EAGLE SECURITY AGENCY, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER EDUARDO G. MAGNO, RODOLFO DEQUINA, AVELINO M. NARVAEZ, JACULO J. JEROME, ROLANDO …

The core issue in these two consolidated cases is the liability
of the principal and the contractor for the payment of the minimum wage and
cost of living allowance increases to security guards under Wage Order Nos. 2,
3, 5 and 6.

The antecedent facts are undisputed.

In 1980, petitioners Philippine Tuberculosis Society, Inc.,
(hereinafter referred to as PTSI) and Eagle Security Agency, Inc. (hereinafter
referred to as EAGLE) entered into a “Contract for Security Services”
wherein the latter agreed to provide security services in the former’s premises. 
The contract covered the period from November 2, 1979 to July 31, 1985. 
Pursuant to this agreement, private respondents were assigned by EAGLE
to PTSI as security guards.

Subsequently, on November 5, 1985, a complaint was filed by
private respondents Rodolfo Dequina, Avelino Narvaez, Jaculo Jerome, Rolando Valencia, Clodualdo
Angra, Jose Samonte, Raul Lagastos, Priscilo Maldo, Jr., R. C. dela Cruz, Jose
Ajeda, and others against PTSI and EAGLE for unpaid
wage and allowance increases under Wage Order Nos. 2, 3, 5 and 6* with interest plus damages and attorney’s fees.

On September 30, 1986, while the case was still pending, ten (10)
additional complainants, namely:  Jose Anastacio, Lauro Roberto, Ismael Salacata, Uldarico Camu, Jesus Carrillo, Diorito Braga, Hilario Llanes, Napoleon Sepole, William Estosane and Amante Sobretodo, joined in the
suit.  However, the labor arbiter dropped
the names of Hilario Llanes,
Napoleon Sapole, William Estosane
and Amante Sobretodo as
complainants, on the ground that only those who signed the verified complaint
and reply should be recognized [Labor Arbiter’s Decision, p. 1; G.R. No. 81447,
Rollo, p. 74.]

On April 6, 1987,
the labor arbiter rendered a decision, the dispositive
portion of which reads as follows:

IN VIEW OF THE FOREGOING, respondent Eagle Security Agency, Inc.
and Philippine Tuberculosis Society, Inc. are hereby ordered to pay jointly and
severally the sixteen (16) complainants of (sic) their unpaid wages and
allowances under Wage Order Nos. 2, 3, 5 and 6. 
The office of the Socio-Economic Analyst is hereby ordered to examine
the records and payrolls of the two (2) respondents to determine their
liabilities.

The claim for damages and attorney’s fees are hereby DISMISSED for lack of merit.

SO ORDERED.  [Labor Arbiter’s Decision, pp. 6-7; G.R. No. 81447, Rollo, pp. 79-80.]

PTSI, EAGLE and the four (4) security guards whose names were
dropped from the complaint filed their appeals to the National Labor Relations
Commission (hereinafter referred to as NLRC).

The NLRC, on November
27, 1987, rendered its decision granting the appeal as to the four
(4) security guards whose names were dropped and denying PTSI and EAGLE’S appeals.  The dispositive
portion of its decision reads as follows:

WHEREFORE, premises considered, let the appealed
decision be, as it is
hereby, Modified in that respondent Eagle Security Agency, Inc.
and the Philippine Tuberculosis Society, Inc. are hereby ordered to pay jointly and severally the twenty (20) complainants of (sic) their unpaid
wages and allowances under Wage Order Nos. 2, 3, 5 and 6.  In all other respects, the
decision is Affirmed.

SO ORDERED.  [NLRC Decision, p. 8; G.R. No. 81447, Rollo, p. 27.]

Both PTSI and EAGLE filed their motions for reconsideration. 
In a resolution dated December
29, 1987, the NLRC denied these motions for lack of merit.

