Light Rail Transit Authority vs. Alvarez

A government-owned and controlled corporation that contracts with an independent contractor for the performance of work is subject to the jurisdiction of labor tribunals for money claims of the contractor's employees and is solidarily liable with the contractor for separation pay under Articles 107 and 109 of the Labor Code, notwithstanding the absence of a direct employer-employee relationship, where the GOCC conducts business through the contractor and contractually assumes obligation for the employees' benefits.

LRTA is a government-owned and controlled corporation created under Executive Order No. 603 for the construction and operation of the light rail transit system. Private respondents were employees of Meralco Transit Organization, Inc. (METRO), which originally managed and operated the LRT system under an Agreement for Management and Operation (AMO-LRTS) with LRTA. When the Commission on Audit nullified the AMO-LRTS in 1989, LRTA acquired all shares of METRO, making it a wholly-owned subsidiary, and appointed its board and management. METRO continued operations until September 30, 2000, when LRTA ceased the subsidiary's operations following the non-renewal of the O&M agreement.

• Nature of Parties: LRTA is a government-owned and controlled corporation created under Executive Order No. 603 for the construction, operation, and maintenance of the light rail transit system. Private respondents are former employees of Meralco Transit Organization, Inc. (METRO), a private corporation that became a wholly-owned subsidiary of LRTA.
• The Management Agreement: On June 8, 1984, LRTA and METRO entered into an Agreement for the Management and Operation of the Light Rail Transit System (AMO-LRTS), wherein METRO managed and operated the LRT system with LRTA shouldering all operating expenses. METRO executed Collective Bargaining Agreements (CBAs) with its employees, which were approved by LRTA's Board of Directors.
• Acquisition of METRO: On April 7, 1989, the Commission on Audit nullified the AMO-LRTS. To resolve this, LRTA purchased all shares of METRO stock on June 8, 1989, making METRO its wholly-owned subsidiary. LRTA appointed METRO's new board and management, continued the AMO-LRTS implementation, and maintained the Metro, Inc. Employees Retirement Plan covering past services of all regular employees.
• Severance Benefit Approval: On November 17, 1997, METRO's general manager (appointed by LRTA) announced that the board approved severance/resignation benefits of one and a half months' salary for every year of service.
• Cessation of Operations: On July 25, 2000, METRO's rank and file employees declared a strike over a retirement fund dispute. LRTA assumed the obligation to update the Metro, Inc. Employees Retirement Fund with the Bureau of Treasury. On September 30, 2000, LRTA stopped METRO's operations.
• Partial Payment: On April 5, 2001, METRO's Board approved the release of the first 50% of severance pay to displaced employees, including private respondents, who were issued certifications of eligibility. The Commission on Audit advised that LRTA, as owner of METRO, was liable to pay the severance pay. LRTA earmarked ₱271,000,000.00 in its 2002 budget for severance pay. However, only the first 50% was paid, leaving a total balance of ₱2,228,691.24 for the ten respondents.
• Demand and Complaint: Private respondents repeatedly demanded payment of the balance from LRTA but were unsuccessful. They filed a complaint before the NLRC for 13th month pay, separation pay, and refund of salary deductions against both LRTA and METRO.
• Execution: During the pendency of the petition before the Supreme Court, private respondents filed a Motion for Issuance of a Writ of Execution. On July 9, 2010, the Labor Arbiter issued a Writ of Execution and subsequently ordered the release of LRTA's cash bond to private respondents.

• Lack of Jurisdiction: LRTA argued that the Labor Arbiter and NLRC have no jurisdiction over LRTA, citing Light Rail Transit Authority v. Venus, Jr., which allegedly established that labor tribunals lack jurisdiction over LRTA as a government-owned and controlled corporation.
• Absence of Employer-Employee Relationship: LRTA maintained that it is not the real, actual, or indirect employer of private respondents, and that no employer-employee relationship exists between LRTA and the respondents. Consequently, solidary liability for separation pay is legally inconceivable.
• Improper Application of Stare Decisis: LRTA contended that the CA erred in applying the doctrine of stare decisis, arguing that the factual and legal circumstances differ from previous cases.

• Stare Decisis: Respondents argued that the doctrine of stare decisis applies, as the factual setting and issues are identical to Light Rail Transit Authority v. Mendoza, where the Court ruled that LRTA is solidarily liable for the remaining 50% of separation pay.
• Jurisdiction over Money Claims: Respondents countered that LRTA's reliance on Venus is misplaced because this case involves monetary claims, not illegal dismissal. Citing Mendoza and Philippine National Bank v. Pabalan, respondents maintained that by engaging in business through METRO, LRTA divested itself of sovereign character and became subject to rules governing private corporations, including the Labor Code.
• Contractual and Statutory Liability: Respondents argued that LRTA contractually obligated itself to fund the retirement benefits when its Board approved the severance package and assumed obligation for the retirement fund. Alternatively, LRTA is solidarily liable as an indirect employer under Articles 107 and 109 of the Labor Code.

• Jurisdiction of Labor Tribunals: Whether the Labor Arbiter and NLRC have jurisdiction over money claims against LRTA, a government-owned and controlled corporation.
• Solidary Liability: Whether LRTA is solidarily liable with METRO for the payment of private respondents' separation pay despite the absence of a direct employer-employee relationship.
• Stare Decisis: Whether the doctrine of stare decisis bars the relitigation of issues previously decided in Light Rail Transit Authority v. Mendoza.

