Meralco Industrial Engineering Services Corporation v.

NLRC,
G.R. No. 145402,
March 14, 2008

Facts:
On 7 November 1984, petitioner and private respondents executed Contract Order No.
166-84, whereby the latter would supply the petitioner janitorial services, which include labor,
materials, tools and equipment, aswell as supervision of its assigned employees, at petitioner’s
Rockwell Thermal Plant in Makati City. Pursuant thereto, private respondents assigned their 49
employees as janitors to petitioner’s Rockwell Thermal Plantwith a daily wage of ₱51.50 per
employee.

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.

Issues:
WON the ultimate liability to pay the monetary awards in favor of the 49 employees falls on the
private respondents without reimbursement from the petitioner.

Ruling:

The court disagreed with the dismissal of the case against the petitioner. Under Art.
107[12] of the Labor Code of the Philippines, [herein petitioner] is considered an indirect
employer and can be held solidarily liable with [private... respondents] as an independent
contractor. Under Art. 109, [13] for purposes of determining the extent of its liability, [herein
petitioner] is considered a direct employer, hence, it is solidarity liable for complainant's (sic)
wage differentials and unpaid overtime.
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. 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. Taken together, an indirect
employer (as defined by Article 107) can only be held solidarity 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 Article106).The petitioner may be considered an
indirect employer only for purposes of unpaid wages. Although petitioner is not liable for
complainants' separation pay, the Court conforms to the consistent findings in the proceedings
below that the petitioner is solidarity liable with the private respondents for the judgment awards
for underpayment of wages and non-payment of overtime pay.