Republic of the Philippines

Supreme Court
Manila
THIRD DIVISION
WOODRIDGE SCHOOL (now
WOODRIDGE COLLEGE, INC.),
Petitioner,

known

- versus -

as G.R. No. 160240

Present:
YNARES-SANTIAGO, J.,
Chairperson,
CARPIO,*
AZCUNA,**
CHICO-NAZARIO, and
NACHURA, JJ.

JOANNE C. PE BENITO and RANDY T. Promulgated:

BALAGUER,
Respondents.
October 29, 2008
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set
aside the Court of Appeals (CA) Decision[1] dated June 30, 2003 and its Resolution[2] dated
September 26, 2003 in CA-G.R. SP No. 75249. The assailed decision in turn set aside the
Resolution[3] of the National Labor Relations Commission (NLRC) dated June 28, 2002 in
NLRC Case No. RAB-IV-3-13593-01-C (CA No. 030579-02).
The factual and procedural antecedents follow:
Petitioner Woodridge School is a private educational institution located at Woodwinds Village,
Molino 6, Bacoor, Cavite. Respondents Joanne C. Pe Benito (Pe Benito) and Randy T. Balaguer
(Balaguer) were hired as probationary high school teachers effective June 1998 and June 1999,
respectively.[4] Their contracts of employment covered a three (3) year probationary period. Pe
Benito handled Chemistry and Physics while Balaguer taught Values Education and Christian
Living.[5]
On February 19, 2001, respondents, together with twenty other teachers, presented petitioner
with a Manifesto Establishing Relevant Issues Concerning the School [6] raising various issues
which they wanted addressed, among which were:
I. NSAT/NEAT ANOMALY:
We emphatically condemn the schools grave act of wrongdoing when it involved
itself on the NSAT and NEAT anomaly. We demand that we be given assurance in
writing that this illegal and immoral conduct will never happen again, otherwise,
we will be obligated as moral guardians of the youth to make more proper action.

II.

TEACHERS RIGHT FOR A DUE PROCESS:

We felt betrayed when one of our former colleague[s] who was then regularly
employed and was perceived to be harmless and an asset to the school, for no
solid basis or apparent investigation conducted by the school, was suddenly
expelled from his job.
xxxx

III.

ISSUANCE OF INDIVIDUAL CONTRACTS:

We wonder until now even after a number of years have already passed, our
copies of individual contracts with the school have not yet been furnished to
us. We demand that this legal document will be (sic) issued to us for job security
and other legal purposes it may serve.
We also demand that AN APPOINTMENT OF PERMANENCY shall be (sic)
given to a permanent teacher from the time the teacher is qualified to be
permanent based on the duly set terms/standards of permanency of the school.
IV.

NON-CLEAR-CUT SCHOOL POLICIES:

It has been observed and experienced from the past school years and until the
present that there are a lot of inconsistencies regarding the schools policies like:
A.

Changing of:
The narrative forms of students
Grades, and
Behavioral rating sheets

With these experiences, the teachers felt cheated and that these affect (sic) their
sense of worth and credibility. We then ask that the school should as always
respect what the teachers deemed to be right and just fitting for the students. After
all, the teachers are the ones meeting and facing the students and they know what
is due to the students better that (sic) anyone else in the school.
B.

Others.[7]

A confrontation between the school administrators and the concerned teachers was held, but no
settlement was arrived at.
For failure of the parties to resolve the issues, especially the alleged NSAT/NEAT anomaly,
respondents filed a formal complaint against petitioner with the Department of Education,
Culture and Sports (DECS)[8] requesting the latter to undertake a formal investigation, institute
appropriate charges, and impose proper sanctions against petitioner.[9]During the pendency of the
DECS case, and for lack of a positive action from petitioner, respondents appeared on television
and spoke over the radio on the alleged NEAT/NSAT anomaly.
On February 28, 2001, petitioner sent two separate Memoranda [10] to respondents placing them
under preventive suspension for a period of thirty days on the following grounds: 1) uttering
defamatory remarks against the school principal in the presence of their co-teachers; 2)
announcing to the students and teachers their alleged immediate termination from service; 3)
tardiness; 4) spreading false accusations against petitioner; 5) absence without official leave; and

6) appearing on television and speaking over the radio to malign petitioner. In the same
memoranda, respondents were required to explain in writing within seventy-two (72) hours why
they should not be terminated from their employment.This prompted respondents to commence
an action for illegal suspension before the NLRC. The case was docketed as NLRC NCR CASE
NO. RAB-IV-3-13593-01-C.
On March 19, 2001, petitioner issued respondents their Notice of Termination, [11] each to take
effect similarly on March 31, 2001, citing the foregoing grounds. In addition, petitioner informed
respondents that they did not qualify as regular employees for their failure to meet the
performance standards made known to them at the start of their probationary period.
Respondents then amended their initial complaint, to include illegal dismissal.
After the submission of the parties position papers, on November 29, 2001, Labor Arbiter
Vicente R. Layawen rendered a Decision dismissing the complaint. [12] He concluded that the
termination of the respondents probationary employment was justified because of their failure to
submit vital teaching documents. Specifically, Pe Benito failed to submit her day book/lesson
plans; while Balaguer failed to submit the subject syllabi and he had no record of class
requirements as to quizzes, seatworks, homeworks, and recitation which were supposed to be the
bases in rating the students performance.[13] More importantly, the Labor Arbiter found
respondents guilty of serious misconduct warranting their dismissal from service because of
maliciously spreading false accusation against the school through the mass media. These acts,
according to the Labor Arbiter, made them unfit to remain in the schools roster of teachers.
[14]
The Labor Arbiter also validated the preventive suspension of respondents for their having
used the classroom as venue in spreading uncorroborated charges against petitioner, thus posing
a serious threat to petitioners business and reputation as a respectable institution.[15]
On appeal to the NLRC, the Commission affirmed [16] the Labor Arbiters disposition in its
entirety. The Commission concluded that respondents acts, taken together, constitute serious
misconduct, warranting their dismissal from service.
Aggrieved, respondents elevated the matter to the CA in CA-G.R. SP No. 75249. The CA
granted the petition and set aside the NLRC ruling in a decision, the dispositive portion of which
reads:
WHEREFORE, premises considered, the present petition is hereby GIVEN DUE
COURSE and the writ prayed for accordingly GRANTED. Consequently, the
assailed Resolutions of public respondent NLRC are hereby SET ASIDE and a
new one is hereby entered declaring the thirty (30)-day suspension of petitioners
on February 28, 2001 as illegal and ordering private respondent Woodridge
School to pay to both petitioners Joanne C. Pe Benito and Randy T. Balaguer their
salaries and benefits accruing during said period of illegal suspension. Woodridge
School is also ordered to pay to petitioner Balaguer back wages for the period
April 1, 2001 up to March 31, 2002. Finally, it is further ordered to pay each of
the petitioners the sums ofP50,000.00 as moral damages, P50,000.00 as
exemplary damages and attorneys fees equivalent to ten percent (10%) of the total
amount due.
No pronouncement as to costs.
SO ORDERED.[17]

The appellate court declared the preventive suspension of respondents invalid because it was
based on the alleged violation of school regulations on the wearing of uniform, tardiness or
absence, and maliciously spreading false accusations against the school, grounds that do not pose
a serious threat to the life or property of the employer or of the workers. [18] Contrary to the Labor
Arbiter and the Commissions findings, the CA concluded that respondents acts do not constitute
serious misconduct. Respondents act of exposing the alleged NSAT/NEAT anomaly, as well as
raising the other issues haunting the school administration, only indicates their concern for the
integrity of the government examination and of the school. The use of the mass media was
simply the respondents response to the petitioners inaction on their grievances. [19] No bad faith
could be attributed to respondents in acting the way they did.
The appellate court likewise refused to sustain petitioners contention that respondents failed to
qualify for permanent employment, as there was no sufficient evidence to prove the same. [20] The
appellate court emphasized that because respondents are probationary employees, legal
protection extends only to the period of their probation.[21] The dismissal breached their
probationary employment, and being tainted with bad faith, the court upheld the award of moral
and exemplary damages.[22]
Aggrieved, petitioner comes before this Court in this petition for review on certiorari, raising the
sole issue of:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS
ERROR IN GRANTING RESPONDENTS PETITION FOR CERTIORARI AND
IN SETTING ASIDE THE FINDINGS OF BOTH THE NLRC AND THE
LABOR ARBITER A QUO.[23]

We deny the petition.

Petitioner asserts that the CA should have outrightly dismissed the petition, because the
verification and certificate of non-forum shopping was signed by only one of the respondents,
without the authority of the other.[24]
Time and again, we have said that the lack of verification is merely a formal defect that is neither
jurisdictional nor fatal. In a proper case, the court may order the correction of the pleading, or act
on the unverified pleading, if the attending circumstances are such that the rule may be dispensed
with in order to serve the ends of justice. It should be stressed that rules of procedure were
conceived and promulgated to effectively aid the court in the dispensation of justice.
[25]
Verification is mainly intended to secure the assurance that the allegations in the petition are
done in good faith or are true and correct and not mere speculation.[26]
In the instant case, this requirement was substantially complied with when one of the petitioners
(respondents herein), who undoubtedly had sufficient knowledge and belief to swear to the truth
of the allegations in the petition, signed the verification attached to it. Indeed, the Court has ruled
in the past that a pleading required by the Rules of Court to be verified may be given due course
even without a verification, if the circumstances warrant the suspension of the rules in the
interest of justice, as in the present case. [27]

As to the certification against forum shopping, the CA correctly relaxed the Rules in order to
serve the ends of justice. While the general rule is that the certificate of non-forum shopping
must be signed by all the plaintiffs or petitioners in a case and the signature of only one of them
is insufficient, this Court has stressed that the rules on forum shopping, which were designed to
promote and facilitate the orderly administration of justice, should not be interpreted with
absolute literalness as to subvert its own ultimate and legitimate objective. Strict compliance
with the provisions regarding the certificate of non-forum shopping merely underscores its
mandatory nature in that the certification cannot be altogether dispensed with or its requirements
completely disregarded. It does not, however, interdict substantial compliance with its provisions
under justifiable circumstances.[28]
In fact, we have relaxed the rules in a number of cases for two compelling reasons: social justice
considerations[29] and the apparent merit[30] of the petition. In light of these jurisprudential
pronouncements, the CA should not be faulted in setting aside the procedural infirmity, allowing
the petition to proceed and deciding the case on the merits. In rendering justice, courts have
always been, as they ought to be, conscientiously guided by the norm that on the balance,
technicalities take a backseat vis--vis substantive rights, and not the other way around.[31]
Now on the substantive issue of the validity of the dismissal and preventive suspension of
respondents.
Petitioner insists that respondents dismissal from service was lawful and justified by the
following grounds: 1) as probationary employees, respondents failed to meet the reasonable
standards for their permanent employment; and 2) in publicly accusing petitioner on radio and
national television, of dishonesty and wrongdoing, during the pendency of the administrative
investigation of the alleged dishonest acts, undertaken by the proper government agency.[32]
Initially, it should be clarified that this controversy revolves only on respondents probationary
employment. On March 31, 2001, the effective date of their dismissal, [33]respondents were not
regular or permanent employees; they had not yet completed three (3) years of satisfactory
service as academic personnel which would have entitled them to tenure as permanent
employees in accordance with the Manual of Regulations for Private Schools.[34] On that date, Pe
Benitos contract of employment still had two months to run, while Balaguers probationary
employment was to expire after one year and two months.
A probationary employee is one who, for a given period of time, is being observed and
evaluated to determine whether or not he is qualified for permanent employment. A probationary
appointment affords the employer an opportunity to observe the skill, competence and attitude of
a probationer. The word probationary, as used to describe the period of employment, implies the
purpose of the term or period. While the employer observes the fitness, propriety and efficiency
of a probationer to ascertain whether he is qualified for permanent employment, the probationer
at the same time, seeks to prove to the employer that he has the qualifications to meet the
reasonable standards for permanent employment.[35]
Probationary employees enjoy security of tenure in the sense that during their probationary
employment, they cannot be dismissed except for cause or when he fails to qualify as a regular
employee.[36] However, upon expiration of their contract of employment, probationary employees
cannot claim security of tenure and compel their employers to renew their employment

contracts. In fact, the services of an employee hired on probationary basis may be terminated
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 that
would hinder the employer from extending a regular or 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, the law does not preclude the employer
from terminating the probationary employment on justifiable ground.[37]
The notices of termination sent by petitioner to respondents stated that the latter failed to qualify
as regular employees.[38] However, nowhere in the notices did petitioner explain the details of
said failure to qualify and the standards not met by respondents. We can only speculate that this
conclusion was based on the alleged acts of respondents in uttering defamatory remarks against
the school and the school principal;[39] failure to report for work for two or three times; [40] going
to class without wearing proper uniform;[41]delay in the submission of class records; and nonsubmission of class syllabi. Yet, other than bare allegations, petitioner failed to substantiate the
same by documentary evidence.Considering that respondents were on probation for three years,
and they were subjected to yearly evaluation by the students and by the school administrators
(principal and vice-principal), it is safe to assume that the results thereof were definitely
documented. As such, petitioner should have presented the evaluation reports and other related
documents to support its claim, instead of relying solely on the affidavits of their witnesses. The
unavoidable inference, therefore, remains that the respondents dismissal is invalid.
If respondents could not be dismissed on the above-mentioned ground, could their services have
been validly terminated on the ground of serious misconduct?
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.
[42]
Under the requirement of substantial due process, the grounds for termination of employment
must be based on just[43] or authorized causes.[44]
Misconduct is defined as improper or wrong conduct. It is the transgression of some established
and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error of judgment. The misconduct to be serious within the
meaning of the Act, must be of such a grave and aggravated character and not merely trivial or
unimportant.[45] Such misconduct, however serious, must nevertheless be in connection with the
work of the employee to constitute just cause for his separation. [46] It is not sufficient that the act
or conduct complained of has violated some established rules or policies. It is equally important
and required that the act or conduct must have been performed with wrongful intent.[47]
Petitioner anchored its imputation of serious misconduct principally on the respondents expose
of the NSAT/NEAT anomaly. Petitioner argues that by appearing on television and speaking over
the radio, respondents were undeserving to become part of the school community, and the
school, therefore, could not be compelled to retain in its employ such undisciplined teachers.
In this regard, we find it necessary to go back to where the controversy started, when the
concerned teachers, including respondents, presented to petitioner a manifesto, setting forth the
issues they wanted the school to address. As correctly observed by the CA, the tenor of the
manifesto indicated good faith, as the teachers, in fact, expressly stated that their ultimate

objective was not to put the school down, but to work for some changes which would be
beneficial to the students, teachers, the school and the country as a whole.[48] In their effort to
settle the issues amicably, the teachers (including respondents) asked for a dialogue with
petitioner but the latter, instead of engaging in creative resolution of the matter, uttered
unnecessary statement against respondents. This incident was followed by subsequent acts of
petitioner showing abuse of its power over the teachers, especially respondents, who at that time,
were under probation. Notwithstanding its claim that respondents were remiss in their duties as
teachers during the whole period of probation, it was only after the NSAT/NEAT expos when
petitioner informed respondents of their alleged substandard performance. The chronology of
events, therefore, supports the view that respondents suspension and eventual dismissal from
service were tainted with bad faith, as obvious retaliatory acts on the part of petitioner.
The totality of the acts of respondents cannot be characterized as misconduct under the law,
serious enough to warrant the severe penalty of dismissal. This is especially true because there is
no finding of malice or wrongful intent attributable to respondents. We quote with approval the
CAs ratiocination in this wise:
Petitioners [respondents herein], along with their colleagues, initiated the dialogue
and brought the above issues to the school authorities but the School Principals
reaction was far from what the teachers expected. Instead of taking serious
concern and properly addressing the teachers grievances as expressed in the
Manifesto, Mrs. Palabrica got angry and hysterical accusing the petitioners
[respondents] of malice and bad faith and even threatened to dismiss
them. Petitioners [respondents] subsequent media expos and filing of a formal
complaint was necessitated by private respondents [petitioners] inaction and
refusal to heed their legitimate complaint. Being but a legitimate exercise of their
rights as such teachers/educators and as citizens, under the circumstances, We
cannot readily impute malice and bad faith on the part of the petitioners
[respondents] who, in fact, risked such the harsh consequence of loss of their job
and non-renewal of their probationary employment contract just so the issue of
the NEAT/NSAT anomaly involving their school would be ventilated in the
proper forum as to compel or somehow pressure not only their school but more
important, the governments education officials at the DECS to undertake proper
and urgent measures. Hardly would such acts in relation to a matter impressed
with public interest i.e. the integrity of the NEAT/NSAT process as a tool
designed by the DECS to measure or gauge the achievement level of pupils and
students in the schools nationwide be considered as showing moral depravity or ill
will on the part of the petitioners. x x x[49]

In light of this disquisition, it is settled that petitioner failed to comply with the requirement of
substantial due process in terminating the employment of respondents.
We now determine whether petitioner had complied with the procedural aspect of lawful
dismissal.
In the termination of employment, the employer must (a) give the employee a written notice
specifying the ground or grounds of termination, giving to said employee reasonable opportunity
within which to explain his side; (b) conduct a hearing or conference during which the employee
concerned, with the assistance of counsel if the employee so desires, is given the opportunity to
respond to the charge, present his evidence or rebut the evidence presented against him; and (c)
give the employee a written notice of termination indicating that upon due consideration of all
circumstances, grounds have been established to justify his termination.[50]

Suffice it to state that respondents were afforded their rights to answer to petitioners allegation
and were given the opportunity to present evidence in support of their defense.Nowhere in any of
their pleadings did they question the procedure for their termination except to challenge the
ground relied upon by petitioner. Ostensibly, therefore, petitioner had complied with the
procedural aspect of due process in terminating the employment of respondents. However, we
still hold that the dismissal is illegal, because of petitioners failure to satisfy the substantive
aspect thereof, as discussed above.
We are not unmindful of the equally important right of petitioner, as employer, under our
Constitution, to be protected in their property and interest. Nevertheless, the particular
circumstances surrounding this case convince us that the supreme penalty of dismissal upon
respondents is not justified. The law regards the workers with compassion. This is not only
because of the laws concern for the workingman. There is, in addition, his family to
consider. Unemployment brings untold hardships and sorrows on those dependent upon the
wage-earner.[51]
Respondents likewise questioned their preventive suspension, but the Labor Arbiter and
the NLRC sustained its validity. The CA, on the other hand, declared the same to be illegal.
Thus, petitioner insists that respondents preventive suspension was proper, in view of the latters
acts of utilizing their time, not to teach, but to spread rumors that the former was about to cease
operation.[52]
The law is clear on this matter. While the employer may place the worker concerned under
preventive suspension, it can do so only if the latters continued employment poses a serious and
imminent threat to the life or property of the employer or of his co-workers. [53] In this case, the
grounds relied upon by petitioner in placing respondents under preventive suspension were the
alleged violation of school rules and regulations on the wearing of uniform, tardiness or absence,
and maliciously spreading false accusations against the school.[54] These grounds do not, in any
way, pose a threat to the life or property of the school, of the teachers or of the students and their
parents. Hence, we affirm the CAs conclusion that respondents preventive suspension was
illegal.
As probationary employees, respondents security of tenure is limited to the period of their
probation for Pe Benito, until June 2001[55] and for Balaguer, June 2002.[56] As they were no
longer extended new appointments, they are not entitled to reinstatement and full
backwages. Rather, Pe Benito is only entitled to her salary for her 30-day preventive suspension.
[57]
As to Balaguer, in addition to his 30-day salary during his illegal preventive suspension, he is
entitled to his backwages for the unexpired term of his contract of probationary employment.
Lastly, petitioner faults the appellate court for awarding moral and exemplary damages in
favor of respondents despite lack of sufficient basis to support the award.[58]
A dismissed employee is entitled to moral damages when the dismissal is attended by bad faith
or fraud; or constitutes an act oppressive to labor; or is done in a manner contrary to good
morals, good customs or public policy. Exemplary damages, on the other hand, may be awarded
if the dismissal is effected in a wanton, oppressive or malevolent manner.[59] The award of said
damages cannot be justified solely upon the premise that the employer fired his employee
without just cause or due process. It is necessary that additional facts be pleaded and proven that

the act of dismissal was attended by bad faith, fraud, et al., and that social humiliation, wounded
feelings and grave anxiety resulted therefrom.[60]
Be that as it may, we find the award of moral and exemplary damages proper, as we quote with
approval the CAs justification for the award, thus:
At any rate, there is no question that both petitioners [respondents herein] are
entitled to the award of moral and exemplary damages, in view of the proven acts
done in bad faith on the part of private respondents [petitioner herein] who
threatened petitioners [respondents] immediate dismissal when the Manifesto was
presented by petitioners [respondents], berating and verbally castigating petitioner
[respondent] Pe Benito, portraying them as mere detractors in an open letter to the
parents who were merely motivated by the design to malign the integrity of the
school. x x x We find such bad faith on the part of private respondents [petitioner]
in effectively exerting pressure to silence the petitioners [respondents] regarding
their legitimate grievances against the school as sufficiently established in the
records, private respondents [petitioners] actuations having sullied the
professional integrity of the petitioners [respondents] and divided the faculty
members on the controversy. For such unjustified acts in relation to the
NEAT/NSAT controversy that resulted to loss, prejudice and damage to
petitioners [respondents], private respondents [petitioner] are liable for moral and
exemplary damages.[61]

WHEREFORE, premises considered, the petition is hereby DENIED. The Court of Appeals
Decision and Resolution dated June 30, 2003 and September 26, 2003, respectively, in CA-G.R.
SP No. 75249, are AFFIRMED.

Republic of the Philippines

Supreme Court
Baguio City

SECOND DIVISION

YOLANDA M. MERCADO,

G.R. No. 183572

CHARITO S. DE LEON, DIANA R.

LACHICA,
MARGARITO
M.
Present:
ALBA, JR., and FELIX A.
TONOG,
Petitioners,

CARPIO, J., Chairperson,

BRION,
DEL CASTILLO,

versus -

PEREZ, and
*

MENDOZA, JJ.

AMA
COMPUTER
COLLEGEPARAAQUE CITY, INC. ,

Promulgated:

Respondent.
April 13, 2010
x-----------------------------------------------------------------------------------------x
DECISION

BRION, J.:

The petitioners Yolanda M. Mercado (Mercado), Charito S. De Leon (De Leon),

Diana R. Lachica (Lachica), Margarito M. Alba, Jr. (Alba, Jr.,), and Felix A.
Tonog (Tonog), all former faculty members of AMA Computer CollegeParaaque City, Inc. (AMACC) assail in this petition for review
on certiorari[1] the Court of Appeals (CA) decision of November 29,

2007[2] and its resolution of June 20, 2008[3] that set aside the National Labor
Relations Commissions (NLRC) resolution dated July 18, 2005.[4]

THE FACTUAL ANTECEDENTS

The background facts are not disputed and are summarized below.

AMACC is an educational institution engaged in computer-based education in

the country. One of AMACCs biggest schools in the country is its branch
at Paraaque City. The petitioners were faculty members who started teaching
at AMACC on May 25, 1998. The petitioner Mercado was engaged as a
Professor 3, while petitioner Tonog was engaged as an Assistant Professor
2. On the other hand, petitioners De Leon, Lachica and Alba, Jr., were all
engaged as Instructor 1.[5] The petitioners executed individual Teachers
Contracts for each of the trimesters that they were engaged to teach, with
the following common stipulation:[6]

1.
POSITION. The TEACHER has agreed to accept a non-tenured
appointment to work in the College of xxx effective xxx to xxx or for
the duration of the last term that the TEACHER is given a teaching
load based on the assignment duly approved by the DEAN/SAVP-COO.
[Emphasis supplied]

For the school year 2000-2001, AMACC implemented new faculty screening
guidelines, set forth in its Guidelines on the Implementation of AMACC
Faculty Plantilla.[7]Under the new screening guidelines, teachers were to be
hired or maintained based on extensive teaching experience, capability,
potential, high academic qualifications and research background. The
performance standards under the new screening guidelines were also used
to determine the present faculty members entitlement to salary
increases.The petitioners failed to obtain a passing rating based on
the performance standards; hence AMACC did not give them any
salary increase.[8]

Because of AMACCs action on the salary increases, the petitioners filed a

complaint with the Arbitration Branch of the NLRC on July 25, 2000, for
underpayment of wages, non-payment of overtime and overload
compensation, 13th month pay, and for discriminatory practices.[9]

On September 7, 2000, the petitioners individually received a memorandum

from AMACC, through Human Resources Supervisor Mary Grace Beronia,
informing them that with the expiration of their contract to teach, their
contract would no longer be renewed.[10] The memorandum[11] entitled Notice
of Non-Renewal of Contract states in full:

In view of the expiration of your contract to teach with AMACC-Paranaque,

We wish to inform you that your contract shall no longer be renewed
effective Thirty (30) days upon receipt of this notice. We therefore would like
to thank you for your service and wish you good luck as you pursue your
career.

You are hereby instructed to report to the HRD for further instruction. Please
bear in mind that as per company policy, you are required to accomplish

your clearance and turn-over all documents and accountabilities to your

immediate superior.

For your information and guidance

The petitioners amended their labor arbitration complaint to include the

charge of illegal dismissal against AMACC. In their Position Paper, the
petitioners claimed that their dismissal was illegal because it was made in
retaliation for their complaint for monetary benefits and discriminatory
practices against AMACC. The petitioners also contended that AMACC failed
to give them adequate notice; hence, their dismissal was ineffectual.[12]

AMACC contended in response that the petitioners worked under a

contracted term under a non-tenured appointment and were still within the
three-year probationary period for teachers. Their contracts were not
renewed for the following term because they failed to pass the Performance
Appraisal System for Teachers (PAST) while others failed to comply with the
other requirements for regularization, promotion, or increase in salary. This
move, according to AMACC, was justified since the school has to maintain its
high academic standards.[13]

The Labor Arbiter Ruling

On March 15, 2002, Labor Arbiter (LA) Florentino R. Darlucio declared in his
decision[14] that the petitioners had been illegally dismissed, and ordered
AMACC to reinstate them to their former positions without loss of seniority
rights and to pay them full backwages, attorneys fees and 13 th month pay.
The LA ruled that Article 281 of the Labor Code on probationary employment
applied to the case; that AMACC allowed the petitioners to teach for the first
semester of school year 2000-200; that AMACC did not specify who among
the petitioners failed to pass the PAST and who among them did not comply
with the other requirements of regularization, promotions or increase in
salary; and that the petitioners dismissal could not be sustained on the basis
of AMACCs vague and general allegations without substantial factual basis.
[15]
Significantly, the LA found no discrimination in the adjustments for the
salary rate of the faculty members based on the performance and other
qualification which is an exercise of management prerogative.[16] On this
basis, the LA paid no heed to the claims for salary increases.

The NLRC Ruling

On appeal, the NLRC in a Resolution dated July 18, 2005 [17] denied AMACCs
appeal for lack of merit and affirmed in toto the LAs ruling. The NLRC,
however, observed that the applicable law is Section 92 of the Manual of
Regulations for Private Schools (which mandates a probationary period of
nine consecutive trimesters of satisfactory service for academic personnel in
the tertiary level where collegiate courses are offered on a trimester basis),
not Article 281 of the Labor Code (which prescribes a probationary period of
six months) as the LA ruled. Despite this observation, the NLRC affirmed the

LAs finding of illegal dismissal since the petitioners were terminated on the
basis of standards that were only introduced near the end of their
probationary period.

The NLRC ruled that the new screening guidelines for the school year 200020001 cannot be imposed on the petitioners and their employment contracts
since the new guidelines were not imposed when the petitioners were first
employed in 1998. According to the NLRC, the imposition of the new
guidelines violates Section 6(d) of Rule I, Book VI of the Implementing Rules
of the Labor Code, which provides that in all cases of probationary
employment, the employer shall make known to the employee the standards
under which he will qualify as a regular employee at the time of his
engagement. Citing our ruling in Orient Express Placement Philippines v.
NLRC,[18] the NLRC stressed that the rudiments of due process demand that
employees should be informed beforehand of the conditions of their
employment as well as the basis for their advancement.

AMACC elevated the case to the CA via a petition for certiorari under Rule 65
of the Rules of Court. It charged that the NLRC committed grave abuse of
discretion in: (1) ruling that the petitioners were illegally dismissed; (2)
refusing to recognize and give effect to the petitioners valid term of
employment; (3) ruling that AMACC cannot apply the performance standards
generally applicable to all faculty members; and (4) ordering the petitioners
reinstatement and awarding them backwages and attorneys fees.

The CA Ruling

In a decision issued on November 29, 2007,[19] the CA granted AMACCs

petition for certiorari and dismissed the petitioners complaint for illegal
dismissal.

The CA ruled that under the Manual for Regulations for Private Schools, a
teaching personnel in a private educational institution (1) must be a full time
teacher; (2) must have rendered three consecutive years of service; and (3)
such service must be satisfactory before he or she can acquire permanent
status.

The CA noted that the petitioners had not completed three (3) consecutive
years of service (i.e. six regular semesters or nine consecutive trimesters of
satisfactory service) and were still within their probationary period; their
teaching stints only covered a period of two (2) years and three (3) months
when AMACC decided not to renew their contracts on September 7, 2000.

The CA effectively found reasonable basis for AMACC not to renew the
petitioners contracts. To the CA, the petitioners were not actually dismissed;
their respective contracts merely expired and were no longer renewed by
AMACC because they failed to satisfy the schools standards for the school
year 2000-2001 that measured their fitness and aptitude to teach as regular
faculty members. The CA emphasized that in the absence of any evidence of

bad faith on AMACCs part, the court would not disturb or nullify its discretion
to set standards and to select for regularization only the teachers who
qualify, based on reasonable and non-discriminatory guidelines.

The CA disagreed with the NLRCs ruling that the new guidelines for the
school year 2000-20001 could not be imposed on the petitioners and their
employment contracts.The appellate court opined that AMACC has the
inherent right to upgrade the quality of computer education it offers to the
public; part of this pursuit is the implementation of continuing evaluation and
screening of its faculty members for academic excellence. The CA noted that
the nature of education AMACC offers demands that the school constantly
adopt progressive performance standards for its faculty to ensure that they
keep pace with the rapid developments in the field of information technology.

Finally, the CA found that the petitioners were hired on a non-tenured basis
and for a fixed and predetermined term based on the Teaching Contract
exemplified by the contract between the petitioner Lachica and AMACC. The
CA ruled that the non-renewal of the petitioners teaching contracts is
sanctioned by the doctrine laid down in Brent School, Inc. v. Zamora[20] where
the Court recognized the validity of contracts providing for fixed-period
employment.
THE PETITION

The petitioners cite the following errors in the CA decision:[21]

1)
The CA gravely erred in reversing the LA and NLRC illegal dismissal
rulings; and
2)
The CA gravely erred in not ordering their reinstatement with full,
backwages.

The petitioners submit that the CA should not have disturbed the findings of
the LA and the NLRC that they were illegally dismissed; instead, the CA
should have accorded great respect, if not finality, to the findings of these
specialized bodies as these findings were supported by evidence on
record. Citing our ruling in Soriano v. National Labor Relations Commission,
[22]
the petitioners contend that in certiorari proceedings under Rule 65 of the
Rules of Court, the CA does not assess and weigh the sufficiency of evidence
upon which the Labor Arbiter and the NLRC based their conclusions. They
submit that the CA erred when it substituted its judgment for that of the
Labor Arbiter and the NLRC who were the triers of facts who had the
opportunity to review the evidence extensively.

On the merits, the petitioners argue that the applicable law on probationary
employment, as explained by the LA, is Article 281 of the Labor Code which
mandates a period of six (6) months as the maximum duration of the
probationary period unless there is a stipulation to the contrary; that the CA
should not have disturbed the LAs conclusion that the AMACC failed to
support its allegation that they did not qualify under the new guidelines
adopted for the school year 2000-2001; and that they were illegally

dismissed; their employment was terminated based on standards that were

not made known to them at the time of their engagement. On the whole, the
petitioners argue that the LA and the NLRC committed no grave abuse of
discretion that the CA can validly cite.

THE CASE FOR THE RESPONDENT

In their Comment,[23] AMACC notes that the petitioners raised no substantial

argument in support of their petition and that the CA correctly found that the
petitioners were hired on a non-tenured basis and for a fixed or
predetermined term. AMACC stresses that the CA was correct in concluding
that no actual dismissal transpired; it simply did not renew the petitioners
respective employment contracts because of their poor performance and
failure to satisfy the schools standards.
AMACC also asserts that the petitioners knew very well that the applicable
standards would be revised and updated from time to time given the nature
of the teaching profession. The petitioners also knew at the time of their
engagement that they must comply with the schools regularization policies
as stated in the Faculty Manual. Specifically, they must obtain a passing
rating on the Performance Appraisal for Teachers (PAST) the primary
instrument to measure the performance of faculty members.
Since the petitioners were not actually dismissed, AMACC submits that the
CA correctly ruled that they are not entitled to reinstatement, full backwages
and attorneys fees.
THE COURTS RULING
We find the petition meritorious.
The CAs Review of Factual Findings under Rule 65

We agree with the petitioners that, as a rule in certiorari proceedings under

Rule 65 of the Rules of Court, the CA does not assess and weigh each piece
of evidence introduced in the case. The CA only examines the factual
findings of the NLRC to determine whether or not the conclusions are
supported by substantial evidence whose absence points to grave abuse of
discretion amounting to lack or excess of jurisdiction. [24] In the recent case
of Protacio v. Laya Mananghaya & Co.,[25] we emphasized that:
As a general rule, in certiorari proceedings under Rule 65 of the Rules of
Court, the appellate court does not assess and weigh the sufficiency of
evidence upon which the Labor Arbiter and the NLRC based their conclusion.
The query in this proceeding is limited to the determination of whether or not
the NLRC acted without or in excess of its jurisdiction or with grave abuse of
discretion in rendering its decision. However, as an exception, the
appellate court may examine and measure the factual findings of
the NLRC if the same are not supported by substantial evidence.
The Court has not hesitated to affirm the appellate courts reversals
of the decisions of labor tribunals if they are not supported by
substantial evidence.[Emphasis supplied]

As discussed below, our review of the records and of the CA decision shows
that the CA erred in recognizing that grave abuse of discretion attended the

NLRCs conclusion that the petitioners were illegally dismissed. Consistent

with this conclusion, the evidence on record show that AMACC failed to
discharge its burden of proving by substantial evidence the just cause for the
non-renewal of the petitioners contracts.

In Montoya v. Transmed Manila Corporation,[26] we laid down our basic

approach in the review of Rule 65 decisions of the CA in labor cases, as
follows:

In a Rule 45 review, we consider the correctness of the assailed CA

decision, in contrast with the review for jurisdictional error that we
undertake under Rule 65. Furthermore, Rule 45 limits us to the review
of questions of law raised against the assailed CA decision. In ruling for
legal correctness, we have to view the CA decision in the same context that
the petition forcertiorari it ruled upon was presented to it; we have to
examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in
the NLRC decision before it, not on the basis of whether the NLRC
decision on the merits of the case was correct. 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. This is the approach that
should be basic in a Rule 45 review of a CA ruling in a labor case. In
question form, the question to ask is: Did the CA correctly
determine whether the NLRC committed grave abuse of discretion in
ruling on the case?

Following this approach, our task is to determine whether the CA correctly

found that the NLRC committed grave abuse of discretion in ruling that the
petitioners were illegally dismissed.

Legal Environment in the Employment of Teachers

a. Rule on Employment on Probationary Status

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. The Labor Code is supplemented with respect to the period of
probation by special rules found in the Manual of Regulations for Private
Schools.[27] 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. [Emphasis supplied]

The CA pointed this out in its decision (as the NLRC also did), and we confirm
the correctness of this conclusion. Other than on the period, the following
quoted portion of Article 281 of the Labor Code still fully applies:

x x x The services of an employee who has been engaged on a probationary

basis may be terminated for a just cause when he fails to qualify as a
regular employee in accordance withreasonable 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 supplied]

b. Fixed-period Employment

The use of employment for fixed periods during the teachers probationary
period is likewise an accepted practice in the teaching profession. We
mentioned this in passing in Magis Young Achievers Learning Center v.
Adelaida P. Manalo,[28] albeit a case that involved elementary, not tertiary,
education, and hence spoke of a school year rather than a semester or a
trimester. We noted in this case:

The common practice is for the employer and the teacher to enter
into a contract, effective for one school year. At the end of the school
year, the employer has the option not to renew the contract, particularly
considering the teachers performance. If the contract is not renewed, the
employment relationship terminates. If the contract is renewed, usually for
another school year, the probationary employment continues. Again, at the
end of that period, the parties may opt to renew or not to renew the
contract. 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. 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.For the entire duration of this three-year period, the
teacher remains under probation. 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. It is when the yearly contract is
renewed for the third time that Section 93 of the Manual becomes operative,
and the teacher then is entitled to regular or permanent employment status.

It is important that the contract of probationary employment specify the

period or term of its effectivity. The failure to stipulate its precise duration
could lead to the inference that the contract is binding for the full three-year
probationary period.

We have long settled the validity of a fixed-term contract in the case Brent
School, Inc. v. Zamora[29] that AMACC cited. Significantly, Brent happened in
a school setting. Care should be taken, however, in reading Brent in the
context of this case as Brent did not involve any probationary employment
issue; it dealt purely and simply with the validity of a fixed-term employment
under the terms of the Labor Code, then newly issued and which does not
expressly contain a provision on fixed-term employment.

c.

Academic and Management Prerogative

Last but not the least factor in the academic world, is that a school enjoys
academic freedom a guarantee that enjoys protection from the Constitution
no less. Section 5(2) Article XIV of the Constitution guarantees all institutions
of higher learning academic freedom.[30]

The institutional academic freedom includes the right of the school or college
to decide and adopt its aims and objectives, and to determine how these
objections can best be attained, free from outside coercion or interference,
save possibly when the overriding public welfare calls for some restraint. The
essential freedoms subsumed in the term academic freedom encompass the
freedom of the school or college to determine for itself: (1) who may teach;
(2) who may be taught; (3) how lessons shall be taught; and (4) who may be
admitted to study.[31]

AMACCs right to academic freedom is particularly important in the present

case, because of the new screening guidelines for AMACC faculty put in place
for the school year 2000-2001. We agree with the CA that AMACC has the
inherent right to establish high standards of competency and efficiency for
its faculty members in order to achieve and maintain academic
excellence. The schools prerogative to provide standards for its teachers and
to determine whether or not these standards have been met is in accordance
with academic freedom that gives the educational institution the right to
choose who should teach.[32] In Pea v. National Labor Relations Commission,
[33]
we emphasized:

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. As long as
the standards fixed are reasonable and not arbitrary, courts are not at liberty
to set them aside. Schools cannot be required to adopt standards which
barely satisfy criteria set for government recognition.

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. Academic freedom, too, is not
the only legal basis for AMACCs issuance of screening guidelines. 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.[34] Thus, AMACC has every right to determine for itself that it shall
use fixed-term employment contracts as its medium for hiring its teachers. It
also acted within the terms of the Manual of Regulations for Private Schools
when it recognized the petitioners to be merely on probationary status up to
a maximum of nine trimesters.

The Conflict: Probationary Status

and Fixed-term Employment

The existence of the term-to-term contracts covering the petitioners

employment is not disputed, nor is it disputed that they were on
probationary status not permanent or regular status from the time they were
employed on May 25, 1998 and until the expiration of their Teaching
Contracts on September 7, 2000. As the CA correctly found, their teaching
stints only covered a period of at least seven (7) consecutive trimesters or
two (2) years and three (3) months of service. This case, however, brings
to the fore the essential question of which, between the two factors
affecting employment, should prevail given AMACCs position that
the teachers contracts expired and it had the right not to renew
them. In other words, should the teachers probationary status be
disregarded simply because the contracts were fixed-term?

The provision on employment on probationary status under the Labor

Code[35] is a primary example of the fine balancing of interests between labor
and management that the Code has institutionalized pursuant to the
underlying intent of the Constitution.[36]

On the one hand, employment on probationary status affords management

the chance to fully scrutinize the true worth of hired personnel before the full
force of the security of tenure guarantee of the Constitution comes into play.
[37]
Based on the standards set at the start of the probationary period,
management is given the widest opportunity during the probationary period
to reject hirees who fail to meet its own adopted but reasonable standards.
[38]
These standards, together with the just[39] and authorized causes[40] for
termination of employment the Labor Code expressly provides, are the
grounds available to terminate the employment of a teacher on probationary
status. For example, the school may impose reasonably stricter attendance
or report compliance records on teachers on probation, and reject a
probationary teacher for failing in this regard, although the same attendance
or compliance record may not be required for a teacher already on
permanent status. At the same time, the same just and authorizes causes for
dismissal under the Labor Code apply to probationary teachers, so that they
may be the first to be laid-off if the school does not have enough students for
a given semester or trimester. Termination of employment on this basis is an
authorized cause under the Labor Code.[41]

Labor, for its part, is given the protection during the probationary period of
knowing the company standards the new hires have to meet during the
probationary period, and to be judged on the basis of these standards, aside
from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards

should be made known to the teachers on probationary status at the start of

their probationary period, or at the very least under the circumstances of the
present case, at the start of the semester or the trimester during which the
probationary standards are to be applied. Of critical importance in invoking a
failure to meet the probationary standards, is that the school should show as
a matter of due process how these standards have been applied. This is
effectively the second notice in a dismissal situation that the law requires as
a due process guarantee supporting the security of tenure provision, [42] and is
in furtherance, too, of the basic rule in employee dismissal that the employer
carries the burden of justifying a dismissal.[43] These rules ensure compliance
with the limited security of tenure guarantee the law extends to probationary
employees.[44]

When fixed-term employment is brought into play under the above

probationary period rules, the situation as in the present case may at first
blush look muddled as fixed-term employment is in itself a valid employment
mode under Philippine law and jurisprudence. [45] The conflict, however, is
more apparent than real when the respective nature of fixed-term
employment and of employment on probationary status are closely
examined.

The fixed-term character of employment essentially refers to the

period agreed upon between the employer and the employee; employment
exists only for the duration of the term and ends on its own when the term
expires. In a sense, employment on probationary status also refers to a
period because of the technical meaning probation carries in Philippine labor
law a maximum period of six months, or in the academe, a period of three
years for those engaged in teaching jobs. Their similarity ends there,
however,
because
of
the
overriding
meaning
that
being on
probation connotes, i.e., a process of testing and observing the character or
abilities of a person who is new to a role or job.[46]

Understood in the above sense, the essentially protective character of

probationary status for management can readily be appreciated. But this
same protective character gives rise to the countervailing but equally
protective rule that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and properly
communicated standards. Otherwise stated, within the period of the
probation, any employer move based on the probationary standards and
affecting the continuity of the employment must strictly conform to the
probationary rules.

Under the given facts where the school year is divided into trimesters, the
school apparently utilizes its fixed-term contracts as a convenient
arrangement dictated by the trimestral system and not because the
workplace parties really intended to limit the period of their relationship to
any fixed term and to finish this relationship at the end of that term. If we
pierce the veil, so to speak, of the parties so-called fixed-term employment
contracts, what undeniably comes out at the core is a fixed-term contract
conveniently used by the school to define and regulate its relations with its
teachers during their probationary period.

To be sure, nothing is illegitimate in defining the school-teacher relationship

in this manner. The school, however, cannot forget that its system of fixedterm contract is a system that operates during the probationary period and
for this reason is subject to the terms of Article 281 of the Labor
Code. Unless this reconciliation is made, the requirements of this
Article on probationary status would be fully negated as the school
may freely choose not to renew contracts simply because their
terms have expired.The inevitable effect of course is to wreck the
scheme that the Constitution and the Labor Code established to
balance relationships between labor and management.

Given the clear constitutional and statutory intents, we cannot but conclude
that in a situation where the probationary status overlaps with a fixed-term
contract not specifically used for the fixed term it offers, Article 281 should
assume primacy and the fixed-period character of the contract must give
way. This conclusion is immeasurably strengthened by the petitioners and
the AMACCs hardly concealed expectation that the employment on probation
could lead to permanent status, and that the contracts are renewable unless
the petitioners fail to pass the schools standards.

To highlight what we mean by a fixed-term contract specifically used for the

fixed term it offers, a replacement teacher, for example, may be contracted
for a period of one year to temporarily take the place of a permanent teacher
on a one-year study leave. The expiration of the replacement teachers
contracted term, under the circumstances, leads to no probationary status
implications as she was never employed on probationary basis; her
employment is for a specific purpose with particular focus on the term and
with every intent to end her teaching relationship with the school upon
expiration of this term.

If the school were to apply the probationary standards (as in fact it says it did
in the present case), these standards must not only be reasonable but must
have also been communicated to the teachers at the start of the
probationary period, or at the very least, at the start of the period when they
were to be applied. These terms, in addition to those expressly provided by
the Labor Code, would serve as the just cause for the termination of the
probationary contract. As explained above, the details of this finding of just
cause must be communicated to the affected teachers as a matter of due
process.

AMACC, by its submissions, admits that it did not renew the petitioners
contracts because they failed to pass the Performance Appraisal System for
Teachers (PAST) and other requirements for regularization that the school
undertakes to maintain its high academic standards. [47] The evidence is
unclear on the exact terms of the standards, although the school also admits
that these were standards under the Guidelines on the Implementation of
AMACC Faculty Plantilla put in place at the start of school year 2000-2001.

While we can grant that the standards were duly communicated to the
petitioners and could be applied beginning the 1 st trimester of the school
year 2000-2001, glaring and very basic gaps in the schools evidence still

exist. The exact terms of the standards were never introduced as evidence;
neither does the evidence show how these standards were applied to the
petitioners.[48] Without these pieces of evidence (effectively, the finding of
just cause for the non-renewal of the petitioners contracts), we have nothing
to consider and pass upon as valid or invalid for each of the
petitioners. Inevitably, the non-renewal (or effectively, the termination of
employment of employees on probationary status) lacks the supporting
finding of just cause that the law requires and, hence, is illegal.

In this light, the CA decision should be reversed. Thus, the LAs decision,
affirmed as to the results by the NLRC, should stand as the decision to be
enforced, appropriately re-computed to consider the period of appeal and
review of the case up to our level.

Given the period that has lapsed and the inevitable change of circumstances
that must have taken place in the interim in the academic world and at
AMACC, which changes inevitably affect current school operations, we hold
that - in lieu of reinstatement - the petitioners should be paid separation pay
computed on a trimestral basis from the time of separation from service up
to the end of the complete trimester preceding the finality of this Decision.
[49]
The separation pay shall be in addition to the other awards, properly
recomputed, that the LA originally decreed.

WHEREFORE, premises considered, we hereby GRANT the petition, and,

consequently, REVERSE and SET ASIDE the Decision of the Court of
Appeals dated November 29, 2007 and its Resolution dated June 20, 2008 in
CA-G.R. SP No. 96599. The Labor Arbiters decision of March 15, 2002,
subsequently affirmed as to the results by the National Labor Relations
Commission, stands and should be enforced with appropriate re-computation
to take into account the date of the finality of this Decision.

