Feagle Construction Corporation vs. Gayda, et al.

A local recruitment agency may be exempted from solidary liability with its foreign principal for workers' unpaid claims where the workers, with full knowledge of the employer's financial distress, voluntarily executed individual written waivers releasing the agency from liability and thereafter entered into new contracts of employment directly with the foreign employer without the agency's participation. The general rule on solidary liability under POEA rules admits of exceptions when changed circumstances and individual agreements between the agency and the workers render the application of the general rule inequitable.

Petitioner Feagle Construction Corporation is a local recruitment agency that deployed Filipino workers to Algosaibi-Bison, Ltd., a construction company in Dammam, Saudi Arabia. The private respondents were Filipino workers employed with Algosaibi-Bison, Ltd. for three to five years on construction projects for the Kingdom of Saudi Arabia. The regulatory backdrop involves Section 1, Rule II of the rules and regulations of the Philippine Overseas Employment Administration, which provides that every licensed private recruitment agency shall be jointly and solidarily liable with the employer for all claims and liabilities arising in connection with the implementation of the employment contract. The case involves the interplay between this regulatory rule and the individual waivers executed by the workers.

Petitioner Feagle Construction Corporation is a local recruitment agency that deployed Filipino workers, including private respondents, to Algosaibi-Bison, Ltd., a construction company in Dammam, Saudi Arabia. The private respondents had been employed with Algosaibi-Bison, Ltd. for three to five years working on construction projects for the Kingdom of Saudi Arabia. Sometime in 1983, Algosaibi-Bison, Ltd. started encountering financial difficulties because of the drop in the price of oil, which caused the income of the Kingdom of Saudi Arabia to plunge from about one hundred billion dollars a year to eighteen billion dollars a year. As a result, the Kingdom of Saudi Arabia encountered financial difficulties in paying Algosaibi-Bison, Ltd. for its construction projects, and starting in 1983, the remittance of the allotments of the beneficiaries of Filipino workers employed with Algosaibi-Bison, Ltd. was delayed. Although all the allotments for 1983 and 1984 were eventually paid, all these payments were delayed.

During all these years, petitioner never charged Filipino workers a single centavo for sending them to work for Algosaibi-Bison, Ltd., and advanced all mobilization expenses out of its funds. Because of its financial difficulties, Algosaibi-Bison, Ltd. could not even reimburse petitioner for the mobilization expenses petitioner advanced, such as passport fees, medical fees, and visa application fees. Petitioner insisted that Algosaibi-Bison, Ltd. should give top priority to the payment of the wages and the allotments of the Filipino workers employed with it. Because of this development, petitioner decided to stop sending back Filipino workers to work with Algosaibi-Bison, Ltd., as workers are given a one-month vacation after a year with re-entry visa.

Sometime in July 1984, the Filipino workers employed with Algosaibi-Bison, Ltd. who had returned to Manila, including private respondents, requested a meeting with the management of petitioner. About forty Filipino workers attended the meeting, during which they requested petitioner to return them to their job site in Saudi Arabia. Mr. Florentino B. Aguila, the president of petitioner, informed the workers that petitioner did not want to send back any workers to Saudi Arabia because of the big risk due to the financial difficulties of Algosaibi-Bison, Ltd. However, the workers pleaded with Mr. Florentino B. Aguila to send them back to Saudi Arabia, explaining that they were jobless in the Philippines because of the depressed economic condition of the country. Rather than remain jobless, they would rather take a chance in Saudi Arabia. They assured petitioner that they were willing to assume the risk in case the remittance of their salaries would be delayed, and they emphasized that they were willing to sign a written statement indicating that they would not hold petitioner liable for any delay or non-payment of their salaries and any amounts due them from Algosaibi-Bison, Ltd. In accordance with their commitment, the said workers, including private respondents, signed a Statement. Moreover, the workers stated they would seek the help of Saudi labor authorities individually in the event they would not be paid. It was under these circumstances that petitioner reluctantly agreed to send back private respondents to Saudi Arabia if they would sign the aforementioned Statement before they left for Saudi Arabia.

While the Filipino workers were in Saudi Arabia, they received their salaries directly from Algosaibi-Bison, Ltd. When Algosaibi-Bison, Ltd. went into bankruptcy in 1986, all the Filipino workers in its employ, including private respondents, dealt with the liquidator directly and in their individual capacities. They filed their claims with the liquidator, and the liquidator issued to each of them a certificate stating the amount payable to each of them as soon as funds are available. The said Filipino workers, including private respondents, agreed that the liquidator would pay them directly and individually through their bank accounts in the Philippines. Just the same, to assist the workers, petitioner wrote the liquidator to follow up the claims of the Filipino workers, and the liquidator replied to it. The reply of the liquidator confirmed the individual agreement of the said workers, including private respondents, that they would be paid by the liquidator directly and individually. The liquidator even refused to furnish petitioner a list of their individual claims and corresponding amounts due each of them, considering these information confidential and privy to said workers. Under the law of Saudi Arabia, the claims of the Filipino workers of Algosaibi-Bison, Ltd. has first priority for payment in the bankruptcy proceeding, as Article 15 of the Labor Law of Saudi Arabia provides that the amounts to which the workman or his dependents are entitled shall be considered first class privileged debts.

