EPARWA SECURITY v LISEO de CAGAYAN UNIVERSITY

November 28, 2006 / Carpio, J. / Topic: Subcontracting / Digest by Chimi ISSUE & RATIO.
1. Whether or not LDCU is ultimately liable to the security guards for the wage
NATURE Petition for Certiorari differentials and premium for holiday and rest day pay YES.
PETITIONER Eparwa Security and Janitorial Services, Inc. The SC invoked Arts. 106, 107 and 109 of the Labor Code to hold LDCU solidarily
RESPONDENT Liceo de Cagayan University liable with Eparwa. Thus, following:
o Art. 106 employer (LDCU) is jointly and severally liable with contractor
(Eparwa) in the same manner and extent that LDCU is liable to
SUMMARY. Eparwa Security and LDCU had a contract whereby Eparwa would supply LDCU
employees directly employed by LDCU.
with security guards. The guards filed a complaint for underpayment of salary and other
o Art 107 Art. 106 will apply in case a person, partnership, assoc or
monetary benefits with the NLRC. The LA held that Eparwa and LDCU were solidarily liable.
corporation, not being an employer, contracts with an independent
NLRC affirmed, and added that LDCU was ULTIMATELY LIABLE. LDCU prayed that it be
contractor for the performance of a work / task / job.
allowed to reimburse from Eparwa whatever it would pay to the guards, which was granted
o Art. 109 LDCU is held responsible with its contractor Eparwa for any
by the CA.
violation of the Labor Code. LDCU is considered as direct employers.
The SC set aside the CA decision. It reasoned that following Arts. 106, 107 and 109 of the
The SC revisited its decision in Eagle Security Agency Inc. v. NLRC wherein the
Labor Code, the principal (LDCU) and contractor (Eparwa) are solidarily liable, and that
guards where not paid by the security agency nor by the principal PTSI:
Eparwa Security should be the immediate recourse of payment since it is the employer of the
o The joint and several liability of the contractor and the principal is to
guards. Eparwa, however, can reimburse payment from LDCU.
FACILITATE if not guarantee, payment of workers for any
work/task/job/project. This protection is pursuant to Article II Sec. 18
DOCTRINE. In case of contracting, the employer or indirect employer shall be held
and Art. XIII Sec. 3 of the 1987 Constitution).
responsible with his contractor to the employees for non-payment of wages or any violation
o Such solidary liability does not preclude right of reimbursement from the
of the Labor Code. The contractor (direct employer) is the immediate recourse of
co-debtor by the one who paid.
payment, while the principal / indirect employer will be ultimately liable (since contractor
o Immediate recourse of payment is with their direct employer Eagle
can reimburse payment OR change contract price).
Security Agency.
o The contract for security services must be amended to allow the
FACTS. adjustment paid for by principal PTSI to Eagle.
1 Dec 1997 Eparwa and LDCU entered into a Contract for Security Services. o Thus, ultimate liability rests with the principal PTSI.
In said agreement LDCU agreed to pay Eparwa Php 5K per guard a month. Therefore, while there was no contract between LDCU and the security guards,
LDCUs liability still remains by virtue of Arts. 106, 107 and 109.
21 Dec 1997 Eleven (11) security guards assigned by Eparwa to LDCU filed a complaint
Eparwa Security cannot adjust the contract price because of the contracts
with the NLRC for underpayment of salary, legal holiday pay, overtime pay, etc.
expiration, but its liability remains because of the ER-EE relationship with the
LDCU filed a cross-claim against Eparwa. LDCU wanted to be reimbursed for any guards.
payment that it would have to make to the guards. Since Eparwa cannot adjust the contract price, it may CLAIM
LA: guards are entitled to wage differential and premium (for holiday and rest day work). REIMBURSEMENT from LDCU for any payment it would make to the guards.
Eparwa and LDCU are SOLIDARILY LIABLE based on ART. 109 of the Labor Code.
Eparwa should pay LDCU Php 20K and P5K to each of guards as damages. DECISION.
LDCU challenged the LA decision re: amount of the award since guards that were not Petition for certiorari granted. CA decision and resolution set aside . NLRC resolution
similarly situated were granted uniform monetary awards. reinstated.
NLRC: affirmed that guards should be paid wage diff. and premium for holiday/RD work.
However, Eparwa should not reimburse LDCU for the payments to the guards. Further,
monetary awards must be recomputed based on the periods actually worked by the
guards. It held Eparwa and LDCU solidarily liable, and LDCU as the one ULTIMATELY
LIABLE.
CA: granted LDCU petition and reinstated LA decision. LDCU can claim reimbursement
from Eparwa.
Petitioner Eparwa: jurisprudence has set forth that ultimate liability lies with LDCU alone.