Del Rosario & Sons Logging Enterprises, Inc. vs. National Labor Relations Commission

An indirect employer who contracts with an independent contractor for the performance of work is jointly and severally liable with the contractor to the employees for unpaid wages and benefits to the extent of the work performed under the contract, pursuant to Articles 106 and 107 of the Labor Code, as amended. Procedural defects in an appeal, such as lack of verification and delayed payment of the appeal fee, are not fatal where the fee has been paid and the appellate body exercises its discretion to resolve the case on the merits.

Petitioner Del Rosario & Sons Logging Enterprises, Inc. is a logging enterprise that entered into a "Contract of Services" with private respondent Calmar Security Agency on February 1, 1978, whereby the latter undertook to supply security guards to the former at the rate of P300.00 per month for each guard. The Labor Code provisions on contractor and subcontractor liability, specifically Articles 106 and 107, govern the relationship between the principal, the contractor, and the employees supplied under such arrangements.

On February 1, 1978, petitioner Del Rosario & Sons Logging Enterprises, Inc. entered into a "Contract of Services" with private respondent Calmar Security Agency, whereby the latter undertook to supply the former with security guards at the rate of P300.00 per month for each guard. On October 4, 1979, Paulino Mabuti, Napoleo Borata, and Silvino Tudio filed a Complaint against the Security Agency and petitioner for underpayment of salary, non-payment of living allowance, and 13th month pay. Thereafter, five other guards filed their complaint for the same causes of action.

In its Answer, petitioner contended that complainants have no cause of action against it due to the absence of an employer-employee relationship between them. The Security Agency also denied liability, alleging that due to the inadequacy of the amounts paid to it under the Contract of Services, it could not possibly comply with the payments required by labor laws.

Assigned for compulsory arbitration, the Labor Arbiter rendered a Decision on December 21, 1979, dismissing the complaint against petitioner for want of employer-employee relationship but ordering the Security Agency to pay complainants the amounts sought by them totalling P2,923.17. The Security Agency appealed to the NLRC, which modified the Decision of the Labor Arbiter by holding that petitioner is liable to pay complainants, jointly and severally, with the Security Agency, on the ground that petitioner is an indirect employer pursuant to Articles 106 and 107 of the Labor Code, as amended. Reconsideration sought by petitioner was denied, and this certiorari petition was instituted.

• Procedural Defects in Appeal: Petitioner contended that the NLRC erred in giving due course to the appeal of the Security Agency despite the fact that it was not under oath and the required appeal fee was not paid.
• Joint and Several Liability: Petitioner argued that the NLRC erred in holding it jointly and severally liable with the Security Agency, maintaining that complainants have no cause of action against it due to the absence of an employer-employee relationship.
• Denial of Motion for Reconsideration: Petitioner argued that the NLRC erred in refusing to give due course to its Motion for Reconsideration.

• Inadequacy of Contract Payments: The Security Agency denied liability, alleging that due to the inadequacy of the amounts paid to it under the Contract of Services, it could not possibly comply with the payments required by labor laws.

• Procedural Defects in Appeal: Whether the NLRC erred in giving due course to the Security Agency's appeal despite the lack of verification and the delayed payment of the appeal fee.
• Joint and Several Liability: Whether petitioner, as an indirect employer under Articles 106 and 107 of the Labor Code, is jointly and severally liable with the Security Agency for the claims of the security guards.

• Procedural Defects in Appeal: No. The formal defects in the appeal were not fatal. The lack of verification could have been easily corrected by requiring an oath, and the appeal fee had been paid although delayed. The NLRC had the inherent power to allow late payment of the appeal fee, and the broader interests of justice demanded that the appeal be given course.
• Joint and Several Liability: Yes. Petitioner's joint and several liability with the Security Agency was correctly adjudged. When petitioner entered into a Contract of Services with the Security Agency and the latter hired complainants to work as guards for the former, petitioner became an indirect employer of respondents-complainants pursuant to the unequivocal terms of Articles 106 and 107 of the Labor Code, as amended.

• Procedural Defects in Appeal: The Court held that the lack of verification in the appeal was not a fatal defect, as it could have been easily corrected by requiring an oath, citing Gaerlan, Sr. vs. National Labor Relations Commission, 132 SCRA 402 [1984]. Regarding the appeal fee, the Court cited Panes vs. Court of Appeals, et al., 120 SCRA 509 [1983], which held that failure to pay docketing fees does not automatically result in dismissal of an appeal; dismissal is discretionary with the appellate court and must be exercised wisely and prudently with a view to substantial justice. While the Court acknowledged the holding in Acda vs. MOLE, 119 SCRA 306 [1982] that payment of the appeal fee is "by no means a mere technicality but is an essential requirement in the perfection of an appeal," it distinguished the present case because the fee had been paid, although delayed. The Court further noted that it was within the inherent power of the NLRC to allow the late payment of the appeal fee. Additionally, Article 221 of the Labor Code provides that in any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling, and the Commission shall use every reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process.

