THIRD DIVISION

[ G.R. No. 70705, August 21, 1989 ]

MOISES DE LEON, PETITIONER, VS. NATIONAL LABOR RELATIONS
COMMISSION AND LA TONDENA, INC., RESPONDENTS.

DECISION

FERNAN, C.J.:

This petition for certiorari seeks to annul and sat aside:  (1) the majority decision
dated January 28, 1985 of the National Labor Relations Commission First Division in
Case No. NCR-8-3566-83, which reversed the Order dated April 6, 1984 of Labor
Arbiter Bienvenido S. Hernandez directing the reinstatement of petitioner Moises de
Leon by private respondent La Tondena, Inc. with payment of backwages and other
benefits due a regular employee; and, (2) the Resolution dated March 21, 1985 denying
petitioner's motion for reconsideration.

It appears that petitioner was employed by private respondent La Tondena, Inc.

on December 11, 1981, at the Maintenance Section of its Engineering Department
in Tondo, Manila.  His work consisted mainly of painting company building and
[1]

equipment, and other odd jobs relating to maintenance.  He was paid on a daily basis
through petty cash vouchers.

In the early part of January, 1983, after a service of more than one (1) year, petitioner
requested from respondent company that he be included in the payroll of regular workers,
instead of being paid through petty cash vouchers.  Private respondent's response to this
request was to dismiss petitioner from his employment on January 16, 1983.  Having
been refused reinstatement despite repeated demands, petitioner filed a complaint for
illegal dismissal, reinstatement and payment of backwages before the Office of the Labor
Arbiter of the then Ministry now Department of Labor and Employment.

Petitioner alleged that he was dismissed following his request to be treated as a regular
employee; that his work consisted of painting company buildings and maintenance chores
like cleaning and operating company equipment, assisting Emiliano Tanque, Jr., a regular
maintenance man; and that weeks after his dismissal, he was re-hired by the respondent
company indirectly through the Vitas-Magsaysay Village Livelihood Council, a labor
agency of respondent company, and was made to perform the tasks which he used to
do.  Emiliano Tanque, Jr. corroborated these averments of petitioner in his affidavit.
[2]
On the other hand, private respondent claimed that petitioner was not a regular employee
but only a casual worker hired allegedly only to paint a certain building in the company
premises, and that his work as a painter terminated upon the completion of the painting
job.

On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez rendered a decision  finding

[3]

the complaint meritorious and the dismissal illegal; and ordering the respondent company
to reinstate petitioner with full backwages and other benefits.  Labor Arbiter Hernandez
ruled that petitioner was not a mere casual employee as asserted by private respondent
but a regular employee.  He concluded that the dismissal of petitioner from the service
was prompted by his request to be included in the list of regular employees and to be paid
through the payroll and is, therefore, an attempt to circumvent the legal obligations of an
employer towards a regular employee.

Labor Arbiter Hernandez found as follows:

"After a thorough examination of the records of the case and evaluation of the evidence
and versions of the parties, this Office finds and so holds that the dismissal of
complainant is illegal.  Despite the impressive attempt of respondents to show that the
complainant was hired as casual and for the work on particular project, that is the
repainting of Mama Rosa Building, which particular work of painting and repainting is
not pursuant to the regular business of the company, according to its theory, we find
differently.  Complainant's being hired on casual basis did not dissuade from the cold fact
that such painting of the building and the painting and repainting of the equipment and
tools and other things belonging to the company and the odd jobs assigned to him to be
performed when he had no painting and repainting works related to maintenance as a
maintenance man are necessary and desirable to the better operation of the business
company.  Respondent did not even attempt to deny and refute the corroborating
statements of Emiliano Tangue, Jr., who was regularly employed by it as a maintenance
man doing the same jobs not only of painting and repainting of building, equipment and
tools and machineries or machines of the company but also other odd jobs in the
Engineering and Maintenance Department that complainant Moises de Leon did perform
the same odd jobs and assignments as were assigned to him during the period de Leon
was employed for more than one year continuously by said respondent company.  We
find no reason not to give credit and weight to the affidavit and statement made therein
by Emiliano Tanque, Jr.  This strongly confirms that complainant did the work pertaining
to the regular business in which the company had been organized.  Respondent cannot be
permitted to circumvent the law on security of tenure by considering complainant as a
casual worker on daily rate basis and after working for a period that has entitled him to be
regularized that he would be automatically terminated.  xxx" [4]

On appeal, however, the above decision of the Labor Arbiter was reversed by the First
Division of the National Labor Relations Commission by virtue of the votes of two
members  which constituted a majority.  Commissioner Geronimo Q. Quadra dissented,
[5]

voting "for the affirmation of the well-reasoned decision of the Labor Arbiter
below."  The motion for reconsideration was denied.  Hence, this recourse.
[6]

Petitioner asserts that the respondent Commission erred and gravely abused its discretion
in reversing the Order of the Labor Arbiter in view of the uncontroverted fact that the
tasks he performed included not only painting but also other maintenance work which are
usually necessary or desirable in the usual business of private respondent; hence, the
reversal violates the Constitutional and statutory provisions for the protection of labor.

The private respondent, as expected, maintains the opposite view and argues that
petitioner was hired only as a painter to repaint specifically the Mama Rosa building at
its Tondo compound, which painting work is not part of their main business; that at the
time of his engagement, it was made clear to him that he would be so engaged on a casual
basis, so much so that he was not required to accomplish an application form or to
comply with the usual requisites for employment; and that in fact, petitioner was never
paid his salary through the regular payroll but always through petty cash vouchers. [7]

The Solicitor General, in his Comment, recommends that the petition be given due course
in view of the evidence on record supporting petitioner's contention that his work was
regular in nature.  In his view, the dismissal of petitioner after he demanded to be
regularized was a subterfuge to circumvent the law on regular employment.  He further
recommends that the questioned decision and resolution of respondent Commission
be annulled and the Order of the Labor Arbiter directing the reinstatement of petitioner
with payment of backwages and other benefits be upheld. [8]

After a careful review of the records of this case, the Court finds merit in the petition
as We sustain the position of the Solicitor General that the reversal of the decision of the
Labor Arbiter by the respondent Commission was erroneous.

The law on the matter is Article 281 of the Labor Code which defines regular and casual
employment as follows:

"Art. 281.  Regular and casual employment - The provisions of a written agreement to the
contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
"An employment shall be deemed to be casual if it is not covered by the preceding
paragraph:  Provided.  That any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exist."

This provision reinforces the Constitutional mandate to protect the interest of labor.  Its
language evidently manifests the intent to safeguard the tenurial interest of the worker
who may be denied the rights and benefits due a regular employee by virtue of lopsided
agreements with the economically powerful employer who can maneuver to keep an
employee on a casual status for as long as convenient.  Thus, contrary agreements
notwithstanding, an employment is deemed regular when the activities performed by the
employee are usually necessary or desirable in the usual business or trade of the
employer.  Not considered regular are the so-called "project employment" the completion
or termination of which is more or less determinable at the time of employment, such as
those employed in connection with a particular construction project,  and seasonal
[9]

employment which by its nature is only desirable for a limited period of

time.  However, any employee who has rendered at least one year of service, whether
continuous or intermittent, is deemed regular with respect to the activity he performed
and while such activity actually exists.

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.  The connection can
be determined by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety.  Also, if the employee has been
performing the job for at least one year, even if the performance is not continuous or
merely intermittent, the law deems the repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensability of that activity to the
business.  Hence, the employment is also considered regular, but only with respect to
such activity and while such activity exists.

In the case at bar, the respondent company, which is engaged in the business of
manufacture and distillery of wines and liquors, claims that petitioner was contracted on a
casual basis specifically to paint a certain company building and that its completion
rendered petitioner's employment terminated.  This may have been true at the beginning,
and had it been shown that petitioner's activity was exclusively limited to painting that
certain building, respondent company's theory of casual employment would have been
worthy of consideration.

However, during petitioner's period of employment, the records reveal that the tasks
assigned to him included not only painting of company buildings, equipment and tools
but also cleaning and oiling machines, even operating a drilling machine, and other odd
jobs assigned to him when he had no painting job.  A regular employee of respondent
company, Emiliano Tanque, Jr., attested in his affidavit that petitioner worked with him
as a maintenance man when there was no painting job.

It is noteworthy that, as wisely observed by the Labor Arbiter, the respondent company
did not even attempt to negate the above averments of petitioner and his co-
employee.  Indeed, the respondent company did not only fail to dispute this vital point, it
even went further and confirmed its veracity when it expressly admitted in its comment
that, "The main bulk of work and/or activities assigned to petitioner was painting and
other related activities.  Occasionally, he was instructed to do other odd things in
connection with maintenance while he was waiting for materials he would need in his job
or when he had finished early one assigned to him." [10]

The respondent Commission, in reversing the finding of the Labor Arbiter reasoned that
petitioner's job cannot be considered as necessary or desirable in the usual business or
trade of the employer because, "Painting the business or factory building is not a part of
the respondent's manufacturing or distilling process of wines and liquors.” [11]

The fallacy of the reasoning is readily apparent in view of the admitted fact that
petitioner's activities included not only painting but other maintenance work as well, a
fact which even the respondent Commission, like the private respondent, also expressly
recognized when it stated in its decision that, "Although complainant's (petitioner) work
was mainly painting, he was occasionally asked to do other odd jobs in connection with
maintenance work."  It misleadingly assumed that all the petitioner did during his more
[12]

than one year of employment was to paint a certain building of the respondent company,
whereas it is admitted that he was given other assignments relating to maintenance work
besides painting company building and equipment.

It is self-serving, to say the least, to isolate petitioner's painting job to justify the
proposition of casual employment and conveniently disregard the other maintenance
activities of petitioner which were assigned by the respondent company when he was not
painting.  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.

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 like Emiliano Tanque, Jr., whom petitioner
often worked with.
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,
until early January, 1983 when he demanded to be regularized and was subsequently
dismissed.  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 his activities as a regular painter and maintenance man still exist.

It is of no moment that petitioner was told when he was hired that his employment

would only be casual, that he was paid through cash vouchers, and that he did not comply
with regular employment procedure.  Precisely, the law overrides such conditions which
are prejudicial to the interest of the worker whose weak bargaining position needs the
support of the State.  What determines whether a certain employment is regular or casual
is not the will and word of the employer, to which the desperate worker often accedes,
much less the procedure of hiring the employee or the manner of paying his salary.  It is
the nature of the activities performed in relation to the particular business or trade
considering all circumstances, and in some cases the length of time of its performance
and its continued existence.

Finally, considering its task to give life and spirit to the Constitutional mandate for the
protection of labor, to enforce and uphold our labor laws which must be interpreted
liberally in favor of the worker in case of doubt, the Court cannot understand the failure
of the respondent Commission to perceive the obvious attempt on the part of the
respondent company to evade its obligations to petitioner by dismissing the latter days
after he asked to be treated as a regular worker on the flimsy pretext that his painting
work was suddenly finished only to rehire him indirectly weeks after his dismissal and
assign him to perform the same tasks he used to perform.  The devious dismissal is too
obvious to escape notice.  The inexplicable disregard of established and decisive facts
which the Commission itself admitted to be so, in justifying a conclusion adverse to the
aggrieved laborer clearly spells a grave abuse of discretion amounting to lack of
jurisdiction.

WHEREFORE, the petition is GRANTED.  The assailed Decision and Resolution of the

National Labor Relations Commission are hereby annulled and set aside.  The Order of
Labor Arbiter Bienvenido S. Hernandez dated April 6, 1984 is reinstated.  Private
respondent is ordered to reinstate petitioner as a regular maintenance man, and to pay
petitioner 1) backwages equivalent to three years from January 16, 1983, in accordance
with the Minimum Wage Orders in effect for the period covered,  2) ECOLA, 3) 13th
Month Pay, 4) and other benefits under pertinent Collective Bargaining Agreements, if
any.

SO ORDERED.
 THIRD DIVISION
[ G.R. NO. 160854, March 03, 2006 ]
BIG AA MANUFACTURER, PETITIONER, VS. EUTIQUIO ANTONIO, JAY
ANTONIO, FELICISIMO ANTONIO, AND LEONARDO ANTONIO,
SR.,* RESPONDENTS.

D I CI S I O N

QUISUMBING, J:

For review on certiorari is the Decision[1] dated April 11, 2003 of the Court of Appeals in
CA-G.R. SP No. 70363 affirming the decision[2] of the National Labor Relations
Commission (NLRC). The NLRC had modified the Labor Arbiter's decision[3] ordering
petitioner to reinstate respondents to their former positions or to pay them separation pay
in case reinstatement was no longer possible, with full backwages in either case. Also
assailed is the appellate court's Resolution[4] dated November 17, 2003, denying the
motion for reconsideration.

The instant petition arose from the following factual antecedents:

Petitioner is a sole proprietorship registered in the name of its proprietor, Enrico E. Alejo,
[5]
 with office address at 311 Barrio Santol, Balagtas, Bulacan.

On January 13, 2000, herein respondents Eutiquio Antonio,[6] Jay Antonio, Felicisimo

Antonio, Leonardo Antonio, Sr. and Roberto Fabian filed a complaint for illegal lay-off
and illegal deductions before the NLRC's Regional Arbitration Branch No. III. They
claimed that they were dismissed on January 11, 2000 and sought separation pay from
petitioner.

When amicable settlement during the mandatory conference failed, the parties were
required to file their position papers. The Labor Arbiter did not dismiss the complaint
with respect to Roberto Fabian, despite his failure to file a position paper. Neither did the
Labor Arbiter's decision concern Roberto Fabian. Hence, this petition shall apply only to
Eutiquio, Jay, Felicisimo, and Leonardo, Sr., all surnamed Antonio, the respondents
herein.

In respondents' position paper,[7] they alleged that as regular employees, they worked

from 8:00 a.m. to 5:00 p.m. at petitioner's premises using petitioner's tools and equipment
and they received P250 per day. Eutiquio was employed as carpenter-foreman from
1991-1999; Jay as carpenter from 1993-1999; Felicisimo as carpenter from 1994-1999;
and Leonardo, Sr. also as carpenter from 1997-1999. According to respondents, they
were dismissed without just cause and due process; hence, their prayer for reinstatement
and full backwages. They also impleaded one Hermie Alejo, a relative of the petitioner's
owner, as co-respondent in their complaint.

On the other hand, in its position paper, petitioner Big AA Manufacturer,[8] affirmed it is

a sole proprietorship registered in the name of Enrico Alejo and engaged in
manufacturing office furniture, but it denied that respondents were its regular employees.
Instead, petitioner claimed that Eutiquio Antonio was one of its independent contractors
who used the services of the other respondents. According to petitioner, its independent
contractors were paid by results and were responsible for the salaries of their own
workers. Allegedly, there was no employer-employee relationship between petitioner and
respondents. However, petitioner stated it allowed respondents to use its facilities to meet
job orders.

Petitioner also denied that respondents were laid-off by Big AA Manufacturer, since they
were project employees only. It added that since Eutiquio Antonio had refused a job
order of office tables, their contractual relationship ended. Petitioner surmised that
Eutiquio resented the January 10, 2000 Implementing Guidelines it issued to improve
efficiency and performance.

In their Reply[9] to petitioner's position paper, respondents stated that Enrico Alejo should
be impleaded as a proper or indispensable party as sole proprietor of Big AA. They also
pointed out that petitioner's payroll shows that Eutiquio Antonio was assigned in its
carpentry section and obtained "vales" (advances on salaries) on various dates. The
Implementing Guidelines and written warnings addressed to Eutiquio Antonio also prove
that respondents were under petitioner's control and supervision.

In its own Reply[10] to respondents' position paper, petitioner labeled as fabricated the
respondents' allegations. It presented additional evidence such as the bio-data of Eutiquio
and Jay to disprove their claim that they worked with petitioner from 1991 and 1993,
respectively. It also said that the claim that respondents received P250 per day based on
its payroll was speculative. While petitioner admitted that respondents were issued
identification cards to gain access to company premises to obtain raw materials, it denied
that respondents worked from 8:00 a.m. to 5:00 p.m. It stated that respondents do not
even have daily time records.

On June 1, 2000, the Labor Arbiter rendered a decision ordering"BIG-AA

MANUFACTURERS II, ET AL." to pay respondents P136,500 as separation pay, and
P121,160 as backwages. It was unclear concerning Enrico Alejo's liability as the sole
proprietor of Big AA. The Labor Arbiter ruled that respondents were regular employees
because their work as carpenters was necessary and desirable in petitioner's business.
Since Eutiquio worked in petitioner's premises and was without substantial capital or
investment in the form of tools, equipment, machinery or work premises, the Labor
Arbiter held that Eutiquio was not an independent contractor. Noting the absence of
contracts providing the duration of respondents' employment and of reports of project
completion to the Department of Labor and Employment (DOLE), the Labor Arbiter also
rejected petitioner's allegation that respondents were project employees. The Labor
Arbiter further held that respondents were constructively dismissed when the
Implementing Guidelines changed their status from regular employees to project
employees.

Both parties appealed to the NLRC. Petitioner claimed that the Labor Arbiter committed
errors in his findings of facts. It also prayed that (1) Eutiquio Antonio be declared a
labor-only contractor; (2) Hermie Alejo be dropped from the case; (3) respondents be
ordered to report back to work; and (4) the respondents' claim for separation pay and
backwages be dismissed.

Respondents, on the other hand, assailed the Labor Arbiter's decision for not ordering
their reinstatement to their former positions.

The NLRC modified the Labor Arbiter's decision. It ordered petitioner to reinstate
respondents to their former positions or to pay them separation pay in case reinstatement
was no longer feasible, with full backwages in either case. It also dropped Hermie Alejo
as a party to the case for he may not be held personally liable with petitioner to satisfy the
judgment in favor of respondents.[11] The NLRC ruled that respondents were regular
employees, not independent contractors. It further held that petitioner failed to justify its
reason for terminating respondents and its failure to comply with the due process
requirements.

Upon denial of the parties' motions for reconsideration, petitioner filed a petition for
certiorari before the Court of Appeals, which dismissed the petition but affirmed the
NLRC decision.

Hence, this petition with prayer for Temporary Restraining Order (TRO). On December
12, 2003, we issued a TRO enjoining the Court of Appeals, NLRC, Labor Arbiter and
respondents from implementing the appellate court's Decision and Resolution.[12]

Before this Court, petitioner claims that the Court of Appeals erred in,
(A) ...finding that respondents are regular employees of petitioner,
(B) ...finding that respondents were illegally dismissed by petitioner and
(C) ...order[ing] petitioner to reinstate respondents [to their former positions with
full backwages] without loss of seniority rights and should reinstatement not be
feasible, to pay respondents separation pay.[13] (Emphasis supplied).
In effect, petitioner prays that we resolve the following issues: Are respondents regular
employees of petitioner? Did they abandon their work? Were they illegally dismissed by
petitioner? If so, what benefits, if any, are due them?

Petitioner contends that employment for more than one year and "performing carpentry
works that were necessary and desirable" in petitioner's usual trade and business are "not
controlling" factors in determining whether respondents are regular employees. Petitioner
argues that Article 280[14] of the Labor Code and the "circumstances which attended the
relationship between" the parties, must be considered. The circumstances of the case,
according to petitioner, show that respondents were not its regular employees.
Specifically, petitioner Eutiquio was an independent businessman and was contracted to
render particular job orders using his own methods and style. Further, Eutiquio hired his
own workers and used his own house as his factory and work premises where he kept his
own tools, equipment and materials.[15]

Respondents point out that petitioner had offered inconsistent arguments. They note that
before the Labor Arbiter, petitioner argued that Eutiquio was an independent contractor.
In its appeal and motion for reconsideration before the NLRC, petitioner prayed that
Eutiquio be declared a labor-only contractor. In this petition, it alleges that Eutiquio is an
independent businessman. Respondents insist that they are petitioner's regular employees
and that their job is necessary and desirable to its main business and day-to-day
operations.

At the outset, it should be stressed that whether respondents are regular employees or
project employees or independent contractors is a question of fact.[16] The unanimous
finding of the Labor Arbiter, NLRC, and Court of Appeals that respondents were
petitioner's regular employees, not independent contractors, binds this Court. Under Rule
45 of the Rules of Court, our jurisdiction is limited to questions of law. Notably,
petitioner not only urges us to reexamine the evidence presented below but to consider
evidence not presented before the Labor Arbiter. This practice of submitting evidence
late is properly rejected as it defeats the speedy administration of justice involving poor
workers. It is also unfair.[17]

Besides, petitioner is barred from raising its new theory that Eutiquio is an independent
businessman who uses his own house as his factory. We consistently rejected this
pernicious practice of shifting to a new theory on appeal in the hope of a favorable result.
Fair play, justice and due process require that as a rule new matters cannot be raised for
the first time before an appellate tribunal.[18]

Moreover, petitioner's inconsistent arguments reflect its lack of candor and its attempt to
confuse the issues in this case to defeat respondents' claims. Before us, petitioner even
admits that "respondents worked within" its premises "for purposes of convenience
especially so since the tools and materials necessary for the job belonged to" it. [19] Recall
also its position before the Labor Arbiter that it allowed respondents to use its facilities
for the "proper implementation" of job orders.

Worse, petitioner first argued that Eutiquio is an independent contractor and that
respondents are project employees, only to pray later that Eutiquio should be declared a
labor-only contractor. It is also surprising how petitioner could argue that respondents are
not its employees, in view of its prayer before the NLRC that respondents be ordered to
report back to work. And after the NLRC ruled that respondents should be reinstated, it
petitioned the Court of Appeals to dismiss respondents' complaint.

Considering the submission of the parties, we are constrained to agree with the
unanimous ruling of the Court of Appeals, NLRC and Labor Arbiter that respondents are
petitioner's regular employees. Respondents were employed for more than one year and
their work as carpenters was necessary or desirable in petitioner's usual trade or business
of manufacturing office furniture. Under Article 280 of the Labor Code, the applicable
test to determine whether an employment should be considered regular or non-regular is
the reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer.[20]

True, certain forms of employment require the performance of usual or desirable

functions and exceed one year but do not necessarily result to regular employment under
Article 280 of the Labor Code.[21] Some specific exceptions include project or seasonal
employment. Yet, in this case, respondents cannot be considered project employees.
Petitioner had neither shown that respondents were hired for a specific project the
duration of which was determined at the time of their hiring nor identified the specific
project or phase thereof for which respondents were hired.

We also agree that Eutiquio was not an independent contractor for he does not carry a
distinct and independent business, and he does not possess substantial capital or
investment in tools, equipment, machinery or work premises.[22] He works within
petitioner's premises using the latter's tools and materials, as admitted by petitioner.
Eutiquio is also under petitioner's control and supervision. Attesting to this is petitioner's
admission that it allowed respondents to use its facilities for the "proper implementation"
of job orders. Moreover, the Implementing Guidelines regulating attendance, overtime,
deadlines, penalties; providing petitioner's right to fire employees or "contractors";
requiring the carpentry division to join petitioner's exercise program; and providing rules
on machine maintenance, all reflect control and supervision over respondents.

Petitioner likewise alleges that it did not dismiss respondents as they were not its regular
employees; that respondents failed to sufficiently establish the fact of illegal dismissal;
and that respondents abandoned the work after it issued the Implementing Guidelines. [23]

Having ruled that respondents are regular employees, we shall proceed to determine
whether respondents have, as petitioner contends, abandoned their work, or they have
been illegally dismissed.

The consistent rule is that the employer must affirmatively show rationally adequate
evidence that the dismissal was for a justifiable cause, failing in which would make the
termination illegal, as in this case.[24]

For accusing respondents of abandonment, petitioner must present evidence (1) not only
of respondents' failure to report for work or absence without valid reason, but (2) also of
respondents' clear intention to sever employer-employee relations as manifested by some
overt acts. The second element is the more determinative factor.[25]

Here, petitioner's argument in support of its abandonment charge was that respondents
may have resented its issuance of the Implementing Guidelines. This, in our view, fails to
establish respondents' intention to abandon their jobs. On the contrary, by filing the
complaint for illegal dismissal within two days of their dismissal on January 11, 2000 and
by seeking reinstatement in their position paper, respondents manifested their intention
against severing their employment relationship with petitioner and abandoning their jobs.
It is settled that an employee who forthwith protests his layoff cannot be said to have
abandoned his work.[26]

Finally, Article 279 of the Labor Code,[27] provides that a regular employee who is
unjustly dismissed from work is 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. If reinstatement is no longer
feasible, separation pay equivalent to one month salary for every year of service should
be awarded as an alternative. This has been our consistent ruling in the award of
separation pay to illegally dismissed employees in lieu of reinstatement. [28]

Hence, the four respondents, Eutiquio, Felicisimo, Jay and Leonardo, Sr., all surnamed
Antonio, are entitled to backwages and separation pay in case their reinstatement is no
longer possible. Eutiquio's and Jay's bio-data reveal that they started working for
petitioner only in 1993 (not 1991) and 1998 (not 1993), respectively. Regrettably, we find
no factual basis for respondents' claim that they received P250 per day. Petitioner's
manifestation reveals, however, that respondents' earnings in 1999 were P211,385 or
P169.37 each per day,[28] which is a little less than the P171.50 minimum wage.[30] The
NLRC should consider that Eutiquio started only in 1993 and Jay, in 1998 and use
P171.50 as respondents' daily wage, not P250 or P169.37.

Lastly, we note the silence of the decisions below with respect to Enrico Alejo, in whose
name petitioner is registered as a sole proprietorship. Alejo as the sole proprietor is liable
to respondents for backwages and separation pay. We also note that Enrico is consistently
represented as petitioner's sole-proprietor in its pleadings including this petition.
Therefore, respondents properly sought the inclusion of Enrico Alejo as a proper or
indispensable party to this case. Strictly speaking, he is the proper party in this case and
the one liable to respondents, for petitioner has no juridical personality to defend this suit.
We have held that:
a sole proprietorship ... does not have a separate juridical personality that could enable it
to file a suit in court. In fact, there is no law authorizing sole proprietorships to file a suit
in court.

A sole proprietorship does not possess a juridical personality separate and distinct from
the personality of the owner of the enterprise. The law merely recognizes the existence of
a sole proprietorship as a form of business organization conducted for profit by a single
individual and requires its proprietor or owner to secure licenses and permits, register its
business name, and pay taxes to the national government. The law does not vest a
separate legal personality on the sole proprietorship or empower it to file or defend an
action in court.[31]
WHEREFORE, the petition is DENIED for lack of merit. Petitioner thru its sole
proprietor, Enrico Alejo, is ordered (1) to reinstate the four respondents to their former
positions without loss of seniority rights and other privileges or to pay them separation
pay in case reinstatement is no longer possible and (2) to pay them full backwages, in
either case, computed from the time their compensation was withheld from them up to
the time of their actual reinstatement or up to the time it is determined that reinstatement
is no longer possible. The NLRC is also ordered to RECOMPUTE respondents,
backwages and separation pay, as aforementioned, and execute the payments to
respondents. Costs against the petitioner.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 141717, April 14, 2004 ]
PHILIPS SEMICONDUCTORS (PHILS.), INC., PETITIONER, VS. ELOISA
FADRIQUELA, RESPONDENT.

DECISION

CALLEJO, SR., J.:

Before us is a petition for review of the Decision[1] of the Court of Appeals (CA) in CA-
G.R. SP No. 52149 and its Resolution dated January 26, 2000 denying the motion for
reconsideration therefrom.

The Case for the Petitioner

The petitioner Philips Semiconductors (Phils.), Inc. is a domestic corporation engaged in

the production and assembly of semiconductors such as power devices, RF modules,
CATV modules, RF and metal transistors and glass diods. It caters to domestic and
foreign corporations that manufacture computers, telecommunications equipment and
cars.

Aside from contractual employees, the petitioner employed 1,029 regular workers. The
employees were subjected to periodic performance appraisal based on output, quality,
attendance and work attitude.[2] One was required to obtain a performance rating of at
least 3.0 for the period covered by the performance appraisal to maintain good standing
as an employee.

On May 8, 1992, respondent Eloisa Fadriquela executed a Contract of Employment with

the petitioner in which she was hired as a production operator with a daily salary of P118.
Her initial contract was for a period of three months up to August 8, 1992,[3] but was
extended for two months when she garnered a performance rating of 3.15.[4] Her contract
was again renewed for two months or up to December 16, 1992,[5] when she received a
performance rating of 3.8.[6] After the expiration of her third contract, it was extended
anew, for three months,[7] that is, from January 4, 1993 to April 4, 1993.

After garnering a performance rating of 3.4,[8] the respondent’s contract was extended for
another three months, that is, from April 5, 1993 to June 4, 1993.[9] She, however,
incurred five absences in the month of April, three absences in the month of May and
four absences in the month of June.[10] Line supervisor Shirley F. Velayo asked the
respondent why she incurred the said absences, but the latter failed to explain her side.
The respondent was warned that if she offered no valid justification for her absences,
Velayo would have no other recourse but to recommend the non-renewal of her contract.
The respondent still failed to respond, as a consequence of which her performance rating
declined to 2.8. Velayo recommended to the petitioner that the respondent’s employment
be terminated due to habitual absenteeism,[11] in accordance with the Company Rules and
Regulations.[12] Thus, the respondent’s contract of employment was no longer renewed.

The Complaint of the Respondent

The respondent filed a complaint before the National Capital Region Arbitration Branch
of the National Labor Relations Commission (NLRC) for illegal dismissal against the
petitioner, docketed as NLRC Case No. NCR-07-04263-93. She alleged, inter alia, that
she was illegally dismissed, as there was no valid cause for the termination of her
employment. She was not notified of any infractions she allegedly committed; neither
was she accorded a chance to be heard. According to the respondent, the petitioner did
not conduct any formal investigation before her employment was terminated.
Furthermore, considering that she had rendered more than six months of service to the
petitioner, she was already a regular employee and could not be terminated without any
justifiable cause. Moreover, her absences were covered by the proper authorizations. [13]

On the other hand, the petitioner contended that the respondent had not been dismissed,
but that her contract of employment for the period of April 4, 1993 to June 4, 1993
merely expired and was no longer renewed because of her low performance rating.
Hence, there was no need for a notice or investigation. Furthermore, the respondent had
already accumulated five unauthorized absences which led to the deterioration of her
performance, and ultimately caused the non-renewal of her contract.[14]

The Ruling of the Labor Arbiter and the NLRC

On June 26, 1997, the Labor Arbiter rendered a decision dismissing the complaint for
lack of merit, thus:
IN THE LIGHT OF ALL THE FOREGOING, the complaint is hereby dismissed for lack
of merit. The respondent is, however, ordered to extend to the complainant a send off
award or financial assistance in the amount equivalent to one-month salary on ground of
equity.[15]
The Labor Arbiter declared that the respondent, who had rendered less than seventeen
months of service to the petitioner, cannot be said to have acquired regular status. The
petitioner and the Philips Semiconductor Phils., Inc., Workers Union had agreed in their
Collective Bargaining Agreement (CBA) that a contractual employee would acquire a
regular employment status only upon completion of seventeen months of service. This
was also reflected in the minutes of the meeting of April 6, 1993 between the petitioner
and the union. Further, a contractual employee was required to receive a performance
rating of at least 3.0, based on output, quality of work, attendance and work attitude, to
qualify for contract renewal. In the respondent’s case, she had worked for the petitioner
for only twelve months. In the last extension of her employment contract, she garnered
only 2.8 points, below the 3.0 required average, which disqualified her for contract
renewal, and regularization of employment. The Labor Arbiter also ruled that the
respondent cannot justifiably complain that she was deprived of her right to notice and
hearing because her line supervisor had asked her to explain her unauthorized absences.
Accordingly, these dialogues between the respondent and her line supervisor can be
deemed as substantial compliance of the required notice and investigation.

The Labor Arbiter declared, however, that the respondent had rendered satisfactory
service for a period of one year, and since her infraction did not involve moral turpitude,
she was entitled to one month’s salary.
Aggrieved, the respondent appealed to the NLRC, which, on September 16, 1998, issued
a Resolution affirming the decision of the Labor Arbiter and dismissing the appeal. The
NLRC explained that the respondent was a contractual employee whose period of
employment was fixed in the successive contracts of employment she had executed with
the petitioner. Thus, upon the expiration of her contract, the respondent’s employment
automatically ceased. The respondent’s employment was not terminated; neither was she
dismissed.

The NLRC further ruled that as a contractual employee, the respondent was bound by the
stipulations in her contract of employment which, among others, was to maintain a
performance rating of at least 3.0 as a condition for her continued employment. Since she
failed to meet the said requirement, the petitioner was justified in not renewing her
contract.

The respondent filed a motion for reconsideration of the resolution, but on January 12,
1999, the NLRC resolved to deny the same.

The Case Before the Court of Appeals

Dissatisfied, the respondent filed a petition for certiorari under Rule 65 before the Court
of Appeals, docketed as CA-G.R. SP No. 52149, for the reversal of the resolutions of the
NLRC.

On October 11, 1999, the appellate court rendered a decision reversing the decisions of
the NLRC and the Labor Arbiter and granting the respondent’s petition. The CA
ratiocinated that the bases upon which the NLRC and the Labor Arbiter founded their
decisions were inappropriate because the CBA and the Minutes of the Meeting between
the union and the management showed that the CBA did not cover contractual employees
like the respondent. Thus, the seventeenth-month probationary period under the CBA did
not apply to her. The CA ruled that under Article 280 of the Labor Code, regardless of
the written and oral agreements between an employee and her employer, an employee
shall be deemed to have attained regular status when engaged to perform activities which
are necessary and desirable in the usual trade or business of the employer. Even casual
employees shall be deemed regular employees if they had rendered at least one year of
service to the employer, whether broken or continuous.

The CA noted that the respondent had been performing activities that were usually
necessary and desirable to the petitioner’s business, and that she had rendered thirteen
months of service. It concluded that the respondent had attained regular status and
cannot, thus, be dismissed except for just cause and only after due hearing. The appellate
court further declared that the task of the respondent was hardly specific or seasonal. The
periods fixed in the contracts of employment executed by the respondent were designed
by the petitioner to preclude the respondent from acquiring regular employment status.
The strict application of the contract of employment against the respondent placed her at
the mercy of the petitioner, whose employees crafted the said contract.

According to the appellate court, the petitioner’s contention that the respondent’s
employment on “as the need arises” basis was illogical. If such stance were sustained, the
court ruled, then no employee would attain regular status even if employed by the
petitioner for seventeen months or more. The CA held that the respondent’s sporadic
absences upon which her dismissal was premised did not constitute valid justifiable
grounds for the termination of her employment. The tribunal also ruled that a less
punitive penalty would suffice for missteps such as absenteeism, especially considering
that the respondent had performed satisfactorily for the past twelve months.

The CA further held that, contrary to the ruling of the Labor Arbiter, the dialogues
between the respondent and the line supervisor cannot be considered substantial
compliance with the requirement of notice and investigation. Thus, the respondent was
not only dismissed without justifiable cause; she was also deprived of her right to due
process.

The petitioner filed a motion for reconsideration of the decision but on January 26, 2000,
the CA issued a resolution denying the same.

The Case Before the Court

The petitioner filed the instant petition and raised the following issues for the court’s
resolution: (a) whether or not the respondent was still a contractual employee of the
petitioner as of June 4, 1993; (b) whether or not the petitioner dismissed the respondent
from her employment; (c) if so, whether or not she was accorded the requisite notice and
investigation prior to her dismissal; and, (d) whether or not the respondent is entitled to
reinstatement and full payment of backwages as well as attorney’s fees.

On the first issue, the petitioner contends that the policy of hiring workers for a specific
and limited period on an “as needed basis,” as adopted by the petitioner, is not new;
neither is it prohibited. In fact, according to the petitioner, the hiring of workers for a
specific and limited period is a valid exercise of management prerogative. It does not
necessarily follow that where the duties of the employee consist of activities usually
necessary or desirable in the usual course of business of the employer, the parties are
forbidden from agreeing on a period of time for the performance of such activities.
Hence, there is nothing essentially contradictory between a definite period of
employment and the nature of the employee’s duties.

According to the petitioner, it had to resort to hiring contractual employees for definite
periods because it is a semiconductor company and its business is cyclical in nature. Its
operation, production rate and manpower requirements are dictated by the volume of
business from its clients and the availability of the basic materials. It produces the
products upon order of its clients and does not allow such products to be stockpiled. Peak
loads due to cyclical demands increase the need for additional manpower for short
duration. Thus, the petitioner often experiences short-term surges in labor requirements.
The hiring of workers for a definite period to supplement the regular work force during
the unpredictable peak loads was the most efficient, just and practical solution to the
petitioner’s operating needs.

The petitioner contends that the CA misapplied the law when it insisted that the
respondent should be deemed a regular employee for having been employed for more
than one year. The CA ignored the exception to this rule, that the parties to an
employment contract may agree otherwise, particularly when the same is established by
company policy or required by the nature of work to be performed. The employer has the
prerogative to set reasonable standards to qualify for regular employment, as well as to
set a reasonable period within which to determine such fitness for the job.

According to the petitioner, the conclusion of the CA that the policy adopted by it was
intended to circumvent the respondent’s security of tenure is without basis. The petitioner
merely exercised a right granted to it by law and, in the absence of any evidence of a
wrongful act or omission, no wrongful intent may be attributed to it. Neither may the
petitioner be penalized for agreeing to consider workers who have rendered more than
seventeen months of service as regular employees, notwithstanding the fact that by the
nature of its business, the petitioner may enter into specific limited contracts only for the
duration of its clients’ peak demands. After all, the petitioner asserts, the union
recognized the need to establish such training and probationary period for at least six
months for a worker to qualify as a regular employee. Thus, under their CBA, the
petitioner and the union agreed that contractual workers be hired as of December 31,
1992.

The petitioner stresses that the operation of its business as a semiconductor company
requires the use of highly technical equipment which, in turn, calls for certain special
skills for their use. Consequently, the petitioner, in the exercise of its best technical and
business judgment, has set a standard of performance for workers as well as the level of
skill, efficiency, competence and production which the workers must pass to qualify as a
regular employee. In rating the performance of the worker, the following appraisal factors
are considered by the respondent company as essential: (1) output (40%), (2) quality
(30%), (3) attendance (15%), and (4) work attitude (15%). The rate of 3.0 was set as the
passing grade. As testified to by the petitioner’s Head of Personnel Services, Ms. Cecilia
C. Mallari:
A worker’s efficiency and productivity can be established only after he has rendered
service using Philips’ equipment over a period of time. A worker has to undergo training,
during which time the worker is taught the manufacturing process and quality control.
After instructions, the worker is subjected to written and oral examinations to determine
his fitness to continue with the training. The orientation and initial training lasts from
three to four weeks before the worker is assigned to a specific work station. Thereafter,
the worker’s efficiency and skill are monitored.
…

Among the factors considered (before a contractual employee becomes a regular

employee) are output, quality, attendance, and work attitude, which includes cooperation,
discipline, housekeeping and inter-office employee relationship. These factors determine
the worker’s efficiency and productivity.[16]
The Court’s Ruling

In ruling for the respondent, the appellate court applied Article 280 of the Labor Code of
the Philippines, as amended, which reads:
Art. 280. Regular and Casual Employment. – The provisions of written agreement to the
contrary notwithstanding and regardless of the oral argument of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph; Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such activity exists.
The appellate court held that, in light of the factual milieu, the respondent was already a
regular employee on June 4, 1993. Thus:
It is apparent from the factual circumstances of this case that the period of employment
has been imposed to preclude acquisition of tenurial security by petitioner. It bears
stressing that petitioner’s original contract of employment, dated May 8, 1992 to August
8, 1992, had been extended through several contracts – one from October 13, 1992 to
December 16, 1992, another from January 7, 1993 to April 4, 1993, and, lastly, from
April 5, 1993 to June 4, 1993.

The fact that the petitioner had rendered more than one year of service at the time of his
(sic) dismissal only shows that she is performing an activity which is usually necessary
and desirable in private respondent’s business or trade. The work of petitioner is hardly
“specific” or “seasonal.” The petitioner is, therefore, a regular employee of private
respondent, the provisions of their contract of employment notwithstanding. The private
respondent’s prepared employment contracts placed petitioner at the mercy of those who
crafted the said contract.[17]
We agree with the appellate court.

Article 280 of the Labor Code of the Philippines was emplaced in our statute books to
prevent the circumvention by unscrupulous employers of the employee’s right to be
secure in his tenure by indiscriminately and completely ruling out all written and oral
agreements inconsistent with the concept of regular employment defined therein. The
language of the law manifests the intent to protect the tenurial interest of the worker who
may be denied the rights and benefits due a regular employee because of lopsided
agreements with the economically powerful employer who can maneuver to keep an
employee on a casual or temporary status for as long as it is convenient to it. [18] In tandem
with Article 281 of the Labor Code, Article 280 was designed to put an end to the
pernicious practice of making permanent casuals of our lowly employees by the simple
expedient of extending to them temporary or probationary appointments, ad infinitum.[19]

The two kinds of regular employees under the law are (1) those engaged to perform
activities which are necessary or desirable in the usual business or trade of the employer;
and (2) those casual employees who have rendered at least one year of service, whether
continuous or broken, with respect to the activities in which they are employed.[20] The
primary standard to determine a regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the 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.[21] If the employee has been performing the
job for at least one year, even if the performance is not continuous or merely intermittent,
the law deems the repeated and continuing need for its performance as sufficient evidence
of the necessity, if not indispensability of that activity to the business of the employer.
Hence, the employment is also considered regular, but only with respect to such activity
and while such activity exists.[22] The law does not provide the qualification that the
employee must first be issued a regular appointment or must be declared as such before
he can acquire a regular employee status.[23]

In this case, the respondent was employed by the petitioner on May 8, 1992 as production
operator. She was assigned to wirebuilding at the transistor division. There is no dispute
that the work of the respondent was necessary or desirable in the business or trade of the
petitioner.[24] She remained under the employ of the petitioner without any interruption
since May 8, 1992 to June 4, 1993 or for one (1) year and twenty-eight (28) days. The
original contract of employment had been extended or renewed for four times, to the
same position, with the same chores. Such a continuing need for the services of the
respondent is sufficient evidence of the necessity and indispensability of her services to
the petitioner’s business.[25] By operation of law, then, the respondent had attained the
regular status of her employment with the petitioner, and is thus entitled to security of
tenure as provided for in Article 279 of the Labor Code which reads:
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 respondent’s re-employment under contracts ranging from two to three months over
a period of one year and twenty-eight days, with an express statement that she may be
reassigned at the discretion of the petitioner and that her employment may be terminated
at any time upon notice, was but a catch-all excuse to prevent her regularization. Such
statement is contrary to the letter and spirit of Articles 279 and 280 of the Labor Code.
We reiterate our ruling in Romares v. NLRC:[26]
Succinctly put, in rehiring petitioner, employment contracts ranging from two (2) to three
(3) months with an express statement that his temporary job/service as mason shall be
terminated at the end of the said period or upon completion of the project was obtrusively
a convenient subterfuge utilized to prevent his regularization. It was a clear
circumvention of the employee’s right to security of tenure and to other benefits. It,
likewise, evidenced bad faith on the part of PILMICO.

The limited period specified in petitioner’s employment contract having been imposed
precisely to circumvent the constitutional guarantee on security of tenure should,
therefore, be struck down or disregarded as contrary to public policy or morals. To
uphold the contractual arrangement between PILMICO and petitioner would, in effect,
permit the former to avoid hiring permanent or regular employees by simply hiring them
on a temporary or casual basis, thereby violating the employee’s security of tenure in
their jobs.[27]
Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the
workers of security of tenure and free them from the bondage of uncertainty of tenure
woven by some employers into their contracts of employment. The guarantee is an act of
social justice. When a person has no property, his job may possibly be his only
possession or means of livelihood and those of his dependents. When a person loses his
job, his dependents suffer as well. The worker should therefor be protected and insulated
against any arbitrary deprivation of his job.[28]

We reject the petitioner’s general and catch-all submission that its policy for a specific
and limited period on an “as the need arises” basis is not prohibited by law or abhorred
by the Constitution; and that there is nothing essentially contradictory between a definite
period of employment and the nature of the employee’s duties.

The petitioner’s reliance on our ruling in Brent School, Inc. v. Zamora[29] and reaffirmed
in subsequent rulings is misplaced, precisely in light of the factual milieu of this case. In
the Brent School, Inc. case, we ruled that the Labor Code does not outlaw employment
contracts on fixed terms or for specific period. We also ruled that the decisive
determinant in “term employment” should not be the activity that the employee is called
upon to perform but the day certain agreed upon by the parties for the commencement
and termination of their employment relationship. However, we also emphasized in the
same case that where from the circumstances it is apparent that the periods have been
imposed to preclude acquisition of tenurial security by the employee, they should be
struck down or disregarded as contrary to public policy and morals. In the Romares v.
NLRC case, we cited the criteria under which “term employment” cannot be said to be in
circumvention of the law on security of tenure, namely:
1) 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; or

2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the latter.
[30]

None of these criteria has been met in this case. Indeed, in Pure Foods Corporation v.
NLRC,[31] we sustained the private respondents’ averments therein, thus:
[I]t could not be supposed that private respondents and all other so-called “casual”
workers of [the petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month
employment contract. Cannery workers are never on equal terms with their employers.
Almost always, they agree to any terms of an employment contract just to get employed
considering that it is difficult to find work given their ordinary qualifications. Their
freedom to contract is empty and hollow because theirs is the freedom to starve if they
refuse to work as casual or contractual workers. Indeed, to the unemployed, security of
tenure has no value. It could not then be said that petitioner and private respondents
“dealt with each other on more or less equal terms with no moral dominance whatever
being exercised by the former over the latter.[32]
We reject the petitioner’s submission that it resorted to hiring employees for fixed terms
to augment or supplement its regular employment “for the duration of peak loads” during
short-term surges to respond to cyclical demands; hence, it may hire and retire workers
on fixed terms, ad infinitum, depending upon the needs of its customers, domestic and
international. Under the petitioner’s submission, any worker hired by it for fixed terms of
months or years can never attain regular employment status. However, the petitioner,
through Ms. Cecilia C. Mallari, the Head of Personnel Services of the petitioner, deposed
that as agreed upon by the Philips Semiconductor (Phils.), Inc. Workers Union and the
petitioner in their CBA, contractual employees hired before December 12, 1993 shall
acquire regular employment status after seventeen (17) months of satisfactory service,
continuous or broken:
5. Q: What was the response of Philips’ regular employees to your hiring of contractual
workers in the event of peak loads?

A: Philip’s regular rank-and-file employees, through their exclusive bargaining agent, the
Philips Semiconductors (Phils.), Inc. Workers Union (“Union”), duly recognized the right
of Philips, in its best business judgment, to hire contractual workers, and excluded these
workers from the bargaining unit of regular rank-and-file employees.

Thus, it is provided under the Collective Bargaining Agreement, dated May 16, 1993,
between Philips and the Union that:

ARTICLE I
UNION RECOGNITION

“Section 1. Employees Covered: The Company hereby recognizes the Union as the
exclusive bargaining representative of the following regular employees in the Factory at
Las Piñas, Metro Manila: Janitors, Material Handlers, Store helpers, Packers, Operators,
QA Inspectors, Technicians, Storekeepers, Production Controllers, Inventory Controllers,
Draftsmen, Machinists, Sr. Technician, Sr. QA Inspectors, Controllers, Sr. Draftsmen,
and Servicemen, except probationary and Casual/Contractual Employees, all of whom do
not belong to the bargaining unit.”

A copy of the CBA, dated May 16, 1993, was attached as Annex “1” to Philip’s Position
Paper, dated August 30, 1993.

6. Q: May a contractual employee become a regular employee of the Philips?

A: Yes. Under the agreement, dated April 6, 1993, between the Union and Philips,
contractual workers hired before 12 December 1993, who have rendered seventeen
months of satisfactory service, whether continuous or broken, shall be given regular
status. The service rendered by a contractual employee may be broken depending on
production needs of Philips as explained earlier.

A copy of the Minutes of the Meeting (“Minutes,” for brevity), dated April 6, 1993,
evidencing the agreement between Philips and the Union has been submitted as Annex
“2” of Philips’ Position Paper.[33]
In fine, under the CBA, the regularization of a contractual or even a casual employee is
based solely on a satisfactory service of the employee/worker for seventeen (17) months
and not on an “as needed basis” on the fluctuation of the customers’ demands for its
products. The illogic of the petitioner’s incongruent submissions was exposed by the
appellate court in its assailed decision, thus:
The contention of private respondent that petitioner was employed on “as needed basis”
because its operations and manpower requirements are dictated by the volume of business
from its client and the availability of the basic materials, such that when the need ceases,
private respondent, at its option, may terminate the contract, is certainly untenable. If
such is the case, then we see no reason for private respondent to allow the contractual
employees to attain their regular status after they rendered service for seventeen months.
Indubitably, even after the lapse of seventeen months, the operation of private respondent
would still be dependent on the volume of business from its client and the availability of
basic materials. The point is, the operation of every business establishment naturally
depends on the law of supply and demand. It cannot be invoked as a reason why a person
performing an activity, which is usually desirable and necessary in the usual business,
should be placed in a wobbly status. In reiteration, the relation between capital and labor
is not merely contractual. It is so impressed with public interest that labor contracts must
yield to the common good.

While at the start, petitioner was just a mere contractual employee, she became a regular
employee as soon as she had completed one year of service. It is not difficult to see that
to uphold the contractual arrangement between private respondent and petitioner would,
in effect, be to permit employers to avoid the necessity of hiring regular or permanent
employees. By hiring employees indefinitely on a temporary or casual status, employers
deny their right to security of tenure. This is not sanctioned by law. …[34]
Even then, the petitioner’s reliance on the CBA is misplaced. For, as ratiocinated by the
appellate court in its assailed decision:
Obviously, it is the express mandate of the CBA not to include contractual employees
within its coverage. Such being the case, we see no reason why an agreement between the
representative union and private respondent, delaying the regularization of contractual
employees, should bind petitioner as well as other contractual employees. Indeed, nothing
could be more unjust than to exclude contractual employees from the benefits of the CBA
on the premise that the same contains an exclusionary clause while at the same time
invoke a collateral agreement entered into between the parties to the CBA to prevent a
contractual employee from attaining the status of a regular employee.

This cannot be allowed.

The CBA, during its lifetime, constitutes the law between the parties. Such being the rule,
the aforementioned CBA should be binding only upon private respondent and its regular
employees who were duly represented by the bargaining union. The agreement embodied
in the “Minutes of Meeting” between the representative union and private respondent,
providing that contractual employees shall become regular employees only after
seventeen months of employment, cannot bind petitioner. Such a provision runs contrary
to law not only because contractual employees do not form part of the collective
bargaining unit which entered into the CBA with private respondent but also because of
the Labor Code provision on regularization. The law explicitly states that an employee
who had rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee. The period set by law is one year. The
seventeen months provided by the “Minutes of Meeting” is obviously much longer. The
principle is well settled that the law forms part of and is read into every contract without
the need for the parties expressly making reference to it. …[35]
On the second and third issues, we agree with the appellate court that the respondent was
dismissed by the petitioner without the requisite notice and without any formal
investigation. Given the factual milieu in this case, the respondent’s dismissal from
employment for incurring five (5) absences in April 1993, three (3) absences in May
1993 and four (4) absences in June 1993, even if true, is too harsh a penalty. We do agree
that an employee may be dismissed for violation of reasonable regulations/rules
promulgated by the employer. However, we emphasized in PLDT v. NLRC[36] that:
Dismissal is the ultimate penalty that can be meted to an employee. Where a penalty less
punitive would suffice, whatever missteps may have been committed by the worker ought
not to be visited with a consequence so severe such as dismissal from employment. For,
the Constitution guarantees the right of workers to “security of tenure.” The misery and
pain attendant to the loss of jobs then could be avoided if there be acceptance of the view
that under certain circumstances of the case the workers should not be deprived of their
means of livelihood.[37]
Neither can the conferences purportedly held between the respondent and the line
supervisor be deemed substantial compliance with the requirements of notice and
investigation. We are in full accord with the following ratiocinations of the appellate
court in its assailed decision:
As to the alleged absences, we are convinced that the same do not constitute sufficient
ground for dismissal. Dismissal is just too stern a penalty. No less than the Supreme
Court mandates that where a penalty less punitive would suffice, whatever missteps may
be committed by labor ought not to be visited with a consequence so severe. (Meracap v.
International Ceramics Manufacturing Co., Inc., 92 SCRA 412 [1979]). Besides, the fact
that petitioner was repeatedly given a contract shows that she was an efficient worker
and, therefore, should be retained despite occasional lapses in attendance. Perfection
cannot, after all, be demanded. (Azucena, The Labor Code, Vol. II, 1996 ed., [p.] 680)

Finally, we are convinced that it is erroneous for the Commission to uphold the following
findings of the Labor Arbiter, thus:
“Those dialogues of the complainant with the Line Supervisor, substantially, stand for the
notice and investigation required to comply with due process. The complainant did not
avail of the opportunity to explain her side to justify her shortcomings, especially, on
absences. She cannot now complain about deprivation of due process.”
Of course, the power to dismiss is a formal prerogative of the employer. However, this is
not without limitations. The employer is bound to exercise caution in terminating the
services of his employees. Dismissals must not be arbitrary and capricious. Due process
must be observed in dismissing an employee because it affects not only his position but
also his means of livelihood. Employers should respect and protect the rights of their
employees which include the right to labor. (Liberty Cotton Mills Workers Union v.
Liberty Cotton Mills, Inc., 90 SCRA 391 [1979])

To rule that the mere dialogue between private respondent and petitioner sufficiently
complied with the demands of due process is to disregard the strict mandate of the law. A
conference is not a substitute for the actual observance of notice and hearing. (Pepsi Cola
Bottling Co., Inc. v. National Labor Relations Commission, 210 SCRA 277 [1992]) The
failure of private respondent to give petitioner the benefit of a hearing before she was
dismissed constitutes an infringement on her constitutional right to due process of law
and not to be denied the equal protection of the laws. The right of a person to his labor is
deemed to be his property within the meaning of the constitutional guarantee. This is his
means of livelihood. He cannot be deprived of his labor or work without due process of
law. (Batangas Laguna Tayabas Bus Co. v. Court of Appeals, 71 SCRA 470 [1976])

All told, the court concludes that petitioner’s dismissal is illegal because, first, she was
dismissed in the absence of a just cause, and second, she was not afforded procedural due
process. In pursuance of Article 279 of the Labor Code, we deem it proper to order the
reinstatement of petitioner to her former job and the payment of her full backwages. Also,
having been compelled to come to court to protect her rights, we grant petitioner’s prayer
for attorney’s fees.[38]
IN LIGHT OF ALL THE FOREGOING, the assailed decision of the appellate court in
CA-G.R. SP No. 52149 is AFFIRMED. The petition at bar is DENIED. Costs against the
petitioner.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 74969, May 07, 1990 ]
TELESFORO MAGANTE, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION AND CONSTRESS PHILIPPINES, INC.,
RESPONDENTS.

DECISION

FERNAN, C.J.:

The issue in this petition for certiorari is whether public respondent National

Labor Relations Commission committed grave abuse of discretion in reversing and
setting aside the decision of Labor Arbiter Domingo V. del Rosario dated June 22, 1983
directing private respondent in Case No. NLRC-NCR- 8-5215-82 entitled
"Telesforo Magante, complainant, vs. Constress Philippines, Inc., respondent" to reinstate
petitioner to his position with full backwages with all the rights and benefits granted by
law.  In lieu of the aforesaid decision, public respondent commission entered a new
judgment dismissing petitioner's complaint for illegal dismissal on the ground that said
petitioner is a project employee whose employment terminated upon the completion of
the project to which he was assigned. [1]

The undisputed facts of the case as culled from the records of the case are:

Private respondent Constress Philippines, Inc. is engaged in the concrete

structural business with address at Ortigas Avenue, Pasig, Metro
Manila.  Petitioner Telesforo Magante, on the other hand, was employed by the former as
a carpenter from April 17, 1980 until his dismissal on March 6, 1982 earning three
hundred pesos (P300.00), more or less, a week excluding allowance and rendering about
fourteen (14) hours of work daily from 7:00 in the morning to 10:00 in the evening.  His
work involved the making of molds (forma or siding of cement post) for bridges,
buildings, charcoal guilder, sea file, and others.  Apparently, petitioner was never
assigned to work outside the plant of private respondent.

Every three (3) months, petitioner was made to fill up and sign an employment contract
relating to a particular phase of work in a specific project.  Allegedly, the terms of the
contract written in English were not understood by petitioner nor was the same explained
to him.  The last hiring agreement entered into between petitioner and private respondent
was on December 7, 1981 which was to take effect on even date with an agreed
compensation of P21.36 a day.

On March 6, 1982, private respondent posted a notice of termination on its bulletin board
to take effect the following day, March 7, 1989, which included petitioner and other
employees as among those whose services were being terminated by private
respondent.  Petitioner was told that he cannot work anymore because he is already old,
that his contract had already expired and was not renewed being a project employee.  The
termination of petitioner and his fellow workers was reported to the Ministry of Labor.

Consequently, petitioner filed a complaint with the then Ministry (now Department) of

Labor and Employment for illegal dismissal.  After the filing of the respective position
papers by the parties, Labor Arbiter Domingo del Rosario rendered a decision  on June
[2]

22, 1983 with the following pronouncement:

"The terms of the contract that complainant is a project worker is not the determining
factor of the status of complainant or any worker but the work performed by him and the
place where he performed his assignment.  The contract entered into by respondent and
complainant is more of a scheme to evade its liability or obligation under the law.
WHEREFORE, respondent is directed to reinstate complainant to his position with
full backwages with all the rights and benefits granted by law and by respondent
Company." [3]
From the foregoing decision of the labor arbiter, private respondent filed an appeal before
the National Labor Relations Commission premised on the ground that the termination of
petitioner's employment was occasioned by the completion of the phase of work in the
project for which he was specifically hired and that he was duly notified thereof in
compliance with the requirements of law.

Finding merit in the appeal, public respondent held that petitioner's employment falls
squarely within the purview of Policy Instructions No. 20, a regulation intended for
stabilizing employer-employee relations in the construction industry which has aptly
taken into consideration the unique characteristics of respondent's business herein,
quoting the pertinent provisions as follows:

"Generally, there are two types of employees in the construction industry namely:
1)      Project employees, and
2)      Non-project employees
"Project employees are those
employed in connection with a particular construction project.  x x x
"Project employees are not entitled to termination 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 number of projects in which they have been employed by a p
articular construction company." [4]

Public respondent further found that upon completion of particular phase of work in the
project for which petitioner's services have been hired, his termination was indubitably
for cause.  With these justifications, public respondent set aside the appealed decision of
the labor arbiter and entered a new judgment dismissing the complaint for lack of
merit.  Petitioner filed a motion for reconsideration of the aforesaid decision but the same
was denied.

Petitioner now comes before Us by way of certiorari to set aside the aforesaid decision of
public respondent promulgated on August 1, 1984 for having been issued with grave
abuse of discretion.  It is asserted in the instant petition that private respondent's
argument that petitioner was only hired for a fixed period of time cannot escape the
factual finding of the Labor Arbiter's decision that the contract entered into by private
respondent with the petitioner is more of a scheme to evade its liability or obligation
under the law by making it appear that said petitioner is a project to project employee.

The Solicitor-General, when required to file a Comment to the instant petition, took the
same stand as petitioner citing the case
of Fegurin, et al. vs. National Labor Relations Commission, et al.  as the basis for
[5]

considering petitioner as a regular and permanent employee who should therefore be

reinstated to his position with backwages.[6]
In view of the Solicitor-General's contrary stand to the decision of public respondent
National Labor Relations Commission, the latter was given an opportunity to file its own
comment to the petition.  In the aforesaid comment, public respondent defends its
decision in line with Article 281 of the Labor Code which provides the exception to
regular and casual employment, that is, when the employment has been fixed for a
specific project or undertaking, the completion or termination of which has been
determined at the time of the engagement of employment.  Public respondent contends
that petitioner's case falls within the exception and the Fegurin case relied upon by
petitioner does not stand on all fours with the present case because the complainants in
said case had lengths of service for nine (9), eight (8) and six (6) years, the shortest being
three (3) years.  In the instant case, petitioner worked only for over a year, his last
contract lasting only a span of four (4) months.  Furthermore, Article 281 of the Labor
Code is intended for all industries except the construction
industry.  Precisely, Policy Instruction No. 20 was promulgated for the reason that
problems of regularity of employment in the construction industry has continued to
plague it.  This policy merely implements the exception to Article 281 of the Labor Code.
[7]

We find merit in the petition as We sustain the position of the Solicitor-General that
petitioner Telesforo Magante was a regular employee of private respondent.

Article 281 of the Labor Code provides:

"Article 281.  Regular and Casual Employment. - The provisions of written agreement to

the contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer except where the employment has been fixed for a specific project
or undertaking, the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season."
"An employment shall be deemed to be casual if it is not covered by the preceding
paragraph:  Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists."

As aptly observed by the Solicitor-General, petitioner has established that since the very
inception of his employment in 1980, he was never deployed from project to project of
private respondent but had been regularly assigned to perform carpentry work under the
supervision of a certain Bernardo Padaon who, since 1964 until his resignation on
January 2, 1982 worked for private respondent as the supervisor of its Carpentry
Department.  This goes to show two things:  that petitioner was assigned to perform tasks
which are usually necessary or desirable in the usual business or trade of private
respondent; and that said assignments did not end on a project to project basis, although
the contrary was made to appear by private respondent through the signing of separate
employment contracts allegedly for different projects because it is indeed obvious that
petitioner continued to perform the same kind of work throughout his period of
employment allegedly considered to have been done on a project to project basis.

Although petitioner had only rendered almost two years of service, nevertheless this
should not detract from his status of being a regular employee because as correctly stated
by the labor arbiter, the determining factor of the status of complainant-petitioner or any
worker is the nature of the work performed by the latter and the place where he
performed his assignment.

We have re-examined the case of Fegurin vs. National Labor Relations Commission  and [8]

found that although the facts of the said case are not on all fours with the instant petition
there being a work pool to which the complaining employees therein belonged,
nonetheless, the doctrine therein may be similarly applied in the case at bar considering
that the nature of the work of petitioner herein and in said case also involved carpentry
work and there was a continuous assignment of similar workload from project to project.

We held therein that the employment of petitioners with the company for several years
[four (4) of whom for nine (9) years, one (1) for eight (8) years, another for six (6) years,
the shortest term being three (3) years] despite the shorter employment periods specified
in their notices of employment, performing activities usually necessary or desirable in the
usual business of the company, shows that they are regular employees.

