Four Fold Test – Employer employee relationship:

Republic of the Philippines vs SSS GR No. 172101 November 23, 2007

Facts: Respondent Asiapro Cooperative is composed of owners-members with primary objectives of
providing them savings and credit facilities and livelihood services. In discharge of said objectives, Asiapro
entered into several service contracts with Stanfilco which is a didivision of DOLE Phils. The owner
members do not receive compensation or wages but they receive a share in the service surplus which the
cooperatives earns from different areas of trade it engages in. Sometime later, the cooperative owners-
members requested Stanfilco’s help in registering them with SSS and remitting their contributions.
Petitioner SSS informed Asiapro that being actually a manpower contractor supplying employees to
Stanfilco hence it is an employer of its owners-members working with Stanfilco, it must be the one to register
itself with SSS as an employer and remit the contributions. Respondent continuously ignoring the demand
of SSS the latter filed before the SSC. SSS filed a petition before SSC against Asiapro & Stanfilco praying
that either of them be directed to register as an employer & to report the owners-members as covered
employees under the compulsory coverage of SSS & to remit the necessary contributions. Asiapro filed its
Answer alleging that there exists no employer-employee relationship between it and its owners-members.
SSC ruled in favor of SSS. On appeal, CA reversed the decision.

Issue: Whether or not there is employer-employee relationship between Asiapro and its owners-members.

Ruling: YES there is an existing employer-employee relationship between Asiapro & its owners-members.
In determining the existence of an employer-employee relationship, the following elements are considered:
(1) the selection and engagement of the workers; (2) the payment of wages by whatever means; (3) the
power of dismissal; and (4) the power to control the worker‘s conduct, with the latter assuming primacy in
the overall consideration. As to the first requisite, it is expressly provided in the Service Contracts that it is
the respondent cooperative which has the exclusive discretion in the selection and engagement of the
owners-members as well as its team leaders who will be assigned at Stanfilco. As to the payment of wages
by whatever means, the weekly stipends or the so-called shares in the service surplus given by Asiapro to
its owner-members were wages as they were equivalent to an amount not lower than that prescribed by
existing labor laws, rules & regulations. Also such stipends or shares are indeed wages as they are given
the owners-members as compensation in rendering services to Stanfilco. As to the third requisite on the
power of dismissal, it is AsiaPro which has the power to investigate, discipline and remove the owners-
members and its team leaders who were rendering services at Stanfilco. And lastly as to the power to
control the worker’s conduct, it is AsiaPro which has the sole control over the manner and means of
performing the services under the said service contracts with Stanfilco as well as the means and methods
of work. Also it is solely and entirely responsible for its owners-members, team leaders and other
representatives at Stanfilco. All these clearly prove that, indeed, there is an employer-employee relationship
between the respondent cooperative and its owners-members. Also jurisdiction lies with the SSC as the
question on the existence of an employer-employee relationship for the purpose of determining the
coverage of the SSS falls within the jurisidiction of the latter which is primarily charged with the duty of
settling disputes arising under the Social Security Law

Other forms of relationship: Independent Contractor/Job Contractor:

Singer Sewing Machine vs Drilon 193 SCRA270 (1991)

FACTS: On February 15, 1989, the respondent union, collectors of Singer Sewing Machine Company-
Singer Machine Collectors Union-Baguio (SIMACUB), filed a petition for direct certification as the sole and
exclusive bargaining agent of all collectors of Petitioner (“Company”). The Company opposed the petition
mainly on the ground that the union members are actually not employees but are independent contractors
as evidenced by the collection agency agreement which they signed. Med-Arbiter, finding that there exists
an employer-employee relationship between the union members and the Company, granted the petition for
certification election. On appeal, Secretary of Labor Franklin M. Drilon affirmed it. Petitioners contend that
respondent Labor Secretary disregarded the well-settled rule that commission agents are not employees
but are independent contractors; the public respondents patently erred in finding that there exists an
employer-employee relationship. The respondents, on the other hand, insist that the provisions of the
Collection Agency Agreement contradict the Company's position that the union members are independent
contractors. To prove that union members are employees, it is asserted that they "perform the most
desirable and necessary activities for the continuous and effective operations of the business of the
petitioner Company" (citing Article 280 of the Labor Code). Petitioners quote paragraph 2 of the Collective
Agency Agreement which states that an agent shall utilize only receipt forms authorized and issued by the
Company. They also note paragraph 3 which states that an agent has to submit and deliver at least once
a week or as often as required a report of all collections made using report forms furnished by the Company.
And that monthly collection quota required by the Company is deemed by respondents as a control measure
over the means by which an agent is to perform his services.

