Paulino Ungos III

Lawyer | Law Professor | Author

Tag: solidary liability

  • The Liability Continues

    Antonio was employed by a foreign principal employer, Fairport Shipping Co., Ltd. (Fairport Shipping) to work as Master on board the vessel M/V Orionis from August 4, 2009 to July 24, 2010.

    Antonio states that Fairport Shipping did not pay his salary and benefits, but assured him that these will be paid in full upon disembarkation. Although Antonio disembarked from the vessel on July 27, 2010, he did not receive his salary and benefits despite his demand.

    On July 24, 2012, Antonio filed a complaint before the Office of the Labor Arbiter for money claims against Fairport Shipping and its current local manning agency Stella Marris Shipmanagement, Inc. (Stella Marris).

    Stella Marris denied liability for Antonio’s claims. Although Stella Marris acknowledged having executed an Affidavit of Assumption of Responsibility, the same only pertained to the assumption of full and complete responsibility for all contractual obligations to the seafarers originally processed and recruited by its immediate predecessor, Global Gateway Crewing Services, Inc. (Global Gateway). Stella Marris explained that Antonio was originally hired by Skippers United Pacific, Inc. (Skippers United), whose obligations under Antonio’s contract were transferred to Global Gateway. Since said obligations were beyond the coverage of its Assumption of Responsibility, Stella Marris posited that it should not be held liable for Antonio’s claims.

    The Office of the Labor Arbiter ruled in favor of Antonio and held the three manning agencies, i.e., Skippers United, Global Gateway, and Stella Marris solidarily liable with Fairport Shipping to pay Antonio his claims. The Office of the Labor Arbiter found Skippers United liable as signatory to the employment contract and Global Gateway as substitute manning agent, which assumed full and complete responsibility for all contractual obligations to the seafarers originally recruited and processed by Skippers United.

    The National Labor Relations Commission, in turn, ruled that the Office of the Labor Arbiter erred in holding Skippers United and Global Gateway solidarily liable with Fairport Shipping since they were not impleaded as parties in the complaint. The Commission then found no basis to hold Stella Marris liable, considering that the latter was not the local manning agency which originally deployed Antonio and it did not assume the liability of Skippers United as the deploying agency. According to the National Labor Relations Commission, it was Skippers United which should have been held liable pursuant to Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995, as amended, which provides that the liability of the original manning agency continues during the entire period of the employment contract and is not affected by the transfers or substitutions of manning agencies. Finally, it observed that the liability assumed by Stella Marris under its Affidavit of Assumption of Responsibility pertained only to those employees originally recruited by Global Gateway, and not of Skippers United, as Antonio was in this case.

    The Court of Appeals affirmed the Decision of the National Labor Relations Commission. Said Court ruled that Skippers United, as Fairport Shipping’s original manning agent, was solidarily liable with Fairport Shipping for Antonio’s claims under the applicable 2003 POEA Rules and Regulations1recent version is the 2016 Revised POEA Rules and Regulations Governing the Recruitment and Employment of Seafarers (POEA Rules and Regulations) since its liability continued during the entire period of the employment contract and was not affected by the transfers or substitutions of manning agencies. Although Fairport Shipping was a party in the complaint, the Court of Appeals still dismissed Antonio’s petition.

    Could Stella Marris be held liable for Antonio’s claims?

    The Supreme Court ruled in the negative.

    The Court stated that while the POEA Rules and Regulations allow the transfer of the registration and/or accreditation of the foreign principal to another local manning agency, which includes the transfer of the full and complete responsibility over all contractual obligations of the principal to the seafarers, the said transfer, covers only those contractual obligations to seafarers “originally recruited and processed by the former agency” relating to the registration of principal and the transfer of registration.

    In the present case, the Court found that Skippers United recruited Antonio and processed his employment as the original local manning agency of Fairport Shipping. For the Court, Skippers United assumed joint and solidary liability with Fairport Shipping under the contract of employment of Antonio as mandated by law.