Moreover, if petitioner were employed as a "project employee", private respondent

should have submitted a report of termination to the nearest public employment office
every time his employment is terminated due to the completion of each construction
project, as required by Policy Instruction No. 20.  which provides:
[9]

"Project employees are not entitled to termination 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 number of projects in which they have been employed by a particular
construction company.  Moreover, the company is not required to obtain a clearance from
the Secretary of Labor in connection with such termination.  What is required of the
company is a report to the nearest Public Employment Office for statistical
purposes." (Italics supplied)

Throughout the duration of petitioner's employment, there should have been filed as
many reports of termination as there were construction projects actually finished if it
were true that petitioner Telesforo Magante was only a project worker.
The foregoing considered, public respondent National Labor Relations Commission
gravely abused its discretion in closing its eyes to the evidence on record and the factual
findings of the labor arbiter in setting aside the decision of the latter.  Construing the
employment contract signed by petitioner with private respondent solely on its face
without considering the surrounding circumstances in this case serves to defeat the
purpose for which the Labor Code and its implementing rules were enacted.

WHEREFORE, the petition for certiorari is granted, and the decision of the National

Labor Relations Commission, dated August 1, 1984 is hereby REVERSED and SET
ASIDE and the decision of the Labor Arbiter dated June 22, 1983 is hereby AFFIRMED
and REINSTATED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 71664, February 28, 1992 ]
BAGUIO COUNTRY CLUB CORPORATION, PETITIONER, VS.
NATIONAL LABOR RELATIONS COMMISSION, ASSOCIATED LABOR
UNION (ALU) AND JIMMY CALAMBA, RESPONDENTS.

DECISION

MEDIALDEA, J.:

This petition for certiorari seeks to annul and set aside the resolution issued by the
respondent National Labor Relations Commission dated June 10, 1985 dismissing the
appeal of petitioner for lack of merit and affirming in toto the decision of the Executive
Labor Arbiter dated September 15, 1982 declaring private respondent Calamba as a
regular employee entitled to reinstatement to the position of gardener without loss of
seniority and with full backwages, benefits and privileges from the time of his dismissal
up to reinstatement including 13th month pay.

The antecedent facts are as follows:

Petitioner Baguio Country Club Corporation (corporation) is a recreational establishment

certified by the Ministry of Labor and Employment as an "entertainment-service"
establishment. Respondent National Labor Relations Commission (Commission) is a
government instrumentality created by law, impleaded in its official capacity, while
private respondent Associated Labor Union (union) is a duly registered labor
organization and private respondent Jimmy Calamba is an employee of the petitioner
corporation as laborer, dishwasher, and gardener.

Private respondent Jimmy Calamba was employed on a day to day basis in various
capacities as laborer and dishwasher for a period of ten (10) months from October 1,
1979 to July 24, 1980. On September 1, 1980 to October 1, 1980, private respondent
Calamba was hired as a gardener and rehired as such on November 15, 1980 to January 4,
1981 when he was dismissed by the petitioner corporation. (see Rollo, pp. 28-36)

On August 3, 1981, private respondent Jimmy Calamba assisted by private

respondent union instituted a complaint against petitioner corporation with the Ministry
of Labor (now Department of Labor and Employment), Baguio District Office, Baguio
City for unfair labor practice, illegal dismissal and non-payment of 13th month pay for
1979 and 1980.

The Executive Labor Arbiter Sotero L. Tumang rendered a decision on September 15,
1982 declaring private respondent Calamba as a regular employee and ordering petitioner
to reinstate private respondent to the position of gardener without loss of seniority and
with full backwages, benefits and privileges from the time of his dismissal up to
reinstatement including 13th month pay.

Labor Arbiter Tumang found as follows:

"After a careful perusal of the facts presented by the parties, we find the complaint for
illegal dismissal and non-payment of thirteenth (13th) month pay, meritorious for the
following reasons:
"1. Complainant Jimmy Calamba has attained regular status as an employee of the Club
on account of the nature of the job he was hired, to perform continuously and on
staggered basis for a span of thirteen months. True that there were employment contracts
executed between the Club and the complainant indicating the period or the number of
days the complainant is being needed but what is to be considered is not the agreement,
written or otherwise, of the parties in determining the regularity or casualness of a job but
it should be the nature of` the job. Clearly, the work of a gardener is not a seasonal or for
a specific period undertaking but it is a whole year round activity. We must not lose sight
of the fact that the Baguio Country Club Corporation is an exclusive Club with sustaining
members who avails (sic) of its facilities the whole year round and it is necessary, as has
been observed and of common knowledge, that the gardens including the green of its golf
course where the complainant was assigned must be properly kept and maintained.
“2. Being a regular employee with more than one (1) year length of service with the
respondent, Jimmy Calamba could not be terminated without a just or valid cause. This is
so explicit in our Constitution that the security of tenure of a worker must be safeguarded
and protected and Jimmy Calamba should enjoy no less protection.
“3. Jimmy Calamba was dismissed without any written clearance from the Ministry of
Labor and Employment prior to his termination. Worse, the respondent fired the
complainant from his job due to the a (sic) alleged expiration of his employment contract
ten (10) times but not even a single report of his dismissal as mandated by law was
submitted to the Ministry of Labor and Employment.
“4. The Company did not refute the claim of Jimmy Calamba for payment of his
thirteenth (13th) month pay under P.D. 851 nor presented any report of compliance to
that effect with the Ministry of Labor and Employment and, therefore, he must be paid
correspondingly." (Rollo, pp. 39-40).

Hence, the petitioner interposed an appeal to the respondent Commission.

On June 10, 1985, after finding that there existed no sufficient justification to disturb the
appealed decision, the respondent Commission rendered resolution dismissing the appeal
for lack of merit.

Hence, this present petition raising four (4) assignment of errors, which are as follows:

"I

"THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING

THAT PRIVATE RESPONDENT JIMMY CALAMBA WAS A 'CASUAL'
EMPLOYEE AND HAD ATTAINED THE STATUS OF A REGULAR EMPLOYEE,
DESPITE THE INCONTROVERTIBLE FACT THAT SAID PRIVATE RESPONDENT
WAS A CONTRACTUAL AND SEASONAL EMPLOYEE.

"II

"THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING

THAT THE CONCLUSIONS OF THE EXECUTIVE LABOR ARBITER WERE
FULLY SUPPORTED BY THE EVIDENCE AND IN UPHOLDING THE
REINSTATEMENT OF PRIVATE RESPONDENT JIMMY CALAMBA.

"III

"THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN HOLDING

THAT THE DISMISSAL OF PRIVATE RESPONDENT JIMMY CALAMBA
REQUIRED PRIOR CLEARANCE FROM THE MINISTRY OF LABOR AND
EMPLOYMENT EACH TIME HIS CONTRACT OF EMPLOYMENT EXPIRED.

"IV
"THAT THE RESPONDENT COMMISSION GRAVELY ERRED IN NOT HOLDING
THAT PRIVATE RESPONDENT ASSOCIATED LABOR UNION HAS NO LEGAL
PERSONALITY TO FILE THIS CASE FOR PRIVATE RESPONDENT JIMMY
CALAMBA BEFORE THE REGIONAL OFFICE OF THE NATIONAL LABOR
RELATIONS COMMISSION, AS SAID PRIVATE RESPONDENT BEING A
CONTRACTUAL EMPLOYEE IS EXPRESSLY EXCLUDED FROM THE
BARGAINING UNIT UNDER THE COLLECTIVE BARGAINING AGREEMENT."
(Rollo, pp. 98-99)

Petitioner maintains that private respondent Calamba was a contractual employee whose
employment was for a fixed and specific period as set forth and evidenced by the private
respondent's contracts of employment, the pertinent portions of which are quoted as
follows:

"x x x
"x x x the employment may be terminated at any time without liability to the Baguio
Country Club other than for salary actually earned up to and including the date of last
service.
"His/her employment shall be on a day to day BASIS for a temporary period x x x subject
to termination at any time at the discretion of the Baguio Country Club Corporation.
"x x x. (Rollo, p. 7)

In addition, petitioner stresses that there was absolutely no oral or documentary evidence
to support the conclusion of the Executive Labor Arbiter which was subsequently
affirmed by the respondent Commission that private respondent Calamba has rendered
thirteen (13) months of continuous service.

On the contrary, respondent Commission through the Solicitor General argues that
private respondent Calamba, having rendered services as laborer, gardener and
dishwasher for more than one (1) year, was a regular employee at the time his
employment was terminated.

Moreover, the nature of private respondent Calamba's employment as laborer, gardener,

and dishwasher pertains to a regular employee because they are necessary or desirable in
the usual business of petitioner as a recreational establishment.

The pivotal issue therefore, is whether or not the private respondent Jimmy Calamba has
acquired the status of a regular employee at the time his employment was terminated.

After a careful review of the records of this case, the Court finds no merit in the petition
and holds that the respondent Commission did not gravely abuse its discretion when it
affirmed in toto the decision of the labor arbiter.
The law on the matter is Article 280 of the Labor Code which defines regular and casual
employment as follows:

"Art.   280. Regular and Casual Employment. -- The provisions of written agreement to

the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.
"An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists."
"This provision reinforces the Constitutional mandate to protect the interest of labor. Its
language evidently manifests the intent to safeguard the tenurial interest of the worker
who may be denied the rights and benefits due a regular employee by virtue of lopsided
agreements with the economically powerful employer who can maneuver to keep an
employee on a casual status for as long as convenient. Thus, contrary agreements
notwithstanding, an employment is deemed regular when the activities performed by the
employee are usually necessary or desirable in the usual business or trade of the
employer. Not considered regular are the so-called "project employment" the completion
or termination of which is more or less determinable at the time of employment, such as
those employed in connection with a particular construction project, and seasonal
employment which by its nature is only desirable for a limited period of time. However,
any employee who has rendered at least one year of service, whether continuous or
intermittent, is deemed regular with respect to the activity he performed and while such
activity actually exists.
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. The connection can
be determined by considering the nature of the work performed and its relation to the
scheme of the particular business or trade in its entirety. Also, if the employee has been
performing the job for at least one year, even if the performance is not continuous or
merely intermittent, the law deems the repeated and continuing need for its performance
as sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is also considered regular, but only with respect to such
activity and while such activity exists." (De Leon v. National Labor Relations
Commission, G.R. No. 70705, August 21, 1989, 176 SCRA 615, 620-621)
In the case at bar, the petitioner corporation, which is certified by the Ministry of Labor
and Employment as an "entertainment service" establishment, claims that private
respondent was contracted for a fixed and specific period. However, the records reveal
that the private respondent was repeatedly re-hired to perform tasks ranging from
dishwashing and gardening, aside from performing maintenance work.

Such repeated rehiring and the continuing need for his service are sufficient evidence of
the necessity and indispensability of his service to the petitioner's business or trade.

The law demands that the nature and entirety of the activities performed by the employee
be considered. It is not tenable to argue that the aforementioned tasks of private
respondent are not necessary in petitioner's business as a recreational establishment, just
as it cannot be said that only those who are directly involved in providing entertainment
service may be considered as necessary employees. Otherwise, there would have been no
need for the regular maintenance section of petitioner corporation.

Furthermore, the private respondent performed the said tasks which lasted for more than
one year, until early January, 1981 when he was terminated. Certainly, by this fact alone
he is entitled by law to be considered a regular employee.

Owing to private respondent's length of service with the petitioner corporation, he

became a regular employee, by operation of law, one year after he was employed. It is
more in consonance with the intent and spirit of the law to rule that the status of regular
employment attaches to the casual employee on the day immediately after the end of his
first year of service. To rule otherwise is to impose a burden on the employee which is
not sanctioned by law. (see Kimberly Independent Labor Union for Solidarity, Activism
and Nationalism in Line Industries and Agriculture v. Drilon, G.R. No. 77629, May 9,
1990, 185 SCRA 190, 203-204)

It is of no moment that private respondent was told when he was hired that his
employment would only be "on a day to day basis for a temporary period" and may be
terminated at any time subject to the petitioner's discretion. Precisely, the law overrides
such conditions which are prejudicial to the interest of the worker. Evidently, the
employment contracts entered into by private respondent with the petitioner have the
purpose of circumventing the employee's security of tenure. The Court therefore,
rigorously disapproves said contracts which demonstrate a clear attempt to exploit the
employee and deprive him of the protection sanctioned by the Labor Code.

It is noteworthy that what determines whether a certain employment is regular or casual

is not the will and word of the employer, to which the desperate worker often accedes. It
is the nature of the activities performed in relation to the particular business or trade
considering all circumstances and in some cases the length of time of its performance and
its continued existence. (see De Leon v. NLRC, ibid)
All premises considered, the Court is convinced that the assailed resolution of the
respondent Commission is not tainted with arbitrariness that would amount to grave
abuse of discretion or lack of jurisdiction and therefore, We find no reason to disturb the
same.

ACCORDINGLY, the petition is DISMISSED for lack of merit.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 86408, February 15, 1990 ]
BETA ELECTRIC CORPORATION, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION, LABOR ARBITER CRESENCIO INIEGO,
BETA ELECTRIC EMPLOYEES ASSOCIATION, AND LUZVIMINDA
PETILLA, RESPONDENTS.

DECISION

SARMIENTO, J.:

The petitioner questions the decision of the National Labor Relations Commission
affirming the judgment of the labor arbiter reinstating the private respondent with
backwages.

The petitioner hired the private respondent as clerk typist III[1] effective December 15,
1986 until January 16, 1987.[2]

On January 16, 1987, the petitioner gave her an extension up to February 15, 1987.[3]

On February 15, 1987, it gave her another extension up to March 15, 1987.[4]

On March 15, 1987, it gave her a further extension until April 30, 1987.[5]

On May 1, 1987, she was given until May 31, 1987.[6]

On June 1, 1987, she was given up to June 30, 1987.[7]

Her appointments were covered by corresponding written contracts.[8] 

On June 22, 1987, her services were terminated without notice or investigation. On the
same day, she went to the labor arbiter on a complaint for illegal dismissal. As the court
has indicated, both the labor arbiter and the respondent National Labor Relations
Commission ruled for her.

The Court likewise rules in her favor.

The petitioner argues mainly that the private respondent's appointment was temporary
and hence she may be terminated at will.

That she had been hired merely on a "temporary basis" "for purposes of meeting the
seasonal or peak demands of the business,"[9] and as such, her services may lawfully be
terminated "after the accomplishment of [her] task"[10] is untenable. The private
respondent was to all intents and purposes, and at the very least, a probationary
employee, who became regular upon the expiration of six months. Under Article 281 of
the Labor Code, a probationary employee is "considered a regular employee" if he has
been "allowed to work after [the] probationary period."[11] The fact that her employment
has been on a contract-to-contract basis can not alter the character of employment,
because contracts can not override the mandate of law. Hence, by operation of law, she
has become a regular employee.

In the case at bar, the private employee was employed from December 15, 1986 until
June 22, 1987 when she was ordered laid-off. Her tenure having exceeded six months,
she attained regular employment.

The petitioner can not rightfully say that since the private respondent’s employment
hinged from contract to contract, it was ergo, "temporary", depending on the term of each
agreement. Under the Labor Code, an employment may only be said to be “temporary"
"where [it] has been fixed for a specific undertaking the completion of or termination of
which has been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for the
duration of the season."[12] Quite to the contrary, the private respondent's work, that of
"typist-clerk" is far from being "specific" or "seasonal", but rather, one, according to the
Code, "where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business."[13] And under the Code, where one performs
such activities, he is a regular employer, “[t]he provisions of written agreement to the
contrary notwithstanding . . .[14]

It is true that in Biboso v. Victories Milling Company, Inc.,[15] we recognized the validity
of contractual stipulations as to the duration of employment, we can not apply it here
because clearly, the contract-to-contract arrangement given to the private respondent was
but an artifice to prevent her from acquiring security of tenure and to frustrate
constitutional decrees.
The petitioner can not insist that the private respondent had been hired "for a specific
undertaking i.e. to handle the backlogs brought about by the seasonal increase in the
volume of her work.”[16] The fact that she had been employed purportedly for the simple
purpose of unclogging the petitioner's files does not make such an undertaking "specific"
from the standpoint of law because in the first place, it is "usually necessary or desirable
in the usual business or trade of the employer,"[17] a development which disqualifies it
outrightly as a "specific undertaking", and in the second place, because a "specific
undertaking" is meant, in its ordinary acceptation, a special type of venture or project
whose duration is coterminous with the completion of the project,[18] e.g., project work. It
is not the case in the proceeding at bar.

WHEREFORE, the petition is DISMISSED. The private respondent is ordered

REINSTATED with backwages equivalent to three years with no qualification or
deductions.

SO ORDERED.  

Melencio-Herrera, (Chairman), Paras, Padilla, and Rega

SECOND DIVISION
[ G.R. No. 208567, November 26, 2014 ]
JEANETTE V. MANALO, VILMA P. BARRIOS, LOURDES LYNN
MICHELLE FERNANDEZ AND LEILA B. TAIÑO, PETITIONERS, VS. TNS
PHILIPPINES INC., AND GARY OCAMPO, RESPONDENTS.

DECISION

MENDOZA, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court assails
the January 29, 2013 Decision[1] and the August 7, 2013 Resolution[2] of the Court of
Appeals (CA), in CA-G.R. SP No. 117637, which set aside the July 23, 2010 Decision [3] of
the National Labor Relations Commission (NLRC) and its October 28, 2010
Resolution[4] and reinstated the May 29, 2009 Decision[5] of the Labor Arbiter’s finding
that petitioners were project employees.

Respondent TNS Philippines Inc. (TNS), with Gary Ocampo as its president and general
manager, was engaged primarily in the business of marketing research and information,
as well as research consultancy and other value-added services to a wide base of clients,
both local and international.[6] As a market research facility, TNS conducted public
surveys about consumer goods, products, merchandise and/or services of its clients.
[7]
 TNS hired several field personnel on a project-to-project basis whose functions were
the following: a) to gather data on consumer goods, commodities, merchandise, and
such other products as requested by clients, through personal interviews, telephone
interviews and/or such other modes akin to the foregoing; and b) to submit the
gathered data to the company for evaluation and/or analysis.[8]

Petitioners Jeanette V. Manalo, Vilma P. Barrios, Lourdes Lynn Michelle Fernandez, and
Leila B. Taiño (petitioners) were hired by TNS as field personnel on various dates starting
1996 for several projects. They were made to sign a project-to-project employment
contract. Thereafter, TNS would file the corresponding termination report with the
Department of Labor and Employment Regional Office (DOLE-RO).[9]

Petitioners were likewise assigned office-based tasks for which they were required to be
in the office from 9:00 o’clock in the morning to 6:00 o’clock in the evening, but most of
the time, they worked beyond 6:00 o’clock without receiving the corresponding
overtime pay. These office-based tasks were not on a per project basis and petitioners
did not sign any contract for these jobs. These assignments were not reported to the
DOLE either.[10]

Later in August 2008, a meeting among the Field Interviewers (FIs) was called by TNS’
field manager. They were told that all old FIs assigned in the “tracking” projects would
be pulled out eventually and replaced by new FIs contracted from an agency. Old FIs
would be assigned only to “adhoc” projects which were seasonal. This prompted
petitioners to file a consolidated complaint for regularization before the LA.[11]

On October 20, 2008, petitioners and TNS were required to file their respective position
papers. On October 21, 2008, petitioners were advised by TNS not to report for work
anymore because they were being pulled out from their current assignments and that
they were not being lined up for any continuing or incoming projects because it no
longer needed their services. They were also asked to surrender their company IDs.
[12]
 Petitioners, thereafter, filed a complaint for illegal dismissal, overtime pay, damages,
and attorney’s fees against TNS. Later, the labor cases for regularization and illegal
dismissal were consolidated.
On May 29, 2009, the LA rendered a decision,[13] dismissing the complaint on the ground
that petitioners were found to be project employees who knew the nature of their
positions as such at the time of their employment and who agreed with full
understanding that the contracts would lapse upon completion of the project stated in
their respective contracts.[14] The LA further ruled that even if petitioners were
continuously rehired for several and different projects, the determining factor was
whether, at the time of hiring, the employment was fixed for a specific project or
undertaking and its completion was predetermined.[15]

The LA was also of the view that petitioners were not illegally dismissed because as
project employees, the employer-employee relationship was terminated upon
completion of the project or phase for which they were hired. The term of their
employment was coterminus with the duration and until the accomplishment of the
project.[16]

As to the claim for overtime pay and damages, the LA held that petitioners were not
entitled to them.Field personnel were excluded from the coverage of the minimum
requirements on hours of work and overtime pay.

Aggrieved, petitioners filed an appeal before the NLRC. Consequently, the NLRC
rendered its judgment[17] in favor of petitioners and reversed the LA ruling. Thus:

We note that, initially, complainants used to be project employees as shown by

the samples of project-to-project employment contracts, project clearance slips, and the
establishment termination reports adduced in evidence. Case records, however, show
that the last time respondent company filed an establishment termination report was
in November 2007 indicating project completion on November 30, 2007. What is clear
though is that complainants were allowed to continue working after November 30,
2007. Respondent company did not adduce in evidence employment contracts relating
to the latest employment of the complainants. In the absence of proof that the
subsequent employment of the complainants continued to be on a project-to-project
basis under a contract of employment, complainants are considered to have become
regular employees after November 30, 2007. The failure to present contract of project
employment means that the employees are regular. [18]

[Emphases supplied]

The NLRC further ruled that, being regular employees, petitioners were illegally
dismissed because TNS, who had the burden of proving legality in dismissal cases, failed
to show how and why the employment of petitioners was terminated on October 21,
2008.[19] Thus, the NLRC set aside the LA decision and held TNS liable for illegal dismissal,
ordering the latter to pay petitioners their respective backwages and separation pay. [20]

TNS moved for reconsideration, but its motion was denied. Thus, it filed a petition
for certiorari  with prayer for preliminary injunction and/or temporary restraining order
before the CA.

On January 29, 2013, the CA ruled in favor of TNS and opined that the projects assigned
to petitioners were distinct and separate from the other undertakings of TNS; that they
were required to sign project-to-project employment contracts; and that a
corresponding termination report was made to DOLE for every accomplished
project.Further, it stated that the repeated re-hiring of petitioners for at least one (1)
year did not ipso facto convert their status to regular employees. According to the CA,
the mere fact that a project employee had worked on a specific project for more than
one (1) year did not necessarily change his status from project employee to regular or
permanent employee.[21]

As to the issue of grave abuse of discretion, the CA held that the NLRC committed such
abuse when it refused to consider the pieces of evidence submitted by TNS during its
determination of the merits of the latter’s motion for reconsideration. It stressed that
the technical rules of evidence were not binding in labor cases, [22] that even if the
evidence was not submitted to the LA, the fact that it was duly introduced on appeal
before the NLRC was enough basis for it to admit them. [23]

Not in conformity, petitioners filed a motion for reconsideration but it was eventually
denied.

Hence, this petition presenting the following

ARGUMENTS:

I. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN HOLDING

THAT THE PETITIONERS ARE NOT REGULAR EMPLOYEES OF THE RESPONDENT
COMPANY.
 II. WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS ERRED IN RULING
THAT THE HONORABLE NLRC COMMITTED GRAVE ABUSE OF DISCRETION. [24]

Petitioners assert that the factual circumstances of the case undoubtedly show their
regular employment status and that the NLRC correctly exercised its discretion. The
respondents argue otherwise insisting that the decision of the CA was correct.

The Court’s Ruling

At the outset, it must be stressed that the Court is not a trier of facts. In petitions for
review under Rule 45, the Court only resolves pure questions of law and is precluded
from reviewing factual findings of the lower tribunals,subject to certain exceptions.This
case is an exception as “this Court may review factual conclusions of the CA when they
are contrary to those of the NLRC or of the Labor Arbiter.”[25]

Upon review of the records, the evidence failed to clearly, accurately, consistently, and
convincingly show that petitioners were still project employees of TNS.

Article 280 of the Labor Code, as amended, clearly defined a project employee as one
whose employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be performed is seasonal
in nature and the employment is for the duration of the season.Additionally, a project
employee is one whose termination of his employment contract is reported to the
DOLE everytime the project for which he was engaged has been completed.

In their Comment,[26] the respondents stressed that the NLRC decision was mainly
anchored upon the supposed lack of compliance with the termination report
requirement under the applicable DOLE Department Orders. The NLRC ruled that
petitioners were regular employees for having been allowed to continue working after
the last submitted termination report. Thus, TNS submitted, albeit belatedly, the
termination reports from November 2007 up to the last termination report filed on
November 18, 2008, by attaching it to the motion for reconsideration filed before the
NLRC.[27]

Although TNS belatedly submitted the supposed lacking termination reports, it failed to
show the corresponding project employment contracts of petitioners covering the
period indicated in the said termination reports.TNS itself stated in its motion for
reconsideration[28] before the NLRC that the project employee status of the employee
could be proved by the employment contracts signed voluntarily by the employees and
by the termination report filed with the DOLE after the completion of every project.
[29] 
Yet, no project employment contracts were shown. It is well-settled that rules of
evidence shall be liberally applied in labor cases, but this does not detract from the
principle that piecemeal presentation of evidence is simply not in accord with orderly
justice.[30] The NLRC was correct in saying that in the absence of proof that the
subsequent employment of petitioners continued to be on a project-to-project basis
under a contract of employment, petitioners were considered to have become regular
employees.[31]

TNS contended that the repeated and successive rehiring of project employees does not
qualify petitioners as regular employees, as length of service is not the controlling
determinant of the employment tenure of a project employee, but whether the
employment has been fixed for a specific project or undertaking and its completion has
been determined at the time of the engagement of the employee. The repeated rehiring
was only a natural consequence of the experience gained from past service rendered in
other projects.[32]

In Maraguinot, Jr. v. NLRC,[33] the Court held that once a project or work pool employee
has been: (1) continuously, as opposed to intermittently, rehired by the same employer
for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the employer, then the employee must
be deemed a regular employee.

Although it is true that the length of time of the employee’s service is not a controlling
determinant of project employment, it is vital in determining whether he was hired for a
specific undertaking or in fact tasked to perform functions vital, necessary and
indispensable to the usual business or trade of the employer. [34] Petitioners’ successive
re-engagement in order to perform the same kind of work firmly manifested the
necessity and desirability of their work in the usual business of TNS as a market research
facility.[35] Undisputed also is the fact that the petitioners were assigned office-based
tasks from 9:00 o’clock in the morning up to 6:00 o’clock in the evening, at the earliest,
without any corresponding remuneration.

The project employment scheme used by TNS easily circumvented the law and
precluded its employees from attaining regular employment status in the subtlest way
possible.Petitioners were rehired not intermittently, but continuously,contract after
contract, month after month, involving the very same tasks. They practically performed
exactly the same functions over several years. Ultimately,without a doubt, the functions
they performed were indeed vital and necessary to the very business or trade of TNS.

Granting arguendo  that petitioners were rehired intermittently, a careful review of the

project employment contracts of petitioners reveals some other vague provisions.
Oddly, one of the terms and conditions in the said contract stated that:

1. The need for your services being determinable and for a specific project starting
____________ your employment will be for the duration of said project of the
Company, namely Project ___________ which is expected to be finished on
_____________. The Company shall have the option of renewing or extending
the period of this agreement for such time as it may be necessary to complete
the project or because we need further time to determine your competence on
the job.

To the Court, the phrase “because we need further time to determine your competence
on the job” would refer to a probationary employment. Such phrase changes the tenor
of the contract and runs counter to the very nature of a project employment. TNS can,
therefore, extend the contract which was already fixed when it deemed it necessary to
determine whether or not the employee was qualified and fit for the job.  Corollarily,
TNS can likewise pre-terminate the contract not because the specific project was
completed ahead of time, but because of failure to qualify for the job.Consistently, the
terms and conditions of the contract, reads:

4. It is expressly agreed and understood that the Company may terminate your
employment after compliance with procedural requirements of law, without benefit of
termination pay and without any obligation on the part of the Company, in the event of
any breach of any conditions hereof:
a) If the project is completed or cancelled before the expected date of completion as
specified in paragraph 1 hereof;
b) If we should find that you are not qualified, competent or efficient in the above-
stated positions for which you are hired in accordance with the company standards made
known to you at the start of your employment;
xxx
For said reason, at the outset, the supposed project employment contract was highly
doubtful. In determining the true nature of an employment, the entirety of the contract,
not merely its designation or by which it was denominated, is controlling.Though there
is a rule that conflicting provisions in a contract should be harmonized to give effect to
all,[36] in this case, however, harmonization is impossible because project employment
and probationary employment are distinct from one another and cannot co-exist with
each other.Hence, should there be ambiguity in the provisions of the contract, the rule
is that all doubts, uncertainties, ambiguities and insufficiencies should be resolved in
favor of labor.[37] This is in consonance with the constitutional policy of providing full
protection to labor.

In sum, petitioners are deemed to have become regular employees. As such, the burden
of proving the legality of their dismissal rests upon TNS.Having failed to discharge such
burden of proving a just or authorized cause, TNS is liable for illegal dismissal.

Accordingly, as correctly ruled by the NLRC, each petitioner is entitled to backwages

from the time of their dismissal up to the finality of this decision plus separation pay,
following their prayer for such relief in lieu of reinstatement, computed as follows as of
May 29, 2009:

a) Backwages:
October 21, 2008 to May 29, 2009 = 7.27 mos.
P382.00 x 26 days x 7.27 mos. = P72, 205.64
b) Separation Pay:
December 1, 2008 to May 29, 2009 = 5.93 mos.
P382.00 x 26 days x 5.03 mps./12 = P4,908.10
P77,113.80
Finally,nowhere in the NLRC resolution denying TNS’ motion for reconsideration
can it be found it outrightly denied the said motion for belatedly submitting the lacking
termination reports. In resolving the motion, the NLRC also took into consideration the
records of the case, meaning, including those belatedly submitted, and despite review of
these records, it still found the evidence insufficient to overturn its decision against TNS.

To reiterate,the technical rules of evidence are not binding on labor tribunals.Such a

rule, however, is not a license for parties to a case to be remiss in their duty to present
every and all proofs, at the earliest opportunity, that will best support their claim and
help the courts to fully, exhaustively and speedily resolve the controversy.
WHEREFORE, the petition is GRANTED. The January 29, 2013 Decision and the August 7,
2013 Resolution of the Court of Appeals in CA-G.R. SP No. 117637 are SET ASIDE. The
July 23, 2010 Decision of the National Labor Relations Commission is
hereby REINSTATED.

SO ORDERED.

SECOND DIVISION
[ G.R. NO. 149985, May 05, 2006 ]
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC.,
PETITIONER, VS. ROSALINA C. ARCEO,*** RESPONDENT.

RESOLUTION

CORONA, J.:

This is a petition for review under Rule 45 of the 1997 Rules of Civil Procedure
assailing the decision[1] of the Court of Appeals (CA) dismissing the petition for certiorari
filed by petitioner.

In May 1990, respondent Rosalina Arceo (Arceo) applied for the position of telephone
operator with petitioner Philippine Long Distance Telephone Company, Inc. - Tarlac
Exchange (PLDT). She, however, failed the pre-employment qualifying examination.
Having failed the test, Arceo requested PLDT to allow her to work at the latter's office
even without pay. PLDT agreed and assigned her to its commercial section where she
was made to perform various tasks like photocopying documents, sorting out telephone
bills and notices of disconnection, and other minor assignments and activities. After two
weeks, PLDT decided to pay her the minimum wage.

On February 15, 1991, PLDT saw no further need for Arceo's services and decided to fire
her but, through the intervention of PLDT's commercial section supervisor, Mrs. Beatriz
Mataguihan, she was recommended for an on-the-job training on minor traffic work.
When she failed to assimilate traffic procedures, the company transferred her to
auxiliary services, a minor facility.
Subsequently, Arceo took the pre-qualifying exams for the position of telephone
operator two more times but again failed in both attempts.

Finally, on October 13, 1991, PLDT discharged Arceo from employment. She then filed a
case for illegal dismissal before the labor arbiter.[2] On May 11, 1993, the arbiter ruled in
her favor. PLDT was ordered to reinstate Arceo to her "former position or to an
equivalent position." This decision became final and executory.

On June 9, 1993, Arceo was reinstated as casual employee with a minimum wage of
P106 per day. She was assigned to photocopy documents and sort out telephone bills.

On September 3, 1996 or more than three years after her reinstatement, Arceo filed a
complaint for unfair labor practice, underpayment of salary, underpayment of overtime
pay, holiday pay, rest day pay and other monetary claims. She alleged in her complaint
that, since her reinstatement, she had yet to be regularized and had yet to receive the
benefits due to a regular employee.

On August 18, 1997, labor arbiter Dominador B. Saludares ruled that Arceo was already
qualified to become a regular employee. He also found that petitioner denied her all the
benefits and privileges of a regular employee. The dispositive portion of his decision
read:
WHEREFORE, premises considered, judgment is hereby rendered declaring
respondent guilty of wanton disregard of the right of herein complainant to become a
regular employee. Concomitantly, respondent is hereby ordered to pay complainant the
following accrued benefits and privileges from May 11, 1993 up to the present:
1. -------- P181,395.00
Underpayment
2. Overtime pay -------- 2,598.00
3. Premium pay -------- 753.00
4. Allowance for -------- 20,000.00
Uniform
5. Cash gift -------- 9,000.00
6. 13th month -------- 45,946.17
pay
7. Mid-year -------- 14,884.57
bonus
8. Longevity pay -------- 5, 314.50
9. Sick leave -------- 6,354.30
10. Rice Subsidy -------- 27,250.00
11. Zero backlog -------- 2,000.00
 Total P316,496.24
Likewise, respondent is hereby ordered to pay attorney's fees in the sum of
P31,649.62 which is equivalent to ten [percent] (10%) of the amount awarded to
complainant.

The claim for damages is dismissed for lack of merit.[3] (emphasis supplied)

The National Labor Relations Commission (NLRC) took cognizance of the case on
appeal. On November 28, 1997, it affirmed the decision of the labor arbiter only insofar
as it found Arceo eligible to become a regular employee. With respect to her monetary
claims, the NLRC remanded the case to the arbiter for reception of evidence. [4] It held:
It is evidently a facetious averment emanating from the respondent that the
complainant should forever remain a casual employee. Not only is such argument
wanting in merit, it clearly goes against the principle that the conferment of regular
status to an employee is by operation of law. xxx

With respect to the money claims, it is our opinion that the complainant is not entitled
thereto insofar as her claims for 1993 is concerned for having been filed beyond the
three year prescriptive period. However, as it concerns the claims for the period 1994 to
1996, it is Our view that the complainant is entitled, not only because it is within the
prescriptive period but also on account of the continuous and unabated violation of the
respondent in regard to the deprivation to the complainant not only of her rightful
status as a regular employee but more particularly to the grant of the appropriate
salaries and benefits.[5]
PLDT sought a reconsideration of the decision but the NLRC rejected it for lack of
merit.

Rebuffed, PLDT went to the CA via a petition for certiorari [6] and ascribed grave abuse of
discretion on the part of the NLRC for considering Arceo a regular employee by
operation of law.

On June 29, 2001, the CA affirmed the contested decision of the NLRC. It held:
xxx It is doctrinaire that in determining what constitutes regular
employment, what is considered [as] the reasonable connection between the
particular activity performed by the employee in relation to the usual business or
trade of the employer,  i.e. if the work is usually necessary or desirable in the usual
business or trade of the employer. xxx And even granting the argument of petitioner
that the nature of Arceo's work is casual or temporary, still she had been converted
into a regular employee by virtue of the proviso in the second paragraph of Article 280
for having worked with PLDT for more than one (1) year.[7] (emphasis supplied)
The CA likewise denied PLDT's motion for reconsideration. Hence, this petition.

PLDT argues that while Article 280 of the Labor Code "regularizes" a casual employee
who has rendered at least one year of service (whether continuous or broken) the
proviso is subject to the condition that the employment subsists or the position still
exists. Even if Arceo had rendered more than one year of service as a casual employee,
PLDT insisted that this fact alone would not automatically make her a regular employee
since her position had long been abolished. PLDT also argues that it would be an even
greater error if Arceo were to be "regularized" as a telephone operator since she
repeatedly failed the qualifying exams for that position.

Thus, the main issue in this case: is Arceo eligible to become a regular employee of
PLDT? Yes.

Article 280 of the Labor Code, as amended, provides:

Art. 280. Regular and Casual Employment. ─ The provisions of written
agreement to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of engagement of the employee or where the work or services
to be performed is seasonal in nature and employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph. Provided, that, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment
shall continue while such activity exists. (emphasis ours)
Under the foregoing provision, a regular employee is (1) one who is either
engaged to perform activities that are necessary or desirable in the usual trade or
business of the employer or (2) a casual employee who has rendered at least one year
of service, whether continuous or broken, with respect to the activity in which he is
employed.
Under the first criterion, respondent is qualified to be a regular employee. Her work,
consisting mainly of photocopying documents, sorting out telephone bills and
disconnection notices, was certainly "necessary or desirable" to the business of PLDT.
But even if the contrary were true, the uncontested fact is that she rendered service for
more than one year as a casual employee. Hence, under the second criterion, she is still
eligible to become a regular employee.

Petitioner's argument that respondent's position has been abolished, if indeed true,
does not preclude Arceo's becoming a regular employee. The order to reinstate her also
included the alternative to reinstate her to "a position equivalent thereto." Thus, PLDT
can still "regularize" her in an equivalent position.

Moreover, PLDT's argument does not hold water in the absence of proof that the
activity in which Arceo was engaged (like photocopying of documents and sorting of
telephone bills) no longer subsists. Under Article 280, any employee who has rendered
at least one year of service "shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue while such activity
exists." For PLDT's failure to show that the activity undertaken by Arceo has been
discontinued, we are constrained to confirm her "regularization" in that position.

From what date will she be entitled to the benefits of a regular employee? Considering
that she has already worked in PLDT for more than one year at the time she was
reinstated, she should be entitled to all the benefits of a regular employee from June 9,
1993 the day of her actual reinstatement.

PLDT's other contention that the "regularization" of respondent as telephone operator

was not possible since she failed in three qualifying exams for that position is also
untenable. It is understood that she will be regularized in the position she held prior to
the filing of her complaint with the labor arbiter, or, if that position was already
abolished, to an equivalent position. The position of telephone operator was never even
considered in any of the assailed decisions of the labor arbiter, the NLRC or the CA.

WHEREFORE, this petition is DENIED.

Costs against petitioner.

SO ORDERED.
 FIRST DIVISION
[ G.R. No. 90653, November 12, 1990 ]
POLICARPIO CAPULE AND LUIS MADORO, PETITIONERS, VS.
NATIONAL LABOR RELATIONS COMMISSION, YAKULT PHILIPPINES,
INC. AND SUETONI TAKASHI, RESPONDENTS.

DECISION

GANCAYCO, J.:

The center of controversy in this petition is whether or not casual or temporary

employees may be dismissed by the employer before the expiration of the one-year
period of employment.

Private respondent company is engaged in the manufacture of cultured milk which is sold
under the brand name "Yakult."

Petitioners were hired to cut cogon grass and weeds at the back of the factory building
used by private respondents.  They were not required to work on fixed schedule and they
worked on any day of the week on their own discretion and convenience.  The services of
the petitioners were terminated by the private respondent on July 13, 1987.

Thus, petitioners filed a complaint for illegal dismissal with the National Labor Relations
Commission (NLRC).  After the position papers of the parties were filed, a decision was
rendered by the labor arbiter on September 20, 1988 finding the dismissal of the
petitioners to be illegal and requiring the private respondent to reinstate them
immediately to their former position with full backwages and without loss of seniority
rights.  The private respondent appealed to the NLRC.  On September 18, 1989,
Commissioner Conrado B. Maglaya rendered a decision setting aside the appealed
decision and issuing a new judgment ordering private respondent to pay petitioners one
(1) month's pay each based on humanitarian considerations.

Hence, the herein petition for certiorari where petitioners allege that the public
respondent NLRC committed a grave abuse of discretion in rendering
the aforestated decision.  Petitioners invoke the provision of Article 4 of the Labor Code
and of Article 1702 of the Civil Code wherein all doubts should be resolved in favor of
labor.
The petition is devoid of merit.

Article 280 of the Labor Code provides as follows:

"Article 280.  Regular and Casual Employment.  - The provisions of written agreement to

the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph:  Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists."

The Solicitor General opines that the cutting of the cogon grass at the back portion of the
building of private respondents may be considered to be usually necessary or desirable in
the usual business or trade of private respondent.  The Court disagrees.  The usual
business or trade of private respondents is the manufacture of cultured milk.  The cutting
of the cogon grasses in the premises of its factory is hardly necessary or desirable in the
usual business of the private respondents.  Indeed, it is alien thereto.

Thus, petitioners are casual employees who cannot be considered regular employees
under the aforestated provision of the Labor Code.  Nevertheless, they may be considered
regular employees if they have rendered services for at least one (1) year.  When, as in
this case, they were dismissed from their employment before the expiration of the one-
year period they cannot lawfully claim that their dismissal was illegal.

Indeed, private respondent had shown that the services of the petitioners were found to be
unsatisfactory, so, their termination.

WHEREFORE, the petition is DISMISSED for lack of merit without pronouncement as

to costs.

SO ORDERED.

EN BANC
[ G.R. No. 109902, August 02, 1994 ]
 ALU-TUCP, REPRESENTING MEMBERS: ALAN BARINQUE, WITH 13
OTHERS, NAMELY: ENGR. ALAN G. BARINQUE, ENGR. DARRELL LEE
ELTAGONDE, EDUARD H. FOOKSON, JR., ROMEO R. SARONA,
RUSSELL GACUS, JERRY BONTILAO, EUSEBIO MARIN, JR., LEONIDO
ECHAVEZ, BONIFACIO MEJOS, EDGAR S. BONTUYAN, JOSE G. GAR-
GUENA, JR., OSIAS B. DANDASAN, AND GERRY I. FETALVERO,
PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION AND
NATIONAL STEEL CORPORATION (NSC), RESPONDENTS.

DECISION

FELICIANO, J.:

In this Petition for Certiorari, petitioners assail the Resolution of the National Labor

Relations Commission ("NLRC") dated 8 January 1993 which declared petitioners to be
project employees of private respondent National Steel Corporation ("NSC"), and the
NLRC's subsequent Resolution of 15 February 1993, denying petitioners' motion for
reconsideration.

Petitioners plead that they had been employed by respondent NSC in connection with its
Five Year Expansion Program (FAYEP I & II)  for varying lengths of time when they
[1]

were separated from NSC's service:

Employe D Nature of Separa

e ate Employment ted
Employed
1.      Alan 5- 8-31-
Engineer 1
Barinque 14-82 91
2.      Jerr 8- 6-30-
Engineer 1
y Bontilao 05-85 92
3.      Edg 1 to
Chainman
ar Bontuyan 1-03-82 present
4.      Osia 9-
Utilityman 1991
s Dandasan 21-82
5.      Leo 6- Eng. 6-30-
nido Echavez 16-82 Assistant 92
6.      Darr 5- 8-31-
Engineer 1
ell Eltagonde 20-85 91
7.      Gerr 4- Mat. regula
y Fetalvero 08-85 Expediter rized
8.      Edu 9- Eng. 8-31-
 ard Fookson 20-84 Assistant 91
9.      Russ 1- 6-30-
Engineer 1
ell Gacus 30-85 92
10.    Jose 3- Warehous to
Garguena 02-81 eman present
11.    Eus 7- Survey 8-31-
ebio Marin, Jr. 07-83 Aide 91
12.    Bon 1 Surv.
1992
ifacio Mejos 1-17-82 Party Head
13.    Ro 2- Machine 8-31-
meo Sarona 26-83 Operator 91[2]

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 complaints were consolidated and after hearing, the Labor Arbiter in a Decision
dated 7 June 1991, declared petitioners "regular project employees who shall continue
their employment as such for as long as such [project] activity exists," but entitled to the
salary of a regular employee pursuant to the provisions in the collective bargaining
agreement. It also ordered payment of salary differentials. [3]

Both parties appealed to the NLRC from that decision. Petitioners argued that they were
regular, not project, employees. Private respondent, on the other hand, claimed that
petitioners are project employees as they were employed to undertake a specific project --
NSC's Five Year Expansion Program (FAYEP I & II).

The NLRC in its questioned resolutions modified the Labor Arbiter's decision. It affirmed
the Labor Arbiter's holding that petitioners were project employees since they were hired
to perform work in a specific undertaking - the Five Year Expansion Program, the
completion of which had been determined at the time of their engagement and which
operation was not directly related to the business of steel manufacturing. The NLRC,
however, set aside the award to petitioners of the same benefits enjoyed
by regular employees for lack of legal and factual basis.

Deliberating on the present Petition for Certiorari, the Court considers that petitioners

have failed to show any grave abuse of discretion or any act without or in excess of
jurisdiction on the part of the NLRC in rendering its questioned resolutions of 8 January
1993 and 15 February 1993.

The law on the matter is Article 280 of the Labor Code which reads in full:
 "Article 280. Regular and Casual Employment -- The provisions of the written
agreement to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration
of the season.
An employment shall be deemed to be casual if it is not covered by the preceding
paragraph: Provided, That, any employee who has rendered at least one year service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists." (Emphases supplied)

Petitioners argue that they are "regular" employees of NSC because: (i) their jobs are
"necessary, desirable and work-related to private respondent's main business, steel-
making"; and (ii) they have rendered service for six (6) or more years to private
respondent NSC. [4]

The basic issue is thus whether or not petitioners are properly characterized as "project
employees" rather than "regular employees" of NSC. This issue relates, of course, to an
important consequence: the services of project employees are co-terminous with the
project and may be terminated upon the end or completion of the project for which they
were hired.  Regular employees, in contrast, are legally entitled to remain in the service
[5]

of their employer until that service is terminated by one or another of the recognized
modes of termination of service under the Labor Code. [6]

It is evidently important to become clear about the meaning and scope of the term
"project" in the present context. The "project" for the carrying out of which "project
employees" are hired would ordinarily have some relationship to the usual business of the
employer. Exceptionally, the "project" undertaking might not have an ordinary or normal
relationship to the usual business of the employer. In this latter case, the determination of
the scope and parameters of the "project" becomes fairly easy. It is unusual (but still
conceivable) for a company to undertake a project which has absolutely no relationship to
the usual business of the company; thus, for instance, it would be an unusual steel-
making company which would undertake the breeding and production of fish or the
cultivation of vegetables. From the viewpoint, however, of the legal characterization
problem here presented to the Court, there should be no difficulty in designating the
employees who are retained or hired for the purpose of undertaking fish culture or the
production of vegetables as "project employees," as distinguished from ordinary or
"regular employees," so long as the duration and scope of the project were determined or
specified at the time of engagement of the "project employees."  For, as is evident from
[7]

the provisions of Article 280 of the Labor Code, quoted earlier, the principal test for
determining whether particular employees are properly characterized as "project
employees" as distinguished from "regular employees," is whether or not the "project
employees" were assigned to carry out a "specific project or undertaking," the duration
(and scope) of which were specified at the time the employees were engaged for that
project.

In the realm of business and industry, we note that "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. A construction company ordinarily
carries out two or more discrete identifiable construction projects: e.g., a twenty-five-
storey hotel in Makati; a residential condominium building in Baguio City; and a
domestic air terminal in Iloilo City. 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.

The term "project" 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."

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
[8]

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.

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:"

"It is well established by the facts and evidence on record that herein 13
complainants were hired and engaged for specific activities or undertaking the period of
which has been determined at time of hiring or engagement. It is of public knowledge
and which this Commission can safely take judicial notice that the expansion program
(FAYEP) of respondent NSC consist of various phases [of] project components which are
being executed or implemented independently or simultaneously from each other. x x x.
In other words, the employment of each 'project worker' is dependent and co-
terminous with the completion or termination of the specific activity or undertaking [for
which] he was hired which has been pre-determined at the time of engagement. Since,
there is no showing that they (13 complainants) were engaged to perform work-related
activities to the business of respondent which is steel-making, there is no logical and
legal sense of applying to them the proviso under the second paragraph of Article 280 of
the Labor Code, as amended.
 x x x                                                              x x x                                                                 x
xx
The present case therefore strictly falls under the definition of 'project
employees' on paragraph one of Article 280 of the Labor Code, as amended. Moreover,
it has been held that the length of service of a project employee is not the controlling
test of employment tenure but whether or not 'the employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee'. (See Hilario Rada v. NLRC,
G.R. No. 96078, January 9, 1992; and Sandoval Shipping, Inc. v. NLRC, 136 SCRA 674
(1985)." [9]

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 [10]

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.

In the case of Mercado, Sr. vs. National Labor Relations Commission,  this Court ruled [11]

that the proviso in the second paragraph of Article 280 relates only to casual
employees and is not applicable to those who fall within the definition of said Article's
first paragraph, i.e., project employees. The familiar grammatical rule is that a proviso is
to be construed with reference to the immediately preceding part of the provision to
which it is attached, and not to other sections thereof, unless the clear legislative intent is
to restrict or qualify not only the phrase immediately preceding the proviso but also
earlier provisions of the statute or even the statute itself as a whole. No such intent is
observable in Article 280 of the Labor Code, which has been quoted earlier.

ACCORDINGLY, in view of the foregoing, the Petition for Certiorari is

hereby DISMISSED for lack of merit. The Resolutions of the NLRC dated 8 January
1993 and 15 February 1993 are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 125837, October 06, 2004 ]
 REYNALDO CANO CHUA, DOING BUSINESS UNDER THE NAME &
STYLE PRIME MOVER CONSTRUCTION DEVELOPMENT, VS. COURT
OF APPEALS, SOCIAL SECURITY COMMISSION, SOCIAL SECURITY
SYSTEM, ANDRES PAGUIO, PABLO CANALE, RUEL PANGAN, AURELIO
PAGUIO, ROLANDO TRINIDAD, ROMEO TAPANG AND CARLOS
MALIWAT, RESPONDENTS.

DECISION

TINGA, J,:

This is a petition for review of the Decision[1] of the Court of Appeals in CA-G.R. CV

No. 38269 dated 06 March 1996, and its Resolution dated 30 July 1996 denying
petitioner’s Motion for Reconsideration,[2] affirming the Order of the Social Security
Commission (SSC) dated 1 February 1995[3] which held that private respondents were
regular employees of the petitioner and ordered petitioner to pay the Social Security
System (SSS) for its unpaid contributions, as well as penalty for the delayed remittance
thereof.

On 20 August 1985, private respondents Andres Paguio, Pablo Canale, Ruel Pangan,
Aurelio Paguio, Rolando Trinidad, Romeo Tapang and Carlos Maliwat (hereinafter
referred to as respondents) filed a Petition[4] with the SSC for SSS coverage and
contributions against petitioner Reynaldo Chua, owner of Prime Mover Construction
Development, claiming that they were all regular employees of the petitioner in his
construction business.[5]

Private respondents claimed that they were assigned by petitioner in his various
construction projects continuously in the following capacity, since the period

indicated, and with the corresponding basic salaries, [6] to wit:

P
Andres Paguio Carpenter 1977
42/day
Pablo Canale Mason 1977 42/day
Ruel Pangan Mason 1979 39/day
Aurelio Paguio Fine grading 1979 42/day
Romeo Tapang Fine grading 1979 42/day
1983
Rolando Trinidad Carpenter 39/day
(Jan.)
 Carlos Maliwat Mason 1977 42/day

Private respondents alleged that petitioner dismissed all of them without justifiable
grounds and without notice to them and to the then Ministry of Labor and Employment.
They further alleged that petitioner did not report them to the SSS for compulsory
coverage in flagrant violation of the Social Security Act.[7]

In his Answer,[8] petitioner claimed that private respondents had no cause of action

against him, and assuming there was any, the same was barred by prescription and
laches. In addition, he claimed that private respondents were not regular employees,
but project employees whose work had been fixed for a specific project or undertaking
the completion of which was determined at the time of their engagement. This being
the case, he concluded that said employees were not entitled to coverage under the
Social Security Act.[9]

Meanwhile, the SSS filed a Petition in Intervention[10] alleging that it has an interest in

the petition filed by private respondents as it is charged with the implementation and
enforcement of the provisions of the Social Security Act. The SSS stated that it is the
mandatory obligation of every employer to report its employees to the SSS for coverage
and to remit the required contribution, including the penalty imposed for late premium
remittances.

On 01 February 1995, the SSC issued its Order[11] which ruled in favor of private

respondents. The SSC, relying on NLRC Case No. RAB-III-8-2373-85, [12] declared private
respondents to be petitioner’s regular employees.[13] It ordered petitioner to pay the SSS
the unpaid SS/EC and Medicare contributions plus penalty for the delayed remittance
thereof, without prejudice to any other penalties which may have accrued. [14] The SSC
denied the Motion for Reconsideration[15] of petitioner for lack of merit.[16]

Petitioner elevated the matter to the Court of Appeals via a Petition for Review.[17] He
claimed that private respondents were project employees, whose periods of
employment were terminated upon completion of the project. Thus, he claimed, no
employer-employee relation existed between the parties. [18] There being no employer-
employee relationship, private respondents are not entitled to coverage under the
Social Security Act.[19] In addition, petitioner claimed that private respondents’ length of
service did not change their status from project to regular employees. [20]

Moreover, granting that private respondents were entitled to coverage under the Act,
petitioner claimed that the SSC erred in imposing penalties since his failure to include
private respondents under SSS coverage was neither willful nor deliberate, but due to
the honest belief that project employees are not regular employees. [21] Likewise, he
claimed that the SSC erred in ordering payment of contributions and penalties even for
long periods between projects when private respondents were not working. [22]

Petitioner also questioned the failure to apply the rules on prescription of actions and of
laches, claiming that the case, being one for the injury to the rights of the private
respondents, should have been filed within four (4) years from the time their cause of
action accrued, or from the time they were hired as project employees. He added that
private respondents “went into a long swoon, folded their arms and closed their
eyes”[23] and filed their claim only in 1985, or six (6) years or eight (8) years after they
were taken in by petitioner.[24]

In resolving the petition, the Court of Appeals synthesized the issues in the petition, to
wit: (1) whether private respondents were regular employees of petitioner, and
whether their causes of action as such are barred by prescription or laches; (2) if so,
whether petitioner is now liable to pay the SSS contributions and penalties during the
period of employment.[25]

The Court of Appeals, citing Article 280 of the Labor Code,[26] declared that private
respondents were all regular employees of the petitioner in relation to certain activities
since they all worked either as masons, carpenters and fine graders in petitioner’s
various construction projects for at least one year, and that their work was necessary
and desirable to petitioner’s business which involved the construction of roads and
bridges.[27] It cited the case of Mehitabel Furniture Company, Inc. v. NLRC,[28] particularly
the ruling therein which states:
By petitioner’s own admission, the private respondents have been hired to work
on certain special orders that as a matter of business policy it cannot decline. These
projects are necessary or desirable in its usual business or trade, otherwise they would
not have accepted …. Significantly, such special orders are not really seasonal but more
or less regular, requiring the virtually continuous services of the “temporary
workers.” The NLRC also correctly observed that “if we were to accept respondent’s
theory, it would have no regular workers because all of its orders would be special
undertakings or projects.” The petitioner could then hire all its workers on a contract
basis only and prevent them from attaining permanent status….
Furthermore, the NLRC has determined that the private respondents have worked for
more than one year in the so-called “special projects” of the petitioner and so fall under
the second condition specified in the above-quoted provision (Article 280, Labor Code).
[29]

The Court of Appeals rejected the claim of prescription, stating that the filing of
private respondents’ claims was well within the twenty (20)-year period provided by the
Social Security Act.[30] It found that the principle of laches could not also apply to the
instant case since delay could not be attributed to private respondents, having filed the
case within the prescriptive period, and that there was no evidence that petitioner
lacked knowledge that private respondents would assert their rights. [31]

Petitioner filed a Motion for Reconsideration,[32] claiming that the Court of Appeals

overlooked (1) the doctrine that length of service of a project employee is not the
controlling test of employment tenure, and (2) petitioner’s failure to place private
respondents under SSS coverage was in good faith. The motion was denied for lack of
merit.[33]

In the present Petition for Review, petitioner again insists that private respondents were
not regular, but project, employees and thus not subject to SSS coverage. In addition,
petitioner claims that assuming private respondents were subject to SSS coverage, their
petition was barred by prescription and laches. Moreover, petitioner invokes the
defense of good faith, or his honest belief that project employees are not regular
employees under Article 280 of the Labor Code.

Petitioner’s arguments are mere reiterations of his arguments submitted before the SSC
and the Court of Appeals. More importantly, petitioner wants this Court to review
factual questions already passed upon by the SSC and the Court of Appeals which are
not cognizable by a petition for review under Rule 45. Well-entrenched is the rule that
the Supreme Court’s jurisdiction in a petition for review is limited to reviewing or
revising errors of law allegedly committed by the appellate court, the findings of fact
being generally conclusive on the Court and it is not for the Court to weigh evidence all
over again.[34]

Stripped of the lengthy, if not repetitive, disquisition of the private parties in the case,
and also of the public respondents, on the nature of private respondents’ employment,
the controversy boils down to one issue: the entitlement of private respondents to
compulsory SSS coverage.
The Social Security Act was enacted pursuant to the policy of the government “to
develop, establish gradually and perfect a social security system which shall be suitable
to the needs of the laborers throughout the Philippines, and shall provide protection
against the hazards of disability, sickness, old age and death.” [35] It provides for
compulsory coverage of all employees not over sixty years of age and their employers.
[36]

Well-settled is the rule that the mandatory coverage of Republic Act No. 1161, as
amended, is premised on the existence of an employer-employee relationship, the
essential elements of which are: (a) selection and engagement of the employee; (b)
payment of wages; (c) the power of dismissal; and (d) the power of control with regard
to the means and methods by which the work is to be accomplished, with the power of
control being the most determinative factor.[37]

There is no dispute that private respondents were employees of petitioner. Petitioner

himself admitted that they worked in his construction projects, [38] although the period of
their employment was allegedly co-terminus with their phase of work. [39] Even without
such admission from petitioner, the existence of an employer-employee relationship
between the parties can easily be determined by the application of the “control
test,”[40] the elements of which are enumerated above. It is clear that private
respondents are employees of petitioner, the latter having control over the results of
the work done, as well as the means and methods by which the same were
accomplished. Suffice it to say that regardless of the nature of their employment,
whether it is regular or project, private respondents are subject of the compulsory
coverage under the SSS Law, their employment not falling under the exceptions
provided by the law.[41] This rule is in accord with the Court’s ruling in Luzon Stevedoring
Corp. v. SSS[42] to the effect that all employees, regardless of tenure, would qualify for
compulsory membership in the SSS, except those classes of employees contemplated in
Section 8(j) of the Social Security Act.[43]

This Court also finds no reason to deviate from the finding of the Court of Appeals
regarding the nature of employment of private respondents. Despite the insistence of
petitioner that they were project employees, the facts show that as masons, carpenters
and fine graders in petitioner’s various construction projects, they performed work
which was usually necessary and desirable to petitioner’s business which involves
construction of roads and bridges. In Violeta v. NLRC,[44] this Court ruled that to be
exempted from the presumption of regularity of employment, the agreement between
a project employee and his employer must strictly conform to the requirements and
conditions under Article 280 of the Labor Code. It is not enough that an employee is
hired for a specific project or phase of work. There must also be a determination of, or a
clear agreement on, the completion or termination of the project at the time the
employee was engaged if the objectives of Article 280 are to be achieved. [45] This second
requirement was not met in this case.

Moreover, while it may be true that private respondents were initially hired for specific
projects or undertakings, the repeated re-hiring and continuing need for their services
over a long span of time—the shortest being two years and the longest being eight—
have undeniably made them regular employees.[46] This Court has held that an
employment ceases to be co-terminus with specific projects when the employee is
continuously rehired due to the demands of the employer’s business and re-engaged for
many more projects without interruption.[47] The Court likewise takes note of the fact
that, as cited by the SSC, even the National Labor Relations Commission in a labor case
involving the same parties, found that private respondents were regular employees of
the petitioner.[48]

Another cogent factor militates against the allegations of the petitioner. In the
proceedings before the SSC and the Court of Appeals, petitioner was unable to show
that private respondents were appraised of the project nature of their employment, the
specific projects themselves or any phase thereof undertaken by petitioner and for
which private respondents were hired. He failed to show any document such as private
respondents’ employment contracts and employment records that would indicate the
dates of hiring and termination in relation to the particular construction project or
phases in which they were employed.[49] Moreover, it is peculiar that petitioner did not
show proof that he submitted reports of termination after the completion of his
construction projects, considering that he alleges that private respondents were hired
and rehired for various projects or phases of work therein.

Anent the issue of prescription, this Court rules that private respondents’ right to file
their claim had not yet prescribed at the time of the filing of their petition, considering
that a mere eight (8) years had passed from the time delinquency was discovered or the
proper assessment was made. Republic Act No. 1161, as amended, prescribes a period
of twenty (20) years, from the time the delinquency is known or assessment is made by
the SSS, within which to file a claim for non-remittance against employers. [50]
Likewise, this Court is in full accord with the findings of the Court of Appeals that private
respondents are not guilty of laches. The principle of laches or “stale demands” ordains
that the failure or neglect, for an unreasonable and unexplained length of time, to do
that which by exercising due diligence could or should have been done earlier, or the
negligence or omission to assert a right within a reasonable time, warrants a
presumption that the party entitled to assert it either has abandoned it or declined to
assert it.[51] In the instant case, this Court finds no proof that private respondents had
failed or neglected to assert their right, considering that they filed their claim within the
period prescribed by law.

This Court finds no merit in petitioner’s protestations of good faith. In United Christian
Missionary Society v. Social Security Commission,[52] this Court ruled that good faith or
bad faith is irrelevant for purposes of assessment and collection of the penalty for
delayed remittance of premiums, since the law makes no distinction between an
employer who professes good reasons for delaying the remittance of premiums and
another who deliberately disregards the legal duty imposed upon him to make such
remittance.[53] For the same reasons, petitioner cannot now invoke the defense of good
faith.

WHEREFORE, the Petition is DENIED. The Decision and Resolution of the Court of

Appeals promulgated on 6 March 1996 and 30 July 1996 respectively, are AFFIRMED.
Costs against petitioner.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 96078, January 09, 1992 ]
HILARIO RADA, PETITIONER, VS. NATIONAL LABOR RELATIONS
COMMISSION (SECOND DIVISION) AND PHILNOR CONSULTANTS AND
PLANNERS, INC., RESPONDENTS.

