Catan vs. NLRC

A private recruitment agency is solidarily liable with its foreign principal for disability benefits under an employment contract that was automatically renewed, and its responsibility toward recruited workers continues until the expiration of their employment contracts even if the agency agreement itself has ended without notice to the worker.

Petitioner Manuela S. Catán/M.S. Catán Placement Agency is a duly licensed recruitment agency that acted as agent of Ali and Fahd Shabokshi Group, a Saudi Arabian firm, in recruiting Filipino workers for overseas employment. Private respondent Francisco D. Reyes was the worker it recruited to work in Saudi Arabia as a steelman under a one-year employment contract. The dispute centers on the interplay between the employment contract's automatic renewal clause, the recruitment agreement between the local agency and its foreign principal, and the agency's statutory liability under the rules implementing the Labor Code.

Petitioner, a duly licensed recruitment agency, as agent of Ali and Fahd Shabokshi Group, a Saudi Arabian firm, recruited private respondent to work in Saudi Arabia as a steelman. The term of the contract was for one year, from May 15, 1981 to May 14, 1982, but it contained an automatic renewal clause providing that the contract "is renewable automatically if neither of the PARTIES notifies the other PARTY of his wishes to terminate the Contract by at least ONE MONTH prior to the expiration of the contractual period." The contract was automatically renewed when private respondent was not repatriated by his Saudi employer but instead was assigned to work as a crusher plant operator.

On March 30, 1983, while working as a crusher plant operator, private respondent's right ankle was crushed under the machine he was operating. On May 15, 1983, after the expiration of the renewed term, he returned to the Philippines, where his ankle was operated on at the Sta. Mesa Heights Medical Center and he incurred expenses. Thereafter, on September 9, 1983, he returned to Saudi Arabia to resume his work. On May 15, 1984, he was repatriated, and upon his return he had his ankle treated, incurring further expenses.

Relying on the provision in the employment contract that the employer shall compensate the employee if he is injured or permanently disabled in the course of employment, private respondent filed a claim against petitioner with the POEA, docketed as POEA Case No. 84-09847. On April 10, 1986, the POEA rendered judgment in his favor, ordering petitioner to pay ₱7,985.60 as disability benefits, ₱25,096.20 as reimbursement for medical expenses, and ten percent of those amounts as attorney's fees. On appeal, the NLRC affirmed the POEA decision on December 12, 1986.

Petitioner then instituted the instant special civil action for certiorari, alleging grave abuse of discretion on the part of the NLRC. As to the medical expenses, petitioner argued that private respondent was negligent in returning to work in Saudi Arabia when he knew he was not yet medically fit; however, the certificate issued by Dr. Shafquat Niazi, the camp doctor, on November 1, 1983 merely stated that private respondent was "unable to walk properly, moreover he is still complaining [of] pain during walking and different lower limbs movement," and nowhere stated that he was not medically fit to work. The NLRC also found unrefuted that private respondent's return to Saudi Arabia on September 9, 1983 was with the full knowledge, consent, and assistance of petitioner, who facilitated his travel papers and purchased his ticket.

• Expiration of the Employment Contract: Petitioner claimed that the NLRC gravely abused its discretion when it ruled that petitioner was liable to private respondent for disability benefits, since at the time he was injured his original employment contract, which petitioner facilitated, had already expired.
• Expiration of the Agency Agreement: Petitioner further disclaimed liability on the ground that its agency agreement with the Saudi principal had already expired when the injury was sustained.
• Worker's Negligence: Petitioner contended that even if it were liable for disability benefits, the NLRC gravely abused its discretion when it affirmed the award of medical expenses, because those expenses were the consequence of private respondent's negligence in returning to work in Saudi Arabia when he knew that he was not yet medically fit to do so.

• Liability for Disability Benefits: Whether the NLRC gravely abused its discretion in ruling that petitioner was liable for disability benefits despite the alleged expiration of the original employment contract and of the agency agreement with the Saudi principal.
• Award of Medical Expenses: Whether the NLRC gravely abused its discretion in affirming the award of medical expenses, given petitioner's claim that private respondent's own negligence in returning to work while medically unfit caused those expenses.

• Liability for Disability Benefits: No. The employment contract was automatically renewed because neither party gave notice of termination at least one month before its expiration, so the injury was sustained during the lifetime of the contract. A private employment agency may be sued jointly and solidarily with its foreign principal for violations of the recruitment agreement and the contracts of employment.
• Award of Medical Expenses: No. No evidence was introduced to prove that private respondent was not medically fit to work when he returned to Saudi Arabia; the camp doctor's certificate did not say so. Moreover, petitioner itself assisted private respondent in returning to work by purchasing his ticket, which is as if petitioner had certified his fitness to work.

