MERALCO INDUSTRIAL ENGINEERING SERVICES CORPORATION,
- versus -
NATIONAL LABOR RELATIONS COMMISSION, OFELIA P. LANDRITO GENERAL SERVICES and/or OFELIA P. LANDRITO,
G.R. No. 145402
YNARES-SANTIAGO, J., Chairperson,
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Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to reverse and set aside (1) the Decision of the Court of Appeals in CA-G.R. SP No. 50806, dated 24 April 2000, which modified the Decision of the National Labor Relations Commission (NLRC), dated 30 January 1996 in NLRC NCR CA No. 001737-91 (NLRC NCR Case No. 00-09-04432-89), and thereby held the petitioner solidarily liable with the private respondents for the satisfaction of the separation pay of the latter’s employees; and (2) the Resolution of the appellate court, dated 27 September 2000, in the same case which denied the petitioner’s Motion for Reconsideration.
Petitioner Meralco Industrial
Engineering Services Corporation (MIESCOR) is a corporation duly organized and
existing under the laws of the Republic of the
The factual milieu of the present case is as follows:
On 20 September 1989, however, the aforesaid 49 employees (complainants) lodged a Complaint for illegal deduction, underpayment, non-payment of overtime pay, legal holiday pay, premium pay for holiday and rest day and night differentials against the private respondents before the Labor Arbiter. The case was docketed as NLRC NCR Case No. 00-09-04432-89.
In view of the enactment of Republic
Act No. 6727,
the contract between the petitioner and the private respondents was amended
for the 10th time on
P63.55 to P89.00 or P2,670.00 per month. Two months thereafter, or on
Since the parties failed to settle
amicably before the Labor Arbiter, they submitted their respective position
papers and other pleadings together with their documentary evidence. Thereafter, a Decision was rendered by the
Labor Arbiter on 26 March 1991, dismissing the Complaint against the petitioner
for lack of merit, but ordering the private respondents to pay the complainants
the total amount of
representing unpaid wages, separation pay and overtime pay; as well as
attorney’s fees in an amount equivalent to 10% of the award or P48,728.70. All other claims of the complainants against
the private respondents were dismissed. 
Feeling aggrieved, private respondents appealed the aforesaid Decision
to the NLRC. Private respondents
alleged, among other things, that: (1) 48 of the 49 complainants had executed
affidavits of desistance and they had never attended any hearing nor given any
authority to anyone to file a case on their behalf; (2) the Labor Arbiter erred
in not conducting a full-blown hearing on the case; (3) there is only one
complainant in that case who submitted a position paper on his own; (4) the
complainants were not constructively dismissed when they were not given
assignments within a period of six months, but had abandoned their jobs when
they failed to report to another place of assignment; and (5) the petitioner, being the principal, was solidarily liable with the
private respondents for failure to make an adjustment on the wages of the
We, however, disagree with the dismissal of
the case against [herein petitioner].
Under Art. 107 of
the Labor Code of the
Both private respondents and petitioner separately moved for reconsideration of the aforesaid Resolution of the NLRC. In their Motion for Reconsideration, private respondents reiterated that the complainants abandoned their work, so that private respondents should not be liable for separation pay; and that petitioner, not private respondents, should be liable for complainants’ other monetary claims, i.e., for wage differentials and unpaid overtime. The petitioner, in its own Motion for Reconsideration, asked that it be excluded from liability. It averred that private respondents should be solely responsible for their acts as it sufficiently paid private respondents all the benefits due the complainants.
P487,287.07 was secured by a surety bond posted by the
hence, there was no longer any impediment to the satisfaction of the
complainants’ claims. Resultantly, the
NLRC denied the private respondents’ Motion for Reconsideration. The NLRC likewise directed the Labor Arbiter
to enforce the monetary award against the private respondents’ surety bond and
to determine who should finally shoulder the liability therefor.
Alleging grave abuse of discretion of
the NLRC in its issuance of the Resolution and Order dated
As a consequence thereof, the
proceedings before the Labor Arbiter resumed with respect to the determination
of who should finally shoulder the liability for the monetary awards granted to
the complainants, in accordance with the NLRC Order dated
As can be gleaned from the Resolution dated
P487,287.07 is concerned.