ISSUE: WON private respondents are regular employees of the company on the alleged ground that they
are performing activities desirable or necessary to the business.

HELD: No. The nature of the relationship between a company and its collecting agents depends on the
circumstances of each particular relationship. Not all collecting agents are employees and neither are all
collecting agents independent contractors. The collectors could fall under either category depending on the
facts of each case. The Collecting Agency Agreement confirms the status of the collecting agent in this
case as an independent contractor not only because he is explicitly described as such but also because
the provisions permit him to perform collection services for the company without being subject to the control
of the latter except only as to the result of his work. In this case said collection agents are not required to
observe office hours or report to Singer's office everyday except, naturally and necessarily, for the purpose
of remitting their collections, The collection agents do not have to devote their time exclusively for SINGER.
There is no prohibition on the part of the collection agents from working elsewhere. Nor are these agents
required to account for their time and submit a record of their activity, The manner and method of effecting
collections are left solely to the discretion of the collection agents without any interference on the part of
Singer, The collection agents shoulder their transportation expenses incurred in the collections of the
accounts assigned to them, They are paid strictly on commission basis. The amounts paid to them are
based solely on the amounts of collection each of them make. They do not receive any commission if they
do not effect any collection even if they put a lot of effort in collecting. They are paid commission on the
basis of actual collections & lastly the commissions earned by the collection agents are directly deducted
by them from the amount of collections they are able to effect. The net amount is what is then remitted to
Singer.". Hence the Court finds that there is no employer employee relationship in this case but one of
independent contractor arrangement between the company and the collecting agents.

Regular Employment:
De Leon vs. NLRC 176 SCRA 615 (1989)
Facts: Petitioner De Leon was employed by respondent company La Tondeña as maintenance man whose
work consisted mainly of painting company building and equipment, and other odd jobs relating to
maintenance. After having worked for respondent for more than a year, petitioner requested that he be
included in the payroll of regular employees, to which the former responded by dismissing petitioner from
his employment. Petitioner having been refused reinstatement filed a complaint before the Labor Arbiter.
Petitioner asserts that he is a regular employee performing similar functions as of a regular maintenance
and was rehired by respondent company’s labor agency to perform the same tasks. Respondent company
meanwhile claims petitioner was a casual worker hired only to paint a certain building in the premises and
that his work as painter terminated upon completion of the job. The Labor Arbiter ruled in favor of petitioner
but was reversed on appeal by the NLRC tribunal.

Issue: Whether or not petitioner De Leon is a regular employee of respondent.

Ruling: YES. The primary standard, therefore, of determining a regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the usual business or
trade of the employer. The test is whether the former is usually necessary or desirable in the usual business
or trade of the employer. It is not tenable to argue that the painting and maintenance work of petitioner are
not necessary in respondent’s business of manufacturing liquors and wines, just as it cannot be said that
only those who are directly involved in the process of producing wines and liquors may be considered as
necessary employees. Otherwise, there would have been no need for the regular Maintenance Section of
respondent company’s Engineering Department, manned by regular employees whom petitioner often
worked with. The law demands that the nature and entirety of the activities performed by the employee be
considered. In the case of petitioner, the painting and maintenance work given him manifest a treatment
consistent with a maintenance man and not just a painter, for if his job was truly only to paint a building
there would have been no basis for giving him other work assignments in between painting activities.

Furthermore, the petitioner performed his work of painting and maintenance activities during his
employment in respondent’s business which lasted for more than one year. Certainly, by this fact alone he
is entitled by law to be considered a regular employee. And considering further that weeks after his
dismissal, petitioner was rehired by the company through a labor agency and was returned to his post in
the Maintenance Section and made to perform the same activities that he used to do, it cannot be denied
that as activities as a regular painter and maintenance man still exist.