In lieu of reinstatement, AMA Computer College-Paraaque City, Inc. is

hereby DIRECTED to pay separation pay computed on a trimestral basis
from the time of separation from service up to the end of the complete
trimester preceding the finality of this Decision. For greater certainty, the
petitioners are entitled to:
(a)
backwages and 13th month pay computed from
September 7, 2000 (the date AMA Computer College-Paraaque City,
Inc. illegally dismissed the petitioners) up to the finality of this Decision;
(b)
monthly
honoraria
(if
applicable)
computed
from September 7, 2000 (the time of separation from service) up to the
finality of this Decision; and
(c) separation pay on a trimestral basis from September 7, 2000 (the time of
separation from service) up to the end of the complete trimester preceding
the finality of this Decision.

The labor arbiter is hereby ORDERED to make another re-computation

according to the above directives. No costs.

SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

SECOND DIVISION

ROBINSONS GALLERIA/ROBINSONS G.R. No. 177937

SUPERMARKET
CORPORATION
and/or JESS MANUEL,
Present:
Petitioners,
CARPIO, J.,
Chairperson,
- versus -

NACHURA,
LEONARDO-DE CASTRO,*
ABAD, and
MENDOZA, JJ.

IRENE R. RANCHEZ,
Respondent.

Promulgated:

January 19, 2011

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court, assailing the Decision[1] dated August 29, 2006 and the
Resolution[2] dated May 16, 2007 of the Court of Appeals (CA) in CA-G.R. SP
No. 91631.

The Facts

The facts of the case are as follows.

Respondent was a probationary employee of petitioner Robinsons

Galleria/Robinsons Supermarket Corporation (petitioner Supermarket) for a
period of five (5) months, or from October 15, 1997 until March 14, 1998.
[3]
She underwent six (6) weeks of training as a cashier before she was hired
as such on October 15, 1997.[4]

Two weeks after she was hired, or on October 30, 1997, respondent reported
to her supervisor the loss of cash amounting to Twenty Thousand Two
Hundred Ninety-Nine Pesos (P20,299.00) which she had placed inside the
company locker. Petitioner Jess Manuel (petitioner Manuel), the Operations
Manager of petitioner Supermarket, ordered that respondent be stripsearched by the company guards. However, the search on her and her
personal belongings yielded nothing.[5]

Respondent acknowledged her responsibility and requested that she be

allowed to settle and pay the lost amount. However, petitioner Manuel did
not heed her request and instead reported the matter to the police.

Petitioner Manuel likewise requested the Quezon City Prosecutors Office for
an inquest.[6]

On November 5, 1997, an information for Qualified Theft was filed with the
Quezon City Regional Trial Court. Respondent was constrained to spend two
weeks in jail for failure to immediately post bail in the amount of Forty
Thousand Pesos (P40,000.00).[7]

On November 25, 1997, respondent filed a complaint for illegal dismissal and
damages.[8]

On March 12, 1998, petitioners sent to respondent by mail a notice of

termination and/or notice of expiration of probationary employment dated
March 9, 1998.[9]

On August 10, 1998, the Labor Arbiter rendered a decision, [10] the fallo of
which reads:

CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered

dismissing the claim of illegal dismissal for lack of merit.

Respondents are ordered to accept complainant to her former or equivalent

work without prejudice to any action they may take in the premises in
connection with the missing money ofP20,299.00.

SO ORDERED.[11]

In dismissing the complaint for illegal dismissal, the Labor Arbiter

ratiocinated that at the time respondent filed the complaint for illegal
dismissal, she was not yet dismissed by petitioners. When she was stripsearched by the security personnel of petitioner Supermarket, the guards
were merely conducting an investigation. The subsequent referral of the loss
to the police authorities might be considered routine. Respondents nonreporting for work after her release from detention could be taken against
her in the investigation that petitioner supermarket would conduct.[12]

On appeal, the National Labor Relations Commission (NLRC) reversed the

decision of the Labor Arbiter in a decision [13] dated October 20, 2003. The
dispositive portion of the decision reads:

WHEREFORE, the appealed decision is SET ASIDE. The respondents are

hereby ordered to immediately reinstate complainant to her former or
equivalent position without loss of seniority rights and privileges and to pay
her full backwages computed from the time she was constructively dismissed
on October 30, 1997 up to the time she is actually reinstated.

SO ORDERED.[14]

In reversing the decision of the Labor Arbiter, the NLRC ruled that respondent
was denied due process by petitioners. Strip-searching respondent and
sending her to jail for two weeks certainly amounted to constructive
dismissal because continued employment had been rendered impossible,
unreasonable, and unlikely. The wedge that had been driven between the
parties was impossible to ignore.[15] Although respondent was only a
probationary employee, the subsequent lapse of her probationary contract of
employment did not have the effect of validly terminating her employment
because constructive dismissal had already been effected earlier by
petitioners.[16]

Petitioners filed a motion for reconsideration, which was denied by the NLRC
in a resolution[17] dated July 21, 2005.

Petitioners filed a petition for certiorari under Rule 65 of the Rules of Court
before the CA. On August 29, 2006, the CA rendered a Decision, the
dispositive portion of which reads:

WHEREFORE, premises considered, the challenged Decision of the National

Labor Relations Commission is AFFIRMED with MODIFICATION in that
should reinstatement be no longer possible in view of the strained relation
between the parties, Petitioners are ordered to pay Respondent separation
pay equivalent to one (1) month pay in addition to backwages from the date
of dismissal until the finality of the assailed decision.

SO ORDERED.[18]

Petitioners filed a motion for reconsideration. However, the CA denied the

same in a Resolution dated May 16, 2007.

Hence, this petition.

Petitioners assail the reinstatement of respondent, highlighting the fact that

she was a probationary employee and that her probationary contract of
employment lapsed on March 14, 1998. Thus, her reinstatement was
rendered moot and academic. Furthermore, even if her probationary contract
had not yet expired, the offense that she committed would nonetheless
militate against her regularization.[19]

On the other hand, respondent insists that she was constructively dismissed
by petitioner Supermarket when she was strip-searched, divested of her
dignity, and summarily thrown in jail. She could not have been expected to
go back to work after being allowed to post bail because her continued

employment had been rendered impossible, unreasonable, and unlikely. She

stresses that, at the time the money was discovered missing, it was not with
her but locked in the company locker. The company failed to provide its
cashiers with strong locks and proper security in the work place. Respondent
argues that she was not caught in the act and even reported that the money
was missing. She claims that she was denied due process.[20]

The Issue

The sole issue for resolution is whether respondent was illegally terminated
from employment by petitioners.

The Ruling of the Court

We rule in the affirmative.

There is probationary employment when the employee upon his engagement

is made to undergo a trial period during which the employer determines his
fitness to qualify for regular employment based on reasonable standards
made known to him at the time of engagement.[21]

A probationary employee, like a regular employee, enjoys security of tenure.

[22]
However, in cases of probationary employment, aside from just or
authorized causes of termination, an additional ground is provided under
Article 281 of the Labor Code, i.e., the probationary employee may also be
terminated for failure to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the
time of the engagement. Thus, the services of an employee who has been
engaged on probationary basis may be terminated for any of the
following: (1) a just or (2) an authorized cause; and (3) when he fails to
qualify as a regular employee in accordance with reasonable standards
prescribed by the employer.[23]

Article 277(b) of the Labor Code mandates that subject to the constitutional
right of workers to security of tenure and their right to be protected against
dismissal, except for just and authorized cause and without prejudice to the
requirement of notice under Article 283 of the same Code, the employer shall
furnish the worker, whose employment is sought to be terminated, a written
notice containing a statement of the causes of termination, and shall afford
the latter ample opportunity to be heard and to defend himself with the
assistance of a representative if he so desires, in accordance with company
rules and regulations pursuant to the guidelines set by the Department of
Labor and Employment.

In the instant case, based on the facts on record, petitioners failed to accord
respondent substantive and procedural due process. The haphazard manner
in the investigation of the missing cash, which was left to the determination
of the police authorities and the Prosecutors Office, left respondent with no
choice but to cry foul. Administrative investigation was not conducted by
petitioner Supermarket. On the same day that the missing money was

reported by respondent to her immediate superior, the company already prejudged her guilt without proper investigation, and instantly reported her to
the police as the suspected thief, which resulted in her languishing in jail for
two weeks.

As correctly pointed out by the NLRC, the due process requirements under
the Labor Code are mandatory and may not be supplanted by police
investigation or court proceedings. The criminal aspect of the case is
considered independent of the administrative aspect. Thus, employers
should not rely solely on the findings of the Prosecutors Office. They are
mandated to conduct their own separate investigation, and to accord the
employee every opportunity to defend himself. Furthermore, respondent was
not represented by counsel when she was strip-searched inside the company
premises or during the police investigation, and in the preliminary
investigation before the Prosecutors Office.

Respondent was constructively dismissed by petitioner Supermarket

effective October 30, 1997. It was unreasonable for petitioners to charge her
with abandonment for not reporting for work upon her release in jail. It would
be the height of callousness to expect her to return to work after suffering in
jail for two weeks. Work had been rendered unreasonable, unlikely, and
definitely impossible, considering the treatment that was accorded
respondent by petitioners.

As to respondents monetary claims, Article 279 of the Labor Code provides

that an employee who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges, to full
backwages, inclusive of allowances, and to other benefits or their monetary
equivalent computed from the time his compensation was withheld from him
up to the time of his actual reinstatement. However, due to the strained
relations of the parties, the payment of separation pay has been considered
an acceptable alternative to reinstatement, when the latter option is no
longer desirable or viable. On the one hand, such payment liberates the
employee from what could be a highly oppressive work environment. On the
other, the payment releases the employer from the grossly unpalatable
obligation of maintaining in its employ a worker it could no longer trust.[24]

Thus, as an illegally or constructively dismissed employee, respondent is

entitled to: (1) either reinstatement, if viable, or separation pay, if
reinstatement is no longer viable; and (2) backwages. These two reliefs are
separate and distinct from each other and are awarded conjunctively.[25]

In this case, since respondent was a probationary employee at the time she
was constructively dismissed by petitioners, she is entitled to separation pay
and backwages. Reinstatement of respondent is no longer viable considering
the circumstances.

However, the backwages that should be awarded to respondent shall be

reckoned from the time of her constructive dismissal until the date of the
termination of her employment,i.e., from October 30, 1997 to March 14,

1998. The computation should not cover the entire period from the time her
compensation was withheld up to the time of her actual reinstatement. This
is because respondent was a probationary employee, and the lapse of her
probationary employment without her appointment as a regular employee of
petitioner Supermarket effectively severed the employer-employee
relationship between the parties.
In all cases involving employees engaged on probationary basis, the
employer shall make known to its employees the standards under which they
will qualify as regular employees at the time of their engagement. Where no
standards are made known to an employee at the time, he shall be deemed
a regular employee,[26] unless the job is self-descriptive, like maid, cook,
driver, or messenger. However, the constitutional policy of providing full
protection to labor is not intended to oppress or destroy management.
[27]
Naturally, petitioner Supermarket cannot be expected to retain respondent
as a regular employee considering that she lost P20,299.00 while acting as a
cashier during the probationary period. The rules on probationary
employment should not be used to exculpate a probationary employee who
acts in a manner contrary to basic knowledge and common sense, in regard
to which, there is no need to spell out a policy or standard to be met.[28]

WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision

of the Court of Appeals in CA-G.R. SP No. 91631 is hereby AFFIRMED with
theMODIFICATION that petitioners are hereby ordered to pay respondent
Irene R. Ranchez separation pay equivalent to one (1) month pay and
backwages from October 30, 1997 to March 14, 1998.

Costs against petitioners.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. L-48494 February 5, 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.
Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.

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, or 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 provisions 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,
13
1977, and J. Walter Thompson
Co.
(Phil.) v. NLRC,
promulgated
on
14
December 29, 1983. TheThompson 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 an 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 to was "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 employment in which a period, where not expressly set
down, 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) deletingmention 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 he 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, 24to 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. 26Under
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 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 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 will all that it implies does not appear ever to
have been applied, Article 280 of the Labor Code not withstanding; 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 re-elect 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 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 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 objecionable 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 s a principle
that does back to In re Allen decided oil 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 Bibiso 31 upon the effect of the expiry of
an agreed period of employment as still good rulea 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.

THIRD DIVISION

AMA COMPUTER COLLEGE,

G.R. No. 164078

PARAAQUE, and/or
AMABLE C. AGUILUZ IX,
President, MRS. CELESTE BANSALE,Present:
School Director, MS. SOCORRO,
MR. PATRICK AZANZA,
GRACE BERANIA and MAJAL JACOB,
Petitioners,

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and

- versus -

REYES, JJ.

ROLANDO A. AUSTRIA,
Respondent.

Promulgated:

November 23, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the
Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA)
Decision[2] datedMarch 29, 2004 which affirmed with modification the
Decision[3] of the National Labor Relations Commission (NLRC), dated March
31, 2003.

The Facts

Petitioner AMA Computer College, Paraaque (AMA)

is
an
educational
institution duly organized under the laws of the Philippines. The rest of the
petitioners are principal officers of AMA. Respondent Rolando A.
Austria[4] (respondent) was hired by AMA on probationary employment as a
college dean on April 24, 2000.[5] On August 22, 2000, respondents

appointment as dean was confirmed by AMAs Officer-in-Charge (OIC),

Academic Affairs, in his Memorandum,[6] which reads:

After a thorough evaluation of the performance of Mr. Rolando Austria as

Dean, we are happy to inform you that he is hereby officially confirmed as
Dean of AMA College Paraaque effectiveApril 17, 2000 to September 17,
2000.

In view of this, he will be entitled to a transportation allowance of One

Thousand Five Hundred Sixty Pesos (P1,560.00).

In the event that Mr. Austria gives up the Dean position or fails to meet the
standards of the (sic) based on the evaluation of his immediate superior, he
shall be considered for a faculty position and the appointee agrees that he
shall lose the transportation allowance he enjoys as Dean and be entitled to
his faculty rate.

Sometime in August 2000, respondent was charged with violating AMAs

Employees Conduct and Discipline provided in its Orientation Handbook
(Handbook),[7] as follows:

1) leaking of test questions;

2) failure to monitor general requirements vital to the operations of the
company; and
3) gross inefficiency.

In a Memorandum[8] dated August 29, 2000, respondent refuted the charges

against him. Thereafter, respondent was placed on preventive suspension
from September 8, 2000 toOctober 10, 2000. Notices[9] of Investigation were
sent to respondent. Eventually, on September 29, 2000, respondent was
informed of his dismissal, to wit:

Dear Mr. Austria[,]

Please be informed that after a careful deliberation on the case filed against
you and upon serious consideration of the evidences (sic) presented, the
Management has found you guilty of violating the following policies:

A. Loss of trust and confidence by management due to gross inefficiency.

(5.21 Very Serious/Grave Offense)

B. Failure to monitor general requirements vital to the operations of the

company.

(5.10 Medium Offense)

C. Leaking of test questions.

(4.17 Very Serious/Grave Offense)

This resulted to the loss of trust and confidence in your credibility as a

company officer holding a highly sensitive position. In view of this, your
services as Dean of AMA Paraaque is hereby terminated effective
immediately.

You are hereby instructed to report to the branch HR Personnel for further
instructions. Please bear in mind that as a company policy you are required
to accomplish your clearance and turn over all documents and
responsibilities to the appropriate officers.

You are barred from entering the company premises unless with clearance
from the HRD.[10]

On October 27, 2000, respondent filed a Complaint [11] for Illegal Dismissal,
Illegal Suspension, Non-Payment of Salary and 13 th Month Pay with prayer for
Damages and Attorney's Fees against AMA and the rest of the petitioners.
Trial on the merits ensued.

The Labor Arbiter's Ruling

In his Decision[12] dated December 6, 2000, the Labor Arbiter held that
petitioners accorded respondent due process. The Labor Arbiter however,
also held that respondent substantially refuted the charges of gross
inefficiency, incompetence, and leaking of test questions filed against him.
But since respondent can no longer be reinstated beyond September 17,
2000 as his designation as college dean was only until such date, respondent
should instead be paid his compensation and transportation allowance for
the period from September 8, 2000 to September 17, 2000, or the salary and
benefits withheld prior thereto. Thus:

WHEREFORE, premises considered, judgment is hereby rendered ordering

respondent AMA Computer College,
Paraaque
to
pay
complainants
proportionate salary for the period beginning 8 September 2000 to 17
September 2000.

P30,000 x 10/30 days = P10,000.00 and his proportionate transportation

allowance.

P1,560.00 x 10/30 days = P520.00 and the salary/benefits withheld prior to 8

September 2000, if any.

All other claims are hereby dismissed for lack of merit.

SO ORDERED.
Aggrieved, respondent appealed the said Decision to the NLRC.[13]

The NLRC's Ruling

On March 31, 2003, the NLRC, in its Decision, [14] found merit in respondent's
appeal.
The
NLRC
opined
that
the
petitioners
did
not
contravene respondent's allegation that hehad attained regular status after

serving the three (3)-month probationary period required under the

Handbook.[15] Thus, while the NLRC sustained the Labor Arbiter's finding that
petitioners failed to establish the grounds for respondent's dismissal, it held
that the Labor Arbiter erred in declaring that respondent's appointment was
only from April 24 to September 17, 2000.Accordingly, the NLRC declared
that respondent was a regular employee and that he was illegally dismissed.
Nevertheless, the NLRC held that reinstatement would not promote industrial
harmony; hence, the NLRC disposed of the case in this wise:

PREMISES
CONSIDERED the
Decision
of December
6,
2000 is VACATED and a new one entered declaring complainant illegally
dismissed. Respondents are directed to pay complainant separation pay
computed at one (1) month per year of service in addition to full backwages
from September 29, 2000 until December 6, 2000, or in the amount of one
hundred thousand three hundred seventy eight-pesos & 80/100
(P100,378.80).

SO ORDERED.[16]

Petitioners filed a Motion for Reconsideration [17] assailing respondent's

regular status, which the NLRC in a Resolution, [18] denied for having been
filed out of time and for lack of merit. Respondent also filed a Motion for
Partial Reconsideration,[19] which the NLRC, in another Resolution,[20] denied
for lack of merit.

Thus, petitioners went to the CA via Petition for Certiorari[21] under Rule 65 of
the 1997 Rules of Civil Procedure.

The CA's Ruling

On March 29, 2004, the CA held that based on the Handbook and on
respondent's appointment, it can be inferred that respondent was a regular
employee, and as such, his employment can only be terminated for any of
the causes provided under Article 282[22] of the Labor Code and after
observance of the requirements of due process.Furthermore, the CA upheld
the Labor Arbiters and the NLRCs similar findings that respondent sufficiently
rebutted the charges against him and that petitioners failed to prove the
grounds for respondent's dismissal. The dispositive portion of the said
Decision reads:

WHEREFORE, premises considered, the petition is hereby DENIED DUE

COURSE and DISMISSED for lack of merit. The decision of the NLRC
is AFFIRMED with MODIFICATIONas above stated, with regard to the
computation of backwages.

SO ORDERED.

Petitioners filed a Motion for Reconsideration [23] of the said Decision, which
the CA denied, in its Resolution[24] dated June 11, 2004, for lack of merit.

Hence, this Petition based on the sole ground that the CA committed serious
error of law in affirming and then further modifying the erroneous decision of
the NLRC declaring that herein respondent was illegally dismissed by AMA.[25]

Petitioners argue that respondent, as college dean, was an academic

personnel of AMA under Section 4(m) (4)(c) of the Manual of Regulations for
Private Schools[26] (Manual) and, as such, his probationary employment is
governed by Section 92[27] thereof and not by the Labor Code or AMA's
Handbook; that under the circumstances, respondent has not yet attained
the status of a regular employee; that respondent's employment was for a
fixed term as found by the Labor Arbiter but the same was terminated earlier
due to just causes; that the respondent, whether he may be considered as a
probationary or a regular employee, was dismissed for just causes; and that
the award of backwages in favor of the respondent, up to the finality of the
decision, is oppressive to the petitioners, considering the absence of an order
of reinstatement and the respondent's fixed period of employment. [28]

On the other hand, respondent counters that both the NLRC and the CA
found that respondent was a regular employee and that he was illegally
dismissed; that the instant Petition raises questions of fact - such as whether
or not respondent is a regular employee and whether or not circumstances
existed warranting his dismissal - which can no longer beinquired into by

this Court;[29] that petitioners assailed the regular status of the respondent
for the first time only before the CA; that they never raised as issue
respondent's regular status before the Labor Arbiter and the NLRC because
they merely concentrated on their stand that respondent was lawfully
dismissed; that petitioners failed to discharge the burden of proving the

existence of a valid ground in dismissing respondent as found by the Labor

Arbiter, the NLRC, and the CA; and that the CA's award of backwages from
the date ofactual dismissal up to the date of the finality of the decision in
favor of the respondent is consonant with Article 279 [30] of the Labor Code,
and hence, valid.[31]

From this exchange of arguments, we glean two ultimate questions that

require resolution, viz.:

1. What is the nature of respondent's employment?

2. Was he lawfully dismissed?

The first question, i.e., whether respondent is a regular, probationary, or

fixed term employee is essentially factual in nature. [32] However, the Court
opts to resolve this question due to the far-reaching effects it could bring to
the sector of the academe.

As an exception to the general rule, we held in Molina v. Pacific Plans, Inc.: [33]

A disharmony between the factual findings of the Labor Arbiter and the
National Labor Relations Commission opens the door to a review thereof by
this Court. Factual findings of administrative agencies are not infallible and
will be set aside when they fail the test of arbitrariness. Moreover, when the
findings of the National Labor Relations Commission contradict those of the
Labor Arbiter, this Court, in the exercise of its equity jurisdiction, may look
into the records of the case and reexamine the questioned findings.

The instant case falls squarely within the aforesaid exception. The Labor
Arbiter held that, while petitioners did not prove the existence of just causes
in order to warrant respondent's dismissal, the latter's employment as dean
ceased to exist upon expiration of respondent's term of employment
on September 17, 2000. In sum, the Labor Arbiter held that the nature of
respondent's employment is one for a fixed term. On the other hand, the
NLRC and the CA both held that respondent is a regular employee because
respondent had fully served the three (3)-month probationary period
required in the Handbook, which the petitioners failed to deny or contravene
in the proceedings before the Labor Arbiter.

Prior to his dismissal, respondent held the position of college dean. The letter
of appointment states that he was officially confirmed as Dean of AMA
College, Paraaque,effective from April 17, 2000 to September 17, 2000.
Petitioners submit that the nature of respondent's employment as dean is
one with a fixed term.

We agree.

We held that Article 280 of the Labor Code does not proscribe or prohibit an
employment contract with a fixed period. Even if the duties of the employee
consist
of
activities
necessary
or
desirable
in
the
usual
business of the employer, the parties are free to agree on a fixed period
of time for the performance of such activities. There is nothing essentially

contradictory between a definite period of employment and the nature of the

employees duties.[34]

Thus, this Court's ruling in Brent School, Inc. v. Zamora[35] is instructive:

The question immediately provoked.

.
.
is whether or not a voluntary agreement on a fixed term or period would be v
alid where the employee "has been engaged to performactivities which are u
sually necessary or desirable in the usual business or trade of the employer."
The definition seems non sequitur. From the premise that the duties of anem
ployee 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 andemployee should be forbidden to stipulate any period
of time for the performance of those activities. There is nothing essentially co
ntradictory between a definite period of anemployment contract and the nat
ure of the employee's duties set down in that contract as being "usually nece
ssary or desirable in the usual business or trade of the employer." Theconcep
t of the employee's duties as being "usually necessary or desirable in the usu
al business or trade of the employer" is not synonymous with or identical to e
mployment with afixed term. Logically, the decisive determinant in term emp
loyment should not be the activities that the employee is called upon to perf
orm, but the day certain agreed upon by theparties for the commencement a
nd termination of their employment relationship, a day certain being underst
ood to be "that which must necessarily come, although it may not beknown
when." Seasonal employment, and employment for a particular project are m
erely instances of employment in which a period, where not expressly set do
wn, is necessarilyimplied.
xxxxxxxxx

Some familiar examples may be cited of employment contracts which may b

e neither for seasonal work nor for specific projects, but to which a fixed t
erm is an essential andnatural appurtenance: overseas employment co
ntracts, for one, to which, whatever the nature of the engagement, the conce
pt of regular employment with all that it implies doesnot appear ever to have
been applied, Article 280 of the Labor Code notwithstanding; also appointm
ents to the positions of dean, assistant dean, college secretary, prin
cipal,and other administrative offices in educational institutions, wh
ich are by practice or tradition rotated among the faculty members,
and where fixed terms are a necessitywithout which no reasonable
rotation would be possible . . . .
xxx

The instant case involves respondent's position as dean, and comes within
the purview of the Brent School doctrine.

First. The letter of appointment was clear. Respondent was confirmed as

Dean of AMA College, Paraaque, effective from April 17, 2000 to September
17, 2000. In numerous cases decided by this Court, we had taken notice, that
by way of practice and tradition, the position of dean is normally an
employment for a fixed term.[36] Although it does not appear on record and
neither was it alleged by any of the parties that respondent, other than
holding the position of dean, concurrently occupied a teaching position, it
can be deduced from the last paragraph of said letter that the respondent
shall be considered for a faculty position in the event he gives up his
deanship or fails to meet AMA's standards. Such provision reasonably serves
the intention set forth in Brent School that the deanship may be rotated
among the other members of the faculty.

Second. The fact that respondent did not sign the letter of appointment is of
no moment. We held in Brent School, to wit:

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.
[37]

The fact that respondent voluntarily accepted the employment, assumed the
position, and performed the functions of dean is clear indication that he
knowingly and voluntarily consented to the terms and conditions of the
appointment, including the fixed period of his deanship. Other than the
handwritten notes made in the letter of appointment, no evidence was ever
presented to show that respondents consent was vitiated, or that respondent
objected to the said appointment or to any of its conditions. Furthermore, in
his status as dean, there can be no valid inference that he was shackled by
any form of moral dominance exercised by AMA and the rest of the
petitioners.

Alternatively, petitioners also claim that respondent did not attain regular
status, relying on Section 92 of the Manual in connection with Section 4(m)
4(c) thereof which provides for a three (3)-year probationary period for
Academic Personnel. Petitioners submit that the position of dean is included
in the provision school officials responsible for academic matters, and may
include other school officials. As such, petitioners aver that the three (3)month probationary period for officers set forth in the Handbook is not
applicable to the case of respondent.

The Handbook merely provides for two classes of employees for purposes of
permanency, i.e., Faculty and Non-Academic. However, the same does not
specifically classify the position of dean as part of the Faculty or of the NonAcademic personnel. At this juncture, we find solace in the Manual of
Regulations for Private Schools Annotated, [38] which provides that the college
dean is the senior officer responsible for the operation of an academic
program, the enforcement of rules and regulations, and the supervision of
faculty and student services. We already had occasion to state that the
position of dean is primarily academic[39] and, as such, he is considered a
managerial employee.[40] Yet, a perusal of the Handbook yields the
interpretation that the provision on the permanency of Faculty members
applies to teachers only. But the Handbook or school manual must yield to
the decree of the Manual, the latter having the character of law.[41] The
specified probationary periods in Section 92 of the Manual are the maximum
periods; under certain conditions, regular status may be achieved by the
employee in less time.[42] However, under the given circumstances and the
fact that the position of dean in this case is for a fixed term, the issue
whether the respondent attained a regular status is not in point. By the same
token, the application of the provision in the Manual as to the required
probationary period is misplaced. It can be well said that a tenured status of
employment co-exists and is co-terminous only with the definite term fixed in
the contract of employment.

In light of the foregoing disquisition, the resolution of the second question

requires full cognizance of respondents fixed term of employment and all the
effects thereof. It is axiomatic that a contract of employment for a definite
period terminates on its own force at the end of such period. [43] The lack of
notice of termination is of no consequence because when the contract
specifies the length of its duration, it comes to an end upon the expiration of
such period.[44]

Thus, the unanimous finding of the Labor Arbiter, the NLRC and the CA that
respondent adequately refuted all the charges against him assumes
relevance only insofar as respondents dismissal from the service was
effected by petitioners before expiration of the fixed period of employment.
True, petitioners erred in dismissing the respondent, acting on the mistaken
belief that respondent was liable for the charges leveled against him. But
respondent also cannot claim entitlement to any benefit flowing from such
employment after September 17, 2000, because the employment, which is
the source of the benefits, had, by then, already ceased to exist.

Finally, while this Court adheres to the principle of social justice and
protection to labor, the constitutional policy to provide such protection to
labor is not meant to be an instrument to oppress employers. The
commitment under the fundamental law is that the cause of labor does not
prevent us from sustaining the employer when the law is clearly on its side.
[45]

WHEREFORE, the instant Petition is GRANTED and the CA Decision in CAG.R. SP No. 78455 is REVERSED and SET ASIDE. The Decision of the Labor
Arbiter, datedDecember 6, 2000, is hereby REINSTATED. No costs.

SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 61594 September 28, 1990
PAKISTAN
INTERNATIONAL
AIRLINES
CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON.
VICENTE LEOGARDO, JR., in his capacity as Deputy Minister;
ETHELYNNE
B.
FARRALES
and
MARIA
MOONYEEN
MAMASIG, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

Ledesma, Saludo & Associates for private respondents.

FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines Corporation
("PIA"), a foreign corporation licensed to do business in the Philippines,
executed in Manila two (2) separate contracts of employment, one with
private respondent Ethelynne B. Farrales and the other with private
respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9
January 1979, provided in pertinent portion as follows:
5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3) years, but can be extended by the
mutual consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided, PIA reserves the
right to terminate this agreement at any time by giving the EMPLOYEE notice
in writing in advance one month before the intended termination or in lieu
thereof, by paying the EMPLOYEE wages equivalent to one month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and by the laws of
Pakistan, and only the Courts of Karachi, Pakistan shall have the jurisdiction
to consider any matter arising out of or under this agreement.
Respondents then commenced training in Pakistan. After their training
period, they began discharging their job functions as flight attendants, with
base station in Manila and flying assignments to different parts of the Middle
East and Europe.
On 2 August 1980, roughly one (1) year and four (4) months prior to the
expiration of the contracts of employment, PIA through Mr. Oscar Benares,
counsel for and official of the local branch of PIA, sent separate letters both
dated 1 August 1980 to private respondents Farrales and Mamasig advising
both that their services as flight stewardesses would be terminated "effective
1 September 1980, conformably to clause 6 (b) of the employment
agreement [they had) executed with [PIA]." 2
On 9 September 1980, private respondents Farrales and Mamasig jointly
instituted a complaint, docketed as NCR-STF-95151-80, for illegal dismissal
and non-payment of company benefits and bonuses, against PIA with the
then Ministry of Labor and Employment ("MOLE"). After several unfruitful
attempts at conciliation, the MOLE hearing officer Atty. Jose M. Pascual
ordered the parties to submit their position papers and evidence supporting
their respective positions. The PIA submitted its position paper, 3 but no
evidence, and there claimed that both private respondents were habitual
absentees; that both were in the habit of bringing in from abroad sizeable
quantities of "personal effects"; and that PIA personnel at the Manila
International Airport had been discreetly warned by customs officials to
advise private respondents to discontinue that practice. PIA further claimed

that the services of both private respondents were terminated pursuant to

the provisions of the employment contract.
In his Order dated 22 January 1981, Regional Director Francisco L. Estrella
ordered the reinstatement of private respondents with full backwages or, in
the alternative, the payment to them of the amounts equivalent to their
salaries for the remainder of the fixed three-year period of their employment
contracts; the payment to private respondent Mamasig of an amount
equivalent to the value of a round trip ticket Manila-USA Manila; and
payment of a bonus to each of the private respondents equivalent to their
one-month salary. 4 The Order stated that private respondents had attained
the status of regular employees after they had rendered more than a year of
continued service; that the stipulation limiting the period of the employment
contract to three (3) years was null and void as violative of the provisions of
the Labor Code and its implementing rules and regulations on regular and
casual employment; and that the dismissal, having been carried out without
the requisite clearance from the MOLE, was illegal and entitled private
respondents to reinstatement with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr.,
Deputy Minister, MOLE, adopted the findings of fact and conclusions of the
Regional Director and affirmed the latter's award save for the portion thereof
giving PIA the option, in lieu of reinstatement, "to pay each of the
complainants [private respondents] their salaries corresponding to the
unexpired portion of the contract[s] [of employment] . . .". 5
In the instant Petition for Certiorari, petitioner PIA assails the award of the
Regional Director and the Order of the Deputy Minister as having been
rendered without jurisdiction; for having been rendered without support in
the evidence of record since, allegedly, no hearing was conducted by the
hearing officer, Atty. Jose M. Pascual; and for having been issued in disregard
and in violation of petitioner's rights under the employment contracts with
private respondents.
1. Petitioner's first contention is that the Regional Director, MOLE, had no
jurisdiction over the subject matter of the complaint initiated by private
respondents for illegal dismissal, jurisdiction over the same being lodged in
the Arbitration Branch of the National Labor Relations Commission ("NLRC")
It appears to us beyond dispute, however, that both at the time the
complaint was initiated in September 1980 and at the time the Orders
assailed were rendered on January 1981 (by Regional Director Francisco L.
Estrella) and August 1982 (by Deputy Minister Vicente Leogardo, Jr.), the
Regional Director had jurisdiction over termination cases.
Art. 278 of the Labor Code, as it then existed, forbade the termination of the
services of employees with at least one (1) year of service without prior
clearance from the Department of Labor and Employment:
Art. 278. Miscellaneous Provisions . . .
(b) With or without a collective agreement, no employer may shut down his
establishment or dismiss or terminate the employment of employees with at
least one year of service during the last two (2) years, whether such service
is continuous or broken, without prior written authority issued in accordance
with such rules and regulations as the Secretary may promulgate . . .
(emphasis supplied)
Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor
Code, made clear that in case of a termination without the necessary
clearance, the Regional Director was authorized to order the reinstatement of
the employee concerned and the payment of backwages; necessarily,

therefore, the Regional Director must have been given jurisdiction over such
termination cases:
Sec. 2. Shutdown or dismissal without clearance. Any shutdown or
dismissal without prior clearance shall be conclusively presumed to be
termination of employment without a just cause. The Regional Director shall,
in such case order the immediate reinstatement of the employee and the
payment of his wages from the time of the shutdown or dismissal until the
time of reinstatement. (emphasis supplied)
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April
1976, was similarly very explicit about the jurisdiction of the Regional
Director over termination of employment cases:
Under PD 850, termination cases with or without CBA are now placed
under the original jurisdiction of the Regional Director. Preventive suspension
cases, now made cognizable for the first time, are also placed under the
Regional Director. Before PD 850, termination cases where there was a CBA
were under the jurisdiction of the grievance machinery and voluntary
arbitration, while termination cases where there was no CBA were under the
jurisdiction of the Conciliation Section.
In more details, the major innovations introduced by PD 850 and its
implementing rules and regulations with respect to termination and
preventive suspension cases are:
1. The Regional Director is now required to rule on every application for
clearance, whether there is opposition or not, within ten days from receipt
thereof.
xxx xxx xxx
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the Regional
Director had jurisdiction, still his order was null and void because it had been
issued in violation of petitioner's right to procedural due process . 6 This
claim, however, cannot be given serious consideration. Petitioner was
ordered by the Regional Director to submit not only its position paper but
also such evidence in its favor as it might have. Petitioner opted to rely solely
upon its position paper; we must assume it had no evidence to sustain its
assertions. Thus, even if no formal or oral hearing was conducted, petitioner
had ample opportunity to explain its side. Moreover, petitioner PIA was able
to appeal his case to the Ministry of Labor and Employment. 7
There is another reason why petitioner's claim of denial of due process must
be rejected. At the time the complaint was filed by private respondents on 21
September 1980 and at the time the Regional Director issued his questioned
order on 22 January 1981, applicable regulation, as noted above, specified
that a "dismissal without prior clearance shall be conclusively presumed to
be termination of employment without a cause", and the Regional Director
was required in such case to" order the immediate reinstatement of the
employee and the payment of his wages from the time of the shutdown or
dismiss until . . . reinstatement." In other words, under the then applicable
rule, the Regional Director did not even have to require submission of
position papers by the parties in view of the conclusive (juris et de jure)
character of the presumption created by such applicable law and regulation.
In Cebu Institute of Technology v. Minister of Labor and Employment, 8 the
Court pointed out that "under Rule 14, Section 2, of the Implementing Rules
and Regulations, the termination of [an employee] which was without
previous clearance from the Ministry of Labor is conclusively presumed to be

without [just] cause . . . [a presumption which] cannot be overturned by any

contrary proof however strong."
3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its
contract of employment with private respondents Farrales and Mamasig,
arguing that its relationship with them was governed by the provisions of its
contract rather than by the general provisions of the Labor Code. 9
Paragraph 5 of that contract set a term of three (3) years for that
relationship, extendible by agreement between the parties; while paragraph
6 provided that, notwithstanding any other provision in the Contract, PIA had
the right to terminate the employment agreement at any time by giving onemonth's notice to the employee or, in lieu of such notice, one-months salary.
A contract freely entered into should, of course, be respected, as PIA argues,
since a contract is the law between the parties. 10 The principle of party
autonomy in contracts is not, however, an absolute principle. The rule in
Article 1306, of our Civil Code is that the contracting parties may establish
such stipulations as they may deem convenient, "providedthey are not
contrary to law, morals, good customs, public order or public policy." Thus,
counter-balancing the principle of autonomy of contracting parties is the
equally general rule that provisions of applicable law, especially provisions
relating to matters affected with public policy, are deemed written into the
contract. 11 Put a little differently, the governing principle is that parties may
not contract away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with public interest. The
law relating to labor and employment is clearly such an area and parties are
not at liberty to insulate themselves and their relationships from the impact
of labor laws and regulations by simply contracting with each other. It is thus
necessary to appraise the contractual provisions invoked by petitioner PIA in
terms of their consistency with applicable Philippine law and regulations.
As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in
effect held that paragraph 5 of that employment contract was inconsistent
with Articles 280 and 281 of the Labor Code as they existed at the time the
contract of employment was entered into, and hence refused to give effect
to said paragraph 5. These Articles read as follows:
Art. 280. 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 to
his backwages computed from the time his compensation was withheld from
him up to the time his reinstatement.
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 as regular employee with respect to the activity in which he is

employed and his employment shall continue while such actually exists.
(Emphasis supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had
occasion to examine in detail the question of whether employment for a
fixed term has been outlawed under the above quoted provisions of the
Labor Code. After an extensive examination of the history and development
of Articles 280 and 281, the Court reached the conclusion that a contract
providing for employment with a fixed period was not necessarily unlawful:
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
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.
xxx xxx xxx
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. (emphasis supplied)
It is apparent from Brent School that the critical consideration is the
presence or absence of a substantial indication that the period specified in

an employment agreement was designed to circumvent the security of

tenure of regular employees which is provided for in Articles 280 and 281 of
the Labor Code. This indication must ordinarily rest upon some aspect of the
agreement other than the mere specification of a fixed term of the
ernployment agreement, or upon evidence aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment
agreement between petitioner PIA and private respondents, we consider that
those provisions must be read together and when so read, the fixed period of
three (3) years specified in paragraph 5 will be seen to have been effectively
neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6
in effect took back from the employee the fixed three (3)-year period
ostensibly granted by paragraph 5 by rendering such period in effect a
facultative one at the option of the employer PIA. For petitioner PIA claims to
be authorized to shorten that term, at any time and for any cause
satisfactory to itself, to a one-month period, or even less by simply paying
the employee a month's salary. Because the net effect of paragraphs 5 and 6
of the agreement here involved is to render the employment of private
respondents Farrales and Mamasig basically employment at the pleasure of
petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to
prevent any security of tenure from accruing in favor of private
respondents even during the limited period of three (3) years, 13 and thus to
escape completely the thrust of Articles 280 and 281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment
agreement which specifies, firstly, the law of Pakistan as the applicable law
of the agreement and, secondly, lays the venue for settlement of any dispute
arising out of or in connection with the agreement "only [in] courts of Karachi
Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the
application of Philippine labor laws and regulations to the subject matter of
this case, i.e., the employer-employee relationship between petitioner PIA
and private respondents. We have already pointed out that the relationship is
much affected with public interest and that the otherwise applicable
Philippine laws and regulations cannot be rendered illusory by the parties
agreeing upon some other law to govern their relationship. Neither may
petitioner invoke the second clause of paragraph 10, specifying the Karachi
courts as the sole venue for the settlement of dispute; between the
contracting parties. Even a cursory scrutiny of the relevant circumstances of
this case will show the multiple and substantive contacts between Philippine
law and Philippine courts, on the one hand, and the relationship between the
parties, upon the other: the contract was not only executed in the
Philippines, it was also performed here, at least partially; private respondents
are Philippine citizens and respondents, while petitioner, although a foreign
corporation, is licensed to do business (and actually doing business) and
hence resident in the Philippines; lastly, private respondents were based in
the Philippines in between their assigned flights to the Middle East and
Europe. All the above contacts point to the Philippine courts and
administrative agencies as a proper forum for the resolution of contractual
disputes between the parties. Under these circumstances, paragraph 10 of
the employment agreement cannot be given effect so as to oust Philippine
agencies and courts of the jurisdiction vested upon them by Philippine law.
Finally, and in any event, the petitioner PIA did not undertake to plead and
prove the contents of Pakistan law on the matter; it must therefore be
presumed that the applicable provisions of the law of Pakistan are the same
as the applicable provisions of Philippine law. 14
We conclude that private respondents Farrales and Mamasig were illegally
dismissed and that public respondent Deputy Minister, MOLE, had not

committed any grave abuse of discretion nor any act without or in excess of
jurisdiction in ordering their reinstatement with backwages. Private
respondents are entitled to three (3) years backwages without qualification
or deduction. Should their reinstatement to their former or other
substantially equivalent positions not be feasible in view of the length of time
which has gone by since their services were unlawfully terminated, petitioner
should be required to pay separation pay to private respondents amounting
to one (1) month's salary for every year of service rendered by them,
including the three (3) years service putatively rendered.
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of
merit, and the Order dated 12 August 1982 of public respondent is hereby
AFFIRMED, except that (1) private respondents are entitled to three (3) years
backwages, without deduction or qualification; and (2) should reinstatement
of private respondents to their former positions or to substantially equivalent
positions not be feasible, then petitioner shall, in lieu thereof, pay to private
respondents separation pay amounting to one (1)-month's salary for every
year of service actually rendered by them and for the three (3) years
putative service by private respondents. The Temporary Restraining Order
issued on 13 September 1982 is hereby LIFTED. Costs against petitioner.
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 RAB11-08-50284-91.
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-1102-00088-88) 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 attorneys
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 petitioners 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 petitioners 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 employers 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 petitioners 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 petitioners 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.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC

G.R. No. 109704 January 17, 1995

ALFREDO
B.
FELIX, petitioner,
vs.
DR. BRIGIDA BUENASEDA, in her capacity as Director, and ISABELO
BAEZ, JR., in his capacity as Administrator, both of the National
Center
for
Mental
Health,
and
the
CIVIL
SERVICE
COMMISSION,respondents.

KAPUNAN, J.:
Taking advantage of this Court's decisions involving the removal of various
civil servants pursuant to the general reorganization of the government after
the EDSA Revolution, petitioner assails his dismissal as Medical Specialist I of
the National Center for Mental Health (formerly the National Mental Hospital)
as illegal and violative of the constitutional provision on security of tenure
allegedly because his removal was made pursuant to an invalid
reorganization.
In Mendoza vs. Quisumbing 1 and the consolidated cases involving the
reorganization of various government departments and agencies we held:
We are constrained to set aside the reorganizations embodied in these
consolidated petitions because the heads of departments and agencies
concerned have chosen to rely on their own concepts of unlimited discretion
and "progressive" ideas on reorganization instead of showing that they have
faithfully complied with the clear letter and spirit of the two Constitutions
and the statutes affecting reorganization. 2
In De Guzman vs. CSC 3, we upheld the principle, laid down by Justice J.B.L.
Reyes in Cruz vs. Primicias 4 that a valid abolition of an office neither results
in a separation or removal, likewise upholding the corollary principle that "if
the abolition is void, the incumbent is deemed never to have ceased to hold
office," in sustaining therein petitioner's right to the position she held prior to
the reorganization.
The instant petition on its face turns on similar facts and issues, which is,
that petitioner's removal from a permanent position in the National Center
for Mental Health as a result of the reorganization of the Department of
Health was void.

However, a closer look at the facts surrounding the instant petition leads us
to a different conclusion.
After passing the Physician's Licensure Examinations given by the
Professional Regulation Commission in June of 1979, petitioner, Dr. Alfredo B.
Felix, joined the National Center for Mental Health (then the National Mental
Hospital) on May 26, 1980 as a Resident Physician with an annual salary of
P15,264.00. 5 In August of 1983, he was promoted to the position of Senior
Resident Physician 6 a position he held until the Ministry of Health
reorganized the National Center for Mental Health (NCMH) in January of
1988, pursuant to Executive Order No. 119.
Under the reorganization, petitioner was appointed to the position of Senior
Resident Physician in a temporary capacity immediately after he and other
employees of the NCMH allegedly tendered their courtesy resignations to the
Secretary of Health. 7 In August of 1988, petitioner was promoted to the
position of Medical Specialist I (Temporary Status), which position was
renewed the following year. 8
In 1988, the Department of Health issued Department Order No. 347 which
required board certification as a prerequisite for renewal of specialist
positions in various medical centers, hospitals and agencies of the said
department. Specifically, Department Order No. 347 provided that specialists
working in various hospitals and branches of the Department of Health be
recognized as "Fellows" of their respective specialty societies and/or
"Diplomates" of their specialty boards or both. The Order was issued for the
purpose of upgrading the quality of specialties in DOH hospitals by requiring
them to pass rigorous theoretical and clinical (bedside) examinations given
by recognized specialty boards, in keeping up with international standards of
medical practice.
Upon representation of the Chiefs of Hospitals of various government
hospitals and medical centers, (then) Secretary of Health Alfredo Bengzon
issued Department Order No. 347 providing for an extension of appointments
of Medical Specialist positions in cases where the termination of medical
specialist who failed to meet the requirement for board certification might
result in the disruption of hospital services. Department Order No. 478 issued
the following guidelines:
1. As a general policy, the provision of Department Order No. 347, Sec. 4
shall apply unless the Chief of Hospital requests for exemption, certifies that
its application will result in the disruption of the delivery service together
with the steps taken to implement Section 4, and submit a plan of action,
lasting no more than 3-years, for the eventual phase out of non-Board
certified medical specialties.
2. Medical specialist recommended for extension of appointment shall meet
the following minimum criteria:
a. DOH medical specialist certified
b. Has been in the service of the Department at least three (3) years prior to
December 1988.
c. Has applied or taken the specialty board examination.
3. Each recommendation for extension of appointment must be individually
justified to show not only the qualification of the recommendee, but also
what steps he has taken to be board certified.
4. Recommendation for extension of appointment shall be evaluated on a
case to case basis.

