G.R. No. 207828 - SRL International Manpower Agency vs. Yarza, Jr.

Case Summary (G.R. No. 207828)

Factual Background and Employment Arrangement

Yarza was hired as a Project Manager for a two-year term by Akkila Co., Ltd., a foreign principal based in the UAE, through SRL, its local manpower agency. His contract stipulated a monthly basic salary of AED 8,000, plus allowances. Initially, Yarza’s deployment was processed under a visit visa instead of an employment visa, a procedure unapproved by the Philippine Overseas Employment Agency (POEA) and contrary to its rules. Despite SRL’s protests and refusal to facilitate deployment under a visit visa, Yarza proceeded with deployment on such visa via a direct arrangement with Akkila. After approximately six months of employment, Yarza was repatriated to the Philippines to secure an employment visa for redeployment. Upon his return, a medical examination revealed that Yarza was unfit for work due to Uncontrolled Diabetes Mellitus Type II, leading Akkila to terminate his employment for medical reasons without prior notice or due process.

Labor Arbiter’s Findings

The Labor Arbiter (LA) dismissed Yarza’s complaint for illegal dismissal, ruling that no employer-employee relationship existed between Yarza and SRL during his initial overseas work. The LA held that Yarza’s deployment on a visit visa was unauthorized and considered Yarza an undocumented worker with no proof of POEA-approved processing. SRL was found not liable for Yarza’s employment or termination, as it did not participate in the deployment after the issuance of the visit visa. The medical disqualification and the absence of a waiver from Akkila justified the failure to redeploy Yarza, and his dismissal was deemed valid due to his medical condition.

NLRC’s Ruling

The National Labor Relations Commission (NLRC) reversed the LA’s decision, ruling that an employer-employee relationship existed between Yarza and the petitioners. The NLRC found SRL actively involved in processing Yarza’s documents and deploying him despite the visit visa issue. It declared Yarza’s termination illegal because the petitioners failed to secure a certification from a competent public health authority confirming Yarza’s incurable medical condition, as required by law for dismissal on medical grounds. The NLRC awarded Yarza payment equivalent to three months’ salary per year of the unexpired term of his contract in line with RA 10022’s limitation on claims, and granted attorney’s fees.

Subsequent NLRC Reconsideration

On reconsideration, the NLRC partially reversed itself, maintaining SRL’s participation in Yarza’s deployment but concluding that the failure to redeploy was due to Yarza failing the required PEME. It ruled that medical disqualification constituted a just cause for dismissal and awarded Yarza one month’s salary as separation pay, dismissing the illegal dismissal claim.

Court of Appeals’ Decision

The Court of Appeals (CA) reinstated the NLRC’s earlier ruling granting Yarza’s claim for illegal dismissal and full salary for the unexpired contract period pursuant to RA 10022. The CA emphasized the joint and solidary liability of SRL, the local placement agency, with its foreign principal Akkila, despite direct hiring and documentation issues. It found that SRL actively participated in Yarza’s deployment and could not disclaim responsibility. The CA held that Yarza’s dismissal was invalid for lack of proper medical certification and failure to comply with procedural due process under the Labor Code and Omnibus Rules. The CA distinguished Yarza’s case from purely medical disqualification and deemed it an illegal termination instead. While recognizing RA 10022’s three-month cap on claims, the CA applied it pending the Supreme Court’s ruling on its constitutionality.

Petitioners’ Arguments before the Supreme Court

SRL argued that it had no employer-employee relationship with Yarza as it ceased processing his documents upon learning of the visit visa irregularity. SRL contended Yarza was directly hired by Akkila and that medical disqualification justified the non-redeployment and dismissal. The petitioners also disputed the award of attorney’s fees.

Yarza’s Counterarguments

Yarza maintained the existence of an employer-employee relationship with SRL, pointing to his attendance of the Pre-Departure Orientation Seminar under SRL, payment of fees by SRL, purchase of his travel ticket by SRL, and repeated communications with SRL. He asserted that he was illegally dismissed without due process, and the petitioners failed to prove just cause for termination. Yarza requested moral and exemplary damages and attorney’s fees.

Supreme Court’s Analysis on Employer-Employee Relationship

The Court reaffirmed that the essential elements of employer-employee relationship are the selection and engagement of the employee, payment of wages, power of dismissal, and power to control the employee’s work. These elements were satisfied as Akkila selected and engaged Yarza, paid his wages, dismissed him, and controlled his work. Although the employment contract was not approved by POEA, an employer-employee relationship existed given the circumstances. SRL’s active participation as local manning agent during the entire deployment process further established its joint responsibility.

Employment Contract Validity and POEA Rules

The “Offer of Employment” was invalid because it lacked POEA approval and contravened Philippine labor policies by applying UAE labor laws instead of Philippine law. Nonetheless, the absence of a valid contract did not preclude Yarza’s protections under Philippine labor laws and his entitlement to security of tenure, as contemplated by the 1987 Constitution and labor statutes.

