DIOSCORO RABAGO, JOSELITO LAGUNA, MELCHOR ESCOLTURA, MORENO MANGABAT, FORTUNATO SARSONAS, ELESEO ASEDELLO, ROMAN DELOS ARCOS, GREGORIO RETARDO, PAULINO IGNACIO, EMILIANO LAGAHIT…

In 1981, Ace Building Care and the Philippine Tuberculosis Society entered into a contract under
which the former would provide the latter with janitorial and allied services
for a stipulated consideration, subject to such
adjustment as might be subsequently required by law.  The contract was renewed yearly until 1985,
when the services were placed under public bidding and a new contract was
awarded to another company, which then took over from ABC.

On September 9, 1985, the 41 janitors ABC had earlier detailed to
PTS filed a complaint with the National Labor Relations Commission against both
ABC and PTS for unpaid wage differentials under Wage Order Nos. 5 and 6, holiday premium pay, damages
and attorney’s fees, reimbursement of cash bond, incentive leave pay and bonus
and separation pay.  ABC filed a
cross-claim against PTS, contending that the latter was liable for the
statutory increases, while PTS moved to dismiss on the ground that it belonged
to the public sector and was not covered by the Labor Code.

On the basis of the position papers and other evidence submitted
by the parties, Labor Arbiter Felipe T. Garduque II
held on September 30, 1987, that
the complainants were not entitled to legal holiday pay and to reimbursement of
cash bond or separation pay except for five of them who were allowed separation
pay.  The decision also awarded incentive
leave with pay except for seven of them, who had worked less than one year.^[1]

The Labor Arbiter also held ABC and PTSI jointly and severally
liable for payment of the wage differentials under Wage Orders Nos. 5 and 6.

Both ABC and PTSI appealed to the NLRC, which on February 15, 1988, affirmed the
decision with respect to the award of separation pay and service incentive
leave with pay but held that it was ABC alone that should pay the wage differentials under Wage Orders
Nos. 5 and 6.^[2]

The complainants and ABC filed their respective motions for
reconsideration and, upon denial thereof, filed the separate petitions for certiorari
with this Court.  Upon motion of ABC, we
issued on May 11, 1988, a
temporary restraining order enjoining the NLRC from enforcing and/or carrying
out its decision dated February 15,
1988.  On September 28, 1988, we consolidated
the two petitions.

In G.R. No. 82868, the petitioners-complainants argue that the
respondent Commission erred in not holding respondents PTS and ABC jointly and solidarily liable for
the differential pay required under Wage Orders Nos. 5 and 6.

In G.R. No. 82932, petitioner ABC raises three issues, to wit:

1.     
Whether or not herein petitioner Ace Building
Care is liable for the wages and allowances mandated by Wage Orders Nos. 5 and
6; and whether or not herein respondent Philippine Tuberculosis Society, Inc.
should be exempted from the payment of the wages and allowances under the said
Wage Orders to the individual respondents.

2.     
Whether or
not herein petitioner is liable to the individual respondents for the payment of the service incentive pay.

3.     
Whether or not herein petitioner is liable to
the five individual respondents for the payment of separation pay.

The first and common issue in these two petitions has already
been resolved by this Court in Eagle Security Agency, Inc. vs. NLRC,^[3]
where we held:

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 latters‘ subcontractor, if any, shall be paid in accordance with the provisions
of this Code.

In the event that the contractor or subcontractor 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.

x x
x

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.

x x
x

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).

On the disavowal of liability by PTS on the ground that it
belongs to the public sector, the Court declared through Justice Cortes:

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).

In his manifestation dated November 8, 1989, the Solicitor
General declared that his office was “abiding by the aforementioned ruling
of the Honorable Court.” PTS, on the other hand, urges us to re-examine
the said case, insisting that the Philippine Tuberculosis Society is expressly
mentioned as belonging to the public sector in Section 3 of the Rules
Implementing Title II, Book IV of the Labor Code, thus:

SEC. 3.  Employer – (a) The
term shall mean any person natural or juridical, domestic or foreign, who
carries on in the Philippines any trade, business, industry, undertaking or activity of any kind and uses the services of
another person who is under his orders
as regards the employment.

