Meralco Indl Engineering Services vs. NLRC, G.R. No.145402

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THIRD DIVISION

MERALCO INDUSTRIAL G.R. No. 145402


ENGINEERING SERVICES
CORPORATION, Present:
Petitioner,
YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
NATIONAL LABOR REYES, JJ.
RELATIONS COMMISSION,
OFELIA P. LANDRITO Promulgated:
GENERAL SERVICES and/or
OFELIA P. LANDRITO, March 14, 2008
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45


of the 1997 Revised Rules of Civil Procedure seeking to reverse and set
aside (1) the Decision1[1] of the Court of Appeals in CA-G.R. SP No. 50806,
dated 24 April 2000, which modified the Decision 2[2] of the National Labor
Relations Commission (NLRC), dated 30 January 1996 in NLRC NCR CA
No. 001737-91 (NLRC NCR Case No. 00-09-04432-89), and thereby held
1 [1]
Penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices Fermin A.
Martin, Jr. and Romeo A. Brawner, concurring; rollo, pp. 34-44.
2 [2]
Penned by Commissioner Vicente S.E. Veloso with Presiding Commissioner Bartolome
S. Carale and Commissioner Alberto R. Quimpo, concurring; rollo, pp. 120-133.
the petitioner solidarily liable with the private respondents for the
satisfaction of the separation pay of the latter’s employees; and (2) the
Resolution3[3] of the appellate court, dated 27 September 2000, in the same
case which denied the petitioner’s Motion for Reconsideration.

Petitioner Meralco Industrial Engineering Services Corporation


(MIESCOR) is a corporation duly organized and existing under the laws of
the Republic of the Philippines and a client of private respondents. Private
respondent Ofelia P. Landrito General Services (OPLGS) is a business firm
engaged in providing and rendering general services, such as janitorial and
maintenance work to its clients, while private respondent Ofelia P. Landrito
is the Proprietor and General Manager of OPLGS.

The factual milieu of the present case is as follows:

On 7 November 1984, petitioner and private respondents executed


Contract Order No. 166-84,4[4] whereby the latter would supply the petitioner
janitorial services, which include labor, materials, tools and equipment, as
well as supervision of its assigned employees, at petitioner’s Rockwell
Thermal Plant in Makati City. Pursuant thereto, private respondents
assigned their 49 employees as janitors to petitioner’s Rockwell Thermal
Plant with a daily wage of P51.50 per employee.

On 20 September 1989, however, the aforesaid 49 employees


(complainants) lodged a Complaint for illegal deduction, underpayment,

3[3]
Id. at 46.
4[4]
Id. at 60-63.
non-payment of overtime pay, legal holiday pay, premium pay for holiday
and rest day and night differentials 5[5] against the private respondents before
the Labor Arbiter. The case was docketed as NLRC NCR Case No. 00-09-
04432-89.

In view of the enactment of Republic Act No. 6727, 6[6] the contract
between the petitioner and the private respondents was amended 7[7] for the
10th time on 3 November 1989 to increase the minimum daily wage per
employee from P63.55 to P89.00 or P2,670.00 per month. Two months
thereafter, or on 2 January 1990,8[8] petitioner sent a letter to private
respondents informing them that effective at the close of business hours on
31 January 1990, petitioner was terminating Contract Order No. 166-84.
Accordingly, at the end of the business hours on 31 January 1990, the
complainants were pulled out from their work at the petitioner’s Rockwell
Thermal Plant. Thus, on 27 February 1990, complainants amended their
Complaint to include the charge of illegal dismissal and to implead the
petitioner as a party respondent therein.

