Case Digest: Urbanes v. Secretary of Labor, G.R. No. 122791, February 19, 2003

 Labor Law | Art. 129

Facts:

  • Placido O. Urbanes, Jr., operating as Catalina Security Agency, had a contract with the Social Security System (SSS) to provide security services.
  • Petitioner requested an adjustment of the contract rate from SSS due to Wage Order No. NCR-03 issued by the Regional Tripartite Wages and Productivity Board-NCR.
  • SSS did not respond to the request, leading to petitioner filing a complaint with the Department of Labor and Employment-National Capital Region (DOLE-NCR) seeking implementation of Wage Order No. NCR-03.
  • SSS argued that petitioner was not the real party in interest and had no legal capacity to file the complaint. SSS also contended that any obligation was to the security guards.
  • Regional Director of DOLE-NCR: Ruled in favor of petitioner, ordering SSS to pay wage differentials to the security guards.
  • Secretary of Labor: Set aside the Regional Director's order, remanding the case for recomputation of wage differentials using a different basis and holding petitioner's agency jointly and severally liable for wage differentials, to be paid directly to the security guards.
Issue: 
WoN the Secretary of Labor does not have jurisdiction to review appeals from decisions of the Regional Directors in complaints filed under Article 129 of the Labor Code.  NO

Held:
In the case of Lapanday Agricultural Development Corporation v. Court of Appeals, the security agency filed a complaint before the Regional Trial Court (RTC) against the principal or client Lapanday for the upward adjustment of the contract rate in accordance with Wage Order Nos. 5 and 6. Lapanday argued that it is the National Labor Relations Commission, not the civil courts, which has jurisdiction to resolve the issue in the case, it involving the enforcement of wage adjustment and other benefits due the agency’s security guards as mandated by several wage orders. Holding that the RTC has jurisdiction over the controversy, this Court ruled:

We agree with the respondent that the RTC has jurisdiction over the subject matter of the present case. It is well settled in law and jurisprudence that where no employer-employee relationship exists between the parties and no issue is involved which may be resolved by reference to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional Trial Court that has jurisdiction. In its complaint, private respondent is not seeking any relief under the Labor Code but seeks payment of a sum of money and damages on account of petitioner’s alleged breach of its obligation under their Guard Service Contract. The action is within the realm of civil law hence jurisdiction over the case belongs to the regular courts. While the resolution of the issue involves the application of labor laws, reference to the labor code was only for the determination of the solidary liability of the petitioner to the respondent where no employer-employee relation exists.

x       x       x (Emphasis supplied).

In the case at bar, even if petitioner filed the complaint on his and also on behalf of the security guards, the relief sought has to do with the enforcement of the contract between him and the SSS which was deemed amended by virtue of Wage Order No. NCR-03. The controversy subject of the case at bar is thus a civil dispute, the proper forum for the resolution of which is the civil courts.

But even assuming arguendo that petitioner’s complaint were filed with the proper forum, for lack of cause of action it must be dismissed.

Articles 106, 107 and 109 of the Labor Code provide:

ART. 106. CONTRACTOR OR SUBCONTRACTOR. — Whenever an employer enters into 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 subcontractor fails to pay the wage 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.

x       x       x (Emphasis supplied)

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. (Emphasis supplied.)

In the case of Eagle Security Agency, Inc. v. NLRC, this Court held: 

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 solidarity 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.

x       x       x (Emphasis supplied).

Passing on the foregoing disquisition in Eagle, this Court, in Lapanday, held:

It is clear also from the foregoing that it is only when [the] contractor pays the increases mandated that it can claim an adjustment from the principal to cover the increases payable to the security guards. The conclusion that the right of the contractor (as principal debtor) to recover from the principal (as solidary co-debtor) arises only if he has paid the amounts for which both of them are jointly and severally liable is in line with Article 1217 of the Civil Code which provides:

"Art. 1217. Payment made by one the solidary debtors extinguishes the obligation. If two or more solidary debtors offer to pay, the creditor may choose which offer to accept.

He who made payment make claim from his co-debtors only the share which corresponds to each, with interest for the payment already made. If the payment is made before the debt is due, no interest for the intervening period may be demanded. . . ." 

In fine, the liability of the SSS to reimburse petitioner arises only if and when petitioner pays his employee-security guards "the increases" mandated by Wage Order No. NCR-03.

The records do not show that petitioner has paid the mandated increases to the security guards. The security guards in fact have filed a complaint with the NLRC against petitioner relative to, among other things, underpayment of wages.

WHEREFORE, the present petition is hereby DISMISSED, and petitioner’s complaint before the Regional Director is dismissed for lack of jurisdiction and cause of action.

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