Article 109 of the Labor Code: Solidary liability of contractor and principal
Status: In force
What does Article 109 say?
The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.
Read the Labor Code on the DOLE website (it uses the article numbers before 2015)
What does it mean in plain language?
Article 109 of the Labor Code makes a company that hires a contractor answer, together with that contractor, for any violation of the Labor Code against the contractor's workers. For money claims under the chapter on payment of wages, the law treats both of them as direct employers. So workers who are not paid correctly may collect from the contractor or from the company that gave it the work.
The article keeps the same number after the 2015 renumbering of the Labor Code.
How does it work in real life?
Arnel: a guard paid below the minimum
Arnel is a guard of a security agency assigned to a warehouse. For a year, the agency pays him below the minimum wage. Under Articles 107 and 109, the warehouse owner is liable with the agency for the underpayment. Arnel may claim from either or from both.
Joy: a cleaner whose contractor closed
Joy works for a cleaning contractor at a hospital. The contractor closes and leaves her last two months of wages unpaid. Article 109 lets her claim them from the hospital as well, for the work she did there. The hospital may later seek reimbursement from the contractor.
Dante: the company already paid the contractor
Dante's agency says it was not paid enough by its client to pay overtime. The client answers that it paid every invoice. As in Mariveles, paying the contractor does not end the client's liability to the workers.
What does this mean in practice?
- Workers often know only the name of the client company where they work. That is enough to name it in a complaint, together with the contractor.
- Payslips, ID cards, guard duty logs, gate passes and the service contract help show who the contractor and the client are.
- Money claims start with conciliation through DOLE's Single Entry Approach. See how to file a labor complaint and late or unpaid salary.
- Whether the arrangement is legitimate contracting or labor-only contracting depends on the facts. See Endo and labor-only contracting.
- A lawyer, a union or the Public Attorney's Office can review a specific case. See Free legal help in the Philippines.
What does Article 109 say?
The full text:
The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.
Two things stand out:
- "Any violation of any provision of this Code." The rule is not limited to unpaid wages. It covers any Labor Code violation against the contractor's workers.
- "Considered as direct employers." For civil liability under the chapter on payment of wages, the company cannot say the workers belong only to the contractor.
Who is the "employer or indirect employer"?
Article 106 covers the employer who gives work to a contractor. Article 107 extends the same rules to an "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.
So a building owner, a school or a shopping mall that hires a security agency or a cleaning company is covered, even if it does not employ the workers itself.
What does "solidary liability" mean for workers?
"Solidary" (also called "joint and several") means each one can be made to pay the whole amount. The worker does not have to collect first from the contractor. The implementing rules say the same thing: every employer or indirect employer is jointly and severally liable with its contractor or subcontractor for the unpaid wages of the contractor's employees (Book III, Rule VIII, Section 7).
The Supreme Court applied this in Mariveles Shipyard Corp. v. Court of Appeals (2003). A shipyard hired a security agency, and the agency underpaid the guards it assigned there. The Court said the shipyard became an indirect employer under Article 107. Following Article 106, when the agency failed to pay the guards, the shipyard as principal became jointly and severally liable for their wages. The Court explained that this is mandated by the Labor Code "to ensure compliance with its provisions, including payment of statutory minimum wage."
Can the company get the money back from the contractor?
Yes. In the same case, the Court said that the solidary liability of the shipyard "does not preclude the application of the Civil Code provision on the right of reimbursement from his co-debtor by the one who paid." The shipyard was held liable together with the agency, without prejudice to its right to be reimbursed by the agency. That right is a matter between the two companies. It does not reduce what the workers may collect.
How is this different from labor-only contracting?
Article 109 applies even when the contractor is legitimate. The company is liable with the contractor, but the contractor stays the employer.
In labor-only contracting, Article 106 goes further: the supplier of workers is treated as a mere agent, and the company is the real employer. That affects regularization and dismissal, not only money claims. See Article 106 and labor-only contracting.
Frequently asked questions
What does Article 109 of the Labor Code say?
Every employer or indirect employer is held responsible with its contractor or subcontractor for any violation of any provision of the Labor Code. For their civil liability under the chapter on payment of wages, they are considered direct employers.
Who is an indirect employer?
Under Article 107, it is a person, partnership, association or corporation which, not being an employer, contracts with an independent contractor for any work, task, job or project. A company that hires a security agency or a janitorial contractor is an example.
Does it help the company that it already paid the contractor?
Not against the workers. In Mariveles Shipyard Corp. v. Court of Appeals (2003), the company argued that it had paid the security agency's bills, but it was still held jointly and severally liable for the guards' underpaid wages and overtime pay. It kept the right to be reimbursed by the agency.
Does Article 109 apply only to labor-only contracting?
No. The liability applies to legitimate contracting too. In labor-only contracting, Article 106 goes further and treats the company as the real employer of the workers.
General information, not legal advice. For your case, ask a lawyer, the Public Attorney's Office (PAO) or the agency.
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