PAKISTAN INTERNATIONAL AIRLINES CORP. (PIA), petitioner, vs. Hon. BLAS F. OPLE, Minister of Labor; Hon.

Vicente Leogardo, Jr., Deputy Minister; Ethelynne B. Farrales & Maria Moonyeen Mamasig, respondents [1990] Dec. 2, 1978: PIA, a foreign corp. licensed to do business in the Philippines, executed in Manila 2 separate contracts of employments with Farrales & Mamasig. Terms of the contract: 1. Term #5 Duration of Employment & Penalty: agreement is for a period of 3yrs. but can be extended by mutual consent of the parties 2. Term #6 Termination: PIA has rt to terminate the agreement by giving the Employee notice in writing in advance 1 month before the intended termination or in lieu thereof, by paying the employee wages equivalent to 1 months salary. 3. Term #10 Applicable Law: Agreement will be construed & governed under & by the law of Pakistan and only the courts of Karachi, Pakistan shall have jurisdiction to consider any matter arising out of or under agreement. Farrales & Mamasig (employees) were hired as flight attendants after undergoing training. Base station was in Manila. Aug. 2, 1980: roughly 1 yr & 4mos prior to the expiration of the contracts, PIA sent separate letters to the 2 employees informing them that they will be terminated effective Sept. 1, 1980. Employees: filed a complaint for illegal dismissal & non-payment of company benefits & bonuses with the Ministry of Labor & Employment (MOLE). PIA submitted a position paper claiming the employees were habitual absentees & they had the habit of bringing in from abroad large quantities of personal effects and the company has been warned by custom officials to advise employees to discontinue that practice. PIA likewise invoked the contract of employment. MOLE Regl director Estrella made the following findings: 1. employees should be reinstated w/full backwages or in the alternative, amounts equivalent to their salaries for the remaining period of the 3-yr employment agreement should be paid 2. the company should pay Mamasig an amount equivalent to the value of a round trip ticket Manila-USA-Manila. 3. PIA should pay each employee a bonus equivalent to their one-month salary. 4. 3-yr period null & void since it violates the Labor Code rule on regular & casual employment. Employees were regular employees after they had rendered more than 1 yr of continued service. 5. Dismissal was illegal because it was carried out w/o the requisite clearance from the MOLE. MOLE Deputy Minister Leogardo affirmed Estrellas decision except the alternative in finding #1.

Issues & Ratio: 1. WON MOLE had jurisdiction over the case. YES. Labor Code Art. 278: termination of the services of employees w/at least 1 yr of service cant be done w/o prior clearance from the DOLE. Rule XIV, Book No. 5 of the Labor Code Implementing Rules & Regulations (IRR) provides that if the termination was done w/o the necessary clearance, the REGIONAL DIRECTOR was authorized to order the reinstatement & payment of backwages. This is likewise provided for in Policy Instruction No. 14 issued by the Sec. Of Labor. 2. WON PIAs rt to procedural process was violatd. NO. MOLE was ordered to submit a position paper & to present evidence in its favor. But it only chose to comply with the first order. Even if no formal hearing was conducted, it had the opportunity to explain its side. It was able to appeal to the Ministry of Labor & Employment. Rule existing at that time provides that a termination w/o the necessary clearance shall be conclusively presumed to be termination of employment w/o just cause & Regional Director must order the immediate reinstatement & payment of backwages. Position paper was not even necessary. Its a presumption w/c cant be overturned by any contrary proof however strong. WON the provisions of the contract superseded the general provisions of the Labor Code. NO. The principle of freedom to contract is not absolute. CC Art. 1306 provides that stipulations by the parties may be allowed provided they are not contrary to law, morals, good customs, public order & policy. Thus, the principle of autonomy of contracting parties must be counterbalanced w/the general rule that provisions of applicable law are deemed written into the contract. In this case, the law relating to labor & employment is an area w/c the parties are not at liberty to insulate themselves & their relationship from by simply contracting w/each other. WON term #5 in the employment contract was contrary to Arts. 280281 of the Labor Code. YES. MOLE held that term no. 5 was contrary to Art. 280 (regular employees cannot be terminated by the employer except for a just cause or when authorized by the code) & 281 (any employee who has rendered at least 1 yr of service, whether continuous or broken, shall be considered as a regular employee) of the Labor Code. Brent School vs. Zamora provides that a contract providing for employment w/a fixed period was not necessarily unlawful. The critical consideration is the presence/absence of a substantial indication that the period specified in

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an employment agreement was designed to circumvent the security of tenure of regular employees. In this case, term #5 should be read alongside term #6, w/c neutralizes the former term. In effect, the 3-yr period becomes facultative at the option of PIA. Net effect would be to render the employment of Mamasig & Farrales at the pleasure of PIA. Thus, terms 5 & 6 were intended to prevent security of tenure from accruing in favor of the employees even during the limited period of 3yrs and in effect escape completely the thrust of the Labor Code provisions. WON only Pakistans laws & courts should govern. NO. Philippine Courts & administrative agencies are the proper forums for the resolution of the contractual dispute. The relationship between PIA & its employees in this case is very much affected w/public interest that the applicable RP laws cant be rendered illusory by the parties agreeing that some other law should govern their relationship. Contract was executed and performed (partially) in RP. Employees are Philippine citizens & residents and were based in the Philippines. PIA, although a foreign corp., is licensed to do business in the RP. PIA did not plead & prove the applicable Pakistani laws on the matter. Thus, its presumed that these laws are the same as the RP laws.

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Holding: Petition dismissed for lack of merit. MOLE order affirmed & modified. 1. Employees were illegally dismissed. 2. MOLE did not commit any gadalej. 3. Employees are entitled to 3 yrs. backwages w/o qualification or deduction. 4. Petitioners should be reinstated. Should reinstatement not be feasible in view of the length of time w/c has gone by, PIA should pay separation pays to employees amounting to 1 months salary for ever year of service rendered by them including the 3 yrs service putatively rendered.