Eastern Assurance & Surety Corporation vs Secretary of Labor

G.R. No. L-79436-50 – 181 SCRA 110 (260 Phil. 115) – Labor Law – Pre-Employment – Liability of Sureties – POEA Rules – Overseas Employment

J & B Manpower Specialist, Inc. is an overseas employment agency registered with the Philippine Overseas Employment Administration and Eastern Assurance & Surety Corporation was its surety beginning January 1985. From 1983 to December 1985, J & B recruited 33 persons but none of them were ever deployed. These 33 persons sued J & B. The POEA as well as the Secretary of Labor ruled in favor of the 33 workers and ordered J & B to refund them (with Eastern Assurance being solidarily liable). Eastern Assurance assailed the ruling claiming that POEA and the Secretary of Labor have no jurisdiction over non-employees (since the 33 were never employed, in short, no employer-employee relations).

ISSUE: Whether or not Eastern Assurance can be held liable in the case at bar.

HELD: Yes. But only for the period covering from January 1985 when the surety took effect (as already held by the Labor Secretary). The Secretary of Labor was given power by Article 34 (Labor Code) and Section 35 and 36 of EO 797 (POEA Rules) to “restrict and regulate the recruitment and placement activities of all agencies,” but also to “promulgate rules and regulations to carry out the objectives and implement the provisions” governing said activities.

Implicit in these powers is the award of appropriate relief to the victims of the offenses committed by the respondent agency or contractor, specially the refund or reimbursement of such fees as may have been fraudulently or otherwise illegally collected, or such money, goods or services imposed and accepted in excess of what is licitly prescribed. It would be illogical and absurd to limit the sanction on an offending recruitment agency or contractor to suspension or cancellation of its license, without the concomitant obligation to repair the injury caused to its victims.

Though some of the cases were filed after the expiration of the surety bond agreement between J & B and Eastern Assurance, notice was given to J & B of such anomalies even before said expiration. In this connection, it may be stressed that the surety bond provides that notice to the principal is notice to the surety. Besides, it has been held that the contract of a compensated surety like respondent Eastern Assurance is to be interpreted liberally in the interest of the promises and beneficiaries rather than strictly in favor of the surety.

Read full text