Casual Employment:
Caro vs. Rilloraza 102 Phil 70
FACTS: Carmen Prieto de Caro owns a building located in Manila. This building is intended or used for
rental (business) purposes, managed by her husband Ramon Caro. Ramon hired the services of Daniel
dela Cruz (a job contractor) to repair other parts of the building. Dela Cruz, in turn, engaged the services of
Lucas Rilloraza, a carpenter to work on the job. While working on the window railing of the building, the
wooden platform on which Rilloraza and another carpenter were working collapsed and Rilloraza fell to the
ground and broke his leg. This injury resulted in his temporary total disability for 6 months and permanent
partial disability of 5% of the broken leg. Rilloraza is asking for compensation from the petitioner for the
injuries suffered. Petitioner contends that Rilloraza is not his employee, on the ground that Rilloraza was
hired by Daniel dela Cruz, who, allegedly, is an independent contractor. Workmen’s Compensation
Commission ruled in favor of Rilloraza, stating that dela Cruz was, at least, “merely an intermediary” and
that petitioner is the “real employer” of Rilloraza.

ISSUE: Is Rilloraza the petitioner’s employee (within the purview of the Workmen’s Compensation Act)?

HELD: Rilloraza was petitioner’s employee within the purview of the Workmen’s Compensation Act and
not an independent contractor. Petitioner did not prove that Dela Cruz had agreed to do a piece of work
“according to his own methods, without being subject to the control of his employer.” Pursuant to Workmen’s
Compensation Act: When an employee suffers personal injury from any accident arising out of and in the
course of his employment, or contracts tuberculosis or other illness directly caused by such employment,
or either aggravated by or the result of the nature of such employment, his employer shall pay compensation
in the sums and to the person hereinafter specified. . . (Section 2.) Further, the Court stated that dela Cruz
does not appear to have any office establishment, or even a license to engage in business. Neither did he
file a bond to answer either for the fulfillment of his contract with petitioner, or for satisfaction of such as
may arise by reason of injury in the course of employment. We fail to see how dela Cruz could possibly be
regarded as an “independent contractor”. In the present case, the building in which Rilloraza worked was
found to be "intended or used for rental (business) purposes." Petitioner, in turn had control of such building,
as manager. Obviously, the repair of said building is part of the usual business of the administration of the
aforesaid properties, so that the same may be suitable for the gainful purpose above referred to.
Consequently, even if Rilloraza, who did the repair work thereof, were a casual laborer, engaged directly
by De la Cruz, acting as an independent contractor, which he is not, the former would still be an employee
of petitioner herein, within the purview of the Workmen's Compensation Act, and, hence, would be entitled
to demand compensation from him.
Project Employment:
ALU – TUCP vs. NLRC 234 SCRA 678 (1994)

FACTS: NSC undertook the ambitious Five Year Expansion Program I and II with the ultimate end in view
of expanding the volume and increasing the kinds of products that it may offer for sale to the public. The
Five Year Expansion Program had a number of component projects: e.g., (a) the setting up of a "Cold
Rolling Mill Expansion Project"; (b) the establishment of a "Billet Steel-Making Plant" (BSP); (c) the
acquisition and installation of a "Five Stand TDM"; and (d) the "Cold Mill Peripherals Project." Instead of
contracting out to an outside or independent contractor the tasks of constructing the buildings with related
civil and electrical works that would house the new machinery and equipment, the installation of the newly
acquired mill or plant machinery and equipment and the commissioning of such machinery and equipment,
NSC opted to execute and carry out its Five Year Expansion Projects "in house," as it were, by
administration. The carrying out of the Five Year Expansion Program (or more precisely, each of its
component projects) constitutes a distinct undertaking identifiable from the ordinary business and activity
of NSC. Each component project, of course, begins and ends at specified times, which had already been
determined by the time petitioners were engaged. We also note that NSC did the work here involved — the
construction of buildings and civil and electrical works, installation of machinery and equipment and the
commissioning of such machinery — only for itself. Private respondent NSC was not in the business of
constructing buildings and installing plant machinery for the general business community, i.e., for unrelated,
third party, corporations. NSC did not hold itself out to the public as a construction company or as an
engineering corporation.

