ABOITIZ & COMPANY, INC., PETITIONER, VS. WORKMEN’S COMPENSATION COMMISSION, HERMOGENA T. CAÑETE AND PIONEER DETECTIVE CREDIT SECURITY AGENCY, INC., RESPONDENTS.

Aboitiz and Company versus Workmen's Compensation Commission

The Case

This is a petition for review filed by Aboitiz and Company against the Workmen's Compensation Commission, the widow Hermogena Cañete, and the Pioneer Detective Credit Security Agency. Aboitiz was ordered to pay death compensation for a security guard assigned to its premises, and it now seeks to shift that burden to the security agency that actually employed and supplied the guard. The case matters because it draws the line between the statutory employer, who answers to the worker under the Workmen's Compensation Act, and the direct employer, who must ultimately bear the cost, especially where a contract expressly assigns that liability.

Procedural History

The claim for death compensation was filed against both Aboitiz and the security agency, jointly and alternatively. The Cebu Unit of the Workmen's Compensation Commission ordered Aboitiz to pay the claimant widow and her minor children death benefits, burial expenses, attorney's fees, and administrative fees. On review, the Workmen's Compensation Commission affirmed that decision and, in effect, absolved the security agency of all liability without saying so expressly. Aboitiz then filed a petition for review with the Supreme Court. The Court denied the petition for lack of merit insofar as it challenged the award of compensation, but gave limited due course to the petition on the question of reimbursement from the security agency. The Court treated that limited petition as a special civil action and submitted it for decision after the security agency failed to file its comment.

Facts

Pioneer Detective Credit Security Agency supplied a security guard to guard the establishment of Aboitiz and Company. The guard, Anastacio Cañete, suffered a fatal heart attack in the course of his employment, caused by hypertensive heart disease. His widow, Hermogena Cañete, together with her minor children, claimed death compensation under the Workmen's Compensation Act.

The claim was filed against both Aboitiz, as owner of the establishment, and the security agency, as the one that employed and furnished the guard. The Commission held Aboitiz liable as the statutory employer and ordered it to pay the death benefits, burial expenses, attorney's fees, and administrative fees. It left the security agency free of any liability.

The contract for security guard service between Aboitiz and the agency contained an express undertaking by the agency to assume sole responsibility for all liabilities under the labor laws, including the Workmen's Compensation Act, for any claim by or against the guard. Aboitiz relied on this undertaking in seeking reimbursement.

Issues

• Whether or not Aboitiz, as owner of the establishment, is liable as statutory employer for the death compensation of the security guard.
• Whether or not the security agency, as the direct employer who supplied the guard, must reimburse Aboitiz for the amounts adjudged against it.

Applicable Provisions

Section 39 of the Workmen's Compensation Act, as amended, defines the term employer:

"Employer" includes every person or association of persons, incorporated or not, public or private, and the legal representative of the deceased employer. It includes the owner or lessee of a factory or establishment or place of work or any other person who is virtually the owner or manager of the business carried on in the establishment or place of work but who, for the reason that there is an independent contractor in the same, or for any other reason, is not the direct employer of laborers employed there.

This provision makes Aboitiz, as owner of the establishment, a statutory employer liable to the worker even though it is not the direct employer of the guard.

Ruling

On the first issue, the Court held that the Commission correctly treated Aboitiz as the owner of the establishment and therefore liable for death compensation as the statutory employer. The definition of employer in Section 39 expressly includes the owner of an establishment who, because an independent contractor is present, is not the direct employer of the laborers employed there.

On the second issue, the Court held that the Commission erred in not holding the security agency liable in turn to reimburse Aboitiz. The agency was the direct employer who employed and furnished the guard in the pursuit of its business of providing security guards. More importantly, the agency was contractually bound by its express undertaking:

The AGENCY shall solely assume all responsibilities and liabilities for any claim or demand by or against the guard arising under all Philippine Labor Laws, including overtime pay, extra compensation on Sundays and legal holidays, liability under the Workmen's Compensation Act, Social Security Act.

That undertaking made the agency ultimately liable and bound it to hold Aboitiz safe and harmless from such claims.

Doctrine

First, under Section 39 of the Workmen's Compensation Act, the owner or lessee of an establishment is a statutory employer liable for compensation to a worker employed there, even if an independent contractor is the direct employer. Second, as between the statutory employer and the direct employer, the direct employer who supplied the worker bears ultimate liability. Third, where the service contract contains an express undertaking by the agency to assume sole responsibility for labor law liabilities, that stipulation is enforceable and entitles the statutory employer to full reimbursement.

Disposition

The Court sentenced Pioneer Detective Credit Security Agency to reimburse and pay Aboitiz all the amounts adjudged against it in the Commission's decision.

Remember This

The single line to memorize: the owner of the establishment is the statutory employer who pays the worker, but the direct employer who supplied him must reimburse the owner. Examiners use this case to test the distinction between statutory and direct employer, and the enforceability of hold-harmless clauses in security service contracts.