Since the parties failed to settle amicably before the Labor Arbiter,
they submitted their respective position papers and other pleadings together
with their documentary evidence. Thereafter, a Decision was rendered by
the Labor Arbiter on 26 March 1991, dismissing the Complaint against the

5[5]
Records, pp. 1-6.
6 [6]
Its complete title is “An Act to Rationalize Wage Policy Determination by Establishing
the Mechanism and Proper Standards Therefor, Amending for the Purpose Article 99 of, and
Incorporating Articles 120, 121, 122, 123, 124, 126 and 127 into, Presidential Decree No. 442, as
Amended, Otherwise Known as the Labor Code of the Philippines, Fixing New Wage Rates,
Providing Wage Incentives for Industrial Dispersal to the Countryside, and for Other Purposes.”
It is also known as the “Wage Rationalization Act.” It took effect on 1 July 1989,
7[7]
Rollo, p. 65.
8[8]
Id. at 64.
petitioner for lack of merit, but ordering the private respondents to pay the
complainants the total amount of P487,287.07 representing unpaid wages,
separation pay and overtime pay; as well as attorney’s fees in an amount
equivalent to 10% of the award or P48,728.70. All other claims of the
9[9]
complainants against the private respondents were dismissed.

Feeling aggrieved, private respondents appealed the aforesaid


Decision to the NLRC. Private respondents alleged, among other things,
that: (1) 48 of the 49 complainants had executed affidavits of desistance and
they had never attended any hearing nor given any authority to anyone to file
a case on their behalf; (2) the Labor Arbiter erred in not conducting a full-
blown hearing on the case; (3) there is only one complainant in that case
who submitted a position paper on his own; (4) the complainants were not
constructively dismissed when they were not given assignments within a
period of six months, but had abandoned their jobs when they failed to
report to another place of assignment; and (5) the petitioner, being the
principal, was solidarily liable with the private respondents for failure
to make an adjustment on the wages of the complainants. 10[10] On 28
May 1993, the NLRC issued a Resolution11[11] affirming the Decision of the
Labor Arbiter dated 26 March 1991 with the modification that the
petitioner was solidarily liable with the private respondents,
ratiocinating thus:

9[9]
Id. at 83-84.
10[10]
Id. at 86-87.
11[11]
Penned by Commissioner Vicente S.E. Veloso with Commissioner Alberto R. Quimpo,
concurring; id. at 86-97.
We, however, disagree with the dismissal of the case against
[herein petitioner]. Under Art. 10712[12] of the Labor Code of the
Philippines, [herein petitioner] is considered an indirect employer and
can be held solidarily liable with [private respondents] as an
independent contractor. Under Art. 109,13[13] for purposes of
determining the extent of its liability, [herein petitioner] is considered
a direct employer, hence, it is solidarily liable for complainant’s (sic)
wage differentials and unpaid overtime. We find this situation
obtaining in this case in view of the failure of [private respondents] to pay
in full the labor standard benefits of complainants, in which case liability
is limited thereto and does not extend to the establishment of employer-
employee relations.14[14] [Emphasis supplied].

Both private respondents and petitioner separately moved for


reconsideration of the aforesaid Resolution of the NLRC. In their Motion
for Reconsideration, private respondents reiterated that the complainants
abandoned their work, so that private respondents should not be liable for
separation pay; and that petitioner, not private respondents, should be liable
for complainants’ other monetary claims, i.e., for wage differentials and
unpaid overtime. The petitioner, in its own Motion for Reconsideration,
asked that it be excluded from liability. It averred that private respondents
should be solely responsible for their acts as it sufficiently paid private
respondents all the benefits due the complainants.

On 30 July 1993, the NLRC issued an Order15[15] noting that based on


the records of the case, the judgment award in the amount of

12[12]
ART. 107. INDIRECT EMPLOYER. The provisions of the immediately preceding
Article shall likewise apply to any person, partnership, association or corporation which, not being
an employer, contracts with an independent contractor for the performance of any work, task, job
or project.
13[13]
ART. 109. SOLIDARY LIABILITY. The provisions of existing laws to the contrary
notwithstanding, every employer or indirect employer shall be held responsible with his contractor
or subcontractor for any violation of any provision of this Code. For purposes of determining the
extent of their civil liability under this Chapter, they shall be considered as direct employers.
14[14]
Rollo, pp. 88-89.
15[15]
Penned by Commissioner Vicente S.E. Veloso with Presiding Commissioner Bartolome S. Carale
and Commissioner Alberto R. Quimpo, concurring; id. at 98-101.
P487,287.07 was secured by a surety bond posted by the private
respondents;16[16] hence, there was no longer any impediment to the
satisfaction of the complainants’ claims. Resultantly, the NLRC denied the
private respondents’ Motion for Reconsideration. The NLRC likewise
directed the Labor Arbiter to enforce the monetary award against the private
respondents’ surety bond and to determine who should finally shoulder the
liability therefor.17[17]