On 5 July 1990, petitioners filed separate complaints for unfair labor practice, regularization and monetary
benefits with the NLRC, Sub-Regional Arbitration Branch XII, Iligan City. The Labor Arbiter declared
petitioners as “regular project employees.” Both parties appealed to the NLRC from that decision. NLRC
affirmed the Labor Arbiter's decision.

ISSUE: Whether or not petitioners are properly characterized as "project employees" rather than "regular
employees" of NSC.

HELD: The term "project" could refer to one or the other of at least two (2) distinguishable types of activities.
Firstly, a project could refer to a particular job or undertaking that is within the regular or usual business of
the employer company, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company. Such job or undertaking begins and ends at determined or determinable
times. The typical example of this first type of project is a particular construction job or project of a
construction company which ordinarily carries out two or more discrete identifiable construction projects.
Employees who are hired for the carrying out of one of these separate projects, the scope and duration of
which has been determined and made known to the employees at the time of employment, are properly
treated as "project employees," and their services may be lawfully terminated at completion of the project.

It could also refer to secondly, a particular job or undertaking that is not within the regular business of the
corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or
regular business operations of the employer. The job or undertaking also begins and ends at determined
or determinable times. The case at bar presents what appears to our mind as a typical example of this kind
of "project." Whichever type of project employment is found in a particular case, a common basic requisite
is that the designation of named employees as "project employees" and their assignment to a specific
project, are effected and implemented in good faith, and not merely as a means of evading otherwise
applicable requirements of labor laws.

Thus, the particular component projects embraced in the Five Year Expansion Program, to which petitioners
were assigned, were distinguishable from the regular or ordinary business of NSC which, of course, is the
production or making and marketing of steel products. During the time petitioners rendered services to
NSC, their work was limited to one or another of the specific component projects which made up the FAYEP
I and II. There is nothing in the record to show that petitioners were hired for, or in fact assigned to, other
purposes, e.g., for operating or maintaining the old, or previously installed and commissioned, steel-making
machinery and equipment, or for selling the finished steel products. We, therefore, agree with the basic
finding of the NLRC (and the Labor Arbiter) that the petitioners were indeed "project employees.” Petitioners
next claim that their service to NSC of more than six (6) years should qualify them as regular employees.
We believe this claim is without legal basis. The simple fact that the employment of petitioners as project
employees had gone beyond one (1) year, does not detract from, or legally dissolve, their status as project
employees. The second paragraph of Article 280 of the Labor Code, quoted above, providing that an
employee who has served for at least one (1) year, shall be considered a regular employee, relates
to casual employees, not to project employees.

Project Employment:
De Ocampo Jr. vs. NLRC 186 SCRA 360 (1990)

Facts: It appears that on September 30, 1980, the services of 65 employees of private respondent Makati
Development Corporation were terminated on the ground of the expiration of their contracts; that the said
employees filed a complaint for illegal dismissal against the MDC on October 1, 1980; * that on October 8,
1980, as a result of the aforementioned termination, the Philippine Transport and General Workers
Association, of which the complainants were members, filed a notice of strike on the grounds of union-
busting, subcontracting of projects which could have been assigned to the dismissed employees, and unfair
labor practice; that on October 14, 1980, the PTGWA declared a strike and established picket lines in the
perimeter of the MDC premises; that on November 4, 1980, the MDC filed with the Bureau of Labor
Relations a motion to declare the strike illegal and restrain the workers from continuing the strike; that on
that same day and several days thereafter the MDC filed applications for clearance to terminate the
employment of 90 of the striking workers, whom it had meanwhile preventively suspended; that of the said
workers, 74 were project employees under contract with the MDC with fixed terms of employment; and that
on August 31, 1982, Labor Arbiter Apolinar L. Sevilla rendered a decision 1denying the applications for
clearance filed by the MDC and directing it to reinstate the individual complainants with two months back
wages each.

Issue: Whether or not the contract workers are regular or project employees?