DECISION

REGALADO, J.:
In this special civil action for certiorari, petitioner Rada seeks to annul the decision of
respondent National Labor Relations Commission (NLRC), dated November 19, 1990,
reversing the decision of the labor arbiter which ordered the reinstatement of petitioner
with backwages and awarded him overtime pay.[1]

The facts, as stated in the Comment of private respondent Philnor Consultants and
Planners, Inc. (Philnor), are as follows:

"Petitioner's initial employment with this Respondent was under a 'Contract of

Employment for a Definite Period' dated July 7, 1977, copy of which is hereto attached
and made an integral part hereof as Annex A whereby Petitioner was hired as 'Driver' for
the construction supervision phase of the Manila North Expressway Extension, Second
Stage (hereinafter referred to as MNEE Stage 2) for a term of ‘about 24 months effective
July 1, 1977’.

xxx

"Highlighting the nature of Petitioner's employment, Annex A specifically provides as

follows:

‘It is hereby understood that the Employer does not have a continuing need for the
services of the Employee beyond the termination date of this contract and that
Employee's services shall automatically, and without notice, terminate upon the
completion of the above specified phase of the project; and that it is further understood
that the engagement of his/her services is co-terminus with the same and not with the
whole project or other phases thereof wherein other employees of similar position as
he/she have been hired.’ (Par. 7, underscoring supplied)

"Petitioner's first contract of employment expired on June 30, 1979. Meanwhile, the main
project, MNEE Stage 2, was not finished on account of various constraints, not the least
of which was inadequate funding, and the same was extended and remained in progress
beyond the original period of 23 years. Fortunately for the Petitioner, at the time the first
contract of employment expired, Respondent was in need of Driver for the extended
project. Since Petitioner had the necessary experience and his performance under the first
contract of employment was found satisfactory, the position of Driver was offered to
Petitioner, which he accepted. Hence a second Contract of Employment for a Definite
Period of 10 months, that is, from July 1, 1979 to April 30, 1980 was executed between
Petitioner and Respondent on July 7, 1979. x x x

"In March 1980 some of the areas or phases of the project were completed, but the bulk
of the project was yet to be finished. By that time some of those project employees whose
contracts of employment expired or were about to expire because of the completion of
portions of the project were offered another employment in the remaining portion of the
project. Petitioner was among those whose contract was about to expire, and since his
service performance was satisfactory, respondent renewed his contract of employment in
April 1980, after Petitioner agreed to the offer. Accordingly, a third contract of
employment for a definite period was executed by and between the Petitioner and the
Respondent whereby the Petitioner was again employed as Driver for 19 months, from
May 1, 1980 to November 30, 1981, x x x.

"This third contract of employment was subsequently extended for a number of times, the
last extension being for a period of 3 months, that is, from October 1, 1985 to December
31, 1985, x x x.

"The last extension, from October 1, 1985 to December 31, 1985 (Annex E) covered by
an ‘Amendment to the Contract of Employment with a Definite Period’, was not
extended any further because Petitioner had no more work to do in the project. This last
extension was confirmed by a notice on November 28, 1985 duly acknowledged by the
Petitioner the very next day, x x x.

"Sometime in the 2nd week of December 1985, Petitioner applied for ‘Personnel
Clearance’ with Respondent dated December 9, 1985 and acknowledged having received
the amount of P3,796,20 representing conversion to cash of unused leave credits and
financial assistance. Petitioner also released Respondent from all obligations and/or
claims, etc. in a ‘Release, Waiver and Quitclaim’ x x x."[2]

Culled from the records, it appears that on May 20, 1987, petitioner filed before the
NLRC, National Capital Region, Department of Labor and Employment, a Complaint for
non-payment of separation pay and overtime pay. On June 3, 1987, Philnor filed its
Position Paper alleging, inter alia, that petitioner was not illegally terminated since the
project for which he was hired was completed; that he was hired under three distinct
contracts of employment, each of which was for a definite period, all within the estimated
period of MNEE Stage 2 Project, covering different phases or areas of the said project;
that his work was strictly confined to the MNEE Stage 2 Project and that he was never
assigned to any other project of Philnor; that he did not render overtime services and that
there was no demand or claim for him for such overtime pay; that he signed a "Release,
Waiver and Quitclaim" releasing Philnor from all obligations and claims; and that
Philnor's business is to provide engineering consultancy services, including supervision
of construction services, such that it hires employees according to the requirements of the
project manning schedule of a particular contract.[3]

On July 2, 1987, petitioner filed an Amended Complaint alleging that he was illegally
dismissed and that he was not paid overtime pay although he was made to render three
hours overtime work from Monday to Saturday for a period of three years.
On July 7, 1987, petitioner filed his Position Paper claiming that he was illegally
dismissed since he was a regular employee entitled to security of tenure; that he was not a
project employee since Philnor is not engaged in the construction business as to be
covered by Policy Instructions No. 20; that the contract of employment for a definite
period executed between him and Philnor is against public policy and a clear
circumvention of the law designed merely to evade any benefits or liabilities under the
statute; that his position as driver was essential, necessary and desirable to the conduct of
the business of Philnor; that he rendered overtime work until 6:00 P.M. daily except
Sundays and holidays and, therefore, he was entitled to overtime pay.[4]

In his Reply to Respondent's Position Paper, petitioner claimed that he was a regular
employee pursuant to Article 278(c) of the Labor Code and, thus, he cannot be terminated
except for a just cause under Article 280 of the Code; and that the public respondent's
ruling in Quiwa vs. Philnor Consultants and Planners, Inc. [5] is not applicable to his case
since he was an administrative employee working as a company driver, which position
still exists and is essential to the conduct of the business of Philnor even after the
completion of his contract of employment. [6] Petitioner likewise avers that the contract of
employment for a definite period entered into between him and Philnor was a ploy to
defeat the intent of Article 280 of the Labor Code.

On July 28, 1987, Philnor filed its Respondent's Supplemental Position Paper, alleging
therein that petitioner was not a company driver since his job was to drive the employees
hired to work at the MNEE Stage 2 Project to and from the field office at Sto. Domingo
Interchange, Pampanga; that the office hours observed in the project were from 7:00
A.M. to 4:00 P.M., Mondays through Saturdays; that Philnor adopted the policy of
allowing certain employees, not necessarily the project driver, to bring home project
vehicles to afford fast and free transportation to and from the project field office
considering the distance between the project site and the employees’ residences, to avoid
project delays and inefficiency due to employee tardiness caused by transportation
problems; that petitioner was allowed to use a project vehicle which he used to pick up
and drop off some ten employees along Epifanio de los Santos Avenue (EDSA), on his
way home to Marikina, Metro Manila; that when he was absent or on leave, another
employee living in Metro Manila used the same vehicle in transporting the same
employees; that the time used by petitioner to and from his residence to the project site
from 5:30 A.M. to 7:00 A.M. and from 4:00 P.M. to 6:00 P.M., or about three hours
daily, was not overtime work as he was merely enjoying the benefit and convenience of
free transportation provided by Philnor, otherwise without such vehicle he would have
used at least four hours by using public transportation and spent P12.00 daily as fare; that
in the case of Quiwa vs. Philnor Consultants and Planners Inc., supra, the NLRC upheld
Philnor's position that Quiwa was a project employee and he was not entitled to
termination pay under Policy Instructions No. 20 since his employment was coterminous
with the completion of the project.
On August 25, 1987, Philnor filed its Respondent's Reply/Comments to Complainant's
Rejoinder and Reply, submitting therewith two letters dated January 5, 1985 and
February 6, 1985, signed by MNEE Stage 2 Project employees, including herein
petitioner, where they asked what termination benefits could be given to them as the
MNEE Stage 2 Project was nearing completion, and Philnor’s letter-reply dated February
22, 1985 informing them that they are not entitled to termination benefits as they are
contractual/project employees.

On August 31, 1989, Labor Arbiter Dominador M. Cruz rendered a decision, [7] with the
following dispositive portion:

"WHEREFORE, in view of all the foregoing considerations, judgment is hereby

rendered:

(1) Ordering the respondent company to re-instate the complainant to his former position
without loss of seniority right and other privileges with full backwages from the time of
his dismissal to his actual reinstatement;

(2) Directing the respondent company to pay the complainant overtime pay for the three
excess hours of work performed during working days from January 1983 to December
1985; and

(3) Dismissing all other claims for lack of merit

SO ORDERED."

Acting on Philnor's appeal, the NLRC rendered its assailed decision dated November 19,
1990, setting aside the labor arbiter's aforequoted decision and dismissing petitioner's
complaint.

Hence this petition wherein petitioner charges respondent NLRC with grave abuse of
discretion amounting to lack of jurisdiction for the following reasons:

1. The decision of the labor arbiter, dated August 31, 1989, has already become final
and executory;
2. The case of Quiwa vs. Philnor Consultants and Planners, Inc. is not binding nor is
it applicable to this case;
3. The petitioner is a regular employee with eight years and five months of
continuous services for his employer, private respondent Philnor;
4. The claims for overtime services, reinstatement and full backwages are valid and
meritorious and should have been sustained; and
5. The decision of the labor arbiter should be reinstated as it is more in accord with
the facts, the law and evidence.
The petition is devoid of merit.

1. Petitioner questions the jurisdiction of respondent NLRC in taking cognizance of

the appeal filed by Philnor in spite of the latter's failure to file a supersedeas bond
within ten days from receipt of the labor arbiter's decision, by reason of which the
appeal should be deemed to have been filed out of time. It will be noted, however,
that Philnor was able to file a bond although it was made beyond the 10-day
reglementary period.

While it is true that the payment of the supersedeas bond is an essential

requirement in the perfection of an appeal, however, where the fee had been paid
although payment was delayed, the broader interests of justice and the desired
objective of resolving controversies on the merits demands that the appeal be
given due course. Besides, it was within the inherent power of the NLRC to have
allowed late payment of the bond, considering that the aforesaid decision of the
labor arbiter was received by private respondent on October 3, 1989 and its appeal
was duly filed on October 13, 1989. However, said decision did not state the
amount awarded as backwages and overtime pay, hence the amount of the
supersedeas bond could not be determined. It was only in the order of the NLRC
of February 16, 1990 that the amount of the supersedeas bond was specified and
which bond, after an extension granted by the NLRC, was timely filed by private
respondent.

Moreover, as provided by Article 221 of the Labor Code, "in any proceeding
before the Commission or any of the Labor Arbiters, the rules of evidence
prevailing in Courts of law or equity shall not be controlling and it is the spirit and
intention of this Code that the Commission and its members and the Labor
Arbiters shall use every and all reasonable means to ascertain the facts in each
case speedily and objectively without regard to technicalities of law or procedure,
all in the interest of due process. [8] Finally, the issue of timeliness of the appeal
being an entirely new and unpleaded matter in the proceedings below it may not
now be raised for the first time before this Court.[9]

2. Petitioner postulates that as a regular employee, he is entitled to security of tenure,

hence he cannot be terminated without cause. Private respondent Philnor believes
otherwise and asserts that petitioner is merely a project employee who was
terminated upon the completion of the project for which he was employed.

In holding that petitioner is a regular employee, the labor arbiter found that:

"x x x There is no question that the complainant was employed as driver in the
respondent company continuously from July 1, 1977 to December 31, 1985 under
various contracts of employment. Similarly, there is no dispute that respondent
Philnor Consultants & Planners, Inc., as its business name connotes, has been
engaged in providing to its client (e) le engineering consultancy services. The
record shows that while the different labor contracts executed by the parties
stipulated definite periods of engaging the services of the complainant, yet the
latter was suffered to continue performing his job upon the expiration of one
contract and the renewal of another. Under these circumstances, the complainant
has obtained the status of regular employee, it appearing that he has worked
without fail for almost eight years, a fraction of six months considered as one
whole year, and that his assigned task as driver was necessary and desirable in the
usual trade/business of the respondent employer. Assuming to be true, as spelled
out in the employment contract, that the Employer has no ‘continuing need for the
services of the Employe(e) beyond the termination date of this contract and that
the Employee's services shall automatically, and without notice, terminate upon
completion of the above specified phase of the project’, still we cannot see our
way clear why the complainant was hired and his services engaged contract after
contract straight from 1977 to 1985 which, to our considered view, lends credence
to the contention that he worked as regular driver ferrying early in the morning
office personnel to the company main office in Pampanga and bringing them back
late in the afternoon to Manila, and driving company executives for inspection of
construction projects, as well as engineers and workers to the jobsites. All told, we
believe that the complainant, under the environmental facts obtaining in the case at
bar, is a regular employee, the provision of written agreement to the contrary
notwithstanding and regardless of the oral understanding of the parties. x x x" [10]

On the other hand, respondent NLRC declared that, as between the uncorroborated
and unsupported assertions of petitioner and those of private respondent which are
supported by documents, greater credence should be given the latter. It further
held that:

"Complainant was hired in a specific project or undertaking as driver. While such

project was still on-going he was hired several times with his employment period
fixed every time his contract was renewed. At the completion of the specific
project or undertaking his employment contract was not renewed.

"We reiterate our ruling in the case of (Quiwa) vs. Philnor Consultants and
Planners, Inc., NLRC RAB III 5-1738-84, it being applicable in this case, viz:

"x x x While it is true that the activities performed by him were necessary or
desirable in the usual business or trade of the respondent as consultants, planners,
contractor and while it is also true that the duration of his employment was for a
period of about seven years, these circumstances did not make him a regular
employee in contemplation of Article 281 of (the) Labor Code. x x x"[11]
Our ruling in Sandoval Shipyards, Inc. vs. National Labor Relations Commission,
et al.[12] is applicable to the case at bar. Thus:

"We hold that private respondents were project employees whose work was
coterminous with the project for which they were hired. Project employees, as
distinguished from regular or non-project employees, are mentioned in section 281
of the Labor Code as those ‘where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee.’

"Policy Instructions No. 20 of the Secretary of Labor, which was issued to

stabilize employer?employee relations in the construction industry, provides:

‘Project employees are those employed in connection with a particular

construction project. Non-project (regular) employees are those employed by a
construction company without reference to any particular project.

‘Project employees are not entitled to termination 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 number of projects in which they have been employed
by a particular construction company. Moreover, the company is not required to
obtain clearance from the Secretary of Labor in connection with such termination.’

"The petitioner cited three of its own cases wherein the National Labor Relations
Commission, Deputy Minister of Labor and Employment Inciong and the Director
of the National Capital Region held that the layoff of its project employees was
lawful. Deputy Minister Inciong in TFU Case No. 1530, In Re Sandoval
Shipyards, Inc. Application for Clearance to Terminate Employees, rendered the
following ruling on February 26, 1979:

‘We feel that there is merit in the contention of the applicant corporation. To our
mind, the employment of the employees concerned were fixed for a specific
project or undertaking. For the nature of the business the corporation is engaged
into is one which will not allow it to employ workers for an indefinite period.

‘It is significant to note that the corporation does not construct vessels for sale or
otherwise which will demand continuous productions of ships and will need
permanent or regular workers. It merely accepts contracts for shipbuilding or for
repair of vessels from, third parties and, only, on occasion when it has work
contract of this nature that it hires workers to do the job which, needless to say,
lasts only for less than a year or longer.
‘The completion of their work or project automatically terminates their
employment, in which case, the employer is, under the law, only obliged to render
a report on the termination of the employment. (139-140, Rollo of G. R. No.
65689)’” (Underscoring supplied.)

In Cartagenas, et al. vs. Romago Electric Company, Inc., et al., [13] we likewise held
that:

"As an electrical contractor, the private respondent depends for its business on the
contracts it is able to obtain from real estate developers and builders of buildings.
Since its work depends on the availability of such contracts or ‘projects,’
necessarily the duration of the employments of its work force is not permanent but
co-terminus with the projects to which they are assigned and from whose payrolls
they are paid. It would be extremely burdensome for their employer who, like
them, depends on the availability of projects, if it would have to carry them as
permanent employees and pay them wages even if there are no projects for them to
work on" (Emphasis supplied.)

It must be stressed herein that although petitioner worked with Philnor as a driver
for eight years, the fact that his services were rendered only for a particular project
which took that same period of time to complete categorizes him as a project
employee. Petitioner was employed for one specific project.

A non-project employee is different in that the employee is hired for more than
one project. A non-project employee, vis-a-vis a project employee, is best
exemplified in the case of Fegurin, et al. vs. National Labor Relations
Commission, et al.[14] wherein four of the petitioners had been working with the
company for nine years, one for eight years, another for six years, the shortest term
being three years. In holding that petitioners are regular employees, this Court
therein explained:

"Considering the nature of the work of petitioners, that of carpenter, laborer or

mason, their respective jobs would actually be continuous and on-going. When a
project to which they are individually assigned is completed, they would be
assigned to the next project or a phase thereof. In other words, they belonged to a
‘work pool’ from which the company would draw workers for assignment to other
projects at its discretion. They are, therefore, actually ‘non-project employees’."

From the foregoing, it is clear that petitioner is a project employee considering that
he does not belong to a "work pool" from which the company would draw workers
for assignment to other projects at its discretion. It is likewise apparent from the
facts obtaining herein that petitioner was utilized only for one particular project,
the MNEE Stage 2 Project of respondent company. Hence, the termination of
 herein petitioner is valid by reason of the completion of the project and the
expiration of his employment contract.

3. Anent the claim for overtime compensation, we hold that petitioner is entitled to
the same. The fact that he picks up employees of Philnor at certain specified points
along EDSA in going to the project site and drops them off at the same points on
his way back from the field office going home to Marikina, Metro Manila is not
merely incidental to petitioner's job as a driver. On the contrary, said
transportation arrangement had been adopted, not so much for the convenience of
the employees, but primarily for the benefit of the employer, herein private
respondent. This fact is inevitably deducible from the Memorandum of respondent
company:

"The herein Respondent resorted to the above transport arrangement because from its
previous project construction supervision experiences. Respondent found out that project
delays and inefficiencies resulted from employees’ tardiness; and that the problem of
tardiness, in turn, was aggravated by transportation problems, which varied in degrees in
proportion to the distance between the project site and the employees’ residence. In view
of this lesson from experience, and as a practical, if expensive, solution to employees’
tardiness and its concomitant problems. Respondent adopted the policy of allowing
certain employees not necessarily project drivers to bring home project vehicles, so that
employees could be afforded fast, convenient and free transportation to and from the
project field office. x x x."[15]

Private respondent does not hesitate to admit that it is usually the project driver who is
tasked with picking up or dropping off his fellow employees. Proof thereof is the
undisputed fact that when petitioner is absent, another driver is supposed to replace him
and drive the vehicle and likewise pick up and/or drop off the other employees at the
designated points on EDSA. If driving these employees to and from the project site is not
really part of petitioner's job, then there would have been no need to find a replacement
driver to fetch these employees. But since the assigned task of fetching and delivering
employees is indispensable and consequently mandatory, then the time required of and
used by petitioner in going from his residence to the field office and back, that is, from
5:30 A.M. to 7:00 A.M. and from 4:00 P.M. to around 6:00 P.M., which the labor arbiter
rounded off as averaging three hours each working day, should be paid as overtime work.
Quintessentially, petitioner should be given overtime pay for the three excess hours of
work performed during working days from January, 1983 to December, 1985.

WHEREFORE, subject to the modification regarding the award of overtime pay to

herein petitioner, the decision appealed from is AFFIRMED in all other respects.

SO ORDERED.
 SECOND DIVISION
[ G.R. No. 113166, February 01, 1996 ]
ISMAEL SAMSON, PETITIONER, VS. NATIONAL LABOR RELATIONS
COMMISSION AND ATLANTIC GULF AND PACIFIC CO., MANILA, INC.,
RESPONDENTS.

DECISION

REGALADO, J.:

In the present petition for review on certiorari, which should properly have been
initiated as and is hereby considered a special civil action for certiorari under Rule 65,
herein petitioner Ismael Samson assails the decision of public respondent National
Labor Relations Commission (NLRC) dated November 29, 1993 [1] which declared that he
was a project employee, in effect reversing the earlier finding of labor arbiter Felipe T.
Garduque II that he is actually a regular employee.

Petitioner has been employed with private respondent Atlantic Gulf and Pacific Co.,
Manila, Inc. (AG & P) in the latter’s various construction projects since April, 1965, in the
course of which employment he worked essentially as a rigger, from laborer to rigger
foreman. From 1977 up to 1985, he was assigned to overseas projects of AG & P,
particularly in Kuwait and Saudi Arabia.

On November 5, 1989, petitioner filed a complaint for the conversion of his employment
status from project employee to regular employee, which complaint was later amended
to include claims for underpayment, non-payment of premium pay for holiday and rest
day, refund of reserve fund, and 10% thereof as attorney’s fees.  Petitioner alleged
therein that on the basis of his considerable and continuous length of service with AG &
P. he should already be considered a regular employee and, therefore, entitled to the
benefits and privileges appurtenant thereto.

The labor arbiter, in a decision dated June 30, 1993,[2] declared that petitioner should be
considered a regular employee on the ground that it has not been shown that AG & P
had made the corresponding report to the nearest Public Employment Office every time
a project wherein petitioner was assigned had been completed and his employment
contract terminated, as required under DOLE Policy Instruction No. 20. Furthermore,
pursuant to the same policy instruction, the labor arbiter found that since petitioner
was not free to leave anytime and to offer his services to other employers, he should be
considered an employee for an indefinite period because he is a member of a work pool
from which AG & P draws its project employees and is considered an employee thereof
during his membership therein, hence the completion of the project does not mean
termination of the employer-employee relationship.

In refutation of the allusion of AG & P to the maxims of "no work, no pay" and "a fair
day’s wage for a fair day’s labor," the labor arbiter held that there is no evidence that at
one point in time the respondent has not secured any contract and, further, that
complainant has been continuously rendering service in the corporation since 1965 up
to the date of his aforesaid decision. Consequently, the labor arbiter ordered that
petitioner’s employment status be changed from project to regular employee effective
November 5, 1989 and that he be given other benefits accorded regular employees plus
10% thereof as attorney’s fees.  The claim against petitioner’s reserve fund was denied
on the ground of prescription.

On appeal, public respondent NLRC reversed the decision of the labor arbiter and
dismissed the complaint for lack of merit.  It ruled that the evidence shows that
petitioner was engaged for a fixed and determinable period, which thereby made him a
project employee; that there was no evidence presented nor any allegation made by
petitioner to support the labor arbiter’s finding that the former was not free to leave
and offer his services to other employers; that Policy Instruction No. 20 has been
superseded by Department Order No. 19, Series of 1993, which provides that non-
compliance with the required report to the nearest Public Employment Office no longer
affixes a prescription of regular employment; and that the repeated or constant re-
hiring of project workers for subsequent projects is permitted without such workers
being considered regular employees.

Finally, it ratiocinated that "[l]ength of service, while such may be used as a yardstick for
other types of employees in other endeavor(s), does not apply to workers in the
construction industry, particularly to project employees.  In the case at bar, the
characteristics peculiar to the construction business make it imperative for construction
companies to hire workers for a particular project as the need arises and it would be
financially disadvantageous to owners of construction companies to retain in its payrolls
employees and/or workers whose services are no longer required in the particular
project to which they have been assigned." [3]

Hence this petition, which presents for resolution the sole issue of whether petitioner is
a project or regular employee.

Petitioner principally argues that respondent commission gravely erred in declaring that
he is merely a project employee, invoking in support thereof the ruling enunciated in
the case of Caramol vs. National Labor Relations Commission, et al.[4] His being a regular
employee is allegedly supported by evidence, such as his project employment contracts
with private respondent, which show that petitioner performed the same kind of work
as rigger throughout his period of employment and that, as such, his task was necessary
and desirable to private respondent’s usual trade or business.

The Solicitor General[5] fully agrees with petitioner, with the observation that the
evidence indubitably shows that after a particular project has been accomplished,
petitioner would be re-hired immediately the following day save for a gap of one (1) day
to one (1) week from the last project to the succeeding one; and that between 1965 to
1977, there were at least fifty (50) occasions wherein petitioner was hired by private
respondent for a continuous period of time.  He hastens to add that Department Order
No. 19, which purportedly superseded Policy Instruction No. 20, cannot be given
retroactive effect because at the time petitioner’s complaint was filed, the latter
issuance was still in force.

On the other hand, private respondent preliminarily avers that the present petition for
review under Rule 45 filed by petitioner is not the proper remedy from a decision of the
NLRC. Even assuming that the same may be treated as a special civil action under Rule
65, the petition must still fail for failure of petitioner to exhaust administrative remedies
in not filing a motion for reconsideration from the questioned decision of respondent
commission as required under Section 14, Rule VII Of the Implementing Rules. Besides,
the judgment under review supposedly became final and executory on January 13, 1994
pursuant to the Entry of Judgment dated February 9, 1994.

Respondent AG & P then insists that petitioner is merely a project employee for several
reasons.  First, the factual findings of respondent commission, which is supported by
substantial evidence, is already conclusive and binding and, therefore, entitled to
respect by this Court. Second, Department Order No. 19 amended Policy Instruction No.
20 by doing away with the required notice of termination upon completion of the
project. Hence, non-compliance with the required report, which is only one of the
"indicators" for project employment, no longer affixes a prescription of regular
employment, by reason of which the doctrine laid down in the Caramol case no longer
applies to the case at bar. In addition, Department Order No. 19 allows the re-hiring of
employees without making them regular employees, aside from the fact that the word
"rehiring" connotes new employment.  Third, on the basis of petitioner’s project
employment contracts, his services were engaged for a fixed and determinable period
which thus makes each employment for every project separate and distinct from one
another.  Consequently, the labor arbiter supposedly erred in taking into account
petitioner’s various employments in the past in determining his length of service,
considering that upon completion of a project, the services of the project employee are
deemed terminated, his employment being coterminous with each project or phase of
the project to which he is assigned.

Finally, so it is claimed, petitioner should be considered a project employee since he falls

under the exception provided for in Article 280 of the Labor Code to the effect that "the
provisions of written agreement to the contrary notwithstanding and regardless of the
oral agreement of the parties, an employment shall be deemed to be regular where the
employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or termination of
which has been determined at the time of the engagement of the employee x x x."

The bulk of the problem appears to hinge on the determination of whether or not
Department Order No. 19 should be given retroactive effect in order that the notice of
termination requirement may be dispensed with in this case for a correlative ruling on
the presumption of regularity of employment which normally arises in case of non-
compliance therewith. Both the petitioner and the Solicitor General submit that said
order can only have prospective application. Private respondent believes otherwise. We
find for petitioner.

When the present action for regularization was filed on November 5, 1989 [6] and during
the entire period of petitioner’s employment with private respondent prior to said date,
the rule in force then was Policy Instruction No. 20 which, in the fourth paragraph
thereof, required the employer company to report to the nearest Public Employment
Office the fact of termination of a project employee as a result of the completion of the
project or any phase thereof in which he is employed.  Furthermore, contrary to private
respondent’s asseveration, Department Order No. 19, which was issued on April 1,
1993, did not totally dispense with the notice requirement but, instead, made provisions
therefor and considered it as one of the "indicators" that a worker is a project
employee.

This is evident in Section 2.2 thereof which provides that:

"2.2 Indicators of project employment. - Either one or more of the following

circumstances, among others, may be considered as indicators that an employee is a
project employee.

(a) The duration of the specific/identified undertaking for which the worker is engaged is
reasonably determinable.

(b) Such duration, as well as the specific work/service to be performed, is defined in an

employment agreement and is made clear to the employee at the time of hiring.

(c) The work/service performed by the employee is in connection with the particular
project/undertaking for which he is engaged.

(d) The employee, while not employed and awaiting engagement, is free to offer his
services to any other employer.

(e) The termination of his employment in the particular project/undertaking is reported

to the Department of Labor and Employment (DOLE) Regional Office having jurisdiction
over the workplace within 30 days following the date of his separation from work, using
the prescribed form on employees terminations/dismissals/suspensions.

(f) An undertaking in the employment contract by the employer to pay completion

bonus to the project employee as practiced by most construction companies." (Italics
supplied)

More importantly, it must be emphasized that the notice of termination requirement

has been retained by express provision of Department Order No. 19 under Section 6.1
thereof, to wit:

"6.1. Requirements of labor and social legislations. - (a) The construction company and
the general contractor and/or subcontractor referred to in Sec. 2.5 shall be responsible
for the workers in its employ on matters of compliance with the requirements of
existing laws and regulations on hours of work, wages, wage-related benefits, health,
safety and social welfare benefits, including submission to the DOLE-Regional Office of
Work Accident/Illness Report, Monthly Report on Employees’
Terminations/Dismissals/Suspensions and other reports. x x x" (Italics Ours.)

Perforce, we agree with the labor arbiter that private respondent’s failure to report the
termination of petitioner’s services to the nearest Public Employment Office, after
completion of every project or a phase thereof to which he is assigned, is a clear
indication that petitioner was not and is not a project employee.

On the bases of the foregoing, the retroactivity or prospectivity of Department Order

No. 19 would normally be of no moment. At any rate, even if the new issuance has
expressly superseded Policy Instruction No. 20, the same cannot be given retroactive
effect as such an application would be prejudicial to the employees and would run
counter to the constitutional mandate on social justice and protection to labor.
Furthermore, this view that we take is more in accord with the avowed purpose of
Department Order No. 19 "to ensure the protection and welfare of workers employed"
in the construction industry, and which interpretation may likewise be inferred from a
reading of Section 7 thereof, applied corollarily to this case, which provides that
"nothing herein shall be construed to authorize the diminution or reduction of benefits
being enjoyed by employees at the time of issuance hereof."

It is a basic and irrefragable rule that in carrying out and interpreting the provisions of
the Labor Code and its implementing regulations, the workingman’s welfare should be
the primordial and paramount consideration. The interpretation herein handed down
gives meaning and substance to the liberal and compassionate spirit of the law
enunciated in Article 4 of the Labor Code that "all doubts n the implementation and
interpretation of the provisions of the Labor Code including its implementing rules and
regulations shall be resolved in favor of labor."[7]

The mandate in Article 281 of the Labor Code, which pertinently prescribes that "the
provisions of written agreement to the contrary notwithstanding and regardless of the
oral agreements of the the parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer" and that "any employee who
has rendered at least one year of service, whether such service is continuous or broken
shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exists," should apply in
the case of herein petitioner.

It is not disputed that petitioner had been working for private respondent for
approximately twenty-eight (28) years as of the adjudication of his plaint by respondent
NLRC, and that his "project-to-project" employment was renewed several times.  With
the successive contracts of employment wherein petitioner continued to perform
virtually the same kind of work, i.e., as rigger, throughout his period of employment, it is
manifest that petitioner’s assigned tasks were usually necessary or desirable in the usual
business or trade of private respondent.[8] The repeated re-hiring and continuing need
for his services are sufficient evidence of the necessity and indispensability of such
services to private respondent’s business or trade. [9]

Where from the circumstances it is apparent that periods have been imposed to
preclude the acquisition of tenurial security by the employee, they should be struck
down as contrary to public policy, morals, good customs or public order. [10] As observed
by the Solicitor General, the record of this case discloses, as part of petitioner’s position
paper, a certification[11] duly issued by private respondent clearly showing that the
former’s services were engaged by private respondent on a continuing basis since 1965. 
The certification indubitably indicates that after a particular project has been
accomplished, petitioner would be re-hired immediately the following day save for a
gap of one (1) day to one (1) week from the last project to the succeeding one. [12] There
can, therefore, be no escape from the conclusion that petitioner is a regular employee
of private respondent.

Anent the issue on non-exhaustion of administrative remedies, we hold that the failure
of the petitioner to file a motion for reconsideration of the NLRC decision before coming
to this court was not a fatal omission.  The exhaustion of administrative remedies
doctrine is not a hard and fast rule and does not apply where the issue is purely a legal
one.[13] A motion for reconsideration as a prerequisite for the filing of an action under
Rule 65 may be dispensed with where the issue is purely of law, as in the present case.
[14]
 At all events and in the interest of substantial justice, especially in cases involving the
rights of workers, procedural lapses, if any, may be disregarded to enable the Court to
examine and resolve the conflicting rights and responsibilities of the parties. This
liberality is warranted in the case at bar, especially since it has been shown that the
intervention of the Court is necessary for the protection of herein petitioner. [15]

WHEREFORE, the questioned decision of respondent National Labor Relations

Commission, dated November 29, 1993, is hereby REVERSED AND SET ASIDE, and the
decision of Labor Arbiter Felipe T. Garduque II in NCR Case No. 00-116255-92, dated
June 30, 1993, is hereby ordered REINSTATED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 107307, August 11, 1997 ]
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION,
PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND
LORENZO MENDOZA, RESPONDENTS.

DECISION

PANGANIBAN, J.:

In the interpretation of an employer’s retrenchment program providing for

separation benefits, all doubts should be construed in favor of the underprivileged
worker.

Statement of the Case

This principle is emphasized in resolving this petition for certiorari [1] under Rule 65 of the
Rules of Court filed by Philippine National Construction Corporation (PNCC) assailing the
September 30, 1992 Decision[2] of Respondent National Labor Relations Commission
(NLRC)[3] in NLRC NCR CA No. 001672-91 (NCR-00-09-04156-89). Public Respondent
NLRC affirmed in all respects, except the award of attorney’s fees, [4] Executive Labor
Arbiter Valentin C. Guanio’s decision, dated December 3, 1990, which ordered thus: [5]

“WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering

the respondent corporation [petitioner herein] to pay complainant [private respondent
herein] his separation pay of P9,204.00 plus ten percent (10%) thereof as attorney’s
fees.”
 The Facts

The facts in this case are undisputed. From July 14, 1981 until September 23, 1982,
Petitioner PNCC employed Private Respondent Mendoza as Driver II at its Magat Dam
Project. A few days after, on September 27, 1982, private respondent was again
employed as Driver II at PNCC’s LRT Project until January 31, 1983. The following day,
February 1, 1983, UNTIL August 1, 1984, petitioner deployed private respondent, also as
Driver II, in its Saudi Arabia Project. It took more than six months for private respondent
to be repatriated to the Philippines. Upon his return, he resumed his work as Driver II in
the PG-7B Project of petitioner from February 22, 1985 until May 18, 1986.

For more than two years afterwards, private respondent was not given any work
assignment. On August 17, 1988, he was hired anew as Driver II for the Molave Project
of petitioner. This lasted until June 15, 1989.

Thereafter, private respondent claimed the benefits of petitioner’s Retrenchment

Program, particularly under paragraph. 2.1 thereof which provides:

“Coverage. -- Special separation benefits shall be given to all regular, project

employees and permanent employees who have rendered at least one (1) year of
continuous service with PNCC and are actively employed in the company as of the date
of their separation.”[6]
However, petitioner denied his claim. Thus, on September 5, 1989, private
respondent filed a complaint for nonpayment of separation pay as provided for in said
program.[7] As earlier stated, the executive labor arbiter granted private respondent’s
plea, and public respondent affirmed such grant minus the award of attorney’s fees.

No motion for reconsideration was filed because, according to petitioner, “the questions
raised before this Honorable Court are the same questions which were considered by
Public Respondent NLRC.”[8]

Acting on the petition, this Court (Second Division) in a Resolution dated October 27,
1992 issued a restraining order enjoining respondents from enforcing the assailed
Decision.[9]

NLRC’s Ruling

In dismissing petitioner’s appeal, Respondent NLRC ratiocinated thus: [10]

 “We fail to see any logic in respondent’s [petitioner herein] contention that the
period determinative of complainant’s [private respondent herein] entitlement to
separation benefits as per its Retrenchment Program of January 16, 1989 should be the
latter’s last assignment, which was for only about ten (10) months. PNCC’s
Retrenchment Program, particularly paragraph 2.1 thereof states that: ‘Special
separation benefits shall be given to regular, project employees and permanent
employees who have rendered at least one year of continuous service in PNCC and are
actively employed in the Company as of the date of their separation.’

Hence, it is clear that the foregoing provision of PNCC’s Retrenchment Program speaks
of at least one year of continuous service without specifying as to whether it should be
immediately prior to the employee’s separation.

We therefore discern no misappreciation of facts on the part of the Executive Labor

Arbiter.”
The Issues

Petitioner raises the following arguments:[11]

“A

The questioned decision of the labor arbiter which was affirmed by public respondent
NLRC in its decision dated September 30, 1992 is not supported by evidence, applicable
law and jurisprudence.

x x x                                             x x x                                     x x x

Private respondent was a project employee and his service with petitioner was not
continuous.”

The executive labor arbiter phrased the latter issue thus: [12]

“x x x the issue of whether the complainant is a regular or a project employee is not

relevant since respondent’s retrenchment or separation program grants separation
benefits to eligible employees irrespective of whether they are regular, project or
permanent employees. The only important thing to consider is whether they are
qualified or eligible to receive these benefits under the program.”

Petitioner contends that the complaint is barred by Article 291 [13] of the Labor Code for
having been filed late on “September 5, 1989 or after the lapse of more than three (3)
years” from his separation from employment on May 18, 1986. [14] Petitioner argues
further that private respondent was employed only for ten (10) months from “August
17, 1988 again as project employee, until his separation on June 15, 1989.” [15] Thus, he is
not entitled to separation pay under its special separation program which applies only
to employees who have rendered at least one year of continuous service at the time of
their separation from PNCC.[16]

Private respondent, on the other hand, alleges that he cannot be expected to file a claim
for separation benefits “within 3 years after 1986 when [he] was ‘rehired’ within two (2)
years or in 1988.”[17] Further, private respondent contends that since he was terminated
from service on “15 June 1989 or five (5) months after the cut-off date of 16 January
1989,” he was covered by the separation program.[18]

The Solicitor General “begs leave of this Honorable Court to discuss first and foremost
the issue of whether or not Respondent Mendoza is a project employee, as the
resolution of this issue in the negative will bar Respondent Mendoza’s claim for
separation pay.”[19] The Solicitor General points out that “[w]hat is clear x x x is the
employment of Respondent Mendoza by herein petitioner on five (5) occasions for its
five (5) different projects. Respondent Mendoza was drawn from a ‘work pool’ from
which petitioner drew workers [for] assignment to other projects at its discretion.” [20]

All told, the Court believes that this case can be resolved on the basis of two issues:

(1)Whether a motion for reconsideration is required prior to filing a petition for

certiorari; and

(2)Whether private respondent is entitled to the separation benefits under petitioner’s

Retrenchment Program.

The Court’s Ruling

The petition has no merit.

First Issue
 Failure to File a Motion for Reconsideration

Petitioner, as noted earlier, admitted that it did not file a motion for reconsideration of
the assailed NLRC Decision.[21] This premature action constitutes a fatal infirmity.[22] In
Interorient Maritime Enterprises vs. National Labor Relations Commission, [23] this Court,
citing a catena of cases, categorically ruled that:

“x x x The unquestioned rule in this jurisdiction is that certiorari will lie only if
there is no appeal or any other plain, speedy and adequate remedy in the ordinary
course of law against the acts of public respondent. In the instant case, the plain and
adequate remedy expressly provided by law was a motion for reconsideration of the
assailed decision, based on palpable errors, to be made under oath and filed within ten
(10) calendar days from receipt of the questioned decision.

(T)he filing of such motion is intended to afford public respondent an opportunity to

correct any factual or fancied error attributed to it by way of a re-examination of the
legal and factual aspects of the case. Petitioner’s inaction or negligence under the
circumstances is tantamount to a deprivation of the right and opportunity of the
respondent Commission to cleanse itself of an error unwittingly committed or to
vindicate itself of an act unfairly imputed. x x x

x x x And for failure to avail of the correct remedy expressly provided by law, petitioner
has permitted the subject Resolution to become final and executory after the lapse of
the ten day period within which to file such motion for reconsideration.”
Earlier, in Labudahon vs. National Labor Relations Commission[24], we already
warned that, where no motion for reconsideration is filed within ten (10) calendar days
from its receipt, the NLRC decision shall become final and executory:

“The New Rules of Procedure of the National Labor Relations Commission

mandate that a motion for reconsideration of any order, resolution or decision of the
Commission must be filed within (10) calendar days from receipt of such order,
resolution or decision. [Sec. 14, Rule VII of the New Rules of Procedure of the National
Labor Relations Commission] If no motion for reconsideration is filed, the NLRC’s order,
resolution or decision shall become final and executory after ten (10) calendar days
from receipt thereof.

The Court ruled upon a similar issue in the case of Zapata vs. NLRC [175 SCRA 56, 5 July
1989], and recently in the case of G.A. Yupangco vs. NLRC [Minute Resolution dated 17
February 1992, G.R. No. 102191]. In the Zapata case, we held --
‘The implementing rules of respondent NLRC are unequivocal in requiring that a
motion for reconsideration of the order, resolution, or decision of the respondent
Commission should be seasonably filed as a precondition for pursuing any further or
subsequent remedy, otherwise the said order, resolution or decision shall become final
and executory after ten calendar days from receipt thereof. Obviously, the rationale
therefor is that the law intends to afford the NLRC an opportunity to rectify such errors
or mistakes it may have lapsed into before resort to the courts of justice can be had. x x
x’

In the case at bar, petitioner’s failure to file a motion for reconsideration, for
whatever reason, is a fatal procedural defect that warrants the dismissal of his present
petition.”
The law is clear that a motion for reconsideration is a mandatory requirement
before one may resort to the special civil action of certiorari. While there are recognized
exceptions to this rule, petitioner has not convinced us that this case is one of them.24-a
Petitioner’s bare allegation that the same questions raised before the public respondent
were to be raised before this Court affords no excuse. Petitioner should have complied
with the procedural requirement. On this ground alone, the petition should be denied.
There is, however, another cogent reason for dismissing it.

Second Issue

Private Respondent Qualified Under Retrenchment Program

What is being contested in this case is whether private respondent is covered by

paragraph 2.1 of the separation program of PNCC. We again quote the said paragraph:
[25]

“Coverage. -- Special separation benefits shall be given to all regular, project

employees and permanent employees who have rendered at least one (1) year of
continuous service with PNCC and are actively employed in the company as of the date
of their separation.”

The Cou[rt notes that the photocopy of the “Separation Program with Special Benefits”
shows that there is a comma after the word “regular”; thus, it reads: “all regular, project
employees and permanent employees x x x.” The comma is also found in petitioner’s
Counter-Manifestation filed with the executive labor arbiter. In the petition itself,
however, no comma was placed after the word “regular.”

The requisites of petitioner’s separation program are as follows:

1.The employee must be either a regular, project or permanent employee;

2.He rendered at least one (1) year of continuous service for the petitioner;

3.He was actively employed in the Company as of the date of his separation.

4.He must have been separated from service on the effectivity of the Separation
Program or on January 16, 1989 or later.[26]

Regarding the first requisite, petitioner does not deny that private respondent was a
“project employee”;[27] thus:
“The employment terms and conditions of Private Respondent contained in the
reverse side of his appointment paper (Exhs. “1” and “1-A” of PNCC’s Reply Position
Paper/Annex “C” to the Petition) clearly showed that he was a project worker.
Moreover, his said appointment paper defined a regular employee as a permanent
employee with respect to a particular project and in no instance beyond the completion
of the items of work or project to which he is employed.” (Underscoring supplied)
Moreover, private respondent’s employment contracts explicitly describe his
employment status as “regular.” Private respondent’s appointment paper dated
September 23, 1982 contained the following particulars: [28]
“1. Re-hired

2. A regular employee

3. Entitled to the separate MELA under PD 1634, 1678, 1713 and wage order #1

4. Not entitled to meal allowance at project site

5. Paid wages, accrued leave benefits and portion of 13th month pay at EMO-Magat”

His second appointment paper dated October 6, 1982 included the following: [29]
“1. Re-hired from CSY

2. A regular employee

3. Entitled to separate MELAS per PD 1634, 1678, 1713 & W.O. # 1”

The clear provisions above have no other import than that private respondent
was a regular employee as of September 23, 1982 and, as such, also covered by the
separation program. These employment contracts ineludibly strengthen the right of
private respondent to separation pay under the PNCC program. Whether as a regular or
as a project employee, private respondent is clearly covered by the said program.

We also note that petitioner did not deny that it continuously employed private
respondent starting July 14, 1981 in different work assignments, interrupted only by the
completion of each project.

Private respondent likewise meets the second requisite of the separation program. He
has rendered more than one (1) year of continuous service with petitioner; in fact, he
had worked for petitioner for at least five (5) years, one (1) month and seven (7) days.
Private respondent’s first work engagement from July 14, 1981 to September 23, 1982
lasted for one (1) year, two (2) months and nine (9) days. His second and third work
engagements from September 27, 1982 to August 1, 1984 were for one (1) year, ten
(10) months and three (3) days. His fourth work engagement from February 22, 1985 to
May 18, 1986 lasted for one (1) year, two (2) months and twenty-six (26) days. The
duration of his fifth, which was also his last work engagement, from August 17, 1988 to
June 15, 1989 was nine (9) months and twenty-eight (28) days.

The program bases the computation of separation benefits on “every year of

completed/credited service.” Contrary to petitioner’s claims, nothing in the phrase
“every year of completed/credited service” can be understood as requiring that the
service be continuous. Thus, it should be stressed that the requirement of continuous
service pertains only to one’s eligibility under the program. No such requirement
restricts the computation of separation benefits. In other words, there is no prohibition
for the cumulation of the services rendered by qualified employees.

Under the separation program, an employee may qualify if he has rendered “at least
one year of continuous service.” As public respondent has stated, the plain language of
the program did not require that continuous service be immediately prior to the
employee’s separation. Thus, private respondent’s other stints at PNCC prior to his last
service in 1989 can properly be considered in order to qualify him under the program.
That the duration of private respondent’s last stint was less than one year does not
militate against his qualification under the program. We grant this liberality in favor of
private respondent in the light of the rule in labor law that “when a conflicting interest
of labor and capital are weighed on the scales of social justice, the heavier influence of
the latter must be counter-balanced by the sympathy and compassion the law must
accord the under-privileged worker.”[30]

Because private respondent was actively employed by PNCC until June 15, 1989, he was
undoubtedly covered by the separation program embracing employment separation on
or after January 16, 1989. Thus, his situation also meets the third and fourth requisites
of the separation program.

In the interpretation of an employer’s program providing for separation benefits, all

doubts should be construed in favor of labor. After all, workers are the intended
beneficiaries of such program and our Constitution mandates a clear bias in favor of the
working class.

No Work Pool

In view of the foregoing, there appears no need to address the question of whether
private respondent was part of a “work pool.” We should point out, however, that the
Solicitor General was inaccurate when he stated that petitioner had a “work pool” and
Respondent Mendoza was a part thereof. In Raycor Aircontrol Systems, Inc. vs. National
Labor Relations Commission,[31] we clarified the status of project employees in a “work
pool” as recognized by Policy Instruction No. 20[32] thus:

    “x x x project employees may or may not be members of a work pool, (that is,
the employer may or may not have formed a work pool at all), and in turn, members of
a work pool could be either project employees or regular employees. In the instant case,
respondent NLRC did not indicate how private respondent came to be considered
members of a work pool as distinguished from ordinary (non-work pool) employees. It
did not establish that a work pool existed in the first place. Neither did it make any
finding as to whether the herein private respondents were indeed free to leave anytime
and offer their services to other employers, as vigorously contended by petitioner,
despite the fact that such a determination would have been critical in defining the
precise nature of private respondent’s employment. Clearly, the NLRC’s conclusion of
regular employment has no factual support and is thus unacceptable.”
As clearly explained above, an employee in the work pool is not necessarily a
regular employee; he may also be a project employee. But as earlier observed, the
resolution of the issue of whether private respondent belonged to a “work pool” is not
necessary to determine whether private respondent is qualified under PNCC’s
separation program.

Attorney’s Fees

We disagree with Respondent NLRC’s disallowance of the award of attorney’s fees.

Private respondent was evidently and legally entitled to separation benefits in the paltry
amount of P9,204.00 when he was separated from service. But because of the
unjustified stance of petitioner, he was compelled to litigate to obtain what was legally
due him, that is, to retain a lawyer and to await for eight years for this case to be finally
decided. It is settled that in actions for recovery of wages or where an employee was
forced to litigate and, thus, incur expenses to protect his rights and interests, the award
of attorney’s fees is legally and morally justifiable. [33]

WHEREFORE, premises considered, the petition is DISMISSED and the assailed Decision

of Respondent NLRC is AFFIRMED with the MODIFICATION that the award of attorney’s
fees is REINSTATED and that legal interest of 6 percent per annum be paid to private
respondent computed from the date of the filing of the complaint before the labor
arbiter. The temporary restraining order issued on October 27, 1992 is likewise LIFTED.
Costs against petitioner.
SO ORDERED.

FIRST DIVISION
[ G.R. No. 82973, September 15, 1989 ]
MARIO CARTAGENAS, JESUS N. MIRABALLES, VICTOR C. MONSOD
AND VICENTE BARROA, PETITIONERS, VS. ROMAGO ELECTRIC
COMPANY, INC. NATIONAL LABOR RELATIONS COMMISSION (FIFTH
DIVISION), RESPONDENTS.

 D E C I S I O N
GRIÑO-AQUINO, J.:

The issue in this case is whether the petitioners are project employees of the private
respondent Romago Electric Company, Inc., as found by the National Labor Relations
Commission, or regular employees as found by the Labor Arbiter.

The facts are recited in the decision of the NLRC as follows:

"Respondent  Romago  is a general contractor engaged in contracting and sub-

contracting of specific building construction projects or undertaking such as electrical,
mechanical and civil engineering aspects in the repair of buildings and from other
kindred services.
"Individual complainants are employed by the respondent in connection with
particular construction projects and they are as follows:

1.  Jesus N.  Miraballes

Project Period
Assigned Covered
L. Towers 4/23/79-
2/26/80
Nat'l Bookstore 2/26/80-
8/28/80
PNRC-MHQ 8/29/80-
Bldg. 9/09/80
A.  Payumo's Re 9/10/80
s.
State  Center 3/05/81-
7/13/81
FEBTC Bldg. 7/14/81-
9/21/81
SMC Complex 9/22/81-
9/10/84
PNB Finance 9/11/84-
Complex 7/12/86
(Annexes 1 to 25, respondent's Position Paper)

2.  Victor C.  Monsod

 Period
Project Assigned
Covered
MMRH Project 4/13/76-
2/02/80
Manila Hotel 2/03/80-
7/19/81
PNB Project 7/20/81-
7/16/84
Manila Hotel 7/17/84-
10/02/84
PNB Finance Cente 10/3/84-
r 7/12/86
(Annexes 30 to 41, ibid)

3.  Vicente  Barroa

Project Period
Assigned Covered
SMC Hoc. 7/5/82-
Project 1/21/85
PNB Finance 1/22/85-
Complex 7/12/86
(Annexes 42 to 47, ibid)

4.  Mario  Cartagenas

Project Period
Assigned Covered
PNB Finance 3/26/82-
Complex 7/12/86
(Annexes 52 to 54, ibid)
"Effective  July 12, 1986, individual complainants and Lawrence  Deguit were
temporarily laid-off by virtue of a memorandum issued by the respondent.   In said
memorandum they were also informed that a meeting regarding the resumption of
operation will be held on July 16, 1986 and that  they will be notified as to when they
will resume work.
“On July 28, 1986, complainants filed the instant case for illegal dismissal but
before the respondent could receive a copy of the complaint and the notification and
summons issued by the NLRC National Capital Region (actually received only on August
22, 1986, page 4, records) individual complainants re-applied with the respondent and
were assigned to work with its project at Robinson - EDSA, specifically on the following
dates, to wit:
1.         Mirabelles and Monsod  -   August 2/86
2.         Barroa                                          August 11/86
3.         Cartagenas                              August 4/86
(Annexes 26 to 29-B; ‘39-41’; 48 to 51-B; '55 to 58-A', ibid)
"In hiring the herein complainants to be assigned to a particular project they have
to fill up an employment application form and are subjected to a pre-hiring
examination.   If evaluated to be qualified they sign at the end portion of their
employment application form that:

"AGREEMENT

"'I hereby agree to the foregoing conditions and accept my employment for a fixed period
and from the above mentioned Project/Assignment only.'

  The conditions of employment to which the complainant agreed are mentioned

in the right upper portion of the same page of said application form, an example of
which reads:

'Assigned to FEBTC G.P. FORNOSO

Project
Position         Electrician
Effectivity      7-14-81
Salary           P18.50/day & allowance
Conditions    Hired for above project only
Approved:                                 Signed                   
Personnel Manager
7/14/81
Date'
(Employment Application Form of MIRABALLES JESUS NIEVA dated July 14, 1981,
Annex 16; 16-A and 16-B, ibid)
"Therereafter the hired employee is given by the respondent an assignment slip,
an example of which reads:

"ASSIGNMENT SLIP

DATE:  July 14, 1981

Engr.  C.A.  Castro

 Project In-Charge
F E F T C            ___
Name of Project

The bearer, Mr. Jesus N. Miraballes will work under you as electrician effective 14 July
81.  His employment will terminate upon
completion/stoppage of the project or terminated earlier for cause.

Signed
GUDIOSO PLATA
Chief Engineer
CONFORME:
SGD. JESUS MIRABALLES'
(Assignment slip of Jesus N.
Miraballes, Annex 17, ibid.)
"xxx                                       xxx                                             xxx
"x x x Respondent introduced documentary exhibits that the complainant have
invariably been issued appointment from project to projects and were issued notice of
temporary lay-off when the PNB Finance Center project was suspended due to lack of
funds and that when work was available particularly respondent's project at Robinson -
EDSA they were rehired and assigned to this project." pp. 16-19; 21-22,  Rollo.)

The NLRC held that the complainants were project employees because their
appointments were "co-terminus with the phase or item of work assigned to them in said
project.” It held further:

"The fact that the complainants worked for the respondent under different
project employment contracts for so many years could not be made a basis to consider
them as regular employees for they remain project employees regardless of the number
of projects in which they have worked.   (p. 22,  Rollo.)

Article 280 of the Labor Code provides:

"ART. 280.   Regular and Casual Employment.   - The provisions of written

agreement to the contrary notwithstanding and regardless of the oral agreements of the
parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer,  except where the employment has been fixed for a
specific project undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in the nature and the employment is for the
duration of the season.
"An employment shall be deemed to be casual if it is not covered by the preceding
paragraph:   Provided, That, any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment shall
continue while such actually exists (Emphasis supplied)." (p. 46,  Rollo.)

As an electrical contractor, the private respondent depends for its business on the
contracts it is able to obtain from real estate developers and builders of buildings.  Since
its work depends on the availability of such contracts or "projects," necessarily the
duration of the employment of its work force is not permanent but co-terminus with the
projects to which they are assigned and from whose payrolls they are paid.  It would be
extremely
burdensome for their employer who, like them, depends on the availability of projects, if
it would have to carry them as permanent employees and pay them wages even if there
are no projects for them to work on.  We hold, therefore, that the NLRC did not abuse its
discretion in finding, based on substantial evidence in the records, that the petitioners are
only project workers of the private respondent.

This case is similar to Sandoval Shipyards, Inc. vs. NLRC, 136 SCRA 675 (1985), where
we held:

"We feel that there is merit in the contention of the applicant corporation.   To
our mind, the employment of the employees concerned were fixed for a specific project
or undertaking.   For the nature of the business the corporation is engaged into is one
which will not allow it to employ workers for an indefinite period.
"It is significant to note that the corporation does not construct vessels for sale or
otherwise which will demand continuous productions of ships and will need permanent
or regular workers.   It merely accepts contracts for shipbuilding or for repair of vessels
from third parties and, only, on occasion when it has work contract of this nature that it
hires workers to do the job which, needless to say, lasts only for less than a year or
longer.
"The completion of their work or project automatically terminates their
employment, in which case, the employer is, under the law, only obliged to render a
report on the termination of the employment." (p. 48,  Rollo.)

Petitioners' invocation of the resolution of this Court in Romago Electric Company, Inc.

vs. Romago Electric United Workers Union-Christian Labor Organization, (REWU-
CLOP), et al., G.R. No. 79774, February 1, 1988, where this Court dismissed the petition,
is not well taken.  As pointed out by the public respondent, the issue in that case was
whether the members of the union may properly participate in the holding of a
certification election.  Since the petitioners in their complaint for illegal dismissal
dated July 28, 1986 (Annex A of petition) averred that they do not belong to any union,
the ruling in Romago vs. REWU-CLOP may not apply to them.  In their Reply to the
public respondents' Comment in this case, they disclosed that they are members and
officers of a new, union which they organized on March 13, 1988 (pp. 62?
63, Rollo).  That supervening fact, however, has no relevance to this case.

We find no reason to depart from the well-settled rule that findings of fact of labor
officials are generally conclusive and binding upon this Court when supported by
substantial evidence, as in this case (Edi-Staff Builders International, Inc. vs. Leogardo,
Jr., 152 SCRA 453; Asiaworld Publishing House, Inc. vs. Ople, 152 SCRA 219; National
Federation of Labor Union vs. Ople, 143 SCRA 124; Dangan vs. NLRC, 127 SCRA 706;
Special Events & Central Shipping Office Workers Union vs. San Miguel Corp., 122
SCRA 557; Mamerto vs. Inciong, 118 SCRA 265; Phil. Labor Alliance Council vs.
Bureau of Labor Relations, 75 SCRA 162).

WHEREFORE, the petition for certiorari is dismissed for lack of merit.  No costs.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 120969, January 22, 1998 ]
ALEJANDRO MARAGUINOT, JR. AND PAULINO ENERO, PETITIONERS,
VS. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION)
COMPOSED OF PRESIDING COMMISSIONER RAUL T. AQUINO,
COMMISSIONER ROGELIO I. RAYALA AND COMMISSIONER
VICTORIANO R. CALAYCAY (PONENTE), VIC DEL ROSARIO AND VIVA
FILMS, RESPONDENTS.

DECISION

DAVIDE, JR., J.:

By way of this special civil action for certiorari under Rule 65 of the Rules of Court,
petitioners seek to annul the 10 February 1995 Decision[1]  of the National Labor
Relations Commission (hereafter NLRC), and its 6 April 1995 Resolution[2]  denying the
motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision
reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92.

The parties present conflicting sets of facts.

Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private

respondents on 18 July 1989 as part of the filming crew with a salary of P375.00 per
week. About four months later, he was designated Assistant Electrician with a weekly
salary of P400.00, which was increased to P450.00 in May 1990. In June 1991, he was
promoted to the rank of Electrician with a weekly salary of P475.00, which was increased
to P593.00 in September 1991.

Petitioner Paulino Enero, on his part, claims that private respondents employed him in
June 1990 as a member of the shooting crew with a weekly salary of P375.00, which was
increased to P425.00 in May 1991, then to P475.00 on 21 December 1991.[3]

Petitioners’ tasks consisted of loading, unloading and arranging movie equipment in the
shooting area as instructed by the cameraman, returning the equipment to Viva Films’
warehouse, assisting in the “fixing” of the lighting system, and performing other tasks
that the cameraman and/or director may assign.[4]

Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs.
Alejandria Cesario, to facilitate their request that private respondents adjust their salary in
accordance with the minimum wage law. In June 1992, Mrs. Cesario informed petitioners
that Mr. Vic del Rosario would agree to increase their salary only if they signed a blank
employment contract. As petitioners refused to sign, private respondents forced Enero to
go on leave in June 1992, then refused to take him back when he reported for work on 20
July 1992. Meanwhile, Maraguinot was dropped from the company payroll from 8 to 21
June 1992, but was returned on 22 June 1992. He was again asked to sign a blank
employment contract, and when he still refused, private respondents terminated his
services on 20 July 1992.[5]   Petitioners thus sued for illegal dismissal[6]  before the Labor
Arbiter.

On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the
trade name of Viva Productions, Inc., and that it is primarily engaged in the distribution
and exhibition of movies -- but not in the business of making movies; in the same vein,
private respondent Vic del Rosario is merely an executive producer, i.e., the financier
who invests a certain sum of money for the production of movies distributed and
exhibited by VIVA.[7]

Private respondents assert that they contract persons called “producers” -- also referred to
as “associate producers”[8]  -- to “produce” or make movies for private respondents; and
contend that petitioners are project employees of the associate producers who, in turn, act
as independent contractors. As such, there is no employer-employee relationship between
petitioners and private respondents.

Private respondents further contend that it was the associate producer of the film
“Mahirap Maging Pogi,” who hired petitioner Maraguinot. The movie shot from 2 July
up to 22 July 1992, and it was only then that Maraguinot was released upon payment of
his last salary, as his services were no longer needed. Anent petitioner Enero, he was
hired for the movie entitled “Sigaw ng Puso,” later re-titled “Narito ang Puso.” He went
on vacation on 8 June 1992, and by the time he reported for work on 20 July 1992,
shooting for the movie had already been completed.[9]

After considering both versions of the facts, the Labor Arbiter found as follows:
On the first issue, this Office rules that complainants are the employees of the
respondents. The producer cannot be considered as an independent contractor but should
be considered only as a labor-only contractor and as such, acts as a mere agent of the real
employer, the herein respondents. Respondents even failed to name and specify who are
the producers. Also, it is an admitted fact that the complainants received their salaries
from the respondents. The case cited by the respondents, Rosario Brothers, Inc. vs. Ople,
131 SCRA 72 does not apply in this case.

It is very clear also that complainants are doing activities which are necessary and
essential to the business of the respondents, that of movie-making. Complainant
Maraguinot worked as an electrician while complainant Enero worked as a crew
[member].[10]
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:
WHEREFORE, judgment is hereby rendered declaring that complainants were illegally
dismissed.

Respondents are hereby ordered to reinstate complainants to their former positions

without loss [of] seniority rights and pay their backwages starting July 21, 1992 to
December 31, 1993 temporarily computed in the amount of P38,000.00 for complainant
Paulino Enero and P46,000.00 for complainant Alejandro Maraguinot, Jr. and thereafter
until actually reinstated.

Respondents are ordered to pay also attorney’s fees equivalent to ten (10%) and/or
P8,400.00 on top of the award.[11]
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-
94). In its decision[12]  of 10 February 1995, the NLRC found the following circumstances
of petitioners’ work “clearly established:”

1. Complainants [petitioners herein] were hired for specific movie projects and their
employment was co-terminus with each movie project the completion/termination
 of which are pre-determined, such fact being made known to complainants at the
time of their engagement.

xxx

2. Each shooting unit works on one movie project at a time. And the work of the
shooting units, which work independently from each other, are not continuous in
nature but depends on the availability of movie projects.

3. As a consequence of the non-continuous work of the shooting units, the total

working hours logged by complainants in a month show extreme variations... For
instance, complainant Maraguinot worked for only 1.45 hours in June 1991 but
logged a total of 183.25 hours in January 1992. Complainant Enero logged a total
of only 31.57 hours in September 1991 but worked for 183.35 hours the next
month, October 1991.

4. Further shown by respondents is the irregular work schedule of complainants on a

daily basis. Complainant Maraguinot was supposed to report on 05 August 1991
but reported only on 30 August 1991, or a gap of 25 days. Complainant Enero
worked on 10 September 1991 and his next scheduled working day was 28
September 1991, a gap of 18 days.

5. The extremely irregular working days and hours of complainants’ work explain
the lump sum payment for complainants’ services for each movie project. Hence,
complainants were paid a standard weekly salary regardless of the number of
working days and hours they logged in. Otherwise, if the principle of “no work no
pay” was strictly applied, complainants’ earnings for certain weeks would be very
negligible.