The judgment award in the total sum of
P487,287.07 as contained
in the Decision dated [26 March 1991] consists
of three (3) parts, as follows: First,
the judgment award on the underpayment; Second,
the judgment award on separation pay; and Third,
the judgment award on the overtime pay.
The question now is: Which of these awards is [petitioner] solidarily liable with [private respondents]?
An examination of the record elicits the finding that [petitioner] is solidarily liable with [private respondents] on the judgment awards on the underpayment and on the non-payment of the overtime pay. xxx. This joint and several liability of the contractor [private respondents] and the principal [petitioner] is mandated by the Labor Code to assure compliance of the provisions therein, including the statutory minimum wage (Art. 99, Labor Code). The contractor-agency 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-agency’s employees for purposes of paying the employees their wages should the contractor-agency 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.
In sum, the complainants may enforce the judgment award on underpayment and the non-payment of overtime pay against either [private respondents] and/or [petitioner].
However, in view of the finding in the Decision that [petitioner] had adjusted its contract price for the janitorial services it contracted with [private respondents] conforming to the provisions of Republic Act No. 6727, should the complainants enforce the judgment on the underpayment and on the non-payment of the overtime pay aginst (sic) [petitioner], the latter can seek reimbursement from the former [meaning (private respondents)], but should the judgment award on the underpayment and on the non-payment of the overtime pay be enforced against [private respondents], the latter cannot seek reimbursement against [petitioner].
The judgment award on separation pay is the sole liability of [private respondents].
WHEREFORE, [petitioner] is jointly and severally liable with [private respondents] in the judgment award on underpayment and on the non-payment of overtime pay. Should the complainants enforce the above judgment award against [petitioner], the latter can seek reimbursement against [private respondents], but should the aforementioned judgment award be enforced against [private respondents], the latter cannot seek reimbursement from the [petitioner].
The judgment award on the payment of separation pay is the sole liability of [private respondents].
Let an alias writ of execution be issued. [Emphasis supplied].
Again, both the private
respondents and the petitioner appealed the afore-quoted Order of the Labor
Arbiter to the NLRC. On
P487,287.62 to perfect their
respective appeals. Both parties complied.
Dissatisfied, private respondents
moved for the reconsideration of the foregoing Decision, but it was denied by
the NLRC in an Order
The Petition made a sole assignment of error, to wit:
THE HONORABLE COMMISSION GRAVELY ERRED AND GRAVELY ABUSED ITS DISCRETION IN FINDING THAT THE ULTIMATE LIABILITY SHOULD FALL ON THE [HEREIN PRIVATE RESPONDENTS] ALONE, WITHOUT REIMBURSEMENT FROM THE [HEREIN PETITIONER], IN ORDER TO SATISFY THE MONETARY AWARDS OF THE [THEREIN COMPLAINANTS].
After due proceedings, the Court of Appeals rendered the assailed Decision on 24 April 2000, modifying the Decision of the NLRC dated 30 January 1996 and holding the petitioner solidarily liable with the private respondents for the satisfaction of the laborers’ separation pay. According to the Court of Appeals:
The [NLRC] adjudged the payment of separation pay to be the sole responsibility of [herein private respondents] because (1) there is no employer-employee relationship between [herein petitioner] and the forty-nine (49) [therein complainants]; (2) the payment of separation pay is not a labor standard benefit. We disagree.
Again, We quote Article 109 of the Labor Code, as amended, viz:
“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 any provision of this Code…”
The abovementioned statute speaks of “any violation of any provision of this Code.” Thus, the existence or non-existence of employer-employee relationship and whether or not the violation is one of labor standards is immaterial because said provision of law does not make any distinction at all and, therefore, this Court should also refrain from making any distinction. Concomitantly, [herein petitioner] should be jointly and severally liable with [private respondents] for the payment of wage differentials, overtime pay and separation pay of the [therein complainants]. The joint and several liability imposed to [petitioner] is, again, without prejudice to a claim for reimbursement by [petitioner] against [private respondents] for reasons already discusses (sic).