Ruling: Contract workers are not considered regular employees, their services being needed only when
there are projects to be undertaken. 'The rationale of this rule is that if a project has already been completed,
it would be unjust to require the employer to maintain them in the payroll while they are doing absolutely
nothing except waiting until another project is begun, if at all. In effect, these stand-by workers would
be enjoying the status of privileged retainers, collecting payment for work not done, to be disbursed
by the employer from profits not earned. But such is not applicable in the case at bar and for good
reason as records show that although the contracts of the project workers had indeed expired, the
project itself was still on-going and so continued to require the workers' services for its completion.
There is no showing that such services were unsatisfactory to justify their termination. The real reason
for the termination of their services even before the completion of the project was the complaint the
project workers had filed and their participation in the strike against the private respondent. These
were the acts that rendered them persona non grata to the management. Their services were
discontinued by the MDC not because of the expiration of their contracts, which had not prevented
their retention or rehiring before as long as the project they were working on had not yet been
completed. The real purpose of the MDC was to retaliate against the workers, to punish them for their
defiance by replacing them with more tractable employees.

Policy Instruction No. 20 of the Department of Labor, provides that "project employees are not entitled
to separation pay if they are terminated as a result of the completion of the project or any phase thereof
in which they are employed, regardless of the projects in which they had been employed by a particular
construction company." In simpler terms, project employees to separation pay if the projects they are
working on have not yet been completed when their services are terminated. And this should be true
even if their contracts have expired, on the theory that such contracts would have been renewed
anyway because their services were still needed.
Applying this rule, we hold that the project workers in the case at bar, who were separated even before
the completion of the project at the New Alabang Village and not really for the reason that their
contracts had expired, are entitled to separation pay. We make this disposition instead of ordering
their reinstatement as it may be assumed that the said project has been completed by this time.
Considering the workers to have been separated without valid cause, we shall compute their
separation pay at the rate of one month for every year of service of each dismissed employee, up to
the time of the completion of the project.

Contractual/Fixed term employment:

Medenilla vs. Phil. Veterans Bank 328 SCRA 1 (2000)

Facts: Petitioners were employees of the Philippine Veterans Bank (PVB). Later their services were
terminated as a result of the liquidation of PVB pursuant to the order of the Monetary Board of the Central
Bank embodied in MB Resolution No. 612. On that same day, petitioners were rehired through PVBs
Bank Liquidator, Antonio T. Castro, Jr.. However, all of them were required to sign employment contracts
which provided that:

(1) The employment shall be strictly on a temporary basis and only for the duration of the
particular undertaking for which a particular employee is hired;

(2) Such temporary employment will not entitle an employee to any benefits except those
granted by law;

(3) The Liquidator reserves the right to terminate the services of the employee at any
time during the period of such employment if the employee is found not qualified,
competent or, efficient in the performance of his job, or have violated any rules and
regulations, or such circumstances and conditions recognized by law.

On January 18, 1991, petitioners received a uniform notice of dismissal effective a month from the date of
receipt, which notice contained the reasons justifying the termination:

"(a) To reduce costs and expenses in the liquidation of closed banks in order to protect
the interests of the depositors, creditors and stockholders of the Philippine Veterans
Bank.

(b) The employment were on strictly temporary basis."

Petitioners filed a case for illegal dismissal before the Labor Arbiter who rendered a decision that
petitioners were illegally dismissed hence reinstatement with backwages. Respondent bank appealed.
NLRC reversed.

ISSUE: Whether the NLRC acted with grave abuse of discretion in ruling that there was a valid fixed-
period of employment & whether or not there was illegal dismissal

Ruling: The employment of petitioners was really for a fixed-period. Said employment contract contained
the following provisions:

"In connection with the liquidation of the Philippine Veterans Bank under Monetary Board Resolution No.
612 dated June 7, 1985, we are confirming your employment under the following terms and conditions:

(1) The employment shall be on a strictly temporary basis and only for the duration of the particular
undertaking for which you are hired and only for the particular days during which actual work is
 available as determined by the Liquidator or his representatives since the work requirements of
the liquidation process merely demand intermittent and temporary rendition of services."