• Liability for Disability Benefits: Private respondent's contract of employment could not be said to have expired on May 14, 1982, because it was automatically renewed since no notice of its termination was given by either or both of the parties at least a month before its expiration, as provided in the contract itself; therefore, the injury was sustained during the lifetime of the contract. Under Section 10(a)(2), Rule V, Book I of the Rules to Implement the Labor Code, a private employment agency has the power to be sued jointly and solidarily with the principal or foreign-based employer for any of the violations of the recruitment agreement and the contracts of employment. The SC applied its recent ruling in Ambraque International Placement & Services vs. NLRC, where a recruitment agency was held solidarily liable for the unpaid salaries of a worker it recruited for employment in Saudi Arabia. Even if petitioner and the Saudi principal had already severed their agency agreement at the time of the injury, petitioner may still be sued for a violation of the employment contract because no notice of the agency agreement's termination was given to private respondent, under Article 1921 of the Civil Code, which provides that if the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. The NLRC reasoned that the obligations covenanted in the recruitment agreement are not coterminous with the term of the agreement: if either or both parties decide to end the agreement, their responsibilities toward the contracted employees do not end but extend up to and until the expiration of the employment contracts of the employees recruited and employed pursuant to the agreement — otherwise the very purpose of the law governing the employment of workers for foreign jobs abroad would be rendered nugatory.
• Award of Medical Expenses: No evidence was introduced to prove that private respondent was not medically fit to work when he returned to Saudi Arabia. Exhibit "B", a certificate issued by Dr. Shafquat Niazi, the camp doctor, on November 1, 1983, merely stated that private respondent was "unable to walk properly, moreover he is still complaining [of] pain during walking and different lower limbs movement"; nowhere did it say that he was not medically fit to work. Further, since petitioner even assisted private respondent in returning to work in Saudi Arabia by purchasing his ticket, it is as if petitioner had certified his fitness to work. The NLRC found it unrefuted that complainant's subsequent departure or return to Saudi Arabia on September 9, 1983 was with the full knowledge, consent, and assistance of petitioner, who facilitated his travel papers.

• Solidary liability of the private employment agency with the foreign principal — Under Section 10(a)(2), Rule V, Book I of the Rules to Implement the Labor Code, a private employment agency may be sued jointly and solidarily with its foreign principal for any violation of the recruitment agreement and the contracts of employment. The SC applied this to hold petitioner liable for the disability benefits due under the employment contract, following Ambraque International Placement & Services vs. NLRC.
• Non-coterminous obligations under the recruitment agreement — The obligations covenanted in the recruitment agreement between the local agent and its foreign principal are not coterminous with the term of the agreement: if either or both parties end the agreement, their responsibilities toward the contracted employees extend up to and until the expiration of the employment contracts of the employees recruited under the agreement. Otherwise, the purpose of the law governing the overseas employment of workers would be rendered nugatory.
• Automatic renewal of the employment contract — Where the contract provides that it is renewable automatically if neither party notifies the other of an intent to terminate at least one month before expiration, the failure to give such notice renews the contract; the worker's injury sustained after the original one-year term but before any notice of termination is therefore within the lifetime of the contract.
• Revocation of agency without notice (Article 1921, Civil Code) — If an agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice those persons if they were not given notice thereof. Applied here, the recruited worker could still sue the local agency even after the agency agreement with the Saudi principal had been severed, because no notice of the termination was given to him.

• "Suffice it to state that albeit local respondent M. S. Catan Agency was at the time of complainant's accident resulting in his permanent partial disability was (sic) no longer the accredited agent of its foreign principal, foreign respondent herein, yet its responsibility over the proper implementation of complainant's employment/service contract and the welfare of complainant himself in the foreign job site, still existed, the contract of employment in question not having expired yet." — The NLRC's articulation, adopted by the SC, of why the agency's liability survived the alleged severance of its agency agreement with the Saudi principal.
• "Art 1921. If the agency has been entrusted for the purpose of contraht with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof." — The Civil Code provision on which the SC relied to hold that the recruited worker could still proceed against the local agency despite the termination of the agency agreement.
• "This must be so, because the obligations covenanted in the recruitment agreement entered into by and between the local agent and its foreign principal are not coterminus with the term of such agreement so that if either or both of the parties decide to end the agreement, the responsibilities of such parties towards the contracted employees under the agreement do not at all end, but the same extends up to and until the expiration of the employment contracts of the employees recruited and employed pursuant to the said recruitment agreement." — The NLRC's formulation, quoted with emphasis by the SC, of the rule that recruitment agencies remain responsible for recruited workers until their employment contracts expire.

• Ambraque International Placement & Services vs. NLRC, G.R. No. 77970, January 28, 1988 — Controlling precedent followed: a recruitment agency was held solidarily liable for the unpaid salaries of a worker it recruited for employment in Saudi Arabia.

• Section 10(a)(2), Rule V, Book I, Rules to Implement the Labor Code — Requires a private employment agency, before recruiting any worker, to submit a formal appointment or agency contract executed by a foreign-based employer, and gives the agency the power to sue and be sued jointly and solidarily with the principal or foreign-based employer for any violation of the recruitment agreement and the contracts of employment; this was the basis for petitioner's solidary liability.
• Article 1921, Civil Code — Provides that the revocation of an agency entrusted for the purpose of contracting with specified persons shall not prejudice those persons if they were not given notice; applied to bar petitioner from escaping liability on the ground that its agency agreement with the Saudi principal had already been severed.