WHEREFORE, premises studiedly considered, the assailed 30 January 1996 decision of [the NLRC] is hereby modified insofar as [petitioner] should be held solidarily liable with [the private respondents] for the satisfaction of the laborers’ separation pay. No pronouncement as to costs. [Emphasis supplied].
petitioner filed a Motion for Reconsideration of the aforesaid Decision but it
was denied by the Court of Appeals in a Resolution dated
Petitioner now comes before this Court via a Petition for Review on Certiorari, docketed as G.R. No. 145402, raising the sole issue of “whether or not the Honorable Court of Appeals palpably erred when it went beyond the issues of the case as it modified the factual findings of the Labor Arbiter which attained finality after it was affirmed by Public Respondent NLRC and by the Supreme Court which can no longer be disturbed as it became the law of the case.”
argues that in the assailed Decision dated
According to petitioner, the NLRC, in
its Resolution dated
Assuming for the sake of argument that the Court of Appeals can still take cognizance of the issue of petitioner’s liability for complainants’ separation pay, petitioner asserts that the appellate court seriously erred in concluding that it is jointly and solidarily liable with private respondents for the payment thereof. The payment of separation pay should be the sole responsibility of the private respondents because there was no employer-employee relationship between the petitioner and the complainants, and the payment of separation pay is not a labor standards benefit.
Law of the case has been defined as the opinion delivered on a former appeal. It is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court. Indeed, courts must adhere thereto, whether the legal principles laid down were “correct on general principles or not” or “whether the question is right or wrong” because public policy, judicial orderliness and economy require such stability in the final judgments of courts or tribunals of competent jurisdiction.
Petitioner’s application of the law of the case principle to the case at bar as regards its liability for payment of separation pay is misplaced.
matters settled in the 23 May 1994 Resolution of this Court in G.R. No. 111506,
which can be regarded as the law of the
case, were (1) both the petitioner and the private respondents were jointly
and solidarily liable for the judgment awards due the complainants; and (2) the
said judgment awards shall be enforced against the surety bond posted by the
private respondents. However, the issue
as regards the liability of the petitioner for payment of separation pay was
yet to be resolved because precisely, the NLRC, in its Order dated
Nonetheless, this Court finds the present Petition meritorious.
The Court of Appeals indeed erred when it ruled that the petitioner was jointly and solidarily liable with the private respondents as regards the payment of separation pay.
The appellate court used as basis Article 109 of the Labor Code, as amended, in holding the petitioner solidarily liable with the private respondents for the payment of separation pay:
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 any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers. [Emphasis supplied].
However, the afore-quoted provision must be read in conjunction with Articles 106 and 107 of the Labor Code, as amended.
Article 107 of the Labor Code, as amended, defines an indirect employer as “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.” To ensure that the contractor’s employees are paid their appropriate wages, Article 106 of the Labor Code, as amended, provides:
ART. 106. CONTRACTOR OR SUBCONTRACTOR. – x x x.
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 of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. [Emphasis supplied].
Taken together, an indirect employer (as defined by Article 107) can only be held solidarily liable with the independent contractor or subcontractor (as provided under Article 109) in the event that the latter fails to pay the wages of its employees (as described in Article 106).
Hence, while it is true that the petitioner was the indirect employer of the complainants, it cannot be held liable in the same way as the employer in every respect. The petitioner may be considered an indirect employer only for purposes of unpaid wages. As this Court succinctly explained in Philippine Airlines, Inc. v. National Labor Relations Commission:
While USSI is an independent contractor under the security service agreement and PAL may be considered an indirect employer, that status did not make PAL the employer of the security guards in every respect. As correctly posited by the Office of the Solicitor General, PAL may be considered an indirect employer only for purposes of unpaid wages since Article 106, which is applicable to the situation contemplated in Section 107, speaks of wages. The concept of indirect employer only relates or refers to the liability for unpaid wages. Read together, Articles 106 and 109 simply mean that the party with whom an independent contractor deals is solidarily liable with the latter for unpaid wages, and only to that extent and for that purpose that the latter is considered a direct employer. The term “wage” is defined in Article 97(f) of the Labor Code as “the remuneration of earnings, however designated, capable of being expressed in terms of money, whether fixed or ascertained on a time, task, piece, or commission basis, or other method of calculating the unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee.”
