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

Case Summary (G.R. No. 145402)

Factual Background

On 7 November 1984, MIESCOR and OPLGS executed Contract Order No. 166-84 under which OPLGS supplied janitorial services, including labor and supervision, at MIESCOR’s Rockwell Thermal Plant and assigned forty-nine employees thereto at a stated daily wage. On 20 September 1989, those forty-nine employees filed a complaint against OPLGS alleging illegal deduction, underpayment, and unpaid overtime and holiday differentials. The contract was amended on 3 November 1989 to conform to Republic Act No. 6727 and on 2 January 1990 MIESCOR notified OPLGS that the contract would terminate effective 31 January 1990. The employees were pulled out from the workplace at the close of business on 31 January 1990. On 27 February 1990 the employees amended their complaint to add a charge of illegal dismissal and implead MIESCOR.

Labor Arbiter Proceedings

The Labor Arbiter conducted proceedings and on 26 March 1991 dismissed the complaint against MIESCOR for lack of merit but ordered OPLGS to pay P487,287.07 representing unpaid wages, separation pay and overtime, plus attorney’s fees amounting to ten percent of the award. All other claims against OPLGS were dismissed. The award against OPLGS was secured by a surety bond.

NLRC Proceedings and Intervening Litigation

On appeal the NLRC issued a Resolution on 28 May 1993 affirming the Labor Arbiter’s decision but modified liability by holding MIESCOR jointly and severally liable with OPLGS for wage differentials and unpaid overtime pursuant to Articles 107 and 109 of the Labor Code. Both parties moved for reconsideration. The NLRC, by Order dated 30 July 1993, denied OPLGS’ motion and directed enforcement against the surety bond and that the Labor Arbiter determine who should finally shoulder the liability. OPLGS sought certiorari before this Court (G.R. No. 111506) which the Court dismissed on 23 May 1994 for failure to show grave abuse of discretion, and that dismissal became final on 25 July 1994. After resumption of proceedings, the Labor Arbiter on 5 October 1994 clarified that MIESCOR was jointly and severally liable only for the awards on underpayment and unpaid overtime, and that the separation pay was the sole liability of OPLGS; the Arbiter further explained that if the employees enforced payment against MIESCOR the latter could seek reimbursement from OPLGS, but not vice versa. Both parties appealed; the NLRC initially dismissed their appeals for non-posting of bond but later, on reconsideration, required each to post appeal bonds which they did.

NLRC Decision of 30 January 1996 and Subsequent Appeals

On 30 January 1996 the NLRC modified the Labor Arbiter’s order to the extent that, while it continued to hold MIESCOR jointly and severally liable for underpayment and unpaid overtime, it directed that the labor-standards award and separation pay be satisfied exclusively through the surety bond posted by OPLGS. OPLGS’s motion for reconsideration was denied on 30 October 1996, the NLRC’s Order becoming final on 29 November 1996. OPLGS filed certiorari before this Court on 4 December 1996; on 9 December 1998 the case was referred to the Court of Appeals in conformity with St. Martin Funeral Home v. NLRC.

Court of Appeals Proceedings and Decision

The Court of Appeals, in CA-G.R. SP No. 50806, rendered a Decision on 24 April 2000. The appellate court concluded that Article 109 of the Labor Code imposed joint and several liability on any employer or indirect employer for any violation of the Code and therefore held MIESCOR solidarily liable with OPLGS for the payment of separation pay as well as wage differentials and overtime. The Court of Appeals directed that MIESCOR was solidarily liable for the laborers’ separation pay, subject to its right to reimbursement from OPLGS, and denied relief sought by MIESCOR. A motion for reconsideration was denied by the Court of Appeals on 27 September 2000.

Issues Presented

The solitary legal issue presented to the Supreme Court was whether the Court of Appeals erred in extending MIESCOR’s joint and several liability to include the separation pay of the forty-nine employees by modifying factual findings of the Labor Arbiter and by going beyond issues properly before it, contrary to the law of the case and settled findings.

Parties’ Contentions

MIESCOR contended that the NLRC’s earlier Resolution and this Court’s dismissal in G.R. No. 111506 had settled the parties’ liabilities and established that MIESCOR was not liable for separation pay; MIESCOR argued that the Court of Appeals exceeded its province by revisiting resolved factual findings and by applying Article 109 beyond unpaid wages. OPLGS argued before the NLRC and appellate courts that the employees had abandoned their work and that MIESCOR, rather than OPLGS, should bear certain liabilities; before the Court of Appeals OPLGS sought to preclude reimbursement claims and maintained MIESCOR’s joint liability.

Ruling of the Supreme Court

The Supreme Court granted the petition. It held that the Court of Appeals erred in ruling that MIESCOR was jointly and severally liable for the employees’ separation pay. The Court reversed and set aside the Court of Appeals Decision dated 24 April 2000 and its Resolution dated 27 September 2000, and reinstated the NLRC Decision dated 30 January 1996. The Supreme Court ordered no costs.

