Security of Tenure is a Right, Not a Privilege: The Implication of Nozomi v. Naredo on Contractual Labor in the Philippines
Allysha May A. Somera[1]
In recent years, there has been a noticeable shift toward job contracting in the Philippines.[2] This trend is often attributed to the dynamics of a globalized economy.[3] As businesses respond to market demands for efficiency, flexibility, and competitiveness, many have adopted contracting arrangements as a practical labor model.[4] Under the Labor Code of the Philippines, job contracting is allowed provided that job contractors possess substantial capital and exercise control over the workers.[5] In contrary, labor-only contracting is prohibited as the intermediary merely supplies workers without capital, equipment, or real independence.[6] This labor contracting scheme circumvents the law and strips workers of essential protections.[7]
The difference in legitimate job contracting and the prohibited labor-only contracting was discussed in the case of Nozomi v. Naredo[8]. In this case, Celestino Naredo and several others were hired by Nozomi Fortune Services, Inc. and assigned to work at Samsung Electro-Mechanics Philippines on various dates between 2003 and 2005.[9] They worked as production operators using Samsung’s equipment, under the supervision of Samsung’s personnel.[10] In 2010, they were told they could be hired as regular employees of Samsung if they passed a qualifying exam.[11] However, they failed, and Samsung informed them their services were no longer needed.[12] Subsequently, they tendered handwritten resignation letters.[13]
A month later, they filed a complaint for illegal dismissal and regularization, alleging that Nozomi was a mere labor-only contractor and that they were effectively regular employees of Samsung.[14] The Labor Arbiter and the NLRC dismissed the complaint, ruling that Nozomi was a legitimate independent contractor and that the workers voluntarily resigned.[15] On appeal, the Court of Appeals reversed the labor tribunals and declared that Nozomi was a labor-only contractor and that Samsung was the actual employer. However, the Court still ruled there was no illegal dismissal.[16]
Nozomi then filed a Petition for Review on Certiorari under Rule 45 before the Supreme Court.[17] Upon this appeal, the issue of whether or not the Court of Appeals erred in declaring Nozomi as a labor-only contractor and in finding Samsung as the true employer of Naredo was raised.[18]
The Supreme Court, affirmed the decision of the Court of Appeals that Nozomi was a labor-only contractor and that Samsung was the actual employer of Celestino Naredo.[19] Under Art. 106 of the Labor Code, “Labor-only contracting exists when the contractor lacks substantial capital or investment and the workers perform activities directly related to the principal’s business.[20] Caballero v. Vikings Commissary also emphasizes that a mere Department of Labor and Employment (DOLE) Certificate of Registration is not conclusive evidence of legitimate contracting as an independent contractor and of its operation.[21] The “totality of circumstances test” and the “control test” are applied to determine the existence of an employer-employee relationship.[22]
In this case, while Nozomi was registered with the DOLE and had substantial capital, the Court found that it did not provide tools or equipment necessary for the workers’ jobs; these were owned by Samsung.[23] Furthermore, Samsung exercised control over Naredo’s work since its supervisors gave instructions, and Naredo’s tasks were part of Samsung’s core production line.[24] These circumstances are also key indicators of labor-only contracting. Naredo’s long-standing deployment to Samsung for more than five years also indicated regular employment.[25] Hence, Samsung was determined to be the true employer.[26] However, as all labor tribunals and the CA found, Naredo voluntarily resigned and failed to present sufficient evidence of coercion or constructive dismissal.[27]
Therefore, the Supreme Court affirmed the Court of Appeals’ ruling that Nozomi was engaged in labor-only contracting, and Samsung was Naredo’s actual employer.[28] The Court, however, ruled that Naredo’s resignation was voluntary, citing a lack of evidence to support his claim of coercion or constructive dismissal.[29]
APPLYING THE FOUR-FOLD TEST AND CONTROL TEST
The case of Nozomi v. Naredo reinforces the application of the four-fold test and control test to determine employer-employee relationships.[30] The four fold test, which consists of (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power to discipline and dismiss; and (4) the employer’s power to control the employee with respect to the means and methods by which the work is to be accomplished,[31] is commonly used to ascertain the presence of an employer-employee relationship.[32] Among the four-fold test, the control factor is regarded as the most significant. The control test provides that an employer-employee relationship exists when the employer retains the right to control the employee not only with respect to the end result of the work, but also the means and methods by which it is carried out.[33] In the absence of such a right, no such relationship exists.[34]
The application of these two tests reiterates that substantial capital alone does not suffice to establish independent contractor status if the contractor lacks the tools, control, or independence in work execution.[35] This aligns with previous rulings such as Cabellero v. Vikings Commissary, which held that job contracting requires not just capital but also independence in delivering specific services. [36]
TENURE UNDER THREAT: THE REALITY OF TENURE PROTECTIONS AND LABOR PRACTICES
Workers in labor-only contracting arrangements are entitled to regular employment status with the principal employer, pursuant to Art. 106 of the Labor Code.[37] Moreover, the Court’s reliance on the four-fold and control tests reflects a consistent doctrinal approach that, where the principal exercises control over the means and methods of work and the workers’ tasks are integral to the principal’s business, the law treats the arrangement as regular employment.[38]In this sense, the decision protects the constitutional guarantee of security of tenure by preventing the circumvention of regularization through contractual concealment.
