Sentinel Security Agency, Inc. vs. National Labor Relations Commission

The transfer of an employee involves a lateral movement within the business or operation of the employer without demotion in rank, diminution of benefits, or suspension of employment; the recall and transfer of security guards require reassignment to another post and are not equivalent to placement on "floating status," which is only justified for a reasonable period of six months in bona fide cases of suspension of operation, business, or undertaking.

The case involves long-term security guards employed by Sentinel Security Agency, Inc. who were assigned to Philamlife's Cebu Branch for periods ranging from four to twenty-seven years. When Philamlife renewed its security services contract with Sentinel, it requested the replacement of all guards. Rather than reassigning the existing guards to other available posts, Sentinel hired new guards and removed the complainants, claiming they were too old, prompting the filing of illegal dismissal complaints.

• The complainants were security guards employed by Sentinel Security Agency, Inc. (the Agency) since various dates between 1966 and 1990, assigned to render guard duty at the premises of Philippine American Life Insurance Company (the Client) at Jones Avenue, Cebu City.
• On December 16, 1993, the Client sent notice that the Agency was again awarded the contract for security services but requested the replacement of all security guards in its offices at Cebu, Bacolod, Cagayan de Oro, Dipolog, and Ilagan.
• On January 12, 1994, the Agency issued a Relief and Transfer Order replacing the complainants as guards of the Client and ordering them to be reassigned to other clients effective January 16, 1994.
• The complainants reported for reassignment but were never given new assignments; instead, Agency personnel told them they were replaced because they were already old ("gui-ilisa mo kay mga tigulang naman mo").
• The complainants filed complaints for illegal dismissal on January 18, January 26, and February 4, 1994, praying for separation pay and other labor standard benefits.
• The Agency hired new security guards to replace the complainants, resulting in a lack of posts to which the complainants could be reassigned, and refused to reassign complainant Andoy when he reported for duty on February 2, 4, and 7, 1994.
• The Client maintained there was no employer-employee relationship between it and the complainants, asserting that the complainants were merely assigned under a job contract and that security services were not necessary and desirable to its usual insurance business.

• Sentinel Security Agency, Inc. argued that there was no dismissal, constructive or otherwise, as the complainants were protected by the contract of security services which allowed recall of guards at the will of either party; that the complainants prematurely filed their cases without giving the Agency a chance to give them assignments; and that the complainants abandoned their employment after being placed on floating status, noting that they did not pray for reinstatement but asked for separation pay instead.
• Philippine American Life Insurance Company argued that there was no employer-employee relationship between it and the complainants as the latter were merely assigned under a job contract; that the Agency had its own separate corporate personality; that the functions of the complainants were not necessary and desirable to the usual business or trade of the Client; and that the Client could not be held jointly and severally liable for illegal dismissal as it did not dismiss the complainants.

• The complainants argued that they were constructively dismissed as the recall from their long-time posts without any good reason was a scheme to camouflage illegal dismissal; that they were told they were replaced because they were old, not because of any infraction or irregularity; that their service records were unblemished; that they reported to the Agency for reassignment on several dates but were not given any assignments; and that the Agency's actions were intended to circumvent Republic Act 7641 (the New Retirement Law) which would have required payment of retirement benefits to employees nearing retirement age.

• Procedural Issues:
  • Whether the complaints for illegal dismissal were prematurely filed before the expiration of the six-month period allowed for security guards to remain on "floating status."
• Substantive Issues:
  • Whether the complainants were illegally dismissed by Sentinel Security Agency, Inc.
  • Whether Philippine American Life Insurance Company is jointly and severally liable with Sentinel Security Agency, Inc. for the payment of backwages, separation pay, 13th month pay, and service incentive leave pay.

• Procedural:
  • The Supreme Court held that the complaints were not prematurely filed. The contention that the Agency could retain the complainants on floating status for six months was rejected because floating status requires the dire exigency of the employer's bona fide suspension of operation, business, or undertaking. In this case, the Agency was awarded a new contract by the Client, there was no surplus of security guards over available assignments, and the Agency hired new guards instead of reassigning the complainants, indicating no bona fide suspension of operations existed.
• Substantive:
  • The Court held that the complainants were illegally dismissed. The Relief and Transfer Order was not a bona fide transfer but a subterfuge to dismiss the complainants. A transfer requires reassignment to another post of equivalent rank without break in service, but the Agency hired new guards and refused to reassign the complainants when they reported for duty, telling them they were too old. This constituted constructive dismissal.
  • The Court held that Philippine American Life Insurance Company is not liable for separation pay and backwages as it did not illegally dismiss the complainants, but it is jointly and severally liable with the Agency for service incentive leave pay under Articles 106, 107, and 109 of the Labor Code as an indirect employer. The award of 13th month pay was deleted as evidence showed it had already been paid.