5. As amended, the other provisions of Department Order No. 34/s. 1988

stands.
Petitioner was one of the hundreds of government medical specialist who
would have been adversely affected by Department Order No. 347 since he
was no yet accredited by the Psychiatry Specialty Board. Under Department
Order No. 478, extension of his appointment remained subject to the
guidelines set by the said department order. On August 20, 1991, after
reviewing petitioner's service record and performance, the Medical
Credentials Committee of the National Center for Mental Health
recommended non-renewal of his appointment as Medical Specialist I,
informing him of its decision on August 22, 1991. He was, however, allowed
to continue in the service, and receive his salary, allowances and other
benefits even after being informed of the termination of his appointment.
On November 25, 1991, an emergency meeting of the Chiefs of Service was
held to discuss, among other matters, the petitioner's case. In the said
meeting Dr. Vismindo de Grecia, petitioner's immediate supervisor, pointed
out petitioner's poor performance, frequent tardiness and inflexibility as
among the factors responsible for the recommendation not to renew his
appointment. 9 With one exception, other department heads present in the
meeting expressed the same opinion, 10 and the overwhelming concensus
was for non-renewal. The matter was thereafter referred to the Civil Service
Commission, which on February 28, 1992 ruled that "the temporary
appointment (of petitioner) as Medical Specialist I can be terminated at any
time . . ." and that "[a]ny renewal of such appointment is within the
discretion of the appointing authority." 11 Consequently, in a memorandum
dated March 25, 1992 petitioner was advised by hospital authorities to
vacate his cottage since he was no longer with said memorandum petitioner
filed a petition with the Merit System Protection Board (MSPB) complaining
about the alleged harassment by respondents and questioning the nonrenewal of his appointment. In a Decision rendered on July 29, 1992, the
(MSPB) dismissed petitioner's complaint for lack of merit, finding that:
As an apparent incident of the power to appoint, the renewal of a temporary
appointment upon or after its expiration is a matter largely addressed to the
sound discretion of the appointing authority. In this case, there is no dispute
that Complainant was a temporary employee and his appointment expired
on August 22, 1991. This being the case, his re-appointment to his former
position or the renewal of his temporary appointment would be determined
solely by the proper appointing authority who is the Secretary, Department
of Health upon the favorable recommendation of the Chief of Hospital III,
NCMH. The Supreme Court in the case of Central Bank vs. Civil Service
CommissionG.R. Nos. 80455-56 dated April 10, 1989, held as follows:
The power of appointment is essentially a political question involving
considerations of wisdom which only the appointing authority can decide.
In this light, Complainant therefore, has no basis in law to assail the nonrenewal of his expired temporary appointment much less invoke the aid of
this Board cannot substitute its judgment to that of the appointing authority
nor direct the latter to issue an appointment in the complainant's favor.
Regarding the alleged Department Order secured by the complainant from
the Department of Health (DOH), the Board finds the same inconsequential.
Said Department Order merely allowed the extension of tenure of Medical
Specialist I for a certain period but does not mandate the renewal of the
expired appointment.

The Board likewise finds as baseless complainant's allegation of harassment.

It should be noted that the subsistence, quarters and laundry benefits
provided to the Complainant were in connection with his employment with
the NCMH. Now that his employment ties with the said agency are severed,
he eventually loses his right to the said benefits. Hence, the Hospital
Management has the right to take steps to prevent him from the continuous
enjoyment thereof, including the occupancy of the said cottage, after his
cessation form office.
In sum, the actuations of Dr. Buenaseda and Lt. Col. Balez are not shown to
have been tainted with any legal infirmity, thus rendering as baseless, this
instant complaint.
Said decision was appealed to the Civil Service Commission which dismissed
the same in its Resolution dated December 1, 1992. Motion for
Reconsideration was denied in CSC Resolution No. 93-677 dated February 3,
1993, hence this appeal, in which petitioner interposes the following
assignments of errors:
I
THE PUBLIC RESPONDENT CIVIL SERVICE COMMISSION ERRED IN HOLDING
THAT BY SUBMITTING HIS COURTESY RESIGNATION AND ACCEPTING HIS
TEMPORARY APPOINTMENT PETITIONER HAD EFFECTIVELY DIVESTED HIMSELF
OF HIS SECURITY OF TENURE, CONSIDERING THE CIRCUMSTANCES OF SUCH
COURTESY RESIGNATION AND ACCEPTANCE OF APPOINTMENT.
II
THE RESPONDENT COMMISSION IN NOT DECLARING THAT THE CONVERSION
OF THE PERMANENT APPOINTMENT OF PETITIONER TO TEMPORARY WAS
DONE IN BAD FAITH IN THE GUISE OF REORGANIZATION AND THUS INVALID,
BEING VIOLATIVE OF THE PETITIONER'S RIGHT OF SECURITY OF TENURE.
Responding to the instant petition, 12 the Solicitor General contends that 1)
the petitioner's temporary appointment after the reorganization pursuant to
E.O. No. 119 were valid and did not violate his constitutional right of security
of tenure; 13 2) petitioner is guilty of estoppel or laches, having acquiesced to
such temporary appointments from 1988 to 1991; 14 and 3) the respondent
Commission did not act with grave abuse of discretion in affirming the
petitioner's non-renewal of his appointment at the National Center for Mental
Hospital. 15
We agree.
The patent absurdity of petitioner's posture is readily obvious.
A residency or resident physician position in a medical specialty is never a
permanent one. Residency connotes training and temporary status. It is the
step taken by a physician right after post-graduate internship (and after
hurdling the Medical Licensure Examinations) prior to his recognition as a
specialist or sub-specialist in a given field.
A physician who desires to specialize in Cardiology takes a required threeyear accredited residency in Internal Medicine (four years in DOH hospitals)
and moves on to a two or three-year fellowship or residency in Cardiology
before he is allowed to take the specialty examinations given by the
appropriate accrediting college. In a similar manner, the accredited
Psychiatrist goes through the same stepladder process which culminates in
his recognition as a fellow or diplomate (or both) of the Psychiatry Specialty
Board. 16 This upward movement from residency to specialist rank,
institutionalized in the residency training process, guarantees minimum

standards and skills and ensures that the physician claiming to be a

specialist will not be set loose on the community without the basic
knowledge and skills of his specialty. Because acceptance and promotion
requirements are stringent, competitive, and based on merit. acceptance to
a first year residency program is no guaranty that the physician will
complete the program. Attribution rates are high. Some programs are
pyramidal. Promotion to the next post-graduate year is based on merit and
performance determined by periodic evaluations and examinations of
knowledge, skills and bedside manner. 17 Under this system, residents,
specialty those in university teaching hospitals18 enjoy their right to security
of tenure only to the extent that they periodically make the grade, making
the situation quite unique as far as physicians undergoing post-graduate
residencies and fellowships are concerned. While physicians (or consultants)
of specialist rank are not subject to the same stringent evaluation
procedures, 19 specialty societies require continuing education as a
requirement for accreditation for good standing, in addition to peer review
processes based on performance, mortality and morbidity audits, feedback
from residents, interns and medical students and research output. The
nature of the contracts of resident physicians meet traditional tests for
determining employer-employee relationships, but because the focus of
residency is training, they are neither here nor there. Moreover, stringent
standards and requirements for renewal of specialist-rank positions or for
promotion to the next post-graduate residency year are necessary because
lives are ultimately at stake.
Petitioner's insistence on being reverted back to the status quo prior to the
reorganizations made pursuant to Executive Order No. 119 would therefore
be akin to a college student asking to be sent back to high school and
staying there. From the position of senior resident physician, which he held
at the time of the government reorganization, the next logical step in the
stepladder process was obviously his promotion to the rank of Medical
Specialist I, a position which he apparently accepted not only because of the
increase in salary and rank but because of the prestige and status which the
promotion conferred upon him in the medical community. Such status,
however, clearly carried with it certain professional responsibilities including
the responsibility of keeping up with the minimum requirements of specialty
rank, the responsibility of keeping abreast with current knowledge in his
specialty rank, the responsibility of completing board certification
requirements within a reasonable period of time. The evaluation made by the
petitioner's peers and superiors clearly showed that he was deficient in a lot
of areas, in addition to the fact that at the time of his non-renewal, he was
not even board-certified.
It bears emphasis that at the time of petitioner's promotion to the position of
Medical Specialist I (temporary) in August of 1988, no objection was raised
by him about the change of position or the temporary nature of designation.
The pretense of objecting to the promotion to specialist rank apparently
came only as an afterthought, three years later, following the non-renewal of
his position by the Department of Health.
We lay stress to the fact that petitioner made no attempt to oppose earlier
renewals of his temporary Specialist I contracts in 1989 and 1990, clearly
demonstrating his acquiescence to if not his unqualified acceptance of the
promotion (albeit of a temporary nature) made in 1988. Whatever objections
petitioner had against the earlier change from the status of permanent
senior resident physician to temporary senior physician were neither pursued
nor mentioned at or after his designation as Medical Specialist I (Temporary).
He is therefore estopped from insisting upon a right or claim which he had

plainly abandoned when he, from all indications, enthusiastically accepted

the promotion. His negligence to assert his claim within a reasonable time,
coupled with his failure to repudiate his promotion to a temporary position,
warrants a presumption, in the words of this Court in Tijam vs.
Sibonghanoy, 20 that he "either abandoned (his claim) or declined to assert
it."
There are weighty reasons of public policy and convenience which demand
that any claim to any position in the civil service, permanent, temporary of
otherwise, or any claim to a violation of the constitutional provision on
security of tenure be made within a reasonable period of time. An assurance
of some degree of stability in the civil service is necessary in order to avoid
needless disruptions in the conduct of public business. Delays in the
statement of a right to any position are strongly discouraged. 21 In the same
token, the failure to assert a claim or the voluntary acceptance of another
position in government, obviously without reservation, leads to a
presumption that the civil servant has either given up his claim of has
already settled into the new position. This is the essence of laches which is
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; it is the negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it either has
abandoned it or declined to assert it. 22
In fine, this petition, on its surface, seems to be an ordinary challenge
against the validity of the conversion of petitioner's position from permanent
resident physician status to that of a temporary resident physician pursuant
to the government reorganization after the EDSA Revolution. What is unique
to petitioner's averments is the fact that he hardly attempts to question the
validity of his removal from his position of Medical Specialist I (Temporary) of
the National Center for Mental Health, which is plainly the pertinent issue in
the case at bench. The reason for this is at once apparent, for there is a
deliberate and dishonest attempt to a skirt the fundamental issue first, by
falsely claiming that petitioner was forced to submit his courtesy resignation
in 1987 when he actually did not; and second, by insisting on a right of claim
clearly abandoned by his acceptance of the position of Medical Specialist I
(Temporary), which is hence barred by laches.
The validity of the government reorganization of the Ministry of Health
pursuant to E.O. 119 not being the real issue in the case at bench, we decline
to make any further pronouncements relating to petitioner's contentions
relating to the effect on him of the reorganization except to say that in the
specific case of the change in designation from permanent resident physician
to temporary resident physician, a change was necessary, overall, to rectify
a ludicrous situation whereby some government resident physicians were
erroneously being classified as permanent resident physicians in spite of the
inherently temporary nature of the designation. The attempts by the
Department of Health not only to streamline these positions but to make
them conform to current standards of specialty practice is a step in a positive
direction. The patient who consults with a physician of specialist rank should
at least be safe in the assumption that the government physician of
specialist rank: 1.) has completed all necessary requirements at least assure
the public at large that those in government centers who claim to be
specialists in specific areas of Medicine possess the minimum knowledge and
skills required to fulfill that first and foremost maxim, embodied in the
Hippocratic Oath, that they do their patients no harm. Primium non nocere.
Finally, it is crystal clear, from the facts of the case at bench, that the
petitioner accepted a temporary appointment (Medical Specialist I). As

respondent Civil Service Commission has correctly pointed out 23, the
appointment was for a definite and renewable period which, when it was not
renewed, did not involve a dismissal but an expiration of the petitioner's
term.
ACCORDINGLY, the petition is hereby DISMISSED, for lack of merit.

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 respondents 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 respondents employment be terminated due to habitual
absenteeism,[11] in accordance with the Company Rules and Regulations.
[12]
Thus, the respondents 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-0704263-93. 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
respondents 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 months 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 respondents
employment automatically ceased. The respondents 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

requirement, the petitioner was justified in not renewing her contract.

said

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 respondents
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 petitioners 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 petitioners contention that the
respondents 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 respondents 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
courts 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 attorneys 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 employees 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 petitioners 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 respondents 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 ofDecember 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
petitioners Head of Personnel Services, Ms. Cecilia C. Mallari:
A workers 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 workers 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 workers efficiency and productivity.
[16]

The Courts 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 petitioners 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 respondents 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 respondents 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
employees 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 petitioners 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 respondents 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
employees right to security of tenure and to other benefits. It, likewise,
evidenced bad faith on the part of PILMICO.
The limited period specified in petitioners 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 employees 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 petitioners 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
employees duties.
The petitioners 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 petitioners 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 petitioners 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: Philips 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 Pias, 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 Philips
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 petitioners
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 petitioners 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 be
ing the rule, the aforementioned CBA should be binding only upon private res
pondent 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 t
o 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
respondents 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 petitioners 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 petitioners prayer
for attorneys 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.

SECOND DIVISION

ROSITA PANGILINAN, YOLANDA

LAYOLA, SALLY GOLDE, AIDA
QUITE,
FERDINAND
CALE,
RAUL
ARUITA,
MANUEL
ERIFUL,
ARNEL
PAULO,
ROSEMARIE
GEOTINA,
SAMUELA KUMAR, REBECCA
PEREZ, EDGAR BELLO, JOSEPH
SORIANO, DANILO AMPULLER,
TOLENTINO
CALLAO,
MANOLITA
MANALANG,
TORIBIO
LETIM,
NANCY
BELGICA, ALFREDO ARELLANO,
JOSEFA CEBUJANO, JUN DEL
ROSARIO, AVELINO AGUILAR,
MILAROSA TIAMSON, EDNA
DICHOSO, JASMIN BOLISAY,
JULIETA
DIDAL,
GERARDO
BARISO, ANGELITO PEAFLOR,
NERISSA LETIM, ALEXANDER
BARBOSA, ELIZABETH SAENS,
NYMPHA
LUGTU,
MYRNA
MORALES, LIZA CRUZ, ELENA
FANG,
EDNA
CRUZA,
GORGONIO
PALMA,
JOSE

G.R. No. 149329

Present:

VERGARA, ALDRIN REMORQUE,

RUDY
BLANCO,
MARIO
BUENVIAJE, MA. CRISTY CEA,
REYNALDO
GUELAS
VILLASENOR,
RHOY
TADO,
LYDIA
SALIPOT,
ANGELITO
PEREZ
VERGARA,
RODOLFO GACHO, JESSIE

PUNO, J., Chairman,

QUISUMBING,
MARTINEZ,
CALLEJO, SR., and
TINGA, JJ.

SAN PEDRO, MARINAO ORCA,

JR., PEBELITO LERONA, PEPE
CONGRESO,
NIMFA
NAPAO,
WILHELMINA BAGUISA, OLIVIA
CAINCAY,
JERRY
MANUEL
NICOLAS, CARLOS ABRATIQUE,
JESUS LIM, JR., AND GERRY
ROXAS,
Petitioners,

Promulgated:
- versus -

July 12, 2004

GENERAL MILLING CORPORATION,
Respondent.
x--------------------------------------------------x

DECISION

CALLEJO, SR., J.:

Before this Court is a petition for review on certiorari of the Decision [1] of the
Court of Appeals in CA-G.R. SP No. 51678 and its Resolution denying the
motion for reconsideration thereon.

The Antecedents

The respondent General Milling Corporation is a domestic corporation

engaged in the production and sale of livestock and poultry. [2] It is, likewise,
the distributor of dressed chicken to various restaurants and establishments
nationwide.[3] As such, it employs hundreds of employees, some on a regular
basis and others on a casual basis, as emergency workers.

The petitioners[4] were employed by the respondent on different dates as

emergency workers at its poultry plant in Cainta, Rizal, under separate
temporary/casual contracts of employment for a period of five months.
[5]
Most of them worked as chicken dressers, while the others served as
packers or helpers.[6] Upon the expiration of their respective contracts, their
services were terminated. They later filed separate complaints for illegal
dismissal and non-payment of holiday pay, 13 th month pay, night-shift
differential and service incentive leave pay against the respondent before
the Arbitration Branch of the National Labor Relations Commission, docketed
as NLRC Case No. RAB-IV-9-4519-92-RI; NLRC Case No. RAB-IV-9-4520-92-RI;
NLRC Case No. RAB-IV-9-4521-92-RI; NLRC Case No. RAB-IV-9-4541-92-RI;
NLRC Case No. RAB-IV-10-4552-92-RI; NLRC Case No. RAB-IV-10-4595-92-RI
and NLRC Case No. RAB-IV-11-4599-92-RI. [7]

The petitioners alleged that their work as chicken dressers was necessary
and desirable in the usual business of the respondent, and added that
although they worked from 10:00 p.m. to 6:00 a.m., they were not paid
night-shift differential.[8] They stressed that based on the nature of their
work, they were regular employees of the respondent; hence, could not be
dismissed from their employment unless for just cause and after due
notice. In support thereof, the petitioners cited the decision of the Honorable
Labor Arbiter Perlita B. Velasco in NLRC Case No. NCR-6-2168-86,
entitled Estelita Jayme, et al. vs. General Milling Corporation; and NLRC Case
No. NCR-9-3726-86, entitled Marilou Carino, et al. vs. General Milling
Corporation.[9] They asserted that the respondent GMC terminated
their contract of employment without just cause and due notice. They further
argued that the respondent could not rely on the nomenclature of their
employment as temporary or casual.

On August 18, 1997, Labor Arbiter (LA) Voltaire A. Balitaan rendered a

decision in favor of the petitioners declaring that they were regular
employees. Finding that the termination of their employment was not based
on any of the just causes provided for in the Labor Code, the LA declared
that they were allegedly illegally dismissed. The decretal portion of the
decision reads:

WHEREFORE, judgment is hereby rendered in these cases, as follows:

1.
Declaring respondent corporation guilty of illegally dismissing
complainants, except Rosalina Basan and Filomena Lanting whose
complaints are hereby dismissed on ground of prescription, and as a
consequence therefor ordering the said respondent corporation to reinstate

them to their former positions without loss of seniority rights and other
privileges and with full backwages from the time they were illegally
dismissed in the aggregate amount of P15,328,594.04;

2.
Ordering respondent corporation to pay the said complainants
their 13th month pay, holiday pay and service incentive leave pay in the
aggregate amount of P1,979,148.23;

3.
Ordering respondent corporation to pay said complainants the
amount of P1,730,744.22 by way of attorneys fees, representing ten
(10%) percentum of the total judgment awards.

The case against individual respondent Medardo Quiambao is hereby

dismissed.[10]

A copy of the decision was sent by registered mail to the respondent on

October 23, 1997 under Registered Mail No. 004567 addressed to Atty.
Emmanuel O. Pacsi, counsel for GMC, 6th Floor, Corinthian Plaza Bldg., 121
Paseo de Roxas, Makati City.[11] However, Beth Cacal, a clerk of the
respondent GMC received the said decision on October 28, 1997.
[12]
Contending that a copy thereof was received only on November 3, 1997,
the respondent filed an appeal on November 12, 1997, before the National
Labor Relations Commission (NLRC), docketed as NLRC NCR CA No. 01446298. The petitioners filed a Motion to Dismiss Respondents Notice of
Appeal/Appeal Memorandum on the ground that the appeal was filed five
days late, considering that the August 18, 1997 Decision was received by the
respondent through its employee, Beth Cacal, on October 28, 1997.[13]

The respondent opposed the motion, contending that Cacal was a mere
clerk, and was not a member of the staff of its Legal Department. It further
contended that the Legal Department was located at the sixth (6 th) floor of
Corinthian Plaza and had its own staff, including the legal secretary who
served as the Legal Departments receiving clerk. [14]Invoking Section 10, Rule
13 of the Rules of Court, in relation to Section 2 thereof, the respondent
alleged that Cacals receipt of the mail and/or decision was not equivalent to
receipt by its counsel. In support thereof, the respondent cited the cases
of Adamson University v. Adamson University Faculty and Employees
Association,[15] and PLDT vs. NLRC.[16]

On May 25, 1998, the NLRC rendered a decision reversing that of the Labor
Arbiter, the dispositive portion of which is herein quoted:

WHEREFORE, except for its award of 13 th month pay, holiday pay and service
incentive leave pay in the aggregate amount of P1,979,148.23 which is
hereby affirmed, the appealed decision is set aside for being contrary to
settled jurisprudence.[17]

The NLRC ruled that the respondent GMC filed its appeal within the
reglementary period. Citing the case of Caete v. NLRC[18] which, in turn,
cited Adamson v. Adamson[19]and United Placement International v. NLRC,
[20]
the NLRC held that service by registered mail is completed only upon
actual receipt thereof by the addressee. Since the addressee of the mail is
the respondents counsel and the person who received it was a non-member
of the Legal Staff, the decision cannot be said to have been validly served on
the respondents counsel on October 28, 1997.

The NLRC also held that the petitioners, who were temporary or contractual
employees of the respondent, were legally terminated upon the expiration of
their respective contracts. Citing the case of Brent School, Inc. vs. Zamora,
[21]
the NLRC explained that while the petitioners work was necessary and
desirable in the usual business of GMC, they cannot be considered as regular
employees since they agreed to a fixed term.

The petitioners motion for reconsideration of the decision having been

denied by the NLRC on October 12, 1998, [22] they filed a petition for certiorari
before the Court of Appeals and assigned the following errors:

I
THE RESPONDENT COMMISSION SERIOUSLY ERRED AND ACTED WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK AND/OR IN EXCESS OF ITS
JURISDICTION IN ENTERTAINING AND GIVING DUE COURSE TO RESPONDENT
COMPANYS APPEAL WHICH WAS UNDENIABLY FILED OUT OF TIME AND
CONSEQUENTLY SETTING ASIDE THE FINAL DECISION OF THE LABOR
ARBITER.

II
THE RESPONDENT COMMISSION SERIOUSLY ERRED AND ACTED WITH GRAVE
ABUSE OF DISCRETION IN HOLDING THAT PETITIONERS DISMISSAL WAS
LEGAL ON THE GROUND OF EXPIRATION OF EMPLOYMENT CONTRACT WHICH
IS NOT A STATUTORY CAUSE UNDER THE LABOR CODE.

III
THE RESPONDENT COMMISSION [S]ERIOUSLY ERRED AND ACTED WITH
GRAVE ABUSE OF DISCRETION IN NOT FINDING THAT PETITIONERS, AS
REGULAR EMPLOYEES, CANNOT BE DISMISSED WITHOUT JUST CAUSE AND
THE REQUIRED DUE PROCESS.[23]

On September 29, 2000, the CA rendered a decision affirming with

modification the decision of the NLRC, the decretal portion of which reads:

WHEREFORE, the appealed decision of the NLRC is hereby AFFIRMED, with

the MODIFICATION that the award of 13th month pay, holiday pay, and
service incentive leave pay shall cover only the year or years when
petitioners were actually employed with herein respondent General Milling
Corporation.[24]

The CA ruled that no grave abuse of discretion could be imputed to the

NLRC, considering that the ten-day period to appeal began to run only from
the date the decision of the LA was validly served on the respondents
counsel. The appellate court also ruled that even assuming arguendo that
the respondent GMCs appeal was filed late, in view of the substantial amount
involved, giving due course to the appeal did not amount to grave abuse of
discretion.

On the merits of the petition, the CA ruled that where the duties of the
employee consist of activities usually necessary or desirable in the usual
business of the employer, it does not necessarily follow that the parties are
forbidden from agreeing on a period of time for the performance of such
activities, and cited the case of St. Theresas School of Novaliches Foundation
v. NLRC.[25] The CA affirmed the entitlement of the petitioners to a
proportionate thirteenth (13th) month pay for the particular year/s the
petitioners were employed. As to the awards of holiday pay and service
incentive leave pay, the CA ruled that they should be limited to the year/s of
actual service.[26]

The petitioners filed a motion for reconsideration of the said decision, which
was denied on July 24, 2001.[27]

The Present Petition

The petitioners filed the instant petition, ascribing the following errors to the
appellate court:

I
THE HONORABLE COURT OF APPEALS GRAVELY ERRED AND ACTED WITHOUT
JURISDICTION WHEN IT MODIFIED THE LABOR ARBITERS JUDGMENT THAT
HAS BECOME FINAL AND EXECUTORY FOR FAILURE OF THE RESPONDENT TO
APPEAL WITHIN THE REGLEMENTARY PERIOD.

II
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE
DECISION OF THE LABOR ARBITER WAS DEEMED SERVED NOT ON THE DATE
WHEN THE DECISION WAS DELIVERED BY THE POSTMASTER TO THE OFFICE
OF THE RESPONDENTS LAWYER, BUT ON THE DATE WHEN THE RECEIVING
CLERK GAVE THE DECISION TO THE LAWYER.

III
THE RESPONDENTS PRACTICE OF HIRING CHICKEN DRESSERS ON A 5-MONTH
CONTRACT AND REPLACING THEM WITH ANOTHER SET OF 5-MONTH
CONTRACT WORKERS, OBVIOUSLY TO PREVENT THEM FROM ATTAINING
REGULAR STATUS, IS VIOLATIVE OF THE CONSTITUTION AND ARTICLES 279
AND 280 OF THE LABOR CODE.[28]

The issues for resolution are (a) whether or not the respondents appeal from
the Labor Arbiters decision was filed within the reglementary period therefor;
and, (b) whether or not the petitioners were regular employees of the
respondent GMC when their employment was terminated.

In petitions for review on certiorari of the decision of the CA, only errors of
law are generally reviewed.[29] Normally, the Supreme Court is not a trier of
facts.[30] In the absence of any showing that the NLRC committed grave
abuse of discretion, or otherwise acted without or in excess of jurisdiction,
the Court is bound by its findings.[31] Such findings are not infallible, however,
particularly when there is a showing that they were arrived at arbitrarily or in
disregard of the evidence on record. In such case, they may be re-examined
by
the
Court.
Hence, when the factual findings of the NLRC are contrary to those of the
Labor Arbiter, the evidentiary facts may be reviewed by the appellate court.
[32]
Considering that the NLRCs findings clash with those of the Labor Arbiters,
this Court is compelled to go over the records of the case as well as the
submissions of the parties.[33]

The Ruling of the Court

The petition is bereft of merit.

Anent the first issue, we agree with the CA that the NLRC did not act with
grave abuse of discretion when it gave due course to the appeal of the
respondent. Decisions of the Labor Arbiter are final and executory, unless
appealed to the Commission, within ten (10) calendar days from receipt
thereof.[34] Copies of decisions or final awards are served on both parties and
their counsel by registered mail,[35] and such service by registered mail is
completed upon actual receipt by the addressee or five (5) days from receipt
of the first notice of the postmaster, whichever is earlier.[36]

The records show that the August 18, 1997 Decision of the Labor Arbiter was
served via registered mail, addressed to the respondent GMCs counsel, Atty.
Emmanuel O. Pacsi, at the sixth (6 th) Floor, Corinthian Plaza Bldg., 121 Paseo
de Roxas, Makati City.[37] It was received by Beth Cacal, a clerk of the
respondent, on October 28, 1997. The petitioners insist that Cacal is a
person with authority to receive legal and judicial correspondence for the
respondents Legal Department. They point out that such authority to receive
mail for and in behalf of the respondents Legal Department is bolstered by
the certification from the Makati Post Office that she received the copy of
their motion to dismiss the appeal, addressed to the said department.

The respondent GMC counters that the service of the LAs decision to a
person not connected to its Legal Department is not a valid service, and that
it is only when a copy of such decision is actually given to such department
that a valid service of the decision is deemed to have been made. Stressing
that factual issues are not proper in a petition for certiorari under Rule 45,
the respondent no longer discussed Cacals authority to receive legal and
judicial communications for the respondent.

A review of the records reveal that Cacal was a clerk at the respondents
office and was assigned at the sixth floor of the Corinthian Plaza Bldg. She
was not assigned at the respondents Legal Department, which has its own
office staff, including a secretary who serves as the departments receiving
clerk.[38] The Court has ruled that a service of a copy of a decision on a
person who is neither a clerk nor one in charge of the attorneys office is
invalid.[39] Thus, there was no grave abuse of discretion on the part of the
NLRC in giving due course to the respondents appeal.
On the second issue, we agree that the petitioners were employees with a
fixed period, and, as such, were not regular employees.

Article 280 of the Labor Code 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.[40]

A regular employee is one who is engaged to perform activities which are

necessary and desirable in the usual business or trade of the employer as
against those which are undertaken for a specific project or are seasonal.
[41]
There are two separate instances whereby it can be determined that an
employment is regular: (1) if the particular activity performed by the
employee is necessary or desirable in the usual business or trade of the
employer; and, (2) if the employee has been performing the job for at least a
year.[42]

In the case of St. Theresas School of Novaliches Foundation vs. NLRC,[43] we

held that Article 280 of the Labor Code does not proscribe or prohibit an
employment contract with a fixed period. We furthered that it does not
necessarily follow that where the duties of the employee consist of activities
usually necessary or desirable in the usual business of the employer, the
parties are forbidden from agreeing on a period of time for the performance
of such activities. There is thus nothing essentially contradictory between a
definite period of employment and the nature of the employees duties.

Indeed, in the leading case of Brent School Inc. v. Zamora,[44] we laid down
the guideline before a contract of employment may be held as valid, to wit:

[S]tipulations 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.
[45]

An examination of the contracts entered into by the petitioners showed that

their employment was limited to a fixed period, usually five or six months,
and did not go beyond such period.

TEMPORARY/CASUAL CONTRACT OF EMPLOYMENT

KNOW ALL MEN BY THESE PRESENTS:

That the GENERAL MILLING CORPORATION, hereby temporarily hires

________________ as Emergency worker for a period beginning from
____________ to _____________, inclusive, at the rate of _____________ per day,
payable every 15th [day] and end of each month.

________________ hereby binds and obligates himself/herself to perform

his/her assigned work diligently and to the best of his/her ability, and
promise to obey all lawful orders of his/ her superior and/or representatives
made in connection with the work for which he/she is employed.

IT IS CLEARLY STIPULATED THAT THE CONDITION OF THIS EMPLOYMENT

SHALL BE AS FOLLOWS:

1.
This employment contract shall be on a DAY-TO-DAY BASIS and
shall not extend beyond the period specified above;

2.
The employee aforementioned may be laid off or separated
from the Firm, EVEN BEFORE THE EXPIRY DATE OF THIS CONTRACT, if his/her
services are no longer needed, or if such services are found to be
unsatisfactory, or if she/he has violated any of the established rules and
regulations of the Company;

3.
In any case, the period of employment shall not go beyond the
duration of the work or purpose for which the aforementioned employee has
been engaged;

4.
That the employee hereby agrees to work in any work shift
schedule that may be assigned to him by the Firm during the period of this
contract; and

This Temporary/Casual Employment contract, unless sooner terminated for

any of the causes above-cited, shall then automatically cease on its expiry
date, without the necessity of any prior notice to the employee concerned.[46]

The records reveal that the stipulations in the employment contracts were
knowingly and voluntarily agreed to by the petitioners without force, duress
or improper pressure, or any circumstances that vitiated their
consent. Similarly, nothing therein shows that these contracts were used as a
subterfuge by the respondent GMC to evade the provisions of Articles 279
and 280 of the Labor Code.

The petitioners were hired as emergency workers and assigned as chicken

dressers, packers and helpers at the Cainta Processing Plant. The respondent
GMC is a domestic corporation engaged in the production and sale of
livestock and poultry, and is a distributor of dressed chicken. While the
petitioners employment as chicken dressers is necessary and desirable in the
usual business of the respondent, they were employed on a mere temporary
basis, since their employment was limited to a fixed period. As such, they
cannot be said to be regular employees, but are merely contractual
employees. Consequently, there was no illegal dismissal when the petitioners
services were terminated by reason of the expiration of their contracts.
[47]
Lack of notice of termination is of no consequence, because when the
contract specifies the period of its duration, it terminates on the expiration of
such period. A contract for employment for a definite period terminates by
its own term at the end of such period.[48]

In sum, we rule that the appeal was filed within the ten (10)-day
reglementary period. Although the petitioners who mainly worked as chicken
dressers performed work necessary and desirable in the usual business of
the respondent, they were not regular employees therein. Consequently, the
termination of their employment upon the expiry of their respective
contracts was valid.

IN LIGHT OF ALL THE FOREGOING, the petition is hereby DENIED DUE

COURSE. The Decision of the Court of Appeals in CA-G.R. SP No. 51678
isAFFIRMED. No costs.

SO ORDERED.

SECOND DIVISION
NOELITO
FABELA,
MARCELO G.R. No. 150658
DELA CRUZ III, ROGELIO LASAT,
HENRY MALIWANAG, MANUEL
DELOS SANTOS, and ROMMEL Present:
QUINES,
Petitioners,

QUISUMBING, J., Chairperson,

CARPIO,

- versus -

CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

SAN MIGUEL CORPORATION and

Promulgated:
ARMAN HICARTE,
February 9, 2007
Respondents.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO MORALES, J.:
On review is the July 30, 2001 Decision of the Court of Appeals reversing the
ruling of the National Labor Relations Commission (NLRC) and the Labor
Arbiter finding petitioners to have been illegally dismissed.
Petitioners, along with Joselito de Lara and John Alovera, were hired by
respondent San Miguel Corporation (SMC) as Relief Salesmen for the Greater
Manila Area (GMA) under separate but almost similarly worded Contracts of
Employment With Fixed Period. After having entered into successive
contracts of the same nature with SMC, the services of petitioners, as well as
de Lara and Alovera, were terminated after SMC no longer agreed to forge
another contract with them.
The dates of hiring of petitioners, et al. and the termination of their
employment are set forth below:[1]

NAME

DATE HIRED

NOELITO FABELA

MAY, 1992

DATE
OF
TERMINATION OF
EMPLOYMENT
AUGUST, 1996

ROGELIO LASAT

AUGUST, 1995

SEPTEMBER,
1997

HENRY MALIWANAG

MAY, 1995

SEPTEMBER,
1997

MANUEL DELOS SANTOS

MAY, 1995

SEPTEMBER,
1997

JOSELITO DE LARA

MAY, 1994

JULY 30,1997

ROMMEL QUINES

OCTOBER, 1994 SEPTEMBER,

1997

MARCELO DELA CRUZ

DECEMBER,
1991

MAY, 1997

JOHN ALOVERA

JUNE, 1992

MAY, 1997

Respondent SMC and its co-respondent Arman Hicarte, who was its Human
Resources Manager, claimed that the hiring of petitioners was not intended
to be permanent, as the same was merely occasioned by the need to fill in a
vacuum arising from SMCs gradual transition to a new system of selling and
delivering its products.

Respondents explained that SMC previously operated under the Route

System,[2] but began implementing in 1993 the Pre-Selling System [3] in which
the salesmen under the earlier system would be replaced by Accounts
Specialists which called for upgraded qualifications.[4]
In support of their claim, respondents presented the affidavit of Mariano N.
Lopez, Assistant Vice President and Area Sales Manager for the GMA Sales
Operations of San Miguel Brewing Philippines.[5]
While some of the qualified regular salesmen were readily upgraded to the
position of Accounts Specialist, respondents claimed that SMC still had to sell
its beer products using the conventional routing system during the transition
stage, thus giving rise to the need for temporary employees; and the
members of the regular Route Crew then existing were required to undergo a
training program to determine whether they possessed or could be trained
for the necessary attitude and aptitude required of an Accounts Specialist,
hence, the hiring of petitioners and others for a fixed period, co-terminus
with the completion of the transition period and Training Program for all
prospective Accounts Specialists.[6]
Claiming that they were illegally dismissed, petitioners, as well as de Lara
and Alovera, filed separate complaints for illegal dismissal against
respondents. The complaints were consolidated.
By Decision dated September 23, 1998, Labor Arbiter Manuel P. Asuncion
held that except for de Lara and Alovera, the complainants-herein petitioners
were illegally dismissed. Thus the decision disposed:
IN LIGHT OF THE FOREGOING CONSIDERATIONS, the respondents are hereby
ordered to reinstate Marcelo Dela Cruz, Norlito Fabela, Henry Maliwanag,
Rogelio Lasat, Manuel Delos Santos and Rommel Quines to their former
positions with full backwages from the time their salaries were withheld until

they are actually reinstated. As of this date, their backwages has reached the
sum of P562,336.64. (See attached computation). The complaints of Jun
Alovera and Joselito De Lara must be dismissed for lack of merit.
SO ORDERED.
The Decision of the Labor Arbiter was affirmed on appeal by the NLRC, by
Resolution of April 28, 2000. Respondents Motion for Reconsideration was
denied, hence, they filed a Petition for Certiorari with the Court of Appeals
before which they contended that herein petitioners were validly hired for a
fixed period which was not renewed, hence, the termination of their services
was valid.
By Decision of July 30, 2001,[7] the Court of Appeals granted respondents
petition and accordingly reversed the decision of the Labor Arbiter and of the
NLRC. The appellate court accordingly dismissed petitioners complaints. In
granting respondents petition, the appellate court ratiocinated:
At bar, there is not any least indication that the employment contract was
not knowingly and voluntarily agreed upon between the parties nary any
force or improper pressure upon the employee nor any circumstances
vitiating his consent. Neither is there any indication or signal of improper
pressure in the execution of the contract nor that the employer and the
employee did not deal with each other on equal terms absent any moral
dominance by the employer upon the employee. Finally, at the time the
contracts were entered into, the parties were pretty aware of the day
certain which must necessarily come although still unknown when at which
time the contract will self- expire.[8] (Underscoring supplied)
Their motion for reconsideration having been denied by the Court of Appeals
by Resolution of October 29, 2001, petitioners filed the present petition.
The validity of the termination of petitioners services depends on whether
they were hired for a fixed period, as claimed by respondents, or as regular
employees who may not be dismissed except for just or authorized causes.
Article 280 of the Labor Code defines regular 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 activity actually exists. (Emphasis, italics and underscoring supplied)
In Pure Foods Corp. v. NLRC,[9] this Court held that under the above-quoted
provision, there are two kinds of regular employees, namely: (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.
Article 280 also recognizes project employees, those whose employment has
been fixed for a specific project or undertaking. (Underscoring supplied)
Project employment is distinct from casual employment referred to in the
second paragraph of Article 280 for, as clarified in Mercado, Sr. v. NLRC,
[10]
the proviso that any employee who has rendered at least one year of
service . . . shall be considered a regular employee does not apply to project
employees, but only to casual employees.
Although Article 280 does not expressly recognize employment for a
fixed period, which is distinct from employment which has been fixed for a
specific project or undertaking,Brent School, Inc. v. Zamora[11] has clarified
that employment for a fixed period is not in itself illegal, viz:
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
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 x x (his) employment?
xxxx

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
employees 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. x x x (Emphasis and underscoring supplied)
Thus, even if the duties of an employee consist of activities usually
necessary or desirable in the usual business of the employer, it does not
necessarily follow that the parties are forbidden from agreeing on a period of
time for the performance of such activities through a contract of employment
for a fixed term.[12]
Respondents, without disputing that the duties of petitioners consisted of
activities necessary or desirable in its usual business or trade, claim that the

contracts of employment entered into by respondent SMC with the herein

petitioners are valid fixed-term contracts under the Brent doctrine.
Albeit the Court of Appeals ruled in respondents favor on the basis of a
finding that petitioners were validly hired as project employees,
[13]
respondents deny that petitioners were project employees, asserting that
they were hired only as fixed-term employees.[14]
Since respondents attribute the termination of petitioners employment to the
expiration of their respective contracts, a determination of whether
petitioners were hired as project or seasonal employees, or as fixed-term
employees without any force, duress or improper pressure having been
exerted against them is in order. If petitioners fall under any of these
categories, then indeed their termination follows from the expiration of their
contracts.
Since, as earlier stated, respondents themselves deny that petitioners were
project employees, and they do not allege that they were seasonal
employees, what remains for determination is whether petitioners were
fixed-term employees under the Brent doctrine.
As the resolution of this issue necessarily involves a calibration of
respondents evidence, the factual findings of the Labor Arbiter and the NLRC
assume importance.[15]
This Court has consistently adhered to the rule that in reviewing
administrative decisions such as those rendered by the NLRC, the findings
of fact made therein are to be accorded not only great weight and
respect, but even finality, for as long as they are supported by
substantial evidence. It is not the function of the Court to once again
review and weigh the conflicting evidence, determine the credibility of the
witnesses or otherwise substitute its own judgment for that of the
administrative agency on the sufficiency of the evidence. Nevertheless, when
the inference made or the conclusion drawn on the basis of certain state of
facts is manifestly mistaken, the Court is not estopped from exercising its
power of review. (Emphasis and underscoring supplied)
Significantly, both the Labor Arbiter and the NLRC found that petitioners
were all regular employees. The NLRC even explicitly stated that the periods
stated in petitioners contracts were fixed not because of temporary
exigencies but because of a scheme to preclude petitioners from acquiring
tenurial security.
The Court of Appeals, however, found that [a]ll indications and established
facts lead to the inevitable conclusion that the contracts of employment
subject matter of this case were executed in good faith and for a lawful and
moral purpose,[16] and thus concluded that the NLRC committed grave abuse
of discretion for holding otherwise.

A considered assessment of the findings of the Labor Arbiter and the NLRC,
however, shows that the same are supported by substantial evidence.
Respondents contention that there are fixed periods stated in the contracts
of employment does not lie. Brent instructs that a contract of employment
stipulating a fixed-term, even if clear as regards the existence of a period, is
invalid if it can be shown that the same was executed with the intention of
circumventing security of tenure, and should thus be ignored. And so
does Paguio v. NLRC,[17] thus:

x x x A stipulation [for a fixed-term] in an agreement can be ignored as and

when it is utilized to deprive the employee of his security of tenure. The
sheer inequality that characterizes employer-employee relations, where the
scales generally tip against the employee, often scarcely provides him real
and better options.
Indeed, substantial evidence exists in the present case showing that the
subject contracts were utilized to deprive petitioners of their security of
tenure.
The contract of employment of petitioner Fabela, for instance, states that the
transition period from the Route System to the Pre-Selling System would be
twelve (12) months from April 4, 1995, thus:
WHEREAS, the FIRST PARTY [San Miguel Corporation] is undertaking a project
to manage the transition in fully implementing the pre-selling system;
WHEREAS, during the transition period, which is twelve (12)
months before the new system will be fully implemented in the districts
planned for in 1995, the FIRST PARTY will conduct a training for the regular
Salesmen and will continue to sell its therefore (sic) beer products using the
conventional system and will therefore need to hire relief personnel to
undertake the activities thereinafter mentioned which are to be
undertaken/performed for a limited/specific period which activities shall
hereinafter be referred to as PROJECT ACTIVITIES.

xxxx

SECTION ONE: TERM OF CONTRACT

The FIRST PARTY hereby hires the SECOND PARTY as PROJECT RELIEF
SALESMAN to perform/undertake the activities listed in Annex A hereof at its
Greater Manila Area Sales Operations, San Miguel Brewing Group and the
latter hereby accepts and agrees such undertaking for a period of twelve
(12) months, starting from April 4, 1995 to April 3, 1996 or upon
completion of the project hereinafter referred to, whichever comes
first, subject to the general supervision, order, advice and directions of the
FIRST PARTY.
x x x x[18] (Emphasis and underscoring supplied)
It bears noting, however, that petitioner Fabela, besides being hired again for
another fixed period of four (4) months after the lapse in April 1996 of the
one-year contract, had already been working for respondent SMC on a fixedterm basis as early as 1992, or one year before respondent SMC even began
its shift to the Pre-selling System in 1993.
Similarly, petitioner Marcelo dela Cruz III was hired prior to the alleged
transition to the new system. In fact, he was hired in December 1991, even
earlier than petitioner Fabela.

The NLRC, therefore, had sufficient basis to believe that the shift of SMC to
the Pre-Selling System was not the real basis for the forging of fixed-term
contracts of employment with petitioners and that the periods were fixed
only as a means to preclude petitioners from acquiring security of tenure.

