Determination of real parties in interest involving sole proprietorships/franchisees set during mandatory conferences

            In a Memorandum dated 01 February 2013, Chairman Gerardo C. Nograles reminded all the Executive/Labor Arbiters that a business or franchise name, unlike a corporation, has no juridical or legal personality to be sued.

            “As to a business franchise, the Franchisor merely grants the Franchisee the right to use its trademark or trade name as well as certain business system and processes, to produce or market a good or service according to a certain standard,” the Chairman said.

            “The franchise agreement does not create an employer-employee relationship between the Franchisor and the workers engaged by the Franchisee,” he added.   

            The memorandum was purposely issued to avoid the circuitous process of remanding labor cases to the Arbitration Branch.

            Records show that several complaints are being filed wherein only the Business or Franchise Name of the respondent or the Franchisor is named as party respondent.

            For this purpose, the memorandum directed the Labor Arbiters to determine the proper parties in a labor case during the mandatory conferences, especially in cases where only the business or franchise name or the franchisor is being sued as party respondent, and to cause the immediate amendment of the complaint by including the proper party respondents.

            In the event that the proper party respondent/s cannot be determined within a reasonable time, the complaint will be dismissed without prejudice on the ground of lack of cause of action.

            The memorandum was part of the strategy and administrative intervention of the NLRC to streamline the procedures at the arbitration level pursuant to its commitment of reforming labor adjudication and arbitration.


Research, Information and Publications Division

National Labor Relations Commission