PTSI and EAGLE filed
separate petitions for certiorari with this Court.  PTSI’s petition was docketed as G.R. No. 81447 while that of EAGLE, G.R. No. 81314.

On motion of PTSI, the
Court, on April 6, 1988,
resolved to consolidate the two (2)
petitions.  Thereafter, on May 25, 1988, the Court gave due course to both petitions and required the parties to submit their respective
memoranda.  On June 20,
1988, the Court, also upon motion of PTSI, resolved to issue a
temporary restraining order enjoining the NLRC from enforcing and/or carrying out its decision dated November 27, 1987 and resolution of December 29, 1987.

1.  Petitioners PTSI and
EAGLE, in this special civil action of certiorari, impugn the decision
of the NLRC as having been
issued with grave abuse of discretion amounting to lack or excess of
jurisdiction.  Petitioners assail the
decision of the NLRC finding them jointly and severally liable to the security
guards for payment of the minimum wage and cost of living allowance increases
under the wage orders.  Both PTSI and
EAGLE point to the other as the one who should be solely liable for paying the
increases.

Petitioner PTSI alleges
that payment of the wage and allowance increases under Wage Order Nos. 2, 3, 5
and 6 should be borne exclusively by EAGLE, pursuant to the following provision
in the “Contract for Security Services”:

3.  AGENCY hereby
binds itself to pay its employees in
accordance with the provisions of the
New Labor Code, as amended, Eight-Hour
Labor Law, the Minimum Wage Law, and
other laws, and/or decrees governing security
agency.  AGENCY shall be solely
responsible for the payment of all indemnities to its employees which may arise under PD No. 442, as amended, and shall
comply with the provisions of all other Philippine laws relative to its employees  . . . [Article VII sec. 3 of the Contract for
Security Services; G. R. No. 81447, Rollo, p. 34;
Underscoring supplied.]

Petitioner EAGLE, on the
other hand, invokes the following provision common to Wage Order Nos. 3, 5 and
6 to support its theory that it is PTSI that should be held liable for the
increases:

In case of contracts for construction projects and for security,
janitorial and similar services, the increase in the minimum wage and allowance
rates of the workers shall be borne by the principal or client of the
construction/service contractor and the contract shall be deemed amended
accordingly . . . **

The Court finds that the NLRC acted correctly in ordering the two
petitioners to jointly and severally pay the wage and allowance increases to
the security guards.

Petitioners’ solidary liability for the
amounts due the security guards finds support in Articles 106, 107 and 109 of
the Labor Code which state that:

ART. 106.  Contractor or subcontractor.  – Whenever an employer enters into a
contract with another person for the performance of the former’s
work, the employees of the contractor and of the latter’s subcontractor, if
any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or suncontracator
fails to pay the wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent that he is liable to employees
directly employed by him.

*        *          *

ART. 107.  Indirect employer.  – The
provisions of the immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work, task,
job or project.

*        *          *

ART. 109.  Solidary liability.  – The provisions of existing laws to the
contrary notwithstanding, every employer or indirect employer shall be held
responsible with his contractor or subcontractor for any violation of this
Code.  For purposes of determining the
extent of the civil liability under this Chapter, they shall be considered as
direct employers.

This joint and several liability of the contractor and the principal is mandated by
the Labor Code to assure compliance of the provisions therein including the
statutory minimum wage [Article 99, Labor Code].  The contractor is made liable by virtue of
his status as direct employer.  The
principal, on the other hand, is made the indirect employer of the contractor’s
employees for purposes of paying the employees their wages should the
contractor be unable to pay them.  This
joint and several liability facilitates, if not guarantees, payment of the
workers’ performance of any work, task, job or project, thus giving the workers
ample protection as mandated by the 1987 Constitution [See Article
II Sec. 18 and Article XIII Sec. 3.]

