9. CEPALCO v. CEPALCO Employee’s Labor Union,
G.R. No. 211015, June 20, 2016
Facts:
 The case involves a dispute between Cagayan Electric Power & Light Company
(CEPALCO) and CEPALCO Employee's Labor Union-Associated Labor Unions-Trade
Union Congress of the Philippines (TUCP).
 CEPALCO is a domestic corporation engaged in electric distribution, while CESCO is a
business entity engaged in trading and services.
 CEPALCO and CESCO entered into a Contract for Meter Reading Work on February 19,
2007, where CESCO undertook to perform CEPALCO's meter-reading activities.
 This resulted in the replacement of several employees and union members of CEPALCO
with CESCO workers.
 TUCP filed a complaint for Unfair Labor Practice (ULP) against CEPALCO, alleging that
the contracting out of services violated the Collective Bargaining Agreement (CBA) and
labor laws and would result in the dissipation of TUCP's membership in CEPALCO.
 TUCP claimed that the workers placed by CESCO should be deemed regular employees
of CEPALCO due to labor-only contracting.
 CEPALCO argued that CESCO is an independent job contractor and that the contracting
out of services did not interfere with the rights of CEPALCO's regular workers.
 The Labor Arbiter (LA) dismissed the complaint, finding that CESCO was an independent
contractor and that there was no evidence of ULP by CEPALCO.
 The National Labor Relations Commission (NLRC) affirmed the LA's ruling.
 TUCP filed a petition for certiorari before the Court of Appeals (CA), which partially granted
the petition.
 The CA declared that CESCO was engaged in labor-only contracting and that the workers
hired by CESCO were regular employees of CEPALCO.
 However, the CA found no evidence of ULP by CEPALCO.
 CEPALCO filed petitions for review on certiorari before the Supreme Court, arguing that
the CA erred in declaring CESCO as a labor-only contractor despite the absence of ULP
by CEPALCO.
 The Supreme Court agreed with the CA's finding that CESCO was engaged in labor-only
contracting but found no evidence of ULP by CEPALCO.
 The Court also noted that TUCP was not a real party-in-interest and had no legal standing
to seek relief for the CESCO employees.
 The Court set aside the portions of the CA decisions declaring the CESCO workers as
regular employees of CEPALCO and held that only the employees of CESCO could seek
such relief.
Issue:
a. Whether CESCO engaged in labor-only contracting and that its employees are actually the
regular employees of CEPALCO.
b. Whether contracting out of activities or services being performed by union members constitute
unfair labor practice.
Ruling:
a. Yes. Labor-only contracting is considered as a form of ULP when the same is devised by the
employer to "interfere with, restrain or coerce employees in the exercise of their rights to selforganization."
In Bankard, Inc. v. NLRC: The Court has ruled that the prohibited acts considered as ULP relate
to the workers' right to self-organization and to the observance of a CBA. It refers to "acts that
violate the workers' right to organize." Without that element, the acts, even if unfair, are not ULP.
In these cases, the Court agrees with the CA that CEPALCO was engaged in labor-only
contracting:
1. petitioners failed to show that CESCO has substantial capital or investment which relates
to the job, work or service to be performed
2. there is no available document to show CESCO's authorized capital stock at the time of
the contracting out of CEPALCO's meter reading activities to CESCO
3. the list of CESCO's office equipment, furniture and fixtures, and vehicles offered in
evidence by petitioners does not satisfy the requirement that they could have been used
in the performance of the specific work contracted out
4. the tools and equipment utilized by CESCO in the meter reading activities are owned by
CEPALCO, emphasizing the fact that CESCO has no basic equipment to carry out the
service contracted out by CEPALCO.
5. records are devoid of evidence to prove that the work undertaken was made under the
sole control and supervision of CESCO. Instead, as noted by the CA, it was CEPALCO
that established the working procedure and methods and supervised CESCO's workers
in their tasks
2. The foregoing findings notwithstanding, the Court, similar to the CA and the labor tribunals,
finds that CEPALCO's contracting arrangements with CESCO did not amount to ULP. This is
because respondent was not able to present any evidence to show that such arrangements
violated CEPALCO's workers' right to self-organization, which, as above-mentioned, constitutes
the core of ULP. Records do not show that this finding was further appealed by respondent. Thus,
the complaints filed by respondent should be dismissed with finality.