Moreover, other than the earlier-mentioned affidavit of Mariano N. Lopez,

respondents have presented no evidence that the shift to the Pre-Selling
System occurred as early as 1993. The employment contracts presented by
respondents in support of their claim that petitioners were hired only for the
transition stage are dated not earlier than April 1995.[19] Even the contract of
petitioner Fabela expressly states that the transition period is twelve
months, beginning in 1995, rather than 1993. If the shift to the new system
only began in 1995, however, then not only petitioners Fabela and dela Cruz
were hired prior to the transition, but also petitioner Quines, who was hired
in 1994.
As Brent pronounces, a fixed-term employment is valid only under certain
circumstances, such as when the employee himself insists upon the 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.
That petitioners themselves insisted on the one-year fixed-term is not even
alleged by respondents. In fact, the sustained desire of each of the
petitioners to enter into another employment contract upon the termination
of the earlier ones clearly indicates their interest in continuing to work for
SMC.
Moreover, respondents have not established that the engagement of
petitioners services, which is not in the nature of a project employment,
required a definite date of termination as a sine qua non.
IN FINE, the finding of the Labor Arbiter and the NLRC that the execution of
the contracts was merely intended to circumvent petitioners security of
tenure merits this Courts concurrence.
WHEREFORE, the petition is GRANTED. The assailed Decision of the Court
of Appeals is SET ASIDE. The Decision dated September 23, 1998 of the
Labor Arbiter, which was affirmed by the National Labor Relations
Commission by Resolution of April 28, 2000, is REINSTATED.
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-NCRCase 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 moviemaking. 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 attorneys 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 NLRCs 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 NLRCs
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 NLRCs
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 NLRCs 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 NLRCs 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 moviemaking 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 VIVAs 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 employers power to control
the employees conduct, the most important element is the employers control
of the employees 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
Companys 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 PRODUCERs 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)
VIVAs 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 directors control, and not VIVAs direction. The director merely
instructs petitioners on how to better comply with VIVAs 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 VIVAs 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
VIVAs 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 VIVAs 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 VIVAs 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 rehired 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 ofIndustrial-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 rehire 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 employers 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 Courts 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 employers
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. 00-0703994-92 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. 147816. May 9, 2003]
EFREN P. PAGUIO, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, METROMEDIA TIMES CORPORATION, ROBINA Y.
GOKONGWEI, LIBERATO GOMEZ, JR., YOLANDA E. ARAGON,
FREDERICK D. GO and ALDA IGLESIA, respondents.
DECISION
VITUG, J.:
On 22 June 1992, respondent Metromedia Times Corporation entered, for the
fifth time, into an agreement with petitioner Efren P. Paguio, appointing the
latter to be an account executive of the firm. [1] Again, petitioner was to solicit
advertisements for "The Manila Times," a newspaper of general circulation,
published by respondent company. Petitioner, for his efforts, was to receive
compensation consisting of a 15% commission on direct advertisements less
withholding tax and a 10% commission on agency advertisements based on
gross revenues less agency commission and the corresponding withholding
tax. The commissions, released every fifteen days of each month, were to be
given to petitioner only after the clients would have paid for the
advertisements. Apart from commissions, petitioner was also entitled to a
monthly allowance of P2,000.00 as long as he met the P30,000.00-monthly
quota.Basically, the contentious points raised by the parties had something
to do with the following stipulations of the agreement; viz:
12. You are not an employee of the Metromedia Times Corporation nor does
the company have any obligations towards anyone you may employ, nor any
responsibility for your operating expenses or for any liability you may
incur. The only rights and obligations between us are those set forth in this
agreement. This agreement cannot be amended or modified in any way
except with the duly authorized consent in writing of both parties.
13. Either party may terminate this agreement at any time by giving written
notice to the other, thirty (30) days prior to effectivity of termination. [2]

On 15 August 1992, barely two months after the renewal of his contract,
petitioner received the following notice from respondent firm Dear Mr. Paguio,
Please be advised of our decision to terminate your services as Account
Executive of Manila Times effective September 30, 1992.
This is in accordance with our contract signed last July 1, 1992.[3]
Apart from vague allegations of misconduct on which he was not given the
opportunity to defend himself, i.e., pirating clients from his co-executives and
failing to produce results, no definite cause for petitioners termination was
given. Aggrieved, petitioner filed a case before the labor arbiter, asking that
his dismissal be declared unlawful and that his reinstatement, with
entitlement to backwages without loss of seniority rights, be
ordered. Petitioner also prayed that respondent company officials be held
accountable for acts of unfair labor practice, for P500,000.00 moral damages
and for P200,000.00 exemplary damages.
In their defense, respondent Metromedia Times Corporation asserted that it
did not enter into any agreement with petitioner outside of the contract of
services under Articles 1642 and 1644 of the Civil Code of the Philippines.
[4]
Asserting their right to terminate the contract with petitioner, respondents
pointed to the last provision thereof stating that both parties could opt to
end the contract provided that either party would serve, thirty days prior to
the intended date of termination, the corresponding notice to the other.
The labor arbiter found for petitioner and declared his dismissal illegal. The
arbiter ordered respondent Metromedia Times Corporation and its officers to
reinstate petitioner to his former position, without loss of seniority rights, and
to pay him his commissions and other remuneration accruing from the date
of dismissal on 15 August 1992 up until his reinstatement. He likewise
adjudged that Liberato I. Gomez, general manager of respondent
corporation, be held liable to petitioner for moral damages in the amount of
P20,000.00.
On appeal, the National Labor Relations Commission (NLRC) reversed the
ruling of the labor arbiter and declared the contractual relationship between
the parties as being for a fixed-term employment. The NLRC declared a fixedterm employment to be lawful as long as it was agreed upon knowingly and
voluntarily by the parties, without any force, duress or improper pressure
being brought to bear upon the worker and absent any other circumstances
vitiating his consent."[5] The finding of the NLRC was primarily hinged on the
assumption that petitioner, on account of his educated stature, having
indeed personally prepared his pleadings without the aid of counsel, was an
unlikely victim of a lopsided contract. Rejecting the assertion of petitioner
that he was a regular employee, the NLRC held: "The decisive determinant
would not be the activities that the employee (was) called upon to perform
but rather, 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 (would) necessarily come,
although it (might) not be known when."[6]
Petitioner appealed the ruling of the NLRC before the Court of Appeals which
upheld in toto the findings of the commission. In his petition for review
on certiorari, petitioner raised the following issues for resolution:
WHETHER OR NOT PETITIONER'S CONTRACT WITH PRIVATE RESPONDENTS
COMPANY IS FOR A FIXED PERIOD.

WHETHER OR NOT PETITIONER'S DISMISSAL IS LEGAL.

WHETHER OR NOT PETITIONER IS ENTITLED TO BACKWAGES AND MORAL
DAMAGES.[7]
The crux of the matter would entail the determination of the nature of
contractual relationship between petitioner and respondent company - was it
or was it not one of regular employment?
A regular employment, whether it is one or not, is aptly gauged from the
concurrence, or the non-concurrence, of the following factors - a) the manner
of selection and engagement of the putative employee, b) the mode of
payment of wages, c) the presence or absence of the power of dismissal; and
d) the presence or absence of the power to control the conduct of the
putative employee or the power to control the employee with respect to the
means or methods by which his work is to be accomplished. [8] The "control
test" assumes primacy in the overall consideration. Under this test, an
employment relation obtains where work is performed or services are
rendered under the control and supervision of the party contracting for the
service, not only as to the result of the work but also as to the manner and
details of the performance desired.[9]
An indicum of regular employment, rightly taken into account by the labor
arbiter, was the reservation by respondent Metromedia Times Corporation
not only of the right to control the results to be achieved but likewise the
manner and the means used in reaching that end. [10] Metromedia Times
Corporation exercised such control by requiring petitioner, among other
things, to submit a daily sales activity report and also a monthly sales report
as well. Various solicitation letters would indeed show that Robina
Gokongwei, company president, Alda Iglesia, the advertising manager, and
Frederick Go, the advertising director, directed and monitored the sales
activities of petitioner.
The Labor Code, in Article 280 thereof, 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 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
proceeding 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 defined, a regular employee is one who is engaged to perform activities
which are necessary and desirable in the usual business or trade of the
employer as against those which are undertaken for a specific project or are
seasonal. Even in these latter cases, where such person has rendered at
least one year of service, regardless of the nature of the activity performed
or of whether it is continuous or intermittent, the employment is considered
regular as long as the activity exists, it not being indispensable that he be
first issued a regular appointment or be formally declared as such before
acquiring a regular status.[11]

That petitioner performed activities which were necessary and desirable to

the business of the employer, and that the same went on for more than a
year, could hardly be denied.Petitioner was an account executive in soliciting
advertisements, clearly necessary and desirable, for the survival and
continued operation of the business of respondent corporation. Robina
Gokongwei, its President, herself admitted that the income generated from
paid
advertisements
was
the
lifeblood
of
the
newspaper's
existence. Implicitly,
respondent
corporation
recognized
petitioners
invaluable contribution to the business when it renewed, not just once but
five times, its contract with petitioner.
Respondent company cannot seek refuge under the terms of the agreement
it has entered into with petitioner. The law, in defining their contractual
relationship, does so, not necessarily or exclusively upon the terms of their
written or oral contract, but also on the basis of the nature of the work
petitioner has been called upon to perform.[12] The law affords protection to
an employee, and it will not countenance any attempt to subvert its spirit
and intent. A stipulation in an agreement can be ignored as and when it is
utilized to deprive the employee of his security of tenure. [13] The sheer
inequality that characterizes employer-employee relations, where the scales
generally tip against the employee, often scarcely provides him real and
better options.
The real question that should thus be posed is whether or not petitioner has
been justly dismissed from service. A lawful dismissal must meet both
substantive and procedural requirements; in fine, the dismissal must be for a
just or authorized cause and must comply with the rudimentary due process
of notice and hearing. It is not shown that respondent company has fully
bothered itself with either of these requirements in terminating the services
of petitioner. The notice of termination recites no valid or just cause for the
dismissal of petitioner nor does it appear that he has been given an
opportunity to be heard in his defense.
The evidence, however, found by the appellate court is wanting that would
indicate bad faith or malice on the part of respondents, particularly by
respondent Liberato I. Gomez, and the award of moral damages must thus
be deleted.
WHEREFORE, the instant petition is GRANTED. The decision of the Court of
Appeals in C.A. G.R. SP No. 527773 and that of the National Labor Relations
Commission are hereby SET ASIDE and that of the Labor Arbiter is
REINSTATED except with respect to the P20,000.00 moral damages adjudged
against respondent Liberato I. Gomez which award is deleted.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

PEDY CASERES and ANDITO G.R.NO. 159343

PAEL,
Petitioners,
Present:

YNARES-SANTIAGO, J.
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

UNIVERSAL ROBINA SUGAR

MILLING CORPORATION
(URSUMCO) and/or RESIDENT
MANAGER RENE CABATE, Promulgated:
Respondents. September 28, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

AUSTRIA-MARTINEZ, J.:

Universal Robina Sugar Milling Corporation (respondent) is a corporation

engaged
in
the
cane
sugar
milling
business. Pedy Caseres (petitioner Caseres) started working for respondent
in 1989, while Andito Pael (petitioner Pael) in 1993. At the start of their
respective employments, they were made to sign a Contract of Employment
for Specific Project or Undertaking. Petitioners' contracts were renewed from
time to time, until May 1999 when they were informed that their contracts
will not be renewed anymore.

Petitioners filed a complaint for illegal dismissal, regularization, incentive

leave pay, 13th month pay, damages and attorneys fees.

In a Decision[1] dated August 24, 1999, the Labor Arbiter (LA) dismissed the
complaint for not being substantiated with clear and convincing evidence.

The National Labor Relations Commission (NLRC) affirmed the LA's dismissal,
[2]
and the Court of Appeals (CA)[3] dismissed the petition filed before it.[4]

Hence, herein Petition for Review on Certiorari under Rule 45 of the Rules of
Court with the issues set forth as follows:

I. WHETHER OR NOT THE PETITIONERS ARE SEASONAL/PROJECT/TERM

EMPLOYEES NOT REGULAR EMPLOYEES OF RESPONDENTS;

II. WHETHER OR NOT THE PETITIONERS WERE ILLEGALLY DISMISSED AND

ARE ENTITLED TO BACKWAGES AND OTHER MONETARY BENEFITS PRAYED
FOR IN THE COMPLAINT.[5]

The petition is without merit.

The rule is clear that a petition for review on certiorari under Rule 45 of the
Rules of Court should raise only questions of law, subject to
certain exceptions.[6] Whether or not respondents were project employees or
regular employees is a question of fact.[7]

The LA, the NLRC and the CA are one in ruling that petitioners were not
illegally dismissed as they were not regular, but contractual or project
employees. Consequently, the finding of the LA, the NLRC, and the CA that
petitioners were project employees binds this Court.[8]

The Court finds no cogent reason to depart from their ruling.

Article 280 of the Labor Code provides:

ART. 280. Regular and Casual Employees. The provision 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 foregoing provision provides for three kinds of employees:

(a) regular employees or those who have been engaged to perform activities
which are usually necessary or desirable in the usual business or trade 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.[9]

The
principal
test
for
determining
whether
an employee
is
a project employee or a regular employee is whether 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.[10] A project employee 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
or where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season. [11] A true project employee
should be assigned to a project which begins and ends at determined or
determinable times, and be informed thereof at the time of hiring.[12]
Petitioners contend that respondent's repeated hiring of their services
qualifies them to the status of regular employees. On this score, the LA
ruled:
This is further buttress[ed] by the fact that the relationship between
complainants and the respondent URSUMCO, would clearly reveal that the
very nature of the terms and conditions of their hiring would show that
complainants were required to perform phases of special projects which are
not related to the main operation of the respondent for a definite period,
after which their services are available to any farm owner.[13]

The NLRC, agreeing with the LA, further ruled that:

In the case at bar, We note that complainants never bothered to deny that
they voluntarily, knowingly and willfully executed the contracts of
employment. Neither was there any showing thatrespondents exercised
moral dominance on the complainants, x x x it is clear that the contracts of
employment are valid and binding on the complainants.

The execution of these contracts in the case at bar is necessitated by the

peculiar nature of the work in the sugar industry which has an off milling
season. The very nature of the terms and conditions of complainants' hiring
reveals that they were required to perform phases of special projects for a
definite period after, their services are available to other farm owners. This is
so because the planting of sugar does not entail a whole year operation, and
utility works are comparatively small during the off-milling season. x x x[14]

Finally, the CA noted:

Petitioner Pedy Caseres first applied with private respondent URSUMCO

on January 9, 1989 as a worker assisting the crane operator at
the transloading station. Upon application, Caseres was interviewed and
made to understand that his employment would be co-terminus with the
phase of work to which he would be then assigned, that is until February 5,
1989 and
thereafter
he
would
be
free
to
seek
employment
elsewhere. Caseres agreed and signed the contract of employment for
specific project or undertaking. After an absence of more than five (5)
months, Caseresre-applied with respondent as a seasonal project worker
assisting in the general underchassis reconditioning to transport units on July
17, 1989. Like his first assignment, Caseres was made to understand that his
services would be co-terminus with the work to which he would be then
assigned that is from July 17, 1989 to July 20, 1989 and that thereafter he is
free to seek employment elsewhere to which Caseres agreed and readily
signed the contract of employment for specific project or undertaking issued
to him. Thereafter Caseres voluntarily signed several other employment
contracts for various undertakings with a determinable period. As in the first
contract, Caseres' services were co-terminus with the work to which he was
assigned, and that thereafter, he was free to seek employment with other
sugar millers or elsewhere.

The
nature
and
terms
and
conditions
of
employment
petitioner Andito Pael were the same as that of his co-petitioner Caseres.

of

xxx

It must be noted that there were intervals in petitioners' respective

employment contracts, and that their work depended on the availability of
such
contracts
or
projects. Consequently,
the
employment
of URSUMCO's work force was not permanent but co-terminous with the
projects to which the employees were assigned and from whose payrolls they
were paid (Palomares vs. NLRC, 277 SCRA 439).

Petitioners' repeated and successive re-employment on the basis of a

contract of employment for more than one year cannot and does not make
them regular employees. Length of service is not the controlling determinant
of the employment tenure of a project employee (Rada vs. NLRC, 205 SCRA
69). x x x[15]

It should be stressed that contracts for project employment are valid under
the law. In Villa v. National Labor Relations Commission,[16] the Court stated
that:

x x x by entering into such contract, an employee is deemed to understand

that his employment is coterminous with the project. He may not expect to
be employed continuously beyond the completion of the project. It is of
judicial notice that project employees engaged for manual services or those

for special skills like those of carpenters or masons, are, as a rule,

unschooled. However, this fact alone is not a valid reason for bestowing
special
treatment
on
them
or
for
invalidating
a contract
of
employment. Project employment contracts are not lopsided agreements in
favor of only one party thereto. The employers interest is equally important
as that of the employees for theirs is the interest that propels economic
activity. While it may be true that it is the employer who drafts project
employment contracts with its business interest as overriding consideration,
such contracts do not, of necessity, prejudice the employee. Neither is the
employee left helpless by a prejudicial employment contract. After all, under
the law, the interest of the worker is paramount.[17]

The fact that petitioners were constantly re-hired does not ipso
facto establish that they became regular employees. Their respective
contracts with respondent show that there were intervals in their
employment. In petitioner Caseres's case, while his employment lasted from
August 1989 to May 1999, the duration of his employment ranged from one
day to several months at a time, and such successive employments were not
continuous. With regard to petitioner Pael, his employment never lasted for
more than a month at a time. These support the conclusion that they were
indeed project employees, and since their work depended on the availability
of such contracts or projects, necessarily the employment of respondents
work force was not permanent but co-terminous with the projects to which
they were assigned and from whose payrolls they were paid. As ruled
inPalomares v. National Labor Relations Commission,[18] it would be
extremely burdensome for their employer to retain them as
permanent employees and pay them wages even if there were no projects to
work on.

Moreover, even if petitioners were repeatedly and successively re-hired, still

it did not qualify them as regular employees, as length of service is not the
controlling determinant of the employment tenure of a project employee,
[19]
but whether the employment has been fixed for a specific project or
undertaking, its completion has been determined at the time of the
engagement of the employee.[20] Further, the proviso in Article 280, stating
that an employee who has rendered service for at least one (1) year shall be
considered aregular employee, pertains to casual employees and not
to project employees.[21]

Accordingly, petitioners cannot complain of illegal dismissal inasmuch as the

completion of the contract or phase thereof for which they have been
engaged automatically terminates their employment.

WHEREFORE, the petition is DENIED.

SO ORDERED.

THIRD DIVISION

BIENVENIDO D. GOMA,

G.R. No. 160905

Petitioner,
Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus -

AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

PAMPLONA PLANTATIONINCORPORAT
ED,
Respondent.

Promulgated:

July 4, 2008

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

For review is the Decision [1] of the Court of Appeals (CA) dated August 27,
2003
granting
respondent
Pamplona
Plantation,
Inc.s
petition
[2]
for certiorari and its Resolution dated November 11, 2003 denying

petitioner Bienvenido Gomas motion for reconsideration, in CA-G.R. SP No.

74892.

Petitioner commenced[3] the instant suit by filing a complaint for illegal

dismissal, underpayment of wages, non-payment of premium pay for holiday
and rest day, five (5) days incentive leave pay, damages and attorneys fees,
against the respondent. The case was filed with the Sub-Regional Arbitration
Branch No. VII of Dumaguete City. Petitioner claimed that he worked as a
carpenter at the Hacienda Pamplona since 1995; that he worked from 7:30
a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. daily with a salary rate
of P90.00 a day paid weekly; and that he worked continuously until 1997
when he was not given any work assignment. [4] On a claim that he was a
regular employee, petitioner alleged to have been illegally dismissed when
the respondent refused without just cause to give him work
assignment. Thus, he prayed for backwages, salary differential, service
incentive leave pay, damages and attorneys fees.[5]

On the other hand, respondent denied having hired the petitioner as its
regular employee. It instead argued that petitioner was hired by a certain
Antoy Caaveral, the manager of the hacienda at the time it was owned by Mr.
Bower and leased by Manuel Gonzales, a jai-alai pelotari known as Ybarra.
[6]
Respondent added that it was not obliged to absorb the employees of the
former owner.

In 1995, Pamplona Plantation Leisure Corporation (PPLC) was created for the
operation of tourist resorts, hotels and bars. Petitioner, thus, rendered
service in the construction of the facilities of PPLC. If at all, petitioner was a
project but not a regular employee.[7]

On June 28, 1999, Labor Arbiter Geoffrey P. Villahermosa dismissed the case
for lack of merit.[8] The Labor Arbiter concluded that petitioner was hired by
the
former
owner,
hence,
was
not
an
employee
of
the
respondent. Consequently, his money claims were denied.[9]

On appeal to the National Labor Relations Commission (NLRC), the petitioner

obtained favorable judgment when the tribunal reversed and set aside the
Labor Arbiters decision. The dispositive portion of the NLRC decision reads:

WHEREFORE, the Decision of the Labor Arbiter is hereby SET ASIDE and a
new one is hereby issued ORDERING the respondent, Pamplona Plantation
Incorporated, the following:

1) to reinstate the complainant, BIENVENIDO D. GOMA to his former position

immediately without loss of seniority rights and other privileges;

2) to pay the same complainant TWELVE THOUSAND THREE HUNDRED FIFTYNINE PESOS (P12,359.00) in salary differentials;

3) to pay to the same complainant ONE HUNDRED ONE THOUSAND SIX

HUNDRED SIXTY PESOS (P101,660.00) in backwages to be updated until
actual reinstatement; and

4) to pay attorneys fee in the amount of ELEVEN THOUSAND FOUR HUNDRED

TWO PESOS (P11,402.00) which is equivalent to ten percent (10%) of the
total judgment award.

The respondent is further ordered to pay the aggregate amount of ONE

HUNDRED FOURTEEN THOUSAND AND NINETEEN PESOS (P114,019.00) to
the complainant through the cashier of this Commission within ten (10) days
from receipt hereof.

SO ORDERED.[10]

Respondents motion for

on September 9, 2002.[11]

reconsideration

was

denied

by

the

NLRC

The NLRC upheld the existence of an employer-employee relationship,

ratiocinating that it was difficult to believe that a simple carpenter from far
away Pamplona would go toDumaguete City to hire a competent lawyer to
help him secure justice if he did not believe that his right as a laborer had
been violated.[12] It added that the creation of the PPLC required the
tremendous task of constructing hotels, inns, restaurants, bars, boutiques
and service shops, thus involving extensive carpentry work. As an old
carpentry hand in the old corporation, the possibility of petitioners
employment was great.[13] The NLRC likewise held that the respondent should
have presented its employment records if only to show that petitioner was
not included in its list of employees; its failure to do so was fatal.
[14]
Considering that petitioner worked for the respondent for a period of two
years, he was a regular employee.[15]

Aggrieved, respondent instituted a special civil action for certiorari under

Rule 65 before the Court of Appeals which granted the same; and
consequently annulled and set aside the NLRC decision. The CA disposed, as
follows:

WHEREFORE, premises considered, the instant petition is GRANTED. The

assailed decision of the NLRC dated October 24, 2000, as well as the
Resolution dated September 9, 2002 in NLRC Case No. V-000882-99, RAB VII0088-98-D are hereby ANNULLED and SET ASIDE. The complaint is
ordered DISMISSED.

SO ORDERED.[16]
Contrary to the NLRCs finding, the CA concluded that there was no employeremployee relationship. The CA stressed that petitioner having raised a
positive averment, had the burden of proving the existence of an employeremployee relationship. Respondent, therefore, had no obligation to prove its
negative averment.[17] The appellate court further held that while the
respondents business required the performance of occasional repairs and
carpentry work, the retention of a carpenter in its payroll was not necessary
or desirable in the conduct of its usual business. [18] Lastly, although the
petitioner was an employee of the former owner of the hacienda, the
respondent was not required to absorb such employees because
employment contracts are in personam and binding only between the
parties.[19]

Petitioner now comes before this Court raising the sole issue:

WHETHER OR NOT THE DECISION OF [THE] COURT OF APPEALS DATED

AUGUST 27, 2003, REVERSING AND SETTING ASIDE THE NLRC (Fourth
Division, Cebu City) RULING THAT THE PETITIONER WAS NOT ILLEGALLY
DISMISSED AS HE WAS NOT AN EMPLOYEE OF RESPONDENT, IS CONTRARY
TO LAW AND JURISPRUDENCE ON WHICH IT WAS BASED, AND NOT IN
CONSONANCE WITH THE EVIDENCE ON RECORD.[20]

The disposition of this petition rests on the resolution of the following

questions: 1) Is the petitioner a regular employee of the respondent? 2) If so,
was he illegally dismissed from employment? and 3) Is he entitled to his
monetary claims?

Petitioner insists that he was a regular employee of the respondent

corporation. The respondent, on the other hand, counters that it did not hire
the petitioner, hence, he was never an employee, much less a regular one.

Both the Labor Arbiter and the CA concluded that there was no employeremployee relationship between the petitioner and respondent. They based
their conclusion on the alleged admission of the petitioner that he was
previously hired by the former owner of the hacienda. Thus, they rationalized
that since the respondent was not obliged to absorb all the employees of the
former owner, petitioners claim of employment could not be sustained. The
NLRC, on the other hand, upheld petitioners claim of regular employment
because of the respondents failure to present its employment records.

The existence of an employer-employee relationship involves a question of

fact which is well within the province of the CA to determine. Nonetheless,
given the reality that the CAs findings are at odds with those of the NLRC, the
Court is constrained to probe into the attendant circumstances as appearing
on record.[21]

A thorough examination of the records compels this Court to reach a

conclusion different from that of the CA. It is true that petitioner admitted
having been employed by the former owner prior to 1993 or before the
respondent took over the ownership and management of the plantation,
however, he likewise alleged having been hired by the respondent as a
carpenter in 1995 and having worked as such for two years until
1997. Notably, at the outset, respondent categorically denied that it hired
the petitioner. Yet, in its petition filed before the CA, respondent made this
admission:

Private respondent [petitioner herein] cannot be considered a regular

employee since the nature of his work is merely project in character in
relation to the construction of the facilities of the Pamplona
Plantation Leisure Corporation.

He is a project employee as he was hired 1) for a specific project or

undertaking, and 2) the completion or termination of such project or
undertaking has been determined at the time of engagement of the
employee. x x x.

xxxx

In other words, as regards those workers who worked in 1995 specifically in

connection with the construction of the facilities of Pamplona Plantation
Leisure Corporation, their employment was definitely temporary in character
and not regular employment. Their employment was deemed terminated by
operation of law the moment they had finished the job or activity under
which they were employed.[22]

Thus, departing from its initial stand that it never hired petitioner, the
respondent eventually admitted the existence of employer-employee
relationship before the CA. It, however, qualified such admission by claiming
that it was PPLC that hired the petitioner and that the nature of his
employment therein was that of a project and not regular employee.

Parenthetically, this Court in Pamplona Plantation Company, Inc. v.

Tinghil[23] and Pamplona Plantation Company v. Acosta[24] had pierced the veil
of corporate fiction and declared that the two corporations, [25] PPLC and the
herein respondent, are one and the same.

By setting forth these defenses, respondent, in effect, admitted that

petitioner worked for it, albeit in a different capacity. Such an allegation is in
the nature of a negative pregnant, a denial pregnant with the admission of
the substantial facts in the pleadings responded to which are not squarely

denied, and amounts to an acknowledgment that petitioner was indeed

employed by respondent.[26]

The employment relationship having been established, the next question we

must answer is: Is the petitioner a regular or project employee?

We find the petitioner to be a regular employee.

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 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 activity exists.

As can be gleaned from this provision, there are two kinds of regular
employees, namely: (1) those who are engaged to perform activities which
are usually necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are
employed.[27] Simply stated, regular employees are classified into: regular
employees by nature of work; and regular employees by years of
service. The former refers to those employees who perform a particular
activity which is necessary or desirable in the usual business or trade of the
employer, regardless of their length of service; while the latter refers to
those employees who have been performing the job, regardless of the nature
thereof, for at least a year. [28] 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.[29]

Respondent is engaged in the management of the Pamplona Plantation as

well as in the operation of tourist resorts, hotels, inns, restaurants,
etc. Petitioner, on the other hand, was engaged to perform carpentry
work. His services were needed for a period of two years until such time that
the respondent decided not to give him work assignment anymore. Owing to

his length of service, petitioner became a regular employee, by operation of

law.

Respondent argues that, even assuming that petitioner can be considered an

employee, he cannot be classified as a regular employee, but merely as a
project employee whose services were hired only with respect to a specific
job and only while that specific job existed.

A project employee is assigned to carry out a specific project or undertaking

the duration and scope of which are specified at the time the employee is
engaged in the project. A project is a job or undertaking which is distinct,
separate and identifiable from the usual or regular undertakings of the
company. A project employee is assigned to a project which begins and ends
at determined or determinable times.[30]

The principal test used to determine whether employees are project

employees as distinguished from regular employees, is whether or not the
employees were assigned to carry out a specific project or undertaking, the
duration or scope of which was specified at the time the employees were
engaged for that project.[31] In this case, apart from respondents bare
allegation that petitioner was a project employee, it had not shown that
petitioner was informed that he would be assigned to a specific project or
undertaking.Neither was it established that he was informed of the duration
and scope of such project or undertaking at the time of his engagement.
Most important of all, based on the records, respondent did not report the
termination of petitioners supposed project employment to the Department
of Labor and Employment (DOLE). Department Order No. 19 (as well as the
old Policy Instructions No. 20) requires employers to submit a report of an
employees
termination
to
the
nearest
public
employment
office every time the employment is terminated due to a completion of a
project. Respondents failure to file termination reports, particularly on the
cessation of petitioners employment, was an indication that the petitioner
was not a project but a regular employee.[32]

We stress herein that the law overrides such conditions which are prejudicial
to the interest of the worker whose weak bargaining position necessitates
the succor of the State.What determines whether a certain employment is
regular or otherwise is not the will or word of the employer, to which the
worker oftentimes acquiesces. Neither is it the procedure of hiring the
employee nor the manner of paying the salary or the actual time spent at
work. It is the character of the activities performed by the employer in
relation to the particular trade or business of the employer, taking into
account all the circumstances, including the length of time of its performance
and its continued existence. Given the attendant circumstances in the case
at bar, it is obvious that one year after he was employed by the respondent,
petitioner became a regular employee by operation of law.[33]

As to the question of whether petitioner was illegally dismissed, we answer in

the affirmative.

Well-established is the rule that regular employees enjoy security of tenure

and they can only be dismissed for just cause and with due process, i.e.,
after notice and hearing. In cases involving an employees dismissal, the
burden is on the employer to prove that the dismissal was legal. This burden
was not amply discharged by the respondent in this case.

Obviously, petitioners dismissal was not based on any of the just or

authorized causes enumerated under Articles 282, [34] 283[35] and 284[36] of the
Labor Code, as amended. After working for the respondent for a period of
two years, petitioner was shocked to find out that he was not given any work
assignment anymore. Hence, the requirement of substantive due process
was not complied with.

Apart from the requirement that the dismissal of an employee be based on

any of the just or authorized causes, the procedure laid down in Book VI, Rule
I, Section 2 (d) of theOmnibus Rules Implementing the Labor Code, must be
followed.[37] Failure to observe the rules is a violation of the employees right
to procedural due process.
In view of the non-observance of both substantive and procedural due
process, in accordance with the guidelines outlined by this Court in Agabon
v. National Labor Relations Commission,[38] we declare that petitioners
dismissal from employment is illegal.[39]
Having shown that petitioner is a regular employee and that his dismissal
was illegal, we now discuss the propriety of the monetary claims of the
petitioner. An illegally dismissed employee is entitled to: (1) either
reinstatement, if viable, or separation pay if reinstatement is no longer
viable, and (2) backwages.[40]

In the instant case, we are prepared to concede the impossibility of the

reinstatement of petitioner considering that his position or any equivalent
position may no longer be available in view of the length of time that this
case has been pending. Moreover, the protracted litigation may have
seriously abraded the relationship of the parties so as to render
reinstatement impractical. Accordingly, petitioner may be awarded
separation pay in lieu of reinstatement.[41]

Petitioners separation pay is pegged at the amount equivalent to petitioners

one (1) month pay, or one-half (1/2) month pay for every year of service,
whichever is higher, reckoned from his first day of employment up to finality
of this decision. Full backwages, on the other hand, should be computed from
the date of his illegal dismissal until the finality of this decision.

On petitioners entitlement to attorneys fees, we must take into account the

fact that petitioner was illegally dismissed from his employment and that his
wages and other benefits were withheld from him without any valid and legal
basis. As a consequence, he was compelled to file an action for the recovery
of his lawful wages and other benefits and, in the process, incurred
expenses. On these bases, the Court finds that he is entitled to attorneys
fees equivalent to ten percent (10%) of the monetary award.[42]

Lastly, we affirm the NLRCs award of salary differential. In light of our

foregoing disquisition on the illegality of petitioners dismissal, and our
adoption of the NLRCs findings, suffice it to state that such issue is a
question of fact, and we find no cogent reason to disturb the findings of the
labor tribunal.

WHEREFORE, premises considered, the petition is GRANTED. The Decision

of the Court of Appeals dated August 27, 2003 and its Resolution
dated November 11, 2003 in CA-G.R. SP No. 74892 are REVERSED and SET
ASIDE. Petitioner is found to have been illegally dismissed from employment
and thus, is ENTITLED to: 1) Salary Differential embodied in the NLRC
decision dated October 24, 2000 in NLRC Case No. V-000882-99; 2)
Separation Pay; 3) Backwages; and 4) Attorneys fees equivalent to ten
percent (10%) of the monetary awards. Upon finality of this judgment, let the
records of the case be remanded to the NLRC for the computation of the
exact amounts due the petitioner.

SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 170181

June 26, 2008

HANJIN HEAVY INDUSTRIES AND CONSTRUCTION CO. LTD., HAK KON

KIM
and/or
JHUNIE
ADAJAR,petitioners,
vs.
FELICITO IBAEZ, ALIGWAS CAROLINO, ELMER GACULA, ENRIQUE
DAGOTDOT AND RUEL CALDA,respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the Decision,1 dated 28 July 2005, rendered by the Court of Appeals,
reversing the Decision,2 promulgated by the National Labor Relations
Commission (NLRC) on 7 May 2004. The Court of Appeals, in its assailed
Decision, declared that respondents are regular employees who were illegally
dismissed by petitioner Hanjin Heavy Industries and & Construction
Company, Limited (HANJIN).
Petitioner HANJIN is a foreign company duly registered with the Securities
and Exchange Commission to engage in the construction business in the
Philippines. Petitioners Hak Kon Kim and Jhunie Adajar were employed as
Project Director and Supervisor, respectively, by HANJIN.
On 11 April 2002, respondents Felicito Ibaez, Aligwas Carolino, Elmer
Gacula, Enrique Dagotdot, Ruel Calda, and four other co-workers filed a
complaint before the NLRC, docketed as NLRC Case No. RAB-IV-04-15515-02RI, for illegal dismissal with prayer for reinstatement and full backwages
against petitioners. In their Position Paper dated 29 July 2002, respondents
alleged that HANJIN hired them for various positions on different dates,
hereunder specified:
Position

Date
of
Employment

Felicito Ibaez

Tireman

7 March 2000

Elmer Gacula

Crane Operator

1992

Enrique Dagotdot

Welder

1995

Aligwas Carolino

Welder

September
1994

Ruel Calda

Warehouseman

26
19963

January

Respondents stated that their tasks were usual and necessary or desirable in
the usual business or trade of HANJIN. Respondents additionally averred that
they were employed as members of a work pool from which HANJIN draws
the workers to be dispatched to its various construction projects; with the
exception of Ruel Calda, who as a warehouseman was required to work in
HANJIN's main office.4 Among the various construction projects to which they
were supposedly assigned, respondents named the North Harbor project in

1992-1994; Manila International Port in 1994-1996; Batangas Port in 19961998; the Batangas Pier, and La Mesa Dam.5
On 15 April 2002, Hanjin dismissed respondents from employment.
Respondents claimed that at the time of their dismissal, HANJIN had several
construction projects that were still in progress, such as Metro Rail Transit
(MRT) II and MRT III, and continued to hire employees to fill the positions
vacated by the respondents.6
Petitioners denied the respondents' allegations. They maintained that
respondents were hired as project employees for the construction of the
LRT/MRT Line 2 Package 2 and 3 Project. HANJIN and respondents purportedly
executed contracts of employment, in which it was clearly stipulated that the
respondents were to be hired as project employees for a period of only three
months, but that the contracts may be renewed, to wit:
Article II
TERM OF AGREEMENT
This Agreement takes effect xxx for the duration of three (3) months and
shall be considered automatically renewed in the absence of any Notice of
Termination by the EMPLOYER to the PROJECT EMPLOYEE. This AGREEMENT
automatically terminates at the completion of the project or any particular
phase thereof,depending upon the progress of the project.7
However, petitioners failed to furnish the Labor Arbiter a copy of said
contracts of employment.
Petitioners asserted that respondents were duly informed of HANJIN's
policies, rules and regulations, as well as the terms of their contracts. Copies
of the employees' rules and regulations were posted on the bulletin boards of
all HANJIN campsite offices.8
Petitioners further emphasized that prior to 15 April 2002, Hak Kon Kim,
HANJIN's Project Director, notified respondents of the company's intention to
reduce its manpower due to the completion of the LRT/MRT Line 2 Package 2
and 3 Project. Respondents were among the project employees who were
thereafter laid off, as shown in the Establishment Termination Report filed by
HANJIN before the Department of Labor and Employment (DOLE) Regional
Office (IV) in Cainta, Rizal on 11 April 2002.9
Finally, petitioners insist that in accordance with the usual practice of the
construction industry, a completion bonus was paid to the respondents. 10 To
support this claim, they offered as evidence payroll records for the period 4
April 2002 to 20 April 2002, with the words "completion bonus" written at the
lower left corner of each page.11
Petitioners attached copies of the Quitclaims, 12 executed by the respondents,
which uniformly stated that the latter received all wages and benefits that
were due them and released HANJIN and its representatives from any claims
in connection with their employment. These Quitclaims also contained
Clearance Certificates which confirmed that the employees concerned were
cleared of all accountabilities at the close of the working hours on 15 April
2002.
In their Reply13 dated 27 August 2002, respondents vehemently refuted
having signed any written contract stating that they were project employees.
The Labor Arbiter found merit in the respondents' complaint and declared
that they were regular employees who had been dismissed without just and
valid causes and without due process. It ruled that HANJIN's allegation that

respondents were project employees was negated by its failure to present

proof thereof. It also noted that a termination report should be presented
after the completion of every project or a phase thereof and not just the
completion of one of these projects. The Labor Arbiter further construed the
number of years that respondents rendered their services for HANJIN as an
indication that respondents were regular, not project, employees. 14 The Labor
Arbiter ordered in its Decision, dated 30 April 2003, that:
WHEREFORE, premises considered, judgment is hereby rendered as follows;
1) Declaring respondent HANJIN HEAVY INDUSTRIES & CONSTRUCTION CO.
LTD. guilty of illegal dismissal
>2) Ordering respondent to reinstate all the complainants to positions
previously occupied by them with full backwages from the time
compensation was withheld from them up to date of actual reinstatement in
the following amount (as of date of this decision):
1. Felicito Ibaez

P 88,020.83

2. Elmer A. Gacula

88,020.83

3. Rizalino De Vera

88,020.83

4. Enrique Dagotdot

88,020.83

5. Carolino Aligwas

88,020.83

6. Ruel Calda

88,020.83

7. Roldan Lanojan

88,020.83

8. Pascual Caranguian

88,020.83

9.
Dalumangcad

Carmelito 88,020.83

Total

P792, 187.47

3) In lieu of reinstatement, respondent is ordered to pay complainants their

separation pay in the following sum:
Felicito Ibaez

P 19,500.00

Elmer A. Gacula

71,500.00

Rizaliano De Vera

19,500.00

Enrique Dagotdot

52,000.00

Carolino Aligwas

58,500.00

Ruel Calda

45,500.00

Roldan Lanojan

19,500.00

Pascual Caranguian

26,000.00

Carmelito Dalumangcad

78,000.00

Total

P390,000.00

4) Ordering respondent to pay each complainant P50,000.00 for moral

damages and P30,000.00 as exemplary damages, or the total sum
of P450,000.00 and P270,000.00, respectively; and
5) Ordering respondent to pay complainants litigation expenses in the sum
of P30,000.00

All other claims are DISMISSED for lack of merit.15

Petitioners filed an appeal before the NLRC. In their Notice of
Appeal/Memorandum Appeal16 dated 5 July 2003, petitioners discarded their
earlier claim that respondents signed employment contracts, unequivocally
informing them of their status as project employees. Nonetheless, they still
contended that the absence of respondents' contracts of employment does
not vest the latter with regular status.
The NLRC reversed the Labor Arbiter's Decision dated 30 April 2003, and
pronounced that the respondents were project employees who were legally
terminated from employment.17 The NLRC gave probative value to the
Termination Report submitted by HANJIN to the DOLE, receipts signed by
respondents for their completion bonus upon phase completion, and the
Quitclaims executed by the respondents in favor of HANJIN. The NLRC also
observed that the records were devoid of any proof to support respondents'
allegation that they were employed before 1997, the time when construction
work on the MRT started. Lastly, it overruled the Labor Arbiter's award of
moral and exemplary damages.18 The dispositive part of the Decision dated 7
May 2004 of the NLCR states that:
WHEREFORE, in view of the foregoing, the decision subject of appeal is
hereby REVERSED and SET ASIDE and a new one is entered DISMISSING
complainants' complaint for lack of merit.19
On appeal, the Court of Appeals reversed the NLRC Decision, dated 7 May
2004. The appellate court looked with disfavor at the change in HANJIN's
initial position before the Labor Arbiter-from its initial argument that
respondents executed employment contracts; to its modified argument
during its appeal before the NLRC-that respondents could still be categorized
as project workers despite the absence of contracts of employment.
Additionally, it adjudged the Termination Report as inconclusive proof that
respondents were project employees. Emphasizing that the employer had
the burden of proving the legality of the dismissal, the appellate court ruled
that respondents were regular employees and upheld the Labor Arbiter's
finding that they were illegally dismissed. The Court of Appeals, however,
adopted the NLRC's deletion of the award of damages. 20 The decretal portion
of the Decision of the Court of Appeals reads:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the challenged decision
and resolution of the NLRC must be, as they hereby are, REVERSED and SET
ASIDE. The decision of the Labor Arbiter is herebyREINSTATED relative to
the award to petitioners of full backwages, separation pay in lieu of
reinstatement, and litigation expenses, but not with respect to the awards for
moral damages or for exemplary damages, both of which are
hereby DELETED. Without costs in this instance.21
Hence, the present Petition, in which the following issues are raised:
I
WHETHER OR NOT THE FINDINGS OF THE HONORABLE COURT OF APPEALS
ARE MERE CONCLUSIONS WITHOUT DELVING INTO THE RECORDS OF THE
CASE AND EXAMINE (sic) FOR ITSELF THE QUESTIONED FINDINGS OF THE
LABOR ARBITER AND THE NATIONAL LABOR RELATIONS COMMISSION
CONTRARY TO THE RULING IN THE CASE OF AGABON VS. NLRC, ET. AL. 442
SCRA 573.
II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS MANIFESTLY

OVERLOOKED CERTAIN RELEVANT FACTS WHICH, IF PROPERLY CONSIDERED,
WOULD RESULT IN A DIFFERENT CONCLUSION.
III
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT
APPLYING THE PERTINENT PROVISIONS OF POLICY INSTRUCTIONS NO. 20, AS
AMENDED BY DEPARTMENT ORDER NO. 19 SERIES OF 1993 IN RELATION TO
ARTICLE 280 OF THE LABOR CODE IN CONSIDERING WHETHER OR NOT
RESPONDENTS ARE PROJECT EMPLOYEES.
IV
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS
WERE ILLEGALLY DISMISSED.22
The Petition is without merit.
As a general rule, the factual findings of the Court of Appeals are binding
upon the Supreme Court. One exception to this rule is when the factual
findings of the former are contrary to those of the trial court or the lower
administrative body, as the case may be. The main question that needs to be
settled-whether respondents were regular or project employees-is factual in
nature. Nevertheless, this Court is obliged to resolve it due to the
incongruent findings of the NLRC and those of the Labor Arbiter and the
Court of Appeals. 23
Article 280 of the Labor Code distinguishes a "project employee" from a
"regular employee" thus:
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 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 supplied.)
From the foregoing provision, 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.24
In a number of cases, 25 the Court has held that the length of service or the
re-hiring of construction workers on a project-to-project basis does not confer
upon them regular employment status, since their re-hiring is only a natural
consequence of the fact that experienced construction workers are preferred.
Employees who are hired for carrying out a separate job, distinct from the
other undertakings of the company, the scope and duration of which has

been determined and made known to the employees at the time of the
employment, are properly treated as project employees and their services
may be lawfully terminated upon the completion of a project. 26Should the
terms of their employment fail to comply with this standard, they cannot be
considered project employees.
In Abesco Construction and Development Corporation v. Ramirez,27 which
also involved a construction company and its workers, this Court considered
it crucial that the employees were informed of their status as project
employees:
The principal test for determining whether employees are "project
employees" or "regular employees" is whether they are assigned to carry out
a specific project or undertaking, the duration and scope of which are
specified at the time they are engaged for that project. Such duration, as
well as the particular work/service to be performed, is defined in an
employment agreement and is made clear to the employees at the time of
hiring.
In this case, petitioners did not have that kind of agreement with
respondents. Neither did they inform respondents of the nature of the latters'
work at the time of hiring. Hence, for failure of petitioners to substantiate
their claim that respondents were project employees, we are constrained to
declare them as regular employees.
In Caramol v. National Labor Relations Commission,28 and later reiterated
in Salinas, Jr. v. National Labor Relations Commission,29 the Court markedly
stressed the importance of the employees' knowing consent to being
engaged as project employees when it clarified that "there is no question
that stipulation on employment contract providing for a fixed period of
employment such as `project-to-project' contract is valid provided the
period 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 x x x."
During the proceedings before the Labor Arbiter, the petitioners' failure to
produce respondents' contracts of employment was already noted, especially
after they alleged in their pleadings the existence of such contracts
stipulating that respondents' employment would only be for the duration of
three months, automatically renewed in the absence of notice, and
terminated at the completion of the project. Respondents denied having
executed such contracts with HANJIN. In their appeal before the NLRC until
the present, petitioners now claim that due to a lapse in management
procedure, no such employment contracts were executed; nonetheless, the
absence of a written contract does not remove respondents from the ambit
of being project employees.30
While the absence of a written contract does not automatically confer regular
status, it has been construed by this Court as a red flag in cases involving
the question of whether the workers concerned are regular or project
employees. In Grandspan Development Corporation v. Bernardo 31 and Audion
Electric Co., Inc. v. National Labor Relations Commission,32 this Court took
note of the fact that the employer was unable to present employment
contracts signed by the workers, which stated the duration of the project. In
another case, Raycor v. Aircontrol Systems, Inc. v. National Labor Relations
Commission,33 this Court refused to give any weight to the employment
contracts offered by the employers as evidence, which contained the
signature of the president and general manager, but not the signatures of
the employees. In cases where this Court ruled that construction workers

repeatedly rehired retained their status as project employees, the employers

were able to produce employment contracts clearly stipulating that the
workers' employment was coterminous with the project to support their
claims that the employees were notified of the scope and duration of the
project.34
Hence, even though the absence of a written contract does not by itself
grant regular status to respondents, such a contract is evidence that
respondents were informed of the duration and scope of their work and their
status as project employees. In this case, where no other evidence was
offered, the absence of an employment contract puts into serious question
whether the employees were properly informed at the onset of their
employment status as project employees. It is doctrinally entrenched that in
illegal dismissal cases, the employer has the burden of proving with clear,
accurate, consistent and convincing evidence that a dismissal was
valid.35 Absent any other proof that the project employees were informed of
their status as such, it will be presumed that they are regular employees in
accordance with Clause 3.3(a) of Department Order No. 19, Series of 1993,
which states that:
a) Project employees whose aggregate period of continuous
employment in a construction company is at least one year shall be
considered regular employees, in the absence of a "day certain"
agreed upon by the parties for the termination of their relationship.
Project employees who have become regular shall be entitled to separation
pay.
A "day" as used herein, is understood to be that which must necessarily
come, although it may not be known exactly when. This means that where
the final completion of a project or phase thereof is in fact determinable and
the expected completion is made known to the employee, such project
employee may not be considered regular, notwithstanding the one-year
duration of employment in the project or phase thereof or the one-year
duration of two or more employments in the same project or phase of the
project. (Emphasis provided.)
Petitioners call attention to the fact that they complied with two of the
indicators of project employment, as prescribed under Section 2.2(e) and (f)
of Department Order No. 19, Series of 1993, entitled Guidelines Governing
the Employment of Workers in the Construction Industry, issued by the DOLE:
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. (Emphasis provided.)
Petitioners argue that the Termination Report filed before the DOLE Regional
Office (IV) in Cainta, Rizal on 11 April 2002 signifies that respondents'
services were engaged merely for the LRT/MRT Line 2 Package 2 and 3
Project.
Given the particular facts established in this case, petitioners' argument fails
to persuade this Court. Petitioners were not able to offer evidence to refute
or controvert the respondents' claim that they were assigned to various
construction projects, particularly the North Harbor Project in 1992-1994;
Manila International Port in 1994-1996; Batangas Port in 1996-1998; the
Batangas Pier; and La Mesa Dam.36 Had respondents' allegations been false,
petitioners could simply present as evidence documents and records in their
custody to disprove the same, i.e., payroll for such projects or termination
reports, which do not bear respondents' names. Petitioners, instead, chose to
remain vague as to the circumstances surrounding the hiring of the
respondents. This Court finds it unusual that petitioners cannot even
categorically state the exact year when HANJIN employed respondents.
It also bears to note that petitioners did not present other Termination
Reports apart from that filed on 11 April 2002. The failure of an employer to
file a Termination Report with the DOLE every time a project or a phase
thereof is completed indicates that respondents were not project
employees.37 Employers cannot mislead their employees, whose work is
necessary and desirable in the former's line of business, by treating them as
though they are part of a work pool from which workers could be continually
drawn and then assigned to various projects and thereafter denied regular
status at any time by the expedient act of filing a Termination Report. This
would constitute a practice in which an employee is unjustly precluded from
acquiring security of tenure, contrary to public policy, morals, good customs
and public order.38
In this case, only the last and final termination of petitioners was reported to
the DOLE. If respondents were actually project employees, petitioners should
have filed as many Termination Reports as there were construction projects
actually finished and for which respondents were employed. Thus, a lone
Termination Report filed by petitioners only upon the termination of the
respondents' final project, and after their previous continuous employment
for other projects, is not only unconvincing, but even suspicious.
Petitioners insist that the payment to the respondents of a completion bonus
indicates that respondents were project employees. To support their claim,
petitioners presented payroll records for the period 4 April 2002 to 20 April
2002, with the words "completion bonus" written at the lower left corner of
each page.39 The amount paid to each employee was equivalent to his
fifteen-day salary. Respondents, however, deny receiving any such amount.
Assuming that petitioners actually paid respondents a completion bonus,
petitioners failed to present evidence showing that they undertook to pay
respondents such a bonus upon the completion of the project, as provided
under Section 2.2(f) of Department Order No. 19, Series of 1993. 40 Petitioners
did not even allege how the "completion bonus" was to be computed or the
conditions that must be fulfilled before it was to be given. A completion

bonus, if paid as a mere afterthought, cannot be used to determine whether

or not the employment was regular or merely for a project. Otherwise, an
employer may defeat the workers' security of tenure by paying them a
completion bonus at any time it is inclined to unjustly dismiss them.
Department Order No. 19, Series of 1993, provides that in the absence of an
undertaking that the completion bonus will be paid to the employee, as in
this case, the employee may be considered a non-project employee, to wit:
3.4 Completion of the project. Project employees who are separated from
work as a result of the completion of the project or any phase thereof in
which they are employed are entitled to the pro-rata completion bonus if
there is an undertaking by for the grant of such bonus. An undertaking by
the employer to pay a completion bonus shall be an indicator that
an employee is a project employee. Where there is no such
undertaking, the employee may be considered a non-project
employee. The pro-rata completion bonus may be based on the industry
practice which is at least the employee's one-half (1/2) month salary for
every 12 months of service and may be put into effect for any project bid (in
case of bid projects) or tender submitted (in case of negotiated projects)
thirty (30) days from the date of issuances of these Guidelines. (Emphasis
supplied.)
Furthermore, after examining the payroll documents submitted by
petitioners, this Court finds that the payments termed as "completion bonus"
are not the completion bonus paid in connection with the termination of the
project. First of all, the period from 4 April 2002 to 20 April 2002, as stated in
the payrolls, bears no relevance to a completion bonus. A completion bonus
is paid in connection with the completion of the project, and is not based on
a fifteen-day period. Secondly, the amount paid to each employee as his
completion bonus was uniformly equivalent to his fifteen-day wages, without
consideration of the number of years of service rendered. Section 3.4 of
Department Order No. 19, Series of 1993, provides that based on industry
practice, the completion bonus is at least the employee's one-half month
salary for every twelve months of service.
Finally, the Quitclaims which the respondents signed cannot bar them from
demanding what is legally due them as regular employees. As a rule,
quitclaims and waivers or releases are looked upon with disfavor and
frowned upon as contrary to public policy. They are thus ineffective to bar
claims for the full measure of a worker's legal rights, particularly when the
following conditions are applicable: 1) where there is clear proof that the
waiver was wangled from an unsuspecting or gullible person, or (2) where
the terms of settlement are unconscionable on their face. 41 To determine
whether the Quitclaims signed by respondents are valid, one important
factor that must be taken into account is the consideration accepted by
respondents; the amount must constitute a reasonable settlement equivalent
to the full measure of their legal rights.42 In this case, the Quitclaims signed
by the respondents do not appear to have been made for valuable
consideration. Respondents, who are regular employees, are entitled to
backwages and separation pay and, therefore, the Quitclaims which they
signed cannot prevent them from seeking claims to which they are entitled.43
Due to petitioners' failure to adduce any evidence showing that petitioners
were project employees who had been informed of the duration and scope of
their employment, they were unable to discharge the burden of proof
required to establish that respondents' dismissal was legal and valid.
Furthermore, it is a well-settled doctrine that if doubts exist between the
evidence presented by the employer and that by the employee, the scales of

justice must be tilted in favor of the latter. 44 For these reasons, respondents
are to be considered regular employees of HANJIN.
Finally, in the instant case, records failed to show that HANJIN afforded
respondents, as regular employees, due process prior to their dismissal,
through the twin requirements of notice and hearing. Respondents were not
served notices informing them of the particular acts for which their dismissal
was sought. Nor were they required to give their side regarding the charges
made against them. Certainly, the respondents' dismissal was not carried out
in accordance with law and was, therefore, illegal.45
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This
Court AFFIRMS the assailed Decision of the Court of Appeals in CA-G.R. SP
No. 87474, promulgated on 28 July 2005, declaring that the respondents are
regular employees who have been illegally dismissed by Hanjin Heavy
Industries & Construction Company, Limited, and are, therefore, entitled to
full backwages, separation pay, and litigation expenses. Costs against the
petitioners.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

THIRD DIVISION

COCOMANGAS HOTEL BEACH

RESORT
MUNRO,

and/or

G.R. No. 167045

SUSAN

Petitioners,

Present:

YNARES-SANTIAGO, J.,
- versus -

Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,

FEDERICO F. VISCA, JOHNNY G.

