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Liability of Indirect Employer:

Facts: Respondents Dionisio Banlasan, Alfredo T. Tafalla, Telesforo
D. Rubia, Rogelio A. Alvarez, Dominador A. Escobal, and Rosauro
Panis were employed as security guards by DNL Security Agency
(DNL Security).
By virtue of the service contract entered into by DNL Security and
petitioner Government Service Insurance System on May 1, 1978,
respondents were assigned to petitioners Tacloban City office. In
February 1993, DNL Security informed respondents that its service
contract with petitioner was terminated. However, DNL Security
instructed respondents to continue reporting for work to petitioner.
Respondents worked until April 20, 1993 without receiving their
wages; after which, they were terminated from employment.
On June 15, 1995, respondents filed with the (NLRC), a complaint
against DNL Security and petitioner for illegal dismissal, separation
pay, salary differential, 13th month pay, and payment of unpaid
The LA found that respondents were not illegally terminated from
employment because the employment of security guards is
dependent on the service contract between the security agency and
its client. However, considering that respondents had been out of
work for a long period, and consonant with the principle of social
justice, the LA awarded respondents with separation pay equivalent
to one (1) month salary for every year of service, to be paid by DNL
Security. Because DNL Security instructed respondents to continue
working for petitioner from February 1993 to April 20, 1993, DNL
Security was also made to pay respondents wages for the period.
The LA further granted respondents claim of salary differential, as
they were paid wages below the minimum wage, as well as 13th
month pay. For these monetary awards, petitioner was made
solidarily liable with DNL Security, as the indirect employer of
Petitioner appealed to the NLRC but was denied.
Issue: WON the petitioner is liable as an indirect employer?
The fact that there is no actual and direct employer-employee
relationship between petitioner and respondents does not absolve
the former from liability for the latters monetary claims. When
petitioner contracted DNL Securitys services, petitioner became
an indirect employer of respondent security guards, pursuant to
Article 107 of the Labor Code.
Thus, after the contractor DNL Security failed to pay respondents
the correct wages and other monetary benefits, petitioner, as
principal, became jointly and severally liable, as provided in
Articles 106 and 109 of the Labor Code.
While it is true that respondents continued working for petitioner
after the expiration of their contract, based on the instruction of
DNL Security, petitioner did not object to such assignment and
allowed respondents to render service.
Thus, petitioner impliedly approved the extension of respondents
services. Accordingly, petitioner is bound by the provisions of the
Labor Code on indirect employment.
Petitioner cannot be allowed to deny its obligation to respondents
after it had benefited from their services.
Petitioners liability, however, cannot extend to the payment of
separation pay. An order to pay separation pay is invested with a
punitive character, such that an indirect employer should not be
made liable without a finding that it had conspired in the illegal
dismissal of the employees.
It should be understood, though, that the solidary liability of
petitioner does not preclude the application of Article 1217 of the
Civil Code on the right of reimbursement from its co-debtor.

on October 1993, Mariveles Shipyard Corporation engaged the
services of Longest Force Investigation and Security Agency, Inc. to
render security services at its premises. Pursuant to their
agreement, Longest Force deployed its security guards, the private
respondents herein, at the petitioners shipyard in Mariveles,
According to petitioner, it religiously complied with the terms of the
security contract with Longest Force, promptly paying its bills and
the contract rates of the latter. However, it found the services being
rendered by the assigned guards unsatisfactory and inadequate,
causing it to terminate its contract with Longest Force on April
1995. Longest Force, in turn, terminated the employment of the
security guards it had deployed at petitioners shipyard.

On September 1996, private respondents filed a case for illegal
dismissal, underpayment of wages pursuant to the PNPSOSIA-
PADPAO rates, non-payment of overtime pay, premium pay for
holiday and rest day, service incentive leave pay, 13th month pay
and attorneys fees, against both Longest Force and petitioner,
before the Labor Arbiter. The case sought the guards reinstatement
with full back wages and without loss of seniority rights.
Longest Force admitted that it employed private respondents and
assigned them as security guards at the premises of petitioner
rendering a 12 hours duty per shift for the said period. It likewise
admitted its liability as to the non-payment of the alleged wage
differential in the total amount of P2,618,025 but passed on the
liability to petitioner
The petitioner denied any liability on account of the alleged illegal
dismissal, stressing that no employer-employee relationship
existed between it and the security guards.
It further pointed out that it would be the height of injustice to
make it liable again for monetary claims which it had already paid.
Anent the cross-claim filed by Longest Force against it, petitioner
prayed that it be dismissed for lack of merit. Petitioner averred that
Longest Force had benefited from the contract; it was now
estopped from questioning said agreement on the ground that it
had made a bad deal.
The Labor Arbiter rendered judgment that Longest Force and
Mariveles Shipping be jointly and severally liable to pay the money
claims of the complainants.
Petitioner appealed the foregoing to the NLRC. The labor tribunal,
affirmed the decision of the Labor Arbiter. Petitioner moved for
reconsideration, but this was denied by the NLRC.
The petitioner then filed a special civil action for certiorari assailing
the NLRC judgment for having been rendered with grave abuse of
discretion with the Court of Appeals. The Court of Appeals denied
due course to the petition and dismissed it outright.
Issue: WON Longest Force should be held solely and ultimately
HELD: Petitioners liability is joint and several with that of Longest
Force, pursuant to Articles 106, 107 and 109 of the Labor Code
RATIO: When petitioner contracted for security services with
Longest Force as the security agency that hired private respondents
to work as guards for the shipyard corporation, petitioner became
an indirect employer of private respondents pursuant to Article
Following Article 106, when the agency as contractor failed to pay
the guards, the corporation as principal becomes jointly and
severally liable for the guards wages. This is mandated by the
Labor Code to ensure compliance with its provisions, including
payment of statutory minimum wage. The security agency is held
liable by virtue of its status as direct employer, while the
corporation is deemed the indirect employer of the guards for the
purpose of paying their wages in the event of failure of the agency
to pay them.
Petitioner cannot evade its liability by claiming that it had religiously
paid the compensation of guards as stipulated under the contract
with the security agency.
Labor standards are enacted by the legislature to alleviate the
plight of workers whose wages barely meet the spiraling costs of
their basic needs. Labor laws are considered written in every
contract. Stipulations in violation thereof are considered null.
Similarly, legislated wage increases are deemed amendments to the
contract. Thus, employers cannot hide behind their contracts in
order to evade their (or their contractors or subcontractors)
liability for noncompliance with the statutory minimum wage.[28]
However, we must emphasize that the solidary liability of
petitioner with that of Longest Force does not preclude the
application of the Civil Code provision on the right of
reimbursement from his co-debtor by the one who paid