6. Respondents also alleged that complainants were not prohibited from working
with such movie companies like Regal, Seiko and FPJ Productions whenever they
are not working for the independent movie producers engaged by respondents...
This allegation was never rebutted by complainants and should be deemed
admitted.

The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances,
taken together, indicated that complainants (herein petitioners) were “project employees.”

After their motion for reconsideration was denied by the NLRC in its Resolution [13]  of 6
April 1995, petitioners filed the instant petition, claiming that the NLRC committed grave
abuse of discretion amounting to lack or excess of jurisdiction in: (1) finding that
petitioners were project employees; (2) ruling that petitioners were not illegally
dismissed; and (3) reversing the decision of the Labor Arbiter.

To support their claim that they were regular (and not project) employees of private
respondents, petitioners cited their performance of activities that were necessary or
desirable in the usual trade or business of private respondents and added that their work
was continuous, i.e., after one project was completed they were assigned to another
project. Petitioners thus considered themselves part of a work pool from which private
respondents drew workers for assignment to different projects. Petitioners lamented that
there was no basis for the NLRC’s conclusion that they were project employees, while
the associate producers were independent contractors; and thus reasoned that as regular
employees, their dismissal was illegal since the same was premised on a “false cause,”
namely, the completion of a project, which was not among the causes for dismissal
allowed by the Labor Code.

Private respondents reiterate their version of the facts and stress that their evidence
supports the view that petitioners are project employees; point to petitioners’ irregular
work load and work schedule; emphasize the NLRC’s finding that petitioners never
controverted the allegation that they were not prohibited from working with other movie
companies; and ask that the facts be viewed in the context of the peculiar characteristics
of the movie industry.

The Office of the Solicitor General (OSG) is convinced that this petition is improper
since petitioners raise questions of fact, particularly, the NLRC’s finding that petitioners
were project employees, a finding supported by substantial evidence; and submits that
petitioners’ reliance on Article 280 of the Labor Code to support their contention that
they should be deemed regular employees is misplaced, as said section “merely
distinguishes between two types of employees, i.e., regular employees and casual
employees, for purposes of determining the right of an employee to certain benefits.”

The OSG likewise rejects petitioners’ contention that since they were hired not for one
project, but for a series of projects, they should be deemed regular employees.
Citing Mamansag v. NLRC,[14]  the OSG asserts that what matters is that there was a time-
frame for each movie project made known to petitioners at the time of their hiring. In
closing, the OSG disagrees with petitioners’ claim that the NLRC’s classification of the
movie producers as independent contractors had no basis in fact and in law, since, on the
contrary, the NLRC “took pains in explaining its basis” for its decision.

As regards the propriety of this action, which the Office of the Solicitor General takes
issue with, we rule that a special civil action for certiorari under Rule 65 of the Rules of
Court is the proper remedy for one who complains that the NLRC acted in total disregard
of evidence material to or decisive of the controversy.[15]  In the instant case, petitioners
allege that the NLRC’s conclusions have no basis in fact and in law, hence the petition
may not be dismissed on procedural or jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of whether an
employer-employee relationship existed between petitioners and private respondents or
any one of private respondents. If there was none, then this petition has no merit;
conversely, if the relationship existed, then petitioners could have been unjustly
dismissed.

A related question is whether private respondents are engaged in the business of making
motion pictures. Del Rosario is necessarily engaged in such business as he finances the
production of movies. VIVA, on the other hand, alleges that it does not “make” movies,
but merely distributes and exhibits motion pictures. There being no further proof to this
effect, we cannot rely on this self-serving denial. At any rate, and as will be discussed
below, private respondents’ evidence even supports the view that VIVA is engaged in the
business of making movies.

We now turn to the critical issues. Private respondents insist that petitioners are project
employees of associate producers who, in turn, act as independent contractors. It is settled
that the contracting out of labor is allowed only in case of job contracting. Section 8, Rule
VIII, Book III of the Omnibus Rules Implementing the Labor Code describes permissible
job contracting in this wise:
Sec. 8. Job contracting. -- There is job contracting permissible under the Code if the
following conditions are met:

(1) The contractor carries on an independent business and

undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free
from the control and direction of his employer or principal in all
matters connected with the performance of the work except as to
the results thereof; and
 
(2) The contractor has substantial capital or investment in the form
of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be engaged in
the business of making motion pictures. As such, and to be a job contractor under the
preceding description, associate producers must have tools, equipment, machinery, work
premises, and other materials necessary to make motion pictures. However, the associate
producers here have none of these. Private respondents’ evidence reveals that the movie-
making equipment are supplied to the producers and owned by VIVA. These include
generators,[16]  cables and wooden platforms,[17]  cameras and “shooting equipment;”[18]  in
fact, VIVA likewise owns the trucks used to transport the equipment. [19]  It is thus clear
that the associate producer merely leases the equipment from VIVA. [20]  Indeed, private
respondents’ Formal Offer of Documentary Evidence stated one of the purposes of
Exhibit “148” as:
To prove further that the independent Producers rented Shooting Unit No. 2 from Viva to
finish their films.[21]
While the purpose of Exhibits “149,” “149-A” and “149-B” was:
[T]o prove that the movies of Viva Films were contracted out to the different independent
Producers who rented Shooting Unit No. 3 with a fixed budget and time-frame of at least
30 shooting days or 45 days whichever comes first.[22]
Private respondents further narrated that VIVA’s generators broke down during
petitioners’ last movie project, which forced the associate producer concerned to rent
generators, equipment and crew from another company.[23]  This only shows that the
associate producer did not have substantial capital nor investment in the form of tools,
equipment and other materials necessary for making a movie. Private respondents in
effect admit that their producers, especially petitioners’ last producer, are not engaged in
permissible job contracting.

If private respondents insist that their associate producers are labor contractors, then these
producers can only be “labor-only” contractors, defined by the Labor Code as follows:
Art. 106. Contractor or subcontractor.-- x x x

There is “labor-only” contracting where the person supplying workers to an employer

does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by such
persons are performing activities which are directly related to the principal business of
such employer. In such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus
Rules Implementing the Labor Code:
Sec. 9. Labor-only contracting. -- (a) Any person who undertakes to supply workers to an
employer shall be deemed to be engaged in labor-only contracting where such person:

(1) Does not have substantial capital or investment in the form of

tools, equipment, machineries, work premises and other
materials; and
 
(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually
employed.
 
  (b) Labor-only contracting as defined herein is hereby
prohibited and the person acting as contractor shall be
 considered merely as an agent or intermediary of the
employer who shall be responsible to the workers in the
same manner and extent as if the latter were directly
employed by him.
 
  (c) For cases not falling under this Article, the Secretary of
Labor shall determine through appropriate orders
whether or not the contracting out of labor is permissible
in the light of the circumstances of each case and after
considering the operating needs of the employer and the
rights of the workers involved. In such case, he may
prescribe conditions and restrictions to insure the
protection and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity engaged in
the same a mere agent or intermediary of the direct employer. But even by the preceding
standards, the associate producers of VIVA cannot be considered labor-only contractors
as they did not supply, recruit nor hire the workers. In the instant case, it was Juanita
Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew
members from an “available group of free-lance workers which includes the
complainants Maraguinot and Enero.”[24]  And in their Memorandum, private respondents
declared that the associate producer “hires the services of... 6) camera crew which
includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and
electrician; (e) clapper; etc....”[25]  This clearly showed that the associate producers did not
supply the workers required by the movie project.

The relationship between VIVA and its producers or associate producers seems to be that
of agency,[26]  as the latter make movies on behalf of VIVA, whose business is to “make”
movies. As such, the employment relationship between petitioners and producers is
actually one between petitioners and VIVA, with the latter being the direct employer.

The employer-employee relationship between petitioners and VIVA can further be

established by the “control test.” While four elements are usually considered in
determining the existence of an employment relationship, namely: (a) the selection and
engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and
(d) the employer’s power to control the employee’s conduct, the most important element
is the employer’s control of the employee’s conduct, not only as to the result of the work
to be done but also as to the means and methods to accomplish the same. [27]  These four
elements are present here. In their position paper submitted to the Labor Arbiter, private
respondents narrated the following circumstances:
[T]he PRODUCER has to work within the limits of the budget he is given by the
company, for as long as the ultimate finish[ed] product is acceptable to the company...

To ensure that quality films are produced by the PRODUCER who is an independent
contractor, the company likewise employs a Supervising PRODUCER, a Project
accountant and a Shooting unit supervisor. The Company’s Supervising PRODUCER is
Mr. Eric Cuatico, the Project accountant varies from time to time, and the Shooting Unit
Supervisor is Ms. Alejandria Cesario.

The Supervising PRODUCER acts as the eyes and ears of the company and of the
Executive Producer to monitor the progress of the PRODUCER’s work
accomplishment. He is there usually in the field doing the rounds of inspection to see if
there is any problem that the PRODUCER is encountering and to assist in threshing out
the same so that the film project will be finished on schedule. He supervises about 3 to 7
movie projects simultaneously [at] any given time by coordinating with each film
“PRODUCER”. The Project Accountant on the other hand assists the PRODUCER in
monitoring the actual expenses incurred because the company wants to insure that any
additional budget requested by the PRODUCER is really justified and warranted
especially when there is a change of original plans to suit the tast[e] of the company on
how a certain scene must be presented to make the film more interesting and more
commercially viable. (emphasis ours)
VIVA’s control is evident in its mandate that the end result must be a “quality film
acceptable to the company.” The means and methods to accomplish the result are
likewise controlled by VIVA, viz., the movie project must be finished within schedule
without exceeding the budget, and additional expenses must be justified; certain scenes
are subject to change to suit the taste of the company; and the Supervising Producer, the
“eyes and ears” of VIVA and del Rosario, intervenes in the movie-making process by
assisting the associate producer in solving problems encountered in making the film.

It may not be validly argued then that petitioners are actually subject to the movie
director’s control, and not VIVA’s direction. The director merely instructs petitioners on
how to better comply with VIVA’s requirements to ensure that a quality film is
completed within schedule and without exceeding the budget. At bottom, the director is
akin to a supervisor who merely oversees the activities of rank-and-file employees with
control ultimately resting on the employer.

Moreover, appointment slips [28]  issued to all crew members state:

During the term of this appointment you shall comply with the duties and responsibilities
of your position as well as observe the rules and regulations promulgated by your
superiors and by Top Management.
The words “superiors” and “Top Management” can only refer to the “superiors” and
“Top Management” of VIVA. By commanding crew members to observe the rules and
regulations promulgated by VIVA, the appointment slips only emphasize VIVA’s control
over petitioners.

Aside from control, the element of selection and engagement is likewise present in the
instant case and exercised by VIVA. A sample appointment slip offered by private
respondents “to prove that members of the shooting crew except the driver are project
employees of the Independent Producers”[29]  reads as follows:

VIVA PRODUCTIONS, INC.

16 Sct. Albano St.
Diliman, Quezon City
   
PEDRO NICOLAS Date: June 15, 1992
_______________  
   
APPOINTMENT SLIP
   
You are hereby appointed as SOUNDMAN for the film project entitled
“MANAMBIT”. This appointment shall be effective upon the
commencement of the said project and shall continue to be effective
until the completion of the same.

For your services you shall receive the daily/weekly/monthly

compensation of P812.50.

During the term of this appointment you shall comply with the duties
and responsibilities of your position as well as observe the rules and
regulations promulgated by your superiors and by Top Management.
   
Very truly yours,
 
(an illegible signature)
   
CONFORME:  
___________________  
Name of appointee  
 
Signed in the presence of:  
_____________________  

Notably, nowhere in the appointment slip does it appear that it was the producer or
associate producer who hired the crew members; moreover, it is VIVA’s corporate name
which appears on the heading of the appointment slip. What likewise tells against VIVA
is that it paid petitioners’ salaries as evidenced by vouchers, containing VIVA’s
letterhead, for that purpose.[30]

All the circumstances indicate an employment relationship between petitioners and VIVA
alone, thus the inevitable conclusion is that petitioners are employees only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private respondents
contend that petitioners were project employees whose employment was automatically
terminated with the completion of their respective projects. Petitioners assert that they
were regular employees who were illegally dismissed.

It may not be ignored, however, that private respondents expressly admitted that
petitioners were part of a work pool;[31]  and, while petitioners were initially hired
possibly as project employees, they had attained the status of regular employees in view
of VIVA’s conduct.

A project employee or a member of a work pool may acquire the status of a regular
employee when the following concur:

1) There is a continuous rehiring of project employees even after

cessation of a project;[32]  and
 
2) The tasks performed by the alleged “project employee” are vital,
necessary and indispensable to the usual business or trade of the
employer.[33]

However, the length of time during which the employee was continuously re-hired is not
controlling, but merely serves as a badge of regular employment.[34]

In the instant case, the evidence on record shows that petitioner Enero was employed for
a total of two (2) years and engaged in at least eighteen (18) projects, while petitioner
Maraguinot was employed for some three (3) years and worked on at least twenty-three
(23) projects.[35]  Moreover, as petitioners’ tasks involved, among other chores, the
loading, unloading and arranging of movie equipment in the shooting area as instructed
by the cameramen, returning the equipment to the Viva Films’ warehouse, and assisting
in the “fixing” of the lighting system, it may not be gainsaid that these tasks were vital,
necessary and indispensable to the usual business or trade of the employer. As regards the
underscored phrase, it has been held that this is ascertained by considering the nature of
the work performed and its relation to the scheme of the particular business or trade in its
entirety.[36]

A recent pronouncement of this Court anent project or work pool employees who had
attained the status of regular employees proves most instructive:
The denial by petitioners of the existence of a work pool in the company because their
projects were not continuous is amply belied by petitioners themselves who admit that:
xxx

A work pool may exist although the workers in the pool do not receive salaries and are
free to seek other employment during temporary breaks in the business, provided that the
worker shall be available when called to report for a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned. This is
beneficial to both the employer and employee for it prevents the unjust situation of
“coddling labor at the expense of capital” and at the same time enables the workers to
attain the status of regular employees. Clearly, the continuous rehiring of the same set of
employees within the framework of the Lao Group of Companies is strongly indicative
that private respondents were an integral part of a work pool from which petitioners drew
its workers for its various projects.

In a final attempt to convince the Court that private respondents were indeed project
employees, petitioners point out that the workers were not regularly maintained in the
payroll and were free to offer their services to other companies when there were no on-
going projects. This argument however cannot defeat the workers’ status of regularity.
We apply by analogy the case of Industrial-Commercial-Agricultural Workers
Organization v. CIR [16 SCRA 562, 567-68 (1966)] which deals with regular seasonal
employees. There we held: xxx

Truly, the cessation of construction activities at the end of every project is a foreseeable
suspension of work. Of course, no compensation can be demanded from the employer
because the stoppage of operations at the end of a project and before the start of a new
one is regular and expected by both parties to the labor relations. Similar to the case of
regular seasonal employees, the employment relation is not severed by merely being
suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The employees are,
strictly speaking, not separated from services but merely on leave of absence without pay
until they are reemployed. Thus we cannot affirm the argument that non-payment of
salary or non-inclusion in the payroll and the opportunity to seek other employment
denote project employment.[37]  (underscoring supplied)
While Lao admittedly involved the construction industry, to which Policy Instruction No.
20/Department Order No. 19[38]  regarding work pools specifically applies, there seems to
be no impediment to applying the underlying principles to industries other than the
construction industry.[39]  Neither may it be argued that a substantial distinction exists
between the projects undertaken in the construction industry and the motion picture
industry. On the contrary, the raison d' etre of both industries concern projects with a
foreseeable suspension of work.

At this time, we wish to allay any fears that this decision unduly burdens an employer by
imposing a duty to re-hire a project employee even after completion of the project for
which he was hired. The import of this decision is not to impose a positive and sweeping
obligation upon the employer to re-hire project employees. What this decision merely
accomplishes is a judicial recognition of the employment status of a project or work pool
employee in accordance with what is fait accompli, i.e., the continuous re-hiring by the
employer of project or work pool employees who perform tasks necessary or desirable to
the employer’s usual business or trade. Let it not be said that this decision “coddles”
labor, for as Lao has ruled, project or work pool employees who have gained the status of
regular employees are subject to the “no work-no pay” principle, to repeat:
A work pool may exist although the workers in the pool do not receive salaries and are
free to seek other employment during temporary breaks in the business, provided that the
worker shall be available when called to report for a project. Although primarily
applicable to regular seasonal workers, this set-up can likewise be applied to project
workers insofar as the effect of temporary cessation of work is concerned. This is
beneficial to both the employer and employee for it prevents the unjust situation of
“coddling labor at the expense of capital” and at the same time enables the workers to
attain the status of regular employees.
The Court’s ruling here is meant precisely to give life to the constitutional policy of
strengthening the labor sector,[40]  but, we stress, not at the expense of management. Lest
it be misunderstood, this ruling does not mean that simply because an employee is a
project or work pool employee even outside the construction industry, he is deemed, ipso
jure, a regular employee. All that we hold today is that once a project or work pool
employee has been: (1) continuously, as opposed to intermittently, re-hired by the same
employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the employer, then the employee must be
deemed a regular employee, pursuant to Article 280 of the Labor Code and jurisprudence.
To rule otherwise would allow circumvention of labor laws in industries not falling
within the ambit of Policy Instruction No. 20/Department Order No. 19, hence allowing
the prevention of acquisition of tenurial security by project or work pool employees who
have already gained the status of regular employees by the employer’s conduct.

In closing then, as petitioners had already gained the status of regular employees, their
dismissal was unwarranted, for the cause invoked by private respondents for petitioners’
dismissal, viz., completion of project, was not, as to them, a valid cause for dismissal
under Article 282 of the Labor Code. As such, petitioners are now entitled to back wages
and reinstatement, without loss of seniority rights and other benefits that may have
accrued.[41]  Nevertheless, following the principles of “suspension of work” and “no pay”
between the end of one project and the start of a new one, in computing petitioners’ back
wages, the amounts corresponding to what could have been earned during the periods
from the date petitioners were dismissed until their reinstatement when petitioners’
respective Shooting Units were not undertaking any movie projects, should be deducted.

Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was
already in effect. Pursuant to Section 34 thereof which amended Section 279 of the Labor
Code of the Philippines and Bustamante v. NLRC,[42]  petitioners are entitled to receive
full back wages from the date of their dismissal up to the time of their reinstatement,
without deducting whatever earnings derived elsewhere during the period of illegal
dismissal, subject, however, to the above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the National
Labor Relations Commission in NLRC NCR CA No. 006195-94 dated 10 February 1995,
as well as its Resolution dated 6 April 1995, are hereby ANNULLED and SET ASIDE
for having been rendered with grave abuse of discretion, and the decision of the Labor
Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject, however, to
the modification above mentioned in the computation of back wages.

No pronouncement as to costs.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 127395, December 10, 1998 ]
PHILIPPINE TOBACCO FLUE-CURING & REDRYING CORPORATION,
PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION,
LIGAYA LUBAT, MARY JANE ESTARIS, EUFRECINA JAVIER, OFELIA
PLANDEZ, EDGARDO FORMENTO, CRESCENCIA TIU, MA. VICTORIA
LEON, GELLEN EULALIA, AIDA LICUDO, LUCINA LURIS, ERLINDA
BORCE, DOMINGA AYALA, CARMELITA APANTO, AIDA ALBANIEL,
SALVACION SORIO, PETRONILA SAMSON, ERLINDA CARANAY,
ROSALIE TIU, MILAGROS QUISMUNDO, LUZ DELA CRUZ, VIVIAN
DERLA, IRENE ENIEGO, VICENTA GARCIA, YOLANDA IGNACIO,
ADORACION LADERA, GLORIA MENDEZ, LEONILA MENDOZA,
REBECCA MORALES, TERESITA TIU, EMELITA QUILANO, JULIETA
PEDRIGAL, ANTONIA REYES, JOSEFA ROSALES, FRANCISCA TISMO,
NORMA AGUIRRE, CAROLINA AVISO, AMELIA BAUTISTA, ROSA
BORJA, APOLONIA CASTILLO, CARMELITA CAYETANO, ROSELFIDA
CENTINA, PATRIA BUSTILLO, FELICIAD CIPRIANO, MARINA CORPUZ,
MATILDE CORPUZ, JOSEFINA CUENZA, BIENVENIDA DE GUZMAN,
EUGENIA DELA CRUZ, MARIA PINEDA, PANCHITA NARCA, CRISANTA
MULAWIN, VIRGINIA MENGOLIO, ROSARIO OSMA, ARCELI
MADRILEJO, CRISTOPHER LABADOR, CANDELARIA LAZONA,
ANGELITA LESTINGYO, CARMELITA ESPIRITU, HELEN ESTARIS,
ROSA JAPSON, ARDIONELA LAZONA, ARIEL ULTRA, REYNANTE
TUMBUCON, ANTENOR REMOLLINO, ALEXANDER REMOLLINO,
ARNALDO NAPALIT, MACARIO MORIEL, JOSELITO LICUDO,
PATERNO LAVALLA, JERRY LICUDO, CESAR SAMSON, EDUARDO
ESGUERRA JR., RAMISES CENTARAN, JUAN BUSTILLO, ROLANDO
ALBANIEL, REYNALDO AQUINO, JAIME ESGUERRA, ARMANDO
 JAPSON, FERNANDO ESGUERRA, CARLITO ENIEGO, REYNALDO
DAYOT, MARCELO DAYOT, RODOLFO CERBITE, ARTEMIO
BOQUILLA, PASCUAL AGUJA, ERIC AGUJA, CELESTINA AQUINO,
REYNALDO BARQUIN, FELOMENA BEGONIA, ROSITA BAGONIA,
REGINA BENITEZ, EDGARDO BERGANO, RODOLFO BORROMEO,
LUDIVICO DALAY, ASCILIPIADES GOYENA, REMEDIO GOYENA,
OSCAR EMNACE, GERTRUDES GUIAO, LOLITA MUSNE, ALBERTO
PARAMA, LUNINGNING PERALTA, AMELIA RANCHES, ERNESTO SAN
JUAN, LIWAYWAY SAN JUAN, RICARDO TRIUMFANTE, LORENA
TORCIDO, PRISCILLA VILLASIN, LUZVIMINDA VILLEGAS, ROSILE
VERSOZA, CHARITO ISIDRO, PETER LABAYNE, AND SHIRLEY LUBAT,
RESPONDENTS.

DECISION

PANGANIBAN, J.:

This case involves two groups of seasonal workers who claimed separation

benefits after the closure of petitioner’s tobacco processing plant in Balintawak, Metro
Manila and the transfer of its tobacco operations to Candon, Ilocos Sur.  Petitioner
refuses to grant separation pay to the workers belonging to the first batch (referred to
as the Lubat group), because they had not been given work during the preceding year
and, hence, were no longer in its employ at the time it closed its Balintawak plant. 
Likewise, it claims exemption from awarding separation pay to the second batch (the
Luris group), because the closure of its plant was due to “serious business losses,” as
defined in Article 283 of the Labor Code.

In resolving this controversy,  this Court issues the following rulings: (1) the aforecited
Article 283 applies to both complete and partial cessation of operations; (2) “serious
business losses” that would have exempted petitioner from paying separation benefits
were not proven by its “recasted financial statements”; (3) the employer’s refusal to
rehire the first batch of employees had no legal justification and was thus an illegal
dimissal; and (4) the second batch of employees are entitled to the separation pay
provided by the Labor Code “in cases of closure x x x not due to serious business losses.”

The Case

The foregoing points encapsulate our ruling on the present Petition for Certiorari,
assailing the August 30, 1996 Decision of the National Labor Relations Commission
(NLRC)[1] in NLRC NCR Case No. 00-08-06061-94 and NLRC Case No. 08-06082-94, the
dispositive portion of which reads:

“WHEREFORE, the instant appeals are hereby dismissed for lack of merit.” [2]

The NLRC upheld the November 27, 1995 Decision of the labor arbiter [3] which disposed:
“WHEREFORE, premises considered, respondent PHILIPPINE TOBACCO FLUE-
CURING and REDYING CORPORATION is hereby ordered to pay within ten (10) days from
receipt hereof herein complainants (Lubat group) their respective separation pay,
equivalent to one-half month pay for every year of service considering the above stated
conditions, as follows: under Lubat Group: Mary Jane Estaris - P9,206.25 (P122.75 x 15
days x 5 yrs.); Eufrecina Javier -- P9,131.25 (P121.75 x 15 days x 5 yrs.); Ofelia Plandez --
P10,957.50 (P121.75 x 15 days x 6 yrs.); Edgardo Pormento - P5,310 (P118 x 15 x 3 yrs.);
Cresenciana Tiu -- P7,140 (P119 x 15 days x 4 yrs.); Ma. Victoria Leon -- P7,305 (P121.75
x 15 days x 4 yrs.); Ligaya Lubat -- P11,047.50 (122.75 x 15 days x 6 yrs.); Gellen Eulalia --
P12,888.75 (P122.75 x 15 days x 7 yrs.); and Aida Licudo -- P18,630 (P124.20 x 15 days x
10 yrs.); and [u]nder Luris group: Erlinda Borce -- P37,116 (P154.65 x 15 days x 21 yrs.) --
(less) of P11,598.75); Dominga Ayala -- P56,477.94 (P156.40 x 15 days x 32 yrs.)  --
P18,594.06); Carmelita Apanto -- P42,720.20 (P154.65 x 15 days x 22 yrs.) --
P13,757.74); Aida Albaniel -- P6,693.75 (P148.75 x 15 days x 5 yrs.) -- P4,462.50);
Salvacion Sorio -- (P51,034.50 (P154.65 x 15 days x 30 yrs.) -- P18,558.00); Petronila
Samon Petronilo Samson) -- P13,567.50 (P150.75 x 15 days x 9 yrs.) P6,783.75); Erlinda
Caranay -- P34,615.81 (P153.65 x 15 days x 20 yrs.) P11,479.19); Rosalie Tiu --
P11,231.25 (P149.75 x 15 days x 7 yrs.) -- P4,492.50);  Milagros Quismundo --
P44,943.73 (P154.65 x 15 days x 26 yrs.) -- P16,149.78); Luz dela Cruz -- P13,567.50
(P150.75 x 15 days x 9 yrs.) -- P6,783.75); Vivian Derla -- P13,477.50 (P149.75 x 15 days x
8 yrs.) -- P4,492.50); Irene Eniego -- P7,475.31 (P149.75 x 15 days x 5 yrs.) --
(P3,755.94);  Vicenta Garcia -- P44,618.56 (P155.35 x 15 days x 26 yrs.) -- P15,967.94);
Yolanda Ignacio -- P7,400.31 (P148.75 x 15 days x 5 yrs.) -- P3,755.94); Adoracion Ladera
P18,276 (P152.30 x 15 days x 12) -- P9,138); Luciana Luris -- P64,577.78 (P159 x 15 days
x 35 yrs.) -- P18,975.97); Gloria Mendez -- P32,266.50 yrs.) -- P3,755.94); Julieta Pedrigal
-- P54,622.68 (P156.40 x 15 x 32 yrs.) -- P20,449.32); Antonia Reyes -- P52,410.26
(P155.35 x 15 x 33 yrs.) -- P24,487.99); Josefa Rosales -- P32,291.83) P153.65 x 15 x 18
yrs.) -- P9,193.67); Francisca Tismo -- P25,377.67); (P153.65 x 15 x 5 yrs.) -- P9,193.58);
Norma Aguirre -- P11,300.25 (P150.75 x 15 x 8 yrs.) P6,783.75); Carolina Aviso --
P4,522.50 (P150.75 x 15 x 4 yrs.) -- P4,522.50); Amelia Bautista -- P13,567.50 (P150.75 x
15 x 9 yrs.) -- P6,783.75); Rosa Borja -- P2,863.75 (P145 x 15 x 3 yrs.) -- P3,661.25);
Apolonia Castillo -- P27,540 (P153 x 15 x 17 yrs.) -- P11,475); Carmelita Cayetano
P34,571.25 (P153.65 x 15 x 20 yrs.) -- P11,523.75); Roselfida Centina -- P11,231.25
(P149.75 x 15 x 7 yrs.) -- P4,492.50); Patria Bustillo -- P39,461.41 (P154.65 x 15 x 24 yrs.)
-- P16,212.59);  Felicidad Cipriano -- P11,306.25 (P150.75 x 15 x 8 yrs.) -- P6,783.75);
Marina Corpuz -- P15,716.25 (150.75 x 15 x 10 yrs.) -- P6,783.75); Matilde Corpuz --
P34,312.50 (P152.50 x 15 x 20 yrs.) -- P11,437.50);  Josefina Cuenza -- P70,241.05
(P159.85 x 15 x 40 yrs.) -- P25,668.95); Bienvenida De Guzman -- P68,974.45 (P159.15 x
15 x 39 yrs.) -- P24,128.30; Eugenio dela Cruz -- P30,281.21 (P153.65 x 15 x 17 yrs.) --
P8,899.54); Maria Pineda -- P11,306.25 (P150.75 x 15 x 8 yrs.) -- P6,783.75); Panchita
Narca – P34,571.25 (P153.65 x 18 x 20) -- P11,523.75); Crisanta Mulawin -- P25,389.98
(P153.65 x 15 x 15 yrs. -- P9,181.87); Virginia Mengolio -- P34,571.25 (P153.65 x 15 x 20
yrs. -- P11,523.75); Rosario Osma -- P25,286.14 (P153. x 15 x 15 yrs.) -- P9,138.80); Arceli
Madrilejo -- P51,034.50 (P154.65 x 15 x 28 yrs.) -- P13,918.50); Christopher Labador --
P13,507.57 (P149.75 x 15 x 8 yrs.) -- P4,462.43); Candelaria Lazona -- P39,435.80
(P154.65 x 15 x 22 yrs.) -- P11,598.75);  Angelita Lestingyo -- P56,469.28 (156 x 15 x 32
yrs.) -- P18,602.72); Carmelita Espiritu -- P20,499.75 (P151.85 x 15 x 13 yrs.) -- P9,111);
Helen Estaris -- P11,156.25 (P148.75 x 15 x 7 yrs.) -- P4,462.50); Rosa Japson --
P29,961.75 (P153.65 x 15 x 18 yrs.) -- P11,523.75); Ardionela Lazona -- P13,479.50)
(P149.75 x 15 x 8 yrs.) -- P4,490.50); Ariel Ultra -- P20,773.70 (P150.75 x 15 x 13 yrs.) --
P8,622.55); Reynante Tumbucon -- P4,343.50 (P147.75 x 15 x 7 yrs. -- P6,738.75);
Antenor Remollino -- P13,609.36) P148-75 x 15 x 8 yrs.) -- P4,240.64);  Alexander
Remollino -- P7,425.56 (P148.75 x 15 x 5 yrs.) -- P3,760.69); Arnaldo Napalit --
P27,817.29 (P152.30 x 15 x 16 yrs. -- P8,734.71); Macario Moriel -- P37,046.96 (153.65 x
15 x 22 yrs. -- (P13,657.57); Joselito Licudo -- P5,135 (P147.75 x 15 x 4 yrs. -- P3,730.69);
Paterno Lavalle -- P7,350.56 (P147.75 x 15 x 5 yrs. -- P3,730.69); Jerry Licudo --
P11,257.05 (P149.75 x 15 x 7 yrs. -- P4,466.70); Cesar Samson -- P2,918.06 (P147.75 x 15
x 3 yrs. -- P3,730.69); Eduardo Esguerra, Jr. P20,412 (P151.20 x 15 x 15 yrs. -- P13,608);
Ramises Centaran -- P17,970 (P149.75 x 15 x 8 yrs. less the amount advanced to him if
any; Juan Bustillo -- P9,665.26 (P148.75 x 15 x 6 yrs. -- P3,722.24); Rolando Albaniel --
P20,351.25 (P150.75 x 15 x 12 yrs. -- P6,783.75); Reynaldo Aquino -- P27,475.35
(P150.75 x 15 x 16 yrs. -- P8,704.65);  Jaime Esguerra -- P3,175.20 (P151.20 x 15 x 19 yrs.
-- P11,340); Armando Japson -- P11,156.25 (P148.75 x 15 x 7 yrs. -- P4,462.50); Fernando
Esguerra -- P15,723[.]75 (P149.75 x 15 x 9 yrs. -- P4,492.50); Carlito Eniego -- P13,066.14
(P145.94 x 15 x 8 yrs. -- P4,446.66); Carlito Eniego -- P13,066.14 (P145.95 x 15 x 8 yrs. --
P4,446.66); Reynaldo Dayot -- P9,566.81 (P147.75 x 15 x 6 yrs. -- P3,730.69); Marcelo
Dayot -- P9,074.36 (P149.75 x 15 x 7 yrs. -- P6,649.39); Rodolfo Cerbite -- P24,873.75
(P150.75 x 15 x 16 yrs. - P11,306.25); Artemio Boquilla -- P44,362.93 (P153.65 x 15 x 25
yrs. -- P13,255.82); and the following subject to the no. of years provided they rendered
at least one (1) month service each season as appearing in their personnel and service
records; Pascuala Aguja -- P48,399.75 (P153.65 x 15 x 26 yrs. -- P11,523.75); Eric Aguja --
P9,667.50 (P118 x 15 x 8 yrs. -- P4,492.50); Celestina Aquino -- P11,257.51 (P149,75 x 15
x 8 yrs. -- P6,712.49);  Reynaldo Barquin -- P13,519.26 (P149.75 x 15 x 9 yrs. --
P6,696.99); Felomena Bagonia -- P24,716.25 (150 x 15 x 14 yrs. -- P6,783.75); Rosita
Bagonia -- P42,386.26 (P149.75 x 15 x 24 years. -- P11,523.75); Regina Benitez --
P56,586.75 (P151 x 15 x 28 yrs. -- P6,833.25);  Edgardo Bergano -- P9,784.75 (P149.40 x
15 x 6 yrs. -- P3,661.25); Rodolfo Borromeo -- P26,979.81 (P150 x 15 x 18 yrs. --
P13,520.19); Ludivico Dalay -- P14,180.36 (P152.50 x 15 x 10 yrs. -- P8,694.64);
Ascilipiades Goyena -- P27,020.63 (P150 x 15 x 18 yrs. -- P13,479.37); Remedios Goyena
-- P22,511.25 (P150 x 15 x 13 yrs. -- P6,738.75);  Oscar Emnace -- P17,970 (P149.75 x 15
x 8 yrs. less the amount he received if any); Gertrudes Guiao P59,670 (P153 x 15 x 29
yrs. -- P6,885); Lolita Musne -- P53,394.36 (P154,65 x 15 x 29 yrs. -- P13,878.39); Alberto
Parama -- P12,161.25 (P140 x 15 x 9 yrs. -- P6,738.75); Luningning Peralta -- P48,448.50
(P153.65 x 15 x 26 yrs. -- P11,475); Amelia Ranches -- P58,102.04 (P157.60 x 15 x 34 yrs.
-- P22,273.96); Ernesto San Juan -- P11,261.25 (P149.75 x 15 x 7 yrs. -- P4,462.50);
Liwayway San Juan -- P67,655.08) P160.35 x 15 x 39 yrs. -- P26,149.67); Ricardo
Triumfante --P8,986.00 (P149.75 x 15 x 7 yrs. -- P6,738.75); Lorena Torcido -- P11,231.25
(P149.75 x 15 x 8 yrs. -- P6,738.75);  Priscilla Villasin -- P64,162.50 (P147.50 x 15 x 29 yrs.
less any amount she received from the respondent; Luzviminda Villegas -- P13,478
(P149.75 x 15 x 8 yrs. -- P4,492.00) Rosile Verzosa -- P13,387.50 (P149. x 15 x 8 yrs. --
P4,492.50) Charito Isidro -- P53,997 (P155.85 x 15 x 32 yrs. -- P20,811); Peter Labayne --
P17,130.36 (P150.45 x 15 x 7 yrs. -- P15,132.38); Shirley Lubat -- P13,773 (P149.75 x 15 x
8 yrs. -- P4,196.22); or a total sum of P2,811,724.33, plus ten (10%) percent attorney’s
fee, or a grand total sum of P3,092,896.76.

“As xxx data o[n] their salary rates were not indicated on record, the claims of
complainants Milagros Calubayan, Carmencita Cruz, Armando Goyena, Erlinda Nakpil,
Pacita Narca, Virgilio Punzalan, Roberto Reduta, Maritess Medina, Nestor Medina, and
Dominga Siababa can not be ascertained, and therefore, the same should be dismissed
but without prejudice.”

“With respect to the other claims of the above Luris group including their charge of
illegal dismissal, they are hereby dismissed for lack of merit.” [4]
The Facts
The facts are summarized in the challenged NLRC Decision as follows:
“These refer to the consolidated cases for payment of separation pay lodged by
[the] Lubat Group, and for illegal dismissal and underpayment of separation pay by [the]
Luris group, with prayers for damages and attorney’s fees against the above
respondents.

“The record reveals that all complainants in both cases were former workers of
respondent with their respective periods of employment and latest wages stated in the
parties’ pleadings/[a]nnexes.

“On August 1, 1994, due to supposed serious financial reverses and losses suffered by
respondent and its desire to prevent further losses, a notice of permanent closure of its
red[r]ying operations at Balintawak, Quezon City and transfer [of] the same to Candon,
Ilocos Sur was served to the DOLE.

“On August 3, 1994, complainants were also notified of the said decision to close and
transfer.

“On August 16, 1994, their separation benefits were given to them but allegedly [based
on] wrong computation when management did not consider 3/4 of their length of
service as claimed by complainants (Luris group).

“While the Lubat group were not granted xxx separation pay as their previous seasonal
service [was] not continuous, and as of August, 1994, they were not employed
ther[e]with as declared by respondent.

“Based on the complaint and from the above facts, the issues are as follows:

1)        Whether or not the Lubat Group are entitled to the payment of separation pay[;]

2)        Whether or not the Luris Group can be legally awarded separation pay
differentials[,] or whether or not the computation adopted by respondent in granting
complainants’ separation pay is erroneous[;] and

3)        Whether or not the Luris group can be properly allowed backwages and damages
by reason of their alleged illegal dismissal, and for both groups, attorney’s fees[.]
“In [its] position paper respondent maintains that [the] Lubat group are not entitled to
separation pay for the reason that they were not among those separated or could not
have been separated from employment on August 3, 1994 due to such closure and
transfer as they were not employed or did not report for work at the plant for the 1994
tobacco season as shown by [the] company’s records.

“As to the Luris group, although being questioned by this group, respondent considers
the following formula in determining the length of service in years as basis for
computing the separation pay of this group to be fair and reasonable and xxx supported
by Article 283 of the Labor Code, as amended, such as the total number of working days
actually worked over total number of working days in a year (303 days), multipl[ied] by
the daily rate and further multipl[ied] by 15 days.

“Respondent explains that this is so because complainants’ nature of work is seasonal as

they are employed every year only during the tobacco season which may fall within the
months of February to November but actually work for a period of less [than] six (6)
months for each season. The law qualifies tenure for purposes of separation benefits as
based on ‘service’ and not ‘employment’.

“With these considerations, respondent claims that complainants’ relief for separation
pay differentials  must fail.

“On the charge of illegal dismissal by the Luris group, respondent asserts that
complainants were separated from employment for [a] just cause that is the closure of
its REDRYING operations at the Balintawak plant and the transfer of the same to
Candon, Ilocos Sur which was authorized by the law and the parties’ CBA.

“The decision of management to close and transfer its tobacco processing and
REDRYING operations was based on the fact that it had consistently incurred a net loss
from these operations, its principal line of business, although its audited financial
statement showed a net profit after tax from 1990 to 1993 based on over-all operations.

“Moreover, respondent points out that as the Luris group and the DOLE were served a
written notice at least one (1) month before the intended date of closure effective on
Sept. 15, 1994, the due process requirement was met.
“Viewed from the above, respondent cannot prosper.

“On the other hand, the Lubat group declare that originally there were seven
complainants but eight were added.

“Being seasonal workers, they were hired by respondent to operate the Balintawak
factory from January to September, averaging 6 to 8 months annually.

“As alleged by them, when they reported for their annual shift, respondent refused to
extend them assignment for no apparent reason up to the end of the season in August,
1994. When they ask[ed] for separation pay, respondent told them that because they
were not in the payroll for 1994, no such benefit would be paid to them.

“It is their contention that complainants are entitled to separation pay [of] at least one-
half month pay for every year of service[,] as they were illegally dismissed[,] to be
computed each season ranging from 6 to 8 months [which] should be considered as one
year, contrary to the respondent’s basis which is the total no. of days they actually
rendered service.

“To back up the above, complainants cite a case wherein the Supreme Court held that
seasonal employees are not strictly speaking, separated from the service but merely
considered on leave of absence without pay until reemployed. Their employment
relationship is never severed but only suspended.

“For the prosecution of this case, complainants were forced to hire the services of
counsel for which they claim xxx attorney’s fees.

“As far as the Luris group are concerned, they state that they were factory workers of
respondents  numbering  one hundred (100) whose names, periods of employment and
latest salaries are contained in the lists attached to their position paper.

“As claimed by this group, on August 3, 1994, respondents told them that their services
were already terminated and all of them dismissed as the factory would be transferred
to Candon, Ilocos Sur.

“Letter-notices dated August 3, 1994, (Annexes F, F-1 and F-2 to their position paper)
showing that the date when they were notified of the closure was the same date they
were instantly dismissed although it is admitted in the notice that their decision to
transfer was made as early as March 5, 1994.

“Furthermore, complainants question the basis of the computations of their separation

benefits which should include the period when there [was] no work to be done in a
year. [B]ecause of necessity, they received the short amount as their separation pay by
way of voucher but ‘under protest’ as shown in Annexes C-C-1 to C-5 to their pleading.

“With the sudden transfer of the machiner[y] of respondents without giving them
advance notice leaving them with insufficient separation pay, complainants experienced
serious anxiety and wounded feelings for which they p[r]ay for damages including
attorney’s fees.

“Consequently, complainants also pray for backwages, allowance and other benefits
from the date of their illegal dismissal up to the final disposition of the case.

“Furthermore, complainants maintain that since the company is being transferred to the
province, the former’s separation may be considered compulsory retirement under R.A.
7641, providing for one-half month pay benefit for every year of service, and under
Section 3, Rule V, Book III of the Labor Code, as amended for which they also demand
payment thereof.

“Complainants also submitted the computation of their differential in separation pay

(addendum and supplemental addendum to their position paper) Annex ‘G’, ‘G-1’ to ‘G-
4’.”
To state the facts simply, there are two groups of employees, namely,  the Lubat
group and the Luris group.  The Lubat group is composed of petitioner’s seasonal
employees who were not rehired for the 1994 tobacco season.  At the start of that
season, they were merely informed that their employment had been terminated at the
end of the 1993 season.  They claimed that petitioner’s refusal to allow them to report
for work without mention of any just or authorized cause constituted illegal dismissal. 
In their Complaint, they prayed for separation pay, back wages, attorney’s fees and
moral damages.

On the other hand, the Luris group is made up of seasonal employees who worked
during the 1994 season.  On August 3, 1994,  they received a notice informing them
that, due to serious business losses, petitioner planned to close its Balintawak plant and
transfer its tobacco processing and redrying operations to Ilocos Sur.  Although the
closure was to be effective September 15, 1994, they were no longer allowed to work
starting August 4, 1994.  Instead, petitioner awarded them separation pay computed
according to the following formula:
total no. of days actually  
worked     x  daily rate x 15 days
___________________________  
_

total no. of working days in one

year
In their Complaint, they claimed that the computation should be based not on
the above mathematical equation, but on the actual number of years served.  In
addition, they contended that they were illegally dismissed, and thus they prayed for
back  wages.

Against these factual antecedents, the labor arbiter ordered the petitioner to pay 
complainants’ separation pay differential plus  attorney’s fees in the total amount of
P3,092,896.76.  Dissatisfied with said Decision, Philippine Tobacco and the complainants
filed their respective appeals before the NLRC. [5]

As noted earlier, the NLRC affirmed the labor arbiter’s Decision. Before this Court, only
Philippine Tobacco filed the present recourse, as the complainants did not question the
NLRC Decision.[6]

Ruling of the NLRC

The NLRC agreed with the labor arbiter that the closure by petitioner herein of its
operations at Balintawak and its transfer thereof to Ilocos Sur were due to serious
financial losses.  Nonetheless, both labor agencies held that the Luris and Lubat groups
were entitled to separation pay equivalent to one-half (1/2) month salary for every year
of service, provided that the employee worked at least one month in a given year.

The NLRC further ruled that private respondents were not entitled to back wages and
damages, since the closure of the factory and the termination of their employment were
due to a legally recognized cause.

Issues
Petitioner raises the following issues:
“A

SUBSTANTIAL AND UNDISPUTED EVIDENCE ON RECORD PROVES THAT THE CLOSURE OF

PETITIONER’S OPERATION WAS DUE TO SERIOUS BUSINESS LOSSES AND FINANCIAL
REVERSES. PRIVATE RESPONDENTS ARE NOT LEGALLY ENTITLED TO SEPARATION PAY.
THE PAYMENT OF SEPARATION PAY TO THE LURIS GROUP IS BASED ONLY ON
PETITIONER’S LIBERALITY.

B.

EVEN ASSUMING THAT PETITIONER’S CLOSURE WAS NOT DUE TO SERIOUS BUSINESS
LOSSES AND FINANCIAL REVERSES, THE LUBAT GROUP WORKERS ARE STILL NOT
ENTITLED [TO] SEPARATION PAY.  THE LUBAT GROUP WERE NOT EMPLOYED WITH
PETITIONER AT THE TIME OF PETITIONER’S CLOSURE.

EVEN ASSUMING THAT THE LURIS GROUP IS ENTITLED TO SEPARATION PAY, PETITIONER
MUST NOT AND CANNOT BE LEGALLY COMPELLED TO PAY MORE THAN THE AMOUNTS
ALREADY GIVEN TO THE [SAID] LURIS GROUP.”[7]
In the Court’s view, three issues must be tackled:  First, did petitioner prove
“serious business losses,” its justification for the nonpayment of separation
pay?  Second, was the dismissal of the employees valid?  Third, how should the
separation pay of illegally dismissed seasonal employees be computed?

The Court’s Ruling

The petition is not meritorious.

First Issue: Serious Business Losses Not Proven

Petitioner asserts that it submitted before the labor arbiter a Statement of Income and
Expenses, as well as a recasted version thereof,  showing that it had suffered serious
business losses in its tobacco processing and redrying operations.  Citing Article 283 of
the Labor Code, it concludes that it is not obligated to award separation pay to its
dismissed workers (whether belonging to the Lubat or the Luris group), because the
closure of its tobacco business was due to an authorized cause.

Petitioner further claims that it complied with the procedural requirements in closing
the aforementioned aspect of its business. It filed at the DOLE on August 2, 1994, a
Petition for Closure.  On August 3, 1994,  it also sent to its employees letters informing
them of its desire to close its tobacco operations in Balintawak effective September 15,
1994.  The fact that it did award separation pay to private respondents was solely out of
generosity, and not out of legal duty.

Article 283 of the Labor Code, which we quote below, prescribes the requisites and the
procedure for an employee’s dismissal arising from the closure or cessation of operation
of the establishment.
“ART. 283. Closure of establishment and reduction of personnel.-- The employer
may also terminate the employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or the closing or cessation
of operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof.  In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher.  In case of retrenchment to prevent losses and in
cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher.  A fraction of at least six (6) months shall be considered one (1)
whole year.”
It must be noted that the present case involves the closure of merely a unit or
division, not the whole business of an otherwise viable enterprise.  Although  Article 283
uses the phrase “closure or cessation of operation of an establishment or undertaking,”
this Court previously ruled in Coca-Cola Bottlers (Phils.), Inc. v. NLRC that said statutory
provision applies in cases of both complete and partial cessation of the business
operation:
“x x x Ordinarily, the closing of a warehouse facility and the termination of the
services of employees there assigned is a matter that is left to the determination of the
employer in the good faith exercise of its management prerogatives. The applicable law
in such a case is Article 283 of the Labor Code which permits ‘closure or cessation of
operation of an establishment or undertaking not due to serious business losses or
financial reverses,’ which, in our reading, includes both the complete cessation of
operations and the cessation of only part of a company’s business.” [8]
In Somerville Stainless Steel Corporation v. NLRC,[9] the Court held that “[t]he
‘loss’ referred to in Article 283 cannot be just any kind or amount of loss; otherwise, a
company could easily feign excuses to suit its whims and prejudices or to rid itself of
unwanted employees.  To guard against this possibility of abuse, the Court laid down
the following standard which a company must meet to justify retrenchment:
‘x x x Firstly, the losses expected should be substantial and not merely de
minimis in extent.  If the loss purportedly sought to be forestalled by retrenchment is
clearly shown to be insubstantial and inconsequential in character, the bonafide nature
of the retrenchment would appear to be seriously in question.  Secondly, the substantial
loss apprehended must be reasonably imminent, as such imminence can be perceived
objectively and in good faith by the employer.  There should, in other words, be a
certain degree of urgency for the retrenchment, which is after all a drastic recourse with
serious consequences for the livelihood of the employees retired or otherwise laid off. 
Because of the consequential nature of retrenchment, it must, thirdly, be reasonably
necessary and likely to effectively prevent the expected losses.  The employer should
have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut
other costs other than labor costs.  An employer who, for instance, lays off substantial
numbers of workers while continuing to dispense fat executive bonuses and perquisites
or so-called ‘golden parachutes,’ can scarcely claim to be retrenching in good faith to
avoid losses.  To impart operational meaning to the constitutional policy of providing
‘full protection’ to labor, the employer’s prerogative to bring down labor costs by
retrenching must be exercised essentially as a measure of last resort, after less drastic
means -- e.g., reduction of both management and rank-and-file- bonuses and salaries,
going on reduced time, improving manufacturing efficiencies, trimming of marketing
and advertising costs, etc. -- have been tried and found wanting.

‘Lastly, but certainly not the least important, alleged losses if already realized, and the
expected imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence.  The reason for requiring this quantum of proof is readily apparent:
any less exacting standard of proof would render too easy the abuse of this ground for
termination of services of employees. x x x’”
To repeat, petitioner did not actually close its entire business.  It merely
transferred or relocated its tobacco processing and redrying operations.  Moreover, it
was also engaged in, among others, corn and rental operations, which were unaffected
by the closure of its Balintawak plant.

Tested against the aforecited standards, we hold that herein petitioner was not able to
prove serious financial losses arising from its tobacco operations.  A close examination
of its Statement of Income and Expenses and its recasted version thereof, which were
presented in support of its contention, suggests its failure to show business losses.

In the recasted Statement, petitioner tried to prove that there was a net loss from its
tobacco processing and redrying operations.  It did so by subtracting all of its selling,
administrative and interest expenses for a given year from the earnings in
its tobacco sales for the corresponding year.  This formula, however, is at best illogical
and misleading.  Petitioner would have us believe that all of its expenses -- selling,
administrative and interest expenses -- resulted only from its tobacco processing and
redrying operations, and that it incurred no expense in its other profit centers.

On the contrary, the Statement of Income and Expenses shows that the selling and
administrative expenses pertain not only to the tobacco business of petitioner, but also
to its corn and rental operations, and that the interest expenses pertain to all of its
business operations.  In fact, the aforementioned Statement shows that there was a net
gain from operations in each year covered by the report.  In other words, the recasted
financial statement effectively modified the Statement of Income and Expenses by
deducting from the tobacco operations alone the operating costs pertaining
to all businesses of petitioner.

The contention of petitioner that tobacco was its main business does not justify the
devious contents of the recasted financial statement.  It is difficult to accept that it could
not have incurred any expense in its other operations.  Common sense revolts against
such proposition.

Misleading is petitioner’s argument that “public respondent cannot recognize

petitioner’s aforesaid Statement as the ‘normal and reliable method of proof of the
profit and loss’, and at the same time inconsistently assert that the same does not show
that the losses were serious or incurred solely by petitioner’s tobacco operations.” [10] An
audited financial statement is indeed the normal method of proof.  But this norm does
not compel this Court to accept the contents of the said documents blindly and without
thinking.  As stated already, the above documents failed to show that petitioner had
incurred from its tobacco operations serious losses sufficient to justify the termination
of the  employment of its workers sans separation pay.

Defective Notice

Article 283 of the Labor Code also requires the employer to furnish both  the  employee 
and  the  Department  of  Labor  and Employment a written Notice of Closure at least
one month prior to closure.  True, in the present case the Notices of Termination were
given to the employees on August 3, 1994, and the intended date of closure was
September 15, 1994.  However, the employees were in fact not allowed to work after
August 3, 1994.  Therefore, the termination notices to the employees were given in
violation of the requisite one-month prior notice under Article 283 of the Labor Code.

Petitioner’s contention that the tobacco season was about to end anyway is without
merit, because the law clearly provides, without any qualification, that the employees
must be given one-month notice prior to closure.  At the very least, respondent
members of the Luris group were deprived of work for the remaining days of  the 1994
tobacco season.  Petitioner could have easily complied with the aforesaid requirement
by sending the notices earlier.  In fact, according to petitioner, the decision to cease its
tobacco operations was made as early as March 5, 1994; hence, petitioner had plenty of
time within which to send the notices.

Given the illogical and misleading entries in the Statement of Income and Expenses, as
well as the recasted version thereof, and the defective Notice of Closure, this Court
holds that petitioner was not able to establish that the closure of its business operations
in its Balintawak plant was in fact due to serious financial losses. Therefore, under the
last two sentences of Article 283 of the Labor Code, the dismissed employees belonging
to the Luris group are entitled to separation pay “equivalent to one (1) month pay or at
least one half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1) whole year.”

Second Issue: Lubat Group Illegally Dismissed

Petitioner relies upon our ruling in Mercado v. NLRC[11] hat the “employment [of
seasonal employees] legally ends upon completion of the x x x season,” a statement
which was subsequently reiterated in Magcalas v. NLRC.[12] Thus, petitioner argues that
it was not obliged to rehire the members of the Lubat group for the 1994 season,
because their employment had been terminated at the end of the 1993 season.  Since
they were not employed for the 1994 season when the Balintawak plant was closed, it
follows that petitioner has no obligation to award them separation pay due to the said
closure.

We are not persuaded. From the facts, we are convinced that petitioner illegally
dismissed the members of the Lubat group when it refused to allow them to work
during the 1994 season.

This Court has previously ruled in Manila Hotel Company v. CIR[13] that seasonal workers
who are called to work from time to time and are temporarily laid off during off-season
are not separated from service in said period, but are merely considered on leave until
reemployed, viz.:
“The nature of their relationship x x x is such that during off season they are
temporarily laid off but during summer season they are re-employed, or when their
services may be needed. They are not strictly speaking separated from the service but
are merely considered as on leave of absence without pay until they are re-employed.”
The above doctrine was echoed by this Court in Industrial-Commercial-
Agricultural Workers’ Organization (ICAWO) v. CIR[14] and  Visayan Stevedore
Transportation Company v. CIR.[15]

Petitioner claims that the aforecited ruling has been superseded by Article 280 of the
Labor Code, which took effect on November 1, 1974.  We  disagree.    There  is no clear
conflict between the above doctrine and Article 280 of the Labor Code.  In fact,  the
same doctrine was reiterated by this Court in Tacloban Sagkahan Rice and Corn Mills
Co. v. NLRC[16] in 1990, which was promulgated after the Labor Code took effect. 
Furthermore, in Bacolod-Murcia Milling Co, Inc. v. NLRC,[17] this Court considered a
seasonal worker “in regular employment” in cases involving the determination of an
employer-employee relationship and security of tenure.  The Court ruled:
“While under prevailing jurisprudence, Canete may be considered as in regular
employment even during those years when she was merely a seasonal worker, that legal
conclusion will hold true only in cases involving the determination of an employer-
employee relationship or security of tenure.”
Again in Gaco v. NLRC, petitioner therein was a seasonal worker employed and
repeatedly rehired in a business enterprise similar to that of petitioner herein.  Finding
that he was in regular employment and thus entitled to separation pay for having been
constructively dismissed, the Court stated:
“It may appear that the work in private respondent Orient Leaf Tobacco
Corporation is seasonal, however, the records reveal that petitioner Zenaida Gaco was
repeatedly re-hired, sufficiently evidencing the necessity and indispensability of her
services to the former’s business or trade.  Furthermore, she has been employed since
1974 up to the end of the season in 1989.  Owing to her length of service, she became a
regular employee, by operation of law, one year after she was employed.” [18]
From the foregoing, it follows that the employer-employee relationship between
herein petitioner and members of the Lubat group was not terminated at the end of the
1993 season.  From the end of the 1993 season until the beginning of the 1994 season,
they were considered only on leave but nevertheless still in the employ of petitioner.

The facts in the above-mentioned cases are different from those in Mercado v.
NLRC[19] and in Magcalas v. NLRC.[20] In Mercado, although respondent constantly availed
herself of petitioners’ services from year to year, it was clear from the facts therein that
they were not in her regular employ.  Petitioners therein performed different phases of
agricultural work in a given year.  However, during that period, they were free to work
for other farm owners, and in fact they did.  In other words, they worked for
respondent, but were nevertheless free to contract their services with other farm
owners.  The Court was thus emphatic when it ruled that petitioners were mere project
employees, who could be hired by other farm  owners. As  such, their employment
would naturally end upon the completion of each project or each phase of farm work
which has been contracted.  In Magcalas v. NLRC, the Court merely cited the
aforequoted ruling to explain the difference among regular, project and seasonal
employees.  In fact, it concluded that the employees therein were regular and not
project employees.

From the peculiar facts of Mercado and Magcalas,   it is clear that the ruling therein is
not inconsistent with Manila Hotel, Gaco and other cases.  It is noteworthy that the
ponente in Mercado concurred in the Court’s ruling in Gaco awarding to the seasonal
employee separation pay for every year of service.

Prescinding from the above,  we hold that petitioner is liable for illegal dismissal and
should be responsible for the reinstatement of the Lubat group and the payment of
their back wages.  However, since reinstatement is no longer possible as petitioner has
already closed its Balintawak plant, respondent members of the said group should
instead be awarded normal separation pay (in lieu of reinstatement) equivalent to at
least one   month pay, or one  month pay for every year of service, whichever is higher. 
It must be stressed that the separation pay being awarded to the Lubat group is due to
illegal dismissal; hence, it is different from the amount of separation pay provided for in
Article 283 in case of retrenchment to prevent losses or in case of closure or cessation of
the employer’s business, in either of which the separation pay is equivalent to at least
one (1) month or one-half (1/2) month pay for every year of service, whichever is
higher.

However, despite the fact that the respondent members of the Lubat group were
entitled to separation pay equivalent to at least one (1) month pay, or one (1) month
pay for every year of service, whichever is higher, they cannot receive more than the
amount awarded to them in the NLRC Decision -- at least one (1) month or one-half
(1/2) month pay for every year of service, whichever is higher -- because they did not
appeal from the said Decision.[21] Therefore, no affirmative award can be given to them.
In the same manner, although respondents should have been entitled to back wages
because petitioner illegally deprived them of work during the 1994 season, no such
award can be given to them, since they did not appeal the NLRC Decision.  The
elementary norms of due process prevent the grant of such awards, as the employer
was not given notice that its filing of its own Petition for Certiorari would put it in
jeopardy of such relief.

Third Issue: Amount of Separation Pay

Petitioner posits that the separation pay of a seasonal worker, who works for only a
fraction of a year, should not be equated with that of a regular worker.  Positing that the
total number of working days in one year is 303 days, petitioner submits the following
formula for the computation of a seasonal worker’s separation pay:
“Total No. of Days Actually  
Worked      X Daily Rate X 15 days”[22]
___________________________  
_

Total No. Of Working Days In

One Year
Agreeing with the labor arbiter and the NLRC, private respondents, on the other
hand, claim that their separation pay should be based on the actual number of years
they have been in petitioner’s service.  They cite the law on service incentive leave,
[23]
 the implementing rules regarding the 13th month pay, [24] Manila Hotel v. CIR,
[25]
 and Chartered Bank v. Ople[26] which allegedly stated that “each season in a year
should be construed as one year of service.”[27]

The amount of separation pay is based on two factors: the amount of monthly salary
and the number of years of service.  Although the Labor Code provides different
definitions as to what constitutes “one year of service,” Book Six [28] does not specifically
define “one year of service” for purposes of computing separation pay.  However, 
Articles 283 and 284 both state in connection with separation pay that a fraction of at
least six months shall be considered one whole year.  Applying this to the case at bar,
we hold that the amount of separation pay which respondent members of the Lubat
and Luris groups should receive is one-half (1/2) their respective average monthly pay
during the last season they worked multiplied by the number of years they actually
rendered service, provided that they worked for at least six months during a given year.
[29]

The formula that petitioner proposes, wherein a year of work is equivalent to actual
work rendered for 303 days, is both unfair and inapplicable, considering that Articles
283 and 284 provide that in connection with separation pay, a fraction of at least six
months shall be considered one whole year.  Under these provisions, an employee who
worked for only six months in a given year -- which is certainly less than 303 days -- is
considered to have worked for one whole year.

In the same manner, Chartered Bank v. Ople,[30] which private respondents cite, does not
support their cause. The said case ruled that regular workers and those who are paid by
the month are both entitled to holiday pay. On the other hand, the law on service
incentive leave pay[31] does not necessarily apply to retirement benefits or separation
pay.  Likewise, the provision regarding the 13th month pay [32] is not applicable to
separation pay.  In fact, an employee who worked for a single month in a year is entitled
to a 13th month pay equivalent to only 1/12 of his or her monthly salary. 
Finally, Manila Hotel Company v. CIR[33] did not rule that seasonal workers are
considered at work during off-season with regard to the computation of separation pay. 
Said case merely held that, in regard to seasonal workers, the employer-employee
relationship is not severed during off-season but merely suspended.

WHEREFORE, the assailed Decision of Respondent NLRC is hereby AFFIRMED WITH THE

MODIFICATION that private respondents are hereby awarded separation pay equivalent
to one (1) month, or to one-half (1/2) month pay[34] for each year that they rendered
service, whichever is higher, provided that they rendered service for at least six (6)
months in a given year. The separation pay to be awarded to members of the Luris
group shall be taken from the amount which petitioner has already awarded to them,
and any excess need not be refunded by the workers.  The ten percent (10%) attorney’s
fees given by the NLRC and the labor arbiter shall be based on the award modified
herein.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 176419, November 27, 2013 ]
GMA NETWORK, INC., PETITIONER, VS. CARLOS P. PABRIGA,
GEOFFREY F. ARIAS, KIRBY N. CAMPO, ARNOLD L. LAGAHIT AND
ARMAND A. CATUBIG, RESPONDENTS.