• Joint and Several Liability: The Court applied the unequivocal terms of Articles 106 and 107 of the Labor Code, as amended. Article 106 provides that in the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with the Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. Article 107 extends this liability to any person, partnership, association, or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job, or project. The Court held that the joint and several liability imposed on petitioner is without prejudice to a claim for reimbursement by petitioner against the Security Agency for such amounts as petitioner may have to pay to complainants. The Security Agency may not seek exculpation by claiming that petitioner's payments to it were inadequate, as an employer is charged with knowledge of labor laws, and the adequacy of the compensation that it demands for contractual services is its principal concern and not any other's.

• Indirect Employer Liability — Under Articles 106 and 107 of the Labor Code, a person, partnership, association, or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job, or project becomes an indirect employer of the contractor's employees. If the contractor fails to pay the wages of its employees, the indirect employer is jointly and severally liable with the contractor to such employees to the extent of the work performed under the contract, in the same manner and extent as if directly employing them. The Court applied this doctrine to hold the petitioner, which contracted with a security agency for guard services, jointly and severally liable for the guards' unpaid wages and benefits.

• Non-Fatal Nature of Appeal Defects — Failure to pay the appeal docketing fee does not automatically result in the dismissal of an appeal; dismissal is discretionary with the appellate court, and such discretion must be exercised wisely and prudently, never capriciously, with a view to substantial justice. Where the appeal fee has been paid, although delayed, the broader interests of justice and the desired objective of resolving controversies on the merits demand that the appeal be given due course. The Court applied this doctrine to uphold the NLRC's decision to give due course to the Security Agency's appeal despite the lack of verification and delayed payment of the appeal fee.

• "The formal defects in the appeal of the Security Agency were not fatal defects. The lack of verification could have been easily corrected by requiring an oath." — This passage establishes the Court's ruling on the procedural issue, holding that verification defects in an appeal are curable and not fatal to the appeal's validity.

• "Clearly, failure to pay the docketing fees does not automatically result in the dismissal of the appeal, Dismissal is discretionary with the Appellate Court (Nawasa vs. Secretary of Public Works and Communications, 16 SCRA 536, 539 [1966]), and discretion must be exercised wisely and prudently, never capriciously, with a view to substantial justice (Cucio vs. Court of Appeals, 57 SCRA 401 [1974])." — This passage, quoted from Panes vs. Court of Appeals, articulates the discretionary nature of dismissing appeals for non-payment of docketing fees, which the Court applied to the present case.

• "When petitioner entered into a Contract of Services with the Security Agency and the latter hired complainants to work as guards for the former, petitioner became an indirect employer of respondents-complainants pursuant to the unequivocal terms of Articles 106 and 107 of the Labor Code, as amended." — This passage states the core ratio decidendi on the substantive issue, applying the indirect employer doctrine to the facts of the case.

• "The Security Agency may not seek exculpation by claiming that petitioner's payments to it were inadequate. As an employer, it is charged with knowledge of labor laws and the adequacy of the compensation that it demands for contractual services is its principal concern and not any other's." — This passage rejects the Security Agency's defense of inadequate compensation, holding that employers cannot escape liability by claiming insufficient payments from the principal.

• Gaerlan, Sr. vs. National Labor Relations Commission, 132 SCRA 402 [1984] — Cited as authority for the proposition that lack of verification in an appeal is not a fatal defect and can be easily corrected by requiring an oath.
• Panes vs. Court of Appeals, et al., 120 SCRA 509 [1983] — Cited as controlling authority for the rule that failure to pay docketing fees does not automatically result in dismissal of an appeal; dismissal is discretionary with the appellate court and must be exercised with a view to substantial justice.
• Acda vs. MOLE, 119 SCRA 306 [1982] — Distinguished from the present case; while it held that payment of the appeal fee is an essential requirement in the perfection of an appeal, the present case involved a fee that had been paid, although delayed.
• Nawasa vs. Secretary of Public Works and Communications, 16 SCRA 536, 539 [1966] — Cited within the Panes quotation for the proposition that dismissal for failure to pay docketing fees is discretionary with the appellate court.
• Cucio vs. Court of Appeals, 57 SCRA 401 [1974] — Cited within the Panes quotation for the proposition that discretion to dismiss an appeal must be exercised wisely and prudently, never capriciously, with a view to substantial justice.
• Lopez vs. Court of Appeals, 75 SCRA 401 [1977] — Cited in the footnotes in connection with the discretionary nature of dismissing appeals for procedural defects.

• Article 106, Labor Code, as amended — Provides that in the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with the Code, the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner and extent that he is liable to employees directly employed by him. The Court applied this provision to hold the petitioner jointly and severally liable with the Security Agency.
• Article 107, Labor Code, as amended — Extends the provisions of Article 106 to any person, partnership, association, or corporation which, not being an employer, contracts with an independent contractor for the performance of any work, task, job, or project. The Court applied this provision to classify the petitioner as an indirect employer of the security guards.
• Article 221, Labor Code — Provides that in any proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts of law or equity shall not be controlling, and the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process. The Court cited this provision to justify the NLRC's giving due course to the appeal despite procedural defects.

Teehankee (Chairman), Relova, Gutierrez, Jr., De la Fuente, and Alampay, JJ., concurred. Plana, J., was on leave.