In the case at bar, it is
beyond dispute that the security guards are the employees of EAGLE [See Article VII Sec. 2 of the Contract
for Security Services; G.R. No. 81447, Rollo, p. 34.]
That they were assigned to guard the premises of PTSI pursuant to the latter’s
contract with EAGLE and that neither of these two entities paid their wage and
allowance increases under the subject wage orders are also admitted [See Labor Arbiter’s Decision,
p. 2; G.R. No. 81447, Rollo, p. 75.] Thus, the
application of the aforecited provisions of the Labor
Code on joint and several liability of the principal and contractor is
appropriate [See Del
Rosario & Sons Logging Enterprises, Inc. v. NLRC, G.R. No. 64204, May 31,
1985, 136 SCRA 669.]

The solidary liability of PTSI and
EAGLE, however, does not preclude the right of reimbursement from his co-debtor
by the one who paid [See Article
1217, Civil Code.] It is with respect to this right of reimbursement that
petitioners can find support in the aforecited
contractual stipulation and Wage Order provision.

The Wage Orders are explicit that payment of the increases are
“to be borne” by the principal or client.  “To be borne”, however, does not
mean that the principal, PTSI in this case, would directly pay the security
guards the wage and allowance increases because there is no privity
of contract between them.  The security
guards’ contractual relationship is with their immediate employer, EAGLE.  As an employer, EAGLE is tasked, among
others, with the payment of their wages [See Article, VII Sec. 3 of the
Contract for Security Services, supra and Bautista v. Inciong, G.R. No. 52824, March 16, 1988, 158 SCRA 665.]

On the other hand, there existed a contractual agreement between
PTSI and EAGLE wherein the former availed of the security services provided by
the latter.  In return, the security
agency collects from its client payment for its security services.  This payment covers the wages for the
security guards and also expenses for their supervision and training, the
guards’ bonds, firearms with ammunitions, uniforms and other equipments,
accessories, tools, materials and supplies necessary for the maintenance of a
security force.

Premises considered, the security
guards’ immediate recourse for the payment of the increases is with their
direct employer, EAGLE.  However, in
order for the security agency to comply with the new wage and allowance rates
it has to pay the security guards, the Wage Orders made specific provision to
amend existing contracts for security services by allowing the adjustment of the consideration paid
by the principal to the security agency concerned.  What the Wage Orders require, therefore, is
the amendment of the contract as to the consideration to cover the service
contractor’s payment of the increases mandated. 
In the end, therefore, ultimate liability for the payment of the
increases rests with the principal.

In view of the foregoing, the security guards should claim the
amount of the increases from EAGLE. 
Under the Labor Code, in case
the agency fails to pay them the amounts claimed.  PTSI should be held solidarily
liable with EAGLE [Articles 106, 107 and 109.] Should EAGLE pay, it can claim
an adjustment from PTSI for an increase in consideration to cover the increases
payable to the security guards.

However, in the instant case, the contract for security services
had already expired without being amended consonant with the Wage Orders.  It is also apparent from a reading of the record that EAGLE does not now demand from PTSI any
adjustment in the contract price and its main concern is freeing itself from liability.  Given these peculiar circumstances, if PTSI
pays the security guards, it cannot claim reimbursement from EAGLE.  But in case it is EAGLE that pays them, the
latter can claim reimbursement from PTSI in lieu of an adjustment, considering
that the contract had expired and had not been renewed.

2.  PTSI also alleges that
it is exempt from payment under the subject Wage Orders because it is a public
sector employer while the Wage Orders cover only employers and employees in the
private sector [G.R. No. 81447, Petition, p. 9; Rollo,
p. 10.] This is unmeritorious.  The
definition of a public sector employer*** relied
upon by PTSI is relevant only for purposes of coverage under the Employees’
Compensation.  Moreover, the Labor Code provides that as used in Book Three,
Title II on Wages, the term “employer”
includes “the Government and all its branches, subdivisions and
instrumentalities, all government-owned or controlled corporations and
institutions  . . .” [Article 97
(b), Labor Code.]