Alleging grave abuse of discretion of the NLRC in its issuance of the


Resolution and Order dated 28 May 1993 and 30 July 1993, respectively,
private respondents filed before this Court a Petition for Certiorari with
prayer for the issuance of a writ of preliminary injunction. The same was
docketed as G.R. No. 111506 entitled Ofelia Landrito General Services v.
National Labor Relations Commission. The said Petition suspended the
proceedings before the Labor Arbiter.

On 23 May 1994, however, this Court issued a Resolution 18[18]


dismissing G.R. No. 111506 for failure of private respondents to sufficiently
show that the NLRC had committed grave abuse of discretion in rendering
its questioned judgment. This Court’s Resolution in G.R. No. 111506
became final and executory on 25 July 1994.19[19]

As a consequence thereof, the proceedings before the Labor Arbiter


resumed with respect to the determination of who should finally shoulder the

16[16]
Records, pp. 250-251.
17[17]
Rollo, p. 100.
18[18]
Records, p. 563.
19[19]
As shown in the Entry of Judgment bearing date 13 September 1994; id. at 573.
liability for the monetary awards granted to the complainants, in accordance
with the NLRC Order dated 30 July 1993.

On 5 October 1994, the Labor Arbiter issued an Order, 20[20] which


reads:

As can be gleaned from the Resolution dated [28 May 1993], there
is that necessity of clarifying the respective liabilities of [herein petitioner]
and [herein private respondents] insofar as the judgment award in the total
sum of P487,287.07 is concerned.

The judgment award in the total sum of P487,287.07 as


contained in the Decision dated [26 March 1991] consists of three (3)
parts, as follows: First, the judgment award on the underpayment;
Second, the judgment award on separation pay; and Third, the judgment
award on the overtime pay.

The question now is: Which of these awards is [petitioner]


solidarily liable with [private respondents]?

An examination of the record elicits the finding that


[petitioner] is solidarily liable with [private respondents] on the
judgment awards on the underpayment and on the non-payment of
the overtime pay. xxx. This joint and several liability of the
contractor [private respondents] and the principal [petitioner] is
mandated by the Labor Code to assure compliance of the provisions
therein, including the statutory minimum wage (Art. 99, 21[21] Labor Code).
The contractor-agency is made liable by virtue of his status as direct
employer. The principal, on the other hand, is made the indirect
employer of the contractor-agency’s employees for purposes of paying
the employees their wages should the contractor-agency be unable to
pay them. This joint and several liability facilitates, if not guarantees,
payment of the workers performance of any work, task, job or
project, thus giving the workers ample protection as mandated by the
1987 Constitution.

20[20]
Penned by Labor Arbiter Donato G. Quinto, Jr.; rollo, pp. 103-105.
21[21]
Art. 99. Regional Minimum Wages. The minimum wage rates for agricultural and non-
agricultural employees and workers in each and every region of the country shall be those
prescribed by the Regional Tripartite Wages and Productivity Boards. [As amended by Republic
Act No. 6727 (Wage Rationalization Act)]. By virtue of Republic Act No. 6727 the Regional
Tripartite Wage and Productivity Boards or RTWPBs have issued orders fixing the minimum
wages for their respective regions.
In sum, the complainants may enforce the judgment award on
underpayment and the non-payment of overtime pay against either [private
respondents] and/or [petitioner].

However, in view of the finding in the Decision that [petitioner]


had adjusted its contract price for the janitorial services it contracted with
[private respondents] conforming to the provisions of Republic Act No.
6727, should the complainants enforce the judgment on the underpayment
and on the non-payment of the overtime pay aginst (sic) [petitioner], the
latter can seek reimbursement from the former [meaning (private
respondents)], but should the judgment award on the underpayment and on
the non-payment of the overtime pay be enforced against [private
respondents], the latter cannot seek reimbursement against [petitioner].