On June 15, 1985, the services of the petitioners were terminated when the Monetary Board ordered the
liquidation of the bank. However, petitioners were re-hired on the following day by the Banks Liquidator
on the basis of the abovementioned employment contract. The Court has repeatedly upheld the validity of
fixed-term employment. In the case of Philippine National Oil Company-Energy Development Corporation
vs. NLRC, it held the two guidelines by which fixed contracts of employment can be said NOT to
circumvent security of tenure which are: First, the fixed period of employment was knowingly and
voluntarily agreed upon by the parties, without any force, duress or improper pressure being brought to
bear upon the employee and absent any other circumstances vitiating his consent and second, it
satisfactorily appears that the employer and employee dealt with each other on more or less equal terms
with no moral dominance whatever being exercised by the former on the latter.

The employment contract entered into by the parties herein appears to have observed the said
guidelines. Furthermore, it is evident from the records that the subsequent re-hiring of petitioners which
was to continue during the period of liquidation and the process of liquidation ended prior to the
enactment of RA 7169 entitled, "An Act to Rehabilitate Philippine Veterans Bank". As to the issue of the
illegal dismissal, the only reason given by the Liquidator for the termination of petitioners employment
was "in line with the need of the objective of the Supervision and Examination Sector, Department V,
Central Bank of the Philippines, to reduce costs and expenses in the liquidation of closed banks in order
to protect the interest of the depositors, creditors and stockholders.

In cases of illegal dismissal, the burden is on the employer to prove that there was a valid ground for
dismissal. Mere allegation of reduction of costs without any proof to substantiate the same cannot be
given credence by the Court. As the respondents failed to rebut petitioners evidence, the conclusion is
that the dismissal in question was illegal. Such illegal dismissal warrants reinstatement and payment of
backwages. However, since petitioners reinstatement is now considered impractical because the
Philippine Veterans Bank has been rehabilitated, the Court limits the relief to be granted to the petitioners
to the unpaid wages during the remaining period of their employment contract.

If the contract is for a fixed term and the employee is dismissed without just cause, he is entitled to the
payment of his salaries corresponding to the unexpired portion of the employment contract. In this case,
the unpaid wages should be reckoned on February 18, 1991 to January 1, 1992. January 1, 1992 is
considered the date of expiration of the period of liquidation since January 2, 1992 was the effectivity of
RA 7169 which rehabilitated the Philippine Veterans Bank.

Probationary Employment:
HOLIDAY INN MANILA and/or HUBERT LINER and BABY DISQUITADO, petitioners,
vs. NATIONAL LABOR RELATIONS COMMISSION (Second Division) and ELENA
HONASAN, respondents.

Facts: Elena Honasan applied for employment with the Holiday Inn and was on April 15, 1991, accepted
for "on-the-job training" as a telephone operator for a period of three weeks. For her services, she received
food and transportation allowance. On May 13, 1992, after completing her training, she was employed on
a "probationary basis" for a period of six months ending November 12, 1991. Her employment contract
stipulated that the Hotel could terminate her probationary employment at any time prior to the expiration of
the six-month period in the event of her failure (a) to learn or progress in her job; (b) to faithfully observe
and comply with the hotel rules and the instructions and orders of her superiors; or (c) to perform her duties
according to hotel standards. On November 8, 1991, four days before the expiration of the stipulated
deadline, Holiday Inn notified her of her dismissal, on the ground that her performance had not come up to
the standards of the Hotel. Through counsel, Honasan filed a complaint for illegal dismissal, claiming that
she was already a regular employee at the time of her separation and so was entitled to full security of
tenure. The complaint was dismissed on April 22, 1992 by the Labor Arbiter, who held that her separation
was justified under Article 281 of the Labor Code providing as follows: Probationary employment shall not
exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has been engaged on a
probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after a probationary period shall be considered a regular
employee. On appeal, this decision was reversed by the NLRC, which held that Honasan had become a
regular employee and so could not be dismissed as a probationer.

ISSUE: Whether or not Honasan is a regular or probationary employee?