NACHURA, and

BAREDO, RONALD Q. TIBUS,

REYES, JJ.

RICHARD G. VISCA and RAFFIE

G. VISCA,

Promulgated:

Respondents.

August 29, 2008

x---------------------------------------------------------x

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the
Rules of Court assailing the Decision [1] dated July 30, 2004 of the Court of

Appeals (CA) in CA-G.R. SP No. 78620 which reversed and set aside the
Resolution dated February 27, 2003 of the National Labor Relations
Commission (NLRC) in NLRC Case No. V-000714-2000; and the CA
Resolution[2]dated February 2, 2005 which denied petitioners' Motion for
Reconsideration.

The present controversy stemmed from five individual complaints[3] for illegal
dismissal filed on June 15, 1999 by Federico F. Visca (Visca), Johnny
G. Barredo,
Ronald
Q. Tibus,
Richard
G. Visca and Raffie G. Visca (respondents) against Cocomangas Hotel Beach
Resort and/or its owner-manager, Susan Munro (petitioners) before SubRegional Arbitration Branch No. VI of the National Labor Relations
Commission (NLRC) in Kalibo, Aklan.

In their consolidated Position Paper,[4] respondents alleged that they were

regular employees of petitioners, with designations and dates of employment
as follows:

Name Designation Date Employed

Federico F. Visca Foreman October 1, 1987

Johnny G. Barredo Carpenter April 23, 1993
Ronald Q. Tibus Mason November 9, 1996
Richard G. Visca Carpenter April 1988
Raffie G. Visca Mason/Carpenter March 27, 1993

tasked with the maintenance and repair of the resort facilities; on May 8,
1999, Maria Nida Iigo-Taala, the Front Desk Officer/Sales Manager, informed
them not to report for work since the ongoing constructions and repairs
would be temporarily suspended because they caused irritation and
annoyance to the resort's guests; as instructed, they did not report for work
the succeeding days; John Munro, husband of petitioner Susan Munro,
subsequently visited respondent foreman Visca and informed him that the
work
suspension
was
due
to
budgetary
constraints;
when
respondent Visca later discovered that four new workers were hired to do
respondents' tasks, he confronted petitioner Munro who explained that
respondents' resumption of work was not possible due to budgetary
constraints; when not less than ten workers were subsequently hired by
petitioners to do repairs in two cottages of the resort and two workers were
retained after the completion without respondents being allowed to resume
work, they filed their individual complaints for illegal dismissal. In addition to
reinstatement with payment of full backwages, respondents prayed for
payment of premium pay for rest day, service incentive leave pay,
13th month pay, and cost-of-living allowance, plus moral and exemplary
damages and attorney's fees.

In their Position Paper,[5] petitioners denied any employer-employee

relationship with respondents and countered that respondent Visca was an

independent contractor who was called upon from time to time when some
repairs in the resort facilities were needed and the other respondents were
selected and hired by him.

On June 30, 2000, the Labor Arbiter (LA) rendered a Decision [6] dismissing the
complaint, holding that respondent Visca was an independent contractor and
the other respondents were hired by him to help him with his contracted
works at the resort; that there was no illegal dismissal but completion of
projects; that respondents were project workers, not regular employees.

On August 9, 2000, respondents filed a Memorandum of Appeal [7] with the

NLRC. No comment thereon was filed by the petitioners.

On August 29, 2002, the NLRC rendered a Decision, [8] setting aside the
Decision of the LA and ordering the payment to respondents
of backwages computed from May 8, 1999 to July 31, 2002, 13th month pay
and service incentive leave pay for three years, in addition to 10% attorney's
fees. The dispositive portion of the NLRC Decision reads:

WHEREFORE, the decision dated June 30, 2000 of the Labor Arbiter is
VACATED and SET ASIDE and a new decision rendered declaring the Illegal
Dismissal of the complainant (sic) and ordering respondent Susan Munro to
pay the complainants the following:

1. Federico F. Visca

P 288,816.53

2. Johnny G. Barredo

P 211,058.47

3. Ronald Q. Tibus

P 175,774.00

4. Richard C. Visca

P 200,977.85

5. Raffie C. Visca

P 211,058.47
P1,087,685.32

6. Attorney's fees (10%)

P 108,768.53

Total Award

P1,196,453.85[9]

Petitioners failed to convince the NLRC that respondent Visca was not an
independent contractor and the other respondents were selected and hired
by him. The NLRC held that respondents were regular employees of
petitioners since all the factors determinative of employer-employee
relationship were present and the work done by respondents was clearly
related to petitioners' resort business. It took into account the following: (a)
respondent Visca was reported by petitioners as an employee in the
Quarterly Social Security System (SSS) report; (b) all of the respondents were
certified to by petitioner Munro as workers and even commended for their
satisfactory performance; (c) respondents were paid their holiday and
overtime pay; and (d) respondents had been continuously in petitioners'
employ from three to twelve years and were all paid by daily wage given
weekly.

On November 18, 2002, petitioners filed a Motion for Reconsideration,

arguing that respondents were project employees. [10] Petitioners also filed a
Supplemental to their Motion for Reconsideration. [11] No opposition or answer
to petitioners' motion for reconsideration and supplement was filed by
respondents despite due notice.[12]

On February 27, 2003, the NLRC made a complete turnabout from its original
decision and issued a Resolution[13] dismissing the complaint, holding that
respondents were not regular employees but project employees, hired for a
short period of time to do some repair jobs in petitioners' resort
business. Nonetheless,
it
ordered
payment
of P10,000.00 to
each
complainant as financial assistance.

Respondents then filed a Petition for Certiorari[14] with the CA raising three
issues for resolution: (a) whether or not the respondents were project
employees of petitioners; (b) whether or not the respondents' dismissal from
work was based on valid grounds; (c) whether or not the NLRC had sufficient
basis to overturn its own decision despite its overwhelming findings that
respondents were illegally dismissed.

On July
30,
2004,
the
CA
rendered
[15]
the dispositve portion of which reads:

its

assailed

Decision,

WHEREFORE, in view of the foregoing, judgment is hereby rendered by us

REVERSING and SETTING ASIDE the NLRC Resolution dated February 28,
2003, REINSTATING the NLRC Decision datedAugust 29, 2000 [sic], and
ORDERING the private respondents to pay damages in the amount
of P50,000.00. The
instant
case
is
hereby
REMANDED
to
the
th
4 Division NLRC, Cebu City for the purpose of UPDATING the award
promulgated in its Decision dated August 29, 2000 [sic].

SO ORDERED.[16]

The CA held respondents were regular employees, not project workers, since
in the years that petitioners repeatedly hired respondents' services, the
former failed to set, even once, specific periods when the employment
relationship would be terminated; that the repeated hiring of respondents
established that the services rendered by them were necessary and
desirable to petitioners' resort business; at the least, respondents were
regular seasonal employees, hired depending on the tourist season and
when the need arose in maintaining petitioners' resort for the benefit of
guests.

In addition to the amounts granted by the NLRC in its August 29, 2002
Decision, the CA awarded respondents P50,000.00 as damages, since their
termination was attended by bad faith, in that petitioners not only gave
respondents the run-around but also blatantly hired others to take
respondents' place despite their claim that the so-called temporary stoppage
of work was due to budgetary constraints.

On August 18, 2004, petitioners filed a Motion for Reconsideration, [17] but it
was denied by the CA in a Resolution[18] dated February 2, 2005.

Petitioners then filed the present petition[19] on the following grounds:

I
THE HONORABLE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO THE
SPECIAL CIVIL ACTION UNDER RULE 65 NOTWITHSTANDING THE FACT THAT
RESPONDENTS HAVE FAILED TO PROVE THE GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION THAT WOULD ALLOW THE
NULLIFICATION OF THE ASSAILED RESOLUTION OF THE NATIONAL LABOR
RELATIONS COMMISSION.

II
THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING
ASIDE THE RESOLUTION DATED FEBRUARY 27, 2003 AND REINSTATING THE
DECISION DATEDAUGUST 29, 2002 RENDERED BY THE NATIONAL LABOR
RELATIONS COMMISSION.[20]

Petitioners argue that the CA erred in giving due course to respondents'

petition, since respondents failed to recite specifically how the NLRC abused
its discretion, an allegation essentially required in a petition
for certiorari under Rule 45 of the Rules of Court; the three issues raised by
respondents in their petition before the CA required appreciation of the
evidence presented below and are therefore errors of judgment, not of
jurisdiction; that the factual findings of the LA and the NLRC on the lack of
employer-employee relationship between petitioners and respondents should
be accorded not only respect but finality.

On the other hand, respondents contend that the issues raised by the
petitioners call for reevaluation of the evidence presented by the parties,
which is not proper in petitions for review under Rule 45 of the Rules of
Court; in any case, they argue that they have amply established that they
are regular employees of petitioners, since their jobs as carpenters, which
include the repairs of furniture, motor boats, cottages and windbreakers, are
not at all foreign to the business of maintaining a beach resort.

The petition is bereft of merit.

The extent of judicial review by certiorari of decisions or resolutions of the

NLRC, as exercised previously by this Court and now by the CA, is described
in Zarate, Jr. v. Olegario,[21]thus:

The rule is settled that the original and exclusive jurisdiction of this Court to
review a decision of respondent NLRC (or Executive Labor Arbiter as in this
case) in a petition for certiorari under Rule 65 does not normally include an

inquiry into the correctness of its evaluation of the evidence. Errors of

judgment, as distinguished from errors of jurisdiction, are not within the
province of a special civil action for certiorari, which is merely confined to
issues of jurisdiction or grave abuse of discretion. It is thus incumbent
upon petitioner to satisfactorily establish that respondent
Commission or executive labor arbiter acted capriciously and
whimsically in total disregard of evidence material to or even
decisive of the controversy, in order that the extraordinary writ
of certiorari will lie. By grave abuse of discretion is meant such capricious
and whimsical exercise of judgment as is equivalent to lack of jurisdiction,
and it must be shown that the discretion was exercised arbitrarily or
despotically. 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 law and common law traditions.
[22]
(Emphasis supplied)

The CA, therefore, can take cognizance of a petition for certiorari if it finds
that
the
NLRC,
in
its
assailed
decision
or
resolution,
committed grave abuse of discretion by
capriciously,
whimsically,
or
arbitrarily disregarding evidence which is material to or decisive of the
controversy. The CA cannot make this determination without looking into the
evidence presented by the parties. The appellate court needs to evaluate the
materiality or significance of the evidence, which is alleged to have been
capriciously, whimsically, or arbitrarily disregarded
by the NLRC, in relation to all other evidence on record.[23]

In Garcia v. National Labor Relations Commission,[24] the Court elucidated on

when certiorari can be properly resorted to, thus:

[I]n Ong v. People, we ruled that certiorari can be properly resorted to where
the factual findings complained of are not supported by the
evidence on record. Earlier, in Gutib v. Court of Appeals, we emphasized
thus:

[I]t has been said that a wide breadth of discretion is granted a court of
justice in certiorari proceedings. The cases in which certiorari will issue
cannot be defined, because to do so would be to destroy its
comprehensiveness and usefulness. So wide is the discretion of the court
that authority is not wanting to show that certiorari is more discretionary
than either prohibition or mandamus. In the exercise of our superintending
control over inferior courts, we are to be guided by all the circumstances of
each particular case as the ends of justice may require. So it is that the writ
will be granted where necessary to prevent a substantial wrong or
to do substantial justice.

And in another case of recent vintage, we further held:

In the review of an NLRC decision through a special civil action for certiorari,
resolution
is
confined
only
to
issues
of
jurisdiction
and grave abuse of discretion on the part of the labor tribunal. Hence, the

Court refrains from reviewing factual assessments of lower courts and

agencies exercising adjudicative functions, such as the NLRC. Occasionally,
however, the Court is constrained to delve into factual matters
where, as in the instant case, the findings of the NLRC contradict
those of the Labor Arbiter.

In this instance, the Court in the exercise of its equity jurisdiction may look
into the records of the case and re-examine the questioned findings. As a
corollary, this Court is clothed with ample authority to review matters, even if
they are not assigned as errors in their appeal, if it finds that their
consideration is necessary to arrive at a just decision of the
case. The same principles are now necessarily adhered to and are
applied by the Court of Appeals in its expanded jurisdiction over
labor cases elevated through a petition for certiorari; thus, we see no
error on its part when it made anew a factual determination of the matters
and on that basis reversed the ruling of the NLRC.[25] (Emphasis supplied)

Thus, pursuant to Garcia, the appellate court can grant a petition

for certiorari when the factual findings complained of are not supported by
the evidence on record; when it is necessary to prevent a substantial wrong
or to do substantial justice; when the findings of the NLRC contradict those of
the LA; and when necessary to arrive at a just decision of the case.[26]

In the present case, respondents alleged in its petition with the CA that
the NLRCs conclusions had no basis in fact and in law, in that it totally
disregarded the evidence of the [respondents] and gave credence to the
[petitioners'] asseverations which were in themselves insufficient to overturn
duly established facts and conclusions.[27] Consequently, the CA was correct
in giving due course to the Petition for Certiorari, since respondents drew
attention to the absence of substantial evidence to support
the NLRC's complete turnabout from its original Decision dated August 29,
2002 finding that respondents were regular employees, to its subsequent
Resolution dated February 27, 2003 classifying respondents as project
employees.

The next issue before the Court is whether the CA committed an error in
reversing the NLRC Resolution dated February 27, 2003. The resolution of
this issue principally hinges on the determination of the question whether
respondents are regular or project employees.

Generally, the existence of an employer-employee relationship is a factual

matter that will not be delved into by this Court, since only questions of law
may be raised in petitions for review.[28] However, the Court is constrained to
resolve the issue of whether respondents are regular or permanent
employees due to the conflicting findings of fact of the LA, the NLRC and the
CA,
thus, necessitating a review of the evidence on record.[29]
The petitioners were ambivalent in categorizing respondents. In their Position
Paper[30] filed before the LA, petitioners classified respondent Visca as an
independent contractor and the other respondents as his employees; while in

their Motion for Reconsideration[31] before the NLRC, petitioners treated

respondents as project employees.

Further, petitioners' position in their Motion for Reconsideration before the

NLRC runs contrary to their earlier submission in their Position Paper before
the LA. While initially advancing the absence of an employer-employee
relationship, petitioners on appeal, sang a different tune, so to speak,
essentially invoking the termination of the period of their employer-employee
relationship.

The NLRC should not have considered the new theory offered by the
petitioners in their Motion for Reconsideration. As the object of the pleadings
is to draw the lines of battle, so to speak, between the litigants and to
indicate fairly the nature of the claims or defenses of both parties, a party
cannot subsequently take a position contrary to, or inconsistent, with his
pleadings.[32] It is a matter of law that when a party adopts a particular
theory and the case is tried and decided upon that theory in the court below,
he will not be permitted to change his theory on appeal. The case will be
reviewed and decided on that theory and not approached and resolved from
a different point of view. To permit a party to change his theory on appeal will
be unfair to the adverse party.[33]

At any rate, after a careful examination of the records, the Court finds that
the CA did not err in finding that respondents were regular employees, not
project employees. A projectemployee 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
or where the work or service to be performed is seasonal in nature and the
employment is for the duration of the season." [34] Before an employee hired
on a per-project basis can be dismissed, a report must be made to the
nearest employment office, of the termination of the services of the workers
every time completes a project, pursuant to Policy Instruction No. 20.[35]

In the present case, respondents cannot be classified as project employees,

since they worked continuously for petitioners from three to twelve years
without any mention of a project to which they were specifically
assigned. While they had designations as foreman, carpenter and mason,
they performed work other than carpentry or masonry. They were tasked
with the maintenance and repair of the furniture, motor boats, cottages, and
windbreakers and other resort facilities. There is likewise no evidence of the
project employment contracts covering respondents' alleged periods of
employment. More importantly, there is no evidence that petitioners
reported the termination of respondents' supposed project employment to
the DOLE as projectemployees. Department Order No. 19, as well as the old
Policy Instructions No. 20, requires employers to submit a report of an
employees termination to the nearest public employment office every time
his employment is terminated due to a completion of a project. Petitioners'
failure to file termination reports is an indication that the respondents were
not project employees but regular employees.[36]

This Court has held that an employment ceases to be coterminous with

specific projects when the employee is continuously rehired due to the
demands of employers business and re-engaged for many more projects
without interruption.[37]

The Court is not persuaded by petitioners' submission that respondents'

services are not necessary or desirable to the usual trade or business of the
resort. The repeated and continuing need for their services is sufficient
evidence of the necessity, if not indispensability, of their services to
petitioners' resort business.[38]

In Maraguinot, Jr. v. National Labor Relations Commission,[39] the Court ruled

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, pursuant to Article 280 of the Labor Code and
jurisprudence.[40]

That respondents were regular employees is further bolstered by the

following evidence: (a) the SSS Quarterly Summary of Contribution
Payments[41] listing respondents as employees of petitioners; (b) the Service
Record Certificates stating that respondents were employees of petitioners
for periods ranging from three to twelve years and all have given very
satisfactory performance;[42] (c) petty cash vouchers[43] showing payment of
respondents' salaries and holiday and overtime pays.

Thus, substantial evidence supported the CA finding that respondents

were regular employees. Being regular employees, they were entitled to secu
rity of
tenure, and their services may not be terminated except for causes provided
by law.

Article 279[44] of the Labor Code, as amended, provides that an illegally

dismissed employee shall be entitled to reinstatement, 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 Court notes that the NLRC, in its earlier Decision dated August 29,
2002 which
was
affirmed
by
the
CA,
computed
the
award
for backwages from May 8, 1999 to July 31, 2002 only.It is evident that
respondents backwages should
not
be
limited
to
said
period. The backwages due respondents must be computed from the time
they were unjustly dismissed until actualreinstatement to their former
positions. Thus, until petitioners implement the reinstatement aspect, its
obligation to respondents, insofar as accrued backwages and other benefits
are concerned, continues to accumulate.

The fact that the CA failed to consider this when it affirmed the August 29,
2002 decision of the NLRC or that respondents themselves did not appeal the
CA Decision on this matter, does not bar this Court from ordering its
modification. While as a general rule, a party who has not appealed is not
entitled to affirmative relief other than the ones granted in the decision of
the court below, this Court is imbued with sufficient authority and discretion
to review matters, not otherwise assigned as errors on appeal, if it finds that
their consideration is necessary in arriving at a complete and just resolution
of the case or to serve the interests of justice or to avoid dispensing
piecemeal justice.[45]

Besides, substantive rights like the award of backwages resulting from illegal
dismissal must not be prejudiced by a rigid and technical application of the
rules.[46] The computation of the award for backwages from the time
compensation was withheld up to the time of actual reinstatement is a mere
legal consequence of the finding that respondents were illegally dismissed by
petitioners.

WHEREFORE, the petition is DENIED. The assailed Decision dated July 30,
2004 and Resolution dated February 2, 2005 of the Court of Appeals in CAG.R. SP No. 78620 areAFFIRMED with MODIFICATION that the award
for backwages should be computed from the time compensation was
withheld up to the time of actual reinstatement.
Double costs against petitioners.

SO ORDERED.

THIRD DIVISION
[G.R. No. 149440. January 28, 2003]
HACIENDA FATIMA and/or PATRICIO VILLEGAS, ALFONSO VILLEGAS
and CRISTINE SEGURA, petitioners, vs. NATIONAL FEDERATION OF
SUGARCANE WORKERS-FOOD AND GENERAL TRADE, respondents.
DECISION
PANGANIBAN, J.:
Although the employers have shown that respondents performed work that
was seasonal in nature, they failed to prove that the latter worked only for
the duration of one particular season. In fact, petitioners do not deny that
these workers have served them for several years already. Hence, they are
regular -- not seasonal -- employees.
The Case
Before the Court is a Petition for Review under Rule 45 of the Rules of Court,
seeking to set aside the February 20, 2001 Decision of the Court of
Appeals[1] (CA) in CA-GR SP No. 51033. The dispositive part of the Decision
reads:
WHEREFORE, premises considered,
for certiorari is hereby DENIED. [2]

the

instant

special

civil

action

On the other hand, the National Labor Relations Commission (NLRC)

Decision,[3] upheld by the CA, disposed in this wise:
WHEREFORE, premises considered, the decision of the Labor Arbiter is
hereby SET ASIDE and VACATED and a new one entered declaring
complainants to have been illegally dismissed. Respondents are
hereby ORDERED to reinstate complainants except Luisa Rombo, Ramona
Rombo, Bobong Abriga and Boboy Silva to their previous position and to pay
full backwages from September 1991 until reinstated. Respondents being
guilty of unfair labor practice are further ordered to pay complainant union
the sum of P10,000.00 as moral damages and P5,000.00 as exemplary
damages.[4]
The Facts
The facts are summarized in the NLRC Decision as follows:
Contrary to the findings of the Labor Arbiter that complainants [herein
respondents] refused to work and/or were choosy in the kind of jobs they
wanted to perform, the records is replete with complainants persistence and
dogged determination in going back to work.
Indeed, it would appear that respondents did not look with favor workers
having organized themselves into a union. Thus, when complainant union
was certified as the collective bargaining representative in the certification

elections, respondents under the pretext that the result was on appeal,
refused to sit down with the union for the purpose of entering into a
collective
bargaining
agreement. Moreover,
the
workers
including
complainants herein were not given work for more than one month. In
protest, complainants staged a strike which was however settled upon the
signing of a Memorandum of Agreement which stipulated among others that:
a) The parties will initially meet for CBA negotiations on the 11th day of
January 1991 and will endeavor to conclude the same within thirty (30) days.
b) The management will give priority to the women workers who are
members of the union in case work relative x x x or amount[ing] to gahit and
[dipol] arises.
c) Ariston Eruela Jr. will be given back his normal work load which is six (6)
days in a week.
d) The management will provide fifteen (15) wagons for the workers and that
existing workforce prior to the actual strike will be given priority. However, in
case the said workforce would not be enough, the management can hire
additional workers to supplement them.
e) The management will not anymore allow the scabs, numbering about
eighteen (18) workers[,] to work in the hacienda; and
f) The union will immediately lift the picket upon signing of this agreement.
However, alleging that complainants failed to load the fifteen wagons,
respondents reneged on its commitment to sit down and bargain
collectively. Instead, respondent employed all means including the use of
private armed guards to prevent the organizers from entering the premises.
Moreover, starting September 1991, respondents did not any more give work
assignments to the complainants forcing the union to stage a strike on
January 2, 1992. But due to the conciliation efforts by the DOLE, another
Memorandum of Agreement was signed by the complainants and
respondents which provides:
Whereas the union staged a strike against management on January 2, 1992
grounded on the dismissal of the union officials and members;
Whereas parties to the present dispute agree to settle the case amicably
once and for all;
Now therefore, in the interest of both labor and management, parties herein
agree as follows:
1. That the list of the names of affected union members hereto attached and
made part of this agreement shall be referred to the Hacienda payroll of
1990 and determine whether or not this concerned Union members are
hacienda workers;
2. That in addition to the payroll of 1990 as reference, herein parties will use
as guide the subjects of a Memorandum of Agreement entered into by and
between the parties last January 4, 1990;
3. That herein parties can use other employment references in support of
their respective claims whether or not any or all of the listed 36 union
members are employees or hacienda workers or not as the case may be;
4. That in case conflict or disagreement arises in the determination of the
status of the particular hacienda workers subject of this agreement herein
parties further agree to submit the same to voluntary arbitration;

5. To effect the above, a Committee to be chaired by Rose Mengaling is

hereby created to be composed of three representatives each and is given
five working days starting Jan. 23, 1992 to resolve the status of the subject
36 hacienda workers. (Union representatives: Bernardo Torres, Martin Alasas, Ariston Arulea Jr.)
Pursuant thereto, the parties subsequently met and the Minutes of the
Conciliation Meeting showed as follows:
The meeting started at 10:00 A.M. A list of employees was submitted by Atty.
Tayko based on who received their 13 th month pay. The following are deemed
not considered employees:
1. Luisa Rombo
2. Ramona Rombo
3. Bobong Abrega
4. Boboy Silva
The name Orencio Rombo shall be verified in the 1990 payroll.
The following employees shall be reinstated immediately upon availability of
work:
1. Jose Dagle 7. Alejandro Tejares
2. Rico Dagle 8. Gaudioso Rombo
3. Ricardo Dagle 9. Martin Alas-as Jr.
4. Jesus Silva 10. Cresensio Abrega
5. Fernando Silva 11. Ariston Eruela Sr.
6. Ernesto Tejares 12. Ariston Eruela Jr.
When respondents again reneged on its commitment, complainants filed the
present complaint.
But for all their persistence, the risk they had to undergo in conducting a
strike in the face of overwhelming odds, complainants in an ironic twist of
fate now find themselves being accused of refusing to work and being
choosy in the kind of work they have to perform.[5] (Citations omitted)
Ruling of the Court of Appeals
The CA affirmed that while the work of respondents was seasonal in nature,
they were considered to be merely on leave during the off-season and were
therefore still employed by petitioners. Moreover, the workers enjoyed
security of tenure. Any infringement upon this right was deemed by the CA
to be tantamount to illegal dismissal.
The appellate court found neither rhyme nor reason in petitioners argument
that it was the workers themselves who refused to or were choosy in their
work. As found by the NLRC, the record of this case is replete with
complainants persistence and dogged determination in going back to work. [6]
The CA likewise concurred with the NLRCs finding that petitioners were guilty
of unfair labor practice.
Hence this Petition.[7]
Issues
Petitioners raise the following issues for the Courts consideration:

A. Whether or not the Court of Appeals erred in holding that respondents,

admittedly seasonal workers, were regular employees, contrary to the clear
provisions of Article 280 of the Labor Code, which categorically state that
seasonal employees are not covered by the definition of regular employees
under paragraph 1, nor covered under paragraph 2 which refers exclusively
to casual employees who have served for at least one year.
B. Whether or not the Court of Appeals erred in rejecting the ruling
in Mercado, xxx, and relying instead on rulings which are not directly
applicable to the case at bench, viz, Philippine Tobacco,Bacolod-Murcia,
and Gaco, xxx.
C. Whether or not the Court of Appeals committed grave abuse of discretion
in upholding the NLRCs conclusion that private respondents were illegally
dismissed, that petitioner[s were] guilty of unfair labor practice, and that the
union be awarded moral and exemplary damages.[8]
Consistent with the discussion in petitioners Memorandum, we shall take up
Items A and B as the first issue and Item C as the second.
The Courts Ruling
The Petition has no merit.
First Issue:
Regular Employment
At the outset, we must stress that only errors of law are generally reviewed
by this Court in petitions for review on certiorari of CA decisions. [9] Questions
of fact are not entertained. [10]The Court is not a trier of facts and, in labor
cases, this doctrine applies with greater force.[11] Factual questions are for
labor tribunals to resolve.[12] In the present case, these have already been
threshed out by the NLRC. Its findings were affirmed by the appellate court.
Contrary to petitioners contention, the CA did not err when it held that
respondents were regular employees.
Article 280 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 natureand 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
exist. (Italics supplied)
For respondents to be excluded from those classified as regular employees, it
is not enough that they perform work or services that are seasonal in
nature. They must have also been employed only for the duration of one
season. The evidence proves the existence of the first, but not of the second,
condition. The fact that respondents -- with the exception of Luisa Rombo,

Ramona Rombo, Bobong Abriga and Boboy Silva -- repeatedly worked as

sugarcane workers for petitioners for several years is not denied by the
latter. Evidently, petitioners employed respondents for more than one
season. Therefore, the general rule of regular employment is applicable.
In Abasolo v. National Labor Relations Commission,[13] the Court issued this
clarification:
[T]he test of whether or not an employee is a regular employee has been laid
down in De Leon v. NLRC, in which this Court held:
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 trade or
business 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.
xxxxxxxxx
x x x [T]he fact that [respondents] do not work continuously for one whole
year but only for the duration of the x x x season 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 off-season are not separated from
service in said period, but merely considered on leave until re-employed. [14]
The CA did not err when it ruled that Mercado v. NLRC[15] was not applicable
to the case at bar. In the earlier case, the workers were required to perform
phases of agricultural work for a definite period of time, after which their
services would be available to any other farm owner. They were not hired
regularly and repeatedly for the same phase/s of agricultural work, but on
and off for any single phase thereof. On the other hand, herein respondents,
having performed the same tasks for petitioners every season for several
years, are considered the latters regular employees for their respective
tasks. Petitioners eventual refusal to use their services -- even if they were
ready, able and willing to perform their usual duties whenever these were
available -- and hiring of other workers to perform the tasks originally
assigned to respondents amounted to illegal dismissal of the latter.
The Court finds no reason to disturb the CAs dismissal of what petitioners
claim was their valid exercise of a management prerogative. The sudden
changes in work assignments reeked of bad faith. These changes were
implemented immediately after respondents had organized themselves into
a union and started demanding collective bargaining. Those who were union
members were effectively deprived of their jobs. Petitioners move actually
amounted to unjustified dismissal of respondents, in violation of the Labor
Code.
Where there is no showing of clear, valid and legal cause for the termination
of employment, the law considers the matter a case of illegal dismissal and
the burden is on the employer to prove that the termination was for a valid
and authorized cause.[16] In the case at bar, petitioners failed to prove any

such cause for the dismissal of respondents who, as discussed above, are
regular employees.
Second Issue:
Unfair Labor Practice
The NLRC also found herein petitioners guilty of unfair labor practice. It ruled
as follows:
Indeed, from respondents refusal to bargain, to their acts of economic
inducements resulting in the promotion of those who withdrew from the
union, the use of armed guards to prevent the organizers to come in, and the
dismissal of union officials and members, one cannot but conclude that
respondents did not want a union in their haciendaa clear interference in the
right of the workers to self-organization.[17]
We uphold the CAs affirmation of the above findings. Indeed, factual findings
of labor officials, who are deemed to have acquired expertise in matters
within their respective jurisdictions, are generally accorded not only respect
but even finality. Their findings are binding on the Supreme Court.[18] Verily,
their conclusions are accorded great weight upon appeal, especially when
supported by substantial evidence.[19] Consequently, the Court is not dutybound to delve into the accuracy of their factual findings, in the absence of a
clear showing that these were arbitrary and bereft of any rational basis.[20]
The finding of unfair labor practice done in bad faith carries with it the
sanction of moral and exemplary damages.[21]
WHEREFORE,
the
Petition
is
hereby DENIED and
Decision AFFIRMED. Costs against petitioners.

the

assailed

SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 79869 September 5, 1991
FORTUNATO
MERCADO,
SR.,
ROSA
MERCADO,
FORTUNATO
MERCADO, JR., ANTONIO MERCADO, JOSE CABRAL, LUCIA MERCADO,
ASUNCION GUEVARA, ANITA MERCADO, MARINA MERCADO, JULIANA
CABRAL, GUADALUPE PAGUIO, BRIGIDA ALCANTARA, EMERLITA
MERCADO, ROMEO GUEVARA, ROMEO MERCADO and LEON
SANTILLAN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), THIRD DIVISION;
LABOR ARBITER LUCIANO AQUINO, RAB-III; AURORA L. CRUZ;
SPOUSES FRANCISCO DE BORJA and LETICIA DE BORJA; and STO.
NIO REALTY, INCORPORATED, respondents.

Servillano S. Santillan for petitioners.

Luis R. Mauricio for private respondents.

PADILLA, J.:p
Assailed in this petition for certiorari is the decision * of the respondent
national Labor Relations Commission (NLRC) dated 8 August 1984 which
affirmed the decision of respondent Labor Arbiter Luciano P. Aquino with the
slight modification of deleting the award of financial assistance to
petitioners, and the resolution of the respondent NLRC dated 17 August
1987, denying petitioners' motion for reconsideration.
This petition originated from a complaint for illegal dismissal, underpayment
of wages, non-payment of overtime pay, holiday pay, service incentive leave
benefits, emergency cost of living allowances and 13th month pay, filed by
above-named petitioners against private respondents Aurora L. Cruz,
Francisco Borja, Leticia C. Borja and Sto. Nio Realty Incorporated, with
Regional Arbitration Branch No. III, National Labor Relations Commission in
San Fernando, Pampanga. 1
Petitioners alleged in their complaint that they were agricultural workers
utilized by private respondents in all the agricultural phases of work on the 7
1/2 hectares of ace land and 10 hectares of sugar land owned by the latter;
that Fortunato Mercado, Sr. and Leon Santillan worked in the farm of private
respondents since 1949, Fortunato Mercado, Jr. and Antonio Mercado since
1972 and the rest of the petitioners since 1960 up to April 1979, when they
were all allegedly dismissed from their employment; and that, during the
period of their employment, petitioners received the following daily wages:
From
1963-1965
1965-1967
1967-1970
1970-1973
1973-1975
1975-1978
1978-1979 P7.00

1962-1963

P1.50
P2.00
P3.00
P4.00
P5.00
P5.00
P6.00

Private respondent Aurora Cruz in her answer to petitioners' complaint

denied that said petitioners were her regular employees and instead averred
that she engaged their services, through Spouses Fortunato Mercado, Sr. and
Rosa Mercado, their "mandarols", that is, persons who take charge in
supplying the number of workers needed by owners of various farms, but
only to do a particular phase of agricultural work necessary in rice production
and/or sugar cane production, after which they would be free to render
services to other farm owners who need their services. 2
The other private respondents denied having any relationship whatsoever
with the petitioners and state that they were merely registered owners of the
land in question included as corespondents in this case. 3
The dispute in this case revolves around the issue of whether or not
petitioners are regular and permanent farm workers and therefore entitled to
the benefits which they pray for. And corollary to this, whether or not said
petitioners were illegally dismissed by private respondents.
Respondent Labor Arbiter Luciano P. Aquino ruled in favor of private
respondents and held that petitioners were not regular and permanent
workers of the private respondents, for the nature of the terms and

conditions of their hiring reveal that they were required to perform phases of
agricultural work for a definite period of time after which their services would
be available to any other farm owner. 4 Respondent Labor Arbiter deemed
petitioners' contention of working twelve (12) hours a day the whole year
round in the farm, an exaggeration, for the reason that the planting of lice
and sugar cane does not entail a whole year as reported in the findings of
the Chief of the NLRC Special Task Force. 5 Even the sworn statement of one
of the petitioners, Fortunato Mercado, Jr., the son of spouses Fortunato
Mercado, Sr. and Rosa Mercado, indubitably show that said petitioners were
hired only as casuals, on an "on and off" basis, thus, it was within the
prerogative of private respondent Aurora Cruz either to take in the
petitioners to do further work or not after any single phase of agricultural
work had been completed by them. 6
Respondent Labor Arbiter was also of the opinion that the real cause which
triggered the filing of the complaint by the petitioners who are related to one
another, either by consanguinity or affinity, was the filing of a criminal
complaint for theft against Reynaldo Mercado, son of spouses Fortunate
Mercado, Sr. and Rosa Mercado, for they even asked the help of Jesus David,
Zone Chairman of the locality to talk to private respondent, Aurora Cruz
regarding said criminal case. 7 In his affidavit, Jesus David stated under oath
that petitioners were never regularly employed by private respondent Aurora
Cruz but were, on-and-off hired to work and render services when needed,
thus adding further support to the conclusion that petitioners were not
regular and permanent employees of private respondent Aurora Cruz. 8
Respondent Labor Arbiter further held that only money claims from years
1976-1977, 1977-1978 and 1978-1979 may be properly considered since all
the other money claims have prescribed for having accrued beyond the three
(3) year period prescribed by law. 9 On grounds of equity, however,
respondent Labor Arbiter awarded petitioners financial assistance by private
respondent Aurora Cruz, in the amount of Ten Thousand Pesos (P10,000.00)
to be equitably divided among an the petitioners except petitioner Fortunato
Mercado, Jr. who had manifested his disinterest in the further prosecution of
his complaint against private respondent. 10
Both parties filed their appeal with the National Labor Relations Commissions
(NLRC). Petitioners questioned respondent Labor Arbiter's finding that they
were not regular and permanent employees of private respondent Aurora
Cruz while private respondents questioned the award of financial assistance
granted by respondent Labor Arbiter.
The NLRC ruled in favor of private respondents affirming the decision of the
respondent Labor Arbiter, with the modification of the deletion of the award
for financial assistance to petitioners. The dispositive portion of the decision
of the NLRC reads:
WHEREFORE, the Decision of Labor Arbiter Luciano P. Aquino dated March 3,
1983 is hereby modified in that the award of P10,000.00 financial assistance
should be deleted. The said Decision is affirmed in all other aspects.
SO ORDERED.

11

Petitioners filed a motion for reconsideration of the Decision of the Third

Division of the NLRC dated 8 August 1984; however, the NLRC denied tills
motion in a resolution dated 17 August 1987. 12
In the present Petition for certiorari, petitioners seek the reversal of the
above-mentioned rulings. Petitioners contend that respondent Labor Arbiter
and respondent NLRC erred when both ruled that petitioners are not regular
and permanent employees of private respondents based on the terms and

conditions of their hiring, for said findings are contrary to the provisions of
Article 280 of the Labor Code. 13 They submit that petitioners' employment,
even assuming said employment were seasonal, continued for so many
years such that, by express provision of Article 280 of the Labor Code as
amended, petitioners have become regular and permanent employees. 14
Moreover, they argue that Policy Instruction No. 12 15 of the Department of
Labor and Employment clearly lends support to this contention, when it
states:
PD 830 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.
If not, then the employment is casual. Employment for a definite period
which exceeds one (1) year shall be considered re for the duration of the
definite period.
This concept of re and casual employment is designed to put an end to
casual employment in regular jobs which has been abused by many
employers to prevent so-called casuals from enjoying the benefits of regular
employees or to prevent casuals from joining unions.
This new concept should be strictly enforced to give meaning to the
constitutional guarantee of employment tenure. 16
Tested under the laws invoked, petitioners submit that it would be unjust, if
not unlawful, to consider them as casual workers since they have been doing
all phases of agricultural work for so many years, activities which are
undeniably necessary, desirable and indispensable in the rice and sugar
cane production business of the private respondents. 17
In the Comment filed by private respondents, they submit that the decision
of the Labor Arbiter, as aimed by respondent NLRC, that petitioners were
only hired as casuals, is based on solid evidence presented by the parties
and also by the Chief of the Special Task Force of the NLRC Regional Office
and, therefore, in accordance with the rule on findings of fact of
administrative
agencies,
the
decision
should
be
given
great
18
weight. Furthermore, they contend that the arguments used by petitioners
in questioning the decision of the Labor Arbiter were based on matters which
were not offered as evidence in the case heard before the regional office of
the then Ministry of Labor but rather in the case before the Social Security
Commission, also between the same parties. 19
Public respondent NLRC filed a separate comment prepared by the Solicitor
General. It submits that it has long been settled that findings of fact of
administrative agencies if supported by substantial evidence are entitled to
great weight. 20 Moreover, it argues that petitioners cannot be deemed to be
permanent and regular employees since they fall under the exception stated
in Article 280 of the Labor Code, which reads:
The provisions of written agreements 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. 21 (emphasis supplied)

The Court resolved to give due course to the petition and required the
parties to submit their respective memoranda after which the case was
deemed submitted for decision.
The petition is not impressed with merit.
The invariable rule set by the Court in reviewing administrative decisions of
the Executive Branch of the Government is that the findings of fact made
therein are respected, so long as they are supported by substantial evidence,
even if not overwhelming or preponderant; 22 that it is not for the reviewing
court to weigh the conflicting evidence, determine the credibility of the
witnesses or otherwise substitute its own judgment for that of the
administrative agency on the sufficiency of the evidence; 23 that the
administrative decision in matters within the executive's jurisdiction can only
be set aside upon proof of gross abuse of discretion, fraud, or error of law. 24
The questioned decision of the Labor Arbiter reads:
Focusing the spotlight of judicious scrutiny on the evidence on record and
the arguments of both parties, it is our well-discerned opinion that the
petitioners are not regular and permanent workers of the respondents. The
very nature of the terms and conditions of their hiring reveal that the
petitioners were required to perform p of cultural work for a definite period,
after which their services are available to any farm owner. We cannot share
the arguments of the petitioners that they worked continuously the whole
year round for twelve hours a day. This, we feel, is an exaggeration which
does not deserve any serious consideration inasmuch as the plan of rice and
sugar cane does not entail a whole year operation, the area in question
being comparatively small. It is noteworthy that the findings of the Chief of
the Special Task Force of the Regional Office are similar to this.
In fact, the sworn statement of one of the petitioners Fortunato Mercado, Jr.,
the son of spouses Fortunato Mercado, Sr. and Rosa Mercado, indubitably
shows that said petitioners were only hired as casuals, on-and-off basis. With
this kind of relationship between the petitioners and the respondent Aurora
Cruz, we feel that there is no basis in law upon which the claims of the
petitioners should be sustained, more specially their complaint for illegal
dismissal. It is within the prerogative of respondent Aurora Cruz either to
take in the petitioners to do further work or not after any single phase of
agricultural work has been completed by them. We are of the opinion that
the real cause which triggered the filing of this complaint by the petitioners
who are related to one another, either by consanguinity or affinity was due to
the filing of a criminal complaint by the respondent Aurora Cruz against
Reynaldo Mercado, son of spouses Fortunato Mercado, Sr. and Rosa Mercado.
In April 1979, according to Jesus David, Zone Chairman of the locality where
the petitioners and respondent reside, petitioner Fortunato Mercado, Sr.
asked for help regarding the case of his son, Reynaldo, to talk with
respondent Aurora Cruz and the said Zone Chairman also stated under oath
that the petitioners were never regularly employed by respondent Aurora
Cruz but were on-and-off hired to work to render services when needed. 25
A careful examination of the foregoing statements reveals that the findings
of the Labor Arbiter in the case are ably supported by evidence. There is,
therefore, no circumstance that would warrant a reversal of the questioned
decision of the Labor Arbiter as affirmed by the National Labor Relations
Commission.
The contention of petitioners that the second paragraph of Article 280 of the
Labor Code should have been applied in their case presents an opportunity
to clarify the afore-mentioned provision of law.