The Court noted that 13 of private respondents filed their claims for salaries due in January, February and March of 1986, when their contracts of employment expired in 1985. It was also clear that private respondents executed new and different contracts of employment directly with Algosaibi-Bison, Ltd. without the participation and consent of petitioner. The former contracts with petitioner expired and private respondents entered into new contracts of employment with Algosaibi-Bison, Ltd., without the participation of petitioner.

• Solidary Liability Exception: Petitioner argued that it should not be held solidarily liable with the foreign employer because of changed circumstances and because of individual agreements between petitioner and private respondents which cannot be considered void as they are not contrary to law.
• Direct Contracts with Foreign Employer: Petitioner maintained that private respondents executed new and different contracts of employment directly with Algosaibi-Bison, Ltd. without the participation and consent of petitioner, and that the claims of private respondents were made directly with the liquidator of Algosaibi-Bison, Ltd., with petitioner having nothing to do with those claims.
• Voluntary Waivers: Petitioner argued that private respondents voluntarily signed individual statements to the effect that each one of them did not hold petitioner responsible for delay or non-payment of their salaries and any amounts due them from Algosaibi-Bison, Ltd., and that these waivers were executed to convince the reluctant petitioner to send them back to Saudi Arabia notwithstanding their knowledge of the financial reverses of the employer.
• Good Faith and Fair Dealing: Petitioner contended that it never took advantage of private respondents, that they were always treated fairly and in accordance with law, and that private respondents did not question the good faith of petitioner.

• Solidary Liability Under POEA Rules: The public respondent National Labor Relations Commission maintained that the general rule as provided for in Section 1, Rule II of the rules and regulations of the Philippine Overseas Employment Administration is that every licensed private recruitment agency shall be jointly and solidarily liable with the employer for all claims and liabilities which may arise in connection with the implementation of the contract of employment.

• Solidary Liability of Recruitment Agency: Whether petitioner may be held solidarily liable with the foreign employer Algosaibi-Bison, Ltd. for any unpaid claims of private respondents against their foreign principal employer, notwithstanding the individual waivers executed by the workers and the changed circumstances of the case.

• Solidary Liability of Recruitment Agency: No. Petitioner cannot be held jointly and solidarily liable with the employer Algosaibi-Bison, Ltd. for the claims of private respondents. The general rule on solidary liability under Section 1, Rule II of the POEA rules and regulations admits of exceptions where changed circumstances and individual agreements between the agency and the workers render its application inequitable.

• Solidary Liability of Recruitment Agency: The Court acknowledged the general rule that every licensed private recruitment agency shall be jointly and solidarily liable with the employer for all claims and liabilities arising in connection with the implementation of the contract of employment. However, the Court found it necessary to deviate from the general rule for two reasons: first, because of changed circumstances, and second, because of individual agreements between petitioner and private respondents which cannot be considered void because they are not contrary to law. The Court noted that 13 of private respondents filed their claims for salaries due in January, February and March of 1986, when their contracts of employment expired in 1985, and that private respondents executed new and different contracts of employment directly with Algosaibi-Bison, Ltd. without the participation and consent of petitioner. The claims of private respondents were made directly with the liquidator of Algosaibi-Bison, Ltd., and they agreed to wait for the promised payment, with petitioner having nothing to do with those claims.

The Court emphasized that petitioner was reluctant to send the private respondents back to Saudi Arabia because as early as 1983, Algosaibi-Bison, Ltd. started encountering financial difficulties because of the drop in the price of oil. Private respondents were the ones who insisted that they be allowed to resume employment, and they were informed of the risks involved relating to the financial reverses of the employer. They insisted on returning to Saudi Arabia and agreed to sign individual statements, which they did, to the effect that each one of them did not hold petitioner responsible for delay or non-payment of their salaries and any amounts due them from Algosaibi-Bison, Ltd. The Court held that these individual statements voluntarily signed by the private respondents to convince the reluctant petitioner to send them back to Saudi Arabia, notwithstanding their knowledge of the financial reverses of the employer, are eloquent individual waivers of their rights against petitioner. They were informed of the risk involved in returning to an employer in serious financial distress, and they insisted on returning to work, even persuading petitioner to allow them to do so, by waiving the possible liability of petitioner. Under these circumstances, the Court could not consider their written waivers as to petitioner's responsibilities void, as they were not victims of deceit or deception, and they entered into those waivers with open eyes and clear minds, aware of the imminent danger and the great risks involved in their renewed ventures.