(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;

(2)    The private sector covered by the
SSS, comprising all employers other than those defined in the
immediately preceding paragraph. 
(Underscoring supplied)

PTS adds:

While it is true that the term “employer” as used in
Title II, Book Three of the Labor Code, includes “the Government and all
its branches, subdivisions and instrumentalities, all government-owned or
controlled corporations and
institutions …,” it does not follow that the government and all its
branches, subdivisions, agencies and instrumentalities are covered by Wage Orders
Nos. 5 and 6.  If it were so, then every employee in the
government receiving the minimum wage would be entitled to wage adjustments thereunder.  This, however, is not what the wage orders intended so their application had to
be limited to “workers in the private sector.”

We disagree.

As the Court sees it, the wage orders do not apply to the direct
employees of PTS who in fact are members of the Government Service Insurance
System.  The complainants in G.R. No.
82868 unquestionably belong to the private sector and for this reason are
covered by the Social Security System. 
They are the indirect employees of the PTS and as such are
entitled to hold it liable, solidarily with their
direct employer, for their unpaid wage differentials.  In this sense, the PTS is correctly classified as an employer
coming under the private sector.  The reference to it as belonging
to the public sector relates only to its direct employees “for purposes of coverage under
the Employees’ Compensation Commission,” not to its indirect employees coming from the private sector.

The issues regarding the separation pay and the service incentive
leave pay are factual.  We have said
often enough that the findings of fact of quasi-judicial agencies which have
acquired expertise on the specific matters entrusted to their jurisdiction are
accorded by this Court not only respect but even finality if they are supported
by substantial evidence.^[4]

We are satisfied that the complainants were able to establish by
Exhibit “B” their length of service to entitle them to service
incentive leave with pay.  The argument
that the affidavit is hearsay because the affiants were not presented for
cross-examination is not
persuasive because the rules of evidence are not strictly observed in proceedings
before administrative bodies like the NLRC, where decisions may be reached on
the basis of position papers
only.  It is also worth noting that ABC
has not presented any evidence of its own to disprove the complainant’s
claim.  As the Solicitor General correctly
points out, it would have been so easy to submit the complainants’ employment
records, which were in the custody of ABC, to show that they had served for
less than one year.

A slight modification must be made, though, in the case of Norma
Moreno Mangabat, who was denied the service incentive
leave with pay, possibly through an oversight. 
Exhibit “B” shows that her employment was from “7/79 to
12/81 and 3/84 to 7/84.” Section 3 of Rule V, Book III of the Omnibus
Rules Implementing the Labor Code, provides that the term “at least one
year service” shall mean service within 12 months, whether continuous
or broken, reckoned from the date the employee started working.

The submission that the five complainants awarded separation pay were not entitled thereto
because their terms expired with the contract with PTS is also not
acceptable.  ABC never offered any
evidence that the employment of the claimants was co-terminal with the
janitorial contract.  We agree that the
termination of ABC’s contract with PTS resulted in a partial closure or
cessation of operations of ABC that called for the application (if only by analogy) of Article 283 of
the Labor Code providing in part as follows:

x x x In
case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business
losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher.  A fraction of at least six (6) months shall
be considered one (1) whole year.

Our conclusion is that Ace Building Care and the Philippine
Tuberculosis Society are solidarily liable to the
complainants for their differential pay under Wage Orders Nos. 5 and 6, PTS
being considered in the
circumstances of this case to be the indirect employer of workers in the
private sector.  ABC is liable for the payment of the separation pay and incentive leave pay of the
complainants mentioned in the challenged decisions, with the modification only
that Norma Moreno Mangabat shall also be entitled to
service incentive leave with pay.

In view of the above findings, it is no longer necessary to
resolve the motion of the complainants that the supersedeas bond fixed by the Court for the issuance of the temporary
restraining order on May 11, 1988, be increased to
P500,000.00.

ACCORDINGLY, judgment is rendered as follows:

(1)  In G.R. No. 82868, the decision of respondent
NLRC is SET ASIDE and that of Labor Arbiter Felipe Garduque
II is REINSTATED, with the modification that Norma Moreno Mangabat
shall also be granted service incentive leave with pay.

(2)  In G.R. No. 82932, the petition is DISMISSED,
with costs against the petitioner.

(3)  The temporary restraining order dated May 11, 1988, is LIFTED.

SO ORDERED.

Narvasa, (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

^[1]
G.R. No. 82932, Rollo, p. 57.

^[2]
Ibid., p. 18.

^[3]
173 SCRA 479.

^[4]
Omar K. Al-Esayi and Company, Ltd. vs. Flores, 183 SCRA 458; Chua vs. NLRC, 182 SCRA 353; Pagkakaisa ng mga Manggagawa vs. Ferrer?Calleja, 181 SCRA 119.