Nevertheless, the same jurisprudence also reveals a recurring weakness in the enforcement of these rights, specifically the procedural burdens that often prevent workers from asserting their rights effectively.[39] The denial of Naredo’s illegal dismissal claim, despite the finding of labor-only contracting and his recognition as a regular Samsung employee, was grounded on the lack of evidence showing that his resignation was forced or the result of constructive dismissal.[40] This illustrated structural tension in labor law, as underlying rights such as security of tenure may exist on paper, but procedural burdens, particularly the requirement to prove constructive dismissal, can limit their practical effect. Workers in precarious arrangements often lack the resources, documentation, or bargaining power to substantiate such claims, making it difficult to translate formal recognition of rights into actual relief. Hence, Nozomi v Naredo reflects both the strength and fragility of labor protections, which are strong in principle but vulnerable to procedural hurdles that employers may exploit, underscoring the need for more worker-centered evidentiary standards and enforcement mechanisms in labor disputes.[41]
CLOSING THE GAPS: STRENGTHENING ENFORCEMENT IN LABOR LAW
This jurisprudence carries significant implications for Filipino laborers, particularly those engaged under service contracting arrangements. While the Supreme Court’s recognition of Samsung as the true employer strengthens the doctrinal protections against labor-only contracting, the case also reveals that these protections can be undermined without stronger enforcement mechanisms. This underscores the urgent need for the DOLE and local governments to adopt more proactive and rigorous scrutiny of service contracts, ensuring that contractual arrangements are not being used to circumvent regularization.[42] Beyond regulatory oversight, the decision supports calls for evidentiary reform, especially in constructive dismissal cases, so that the burden of proving coercion does not rest entirely on workers who often lack the documentation, legal assistance, or bargaining power to sustain their claims.
Preventive measures that empower workers before disputes escalate are likewise essential.[43] Legal literacy and organizing at the community-level can equip laborers with the knowledge to recognize unlawful contractual schemes and understand their rights under the Labor Code. Through fostering a culture of early rights assertion, workers are better positioned to resist pressure to resign or to document coercive practices that might later form the basis of a constructive dismissal claim. Nozomi v. Naredo emphasizes that the State must fortify institutional enforcement against contractual circumvention, while civil society must invest in empowering workers to act collectively and decisively before they lose access to legal remedies.
[1] Allysha May A. Somera is an incoming fourth-year law student of Ateneo de Naga University. She was part of SALIGAN’s 2025 Internship Program.
[2] Asean Services Employees Trade Unions Council, between Flexibility and Security: The Rise of Non-Standard Employment In Selected Asean Countries, at 97, para 1, available at https://library.fes.de/pdf-files/bueros/singapur/10792.pdf (last accessed Jun. 14, 2025).
[3] Id. at 27.
[4] Winfred M. Villamil & Joel Hernandez, Globalization, Labor Markets and Human Capital in the Philippines, at 1, available at https://www.dlsu.edu.ph/wp-content/uploads/pdf/vcri/aki/_idrc/_vol2/01NovVillamilAndHernandezGlobalization2.pdf (last accessed Jul. 08, 2025).
[5] A Decree Instituting a Labor Code, thereby Revising and Consolidating Labor and Social Laws to Afford Protection to Labor, Promote Employment and Human Resources Development and ensure Industrial Peace Based on Social Justice [LABOR CODE], Republic Act No. 442, arts. 106-9, para. 3 (as amended).
[6] Department of Labor and Employment (DOLE) Dept. Order No. 10, art.1 (S. 1997); Department of Labor and Employment (DOLE) Dept. Order No. 18-02, §§5-6 (S. 2002); Department of Labor and Employment (DOLE) Dept. Order No. 18-A, §§4-6 (S. 2011); & Department of Labor and Employment (DOLE) Dept. Order No. 174, §§ 4-5 (S. 2017).
[7] Id.
[8] Nozomi Fortune Services, Inc. v. Naredo, G.R. No. 221043 (2024).
[9] Id.
[10] Id.
[11] Id.
[12] Id.
[13] Id.
[14] Nozomi v. Naredo, supra note 35.
[15] Id.
[16] Id.
[17] Id.
[18] Id.
[19] Id.
[20] LABOR CODE, art. 294 (as amended).
[21] Elba J. Caballero v. Vikings Commissary, G.R. No. 238859, 931 Phil. 552 (2022).
[22] Nozomi v. Naredo, supra note 35.
[23] Id.
[24] Id.
[25] Id.
[26] Id.
[27] Id.
[28] Nozomi v. Naredo, supra note 35.
[29] Id.
[30] Id.
[31] Anselmo P. Bulanon v. Mendco Development Corporation, G.R. No. 219637, 941 Phil. 628 (2023).
[32] Marion N. Felicilda v. Manchesteve H. Uy, G.R. No. 221241, 795 Phil. 408 (2016).
[33] Ronaldo O. Martinez, et al., v. Magnolia Poultry Processing Plant (MPPP), now named as San Miguel Foods, Inc., (SMFI) – MPPP, G.R. No. 231579, 904 Phil. 475 (2021).
[34] Id.
[35] Nozomi v. Naredo, supra note 35.
[36] Caballero v. Vikings, supra note 48.
[37] LABOR CODE, art. 106 (as amended).
[38] LABOR CODE, art. 294 (as amended).
[39] Id.; See Gan v. Galderma Philippines, Inc., G.R. No. 177167, 701 Phil. 612 (2018).
[40] Nozomi v. Naredo, supra note 35.
[41] Nozomi v. Naredo, supra note 35.
[42] See DOLE Department Order No. 174, S. 2017.
[43] See International Labour Organization, “Freedom of Association and Protection of the Right to Organise Convention” (Convention No. 87, 1948).