LEOPARD SECURITY AND INVESTIGATION AGENCY, PETITIONER, VS. THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, ROMEO NERO AND PILIPINAS BANK, RESPONDENTS.

Leopard Security and Investigation Agency versus National Labor Relations Commission

The Case

This is a petition brought by Leopard Security and Investigation Agency against the National Labor Relations Commission, its former security guard Romeo Nero, and its client Pilipinas Bank. The agency asks the Supreme Court to overturn the ruling that held it liable, together with the bank, for the guard's unpaid salary and benefits. The case matters because it fixes the reach of an employer's liability in a labor-only contracting arrangement, and it teaches how the Labor Code's rule on indirect employers operates alongside a private service contract between a security agency and its client.

Procedural History

Romeo Nero filed a complaint with the National Labor Relations Commission against Leopard Security and Investigation Agency for illegal dismissal, underpayment of salaries, non-payment of overtime pay, legal holiday pay, premium for holiday pay, separation pay, and violation of certain labor laws. The agency impleaded Pilipinas Bank as a third-party defendant. Labor Arbiter Cornelio T. Linsangan rendered a decision in favor of Nero, ordering the agency and the bank to pay him underpayment of basic salary, emergency cost of living allowance, and overtime, and ordering the agency alone to pay a uniform allowance and underpayment of thirteenth month pay. The complaint for illegal dismissal and the other monetary claims were dismissed. Both the agency and the bank appealed to the National Labor Relations Commission, and its First Division affirmed the labor arbiter's decision. The agency then elevated the matter to the Supreme Court. Although the petition was captioned as a petition for review, the Court treated it as a special civil action for certiorari, since labor cases are reviewed by certiorari under Rule 65 and not by appeal, and it did so in the interest of justice on account of the jurisdictional issues raised.

Facts

Since June 30, 1985, Romeo Nero had been employed as a security guard of Leopard Security and Investigation Agency. He was assigned to guard the premises of Pilipinas Bank, then a client of the agency. Later, he was assigned to another client, the Far East Bank and Trust Company. On July 20, 1987, he resigned from the agency.

On August 13, 1987, Nero filed a complaint against the agency with the National Labor Relations Commission, seeking relief for illegal dismissal, underpayment of salaries, non-payment of overtime pay, legal holiday pay, premium for holiday pay, separation pay, and violations of certain labor laws. The agency countered that Nero had voluntarily resigned and had executed a quitclaim absolving the company from any financial liability in relation to his previous employment, so that he was estopped from complaining. The agency also impleaded Pilipinas Bank as a third-party defendant.

The labor arbiter ruled for Nero, and the National Labor Relations Commission affirmed. Before the Supreme Court, the agency argued that it could not be held solidarily liable with the bank, that the written service agreement between them had been modified verbally, that the bank would be unjustly enriched if the agency were made to pay, and that Nero had executed a quitclaim in its favor.

Issues

• Whether or not the security agency may be held solidarily liable with its client bank for the money awarded to the security guard.
• Whether or not the written service contract between the agency and the bank was modified by a verbal agreement.
• Whether or not the bank would be unjustly enriched if the agency were made to pay the award.
• Whether or not the quitclaim allegedly executed by the guard bars his complaint.

Applicable Provisions

Article 106 of the Labor Code, as discussed in the decision, provides:

Under Article 106 of the Labor Code, Leopard Security and Investigation Agency is a contractor, with respect to herein respondent Pilipinas Bank. Under the same provision, in case the contractor fails to pay the wages of its employee in accordance with law, the indirect employer, who is the respondent Bank in this case, is jointly and severally liable with the contractor to the employee to the extent of the work performed under the contract, in the same manner and extent that he is liable to the employees directly employed by him.

This provision is the basis for holding the client bank solidarily liable with the security agency for the guard's unpaid wages and benefits.

The parol evidence rule, as invoked by the Court, provides:

When the terms of an agreement have been reduced to writing, it is to be considered as containing all such terms, and, therefore, there can be, between the parties and their successors in interest, no evidence of the terms of the agreement other than the contents of the writing.

This rule defeats the agency's claim that the written service contract was modified verbally.

Ruling

On the first issue, the Court held that the agency is clearly liable to Nero, and that notwithstanding the service contract, Pilipinas Bank is solidarily liable with the agency under Article 106 of the Labor Code. The Court approved the Commission's observation that the agency is a contractor with respect to the bank, and that the bank, as indirect employer, is jointly and severally liable with the contractor to the employee to the extent of the work performed under the contract. If the bank pays, it may recover what it paid from the agency under their service contract, which vests sole liability on the agency.

On the second issue, the Court held that the agency cannot claim a verbal modification, because no evidence supported it, and under the parol evidence rule a written agreement is deemed to contain all its terms.

On the third issue, the Court held that the bank cannot be said to be unjustly enriched, since the terms of the service contract were voluntarily negotiated, and if the agency got a bad bargain, the misadventure is, absent fraud, for its own account.

On the fourth issue, the Court held that the quitclaim was not sufficiently proved, as the petition merely mentioned its contents without indicating its authorship, so Nero is not estopped from filing the complaint.

Doctrine

A security agency is a contractor with respect to its client, and the client is an indirect employer under Article 106 of the Labor Code. When the contractor fails to pay the wages of its employee in accordance with law, the indirect employer is jointly and severally liable with the contractor to the employee, to the extent of the work performed under the contract. The indirect employer who pays may recover the amount from the contractor under their service contract. A written service contract cannot be modified by mere verbal agreement where no evidence supports it, under the parol evidence rule. A quitclaim that is not sufficiently proved does not estop an employee from pursuing his claims.

Disposition

The Supreme Court dismissed the petition for lack of merit, with costs against the petitioner, thereby affirming the ruling holding the agency and the bank solidarily liable to Romeo Nero.

Remember This

Remember that the indirect employer is solidarily liable with the contractor for the employee's wages, but may recover what it pays from the contractor under their service contract. Examiners use this case to test the solidary liability of a client bank with a security agency under Article 106 of the Labor Code, and the application of the parol evidence rule to a written service agreement.