G.R. No. 82868 - Rabago vs. National Labor Relations Commission

Ace Building Care (“ABC”) and the Philippine Tuberculosis Society (“PTS”) entered into a 1981 contract whereby ABC was engaged to provide janitorial and allied services to PTS for a stipulated consideration.
The contract was renewed on a yearly basis until 1985, at which point the services were subjected to public bidding and a new contract was awarded to another company, thereby terminating ABC’s provision of services.

On September 9, 1985, the 41 janitors detailed by ABC to PTS filed a complaint with the National Labor Relations Commission (NLRC).
The complaint sought unpaid wage differentials under Wage Order Nos. 5 and 6, holiday premium pay, damages, attorney’s fees, the reimbursement of a cash bond, incentive leave pay, bonus, and separation pay.
ABC, in turn, filed a cross-claim against PTS, alleging that PTS was liable for the statutory wage increases.

Labor Arbiter Felipe T. Garduque II rendered a decision on September 30, 1987, ruling that the complainants were not entitled to legal holiday pay and to reimbursement of cash bond or full separation pay, except for a limited number of cases where separation pay was allowed.
The decision granted incentive leave with pay to most complainants; however, it excluded seven complainants who had worked less than one year.
ABC and PTS were held jointly and severally liable for the wage differentials under Wage Orders Nos. 5 and 6.

Both ABC and PTS appealed the Labor Arbiter’s decision to the NLRC.
On February 15, 1988, the NLRC affirmed the award of separation pay and service incentive leave pay as determined by the Labor Arbiter but modified the liability for the wage differentials by holding that only ABC should pay such differentials.
Subsequent motions for reconsideration were filed by the complainants and ABC, which, after being denied, led to the filing of separate petitions for certiorari with the Supreme Court.
On May 11, 1988, a temporary restraining order was issued by the Supreme Court at ABC’s motion, enjoining the enforcement of the NLRC’s decision.
The separate petitions (G.R. Nos. 82868 and 82932) were later consolidated on September 28, 1988.

PTS argued it was exempt from the wage orders on the basis that it belonged to the public sector, while ABC and the complainants asserted that the wage orders applied, particularly to the indirect employees of PTS.
The case involved discussions on the proper interpretation of “employer” under various provisions of the Labor Code and Rules, especially concerning the coverage of wage orders and the differentiation between direct and indirect employment.

Whether ABC, as well as PTS, should be held jointly and severally liable for the wage differentials mandated under Wage Orders Nos. 5 and 6.
Whether the wage orders apply to indirect employment relationships, particularly those involving workers detailed by ABC to PTS.

Whether PTS, which contended that it belonged to the public sector, is exempt from the application of Wage Orders Nos. 5 and 6.
The implications of being classified as a public sector employer for the direct versus indirect employees and for statutory benefits under the Labor Code.

Whether ABC is liable to the complainants for the payment of service incentive leave pay.
Whether ABC is liable for the payment of separation pay, including the specific case of the five complainants awarded separation pay and the issue regarding whether these benefits should extend despite the termination of the contractual relationship with PTS.
The proper interpretation of the “at least one year” service requirement for service incentive leave pay and the application of Article 283 of the Labor Code in cases of retrenchment or cessation of operations.