    The Court likewise found that Fairport Shipping thereafter transferred its accreditation or registration to Global Gateway in accordance with POEA Rules and Regulations. And by virtue of an Affidavit of Assumption of Responsibility Global Gateway assumed full and complete responsibility and without qualification all contractual obligations to the seafarers originally recruited and processed by Skippers United for the vessel M/V Orionis. Stella Marris then executed an Affidavit of Assumption of Responsibility covering those contractual obligations of Fairport that were “originally processed and recruited by Global.”

    Since the Court considered Stella Marris’ limited assumption of liability to be consistent with the POEA Rules and Regulations which, to reiterate, pertained only to the liability of the substitute manning agent to those contracts originally recruited by the transferor, the Court found no basis to hold Stella Marris liable for Antonio’s claims.

    Did the Court deny Antonio’s claims for his failure to implead Skippers United and Global Gateway?

    No.

    The Court cited relevant portions of Section 10 of the Migrant Workers and Overseas Filipinos Act of 1995, as amended, which provides that the local manning agency assumes joint and solidary liability with the employer for all claims and liabilities which may arise in connection with the implementation of the employment contract.

    This liability remains intact and extends up to and until the expiration of the employment contracts of the employees recruited and employed pursuant to the said agreement and covers any and all claims arising therefrom. The solidary liability of the foreign principal and the recruitment agency to the employees shall not be affected by any substitution, amendment or modification made locally or in a foreign country of the said contract.

    According to jurisprudence,2Catan v. National Labor Relations Commission, G.R. No. 77279, [April 15, 1988], 243 PHIL 858-864 this must be so, because the obligations covenanted in the recruitment agreement entered into by and between the local agent and its foreign principal are not coterminous with the term of such agreement so that if either or both of the parties decide to end the agreement, the responsibilities of such parties towards the contracted employees under the agreement do not at all end, but the same extends up to and until the expiration of the employment contracts of the employees recruited and employed pursuant to the said recruitment agreement. Otherwise, this will render nugatory the very purpose for which the law governing the employment of workers for foreign jobs abroad was enacted.

    The Court added that even if an Affidavit of Assumption of Responsibility was validly executed by the transferee agent assuming the full and complete responsibility over all contractual obligations of the principal to the seafarers originally recruited and processed by therein original manning agent, the latter’s liability to its recruited workers remained intact because the said workers were not privy to such contract of transfer.

    In the present case, the Court discovered that prior to the filing of the complaint in the present case, Antonio had earlier filed a complaint against Skippers United and Fairport Shipping. The Court also noticed that during the pendency thereof, Fairport Shipping’s manning agent transferred from Skippers United to Global Gateway, and Global Gateway to Stella Marris.

    However, the Office of the Labor Arbiter rendered a Decision dismissing this earlier complaint, without prejudice to Antonio’s refiling of the case against the alleged proper parties, i.e., Global Gateway, Fairport Shipping, and Stella Marris. Antonio appealed this Decision before the National Labor Relations Commission, but the appeal was dismissed due to his failure to sign the certificate of non-forum shopping. Unfortunately, Antonio no longer moved for reconsideration of the said Resolution.

    According to the Court, since both Skippers United and Global Gateway were not impleaded in the present complaint; it could not adjudge their respective liabilities to Antonio.

    Nonetheless, the Court took into account the mistake of the Office of the Labor Arbiter in dismissing the earlier complaint. Said the Court: “so as not to cause Antonio serious injustice absent any fault or wrongdoing, the Court deems it proper to remand the present case back to the Office of the Labor Arbiter in order to further implead both Skippers United and Global Gateway as respondents together with Fairport Shipping, the original respondent.”

    The Court explained that such course of action found bearing in Section 11, Rule 3 of the Rules of Court, which provides that parties may be added by order of the court on its own initiative at any stage of the action and on such terms as are just.

