G.R. No. 122468 & G.R. No. 122716 September 3, 1998
SENTINEL SECURITY AGENCY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ADRIANO CABANO, JR., VERONICO C. ZAMBO, HELCIAS ARROYO, RUSTICO ANDOY, and MAXIMO ORTIZ, respondents.

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, VERONICO ZAMBO, HELCIAS ARROYO, ADRIANO CABANO, MAXIMO ORTIZ, and RUSTICO ANDOY, respondents.

FACTS

The complainants (private respondents) were employees of Sentinel Security Agency, Inc. (the Agency) assigned to render guard duty at the premises of Philippine American Life Insurance Company (the Client) in Cebu City. On December 16, 1993, the Client sent a notice that the Agency was again awarded the security services contract, with a request to replace all the security guards. In compliance, the Agency issued a Relief and Transfer Order on January 12, 1994, replacing the complainants and ordering them to report for reassignment to other clients effective January 16, 1994. The complainants reported but were not given new assignments. They were told they were replaced because they were already old. They filed illegal dismissal cases on January 18, January 26, and February 4, 1994. The Agency and the Client maintained there was no dismissal, arguing the contract allowed the recall of guards at the will of either party and that the complainants filed prematurely. The Client also averred no employer-employee relationship existed between it and the complainants. The Labor Arbiter ordered the Agency and the Client to pay 13th month pay and service incentive leave benefits. On appeal, the NLRC modified the decision, finding constructive illegal dismissal. It ordered the Agency to pay separation pay and both the Agency and the Client to pay jointly and severally one year of backwages and corresponding 13th month pay.

ISSUE

1. Whether the complainants were illegally dismissed by Sentinel Security Agency, Inc.
2. Whether Philippine American Life Insurance Company is jointly and severally liable with the Agency for the payment of backwages, 13th month pay, and service incentive leave pay.

RULING

1. Yes, the complainants were illegally dismissed. The Supreme Court agreed with the NLRC’s conclusion of illegal dismissal but not its speculative reasoning regarding the circumvention of Republic Act 7641 (the New Retirement Law). The Court held that the relief and transfer order per se, akin to being placed on temporary “off-detail” or “floating status,” is not equivalent to dismissal as long as it does not continue beyond a reasonable time. However, the Agency failed to prove that the complainants abandoned their employment. The burden of proof to show a valid dismissal rests on the employer. The Agency’s claim of abandonment was contradicted by the complainants’ immediate filing of the illegal dismissal cases. Furthermore, the Court found that placing employees on “floating status” for more than six months amounts to constructive dismissal. Since the complainants were not given new assignments after being relieved and were told they were replaced due to old age, the act constituted constructive dismissal.
2. Yes, the Client is jointly and severally liable with the Agency for the complainants’ monetary awards, specifically back wages, 13th month pay, and service incentive leave pay. The Court ruled that the Labor Code provisions on solidary liability apply. Article 109 of the Labor Code states that the employer (the Agency) and the indirect employer (the Client) are jointly and severally liable for the workers’ wages. This solidary liability extends to the claims of the employees. The Client, as the principal who engaged the services of the security agency, is considered an indirect employer. Therefore, the Client is solidarily liable with the Agency for the complainants’ monetary claims arising from illegal dismissal. However, the Client is not liable for separation pay, as this is the sole liability of the direct employer, the Agency. The NLRC decision was affirmed with the modification that the Agency alone is liable for the separation pay.