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari filed by petitioner GMA Network, Inc.

assailing the Decision[1] of the Court of Appeals dated September 8, 2006 and the
subsequent Resolution[2] dated January 22, 2007 denying reconsideration in CA-G.R. SP
No. 73652.

The Court of Appeals summarized the facts of the case as follows:

On July 19, 1999, due to the miserable working conditions, private respondents
were forced to file a complaint against petitioner before the National Labor Relations
Commission, Regional Arbitration Branch No. VII, Cebu City, assailing their respective
employment circumstances as follows:

NAME DATE HIRED POSITION

Carlos Pabriga 2 May 1997 Television Technicians
Geoffrey Arias 2 May 1997 Television Technicians
Kirby Campo 1 Dec. 1993 Television Technicians
Arnold Laganit 11 Feb. 1996 Television Technicians
Armand Catubig 2 March 1997 Television Technicians
Private respondents were engaged by petitioner to perform the following activities, to
wit:
1) Manning of Technical Operations Center:
(a) Responsible for the airing of local commercials; and
(b) Logging/monitoring of national commercials (satellite)

2) Acting as Transmitter/VTR men:

(a) Prepare tapes for local airing;
(b) Actual airing of commercials;
(c) Plugging of station promo;
(d) Logging of transmitter reading; and
(e) In case of power failure, start up generator set to resume program;

3) Acting as Maintenance staff;

(a) Checking of equipment;
(b) Warming up of generator;
(c) Filling of oil, fuel, and water in radiator; and

4) Acting as Cameramen
On 4 August 1999, petitioner received a notice of hearing of the complaint.  The
following day, petitioner’s Engineering Manager, Roy Villacastin, confronted the private
respondents about the said complaint.

On 9 August 1999, private respondents were summoned to the office of petitioner’s

Area Manager, Mrs. Susan Aliño, and they were made to explain why they filed the
complaint.  The next day, private respondents were barred from entering and reporting
for work without any notice stating the reasons therefor.

On 13 August 1999, private respondents, through their counsel, wrote a letter to Mrs.
Susan Aliño requesting that they be recalled back to work.

On 23 August 1999, a reply letter from Mr. Bienvenido Bustria, petitioner’s head of
Personnel and Labor Relations Division, admitted the non-payment of benefits but did
not mention the request of private respondents to be allowed to return to work.

On 15 September 1999, private respondents sent another letter to Mr. Bustria

reiterating their request to work but the same was totally ignored.  On 8 October 1999,
private respondents filed an amended complaint raising the following additional issues:
1) Unfair Labor Practice; 2) Illegal dismissal; and 3) Damages and Attorney’s fees.

On 23 September 1999, a mandatory conference was set to amicably settle the dispute
between the parties, however, the same proved to be futile.  As a result, both of them
were directed to file their respective position papers.

On 10 November 1999, private respondents filed their position paper and on 2 March
2000, they received a copy of petitioner’s position paper.  The following day, the Labor
Arbiter issued an order considering the case submitted for decision. [3]

In his Decision dated August 24, 2000, the Labor Arbiter dismissed the complaint of
respondents for illegal dismissal and unfair labor practice, but held petitioner liable for
13th month pay.  The dispositive portion of the Labor Arbiter’s Decision reads:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered

dismissing the complaints for illegal dismissal and unfair labor practice.

Respondents are, however, directed to pay the following complainants their

proportionate 13th month pay, to wit:

1. Kirby Campo P 7,716.04

2. Arnold Lagahit 7,925.98
3. Armand Catubig 4,233.68
4. Carlos Pabriga 4,388.19
5. Geoffrey Arias 4,562.01
P28,826.14
10% Attorney’s fees 2,882.61
GRAND TOTAL P31,708.75
All other claims are, hereby, dismissed for failure to substantiate the same. [4]

Respondents appealed to the National Labor Relations Commission (NLRC).  The NLRC
reversed the Decision of the Labor Arbiter, and held thus:

WHEREFORE, we make the following findings:

a) All complainants are regular employees with respect to the particular activity to
which they were assigned, until it ceased to exist.  As such, they are entitled to payment
of separation pay computed at one (1) month salary for every year of service;
b) They are not entitled to overtime pay and holiday pay; and

c) They are entitled to 13th month pay, night shift differential and service incentive leave
pay.

For purposes of accurate computation, the entire records are REMANDED to the
Regional Arbitration Branch of origin which is hereby directed to require from
respondent the production of additional documents where necessary.

Respondent is also assessed the attorney’s fees of ten percent (10%) of all the above
awards.[5]

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari.  On

September 8, 2006, the appellate court rendered its Decision denying the petition for
lack of merit.

Petitioner filed the present Petition for Review on Certiorari, based on the following
grounds:

I.

THE COURT OF APPEALS GRAVELY ERRED FINDING RESPONDENTS ARE REGULAR

EMPLOYEES OF THE PETITIONER AND ARE NOT PROJECT EMPLOYEES.

II.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING SEPARATION PAY TO

RESPONDENTS ABSENT A FINDING THAT RESPONDENTS WERE ILLEGALLY DISMISSED.

III.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING NIGHT SHIFT DIFFERENTIAL

PAY CONSIDERING THE ABSENCE OF EVIDENCE WHICH WOULD ENTITLE THEM TO
SUCH AN AWARD.

IV.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING ATTORNEY’S FEES TO
RESPONDENTS.[6]

The parties having extensively elaborated on their positions in their respective

memoranda, we proceed to dispose of the issues raised.

Five Classifications of Employment

At the outset, we should note that the nature of the employment is determined by law,
regardless of any contract expressing otherwise. The supremacy of the law over the
nomenclature of the contract and the stipulations contained therein is to bring to life
the policy enshrined in the Constitution to afford full protection to labor.  Labor
contracts, being imbued with public interest, are placed on a higher plane than ordinary
contracts and are subject to the police power of the State. [7]

Respondents claim that they are regular employees of petitioner GMA Network, Inc. 

The latter, on the other hand, interchangeably characterize respondents’ employment
as project and fixed period/fixed term employment.  There is thus the need to clarify the
foregoing terms.

The terms regular employment and project employment are taken from Article 280 of

the Labor Code, which also speaks of casual and seasonal employment:

ARTICLE 280. Regular and casual employment. – The provisions of written

agreement to the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and employment is for the duration of
the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such activity actually exist.

A fifth classification, that of a fixed term employment, is not expressly mentioned in the
Labor Code.  Nevertheless, this Court ruled in Brent School, Inc. v. Zamora,[8] that such a
contract, which specifies that employment will last only for a definite period, is not per
se illegal or against public policy.

Whether respondents are regular or project employees

Pursuant to the above-quoted Article 280 of the Labor Code, employees performing
activities which are usually necessary or desirable in the employer’s usual business or
trade can either be regular, project or seasonal employees, while, as a general rule,
those performing activities not usually necessary or desirable in the employer’s usual
business or trade are casual employees.  The reason for this distinction may not be
readily comprehensible to those who have not carefully studied these provisions: only
employers who constantly need the specified tasks to be performed can be justifiably
charged to uphold the constitutionally protected security of tenure of the corresponding
workers.  The consequence of the distinction is found in Article 279 of the Labor Code,
which provides:

ARTICLE 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.

On the other hand, the activities of project employees may or may not be usually
necessary or desirable in the usual business or trade of the employer, as we have
discussed in ALU-TUCP v. National Labor Relations Commission,[9] and recently reiterated
in Leyte Geothermal Power Progressive Employees Union-ALU-TUCP v. Philippine
National Oil Company-Energy Development Corporation.[10]  In said cases, we clarified
the term “project” in the test for determining whether an employee is a regular or
project employee:
 It is evidently important to become clear about the meaning and scope of the
term “project” in the present context. The “project” for the carrying out of which
“project employees” are hired would ordinarily have some relationship to the usual
business of the employer.  Exceptionally, the “project” undertaking might not have an
ordinary or normal relationship to the usual business of the employer.  In this latter
case, the determination of the scope and parameters of the “project” becomes fairly
easy. It is unusual (but still conceivable) for a company to undertake a project which has
absolutely no relationship to the usual business of the company; thus, for instance, it
would be an unusual steel-making company which would undertake the breeding and
production of fish or the cultivation of vegetables. From the viewpoint, however, of the
legal characterization problem here presented to the Court, there should be no difficulty
in designating the employees who are retained or hired for the purpose of undertaking
fish culture or the production of vegetables as “project employees,” as distinguished
from ordinary or “regular employees,” so long as the duration and scope of the project
were determined or specified at the time of engagement of the “project employees.”
For, as is evident from the provisions of Article 280 of the Labor Code, quoted
earlier, the principal test for determining whether particular employees are properly
characterized as “project employees” as distinguished from “regular employees,”
is whether or not the “project employees” were assigned to carry out a “specific
project or undertaking,” the duration (and scope) of which were specified at the time
the employees were engaged for that project.

In the realm of business and industry, we note that “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.  A construction
company ordinarily carries out two or more [distinct] identifiable construction projects:
e.g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio
City; and a domestic air terminal in Iloilo City.  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.
The term “project” 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. x x x.[11] (Emphases supplied, citation omitted.)

Thus, in order to safeguard the rights of workers against the arbitrary use of the word
“project” to prevent employees from attaining the status of regular employees,
employers claiming that their workers are project employees should not only prove that
the duration and scope of the employment was specified at the time they were engaged,
but also that there was indeed a project.  As discussed above, the project could either be
(1) 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; or (2) a particular job or undertaking that is not
within the regular business of the corporation.  As it was with regard to the distinction
between a regular and casual employee, the purpose of this requirement is to delineate
whether or not the employer is in constant need of the services of the specified
employee.  If the particular job or undertaking is within the regular or usual business of
the employer company and it is not identifiably distinct or separate from the other
undertakings of the company, there is clearly a constant necessity for the performance
of the task in question, and therefore said job or undertaking should not be considered
a project.

Brief examples of what may or may not be considered identifiably distinct from the
business of the employer are in order.  In Philippine Long Distance Telephone Company
v. Ylagan,[12] this Court held that accounting duties were not shown as distinct, separate
and identifiable from the usual undertakings of therein petitioner PLDT. Although
essentially a telephone company, PLDT maintains its own accounting department to
which respondent was assigned.  This was one of the reasons why the Court held that
respondent in said case was not a project employee.  On the other hand, in San Miguel
Corporation v. National Labor Relations Commission,[13] respondent was hired to repair
furnaces, which are needed by San Miguel Corporation to manufacture glass, an integral
component of its packaging and manufacturing business.  The Court, finding that
respondent is a project employee, explained that San Miguel Corporation is not engaged
in the business of repairing furnaces.  Although the activity was necessary to enable
petitioner to continue manufacturing glass, the necessity for such repairs arose only
when a particular furnace reached the end of its life or operating cycle.  Respondent
therein was therefore considered a project employee.

In the case at bar, as discussed in the statement of facts, respondents were assigned to
the following tasks:

1) Manning of Technical Operations Center:

(a) Responsible for the airing of local commercials; and
(b) Logging/monitoring of national commercials (satellite)

2) Acting as Transmitter/VTR men:

(a) Prepare tapes for local airing;
(b) Actual airing of commercials;
(c) Plugging of station promo;
(d) Logging of transmitter reading; and
(e) In case of power failure, start up generator set to resume program;

3) Acting as Maintenance staff;

(a) Checking of equipment;
(b) Warming up of generator;
(c) Filling of oil, fuel, and water in radiator; and

4) Acting as Cameramen[14]

These jobs and undertakings are clearly within the regular or usual business of the
employer company and are not identifiably distinct or separate from the other
undertakings of the company.  There is no denying that the manning of the operations
center to air commercials, acting as transmitter/VTR men, maintaining the equipment,
and acting as cameramen are not undertakings separate or distinct from the business of
a broadcasting company.

Petitioner’s allegation that respondents were merely substitutes or what they call pinch-
hitters (which means that they were employed to take the place of regular employees of
petitioner who were absent or on leave) does not change the fact that their jobs cannot
be considered projects within the purview of the law.  Every industry, even public
offices, has to deal with securing substitutes for employees who are absent or on leave. 
Such tasks, whether performed by the usual employee or by a substitute, cannot be
considered separate and distinct from the other undertakings of the company.  While it
is management’s prerogative to device a method to deal with this issue, such
prerogative is not absolute and is limited to systems wherein employees are not
ingeniously and methodically deprived of their constitutionally protected right to
security of tenure.  We are not convinced that a big corporation such as petitioner
cannot device a system wherein a sufficient number of technicians can be hired with a
regular status who can take over when their colleagues are absent or on leave,
especially when it appears from the records that petitioner hires so-called pinch-hitters
regularly every month.

In affirming the Decision of the NLRC, the Court of Appeals furthermore noted that if
respondents were indeed project employees, petitioner should have reported the
completion of its projects and the dismissal of respondents in its finished projects:

There is another reason why we should rule in favor of private respondents. 

Nowhere in the records is there any showing that petitioner reported the completion of
its projects and the dismissal of private respondents in its finished projects to the
nearest Public Employment Office as per Policy Instruction No. 20 [15] of the Department
of Labor and Employment [DOLE].  Jurisprudence abounds with the consistent rule that
the failure of an employer to report to the nearest Public Employment Office the
termination of its workers’ services everytime a project or a phase thereof is completed
indicates that said workers are not project employees.

In the extant case, petitioner should have filed as many reports of termination as there
were projects actually finished if private respondents were indeed project employees,
considering that the latter were hired and again rehired from 1996 up to 1999.  Its
failure to submit reports of termination cannot but sufficiently convince us further that
private respondents are truly regular employees.  Important to note is the fact that
private respondents had rendered more than one (1) year of service at the time of their
dismissal which overturns petitioner’s allegations that private respondents were hired
for a specific or fixed undertaking for a limited period of time. [16] (Citations omitted.)

We are not unaware of the decisions of the Court in Philippine Long Distance Telephone
Company v. Ylagan[17] and ABS-CBN Broadcasting Corporation v. Nazareno[18] which held
that the employer’s failure to report the termination of employees upon project
completion to the DOLE Regional Office having jurisdiction over the workplace within
the period prescribed militates against the employer’s claim of project employment,
even outside the construction industry.  We have also previously stated in another case
that the Court should not allow circumvention of labor laws in industries not falling
within the ambit of Policy Instruction No. 20/Department Order No. 19, thereby
allowing the prevention of acquisition of tenurial security by project employees who
have already gained the status of regular employees by the employer’s conduct. [19]

While it may not be proper to revisit such past pronouncements in this case, we
nonetheless find that petitioner’s theory of project employment fails the principal test
of demonstrating that the alleged project employee was assigned to carry out a specific
project or undertaking, the duration and scope of which were specified at the time the
employee is engaged for the project.[20]

The Court of Appeals also ruled that even if it is assumed that respondents are project
employees, they would nevertheless have attained regular employment status because
of their continuous rehiring:

Be that as it may, a project employee may also attain the status of a regular
employee if there is a continuous rehiring of project employees after the stoppage of a
project; and the activities performed are usual [and] customary to the business or trade
of the employer.  The Supreme Court ruled that a project employee or a member of a
work pool may acquire the status of a regular employee when the following concur:

1)      There is a continuous rehiring of project employees even after cessation of a

project; and

2)      The tasks performed by the alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer.

The circumstances set forth by law and the jurisprudence is present in this case.  In fine,
even if private respondents are to be considered as project employees, they attained
regular employment status, just the same.[21] (Citation omitted.)

Anent this issue of attainment of regular status due to continuous rehiring, petitioner
advert to the fixed period allegedly designated in employment contracts and reflected in
vouchers.  Petitioner cites our pronouncements in Brent, St. Theresa’s School of
Novaliches Foundation v. National Labor Relations Commission,[22] and Fabela v. San
Miguel Corporation,[23] and argues that respondents were fully aware and freely entered
into agreements to undertake a particular activity for a specific length of time. [24] 
Petitioner apparently confuses project employment from fixed term employment.  The
discussions cited by petitioner in Brent, St. Theresa’s and Fabela all refer to fixed term
employment, which is subject to a different set of requirements.
Whether the requisites of a valid fixed term employment are met

As stated above, petitioner interchangeably characterizes respondents’ service

as project and fixed term employment.  These types of employment, however, are not
the same.  While the former requires a project as restrictively defined above, the
duration of a fixed-term employment agreed upon by the parties may be any day
certain, which is understood to be “that which must necessarily come although it may
not be known when.”[25]  The decisive determinant in fixed-term employment is not the
activity that the employee is called upon to perform but the day certain agreed upon by
the parties for the commencement and termination of the employment relationship. [26]

Cognizant of the possibility of abuse in the utilization of fixed-term employment

contracts, we emphasized in Brent  that where from the circumstances it is apparent
that the periods have been imposed to preclude acquisition of tenurial security by the
employee, they should be struck down as contrary to public policy or morals.[27]  We
thus laid down indications or criteria under which “term employment” cannot be said to
be in circumvention of the law on security of tenure, namely:

1) 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; or

2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the
latter. [28] (Citation omitted.)

These indications, which must be read together, make the Brent  doctrine applicable
only in a few special cases wherein the employer and employee are on more or less in
equal footing in entering into the contract.  The reason for this is evident: when a
prospective employee, on account of special skills or market forces, is in a position to
make demands upon the prospective employer, such prospective employee needs less
protection than the ordinary worker.  Lesser limitations on the parties’ freedom of
contract are thus required for the protection of the employee.  These indications were
applied in Pure Foods Corporation v. National Labor Relations Commission,[29] where we
discussed the patent inequality between the employer and employees therein:
 [I]t could not be supposed that private respondents and all other so-called
“casual” workers of [the petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-
month employment contract. Cannery workers are never on equal terms with their
employers. Almost always, they agree to any terms of an employment contract just to
get employed considering that it is difficult to find work given their ordinary
qualifications. Their freedom to contract is empty and hollow because theirs is the
freedom to starve if they refuse to work as casual or contractual workers. Indeed, to the
unemployed, security of tenure has no value. It could not then be said that petitioner
and private respondents “dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter.

To recall, it is doctrinally entrenched that in illegal dismissal cases, the employer has the
burden of proving with clear, accurate, consistent, and convincing evidence that the
dismissal was valid.[30]  It is therefore the employer which must satisfactorily show that it
was not in a dominant position of advantage in dealing with its prospective employee. 
Thus, in Philips Semiconductors (Phils.), Inc. v. Fadriquela,[31] this Court rejected the
employer’s insistence on the application of the Brent doctrine when the sole
justification of the fixed terms is to respond to temporary albeit frequent need of such
workers:

We reject the petitioner’s submission that it resorted to hiring employees for

fixed terms to augment or supplement its regular employment “for the duration of peak
loads” during short-term surges to respond to cyclical demands; hence, it may hire and
retire workers on fixed terms, ad infinitum, depending upon the needs of its customers,
domestic and international.  Under the petitioner's submission, any worker hired by it
for fixed terms of months or years can never attain regular employment status. x x x.

Similarly, in the case at bar, we find it unjustifiable to allow petitioner to hire and rehire
workers on fixed terms, ad infinitum, depending upon its needs, never attaining regular
employment status.  To recall, respondents were repeatedly rehired in several fixed
term contracts from 1996 to 1999.  To prove the alleged contracts, petitioner presented
cash disbursement vouchers signed by respondents, stating that they were merely hired
as pinch-hitters.  It is apparent that respondents were in no position to refuse to sign
these vouchers, as such refusal would entail not getting paid for their services.  Plainly,
respondents as “pinch-hitters” cannot be considered to be in equal footing as petitioner
corporation in the negotiation of their employment contract.

In sum, we affirm the findings of the NLRC and the Court of Appeals that respondents
are regular employees of petitioner.  As regular employees, they are entitled to security
of tenure and therefore their services may be terminated only for just or authorized
causes.  Since petitioner failed to prove any just or authorized cause for their
termination, we are constrained to affirm the findings of the NLRC and the Court of
Appeals that they were illegally dismissed.

Separation Pay, Night Shift Differential and Attorney’s Fees 

Petitioner admits that respondents were not given separation pay and night shift
differential.  Petitioner, however, claims that respondents were not illegally dismissed
and were therefore not entitled to separation pay.  As regards night shift differential,
petitioner claims that its admission in its August 23, 1999 letter as to the nonpayment
thereof is qualified by its allegation that respondents are not entitled thereto. 
Petitioner points out that respondents failed to specify the period when such benefits
are due, and did not present additional evidence before the NLRC and the Court of
Appeals.[32]

In light, however, of our ruling that respondents were illegally dismissed, we affirm the
findings of the NLRC and the Court of Appeals that respondents are entitled to
separation pay in lieu of reinstatement.  We quote with approval the discussion of the
Court of Appeals:

However, since petitioner refused to accept private respondents back to work,

reinstatement is no longer practicable. Allowing private respondents to return to their
work might only subject them to further embarrassment, humiliation, or even
harassment.

Thus, in lieu of reinstatement, the grant of separation pay equivalent to one (1) month
pay for every year of service is proper which public respondent actually did. Where the
relationship between private respondents and petitioner has been severely strained by
reason of their respective imputations of accusations against each other, to order
reinstatement would no longer serve any purpose. In such situation, payment of
separation pay instead of reinstatement is in order.[33] (Citations omitted.)

As regards night shift differential, the Labor Code provides that every employee shall be
paid not less than ten percent (10%) of his regular wage for each hour of work
performed between ten o’clock in the evening and six o’clock in the morning. [34]  As
employees of petitioner, respondents are entitled to the payment of this benefit in
accordance with the number of hours they worked from 10:00 p.m. to 6:00 a.m., if any. 
In the Decision of the NLRC affirmed by the Court of Appeals, the records were
remanded to the Regional Arbitration Branch of origin for the computation of the night
shift differential and the separation pay.  The Regional Arbitration Branch of origin was
likewise directed to require herein petitioner to produce additional documents where
necessary.  Therefore, while we are affirming that respondents are entitled to night shift
differential in accordance with the number of hours they worked from 10:00 p.m. to
6:00 a.m., it is the Regional Arbitration Branch of origin which should determine the
computation thereof for each of the respondents, and award no night shift differential
to those of them who never worked from 10:00 p.m. to 6:00 a.m.

It is also worthwhile to note that in the NLRC Decision, it was herein petitioner GMA
Network, Inc. (respondent therein) which was tasked to produce additional documents
necessary for the computation of the night shift differential.  This is in accordance with
our ruling in Dansart Security Force & Allied Services Company v. Bagoy,[35] where we
held that it is entirely within the employer’s power to present such employment records
that should necessarily be in their possession, and that failure to present such evidence
must be taken against them.

Petitioner, however, is correct that the award of attorney’s fees is contrary to

jurisprudence.  In De los Santos v. Jebsen Maritime, Inc.,[36] we held:

Likewise legally correct is the deletion of the award of attorney's fees, the NLRC
having failed to explain petitioner’s entitlement thereto. As a matter of sound policy, an
award of attorney’s fees remains the exception rather than the rule.  It must be
stressed, as aptly observed by the appellate court, that it is necessary for the trial court,
the NLRC in this case, to make express findings of facts and law that would bring the
case within the exception.  In fine, the factual, legal or equitable justification for the
award must be set forth in the text of the decision. The matter of attorney’s fees cannot
be touched once and only in the fallo of the decision, else, the award should be thrown
out for being speculative and conjectural.  In the absence of a stipulation, attorney’s
fees are ordinarily not recoverable; otherwise a premium shall be placed on the right to
litigate.  They are not awarded every time a party wins a suit. (Citations omitted.)

In the case at bar, the factual basis for the award of attorney’s fees was not discussed in
the text of NLRC Decision.  We are therefore constrained to delete the same.

WHEREFORE, the Decision of the Court of Appeals dated September 8, 2006 and the
subsequent Resolution denying reconsideration dated January 22, 2007 in CA-G.R. SP
No. 73652, are hereby AFFIRMED, with the MODIFICATION that the award of attorney’s
fees in the affirmed Decision of the National Labor Relations Commission is
hereby DELETED.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 208936, April 17, 2017 ]
HERMA SHIPYARD, INC., AND MR. HERMINIO ESGUERRA,
PETITIONERS, VS. DANILO OLIVEROS, JOJIT BESA, ARNEL SABAL,
CAMILO OLIVEROS, ROBERT NARIO, FREDERICK CATIG, RICARDO
ONTALAN, RUBEN DELGADO, SEGUNDO LABOSTA, EXEQUIEL
OLIVERIA, OSCAR TIROL AND ROMEO TRINIDAD, RESPONDENTS.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari[1] assails the Decision[2] dated May 30, 2013
of the Court of Appeals (CA) in CA-G.R. SP No. 118068 that reversed the Decisions of the
National Labor Relations Commission (NLRC) and the Labor Arbiter and declared that
Danilo Oliveros, Jojit Besa, Arnel Sabal, Camilo Oliveros, Robert Nario, Frederick Catig,
Ricardo Ontalan, Ruben Delgado, Segundo Labosta, Exequiel Oliveria, Oscar Tirol and
Romeo Trinidad (respondents) are regular employees of petitioner Herma Shipyard, Inc.
(Herma Shipyard).

Factual Antecedents

Herma Shipyard a domestic corporation engaged in the business of shipbuilding and

repair. The respondents were its employees occupying various positions such as welder,
leadman, pipe fitter, laborer, helper, etc.

On June 17, 2009, the respondents filed before the Regional Arbitration Branch III, San
Fernando City, Pampanga a Complaint[3] for illegal dismissal, regularization, and non-
payment of service incentive leave pay with prayer for the payment of full backwages
and attorney's fees against petitioners. Respondents alleged that they are Herma
Shipyard's regular employees who have been continuously performing tasks usually
necessary and desirable in its business. On various dates, however, petitioners
dismissed them from employment.

Respondents further alleged that as a condition to their continuous and uninterrupted

employment, petitioners made them sign employment contracts for a fixed period
ranging from one to four months to make it appear that they were project-based
employees. Per respondents, petitioners resorted to this scheme to defeat their right to
security of tenure, but in truth there was never a time when they ceased working for
Herma Shipyard due to expiration of project-based employment contracts. In fact, if
they were indeed project employees, petitioners should have reported to the
Department of Labor and Employment (DOLE) the completion of such project. But
petitioners have never submitted such report to the DOLE.

For their defense, petitioners argued that respondents were its project-based
employees in its shipbuilding projects and that the specific project for which they were
hired had already been completed. In support thereof, Herma Shipyard presented
contracts of employment, some of which are written in the vernacular and denominated
as Kasunduang Paglilingkod (Pang-Proyektong Kawani).[4]

Ruling of the Labor Arbiter

On May 24, 2010the Labor Arbiter rendered a Decision[5] dismissing respondents'

Complaint. The Labor Arbiter held that respondents were project based employees
whose services were validly terminated upon the completion of the specific work for
which they were individually hired. The dispositive portion of the Labor Arbiter's
Decision reads:
WHEREFORE, premises considered, let the instant complaint be, as it is hereby
ORDERED dismissed for lack of merit.

All the money claims as well as moral and exemplary damages and attorney's fees raised
by the complainants in their complaint are likewise DENIED for lack of merit.

SO ORDERED.[6]
Respondents thus appealed to the NLRC.
Ruling of the National Labor Relations Commission

On September 7, 2010, the NLRC rendered its Decision [7] denying respondents' appeal
and affirming in toto the Decision of the Labor Arbiter. It sustained the finding of the
Labor Arbiter that based on their employment contracts, respondents were project-
based employees hired to do a particular project for a specific period of time.

Respondents moved tor reconsideration but the NLRC denied their Motion for
Reconsideration[8] in its November 11, 2010 Resolution.[9]

Unfazed, respondents filed a Petition for Certiorari[10] before the CA imputing grave

abuse of discretion amounting to lack or excess of jurisdiction on the part of the labor
tribunals in finding that they were project-based employees and in not awarding them
service incentive leaves. Respondents contended that the labor tribunals grievously
erred in relying on the project employment contracts which were tor a uniform duration
of one month. They argued that if it were true that they were project-based employees,
the duration of their employment should have coincided with the completion of the
project for which they were hired and not for a uniform period of one month.

Ruling of the Court of Appeals

On May 30, 2013, the CA rendered its assailed Decision[11] granting respondents' Petition
for Certiorari and setting aside the labor tribunals' Decisions. It held that even if the
contracts of employment indicated that respondents were hired as project-based
workers, their employment status have become regular since: they were performing
tasks that are necessary, desirable, and vital to the operation of petitioners' business;
petitioners failed to present proof that respondents were hired for a specit1c period or
that their employment was coterminous with a specific project; it is not clear from the
contracts of employment presented that the completion or termination of the project or
undertaking was already determined at the time petitioners engaged the services of
respondents; respondents were made to work not only in one project but also in
different projects and were assigned to different departments of Herma Shipyard;
respondents were repeatedly and successively rehired as employees of Herma Shipyard;
except with regard to respondents' last employment, petitioners failed to present proof
that they reported to the nearest public employment office the termination of
respondents' previous employment or every time a project or a phase thereof had been
completed; and, petitioners failed to file as many reports of termination as there were
shipbuilding and repair projects actually completed. The CA concluded that the project
employment contracts were indeed used as a device to circumvent respondents' right to
security of tenure. The fallo of the assailed CA Decision reads:
WHEREFORE, the instant petition for certiorari is GRANTED. The assailed decision
and resolution of the respondent National Labor Relations Commission are REVERSED
and SET ASIDE, and a new judgment is hereby rendered holding petitioners as regular
employees and declaring their dismissal as illegal. Accordingly, private respondents are
hereby ordered to REINSTATE petitioners to their former employment. Should
reinstatement be not possible due to strained relations, private respondents are
ordered to pay petitioners their separation pay equivalent to one-month pay or one-
half-month pay for very year of service, whichever is higher, with full backwages
computed from the time of dissmissal up to the finality of the decision. For this purpose,
the case is hereby REMANDED to the respondent NLRC for the computation of the
amounts due petitioners.

SO ORDERED.[12]
Petitioners moved for reconsideration. In a Resolution[13] dated August 30, 2013,
however, the CA denied their Motion for Reconsideration. [14]

Hence, this Petition for Review on Certiorari assailing the May 30, 20l3 Decision and
August 30, 2013 Resolution of the CA, Petitioners anchor their Petition on the following
arguments:
A

PREVAILING JURISPRUDENCE DICTATES THAT RESPONDENTS ARE NOT REGULAR

EMPLOYEES OF PETITIONER [HERMA SHIPYARD]. THEY ARE PROJECT EMPLOYEES
WHOSE TERMS OF EMPLOYMENT WERE VALIDLY TERMINATED UPON THE EXPIRATION
OF THE TERM OF THEIR PROJECT EMPLOYMENT CONTACTS.

THE ASSAILED DECISION AND ASSAILED RESOLUTION RULED ON ISSUES WHICH WERE
NEITHER DISPUTED IN RESPONDENTS' PETITION FOR CERTIORARI NOR RAISED IN THE
DECISION OF THE HONORABLE [NLRC].

AS BORNE BY THE PROJECT EMPLOYMENT CONTRACTS OF RESPONDENTS AND

TERMINATION REPORTS SUBMITTED TO THE DEPARTMENT OF LABOR AND
EMPLOYMENT, RESPONDENTS ARE UNDOUBTEDLY PROJECT EMPLOYEES OF PETITIONER
[HERMA SHIPYARD].

THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER THAT RESPONDENTS'

PETITION FOR CERTIORARI DID NOT RAISE AS AN ISSUE THE ACTS COMMITTED BY THE
HONORABLE [NLRC] WHICH AMOUNTED TO GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION.

BY VIRTUE OF THE DOCTRINE OF SEPARATE JURIDICAL PERSONALITY, PETITIONER

ESGUERRA SHOULD NOT BE HELD LIABLE IN THE INSTANT LABOR COMPLAINT

THE HONORABLE COURT OF APPEALS FAILED TO GIVE WEIGHT AND RESPECT TO THE
FACTUAL FINDINGS OF THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
AND THE HONORABLE LABOR ARBITER.

THE HONORABLE COURT OF APPEALS DID NOT ACQUIRE JURISDICTION OVER THE
INSTANT CASE AS THE HONORABLE NLRC'S DECISION AND RESOLUTION ALREADY
BECAME EXECUTORY CONSIDERING THAT RESPONDENTS' PETITION FOR CERTIORARI
WAS FILED BEYOND THE REGLEMENTARY PERIOD PRESCRIBED BY THE RULES.[15]
Petitioners contend, among others, that necessity and desirability of
respondents' services in Herma Shipyard's business are not the only factors to be
considered in determining the nature of respondents' employment. They assert that the
CA should have also taken into consideration the contracts of employment signed by the
respondents apprising them of the fact that their services were engaged for a particular
project only and that their employment was coterminous therewith. The authenticity
and genuineness of said contracts, according to petitioners, were never disputed by the
respondents during the pendency of the case before the labor tribunals. It was only in
their Comment[16] to the instant Petition that respondents disavow said contracts of
employment for allegedly being fictitious.
Petitioners aver that the CA also erred in ruling that the duration of respondents'
employment depends upon a progress accomplishment as paragraph 10 of the
employment contract readily shows that the same is dependent upon the completion of
the project indicated therein.

With regard to the repeated rehiring of the respondents, petitioners insist that the same
will not result in respondents becoming regular employees because length of service
does not determine employment status. What is controlling of project-based
employment is whether the employment has been fixed for a specific project or
undertaking, its completion having been determined and made known to the employees
at the time of their engagement. Thus, regardless of the number of projects for which
respondents had been repeatedly hired, they remained project-based employees
because their engagements were limited to a particular project only. Petitioners
emphasize that Herma Shipyard merely accepts contracts for shipbuilding and for repair
of vessels. It is not engaged in the continuous production of vessels for sale which would
necessitate the hiring of a large number of permanent employees.

Respondents, for their part, deny having worked for a specific project or undertaking.
They insist that the employment contracts presented by petitioners purportedly
showing that they were project-based employees are fictitious designed to circumvent
the law. In any case, said contracts are not valid project employment contracts because
the completion of the project had not been determined therein or at the time of their
engagement. In fact, the duration of their contracts with Herma Shipyard may be
extended as needed for the completion of various projects and not for a definite
duration. And even assuming that they were previously hired as project employees,
their employment ceased to be coterminous with a specific project and became a
regular after they were repeatedly rehired by the petitioners for various projects.

Our Ruling

The Petition is impressed with merit.

At the outset, the issue of whether petitioners were project-based employees is a

question of fact that, generally, cannot be passed and ruled upon by this Court in a
petition for review on certiorari filed under Rule 45 of the Rules of Court. It is settled
that the jurisdiction of this Court in a Rule 45 petition is generally limited to reviewing
errors of law. Nevertheless, in view of the opposing views of the tribunals below, this
Court shall take cognizance of and resolve the factual issues involved in this case. [17]

Who are project-based employees?

A project employee under Article 280 (now Article 294)[18] of the Labor Code, as
amended, is one whose employment has been fixed for a specific project or
undertaking, the completion or termination of which has been determined at the time
of the engagement of the employee. Thus:
Art, 280. Regular and Casual Employment. - The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time
of the engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season.

x x x x (Emphasis supplied)
The services of project-based employees are co-terminous with the project and
may be terminated upon the end or completion of the project or a phase thereof for
which they were hired.[19] The principal test in determining whether particular
employees were engaged as project-based employees, as distinguished from regular
employees, is whether they were assigned to carry out a specific project or undertaking,
the duration and scope of which was specified at, and made known to them, at the time
of their engagement.[20] It is crucial that the employees were informed of their status as
project employees at the time of hiring and that the period of their employment must
be knowingly and voluntarily agreed upon by the parties, without any force, duress, or
improper pressure being brought to bear upon the employees or any other
circumstances vitiating their consent.[21]

Respondents knowingly and voluntarily entered into and signed the project-based
employment contracts.

The records of this case reveal that for each and every project respondents were hired,
they were adequately informed of their employment status as project-based employees
at least at the time they signed their employment contract They were fully apprised of
the nature and scope of their work whenever they affixed their signature to their
employment contract. Their contracts of employment (mostly written in the vernacular)
provide in no uncertain terms that they were hired as project based employees whose
services are coterminous with the completion of the specific task indicated therein. All
their contracts of employment state clearly the date of the commencement of the
specific task and the expected completion date thereof. They also contain a provision
expressly stating that respondents' employment shall end upon the arrival of the target
completion date or upon the completion of such project. Except for the underlined
portions, the contracts of employment read:
KASUNDUAN NG PAGLILINGKOD
(PANG-PROYEKTONG KAWANI)

ALAMIN NG LAHAT NA:

HERMA SHIPYARD, INC., isang Korporasyon na itinatag at nananatili sa ilalim ng batas ng

Pilipinas at may tanggapan sa Herma Industrial Complex, Mariveles, Bataan na
kinakatawan [ni] EDUARDO S. CARANCIO ay makikilala bilang KUMPANYA;

OLIVEROS, CAMILO IBAÑEZ, sapat ang gulang, Pilipino, may asawa/walang asawa na
tubong _______, nainirahan sa BASECO Country Aqwawan, Mariveles, Bataan dito ay
makikilala bilang PANG-PROYEKTONG KAWANI;

NAGSASAYSAY NA:

NA, ang Kumpanya ay nangangailangan ng paglilingkod ng isang Ship Fitter Class A sa

panandaliang panahon at bilang pang suporta sa paggawa at pagsasaayos ng proyekto
para sa MT Masinop.

NA, ang PANG-PROYEKTONG KAWANI ay nagpapahayag ng kanyang kakayahan at

kagustuhang isagawa ang proyektong iniaalok ng KUMPANYA at handing tuparin ang
nasabing Gawain sa KUMPANYA sa ilaalim ng sumusunod na kondisyon;

Bilang pagkilala sa maga nasabing batayan, ang mga kinauukulang partido ay

nagkakasundo at nagtatakda ng mga sumusunod:

1) Ang KUMPANYA ay pumapayag na bayaran ang serbisyo ng PANG-PROYEKTONG

KAWANI bilang isang Ship Fitter Class A sa nasabing proyekto simula 4/1/2009 hanggang
4/30/2009 o sa sandaling matapos ang nasabing gawain o anumang bahagi nito kung
saan siya ay inupahan o kung saan ang kanyang serbisyo ay kailangan at ang PANG-
PROYEKTONG KAWANI ay sumasang-ayon. Ang mga gawaing nabanggit sa kasunduang
 ito ay hindi pangkaraniwang ginagawa ng KUMPANYA kundi para lamang sa itinakdang
panahon o hanggang matapos ang nasabing proyekto;
2) Ang KUMPANYA ay may karapatan na pawalang bisa o kanselahin ang kasunduang
ito anomang oras kung mapatutunayan na ang PANG-PROYEKTONG KAWANI ay walang
kakayahan na gawin ang naturang gawain kung saan siya ay inupahan nang naaayon sa
pamantayan o sa kagustuhan ng KUMPANYA o sa anumang dahilan na naaayon sa batas,
kasama na rito ang paglabag ng PANG PROYEKTONG KAWANI sa mga alituntunin ng
KUMPANYA;
3) Ang PANG-PROYEKTONG KAWANI ay sumasang-ayon na gampanan ang mga gawaing
ito para sa KUMPANYA buong katapatan at husay;
4) Ang PANG-PROYEKTONG KAWANI ay magtratrabaho ng walong (8) oras sa bawat
araw ng trabaho ayon sa oras na itinakda ng KUMPANYA at siya ay babayaran ng P405
(P397.00/basic + 8/ecola) bawat araw at ito ay kanyang matatanggap tuwing ika-labinlimang
araw at katapusan ng buwan na kanyang ipinagtrabaho. Ang PANGPROYEKTONG KAWANI ay
hindi babayaran sa rnga araw na hindi siya pumasok sa trabaho sa KUMPANYA;
5) Lahat ng kaalaman o impormasyon na maaaring mabatid ng PANGPROYEKTONG
KAWANI habang siya ay may kaugnayan sa KUMPANYA ay iingatan niya at hindi maaaring
gamitin, ipasipi o ipaalam sa kaninuman ng walang kaukulang pahintulot lalo na kung ito ay
maaaring makapinsala sa KUMPANYA;
6) Ang PANG-PROYEKTONG KAWANI ay nangangako na ibibigay ang kanyang panahon
at buong kakayahan para sa kapakanan ng KUMPANYA, tutugon sa lahat ng alituntunin ng
KUMPANYA, susunod sa utos ng mga namumuno na naaayon sa batas, at tatanggapin ang
pananagutan sa lahat ng kanyang mga galaw na maaaring makapinsala o makasakit sa kapwa
kawani at sa ari-arian ng KUMPANYA, ganun din ang kapakanan at ari-arian ng ibang tao;
7) Nababatid at nauunawaan ng bawat partido sa kasunduang ito na ang PANG-
PROYEKTO KAWANI ay hindi maituturing na pampirmihan or "regular" na kawani ano man
at gaano man katagal ang kanyang paglingkod sa Kumpanya. Sa ganitong kadahilanan,
ang PANG-PROYEKTO KAWANI ay hindi tatanggap ng karaniwang benepisyo na
ipinagkakaloob sa pampirmihan o "regular" na kawani; katulad ng bonuses, medical
insurance, at retirement benefits, maliban sa ilang benepisyo na pinagkakaloob ng batas.
8) Sa pagtupad ng mga nasabing gawa, nalalaman at inaasahan ng PANG-PROYEKTONG
KAWANI ang ilang kaakibat na peligro sa maayos na pagganap ng naturang rnga gawa. Alam
ng PANG-PROYEKTONG KAWANI na ang KUMPANYA ay walang kinalaman sa bagay na ito at
hindi dapat panagutin ukol dito;
9) Ang lahat ng mga nakasaad at nasusulat na mga kondisyon sa kasunduang ito ay
nauunawaan at naiintindihan ng PANG-PROYEKTONG KAWANI;
10 Ang kasunduang ito ay maaaring palawigin ng mas mahabang panahon na maaaring
) kailanganin para sa matagumpay na pagtatapos ng mga gawa o proyektong pinagkasunduan;

BILANG SAKSI sa kasundang ito, ang mga partido ay lumagda ngayong ika-
1 ng Abril 2009 sa Mariveles, Bataan, Pilipinas;[22] (Emphases supplied)
There is no indication that respondents were coerced into signing their
employment contracts or that they affixed their signature thereto against their will.
While they claim that they signed the said contracts in order to securee continuous
employment, they have not, however, presented sufficient evidence to support the
same other than their bare allegations. It is settled that "[c]ontracts for project
employment are valid under the law."[23] Thus, in Jamias v. National Labor Relations
Commission,[24] this Court upheld the project employment contracts which were
knowingly and voluntarily signed by the employees for want of proof that the employers
employed force, intimidation, or fraudulently manipulated them into signing the same.
Similarly in this case, by voluntarily entering into the aforementioned project
employment contracts, respondents are deemed to have understood that their
employment is coterminous with the particular project indicated therein. They cannot
expect to be employed continuously beyond the completion of such project because a
project employment terminates as soon as it is completed.

Performance by project-based employees of tasks necessary and desirable to the usual

business operation of the employer will not automatically result in their
regularization.

ln disregarding the project employment contracts and ruling that respondents are
regular employees, the CA took into consideration that respondents were performing
tasks necessary and desirable to the business operation of Herma Shipyard and that
they were repeatedly hired. Thus:
[I]t is significant to note that even if the contract of employment indicates that
[respondents] were hired a project workers, they are still considered regular employees
on the ground that as welder, ship fitter, pipe fitter, expediter and helper,
[respondents'] services are all necessary, desirable and vital to the operation of the ship
building and repair business of [petitioners]. A confirmation of the necessity and
desirability of their services is the fact that [respondents] were continually and
successively assigned to the different projects of private respondents even after the
completion of a particular project to which they were previously assigned. On this score,
it cannot be denied that petitioners were regular employees. [25]
It is settled, however, that project-based employees may or may not be
performing tasks usually necessary or desirable in the usual business or trade of the
employer. The fact that the job is usually necessary or desirable in the business
operation of the employer does not automatically imply regular employment; neither
does it impair the validity of the project employment contract stipulating fixed duration
of employment.[26] As this Court held in ALU-TUCP v. National Labor Relations
Commission:[27]
 In the realm of business and industry, we note that 'project' could refer to one or
the other of at least two (2) distinguishable types of activities. Firstly, a project could
refr 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
particulr construction job or project of a construction company. A construction company
ordinarily carries out two or more discrete identifiable construction projects: e.g., a
twenty-five storey hotel in Makati; a residential condominium building in Baguio City;
amd a domestic air terminal in Iloilo City. 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.

The term 'project' could also refer to, secondly, 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.[28]
Here, a meticulous examination of the contracts of employment reveals that
while the tasks assignd to the respondents were indeed necessary and desirable in the
usual business of Herma Shipyard, the same were distinct, separate, and identifiable
from the other projects or contract services. Below is the summary of respondents'
employment contracts indicating the positions they held, the specific projects for which
they were hired, and the duration or expected completion thereof:
Names Positions Projects Durations
1. Ricardo J. Pipe Fitter MT Masinop 03/18/09-
Ontolan Pipe Fitter 12mb_phase 3 03/31/09[29]
Pipe Fitter 12mb/Petrotrade 6 09/15/08-12/20/08[30]
Pipe Fitter Alcem Calaca 05/29/08-08/31/08[31]
Pipe Fitter Hull 0102-phase 6 04/29/08-
Pipe Fitter Hull 0103 & Hull 0104-phase 1 completion[32]
12/17/07-03/03/08[33]
09/11/07-12/11/07[34]
2. Robert T. Welder 6G MT Masinop 03/18/09-
Nario Welder 6G 12mb/Matikas/Red Dragon 03/31/09[35]
Welder 6G 22mb/12mb/Galapagos/Petrotrad 06/02/08-07/31/08[36]
e 7/Ma Oliva/Solid 03/04/08-06/05/08[37]
 Sun/Hagonoy/Banga Uno/Bigaa
Welder 6G Hull 0102-phase 5
10/18/07-12/18/07[38]
3. Oscar J. Pipe Fitter Red Dragon (installation of 01/16/09-
Tirol Class B lube oil, diesel oil, air compressed 02/15/09[39]
line, freshwater cooling, lavatory,
sea water pipe line)
Pipe Fitter MT Magino/MV Diana 06/27/08-
----------- Petrotrade 7/Solid Gold completion[40]
02/08/08[41]-
02/08/08[42]
4. Exequiel R. Leadman 12mb/Petrotrade 6 05/29/08-
Oliveria Leadman Red Dragon 08/31/08[43]
Leadman Hull 0102-phase 6 04/29/08-05/31/08[44]
Leadman Hull 0102-phase 5 12/01/07[45]
Leadman   Hull 0102-phase 4 03/03/08[46]
09/11/07-11/30/07[47]
06/07/07-08/27/07[48]
5. Arnel S. Leadman MT Masinop 03/18/09-
Sabal Leadman 12mb-phase 3 03/31/09[49]
Leadman 12mb/Petrotrade 6 09/15/08[50]-
Leadman 22mb/12mb/Galapagos/Petrotrad 12/20/08[51]
e 7/Ma Oliva/Solid 05/29/08-08/31/08[52]
Sun/Hagonoy/Banga Uno/Bigaa 03/04/08-06/05/08[53]
Leadman Hull 0102-phase 6
Leadman Hull 0102-phase 5 12/01/2007[54]-
Pipe Fitter Hull 0102-phase 4 3/03/08[55]
---------- Hull 0102-phase 2 9/11/07-11/30/07[56]
Pipe Fitter Hull 0102 6/13/07-09/04/07[57]
Pipe Fitter Petro Trade 8/EUN HEE 01/15/07-03/30/07[58]
Pipe Fitter MT Angat 01/08/07-
Pipe Fitter M/T Pandi completion[59]
Pipe Fitter M/T Makisig 05/17/06-
Pipe Fitter Petro Trade - 7 completion[60]
06/02/05[61]-
06/25/05[62]
12/08/04-
completion[63]
11/08/04-
completion[64]
08/12/04[65]-
09/13/04[66]
6. Segundo Q. ABS Welder MT Masinop 13/18/09-
Labosta, Jr. 6G 12mb-phase 3 03/31/09[67]
 ABS Welder 6G Petrotrade 6/12 mb 09/26/08-12/20/08[68]
ABS Welder 6G Cagayan de Oro/Petrotrade 08/01/08-10/31/08[69]
ABS Welder 6G 6/Plaridel 16/01/08-07/31/08[70]
7. Jojit A. Besa Leadman - MT Masinop 03/18/09-
ABS 6G 12mb/Barge Kwan Sing/Solid Pearl 03/31/09[71]
Leadman - ABS 6G 12mb-phase 3 01/16/09-03/14/09[72]
Leadman - ABS 6G Hull 0102-phase 6 10/10/08-12/20/08[73]
ABS Welder 6G Hull 0102-phase 4 12/01/07-02/29/08[74]
Pipe Welder Hull 0102-phase 4 06/07/07-08/29/07[75]
Pipe Welder MT Matilde/M/Tug Mira 06/01/07-08/27/07[76]
Pipe Fitter MT Marangal/MT Masikap/MT 08/07/06-
Pipe Fitter Maginoo/Petro Trade 8 completion[77]
MV ST Ezekiel Moreno 04/15/06-
Pipe Fitter/Welder MT Plaridel/Monalinda completion[78]
Pipe Fitter 95/Tug Boat Sea Lion 03/01/06-
Pipe Fitter MT Angat/Banga Dos completion[79]
M/T Makisig 11/03/05-
Pipe Fitter M/T Baliuag Oceantique completion[80]
Pipe Fitter Petro Trade-7
Pipe Fitter Petro Trade V/Guiguinto 05/31/05-06/30/05
11/08/04-
Pipe Fitter completion[81]
Pipe Fitter 10/18/04-
Pipe Fitter completion[82]

9/17/04-one
month/completion[83]
08/03/04-two
months/completion[84]
07/03/04-one
month/completion[85]
8. Camilo I. Ship Fitter MT Masinop 04/01/09-
Oliveros Class A 04/30/09[86]
Leadman Petrotrade 6/Plaridel/Red Dragon
ABS Welder 6G Hull 0102/0103 06/03/08-09/10/08[87]
Welder Hull 0102-phase 5 01/15/08-
Welder Hull 0102-phase 4 completion[88]
Welder Hull 0102-phase 3 09/11/07-12/04/07[89]
Welder Hull 0102-phase 2 06/06/07-08/28/07[90]
Ship Welder 22 mb oil tanker 04/12/07-06/12/07[91]
01/24/07-03/30/07[92]
09/06/06-
completion[93]
9. Romeo I. Helper Modernization project - 01/24/07-
Trinidad painting of prod'n bldg. and 01/28/07[94]
Laborer overhead crane
Pin Jiq assembly, building table 09/10/07-12/10/07[95]
construction, painting of ex-oxygen
Laborer     bldg, frabrication of slipway railings
Ground level of main entrance 04/23/07-05/31/07[96]
road & CHB wall plastering/repair
Electrician/Laborer of warehouse no 1 for conversion
    to training bldg. 12/04/06-
Construction of launchway and completion[97]
perimeter fence
10. Ruben F. Leadman Red Dragon (water tight 01/16/09-
Delgado door installation, soft batch) 12/15/09[98]
Leadman Red Dragon
Leadman MV Ma. Diana 10/13/08-12/20/08[99]
Ship Fitter Hull 0102-Phase 4 06/28/08-
Ship Fitter Thomas Cloma completion[100]
Ship Fitter MV Solid Jade/Construction of New 05/30/07-
Caisson Gate 08/26/07[101]
Ship Fitter MT Hagonoy 12/03/07-
Ship Fitter MT Mabiuag completion[102]
Ship Fitter MT Ma Xenia 03/10/07-
completion[103]
02/01/07[104]-
02/21/07[105]
01/09/07-
completion[106]
12/18/06[107]-
1/07/07[108]
11. Danilo I. Welder 3G & MT Hagonoy/MT 04/01/09-
Oliveros 4G Masinop/MT Matikas 04/15/09[109]
Welder 3G & 4G Hagonoy 03/20/09-
Welder 3G & 4G 12mb-phase 3 03/31/09[110]
Welder 12mb/Petrotrade 6 09/25/08-
Welder 3G & 4G Hull 0102-phase 6 12/20/08[111]
Welder Hull 0102-phase 5 07/01/08-
Welder Hull 0102 09/30/08[112]
12/08/07-
03/08/08[113]
09/10/07-
12/10/07[114]
12/19/06-
completion[115]
12. Frederick Pipe Fitter MT Masinop 02/06/09-
C. Catig Class C 12mb 02/28/09[116]
Pipe Fitter Class C 12mb-phase 3 01/08/09-
Helper 12mb/Petrotrade 6 01/31/09[117]
Helper Hull 0102-phase 6 19/15/08-
Helper Hull 0102, Hull 0103, Hull 0104 completion[118]
Helper Hull 0103 phase 1 05/29/08-
Helper 08/31/08[119]
01/02/08-
03/31/08[120]
10/01/07-
12/31/07[121]
07/25/07-
09/31/07[122]
As shown aboverespondents were hired for various projects which are distinct,
separate, and identifiable from each other. The CA thus erred in immediately concluding
that since respondents were performing tasks necessary, desirable, and vital to Herma
Shipyard's business operation, they are regular employees.

Repeated rehiring of project employees to different projects does not ipso facto make
them regular employees.

"[T]he repeated and successive rehiring [of respondents as project-based employees]

does not [also], by and of itself, qualify them as regular employees. Case law states that
length of service (through rehiring) is not the controlling detenninant of the
employment tenure [of project-based employees but, as earlier mentioned], whether
the employment has been fixed for a specific project or undertaking, with its completion
having been determined at the time of [their] engagement." [123] Stated otherwise, the
rule that employees initially hired on a tempormy basis may become permanent
employees by reason of their length of service is not applicable to project-based
employees. Our ruling in Villa v. National Labor Relations Commission[124] is instructive
on the matter, viz.:
Thus, the fact that petitioners worked for NSC under different project
employment contracts for several years cannot be made a basis to consider them as
regular employees, for they remain project employees regardless of the number of
projects in which they have worked. Length of service is not the controlling determinant
of the employment tenure of a project employee. In the case of Mercado Sr. v. NLRC,
this court ruled that the proviso in the second paragraph of Article 280, providing that
an employee who has served for at least one year, shall be considered a regular
employee, relates only to casual employees and not to project employees.
 The rationale for the inapplicability of this rule to project-based employees was
discussed in Dacles v. Millenium Erectors Corporation,[125] to wit:
x x x While generally, length of service provides a fair yardstick for determining
when an employee initially hired on a temporary basis becomes a permanent one,
entitled to the security and benefits of regularization, this standard will not be fair, if
applied to the construction industry because construction firms cannot guarantee work
and funding for its payrolls beyond the life of each project as they have no control over
the decisions ard resources of project proponents or owners. Thus, once the project is
completed it would be unjust to require the employer to maintain these employees in
their payroll since this would be tantamount to making the employee a privileged
retainer who collects payment from his employer for work not done, and amounts to
labor coddling at the expense of management.[126]
Indeed, if we consider the nature of Herma Shipyard's business, it is clear that
Herma Shipyard only hires workers when it has existing contracts for shipbuilding and
repair. It is not engaged in the business of building vessels for sale which would require
it to continuously construct vessels for its inventory and consequently hire a number of
pemmnent employees. In Sandoval Shipyards, Inc. v. National Labor Relations
Commission[127] where therein petitioner was engaged in a similar kind of business, this
Court opined that:
It is significant to note that the corporation does not construct vessels for sale or
otherwise which will demand continuous productions of ships and will need permanent
or regular workers. It merely accepts contracts for shipbuilding or for repair of vessels
from the third parties and, only, on occasion when it has work contract of this nature
that it hires workers to do the job which, needless to say, lasts only for less than a year
or longer.[128]

The completion of their work or project automatically terminates their employment, in

which case, the employer is, under the law, only obliged to render a report on the
termination of the employment.
Hence, Herma Shipyard should be allowed "to reduce [its] work force into a
number suited for the remaining work to be done upon the completion or proximate
accomplishment of [each particular] project."[129] As for respondents, since they were
assigned to a project or a phase thereof which begins and ends at determined or
determinable times, their services were lawfully terminated upon the completion of
such project or phase thereof.[130]

Moreover, our examination of the records revealed other circumstances that convince
us that respondents were and remained project-based employees, albeit repeatedly
rehired. Contrary to their claim, respondents' employment were neither continuous and
uninterrupted nor for a uniform period of one month; they were intermittent with
varying durations, as well as gaps ranging from a few days to several weeks or months.
These gaps coincide with the completion of a particular project and the start of a new
specific and distinct project for which they were individually rehired. And for each
completed project, petitioners submitted the required Establishment Employment
Records to the DOLE which is a clear indicator of project employment. [131] The records
also show that respondents' employment had never been extended beyond the
completion of each project or phase thereof for which they had been engaged.

The project employment contract is not subject to a condition.

The CA likewise erred in holding that paragraph 10 of the employment contract allowing
the extension of respondents' employment violates the second requisite of project
employment that the completion or termination of such project or undertaking be
determined at the time of engagement of the employee. It reads:
10 Ang kasunduang ito ay maaaring palawigin ng mas mahabang panahon na maaaring
kailanganin para sa matagumpay na pagtatapos ng mga gawa o proyektong pinagkasunduan;
[132]

To our mind, paragraph 10 is in harmony with the agreement of the parties that
respondents' employment is coterminous with the particular project stated in their
contract. It was placed therein to ensure the successful completion of the specific work
for which respondents were hired. Thus, in case of delay or where said work is not
finished within the estimated date of completion, respondents' period of emplqyrnent
can be extended until it is completed. In which casethe duration and nature of their
employment remains the same as previously determined in the project employment
contract; it is still coterminous with the particular project for which they were fully
apprised of at the time of their engagement.

As to the requirement that the completion or termination of the specific project or

undertaking or which respondents were hired should be determined at the time of their
engagement, we rule and so hold that it is enough that Herma Shipyard gave the
approximate or target completion date in the project employment contract. Given the
nature of its business and the scope of its projects which take months or even years to
finish, we cannot expect Herma Shipyard to give a definite and exact completion date. It
can only approximate or estimate the completion date. What is important is that the
respondents were apprised at the time of their engagement that their employment is
coterminous with the specific project and that should their employment be extended by
virtue of paragraph 10 the purpose of the extension is only to complete the same
specific project, and not to keep them employed even after the completion thereof. Put
differently, paragraph 10 does not allow the partis to extend the period of respondents'
employment after the completion of the specific project for which they were hired.
Their employment can only be extended if that particular project, to which their
employment depends, remains unfinished.

In sum, the CA erred in disregarding the project employment contracts and in

concluding that respondents have become regular employees because they were
performing tasks necessary and desirable to the business of Herma Shipyard and were
repeatedly rehired. 1be Labor Arbiter and the NLRC, which have expertise in their
specific and specializd jurisdiction, did not err, much less commit grave abuse of
discretion in holding that respondents were project-based employees. Their uniform
conclusion is supported by substantial evidence and should, therefore, be accorded not
only respect, but even finality.

WHEREFORE, the instant Petition for Review on Certiorari is GRANTED. The assailed

Decision dated May 30, 2013 of the Court of Appeals in CA-G.R. SP No. 118068
is REVERSED and SET ASIDE. The May 24, 2010 Decision of the Labor Arbiter dismissing
respondents' Complaint and affirmed by the National Labor Relations Commission in its
Decision dated September 7, 2010 is REINSTATED and AFFIRMED.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 169905, September 07, 2011 ]
ST. PAUL COLLEGE QUEZON CITY, SR. LILIA THERESE TOLENTINO,
SPC, SR. BERNADETTE RACADIO, SPC, AND SR. SARAH MANAPOL,
PETITIONERS, - VERSUS- REMIGIO MICHAEL A. ANCHETA II AND
CYNTHIA A. ANCHETA, RESPONDENT.

DECISION
PERALTA, J.:

This resolves the Petition for Review[1] dated November 18, 2005 of petitioners
St. Paul College, Quezon City, et al. which seeks to reverse and set aside the
Decision[2] dated July 8, 2005 of the Court of Appeals (CA) and its Resolution [3] dated
September 29, 2005, reversing the Decision[4] dated February 28, 2003 of the National
Labor Relations Commission (NLRC) and the Decision[5] dated November 20, 2000 of the
Labor Arbiter.

As culled from the records, the antecedent facts are the following:

Petitioner St. Paul College, Quezon City (SPCQC) is a private Catholic educational
institution. It is represented by its President, petitioner Sr. Lilia Therese Tolentino, SPC,
the College Dean, Sr. Bernadette Racadio, SPC, and the Mass Communication Program
Director, Sr. Sarah Manapol, SPC.  The respondents, Spouses Remigio Michael A.
Ancheta II and Cynthia A. Ancheta are former teachers of the same school.

Respondent Remigio Michael was hired by the SPCQC as a teacher in the General
Education Department with a probationary rank in the School Year (SY) 1996-1997
which was renewed in the following SY 1997-1998.  His wife, respondent Cynthia was
hired by the same school as a part time teacher of the Mass Communication
Department in the second semester of SY 1996-1997 and her appointment was renewed
for SY 1997-1998.

On February 13, 1998, respondent Remigio Michael wrote a letter[6] to petitioner Sr.
Lilia, signifying his intention to renew his contract with SPCQC for SY 1998-1999.  A
letter[7] of the same tenor was also written by respondent Cynthia addressed to
petitioner Sr. Lilia.

Petitioner Sr. Bernadette, on March 9, 1998, sent two letters[8] with the same contents
to the respondent spouses informing them that upon the recommendation of the
College Council, the school is extending to them new contracts for SY 1998-1999.

A letter[9] dated April 22, 1998 was sent to petitioner Sr. Bernadette and signed by some
of the teachers of SPCQC, including the respondent spouses.  The said letter contained
the teachers' sentiments regarding two school policies, namely: first, the policy of
penalizing the delay in encoding final grades and, second, the policy of withholding
salaries of the teachers. Meanwhile, a letter [10] dated April 21, 1998 (the date, later on
contested by respondent Remigio Michael to be ante-dated) was written by petitioner
Sr. Bernadette to respondent Remigio Michael, reiterating the conversation that took
place between them the day before the date of the said letter (April 20, 1998).  The
letter enumerated the departmental and instructional policies that respondent Remigio
Michael failed to comply with, such as the late submission of final grades, failure to
submit final test questions to the Program Coordinator, the giving of tests in the essay
form instead of the multiple choice format as mandated by the school and the high
number of students with failing grades in the classes that he handled.

Thereafter, petitioner Sr. Bernadette wrote a letter[11] dated April 30, 1998 to petitioner
Sr. Lilia, endorsing the immediate termination of the teaching services of the
respondent spouses on the following grounds:

1.  Non-compliance with the departmental policy to submit their final test
questions to their respective program coordinators for checking/comments (violating
par. 7.1, p. 65 of the Faculty Manual).

