Meralco v NLRC

G.R. No. 145402 | March 14, 2008

Topic: Work Relationship - Independent Contractor – Trilateral Relationship - Solidary Liability of Indirect
Employer/Direct Employer

Doctrine:
An indirect employer (Article 107) can only be held solidarily liable with the independent contractor or
subcontractor (Article 109) in the event that the latter fails to pay the wages of its employees (Article
106).

Summary:
OPLGS assigned 49 workers at MIESCOR’s Rockwell Plant to provide janitorial and maintenance services.
The 49 workers filed a compliant for illegal deduction and underpayment against OPLGS before the Labor
Arbiter, who ruled that OPLGS should be liable for the fees, but upon appeal, the NLRC modified the LA
decision and held that MIESCOR should be solidarily liable. CA ruled that both parties are liable for all 3
parts of the judgment award, but the SC held that it was OPLGS, as the employer, that was liable for the
separation pay. MIESCOR also not held liable for the underpayment & overtime pay because they already
handed it over to OPLGS, but it was OPLGS who failed to give it to the complainants.

Petitioner: Meralco Industrial Engineering Services Corporation (MIESCOR)

FACTS:
 7 Nov 1984 - MIESCOR and OPLGS executed Contract Order No. 166-84, where OPLGS would
supply MIESCOR w/ janitorial services (labor, materials, tools and equipment, supervision of
assigned employees) at petitioner’s Rockwell Thermal Plant in Makati City.
o OPLGS assigned their 49 employees as janitors to the Rockwell Thermal Plant with a daily
wage of ₱51.50 per employee.
 20 Sept 1989 - The 49 OPLGS employees lodged a Complaint (NLRC NCR Case No. 00-09-04432-
89) for illegal deduction, underpayment, non-payment of overtime pay, legal holiday pay, premium
pay for holiday and rest day and night differentials against the OPLGS before the Labor Arbiter (LA).
 Due RA 6727’s enactment, the contract between the petitioner and the private respondents was
amended for the 10th time (1989). The employees’ daily minimum wage was raised from ₱63.55 to
₱89.00 or ₱2,670.00 per month.
 2 Jan 1990 - MIESCOR sent a letter to OPLGS that they were terminating the contract on Jan 31, 1990.
The 49 complainants were pulled out from their work on the said date.
27 Feb 1990 - complainants amended their Complaint to include the charge of illegal dismissal and to
implead MIESCOR as a party respondent therein.
 26 March 1991 – the LA dismissed the Complaint against the petitioner for lack of merit, but ordered
the private respondents to pay the complainants:
o ₱487,287.07 representing unpaid wages, separation and overtime pay
o attorney’s fees in an amount equivalent to 10% of the award or ₱48,728.70
o (all other complaints dismissed)
 OPLGS appealed the decision to the NLRC, citing (they gave 5 pero eto lang relevant)
 o Complainants not constructively dismissed when they were not given assignments within six
months – they had abandoned their jobs when they failed to report to another place of
assignment;
o MIESCOR (principal) solidarily liable with the private respondents for failure to make an
adjustment on the wages of the complainants.
 28 May 1993 – NLRC affirmed decision of the LA, with the modification that MIESCOR was solidarily
liable.
o Under Art. 107 of the Labor Code, MIESCOR is considered an indirect employer and can be
held solidarily liable with private respondents as an independent contractor.
o Under Art. 109, for purposes of determining the extent of its liability, MIESCOR is considered
a direct employer, hence, it is solidarily liable for complainant’s wage differentials and unpaid
overtime.
 Both parties moved for reconsideration.
 30 July 1993 - the NLRC determined that the ₱487,287.07 was secured by a surety bond posted by
OPLGS; no more impediment to payment of the claims.
o NLRC denied the OPLGS’ Motion for Reconsideration. The NLRC directed the LA to enforce
the monetary award against OPLGS’ surety bond and to determine who should finally shoulder
the liability therefor.
 OPLGS alleged the NLRC of GAD but it was subsequently dismissed by the SC due to their failure to
show specific acts of GAD.
o (bc of this, natigil saglit yung proceedings sa NLRC. Pero nung binasura, tuloy ang ligaya)
 5 Oct 1994 – LA issued an order
o ₱487,287.07 consists of three (3) parts: the judgment award on the underpayment, separation
pay, and overtime pay.
o MIESCOR is jointly and severally liable with OPLGS in the judgment award on underpayment
and on the non-payment of overtime pay.
 If complainants enforce the judgment award against MIESCOR, MIESCOR can seek
reimbursement against OPLGS, but should the judgment award be enforced against
OPLGS, the latter cannot seek reimbursement from the MIESCOR.
o Separation pay is the sole liability of OPLGS.
 25 Apr 1995 – NLRC affirmed the LA order and dismissed both appeals.
 27 July 1995 – NLRC granted their motions for reconsideration, directing both parties to post an appeal
bond of ₱487,287.62. Both parties complied.
 30 January 1996 - NLRC modified the Oct 5 Order of the LA.
o Labor-standards award & separation pay to be satisfied exclusively through the surety bond
posted by OPLGS.
 OPLGS appealed AGAIN. Denied.
 CA - MIESCOR should be jointly and severally liable with OPLGS for the payment of wage
differentials, overtime pay AND separation pay of the 49 complainants.

ISSUE + HELD:

1. W/N Meralco should be jointly and severally liable with OPLGS re separation pay - NO.
 The CA erroneously used Art 109 of the LC. It should’ve been read in conjunction w/ Articles 106-
107.
o Taken together, an indirect employer (Article 107) can only be held solidarily liable with
the independent contractor or subcontractor (Article 109) in the event that the latter fails to
pay the wages of its employees (Article 106).
 While it is true that MIESCOR was the indirect employer of the complainants, it cannot be held liable
in the same way as the employer in every respect. MIESCOR may be considered an indirect
employer only for purposes of unpaid wages.
o The concept of indirect employer only relates or refers to the liability for unpaid wages. (PAL
v NLRC)
 No employer-employee relationship between MIESCOR and the complainants.
o OPLGS is their employer - the only one who can terminate their employment.
 The only instance when the principal can also be held liable with the independent contractor or
subcontractor for the back wages 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.
o In the present case – no allegation or proof that the MIESCOR conspired with OPLGS in the
illegal dismissal of the latter’s employees; hence, it cannot be held liable for the same.
 Liability for the separation pay of the complainants be extended to the petitioner based on contract.
o The contract has no provision for separation pay if MIESCOR terminates the same. 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.
 SC conforms to the consistent findings that the MIESCOR is solidarily liable with OPLGS for the
judgment awards for underpayment of wages and non-payment of overtime pay.
 OPLGS had already posted a surety bond sufficient to cover all the judgment awards.
o The joint and several liability of the principal with the contractor were enacted to ensure
compliance with the LC’s provisions, principally those on statutory minimum wage. This
guarantees payment of the workers’ compensation.
o It will be futile to continuously hold the petitioner jointly and severally liable with the
private respondents for the judgment awards for underpayment of wages and non-
payment of overtime pay.
 OPLGS have nothing more to recover from MIESCOR.
o MIESCOR had already handed over the wages and other benefits of the complainants. They
also complied with the salary increases in accordance with the minimum wage set by Republic
Act No. 6727.
o It was OPLGS who failed to turn them over to the complainants thus they should now solely
bear the liability for the underpayment of wages and non-payment of the overtime pay.

RULING: 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 CA No. 001737-91 (NLRC NCR Case No. 00-
09-04432-89) is hereby REINSTATED. No costs.