Legal Basis and Reasoning

The Court analyzed Articles 106, 107, and 109 of the Labor Code together. It explained that Article 107 defines an indirect employer as one who contracts with an independent contractor for work; Article 106 imposes joint and several liability upon the employer with the contractor only when the contractor fails to pay the wages of its employees; and Article 109 declares that an employer or indirect employer shall be held responsible with its contractor for violations of the Code but, read in context with Articles 106 and 107, the solidary liability of the indirect employer relates to unpaid wages. The Court cited Philippine Airlines, Inc. v. NLRC to support that the status of indirect employer does not make the principal the employer in every respect and that the concept of indirect employer relates to liability for unpaid wages. The Court further noted that the term wage is defined in Article 97(f) and that separation pay and back wages arising from illegal dismissal differ from statutory minimum wage claims and require proof of conspiracy between the principal and the contractor before the principal may be held jointly liable for dismissal-related awards. The Court cited Rosewood Processing, Inc. v. NLRC to stress that liability for illegal dismissal can extend to an indirect employer only where the principal conspired with the contractor in the illegal dismissal, a fact not alleged or proved here. The Court examined the service contract and found no provision imposing separation-pay liability upon MIESCOR. It rejected the Court of Appeals’ broad reading of Article 109 as making separation pay a labor-standard to be enforced against an indirect employer irrespective of the statutory scheme and the facts.

Findings on Evidence and Law of the Case

The Supreme Court adhered to the factual findings of the Labor Arbiter that MIESCOR had adjusted its contract price and had complied with wage adjustments required by Republic Act No. 6727, and that OPLGS had posted a surety bond sufficient to cover the judgment awards. The Court observed that the issue of MIESCOR’s liability

Case Syllabus (G.R. No. 145402)

Parties and Procedural Posture

Meralco Industrial Engineering Services Corporation (MIESCOR) was the petitioner and contracting principal in a janitorial services arrangement at the Rockwell Thermal Plant.
Ofelia P. Landrito General Services (OPLGS) and Ofelia P. Landrito were the private respondents and the contractor and proprietor, respectively, who supplied janitorial personnel.
The case reached the Supreme Court by Petition for Review on Certiorari under Rule 45, Rules of Court, assailing the Court of Appeals decision in CA-G.R. SP No. 50806 and its denial of reconsideration.
The ultimate question presented was whether the Court of Appeals erred in holding MIESCOR jointly and severally liable with OPLGS for the employees' separation pay.

Key Factual Allegations

The parties executed Contract Order No. 166-84, under which OPLGS assigned forty-nine janitorial employees to MIESCOR at a daily wage initially recorded as P51.50.
The parties amended the contract following Republic Act No. 6727 to increase the minimum daily wage to P89.00 or P2,670.00 per month.
The forty-nine employees filed a complaint on 20 September 1989 for illegal deduction, underpayment, unpaid overtime, holiday pay, and differentials, docketed as NLRC NCR Case No. 00-09-04432-89.
MIESCOR terminated the contract effective 31 January 1990, and the employees amended their complaint on 27 February 1990 to allege illegal dismissal and to implead MIESCOR.

Procedural History

The Labor Arbiter rendered judgment on 26 March 1991 ordering OPLGS to pay P487,287.07 representing unpaid wages, separation pay, overtime pay, and attorneys' fees, and dismissed claims against MIESCOR for lack of merit.
The NLRC rendered a Resolution on 28 May 1993 modifying the Arbiter's decision to hold MIESCOR solidarily liable with OPLGS for wage differentials and unpaid overtime under Arts. 107 and 109, Labor Code.
OPLGS petitioned this Court in G.R. No. 111506, which this Court dismissed by Resolution dated 23 May 1994, and that dismissal became final and executory.
The Labor Arbiter issued an Order on 5 October 1994 clarifying that MIESCOR was jointly and severally liable only for underpayment and unpaid overtime but that separation pay was solely OPLGS’s liability.
The NLRC issued a Decision on 30 January 1996 modifying the Arbiter’s Order and directing satisfaction of the labor-standards award and separation pay exclusively through the surety bond posted by OPLGS.
The Court of Appeals, in a Decision dated 24 April 2000, modified the NLRC Decision and held MIESCOR solidarily liable with OPLGS for the employees’ separation pay, and denied reconsideration on 27 September 2000.

Issues Presented

Whether the Court of Appeals gravely erred in holding MIESCOR jointly and severally liable with OPLGS for the employees’ separation pay.
Whether the precedent and prior final rulings in the case constituted the law of the case binding the Court of Appeals and the Supreme Court on the question of MIESCOR’s liability for separation pay.

Parties' Contentions

MIESCOR contended that the Court of Appeals exceeded the issues, violated the law of the case, and wrongly disturbed final factual findings that it had already adjusted the contract price to cover statutory wage increases and had no liability for separation pay.
OPLGS contended that MIESCOR should be the ultimate party liable or, in the alternative, that OPLGS retained a right to reimbursement from MIESCOR for any awards it satisfied.

Statutory Framework

Art. 106, Labor Code was cited as making the employer jointly and severally liable with a contractor for unpaid wages when the contractor fails to pay.
Art. 107, Labor