The judgment award on separation pay is the sole liability of


[private respondents].

WHEREFORE, [petitioner] is jointly and severally liable with


[private respondents] in the judgment award on underpayment and
on the non-payment of overtime pay. Should the complainants
enforce the above judgment award against [petitioner], the latter can
seek reimbursement against [private respondents], but should the
aforementioned judgment award be enforced against [private
respondents], the latter cannot seek reimbursement from the
[petitioner].

The judgment award on the payment of separation pay is the


sole liability of [private respondents].

Let an alias writ of execution be issued. [Emphasis supplied].

Again, both the private respondents and the petitioner appealed the
afore-quoted Order of the Labor Arbiter to the NLRC. On 25 April 1995,
the NLRC issued a Resolution22[22] affirming the Order dated 5 October 1994
of the Labor Arbiter and dismissing both appeals for non-posting of the
appeal or surety bond and/or for utter lack of merit. 23[23] When the private
respondents and the petitioner moved for reconsideration, however, it was

22[22]
Penned by Commissioner Vicente S.E. Veloso with Presiding Commissioner Bartolome S. Carale
and Commissioner Alberto R. Quimpo, concurring; rollo, pp. 106-114.
23[23]
Id. at 113.
granted by the NLRC in its Order24[24] dated 27 July 1995. The NLRC thus
set aside its Resolution dated 25 April 1995, and directed the private
respondents and the petitioner to each post an appeal bond in the amount of
P487,287.62 to perfect their respective appeals.25[25] Both parties complied.26
[26]

On 30 January 1996, the NLRC rendered a Decision modifying the


Order of the Labor Arbiter dated 5 October 1994, the dispositive portion of
which reads:

WHEREFORE, the [21 November 1994] appeal of [herein


petitioner] is hereby granted. The [5 October 1994] Order of Labor
Arbiter Donato G. Quinto, Jr., is modified to the extent that it still held
[petitioner] as “jointly and severally liable with [herein private
respondents] in the judgment award on underpayment and on the
non-payment of overtime pay,” our directive being that the Arbiter
should now satisfy said labor-standards award, as well as that of the
separation pay, exclusively through the surety bond posted by
[private respondents].27[27] [Emphasis supplied].

Dissatisfied, private respondents moved for the reconsideration of the


foregoing Decision, but it was denied by the NLRC in an Order 28[28] dated 30
October 1996. This NLRC Order dated 30 October 1996 became final and
executory on 29 November 1996.

On 4 December 1996, private respondents filed a Petition for


Certiorari29[29] before this Court assailing the Decision and the Order of the
24[24]
Id. at 115-118.
25[25]
Id. at 117.
26[26]
Records, pp. 714-717 and 814-817.
27[27]
Rollo, pp. 132-133.
28[28]
Id. at 135-136.
29 [29]
In Molina v. Pacific Plans, Inc., G.R. No. 165476, 10 March 2006, 484 SCRA 498, 516,
this Court ruled that: “Under Rule VII, Section 2 of the NLRC Omnibus Rules of Procedure, the
NLRC dated 30 January 1996 and 30 October 1996, respectively. On 9
December 1998, this Court issued a Resolution 30[30] referring the case to the
Court of Appeals conformably with its ruling in St. Martin Funeral Home v.
National Labor Relations Commission.31[31] The case was docketed before
the appellate court as CA-G.R. SP No. 50806.

