G.R. No. 145402 - Meralco Industrial Engineering Services Corp. vs. National Labor Relations Commission

Case Summary (G.R. No. 145402)

Relevant Laws and Contractual Background

The parties executed Contract Order No. 166-84 on November 7, 1984, where OPLGS was to supply labor and supervise its employees at petitioner’s plant. The wages of the 49 janitors were initially set at P51.50 per day but were increased to comply with Republic Act No. 6727 (Wage Rationalization Act) as amended, raising daily wages accordingly. Petitioner terminated the service contract effective January 31, 1990, and the employees filed complaints for illegal deductions, underpayment, non-payment of overtime, and eventually illegal dismissal.

Proceedings Before Labor Arbiter and NLRC

The Labor Arbiter dismissed the complaint against the petitioner for lack of merit but ordered the private respondents to pay unpaid wages, separation pay, overtime, and attorney’s fees. Upon appeal, the National Labor Relations Commission (NLRC) held the petitioner solidarily liable with the private respondents for wage differentials and unpaid overtime but not for separation pay, which was deemed the sole liability of the private respondents. The NLRC reasoned this based on Articles 106, 107, and 109 of the Labor Code under the concept of indirect employer and solidary liability for labor standards violations.

Joint and Several Liability under the Labor Code

Article 106 of the Labor Code holds the principal solidarily liable with the independent contractor if the latter fails to pay wages. Article 107 defines an indirect employer as a person contracting with an independent contractor for work, while Article 109 imposes solidary liability on every employer or indirect employer for violations of the Labor Code without distinction. The NLRC’s interpretation limited petitioner’s liability to wage-related claims (underpayment and overtime) and excluded separation pay as petitioner was an indirect employer only for wage purposes.

Court of Appeals’ Modification and Petitioner’s Objection

The Court of Appeals modified the NLRC decision by declaring petitioner solidarily liable with the private respondents not only for wages and overtime but also for separation pay. The appellate court based this on Article 109, eschewing distinctions between labor standards and other claims and ignoring the absence of an employer-employee relationship as irrelevant for imposing solidary liability.

Supreme Court's Reassertion of the Law and the "Law of the Case" Doctrine

Petitioner challenged the appellate ruling, arguing it violated the law of the case doctrine as the NLRC’s decision became final and executory and that separation pay is not a labor standard benefit subject to solidary liability. The Supreme Court clarified that the prior NLRC ruling and dismissal of related certiorari petitions established that petitioner is liable only for unpaid wages and overtime pay, not separation pay. The “law of the case” rule mandates adherence to established rulings unless new facts or changes justify reconsideration; here, separation pay liability remained undecided in prior rulings and was therefore properly addressed later.

Interpretation of Solidary Liability Limits

The Supreme Court emphasized that Articles 106, 107, and 109 must be read conjunctively. Solidary liability for an indirect employer applies strictly to unpaid wages and statutory minimum wage compliance, not to separation pay, which is not classified as a labor standard benefit under these provisions. The principal (MIESCOR), as an indirect employer, cannot be held liable for separation pay absent proof of employer-employee relationship or conspiracy in the illegal dismissal, which was not shown in this case.

On Employer-Employee Relationship and Conspiracy Requirement

The complainants were employees of OPLGS, not MIESCOR. The Court underscored that only the employer (OPLGS) could legally dismiss the employees, and without conspiracy or complicity from the principal, the principal is not liable for illegal dismissal consequences such as separation pay. This is consistent with prior jurisprudence distinguishing wage-related obligations from termination-related liabilities.

Contractual Terms and Effect on Liability for Separation Pay

The service contract between petitioner and private respondents did not provide for separation pay obligations upon termination. Under Philippine contract law principles, the Court cannot impose such liability absent contractual stipulations or legal mandate. The absence of such a provision negates petitioner’s responsibility to pay separation benefits.

Private Respondents’ Liability and Reimbursement Issues

Given petitioner’s prior compliance with wage adjustments according to RA 6727 and payment remittances, private respondents alone bear the responsibility for unpaid wages, overtime, and separation pay. The private respondents had posted a surety bond sufficient for all monetary awards to the complainants, satisfying workers’ claims. The Court further held petitioner’s prior payments could not be grounds for private respondents to seek reimbursement, as petitioner had fulfilled its contractual obligations to pr

Case Syllabus (G.R. No. 145402)

Case Background and Parties Involved

Petitioner: Meralco Industrial Engineering Services Corporation (MIESCOR), a Philippine corporation engaged as a client contracting janitorial services.
Respondents: Ofelia P. Landrito General Services (OPLGS), a business firm providing janitorial and maintenance services, and Ofelia P. Landrito, the proprietor and general manager of OPLGS.
Contractual Relationship: On November 7, 1984, MIESCOR and OPLGS entered into Contract Order No. 166-84 for janitorial services at MIESCOR’s Rockwell Thermal Plant in Makati.
OPLGS assigned 49 employees as janitors with a daily wage initially set at P51.50 per employee.
Modification of contract wage terms occurred due to the Wage Rationalization Act (Republic Act No. 6727), increasing the minimum daily wage to P89.00 effective November 3, 1989.
Termination of Contract: On January 2, 1990, MIESCOR informed OPLGS that the contract would terminate effective January 31, 1990, leading to the removal of the janitorial employees.

Nature of the Complaint and Procedural History

On September 20, 1989, the 49 janitors filed complaints of illegal deductions, underpayment, non-payment of overtime and holiday pay, premium pay, and night differentials against OPLGS before the Labor Arbiter.
The case was docketed as NLRC NCR Case No. 00-09-04432-89.
On February 27, 1990, the complainants amended their complaint to include claims of illegal dismissal and impleaded MIESCOR as a party respondent.
The Labor Arbiter, in a decision dated March 26, 1991, dismissed complaints against MIESCOR but ordered OPLGS to pay unpaid wages, separation pay, overtime, and attorney's fees totaling P487,287.07.
Both parties filed appeals and motions for reconsideration to the NLRC.

Labor Arbiter and NLRC Findings on Employer Liability

The Labor Arbiter held private respondents (OPLGS and proprietor) solely liable for the monetary awards.
The NLRC issued a Resolution on May 28, 1993, affirming the Labor Arbiter’s decision but modified it by holding MIESCOR solidarily liable with private respondents for wage differentials and unpaid overtime pay, pursuant to Articles 106, 107, and 109 of the Labor Code.
Rationale: MIESCOR was an indirect employer as contractor principal and thus solidarily liable for labor standards violations.
The NLRC classified separation pay as the sole liability of private respondents.
Subsequent motions for reconsideration by both parties were denied or partially granted, leading to further clarification by the Labor Arbiter on October 5, 1994, delineating the scope of MIESCOR's liability:
- Joint and several liability for underpayment and unpaid overtime pay.
- Sole liability of OPLGS for separation pay.

Additional Appeals, Court Proceedings, and Final Decisions Prior to Supreme Court Review

Both parties appealed the Labor Arbiter’s order to the NLRC.
The NLRC initially dismissed the appeals for lack of surety bond but later allowed perfection upon posting of bonds.
On January 30, 1996, the NLRC issued a Decision modifying the Labor Arbiter’s Order, holding that monetary awards including separation pay should be satisfied exclusively through OPLGS's surety bond, effectively relieving MIESCOR from the obligation to pay separation pay.
Private respondents’ motion for reconsideration was denied, and they filed a Petition for Certiorari with the Supreme Court, which was later dismissed for failure to demonstrate grave abuse of discretion.
The case was referred to the Court of Appeals in 1998 pursuant to estab