CONSTITUTIONAL LAW II |

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TOPIC IN THE SYLLABUS Article XIII Sec. 3: LABOR (Protection of workers – solidary
liability of employers)
TITLE Eagle Security Agency, Inc. v. NLRC
GR NO. 81314 – EAGLE; 81447 - PTSI
DATE May 18, 1989
PETITIONERS Eagle Security Agency, Inc.
RESPONDENTS National Labor Relations Commission, Labor Arbiter Eduardo G.
Magno, Rodolfo Dequina, et al.

DEFINITION OF TERMS
NLRC - National Labor Relations Commission
PTSI - Philippine Tuberculosis Society, Inc.
EAGLE - Eagle Security Agency, Inc.

RELEVANT DOCTRINES/LAWS:
Constitution: Constitution: Article XIII Sec. 3
Statutes: Labor Code: Articles 106, 107, 109
In the event that the contractor or subcontractor fails to pay the wages of his employees, the contractor is made liable by virtue of his status as direct
employer. The principal, on the other hand, is made the indirect employer of the contractor's employees for purposes of paying the employees
their wages.

FACTS:
1. Philippine Tuberculosis Society, Inc. (PTSI) and Eagle Security Agency, Inc. (EAGLE) entered into a "Contract for Security Services" wherein EAGLE
agreed to provide security services in PTSI’s premises. The contract covered the period from November 2, 1979 to July 31, 1985.
2. [November 5, 1985] a complaint was filed by private respondents Rodolfo Dequina et al. (20 security guards) against PTSI and EAGLE for unpaid wage
and allowance increases under Wage Order Nos. 2, 3, 5 and 6 with interest plus damages and attorney's fees.
3. Labor Arbiter rendered its decision
a. Declared PTSI&EAGLE jointly and severally liable for unpaid wages and allowances.
b. Dismissed claim for damages and attorney’s fees.
c. Dropped names of 4 security guards who did not sign the verified complaint & reply.
4. PTSI, EAGLE & the 4 security guards appealed.
5. NLRC rendered its decision
a. Granted the appeal as to the four (4) security guards whose names were dropped.
b. Denied PTSI and EAGLE's appeals.
PTSI’s Response
PTSI alleges that payment of the wage and allowance increases under Wage Order Nos. 2, 3, 5 and 6 should be borne exclusively by EAGLE, pursuant to the
following provision in the "Contract for Security Services":
AGENCY hereby binds itself to pay its employees in accordance with the provisions of the New Labor Code, as amended, Eight-Hour Labor
Law, the Minimum Wage Law, and other laws, and/or decrees governing security agency. XXX
EAGLE’s Response
EAGLE invokes Wage Order Nos. 3, 5 and 6 to support its theory that it is PTSI that should be held liable for the increases:
In case of contracts for construction projects and for security, janitorial and similar services, the increase in the minimum wage and
allowance rates of the workers shall be borne by the principal or client of the construction/service contractor and the CONTRACT SHALL BE
DEEMED AMENDED ACCORDINGLY XXX

DECISION:
Petitions DISMISSED. NLRC decision AFFIRMED.

ISSUES, RULING, AND RATIO:

1. On Solidary Liability
a. Solidary Liability under the Labor Code
PTSI&EAGLE’s solidary liability for the amounts due the security guards finds support in Articles 106, 107 and 109 of the Labor Code which
state that:
i. In the event that the contractor or subcontractor fails to pay the wages of his employees:
1. The contractor is made liable by virtue of his status as direct employer.
2. The principal, on the other hand, is made the indirect employer of the contractor's employees for purposes of paying the
employees their wages.
ii. Purpose of Solidary Liability: to assure compliance of the Labor Code including the statutory minimum wage. It guarantees, payment
of the workers' performance of any work, task, job or project, thus giving the workers ample protection as mandated by the 1987
Constitution.
b. In this case:
i. Solidary Liability under Articles 106,107,109 shall apply because neither of the 2 entities paid their wage and allowance increases
under the subject wage orders.
ii. The solidary liability of PTSI & EAGLE, however, does not preclude the right of reimbursement from his co-debtor by the one who
paid
[Article 1217, Civil Code]
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c. Wage Orders deemed to amend existing contracts

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.
i. In the end, therefore, ultimate liability for the payment of the increases rests with the principal.
ii. Thus, EAGLE could have claimed an adjustment from PTSI for an increase in consideration to cover the increases payable to the
security guards.
d. In this case:
i. However, the contract for security services had already expired without being amended pursuant to the Wage Orders.
ii. Also, EAGLE does not now demand from PTSI any adjustment in the contract price (its main concern is just freeing itself from liability).
iii. Given these peculiar circumstances, if PTSI pays the security guards, it cannot claim reimbursement from EAGLE. But in case it is
EAGLE that pays them, the latter can claim reimbursement from PTSI in lieu of an adjustment, considering that the contract, had
expired and had not been renewed.

Other issues not related to the syllabus topic

2. On the coverage of the Wage Orders
a. PTSI also alleges that it is exempt from payment under the subject Wage Orders because it is a public sector employer while the Wage Orders
cover only employers and employees in the private sector.
b. However, PTSI relied upon a definition not applicable to this case. Moreover, the Labor Code provides that "employer" includes "the Government
and all its branches, subdivisions and instrumentalities, all government-owned or controlled corporations and institutions . . ."
3. On Impairment of the Obligations of Contracts
a. Time and again, this Court has rejected this line of reasoning in sustaining the validity and constitutionality of labor and social legislations like
the Blue Sunday Law, compulsory coverage of private sector employees in the Social Security System, and the abolition of share tenancy enacted
pursuant to the police power of the State.
b. The Wage Orders are no different from the aforecited laws. They are labor standard legislations enacted to alleviate the plight of the workers
whose wages barely meet the spiralling costs of their basic needs. The increase in the minimum wage and the cost of living allowance was
ordered precisely to ensure the workers' health, efficiency and well-being towards achieving the country's goal of ensuring increased
productivity and viability of business and industry.