Article 280 of the Labor Code reads in full:

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 first paragraph answers the question of who are employees. It states
that, regardless of any written or oral agreement to the contrary, an
employee is deemed regular where he is engaged in necessary or desirable
activities in the usual business or trade of the employer, except for project
employees.
A project employee has been defined to be 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 26 as in the present case.
The second paragraph of Art. 280 demarcates as "casual" employees, all
other employees who do not fan under the definition of the preceding
paragraph. The proviso, in said second paragraph, deems as regular
employees those "casual" employees who have rendered at least one year of
service regardless of the fact that such service may be continuous or broken.
Petitioners, in effect, contend that the proviso in the second paragraph of
Art. 280 is applicable to their case and that the Labor Arbiter should have
considered them regular by virtue of said proviso. The contention is without
merit.
The general rule is that the office of a proviso is to qualify or modify only the
phrase immediately preceding it or restrain or limit the generality of the
clause that it immediately follows. 27 Thus, it has been held 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 the statute itself or to other
sections thereof. 28 The only exception to this rule is where the clear
legislative intent is to restrain or qualify not only the phrase immediately
preceding it (the proviso) but also earlier provisions of the statute or even
the statute itself as a whole. 29
Policy Instruction No. 12 of the Department of Labor and Employment
discloses that the concept of regular and casual employees was designed to
put an end to casual employment in regular jobs, which has been abused by
many employers to prevent called casuals from enjoying the benefits of
regular employees or to prevent casuals from joining unions. The same
instructions show that the proviso in the second paragraph of Art. 280 was
not designed to stifle small-scale businesses nor to oppress agricultural land
owners to further the interests of laborers, whether agricultural or industrial.
What it seeks to eliminate are abuses of employers against their employees

and not, as petitioners would have us believe, to prevent small-scale

businesses from engaging in legitimate methods to realize profit. Hence, the
proviso is applicable only to the employees who are deemed "casuals" but
not to the "project" employees nor the regular employees treated in
paragraph one of Art. 280.
Clearly, therefore, petitioners being project employees, or, to use the correct
term, seasonal employees, their employment legally ends upon completion
of the project or the season. The termination of their employment cannot and
should not constitute an illegal dismissal. 30
WHEREFORE, the petition is DISMISSED. The decision of the National Labor
Relations Commission affirming that of the Labor Arbiter, under review, is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.

SECOND DIVISION
[G.R. No. 118475. November 29, 2000]
ELVIRA ABASOLO, ANTONIO ABAY, PURIFICACION ABAY, CATALINA
ABELLERA, DANIEL ABELLERA, ELSIE ABELLERA, LOURDES ADUSE,
PACITA ALAMAN, REYNALDO ALBAY, ROGELIO ALBAY, EMERITA ALCOY,
ERLINDA ALEGRE, CORAZON ALOOT, IMELDA ALOOT, ROWENA ALOOT,
SHIRLEY JULIANA ALOOT, ADORACION ANTALAN, ESTRELLA ANTOLIN,
EPIFANIA ANTONIO, CARMELITA AQUINO, CECENIA ASPIRAS,
EMILIANA ASPIRAS, ANA BELEN ASPREC, MELENCIO ASPURIA,
ILUMINADA ASTRO, CARMELITA ASUNCION, FLORENTINA AVENA,
EMILIA BACQUIL, GLORIA BAGALAN, BENJAMIN BALANAG, CLARITA
BALANAG, CONSUELO BALANAG, DOLORES BALANAG, CANDIDA
BALANGA, CLARITA BALANGA, FRANCISCA BALANGA, CORAZON
BALANGUE, MILDRED BALANGUE, ERLINDA BALDERAS, MANUEL
BALLESIL, ERLINDA BAMBAO, ROSEMARIE BASIO, AMALIA BATARIO,
CONCHITA BATARIO, CORAZON BATARIO, ERLINDA BATARIO, GLORIA
BATARIO, PEDRO BATARIO, JR., REBECCA BATARIO, PERLA BAUTISTA,
SHIRLEY
BAUTISTA,
ANGELISA
BAYANI,
MORGAN
BEGALAN,
FRANCISCA BERBON, BERNARD VISITACION, EVELYN BIASON,
VERONICA BLANDO, UFENIA BLANZA, AMBROSIA BOADO, CARLOS
BOADO, LOLITA BORJE, MARILOU BUNGAY, RODRIGO BURGOS,
AMELITA CABALBAG, ERNESTO CABALBAG, ELVIRA CABUGON,
JOSEFINA CACANINDIN, CORAZON CACAYARA, JAIME CACHERO,
JULIET CALLANO, ANDRES CALUZA, TERESITA CALUZA, ISABEL
COMADRO, EDITA CARBONEL, LOLITA CARILLA, BIENVENIDA CARINO,
DELIA CARINO, LOLITA CARINO, AMARIO CARREON, ARMELINDA
CARREON, ERLINDA CARREON, FECIDAD CARREON, JOSE CARREON,
MA. VICTORIA CARREON, BENJAMIN CASALLO, DEMETRIA CASEM,
ALBERTO CASIM, GLORIA CASIM, FLORIDA CATUNGAL, ESTER
CAVINTA, REMEDIOS CAVINTA, ROSALINDA CAVINTA, JULITA
CAYABYAB, IRENE CELESTE CARMELITA CHAN, ESMENIA CORDERO,
LYDIA CORPUZ, JOVA CORTEZ, NORA CORTEZ, MAGDALENA CUDAL,
GENOVA DACANAY, SABINA BACLAN, CORAZON DANAO, ELISA
DASALLA, AGNES BIBIANA DE CASTRO, ANITA DE CASTRO, EDITHA
DE CASTRO, NIDA DE CASTRO, CORAZON DE JESUS, JOSE DE JESUS,
MERLA DE JESUS, MILAGROS DE VERA, APOLINARIO DOLATRE,

CAMILO DOLOR, JR., LOLITA DOLOR, WILMA DOMINGO, OLYMPIA

DOMONOON, BASILIO DULATRE, BASILIO DULATRE,
IMELDA
DULATRE, LETICIA DULATRE, MARTINA DULATRE, RODRIGO DULATRE,
JR., ROGELIO DULATRE, TRIFONA DULATRE, CONSOLACION DULAY,
CRESILDA DULAY, DANILO DULAY, EDITHA DULAY, ELENA G. DULAY,
ERLINDA DULAY, ESTRELLA DULAY, ESTELITA DULAY, ESTRELITA P.
DULAY, EVANGELINE DULAY, FELICIDAD DULAY, FELISA DULAY, GINA
DULAY, GINA DULAY, GLORIA DULAY, GUILLERMO DULAY, JAIME
DULAY, LETICIA DULAY, LOLITA DULAY, LUIS DULAY, MARIA G. DULAY,
MILAGROS DULAY, REMEDIOS DULAY, ROBERTO DULAY, SOTERO
DULAY, TERESITA DULAY, TERESITA G. DULAY, TERESITA M. DULAY,
THERESITA DULAY, VALENTIN DULAY, EDITHA DUMO, REMEDIOS DY,
RIA MAPILI, VICTORIO MAPILI, ROBERTO MARAMBA, SUSANA
MARAMBA, ANDRES MARCOS, LANIA MARCOS, AURORA MARGASA,
ARSENIA MARIGZA, LOLITA MARQUEZ, ANA MARIA MARZAN,
ANGELITA MEDINA, ADELINA MEDRIANO, ELIZABETH MEDRIANO,
HERMINIA M. MEDRIANO, ROSALINDA MEDRIANO, CLEOFE MELANA,
LOLITA MELENDEZ, LOURDES MIGUEL, EMILIA G. MILANES, JOSE
MILANES, LILIA MILO, LILIAN MILO, FELICIDA MORION, EVELYN
MOSTER, ADORACION MUNAR, ELEONORA MUNAR, IMELDRA
NAVARRO, TERESITA NAVERIDA, ANITA NINOBLA, AURELIA NINOBLA,
CARMELITA NINOBLA, MARCELA NINOBLA, MYRNA NISPERO,
JOSEFINA NUTO, LANY OBSRA, ELENA OCAMPO, SYLVIA OLINARES,
ROSITA OPENIANO, TRINIDAD ORDUNA, ROSALINDA ORDONEZ,
JESSIE ORIBELLO, REMEDIOS ORIBELLO, TERESITA ORIBELLO,
HILARIO ORACION, AVELINA ORTILLA, MAGDALENA ORTILLA,
MARIETTA ORTILLA, LEONORA PADER, AMALIA PADILLA, ARCELITA
PADILLA, EVELYN PADILLA, FELICIDA ORTILLA, JOSELYN PADILLA,
JOSEPHINE PADILLA, VIRGINIA PADILLA, CLARITA PAIS, EDUARDO
PANIS, JESUS PANIS, JOSE PANIS, TEOFILA PANIS, VIOLETA PARADO,
ROSITA PAROCHA, CARMELITA PASCUA, LUCIA PAYUMO, MARIA
PICAR, REYNALDA PILARCA, LUZVIMINDA QUERO, ALEJANDRA
QUEZADA, TEODORO QUEZADA, ARLENE QUIBAN, AIDA QUINDARA,
JUANITA QUINONES, GLORIA RABOT, EFREN RACELIS, ERLINDA
RACELIS, IMELDA RACELIS, REMEDIOS RACELIS, SUSANA RACELIS,
TERESITA RACELIS, FLORITA RAQUEL, ALMA RAMIREZ, CARMEN
RAMIREZ, ROSEMARIE RAMIREZ, GEMMA RAMOS, JUANITA RAMOS,
IMELITA REYES, VICTORIA A. RIVERA, VIRGINIA RIVERA, LYDIA
ROBLES, EMILIA RONQUILLO, ROSALLA ROSETE, FORTUNATO RUIZ,
GLORIA RUIZ, RICARDO RUIZ, ROSALINDA RUIZ, ROLIE RUIZ, DANILO
RULLA, EDITHA RULLA, MARITES RULLA, ANTONIO RULLAMOS,
BERNADETEE
RULLAMAS,
JULITA
R.
RULLAMAS,
SOLEDAD
RULLAMAS, CELILIA RULLAN, NAPOLEON RULLAN, NORA RULLAN,
WARLITO RULLAN, AURORA RULLODA, GLORIA RULLODA, REMEDIOS
RULLODA, LETICIA RUMATAY, FELY RUNAS, RIZALITO RUNAS,
DOMINGA SABADO, JOSE SACDAL, CLARITA SALAZAR, GLORIA
SALTING, PURITA SAMSON, ESTRELLITA SERRANO, GEMMA SIABABA,
SUSANA SIABANA, PERLITA SOBREMONTE, CARMEN SOBREVILLA,
RUBIE SOLOMON, MONICA SORIANO, ERLINDA SUGUITAN, JULITA
SUCNET, FEDEL TACIO, LETICIA TAGARA, JOSEFINA TALENG, MARILY
TAMONDON, NIEVEZ TAMONDON, GLORI TANGALIN, LEONARDO
TANGALIN, MYRNA TANGALIN, NOEMA TANGALIN, NORMA TANGALIN,
CRISTETA TEANAN, RUFINA TRANCIA, ALMA TRINIDAD, GLORIA
TUGADE, TERESITA TUMBAGA, ALICIA UBONGEN, ZENAIDA UCOL,
ADELA UGAY, AMAILIA UGAY, ESTELLA UGAY, HONORATO UGAY,
JULIETA UGAY, LOURDES UGAY, PURIFICACION UGAY, ROSEMARIE
UGAY, RUFINA UGAY, ANGELITO UMEL, JOSEFINA VALDEZ, ALFREDO

VERCELES, JOSIE VERCELES, HELEN VILLANUEVA, SALVACION

VILLAROSA, DOMINGO YARANON, FELIMON YARANON, FELIX
YARANON, MONICA YARES, CONSOLACION YARIZ, DEMETRIA YARIZ,
IMELDA YARIZ, MARGARITA ZARATE, ESMERALDA ABAD, LOURDES
ABELLERA, MILAGROS ADUBE, JOSEPHINE ARIAS, ERLINDA ASPERIN,
EMELDA ASUNCION, LILIA ASUNCION, VIOLETA ASUNCION, ROSA
BALAGOT, ADORACION BALANAG, ALICA J. BALANAG, GLECERIA
BALANGA, CORAZON BAMBICO, RICARDO BAIARIO, ADELA BAUTISTA,
CORAZON BRAVO, DINAH BULATAO, MARILOU BUNGAY, LORETO
BURGOS,
EVELYN
CABUNIAS,
CARLITO
CACAYURAN,
ISABEL
CAMACHO, LUCRECIA CARREON, ALFREDO CASEM, HERA CASEM,
MELY CASEM, NATIVIDAD CASIPIT, MARILYN CASTILLO, NENITA
CASTANEDA, CARMELITA CAVINTA, LEONIDA CAVINTA, LEONILA
CAVINTA, MELANIE CHAVEZ, LORETO CORTEZ, HERMANA DACANAY,
MARIETTA DACANAY, MARITES G. DACANAY, MARIO DALAZA, AIDA
DANAO, EVA DANAO, MARGIE DE GUZMAN, NATIVIDAD DE CASTRO,
NATIVIDAD DELA CRUZ, LORETA DIFUNTORUM, LOLITA DISTOR,
ADELINA DOMONDON, HELEN DULATRE, IMELDA M. DULATRE, JOSE
N. DULATRE, LYDIA A. DULATRE, MERLY DULATRE, CONCEPCION
DULAY, DOMINGA DULAY, ELENA C. DULAY, ERLINDA DULAY, ORPILINA
R. DULAY, PABLO A. DULAY, RENATO DULAY, NORMA EISMA, EDNA
ESTOQUE, TEOFILO FAJARDO, ADELINA FONTANILLA, TERESITA
FORONDA, MARGARITA FREDELUCES, RUFINA GALESTE, MARISSA
GALI, LUZVIMINDA GAMBOA, CLEOFE GARCIA, ERLINDA GAPASIN,
JULITA GATCHALIAN, MARISSA GATCHALIAN, ALFONSO HALOG,
TERESITA IBASAN, RICARDO JUGO, ELMA JULOYA, ELENITA LACUATA,
EPIFANIA LACUATA, SEBASTIAN LACUATA, JOSEFINA LARON, PEDRO
LEGASPI, DOLORES LUCENA, FLORDELIZA MABANTA, PERLITA
MACAGBA, CESAR MAGLAYA, ERNA MAGNO, GLORIA MAGNO, BONA P.
MAMARIL, CONCEPCION MAMARIL, MARCELINA MAMARIL, TERESITA
MAMARIL, ESTINILIE MANGADANG, HERMOGENES MANGADANG,
LETICIA MANGADANG, LYDIA MANGADANG, SHIRLEY MANGADANG,
SONIA MANGADANG,
TRINIDAD
MANGADANG,
VICTORIANO
MANGADANG, CRESTITA D. MANZANO, ERLINDA MAPALO, FABIAN F.
MAPANAO, LYDIA MAPILE, RUMO MASON, SUSANA MEDRIANO,
DOLORES MILAN, ANTONIO G. MUNAR, MARINA NINIALBA, CORAZON
B. NINOBLE, SUSAN ORIBELLO, JOVENCIO ORLINO, CHARITO ORPILLA,
FERDINAND PADILLA, LETECIA PAGADUAN, BERLINA PALMONES,
ARISTON PANIS, PATRICIO PANIS, PRIMO PANIS, REMEDIOS B. PANIS,
EMELITO PERALTA, GLORIA RAMIREZ, DOMINGA RAMOS, GERTRUDES
RAMOS, DOROTEO REFUERZO, JR., JUANITA REFUERZO, FLORENCIO
REGACHO, MAGDALENA REBACHO, ADELINA REYES, DELIA REYES,
EUFENIA RIVERA, LEONORA RIVERA, ROSEMARIE ROSIMO, VICTORIA
RUALO, DANILO RULLAN, AURORA RULLODA, SERAFICA RULLODA,
ZENAIDO
P.
RULLODA,
IMELDA
RUNAS,
REMEDIOS SANTOS,
DOMINADOR
TABABA,
ROSENDA
TABAO,
JOSEFINA
TALENS,
REVELINA TORCEDO, RUFINA TUMBANGA, JULITA F. UGAY, BRENDA
VILLANUEVA, GLORIA VILORIA, FLORIDA YARIS, MARGARITA ZARATE,
FERNANDO
SACDAL,
ANICETA
MANONGDO
and
BEATRIZ
UGAY, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION,
LABOR ARBITER RICARDO N. OLAIREZ, LA UNION TOBACCO
REDRYING CORPORATION and SEE LIN CHAN, respondents.
DECISION
DE LEON, JR., J.:

Before us is a petition for certiorari seeking to annul two Resolutions of the

National Labor Relations Commission (NLRC), Third Division, dated July 6,
1994[1] and September 23, 1994[2], in its affirmance of the Decision [3] of Labor
Arbiter Ricardo N. Olairez dated December 29, 1993 dismissing petitioners
consolidated complaint for separation pay for lack of merit.
The facts are as follows:
Private respondent La Union Tobacco Redrying Corporation (LUTORCO), which
is owned by private respondent See Lin Chan, is engaged in the business of
buying, selling, redrying and processing of tobacco leaves and its byproducts. Tobacco season starts sometime in October of every year when
tobacco farmers germinate their seeds in plots until they are ready for
replanting in November. The harvest season starts in mid-February. Then, the
farmers sell the harvested tobacco leaves to redrying plants or do the
redrying themselves. The redrying plant of LUTORCO receives tobacco for
redrying at the end of February and starts redrying in March until August or
September.
Petitioners have been under the employ of LUTORCO for several years until
their employment with LUTORCO was abruptly interrupted sometime in
March 1993 when Compania General de Tabaccos de Filipinas (also known as
TABACALERA) took over LUTORCOs tobacco operations. New signboards were
posted indicating a change of ownership and petitioners were then asked by
LUTORCO to file their respective applications for employment with
TABACALERA. Petitioners were caught unaware of the sudden change of
ownership and its effect on the status of their employment, though it was
alleged that TABACALERA would assume and respect the seniority rights of
the petitioners.
On March 17, 1993, the disgruntled employees instituted before the NLRC
Regional Arbitration Branch No. 1, San Fernando, La Union a complaint [4] for
separation pay against private respondent LUTORCO on the ground that
there was a termination of their employment due to the closure of LUTORCO
as a result of the sale and turnover to TABACALERA. Other equally affected
employees filed two additional complaints[5], also for separation pay, which
were consolidated with the first complaint.
Private respondent corporation raised as its defense that it is exempt from
paying separation pay and denied that it terminated the services of the
petitioners; and that it stopped its operations due to the absence of capital
and operating funds caused by losses incurred from 1990 to 1992 and
absence of operating funds for 1993, coupled with adverse financial
conditions and downfall of prices. [6] It alleged further that LUTORCO entered
into an agreement with TABACALERA to take over LUTORCOs tobacco
operations for the year 1993 in the hope of recovering from its serious
business losses in the succeeding tobacco seasons and to create a
continuing source of income for the petitioners. [7] Lastly, it manifested that
LUTORCO, in good faith and with sincerity, is willing to grant reasonable and
adjusted amounts to the petitioners, as financial assistance, if and when
LUTORCO could recover from its financial crisis.[8]
On December 29, 1993, Labor Arbiter Ricardo N. Olairez rendered his
decision dismissing the complaint for lack of merit. In upholding private
respondent LUTORCOs position, the Labor Arbiter declared that the
petitioners are not entitled to the benefits under Article 283 [9] of the Labor
Code since LUTORCO ceased to operate due to serious business losses and,
furthermore, TABACALERA, the new employer of the petitioner has assumed
the seniority rights of the petitioners and other employment liabilities of the
LUTORCO.[10]

Petitioners appealed[11] then the decision of the Labor Arbiter to the public
respondent NLRC where it was assigned to the Third Division.
In its Opposition to Appeal[12] dated February 5, 1994 private respondent
LUTORCO presented new allegations and a different stand for denying
separation pay. It alleged that LUTORCO never ceased to operate but
continues to operate even after TABACALERA took over the operations of its
redrying plaint in Aringay, La Union. Petitioners were not terminated from
employment but petitioners instead refused to work with TABACALERA,
despite the notice to petitioners to return to work in view of LUTORCOs need
for workers at its Agoo plant which had approximately 300,000 kilos of
Virginia tobacco for processing and redrying. Furthermore, petitioners are not
entitled to separation pay because petitioners are seasonal workers.
Adopting these arguments of private respondent, the NLRC, in a
Resolution[13] dated July 6, 1994, affirmed the dismissal of the consolidated
complaints for separation pay. Public respondent held that petitioners are not
entitled to the protection of Article 283 of the Labor Code providing for
separation pay since there was no closure of establishment or termination of
services to speak of. It declared that there was no dismissal but a non-hiring
due mainly to [petitioners] own volition.[14] Moreover, the benefits of Article
283 of the Labor Code apply only to regular employees, not seasonal workers
like petitioners.[15] Inasmuch as public respondent in its Resolution [16] dated
September 23, 1994 denied petitioners motion for reconsideration,
petitioners now assail the correctness of the NLRCs resolution via the instant
petition.
Petitioners anchor their petition on the following grounds, to wit:
I. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN
RULING THAT THERE WAS NO DISMISSAL OR TERMINATION OF
SERVICES.
II. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN
RULING THAT PETITIONERS WERE NOT REGULAR EMPLOYEES.
III. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN
NOT AWARDING SEPARATION PAY TO THE PETITIONERS.
Petitioners vigorously maintain that they are regular workers of respondent
LUTORCO since they worked continuously for many years with LUTORCO,
some of them even for over 20 years, and that they performed functions
necessary and desirable in the usual business of LUTORCO. [17] According to
them, the fact that some of them work only during the tobacco season does
not affect their status as regular workers since they have been repeatedly
called back to work for every season, year after year. [18] Thus, petitioners
take exception to the factual findings and conclusions of the NLRC, stressing
that the conclusions of the NLRC were based solely on the new theory
advanced by private respondent LUTORCO only on appeal, that is, that it was
only LUTORCOs tobacco re-drying operation that was sold, and hence,
diametrically opposed to its theory before the Labor Arbiter, i.e., that it is the
entire company (LUTORCO) itself that was sold.
Private respondent LUTORCO, on the other hand, insists that petitioners
employment was not terminated; that it never ceased to operate, and that it
was petitioners themselves who severed their employer-employee
relationship when they chose employment with TABACALERA because
petitioners found more stability working with TABACALERA than with

LUTORCO.[19] It likewise insists that petitioners are seasonal workers since

almost all of petitioners never continuously worked in LUTORCO for any given
year[20] and they were required to reapply every year to determine who
among them shall be given work for the season. To support its argument that
petitioners are seasonal workers, private respondent LUTORCO cites the case
ofMercado, Sr. v. NLRC[21] wherein this Court held that the employment of
[seasonal workers] legally ends upon the completion of the xxx season.
Clearly, the crux of the dispute boils down to two issues, namely, (a) whether
petitioners employment with LUTORCO was terminated, and (b) whether
petitioners are regular or seasonal workers, as defined by law. Both issues
are clearly factual in nature as they involved appreciation of evidence
presented before the NLRC whose finding of facts and conclusions thereon
are entitled to respect and finality in the absence of proof that they were
arrived at arbitrarily or capriciously. [22] In the instant case, however, cogent
reasons exist to apply the exception, to wit:
First, upon a thorough review, the records speak of a sale to TABACALERA in
1993 under conditions evidently so concealed that petitioners were not
formally notified of the impending sale of LUTORCOs tobacco re-drying
operations to TABACALERA and its attendant consequences with respect to
their continued employment status under TABACALERA. They came to know
of the fact of that sale only when TABACALERA took over the said tobacco redrying operations. Thus, under those circumstances, the employment of
petitioners with respondent LUTORCO was technically terminated when
TABACALERA took over LUTORCOs tobacco re-drying operations in 1993. [23]
Moreover, private respondent LUTORCOs allegation that TABACALERA
assured the seniority rights of petitioners deserves scant consideration
inasmuch as the same is not supported by documentary evidence nor was it
confirmed by TABACALERA. Besides, there is no law requiring that the
purchaser of an entire company should absorb the employees of the selling
company. The most that the purchasing company can do, for reasons of
public policy and social justice, is to give preference to the qualified
separated employees of the selling company, who in its judgment are
necessary in the continued operation of the business establishment. In the
instant case, the petitioner employees were clearly required to file new
applications for employment. In reality then, they were hired as new
employees of TABACALERA.
Second, private respondent LUTORCOs contention that petitioners
themselves severed the employer-employee relationship by choosing to work
with TABACALERA is bereft of merit considering that its offer to return to work
was made more as an afterthought when private respondent LUTORCO later
realized it still had tobacco leaves for processing and redrying. The fact that
petitioners ultimately chose to work with TABACALERA is not adverse to
petitioners cause. To equate the more stable work with TABACALERA and the
temporary work with LUTORCO is illogical. Petitioners untimely separation in
LUTORCO was not of their own making and therefore, not construable as
resignation therefrom inasmuch as resignation must be voluntary and made
with the intention of relinquishing the office, accompanied with an act of
relinquishment.[24]
Third, the test of whether or not an employee is a regular employee has been
laid down in De Leon v. NLRC,[25] in which this Court held:
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.
Thus, the nature of ones employment does not depend solely on the will or
word of the employer. Nor on the procedure for hiring and the manner of
designating the employee, but on the nature of the activities to be
performed by the employee, considering the employers nature of business
and the duration and scope of work to be done.[26]
In the case at bar, while it may appear that the work of petitioners is
seasonal, inasmuch as petitioners have served the company for many years,
some for over 20 years, performing services necessary and indispensable to
LUTORCOs business, serve as badges of regular employment. [27] Moreover,
the fact that petitioners do not work continuously for one whole year but only
for the duration of the tobacco season does not detract from considering
them in regular employment since in a litany of cases [28] this Court has
already settled 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 re-employed.
Private respondents reliance on the case of Mercardo v. NLRC is misplaced
considering that since in said case of Mercado, although the respondent
company therein consistently availed of the services of the petitioners
therein from year to year, it was clear that petitioners therein were not in
respondent companys regular employ. Petitioners therein performed different
phases of agricultural work in a given year. However, during that period, they
were free to contract their services to work for other farm owners, as in fact
they did. Thus, the Court ruled in that case that their employment would
naturally end upon the completion of each project or phase of farm work for
which they have been contracted.
All the foregoing considered, the public respondent NLRC in the case at bar
erred in its total affirmance of the dismissal of the consolidated complaint,
for separation pay, against private respondents LUTORCO and See Lin Chan
considering that petitioners are regular seasonal employees entitled to the
benefits of Article 283 of the Labor Code which applies to closures or
cessation of an establishment or undertaking, whether it be a complete or
partial cessation or closure of business operation.[29]
In the case of Philippine Tobacco Flue-Curing & Redrying Corporation v.
NLRC[30] this Court, when faced with the question of whether the separation
pay of a seasonal worker, who works for only a fraction of a year, should be
equated with the separation pay of a regular worker, resolved that question
in this wise:
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[31] 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 case at bar, we hold that the
amount of separation pay which respondent members xxx 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.
Thus, in the said case, the employees were awarded separation pay
equivalent to one (1) month, or to one-half (1/2) month pay for every year
they rendered service, whichever is higher, provided they rendered service
for at least six (6) months in a given year. As explained in the text of the
decision in the said case, month pay shall be understood as average monthly
pay during the last season they worked. [32] An award of ten percent (10%) of
the total amount due petitioners as attorneys fees is legally and morally
justifiable under Art. 111 of the Labor Code, [33] Sec. 8, Rule VIII, Book III of its
Implementing Rules,[34] and par. 7, Art. 2208[35] of the Civil Code.[36]
WHEREFORE, the petition is hereby GRANTED, and the assailed Resolutions
dated July 6, 1994 and September 23, 1994 of public respondent NLRC are
REVERSED and SET ASIDE. Private respondent La Union Tobacco Redrying
Corporation is ORDERED: (a) to pay petitioners separation pay equivalent to
one (1) month, or one-half (1/2) month pay 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, and; (b) to pay ten percent (10%) of the total
amount due to petitioners, as and for attorneys fees. Consequently, public
respondent NLRC is ORDERED to COMPUTE the total amount of separation
pay which each petitioner who has rendered service to private respondent
LUTORCO for at least six (6) months in a given year is entitled to receive in
accordance with this decision, and to submit its compliance thereon within
forty-five (45) days from notice of this decision.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. L-9569

September 30, 1957

RAMON
vs.
LUCAS
RILLORAZA
and
COMMISSION, respondents.

CARO, petitioner,
WORKMEN'S

Ramon
S.
Ereneta
for
Sabino Padilla Romero for respondent Lucas Rilloraza.

COMPENSATION
petitioner.

CONCEPCION, J.:
Petitioner Ramon Castro seeks a review, by writ of certiorari, of a decision of
the Workmen's Compensation Commission, which affirmed that of a referee
thereof, sentencing said petitioner to pay the sum of P723.34 to respondent
Lucas Rilloraza, by way of compensation for an injury suffered by the latter,
in addition to the fees of said Commission.

While constructing the window railing of a building located at No. 1049 R.

Hidalgo Street, Manila, and belonging to Mrs. Carmen Prieto de Carpo, but
managed by her husband, petitioner Ramon Caro, as administrator of their
conjugal partnership, and President and General Manager of Ramcar Inc., on
August 4, 1953, at about 4:00 p.m. Lucas Rilloraza, a carpenter by
occupation, fell to the ground and broke his leg, as the wooden platform on
which he and another carpenter were working collapsed. According to Dr.
Fidel Guilateo, of the Workmen's Compensation Commission, said injury
produced temporary total disability for a period of six (6) months, and
permanent partial disability of five (51%) per cent of said leg.
The only question for determination in this case is whether Rilloraza was
petitioner's employee, within the purview of the Workmen's Compensation
Act. Petitioner maintains the negative view, upon the ground that Rilloraza
was hired by one Daniel de la Cruz, who, allegedly, is an independent
contractor. This pretense was rejected, however by the Workmen's
Compensation Commission which was affirmed that De la Cruz was, at least,
"merely an intermediary" and that petitioner is the "real employer" of
Rilloraza. In this connection, the decision of the referee, which was affirmed
by the Workmen's Compensation Commissioner, says:
As may be seen from the above resume of facts, preponderance of evidence
tends to point that defendant Ramon Caro is the employer in the sense
contemplated by the Act. But even assuming that Daniel de la Cruz, alleged
contractor, engaged by respondent really had such work undertaken for the
latter, yet the former's participation as such contractor is considered as
merely an intermediary between Ramon Caro and the laborers working
under him. (Emphasis ours).
Petitioner Caro assails this finding, stating:
In support of his contention that Daniel de la Cruz was an independent
contractor, petitioner prescribed Exhibits 'A', 'B', 'C', and 'D', which were the
contracts signed by Daniel de la Cruz for the repairs job on the various
portions of the building, specifying the nature of the work to be done and the
contract prices, and in all said contracts, Daniel de la Cruz had invariably
assumed all responsibility for whether accident may happen to his laborers
engaged in these jobs.
Said Exhibits1 do not justify the conclusion drawn therefrom by herein
petitioner. Exhibits B, C and D are dated respectively, December 9 and 16,
1953, and May 21, 1954, long after the accident that disabled respondent
Rilloraza, who, therefore, had nothing to do with the subject-matter of said
contracts. Exhibit A refers to the work of changing the "soleras" or floor
joists, whereas, at the time of the occurrence, Rilloraza was constructing a
"window railing," which is not covered by said contract.
At any rate, the provision in Exhibit A (as well as in Exhibits B, C and D)
relieving petitioner from liability for any accident that may happen to the
laborers placed in the job by De la Cruz, can not, and does not, affect such
obligations as petitioner may have under the Workmen's Compensation Act.
To begin with, De la Cruz spoke only for himself in the exhibits
aforementioned. He did not represent Rilloraza, and had no authority to
represent him therein.1wphl.nt
Secondly, section 7 of said Act provides:
Any contract, regulation or device of any sort intended to exempt the
employer from all part of the liability created by this Act shall be null and
void. (Emphasis ours)

Pursuant thereto, even if Exhibit A had been signed by Rilloraza himself, it

could not affect his rights, if any, to compensation from petitioner
herein.1wphl.nt
Thirdly, as held in Andoyo vs. Manila Railroad Co., G. R. No. 34722 (March
28,1932); 56 Phil., 852 (unreported).
In regard to the first assignment of error, the defendant company pretends to
show through Venancio Nasol's own testimony that he was an independent
contractor who undertook to construct a railway line between Maropadlusan
and Mantalisay, but as far as the record shows, Nasol did not testify that the
defendant company had no control over him as to the manner or methods
he employed in pursuing his work. On the contrary, he stated that he was
not bonded, and that he only depended upon the Manila Railroad for money
to be paid to his laborers. As stated by counsel for the plaintiffs, the word
"independent contractor" means 'one who exercises independent
employment and contracts to do a piece of work according to his own
methods and without being subject to control of his employer except as to
result of the work.' Furthermore, if the employer claims that the workmen is
an independent contractor, for whose acts he is not responsible, the burden
is on him to show his independence. (Ruel Ligerwood, Rural Tel. Co.supra;
emphasis ours.)
Tested by these definitions and by the fact that the defendant has presented
practically no evidence to determine whether Venancio Nasol was in reality
an independent contractor or not, we are inclined to think that he but an
intermediary between the defendant and certain laborers. It is indeed
difficult to find that Nasol is an independent contractor; a person
who possesses no capital or money of his own to pay his obligations to
them, who files no bond to answer for any fulfillment of his contract with his
employer andspecially subject to the control and supervision of his employer,
falls short of the requisites or conditions necessary for the common and
independent contractor. (Emphasis ours.)
Petitioner herein did not prove, or even try to prove, that De la Cruz had
agreed to do a piece of work "according to his own methods . . . without
being subject to the control of his employer." On the contrary, the reference,
in Exhibit A, to the general nature of the work to be undertaken, without any
plans or specifications to be followed, indicates that the floor joists
mentioned in said contract were to be changed under the direction and
control of Mr. Caro or his representative, and in the manner or by the or by
the method designated by either. In other words, Daniel de la Cruz was not
an independent contractor, within the purview of the Workmen's
Compensation Act. In fact, the notice of injury filed by Rilloraza on
September 28, 1953, referred to De la Cruz as a "capataz". In other words,
even if Rilloraza had been engaged by De la Cruz, and there is no affirmative
evidence thereon, the former was induced to believe that the latter acted
merely as foreman of Caro, who, in turn, was Rilloraza's employer.
Moreover, pursuant to the Workmen's Compensation Act:
When an employee suffers personal injury from any accident arising out of
and in the course of his employment, or contracts tuberculosis or other
illness directly caused by such employment, or either aggravated by or the
result of the nature of such employment, his employer shall pay
compensation in the sums and to the person hereinafter specified. . .
(Section 2.)
The "employer" and the "employee" referred to in this provision are defined
in section 39 of said Act, as follows:

(a) 'Employer' includes every person or association of persons, incorporated

or not, public or private, and the legal representative of the deceased
employer. It includes the owner or lessee of a factory or establishment or
place of work or any other person who is virtually the owner or manager of
the business carried on in the establishment or place of work but who, for
the reason that there is an independent contractor in the same, or for any
other reason is not the direct employer of laborers employed there.
(b) 'Laborer' is used as a synonym of 'Employee' and means every person
who, has entered the employment of, or works under a service . . . for an
employer. It does not include a person whose employment is purely
casual and is not for the purpose of the occupation or business of the
employer. Any reference to a laborer injured shall, in case he dies, include a
reference to the person dependent on him, as defined in this Act, if the
context so requires or, if the employer is a minor or incapacitated to his
guardian or nearest of kin. (Emphasis supplied.)
In other words, the owner or lessee of a factory or place of work or the owner
or the manager of the business therein carried on, may be bound to pay the
compensation provided in section 2, above quoted, despite the intervention
of an "independent contractor." Thus, in De los Santos vs. Javier (58 Phil.,
82), it was held:1wphl.nt
. . . If we refer again to the definition of employer, we shall see that it
comprises the owner or lessee of a factory or establishment of place of work
or any other person who is virtually the owner or manager of the business
carried on in the establishment or place of work but who, for the reason that
there is an independent contractor in the same, or for any other reason, is
not the direct employer of laborers employed there. We take this to mean
that although the owner of the factory is not the direct employer of the
laborers employed therein because there is an independent contractor in the
factory, the owner of the factory is nevertheless to be considered for the
purposes of the Workmen's Compensation Act as the employer of the
laborers working under the independent contractor, but that is true only with
respect to laborers doing work which is in the usual course of the owner's
business. (Emphasis supplied.)
This was reiterated in Philippine Manufacturing Co. vs. Geronimo, (96 Phil.,
276). The reason is that.
. . . If the owner of a factory were not liable for the injuries sustained by the
employees of an independent contractor engaged in the usual business of
the owner, the owner of the factory by the mere subterfuge of an
independent in contractor could relieve himself of all liability and
completely defeat the purposes of the law. . . (The Law Governing Labor
Disputes in the Philippines, by Vicente J , Francisco (2nd Ed.), p. 813;
Emphasis supplied.)
This is, exactly, what would happen if contracts like Exhibit A sufficed to
place the aforementioned owner or manager beyond the pale of the
Workmen's Compensation Act. Indeed, Daniel de la Cruz does not appear to
have any office establishment, or even a license to engage in business as
building contractor. He would seem to be merely a free lancing carpenter
(not uncommon in Manila), with some experience in carpentry work, who
goes around looking for minor repair or construction jobs, for he has like
the intermediary in Andoyo case "no capital or money to pay his laborers
or to comply with his obligations to them." Neither did he file a bond to
answer either for the fulfillment of his contract with petitioner herein, or for
the satisfaction of such as may arise by reason of any injury arising out of
and in the ordinary course of the employment of the laborers engaged

pursuant to see Exhibit A. In the light of these facts, we fail to see the how
De la Cruz could possibly be regarded an "independent" contractor. Indeed,
there is nothing to indicate that he could pay the compensation prescribed in
Republic Act 772.
Upon the other hand, the reference made therein, and in the decisions on
this subject, to "independent" contractors, shows already that such status
was not meant to be given to every contractor and that the party relying
upon said status must establish to the satisfaction of the Court the conditions
essential therefore. The mere introduction of Exhibit A, 2 without even the
testimony of De la Cruz,3 and without any affirmative evidence to the effect
that it was he, acting in his own name and behalf, who engaged the services
of Rilloraza, is far from sufficient to prove that De la Cruz was an
independent contractor, pursuant to the accepted standards thereon. Under
these conditions, a decision in favor of petitioner herein would, in effect, set
at naught and completely nullify the provisions of the Workmen's
Compensation Act, inasmuch as the door would, thereby be left wide open
for the effective circumvention, and evasion of the responsibility therein
created by the expedient of engaging the services of an indigent and
irresponsible intermediary willing to relieve the employer from his liability
under said Act.
It is well settled that the same "should be interpreted so as to accomplish not
defeat the purpose for which it was enacted by the Legislature." 4 that it "is a
social legislation designed to give relief to the workman who has been a
victim of an accident in the pursuit of his employment," 5 and that it should
be construed "fairly, reasonably or liberally in favor of and for the benefit of
their dependents and all doubts as to right to compensation resolved in their
favor and all presumptions indulged in their favor."6 In fact, the Workmen's
Compensation Act7 specifically provides that "in any proceeding for the
enforcement of the claim for compensation" under the provisions thereof, "it
shall be presumed in the absence of substantial evidence to the contrary
1. That the claim comes within the provisions of this Act;"
Again, subdivisions (a) and (b) of section 39 of the Workmen's Compensation
Act are explicit on the conditions essential to be exempt from responsibility
under section 2 of said Act, namely: (1) the employment must be "purely
casual" and, in addition thereto, (2) said employment must "not be for the
purposes of the occupation or business of the employee."
. . . When the law makes the owner of the factory the employer of the
laborers employed therein notwithstanding the intervention of an
independent contractor, it refers to laborers engaged in carrying on the usual
business of the factory, and not to the laborers of an independent contractor
doing work separate and distinct from the usual business of the owner of the
factory. (The Law Governing Labor Disputes in the Philippines, by Vicente J.
Francisco [2nd Ed.], p. 812; emphasis supplied.)1wphl.nt
"Employment is 'casual' when it is irregular, unpredictable, sporadic and brief
in nature. Under most statutes; even if casual, it is not exempt unless it is
also outside the business of the employer. Under this test, most maintenance
and repair activities, as well as even remodelling and incidental construction,
have been held to be within the usual course of a business." (Larson's
Workmen's Compensation Law, Vol. 1, p. 759; emphasis supplied.).
Accordingly, in Mansal vs. P. P. Gocheco Lumber Co., 96 Phil., 941 (April
30,1935), we held that a laborer, who had been injured while stacking
lumber in a lumber yard belonging to the defendant company, was entitled
to compensation from the latter, although he had been employed by a

contractor who undertook to do the stacking of lumber in said yard at a given

rate. In the same case we said:
The case at bar is similar or parallel to that of stevedores unloading cargo
from a ship. The fact that the stevedores work under the control of a
contractor, who pays them, and that they may seek other work under
different carriers, and their work covers a short period of time as to each
carrier, does not exempt the carrier who had employed them in the
unloading of the cargo from paying compensation for death or injuries
received by them because the unloading of the cargo is an ordinary part of a
carrier's duty. To this effect, is our decision in the case of Flores. vs. Cia.
Maritima, 57 Phil., 905 thus:
There is not the least shadow of doubt that the deceased was a laborer in
the legal sense. He had been recruited by order of the captain of the ship
and he was engaged in the work of unloading the ship's cargo at the time of
the accident. There can be no dispute that this kind of work is included in the
business in which the appellee is engaged. That the deceased had been
recruited by a contractor is of no moment because the latter, for purposes of
the law, was an agent or representative of the ships captain who in turn,
represents the appellee. (Emphasis supplied.)
Likewise in the case of Achijiro Idoma (23 Hawaii, 291), the facts and
conclusion reached as abstracted in the aforementioned work on the
Philippine Labor Laws, were:
A sugar company let a contract to H. to build a road-bed on its plantation to
be used in its business, furnished H. with camps, tools, and appliances, the
work to be to the satisfaction of the company's engineers; the claimant, a
workman employed by H. who alone had the right to discharge him, was
injured while working on the road-bed and filed with the Industrial Accident
Board his claim for compensation against the company and H. the question
of liability of the company was reserved to the Hawaii court. It was held that
the company was liable, it being an employer of the claimant within the
language and intent of the act. (Emphasis supplied.)
In the present case, the building in which Rilloraza worked was found to be
"intended or used for rental (business) purposes." Petitioner, in turn had
control of such building, as manager of Ramcar, Inc., and administrator, not
only of his paraphernal properties, but, also, of those of his wife, Carmen
Prieto, "which properties have been incorporated with those of Prieto
Hermanos."8 Obviously, the repair of said building is part of the usual
business of the administration of the aforesaid properties, so that the same
may be suitable for the gainful purpose above referred to. Consequently,
even if Rilloraza, who did the repair work thereof, were a casual laborer,
engaged directly by De la Cruz, acting as an independent contractor, which
he is not, the former would still be an employee of petitioner herein, within
the purview of the Workmen's Compensation Act, and, hence, would be
entitled to demand compensation from him.
During our deliberations on this case, the question arose which is not
raised by petitioner whether the word "business" appearing in the
definition of the term "employer", is limited to "commercial" enterprises only,
as distinguished from undertakings of a "civil nature. In this connection,
Larson, in his work on "The Law of Workmen's Compensation," says:
. . . The crucial word here is 'business', and the courts, ever since the original
leading case of Marsh vs. Groner, have followed the example of that case in
giving the meaning:

There are few words more current in our speech than the word 'business';
few that included a a greater variety of subject, and yet none which in
popular speech, has greater or more marked singleness in denotement.
When one's business is the subject of common speech, no one can be in
doubt as to the reference. It would be a very exceptional person we do not
know how to otherwise describe him-who would not understand that the
reference is to the habitual or regular occupation that the party is engaged
in, with a view to winning a livelihood or some again. (Vol. I, pp. 738-739;
emphasis supplied.)
This view is borne out by the fact that the term "employee" as used in our
Workmen's Compensation Act, "does not include a person whose
employment is purely casual and is not for the purposes of
the occupation orbusiness of the employer." In other words, within the
purview of the terms "employer" and "employee", as defined and used in
said Act, "business' is synonymous with "occupation", or the means by which
a party, habitually or regularly earns a "livelihood or some gain."
. . . The owner of a building who entered it for income purposes, and
maintained the building in repair for that purpose, was liable to an employee
of a contractor repairing the building, as maintenance of the building was
considered "part of the owner's business. (Davis vs. Industrial Com. 297 III29,
130 N. E. 333; emphasis supplied.)
. . . where the home owner rents out the second floor, he is engaged in a
business for a pecuniary profit and hence liable for injuries sustained by
claimant who fell from a scaffold which had been set up to rebuild a chimney
on the house. (Reibold vs. Doll, 283 App Div. 750,128 N. Y. S. 2d 45 [1954];
emphasis supplied.)
. . . it has been held that the work of taking up carpets or mattings, and of
cleaning walls, transons, and curtains is a necessary part of the business of
keeping the rooms and hallways of a lodging house in a state of cleanliness
and good order, so that an employee injured while engaged in that work, is
in the usual course of the trade, business, profession or occupation of the
employer who conducted the lodging house. (23 R. C. L. Sec. 62, p.769;)
emphasis supplied.1wphl.nt
In fact, petitioner herein impliedly admitted 9 and the writer of the dissenting
opinion explicitly conceded, during, our deliberations, that the liability of said
petitioner would be incontestable had he directly engaged the services of
respondent Rilloraza. Said liability could not possibly exist had those
services, which were seemingly casual, not been given "for the purposes of
the occupation or business of the employer."10
The case of the Philippine Manufacturing Co. vs. Geronimo (L-6968), 11 relied
upon in the dissent, is not in point, for the following reasons, namely:
1. The work of painting a water tank,12 during which the injury involved
therein was sustained, had been undertaken by one Garcia, who "used to
engage in painting contracts,"13 under conditions giving Garcia the status of
an "independent" contractor,14 which De la Cruz does not have in the present
case.
2. The Philippine Manufacturing Co. was engaged in the business of the
manufacture of soap, vegetable lard, cooking oil and margarine, not of
painting any water tank.15 But, when one's business is to let houses for
income purposes, the repair, maintenance and painting thereof, with a view
to attracting or keeping tenants and of inducing them to pay a good or
increased rental is, most certainly, part of said business.