The Petition made a sole assignment of error, to wit:

THE HONORABLE COMMISSION GRAVELY ERRED AND


GRAVELY ABUSED ITS DISCRETION IN FINDING THAT THE
ULTIMATE LIABILITY SHOULD FALL ON THE [HEREIN PRIVATE
RESPONDENTS] ALONE, WITHOUT REIMBURSEMENT FROM
THE [HEREIN PETITIONER], IN ORDER TO SATISFY THE
MONETARY AWARDS OF THE [THEREIN COMPLAINANTS].32[32]

After due proceedings, the Court of Appeals rendered the assailed


Decision on 24 April 2000, modifying the Decision of the NLRC dated 30
January 1996 and holding the petitioner solidarily liable with the
private respondents for the satisfaction of the laborers’ separation pay.
According to the Court of Appeals:

The [NLRC] adjudged the payment of separation pay to be the sole


responsibility of [herein private respondents] because (1) there is no
employer-employee relationship between [herein petitioner] and the forty-
nine (49) [therein complainants]; (2) the payment of separation pay is not
a labor standard benefit. We disagree.

decision of the NLRC becomes final and executory after ten (10) calendar days from receipt of the
same. xxx. Nonetheless, the Court ruled in St. Martin Funeral Home v. NLRC that, although the
10-day period for finality of the NLRC decision may have elapsed as contemplated in the last
paragraph of Section 223 of the Labor Code, the CA may still take cognizance of and resolve a
petition for certiorari for the nullification of the decision of the NLRC on jurisdictional and due
process considerations.”
30[30]
CA rollo, pp. 186-187.
31[31]
G.R. No. 130866, 16 September 1998, 295 SCRA 494.
32[32]
CA rollo, p. 194.
Again, We quote Article 109 of the Labor Code, as amended, viz:

“The provisions of existing laws to the contrary


notwithstanding, every employer or indirect employer shall
be held responsible with his contractor or subcontractor
for any violation of any provision of this Code…”

The abovementioned statute speaks of “any violation of any


provision of this Code.” Thus, the existence or non-existence of
employer-employee relationship and whether or not the violation is
one of labor standards is immaterial because said provision of law
does not make any distinction at all and, therefore, this Court should
also refrain from making any distinction. Concomitantly, [herein
petitioner] should be jointly and severally liable with [private
respondents] for the payment of wage differentials, overtime pay and
separation pay of the [therein complainants]. The joint and several
liability imposed to [petitioner] is, again, without prejudice to a claim
for reimbursement by [petitioner] against [private respondents] for
reasons already discusses (sic).

WHEREFORE, premises studiedly considered, the assailed 30


January 1996 decision of [the NLRC] is hereby modified insofar as
[petitioner] should be held solidarily liable with [the private
respondents] for the satisfaction of the laborers’ separation pay. No
pronouncement as to costs.33[33] [Emphasis supplied].

The petitioner filed a Motion for Reconsideration of the aforesaid


Decision but it was denied by the Court of Appeals in a Resolution dated 27
September 2000.

Petitioner now comes before this Court via a Petition for Review on
Certiorari, docketed as G.R. No. 145402, raising the sole issue of “whether
or not the Honorable Court of Appeals palpably erred when it went beyond
the issues of the case as it modified the factual findings of the Labor Arbiter
which attained finality after it was affirmed by Public Respondent NLRC

33[33]
Rollo, pp. 42-44.
and by the Supreme Court which can no longer be disturbed as it became
the law of the case.”34[34]

Petitioner argues that in the assailed Decision dated 24 April 2000, the
Court of Appeals found that the sole issue for its resolution was whether the
ultimate liability to pay the monetary awards in favor of the 49 employees
falls on the private respondents without reimbursement from the petitioner.
Hence, the appellate court should have limited itself to determining the right
of private respondents to still seek reimbursement from petitioner for the
monetary awards on the unpaid wages and overtime pay of the
complainants.

According to petitioner, the NLRC, in its Resolution dated 28 May


1993, already found that petitioner had fully complied with its salary
obligations to the complainants. Petitioner invokes the same NLRC
Resolution to support its claim that it was not liable to share with the private
respondents in the payment of separation pay to complainants. When
private respondents questioned the said NLRC Resolution in a Petition for
Certiorari with this Court, docketed as G.R. No. 111506, this Court found
that the NLRC did not commit grave abuse of discretion in the issuance
thereof and accordingly dismissed private respondents’ Petition. Said
NLRC Resolution, therefore, has since become final and executory and can
no longer be disturbed for it now constitutes the law of the case.