• Stare Decisis: The petition is barred by the doctrine of stare decisis. The same factual setting and issues raised in this case were previously litigated and decided in Light Rail Transit Authority v. Mendoza, where the Court ruled that LRTA is solidarily liable for the remaining 50% of respondents' separation pay. The rule of stare decisis is a bar to any attempt to re-litigate the same issue where the same questions relating to the same event have been put forward by parties similarly situated as in a previous case decided by a competent court.
• Jurisdiction of Labor Tribunals: Labor tribunals have jurisdiction over private respondents' money claims against LRTA. LRTA's reliance on Venus is misplaced because Venus involved illegal dismissal, whereas this case involves monetary claims. By engaging in business through the instrumentality of METRO, a private corporation, LRTA divested itself pro hac vice of its sovereign character, rendering it subject to the rules of law governing private corporations, including the Labor Code. The claim does not involve employment with LRTA but rather LRTA's liability for monetary obligations arising from its business relations with METRO.
• Solidary Liability: LRTA is solidarily liable with METRO for the payment of private respondents' separation pay. First, LRTA contractually obligated itself to fund METRO's retirement fund and approved the severance benefits, as evidenced by Resolution No. 00-44 and the assumption of obligation to update the retirement fund with the Bureau of Treasury. Second, even absent contractual liability, LRTA is solidarily liable as an indirect employer under Articles 107 and 109 of the Labor Code. By contracting with METRO for the management and operation of the LRT system, LRTA became an indirect employer. The fact that there is no actual and direct employer-employee relationship does not absolve LRTA from liability. Department Order No. 18-02, Series of 2002, further supports this liability where the contract is preterminated (or not renewed) for reasons not attributable to the contractor.

• Stare Decisis — The doctrine of stare decisis is a bar to any attempt to re-litigate the same issue where the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and decided by a competent court. Once a case has been decided, the same parties or those similarly situated cannot relitigate the same issue in a subsequent case.
• Government Immunity and GOCCs — By engaging in a particular business through the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations. A government-owned and controlled corporation conducting business through a private subsidiary is subject to labor jurisdiction for money claims arising from such business relations.
• Solidary Liability of Indirect Employers (Articles 107 and 109, Labor Code) — Article 107 defines an indirect employer as 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. Article 109 mandates that every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of the Labor Code, and for purposes of determining civil liability, they shall be considered as direct employers. The owner of a project is not the direct employer but merely an indirect employer, by operation of law, of his contractor's employees. Under Department Order No. 18-02, Series of 2002, the principal is solidarily liable in case the contract between the principal and contractor is preterminated for reasons not attributable to the contractor, or where the nonrenewal of the contract produces the same adverse effect on employees (involuntary loss of employment).

• "The rule of stare decisis is a bar to any attempt to re-litigate the same issue where the same questions relating to the same event have been put forward by parties similarly situated as in a previous case litigated and decided by a competent court." — Articulates the bar against relitigation of identical issues previously decided in Mendoza.
• "By engaging in a particular business thru the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations." — Establishes that GOCCs engaging in business through private corporate instrumentalities are subject to private law rules, including labor jurisdiction.
• "The owner of the project is not the direct employer but merely an indirect employer, by operation of law, of his contractor's employees." — Defines the statutory relationship between a principal and a contractor's employees under the Labor Code.
• "The fact that there is no actual and direct employer-employee relationship between LRTA and private respondents does not absolve the former from liability for the latter's monetary claims." — Affirms that solidary liability attaches to indirect employers regardless of the absence of direct employment relationship.

• Light Rail Transit Authority v. Mendoza, G.R. No. 202322, August 19, 2015 — Controlling precedent establishing LRTA's solidary liability for separation pay under identical facts; applied through stare decisis to bar relitigation.
• Light Rail Transit Authority v. National Labor Relations Commission (Malanao), CA-G.R. SP No. 83984, April 27, 2005 — Followed by the Labor Arbiter in ruling for joint and several liability; established contractual assumption of obligation by LRTA to fund retirement benefits.
• Philippine National Bank v. Pabalan, G.R. No. L-33112, June 15, 1978 — Cited for the principle that government divests itself of sovereign character when engaging in business through corporate instrumentalities.
• Light Rail Transit Authority v. Venus, Jr., G.R. No. 163782, March 24, 2006 — Distinguished; involved illegal dismissal rather than monetary claims, rendering it inapplicable to the jurisdictional question in this case.

• Article 107 (Indirect Employer), Labor Code — Defines indirect employer as 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. Applied to classify LRTA as indirect employer of METRO's employees.
• Article 109 (Solidary Liability), Labor Code — Mandates that every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of the Code, and shall be considered as direct employers for purposes of determining civil liability. Applied to hold LRTA solidarily liable with METRO.
• Department Order No. 18-02, Series of 2002 (Rules Implementing Articles 106-109, Labor Code) — Section 19 provides that the principal shall be solidarily liable in case of pretermination of contract for reasons not attributable to the contractor. Applied by analogy to nonrenewal of contract producing the same effect of involuntary employment loss.

Presbitero J. Velasco, Jr., Diosdado M. Peralta, Jose C. Perez, and Mario V. Reyes, JJ.