Further, there is no question that private respondents are operating as an independent contractor and that the complainants were their employees. There was no employer-employee relationship that existed between the petitioner and the complainants and, thus, the former could not have dismissed the latter from employment. Only private respondents, as the complainants’ employer, can terminate their services, and should it be done illegally, be held liable therefor. The only instance when the principal can also be held liable with the independent contractor or subcontractor for the backwages and separation pay of the latter’s employees is when there is proof that the principal conspired with the independent contractor or subcontractor in the illegal dismissal of the employees, thus:
The liability arising from an illegal dismissal is unlike an order to pay the statutory minimum wage, because the workers’ right to such wage is derived from law. The proposition that payment of back wages and separation pay should be covered by Article 109, which holds an indirect employer solidarily responsible with his contractor or subcontractor for “any violation of any provision of this Code,” would have been tenable if there were proof - there was none in this case - that the principal/employer had conspired with the contractor in the acts giving rise to the illegal dismissal. 
It is the established fact of conspiracy that will tie the principal or indirect employer to the illegal dismissal of the contractor or subcontractor’s employees. In the present case, there is no allegation, much less proof presented, that the petitioner conspired with private respondents in the illegal dismissal of the latter’s employees; hence, it cannot be held liable for the same.
Neither can the liability for the separation pay of the complainants be extended to the petitioner based on contract. Contract Order No. 166-84 executed between the petitioner and the private respondents contains no provision for separation pay in the event that the petitioner terminates the same. It is basic that a contract is the law between the parties and the stipulations therein, provided that they are not contrary to law, morals, good customs, public order or public policy, shall be binding as between the parties. Hence, if the contract does not provide for such a liability, this Court cannot just read the same into the contract without possibly violating the intention of the parties.
It is also worth noting that although the issue in CA-G.R. SP No. 50806 pertains to private respondents’ right to reimbursement from petitioner for the “monetary awards” in favor of the complainants, they limited their arguments to the monetary awards for underpayment of wages and non-payment of overtime pay, and were conspicuously silent on the monetary award for separation pay. Thus, private respondents’ sole liability for the separation pay of their employees should have been deemed settled and already beyond the power of the Court of Appeals to resolve, since it was an issue never raised before it.
Although petitioner is not liable for complainants’ separation pay, the Court conforms to the consistent findings in the proceedings below that the petitioner is solidarily liable with the private respondents for the judgment awards for underpayment of wages and non-payment of overtime pay.
In this case, however, private respondents had already posted a surety bond in an amount sufficient to cover all the judgment awards due the complainants, including those for underpayment of wages and non-payment of overtime pay. The joint and several liability of the principal with the contractor and subcontractor were enacted to ensure compliance with the provisions of the Labor Code, principally those on statutory minimum wage. This liability facilitates, if not guarantees, payment of the workers’ compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution. With private respondents’ surety bond, it can therefore be said that the purpose of the Labor Code provision on the solidary liability of the indirect employer is already accomplished since the interest of the complainants are already adequately protected. Consequently, it will be futile to continuously hold the petitioner jointly and solidarily liable with the private respondents for the judgment awards for underpayment of wages and non-payment of overtime pay.
But while this Court had previously ruled that the indirect employer can recover whatever amount it had paid to the employees in accordance with the terms of the service contract between itself and the contractor, the said ruling cannot be applied in reverse to this case as to allow the private respondents (the independent contractor), who paid for the judgment awards in full, to recover from the petitioner (the indirect employer).
Private respondents have nothing more to recover from petitioner.
Petitioner had already handed over to private respondent the wages and other benefits of the complainants. Records reveal that it had complied with complainants’ salary increases in accordance with the minimum wage set by Republic Act No. 6727 by faithfully adjusting the contract price for the janitorial services it contracted with private respondents.  This is a finding of fact made by the Labor Arbiter, untouched by the NLRC and explicitly affirmed by the Court of Appeals, and which should already bind this Court.
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are completely devoid of support from the evidence on record, or the assailed judgment is based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court.