Thus, for instance, in De los Santos vs. Javier (supra) the defendant, who
intended to buy and sell hogs and establish a plant for curing ham, entered
into a contract with one Esquillo for the construction by the latter of a corral
for hogs and an office for the persons in charge of the corral. While working
on said construction, in which Javier had no direct intervention, De los
Santos, a laborer engaged by Esquillo, accidentally sustained injuries which
caused his death. This Court held that Javier was not bound to pay
compensation therefor, the laborer not being his employee, inasmuch as the
business which Javier "was going to establish was that of buying and selling
hogs and curing ham." He "was not a building contractor , and it was not part
of his business to construct buildings." We added, however, that "if the
defendant had made a contract with Esquillo to take the hogs from the corral
to the slaughter houses, and the deceased as one of the employees of
Esquillo had been fatally injured while engaged in that work, the defendant
would have been liable to the heirs of the deceased, although Esquillo was
an independent contractor and the deceased his employee."16 1wphl.nt
Wherefore, the decision appealed from is hereby affirmed, with costs against
the petitioner. It is so ordered.
Paras, C. J., Bengzon, Reyes, J. B. L., and Endencia, JJ., concur.

FELIX, J., concurring:

Although I agree with Mr. Justice Marceliano R. Montemayor that since the
claim on the employer is based on the alleged relationship of the claimant to
the petitioner, it is incumbent upon the former to prove that he was the
latter's employee, or said in other words, that the burden of proving that
essential and basic fact rests upon the claimant Lucas Rilloraza, yet the
record contains sufficient proof to establish that Daniel De la Cruz was not an
independent contractor for the execution of the job herein involved, but a
sort of intermediary between the petitioner and the claimant and a
foreman, co-employee or co-worker of respondent Rilloraza. For this reason, I
concur in the majority decision penned by Mr. Justice Roberto Concepcion.

MONTEMAYOR, J., dissenting:

The basic facts in the case as well as the issue involved are correctly stated
in the learned majority opinion, penned by Mr. Justice Concepcion, which for
the purpose of reference I quote below:
While constructing the window railing of a building located at No. 1049 R.
Hidalgo Street, Manila, and belonging to Mrs. Carmen Prieto de Caro, but
managed by her husband, petitioner Ramon Caro, as administrator of their
conjugal partnership, and President and General Manager of Ramcar Inc., on
August 4, 1953, at about 4:00 p.m., Lucas Rilloraza, a carpenter by
occupation, fell to the ground and broke his leg, as the wooden platform on
which he and another carpenter were working collapsed. According to Dr.
Fidel Guilateo, of the Workmen's Compensation Commission, said injury
produced temporary total disability for a period of six (6) months, and
permanent partial disability of five (5%) per cent of said leg.
The only question for determination in this case is whether Rilloraza was
petitioner's employee, within the purview of the Workmen's Compensation
Act. Petitioner maintains the negative view upon the ground that Rilloraza
was hired by one Daniel de la Cruz, who allegedly, is an independent

contractor. This pretense was rejected, however, by the Workmen's

Compensation Commission, which held that De la Cruz was, at least 'merely
an intermediary' and that petitioner is the 'real employer' of Rilloraza.
Throughout the majority opinion, the theory seems to be maintained that
since petitioner Caro, administrator, was in charge of the house at No. 1049
R. Hidalgo Street, Manila belonging to his wife Carmen, on which some repair
work was being done by respondent Rilloraza at the time he suffered injuries,
for the purpose of determining liability for compensation for said injuries, he
(Caro) had the burden of proving that he did not hire Rilloraza and that the
latter was not his laborer or employee within the provisions of the Workmen's
Compensation Act. I disagree. The claim of Rilloraza for compensation is not
based on tort, governed by the Civil Code or the criminal law, to establish
civil liability, but is founded exclusively on the Workmen's Compensation Act,
particularly, Section 2 thereof, which in part provides:
When an employee suffers personal injury from any accident arising out of
and in the course of his employment, . . . his employer shall pay
compensation in the sums and to the person hereinafter specified. (Emphasis
supplied.)
Naturally, since the claim is based on the employer and employee
relationship, the claimant to establish his claim, is the one called upon to
prove that he was the employee of the petitioner because the latter had
hired him. In other words, the burden of proving that essential and basic fact
rests upon claimant Rilloraza. Did he prove that relationship? The very
findings contained in the Referee's decision sustaining the claim shows that
Rilloraza did not. On the contrary to, the same decision, it was not Caro but
De la Cruz who hired him. I quote from the Referee's decision:1wphl.nt
During the hearing of the case, Lucas Rilloraza declared that sometime in
June, 1953, lie was hired as carpenter at P6.00 a day, by Daniel de la Cruz for
the latter's contract work in the repair and/or construction of the building on
the premises located at 1049 R. Hidalgo, Quiapo, Manila; that said building
under construction or repair belongs to respondent Ramon Caro . . .
xxx

xxx

xxx

We are here called upon to determine the merit of the defense of

'independent contractor' advanced by respondent. To resolve, let us analyze
the following resume of facts material to the issue:
(1) That claimant testified to the effect that he was hired and accepted for
work by Daniel de la Cruz, the alleged independent contractor;
(2) That it was Daniel de la Cruz who assigned and supervised claimant over
the work performed, paid salaries of the workers therein (including the
claimant) . . . (Emphasis supplied.)
The above quotation embodying the testimony of Rilloraza and the resume of
facts made by the Referee, is the best and, to me, conclusive proof that the
employer of Rilloraza was De la Cruz, and the latter was an independent
contractor. If Rilloraza wanted to prove that, although he was actually hired
by De la Cruz, nevertheless, the latter acted merely as an intermediary, so
that in reality, he was employed by Caro, in such case, Rilloraza must also
prove that De la Cruz acted as an, agent or intermediary, not as an
independent contractor. However, Rilloraza again failed to prove this point.
On the contrary, he said that it was De la Cruz "who assigned and supervised
claimant (Rilloraza) over the work performed, paid the salaries of the workers
therein including the claimant" (Rilloraza). Moreover, as stated in the
Referee's decision, Rilloraza testified that he was hired by De la Cruz in

connection with the latter's contract to repair the house at 1049 R. Hidalgo,
Quiapo, Manila, meaning that De la Cruz was a contractor.
But let us pass over this failure of Rilloraza to show that he was an employee
of Caro, and as already said, the seemingly affirmative proof that his real
employer was De la Cruz, and analyze the relationship between Caro on one
side and De la Cruz on the other. Judging from the four exhibits (Exhibits A,
B, C, and D), quoted in the majority decision, the same covered different and
separate phases of the entire repair work on the house in question,
undertaken by De la Cruz. True, the last three exhibits bear dates subsequent
to the occurrence of the accident that befell Rilloraza, although Exhibit A
bears a date that is three months prior to the accident. Anyway, these four
exhibits which are agreements or contracts between De la Cruz and Caro
show the same pattern as to the role assumed and played by De la Cruz in
the repair work on the house, for which repair work, according to the
testimony of Rilloraza, he (Rilloraza) was engaged and hire, supervised and
paid by De la Cruz. For each one of these repair jobs, De la Cruz was to be
paid a fixed amount (P300, P130, P300, and P70), the job to be done not only
by De la Cruz himself, but by his own men, and to be finished within a certain
period. In each and all of said agreements, De la Cruz held himself
responsible for any injury suffered by his men. The relationship of employer
and independent contractor, to me cannot be any clearer. Caro, as
administrator and in of the house of his wife, wanted some repair work done
on it. Although a businessman, his business knowledge and ability and
training were apparently confined to the manufacture of automobile
batteries and the sale of cars, and did not extend to house construction or
repair. Not knowing who are good and efficient carpenters, who are careful
and not negligent about their personal safety, he decided to do the work by
contract, and he engaged De la Cruz to do the work within a certain period
and for a certain price.
But the Referee and the majority opinion say that De la Cruz was not an
independent contractor, simply because he had no capital or money of his
own to pay his carpenters and laborers, and because he filed no bond. I am
afraid that this alleged lack of capital, and the supposed financial inability of
Dela Cruz to pay his men from his own funds, is merely a conclusion drawn
from the fact that he was only a modest and small time contractor
(contratista) and was presumably paid by Caro weekly or periodically for the
work being done by him. But this seems to be a well established practice
among, independent contractors, to be paid either periodically, or as the
construction or repair work progresses, according to the amount of work
done, this, not exactly to enable the contractor to pay his men, because
some contractors have their own capital and ready cash, but rather for the
contractor to be on the safe side and guard against failure or refusal of the
owner or employer to pay full price of the contract after the work is
completed.
As regards the filing of a bond by a contractor, that is not always done. In a
big contract involving thousands or hundreds of thousands of pesos, such is
the construction of a bridge, school building, a factory or a commercial
house, with elaborate specifications, specially where the time element is
important, the contractor is almost invariably required to file a bond so that
he should abandon the work when it is only partly finished, or fail to strictly
follow the specifications, the owner of the bridge or school building such as
the Government, or the private owner of the factory or commercial house,
may be amply protected against damages, because it might be necessary to
find and hire another contractor to finish the job, or to demolish and
reconstruct the work already done by the delinquent contractor, all of which

would involve loss of much time and additional expense. But for small repair
jobs of P70, P130 or P300, and without specifications, like the ones
undertaken by De la Cruz, there was absolutely no necessity for any bond
because if De la Cruz abandoned his contract, Caro could easily have gotten
another contractor to finish the jobs, considering their relative insignificance.
The majority opinion cites the case of Andoyo vs. Manila Railroad Co., G.R.
No. 34722, March 28, 1932. According to the, facts of said case appearing in
the quotation, Venancio Nasol undertook to Construct a railway line between
Maropadlusan and Mantalisay for the Manila Railroad Company. We all know
that the construction of a railroad line, however short, involves considerable
outlay, capital and investment, and the work has to be finished within the
shortest time possible so that the Railroad Company could immediately use it
for its rolling stock. As I have already said, in such a contract, the filing of a
bond by the contractor is very necessary to protect the employer from loss in
cage of failure of the contractor to live up to his contract. The Court in that
case found as a fact that Nasol had no capital for such a big project; he filed
no bond and he did not say that the Manila Railroad Company had no control
over him as to the manner or methods he employed in pursuing the work. No
wonder that the Court found him not to be an independent contractor.
Speaking of the agreements Exhibits A, B, C, and D, the majority opinion
declares that De la Cruz had no right to speak for Rilloraza about the latter's
right or lack of right to claim compensation from Caro in case of any injury
suffered by him, arising out of his work. But De la Cruz did not attempt or
even pretend to speak for Rilloraza in this regard. He was merely assuming
the responsibility as Rilloraza's employer. As a matter of fact, that
assumption and undertaking of responsibility by De la Cruz was really
necessary for Caro's protection and peace of mind because if he is an
independent contractor, as I firmly believe he is, then it is he who is called
upon to answer for any compensation claim made by his employees. That
assurance and undertaking by De La Cruz is clearly indicative of his role asan
independent contractor.
Going back to my quotation from the Referee's decision, the same, in my
opinion, conclusively proves that De la Cruz was the employer of Rilloraza,
because it was the former who hired Rilloraza as a carpenter at P6 a day,
assigned him to work, supervised his work, and paid his salary. Nowhere do
we find any intervention by or even reference to Caro, as far as Rilloraza was
concerned. Moreover, the quotation mentions De la Cruz' "contract work in
the repair and/or construction of the building on the premises located at
1049 R. Hidalgo, Quiapo." Caro is mentioned only, as the alleged owner of
said house. The only logical conclusion from the above quotation is that De la
Cruz, as contractor, was given a contract by Caro to make repairs on the
house in question, and to hurry out his contract ', he hired his own men,
including Rilloraza, assigned the task or carpentry work to be done by each,
supervised them and paid their wages. Can there be any clearer case of an
independent contractor? But the majority opinion says that in the notice of
injury, Exhibit A, Rilloraza referred to De la Cruz as his "capataz" who took
him to a "manghihilot" after the injury. His reference to De la Cruz as
"capataz" can be explained because, according to his testimony referred to
by the Referee, Rilloraza said that De la Cruz not only hired him and paid his
wages, but he supervised his work. However, in question 21 of the same
exhibit, we find the following:1wphl.nt
21. Have you given your employer of notice of inquiry/sickness? Yes, when?
August 4, 1953. To whom? Mr. Daniel Cruz. He was a witness to the accident.

In other words, answering question No. 21, Rilloraza said that he gave notice
of his injury to De la Cruz as his employer, and in fact, De la Cruz witnessed
the accident.
Page 6 of the majority opinion says the following: "In other words, even if
Rilloraza had been engaged by De la Cruz and there is no affirmative
evidence thereon. . ." Is not the testimony of Rilloraza and as found by the
Referee that De la Cruz engaged him as a carpenter at P6 a day, an
affirmative evidence of employment? Can there be any better evidence that
Rilloraza was employed by De la Cruz than Rilloraza's own testimony?.
On page 5 of the majority opinion, we find the following statement and
assertion:
Petitioner herein did not prove, or even try to prove, that De la Cruz had
agreed to do a piece of work 'according to his own methods . . . without
being subject to the control of his employer'. On the contrary, the reference,
in Exhibit A, to the general nature of the work to be undertaken, without any
plans or specifications to be followed, indicates that the floor joists
mentioned in said contract to be changed under the direction and control of
Mr. Caro or his representative, and in the manner or the method designated
by either. In other words Daniel de la Cruz was not an independent
contractor, within the purview of the Workmen's Compensation Act. . . .
1wphl.nt
Again I have to disagree. Contrary to the above assertion, the very Exhibit A
is the best proof that De la Cruz had agreed to do a piece of work without
being subject to the control of his employer Caro. Let us again reproduce
Exhibit A:
EXHIBIT A
AGREEMENT
I, DANIEL DE LA CRUZ, have accepted the job changing the floor joists
("soleras") of the old building at 1049 R. Hidalgo, for the sum of THREE
HUNDRED (P300) PESOS, to be finished before the end of August, 1953.
I will be responsible for any accident that may happen to the laborers I may
place in this work.
MANILA, May 15, 1953.
(Sgd.) DANIEL
B.
Angeles,
Rizal

DE

LA
San

CRUZ
Juan

According to Exhibit A, De la Cruz accepted a carpentry job without any

strings attached. He hired his own laborers and placed them in the work. Not
a word was said about supervision or control by Caro, or the details and the
manner the job was to be done, or the hours of work of the laborers. But the
majority opinion says that since there were no plans or specifications
mentioned in Exhibit A, that is an indication that the floor joists mentioned in
the contract were to be changed at the direction and control of Mr. Caro or
his representative. I am afraid that the conclusion is unwarranted. To change
the floor joists ("soleras") of an old building with new ones, supplied by the
owner, as in this case, for the stipulated price of P300 would hardly call for
plans and specifications. Any master carpenter worthy of the name can, with
the aid of his men, easily remove old floor joists ("soleras") and replace them
with new ones, without any supervision, much less any plans or
specifications. Of course, said master carpenter, as did De la Cruz,

supervised his men. Specifications are needed only for big constructions, like
a bridge, a schoolhouse, or a factory where the contractor also supplies the
material, in order to guard against the contractor using material inferior to or
different from that agreed upon between owner and contractor.
On this point of independent contractor, I may cite a few authorities:
An 'independent contractor' is one who contracts to do specific piece of
work, furnishes his own assistants, and executes work entirely in accordance
with his own ideas or plans previously given by him by person for whom work
was done, without being subject to letters orders in respect to details of
work. Ruth Bros. vs. Roberto, 109 S. W. 2d 800, 802, 270 Ky. 339. (21 Words
and Phrases p. 24).
An 'independent contractor' is one who engages to perform a certain service
for another, according to his own manner and method, free from control and
direction of his employer in all matters connected with the performance of
the service, except as to the result or product of the work. Fairmont
Creamery Co. of Lawton vs. Carsten, 55 P. 2d 757, 759, 175 Okl. 592. (Ibid.
Principal test to be applied in determining whether one rendering services for
another is an 'employee' or an 'independent contractor' is whether employer
has right to control details of work, place of work, time of employment,
method of payment, and right of summary discharge are to be considered.
Town of Eagle vs. Industrial Commission, 266 N.W. 274, 275, 221 Wis. 166.
(Ibid., p. 36).
Experienced carpenter, contracting to construct house by means and
methods he deemed proper for fixed consideration, and employing, fixing
wages, and hours, and having entire control of men assisting him, held
'independent contractor,' not entitled to benefit of Workmen's Compensation
Act. Royal Indemnity Co. vs. Blankenship, Tex. Civ. App., 65 S.W. 2d 327, 329.
(Ibid.)
A carpenter, who was engaged by the owner of a building to make repairs to
the roof and veranda of the building, and who did the work in his own way
and at his own time, without direction from the owner, except indication of
the places to be repaired, was an 'independent contractor', and not an
'employee', within the Workmen's Compensation Law; the test being that a
contractor is subject to the will of his employer only as to the result of his
work, and not as to the means by which it is accomplished. Ball vs. Bertelle's
estate, 195 N.Y.S. 150, 201 App. Div. 708. (Ibid.)
A painter, who agrees with an apartment house owner, furnishing the
materials, to paint a given number of windows with his own brushes, in his
own manner and for a fixed sum for the entire work, is an 'independent
contractor' and not an 'employee', within the Workmen's Compensation Law.
Prince vs. Schwartz, 180 N.Y.S. 703, 190 App. Div. 820". (Ibid. p.57).
Payment of a fixed sum for a completed job is characteristic of independent
contractorship, but not conclusive. A typical example is that of a contract to
clean out a well for one hundred dollars. This was held not only to negative
employment, but even to take the case out of the special Washington statute
embracing independent contractors when the essence of the contract is
personal service. Similarly, a workman who agreed to tear down a barn for
$183 plus a chicken roost valued at $2 was held an independent contractor.
(Workmen's Compensation Law, Larson, Vol. 1, p. 650).
On the basis of Exhibits A, B, C, and D, which as already said, give a pattern
of the relationship between De la Cruz and Caro, and applying the authorities
abovecited, De la Cruz was clearly an independent contractor because De la

Cruz hired his own men, assigned them to their work, fixed their hours of
work, and paid them. On the other hand, Caro had no relation whatsoever
with the hiring of said men, their selection as to their capabilities as
carpenters, the hours of work, the tools used, and the manner they did their
repair job, etc. The only thing Caro was interested in was the finished job for
which he paid or promised to pay a fixed amount.
But we need not go to foreign authorities to show that De la Cruz was an
independent contractor and that Rilloraza was not an employee of Caro. In
the case of Gatalla vs. Tayabas Lumber Co., Inc., 37 Phil. 835, the Company
engaged in the cutting of lumber, used to haul its timber through "kaingins"
occupied by Martinez Mercurio, and to facilitate passage, the two men and
the, Company entered into a contract whereby the two men undertook to
open a trail over their "kaingins", clear it of underbrush and trees and
maintain the same, for the sum of P50 a year receiving advance payment of
P150 for three years. The two men hired one Mariano Oriel to help them cut
the brush and trees found on this proposed trail. While working, a tree fell on
Oriel, killing him. His heirs filed a claim against the Lumber Company and the
trial court awarded said heirs the funeral expenses of Oriel, as well as the
sum of P3 a week, which he used to earn for 208 weeks. On appeal to this
Court, the judgment was reversed and the Lumber Company was absolved
from the complaint. This Tribunal, through Mr. Justice Imperial, said:
. . . There is no doubt that the deceased was not an employee or laborer of
the appellant and that between them there was not even a contractual or
juridical relation.
The trail belonged to Martinez and Mercurio because it was within the lands
of which they were in possession. The contract executed between them and
the appellant was entirely independent of the latter's business of cutting
timber, and the wages earned by the deceased came directly from the
owners of the lands. It is true that the appellant's timber had to pass over
the trail which Martinez and Mercurio were to open, but the appellant had not
the least intervention in the task of clearing it which the former undertook to
do, except that of paying the annual rent of P50 which was stipulated as
payment for the use of said trail. Employers should deserve before the law
the same consideration as workmen and they should not be held liable for
accidents suffered by those who are not their laborers or employees.
According to the evidence, the relation created was between the deceased,
on the one hand, and Joaquin Martinez and Fabian Mercurio, on other hand.
In effect, this Court held Martinez and Mercurio as independent contractors,
employers of Oriel.
In the case of Philippine Manufacturing Company vs. Santos, G.R. No. L-6968,
November 29, 1954, the facts are as follows: The Philippine Manufacturing
Company, later referred to as the Company, is a corporation engaged in the
manufacture of soap, vegetable lard, cooking oil, and margarine, with factory
at Velasquez, Tondo, Manila. It engaged one Eliano Garcia to paint an
elevated tank within the factory compound, erected for the purpose of water
storage for use in case of fire. Garcia, engaged in painting contracts, hired
Arcadio Geronimo as a painter and laborer. The contract, Annex "A" between
the Company and Garcia reads as follows:
DESCRIPTION

PRICE

For supplying labor, equipment and tools in the paint of the

inside of the elevated water tank located at 1120 Velasquez, P590.0
Tondo, Manila, under the following specifications:
0.
1. Wire brush inside surface to bare metal.
2. Wipe off loose dirt and rust.
3. Apply two coats of Kepper's Tank Solution.
4. Clean job site broom clean.
5. The Contractor agrees to comply with the provisions of Republic Act
No. 602 and the local laws and regulations. The Contract to shall also
be responsible for indemnity, and save harmless the Philippines
Manufacturing Company from and against any claims, losses, and or
damages arising out of or in connection with the prosecution of the
work herein mentioned.
On November 22, 1952, Geronimo died as a result of a fall while painting the
elevated water tank. A claim for compensation was filed with the Workmen's
Compensation Commission, which ordered the Company to pay said
compensation. On appeal to this Court, the decision rendered by the
Commission was set aside, with an order that another decision should be
rendered, ordering Garcia to pay the compensation. Said this Court, speaking
through Mr. Justice Alex Reyes:
It thus appears that Garcia, a painting contractor had by contract undertaken
to paint a water tank belonging to the company 'in accordance with
specifications and price stipulated', and with 'the actual supervision of the
work (being) taken care of by' himself. Clearly, this made Garcia an
independent contractor, for while the company prescribed what should be
done, the doing of it and the supervision thereof was left entirely to him, all
of which meant that he was free to do that job according to his own method
within being subject to the control of the company except as to the result.
The decision complained of, however, holds that Garcia was not an
independent contractor because (1) he had no capital of his own, (2) he did
not do the painting job according to his own method and without being
subject to the control of the company, and (3) he put up no bond to answer
for the fulfillment of his contract. The first ground is contrary to what appears
on the record, for in the report of the accident filed by his contractor (Exhibit
A) it is stated that his capital was less than P10,000.00, which is an
admission that he had capital of his own although it is less than the amount.
The second ground is without factual basis and is, moreover, contrary to
what may be fairly inferred from the stipulated facts that the company was
to pay for the work called for in the Annex A, the contractor to furnish labor,
equipment and tools therefor, have the actual supervision of the work and be
responsible for all claims for indemnity. The absence of a bond is some time
taken into account together with other circumstances indicative of the
capacity in which a person undertakes to do a piece of work for another. But
it is not a controlling factor in determining whether that person is an
independent contractor.
xxx

xxx

xxx

It follows from the foregoing that the deceased cannot be regarded as the
laborer or employee of the manufacturing company, for he was working in an

independent contractor and met death while doing work which was not in the
usual course of the company's business. Such being the case, the company
is not the one called upon to pay the compensation due to the dependents of
the deceased. Responsibility for such payment rests upon his employer,
Eliano Garcia. (Emphasis supplied)
It will be noticed from the above decision that although Garcia did not file
any bond, nevertheless, he was held to be an independent contractor.
Then we have the recent case of Josefa Vda. de Cruz et al. vs. The Manila
Hotel Company,. G.R. No. L-9110, April 30, 1957, the facts of which are as
follows: In 1954, by reason of the leasing of the Manila Hotel to the Bay View
Hotel, the corporation owning the Manila Hotel notified its employees that
were to be laid off that it grant them a separation gratuity. For several years
prior to 1954, Tirso Cruz with his orchestra furnished music for the Hotel,
under the conditions embodied in the contract, Annex 1, whereby the Manila
Hotel engaged the services of Tirso Cruz orchestra, composed of fifteen
musicians, including Tirso and Ric Cruz as vocalist, at P250 per day, the
orchestra to play from 7:30 P.M. to closing time daily. Tirso and his musicians
claimed the gratuity promised to its employees, but the Hotel management
denied the claim, saying that they were not its employees. They brought an
action to enforce their claim in the Court of First Instance of Manila. On
motion by the Hotel and after hearing the parties, the trial court dismissed
the complaint for lack of cause of action for the reason that plaintiffs were
not employees of the Hotel. On appeal, this Court affirming the order of
dismissal, through Mr. Justice Bengzon, said:
Still going further, are these plaintiffs 'employees' of the Hotel? None of
them, except Tirso Cruz and Ric Cruz, is mentioned in the contract Exhibit 1.
None has submitted any contract or appointment except said Exhibit 1.
Obviously their connection with the Hotel was only thru Tirso Cruz who was
the leader of the orchestra; and they couldn't be in a better class than Tirso
Cruz who dealt with the Hotel. Was Tirso Cruz an employee? Or was he an
independent contractor, as held by the trial court?
It will be observed that by Annex 1 the Manila Hotel contracted or engaged
the 'services of your orchestra' (of Tirso Cruz) 'composed of fifteen musicians
including yourself plus Ric Cruz as vocalist' at P250.00 per day, said
orchestra to play from 7:30 p. m. to closing time daily'. What pieces the
orchestra shall play, and how the music shall be arranged or directed, the
intervals and other details-such are left to the leader's discretion. The
musical instruments, the music papers and other paraphernalia are not
furnished by the Hotel; they belong to the orchestra, which-in turn belongs to
Tirso Cruz-not to the Hotel. The individual musicians, and the instruments
they handle have not been selected by the Hotel. It reserved no power to
discharge any musician. How much salary is given to the individual members
is left entirely to 'the orchestra' or the leader. Payment of such salary is not
made by the Hotel to the individual musicians, but only a lump sum
compensation is given weekly to Tirso Cruz.
Considering the above features of the relationship, in connection with the
tests indicated by numerous authorities, it is our opinion that Tirso Cruz was
not an employee of the Manila Hotel, but one engaged to furnish music to
said hotel for the price of P250 daily, in other words, an independent
contractor (1) within the meaning of the law of master and servant.
'An independent contractor is one who in rendering services, exercises an
independent employment or occupation and represents the will of his
employer only as to the results of his work and not as to the means whereby
it is accomplished; one who exercising an independent employment,

contracts to do a piece work according to his own methods, without being

subject to the control of his employer except as to the result of his work; and
who engages to perform a certain service for another, according to his own
manner and method, free from the control and direction of his employer in all
matters connected with the performance of the service, except as to the
result of the work.' (56 C.J.S. pp. 41-43.)1wphl.nt
Again, it will be noticed that contrary to the theory maintained in the
majority opinion that to be an independent contractor, one must have capital
and must file a bond, this Court, despite the fact that Tirso filed no bond and
there is no proof that he had capital, held Tirso as an independent contractor.
In all probability, Tirso actually had no capital. He was but a mere musician,
although he was a band leader and led and directed his orchestra, and
played an instrument. Borrowing the phrase used in the majority opinion,
Tirso was but "a free-lancing" musician who contracted to furnish music to
hotels and night clubs, and yet this Court said he was an independent
contractor. He, not his orchestra, was paid P250 a day, and most likely, when
Tirso was paid a lump sum at the end of the week, from it he paid his
musicians their share according to a schedule previously fixed by him or
agreed upon by them.
On the basis of the above-cited decisions, I believe that De la Cruz who
undertook to do a repair job for a fixed amount and within a certain period of
time, hired and employed his own men to do the work with their own tools
and instruments and according to the method and manner he chose,
supervised them, fixed their hours of work, and paid them, although he filed
no bond and there was no proof that he had any capital of his own to pay his
men, was an independent contractor and employer of Rilloraza, to whom the
latter should look for compensation for his injuries.
But the majority opinion cites Section 39 (a) of the Workmen's Compensation
Act, which reads:
(a) 'Employer' includes every person or association of persons, incorporated
or not, public or private, and the legal representative of the deceased
employer. It includes the owner or lessee of a factory or establishment or
place of work or any other person who is virtually the owner or manager of
the business carried on in the establishment or place of work but who, for
the reason that there is an independent contractor in the same, or for any
other reason is not the direct employer of laborers employed there.
The above provision of the Workmen's Compensation Act has been
interpreted in the very case of De los Santos vs. Javier, 58 Phil. 82, cited in
the majority opinion, to the effect that notwithstanding that there is an
independent contractor in a factory or place of business, the owner or
manager of the factory is held liable as an employer of the laborers working
under the independent contractor, but only with respect to laborers doing
the work which is in the usual course of the owner's business. This provision
and interpretation of the law is a wise one so as to prevent the owner or
manager of a factory or place of business from avoiding liability by
employing an independent contractor to run his business. If for instance, in
his business of manufacturing automobile batteries and selling cars, Caro
employed an independent contractor in his factory or place of business to
perform that work or conduct said business, just to avoid liability for
compensation for injuries suffered by those employed by the independent
contractor, according to law, Caro would still be liable, because he would be
regarded as the employer of said laborers of the independent contractor. But
this law finds absolutely no application in the present case. There is no claim
or pretense that the repair of the house of Caro's wife at R. Hidalgo Street

had any relation or connection with Caro's business of manufacturing

automobile batteries and selling cars. Was the repair job connected with any
other business in which Caro was then engaged? Neither the record nor the
decision of the Referee nor the majority opinion mentions, much less shows
said business. The only statement made on this point is the one aside, by the
Referee to the effect that the house in question is "apparently intended or
used for rental (business) purposes". What the Referee meant by that phrase
is not clear. But assuming for a moment that the house was not only
intended but actually used for rental purposes, was that a business within
the meaning of Section 39 (a) of the Workmen's Compensation Act, as
above-quoted? Can the husband, as administrator of his wife's property, such
as the house in question, be regarded as engaging in a business if he rents
said house?
In the case of Domingo Imperial vs. Collector of Internal Revenue,. G.R. No. L7924, September 30, 1955, this Court held that renting a nine door camarin,
to three merchants paying monthly rentals amounting to P6,240 a year was
not enough to consider its owner as engaged in the business of leasing real
estate so as to render him liable to the payment of the real estate dealers
tax. Said this Court speaking through Mr. Justice Labrador:
It is apparent that as the plaintiff was, from 1946 to 1950, Senator-at-large
and later Minister in a foreign country, the exercise of the duties of which
offices required the greater part of his time and his absence from the
Philippines, there is no weight in the argument, in the absence of proof, that
during that period of time he was "engaged in leasing real estate," especially
if it be taken in account that the camarin which he had been easing to the
merchant-tenants appears to be the only property of his for lease, and the
annual rental received therefrom being much less than the annual income he
received from the office or offices which he had been holding. 'To engage' is
to embark in a business or to employ oneself therein (Webster's New
International Dictionary). The word 'engage' connotes more than a single act
or a single transaction; it involves some continuity of action (Day vs.
Equitable Life Assur. Soc. of the United States, 83 F. 2d 147, 148). 'To engage
in business' is uniformly construed as signifying to follow the employment or
occupation which occupies the time, attention, and labor for the purpose of a
livelihood or profit (Semple vs. Schwarz, 109 S.W. 633, 636, citing Beickler
vs. Guenther, 96 N.W. 895, 896). The expressions 'engage in business,'
'carrying on business' or 'doing business' do not have different meanings, but
separately or connectedly convey the idea of progression, continuity, or
sustained activity, and 'engaged in business' means occupied or employed in
business, "carrying on business' does not mean the performance of a single
disconnected act but means conducting, prosecuting, and continuing
business by performing progressively all the acts normally incident thereto
while 'doing business' conveys the idea of business being done, not from
time to time, but all the time.'(Lewellyn vs. Pittsburgh, B & L.E.R. Co., C.C.A.
Pa., 222 F. 177, 185).Under the circumstances we cannot hold that the
plaintiff was engaged in leasing real estate, as the act of his in leasing his
only camarin was an isolated transaction, and as he was at the time
occupied in holding an office under the Philippine Government which
required the greater part of his time and attention.
But again, assuming for a moment that renting a single house not needed by
the owner is a regular business, this without proof that said owner has
obtained the corresponding license or permit and has been required to pay
and has been paying the real estate dealers tax, can we consider the repair
of said house for rent a part of the business of house renting? I hold that we
may not. Caro was not engaged in the construction or contracting business

to build and repair houses for rent. Now, if Caro, assuming that renting one
single house of his wife can be considered a regular business, had employed,
say, a bill collector to collect the monthly rent, or a bookkeeper to keep the
books of the business, and anyone of them is injured, then he may perhaps
be held liable to pay compensation.
The majority opinion cites foreign authorities to the effect that the owner of a
building who rents it for income purposes and maintains the same repair for
that purpose, was liable for the employees of the contractor repairing the
building as maintenance of the building was considered as part of the
owner's business. True, there are some authorities holding this view , but I
believe that the weight of authorities is, by far, on the other side. And this
weight of authority to me, is the more reasonable because the mere repair or
painting of a building or structure which is connected, even intimately
related to the main business, can hardly be considered as part of said
business. The repair of a building for rent or the installation of additional
facilities such as plumbing, electrical appliances, etc. may not be regarded
as part of the business of renting houses or apartments. They rightly belong
to building and construction work, or the plumbing or electrical installation
business. That is why, in the case of Mansal vs. P.P. Gocheco Lumber Co.* G.
R. No. L-8017, April 30, 1955, cited in the majority opinion, this Court,
through Mr. Justice Labrador, gave the following example:
In a saw mill, for example, if a power unit running the mill gets out of order
and a mechanic is contracted to fix the engine, the work of the mechanic
would be considered as purely casual, because the reparation of the mill is
not the actual work or business of the sawmill but the sawing lumber.
The majority opinion cites that case of Achijiro Idoma (23 Hawaii, 291) which
holds that where a sugar company gave a contract to H. to build a road-bed
on its plantation to be used in its business, furnishing H. with camps, tools,
and appliances, the work to be to the satisfaction of the company, and the
claimant, a workman employed by H. who alone had a right to discharge
him, was injured, the company was liable as employer of the claimant for
injuries suffered by him. However, it will be seen that in that case, the
company furnished H. not only with camps, but also with the tools and
appliances to be used by him, thereby giving ground to the conclusion that
H. was a mere intermediary or an agent performing a work as indicated,
closely supervised and controlled by the company. On the other hand, we
have the case of Catalla vs. Tayabas Lumber Co., supra, decided by this
Court wherein Martinez and Mercurio undertook to construct and maintain a
trail or road over their kaingins for the use of the lumber company in hauling
its lumber, for a certain amount. The two men employed one Oriel to help
cut trees and brush on the proposed trail or road, paying him P1 to P2 daily.
While working, Oriel was killed by a tree falling upon him and his heirs filed a
claim against the lumber company. This Court, reversing the decision of the
lower court which awarded compensation to Oriel's heirs, held that he (Oriel)
was not an employee of the lumber company because although the
company's timber had to pass over the trail or road, nevertheless, it had no
intervention in the task of clearing it.
The majority also cites the case of Mansal vs. P. P. Gocheco Lumber Co.
already referred to which held that a laborer injured while stacking lumber in
the lumber yard of the company, was entitled to compensation from the
latter although he had been employed by a contractor who undertook to do
the stacking of lumber in the yard at a given rate. I agree with the ruling in
said case, because the stacking of lumber in a lumber yard is clearly part
and parcel of the operation of the sawmill of the company. So is the
unloading of cargoes from a ship, said work being an ordinary part of

carrier's duty mentioned in said decision. The same is true in the case of
Flores vs. Cia. Maritima, 57 Phil. 905, also cited in the majority opinion,
wherein the deceased had been recruited by order of the very captain of the
ship, and was engaged in the work of unloading the ship's cargo, which work
is part of the carrier's duty. Naturally, the company was held liable.
But in the case of De los Santos vs. Javier, 58 Phil. 82, this Court made the
following statement of facts, and rendered its conclusion as
follows:1wphl.nt
It appears from the evidence that the defendant was going to buy and sell
hogs and to establish a plant for curing hams, and that through Carmen
Javier de la Rea he engaged a contractor by the name of Fructuoso Esquillo
to construct a corral for hogs and an office for the, person in charge of the
corral. The price agreed upon was P500. The contractor was to furnish the
labor. The work was to be finished within fifteen days. The deceased
Bonifacio de los Santos was one of the workmen engaged by the contractor.
He was paid by the contractor and was subject to the contractor's orders.
The defendant had no direct intervention in the work. On June 15, 1931,
while Bonifacio de los Santos was engaged in placing a beam he fell from a
scaffold and received injuries which caused his death the next day.
Under these circumstances, we are constrained to hold that Bonifacio de los
Santos was not an employee of the defendant. As already indicated, the
business which the defendant was going to establish was that of buying and
selling hogs and curing hams. The defendant was not a building contractor,
and it was not a part of his business to construct buildings. If we refer again
to the definition of employer, we shall see that it compromises the owner or
lessee of a factory or establishment or place of work or any other person who
is virtually the owner or manager of the business carried on in the
establishment or place of work but who, for the reason that there is an
independent contractor in the same, or for any other reason, is not the direct
employer of laborers employed there. We take this to mean that although the
owner of the factory is not the direct employer of the laborers employed
therein because there is an independent contractor in the factory, the owner
of the factory is nevertheless to be considered for the purposes of the
Workmen's Compensation Act as the employer of the laborers working under
the independent contractor, but that it is true only with respect to laborers
doing work which is in the usual course of the owner's business. In the case
at bar, for example, if the defendant had made contract with Esquillo to take
the hogs from the corral to the slaughterhouse, and the deceased as one of
the employees of Esquillo had been fatally injured while engaged in that
work, the defendant would have been liable to the heirs of the deceased,
although Esquillo was an independent contractor and the deceased
employee.
'Most of the compensation acts expressly or impliedly provide that any
person who has work done under contract on or about his premises, which is
an operation of the usual business which he there carries on, shall be
deemed an employer and shall be liable under the act to such contractor, his
subcontractors, and their employees, when injured or killed on or about the
premises of the employer while doing work which is in the usual course of his
business.
'These provisions as a rule are not held to apply to the owner of premises
upon which improvements are being erected, demolished, altered or repaired
by an independent contractor, nor to a contract made by the owner of the
premises with an independent contractor.' . . . (Schneider on Workmen's

Compensation Law, Second Edition, pages 310 to 312, and cases there
cited.).
In other words, when the law makes the owner of the factory the employer
therein notwithstanding the intervention of an independent contractor, it
refers to laborers engaged in carrying on the usual business of the factory,
and not to the laborers of an independent contractor doing work separate
and distinct from the usual business of the owner of the factory. (Emphasis
supplied.)
It will be seen from the above quotation that although the construction of the
corral for hogs and an office for the person in charge of the corral, especially
the corral itself, was intimately and closely connected with the business of
buying and selling hogs and curing hams nevertheless, this Court held that
said construction was not a part of the business because the owner was not
a building contractor and it was not a part of his business to construct
buildings.
It is interesting to note that the latter part of the quotation citing with favor
Schneider on Workmen's Compensation Law, which I again reproduce below
for emphasis:
'These provisions as a rule are not held to apply to the owner of premises
upon which improvements are being erected, demolished, altered or repaired
by an independent contractor, nor to a contract made by the owner of the
premises with an independent contractor. . .
directly contradicts the view of Larson in his book on the Workmen's
Compensation Law cited by the majority opinion to the effect that
maintenance and repair activities and as well as remodelling and other
incidental construction in a house has been held to be within the course of
trade, occupation or business.
Lastly, assuming for the moment that Rilloraza was an employee of Caro,
which he is not, and that the latter was engaged in the business of renting
houses, which was not proven, inasmuch as Rilloraza's work of repairing the
house was not within but outside the alleged business of renting houses, I
hold that Rilloraza should be regarded as a mere casual employee within the
meaning of Section 39 (b) which provides:
(b) 'Laborer' is used as synonym of 'Employee' and means every person who
has entered the employment of, or works under a service. . . for an employer.
It does not include a person whose employment is purely casual and is not
for the purposes of the occupation or business of the employer.. . .
"Casual" is defined and described by Larson in his book Workmen's
Compensation Law cited in the majority opinion as follows:1wphl.nt
Employment is casual where it is irregular, unpredictable, sporadic and brief
in nature.
In that case of Mansal vs. P. P. Gocheco Lumber Co., supra, this Court through
Mr. Justice Labrador, defined "casual" as follows:
"Casual" means occasional, coming without regularity.
The following authorities are enlightening:
Carpenter employed by merchant on work of converting warehouse into
apartment and garage held engaged in 'casual employment' at time of his
death, so that his widow was not entitled to compensation, 77 P.S. Sec. 22.
Fedak vs. Dzialdowski, 172 A. 187, 188, 113 Pa. Super. 104. (Words &
Phrases, Vol. 6. p. 291).

Carpenter engaged by butchers on work of enlarging storeroom and

constructing apartments for renting purposes held engaged in 'casual
employment,' and not in 'regular course of the business of the employers,' at
time of injury, and not entitled to compensation. 77 P.S. Sec. 22. Quick vs.
E.B. Kintner & Son, 172 A. 189, 113 Pa. Super. 108. (Ibid.).
Employment by hotel manager of painter on hourly salary basis to do some
painting in hotel, the work being apparently of limited scope, held 'casual
employment' within provision of Workmen's Compensation Law, excepting
such employment from operation of compensation law. Rev. St. 1931, Sec.
124-101 et seq., and Sec. 124-106-7. In re Lamont, 41 P. 2d 497, 499, 48 Wy.
56. (Ibid.)
In the case of Orr et al vs. Boise Cold Storage Co. et al., 12 Pacific Reporter
(2d Series) p.270, the Company was engaged in the manufacture, storage,
and sale of ice and maintained a commercial cold storage warehouse. Said
Company employed Orr who was a carpenter by occupation and a helper at a
fixed daily wage to repair and put back into place a wall of the storage
warehouse which was bulging and was separated from the ceiling, leaving an
opening. The job lasted about ten days. While working on it, as the helper
was descending from a scaffold erected to facilitate the work, a heavy claw
hammer that he was carrying in a loop in his overalls caught a projection,
became dislodged, and fell, striking Orr who was standing directly below and
knocking him down. From this injury, Orr eventually died and his heirs filed a
claim against the Company. The Industrial Accident Board after hearing,
awarded compensation, which award was modified and affirmed by the
District Court. However, on appeal to the Supreme Court of Idaho, the
judgment was reversed on the ground that the employment of Orr was
casual within the meaning of the law, C.S. Sec. 62616, as amended, which
provides that; "None of the provisions of this chapter shall apply to: . . . 3.
Casual employment." The Idaho Supreme Court held that the employment of
Orr was merely incidental and occasional, without regularity, and for a
limited and temporary purpose, and was not a regular recurring employment
which was customary and to be anticipated with regularity.
The case of Blood vs. Industrial Acc. Commission State of California et al.,
157 Pacific Reporter, p. 1140, involved the interpretation and application of
the Workmen's Compensation, Insurance and Safety Act, which excluded
from the beginning of the word 'employee' as used in the act, any person
whose employment is both casual and not in the usual course of the trade,
business, profession, or occupation of his employer. Petitioner Blood owned a
two-story building in Los Angeles, consisting of a store-room below and two
flats above, one of the two flats being occupied by himself. Blood employed
one W. F. Heck, a house painter by trade, to apply two coats of paint to the
house, Blood furnishing the painting materials and paying Heck $3.50 a day,
the period of employment being indefinite, although the evidence showed
that the work could reasonably had been done in two weeks. During the
work, Heck was accidentally injured and suffered a temporary total disability.
The Industrial Accidental Commission made an award in his favor. Upon
review by certiorari of the award, the District Court of Appeals, Second
District of California, held that the employment of Heck was not in the usual
course of any business of his employer, there being no evidence Blood was
engaged in any business which in its usual course, if at all, called for the
employment of house painters. Citing a Massachusetts decision interpreting
the word "casual" to be something which comes without regularity and is
occasional and incidental; that its meaning may be more clearly understood
by referring to its antonyms, which are "regular", "systematic" "periodic",
and "certain" and applying these distinctions, it was held that the

employment of Heck by Blood to paint his house, was casual, that is, it was a
mere occasional and incidental contract not constituting or connected with
any regular, systematic, or certain-business. The award under review was
consequently annulled.
Other similar cases may be cited to show that employment which is not
regular but is merely occasional and incidental, which although related to
and connected with the regular business of the owner or employer,
nevertheless, is not within the usual course of trade, business, profession or
occupation of said employer, is to be considered casual employment within
the meaning of the Workman's Compensation Law.
The majority opinion stresses the purpose of the Workmen's Compensation
Act which is a social legislation designed to give relief to the workman who
has suffered injury from his employment. and hence should be considered
liberally and for the benefit of employees and their dependents, and that all
doubts as to the right of compensation resolved in their favor. I agree.
However, it has been noted that this liberal interpretation of the law and the
presumption to be indulged in favor of employees, not infrequently, has been
overdone and over extended by trial courts and the Workmen's
Compensation Commission, resulting at times in inequality in the application
of said law and clear injustice to the employer. That is the reason why in the
case of Catalla vs. Tayabas Lumber Company, supra, this same Tribunal in
reversing a decision of the Court of First Instance sentencing the Lumber
Company to pay compensation, was promoted to declare.
We regret to be compelled to describe the question against the appellee's
claim. This case should be decided not from a sympathetic point of view
which the working class well deserves, but in accordance with the proven
facts and the law applicable thereto .
. . . Employers should deserve before the law the same consideration as
workmen and they should not be held liable for accidents suffered by those
who are not their laborers or employees.. . . (Emphasis supplied.)
And in the case of De los Santos vs. Javier, supra this Court also reversed the
decision of the Instance in favor of the employee citing the case of Packet vs.
Moretown Creamery Co. (91 Vt. 97; 99 Atlantic, 638), the language of whose
statute is practically the same as that of our Workmen's Compensation Law,
and this Court made the following statement:
. . .A creamery company entered into a contract with a builder for the
erection of a new creamery building, and one hired by the, builder was
injured. Held, That such person could not, despite section 63a, declaring that
the act should be liberally construed, be treated as a workman of the
creamery company and entitled to demand compensation from it, the
company not being engaged in the business of erecting buildings, this being
particularly true as the liability of the creamery company's insurance carrier
would be extended to an unthought of length. (Emphasis supplied.)
Again, in the case of Philippine Manufacturing Company vs. Geronimo, supra,
this Court head to reverse a decision or award rendered by the Workmen's
Compensation Commission and ordered that another decision be rendered
ordering the dependent contractor instead of the Company to pay the
compensation. Other similar cases may be cited.1wphl.nt
I am seriously and truly concerned over the implications and far-reaching
effects of the majority in so far as it rules that notwithstanding the
intervention of a contractor like De la Cruz, the owner of administrator of
property over which repair work is done is nevertheless liable for any injuries
suffered by the laborer or carpenter employed by the contractor. That is the

reason I felt constrained to state the reasons for my dissent and to dwell
rather extensively and perhaps elaborately on the subject. Heretofore, and
for years and decades, these small and modest contractors like De la Cruz, in
the cities and big towns in this country, have by contracts for stipulated
sums and for fixed periods of time, undertaken the construction, painting and
repair of small factories, business houses, apartment houses and houses for
rent, including plumbing and electrical installations in them, almost
invariably, furnishing the labor only, and they have performed their task to
the satisfaction of the owners and for the profit of themselves as well as the
thousands of employees and laborers, skilled and non-skilled, hired by them.
Now comes the majority opinion saying that despite the intervention of an
independent contractor, if the latter is a small operator and has no capital, in
case of injury suffered by a laborer of said small contractor, the owner is
liable to pay compensation. Those who would sign the majority opinion may
not realize it, but the doctrine being laid down by it would surely and
suddenly make all these house owners and prospective builders, realize their
precarious situation. To play safe and avoid liability, they would by-pass,
though reluctantly, these small and modest contratistas and go and entrust
their constructions, repairs, and installations to the big, moneyed, and
established building and construction contractors like Santa Clara
Construction Company Pio Barretto & Sons, Inc., Capitol Construction
Company, and others who are in a position to assume and discharge said
liability. The work would most likely cost more, but then the owners are
relieved from worry and the possibility of facing claims for compensation.
This would surely and inevitably spell rum to all small and modest plumbers,
painters, carpenters, electricians, laborers and helpers. In other words, with a
stroke of the judicial pen, these thousands of small contractors and their still
greater number of men, who form an important sector of our national
economy, would be obliterated from the industrial scene, all because,
according to the majority opinion, they cannot be considered as independent
contractors just because they put up no bonds, which are jobs, and they do
not count with capital like the big, well established ones.
In conclusion, I believe and hold that under the facts proven in this case, and
under the law, De la Cruz should be considered an independent contractor
that as such independent contractor, he employed Rilloraza, and so
compensation to Rilloraza should be paid not by Caro but by De la Cruz, not
only because of his assumption of such liability, as stipulated in his
agreement, but because he was the real employed; that even under Section.
39 (a) of the Workmen's Compensation Act, Caro may not be regarded as the
employer for the reason that, assuming, that the house in question was
actually rented for purposes of profit, and assuming further that renting one
single considered a regular business or occupation, the work being done by
Rilloraza on said house was not within but rather outside of the regular
business of renting houses; that assuming that Caro was the employer of
Rilloraza, still, the employment of the latter was casual under the provision,
of Section 39 (b) of the Workmen's Compensation Act, and so, Rilloraza is not
entitled to Compensation. Consequently, the appealed decision should be
reversed. 1wphl.nt

FIRST
[G.R.