    The Court stated that once Skippers United and Global Gateway, together with Fairport Shipping, are properly impleaded, Antonio’s monetary claims in the present complaint should be resolved by the Office of the Labor Arbiter with utmost dispatch on its merits.

    Further reading:

    • Orlanes v. Stella Marris Shipmanagement, Inc., G.R. No. 247702, June 14, 2021.

  • No Alternative But to Implement a Retrenchment Program

    In February 1999, the employee was hired to work as a production operator in the hermetic department of the employer corporation. Later, the employee was promoted to the position of quality assurance calibration technician.

    On 23 April 2009, the employee filed for and commenced her 60-day maternity leave, which was to end on 21 June 2009. She gave birth on 27 April 2009.

    On 8 May 2009, while on her maternity leave, the employee was asked to see the employer’s human resource and administrative manager. During their meeting on 21 May 2009, the employee received a letter informing her of her dismissal from employment, effective on 22 June 2009, or the day after the end of her maternity leave. She was told that she would receive her separation pay on the same date. The employer explained that it had to implement survival measures (such as energy saving programs, forced leaves, and compressed workweek arrangements) in view of the global economic crisis that started in the previous year. The employer added that it also suffered a 30% reduction in business volume resulting to substantial losses that threatened its survival. According to the employer, to minimize continuing losses and to ensure survival of the company, it had no alternative but to implement a retrenchment program.

    The employee then went to the Department of Labor and Employment, where she was advised to first accept her separation pay before filing a complaint. Thus, on 8 June 2009, after she had been required to process her clearance and sign several documents, the employee received her separation pay.

    On 9 July 2009, the employee lodged her complaint for illegal dismissal against her employer.

    Was the dismissal from employment on the ground of retrenchment valid?

    In Team Pacific Corp. v. Parente1G.R. No. 206789, July 15, 2020, the Supreme Court declared the illegality of the employee’s dismissal from employment.

    Under Article 2982Article 298 of the Labor Code of the Philippines states: “ARTICLE 298. Closure of Establishment and Reduction of Personnel. — The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. . . . In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. of the Labor Code of the Philippines, retrenchment is one of the authorized causes to dismiss an employee. It involves a reduction in the workforce and is resorted to when the employer encounters business reverses, losses, or economic difficulties, such as “recessions, industrial depressions, or seasonal fluctuations.” This is usually done as a last recourse when other methods are found inadequate.3La Consolacion College of Manila v. Pascua, G.R. No. 214744, March 14, 2018.

    There is a valid retrenchment if the employer had complied with the procedural and substantive requisites of valid retrenchment.

    With regard to the procedural requisites for a valid retrenchment, the employer must:

    • serve a written notice on the employee and the Department of Labor and Employment one month before the date of the dismissal; and
    • pay the required amount of separation pay.

    As to the substantive requisites, the employer must show that:

    • the retrenchment was a necessary measure to prevent substantial and serious business losses;
    • the retrenchment was done in good faith and not to defeat employees’ rights; and
    • it was fair and reasonable in selecting the employees who will be retrenched.4La Consolacion College of Manila v. Pascua, G.R. No. 214744, March 14, 2018.

    Absent any of these, the dismissal is illegal.

    In the said case, the Court found that the employer failed to comply with all the requisites for a valid retrenchment.

    Record revealed that the employer submitted the following documents:

    • Audited Financial Statements for the years 2006 to 2009, showing its net losses and deficits amounting to millions;
    • Letter dated 29 April 2008 advising the Department of Labor and Employment of the compressed work week arrangement it will be implementing;
    • Notice of Retrenchment dated 8 May 2009, served on the Department of Labor and Employment;
    • Duly accomplished Establishment Employment Report received by the Department of Labor and Employment on 8 May 2009;
    • List of Affected Workers by Displacements received by the Department of Labor and Employment on 8 May 2009; and
    • The Decision granting the employer’s Petition for Corporate Rehabilitation.

