Case Digest: Rosewood Processing Inc. v. NLRC, G.R. No. 116476-84, May 21 1998

  • The six complainants, employed as security guards filed a complaint for illegal dismissal, underpayment of wages, and nonpayment of various benefits against Veterans Philippine Scout Security Agency and/or Sergio Jamila IV.
  • Rosewood Processing Inc. was impleaded as a third-party respondent by the security agency.
  • LA: Ordered the respondents to pay complainants their monetary benefits holding petitioner Rosewood Processing Inc. jointly and severally liable with the security agency as the complainants' indirect employer under Articles 106, 107, and 109 of the Labor Code.
  • NLRC: Dismissed petitioner's appeal.
WoN Rosewood Processing Inc. is jointly and severally liable as an Indirect Employer. YES

The court clarified that the liability of the petitioner as an indirect employer is limited to the extent of work performed under the contract between the petitioner and the agency, holding the petitioner liable for wage differentials during the period when the complainants were actually under its employ.

The court exempted the petitioner from the payment of back wages and separation pay, as these liabilities have a punitive character and require evidence of the petitioner's involvement in the illegal dismissal. The security agency was found entirely liable, as it did not appeal from the decisions of the labor arbiter and the Respondent Commission.

The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of the Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of his or her status as a direct employer, and the principal as the indirect employer of the contractor's employees. 

This liability facilitates, if not guarantees, payment of the workers' compensation, thus, giving the workers ample protection as mandated by the 1987 Constitution. This is not unduly burdensome to the employer. Should the indirect employer be constrained to pay the workers, it can recover whatever amount it had paid in accordance with the terms of the service contract between itself and the contractor. 

Under the Labor Code, an employer is solidarily liable for legal wages due security guards for the period of time they were assigned to it by its contracted security agency. However, in the absence of proof that the employer itself committed the acts constitutive of illegal dismissal or conspired with the security agency in the performance of such acts, the employer shall not be liable for back wages and/or separation pay arising as a consequence of such unlawful termination.

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