• Transfer vs. Floating Status — Transfer involves a lateral movement from one position to another of equivalent rank, level, or salary, or from one office to another within the same business establishment without demotion or diminution of benefits; it is distinguished from "floating status" or "off-detailing," which is not equivalent to dismissal only if it does not continue beyond a reasonable time and is justified by bona fide suspension of operation.
• Constructive Dismissal — The recall of employees from their posts without good reason and the refusal to reassign them despite the availability of work constitutes constructive dismissal, particularly when the employer hires new workers to replace them.
• Abandonment — Abandonment requires a deliberate and unjustified refusal of an employee to resume work coupled with a clear absence of intention to return; it is incompatible with constructive dismissal and cannot be inferred merely from the failure to pray for reinstatement where the employee alleges constructive dismissal and reports for reassignment.
• Joint and Several Liability of Indirect Employer — Under Articles 106, 107, and 109 of the Labor Code, a client who contracts with a security agency is an indirect employer jointly and severally liable with the contractor for the workers' wages, including service incentive leave pay, to the extent of the work performed under the contract.

• "The transfer of an employee involves a lateral movement within the business or operation of the employer, without demotion in rank, diminution of benefits or, worse, suspension of employment even if temporary."
• "The recall and transfer of security guards require reassignment to another post and are not equivalent to their placement on 'floating status.' Off-detailing security guards for a reasonable period of six months is justified only in bona fide cases of suspension of operation, business or undertaking."
• "Abandonment, as a just and valid cause for termination, requires a deliberate and unjustified refusal of an employee to resume his work, coupled with a clear absence of any intention of returning to his or her work."
• "A transfer means a movement (1) from one position to another of equivalent rank, level or salary, without a break in the service; and (2) from one office to another within the same business establishment."

• Superstar Security Agency, Inc. vs. National Labor Relations Commission (184 SCRA 74) — Distinguished; guard placed on temporary off-detail due to poor performance and cost-cutting program, unlike the present case where guards were replaced due to age without infraction.
• A' Prime Security Services, Inc. vs. National Labor Relations Commission (220 SCRA 143) — Distinguished; relief of guard due to sleeping on duty and refusal to resume work, unlike the present case where guards had unblemished records.
• Rosewood Processing, Inc. vs. National Labor Relations Commission — Cited for the rule that notwithstanding the service contract between client and security agency, the two are solidarily liable for proper wages under Articles 106, 107, and 109 of the Labor Code.
• Escobin vs. National Labor Relations Commission — Cited for the principle that abandonment is incompatible with constructive dismissal.
• Agro Commercial Security Services Agency, Inc. vs. National Labor Relations Commission (175 SCRA 790) — Cited for the rule that being placed off-detail is not equivalent to dismissal so long as such status does not continue beyond reasonable time.

• Article 106 of the Labor Code (Contractor or Subcontractor) — Provides for joint and several liability of the employer with the contractor for wages of employees to the extent of work performed under the contract.
• Article 107 of the Labor Code (Indirect Employer) — Extends application of Article 106 to any person not being an employer who contracts with an independent contractor.
• Article 109 of the Labor Code (Solidary Liability) — Holds every employer or indirect employer responsible with his contractor for any violation of the Labor Code provisions.
• Article 95 of the Labor Code (Right to Service Incentive Leave) — Grants every employee who has rendered at least one year of service a yearly service incentive leave of five days with pay.
• Article 287 of the Labor Code (as amended by Republic Act 7641) — Governs retirement pay, binding the Agency to provide retirement pay upon employees reaching retirement age.
• Republic Act 7641 (New Retirement Law) — Effective January 7, 1993, giving retirement benefits of one-half month pay per year of service to retirable employees.
• Section 5 of the Implementing Rules and Regulations of the Labor Code — Provides that service incentive leave shall be commutable to its money equivalent if not used at the end of the year.