3.  It is further contended
by PTSI that to uphold the ruling of the NLRC would be violative
of the Constitutional prohibition against impairment of the obligation of
contracts [Article III sec. 10 of the 1987 Constitution.] Time and again, this
Court has rejected this line of reasoning in
sustaining the validity and constitutionality of labor and social
legislations like the Blue Sunday Law [Asia Bed Factory v. National Bed and
Kapok Industries Workers’ Union, et al., 100 Phil. 837 (1957)], compulsory
coverage of private sector employees in the Social Security System [Phil.
Blooming Mills Co., Inc. v.
Social Security System, G.R. No. L-21223, August 31, 1966, 17 SCRA 1077], and the abolition of share tenancy [Vda. de Genuino v. Court of
Agrarian Relations, G.R. No. L-25035, February 26, 1968, 22 SCRA 792] enacted pursuant to the
police power of the State.

The Wage Orders are no
different from the aforecited laws.  They are labor standard legislations enacted
to alleviate the plight of the workers whose wages barely meet the spiralling costs of their basic needs.  The increase in the minimum wage and
the cost of living allowance was ordered precisely to ensure the workers’ health, efficiency and well-being towards achieving the
country’s goal of ensuring increased productivity and viability of business and
industry [See Whereas Clause of the Wage Orders.]

4.  Petitioner EAGLE would
moreover ascribe grave abuse of discretion to both the Labor Arbiter and the
NLRC for the inclusion of certain security guards in the complaint.

Firstly, EAGLE contends that the names of Rodolfo Dequina and R.C. dela Cruz should
have been dropped from the complaint as they had already resigned from its
employ and signed a quitclaim in favor of the security agency [G.R. No. 81314,
Petition, p. 6; Rollo, p. 7.]

However, no grave abuse of discretion can be ascribed to the
labor arbiter for not dropping their names from the complaint it appearing that
the alleged resignation letters are not of record [Labor Arbiter’s Decision, p.
6; G. R. No. 81314, Rollo, p. 18.]

Secondly, EAGLE assails the NLRC’s inclusion
of the four (4) security guards whose names were dropped by the labor arbiter
in the complaint.  However, these four
(4) security guards are part of the ten (10) additional complainants
denominated as “and others” in the complaint and who were identified
in their Manifestation dated September
30, 1986.  Further, they
submitted individual computations in their “Reply to Separate Position
Papers Filed by Respondents”. 
Accordingly, the Court finds no grave abuse of discretion committed by
the NLRC in granting their appeal.

WHEREFORE, in view of the foregoing, the petitions in G.R.
No. 81314 and G.R. No. 81447 are
hereby DISMISSED and the decision and resolution of the NLRC in
NLRC-NCR-11-3652-85 dated November
27, 1987 and December 29,
1987, respectively, are AFFIRMED.  The temporary restraining order issued by the Court on June 20, 1988 is hereby LIFTED and SET ASIDE.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr.,
Feliciano, and Bidin,
JJ., concur.

* Wage Order No. 2 was passed on July
6, 1983 and immediately took effect; Wage
Order No. 3, passed on November 7, 1983, took effect on November 1, 1983; Wage
Order No. 5 was passed on June 11, 1984 and took effect on June 16, 1984; and
Wage Order No. 6, passed on October 26, 1984, took effect on November 1, 1984.

** Sections 4, 6
and 9 of Wage Order Nos. 3, 5 and 6, respectively.  Wage Order No. 2 is silent as regard said
provision but its implementing rules contain a similar provision in Section 4
(b), Chapter IV.

*** Rule I Sec. 3 of the Amended
Rules on Employees’ Compensation provides that – (b) An employer shall belong
to either:  (1) The public sector covered
by the GSIS, comprising the National Government, including government-owned or
controlled corporations, the Philippine Tuberculosis Society, the Philippine
National Red Cross, and the Philippine Veterans Bank; . . .