Dismissal for Disease and Procedural Due Process

The Court held that dismissal on grounds of disease (Article 299 of the Labor Code and its implementing rules) requires a certification from a competent public health authority that the disease is incurable within six months and that continued employment is prohibited or prejudicial. Akkila failed to present such certification. Moreover, procedural due process needed at least two notices and an opportunity to be heard, which were not given. Thus, the dismissal was illegal.

Liability of Petitioners and Legal Framework for OFW Protection

Under Section 10, RA 8042, as amended by RA 10022, recruitment agencies and their foreign principals are jointly and solidarily liable for monetary claims arising from employer-employee relationships involving OFWs. This continuing liability extends throughout the employment contract's duration and covers claims including actual and moral damages. The Court underscored the recruitment agency’s covenant with the State to protect the welfare of migrant workers.

Application of Case Law on Solidary Liability and Protection of OFWs

The Court applied precedents affirming the continuing and joint liability of placement agencies and principals for the welfare, safety, and protection of overseas Filipino workers, including liability for moral and exemplary damages. Recruitment agencies

Case Syllabus (G.R. No. 207828)

Background and Procedural History

This petition for review on certiorari challenges the March 25, 2013 Decision and June 18, 2013 Resolution of the Court of Appeals (CA) in CA-AG.R. SP No. 126776.
The CA's decision reinstated the National Labor Relations Commission’s (NLRC) March 29, 2012 Decision, which held petitioners liable for illegal dismissal of respondent Pedro S. Yarza, Jr.
The NLRC initially found illegal dismissal but partially reversed in a July 23, 2012 resolution, reducing compensation due to Yarza’s medical disqualification.
Yarza allegedly contracted for a two-year employment as Project Manager with petitioners, specifically Akkila Co. Ltd. UAE (a foreign principal), facilitated by SRL International Manpower Agency (SRL) as the local recruitment agency.
Yarza was repatriated to the Philippines after about six months of work with instructions to renew his visa and return, but was terminated without prior notice or due process.

Facts of the Case

Yarza was hired as Project Manager under a contract paying AED 8,000 basic monthly salary plus allowances, and was deployed to UAE on October 14, 2010.
He was repatriated on March 24, 2011, purportedly to renew his work visa.
Yarza complied with the requirement but was unexpectedly terminated via a letter dated May 22, 2011, on medical grounds of diabetes.
SRL initially handled Yarza’s deployment documents but ceased doing so upon discovery that Akkila obtained a visit visa, rather than an employment visa, contrary to POEA rules.
Yarza undertook deployment himself on the visit visa, later rejected by petitioners after a medical fitness examination conducted by SRL’s accredited clinic, Seamed Medical Clinic.
The clinic found Yarza unfit for work due to Uncontrolled Diabetes Mellitus Type II.
Petitioners did not secure a required certification from competent public health authorities to justify termination due to illness.
Yarza filed for illegal dismissal, claiming security of tenure and entitlement to salary for unexpired contract period and damages.

Ruling of the Labor Arbiter (LA)

The LA dismissed Yarza’s complaint for lack of merit.
Held no employer-employee relationship existed between Yarza and SRL or petitioners for the initial employment as the contract was solely between Yarza and Akkila.
Found Yarza left as an undocumented worker due to failure to process official POEA documents for employment visa.
Determined that SRL was not liable for Yarza’s deployment or subsequent termination, as Yarza handled his own deployment under a visit visa.
Noted medical unfitness and lack of waiver from petitioners justified non-redeployment; thus, no illegal dismissal occurred.
Denied salary claims for unexpired portion of contract.

Ruling of the National Labor Relations Commission (NLRC)

The NLRC reversed the LA’s decision in its March 29, 2012 Decision, finding substantial evidence showing SRL’s active participation in Yarza’s recruitment, documentation, and deployment.
Held that petitioners failed to justify dismissal based on illness, as no certification from a competent public health authority was presented.
Ordered petitioners to pay Yarza salaries for the unexpired portion of his contract but limited by RA 10022’s "three-month pay for every year of unexpired term" cap.
Granted attorney’s fees at 10% of the monetary award.
In the July 23, 2012 Resolution, the NLRC partly reversed its own ruling, dismissing illegal dismissal claim, reasoning that failure to redeploy was due to Yarza’s medical disqualification after the PEME.
Awarded medical separation pay equivalent to one month’s salary plus attorney’s fees.
Cited compliance with POEA rules requiring only medically and technically qualified recruits to be deployed.

Ruling of the Court of Appeals (CA)

The CA reversed the NLRC’s July 23, 2012 Resolution and reinstated the March 29, 2012 Decision.
Declared Yarza was illegally dismissed and entitled to full salaries for the unexpired portio