Assuming for the sake of argument that the Court of Appeals can still
take cognizance of the issue of petitioner’s liability for complainants’
34[34]
Id. at 173.
separation pay, petitioner asserts that the appellate court seriously erred in
concluding that it is jointly and solidarily liable with private respondents for
the payment thereof. The payment of separation pay should be the sole
responsibility of the private respondents because there was no employer-
employee relationship between the petitioner and the complainants, and the
payment of separation pay is not a labor standards benefit.

Law of the case has been defined as the opinion delivered on a former
appeal. It is a term applied to an established rule that when an appellate
court passes on a question and remands the case to the lower court for
further proceedings, the question there settled becomes the law of the case
upon subsequent appeal. It means that whatever is once irrevocably
established as the controlling legal rule or decision between the same parties
in the same case continues to be the law of the case, whether correct on
general principles or not, so long as the facts on which such decision was
predicated continue to be the facts of the case before the court. 35[35] Indeed,
courts must adhere thereto, whether the legal principles laid down were
“correct on general principles or not” or “whether the question is right or
wrong” because public policy, judicial orderliness and economy require such
stability in the final judgments of courts or tribunals of competent
jurisdiction.36[36]

Petitioner’s application of the law of the case principle to the case at


bar as regards its liability for payment of separation pay is misplaced.

35 [35]
Pelayo v. Perez, G.R. No. 141323, 8 June 2005, 459 SCRA 475, 484, citing Cucueco v.
Court of Appeals, G.R. No. 139278, 25 October 2004, 441 SCRA 290, 300-301.
36 [36]
Bañes v. Lutheran Church in the Philippines, G.R. No. 142308, 15 November 2005, 475
SCRA 13, 31.
The only matters settled in the 23 May 1994 Resolution of this Court
in G.R. No. 111506, which can be regarded as the law of the case, were (1)
both the petitioner and the private respondents were jointly and solidarily
liable for the judgment awards due the complainants; and (2) the said
judgment awards shall be enforced against the surety bond posted by the
private respondents. However, the issue as regards the liability of the
petitioner for payment of separation pay was yet to be resolved because
precisely, the NLRC, in its Order dated 30 July 1993, still directed the Labor
Arbiter to make a determination on who should finally shoulder the
monetary awards granted to the complainants. And it was only after G.R.
No. 111506 was dismissed by this Court that the Labor Arbiter promulgated
his Decision dated 5 October 1994, wherein he clarified the respective
liabilities of the petitioner and the private respondents for the judgment
awards. In his 5 October 1994 Decision, the Labor Arbiter explained that
the solidary liability of the petitioner was limited to the monetary awards for
wage underpayment and non-payment of overtime pay due the
complainants, and it did not, in any way, extend to the payment of separation
pay as the same was the sole liability of the private respondents.

Nonetheless, this Court finds the present Petition meritorious.

The Court of Appeals indeed erred when it ruled that the petitioner
was jointly and solidarily liable with the private respondents as regards the
payment of separation pay.
The appellate court used as basis Article 109 of the Labor Code, as
amended, in holding the petitioner solidarily liable with the private
respondents for the payment of separation pay:

ART. 109. Solidary Liability. - The provisions of existing laws to


the contrary notwithstanding, every employer or indirect employer shall be
held responsible with his contractor or subcontractor for any violation of
any provision of this Code. For purposes of determining the extent of
their civil liability under this Chapter, they shall be considered as direct
employers. [Emphasis supplied].

However, the afore-quoted provision must be read in conjunction with


Articles 106 and 107 of the Labor Code, as amended.

Article 107 of the Labor Code, as amended, defines an indirect


employer as “any person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor for the
performance of any work, task, job or project.” To ensure that the
contractor’s employees are paid their appropriate wages, Article 106 of the
Labor Code, as amended, provides:

ART. 106. CONTRACTOR OR SUBCONTRACTOR. – x x x.

In the event that the contractor or subcontractor fails to pay the


wages of his employees in accordance with this Code, the employer shall
be jointly and severally liable with his contractor or subcontractor to such
employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed
by him. [Emphasis supplied].