    Although the Court acknowledged that these documents would suffice to show business losses and compliance with notice requirements, it, nonetheless, ruled that the employer failed to establish that the employees chosen for retrenchment were selected through fair and reasonable criteria. According to the Court, the employer failed to prove that it used fair and reasonable criteria in carrying out the retrenchment program. It also failed to justify why it included the employee, who had already been employed for 10 years. The Court thus ordered the employer to reinstate the employee to her former position and pay her backwages.

    Did the acts of accepting separation pay from the employer and signing a waiver and quitclaim bar the employee from questioning the illegality of her dismissal?

    The Court held that the employee was not barred by estoppel. According to the Court, such acts are generally taken with a grain of salt, considering that employees are usually at an economic disadvantage and are often left with no choice, since they are suddenly faced with the pressure to meet financial burdens. Here, the Court found that the employee was dismissed from employment when she had just given birth. Her dismissal’s effectivity was set on the date she was supposed to return from her maternity leave. For the Court, the employee was at a clear disadvantage, having found herself without a job and a source of income right at a time when finances were crucial. Thus, the employee could not be deemed to have waived her right to file a complaint. She was not estopped from contesting the legality of her dismissal.

    Can the officers be held solidarily liable with the employer corporation?

    The Supreme Court ruled in the negative in view of the principle that corporate directors and officers are solidarily liable with the corporation for the termination of employees done with malice or bad faith. According to the Court, although the employer was unable to show that it applied fair and reasonable criteria in selecting the employees to be entrenched, it did not mean that the dismissals were automatically done in bad faith or with malice. It may have simply failed to strictly comply or to sufficiently prove compliance with the stringent rules for a valid retrenchment. As such, bad faith or malice must still be proved. Since the employee failed to present clear and convincing evidence that the officers of the employer corporation acted in bad faith or with malice, breached any duty, or were motivated by ill will, the employer corporation’s separate and distinct personality was respected.

    Further reading:

    • Team Pacific Corp. v. Parente, G.R. No. 206789, July 15, 2020.

  • Invalid Addendum

    Norly M. Baybayan (Baybayan) was hired by Wacoal through its agent, petitioner Prime Stars, for a contract period of 24 months or two years, with a monthly salary of NT$15,840.00. However, he soon discovered that he was only paid NT$9,000.00 a month. Upon inquiry, he was informed that an amount of NT$4,000.00 was being deducted from his salary for expenses for his board and lodging. Since he still had debts to pay back home, he finished the contract and returned to the Philippines on 19 May 2009. He then instituted a complaint for underpayment of salaries and the reimbursement of his transportation expenses against petitioners Prime Star and Peralta.

    Michelle V. Beltran (Beltran) was hired by Avermedia, through its agent, petitioner Prime Stars, as an “operator” who assembles TV boxes and USBs. Her contract duration was for two years with a monthly salary of NT$17,280.00. She was deployed on 22 June 2008. After a year, she was abruptly and unceremoniously dismissed by her supervisor and was immediately repatriated to the Philippines on 3 July 2009. Beltran then instituted a complaint for illegal dismissal and sought for the payment of salaries for the unexpired portion of her contract, the refund of her repatriation expenses, plus damages and attorney’s fees against the petitioners.

    Petitioners denied that Baybayan was underpaid as his payslips for the months of March and April 2009 indicated that he received a monthly salary of NT$17,280.00 during his employment with Wacoal. Petitioners explained that Baybayan signed an Addendum to the Employment Contract (Addendum), which authorized the deduction of the amount of NT$4,000.00 as payment for his monthly food and accommodation. In the same Addendum, Baybayan was apprised that the transportation expenses for his round trip tickets from the Philippines to Taiwan shall be at his own expense. Petitioners further explained that these were supported by Baybayan’s sworn statement, Written Acknowledgment, Foreign Worker’s Affidavit Regarding Expenses Incurred for Entry into the Republic of China to Work and the Wage and Salary and Overseas Contract Worker’s Questionnaire.

