Philippine Airlines, Inc. v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: Philippine Airlines, Inc. (PAL) contracted the services of G. C. Services Enterprises to undertake specific projects. G.C. Services hired carpenters, painters, and electricians and assigned them to PAL's shops. In March 1990, PAL terminated its contract with G.C. Services, leading to the dismissal of G.C. Services employees. PAL offered some of them employment as regular employees, but not all were hired due to lack of vacant positions and unsatisfactory performance. Those not hired filed a complaint for illegal dismissal, represented by the National Organization of the Workingmen (NOWM). Procedural History: The Labor Arbiter ruled that G.C. Services was a labor-only contractor and an agent of PAL, thus deeming the private respondents as employees of PAL. The termination was declared illegal, and PAL and G.C. Services were held jointly and severally liable for separation pay, backwages, and attorney's fees. The National Labor Relations Commission (NLRC) affirmed the Labor Arbiter's decision with modifications to the monetary award computation. PAL's motion for reconsideration was denied. The Petition: Petitioner PAL filed a special civil action for certiorari seeking to annul the NLRC's decision and resolution, raising issues of illegal dismissal, entitlement to separation pay and backwages, and joint and several liability.
Issue(s)
Whether petitioner illegally dismissed private respondents from the service. Whether private respondents are entitled to separation pay and backwages. Whether petitioner should be held jointly and severally liable with G.C. Services Enterprises.
Ruling
The petition is partially GRANTED. The assailed Decision and Resolution of the NLRC are modified. PAL is ordered to pay private respondents separation pay. The award of backwages is set aside for lack of legal basis. The award of attorney's fees is modified to 5% of the separation pay.
Ratio Decidendi
On the issue of illegal dismissal: The Court found that private respondents were employees of PAL through G.C. Services, which was determined to be a labor-only contractor. The work performed by the private respondents was directly related to PAL's principal business, and they had been employed for extended periods. However, the Court also recognized that PAL had a valid reason for terminating their services due to redundancy, as there were no longer vacant positions for them in PAL's regular workforce. The Court clarified that redundancy is an authorized cause for termination under Article 283 of the Labor Code, and therefore, the dismissal, while resulting in termination, was not illegal in the sense of being without just or authorized cause. The Court noted the apparent contradiction in the Labor Arbiter's finding of redundancy and the subsequent declaration of illegal dismissal. On the entitlement to separation pay and backwages: The Court held that private respondents are entitled to separation pay as provided under Article 283 of the Labor Code, which governs termination due to redundancy. This entitlement is based on the finding that their services were in excess of what was reasonably demanded by PAL's business operations. However, the Court ruled that private respondents are not entitled to backwages. Backwages are awarded in cases of unjust dismissal under Article 279 of the Labor Code, not in cases of termination for authorized causes like redundancy. The Court emphasized that the award of backwages by the Labor Arbiter and NLRC was an attempt to penalize PAL for engaging in labor-only contracting, which is not the prescribed remedy under the law for such a violation. The law's effect is to consider the workers as direct employees, but the termination due to redundancy remains valid. On joint and several liability: The Court affirmed the joint and several liability of PAL and G.C. Services Enterprises. Citing Articles 106, 107, and 109 of the Labor Code, the Court reiterated that in cases of labor-only contracting, the contractor is considered a mere agent of the employer. Consequently, the employer is responsible to the employees of the labor-only contractor as if they were directly employed. This liability is imposed by law to protect the rights of employees and cannot be waived or avoided by contractual stipulations between the employer and the contractor. Therefore, PAL cannot escape liability by invoking its Service Agreement with G.C. Services.
Main Doctrine
Where labor-only contracting exists, the employer is responsible to the employees of the contractor as if they were directly employed. Termination due to redundancy is an authorized cause, entitling employees to separation pay but not backwages.