Taken together, an indirect employer (as defined by Article 107) can


only be held solidarily liable with the independent contractor or
subcontractor (as provided under Article 109) in the event that the latter fails
to pay the wages of its employees (as described in Article 106).

Hence, while it is true that the petitioner was the indirect employer of
the complainants, it cannot be held liable in the same way as the employer in
every respect. The petitioner may be considered an indirect employer only
for purposes of unpaid wages. As this Court succinctly explained in
Philippine Airlines, Inc. v. National Labor Relations Commission37[37]:

While USSI is an independent contractor under the security service


agreement and PAL may be considered an indirect employer, that status
did not make PAL the employer of the security guards in every respect.
As correctly posited by the Office of the Solicitor General, PAL may be
considered an indirect employer only for purposes of unpaid wages since
Article 106, which is applicable to the situation contemplated in Section
107, speaks of wages. The concept of indirect employer only relates or
refers to the liability for unpaid wages. Read together, Articles 106 and
109 simply mean that the party with whom an independent contractor
deals is solidarily liable with the latter for unpaid wages, and only to that
extent and for that purpose that the latter is considered a direct employer.
The term “wage” is defined in Article 97(f) of the Labor Code as “the
remuneration of earnings, however designated, capable of being expressed
in terms of money, whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the unwritten contract of
employment for work done or to be done, or for services rendered or to be
rendered and includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities customarily
furnished by the employer to the employee.”

Further, there is no question that private respondents are operating as


an independent contractor and that the complainants were their employees.
There was no employer-employee relationship that existed between the
petitioner and the complainants and, thus, the former could not have
dismissed the latter from employment. Only private respondents, as the

37 [37]
G.R. No. 120506, 28 October 1996, 263 SCRA 638, 656-657.
complainants’ employer, can terminate their services, and should it be done
illegally, be held liable therefor. The only instance when the principal can
also be held liable with the independent contractor or subcontractor for the
backwages and separation pay of the latter’s employees is when there is
proof that the principal conspired with the independent contractor or
subcontractor in the illegal dismissal of the employees, thus:

The liability arising from an illegal dismissal is unlike an order to


pay the statutory minimum wage, because the workers’ right to such wage
is derived from law. The proposition that payment of back wages and
separation pay should be covered by Article 109, which holds an indirect
employer solidarily responsible with his contractor or subcontractor for
“any violation of any provision of this Code,” would have been tenable if
there were proof - there was none in this case - that the principal/employer
had conspired with the contractor in the acts giving rise to the illegal
dismissal. 38[38]

It is the established fact of conspiracy that will tie the principal or indirect
employer to the illegal dismissal of the contractor or subcontractor’s
employees. In the present case, there is no allegation, much less proof
presented, that the petitioner conspired with private respondents in the illegal
dismissal of the latter’s employees; hence, it cannot be held liable for the
same.

Neither can the liability for the separation pay of the complainants be
extended to the petitioner based on contract. Contract Order No. 166-84
executed between the petitioner and the private respondents contains no
provision for separation pay in the event that the petitioner terminates the
same. It is basic that a contract is the law between the parties and the

38 [38]
Rosewood Processing, Inc. v. National Labor Relations Commission, G.R. No. 116476-
84, 21 May 1998, 290 SCRA 408, 427.
stipulations therein, provided that they are not contrary to law, morals, good
customs, public order or public policy, shall be binding as between the
parties.39[39] Hence, if the contract does not provide for such a liability, this
Court cannot just read the same into the contract without possibly violating
the intention of the parties.

It is also worth noting that although the issue in CA-G.R. SP No.


50806 pertains to private respondents’ right to reimbursement from
petitioner for the “monetary awards” in favor of the complainants, they
limited their arguments to the monetary awards for underpayment of wages
and non-payment of overtime pay, and were conspicuously silent on the
monetary award for separation pay. Thus, private respondents’ sole liability
for the separation pay of their employees should have been deemed settled
and already beyond the power of the Court of Appeals to resolve, since it
was an issue never raised before it.40[40]

Although petitioner is not liable for complainants’ separation pay, the


Court conforms to the consistent findings in the proceedings below that the
petitioner is solidarily liable with the private respondents for the judgment
awards for underpayment of wages and non-payment of overtime pay.