This policy was formulated to ensure the validity and reliability of test questions of
teachers for the good of the students.  This in effect can minimize if not prevent
unnecessary failure of students.

2.  Non-compliance with the standard format (multiple choice) of final test questions as
agreed upon in the department.  Mr. Ancheta prepared purely essay questions for the
students.

Well-prepared multiple choice questions are more objective, and develop critical
thinking among students.

3.  Failure to encode their modular grade reports as required (violating par. H. 8, p. 66 of
our Faculty manual).

4.  Failure to submit and update required modules (syllabi) of their subject despite
reminders (violating D, 1.5, p. 40 of our Faculty Manual).

5.  Both spouses have a gross number of failure in their class.

Mr. Ancheta failed 27 in a class of 44 students, and had a total number of 56 failures in
his sections of Philippine History.  Mrs. Ancheta failed 11 students in a class of 37, and
had a total number of 16 failures in her 2 classes of Communication Theories.

When I talked to each of them to re-examine their bases of failure, they refused saying
that they had done this; otherwise, the number of failures would have been more. I
gathered data as to the mental ability of the students who failed, and the number of
students who incurred more than one failure.  In Mr. Ancheta's class of 44 students with
27 failures, majority had average IQ's, 8 were on probation status, and 2 had above-
average IQ.  Only 7 of his 27 failures were also failing in other subjects.

6.  Failure to report to work on time (violating par. 1, 21, p. 63 of our Faculty Manual).

7.  Both spouses are not open to suggestions to improve themselves as teachers.  They
just see their points and their principles.

When I talked to Mr. Ancheta the second time telling him of the data I gathered,
including the information that statistics permits only 1 to 2% failures, he still refused to
budge in to review his grades and his quality of teaching.  He stood firm in his conviction
and ground that the students were to blame for their failures, and reiterated his
disagreement with several school policies (which he violated) contained in his letter
which he had asked his wife to give to the dean's office.  Not content on writing down
his personal disagreement on some policies, he also asked some faculty members to
read his letter and put their signatures on it if they were in favor of one or all of his
points.

In other words, said spouses had refused and continue to refuse to evaluate the
students' performance on the bases of an established grading system to ensure just and
fair appraisal (violating par. 1.4, p. 40 of our Faculty Manual). [12]

Respondent spouses were given an opportunity to comment on the above letter-

recommendation of petitioner Sr. Bernadette.[13]  On May 4, 1998, respondent spouses
sent their respective comments[14] to petitioner Sr. Lilia.  Subsequently, the respondent
spouses received their respective letters of termination [15] on May 14, 1998. 
Respondent spouses sent a letter[16] for reconsideration to petitioner Sr. Lilia, but was
eventually denied.[17]

Thus, respondent spouses filed a Complaint[18] for illegal dismissal with the NLRC.  On
November 20, 2000, the Labor Arbiter dismissed the complaint, [19] the dispositive
portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the

complaint of illegal dismissal for lack of merit.  All other claims are denied for lack of
basis.

SO ORDERED.

The decision of the Labor Arbiter was appealed to the NLRC, but was affirmed by the
latter on February 28, 2003,[20] disposing the case as follows:

WHEREFORE, premises considered, the appeal is DISMISSED for lack of merit and
the Decision appealed from is AFFIRMED en toto.

SO ORDERED.

After the denial of their motion for reconsideration with the NLRC, [21]  the respondent
spouses filed a petition for certiorari with the CA.  In its Decision[22] dated July 8, 2005,
the CA granted the petition and reversed the decisions of the Labor Arbiter and the
NLRC, thus, it ruled:

WHEREFORE, finding grave abuse of discretion amounting to lack or excess of

jurisdiction, the court resolved to SET ASIDE the decision dated February 28, 2003 of
public respondent National Labor Relations Commission.  Private respondents are
hereby ordered to pay, jointly and severally, petitioners the following:

a) Separation pay equivalent to one (1) month's pay for every year of continuous
service;

b) Deficiency wages to be computed from the unexpired portion of petitioners'

employment contract.

c)  Moral damages in the amount of P250,000.00 to each [of the] petitioners;

d) Exemplary damages also in the amount of P250,000.00 to each [of the] petitioners;
and
e) Attorney's fees.
SO ORDERED.

In its Resolution[23] dated September 29, 2005, the CA denied the motion for
reconsideration of the petitioners herein; hence, the present petition.

The petitioners cited the following arguments:

I.

THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, COMMITTED GRAVE
AND REVERSIBLE ERROR IN SETTING ASIDE THE FINDING IN THE DECISION DATED 20
NOVEMBER 2000 OF THE HONORABLE LABOR ARBITER IN NLRC NCR CASE NO. 00-07-
06018-98 THAT INDIVIDUAL CONTRACTS OF EMPLOYMENT OF ATTY. REMIGIO MICHAEL
A. ANCHETA II AND MS. CYNTHIA  A. ANCHETA HAD EXPIRED AT THE END OF SY 1997-
1998, I.E., 1 JUNE 1997- 31 MARCH 1998, AND WAS NOT RENEWED FOR SY 1998-1999
AND, ACCORDINGLY, THEY WERE NOT ILLEGALLY TERMINATED BY ST. PAUL COLLEGE
QUEZON CITY.

II.

THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, COMMITTED GRAVE
AND REVERSIBLE ERROR IN SETTING ASIDE THE DECISION DATED 28 FEBRUARY 2003 OF
THE NATIONAL LABOR RELATIONS COMMISSION IN NLRC NCR CA NO. 02775-01
FINDING THAT ATTY. REMIGIO MICHAEL A. ANCHETA II AND MS. CYNTHIA A. ANCHETA
WERE DISMISSED FOR JUST CAUSE AND AFTER DUE PROCESS.

III.

THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT, COMMITTED GRAVE
AND REVERSIBLE ERROR IN RULING THAT ATTY. REMIGIO MICHAEL A. ANCHETA II AND
MS. CYNTHIA A. ANCHETA WERE (A) EXTENDED A THIRD APPOINTMENT TO TEACH AS
PROBATIONARY TEACHERS FOR SY 1998-1999, (B) ILLEGALLY DISMISSED BY ST. PAUL
COLLEGE QUEZON CITY AS AN ACT OF RETALIATION ON THE PART OF SR. BERNADETTE
RACADIO, SPC AND (C) ENTITLED TO SEPARATION PAY, DEFICIENCY WAGES, MORAL
AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES.[24]
The petition is impressed with merit.

Before this Court delves into the merits of the petition, it deems it necessary to discuss
the nature of the employment of the respondents.  It is not disputed that respondent
Remigio Michael was a full-time probationary employee and his wife, a part-time
teacher of the petitioner school.

A reality we have to face in the consideration of employment on probationary status of

teaching personnel is that they are not governed purely by the Labor Code. [25] The Labor
Code is supplemented with respect to the period of probation by special rules found in
the Manual of Regulations for Private Schools.[26] On the matter of probationary period,
Section 92 of these regulations provides:

Section 92. Probationary Period. - Subject in all instances to compliance with the

Department and school requirements, the probationary period for academic personnel
shall not be more than three (3) consecutive years of satisfactory service for those in the
elementary and secondary levels, six (6) consecutive regular semesters of satisfactory
service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory
service for those in the tertiary level where collegiate courses are offered on a trimester
basis.

A probationary employee or probationer is one who is on trial for an employer, during

which the latter determines whether or not he is qualified for permanent employment.
[27]
 The probationary employment is intended to afford the employer an opportunity to
observe the fitness of a probationary employee while at work, and to ascertain whether
he will become an efficient and productive employee.[28] While the employer observes
the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified
for permanent employment, the probationer, on the other hand, seeks to prove to the
employer that he has the qualifications to meet the reasonable standards for
permanent employment.[29] Thus, the word probationary, as used to describe the period
of employment, implies the purpose of the term or period, not its length. [30]

The common practice is for the employer and the teacher to enter into a contract,
effective for one school year.[31] At the end of the school year, the employer has the
option not to renew the contract, particularly considering the teacher's performance.
[32]
 If the contract is not renewed, the employment relationship terminates.[33] If the
contract is renewed, usually for another school year, the probationary employment
continues.[34] Again, at the end of that period, the parties may opt to renew or not to
renew the contract.[35] If renewed, this second renewal of the contract for another
school year would then be the last year - since it would be the third school year - of
probationary employment.[36] At the end of this third year, the employer may now
decide whether to extend a permanent appointment to the employee, primarily on the
basis of the employee having met the reasonable standards of competence and
efficiency set by the employer.[37] For the entire duration of this three-year period, the
teacher remains under probation.[38] Upon the expiration of his contract of employment,
being simply on probation, he cannot automatically claim security of tenure and compel
the employer to renew his employment contract. [39]

Petitioner school contends that it did not extend the contracts of respondent spouses. It
claims that, although, it has sent letters to the spouses informing them that the school is
extending to them new contracts for the coming school year, the letters do not
constitute as actual employment contracts but merely offers to teach on the said school
year. The respondent spouses wrote to the president, petitioner Sr. Lilia:

Respondent Remigio Michael:

Dear Sister,

Peace!

This signifies my intention of renewing my contract of employment with [SPCQC] for SY

1998-1999.

Thank you.[40]

Respondent Cynthia:

Dear Sister,

I wish to continue teaching in St. Paul College Quezon City for school year 1998-99.

Thank you very much.[41]

In response to the above, the college dean, petitioner Sr. Bernadette wrote the
respondent spouses letters with the same contents, thus:
 This is to acknowledge receipt of your letter of application to teach during the
School year of 1998-1999.

Upon the recommendation of the College Council, I am happy to inform you that the
school is extending to you a new contract for School year 1998-1999.

I wish to take this opportunity to thank you for the service which you have rendered to
our students and to the school during the past School year 1997-1998.  I hope you will
again go out of your way and cooperate in this apostolate that we are doing.

Congratulations and I look forward to a fruitful and harmonious time with you. [42]

Section 91 of the Manual of Regulations for Private Schools, states that:

Section 91. Employment Contract.  Every contract of employment

shall specify the designation, qualification, salary rate, the period and nature of service
and its date of effectivity, and such other terms and condition of employment as may be
consistent with laws and rules, regulations and standards of the school.  A copy of the
contract shall be furnished the personnel concerned. [43]

It is important that the contract of probationary employment specify the period or term
of its effectivity.[44] The failure to stipulate its precise duration could lead to the
inference that the contract is binding for the full three-year probationary period. [45] 
Therefore, the letters sent by petitioner Sr. Racadio, which were void of any specifics
cannot be considered as contracts.  The closest they can resemble to are that of
informal correspondence among the said individuals.  As such, petitioner school has the
right not to renew the contracts of the respondents, the old ones having been expired at
the end of their terms.

Assuming, arguendo, that the employment contracts between the petitioner school and

the respondent spouses were renewed, this Court finds that there was a valid and just
cause for their dismissal. The Labor Code commands that before an employer may
legally dismiss an employee from the service, the requirement of substantial and
procedural due process must be complied with.[46] Under the requirement of substantial
due process, the grounds for termination of employment must be based on just [47] or
authorized causes.[48]

Petitioner school charged respondent Remigio Michael of non-compliance with a school

policy regarding the submission of final test questions to his program coordinator for
checking or comment.  Following due process, the same respondent admitted the
charge in his letter,[49] stating that:

It is true that I failed to submit a copy of my final exam to my program

coordinator for checking or comment. But to single me out (and Mrs. Cynthia Ancheta
for that matter) and hold me accountable for it would not only defy the basic tenets of
fair play and equality.  It is a common knowledge that there are many teachers who do
not comply with this policy. To impose solely upon me the whole weight of this
particular policy, leaving the others who similarly violate the same policy, would put me
under the mercy of selective justice and the exercise of gross abuse of discretion by the
Dean.  If the root cause of this matter - which I will discuss later - had not happened, I
know that my attention would never be called to this policy, as what was the case in the
past.  I plead to you, Sister, to find out how many of us have not complied with this
policy and how many were actually called their attention for non-compliance.  I do not
disagree with the objective of this policy;  I am only shocked to find out that while many
are non-compliant, only few are punished.  So be it, I apologize for my violation.[50]

Respondent Remigio Michael was further charged with non-compliance with the
standard format (multiple choice) of final test questions as agreed upon by the different
departments of petitioner school, to which the former replied:

I am not the only one who does not comply with this policy.  Many teachers do
not give multiple choice exams at all; others do not give a pure multiple choice exam.  I
urge you, Sister, to kindly do the rounds.  x x x

xxxx

Again, I apologize if I did not comply with this policy. [51]

He was also charged with failure to encode modular grade reports as required by the
school.  On that charge, respondent Remigio Michael cited a letter dated April 22, 1998
that criticizes the school policy of penalizing the delays in encoding final grades.

On the charge that he had a high failure rate in his classes, respondent Remigio Michael 
claimed that he did not flunk students, but the latter failed.  He further commented that
petitioner school did not consciously promote academic excellence.
Finally, as to the charge that he constantly failed to report for work on time, the same
respondent admitted such tardiness but only with respect to his 7:30 a.m. classes.

Respondent Remigio Michael's spouse shared the same defenses and admissions as to
the charges against her.

The plain admissions of the charges against them were the considerations taken into
account by the petitioner school in their decision not to renew the respondent spouses'
employment contracts.  This is a right of the school that is mandated by law and
jurisprudence. It is the prerogative of the school to set high standards of efficiency for its
teachers since quality education is a mandate of the Constitution. [52] As long as the
standards fixed are reasonable and not arbitrary, courts are not at liberty to set them
aside.[53] Schools cannot be required to adopt standards which barely satisfy criteria set
for government recognition.[54]  The same academic freedom grants the school the
autonomy to decide for itself the terms and conditions for hiring its teacher, subject of
course to the overarching limitations under the Labor Code. [55]  The authority to hire is
likewise covered and protected by its management prerogative - the  right of an
employer to regulate all aspects of employment, such as hiring, the freedom to
prescribe work assignments, working methods, process to be followed, regulation
regarding transfer of employees, supervision of their work, lay-off and discipline, and
dismissal and recall of workers.[56]

WHEREFORE, the Petition for Review dated November 18, 2005 of petitioners St. Paul
College, Quezon City, et al. is hereby GRANTED and the  Decision dated July 8, 2005 of
the Court of Appeals and its Resolution dated September 29, 2005 are
hereby REVERSED and SET ASIDE.  Consequently, the Decision dated February 28, 2003
of the National Labor Relations Commission and the Decision dated November 20, 2000
of the Labor Arbiter are hereby REINSTATED.

SO ORDERED.

EN BANC
[ G.R. No. L-48494, February 05, 1990 ]
BRENT SCHOOL, INC., AND REV. GABRIEL DIMACHE, PETITIONERS,
VS. RONALDO ZAMORA, THE PRESIDENTIAL ASSISTANT FOR LEGAL
AFFAIRS, OFFICE OF THE PRESIDENT, AND DOROTEO R. ALEGRE,
 RESPONDENTS.

DECISION

NARVASA, J.:

The question presented by the proceedings at bar[1] is whether or not the

provisions of the Labor Code,[2] as amended,[3] have anathematized "fixed period
employment" or employment for a term.

The root of the controversy at bar is an employment contract in virtue of which Doroteo
R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly compensation
of P20,000.00.[4] The contract fixed a specific term for its existence, five (5) years, i.e.,
from July 18, 1971, the date of execution of the agreement, to July 17, 1976. Subsequent
subsidiary agreements dated March 15, 1973, August 28, 1973, and September 14, 1974
reiterated the same terms and conditions, including the expiry date, as those contained in
the original contract of July 18, 1971.[5] 

Some three months before the expiration of the stipulated period, or more precisely on
April 20, 1976, Alegre was given a copy of the report filed by Brent School with the
Department of Labor advising of the termination of his services effective on July 16,
1976. The stated ground for the termination was "completion of contract, expiration of
the definite period of employment." And a month or so later, on May 26, 1976, Alegre
accepted the amount of P3,177.71, and signed a receipt therefor containing the phrase, "in
full payment of services for the period May 16, to July 17, 1976 as full payment of
contract."

However, at the investigation conducted by a Labor Conciliator of said report of

termination of his services, Alegre protested the announced termination of his
employment. He argued that although his contract did stipulate that the same would
terminate on July 17, 1976, since his services were necessary and desirable in the usual
business of his employer, and his employment had lasted for five years, he had acquired
the status of a regular employee and could not be removed except for valid cause.[6] The
Regional Director considered Brent School's report as an application for clearance to
terminate employment (not a report of termination), and accepting the recommendation
of the Labor Conciliator, refused to give such clearance and instead required the
reinstatement of Alegre, as a "permanent employee," to his former position without loss
of seniority rights and with full back wages. The Director pronounced "the ground relied
upon by the respondent (Brent) in terminating the services of the complainant (Alegre) **
(as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular No. 8, series
of 1969, of the Bureau of Private Schools.[7]
Brent School filed a motion for reconsideration. The Regional Director denied the motion
and forwarded the case to the Secretary of Labor for review. [8] The latter sustained the
Regional Director.[9] Brent appealed to the Office of the President. Again it was rebuffed.
That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's
decision, ruling that Alegre was a permanent employee who could not be dismissed
except for just cause; and expiration of the employment contract was not one of the just
causes provided in the Labor Code for termination of services.[10]

The School is now before this Court in a last attempt at vindication. That it will get here.

The employment contract between Brent School and Alegre was executed on July 18,
1971, at a time when the Labor Code of the Philippines (P.D. 442) had not yet been
promulgated. Indeed, the Code did not come into effect until November 1, 1974, some
three years after the perfection of the employment contract, and rights and obligations
thereunder had arisen and been mutually observed and enforced.

At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about
the validity of term employment. It was impliedly but nonetheless clearly recognized by
the Termination Pay Law, R.A. 1052, [11]  as amended by R.A. 1787.[12] Basically, this
statute provided that— 

In cases of employment, without a definite period, in a commercial, industrial, or

agricultural establishment or enterprise, the employer or the employee may terminate at
any time the employment with just cause; or without just cause in the case of an
employee by serving written notice on the employer at least one month in advance, on in
the case of an employer, by serving such notice to the employee at least one month in
advance or one-half month for every year of service of the employee, whichever is
longer, a fraction of at least six months being considered as one whole year. 

The employer, upon whom no such notice was served in case of termination of
employment without just cause, may hold the employee liable for damages. 

The employee, upon whom no such notice was served in case of termination of
employment without just cause, shall be entitled to compensation from the date of
termination of his employment in an amount equivalent to his salaries or wages
corresponding to the required period of notice.

There was, to repeat, clear albeit implied recognition of the licitness of term employment,
RA 1787 also enumerated what it considered to be just causes for terminating an
employment without a definite period, either by the employer or by the employee without
incurring any liability therefor.
Prior thereto, it was the Code of Commerce which governed employment without a fixed
period, and also implicitly acknowledged the propriety of employment with a fixed
period. Its Article 302 provided that — 

In cases in which the contract of employment does not have a fixed period, any of the
parties may terminate it, notifying the other thereof one month in advance. 

The factor or shop clerk shall have a right, in this case, to the salary corresponding to said
month.

The salary for the month directed to be given by the said Article 302 of the Code of
Commerce to the factor or shop clerk, was known as the mesada (from mes, Spanish for
"month"). When Article 302 (together with many other provision of the Code of
Commerce) was repealed by the Civil Code of the Philippines, Republic Act No. 1052
was enacted avowedly for the precise purpose of reinstating the mesada. 

Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and
became effective on August 30, 1950, itself deals with obligations with a period in
section 2, Chapter 3, Title I, Book IV; and with contracts of labor and for a piece of work,
in Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No prohibition
against term or fixed-period employment is contained in any of its articles or is otherwise
deducible therefrom.

It is plain then that when the employment contract was signed between Brent School and
Alegre on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation
fixing the duration thereof. Stipulations for a term were explicitly recognized as valid by
this Court, for instance, in Biboso v. Victorias Milling Co., Inc., promulgated on March
31, 1977,[13]  and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on December 29,
1983.[14] The Thompson  case involved an executive who had been engaged for a fixed
period of three (3) years. Biboso involved teachers in a private school as regards whom,
the following pronouncement was made: 

"What is decisive is that petitioners (teachers) were well aware all the time that their
tenure was for a limited duration. Upon its termination, both parties to the employment
relationship were free to renew it or to let it lapse." (p. 254)

Under American law[15] the principle is the same. "Where a contract specifies the period
of its duration, it terminates on the expiration of such period."[16] "A contract of
employment for a definite period terminates by its own terms at the end of such
period."[17]

The status of legitimacy continued to be enjoyed by fixed-period employment contracts

under the Labor Code (Presidential Decree No. 442), which went into effect on
November 1, 1974. The Code contained explicit references to fixed period employment,
or employment with a fixed or definite period. Nevertheless, obscuration of the principle
of licitness of term employment began to take place at about this time.

Article 320, entitled "Probationary and fixed period employment," originally stated that
the "termination of employment of probationary employees and those employed WITH A
FIXED PERIOD shall be subject to such regulations as the Secretary of Labor may
prescribe." The asserted objective was "to prevent the circumvention of the right of the
employee to be secured in their employment as provided ** (in the Code)."

Article 321 prescribed the just causes for which an employer could terminate "an
employment without a definite period."

And Article 319 undertook to define "employment without a fixed period" in the
following manner:[18]  

An employment shall be deemed to be without a definite period  for purposes of this

Chapter where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the employee
or where the work or service to be performed is seasonal in nature and the employment is
for the duration of the season.

The question immediately provoked by a reading of Article 319 is whether or not a

voluntary agreement on a fixed term or period would be valid where the employee "has
been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer." The definition seems a non sequitur. From the
premise — that the duties of an employee entail "activities which are usually necessary or
desirable in the usual business or trade of the employer" — the conclusion does not
necessarily follow that the employer and employee should be forbidden to stipulate any
period of time for the performance of those activities. There is nothing essentially
contradictory between a definite period of an employment contract and the nature of the
employee's duties set down in that contract as being "usually necessary or desirable in the
usual business or trade of the employer." The concept of the employee's duties as being
"usually necessary or desirable in the usual business or trade of the employer" is not
synonymous with or identical to employment with a fixed term. Logically, the decisive
determinant in term employment should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by the parties for the commencement
and termination of their employment relationship, a day certain being understood to be
"that which must necessarily come, although it may not be known
when."[19] Seasonal employment, and employment for a particular project are merely
instances of employment in which a period, where not expressly set down, is necessarily
implied.

Of course, the term period has a definite and settled signification. It means, "Length of

existence; duration. A point of time marking a termination as of a cause or an activity; an
end, a limit, a bound; conclusion; termination. A series of years, months or days in which
something is completed. A time of definite length, * * the period from one fixed date to
another fixed date * * ."[20] It connotes a "space of time which has an influence on an
obligation as a result of a juridical act, and either suspends its demandableness or
produces its extinguishment."[21] It should be apparent that this settled and familiar notion
of a period, in the context of a contract of employment, takes no account at all of the
nature of the duties of the employee; it has absolutely no relevance to the character of his
duties as being "usually necessary or desirable to the usual business of the employer," or
not.

Subsequently, the foregoing articles regarding employment with "a definite period" and
"regular" employment were amended by Presidential Decree No. 850, effective
December 16, 1975.

Article 320, dealing with "Probationary and fixed period employment," was altered
by eliminating the reference to persons "employed with a fixed period," and was
renumbered (becoming Article 271). The Article[22] now reads: 

* *. Probationary employment. — Probationary employment shall not exceed six 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 in 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.

Also amended by PD 850 was Article 319 (entitled "Employment with a fixed
period," supra) by (a) deleting mention of employment with a fixed or definite period, (b)
adding a general exclusion clause declaring irrelevant written or oral agreements "to the
contrary," and (c) making the provision treat exclusively of "regular" and "casual"
employment. As revised, said article, renumbered 270,[23] now reads:

* * Regular and Casual Employment. — The provisions of written agreement to the

contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be employed is seasonal
in nature and the employment is for the duration of the season. 

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: provided, that, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists.

The first paragraph is identical to Article 319 except that, as just mentioned, a clause has
been added, to wit: "The provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreements of the parties ..." The clause would appear to be
addressed inter alia to agreements fixing a definite period for employment. There is
withal no clear indication of the intent to deny validity to employment for a definite
period. Indeed, not only is the concept of regular employment not essentially inconsistent
with employment for a fixed term, as above pointed out, Article 272 of the Labor Code,
as amended by said PD 850, still impliedly acknowledged the propriety of term
employment: it listed the "just causes" for which "an employer may
terminate employment without a definite period," thus giving rise to the inference that if
the employment be with a definite period, there need be no just cause for termination
thereof if the ground be precisely the expiration of the term agreed upon by the parties for
the duration of such employment.

Still later, however, said Article 272 (formerly Article 321) was further amended
by Batas Pambansa Bilang 130,[24] to eliminate altogether reference to employment
without a definite period. As lastly amended, the opening lines of the article (renumbered
283), now pertinently read: "An employer may terminate an employment for any of the
following just causes: ** ." BP 130 thus completed the elimination of every reference in
the Labor Code, express or implied, to employment with a fixed or definite period or
term.

It is in the light of the foregoing description of the development of the provisions of the
Labor Code bearing on term or fixed-period employment that the question posed in the
opening paragraph of this opinion should now be addressed. Is it then the legislative
intention to outlaw stipulations in employment contracts laying down a definite period
therefor? Are such stipulations in essence contrary to public policy and should not on this
account be accorded legitimacy?

On the one hand, there is the gradual and progressive elimination of references to term or
fixed-period employment in the Labor Code, and the specific statement of the rule [25]  that
— 
* * Regular and Casual Employment. — The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be employed is seasonal
in nature and the employment is for the duration of the season. 

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: provided, that, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists.

There is, on the other hand, the Civil Code, which has always recognized, and continues
to recognize, the validity and propriety of contracts and obligations with a fixed or
definite period, and imposes no restraints on the freedom of the parties to fix the duration
of a contract, whatever its object, be it specie, goods or services, except the general
admonition against stipulations contrary to law, morals, good customs, public order or
public policy.[26] Under the Civil Code, therefore, and as a general proposition, fixed-term
employment contracts are not limited, as they are under the present Labor Code, to those
by nature seasonal or for specific projects with pre-determined dates of completion; they
also include those to which the parties by free choice have assigned a specific date of
termination.

Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and
natural appurtenance: overseas employment contracts, for one, to which, whatever the
nature of the engagement, the concept of regular employment with all that it implies does
not appear ever to have been applied, Article 280 of the Labor Code notwithstanding;
also appointments to the positions of dean, assistant dean, college secretary, principal,
and other administrative offices in educational institutions, which are by practice or
tradition rotated among the faculty members, and where fixed terms are a necessity
without which no reasonable rotation would be possible. Similarly, despite the provisions
of Article 280, Policy Instructions No. 8 of the Minister of Labor [27] implicitly recognize
that certain company officials may be elected for what would amount to fixed periods, at
the expiration of which they would have to stand down, in providing that these officials,"
* * may lose their jobs as president, executive vice-president or vice-
president, etc., because the stockholders or the board of directors for one reason or
another did not reelect them."
There can of course be no quarrel with the proposition that where from the circumstances
it is apparent that periods have been imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or disregarded as contrary to public policy,
morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise,
where the reason for the law does not exist, e.g., where it is indeed the employee himself
who insists upon a period or where the nature of the engagement is such that, without
being seasonal or for a specific project, a definite date of termination is a sine qua non,
would an agreement fixing a period be essentially evil or illicit, therefore anathema?
Would such an agreement come within the scope of Article 280 which admittedly was
enacted "to prevent the circumvention of the right of the employee to be secured in * *
(his) employment?"

As it is evident from even only the three examples already given that Article 280 of the
Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut
of employment contracts to which the lack of a fixed period would be an anomaly, but
would also appear to restrict, without reasonable distinctions, the right of an employee to
freely stipulate with his employer the duration of his engagement, it logically follows that
such a literal interpretation should be eschewed or avoided. The law must be given a
reasonable interpretation, to preclude absurdity in its application. Outlawing the whole
concept of term employment and subverting to boot the principle of freedom of contract
to remedy the evil of employers' using it as a means to prevent their employees from
obtaining security of tenure is like cutting off the nose to spite the face or, more
relevantly, curing a headache by lopping off the head. 

"It is a salutary principle in statutory construction that there exists a valid presumption
that undesirable consequences were never intended by a legislative measure, and that a
construction of which the statute is fairly susceptible is favored, which will avoid all
objectionable, mischievous, undefensible, wrongful, evil, and injurious consequences." [28]

"Nothing is better settled than that courts are not to give words a meaning which
would lead to absurd or unreasonable consequences. That is a principle that goes back
to In re Allen decided on October 27, 1903, where it was held that a literal
interpretation is to be rejected if it would be unjust or lead to absurd results. That is a
strong argument against its adoption. The words of Justice Laurel are particularly apt.
Thus: "The fact that the construction placed upon the statute by the appellants would
lead to an absurdity is another argument for rejecting it. * *.'" [29]   

"* * We have, here, then a case where the true intent of the law is clear that calls for the
application of the cardinal rule of statutory construction that such intent of spirit must
prevail over the letter thereof, for whatever is within the spirit of a statute is within the
statute, since adherence to the letter would result in absurdity, injustice and contradictions
and would defeat the plain and vital purpose of the statute."[30]
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have been, as
already observed, to prevent circumvention of the employee's right to be secure in his
tenure, the clause in said article indiscriminately and completely ruling out all written or
oral agreements conflicting with the concept of regular employment as defined therein
should be construed to refer to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed upon knowingly
and voluntarily 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, or where 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 over the latter. Unless thus limited in its purview, the law would be made to
apply to purposes other than those explicitly stated by its framers; it thus becomes
pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended
consequences.

Such interpretation puts the seal on Biboso[31] upon the effect of the expiry of an agreed
period of employment as still good rule — a rule reaffirmed in the recent case
of Escudero vs. Office of the President  (G.R. No. 57822, April 26, 1989) where, in the
fairly analogous case of a teacher being served by her school a notice of termination
following the expiration of the last of three successive fixed-term employment contracts,
the Court held: 

"Reyes' (the teacher's) argument is not persuasive. It loses sight of the fact that her
employment was probationary, contractual in nature, and one with a definitive period. At
the expiration of the period stipulated in the contract, her appointment was deemed
terminated and the letter informing her of the non-renewal of her contract is not a
condition sine qua non before Reyes may be deemed to have ceased in the employ of
petitioner UST. The notice is a mere reminder that Reyes' contract of employment was
due to expire and that the contract would no longer be renewed. It is not a letter of
termination. The interpretation that the notice is only a reminder is consistent with the
court's finding in Labajo, supra. * * * "[32]

Paraphrasing Escudero, respondent Alegre's employment was terminated upon the

expiration of his last contract with Brent School on July 16, 1976 without the necessity of
any notice. The advance written advice given the Department of Labor with copy to said
petitioner was a mere reminder of the impending expiration of his contract, not a letter of
termination, nor an application for clearance to terminate which needed the approval of
the Department of Labor to make the termination of his services effective. In any case,
such clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of is REVERSED and SET
ASIDE. Respondent Alegre's contract of employment with Brent School having lawfully
terminated with and by reason of the expiration of the agreed term of period thereof, he is
declared not entitled to reinstatement and the other relief awarded and confirmed on
appeal in the proceedings below. No pronouncement as to costs.

SO ORDERED. 

FIRST DIVISION
[ G.R. No. 78693, January 28, 1991 ]
ZOSIMO CIELO, PETITIONER, VS. THE HONORABLE NATIONAL
LABOR RELATIONS COMMISSION, HENRY LEI AND/OR HENRY LEI
TRUCKING, RESPONDENTS.

DECISION

CRUZ, J.:

The petitioner is a truck driver who claims he was illegally dismissed by the
private respondent, the Henry Lei Trucking Company.  The Labor Arbiter found for him
and ordered his reinstatement with back wages.[1] On appeal, the decision was reversed
by the National Labor Relations Commission, which held that the petitioner's
employment had expired under a valid contract.[2] The petitioner then came to us
on certiorari under Rule 65 of the Rules of Court.

Required to submit a Comment (not to file a motion to dismiss), the private respondent
nevertheless moved to dismiss on the ground that the petition was filed sixty-eight days
after service of the challenged decision on the petitioner, hence late.  The motion was
untenable, of course.  Petitions for certiorari under Rule 65 may be instituted within a
reasonable period, which the Court has consistently reckoned at three months.*

In his own Comment, the Solicitor General defended the public respondent and agreed
that the contract between the petitioner and the private respondent was a binding
agreement not contrary to law, morals or public policy.  The petitioner's services could
be legally terminated upon the expiration of the period agreed upon, which was only six
months.  The petitioner could therefore not complain that he had been illegally
dismissed.

As an examination of the claimed agreement was necessary to the resolution of this

case, the Court required its production by the petitioner.  But he could not comply
because he said he had not been given a copy by the private respondent.  A similar
requirement proved fruitless when addressed to the private respondent, which
explained it could not locate the folder of the case despite diligent search.  It was only
on October 15, 1990, that the records of the case, including the subject agreement,
were finally received by the Court from the NLRC, which had obtained them from its
Cagayan de Oro regional office.[3]

The said agreement reads in full as follows:

A G R E E M E N T

KNOW ALL MEN BY THESE PRESENTS:

This Agreement made and executed by and between:

HENRY LEI, of legal age, Filipino citizen, married, and a resident of Digos, Davao del Sur,
now and hereinafter called the FIRST PARTY,

-and-

ZOSIMO CIELO, of legal age, married, Filipino citizen, and a resident of Agusan, Canyon,
Camp Phillips, now and hereinafter called the SECOND PARTY,

W I T N E S S E T H

That the FIRST PARTY is an owner of some cargo trucks.

WHEREAS, the SECOND PARTY desires to operate one of the said cargo trucks which he
himself shall drive for income;

NOW, THEREFORE, for the foregoing premises, the FIRST PARTY does hereby assign one
cargo truck of his fleet to the SECOND PARTY under the following conditions and
stipulations:

1.  That the term of this Agreement is six (6) months from and after the execution
hereof, unless otherwise earlier terminated at the option of either party;

2.  That the net income of the said vehicle after fuel and oil shall be divided by and
between them on ninety/ten percent (90/10%) basis in favor of the FIRST PARTY;

3.  That there is no employer/employee relationship between the parties, the nature of
this Agreement being contractual;

4.  In the event the SECOND PARTY needs a helper the personnel so employed by him
shall be to his personal account, who shall be considered his own employee;

5.  That the loss of or damage to the said vehicle shall be to account of the SECOND
PARTY; he shall return the unit upon the expiration or termination of this contract in the
condition the same was received by him, fair wear and tear excepted.

IN WITNESS WHEREOF, the parties hereunto affixed their signature on this 30th day of
June, 1984, at Digos, Davao del Sur, Philippines.

(Sgd.) HENRY LEI (Sgd.) ZOSIMO CIELO

First Party Second Party
   
SIGNED IN THE PRESENCE OF:
   
(Sgd.) VICTOR CHAN (Sgd.) AMALFE M. NG
The agreement was supposed to have commenced on June 30, 1984, and to end
on December 31, 1984.  On December 22, 1984, however, the petitioner was formally
notified by the private respondent of the termination of his services on the ground of
expiration of their contract.  Soon thereafter, on January 22, 1985, the petitioner filed
his complaint with the Ministry of Labor and Employment.

In his position paper, the petitioner claimed he started working for the private
respondent on June 16, 1984, and having done so for more than six months had
acquired the status of a regular employee.  As such, he could no longer be dismissed
except for lawful cause.  He also contended that he had been removed because of his
refusal to sign, as required by the private respondent, an affidavit reading as follows:
A F F I D A V I T

That I, ZOSIMO CIELO, Filipino, of legal age, married/single and a resident of Agusan
Canyon, Camp Phillips, after having been duly sworn to in accordance with law, hereby
depose and say:

That I am one of the drivers of the trucks of Mr. HENRY LEI whose hauling trucks are
under contract with the Philippine Packing Corporation;

That I have received my salary and allowances from Mr. HENRY LEI the sum of P1,421.10
for the month of October 1984.  That I have no more claim against the said Mr. Henry
Lei.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 15th day of November
1984.

______________
Driver       
The private respondent rests its case on the agreement and maintains that the
labor laws are not applicable because the relations of the parties are governed by their
voluntary stipulations.  The contract having expired, it was the prerogative of the
trucking company to renew it or not as it saw fit.

The writ will issue.

While insisting that it is the agreement that regulates its relations with the petitioner,
the private respondent is ensnared by its own words.  The agreement specifically
declared that there was no employer-employee relationship between the parties.  Yet
the affidavit the private respondent prepared required the petitioner to acknowledge
that "I have received my salary and allowances from Mr. Henry Lei," suggesting an
employment relationship.  According to its position paper, the petitioner's refusal to
sign the affidavit constituted disrespect or insubordination, which had "some bearing on
the renewal of his contract of employment with the respondent." Of this affidavit, the
private respondent had this to say:
x x x Since October 1984, respondent adopted a new policy to require all
their employees to sign an affidavit to the effect  that they received their salaries.  Copy
of which is hereto attached as Annex "C," covering the months of October and
November 1984.  All other employees of the respondent signed the said affidavit, only
herein complainant refused to do so for reasons known only to him.  x x x
It appears from the records that all the drivers of the private respondent have
been hired on a fixed contract basis, as evidenced by the mimeographed form of the
agreement and of the affidavit.  The private respondent merely filled in the blanks with
the corresponding data, such as the driver's name and address, the amount received by
him, and the date of the document.  Each driver was paid through individual
vouchers[4] rather than a common payroll, as is usual in companies with numerous
employees.

The private respondent's intention is obvious.  It is remarkable that neither the NLRC
nor the Solicitor General recognized it.  There is no question that the purpose behind
these individual contracts was to evade the application of the labor laws by making it
appear that the drivers of the trucking company were not its regular employees.

Under these arrangements, the private respondent hoped to be able to terminate the
services of the drivers without the inhibitions of the Labor Code.  All it had to do was
refuse to renew the agreements, which, significantly, were uniformly limited to a six-
month period.  No cause had to be established because such renewal was subject to the
discretion of the parties.  In fact, the private respondent did not even have to wait for
the expiration of the contract as it was there provided that it could be "earlier
terminated at the option of either party."

By this clever scheme, the private respondent could also prevent the drivers from
becoming regular employees and thus be entitled to security of tenure and other
benefits, such as a minimum wage, cost-of-living allowances, vacation and sick leaves,
holiday pay, and other statutory requirements.  The private respondent argues that
there was nothing wrong with the affidavit because all the affiant acknowledged therein
was full payment of the amount due him under the agreement.  Viewed in this light,
such acknowledgment was indeed not necessary at all because this was already
embodied in the vouchers signed by the payee-driver.  But the affidavit, for all its
seeming innocuousness, imported more than that.  What was insidious about the
document was the waiver the affiant was unwarily making of the statutory rights due
him as an employee of the trucking company.

And employee he was despite the innocent protestations of the private respondent.  We
accept the factual finding of the Labor Arbiter that the petitioner was a regular
employee of the private respondent.  The private respondent is engaged in the trucking
business as a hauler of cattle, crops and other cargo for the Philippine Packing
Corporation.  This business requires the services of drivers, and continuously because
the work is not seasonal, nor is it limited to a single undertaking or operation.  Even if
ostensibly hired for a fixed period, the petitioner should be considered a regular
employee of the private respondent, conformably to Article 280 of the Labor Code
providing as follows:
Art. 280.  Regular and Casual Employment. - The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph; Provided, that, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists.  (Underscoring supplied for emphasis)
In Brent School, Inc. v. Zamora,[5] the Court affirmed the general principle that
"where from the circumstances it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee, they should be struck down or
disregarded as contrary to public policy, morals, etc." Such circumstances have been
sufficiently established in the case at bar and justify application of the following
conclusions:
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have been,
as already observed, to prevent circumvention of the employee's right to be secure in
his tenure, the clause in said article indiscriminately and completely ruling out all written
or oral agreements conflicting with the concept of regular employment as defined
therein should be construed to refer to the substantive evil that the Code itself has
singled out: agreements entered into precisely to circumvent security of tenure.
The agreement in question had such a purpose and so was null and void ab initio.

The private respondent's argument that the petitioner could at least be considered on
probation basis only and therefore separable at will is self-defeating.  The Labor Code
clearly provides as follows:
Art. 281.  Probationary employment. - 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.
There is no question that the petitioner was not engaged as an apprentice, being
already an experienced truck driver when he began working for the private respondent. 
Neither has it been shown that he was informed at the time of his employment of the
reasonable standards under which he could qualify as a regular employee.  It is plain
that the petitioner was hired at the outset as a regular employee.  At any rate, even
assuming that the original employment was probationary, the Labor Arbiter found that
the petitioner had completed more than six month's service with the trucking company
and so had acquired the status of a regular employee at the time of his dismissal.

Even if it be assumed that the six-month period had not yet been completed, it is settled
that the probationary employee cannot be removed except also for cause as provided
by law.  It is not alleged that the petitioner was separated for poor performance; in fact,
it is suggested by the private respondent that he was dismissed for disrespect and
insubordination, more specifically his refusal to sign the affidavit as required by
company policy.  Hence, even as a probationer, or more so as a regular employee, the
petitioner could not be validly removed under Article 282 of the Labor Code, providing
as follows:
Art. 282.  Termination by employer. - An employer may terminate an
employment for any of the following causes:

(a)  Serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work:

(b)  Gross and habitual neglect by the employee of his duties:

(c)  Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative;

(d)  Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized representative;
and
(e)  Other causes analogous to the foregoing.
In refusing to sign the affidavit as required by the private respondent, the
petitioner was merely protecting his interests against an unguarded waiver of the
benefits due him under the Labor Code.  Such willful disobedience should commend
rather than prejudice him for standing up to his rights, at great risk to his material
security, against the very source of his livelihood.

The Court looks with stern disapproval at the contract entered into by the private
respondent with the petitioner (and who knows with how many other drivers).  The
agreement was a clear attempt to exploit the unwitting employee and deprive him of
the protection of the Labor Code by making it appear that the stipulations of the parties
were governed by the Civil Code as in ordinary private transactions.  They were not, to
be sure.  The agreement was in reality a contract of employment into which were read
the provisions of the Labor Code and the social justice policy mandated by the
Constitution.  It was a deceitful agreement cloaked in the habiliments of legality to
conceal the selfish desire of the employer to reap undeserved profits at the expense of
its employees.  The fact that the drivers are on the whole practically unlettered only
makes the imposition more censurable and the avarice more execrable.

WHEREFORE, the petition is GRANTED.  The decision of the National Labor Relations
Commission is SET ASIDE and that of the Labor Arbiter REINSTATED, with costs against
the private respondents.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 122653, December 12, 1997 ]
PURE FOODS CORPORATON, PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION, RODOLFO CORDOVA, VIOLETA CRUSIS,
ET AL.,* RESPONDENTS.
DECISION

DAVIDE, JR., J.:

 The crux of this petition for certiorari  is the issue of whether employees hired for
a definite period and whose services are necessary and desirable in the usual business
or trade of the employer are regular employees.

The private respondents (numbering 906) were hired by petitioner Pure Foods
Corporation to work for a fixed period of five months at its tuna cannery plant in
Tambler, General Santos City. After the expiration of their respective contracts of
employment in June and July 1991, their services were terminated. They forthwith
executed a “Release and Quitclaim” stating that they had no claim whatsoever against
the petitioner.

On 29 July 1991, the private respondents filed before the National Labor Relations
Commission (NLRC) Sub-Regional Arbitration Branch No. XI, General Santos City, a
complaint for illegal dismissal against the petitioner and its plant manager, Marciano
Aganon. [1] This case was docketed as RAB-11-08-50284-91.

On 23 December 1992, Labor Arbiter Arturo P. Aponesto handed down a

decision [2] dismissing the complaint on the ground that the private respondents were
mere contractual workers, and not regular employees; hence, they could not avail of the
law on security of tenure. The termination of their services by reason of the expiration
of their contracts of employment was, therefore, justified. He pointed out that earlier
he had dismissed a case entitled “Lakas ng Anak-Pawis- NOWM v. Pure Foods Corp.”
(Case No. RAB-11-02-00088-88) because the complainants therein were not regular
employees of Pure Foods, as their contracts of employment were for a fixed period of
five months. Moreover, in another case involving the same contractual workers of Pure
Foods (Case No. R-196-ROXI- MED- UR-55-89), then Secretary of Labor Ruben Torres
held, in a Resolution dated 30 April 1990, that the said contractual workers were not
regular employees.

The Labor Arbiter also observed that an order for private respondents’ reinstatement
would result in the reemployment of more than 10,000 former contractual employees
of the petitioner. Besides, by executing a “Release and Quitclaim,” the private
respondents had waived and relinquished whatever right they might have against the
petitioner.

The private respondents appealed from the decision to the National Labor Relations
Commission (NLRC), Fifth Division, in Cagayan de Oro City, which docketed the case as
NLRC CA No. M-001323-93.

On 28 October 1994, the NLRC affirmed the Labor Arbiter's decision. [3] However, on

private respondents’ motion for reconsideration, the NLRC rendered another decision
on 30 January 1995 [4] vacating and setting aside its decision of 28 October 1994 and
holding that the private respondents and their co-complainants were regular
employees. It declared that the contract of employment for five months was a
“clandestine scheme employed by [the petitioner] to stifle [private respondents’] right
to security of tenure” and should therefore be struck down and disregarded for being
contrary to law, public policy, and morals. Hence, their dismissal on account of the
expiration of their respective contracts was illegal.

Accordingly, the NLRC ordered the petitioner to reinstate the private respondents to
their former position without loss of seniority rights and other privileges, with full back
wages; and in case their reinstatement would no longer be feasible, the petitioner
should pay them separation pay equivalent to one-month pay or one-half-month pay for
every year of service, whichever is higher, with back wages and 10% of the monetary
award as attorney’s fees.

Its motion for reconsideration having been denied,[5] the petitioner came to this Court
contending that respondent NLRC committed grave abuse of discretion amounting to
lack of jurisdiction in reversing the decision of the Labor Arbiter.

The petitioner submits that the private respondents are now estopped from questioning
their separation from petitioner’s employ in view of their express conformity with the
five-month duration of their employment contracts. Besides, they fell within the
exception provided in Article 280 of the Labor Code which reads: “[E]xcept where the
employment has been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement of the
employee.”

Moreover, the first paragraph of the said article must be read and interpreted in
conjunction with the proviso in the second paragraph, which reads: “Provided that any
employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the
activity in which he is employed....” In the instant case, the private respondents were
employed for a period of five months only. In any event, private respondents' prayer for
reinstatement is well within the purview of the “Release and Quitclaim” they had
executed wherein they unconditionally released the petitioner from any and all other
claims which might have arisen from their past employment with the petitioner.

In its Comment, the Office of the Solicitor General (OSG) advances the argument that
the private respondents were regular employees, since they performed activities
necessary and desirable in the business or trade of the petitioner. The period of
employment stipulated in the contracts of employment was null and void for being
contrary to law and public policy, as its purpose was to circumvent the law on security
of tenure. The expiration of the contract did not, therefore, justify the termination of
their employment.

The OSG further maintains that the ruling of the then Secretary of Labor and
Employment in LAP-NOWM v. Pure Foods Corporation is not binding on this Court;
neither is that ruling controlling, as the said case involved certification election and not
the issue of the nature of private respondents’ employment. It also considers private
respondents’ quitclaim as ineffective to bar the enforcement for the full measure of
their legal rights.

The private respondents, on the other hand, argue that contracts with a specific period
of employment may be given legal effect provided, however, that they are not intended
to circumvent the constitutional guarantee on security of tenure. They submit that the
practice of the petitioner in hiring workers to work for a fixed duration of five months
only to replace them with other workers of the same employment duration was
apparently to prevent the regularization of these so-called “casuals,” which is a clear
circumvention of the law on security of tenure.

We find the petition devoid of merit.

Article 280 of the Labor Code defines regular and casual employment as follows:

ART. 280. Regular and Casual Employment.-- The provisions of written agreement
to the contrary notwithstanding and regardless of the oral argument of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph; Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such activity exists.
Thus, the two kinds of regular employees are (1) those who are engaged to
perform activities which are necessary or desirable in the usual business or trade of the
employer; and (2) those casual employees who have rendered at least one year of
service, whether continuous or broken, with respect to the activity in which they are
employed.[6]

In the instant case, the private respondents’ activities consisted in the receiving,
skinning, loining, packing, and casing-up of tuna fish which were then exported by the
petitioner. Indisputably, they were performing activities which were necessary and
desirable in petitioner’s business or trade.

Contrary to petitioner's submission, the private respondents could not be regarded as

having been hired for a specific project or undertaking. The term “specific project or
undertaking” under Article 280 of the Labor Code contemplates an activity which is not
commonly or habitually performed or such type of work which is not done on a daily
basis but only for a specific duration of time or until completion; the services employed
are then necessary and desirable in the employer’s usual business only for the period of
time it takes to complete the project.[7]

The fact that the petitioner repeatedly and continuously hired workers to do the same
kind of work as that performed by those whose contracts had expired negates
petitioner’s contention that those workers were hired for a specific project or
undertaking only.

Now on the validity of private respondents' five-month contracts of employment. In the

leading case of Brent School, Inc. v. Zamora, [8] which was reaffirmed in numerous
subsequent cases, [9] this Court has upheld the legality of fixed-term employment. It
ruled that the decisive determinant in term employment should not be the activities
that the employee is called upon to perform but the day certain agreed upon by the
parties for the commencement and termination of their employment relationship. But,
this Court went on to say that where from the circumstances it is apparent that the
periods have been imposed to preclude acquisition of tenurial security by the employee,
they should be struck down or disregarded as contrary to public policy and morals.

Brent also laid down the criteria under which term employment cannot be said to be in
circumvention of the law on security of tenure:
1) 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; or

2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the
latter.
None of these criteria had been met in the present case. As pointed out by the
private respondents:
[I]t could not be supposed that private respondents and all other so-called
“casual” workers of [the petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-
month employment contract. Cannery workers are never on equal terms with their
employers. Almost always, they agree to any terms of an employment contract just to
get employed considering that it is difficult to find work given their ordinary
qualifications. Their freedom to contract is empty and hollow because theirs is the
freedom to starve if they refuse to work as casual or contractual workers. Indeed, to the
unemployed, security of tenure has no value. It could not then be said that petitioner
and private respondents "dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter. [10]
The petitioner does not deny or rebut private respondents' averments (1) that
the main bulk of its workforce consisted of its so-called “casual” employees; (2) that as
of July 1991, “casual” workers numbered 1,835; and regular employees, 263; (3) that
the company hired “casual” every month for the duration of five months, after which
their services were terminated and they were replaced by other “casual” employees on
the same five-month duration; and (4) that these “casual” employees were actually
doing work that were necessary and desirable in petitioner’s usual business.

As a matter of fact, the petitioner even stated in its position paper submitted to the
Labor Arbiter that, according to its records, the previous employees of the company
hired on a five-month basis numbered about 10,000 as of July 1990. This confirms
private respondents’ allegation that it was really the practice of the company to hire
workers on a uniformly fixed contract basis and replace them upon the expiration of
their contracts with other workers on the same employment duration.

This scheme of the petitioner was apparently designed to prevent the private
respondents and the other “casual” employees from attaining the status of a regular
employee. It was a clear circumvention of the employees’ right to security of tenure and
to other benefits like minimum wage, cost-of-living allowance, sick leave, holiday pay,
and 13th month pay. [11] Indeed, the petitioner succeeded in evading the application of
labor laws. Also, it saved itself from the trouble or burden of establishing a just cause for
terminating employees by the simple expedient of refusing to renew the employment
contracts.

The five-month period specified in private respondents’ employment contracts having

been imposed precisely to circumvent the constitutional guarantee on security of tenure
should, therefore, be struck down or disregarded as contrary to public policy or
morals. [12] To uphold the contractual arrangement between the petitioner and the
private respondents would, in effect, permit the former to avoid hiring permanent or
regular employees by simply hiring them on a temporary or casual basis, thereby
violating the employees’ security of tenure in their jobs. [13]

The execution by the private respondents of a “Release and Quitclaim” did not preclude
them from questioning the termination of their services. Generally, quitclaims by
laborers are frowned upon as contrary to public policy and are held to be ineffective to
bar recovery for the full measure of the workers’ rights. [14] The reason for the rule is
that the employer and the employee do not stand on the same footing. [15]

Notably, the private respondents lost no time in filing a complaint for illegal dismissal.
This act is hardly expected from employees who voluntarily and freely consented to
their dismissal.[16]

The NLRC was, thus, correct in finding that the private respondents were regular
employees and that they were illegally dismissed from their jobs. Under Article 279 of
the Labor Code and the recent jurisprudence, [17] the legal consequence of illegal
dismissal is reinstatement without loss of seniority rights and other privileges, with full
back wages computed from the time of dismissal up to the time of actual reinstatement,
without deducting the earnings derived elsewhere pending the resolution of the case.
However, since reinstatement is no longer possible because the petitioner's tuna
cannery plant had, admittedly, been closed in November 1994,[18] the proper award is
separation pay equivalent to one month pay or one-half month pay for every year of
service, whichever is higher, to be computed from the commencement of their
employment up to the closure of the tuna cannery plant. The amount of back wages
must be computed from the time the private respondents were dismissed until the time
petitioner's cannery plant ceased operation.[19]

WHEREFORE, for lack of merit, the instant petition is DISMISSED and the challenged

decision of 30 January 1995 of the National Labor Relations Commission in NLRC CA No.
M-001323-93 is hereby AFFIRMED subject to the above modification on the
computation of the separation pay and back wages.
SO ORDERED.

SECOND DIVISION
[ G.R. No. 108405, April 04, 2003 ]
JAIME D. VIERNES, CARLOS R. GARCIA, BERNARD BUSTILLO, DANILO
C. BALANAG, FERDINAND DELLA, EDWARD A. ABELLERA,
ALEXANDER ABANAG, DOMINGO ASIA, FRANCISCO BAYUGA,
ARTHUR M. ORIBELLO, BUENAVENTURA DE GUZMAN, JR., ROBERT
A. ORDOÑO, BERNARD V. JULARBAL, IGNACIO C. ALINGBAS AND
LEODEL N. SORIANO, PETITIONERS, VS. NATIONAL LABOR
RELATIONS COMMISSION (THIRD DIVISION), AND BENGUET
ELECTRIC COOPERATIVE, INC. (BENECO) RESPONDENTS.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a petition for certiorari seeking to annul the decision promulgated by

the National Labor Relations Commission (NLRC) on July 2, 1992 in NLRC CA No. L-
000384-92,[1] and its resolution dated September 24, 1992 denying petitioners’ motion
for reconsideration.

The factual background of this case, as summarized by the Labor Arbiter, is as follows:
 Fifteen (15) in all, these are consolidated cases for illegal dismissal,
underpayment of wages and claim for indemnity pay against a common respondent, the
Benguet Electric Cooperative, Inc., (BENECO for short) represented by its Acting General
Manager, Gerardo P. Versoza.

Complainants’ services as meter readers were contracted for hardly a month’s duration,
or from October 8 to 31, 1990. Their employment contracts, couched in identical terms,
read:
You are hereby appointed as METER READER (APPRENTICE) under BENECO-NEA
Management with compensation at the rate of SIXTY-SIX PESOS AND SEVENTY-FIVE
CENTAVOS (P66.75) per day from October 08 to 31, 1990.

x x x. (Annex ‘B’, Complainants’ Joint Position Paper)

The said term notwithstanding, the complainants were allowed to work beyond
October 31, 1990, or until January 2, 1991. On January 3, 1991, they were each served
their identical notices of termination dated December 29, 1990. The same read:
Please be informed that effective at the close of office hours of December 31,
1990, your services with the BENECO will be terminated. Your termination has nothing
to do with your performance. Rather, it is because we have to retrench on personnel as
we are already overstaffed.

x x x. (Annex ‘C’, CJPP)

On the same date, the complainants filed separate complaints for illegal
dismissal. And following the amendment of said complaints, they submitted their joint
position paper on April 4, 1991. Respondent filed its position paper on April 2, 1991.

It is the contention of the complainants that they were not apprentices but regular
employees whose services were illegally and unjustly terminated in a manner that was
whimsical and capricious. On the other hand, the respondent invokes Article 283 of the
Labor Code in defense of the questioned dismissal.[2]
On October 18, 1991, the Labor Arbiter rendered a decision, the dispositive
portion of which reads as follows:
WHEREFORE, judgment is hereby rendered:

1. Dismissing the complaints for illegal dismissal filed by the complainants for lack of
merit. However in view of the offer of the respondent to enter into another temporary
employment contract with the complainants, the respondent is directed to so extend
such contract to each complainant, with the exception of Jaime Viernes, and to pay each
the amount of P2,590.50, which represents a month’s salary, as indemnity for its failure
to give complainants the 30-day notice mandated under Article 283 of the Labor Code;
or, at the option of the complainants, to pay each financial assistance in the amount of
P5,000.00 and the P2,590.50 above-mentioned.

2. Respondent is also ordered:

A. To pay complainants the amount representing underpayment of their wages:

a) Jaime Viernes, Carlos Garcia, Danilo Balanag, Edward Abellera, Francisco

Bayuga, Arthur Oribello, Buenaventura de Guzman, Jr., Robert Ordoño, Bernard Jularbal
and Leodel Soriano, P1,994.25 each;

b) Bernard Bustillo and Domingo Asia, P1,838.50 each; and

c) Ferdinand Della, Alexander Abanag and Ignacio Alingbas, P1,816.25 each.

B. To extend to complainant Jaime Viernes an appointment as regular employee for the

position of meter reader, the job he held prior to his termination, and to pay him
P2,590.50 as indemnity, plus the underpayment of his wages as above stated.

C. To pay P7,000.00 as and for attorney’s fees.

No damages.

SO ORDERED.[3]
Aggrieved by the Labor Arbiter’s decision, the complainants and the respondent
filed their respective appeals to the NLRC.

On July 2, 1992, the NLRC modified its judgment, to wit:

WHEREFORE, premises considered, judgment is hereby rendered modifying the
appealed decision by declaring complainants’ dismissal illegal, thus ordering their
reinstatement to their former position as meter readers or to any equivalent position
with payment of backwages limited to one year and deleting the award of indemnity
and attorney’s fees. The award of underpayment of wages is hereby AFFIRMED.

SO ORDERED.[4]
 On August 27, 1992, complainants filed a Motion for Clarification and Partial
Reconsideration.[5] On September 24, 1992, the NLRC issued a resolution denying the
complainants’ motion for reconsideration.[6]

Hence, complainants filed herein petition.

Private respondent BENECO filed its Comment; the Office of the Solicitor General (OSG)
filed a Manifestation and Motion in Lieu of Comment; public respondent NLRC filed its
own Comment; and petitioners filed their Manifestation and Motion In Lieu of
Consolidated Reply. Public respondent NLRC, herein petitioners, and private respondent
filed their respective memoranda, and the OSG, its Manifestation in 1994.

Pursuant to our ruling in Rural Bank of Alaminos Employees Union vs. NLRC,[7] to wit:
…in the decision in the case of St. Martin Funeral Homes vs. National Labor
Relations Commission, G.R. No. 130866, promulgated on September 16, 1998, this Court
pronounced that petitions for certiorari relating to NLRC decisions must be filed directly
with the Court of Appeals, and labor cases pending before this Court should be referred
to the appellate court for proper disposition. However, in cases where the Memoranda
of both parties have been filed with this Court prior to the promulgation of the St.
Martin decision, the Court generally opts to take the case itself for its final disposition. [8]
and considering that the parties have filed their respective memoranda as of
1994, we opt to resolve the issues raised in the present petition.

The parties raised the following issues:

1. Whether the respondent NLRC committed grave abuse of discretion in
ordering the reinstatement of petitioners to their former position as meter readers on
probationary status in spite of its finding that they are regular employees under Article
280 of the Labor Code.

2. Whether the respondent NLRC committed grave abuse of discretion in limiting the
backwages of petitioners to one year only in spite of its finding that they were illegally
dismissed, which is contrary to the mandate of full backwages until actual reinstatement
but not to exceed three years.

3. Whether the respondent NLRC committed grave abuse of discretion in deleting the
award of indemnity pay which had become final because it was not appealed and in
deleting the award of attorney’s fees because of the absence of a trial-type hearing.
4. Whether the mandate of immediately executory on the reinstatement aspect even
pending appeal as provided in the decision of Labor Arbiters equally applies in the
decision of the National Labor Relations Commission even pending appeal, by means of
a motion for reconsideration of the order reinstating a dismissed employee or pending
appeal because the case is elevated on certiorari before the Supreme Court. [9]
We find the petition partly meritorious.

As to the first issue: We sustain petitioners’ claim that they should be reinstated to their
former position as meter readers, not on a probationary status, but as regular
employees.

Reinstatement means restoration to a state or condition from which one had been
removed or separated.[10] In case of probationary employment, Article 281 of the Labor
Code requires the employer to make known to his employee at the time of the latter’s
engagement of the reasonable standards under which he may qualify as a regular
employee.

A review of the records shows that petitioners have never been probationary
employees. There is nothing in the letter of appointment, to indicate that their
employment as meter readers was on a probationary basis. It was not shown that
petitioners were informed by the private respondent, at the time of the latter’s
employment, of the reasonable standards under which they could qualify as regular
employees. Instead, petitioners were initially engaged to perform their job for a limited
duration, their employment being fixed for a definite period, from October 8 to 31,
1990.

Private respondent’s reliance on the case of Brent School, Inc. vs. Zamora,[11] wherein we
held as follows:
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have been,
as already observed, to prevent circumvention of the employee’s right to be secure in
his tenure, the clause in said article indiscriminately and completely ruling out all written
or oral agreements conflicting with the concept of regular employment as defined
therein should be construed to refer to the substantive evil that the Code itself has
singled out: agreements entered into precisely to circumvent security of tenure. It
should have no application to instances where a fixed period of employment was agreed
upon knowingly and voluntarily 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, or where 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 over the latter.[12]
is misplaced.

The principle we have enunciated in Brent applies only with respect to fixed term
employments. While it is true that petitioners were initially employed on a fixed term
basis as their employment contracts were only for October 8 to 31, 1990, after October
31, 1990, they were allowed to continue working in the same capacity as meter readers
without the benefit of a new contract or agreement or without the term of their
employment being fixed anew. After October 31, 1990, the employment of petitioners is
no longer on a fixed term basis. The complexion of the employment relationship of
petitioners and private respondent is thereby totally changed. Petitioners have attained
the status of regular employees.

