GR 82868; (August, 1991) (Digest)
G.R. No. 82868 & G.R. No. 82932 ; August 5, 1991
DIOSCORO RABAGO, ET AL. and ACE BUILDING CARE, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE TUBERCULOSIS SOCIETY, INC., respondents.
FACTS
Ace Building Care (ABC) entered into a yearly janitorial service contract with the Philippine Tuberculosis Society, Inc. (PTS) from 1981 to 1985. ABC assigned 41 janitors to PTS. When the contract was awarded to a new company in 1985, the janitors filed a complaint with the NLRC against both ABC and PTS for various monetary claims, including wage differentials under Wage Orders Nos. 5 and 6. The Labor Arbiter held ABC and PTS jointly and severally liable for the wage differentials.
On appeal, the NLRC modified the decision, holding ABC solely liable for the wage differentials while affirming awards for separation pay and service incentive leave to specific employees. Both the janitors and ABC filed separate petitions for certiorari. The janitors ( G.R. No. 82868 ) argued for the reinstatement of solidary liability, while ABC (G.R. No. 82932) contested its liability for the wage differentials and the awards for incentive leave and separation pay.
ISSUE
The primary issue is whether PTS, as the principal, can be held jointly and severally liable with ABC, the contractor, for the payment of the janitors’ wage differentials under Wage Orders Nos. 5 and 6.
RULING
Yes. The Supreme Court reinstated the Labor Arbiter’s decision, holding ABC and PTS solidarily liable for the wage differentials. The Court applied Articles 106, 107, and 109 of the Labor Code, which establish the solidary liability of the principal (indirect employer) and the contractor (direct employer) for violations of the Labor Code, including the payment of statutory minimum wages.
The legal logic is that this joint and several liability mechanism is designed to ensure workers are paid their lawful wages, especially when the direct employer-contractor fails to do so. It treats the principal as an indirect employer for this specific purpose, providing ample protection to workers as mandated by the Constitution. The Court cited the precedent in Eagle Security Agency, Inc. vs. NLRC, which involved an analogous contractor-principal relationship. The fact that PTS is a non-stock, non-profit corporation does not exempt it from this statutory obligation towards workers engaged in its premises.
Regarding the ancillary issues, the Court affirmed ABC’s liability for the awarded separation pay and service incentive leave, modifying the decision only to grant incentive leave pay to one employee previously denied through oversight. The termination of ABC’s contract with PTS was deemed a partial closure, justifying separation pay under Article 283 of the Labor Code by analogy.