In this case, however, private respondents had already posted a surety


bond in an amount sufficient to cover all the judgment awards due the
complainants, including those for underpayment of wages and non-payment
of overtime pay. The joint and several liability of the principal with the

39[39]
Roxas v. De Zuzuarregui, Jr., G.R. No. 152072, 31 January 2006, 481 SCRA 258, 276.
40[40]
See private respondents’ Petition, CA rollo, pp. 7-15.
contractor and subcontractor were enacted to ensure compliance with the
provisions of the Labor Code, principally those on statutory minimum wage.
This liability facilitates, if not guarantees, payment of the workers’
compensation, thus, giving the workers ample protection as mandated by the
1987 Constitution.41[41] With private respondents’ surety bond, it can
therefore be said that the purpose of the Labor Code provision on the
solidary liability of the indirect employer is already accomplished since the
interest of the complainants are already adequately protected. Consequently,
it will be futile to continuously hold the petitioner jointly and solidarily
liable with the private respondents for the judgment awards for
underpayment of wages and non-payment of overtime pay.

But while this Court had previously ruled that the indirect employer
can recover whatever amount it had paid to the employees in accordance
with the terms of the service contract between itself and the contractor, 42[42]
the said ruling cannot be applied in reverse to this case as to allow the
private respondents (the independent contractor), who paid for the judgment
awards in full, to recover from the petitioner (the indirect employer).

Private respondents have nothing more to recover from petitioner.

Petitioner had already handed over to private respondent the wages


and other benefits of the complainants. Records reveal that it had complied
with complainants’ salary increases in accordance with the minimum wage
set by Republic Act No. 6727 by faithfully adjusting the contract price for

41[41]
Rosewood Processing, Inc. v. National Labor Relations Commission, supra note 38 at 425-426.
42[42]
Id.
the janitorial services it contracted with private respondents. 43[43] This is a
finding of fact made by the Labor Arbiter,44[44] untouched by the NLRC45[45]
and explicitly affirmed by the Court of Appeals, 46[46] and which should
already bind this Court.

This Court is not a trier of facts. Well-settled is the rule that the
jurisdiction of this Court in a petition for review on certiorari under Rule 45
of the Revised Rules of Court is limited to reviewing only errors of law, not
of fact, unless the factual findings complained of are completely devoid of
support from the evidence on record, or the assailed judgment is based on a
gross misapprehension of facts. Besides, factual findings of quasi-judicial
agencies like the NLRC, when affirmed by the Court of Appeals, are
conclusive upon the parties and binding on this Court.47[47]

Having already received from petitioner the correct amount of wages


and benefits, but having failed to turn them over to the complainants, private
respondents should now solely bear the liability for the underpayment of
wages and non-payment of the overtime pay.

WHEREFORE, premises considered, the instant Petition is hereby


GRANTED. The Decision and Resolution of the Court of Appeals dated 24
April 2000 and 27 September 2000, respectively, in CA-G.R. SP No. 50806,
are hereby REVERSED AND SET ASIDE. The Decision dated 30
January 1996 of the National Labor Relations Commission in NLRC NCR
43[43]
Rollo, pp. 40-41.
44[44]
Id. at 104-105.
45[45]
Id. at 120-133.
46[46]
Id. at 140-141.
47[47]
Ramos v. Court of Appeals, G.R. No. 145405, 29 June 2004, 433 SCRA 177, 182.
CA No. 001737-91 (NLRC NCR Case No. 00-09-04432-89) is hereby
REINSTATED. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

CONSUELO YNARES – SANTIAGO


Associate Justice
Chairperson

MA. ALICIA AUSTRIA-MARTINEZ


ANTONIO EDUARDO B. NACHURA
Associate Justice Associate Justice

RUBEN T. REYES

Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the


Division Chairperson’s attestation, it is hereby certified that the conclusions
in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

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