Having already received from petitioner the correct amount of wages and benefits, but having failed to turn them over to the complainants, private respondents should now solely bear the liability for the underpayment of wages and non-payment of the overtime pay.
premises considered, the instant Petition is hereby GRANTED. The Decision and
Resolution of the Court of Appeals dated
MINITA V. CHICO-NAZARIO
CONSUELO YNARES – SANTIAGO
Associate Justice Associate Justice
RUBEN T. REYES
I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
Chairperson, Third Division
Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.
REYNATO S. PUNO
 Penned by Associate Justice Andres B. Reyes, Jr. with Associate Justices Fermin A. Martin, Jr. and Romeo A. Brawner, concurring; rollo, pp. 34-44.
 Penned by Commissioner Vicente S.E. Veloso with Presiding Commissioner Bartolome S. Carale and Commissioner Alberto R. Quimpo, concurring; rollo, pp. 120-133.
 Records, pp. 1-6.
 Its complete title is “An Act to
Rationalize Wage Policy Determination by Establishing the Mechanism and Proper
Standards Therefor, Amending for the Purpose Article 99 of, and Incorporating
Articles 120, 121, 122, 123, 124, 126 and 127 into, Presidential Decree No.
442, as Amended, Otherwise Known as the Labor Code of the Philippines, Fixing
New Wage Rates, Providing Wage Incentives for Industrial Dispersal to the
Countryside, and for Other Purposes.” It
is also known as the “Wage Rationalization Act.” It took effect on
 Rollo, p. 65.
 Penned by Commissioner Vicente S.E. Veloso with Commissioner Alberto R. Quimpo, concurring; id. at 86-97.
 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 any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.
 Rollo, pp. 88-89.
 Penned by Commissioner Vicente S.E. Veloso with Presiding Commissioner Bartolome S. Carale and Commissioner Alberto R. Quimpo, concurring; id. at 98-101.
 Records, pp. 250-251.
 Rollo, p. 100.
 Records, p. 563.
 As shown in the Entry of Judgment bearing
 Penned by Labor Arbiter Donato G. Quinto, Jr.; rollo, pp. 103-105.
 Art. 99. Regional Minimum Wages. The minimum wage rates for agricultural and non- agricultural employees and workers in each and every region of the country shall be those prescribed by the Regional Tripartite Wages and Productivity Boards. [As amended by Republic Act No. 6727 (Wage Rationalization Act)]. By virtue of Republic Act No. 6727 the Regional Tripartite Wage and Productivity Boards or RTWPBs have issued orders fixing the minimum wages for their respective regions.
 Penned by Commissioner Vicente S.E. Veloso with Presiding Commissioner Bartolome S. Carale and Commissioner Alberto R. Quimpo, concurring; rollo, pp. 106-114.
 Records, pp. 714-717 and 814-817.
 Rollo, pp. 132-133.
 In Molina v. Pacific Plans, Inc., G.R. No. 165476, 10 March 2006, 484 SCRA 498, 516, this Court ruled that: “Under Rule VII, Section 2 of the NLRC Omnibus Rules of Procedure, the decision of the NLRC becomes final and executory after ten (10) calendar days from receipt of the same. xxx. Nonetheless, the Court ruled in St. Martin Funeral Home v. NLRC that, although the 10-day period for finality of the NLRC decision may have elapsed as contemplated in the last paragraph of Section 223 of the Labor Code, the CA may still take cognizance of and resolve a petition for certiorari for the nullification of the decision of the NLRC on jurisdictional and due process considerations.”
 CA rollo, pp. 186-187.
 G.R. No. 130866,
 CA rollo, p. 194.
 Rollo, pp. 42-44.
 Pelayo v. Perez, G.R. No. 141323, 8 June 2005, 459 SCRA 475, 484, citing Cucueco v. Court of Appeals, G.R. No. 139278, 25 October 2004, 441 SCRA 290, 300-301.
 G.R. No. 120506,
Processing, Inc. v. National Labor Relations Commission, G.R. No.
v. De Zuzuarregui, Jr., G.R. No. 152072,
 See private respondents’ Petition, CA rollo, pp. 7-15.
 Rosewood Processing, Inc. v. National Labor Relations Commission, supra note 38 at 425-426.
 Rollo, pp. 40-41.
 Ramos v. Court of Appeals,
G.R. No. 145405,