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GSIS VS NLRC G.R No. 157647

Facts:
Tomas Lanting, doing business under the name and style of Lanting Security and Watchman Agency (LSWA)
entered into a Security Service Contract to provide security guards to the properties of the Government Service
Insurance System (GSIS) at the contract rate of P3,000.00 per guard per month.
During the effectivity of the contract, LSWA requested the GSIS for an upward adjustment of the contract rate in view
of Section 7 of Wage Order No. 1 and Section 3 of Wage Order No. 2, which were issued by the Regional Tripartite
Wages and Productivity Board-NCR pursuant to Republic Act No. 6727, otherwise known as the Wage
Rationalization Act.
Acting on the request of LSWA, the GSIS, through its Board of Trustees and under Board Resolution No. 207, dated
May 24, 1991, approved the upward adjustments of the contract price from P3,000.00 to P3,716.07 per guard, per
month effective November 1, 1990 to January 7, 1991, and P4,200.00 effective January 8, 1991 to May 31, 1991.
LSWA assigned security guards Daniel Fanila, Hector Moreno, Isauro Ferrer, Rubin Wilfredo, Jesus Delima Jr.,
Maria Legaspi, Santiago Noto Jr., and Virgilio Soriano (hereafter complainants) to guard one of GSIS's properties.
On March 15, 1993, GSIS terminated the Security Service Contract with LSWA. All the complainants, except Virgilio
Soriano, were absorbed by the incoming security agency. On March 7, 1994, complainants filed separate
complaints against LSWA for underpayment of wages and non-payment of labor standard benefits from March 1991
to March 15, 1993. Virgilio Soriano also complained of illegal dismissal.
In its Position Paper, LSWA alleged that complainants were estopped from claiming that they were underpaid
because they were informed that the pay and benefits given to them were based on the contract rate of P103.00 per
eight hours of work or about P3,100.00 per month.
Issue: Whether GSIS is solidarily liable for payment of complainants-respondnents' salary differentials.
Held: Yes. Articles 106 and 107 of the Labor Code provide:
ART. 106. Contractor or subcontractor. Whenever an employer enters into contract with another person for
the performance of the former's work, the employees of the contractor and of the latter's subcontractor, if any, shall
be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wage of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same manner and extent that he is liable to employees directly
employed by him.
ART. 107 Indirect employer. The provisions of the immediately preceding Article shall likewise apply to
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.
In this case, the GSIS cannot evade liability by claiming that it had fully paid complainants' salaries by incorporating
in the Security Service Contract the salary rate increases mandated by Wage Order Nos. 1 and 2 by increasing the
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contract price from P3,000.00 to P3,176.07 per guard per month effective November 1, 1990 to January 7, 1991, and
P4,200.00 effective January 8, 1991 to May 31, 1991.
In Rosewood Processing, Inc. v. National Labor Relations Commission, 25 the Court explained the rationale for the
joint and several liability of the employer, thus:
The joint and several liability of the employer or principal was enacted to ensure compliance with the provisions of the
Code, principally those on statutory minimum wage. The contractor or subcontractor is made liable by virtue of his or
her status as a direct employer, and the principal as the indirect employer of the contractor's employees. This liability
facilitates, if not guarantees, payment of the workers' compensation, thus, giving the workers ample protection as
mandated by the 1987 Constitution. This is not unduly burdensome to the employer. Should the indirect employer be
constrained to pay the workers, it can recover whatever amount it had paid in accordance with the terms of the
service contract between itself and the contractor.
Thus, the Court does not agree with the GSIS's claim that a double burden would be imposed upon the latter
because it would be paying twice for complainants' services. Such fears are unfounded. Under Article 1217 of the
Civil Code, if the GSIS should pay the money claims of complainants, it has the right to recover from LSWA whatever
amount it has paid in accordance with the terms of the service contract between the LSWA and the GSIS. Joint and
solidary liability is simply meant to assure aggrieved workers of immediate and sufficient payment of what is due
them. This is in line with the policy of the State to protect and alleviate the plight of the working class.