Ruling: Honasan is deemed a regular employee of the company. Honasan was placed by the petitioner
on probation twice, first during her on-the-job training for three weeks, and next during another period of six
months, ostensibly in accordance with Article 281. Her probation clearly exceeded the period of six months
prescribed by this article. Probation is the period during which the employer may determine if the employee
is qualified for possible inclusion in the regular force. In the case at bar, the period was for three weeks,
during Honasan's on-the-job training. When her services were continued after this training, the petitioners
in effect recognized that she had passed probation and was qualified to be a regular employee. Honasan
was certainly under observation during her three-week on-the-job training. If her services proved
unsatisfactory then, she could have been dropped as early as during that period. But she was not. On the
contrary, her services were continued, presumably because they were acceptable, although she was
formally placed this time on probation.

Even if it be supposed that the probation did not end with the three-week period of on-the-job training,
there is still no reason why that period should not be included in the stipulated six-month period of probation.
Honasan was accepted for on-the-job training on April 15, 1991. Assuming that her probation could be
extended beyond that date, it nevertheless could continue only up to October 15, 1991, after the end of six
months from the earlier date. Under this more lenient approach, she had become a regular employee of
Holiday Inn and acquired full security of tenure as of October 15, 1991.The consequence is that she could
no longer be summarily separated on the ground invoked by the petitioners. As a regular employee, she
had acquired the protection of Article 279 of the Labor Code on Security of Tenure stating as follows:

Art. 279. Security of Tenure — In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other
privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary
equivalent computed from the time his compensation was withheld from him up to the time of his actual
reinstatement.

The grounds for the removal of a regular employee are enumerated in Articles 282, 283 and 284 of the
Labor Code. The procedure for such removal is prescribed in Rule XIV, Book V of the Omnibus Rules
Implementing the Labor Code. These rules were not observed in the case at bar as Honasan was simply
told that her services were being terminated because they were found to be unsatisfactory. No
administrative investigation of any kind was undertaken to justify this ground. She was not even accorded
prior notice, let alone a chance to be heard. We find in the Hotel's system of double probation a transparent
scheme to circumvent the plain mandate of the law and make it easier for it to dismiss its employees even
after they shall have already passed probation. The petitioners had ample time to summarily terminate
Honasan's services during her period of probation if they were deemed unsatisfactory. Not having done so,
they may dismiss her now only upon proof of any of the legal grounds for the separation of regular
employees, to be established according to the prescribed procedure.
Probationary Employment:
Philippine Daily Inquirer vs. Magtibay 528 SCRA 355 -(2007)
FACTS: The Philippine Daily Inquirer hired Magtibay, on contractual basis, to assist, for a period of 5
months, the regular phone operator. After the expiration of Magtibay’s contractual employment, PDI
announced the creation and availability of a new position for a 2nd telephone operator who would undergo
probationary employment. After the usual interview for the 2nd telephone operator slot, PDI chose to hire
Magtibay on a probationary basis for a period of 6 months. The signing of a written contract of employment
followed. A week before the end the agreed 6-month probationary period,a PDI officer handed Magtibay
his termination paper, grounded on his alleged failure to meet company standards. Aggrieved, Magtibay
immediately filed a complaint for illegal dismissal and damages before the LA.

ISSUE: was there illegal dismissal?

HELD: NO. Art. 281. Probationary employment. ̶ Probationary employment shall not exceed 6 months from
the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a
longer period. The services of an employee who has been engaged on a probationary basis may be
terminated for a (1) just cause or (2) when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall be considered a regular employee.

It is undisputed that PDI apprised Magtibay of the ground of his termination, i.e., he failed to qualify as a
regular employee in accordance with reasonable standards made known to him at the time of
engagement, only a week before the expiration of the six-month probationary period. Given this
perspective, does this make his termination unlawful for being violative of his right to due process of law?
It does not. Unlike under the first ground for the valid termination of probationary employment which is for
just cause, the second ground does not require notice and hearing. Due process of law for this second
ground consists of making the reasonable standards expected of the employee during his probationary
period known to him at the time of his probationary employment. By the very nature of a probationary
employment, the employee knows from the very start that he will be under close observation and his
performance of his assigned duties and functions would be under continuous scrutiny by his superiors. It
is in apprising him of the standards against which his performance shall be continuously assessed where
due process regarding the second ground lies, and not in notice and hearing as in the case of the first
ground.