    With respect to Beltran, petitioners contended that it was Beltran who voluntarily preterminated her contract for personal reasons. According to petitioners, Beltran approached them and expressed her intent to return to the Philippines, as evidenced by her handwritten statement which she duly signed on 4 July 2009. Petitioners add that the handwritten statement was supported by her sworn statement, written acknowledgment, Foreign Worker’s Affidavit, and Overseas Contract Worker’s Questionnaire.

    The issues of illegal dismissal, salary differentials, transportation expenses, damages, attorney’s fees and liability of petitioner Peralta were elevated to the Supreme Court.

    RULING:

    Beltran did not voluntarily preterminate her employment contract. She was illegally dismissed.

    The Supreme Court found that petitioners’ complete reliance on Beltran’s alleged voluntary execution of the Mutual Contract Annulment Agreement and the Worker Discontinue Employment Affidavit to support the claim that Beltran voluntarily preterminated her contract was unavailing. This was because her supposed resignation was inconsistent with her filing of the complaint for illegal dismissal.

    Furthermore, the Court found the wordings of Beltran’s relinquishment of her contract of employment ambiguous and doubtful. The burden of proving that Beltran voluntary preterminated her contract fell upon petitioners as the employer. Petitioners failed to discharge such burden despite their claim that the latter resigned.

    Specifically, the Court found it highly unlikely that Beltran would just quit even before the end of her contract after all the expenses she incurred and still needed to settle and the sacrifices she went through in seeking financial upliftment. According to the Court, it was incongruous for Beltran to simply give up her work, return home, and be unemployed once again given that so much time, effort, and money have already been invested to securing her employment abroad and enduring the tribulations of being in a foreign country, away from her family.

    Beltran was accordingly awarded her salaries for the unexpired portion of her employment contract.

    Baybayan and Beltran should be granted salary differentials and refund of transportation expenses.

    Paragraph (i) of Article 34 of the Labor Code of the Philippines prohibits the substitution or alteration of employment contracts approved and verified by the Department of Labor and Employment from the time of the actual signing thereof by the parties up to and including the period of expiration of the same without the approval of the said Department.

    Furthermore, Republic Act No. 8042, otherwise known as the Migrant Workers and Overseas Filipinos Act of 1995, explicitly prohibits the substitution or alteration to the prejudice of the worker of employment contracts already approved and verified by the Department of Labor and Employment from the time of actual signing thereof by the parties up to and including the period of the expiration of the same without the approval of the said Department.

    In the present case, petitioners admitted that the employment contracts of Baybayan and Beltran were indeed amended, but posited that the Addendum, while apparently did not appear to contain any indication of Philippine Overseas Employment Administration approval, actually contained provisions which have been approved by the Philippine Overseas Employment Administration through Baybayan and Beltran’s Foreign Worker’s Affidavits.

    The Supreme Court did not agree.

    According to the Court, the clear and categorical language of the law imposes upon foreign principals minimum terms and conditions of employment for land-based overseas Filipino workers, which include basic provisions for food, accommodation and transportation. The licensed recruitment agency shall also, prior to the signing of the employment contract, inform the overseas Filipino workers of their rights and obligations, and disclose the full terms and conditions of employment, and provide them with a copy of the Philippine Overseas Employment Administration-approved contract, to give them ample opportunity to examine the same.

    Article IV of Baybayan and Beltran’s Employment Contract, in relation to Section 2, Rule 1, Part V of the Philippine Overseas Employment Administration Rules and Regulations Governing the Recruitment and Employment of Land-based Overseas Workers,1“Section 2. Minimum Provisions of Employment Contract. — Consistent with its welfare and employment facilitation objectives, the following shall be considered minimum requirements for contracts of employment of land-based workers:

    x x x

    b. Free transportation to and from the worksite, or offsetting benefit;

    c. Free food and accommodation, or offsetting benefit;”     provided Baybayan and Beltran with:

    • free food and accommodation for the duration of the contract
    • an economy class air ticket from the country of origin to Taiwan
    • a ticket back to the country of origin upon completion of the contract.

