secretary of Labor, Secretary Bello denied PLDT’s appeal, but partially granted the appeal of the contractors. Thus, contractors that were able to show proof of compliance with DO 18-A were declared as legitimate contractors.

The Secretary’s Resolution was raised to the Court of Appeals (CA) on a Petition for Certiorari. The CA affirmed the Resolution with modifications, reversing the Secretary’s ruling insofar as it ordered the regularization of the following groups of workers:

1. 1. Janitorial, maintenance, security, and messengerial services;
   2. Medical services provider;
   3. Individuals who render “professional services;”
   4. Contractual workers engaged in information technology-based services; and
   5. Employees engaged in sales who are paid on commission basis

The CA found that the Secretary’s Resolution was issued with grave abuse of discretion, because it presumed, instead of demonstrated, the existence of control. It was based on interviews conducted by labor law compliance officers of not more than a thousand individuals, but the results of which were made to apply to at least 7,000 employees. Thus, such findings cannot constitute the substantial evidence required to prove the existence of employer-employee relationship or labor-only contracting.

The parties filed their respective appeals to the Supreme Court, which upheld the findings of the CA.

Labor-only contracting vs. legitimate contracting

The Supreme Court reiterated that labor contracting is not illegal per se. There is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a principal and any of the following elements are present:

1. 1. The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of the principal; or
   2. The contractor does not exercise the right to control the performance of the work of the contractual employee.

Substantial evidence needed to establish labor-only contracting

The Supreme Court agreed with the CA’s ruling that the Secretary’s finding of labor-only contracting was not supported by substantial evidence. Substantial evidence is defined as such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. The Secretary’s findings based principally on interviews of the workers are not substantial to establish labor-only contracting and other illicit forms of employment arrangements. The Supreme Court warned against the dangers of using anecdotal evidence to support factual conclusions, as anecdotal evidence is malleable and may be tailored to suit any narrative or conclusion.

Further, the application to more than 7,000 workers of the DOLE’s findings based on statements made by less than 1,000 employees is speculative. Conclusions based on “sampling” or “probability” do not constitute substantial evidence, as the circumstances showing control must be established with particularity.

Burden of employer to prove seasonal or fixed-term employment

Nevertheless, the workers engaged in installation, repair, and maintenance services of PLDT lines should be regularized because they perform tasks that are necessary and desirable, and directly related to the business of PLDT.

It was PLDT’s obligation to prove with substantial evidence that the workers were seasonal or fixed-term employees. To exclude those “seasonal” employees from regularization, the employer must show that:

1. 1. The employee is performing work or services that are seasonal in nature; and
   2. They had been employed for the duration of the season

PLDT did not offer any evidence to establish any of these circumstances. Thus, the employees in question must be regularized by PLDT.

This Decision demonstrates that while Philippine labor laws are highly protective of the rights of labor, it is imperative that the burden of proof must be satisfied to establish essential facts, as well as violations of labor law.

What Actions Should Foreign Companies Do?

Companies which are contracting out work should ensure compliance with the rules on legitimate labor contracting. The latest rules on labor-contracting are found in DOLE Department Order No. 174-17.

2.2  Philippine Competition Commission (PCC) Commission Resolution No. 01-2024 – Adjusting the Merger Notification Thresholds Pursuant to Memorandum Circular 18-001, issued on 21 February 2024

The Philippine Competition Commission (Commission) is the government authority mandated to implement the country’s competition policies, foremost of which is Republic Act No. 10667, or the Philippine Competition Act (PCA). The PCA requires compulsory notification of mergers or acquisitions where the transaction value exceeds a certain threshold set by the Commission.

On 21^st February 2024, the Commission issued Resolution No. 01-2024, which adjusted the notification thresholds effective 1 March 2024, from the previous thresholds set under Memorandum Circular No. 04-2023.

Under the new threshold, parties to a merger or acquisition shall be required to provide notification in compliance with Section 17 of the PCA when:

1. The Size of Party exceeds Seven Billion Eight Hundred Million Pesos (Php7,800,000,000.00);
   and
2. The Size of Transaction [under Rule 4, Section 3(b), subsections (1), (2), (3) or (4), or Section 3(d) of the IRR, as the case may be] exceeds Three Billion Two Hundred Million Pesos (Php3,200,000,00.00).

The revised thresholds shall also apply to joint venture transactions.

What Actions Should Foreign Companies Do?

Entities which are involved in or anticipating a merger or acquisition should take note of the increased thresholds for compulsory notification in order to determine whether they are required to notify the Commission of the transaction.