The Court also considered that as of record, petitioner never took advantage of private respondents, that they were always treated fairly and in accordance with law, and that private respondents did not question the good faith of petitioner. Their former employer Algosaibi-Bison, Ltd. went into bankruptcy in 1986 and petitioner had nothing to do with that. Private respondents filed their claims directly with the liquidator of their former employer, were given certificates of the amounts due them to be given preference under the laws of Saudi Arabia, and were to be paid directly, again without participation of the petitioner. Petitioner wrote the liquidator just to help private respondents so that their claims may be expedited. Accordingly, the Court held that in view of the circumstances proven in this case, and the very clear waiver of liability individually signed by private respondents in favor of petitioner, the petitioner cannot be held jointly and solidarily liable with the employer Algosaibi-Bison, Ltd. for the claims of private respondents.

• Solidary Liability of Recruitment Agencies — Under Section 1, Rule II of the POEA rules and regulations, every licensed private recruitment agency shall be jointly and solidarily liable with the employer for all claims and liabilities which may arise in connection with the implementation of the contract of employment. This general rule, however, admits of exceptions where changed circumstances and individual agreements between the agency and the workers render its application inequitable. The Court applied this doctrine by finding that the workers' voluntary waivers and direct contracts with the foreign employer constituted exceptional circumstances warranting deviation from the general rule.

• Waiver of Rights — A written waiver of rights against a recruitment agency is valid and binding where the workers were informed of the risks involved, insisted on returning to work despite warnings, and entered into the waiver with open eyes and clear minds, aware of the imminent danger and great risks involved. The Court applied this doctrine by holding that the individual statements voluntarily signed by private respondents to convince the reluctant petitioner to send them back to Saudi Arabia were eloquent individual waivers of their rights against petitioner, and could not be considered void as they were not victims of deceit or deception.

• "We agree with Public Respondents that the general rule as provided for in Section 1, Rule II of the rules and regulations of the Philippine Overseas Employment Administration is that every licensed private recruitment agency shall be jointly and solidarity liable with the employer for all claims and liabilities which may arise in connection with the implementation of the contract of employment. In this case, however, We find it necessary to deviate from the general rule. First, because of changed circumstances, and second, because of individual agreements between petitioner and private respondents which cannot be considered void because the same cannot be considered contrary to law." — This passage establishes the Court's recognition of the general rule on solidary liability while justifying the deviation based on the exceptional circumstances of the case.

• "These individual statements voluntary signed by the private respondents to convince the reluctant petitioner to send them back to Saudi Arabia, notwithstanding their knowledge of the financial reverses of this employer, are eloquent individual waivers of their rights against petitioner. They were informed of the risk involved in returning to an employer in serious financial distress. They insisted on returning to work, even persuading petitioner to allow them to do so, by waiving the possible liability of petitioner. Under these circumstances, when private respondents were insisting to return to work despite the warning, We cannot consider their written waivers as to petitioner's responsibilities void. They were not victims of deceit or deception. They entered into those waivers with open eyes and clear minds. They were aware of the imminent danger and the great risks involved in their renewed ventures." — This passage articulates the Court's reasoning for upholding the validity of the waivers, emphasizing the voluntariness and informed nature of the workers' consent.

• "Holding, therefore, that in view of the circumstances proven in this case, and the very clear waiver of liability individually signed by private respondents in favor of petitioner, the petitioner cannot be held jointly and solidarity liable with the employer Algosaibi-Bison, Ltd. for the claims of private respondents." — This passage states the core holding of the case, directly resolving the issue of solidary liability in favor of petitioner.

• N/A — The decision does not cite any prior jurisprudence as controlling precedent.

• Section 1, Rule II, Rules and Regulations of the Philippine Overseas Employment Administration — This provision establishes the general rule that every licensed private recruitment agency shall be jointly and solidarily liable with the employer for all claims and liabilities which may arise in connection with the implementation of the contract of employment. The Court acknowledged this rule but found it necessary to deviate from it based on the exceptional circumstances of the case.
• Article 15, Labor Law of Saudi Arabia — This provision provides that the amounts to which the workman or his dependents are entitled shall be considered first class privileged debts, and for the recovery thereof the workman or his heirs shall have priority rights over all the employer's property. The Court noted this provision to show that the workers' claims had priority in the bankruptcy proceeding in Saudi Arabia.

Narvasa (Chairman), Cruz, and Medialdea, JJ., concurred.

N/A — No dissenting opinions are noted in the provided case text.