Under Article 280 of the Labor Code, a regular employee is one who is engaged to
perform activities which are necessary or desirable in the usual business or trade of the
employer, or a casual employee who has rendered at least one year of service, whether
continuous or broken, with respect to the activity in which he is employed.

In De Leon vs. NLRC,[13] and Abasolo vs. NLRC,[14] we laid down the test in determining
regular employment, to wit:
The primary standard, therefore, of determining regular employment is the
reasonable connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer. The test is whether the former is
usually necessary or desirable in the usual business or trade of the employer. The
connection can be determined by considering the nature of the work performed and its
relation to the scheme of the particular business or trade in its entirety. Also if the
employee has been performing the job for at least a year, even if the performance is not
continuous and merely intermittent, the law deems repeated and continuing need for
its performance as sufficient evidence of the necessity if not indispensability of that
activity to the business. Hence, the employment is considered regular, but only with
respect to such activity and while such activity exists. [15]
Clearly therefrom, there are two separate instances whereby it can be
determined that an employment is regular: (1) The particular activity performed by the
employee is necessary or desirable in the usual business or trade of the employer; or (2)
if the employee has been performing the job for at least a year.

Herein petitioners fall under the first category. They were engaged to perform activities
that are necessary to the usual business of private respondent. We agree with the labor
arbiter’s pronouncement that the job of a meter reader is necessary to the business of
private respondent because unless a meter reader records the electric consumption of
the subscribing public, there could not be a valid basis for billing the customers of
private respondent. The fact that the petitioners were allowed to continue working after
the expiration of their employment contract is evidence of the necessity and desirability
of their service to private respondent’s business. In addition, during the preliminary
hearing of the case on February 4, 1991, private respondent even offered to enter into
another temporary employment contract with petitioners. This only proves private
respondent’s need for the services of herein petitioners. With the continuation of their
employment beyond the original term, petitioners have become full-fledged regular
employees. The fact alone that petitioners have rendered service for a period of less
than six months does not make their employment status as probationary.

Since petitioners are already regular employees at the time of their illegal dismissal from
employment, they are entitled to be reinstated to their former position as regular
employees, not merely probationary.

As to the second issue, Article 279 of the Labor Code, as amended by R.A. No. 6715,
which took effect on March 21, 1989, provides that an illegally dismissed employee is
entitled to 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. Since petitioners were employed on October
8, 1990, the amended provisions of Article 279 of the Labor Code shall apply to the
present case. Hence, it was patently erroneous, tantamount to grave abuse of discretion
on the part of the public respondent in limiting to one year the backwages awarded to
petitioners.

With respect to the third issue, an employer becomes liable to pay indemnity to an
employee who has been dismissed if, in effecting such dismissal, the employer fails to
comply with the requirements of due process.[16] The indemnity is in the form of nominal
damages intended not to penalize the employer but to vindicate or recognize the
employee’s right to procedural due process which was violated by the employer.
[17]
 Under Article 2221 of the Civil Code, nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any
loss suffered by him.

We do not agree with the ruling of the NLRC that indemnity is incompatible with the
award of backwages. These two awards are based on different considerations.
Backwages are granted on grounds of equity to workers for earnings lost due to their
illegal dismissal from work.[18] On the other hand, the award of indemnity, as we have
earlier held, is meant to vindicate or recognize the right of an employee to due process
which has been violated by the employer.

In the present case, the private respondent, in effecting the dismissal of petitioners from
their employment, failed to comply with the provisions of Article 283 of the Labor Code
which requires an employer to serve a notice of dismissal upon the employees sought to
be terminated and to the Department of Labor, at least one month before the intended
date of termination. Petitioners were served notice on January 3, 1991 terminating their
services, effective December 29, 1990, or retroactively, in contravention of Article 283.
This renders the private respondent liable to pay indemnity to petitioners.

Thus, we find that the NLRC committed grave abuse of discretion in deleting the award
of indemnity. In Del Val vs. NLRC,[19] we held that the award of indemnity ranges from
P1,000.00 to P10,000.00 depending on the particular circumstances of each case. In the
present case, the amount of indemnity awarded by the labor arbiter is P2,590.50, which
is equivalent to petitioners’ one-month salary. We find no cogent reason to modify said
award, for being just and reasonable.

As to the award of attorney’s fees, the same is justified by the provisions of Article 111
of the Labor Code, to wit:
Art. 111. Attorney’s fees – (a) In cases of unlawful withholding of wages the
culpable party may be assessed attorney’s fees equivalent to ten percent of the amount
of wages recovered.

(b) It shall be unlawful for any person to demand or accept, in any judicial or
administrative proceedings for the recovery of the wages, attorney’s fees which exceed
ten percent of the amount of wages recovered.
 As to the last issue, Article 223 of the Labor Code is plain and clear that the
decision of the NLRC shall be final and executory after ten (10) calendar days from
receipt thereof by the parties. In addition, Section 2(b), Rule VIII of the New Rules of
Procedure of the NLRC provides that “should there be a motion for reconsideration
entertained pursuant to Section 14, Rule VII of these Rules, the decision shall be
executory after ten calendar days from receipt of the resolution on such motion.”

We find nothing inconsistent or contradictory between Article 223 of the Labor Code
and Section 2(b), Rule VIII, of the NLRC Rules of Procedure. The aforecited provision of
the NLRC Rules of Procedure merely provides for situations where a motion for
reconsideration is filed. Since the Rules allow the filing of a motion for reconsideration
of a decision of the NLRC, it simply follows that the ten-day period provided under
Article 223 of the Labor Code should be reckoned from the date of receipt by the parties
of the resolution on such motion. In the case at bar, petitioners received the resolution
of the NLRC denying their motion for reconsideration on October 22, 1992. Hence, it is
on November 2, 1992 that the questioned decision became executory.

WHEREFORE, the petition is partially GRANTED. The decision of the National Labor
Relations Commission dated July 2, 1992 is MODIFIED. Private respondent Benguet
Electric Cooperative, Inc. (BENECO) is hereby ordered to reinstate petitioners to their
former or substantially equivalent position as regular employees, without loss of
seniority rights and other privileges appurtenant thereto, with full backwages from the
time of their dismissal until they are actually reinstated. The amount of P2,590.50
awarded by the labor arbiter as indemnity to petitioners is REINSTATED. Private
respondent is also ordered to pay attorney’s fees in the amount of ten percent (10%) of
the total monetary award due to the petitioners. In all other respects the assailed
decision and resolution are AFFIRMED.

Costs against private respondent BENECO.

SO ORDERED.

SPECIAL FIRST DIVISION

[ G.R. No. 110524, July 29, 2002 ]
DOUGLAS MILLARES AND ROGELIO LAGDA, PETITIONERS, VS.
NATIONAL LABOR RELATIONS COMMISSION, TRANS-GLOBAL
MARITIME AGENCY, INC. AND ESSO INTERNATIONAL SHIPPING CO.,
LTD. RESPONDENTS.

RESOLUTION

KAPUNAN, J.:

On March 14, 2000, the Court promulgated its decision in the above-entitled
case, ruling in favor of the petitioners. The dispositive portion reads, as follows:

WHEREFORE, premises considered, the assailed Decision, dated June 1, 1993, of the

National Labor Relations Commission is hereby REVERSED and SET ASIDE and a
new judgment is hereby rendered ordering the private respondents to:

(1) Reinstate petitioners Millares and Lagda to their former positions without loss of
seniority rights, and to pay full backwages computed from the time of illegal dismissal to
the time of actual reinstatement;

(2) Alternatively, if reinstatement is not possible, pay petitioners Millares and Lagda
separation pay equivalent to one month’s salary for every year of service; and,

(3) Jointly and severally pay petitioners One Hundred Percent (100%) of their total
credited contributions as provided under the Consecutive Enlistment Incentive Plan.

SO ORDERED.[1]

A motion for reconsideration was consequently filed[2] by the private respondents to

which petitioners filed an Opposition thereto.[3]

In a Minute Resolution dated June 28, 2000, the Court resolved to deny the motion for
reconsideration with finality.[4]

Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME) filed a
Motion for Leave to Intervene and to Admit a Motion for Reconsideration in
Intervention.

Private respondents, meanwhile, also filed a Motion for Leave to File a Second Motion
for Reconsideration of our decision.

In both motions, the private respondents and FAME respectively pray in the main that the
Court reconsider its ruling that “Filipino seafarers are considered regular employees
within the context of Article 280 of the Labor Code.” They claim that the decision may
establish a precedent that will adversely affect the maritime industry.

The Court resolved to set the case for oral arguments to enable the parties to present their
sides.

To recall, the facts of the case are, as follows:

Petitioner Douglas Millares was employed by private respondent ESSO International

Shipping Company LTD. (Esso International, for brevity) through its local manning
agency, private respondent Trans-Global Maritime Agency, Inc. (Trans-Global, for
brevity) on November 16, 1968 as a machinist. In 1975, he was promoted as Chief
Engineer which position he occupied until he opted to retire in 1989. He was then
receiving a monthly salary of US $1,939.00.

On June 13, 1989, petitioner Millares applied for a leave of absence for the period July 9
to August 7, 1989. In a letter dated June 14, 1989, Michael J. Estaniel, President of
private respondent Trans-Global, approved the request for leave of absence. On June 21,
1989, petitioner Millares wrote G.S. Hanly, Operations Manager of Exxon International
Co., (now Esso International) through Michael J. Estaniel, informing him of his intention
to avail of the optional retirement plan under the Consecutive Enlistment Incentive Plan
(CEIP) considering that he had already rendered more than twenty (20) years of
continuous service. On July 13, 1989 respondent Esso International, through W.J. Vrints,
Employee Relations Manager, denied petitioner Millares’ request for optional retirement
on the following grounds, to wit: (1) he was employed on a contractual basis; (2) his
contract of enlistment (COE) did not provide for retirement before the age of sixty (60)
years; and (3) he did not comply with the requirement for claiming benefits under the
CEIP, i.e., to submit a written advice to the company of his intention to terminate his
employment within thirty (30) days from his last disembarkation date.

On August 9, 1989, petitioner Millares requested for an extension of his leave of absence
from August 9 to 24, 1989. On August 19, 1989, Roy C. Palomar, Crewing Manager,
Ship Group A, Trans-global, wrote petitioner Millares advising him that respondent Esso
International “has corrected the deficiency in its manpower requirement specifically in
the Chief Engineer rank by promoting a First Assistant Engineer to this position as a
result of (his) previous leave of absence which expired last August 8, 1989. The
adjustment in said rank was required in order to meet manpower schedules as a result of
(his) inability.”

On September 26, 1989, respondent Esso International, through H. Regenboog, Personnel

Administrator, advised petitioner Millares that in view of his absence without leave,
which is equivalent to abandonment of his position, he had been dropped from the roster
of crew members effective September 1, 1989.
On the other hand, petitioner Lagda was employed by private respondent Esso
International as wiper/oiler in June 1969. He was promoted as Chief Engineer in 1980, a
position he continued to occupy until his last COE expired on April 10, 1989. He was
then receiving a monthly salary of US$1,939.00.

On May 16, 1989, petitioner Lagda applied for a leave of absence from June 19, 1989 up
to the whole month of August 1989. On June 14, 1989, respondent Trans-Global’s
President, Michael J. Estaniel, approved petitioner Lagda’s leave of absence from June
22, 1989 to July 20, 1989 and advised him to report for re-assignment on July 21, 1989.

On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley, Operations Manager of
respondent Esso International, through respondent Trans-Global’s President Michael J.
Estaniel, informing him of his intention to avail of the optional early retirement plan in
view of his twenty (20) years continuous service in the complaint.

On July 13, 1989, respondent Trans-global denied petitioner Lagda’s request for
availment of the optional early retirement scheme on the same grounds upon which
petitioner Millares request was denied.

On August 3, 1989, he requested for an extension of his leave of absence up to August

26, 1989 and the same was approved. However, on September 27, 1989, respondent Esso
International, through H. Regenboog, Personnel Administrator, advised petitioner Lagda
that in view of his “unavailability for contractual sea service,” he had been dropped from
the roster of crew members effective September 1, 1989.

On October 5, 1989, petitioners Millares and Lagda filed a complaint-affidavit, docketed

as POEA (M) 89-10-9671, for illegal dismissal and non-payment of employee benefits
against private respondents Esso International and Trans-Global, before the POEA. [5]

On July 17, 1991, the POEA rendered a decision dismissing the complaint for lack of
merit.

On appeal to the NLRC, the decision of the POEA was affirmed on June 1, 1993 with the
following disquisition:

The first issue must be decided in the negative. Complainants-appellants, as seamen and
overseas contract workers are not covered by the term “regular employment” as defined
under Article 280 of the Labor Code. The POEA, which is tasked with protecting the
rights of the Filipino workers for overseas employment to fair and equitable recruitment
and employment practices and to ensure their welfare, prescribes a standard employment
contract for seamen on board ocean-going vessels for a fixed period but in no case to
exceed twelve (12) months (Part 1, Sec. C). This POEA policy appears to be in
consonance with the international maritime practice. Moreover, the Supreme Court
in Brent School, Inc. vs. Zamora, 181 SCRA 702, had held that a fixed term is essential
and natural appurtenance of overseas employment contracts to which the concept of
regular employment with all that it implies is not applicable, Article 280 of the Labor
Code notwithstanding. There is, therefore, no reason to disturb the POEA Administrator’s
finding that complainants-appellants were hired on a contractual basis and for a definite
period. Their employment is thus governed by the contracts they sign each time they are
re-hired and is terminated at the expiration of the contract period.[6]

Undaunted, the petitioners elevated their case to this Court [7] and successfully obtained
the favorable action, which is now vehemently being assailed.

At the hearing on November 15, 2000, the Court defined the issues for resolution in this
case, namely:

I. ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE

EMPLOYMENTS ARE TERMINATED EVERYTIME THEIR CONTRACTS OF
EMPLOYMENT EXPIRE?

II. ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE THEY

DISMISSED WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO
REINSTATEMENT AND BACKWAGES, INCLUDING PAYMENT OF 100% OF
THEIR TOTAL CREDITED CONTRIBUTIONS TO THE CONSECUTIVE
ENLISTMENT INCENTIVE PLAN (CEIP)?

III. DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR

SEAFARERS ON BOARD FOREIGN VESSELS (SEC. C., DURATION OF
CONTRACT) PRECLUDE THE ATTAINMENT BY SEAMEN OF THE STATUS OF
REGULAR EMPLOYEES?

IV. DOES THE DECISION OF THE COURT IN G.R. NO. 110524 CONTRAVENE

INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE LAW OF THE
LAND UNDER SECTION 2, ARTICLE II OF THE CONSTITUTION?

V. DOES THE SAME DECISION OF THE COURT CONSTITUTE A DEPARTURE

FROM ITS RULING IN COYOCA VS. NLRC (G.R. NO. 113658, March 31, 1995)? [8]

In answer to the private respondents’ Second Motion for Reconsideration and to FAME’s
Motion for Reconsideration in Intervention, petitioners maintain that they are regular
employees as found by the Court in the March 14, 2000 Decision. Considering that
petitioners performed activities which are usually necessary or desirable in the usual
business or trade of private respondents, they should be considered as regular employees
pursuant to Article 280, Par. 1 of the Labor Code.[9] Other justifications for this ruling
include the fact that petitioners have rendered over twenty (20) years of service, as
admitted by the private respondents;[10] that they were recipients of Merit Pay which is an
express acknowledgment by the private respondents that petitioners are regular and not
just contractual employees;[11] that petitioners were registered under the Social Security
System (SSS).

The petitioners further state that the case of Coyoca v. NLRC[12] which the private
respondents invoke is not applicable to the case at bar as the factual milieu in that case is
not the same. Furthermore, private respondents’ fear that our judicial pronouncement will
spell the death of the manning industry is far from real. Instead, with the valuable
contribution of the manning industry to our economy, these seafarers are supposed to be
considered as “Heroes of the Republic” whose rights must be protected. [13] Finally, the
first motion for reconsideration has already been denied with finality by this Court and it
is about time that the Court should write finis to this case.

The private respondents, on the other hand, contend that: (a) the ruling holding
petitioners as regular employees was not in accord with the decision in Coyoca v.
NLRC, 243 SCRA 190; (b) Art. 280 is not applicable as what applies is the POEA Rules
and Regulations Governing Overseas Employment; (c) seafarers are not regular
employees based on international maritime practice; (d) grave consequences would result
on the future of seafarers and manning agencies if the ruling is not reconsidered; (e) there
was no dismissal committed; (f) a dismissed seafarer is not entitled to back wages and
reinstatement, that being not allowed under the POEA rules and the Migrant Workers
Act; and, (g) petitioners are not entitled to claim the total amount credited to their account
under the CEIP.[14]

Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME) avers that

our decision, if not reconsidered, will have negative consequences in the employment of
Filipino Seafarers overseas which, in turn, might lead to the demise of the manning
industry in the Philippines. As intervenor FAME puts it:

xxx

7.1 Foreign principals will start looking for alternative sources for seafarers to man their
ships. AS reported by the BIMCO/ISF study, “there is an expectancy that there will be an
increasing demand for (and supply of) Chinese seafarers, with some commentators
suggesting that this may be a long-term alternative to the Philippines.” Moreover, “the
political changes within the former Eastern Bloc have made new sources of supply
available to the international market.” Intervenor’s recent survey among its members
shows that 50 Philippine manning companies had already lost some 6,300 slots to other
Asian, East Europe and Chinese competition for the last two years;

7.2 The Philippine stands to lose an annual foreign income estimated at U.S. DOLLARS
TWO HUNDRED SEVENTY FOUR MILLION FIVE HUNDRED FORTY NINE
THOUSAND (US$ 274,549,000.00) from the manning industry and another US
DOLLARS FOUR BILLION SIX HUNDRED FIFTY MILLION SEVEN HUNDRED
SIX THOUSAND (US$ 4,650,760,000.00) from the land-based sector if seafarers and
equally situated land-based contract workers will be declared regular employees;

7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers will be rendered
jobless should we lose the market;

7.4 Some 360 manning agencies (as of 30 June 2000) whose principals may no longer be
doing business with them will close their shops;

7.5 The contribution to the Overseas Worker’s Welfare Administration by the sector,
which is USD 25.00 per contract and translates to US DOLLARS FOUR MILLION (US$
4,000,000.00)annually, will be drastically reduced. This is not to mention the processing
fees paid to POEA, Philippine Regulatory Commission (PRC), Department of Foreign
Affairs (DFA) and Maritime Industry Authority (MARINA) for the documentation of
these seafarers;

7.6 Worst, some 195,917 (as of 1998) families will suffer socially and economically, as
their breadwinners will be rendered jobless; and

7.7 It will considerably slow down the government’s program of employment generation,
considering that, as expected foreign employers will now avoid hiring Filipino overseas
contract workers as they will become regular employees with all its concomitant effects.
[15]

Significantly, the Office of the Solicitor General, in a departure from its original position
in this case, has now taken the opposite view. It has expressed its apprehension in
sustaining our decision and has called for a re-examination of our ruling.[16]

Considering all the arguments presented by the private respondents, the Intervenor
FAME and the OSG, we agree that there is a need to reconsider our position with respect
to the status of seafarers which we considered as regular employees under Article 280 of
the Labor Code. We, therefore, partially grant the second motion for reconsideration.

In Brent School Inc. v. Zamora,[17] the Supreme Court stated that Article 280 of the Labor
Code does not apply to overseas employment.

In the light of the foregoing description of the development of the provisions of the Labor
Code bearing on term or fixed-period employment that the question posed in the opening
paragraph of this opinion should now be addressed. Is it then the legislative intention to
outlaw stipulations in employment contracts laying down a definite period therefor? Are
such stipulations in essence contrary to public policy and should not on this account be
accorded legitimacy?

On the other hand, there is the gradual and progressive elimination of references to term
or fixed-period employment in the Labor Code, and the specific statement of the rule
that:

Regular and Casual Employment – The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall
be deemed to be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer
except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of
the employee or where the work or service to be employee is seasonal in nature and the
employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph; provided that, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists.

There is, on the other hand, the Civil Code, which has always recognized, and continues
to recognize, the validity and propriety of contracts and obligations with a fixed or
definite period, and imposes no restraints on the freedom of the parties to fix the duration
of a contract, whatever its object, be it specific, goods or services, except the general
admonition against stipulations contrary to law, morals, good customs, public order or
public policy. Under the Civil code, therefore, and as a general proposition, fixed-term
employment contracts are not limited, as they are under the present Labor Code, to those
by natural seasonal or for specific projects with predetermined dates of completion; they
also include those to which the parties by free choice have assigned a specific date of
termination.

Some familiar examples may be cited of employment contract which may be neither
for seasonal work nor for specific projects, but to which a fixed term is an essential
and natural appurtenance: overseas employment contracts, for one, to which,
whatever the nature of the engagement, the concept of regular employment with all
that it implies does not appear ever to have been applied. Article 280 of the Labor
Code notwithstanding also appointments to the positions of dean, assistant dean, college
secretary, principal, and other administrative offices in educational institutions, which are
by practice or tradition rotated among the faculty members, and where fixed terms are a
necessity without which no reasonable rotation would be possible. Similarly, despite the
provisions of Article 280, Policy Instructions. No. 8 of the Minister of Labor implicitly
recognize that certain company officials may be elected for what would amount to fix
periods, at the expiration of which they would have to stand down, in providing that these
officials, xxx may lose their jobs as president, executive vice-president or vice-president,
etc. because the stockholders or the board of directors for one reason or another did not
reelect them.

There can of course be no quarrel with the proposition that where from the circumstances
it is apparent that periods have been imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or disregard as contrary to public policy,
morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise,
where the reason for the law does not exists, e.g., where it is indeed the employee himself
who insists upon a period or where the nature of the engagement is such that, without
being seasonal or for a specific project, a definite date of termination is a sine qua non,
would an agreement fixing a period be essentially evil or illicit, therefore anathema?
Would such an agreement come within the scope of Article 280 which admittedly was
enacted “to prevent the circumvention of the right of the employee to be secured in xxx
his employment

As it is evident from even only the three examples already given that Article 280 of the
Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut
of employment contracts to which the lack of a fixed period would be an anomaly, but
would also appear to restrict, without reasonable distinctions, the right of an employee to
freely stipulate within his employer the duration of his engagement, it logically follows
that such a literal interpretation should be eschewed or avoided. The law must be given a
reasonable interpretation, to preclude absurdity in its application. Outlawing the whole
concept of term employment and subverting to boot the principle of freedom of contract
to remedy the evil of employer’s using it as a means to prevent their employees from
obtaining security of tenure is like cutting off the nose to spite the face or, more
relevantly, curing a headache by lopping of the head.

It is a salutary principle in statutory construction that there exists a valid presumption that
undesirable consequences were never intended by a legislative measure, and that a
construction of which the statute is fairly susceptible is favored, which will avoid all
objectionable, mischievous, indefensible, wrongful, evil, and injurious consequences.”

Nothing is better settled than that courts are not to give words a meaning which would
lead to absurd or unreasonable consequences. That is a principle that goes back to In re
Allen decided on October 27, 1902, where it was held that a literal interpretation is to be
rejected if it would be unjust or lead to absurd results. That is a strong argument against
its adoption. The words of Justice Laurel are particularly apt. Thus: “the appellants would
lead to an absurdity is another argument for rejecting it.”
Xxx We have, here, then a case where the true intent of the law is clear that calls for the
application of the cardinal rule of statutory construction that such intent of spirit must
prevail over the letter thereof, for whatever is within the spirit of a statute is within the
statute, since adherence to the letter would result in absurdity, injustice and contradictions
and would defeat the plain and vital purpose of the statute.

Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor code clearly appears to have
been, as already observed, to prevent circumvention of the employee’s right to be
secure in his tenure, the clause in said article indiscriminately and completely ruling
out all written or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to the substantive evil
that the Code itself has singled out; agreements entered into precisely to circumvent
security of tenure. It should have no application to instances where a fixed period of
employment was agreed upon knowingly and voluntarily 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, or where 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 over the
latter. Unless thus limited in its purview, the law would be made to apply to purposes
other than those explicitly stated by its framers; it thus becomes pointless and arbitrary,
unjust in its effects and apt to lead to absurd and unintended consequences.

Again, in Pablo Coyoca v. NLRC,[18] the Court also held that a seafarer is not a regular
employee and is not entitled to separation pay. His employment is governed by the POEA
Standard Employment Contract for Filipino Seamen.

XXX. In this connection, it is important to note that neither does the POEA standard
employment contract for Filipino seamen provide for such benefits.

As a Filipino seaman, petitioner is governed by the Rules and Regulations

Governing Overseas Employment and the said Rules do not provide for separation
or termination pay. What is embodied in petitioner’s contract is the payment of
compensation arising from permanent partial disability during the period of employment.
We find that private respondent complied with the terms of contract when it paid
petitioner P42,315.00 which, in our opinion, is a reasonable amount, as compensation for
his illness.

Lastly, petitioner claims that he eventually became a regular employee of private

respondent and thus falls within the purview of Articles 284 and 95 of the Labor Code. In
support of this contention, petitioner cites the case of Worth Shipping Service, Inc., et al.
v. NLRC, et al., wherein we held that the crew members of the shipping company had
attained regular status and thus, were entitled to separation pay. However, the facts of
said case differ from the present. In Worth, we held that the principal and agent had
“operational control and management” over the MV Orient Carrier and thus, were the
actual employers of their crew members.

From the foregoing cases, it is clear that seafarers are considered contractual employees.
They can not be considered as regular employees under Article 280 of the Labor Code.
Their employment is governed by the contracts they sign everytime they are rehired and
their employment is terminated when the contract expires. Their employment is
contractually fixed for a certain period of time. They fall under the exception of Article
280 whose employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of engagement of the
employee or where the work or services to be performed is seasonal in nature and the
employment is for the duration of the season.[19] We need not depart from the rulings of
the Court in the two aforementioned cases which indeed constitute stare decisis with
respect to the employment status of seafarers.

Petitioners insist that they should be considered regular employees, since they have
rendered services which are usually necessary and desirable to the business of their
employer, and that they have rendered more than twenty(20) years of service. While this
may be true, the Brent case has, however, held that there are certain forms of employment
which also require the performance of usual and desirable functions and which exceed
one year but do not necessarily attain regular employment status under Article 280.
[20]
 Overseas workers including seafarers fall under this type of employment which are
governed by the mutual agreements of the parties.

In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed
by the Rules and Regulations of the POEA. The Standard Employment Contract
governing the employment of All Filipino seamen on Board Ocean-Going Vessels of the
POEA, particularly in Part I, Sec. C specifically provides that the contract of seamen
shall be for a fixed period. And in no case should the contract of seamen be longer than
12 months. It reads:

Section C. Duration of Contract

The period of employment shall be for a fixed period but in no case to exceed 12

months and shall be stated in the Crew Contract. Any extension of the Contract period
shall be subject to the mutual consent of the parties.

Moreover, it is an accepted maritime industry practice that employment of seafarers are

for a fixed period only. Constrained by the nature of their employment which is quite
peculiar and unique in itself, it is for the mutual interest of both the seafarer and the
employer why the employment status must be contractual only or for a certain period of
time. Seafarers spend most of their time at sea and understandably, they can not stay for a
long and an indefinite period of time at sea.[21] Limited access to shore society during the
employment will have an adverse impact on the seafarer. The national, cultural and
lingual diversity among the crew during the COE is a reality that necessitates the
limitation of its period.[22]

Petitioners make much of the fact that they have been continually re-hired or their
contracts renewed before the contracts expired (which has admittedly been going on for
twenty (20) years). By such circumstance they claim to have acquired regular status with
all the rights and benefits appurtenant to it.

Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was

dictated by practical considerations that experienced crew members are more preferred.
Petitioners were only given priority or preference because of their experience and
qualifications but this does not detract the fact that herein petitioners are contractual
employees. They can not be considered regular employees. We quote with favor the
explanation of the NLRC in this wise:

Xxx The reference to “permanent” and “probationary” masters and employees in these
papers is a misnomer and does not alter the fact that the contracts for enlistment between
complainants-appellants and respondent-appellee Esso International were for a definite
periods of time, ranging from 8 to 12 months. Although the use of the terms “permanent”
and “probationary” is unfortunate, what is really meant is “eligible for-re-hire”. This is
the only logical conclusion possible because the parties cannot and should not violate
POEA’s requirement that a contract of enlistment shall be for a limited period only; not
exceeding twelve (12)months.[23]

From all the foregoing, we hereby state that petitioners are not considered regular or
permanent employees under Article 280 of the Labor Code. Petitioners’ employment
have automatically ceased upon the expiration of their contracts of enlistment (COE).
Since there was no dismissal to speak of, it follows that petitioners are not entitled to
reinstatement or payment of separation pay or backwages, as provided by law.

With respect to the benefits under the Consecutive Enlistment Incentive Plan (CEIP), we
hold that the petitioners are still entitled to receive 100% of the total amount credited to
him under the CEIP. Considering that we have declared that petitioners are contractual
employees, their compensation and benefits are covered by the contracts they signed and
the CEIP is part and parcel of the contract.

The CEIP was formulated to entice seamen to stay long in the company. As the name
implies, the program serves as an incentive for the employees to renew their contracts
with the same company for as long as their services were needed. For those who
remained loyal to them, they were duly rewarded with this additional remuneration under
the CEIP, if eligible. While this is an act of benevolence on the part of the employer, it
can not, however, be denied that this is part of the benefits accorded to the employees for
services rendered. Such right to the benefits is vested upon them upon their eligibility to
the program.

The CEIP provides that an employee becomes covered under the Plan when he completes
thirty-six (36) months or an equivalent of three (3) years of credited service with respect
to employment after June 30, 1973.[24] Upon eligibility, an amount shall be credited to his
account as it provides, among others:

III. Distribution of Benefits

A. Retirement, Death and Disability

When the employment of an employee terminates because of his retirement, death or

permanent and total disability, a percentage of the total amount credited to his account
will be distributed to him (or his eligible survivor(s) in accordance with the following:

Reason for Termination Percentage  

a) Attainment of 100%
mandatory retirement age  
of 60.
b) Permanent and 100%
total disability, while under
 
contract, that is not due to
accident or misconduct.
c) Permanent and 100%
total disability, while under
contract, that is due to  
accident, and not due to
misconduct.

xxx

B. Voluntary Termination

When an employee voluntary terminates his employment with at least 36 months of

credited service without any misconduct on his part, 18 percent of the total amount
credited to his account, plus an additional ½ of one percent for each month (up to a
maximum of 164 months of credited service in excess of 36, will be distributed to him
provided (1) the employee has completed his last Contract of Enlistment and (2)
employee advises the company in writing, within 30 days, from his last disembarkation
date, of his intention to terminate his employment. (To advise the Company in writing
means that the original letter must be sent to the Company’s agent in the Philippines, a
copy sent to the Company in New York).

xxx

C. Other Terminations

When the employment of an employee is terminated by the Company for a reason other
than one in A and B above, without any misconduct on his part, a percentage of the total
amount credited to his account will be distributed to him in accordance with the
following.

Credited Percentag
   
Service e
36 50%
   
months
48 “ 75%    
60 “ 100%    

When the employment of an employee is terminated due to his poor-performance,

misconduct, unavailability, etc., or if employee is not offered re-engagement for similar
reasons, no distribution of any portion of employee’s account will ever be made to him
(or his eligible survivor[s]).

It must be recalled that on June 21, 1989, Millares wrote a letter to his employer
informing his intention to avail of the optional retirement plan under the CEIP
considering that he has rendered more than twenty (20) years of continuous service.
Lagda, likewise, manifested the same intention in a letter dated June 26, 1989. Private
respondent, however, denied their requests for benefits under the CEIP since: (1) the
contract of enlistment (COE) did not provide for retirement before 60 years of age; and
that (2) petitioners failed to submit a written notice of their intention to terminate their
employment within thirty (30) days from the last disembarkation date pursuant to the
provision on Voluntary Termination of the CEIP. Petitioners were eventually dropped
from the roster of crew members and on grounds of “abandonment” and “unavailability
for contractual sea service”, respectively, they were disqualified from receiving any
benefits under the CEIP.[25]

In our March 14, 2000 Decision, we, however, found that petitioners Millares and Lagda
were not guilty of “abandonment” or “unavailability for contractual sea service,” as we
have stated:
The absence of petitioners was justified by the fact that they secured the approval of
private respondents to take a leave of absence after the termination of their last contracts
of enlistment. Subsequently, petitioners sought for extensions of their respective leaves of
absence. Granting arguendo that their subsequent requests for extensions were not
approved, it cannot be said that petitioners were unavailable or had abandoned their work
when they failed to report back for assignment as they were still questioning the denial of
private respondents of their desire to avail of the optional early retirement policy, which
they believed in good faith to exist.[26]

Neither can we consider petitioners guilty of poor performance or misconduct since they
were recipients of Merit Pay Awards for their exemplary performances in the company.

Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for Lagda) which
private respondent considered as belated written notices of termination, we find such
assertion specious. Notwithstanding, we could conveniently consider the petitioners
eligible under Section III-B of the CEIP (Voluntary Termination), but this would,
however, award them only a measly amount of benefits which to our mind, the petitioners
do not rightfully deserve under the facts and circumstances of the case. As the CEIP
provides:

III. Distribution of Benefits

xxx

E. Distribution of Accounts

When an employee terminates under conditions that would qualify for a distribution of
more than one specified in A, B or C above, the largest single amount, only, will be
distributed.

Since petitioners’ termination of employment under the CEIP do not fall under Section
III-A (Retirement, Death and Disability) or Section III-B (Voluntary Termination), nor
could they be considered under the second paragraph of Section III-C, as earlier
discussed; it follows that their termination falls under the first paragraph of Section III-C
for which they are entitled to 100% of the total amount credited to their accounts. The
private respondents can not now renege on their commitment under the CEIP to reward
deserving and loyal employees as the petitioners in this case.

In taking cognizance of private respondent’s Second Motion for Reconsideration, the

Court hereby suspends the rules to make them conformable to law and justice and to
subserve an overriding public interest.
IN VIEW OF THE FOREGOING, the court Resolved to Partially GRANT Private
Respondent’s Second Motion for Reconsideration and Intervenor FAMES’ Motion for
Reconsideration in Intervention. The Decision of the National Labor Relations
Commission dated June 1, 1993 is hereby REINSTATED with MODIFICATION. The
Private Respondents, Trans-Global Maritime Agency, Inc. and Esso International
Shipping Co.,Ltd. are hereby jointly and severally ORDERED to pay petitioners One
Hundred Percent (100%) of their total credited contributions as provided under the
Consecutive Enlistment Incentive Plan(CEIP).

SO ORDERED.

SECOND DIVISION
[ G.R. No. 186439, January 15, 2014 ]
UNIVERSAL ROBINA SUGAR MILLING CORPORATION AND RENE
CABATI, PETITIONERS, VS. FERDINAND ACIBO, ROBERTO AGUILAR,
EDDIE BALDOZA, RENE ABELLAR, DIOMEDES ALICOS, MIGUEL
ALICOS, ROGELIO AMAHIT, LARRY AMASCO, FELIPE BALANSAG,
ROMEO BALANSAG, MANUEL BANGOT, ANDY BANJAO, DIONISIO
BENDIJO, JR., JOVENTINO BROCE, ENRICO LITERAL, RODGER
RAMIREZ, BIENVENIDO RODRIGUEZ, DIOCITO PALAGTIW, ERNIE
SABLAN, RICHARD PANCHO, RODRIGO ESTRABELA, DANNY
KADUSALE AND ALLYROBYL OLPUS, RESPONDENTS.

DECISION

BRION, J.:

We resolve in this petition for review on certiorari[1] the challenge to the

November 29, 2007 decision[2] and the January 22, 2009 resolution[3] of the Court of
Appeals (CA) in CA-G.R. CEB-SP No. 02028. This CA decision affirmed with modification
the July 22, 2005 decision[4] and the April 28, 2006 resolution[5] of the National Labor
Relations Commission (NLRC) in NLRC Case No. V-00006-03 which, in turn, reversed the
October 9, 2002 decision[6] of the Labor Arbiter (LA).   The LA’s decision dismissed the
complaint filed by complainants Ferdinand Acibo, et al.[7] against petitioners Universal
Robina Sugar Milling Corporation (URSUMCO) and Rene Cabati.

The Factual Antecedents

URSUMCO is a domestic corporation engaged in the sugar cane milling business; Cabati
is URSUMCO’s Business Unit General Manager.

The complainants were employees of URSUMCO. They were hired on various dates
(between February 1988 and April 1996) and on different capacities, [8] i.e., drivers, crane
operators, bucket hookers, welders, mechanics, laboratory attendants and aides, steel
workers, laborers, carpenters and masons, among others.  At the start of their
respective engagements, the complainants signed contracts of employment for a period
of one (1) month or for a given season.  URSUMCO repeatedly hired the complainants to
perform the same duties and, for every engagement, required the latter to sign new
employment contracts for the same duration of one month or a given season.

On August 23, 2002,[9] the complainants filed before the LA complaints for

regularization, entitlement to the benefits under the existing Collective Bargaining
Agreement (CBA), and attorney’s fees.

In the decision[10] dated October 9, 2002, the LA dismissed the complaint for lack of
merit.  The LA held that the complainants were seasonal or project workers and not
regular employees of URSUMCO.  The LA pointed out that the complainants were
required to perform, for a definite period, phases of URSUMCO’s several projects that
were not at all directly related to the latter’s main operations.  As the complainants
were project employees, they could not be regularized since their respective
employments were coterminous with the phase of the work or special project to which
they were assigned and which employments end upon the completion of each project. 
Accordingly, the complainants were not entitled to the benefits granted under the CBA
that, as provided, covered only the regular employees of URSUMCO.

Of the twenty-two original complainants before the LA, seven appealed the LA’s ruling
before the NLRC, namely: respondents Ferdinand Acibo, Eddie Baldoza, Andy Banjao,
Dionisio Bendijo, Jr., Rodger Ramirez, Diocito Palagtiw, Danny Kadusale and Allyrobyl
Olpus.

The Ruling of the NLRC

In its decision[11] of July 22, 2005, the NLRC reversed the LA’s ruling; it declared the
complainants as regular URSUMCO employees and granted their monetary claims under
the CBA.  The NLRC pointed out that the complainants performed activities which were
usually necessary and desirable in the usual trade or business of URSUMCO, and had
been repeatedly hired for the same undertaking every season.  Thus, pursuant to Article
280 of the Labor Code, the NLRC declared that the complainants were regular
employees.  As regular employees, the NLRC held that the complainants were entitled
to the benefits granted, under the CBA, to the regular URSUMCO employees.

The petitioners moved to reconsider this NLRC ruling which the NLRC denied in its April
28, 2006 resolution.[12] The petitioners elevated the case to the CA via a petition
for certiorari.[13]

The Ruling of the CA

In its November 29, 2007 decision,[14] the CA granted in part the petition; it affirmed the
NLRC’s ruling finding the complainants to be regular employees of URSUMCO, but
deleted the grant of monetary benefits under the CBA.

The CA pointed out that the primary standard for determining regular employment is
the reasonable connection between a particular activity performed by the
employee vis-à-vis the usual trade or business of the employer.  This connection, in turn,
can be determined by considering the nature of the work performed and the relation of
this work to the business or trade of the employer in its entirety.

In this regard, the CA held that the various activities that the complainants were tasked
to do were necessary, if not indispensable, to the nature of URSUMCO’s business.  As
the complainants had been performing their respective tasks for at least one year, the
CA held that this repeated and continuing need for the complainants’ performance of
these same tasks, regardless of whether the performance was continuous or
intermittent, constitutes sufficient evidence of the necessity, if not indispensability, of
the activity to URSUMCO’s business.

Further, the CA noted that the petitioners failed to prove that they gave the
complainants opportunity to work elsewhere during the off-season, which opportunity
could have qualified the latter as seasonal workers.  Still, the CA pointed out that even
during this off-season period, seasonal workers are not separated from the service but
are simply considered on leave until they are re-employed.  Thus, the CA concluded that
the complainants were regular employees with respect to the activity that they had
been performing and while the activity continued.

On the claim for CBA benefits, the CA, however, ruled that the complainants were not
entitled to receive them.  The CA pointed out that while the complainants were
considered regular, albeit seasonal, workers, the CBA-covered regular employees of
URSUMCO were performing tasks needed by the latter for the entire year with no
regard to the changing sugar milling season.  Hence, the complainants did not belong to
and could not be grouped together with the regular employees of URSUMCO, for
collective bargaining purposes;  they constitute a bargaining unit separate and distinct
from the regular employees. Consequently, the CA declared that the complainants could
not be covered by the CBA.

The petitioners filed the present petition after the CA denied their motion for partial
reconsideration[15] in the CA’s January 22, 2009 resolution.[16]

The Issues

The petition essentially presents the following issues for the Court’s resolution: (1)
whether the respondents are regular employees of URSUMCO; and (2) whether
affirmative relief can be given to the fifteen (15) of the complainants who did not appeal
the LA’s decision.[17]

The Court’s Ruling

We resolve to partially GRANT the petition.

On the issue of the status of

the respondents’ employment

The petitioners maintain that the respondents are contractual or project/seasonal

workers and not regular employees of URSUMCO. They thus argue that the CA erred in
applying the legal parameters and guidelines for regular employment to the
respondents’ case.  They contend that the legal standards – length of the employee’s
engagement and the desirability or necessity of the employee’s work in the usual trade
or business of the employer – apply only to regular employees under paragraph 1,
Article 280 of the Labor Code, and, under paragraph 2 of the same article, to casual
employees who are deemed regular by their length of service.
The respondents, the petitioners point out, were specifically engaged for a fixed and
predetermined duration of, on the average, one (1) month at a time that coincides with
a particular phase of the company’s business operations or sugar milling season.  By the
nature of their engagement, the respondents’ employment legally ends upon the end of
the predetermined period; thus, URSUMCO was under no legal obligation to rehire the
respondents.

In their comment,[18] the respondents maintain that they are regular employees of

URSUMCO.  Relying on the NLRC and the CA rulings, they point out that they have been
continuously working for URSUMCO for more than one year, performing tasks which
were necessary and desirable to URSUMCO’s business.  Hence, under the above-stated
legal parameters, they are regular employees.

We disagree with the petitioners’ position. We find the respondents to be regular

seasonal employees of URSUMCO.

As the CA has explained in its challenged decision, Article 280 of the Labor Code
provides for three kinds of employment arrangements, namely: regular,
project/seasonal and casual. Regular employment refers to that arrangement whereby
the employee “has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer[.]”[19] Under the definition, the
primary standard that determines regular employment is the reasonable connection
between the particular activity performed by the employee and the usual business or
trade of the employer;[20] the emphasis is on the necessity or desirability of the
employee’s activity. Thus, when the employee performs activities considered necessary
and desirable to the overall business scheme of the employer, the law regards the
employee as regular.

By way of an exception, paragraph 2, Article 280 of the Labor Code also considers
regular a casual employment arrangement when the casual employee’s engagement has
lasted for at least one year, regardless of the engagement’s continuity. The controlling
test in this arrangement is the length of time during which the employee is engaged.

A project employment, on the other hand, contemplates on arrangement  whereby “the

employment has been fixed for a specific project or  undertaking  whose completion  or 
termination  has  been  determined at the time of the engagement of the
employee[.]”[21] Two requirements, therefore, clearly need to be satisfied to remove the
engagement from the presumption of regularity of employment, namely: (1)
designation of a specific project or undertaking for which the employee is hired; and (2)
clear determination of the completion or termination of the project at the time of the
employee’s engagement.[22] The services of the project employees are legally and
automatically terminated upon the end or completion of the project as the employee’s
services are coterminous with the project.

Unlike in a regular employment under Article 280 of the Labor Code, however, the
length of time of the asserted “project” employee’s engagement is not controlling as the
employment may, in fact, last for more than a year, depending on the needs or
circumstances of the project.  Nevertheless, this length of time (or the continuous
rehiring of the employee even after the cessation of the project) may serve as a badge
of regular employment when the activities performed by the purported “project”
employee are necessary and indispensable to the usual business or trade of the
employer.[23] In this latter case, the law will regard the arrangement as regular
employment.[24]

Seasonal employment operates much in the same way as project employment, albeit it
involves work or service that is seasonal in nature or lasting for the duration of the
season.[25] As with project employment, although the seasonal employment
arrangement involves work that is seasonal or periodic in nature, the employment itself
is not automatically considered seasonal so as to prevent the employee from attaining
regular status.  To exclude the asserted “seasonal” employee from those classified as
regular employees, the employer must show that: (1) the employee must be performing
work or services that are seasonal in nature; and (2) he had been employed for the
duration of the season.[26] Hence, when the “seasonal” workers are continuously and
repeatedly hired to perform the same tasks or activities for several seasons or even after
the cessation of the season, this length of time may likewise serve as badge of regular
employment.[27] In fact, even though denominated as “seasonal workers,” if these
workers are called to work from time to time and are only temporarily laid off during the
off-season, the law does not consider them separated from the service during the off-
season period. The law simply considers these seasonal workers on leave until re-
employed.[28]

Casual employment, the third kind of employment arrangement, refers to any other
employment arrangement that does not fall under any of the first two categories, i.e.,
regular or project/seasonal.
Interestingly, the Labor Code does not mention another employment arrangement –
contractual or fixed term employment (or employment for a term) – which, if not for the
fixed term, should fall under the category of regular employment in view of the nature
of the employee’s engagement, which is to perform an activity usually necessary or
desirable in the employer’s business.

In Brent School, Inc. v. Zamora,[29] the Court, for the first time, recognized and resolved
the anomaly created by a narrow and literal interpretation of Article 280 of the Labor
Code that appears to restrict the employee’s right to freely stipulate with his employer
on the duration of his engagement.  In this case, the Court upheld the validity of the
fixed-term employment agreed upon by the employer, Brent School, Inc., and the
employee, Dorotio Alegre, declaring that the restrictive clause in Article 280 “should  be 
construed  to  refer  to  the substantive evil that the Code itself x x x singled out:
agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where [the] fixed period of  employment  was agreed upon
knowingly and voluntarily by the parties x x x absent any x x x circumstances vitiating
[the employee’s] consent, or where [the facts satisfactorily show] that the employer and
[the] employee dealt  with each other on more or less equal terms[.]”[30] The
indispensability or desirability of the activity performed by the employee will not
preclude the parties from entering into an otherwise valid fixed term employment
agreement; a definite period of employment does not essentially contradict the nature
of the employees duties[31] as necessary and desirable to the usual business or trade of
the employer.

Nevertheless, “where the circumstances evidently show that the employer imposed the
period precisely to preclude the employee from acquiring tenurial security, the law and
this Court will not hesitate to strike down or disregard the period as contrary to public
policy, morals, etc.”[32] In such a case, the general restrictive rule under Article 280 of the
Labor Code will apply and the employee shall be deemed regular.

Clearly, therefore, the nature of the employment does not depend solely on the will or
word of the employer or on the procedure for hiring and the manner of designating the
employee. Rather, the nature of the employment depends on the nature of the
activities to be performed by the employee, considering the nature of the employer’s
business, the duration and scope to be done,[33] and, in some cases, even the length of
time of the performance and its continued existence.
In light of the above legal parameters laid down by the law and applicable
jurisprudence, the respondents are neither project, seasonal nor fixed-term employees,
but regular seasonal workers of URSUMCO.  The following factual considerations from
the records support this conclusion:

First, the respondents were made to perform various tasks that did not at all pertain to
any specific phase of URSUMCO’s strict milling operations that would ultimately cease
upon completion of a particular phase in the milling of sugar; rather, they were tasked
to perform duties regularly and habitually needed in URSUMCO’s operations during the
milling season. The respondents’ duties as loader operators, hookers, crane operators
and drivers were necessary to haul and transport the sugarcane from the plantation to
the mill; laboratory attendants, workers and laborers to mill the sugar; and welders,
carpenters and utility workers to ensure the smooth and continuous operation of the
mill for the duration of the milling season, as distinguished from the production of the
sugarcane which involves the planting and raising of the sugarcane until it ripens for
milling. The production of sugarcane, it must be emphasized, requires a different set of
workers who are experienced in farm or agricultural work.  Needless to say, they
perform the activities that are necessary and desirable in sugarcane production. As in
the milling of sugarcane, the plantation workers perform their duties only during the
planting season.

Second, the respondents were regularly and repeatedly hired to perform the same tasks
year after year. This regular and repeated hiring of the same workers (two different sets)
for two separate seasons has put in place, principally through jurisprudence, the system
of regular seasonal employment in the sugar industry and other industries with a similar
nature of operations.

Under the system, the plantation workers or the mill employees do not work
continuously for one whole year but only for the duration of the growing of the
sugarcane or the milling season.  Their seasonal work, however, does not detract from
considering them in regular employment since in a litany of cases, this Court has already
settled that seasonal workers who are called to work from time to time and are
temporarily laid off during the off-season are not separated from the service in said
period, but are merely considered on leave until re-employment. [34] Be this as it may,
regular seasonal employees, like the respondents in this case, should not be confused
with the regular employees of the sugar mill such as the administrative or office
personnel who perform their tasks for the entire year regardless of the season.  The
NLRC, therefore, gravely erred when it declared the respondents regular employees of
URSUMCO without qualification and that they were entitled to the benefits granted,
under the CBA, to URSUMCO’S regular employees.

Third, while the petitioners assert that the respondents were free to work elsewhere
during the off-season, the records do not support this assertion.  There is no evidence
on record showing that after the completion of their tasks at URSUMCO, the
respondents sought and obtained employment elsewhere.

Contrary to the petitioners’ position, Mercado, Sr. v. NLRC, 3rd Div.[35] is not applicable
to the respondents as this case was resolved based on different factual considerations.
In Mercado, the workers were hired to perform phases of the agricultural work in their
employer’s farm for a definite period of time; afterwards, they were free to offer their
services to any other farm owner. The workers were not hired regularly and repeatedly
for the same phase(s) of agricultural work, but only intermittently for any single phase.
And, more importantly, the employer in Mercado sufficiently proved these factual
circumstances. The Court reiterated these same observations in Hda. Fatima v. Nat’l
Fed. of Sugarcane Workers-Food and Gen. Trade[36] and Hacienda Bino/Hortencia Starke,
Inc. v. Cuenca.[37]

At this point, we reiterate the settled rule that in this jurisdiction, only questions of law
are allowed in a petition for review on certiorari.[38] This Court’s power of review in a
Rule 45 petition is limited to resolving matters pertaining to any perceived legal errors,
which the CA may have committed in issuing the assailed decision. [39] In reviewing the
legal correctness of the CA’s Rule 65 decision in a labor case, we examine the CA
decision in the context that it determined, i.e., the presence or absence of grave abuse
of discretion in the NLRC decision before it and not on the basis of whether the NLRC
decision on the merits of the case was correct. [40] In other words, we have to be keenly
aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC
decision challenged before it.[41]

Viewed in this light, we find the need to place the CA’s affirmation, albeit with
modification, of the NLRC decision of July 22, 2005 in perspective. To recall, the NLRC
declared the respondents as regular employees of URSUMCO.[42] With such a
declaration, the NLRC in effect granted the respondents’ prayer for regularization and,
concomitantly, their prayer for the grant of monetary benefits under the CBA for
URSUMCO’s regular employees. In its challenged ruling, the CA concurred with the NLRC
finding, but with the respondents characterized as regular seasonal employees of
URSUMCO.

The CA misappreciated the real import of the NLRC ruling. The labor agency did not
declare the respondents as regular seasonal employees, but as regular employees. This
is the only conclusion that can be drawn from the NLRC decision’s dispositive portion,
thus:

WHEREFORE, premises considered, the appeal is hereby GRANTED. 

Complainants are declared regular employees of respondent. As such, they are entitled
to the monetary benefits granted to regular employees of respondent company based
on the CBA, reckoned three (3) years back from the filing of the above-entitled case on
23 August 2002 up to the present or to their entire service with respondent after the
date of filing of the said complaint if they are no longer connected with respondent
company.[43]

It is, therefore, clear that the issue brought to the CA for resolution is whether the
NLRC gravely abused its discretion in declaring the respondents regular employees of
URSUMCO and, as such, entitled to the benefits under the CBA for the regular
employees.

Based on the established facts, we find that the CA grossly misread the NLRC ruling and
missed the implications of the respondents’ regularization. To reiterate, the
respondents are regular seasonal employees, as the CA itself opined when it declared
that “private respondents who are regular workers with respect to their seasonal tasks
or activities and while such activities exist, cannot automatically be governed by the CBA
between petitioner URSUMCO and the authorized bargaining representative of the
regular and permanent employees.”[44] Citing jurisprudential standards,[45] it then
proceeded to explain that the respondents cannot be lumped with the regular
employees due to the differences in the nature of their duties and the duration of their
work  vis-a-vis  the operations of the company.

The NLRC was well aware of these distinctions as it acknowledged that the respondents
worked only during the milling season, yet it ignored the distinctions and declared them
regular employees, a marked departure from existing jurisprudence. This, to us, is grave
abuse of discretion, as it gave no reason for disturbing the system of regular seasonal
employment already in place in the sugar industry and other industries with similar
seasonal operations. For upholding the NLRC’s flawed decision on the respondents’
employment status, the CA committed a reversible error of judgment.

In sum, we find the complaint to be devoid of merit. The issue of granting affirmative
relief to the complainants who did not appeal the CA ruling has become academic.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED.  Except for the

denial of the respondents’ claim for CBA benefits, the November 29, 2007 decision and
the January 22, 2009 resolution of the Court of Appeals are SET ASIDE. The complaint
is DISMISSED for lack of merit.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 72222, January 30, 1989 ]
INTERNATIONAL CATHOLIC MIGRATION COMMISSION,
PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND
BERNADETTE GALANG, RESPONDENTS.

DECISION

FERNAN, C. J.:

The issue to be resolved in the instant case is whether or not an employee who
was terminated during the probationary period of her employment is entitled to her
salary for the unexpired portion of her six-month probationary employment.

The facts of the case are undisputed.

Petitioner International Catholic Migration Commission (ICMC), a non-profit

organization dedicated to refugee service at the Philippine Refugee Processing Center in
Morong, Bataan, engaged the services of private respondent Bernadette Galang on
January 24, 1983 as a probationary cultural orientation teacher with a monthly salary of
P2,000.00.
Three (3) months thereafter, or on April 22, 1983, private respondent was informed,
orally and in writing, that her services were being terminated for her failure to meet the
prescribed standards of petitioner as reflected in the performance evaluation of her
supervisors during the teacher evaluation program she underwent along with other
newly-hired personnel.

Despite her termination, records show that private respondent did not leave the ICMC
refugee camp at Morong, Bataan, but instead stayed thereat for a few days before
leaving for Manila, during which time, she was observed by petitioner to be allegedly
acting strangely.

On July 24, 1983, private respondent returned to Morong, Bataan on board the service
bus of petitioner to accomplish the clearance requirements.  In the evening of that same
day, she was found at the Freedom Park of Morong wet and shivering from the rain and
acting bizarrely.  She was then taken to petitioner's hospital where she was given the
necessary medical attention.

Two (2) days later, or on July 26, 1983, she was taken to her residence in Manila aboard
petitioner's service bus.  Thru a letter, her father expressed appreciation to petitioner
for taking care of her daughter.  On that same day, her father received, on her behalf,
the proportionate amount of her 13th month pay and the equivalent of her two-week
pay.

On August 22, 1983, private respondent filed a complaint[1] for illegal dismissal, unfair
labor practice and unpaid wages against petitioner with the then Ministry of Labor and
Employment, praying for reinstatement with backwages, exemplary and moral
damages.

On October 8, 1983, after the parties submitted their respective position papers and
other pleadings, Labor Arbiter Pelagio A. Carpio rendered his decision dismissing the
complaint for illegal dismissal as well as the complaint for moral and exemplary
damages but ordering the petitioner to pay private respondent the sum of P6,000.00 as
payment for the last three (3) months of the agreed employment period pursuant to her
verbal contract of employment.[2]

Both parties appealed the decision to the National Labor Relations Commission.  In her
appeal, private respondent contended that her dismissal was illegal considering that it
was effected without valid cause.  On the other hand, petitioner countered that private
respondent who was employed for a probationary period of three (3) months could not
rightfully be awarded P6,000.00 because her services were terminated for failure to
qualify as a regular employee in accordance with the reasonable standards prescribed
by her employer.

On August 22, 1985, the NLRC, by a majority vote of Commissioners Guillermo C.

Medina and Gabriel M. Gatchalian, sustained the decision of the Labor Arbiter and thus
dismissed both appeals for lack of merit.  Commissioner Miguel Varela, on the other
hand, dissented and voted for the reversal of the Labor Arbiter's decision for lack of
legal basis considering that the termination of services of complainant, now private
respondent, was effected during her probationary period on valid grounds made known
to her.[3]

Dissatisfied, petitioner filed the instant petition.

Petitioner maintains that private respondent is not entitled to the award of salary for
the unexpired three-month portion of the probationary period since her services were
terminated during such period when she failed to qualify as a regular employee in
accordance with the reasonable standards prescribed by petitioner; that having been
terminated on valid grounds during her probationary period, or specifically on April 24,
1983, petitioner is not liable to private respondent for services not rendered during the
unexpired three-month period, otherwise, unjust enrichment on her part would result;
that under Article 282 (now Article 281) of the Labor Code, if the employer finds that
the probationary employee does not meet the standards of employment set for the
position, the probationary employee may be terminated at any time within the six-
month period, without need of exhausting said entire six-month term. [4]

The Solicitor General, on the other hand, contends that a probationary employment for
six (6) months, as in the case of herein private respondent, is an employment for a
definite period of time and, as such, the employer is duty bound to allow the
probationary employee to work until the termination of the probationary employment
before her reemployment could be refused; that when petitioner disrupted the
probationary employment of private respondent, without giving her the opportunity to
improve her method of instruction within the said period, it held itself liable to pay her
salary for the unexpired portion of such employment by way of damages pursuant to
the general provisions of civil law that he who in any manner contravenes the terms of
his obligation without any valid cause shall be liable for damages; [5] that, as held
in Madrigal v. Ogilvie et al.,[6] the damages so awarded are equivalent to her salary for
the unexpired portion of her employment for a fixed period.[7]

We find for petitioner.

There is justifiable basis for the reversal of public respondent's award of salary for the
unexpired three-month portion of private respondent's six-month probationary
employment in the light of its express finding that there was no illegal dismissal.  There
is no dispute that private respondent was terminated during her probationary period of
employment for failure to qualify as a regular member of petitioner's teaching staff in
accordance with its reasonable standards.  Records show that private respondent was
found by petitioner to be deficient in classroom management, teacher-student
relationship and teaching techniques.[8] Failure to qualify as a regular employee in
accordance with the reasonable standards of the employer is a just cause for
terminating a probationary employee specifically recognized under Article 282 (now
Article 281) of the Labor Code which provides thus:
"ART. 281.  Probationary employment. Probationary employment shall not
exceed six 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
has been engaged in 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." (Underscoring supplied.)
It must be noted that notwithstanding the finding of legality of the termination of
private respondent, public respondent justified the award of salary for the unexpired
portion of the probationary employment on the ground that a probationary
employment for six (6) months is an employment for a "definite period" which requires
the employer to exhaust the entire probationary period to give the employee the
opportunity to meet the required standards.

The legal basis of public respondent is erroneous.  A probationary employee, as

understood under Article 282 (now Article 281) of the Labor Code, is one who is on trial
by an employer during which the employer determines whether or not he is qualified
for permanent employment.  A probationary appointment is made to afford the
employer an opportunity to observe the fitness of a probationer while at work, and to
ascertain whether he will become a proper and efficient employee. [9] The word
"probationary", as used to describe the period of employment, implies the purpose of
the term or period, but not its length.[10]

Being in the nature of a "trial period"[11] the essence of a probationary period of

employment fundamentally lies in the purpose or objective sought to be attained by
both the employer and the employee during said period.  The length of time is
immaterial in determining the correlative rights of both in dealing with each other
during said period.  While the employer, as stated earlier, observes the fitness, propriety
and efficiency of a probationer to ascertain whether he is qualified for permanent
employment, the probationer, on the other, seeks to prove to the employer that he has
the qualifications to meet the reasonable standards for permanent employment.

It is well settled that the employer has the right or is at liberty to choose who will be
hired and who will be denied employment.  In that sense, it is within the exercise of the
right to select his employees that the employer may set or fix a probationary period
within which the latter may test and observe the conduct of the former before hiring
him permanently.  The equality of right that exists between the employer and the
employee as to the nature of the probationary employment was aptly emphasized by
this Court in Grand Motor Parts Corporation v. Minister of Labor, et al., 130 SCRA 436
(1984), citing the 1939 case of Pampanga Bus Co., Inc. v. Pambusco Employees Union,
Inc., 68 Phil. 541, thus:
"The right of a laborer to sell his labor to such persons as he may choose is, in its
essence, the same as the right of an employer to purchase labor from any person whom
it chooses.  The employer and the employee have thus an equality of right guaranteed
by the Constitution.  If the employer can compel the employee to work against the
latter's will, this is servitude.  If the employee can compel the employer to give him work
against the employer's will, this is oppression."
As the law now stands, Article 281 of the Labor Code gives sample authority to
the employer to terminate a probationary employee 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.  There is nothing under
Article 281 of the Labor Code that would preclude the employer from extending a
regular or a permanent appointment to an employee once the employer finds that the
employee is qualified for regular employment even before the expiration of the
probationary period.  Conversely, if the purpose sought by the employer is neither
attained nor attainable within the said period, Article 281 of the Labor Code does not
likewise preclude the employer from terminating the probationary employment on
justifiable causes as in the instant case.

We find unmeritorious, therefore, public respondent's argument that the security of

tenure of probationary employees within the period of their probation, as in the case of
herein private respondent, justified the award of salary for the unexpired portion of her
probationary employment.  The termination of private respondent predicated on a just
cause negates the application in this Case of the pronouncement in the case of Biboso v.
Victorias Milling Co., Inc.,[12] on the right of security of tenure of probationary
employees.

Upon inquiry by the then Ministry of Labor and Employment as a consequence of the
illegal dismissal case filed by private respondent before it, docketed as Case No. NLRC
NCR-8-3786-83, it was found that there was no illegal dismissal involved in the case,
hence, the circumvention of the rights of the probationary employees sought to be
regulated as pointed out in Biboso v. Victorias Milling Co., Inc.,[13] is wanting.

There was no showing, as borne out by the records, that there was circumvention of the
rights of private respondent when she was informed of her termination.  Her dismissal
does not appear to us as arbitrary, fanciful or whimsical.  Private respondent was duly
notified, orally and in writing, that her services as cultural orientation teacher were
terminated for failure to meet the prescribed standards of petitioner as reflected in the
performance evaluation conducted by her supervisors during the teacher evaluation
program.  The dissatisfaction of petitioner over the performance of private respondent
in this regard is a legitimate exercise of its prerogative to select whom to hire or refuse
employment for the success of its program or undertaking.  More importantly, private
respondent failed to show that there was unlawful discrimination in the dismissal.