    Furthermore, it was stated therein that an employment contract cannot be altered or modified without the prior approval of the Philippine Overseas Employment Administration.

    In the present case, the Addendum required Baybayan and Beltran shoulder their food and accommodation and transportation fare.

    Although the Court recognized the fact that the parties may stipulate on other terms and conditions of employment as well as other benefits, such stipulations should not violate the minimum requirements required by law as these would be disadvantageous to the employee. Section 3, Rule 1, Part V of the Philippine Overseas Employment Administration Rules and Regulations Governing the Recruitment and Employment of Land-based Overseas Workers states:

    “Section 3. Freedom to Stipulate. — Parties to overseas employment contracts are allowed to stipulate other terms and conditions and other benefits not provided under these minimum requirements; provided the whole employment package should be more beneficial to the worker than the minimum; provided that the same shall not be contrary to law, public policy and morals, and provided further, that Philippine agencies shall make foreign employers aware of the standards of employment adopted by the Administration.”

    The Court found that the minimum provisions for employment of Baybayan and Beltran were not met, and that there was diminution of their benefits which were already guaranteed by law and granted in their favor under their Philippine Overseas Employment Administration-approved contracts of employment.

    Accordingly, the Court ruled that the Addendum, absent the approval of the Philippine Overseas Employment Administration, was declared invalid for being contrary to law and public policy.

    Baybayan and Beltran should be awarded moral and exemplary damages and attorney’s fees.

    This was because the acts of the petitioners were evidently tainted with bad faith. Petitioners’ failure to comply with the stipulations on the Philippine Overseas Employment Administration-approved employment contracts constituted an act oppressive to labor and more importantly, contrary to law and public policy. Petitioners even tried to justify the execution and validity of the Addendum and cloak the latter as legal and binding through Baybayan and Beltran’s execution of Foreign Worker’s affidavits. According to the Court, petitioners’ circumvention of labor laws and the intentional diminution of employee’s benefits to land-based overseas workers were indicative of petitioners’ exercise of bad faith and fraud in their dealings with Filipino workers.

    With regard to Beltran’s dismissal from employment, the Court found nothing “voluntary” in putting words into Beltran’s own mouth in the guise of her handwritten statement of resignation. Petitioners’ attempt to demonstrate voluntariness should fail since “cooperate” was more of an imposition coming from the employer rather than from a disadvantaged overseas employee. The Court considered the execution of the documents plainly oppressive and violative of Beltran’s security of tenure.

    The Court accordingly awarded Baybayan and Beltran moral and exemplary damages to allay the sufferings they experienced and by way of example or correction for public good, respectively.

    Peralta should be solidarily liable with Prime Stars.

    Section 10 of Republic Act No. 8042 mandates solidary liability among the corporate officers, directors, partners and the corporation or partnership for any claims and damages that may be due to the overseas workers, viz.:

    “Section 10. Monetary Claims. — x x x The liability of the principal/employer and the recruitment/placement agency for any and all claims under this section shall be joint and several. This provision shall be incorporated in the contract for overseas employment and shall be a condition precedent for its approval. The performance bond to be filed by the recruitment/placement agency, as provided by law, shall be answerable for all money claims or damages that may be awarded to the workers. If the recruitment/placement agency is a juridical being, the corporate officers and directors and partners as the case may be, shall themselves be jointly and solidarily liable with the corporation or partnership for the aforesaid claims and damages.”

    Further Reading:

    • Prime Stars International Promotion Corp. v. Baybayan, G.R. No. 213961, January 22, 2020.

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