G.R. No. 195654 - Inutan vs. Napar Contracting and Allied Services

Petitioners—Reynaldo Inutan, Helen Carte, Noel Ayson, Ivy Cabarle, Noel Jamili, Maritess Hular, Rolito Azucena, Raymundo Tunog, Roger Bernal, Agustin Estre, Marilou Sagun, and Enrique Ledesma, Jr.—were employees of respondent Napar Contracting & Allied Services, a recruitment agency owned and managed by Norman Lacsamana.
The petitioners were assigned by Napar to work at respondent Jonas International, Inc., a corporation engaged in the manufacture of food products, under the management of Philip Young.
In September 2002, petitioners, along with co-workers, filed three separate complaints before the NLRC for wage differentials, 13th month pay, overtime pay, holiday pay, premium pay for holiday and rest day, service incentive leave pay, and unpaid emergency cost of living allowance.

On January 13, 2003, the complainants and respondents entered into a Joint Compromise Agreement to settle the disputes, which provided that:

Petitioners were to be considered regular employees of Napar and entitled to all applicable benefits;
Petitioners were to be reassigned by Napar within 45 days or by February 26, 2003, failing which they would be reinstated in the payroll or given salary equivalent to the minimum wage; and
Each petitioner would receive P7,000.00 as payment for their monetary claims, which was stated to be considered in any future litigation.

On January 16, 2003, Labor Arbiter Jaime Reyno approved the compromise, enjoined the parties to comply with it, and dismissed the initial cases without prejudice.

Petitioners, having complied by reporting to Napar and submitting required documents, found that respondents failed to reassign them despite imposing additional requirements (e.g., orientations, interviews, examinations) meant to assess their skills.
Believing that respondents’ conduct amounted to a breach of the Joint Compromise Agreement, petitioners re-filed four separate complaints before the NLRC for illegal dismissal and various monetary claims, consolidating these new actions.
Respondents argued that petitioners had already enjoyed the partial benefits of the compromise and that the proper remedy was the execution of the agreement, not its rescission.

In a July 29, 2004 decision, Labor Arbiter Pablo C. Espiritu, Jr. ruled that the breached conditions under the Joint Compromise Agreement justified its rescission and held that petitioners were constructively dismissed.
The NLRC, in its June 26, 2008 decision and October 14, 2008 resolution, granted respondents’ appeal by holding that the approved compromise had the effect of res judicata, thereby dismissing the new complaints and ordering execution of the agreement.
Both parties filed motions for reconsideration, but these were denied by the NLRC.

Petitioners filed a Petition for Certiorari before the Court of Appeals (CA), arguing that respondents’ failure to comply with the Joint Compromise Agreement entitled them to its rescission and the filing of new complaints.
The CA, viewing the January 16, 2003 approval of the compromise as a final judgment, maintained that the new complaints were barred by res judicata and should have been enforced by a motion for execution rather than a separate suit.
The CA dismissed the petition for certiorari and later denied a motion for reconsideration on February 10, 2011.

Whether the Court of Appeals gravely erred in ruling that the petitioners’ complaints were barred by res judicata as a result of the judicially approved Joint Compromise Agreement.

Petitioners contend that respondents’ breach of the agreement under Article 2041 of the Civil Code provided them the right to rescind and re-file their claims.

Whether, by re-filing a second complaint, petitioners were enforcing the Joint Compromise Agreement rather than rescinding it.

Petitioners argue that their new complaints, which additionally include claims of illegal dismissal, reflect their intent to exercise the rescission option due to respondents’ failure to provide work in accordance with the agreement.

Whether petitioners are entitled to separation pay in lieu of reinstatement and full backwages, including additional monetary awards, as a consequence of their illegal dismissal.

Petitioners maintained that the respondents’ insistence on conditional reassignment—imposing requirements not necessary for regular employees—amounted to constructive and illegal dismissal.