It was thus a grave abuse of discretion on the part of public respondent to order
petitioner to pay private respondent her salary for the unexpired three-month portion
of her six-month probationary employment when she was validly terminated during her
probationary employment.  To sanction such action would not only be unjust, but
oppressive on the part of the employer as emphasized in Pampanga Bus Co., Inc. v.
Pambusco Employer Union, Inc.,[14]

WHEREFORE, in view of the foregoing, the petition is GRANTED.  The Resolution of the
National Labor Relations Commission dated August 22, 1985, is hereby REVERSED and
SET ASIDE insofar as it ordered petitioner to pay private respondent her P6,000.00
salary for the unexpired portion of her six-month probationary employment.  No cost.

SO ORDERED.

FIRST DIVISION
[ G.R. No. 74004, August 10, 1989 ]
A.M. ORETA & CO., INC., PETITIONER, VS. NATIONAL LABOR
RELATIONS COMMISSION AND SIXTO GRULLA, JR., RESPONDENTS.

DECISION

MEDIALDEA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court seeking the

annulment of the Resolution of the respondent National Labor Relations Commission
dated January 17, 1986 (p. 24, Rollo) in BES Case No. 81-1371 entitled, "SIXTO
GRULLA, JR., Complainant, versus A.M. ORETA & COMPANY, INC. and/or
ENGINEERING CONSTRUCTION & INDUSTRIAL DEVELOPMENT CO.
(ENDECO), Respondents", affirming the decision of the Philippine Overseas
Employment Administration (POEA) awarding to private respondent
herein Sixto Grulla the salaries corresponding to the unexpired portion of his employment
contract.

The antecedent facts are as follows:

Private respondent Grulla was engaged by Engineering Construction and Industrial

Development Company (ENDECO) through A.M. Oreta and Co., Inc. as a carpenter in
its project in Jeddah, Saudi Arabia.  The contract of employment, which was entered into
on June 11, 1980 was for a period of twelve (12) months.  Respondent Grulla left
the Philippines for Jeddah, Saudi Arabia on August 5, 1980.

On August 15, 1980, Grulla met an accident which fractured his lumbar vertebrae while
working at the jobsite.  He was rushed to the New Jeddah Clinic and was confined there
for twelve (12) days.  On August 27, 1980, Grulla was discharged from the hospital and
was told that he could resume his normal duties after undergoing physical therapy for two
weeks.
On September 18, 1980, respondent Grulla reported back to his Project Manager and
presented to the latter a medical certificate declaring the former already physically fit for
work.  Since then, he started working again until he received a notice of termination of
his employment on October 9, 1980.

In December, 1981, respondent Grulla filed a complaint for illegal dismissal, recovery of

medical benefits, unpaid wages for the unexpired ten (10) months of his contract and the
sum of P1,000.00 as reimbursement of medical expenses against A.M. Oreta and
Company, Inc. and Engineering Construction and Industrial Development Co.
(ENDECO) with the Philippine Overseas and Employment Administration (POEA).

The petitioner A.M. Oreta and Company, Inc. and ENDECO filed their answer and
alleged that the contract of employment entered into between petitioners
and Grulla provides, as one of the grounds for termination of employment, violation of
the rules and regulations promulgated by the contractor; and that Grulla was dismissed
because he has not performed his duties satisfactorily within the probationary period of
three months.

On August 8, 1985, the POEA rendered a decision (pp. 97-107, Rollo),

the dispositive portion of which states, inter alia:

"In view of the foregoing, this Office finds and so holds that complainant's
dismissal was illegal and warrants the award of his wages for the unexpired portion of
the contract.
"2.  Anent the complainant's claim for medical expenses, this Office finds the
same to be well-taken.  Respondent did not deny either specifically or
generally said claim.  Hence, it is deemed admitted.
"WHEREFORE, judgment is hereby rendered ordering respondents
A.M. Oreta and Company, Inc. and its foreign principal Engineering Construction and
Industrial Development Company (ENDECO) jointly and severally to pay complainant
within ten (10) days from receipt of this Order the sum of THREE THOUSAND SEVEN
HUNDRED US DOLLARS  (US $3,700.00) or its peso equivalent at the time of payment
representing complainant's salaries for the unexpired portions of his contract for ten
(10) months and the sum of ONE THOUSAND PESOS (P1,000.00) representing
reimbursement of medical expenses.
"Respondent is likewise ordered to pay attorney's fees equivalent to ten (10%)
percent of the total award.
"SO ORDERED."
Petitioner appealed from the adverse decision to the respondent
Commission.  On January 17, 1986, respondent Commission dismissed the appeal for
lack of merit and affirmed in toto the decision of the POEA.

On April 1, 1986, the instant petition was filed on the ground that the respondent
Commission committed grave abuse of discretion in affirming the decision of the
POEA.  A temporary restraining order was issued by this Court on April 23, 1986,
enjoining the respondents from enforcing the questioned resolution of the respondent
Commission.

The issues to be resolved in the instant case are whether or not the employment of
respondent Grulla was illegally terminated by the petitioner; and whether or not the
respondent Grulla is entitled to salaries corresponding to the unexpired portion of his
employment contract.

Petitioner contends that the respondent Grulla was validly dismissed because the latter
was still a probationary employee; and that his dismissal was justified on the basis of his
unsatisfactory performance of his job during the probationary period.  This contention
has no merit.

Article 280 (formerly Article 281) of the Labor Code, as amended, provides:

"Article 280. Regular and Casual Employment. - The provisions of written

agreement to the contrary notwithstanding and regardless of the oral agreements of
the parties, an employment shall be deemed to be regular where the employee has
been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employment or where the work or
service to be performed is seasonal in nature and the employment is for the duration of
the season.
"An employment shall be deemed to be casual if it is not covered by the
preceding paragraph:  Provided, that any employee who has rendered at least one year
of service, whether such service is continuous or broken, shall be considered a regular
employee with respect to the activity in which he is employed and his employment shall
continue while such actually exists."

It may be well to cite at this point Policy Instructions No. 12 of the then Minister of
Labor (now Secretary of Labor and Employment) which provides:
 "PD 850 has defined the concept of regular and casual employment.  What
determines regularity or casualness is not the employment contract, written or
otherwise, but the nature of the job.  If the job is usually necessary or desirable to the
main business of the employer, then employment is regular.  x x x."

Petitioner admitted that respondent Grulla was employed in the company as a carpenter

for a period of twelve months before he was dismissed on October 9, 1980.  A perusal of
the employment contract reveals that although the period of employment of
respondent Grulla is twelve (12) months, the contract period is renewable subject to
future agreement of the parties.  It is clear from the employment contract that the
respondent Grulla was hired by the company as a regular employee and not just a mere
probationary employee.

On the matter of probationary employment, the law in point is Article 281 (formerly
Article 282) of the Labor Code which provides in part:

"Art. 281. Probationary Employment. -

x x x.  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 accor
dance 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." (Emphasis ours)

The law is clear to the effect that in all cases involving employees engaged on
probationary basis, the employer shall make known to the employee at the time he is
hired, the standards by which he will qualify as a regular employee.  Nowhere in the
employment contract executed between petitioner company and respondent Grulla is
there a stipulation that the latter shall undergo a probationary period for three months
before he can qualify as a regular employee.  There is also no evidence on record
showing that the respondent Grulla had been apprised of his probationary status and the
requirements which he should comply in order to be a regular employee.  In the absence
of these requisites, there is justification in concluding that respondent Grulla was a
regular employee at the time he was dismissed by petitioner.  As such, he is entitled to
security of tenure during his period of employment and his services cannot be terminated
except for just and authorized causes enumerated under the Labor Code and under the
employment contract.

Granting, in gratia argumenti, that respondent is a probationary employee, he cannot,

likewise, be removed except for cause during the period of probation.  Although a
probationary or temporary employee has limited tenure, he still enjoys security of
tenure.  During his tenure of employment or before his contract expires, he cannot be
removed except for cause as provided for by law (Euro-Linea Phils., Inc. v. NLRC,
No. L-75782, December 1, 1987, 156 SCRA 78; Manila Hotel Corporation v. NLRC,
No. L-53453, January 22, 1986, 141 SCRA 169).

Article 282 of the Labor Code sets forth the following just causes for which an employer
may terminate an employment, namely:

“(a)   Serious misconduct or willful disobedience by the employee of the lawful

orders of his employer or representative in connection with his work;
“(b)   Gross and habitual neglect by the employee of his duties;
“(c)   Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative;
“(d)   Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized representative;
and
“(e)   Other causes analogous to the foregoing."

The alleged ground of unsatisfactory performance relied upon by petitioner for

dismissing respondent Grulla is not one of the just causes for dismissal provided in the
Labor Code.  Neither is it included among the grounds for termination of employment
under Article VII of the contract of employment executed by petitioner company and
respondent Grulla (p. 18, Rollo).  Moreover, petitioner has failed to show proof of the
particular acts or omissions constituting the unsatisfactory performance of Grulla of his
duties, which was allegedly due to his poor physical state after the accident.  Contrary to
petitioner's claims, records show that the medical certificate issued by the hospital where
respondent Grulla was confined as a result of the accident, clearly and positively stated
that Grulla was already physically fit for work after he was released from the hospital (p.
102, Rollo).

Anent the respondent Commission's finding of lack of due process in the dismissal
of Grulla, the petitioner claims that notice and hearing are important only if the employee
is not aware of the problems affecting his employment; that the same is not true in the
instant case where respondent Grulla knew all along that he could no longer effectively
perform his job due to his physical condition.  We find that this contention has no legal
basis.

The twin requirements of notice and hearing constitute essential elements of due process
in cases of employee dismissal:  the requirement of notice is intended to inform the
employee concerned of the employer's intent to dismiss and the reason for the proposed
dismissal, while the requirement of hearing affords the employee an opportunity to
answer his employer's charges against him and accordingly to defend
himself therefrom before dismissal is effected.  Neither of these requirements can be
dispensed with without running afoul of the due process requirement of the constitution
(Century Textile Mills, Inc., et al. v. NLRC, et al., G.R. No. 77859, May 25, 1988).

In the case at bar, respondent Grulla was not, in any manner, notified of the charges
against him before he was outrightly dismissed.  Neither was any hearing or investigation
conducted by the company to give the respondent a chance to be heard concerning the
alleged unsatisfactory performance of his work.

In view of the foregoing, the dismissal of respondent Grulla violated the security of

tenure under the contract of employment which specifically provides that the contract
term shall be for a period of twelve (12) calendar months.  Consequently, the
respondent Grulla should be paid his salary for the unexpired portion of his contract of
employment which is ten (10) months (See Cuales v. NLRC, et al., No. L-57379, April
28, 1983, 121 SCRA 812).

The findings of the POEA and the respondent Commission that the respondent Grulla is
entitled to salaries in the amount of US $3,700.00 or its equivalent in Philippine currency
for the unexpired portion of his contract and the sum of P1,000.00 as reimbursement of
medical expenses bear great weight.  Well-established is the principle that findings of
administrative agencies which have acquired expertise because their jurisdiction is
confined to specific matters are generally accorded not only respect but even
finality.  Judicial review by this Court on labor cases does not go so far as to evaluate the
sufficiency of the evidence upon which the labor officer or office based his or its
determination but are limited to issues of jurisdiction or grave abuse of discretion
(Special Events and Central Shipping Office Workers Union v. San Miguel Corporation,
Nos. L-51002-06, May 30, 1983, 122 SCRA 557).  In the instant case, the assailed
Resolution of the respondent Commission is not tainted with arbitrariness that would
amount to grave abuse of discretion or lack of jurisdiction and therefore, We find no
reason to disturb the same.

ACCORDINGLY, premises considered, the instant petition is dismissed for lack of

merit and the resolution of the respondent Commission dated January 17, 1986 is hereby
AFFIRMED.  The temporary restraining order issued on April 23, 1986 is lifted.

SO ORDERED.

THIRD DIVISION
[ G.R. No. 121071, December 11, 1998 ]
PHIL. FEDERATION OF CREDIT COOPERATIVES, INC. (PECCI) AND FR.
BENEDICTO JAYOMA, PETITIONERS, VS. NATIONAL LABOR
RELATIONS COMMISSION (FIRST DIVISION) AND VICTORIA ABRIL, 
RESPONDENTS.

DECISION

ROMERO, J.:

It is an elementary rule in the law on labor relations that a probationary

employee who is engaged to work beyond the probationary period of six months, as
provided under Art. 281 of the Labor Code, as amended, or for any length of time set
forth by the employer, shall be considered a regular employee.

Sometime in September 1982, private respondent Victoria Abril was employed by

petitioner Philippine Federation of Credit Cooperatives, Inc. (PFCCI), a corporation
engaged in organizing services to credit and cooperative entities, as Junior Auditor/Field
Examiner and thereafter held positions in different capacities, to wit: as office secretary
in 1985 and as cashier-designate for four (4) months ending in April 1988. Respondent,
shortly after resuming her position as office secretary, subsequently went on leave until
she gave birth to a baby girl. Upon her return sometime in November 1989, however,
she discovered that a certain Vangie Santos had been permanently appointed to her
former position. She, nevertheless, accepted the position of Regional Field Officer as
evidenced by a contract which stipulated, among other things, that respondent’s
employment status shall be probationary for a period of six (6) months. Said period
having elapsed, respondent was allowed to work until PFCCI presented to her another
employment contract for a period of one year commencing on January 2, 1991 until
December 31, 1991, after which period, her employment was terminated.

In a complaint for illegal dismissal filed by respondent against PFCCI on April 1, 1992,
Labor Arbiter Cornelio L. Linsangan rendered a decision on March 10, 1993 dismissing
the same for lack of merit but ordered PFCCI to reimburse her the amount of P2,500.00
which had been deducted from her salary.

On appeal, however, the said decision was reversed by the National Labor Relations
Commission (NLRC), the dispositive portion of which reads:
 "WHEREFORE, the appealed decision is hereby set aside. The respondents are
hereby directed to reinstate complainant to her position last held, which is that of a
Regional Field Officer, or to an equivalent position if such is no longer feasible, with full
backwages computed from January 1, 1992 until she is actually reinstated.

SO ORDERED."
We find no merit in the petition.

Article 281 of the Labor Code, as amended, allows the employer to secure the services
of an employee on a probationary basis which allows him to terminate the latter for just
cause or upon failure to qualify in accordance with reasonable standards set forth by
the employer at the time of his engagement. As defined in the case of International
Catholic Migration v. NLRC,[1] "a probationary employee is one who is on trial by an
employer during which the employer determines whether or not he is qualified for
permanent employment. A probationary employment is made to afford the employer
an opportunity to observe the fitness of a probationer while at work, and to ascertain
whether he will become a proper and efficient employee."

Probationary employees, notwithstanding their limited tenure, are also entitled to

security of tenure. Thus, except for just cause as provided by law, [2] or under the
employment contract, a probationary employee cannot be terminated.[3]

In the instant case, petitioner refutes the findings of the NLRC arguing that, after
respondent had allegedly abandoned her secretarial position for eight (8) months, she
applied for the position of Regional Field Officer for Region IV, which appointment, as
petitioner would aptly put it, "had been fixed for a specific project or undertaking the
completion or termination of which had been determined at the time of the
engagement of said private respondent and therefore considered as a casual or
contractual employment under Article 280 of the Labor Code."[4]

The contention that respondent could either be classified as a casual or contractual

employee is utterly misplaced; thus, it is imperative for the Court to elucidate on the
kinds of employment recognized in this jurisdiction. The pertinent provision of the Labor
Code, as amended, states:
"Art. 280. Regular and casual employment. - The provisions of written agreement
to the contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such activity exists."
This provision of law comprehends three kinds of employees: (a) regular
employees or those whose work is necessary or desirable to the usual business of the
employer; (b) project employees or those whose employment has been fixed for a
specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration
of the season; and (c) casual employees or those who are neither regular nor project
employees. With regard to contractual employees, the Court in the leading case
of Brent School, Inc. v. Zamora,[5] laid down the guidelines before a contract of
employment may be held as valid, to wit: "stipulations in employment contracts
providing for term employment or fixed period employment are valid when the period
were agreed upon knowingly and voluntarily by the parties without force, duress or
improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent, or where 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 over the latter."

Having expounded on the various types of employees, the Court is constrained to

review the contract of employment entered into between the party-litigants. The said
contract reads:
"That the employer hires the employee on contractual basis to the position of
Regional Field Officer of Region 4 under PFCCI/WOCCU/Aid Project No. 8175 and to do
the function as stipulated in the job description assigned to him (her): on probationary
status effective February 17/90 for a period not to exceed six (6) months from said
effectivity, subject to renewal of this contract should the employee’s performance be
satisfactory."
 While the initial statements of the contract show that respondent’s employment
was for a fixed period, the succeeding provisions thereof contradicted the same when it
provided that respondent shall be under probationary status commencing on February
17, 1990 and ending six (6) months thereafter. Petitioner manifested that respondent’s
employment for a period of one year, from January until December 1991, having been
fixed for a specified period, could not have converted her employment status to one of
regular employment. Conversely, it likewise insisted that respondent was employed to
perform work related to a project funded by the World Council of Credit Unions
(WOCCU) and hence, her status is that of a project employee. The Court is, thus,
confronted with a situation under which the terms of the contract are so ambiguous as
to preclude a precise application of the pertinent labor laws.

Amidst the muddled assertions by petitioner, we adhere to the pronouncement stated

in the recent case of Villanueva v. NLRC,[6] where the Court ruled that where a contract
of employment, being a contract of adhesion, is ambiguous, any ambiguity therein
should be construed strictly against the party who prepared it. Furthermore, Article
1702 of the Civil Code provides that, in case of doubt, all labor contracts shall be
construed in favor of the laborer. It added:
"We cannot allow the respondent company to construe otherwise what appears
to be clear from the wordings of the contract. The interpretation which the respondent
company seeks to wiggle out is wholly unacceptable, as it would result in a violation of
petitioner’s right to security of tenure guaranteed in Section 3 of Article XIII of the
Constitution and in Articles 279 and 281 of the Labor Code."
After a careful scrutiny of the subject contract, we arrive at the conclusion that
there was no grave abuse of discretion on the part of the NLRC and, thus, affirm the
finding that respondent has become a regular employee entitled to security of tenure
guaranteed under the Constitution and labor laws.

Regardless of the designation petitioner may have conferred upon respondent’s

employment status, it is, however, uncontroverted that the latter, having completed the
probationary period and allowed to work thereafter, became a regular employee who
may be dismissed only for just or authorized causes under Articles 282, 283 and 284 of
the Labor Code, as amended. Therefore, the dismissal, premised on the alleged
expiration of the contract, is illegal and entitles respondent to the reliefs prayed for.

WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED and the
decision of the National Labor Relations Commission dated November 28, 1994
is AFFIRMED. No costs.

SO ORDERED.

SECOND DIVISION
[ G.R. No. 88636, October 03, 1991 ]
LINA B. OCTAVIANO, PETITIONER, VS. NATIONAL LABOR RELATIONS
COMMISSION AND GENERAL DIESEL POWER CORPORATION,
RESPONDENTS.

DECISION

SARMIENTO, J.:

The petitioner, Lina Octaviano, assails the decision of the National Labor
Relations Commission (NLRC), Fourth Division, dated March 20, 1989, affirming with
modification the decision of the labor arbiter reducing her award of full backwages to
only one (1) year.

The facts in brief are:

The private respondent, General Diesel Power Corporation, hired Lina as a component
mechanic and issued a temporary employment as such from November 21, 1984 up to
May 21, 1985.[1] She was however made to work, in fact, as a secretary and parts clerk. [2]

On May 22, 1985, the private respondent extended her another contract of
employment providing a probationary period of six (6) months. [3] On November 21,
1985, she was terminated, as management decided to end her probationary
employment.[4]

On January 20, 1986, she was rehired as a parts clerk.[5] Pursuant to management's prior
arrangement, she was issued a six-month probationary employment.  On June 5, 1986,
she was again dismissed.[6]

On July 8, 1986, she lodged a complaint for illegal dismissal and then filed an amended
complaint on January 30, 1987.

On May 22, 1988, Labor Arbiter Felipe T. Garduque II ordered her reinstatement without
loss of seniority rights and privileges, with full backwages from her dismissal on June
5,1986 up to her actual reinstatement, including her legal holiday pay for ten regular
holidays, and unpaid wages and allowance from June 1-15, 1986 in the amounts of
P500.00 and P215.00, respectively, and 13th month pay in the sum of P416.65 less
P213.70 for advances and canteen bills, with ten (10)% thereof as attorney's fee. [7] All
other claims were dismissed.  The respondent corporation appealed to the NLRC
interposing grave abuse of discretion.

The NLRC affirmed the labor arbiter’s ruling but reduced the award of full backwages to
only one year.  Ironically, the NLRC cited in particular Lina's educational background to
justify the reduction.  We quote:
It is not disputed that herein complainant is a graduate of chemical engineering
and that the periods of her separate employment contracts range from six (6) months to
one (1) year.  Having technical or engineering background, it would not be difficult for
complainant to find a job during her period of lay-off.  As such, she is therefore not
expected to remain idle and wait for a windfall for this would be tantamount to
rewarding her for her idleness during her lay off.  [*]
The petitioner now complains that the NLRC erred in limiting the award of
backwages to one year.  She invokes Article 279 of the Labor Code, which guarantees
security of tenure to a regular employee, prohibiting his termination except for a just
cause, and entitling an unjustly dismissed worker to reinstatement with full backwages.

We find the petition meritorious and we grant it.  We rule that the NLRC gravely abused
its discretion in limiting the award of backwages to one year.

The facts of the case as indicated by the arbiter and the NLRC are uncontroverted.  Lina
was unjustly and unlawfully terminated even after she had already completed
successive three six-month probationary periods of employment which should have
converted her status to that of a regular employee.  Her termination, therefore, violated
her right to security of tenure in her employment.  But even probationary employees
are protected by law.  For one, probationary employment should not exceed six (6)
months from the date the employee started working, unless it is covered by an
apprenticeship agreement stipulating a longer period. [8] True, 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 the
reasonable standards made known by the employer to the employee at the time of his
employment.[9] But the law is explicit that an employee who is allowed to work after a
probationary period shall be considered a regular employee.[10]

It is clear from the foregoing that Lina should be considered a regular employee on all
counts.  First, the nature of her job as a parts clerk required her to perform activities
which were deemed necessary and desirable in the usual business of General Diesel
Power Corporation, in connection with dealing in parts, sales, and services.  (She was
neither contracted for a specified project nor required to perform work that was
seasonable in nature.) Under Article 280 of the Labor Code, when one performs such
activities, he is deemed a regular employee, "[t]he provisions of written agreement to
the contrary notwithstanding . . ." Second, her employment was not covered by any
apprenticeship agreement.  Third, she was rehired on May 22, 1985 and on January 20,
1986.  This fact of rehiring negates management's claims that she failed to qualify as a
regular employee.  On the contrary, management promoted her to parts clerk.  Finally,
at the risk of being repetitious, Lina had been re-hired to work not only after her first
six-month probationary period from November 21, 1984 to May 21,1985, she had been
also re-hired to work immediately after her second six-month probationary period from
May 22, 1985 to November 21, 1985; and then again on January 20, 1986, she was
rehired on a probationary status — her third — and was again terminated on June 5,
1986.  Thus, we can readily see that Lina had been hired and again and again rehired
and again and again and again fired.  We perceive these successive hirings and firings as
a ploy to avoid the obligations imposed by law on employers for the protection and
benefit of probationary employees, who, more often than not, are kept in the bondage,
so to speak, of unending probationary employment without any complaint due to the
serious unemployment problem besetting our country today.  The Court can not
countenance this overreaching.  No member of the country's work force must be
allowed to be taken advantage of by any employer.

An employee who is allowed to work after a probationary period, shall be considered a

regular employee.[11] The fact that Lina worked on a contract-to-contract basis can not
alter the character of her employment, because contracts can not override the mandate
of law.[12] Hence, by operation of law, she has likewise, become a regular employee. [13]

We find self-defeating the private respondent's arguments that the petitioner, while in
her probationary periods, had failed to measure up to the standards of her work and
had been found unfit for her job, in the light of the circumstance discussed earlier. 
Second, the private respondent failed to establish that there had been reasonable
standards set forth by the company by which Lina would measure up to as a regular
employee.  If indeed there were, the respondent should have attached copies of those
standards as annexes to its pleadings; the records reveal nothing of the sort, hence, we
dismiss such trivial justifications.

We agree with the petitioner that she was unceremoniously terminated by the
respondent company to prevent her from becoming a regular employee and exclude her
from all the benefits thereto.  As we previously stated, this is not only a common but a
convenient practice of unscrupulous employers to circumvent the law on security of
tenure.  Security of tenure, which is a right of paramount value guaranteed by the
Constitution, should not be denied to the workers by such strategem.  We can not
permit such a subterfuge, if we are to be true to the law and social justice.  The law and
social justice mandate that an employee whose termination was illegal is entitled to
reinstatement with full backwages.[14]

Under Article 279 of the Code, "[a]n 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." Backwages, as we have defined, represent
compensation that should have been earned but were not collected because of unjust
dismissal.[15] Such being the case, the award of backwages computed from the time of
Lina's dismissal up to the time of her reinstatement is not tantamount to rewarding
idleness but to enable her to recover her loss of income during her lack of employment
caused by her dismissal.  Clearly then, the NLRC committed a grave abuse of discretion
when it reduced the award of backwages to one year and compounded that abuse by
giving the reason that the petitioner could have easily landed a better-paying job if she
seriously looked for one, she being a chemical engineering graduate.

Worth noting is the manifestation of the Solicitor General when required to comment
by the Court:  that "[H]e does not agree with the position of the public respondent,
NLRC and cannot represent said public respondent in this case without, in his honest
belief and understanding, going against the law, the evidence and jurisprudence."

The respondent also argues that the petitioner should not be entitled to backwages
because she was given separation pay upon termination of her employment. 
Furthermore, she also signed a quitclaim discharging the company from any liability.

These arguments are devoid of merit.  The fact that the petitioner received separation
pay should not be taken against her for it is but natural for her to accept whatever
amounts the company would give her.  Her receipt of separation pay does not relieve
the company of its obligations under the law.  Backwages and separation pay are reliefs
distinct and separate from each other.  Payment of backwages in the form of relief that
restores the income that was lost by reason of unlawful dismissal is distinguished from
separation pay which provides the employee money during the period in which he is
locating a new job.[16] We have moreover held that a quitclaim will not estop a dismissed
employee from complaining to the authorities.[17]

We have consistently adopted the policy of awarding backwages to illegally dismissed

employees equivalent to three years without qualification or deduction, in order to
avoid protracted delay in the execution of the award for backwages due to extended
hearings and unavoidable delays and difficulties encountered in determining the
earnings of laid-off employees ordered to be reinstated with backwages during the
pendency of the case for purposes of deducting the same from the gross backwages
awarded.[18] In the case at bar, we can not find a good reason why we should depart
from this established policy.  The company had unlawfully terminated the petitioner
from her work.  We take this opportunity to reaffirm our concern for the lowly worker
who, like the petitioner, is often at the mercy of her employer, by reinstating her to her
previous position or its equivalent, with backwages.

WHEREFORE, the petition is GRANTED.  The private respondent is ORDERED to

REINSTATE the petitioner to her former position without loss of seniority rights and
other privileges, with backwages equivalent to three years without deduction or
qualification.

Costs against the private respondent.

SO ORDERED.

SECOND DIVISION
[ G.R. No. L-63316, July 31, 1984 ]
 ILUMINADA VER BUISER, MA CECILIA RILLO-ACUÑA AND MA.
MERCEDES P. INTENGAN, PETITIONERS, VS. HON. VICENTE
LEOGARDO, JR., IN HIS CAPACITY AS DEPUTY MINISTER OF THE
MINISTRY OF LABOR & EMPLOYMENT, AND GENERAL TELEPHONE
DIRECTORY, CO., RESPONDENTS.

DECISION

GUERRERO, J.:

This is a petition for certiorari  seeking to set aside the Order of the Deputy
Minister of Labor and Employment, affirming the Order of the Regional Director,
National Capital Region, in Case No. NCR-STF-5-2851-81, which dismissed the
petitioners' complaint for alleged illegal dismissal and unpaid commission.

Petitioners were employed by the private respondent GENERAL TELEPHONE

DIRECTORY COMPANY as sales representatives and charged with the duty of
soliciting advertisements for inclusion in a telephone directory.

The records show that petitioners Iluminada Ver Buiser and Ma. Mercedes P. Intengan
entered into an "Employment Contract (on Probationary Status)" on May 26, 1980 with
private respondent, a corporation engaged in the business of publication and circulation
of the directory of the Philippine Long Distance Telephone Company. Petitioner Ma.
Cecilia Rillo-Acuña entered into the same employment contract on June 11, 1980 with
the private respondent.

Among others, the "Employment Contract (On Probationary Status)" included the
following common provisions:

"1. The company hereby employs the employee as telephone sales representative on a
probationary status for a period of eighteen (18) months, i.e. from May 1980 to October
1981, inclusive. It is understood that during the probationary period of employment, the
Employee may be terminated at the pleasure of the company without the necessity of
giving notice of termination or the payment of termination pay.

"The Employee recognizes the fact that the nature of the telephone sales representative's
job is such that the company would be able to determine his true character, conduct and
selling capabilities only after the publication of the directory, and that it takes about
eighteen (18) months before his worth as a telephone sales representative can be fully
evaluated inasmuch as the advertisement solicited by him for a particular year are
published in the directory only the following year."
Corollary to this, the private respondent prescribed sales quotas to be accomplished or
met by the petitioners. Failing to meet their respective sales quotas, the petitioners were
dismissed from the service by the private respondent. The records show that the private
respondent terminated the services of petitioners Iluminada Ver Buiser and Cecilia Rillo-
Acuña on May 14, 1981 and petitioner Ma. Mercedes P. Intengan on May 18, 1981 for
their failure to meet their sales quotas.

Thus, on May 27, 1981, petitioners filed with the National Capital Region, Ministry of
Labor and Employment, a complaint for illegal dismissal with claims for back-wages,
earned commissions and other benefits, docketed as Case No. NCR-STF-5-2851-81.

The Regional Director of said ministry, in an Order dated September 21, 1982, dismissed
the complaints of the petitioners, except the claim for allowances which private
respondent was ordered to pay. A reconsideration of the Order was sought by the
petitioners in a motion filed on September 30, 1982. This motion, however, was treated
as an appeal to the Minister of Labor.

On appeal, Deputy Minister Vicente Leogardo, Jr. of the Ministry of Labor issued an
Order dated January 7, 1983, affirming the Regional Director's Order dated September
21, 1982, wherein it ruled that the petitioners have not attained permanent status since
private respondent was justified in requiring a longer period of probation, and that the
termination of petitioners' services was valid since the latter failed to meet their sales
quotas.

Hence, this petition for certiorari on the alleged ground that public respondent
committed grave abuse of discretion amounting to lack of jurisdiction. Specifically,
petitioners submit that:

1. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of
discretion amounting to lack of jurisdiction in ruling that the probationary employment of
petitioners herein is eighteen (18) months instead of the mandated six (6) months under
the Labor Code, and in consequently further ruling that petitioners are not entitled to
security of tenure while under said probation for 18 months.

2. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of
discretion amounting to lack of jurisdiction in ruling that petitioners were dismissed for a
just and valid cause.

3. The Hon. Regional Director and the Hon. Deputy Minister committed grave abuse of
discretion amounting to lack of jurisdiction in ruling that petitioners are not entitled to the
commissions they have earned and accrued during their period of employment.
Petitioners contend that under Articles 281-282 of the Labor Code, having served the
respondent company continuously for over six (6) months, they have become
automatically regular employees notwithstanding an agreement to the contrary. Articles
281-282 read thus:

"Art. 282. Probationary Employment. 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.
(As amended by PD 850)."

"Art. 281. Regular and Casual Employment. - The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: Provided, That, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his employment shall continue
while such actually exists. (As amended by PD 850)."

It is petitioners' submission that probationary employment cannot exceed six (6) months,
the only exception being apprenticeship and learnership agreements as provided in the
Labor Code; that the Policy Instruction of the Minister of Labor and Employment nor any
agreement of the parties could prevail over this mandatory requirement of the law; that
this six months prescription of the Labor Code was mandated to give further efficacy to
the constitutionally-guaranteed security of tenure of workers; and that the law does not
allow any discretion on the part of the Minister of Labor and Employment to extend the
probationary period for a longer period except in the aforecited instances. Finally,
petitioners maintain that since they are regular employees, they can only be removed or
dismissed for any of the just and valid causes enumerated under Article 283 of the Labor
Code.

We reject petitioners' contentions. They have no basis in law.

Generally, the probationary period of employment is limited to six (6) months. The
exception to this general rule is when the parties to an employment contract may agree
otherwise, such as when the same is established by company policy or when the same is
required by the nature of work to be performed by the employee. In the latter case, there
is recognition of the exercise of managerial prerogatives in requiring a longer period of
probationary employment, such as in the present case where the probationary period was
set for eighteen (18) months, i.e. from May, 1980 to October, 1981 inclusive, especially
where the employee must learn a particular kind of work such as selling, or when the job
requires certain qualifications, skills, experience or training.

Policy Instruction No. 11 of the Minister of Labor and Employment has clarified any and
all doubts on the period of probationary employment. It states as follows:

"Probationary Employment has been the subject of misunderstanding in some quarter.

Some people believe six (6) months is the probationary period in all cases. On the other
hand, employees who have already served the probationary period are sometimes
required to serve again on probation.

Under the Labor Code, six (6) months is the general probationary period, but the
probationary period is actually the period needed to determine fitness for the job. This
period, for lack of a better measurement is deemed to be the period needed to learn the
job.

The purpose of this policy is to protect the worker at the same time enable the employer
to make a meaningful employee selection. This purpose should be kept in mind in
enforcing this provision of the Code. This issuance shall take effect immediately."

In the case at bar, it is shown that private respondent Company needs at least eighteen
(18) months to determine the character and selling capabilities of the petitioners as sales
representatives. The Company is engaged in advertisement and publication in the Yellow
Pages of the PLDT Telephone Directories. Publication of solicited ads are only made a
year after the sale has been made and only then will the company be able to evaluate the
efficiency, conduct, and selling ability of its sales representatives, the evaluation being
based on the published ads. Moreover, an eighteen-month probationary period is
recognized by the Labor Union in the private respondent company, which is Article V of
the Collective Bargaining Agreement, thus:

"Probationary Period - New employees hired for regular or permanent shall undergo a
probationary or trial period of six (6) months, except in the cases of telephone or sales
representatives where the probationary period shall be eighteen (18) months."

And as indicated earlier, the very contracts of employment signed and acquiesced to by
the petitioners specifically indicate that "the company hereby employs the employee as
telephone sales representative on a probationary status for a period of eighteen (18)
months, i.e. from May 1980 to October 1981, inclusive." This stipulation is not contrary
to law, morals and public policy.

We, therefore, hold and rule that the probationary employment of petitioners set to
eighteen (18) months is legal and valid and that the Regional Director and the Deputy
Minister of Labor and Employment committed no abuse of discretion in ruling
accordingly.

On the second assignment of error that public respondent committed grave abuse of
discretion in ruling that petitioners were dismissed for a just and valid cause, this is not
the first time that this issue has been raised before this Court. Earlier, in the case of
"Arthur Golez vs. The National Labor Relations Commission and General Telephone
Directory Co.", G.R. No. L-64459, July 25, 1983, the petition for certiorari which raised
the same issue against the herein private respondent was dismissed by this Court for lack
of merit.

The practice of a company in laying off workers because they failed to make the work
quota has been recognized in this jurisdiction. (Philippine American Embroideries vs.
Embroidery and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners'
failure to meet the sales quota assigned to each of them constitute a just cause of their
dismissal, regardless of the permanent or probationary status of their employment.
Failure to observe prescribed standards of work, or to fulfill reasonable work assignments
due to inefficiency may constitute just cause for dismissal. Such inefficiency is
understood to mean failure to attain work goals or work quotas, either by failing to
complete the same within the allotted reasonable period, or by producing unsatisfactory
results. This management prerogative of requiring standards may be availed of so long as
they are exercised in good faith for the advancement of the employer's interest.

Petitioners anchor their claim for commission pay on the Collective Agreement (CBA) of
September 1981, in support of their third assignment of error. Petitioners cannot avail of
this agreement since their services had been terminated in May, 1981, at a time when the
CBA of September, 1981 was not yet in existence.

In fine, there is nothing in the records to show any abuse or misuse of power properly
vested in the respondent Deputy Minister of Labor and Employment. For certiorari to lie,
"there must be capricious, arbitrary and whimsical exercise of power, the very antithesis
of the judicial prerogative in accordance with centuries of both civil and common law
traditions." (Panaligan vs. Adolfo, 67 SCRA 176, 180). The "abuse of discretion must be
grave and patent, and it must be shown that the discretion was exercised arbitrarily or
despotically." (Palma and Ignacio vs. Q. & S., Inc., et al., 17 SCRA 97, 100; Philippine
Virginia Tobacco Administration vs. Lucero, 125 SCRA 337, 343).
WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

Makasiar, (Chairman), Aquino, Concepcion, Jr., Abad Santos, Escolin, and Cuevas,

JJ., concur.

FIRST DIVISION
[ G.R. No. 74246, January 26, 1989 ]
MARIWASA MANUFACTURING, INC., AND ANGEL T. DAZO,
PETITIONERS, VS. HON. VICENTE LEOGARDO, JR., IN HIS CAPACITY
AS DEPUTY MINISTER OF MINISTRY OF LABOR AND EMPLOYMENT,
AND JOAQUIN A. DEQUILA, RESPONDENTS.

DECISION

NARVASA, J.:

There is no dispute about the facts in this case, and the only question for the
Court is whether or not, Article 282 of the Labor Code notwithstanding, probationary
employment may validly be extended beyond the prescribed six-month period by
agreement of the employer and the employee.

Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation by petitioner
Mariwasa Manufacturing, Inc. (hereafter, Mariwasa only) as a general utility worker on
January 10, 1979.  Upon the expiration of the probationary period of six months,
Dequila was informed by his employer that his work had proved unsatisfactory and had
failed to meet the required standards.  To give him a chance to improve his performance
and qualify for regular employment, instead of dispensing with his services then and
there, with his written consent Mariwasa extended his probation period for another
three months from July 10 to October 9, 1979.  His performance, however, did not
improve and on that account Mariwasa terminated his employment at the end of the
extended period.[1]

Dequila thereupon filed with the Ministry of Labor against Mariwasa and its Vice-
President for Administration, Angel T. Dazo, a complaint for illegal dismissal and
violation of Presidential Decrees Nos. 928 and 1389.[2] His complaint was dismissed after
hearing by Director Francisco L. Estrella, Director of the Ministry's National Capital
Region, who ruled that the termination of Dequila's employment was in the
circumstances justified and rejected his money claims for insufficiency of evidence. [3] On
appeal to the Office of the Minister, however, said disposition was reversed. 
Respondent Deputy Minister Vicente Leogardo, Jr. held that Dequila was already a
regular employee at the time of his dismissal, therefore, could not have been lawfully
dismissed for failure to meet company standards as a probationary worker.  He was
ordered reinstated to his former position without loss of seniority and with full back
wages from the date of his dismissal until actually reinstated. [4] This last order appears
later to have been amended so as to direct payment of Dequila's back wages from the
date of his dismissal to December 20, 1982 only. [5]

Mariwasa and Dazo, now petitioners, thereafter besought this Court to review Hon.
Leogardo's decision on certiorari and prohibition, urging its reversal for having been
rendered with grave abuse of discretion and/or without or in excess of jurisdiction. [6]

The petition, as well as the parties' comments subsequently submitted all underscore
the fact that the threshold issue here is, as first above stated, the legal one of whether
employer and employee may by agreement extend the probationary period of
employment beyond the six months prescribed in Art. 282 of the Labor Code, which
provides that:
"Art. 282.  – Probationary Employment.  – 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."
The Court agrees with the Solicitor General, who takes the same position as the
petitioners, that such an extension may lawfully be covenanted, notwithstanding the
seemingly restrictive language of the cited provision.  Buiser vs. Leogardo, Jr.
[7]
 recognized agreements stipulating longer probationary periods as constituting lawful
exceptions to the statutory prescription limiting such periods to six months, when it
upheld as valid an employment contract between an employer and two of its employees
that provided for an eighteen-month probation period.  This Court there held:
 "It is petitioners' submission that probationary employment cannot exceed six (6)
months, the only exception being apprenticeship and learnership agreements as
provided in the Labor Code; that the Policy Instruction of the Minister of Labor and
Employment nor any agreement of the parties could prevail over this mandatory
requirement of the law; that this six months prescription of the Labor Code was
mandated to give further efficacy to the constitutionally-guaranteed security of tenure
of workers; and that the law does not allow any discretion on the part of the Minister of
Labor and Employment to extend the probationary period for a longer period except in
the aforecited instances.  Finally, petitioners maintain that since they are regular
employees, they can only be removed or dismissed for any of the just and valid causes
enumerated under Article 283 of the Labor Code.

"We reject petitioners' contentions.  They have no basis in law.

"Generally, the probationary period of employment is limited to six (6) months.  The
exception to this general rule is when the parties to an employment contract may agree
otherwise, such as when the same is established by company policy or when the same is
required by the nature of work to be performed by the employee.  In the latter case,
there is recognition of the exercise of managerial prerogatives in requiring a longer
period of probationary employment, such as in the present case where the probationary
period was set for eighteen (18) months, i.e. from May, 1980 to October, 1981 inclusive,
especially where the employee must learn a particular kind of work such as selling, or
when the job requires certain qualifications, skills, experience or training.

“xxx                 xxx                  xxx.

"We,  therefore, hold and rule that the probationary employment of petitioners set to
eighteen (18) months is legal and valid and that the Regional Director and the Deputy
Minister of Labor and Employment committed no abuse of discretion in ruling
accordingly."
The single difference between Buiser and the present case:  that in the former
involved an eighteen-month probationary period stipulated in the original contract of
employment, whereas the latter refers to an extension agreed upon at or prior to the
expiration of the statutory six-month period, is hardly such as to warrant or even
suggest a different ruling here.  In both cases the parties' agreements in fact resulted in
extensions of the period prescribed by law.  That in this case the inability of the
probationer to make the grade became apparent only at or about the end of the six-
month period, hence an extension could not have been pre-arranged as was done
in Buiser assumes no adverse significance, given the lack, as pointed out by the Solicitor
General, of any indication that the extension to which Dequila gave his agreement was a
mere stratagem of petitioners to avoid the legal consequences of a probationary period
satisfactorily completed.

For aught that appears of record, the extension of Dequila's probation was ex gratia, an
act of liberality on the part of his employer affording him a second chance to make good
after having initially failed to prove his worth as an employee.  Such an act cannot now
unjustly be turned against said employer's account to compel it to keep on its payroll
one who could not perform according to its work standards.  The law, surely, was never
meant to produce such an inequitable result.

By voluntarily agreeing to an extension of the probationary period, Dequila in effect

waived any benefit attaching to the completion of said period if he still failed to make
the grade during the period of extension.  The Court finds nothing in the law which by
any fair interpretation prohibits such a waiver.  And no public policy protecting the
employee and the security of his tenure is served by proscribing voluntary agreements
which, by reasonably extending the period of probation, actually improve and further a
probationary employee's prospects of demonstrating his fitness for regular
employment.

Having reached the foregoing conclusions, the Court finds it unnecessary to consider
and pass upon the additional issue raised in the Supplemental Petition [8] that the back
wages adjudged in favor of private respondent Dequila were erroneously computed.

WHEREFORE, the petition is granted.  The orders of the public respondent complained

of are reversed and set aside.  Private respondent's complaint against petitioners for
illegal dismissal and violation of Presidential Decrees 928 and 1389 is dismissed for lack
of merit, without pronouncement as to costs.

SO ORDERED.

THIRD DIVISION
[ G.R. NO. 152949, August 14, 2007 ]
AKLAN COLLEGE, INCORPORATED AND MSGR. ADOLFO P. DEPRA,
PETITIONERS, VS. RODOLFO P. GUARINO, RESPONDENT.
 DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a petition for Review on Certiorari under Rule 45 of the Rules of
Court filed by Aklan College, Incorporated (ACI) and Msgr. Adolfo P. Depra (Msgr.
Depra) assailing the Decision[1] of the Court of Appeals (CA) dated March 9, 2001, and
its Resolution[2] of April 5, 2002 in CA-G.R. SP No. 54035.

The undisputed facts, as summarized by the CA, are as follows:

Private respondent Guarino was first hired in 1972 as an instructor by petitioner College.

In 1974, private respondent was appointed as Acting Dean of the Commerce and
Secretarial Department.

On November 26, 1990, he was again appointed by the petitioner as Acting Personnel
Director, in addition to his duties as acting dean. His appointment as Acting Personnel
Director was in a temporary basis and until it is revoked by the President or Rector of the
College. (Annex "A", Rollo, 32)

A year after, private respondent went on leave for one year from November 4, 1991 up to
November 4, 1992.

On October 20, 1992, private respondent wrote the petitioner through its Rector
informing the latter of his intention of reassuming his positions with the petitioner
college.

However, in petitioner's response, it informed private respondent that he cannot anymore

reassume his former position as Acting Dean of the Commerce and Secretarial
Department because he is not qualified for the position.

Then, on November 10, 1992, petitioner formally informed private respondent that the
Board of Trustees of the petitioner college has decided not to allow him to reassume his
position as Acting Dean for the reason that he has not qualified to continue holding the
position and that the position of Acting Personnel director has already been filled up by a
regular incumbent.

Hence, on November 11, 1992, private respondent filed the instant case for illegal
dismissal against petitioner with the office of the Department of Labor in Kalibo, Aklan.
[3]
On May 24, 1994, the Labor Arbiter (LA) handling the case rendered judgment
dismissing the complaint for lack of merit.

Rodolfo P. Guarino (respondent) filed an appeal with the National Labor Relations
Commission (NLRC). On March 9, 1995, the NLRC rendered a Decision reversing the
LA, with the following dispositive portion:
WHEREFORE, the respondents are hereby ordered to pay the complainant separation
pay for his discharge from the position of Dean of Commerce and Secretarial Science,
equivalent to one month pay for every year of service, a fraction of six months being
considered one year.

The respondents are further ordered to reinstate the complainant in his position as
personnel director with full backwages from the time his salaries were withheld from him
until his actual reinstatement, and as instructor without backwages.

The respondents are furthermore ordered to pay the complainant 10% of the monetary
awards as attorney's fees.

Other claims are hereby DISMISSED for lack of sufficient evidence.

Complainant's monetary awards up to March 10, 1995 are (sic) P149,955.85 computed as
follows:
I Separation Pay as Dean
P 4, 395.50 x 17 years P 74, 723.50
II Backwages as Personnel Director
(Nov. 10, 1992-March 10, 1995)
P 61, 600.00
P 2,200 x 28 months
Sub-total P 136, 323.50
II 10% ATTORNEY'S FEES P 13, 623.35
Grand total P 149, 955.85

Aggrieved by the Decision of the NLRC, petitioners filed a special civil action
for certiorari with the CA. On March 9, 2001, the CA rendered judgment denying the
petition and affirming the assailed decision of the NLRC.[5] Petitioners' Motion for
Reconsideration was subsequently denied by the CA in its Resolution dated April 5,
2002.[6]

Hence, herein petition with a sole Assignment of Error, to wit:

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
DISREGARDING THE WELL-SETTLED DOCTRINE LAID DOWN IN LA
SALETTE OF SANTIAGO, INC. v. NLRC, 195 SCRA 80 [1991] THAT NO
EMPLOYEE ATTAINS A SECOND SECURITY OF TENURE TO AN
ADMINISTRATIVE POSITION.[7]
Petitioners contend that it is not a disputed fact that, during his employment with
petitioner ACI, respondent held three concurrent positions: those of an instructor, Acting
Dean of the Commerce Department and Acting Personnel Director; what petitioners
refused to give back to respondent when he was sent a letter dated November 10, 1992
were his positions as Acting Dean and Acting Personnel Director; respondent was never
stripped of his position as an instructor. Citing the case of La Salette of Santiago, Inc. v.
National Labor Relations Commission,[8] petitioners assert that while an employee attains
security of tenure as a member of the teaching staff of a private educational institution
from which he could only be removed for cause, he cannot always aspire for a second
tenure in an administrative position and can, therefore, be stripped of this position by the
appointing power without the latter being held responsible for illegal dismissal.
Petitioners argue that when private respondent was not allowed to re-assume his former
administrative positions as Acting Dean and Acting Personnel Director but was still
considered as an instructor and was even prodded to resume his teaching responsibilities,
he could not be considered as having been illegally dismissed.

Petitioners further argue that there was no law or agreement which gave respondent
additional tenure as dean; that his appointment as dean in a regular capacity was made
dependent on his graduation with a degree of Master in Business Administration (MBA),
as this is a requirement imposed by DECS Order No. 5, Series of 1990 as well as the
Manual of Regulations for Private Schools; that petitioner was not able to finish his MBA
which compelled petitioner ACI to withhold the position from him.

Petitioners also aver that respondent's appointment as Dean and Personnel Director was
only in an acting but never in a regular capacity. Citing various rulings of this Court,
petitioners contend that a bona fide appointment in an acting capacity is essentially
temporary and revocable in character and the holder of such an appointment may be
removed anytime even without hearing or cause.

On the other hand, respondent argues that petitioners' reliance on La Salette is misplaced,
as the factual circumstances obtaining therein are materially different from those in the
present case. Respondent contends that in La Salette, the complainant therein was
appointed to various administrative positions for a definite or fixed term, while in the
present case respondent was appointed as dean not for a fixed duration but for an
indefinite period. In addition, respondent claims that by continuously serving as Dean of
ACI's Commerce and Secretarial Department for more than 17 years, his assumption of
the said office could not be considered as temporary. He claims that while he was not
formally appointed as dean, he has acquired security of tenure as such pursuant to the
provisions of Article 280 of the Labor Code.[9]

The Court finds the petition meritorious.

Respondent's termination as Acting Personnel Director is valid.

The factual milieu in La Salette is similar to the present case insofar as respondent's
position as Personnel Director is concerned. In La Salette, the respondent therein
occupied different administrative positions in various capacities every so often and for a
period not exceeding three years. For three years, she was the principal of La Salette
Jones High School. For the next three years she worked as teacher and Subject Area
Coordinator of a sister school, La Salette of Santiago. Thereafter, for seven years, she
was employed as a full-time instructor in still another sister corporation, La Salette
College; and for two years of that period, she served as the Head of the Department of
Education and Liberal Arts. After which, for three years, she was assigned as Assistant
Principal of the High School Department of La Salette of Santiago, concurrently with her
work as part-time instructor in La Salette College. For the last two years of her
connection with the La Salette School System, she was designated as High School
Principal of La Salette of Santiago. On this matter, the Court held as follows:
What is immediately apparent from this second look at the material facts is that while
Clarita Javier's work as teacher in the La Salette School System was more or less
continuous, or was evidently intended to be on a permanent basis, her assignment in one
administrative office or another-i.e., as high school principal, subject area coordinator,
head of a college department, assistant principal- was not. In these administrative posts,
she served in a non-permanent capacity, either at the pleasure of the school or for a fixed
term. She could not but have become aware of the pattern in her employment relationship
with her employer, of the duality in the nature of her employment, particularly of the
non-permanent character of her stints in the administrative positions to which she was
designated.

There was therefore no cause for her to believe that security of tenure could be obtained
by her in any of the administrative positions she held at one time or another. On the
contrary, the temporariness of her occupancy of those administrative offices must have
become quite apparent to her, in light of the facts. x x x[10]
In the present case, it is not disputed that respondent was appointed as Acting Personnel
Director on November 26, 1990. He went on leave for one year from November 4, 1991
until November 4, 1992, after which he was no longer allowed to re-assume his
administrative posts. Having assumed the position of Personnel Director in an acting
capacity, respondent could not reasonably have expected that he had acquired security of
tenure.

Moreover, in La Salette, the respondent's appointment to the various administrative

positions she held were not even in an acting capacity. Yet this Court held that she never
attained security of tenure with respect to these positions. In the present case, with all the
more reason should respondent not expect that he has gained security of tenure,
considering that his appointment was only in an acting capacity.

This Court has held that an acting appointment is merely temporary, or one which is good
until another appointment is made to take its place.[11] And if another person is appointed,
the temporary appointee should step out and cannot even dispute the validity of his
successor's appointment.[12] The undisturbed unanimity of cases is that one who holds a
temporary appointment has no fixed tenure of office; his employment can be terminated
anytime at the pleasure of the appointing power without need to show that it is for cause.
[13]

Insofar as the principles governing permanent and temporary appointments are

concerned, this Court finds the ruling in the more recent case of Achacoso v.
Macaraig[14] relevant and instructive. While Achacoso served as the jurisprudential basis
in cases involving the issue of security of tenure in career executive service positions in
the government, this Court finds the rules on permanent and temporary appointments
enunciated therein applicable to the present case.

This Court held in Achacoso that a permanent appointment can be issued only to a person
who meets all the requirements for the position to which he is being appointed; a person
who does not have the requisite qualifications for the position cannot be appointed to it in
the first place or, only as an exception to the rule, may be appointed to it merely in an
acting capacity in the absence of persons who are qualified; the purpose of an acting or
temporary appointment is to prevent a hiatus in the discharge of official functions by
authorizing a person to discharge the same pending the selection of a permanent or
another appointee; the person named in an acting capacity accepts the position under the
condition that he shall surrender the office once he is called upon to do so by the
appointing authority.[15]

Consistent with the rulings in La Salette, Achacoso and the other cases cited above,
respondent could not have attained security of tenure with respect to his position as
Personnel Director of ACI. His termination as such is valid.

On the other hand, the factual circumstances are different with respect to respondent's
appointment as Acting Dean of ACI's Commerce Department. In the present case,
respondent was allowed to occupy the position of Acting Dean for a continuous period of
17 years, more or less, beginning in 1974 until he went on leave on November 4, 1991.
Unlike the private respondent in La Salette, herein respondent's term as acting dean
remained uninterrupted. In fact, there was not even any showing that he was handed any
re-appointment paper or made to sign a renewal contract regarding the said position.

Nonetheless, the Court finds respondent's termination as Acting Dean also valid for the
following reasons:

Petitioners assert that under DECS Order No. 5, Series of 1990, as well as Section 41 of
the Manual of Regulations for Private Schools, the acquisition of a Master's degree has
been made a requirement before a person can be appointed as Dean of an undergraduate
program.

Article IV (1) (1.2) of DECS Order No. 5, Series of 1990, provides for the following
minimum qualifications for the position of chairman, dean or director of a school's
accounting program, to wit:

a. Holder of a CPA certificate issued by the Professional Regulation

Commission;

b. Holder of at least a master's degree in business, accountancy, or

business education;

c. Teaching experience of at least three (3) years;

d. The ability to lead and gain the confidence and respect of the faculty.

However, the Court finds that petitioners erred in relying upon the above-quoted
provisions of DECS Order No. 5, Series of 1990, as its basis in dismissing respondent as
the Acting Dean of its Commerce Department, because the said Order specifically applies
only to the position of chairman, dean or director of a school's Accounting Department.
Moreover, petitioners failed to refute respondent's contention in his Position Paper that
the Department of Commerce to which he was assigned consists of many fields of study
other than accounting.

The Court also notes that the Manual being referred to by petitioners is the 1992 Manual
of Regulations for Private Schools (8th Edition). The 1992 Manual took effect at the
beginning of the summer session of 1993.[16] Prior to its effectivity, what was in force was
the 1970 Manual of Regulations (7th Edition). The alleged illegal dismissal of respondent
took place on November 10, 1992. At the time of the dismissal, what was in effect was
the 1970 Manual. Hence, it should have been the 1970 Manual, and not the 1992 Manual,
that petitioners cited as their basis in dismissing respondent from his position as Acting
Dean.

In any case, it must be pointed out that like the 1992 Manual, the 1970 Manual requires
that a Dean of an undergraduate program must have acquired an appropriate graduate
degree. Paragraph 69 of the 1970 Manual provides:
69. Administrative and supervisory officials should have the following minimum
qualifications, duly supported by credentials on file with the school.

a. For principal of primary and/or intermediate schools, a holder of a

Bachelor's degree in Elementary Education or equivalent with three years
of successful teaching experience in the elementary grades.
 b. For principal of secondary schools, a holder of a Bachelor of Science in
Education degree or equivalent with three years of successful teaching
experience in the high school.

c. College dean, a holder of an appropriate graduate degree with at least

three years of successful college teaching experience.

d. Dean of the Graduate School, a holder of an appropriately earned doctorate

degree with at least three years of successful graduate school teaching
experience. (emphasis supplied)

Both the 1970 and 1992 Manuals were promulgated by the Department of Education,
Culture and Sports (now, Department of Education) in the exercise of its rule-making
power as provided for under Section 70[17] of Batas Pambansa Blg. 232, otherwise known
as the Education Act of 1982. As such, these Manuals have the force and effect of law. [18]

Since the 1970 Manual imposes minimum requirements that must be complied with
before a person can be appointed as a college dean, petitioner ACI is duty-bound to
comply with these requirements. Otherwise, it runs the risk of incurring administrative
sanctions from DECS.[19] In the present case, the fact that respondent was retained as an
acting dean for 17 years did not give him a vested right to occupy in a permanent
capacity the position to which he was appointed. Neither do his long years of service
confer upon him the requisite qualifications which he does not possess. Not being a
master's degree holder, he was never and could never have been appointed in a permanent
capacity, as he is not qualified under the law. Thus, pursuant to the 1970 Manual,
respondent's dismissal as acting dean of ACI's Commerce Department is valid.

Respondent's appointment as dean of petitioners' Commerce Department was also in an

acting capacity. Hence, the Court finds the rulings in La Salette and Achacoso, which
were earlier discussed, applicable.

The Court is not persuaded by respondent's contention that petitioner ACI is estopped
from assailing respondent's qualification since it allowed the latter to continue occupying
the position of acting dean for more than 17 years despite the said requirement being
imposed by the DECS.

In the present case, the employment of respondent as Acting Dean is contrary to the
express provisions of the 1970 Manual. It is settled that estoppel cannot give validity to
an act that is prohibited by law, or one that is against public policy.[20] Neither can the
defense of illegality be waived.[21] Hence, respondent's appointment as Acting Dean can
never be deemed validated by estoppel.

Moreover, respondent cannot deny that he is aware of the fact that a master's degree in
business administration is required of a person who is appointed to the position of ACI's
Dean of Commerce. He never disputed petitioners' contention in their Answer/Position
Paper[22] filed with the Labor Arbiter that he was indeed aware of this requirement. In
fact, it was in his Memorandum-Proposal addressed to the Rector of ACI dated May 26,
1972[23] that respondent suggested that ACI grant him financial assistance so that he can
go to graduate school and take up MBA. ACI acted favorably on his suggestion and
awarded him a scholarship grant less than a month after the said Memorandum-Proposal
was submitted.

In addition, one of the conditions imposed by petitioners upon respondent in their

Scholarship and Employment contract was for him to serve as Dean of its Commerce
Department after he finished his MBA. Despite the opportunity given him, respondent
still failed to obtain an MBA. Nonetheless, respondent was still allowed to retain his
position as Acting Dean. Under the foregoing circumstances, especially in light of the
requirements imposed by law, petitioners' extension of respondent's appointment can be
considered simply as an act of grace on the part of the former and may not be interpreted
as a change of status from temporary to permanent. If the intention of the petitioners was
to make respondent's appointment permanent, they would have done so by executing a
different appointment paper considering the fact that the original appointment was of a
temporary nature.

Moreover, the provisions of Article 280 of the Labor Code are not applicable to the
present case especially with respect to the issue of respondent's acquisition of security of
tenure. It is settled that questions respecting a private school teacher's entitlement to
security of tenure are governed by the Manual of Regulations for Private Schools and not
the Labor Code. Paragraph 75[24] of the 1970 Manual (now Section 93[25] of the 1992
Manual) lays down the requisites before a teacher can be considered as having attained a
permanent status and therefore entitled to security of tenure. In La Salette, the Court was
clear in ruling that, unlike teachers (assistant instructors, instructors, assistant professors,
associate professors, full professors) who aspire for and expect to acquire permanency, or
security of tenure, in their employment as faculty members, teachers who are appointed
as department heads or administrative officials (e.g., college or department secretaries,
principals, directors, assistant deans, deans) do not normally, and should not expect to,
acquire a second status of permanency or an additional or second security of tenure as
such officer. In the instant case, it is not disputed that respondent was never removed
from his position as instructor. He was only dismissed from his capacity as Acting Dean
and Acting Personnel Director.

As to respondent's right to procedural due process, this Court has held that there is no
need of a notice to the acting appointee or any form of hearing.[26] Such procedural
requirements apply where the officer is removable only for cause.[27] This Court reiterates
the rule that a bona fide appointment in an acting capacity is essentially temporary and
revocable in character and the holder of such appointment may be removed anytime even
without hearing or cause.[28]

As to respondent's entitlement to separation pay, the settled rule is that separation pay is
the amount that an employee receives at the time of his severance from the service and is
designed to provide the employee with the wherewithal during the period that he is
seeking another employment.[29] In the present case, while respondent was no longer
allowed to return to his positions as Acting Dean and Acting Personnel Director he was,
nonetheless, retained as an instructor. Hence, he could not be deemed as separated from
the service because his employment as instructor remains.

On the other hand, if respondent chose to seek another employment as there is no

showing in the present case that he returned to his position as instructor, petitioners
should not be faulted and made to suffer the consequence of respondent's decision. In
such a case he is deemed to have voluntarily resigned. Settled is the rule that an employee
who voluntarily resigns from employment is not entitled to separation pay unless,
however, there is a stipulation for payment of such in the employment contract or
Collective Bargaining Agreement, or payment of the amount is sanctioned by established
employer practice or policy.[30] There is no proof to show that the present case falls under
any of the above-enumerated exceptions. Hence, the Court finds no cogent reason to
award him separation pay.

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of

Appeals dated March 9, 2001 in CA-G.R. SP No. 54035, which affirmed the Decision of
the National Labor Relations Commission, Fourth Division, Cebu City in NLRC Case
No. V-0261-94 is REVERSED and SET ASIDE. The Labor Arbiter's Decision dated
May 24, 1994 in RAB Case No. 0210-AKLAN-92 (06-11-700045-92), dismissing
respondent's complaint for lack of merit, is REINSTATED.

No costs.

SO ORDERED.