DIVISION
No.

90653.

November

12,

1990.]

POLICARPIO CAPULE AND LUIS MADORO, Petitioners, v. NATIONAL

LABOR RELATIONS COMMISSION, YAKULT PHILIPPINES, INC. AND
SUETONI
TAKASHI, Respondents.
Banzuela, Flores,
for Petitioners.
Cruz, Durian,
Respondents.

Miralles,

Agabin,

Raneses,

Atienza,

Sy,

Alday

Taquio

&

&

Associates,

Tuason

for Private

SYLLABUS

1. LABOR LAW; LABOR RELATIONS; CASUAL EMPLOYEES, WHEN CONSIDERED

REGULAR; CASE AT BAR. 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.

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."cralaw virtua1aw library

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.chanrobles virtual lawlibrary
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) months 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.chanrobles
law
library
:
red
The

petition

is

devoid

of

merit.

Article 280 of the Labor Code provides as follows:jgc:chanrobles.com.ph

"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."cralaw
virtua1aw
library
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.chanrobles
virtual
lawlibrary
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
pronouncement

petition

is

DISMISSED
as

for

lack
to

of

merit

without
costs.

SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. Nos. 82643-67 August 30, 1990
PHILIPPINE
GEOTHERMAL,
INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TEODULO C. CUEBILLAS,
ARMANDO CILOT, MARIANO CORULLO, YOLANDA CAL, EFREN
CLERIGO, FELICISSIMO VARGAS, et al., respondents.
Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles for petitioner.
Napoleon Banzuela, Jr. for private respondents.

PARAS, J.:
This is a petition for review on certiorari seeking to annul and set aside; (a)
the Resolution of the National Labor Relations Commission * dated November
9, 1987 in Labor Cases Nos. RAB-403-85 to 427-85 and RAB Nos. 0392-85 to
0393-85 entitled Teodulo C. Cuebillas, et. al. vs. Philippine Geothermal, Inc.
et al. and Efren N. Clerigo et. al. vs. Phil. Geothermal Inc. respectively which
declared respondent employees as regular and permanent employees of
petitioner company and ordered their reinstatement and (b) the Resolution
dated March 9,1988 which denied the Motion for Reconsideration.
The facts of the case are as follows:
Petitioner Philippine Geothermal, Inc. is a U.S. corporation engaged in the
exploration and development of geothermal energy resources as an
alternative source of energy. It is duly authorized to engage in business in
the Philippines and at present is the prime contractor of the National Power
Corporation at the latter's operation of the Tiwi, Albay and the MakilingBanahaw Geothermal Projects. 1
Private respondents, on the other hand, are employees of herein petitioner
occupying various positions ranging from carpenter to Clerk II who had
worked with petitioner company under individual contracts, categorized as
contractual employment, for a period ranging from fifteen (15) days to three

(3) months. These contracts were regularly renewed to the extent that
individual private respondents had rendered service from three (3) to five (5)
years until 1983 and 1984 when petitioner started terminating their
employment by not renewing their individual contracts. Subsequently
petitioner entered into job contracting agreement with Dra. Generosa
Gonzales
who
supplies
it
with
skilled
2
manpower.
Sometime in July 1983, herein private respondents organized a separate
labor union in view of their exclusion in the bargaining unit of the regular
rank and file employees represented by the Federation of Free Workers. In
August 1983, they filed a petition for certification election with the Ministry
of Labor and Employment, NCR, docketed as Case No. NCD-LRD-8-242-84.
Because of this, herein petitioner allegedly started harassing them and
replaced them with so called "contract workers". Thus, complainant union
and herein respondent employees filed a case for illegal lock-out and unfair
labor practice, docketed as Case No. 1420-83 and the instant consolidated
cases RAB Case Nos. 0403-85 to 427-85 and RAB Cases Nos. 0392-85 to
0393-85, involving 26 workers, for unfair labor practice and/or illegal
dismissal, reinstatement backwages and service incentive. 3
On March 3, 1987, Labor Arbiter Voltaire A. Balitaan rendered a decision in
favor of the respondents the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the petitioners and
they are hereby declared regular and permanent employees of the
respondent and finding their dismissal from the service illegal, respondent is
ordered to reinstate them to their former positions without loss of seniority
rights and with one year backwages without qualification or deduction in the
amount of P590,021.76.
SO ORDERED.

On Appeal, the National Labor Relations Commission on November 9, 1987

rendered a decision dismissing the appeal and affirming the decision of the
Labor Arbiter. 5 A motion for reconsideration was denied on March 9, 1988 for
lack of merit. 6
Hence, this petition which was filed on April 22, 1988.
In the meantime, a writ of execution was issued by Executive Arbiter Gelacio
L. Rivera, Jr. on April 11, 1988 on the ground that no appeal was interposed
hence the decision of the Labor Arbiter had become final and executory. 7
On April 20, 1988, petitioner filed a motion for the issuance of a Temporary
Restraining Order as the Sheriff tried to enforce the Writ of Execution dated
April 11, 1988 against petitioner on April 18, 1988. They further alleged that
they are ready, willing and able to post a supersedeas bond to answer for
damages which respondents may suffer. 8
On June 29, 1988, this Court issued a Temporary Restraining Order enjoining
respondents from enforcing the Resolution dated November 9, 1987, any writ
of execution or notice of garnishment issued in RAB Cases Nos. 0403-85 to
427-85 and RAB Cases Nos. 0392-85 to 393-85 of the National Labor
Relations Commission, Department of Labor and Employment. 9
On April 17, 1989, this Court resolved to dismiss the petition for failure to
sufficiently show that the respondent commission had committed grave
abuse of discretion in rendering the questioned judgment and lifted the
Temporary Restraining Order issued on June 29, 1988. 10 A motion for
reconsideration was filed by petitioner on May 25, 1989. 11

On June 5, 1989, this Court granted the motion; and set aside the resolution
dated April 17, 1989; gave due course to the petition and required the
patties to submit simultaneously, their respective memoranda. 12
Private respondents filed their memorandum on August 8, 1989 13 while
public respondent filed its memorandum on September 1, 1989. 14 Petitioner
filed its memorandum on September 8, 1989. 15
The main issue in the case at bar is whether or not private respondents may
be considered regular and permanent employees due to their length of
service in the company despite the fact that their employment is on
contractual basis.
Petitioner alleges that it engaged the services of private respondents on a
monthly basis to ensure that manpower would be available when and where
needed. Private respondents were fully aware of the nature of their
employment as this was clearly spelled out in the employment contracts.
What happened to them was not a case of unwarranted dismissal but simply
one of expiration of the tenure of employment contracts and the completion
of the phase of the project for which their services were hired. 16
In the recent case of Kimberly Independent Labor Union for Solidarity,
Activism, and Nationalism-Olalia vs. Hon. Franklin M. Drilon, G.R. Nos. 77629
and 78791 promulgated last May 9, 1990, this Court classified the two kinds
of regular employees, as: 1) those who are engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the
employer; and 2) those who have rendered at least one (1) year of service,
whether continuous or broken with respect to the activity in which they are
employed. While the actual regularization of these employees entails the
mechanical act of issuing regular appointment papers and compliance with
such other operating procedures, as may be adopted by the employer, it is
more in keeping 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.
Assuming therefore, that an employee could properly be regarded as a
casual (as distinguished from a regular employee) he becomes entitled to be
regarded as a regular employee of the employer as soon as he has
completed one year of service. Under the circumstances, employers may not
terminate the service of a regular employee except for a just cause or when
authorized under the Labor Code. It is not difficult to see that to uphold the
contractual arrangement between the employer and the employee would in
effect be to permit employers to avoid the necessity of hiring regular or
permanent employees indefinitely on a temporary or casual status, thus to
deny them security of tenure in their jobs. Article 106 of the Labor Code is
precisely designed to prevent such result. 17
It is the policy of the state to assure the right of workers to "security of
tenure." 18 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.
Therefore, he should be protected against any arbitrary deprivation of his
job. Article 280 of the Labor Code has construed "security of tenure" as
meaning that "the employer shall not terminate the services of the employee
except for a just cause or when authorized by the Code." 19
PREMISES CONSIDERED, the decision of the National Labor Relations
Commission is hereby AFFIRMED and the Temporary Restraining Order issued
on June 29, 1988 is hereby LIFTED permanently.
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 months 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
Esso International as wiper/oiler in June 1969. He was
Engineer in 1980, a position he continued to occupy
expired on April 10, 1989. He was then receiving a
US$1,939.00.

private respondent
promoted as Chief
until his last COE
monthly salary of

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-Globals President, Michael J. Estaniel, approved petitioner
Lagdas 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-Globals
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 Lagdas 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 complaintaffidavit, docketed as POEA (M) 89-10-9671, for illegal dismissal and nonpayment 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 Administrators 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 FAMEs 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. Intervenors 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 Workers 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 governments 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 reexamination 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
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 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 employees 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
petitioners 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 POEAs
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 mandatory retire- 100%
ment age of 60.
b) Permanent and total disability, 100%
while under contract, that is
not due to accident or misconduct.
c) Permanent and total disability, 100%
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 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 Companys 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 Service Percentage
36 months 50%
48 75%
60 100%
When the employment of an employee is terminated due to his poorperformance, misconduct, unavailability, etc., or if employee is not offered
re-engagement for similar reasons, no distribution of any portion of
employees 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 respondents 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 Respondents 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.

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 70705 August 21, 1989
MOISES
vs.
NATIONAL LABOR
INC., respondents.

DE
RELATIONS

LEON, petitioner,
COMMISSION

and

LA

TONDE;A

Amorito V. Canete for petitioner.

Pablo R. Cruz for private respondent.

FERNAN, C.J.:
This petition for certiorari seeks to annul and set aside: (1) the majority
decision dated January 28, 1985 of the National Labor Relations Commission
First Division in Case No. NCR- 83566-83, 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
Tonde;a 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 Tonde;a
Inc. on December 11, 1981, at the Maintenance Section of its Engineering
Department in Tondo, Manila. 1 His work consisted mainly of painting
company building and 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 lie 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 3 finding 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 Tanque Jr., who was regularly employed by it as a
maintenance man doing same jobs not only of painting and repainting of
building, equipment and tools and machineries or machines if 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 Id 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. ... . 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 5 which constituted a majority. Commissioner
Geronimo Q. Quadra dissented, voting "for the affirmation of the wellreasoned decision of the Labor Arbiter below." 6 The motion for
reconsideration was denied. Hence, this recourse.
Petitioner asserts that the respondent Commission erred and gravely abuse
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 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 9 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.
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 findings 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. 12 It misleadingly assumed that all the petitioner did during his more
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 as 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. That
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 Aluminum 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. 141093. February 20, 2001]
PRUDENTIAL BANK and TRUST COMPANY, petitioner, vs. CLARITA T.
REYES, respondent.
DECISION
GONZAGA-REYES, J.:
Before the Court is a petition for review on certiorari of the Decision,[1] dated
October 15, 1999 of the Court of Appeals in C.A.-G.R. SP No. 30607 and of its
Resolution, dated December 6, 1999 denying petitioners motion for

reconsideration of said decision. The Court of Appeals reversed and set aside
the resolution[2] of the National Labor Relations Commission (NLRC) in NLRC
NCR CA No. 009364-95, reversing and setting aside the labor arbiters
decision and dismissing for lack of merit private respondents complaint.[3]
The case stems from NLRC NCR Case No. 00-06-03462-92, which is a
complaint for illegal suspension and illegal dismissal with prayer for moral
and exemplary damages, gratuity, fringe benefits and attorneys fees filed by
Clarita Tan Reyes against Prudential Bank and Trust Company (the Bank)
before the labor arbiter. Prior to her dismissal, private respondent Reyes held
the position of Assistant Vice President in the foreign department of the
Bank, tasked with the duties, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the collection of
foreign bills or checks purchased, including the signing of transmittal letters
covering the same.
After proceedings duly undertaken by the parties, judgment was rendered by
Labor Arbiter Cornelio L. Linsangan, the dispositive portion of which reads:
WHEREFORE, finding the dismissal of complainant to be without factual and
legal basis, judgment is hereby rendered ordering the respondent bank to
pay her back wages for three (3) years in the amount of P540,000.00
(P15,000.00 x 36 mos.). In lieu of reinstatement, the respondent is also
ordered to pay complainant separation pay equivalent to one month salary
for every year of service, in the amount of P420,000.00 (P15,000 x 28
mos.). In addition, the respondent should also pay complainant profit sharing
and unpaid fringe benefits. Attorneys fees equivalent to ten (10%) percent of
the total award should likewise be paid by respondent.
SO ORDERED.[4]
Not satisfied, the Bank appealed to the NLRC which, as mentioned at the
outset, reversed the Labor Arbiters decision in its Resolution dated 24 March
1997. Private respondent sought reconsideration which, however, was denied
by the NLRC in its Resolution of 28 July 1998. Aggrieved, private respondent
commenced on October 28, 1998, a petition for certiorari before the
Supreme Court.[5] The subject petition was referred to the Court of
Appeals for appropriate action and disposition per resolution of this Court
dated November 25, 1998, in accordance with the ruling in St. Martin
Funeral Homes vs. NLRC.[6]
In its assailed decision, the Court of Appeals adopted the following
antecedent facts leading to Reyess dismissal as summarized by the NLRC:
The auditors of the Bank discovered that two checks, No. 011728-7232-146,
in the amount of US$109,650.00, and No. 011730-7232-146, in the amount
of US$115,000.00, received by the Bank on April 6, 1989, drawn by the
Sanford Trading against Hongkong and Shanghai Banking Corporation, Jurong
Branch, Singapore, in favor of Filipinas Tyrom, were not sent out for collection
to Hongkong Shanghai Banking Corporation on the alleged order of the
complainant until the said checks became stale.
The Bank created a committee to investigate the findings of the auditors
involving the two checks which were not collected and became stale.
On March 8, 1991, the president of the Bank issued a memorandum to the
complainant informing her of the findings of the auditors and asked her to
give her side. In reply, complainant requested for an extension of one week
to submit her explanation. In a subsequent letter, dated March 14, 1991, to
the president, complainant stated that in view of the refusal of the Bank that
she be furnished copies of the pertinent documents she is requesting and the

refusal to grant her a reasonable period to prepare her answer, she was
constrained to make a general denial of any misfeasance or malfeasance on
her part and asked that a formal investigation be made.
As the complainant failed to attend and participate in the formal
investigation conducted by the Committee on May 24, 1991, despite due
notice, the Committee proceeded with its hearings and heard the testimonies
of several witnesses.
The Committees findings were:
a) The two (2) HSBC checks were received by the Foreign Department on 6
April 1989. On the same day, complainant authorized the crediting of the
account of Filipinas Tyrom in the amount of P4,780,102.70 corresponding to
the face value of the checks, (Exhibits 6, 22 to 22-A and 23 to 23-A). On the
following day, a transmittal letter was prepared by Ms. Cecilia Joven, a
remittance clerk then assigned in the Foreign Department, for the purpose of
sending out the two (2) HSBC checks for collection. She then requested
complainant to sign the said transmittal letters (Exhibits 1, 7 and 25; TSN, 11
March 1993, pp. 42-52), as it is complainant who gives her instructions
directly concerning the transmittal of foreign bills purchased. All other
transmittal letters are in fact signed by complainant.
b) After Ms. Joven delivered the transmittal letters and the checks to the
Accounting Section of the Foreign Department, complainant instructed her to
withdraw the same for the purpose of changing the addressee thereon from
American Express Bank to Bank of Hawaii (ibid.) under a special collection
scheme (Exhibits 4 and 5 to 5-B).
c) After complying with complainants instruction, Ms. Joven then returned to
complainant for the latter to sign the new transmittal letters. However,
complainant told Ms. Joven to just hold on to the letters and checks and
await further instructions (ibid.). Thus, the new transmittal letters remained
unsigned. (See Exhibits 5 to 5-B).
d) In June 1989, Ms. Joven was transferred to another department. Hence,
her duties, responsibilities and functions, including the responsibility over the
two (2) HSBC checks, were turned over to another remittance clerk, Ms.
Analisa Castillo (Exhibit 14; TSN, 4 June 1993, pp. 27-29).
e) When asked by Ms. Castillo about the two (2) HSBC checks, Ms. Joven
relayed to the latter complainants instruction (Exhibit 14; TSN, 4 June 1993,
p. 42).
f) About fifteen (15) months after the HSBC checks were received by the
Bank, the said checks were discovered in the course of an audit conducted
by the Banks auditors. Atty. Pablo Magno, the Banks legal counsel, advised
complainant to send the checks for collection despite the lapse of fifteen (15)
months.
g) Complainant, however, deliberately withheld Atty. Magnos advice from her
superior, the Senior Vice-President, Mr. Renato Santos and falsely informed
the latter that Atty. Magno advised that a demand letter be sent instead,
thereby further delaying the collection of the HSBC checks.
h) On 10 July 1990, the HSBC checks were finally sent for collection, but were
returned on 16 July 1990 for the reason account closed (Exhibits 2-A and 3A).
After a review of the Committees findings, the Board of Directors of the Bank
resolved not to re-elect complainant any longer to the position of assistant
president pursuant to the Banks By-laws.

On July 19, 1991, complainant was informed of her termination of

employment from the Bank by Senior Vice President Benedicto L. Santos, in a
letter the text of which is quoted in full:
Dear Mrs. Reyes:
After a thorough investigation and appreciation of the charges against you as
contained in the Memorandum of the President dated March 8, 1991, the Fact
Finding Committee which was created to investigate the commission and/or
omission of the acts alluded therein, has found the following:
1. You have deliberately held the clearing of Checks Nos. 11728 and 11730
of Hongkong and Shanghai Banking Corporation in the total amount of
US$224,650.00 by giving instructions to the collection clerk not to send the
checks for collection. In view thereof, when the said checks were finally sent
to clearing after the lapse of 15 months from receipt of said checks, they
were returned for the reason Account closed. To date, the value of said
checks have not been paid by Filipinas Tyrom, which as payee of the checks,
had been credited with their peso equivalent;
2. You tried to influence the decision of Atty. Pablo P. Magno, Bank legal
counsel, by asking him to do something allegedly upon instructions of a
Senior Vice President of the Bank or else lose his job when in truth and in fact
no such instructions was given; and
3. You deliberately withheld from Mr. Santos, Senior Vice President, the
advice given by the legal counsel of the Bank which Mr. Santos had asked
you to seek. As a matter of fact, you even relayed a false advice which
delayed further the sending of the two checks for collection. Likewise, you
refused to heed the advice of the Banks legal counsel to send the checks for
collection.
These findings have given rise to the Banks loss of trust and confidence in
you, the same being acts of serious misconduct in the performance of your
duties resulting in monetary loss to the Bank. In view thereof, the Board has
resolved not to re-elect you to the position of Assistant Vice President of the
Bank. Accordingly, your services are terminated effective immediately. In
relation thereto, your monetary and retirement benefits are forfeited except
those that have vested in you.
In her position paper, complainant alleged that the real reason for her
dismissal was her filing of the criminal cases against the bank president, the
vice president and the auditors of the Bank, such filing not being a valid
ground for her dismissal. Furthermore, she alleged that it would be selfserving for the respondent to state that she was found guilty of gross
misconduct in deliberately withholding the clearing of the two dollar
checks. She further alleged that she was not afforded due process as she
was not given the chance to refute the charges mentioned in the letter of
dismissal. Hence, she was illegally dismissed.
On the other hand, respondent argues that there were substantial bases for
the Bank to lose its trust and confidence on the complainant and,
accordingly, had just cause for terminating her services. Moreover, for filing
the clearly unfounded suit against the respondents officers, complainant is
liable to pay moral and exemplary damages and attorneys fees.[7]
The Court of Appeals found that the NLRC committed grave abuse of
discretion in ruling that the dismissal of Reyes is valid. In effect, the Court of
Appeals reinstated the judgment of the labor arbiter with modification as
follows:

WHEREFORE, in the light of the foregoing, the decision appealed from is

hereby REVERSED and SET ASIDE. In lieu thereof, judgment is hereby
rendered ordering respondent Bank as follows:
1. To pay petitioner full backwages and other benefits from July 19, 1991 up
to the finality of this judgment;
2. To pay petitioner separation pay equivalent to one (1) month salary for
every year of service in lieu of reinstatement; and
3. To pay attorneys fee equivalent to ten (10%) percent of the total award.
SO ORDERED.[8]
Hence, the Banks recourse to this Court contending in its memorandum that:
IN SETTING ASIDE THE DECISION DATED 24 MARCH 1997 AND THE
RESOLUTION DATED 28 JULY 1998 OF THE NLRC AND REINSTATING WITH
MODIFICATION THE DECISION DATED 20 JULY 1995 OF LABOR ARBITER
CORNELIO L. LINSANGAN, THE HONORABLE COURT OF APPEALS SERIOUSLY
ERRED, IN VIEW OF THE FOLLOWING:
I.
IT IS THE SEC (NOW THE REGIONAL TRIAL COURT) AND NOT THE NLRC
WHICH HAS ORIGINAL AND EXCLUSIVE JURISDICTION OVER CASES INVOLVING
THE REMOVAL FROM OFFICE OF CORPORATE OFFICERS.
II.
EVEN ASSUMING ARGUENDO THAT THE NLRC HAS JURISDICTION, THERE WAS
SUBSTANTIAL EVIDENCE OF RESPONDENTS MISCONDUCT JUSTIFYING THE
BANKS LOSS OF TRUST AND CONFIDENCE ON (sic) HER.
III.
EVEN ASSUMING ARGUENDO THAT RESPONDENT WAS ENTITLED TO
BACKWAGES, THE HONORABLE COURT OF APPEALS ERRED IN AWARDING
UNLIMITED AND UNQUALIFIED BACKWAGES THEREBY GOING FAR BEYOND
THE LABOR ARBITERS DECISION LIMITING THE SAME TO THREE YEARS,
WHICH DECISION RESPONDENT HERSELF SOUGHT TO EXECUTE.[9]
In sum, the resolution of this petition hinges on (1) whether the NLRC has
jurisdiction over the complaint for illegal dismissal; (2) whether complainant
Reyes was illegally dismissed; and (3) whether the amount of back wages
awarded was proper.
On the first issue, petitioner seeks refuge behind the argument that the
dispute is an intra-corporate controversy concerning as it does the nonelection of private respondent to the position of Assistant Vice-President of
the Bank which falls under the exclusive and original jurisdiction of the
Securities and Exchange Commission (now the Regional Trial Court) under
Section 5 of Presidential Decree No. 902-A. More specifically, petitioner
contends that complainant is a corporate officer, an elective position under
the corporate by-laws and her non-election is an intra-corporate controversy
cognizable by the SEC invoking lengthily a number of this Courts decisions.
[10]

Petitioner Bank can no longer raise the issue of jurisdiction under the
principle of estoppel. The Bank participated in the proceedings from start to
finish. It filed its position paper with the Labor Arbiter.When the decision of
the Labor Arbiter was adverse to it, the Bank appealed to the NLRC. When
the NLRC decided in its favor, the bank said nothing about jurisdiction. Even
before the Court of Appeals, it never questioned the proceedings on the

ground of lack of jurisdiction. It was only when the Court of Appeals ruled in
favor of private respondent did it raise the issue of jurisdiction. The Bank
actively participated in the proceedings before the Labor Arbiter, the NLRC
and the Court of Appeals. While it is true that jurisdiction over the subject
matter of a case may be raised at any time of the proceedings, this rule
presupposes that laches or estoppel has not supervened. In this
regard, Baaga vs. Commission on the Settlement of Land Problems,[11] is
most enlightening. The Court therein stated:
This Court has time and again frowned upon the undesirable practice of a
party submitting his case for decision and then accepting the judgment, only
if favorable, and attacking it for lack of jurisdiction when adverse. Here, the
principle of estoppel lies. Hence, a party may be estopped or barred from
raising the question of jurisdiction for the first time in a petition before the
Supreme Court when it failed to do so in the early stages of the proceedings.
Undeterred, the Bank also contends that estoppel cannot lie considering that
from the beginning, petitioner Bank has consistently asserted in all its
pleadings at all stages of the proceedings that respondent held the position
of Assistant Vice President, an elective position which she held by virtue of
her having been elected as such by the Board of Directors. As far as the
records before this Court reveal however, such an assertion was made only
in the appeal to the NLRC and raised again before the Court of Appeals, not
for purposes of questioning jurisdiction but to establish that private
respondents tenure was subject to the discretion of the Board of Directors
and that her non-reelection was a mere expiration of her term. The Bank
insists that private respondent was elected Assistant Vice President
sometime in 1990 to serve as such for only one year. This argument will not
do either and must be rejected.
It appears that private respondent was appointed Accounting Clerk by the
Bank on July 14, 1963. From that position she rose to become
supervisor. Then in 1982, she was appointed Assistant Vice-President which
she occupied until her illegal dismissal on July 19, 1991. The banks
contention that she merely holds an elective position and that in effect she is
not a regular employee is belied by the nature of her work and her length of
service with the Bank. As earlier stated, she rose from the ranks and has
been employed with the Bank since 1963 until the termination of her
employment in 1991. As Assistant Vice President of the foreign department
of the Bank, she is tasked, among others, to collect checks drawn against
overseas banks payable in foreign currency and to ensure the collection of
foreign bills or checks purchased, including the signing of transmittal letters
covering the same. It has been stated that the primary standard 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. [12] Additionally, an employee is regular because
of the nature of work and the length of service, not because of the mode or
even the reason for hiring them.[13] As Assistant Vice-President of the Foreign
Department of the Bank she performs tasks integral to the operations of the
bank and her length of service with the bank totaling 28 years speaks
volumes of her status as a regular employee of the bank. In fine, as a regular
employee, she is entitled to security of tenure; that is, her services may be
terminated only for a just or authorized cause. [14] This being in truth a case of
illegal dismissal, it is no wonder then that the Bank endeavored to the very
end to establish loss of trust and confidence and serious misconduct on the
part of private respondent but, as will be discussed later, to no avail.
This brings us to the second issue wherein the Bank insists that it has
presented substantial evidence to prove the breach of trust on the part of

private respondent warranting her dismissal. On this point, the Court of

Appeals disagreed and set aside the findings of the NLRC that Reyes
deliberately withheld the release of the two dollar checks; that she is guilty
of conflict of interest that she waived her right to due process for not
attending the hearing; and that she was dismissed based on loss of trust and
confidence. We quote pertinent portions of the decision, to wit:
FIRST: Respondent Bank heavily relied on the testimony and affidavit of
Remittance Clerk Joven in trying to establish loss of confidence. However,
Jovens allegation that petitioner instructed her to hold the subject two dollar
checks amounting to $224,650.00 falls short of the requisite proof to warrant
petitioners dismissal. Except for Jovens bare assertion to withhold the dollar
checks per petitioners instruction, respondent Bank failed to adduce
convincing evidence to prove bad faith and malice. It bears emphasizing that
respondent Banks witnesses merely corroborate Jovens testimony.
Upon this point, the rule that proof beyond reasonable doubt is not required
to terminate an employee on the charge of loss of confidence and that it is
sufficient that there is some basis for such loss of confidence, is not
absolute. The right of an employer to dismiss employees on the ground that
it has lost its trust and confidence in him must not be exercised arbitrarily
and without just cause. For loss of trust and confidence to be valid ground for
an employees dismissal, it must be substantial and not arbitrary, and must
be founded on clearly established facts sufficient to warrant the employees
separation from work (Labor vs. NLRC, 248 SCRA 183).
SECOND. Respondent Banks charge of deliberate withholding of the two
dollar checks finds no support in the testimony of Atty. Jocson, Chairman of
the Investigating Committee. On cross examination, Atty. Jocson testified that
the documents themselves do not show any direct withholding (pp. 186-187,
Rollo). There being conflict in the statement of witnesses, the court must
adopt the testimony which it believes to be true (U.S. vs. Losada, 18 Phil.
90).
THIRD. Settled is the rule that when the conclusions of the Labor Arbiter are
sufficiently substantiated by the evidence on record, the same should be
respected by appellate tribunals since he is in a better position to assess and
evaluate the credibility of the contending parties (Ala Mode Garments, Inc.
vs. NLRC, 268 SCRA 497). In this regard, the Court quotes with approval the
following disquisition of Labor Arbiter Linsangan, thus:
This Office has repeatedly gone over the records of the case and
painstakingly examined the testimonies of respondent banks witnesses. One
thing was clearly established: that the legality of complainants dismissal
based on the first ground stated in respondents letter of termination (exh.
25-J, supra) will rise or fall on the credibility of Miss Joven who undisputedly
is the star witness for the bank. It will be observed that the testimonies of
the banks other witnesses, Analiza Castillo, Dante Castor and Antonio Ragasa
pertaining to the non-release of the dollar checks and their corresponding
transmittal letters were all anchored on what was told them by Ms. Joven,
that is: she was instructed by complainant to hold the release of subject
checks. In a nutshell, therefore, the issue boils down to who between
complainant and Ms. Joven is more credible.
After painstakingly examining the testimonies of Ms. Joven and respondents
other witnesses this Office finds the evidence still wanting in proof of
complainants guilt. This Office had closely observed the demeanor of Ms.
Joven while testifying on the witness stand and was not impressed by her
assertions. The allegation of Ms. Joven in that her non-release of the dollar
checks was upon the instruction of complainant Reyes is extremely

doubtful. In the first place, the said instruction constitutes a gross violation of
the banks standard operating procedure. Moreover, Ms. Joven was fully
aware that the instruction, if carried out, will greatly prejudice her employer
bank. It was incumbent upon Ms. Joven not only to disobey the instruction
but even to report the matter to management, if same was really given to
her by complainant.
Our doubt on the veracity of Ms. Jovens allegation even deepens as we
consider the fact that when the non-release of the checks was discovered by
Ms. Castillo the former contented herself by continuously not taking any
action on the two dollar checks. Worse, Ms. Joven even impliedly told by Ms.
Castillo (sic) to ignore the two checks and just withhold their release. In her
affidavit Ms. Castillo said:
4. When I asked Cecille Joven what I was supposed to do with those checks,
she said the same should be held as per instruction of Mrs. Reyes. (Exh. 14,
supra).
The evidence shows that it was only on 16 May 1990 that Ms. Joven broke
her silence on the matter despite the fact that on 15 November 1989, at
about 8:00 p.m. the complainant, accompanied by driver Celestino Banito,
went to her residence and confronted her regarding the non-release of the
dollar checks. It took Ms. Joven eighteen (18) months before she explained
her side on the controversy. As to what prompted her to make her letter of
explanation was not even mentioned.
On the other hand, the actions taken by the complainant were
spontaneous. When complainant was informed by Mr. Castor and Ms. Castillo
regarding the non-release of the checks sometime in November, 1989 she
immediately reported the matter to Vice President Santos, Head of the
Foreign Department. And as earlier mentioned, complainant went to the
residence of Ms. Joven to confront her. In this regard, Celestino Bonito,
complainants driver, stated in his affidavit, thus:
1. Sometime on November 15, 1989 at about 7:00 oclock in the evening,
Mrs. Clarita Tan Reyes and I were in the residence of one Ms. Cecille Joven,
then a Processing Clerk in the Foreign Department of Prudential Bank;
2. Ms. Cecille Joven, her mother, myself, and Mrs. Clarita Tan Reyes were
seated in the sala when the latter asked the former, Ms. Cecille Joven, how it
came about that the two dollar checks which she was then holding with the
transmittal letters, were found in a plastic envelope kept day-to-day by the
former;
3. Hesitatingly, Cecille Joven said: Eh, Mother (Mrs. Tan Reyes had been
intimately called Mother in the Bank) akala ko bouncing checks yon mga yon.
4. Mrs. Clarita Tan Reyes, upon hearing those words, was surprised and she
said: Ano, papaano mong alam na bouncing na hindi mo pa pinadadala;
5. Mrs. Cecille Joven turned pale and was not able to answer.
There are other factors that constrain this Office to doubt even more the
legality of complainants dismissal based on the first ground stated in the
letter of dismissal. The non-release of the dollar checks was reported to top
management sometime on 15 November 1989 when complainant,
accompanied by Supervisor Dante Castor and Analiza Castillo, reported the
matter to Vice President Santos. And yet, it was only on 08 March 1991, after
a lapse of sixteen (16) months from the time the non-release of the checks
was reported to the Vice President, that complainant was issued a

memorandum directing her to submit an explanation. And it took the bank

another four (4) months before it dismissed complainant.
The delayed action taken by respondent against complainant lends credence
to the assertion of the latter that her dismissal was a mere retaliation to the
criminal complaints she filed against the banks top officials.
It clearly appears from the foregoing that the complainant herein has no
knowledge of, much less participation in, the non-release of the dollar checks
under discussion. Ms. Joven is solely responsible for the same. Incidentally,
she was not even reprimanded by the bank.
FOURTH. Respondent Bank having failed to furnish petitioner necessary
documents imputing loss of confidence, petitioner was not amply afforded
opportunity to prepare an intelligent answer. The Court finds nothing
confidential in the auditors report and the affidavit of Transmittal Clerk
Joven. Due process dictates that management accord the employees every
kind of assistance to enable him to prepare adequately for his defense,
including legal representation.
The issue of conflict of interest not having been covered by the investigation,
the Court finds it irrelevant to the charge.[15]
We uphold the findings of the Court of Appeals that the dismissal of private
respondent on the ground of loss of trust and confidence was without
basis. The charge was predicated on the testimony of Ms. Joven and we defer
to the findings of the Labor Arbiter as confirmed and adopted by the Court of
Appeals on the credibility of said witness. This Court is not a trier of facts and
will not weigh anew the evidence already passed upon by the Court of
Appeals.[16]
On the third issue, the Bank questions the award of full backwages and other
benefits from July 19, 1991 up to the finality of this judgment; separation pay
equivalent to one (1) month salary for every year of service in lieu of
reinstatement; and attorneys fees equivalent to ten (10%) percent of the
total award. The Bank argues, in the main, that private respondent is not
entitled to full backwages in view of the fact that she did not bother to
appeal that portion of the labor arbiters judgment awarding back wages
limited to three years. It must be stressed that private respondent filed a
special civil action for certiorari to review the decision of the NLRC [17] and not
an ordinary appeal. An ordinary appeal is distinguished from the remedy of
certiorari under Rule 65 of the Revised Rules of Court in that in ordinary
appeals it is settled that a party who did not appeal cannot seek affirmative
relief other than the ones granted in the decision of the court below. [18] On
the other hand, resort to a judicial review of the decisions of the National
Labor Relations Commission in a petition for certiorari under Rule 65 of Rules
of Court is confined to issues of want or excess of jurisdiction and grave
abuse of discretion.[19] In the instant case, the Court of Appeals found that
the NLRC gravely abused its discretion in finding that the private
respondents dismissal was valid and so reversed the same. Corollary to the
foregoing, the appellate court awarded backwages in accordance with
current jurisprudence.
Indeed, jurisprudence is clear on the amount of backwages recoverable in
cases of illegal dismissal. Employees illegally dismissed prior to the
effectivity of Republic Act No. 6715 on March 21, 1989 are entitled to
backwages up to three (3) years without deduction or qualification, while
those illegally dismissed after are granted full backwages inclusive of
allowances and other benefits or their monetary equivalent from the time
their actual compensation was withheld from them up to the time of their

actual reinstatement.[20] Considering that private respondent was terminated

on July 19, 1991, she is entitled to full backwages from the time her actual
compensation was withheld from her (which, as a rule, is from the time of
her illegal dismissal) up to the finality of this judgment (instead of
reinstatement) considering that reinstatement is no longer feasible as
correctly pointed out by the Court of Appeals on account of the strained
relations brought about by the litigation in this case. Since reinstatement is
no longer viable, she is also entitled to separation pay equivalent to one (1)
month salary for every year of service. [21] Lastly, since private respondent
was compelled to file an action for illegal dismissal with the labor arbiter, she
is likewise entitled to attorneys fees[22] at the rate above-mentioned. There is
no room to argue, as the Bank does here, that its liability should be mitigated
on account of its good faith and that private respondent is not entirely
blameless. There is no showing that private respondent is partly at fault or
that the Bank acted in good faith in terminating an employee of twenty-eight
years. In any event, Article 279 of Republic Act No. 6715 [23] clearly and
plainly provides for full backwages to illegally dismissed employees.
WHEREFORE, the instant petition for review on certiorari is DENIED, and the
assailed Decision of the Court of Appeals, dated October 15, 1999, is
AFFIRMED.
SO ORDERED.

FIRST DIVISION
[G. R. No. 148492. May 9, 2003]
BUENAVENTURA C. MAGSALIN & COCA-COLA BOTTLERS PHILS.,
INC., petitioners, vs. NATIONAL ORGANIZATION OF WORKING MEN

(N.O.W.M.), RODOLFO MELGAR, ARNEL DELOS SANTOS, SILVERIO

MINDAJAO,
RUBEN
NAVALES,
BOBBY
AUSTERO,
RAYMUNDO
GAUDICOS, CHRISTOPHER PERALTA, GIOVANI DELA CRUZ, JOSELITO
OCCIDENTAL, AMADO BODASAN, FREDERIK MAGALINO, CHITO
OCCIDENTAL, ALEXANDER DELOS SANTOS, DEONIL MESA, OLIVER
VILLAFLOR, ROBERTO TUMONBA, RODRIGO ANGELES, ROMMEL
ABAD, FELIX AVENIDO, ARMANDO AMOR, FREDERICK DE GUZMAN,
CEA CARMELO, MARIANO CAETE, ALBERTO ANTONES, ROMEO
BASQUINAS, ROGELIO MALINIS, EDMUNDO BAYOS, RAMIL REVADO,
JOEL PIATA, OSCAR MALINAY, ROBERT REYES, JIMMY REYES, RETCHEL
HAUTEA, VICTORINO TORRALBA, NOEL RUBAI, RENATO DE OCAMPO,
JESUS NOZON, JOEL MALINIS, REYNALDO GREGORY, MICHAEL RUBIA,
JOSELITO VILLANUEVA, LEONARDO MONDINA, EDUARDO BELLA,
WILFREDO BELLA, ALBERTO MAGTIBAY, MIGUEL CUESTA, JOSE
MARCOS RODRIGUEZ III, HERMINIO ROFLO, ERNIE CHAVEZ, NELSON
LOGRONIO, LEONILO GALAPIN, REY PANGILINAN, LARRY JAVIER,
MATIAS ARBUES, RONILO AUSTERO, ADEMAR ESTUITA, EDWIN DE
LEON, RANDY DE CHAVEZ, respondents.
DECISION
VITUG, J.:
Coca-Cola Bottlers Phils., Inc., herein petitioner, engaged the services of
respondent workers as sales route helpers for a limited period of five
months. After five months, respondent workers were employed by petitioner
company on a day-to-day basis. According to petitioner company,
respondent workers were hired to substitute for regular sales route helpers
whenever the latter would be unavailable or when there would be an
unexpected shortage of manpower in any of its work places or an unusually
high volume of work. The practice was for the workers to wait every morning
outside the gates of the sales office of petitioner company. If thus hired, the
workers would then be paid their wages at the end of the day.
Ultimately, respondent workers asked petitioner company to extend to them
regular appointments. Petitioner company refused. On 07 November 1997,
twenty-three (23) of the temporary workers (herein respondents) filed with
the National Labor Relations Commission (NLRC) a complaint for the
regularization of their employment with petitioner company. The complaint
was amended a number of times to include other complainants that
ultimately totaled fifty-eight (58) workers. Claiming that petitioner company
meanwhile terminated their services, respondent workers filed a notice of
strike and a complaint for illegal dismissal and unfair labor practice with the
NLRC.
On 01 April 1998, the parties agreed to submit the controversy, including the
issue raised in the complaint for regularization of employment, for voluntary
arbitration. On 18 May 1998, the voluntary arbitrator rendered a decision
dismissing the complaint on the thesis that respondents (then complainants)
were not regular employees of petitioner company.
Respondent workers filed with the Court of Appeals a petition for review
under Rule 43 of the Rules of Civil Procedure assailing the decision of the
voluntary arbitrator, therein contending that 1. The Voluntary Arbitrator committed errors in finding that petitioners
voluntarily and knowingly agreed to be employed on a day-to-day basis; and
2. The Voluntary Arbitrator committed errors in finding that petitioners
dismissal was valid.[1]

In its decision of 11 August 2000, the Court of Appeals reversed and set
aside the ruling of the voluntary arbitrator, it concluded WHEREFORE, the assailed decision of the Voluntary Arbitrator is hereby
REVERSED and SET ASIDE and anew one is entered:
1. Declaring petitioners as regular employees of Coca-Cola Bottlers Phils.,
Inc. and their dismissal from employment as illegal;
2. Ordering respondent Coca-Cola Bottlers Phils., Inc. to reinstate petitioners
to their former positions with full backwages, inclusive of allowances that
petitioners had been receiving during their employment and 13 th month pay,
computed from the date of their termination up to the time of their actual
reinstatement (Paramount Vinyl Product Corp. vs. NLRC, 190 SCRA 526). [2]
Petitioner companys motion for reconsideration was denied in a resolution,
dated 21 May 2001, of the appellate court.
The focal issues revolve around the matter of whether or not the nature of
work of respondents in the company is of such nature as to be deemed
necessary and desirable in the usual business or trade of petitioner that
could qualify them to be regular employees.
The basic law on the case is Article 280 of the Labor Code. Its pertinent
provisions read:
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.
Coca-Cola Bottlers Phils., Inc., is one of the leading and largest
manufacturers of softdrinks in the country. Respondent workers have long
been in the service of petitioner company.Respondent workers, when hired,
would go with route salesmen on board delivery trucks and undertake the
laborious task of loading and unloading softdrink products of petitioner
company to its various delivery points.
Even while the language of law might have been more definitive, the clarity
of its spirit and intent, i.e., to ensure a regular workers security of tenure,
however, can hardly be doubted. In determining whether an employment
should be considered regular or non-regular, the applicable test is the
reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The
standard, supplied by the law itself, is whether the work undertaken is
necessary or desirable in the usual business or trade of the employer, a fact
that can be assessed by looking into the nature of the services rendered and
its relation to the general scheme under which the business or trade is
pursued in the usual course. It is distinguished from a specific undertaking

that is divorced from the normal activities required in carrying on the

particular business or trade. But, although the work to be performed is only
for a specific project or seasonal, where a person thus engaged has been
performing the job for at least one year, even if the performance is not
continuous or is merely intermittent, the law deems the repeated and
continuing need for its performance as being sufficient to indicate the
necessity or desirability of that activity to the business or trade of the
employer. The employment of such person is also then deemed to be regular
with respect to such activity and while such activity exists.[3]
The argument of petitioner that its usual business or trade is softdrink
manufacturing and that the work assigned to respondent workers as sales
route helpers so involves merely postproduction activities, one which is not
indispensable in the manufacture of its products, scarcely can be
persuasive. If, as so argued by petitioner company, only those whose work
are directly involved in the production of softdrinks may be held performing
functions necessary and desirable in its usual business or trade, there would
have then been no need for it to even maintain regular truck sales route
helpers. The nature of the work performed must be viewed from a
perspective of the business or trade in its entirety [4] and not on a confined
scope.
The repeated rehiring of respondent workers and the continuing need for
their services clearly attest to the necessity or desirability of their services in
the regular conduct of the business or trade of petitioner company. The Court
of Appeals has found each of respondents to have worked for at least one
year with petitioner company. While this Court, in Brent School, Inc. vs.
Zamora,[5] has upheld the legality of a fixed-term employment, it has done
so, however, with a stern admonition that where from the circumstances it is
apparent that the period has been imposed to preclude the acquisition of
tenurial security by the employee, then it should be struck down as being
contrary to law, morals, good customs, public order and public policy. The
pernicious practice of having employees, workers and laborers, engaged for
a fixed period of few months, short of the normal six-month probationary
period of employment, and, thereafter, to be hired on a day-to-day basis,
mocks the law. Any obvious circumvention of the law cannot be
countenanced. The fact that respondent workers have agreed to be
employed on such basis and to forego the protection given to them on their
security of tenure, demonstrate nothing more than the serious problem of
impoverishment of so many of our people and the resulting unevenness
between labor and capital. A contract of employment is impressed with
public interest. The provisions of applicable statutes are deemed written into
the contract, and the parties are not at liberty to insulate themselves and
their relationships from the impact of labor laws and regulations by simply
contracting with each other.[6]
With respect to the Release, Waiver and Quitclaim executed by thirty-six (36)
of the original complainants, namely, Rommel Abad, Armando Amor, Bobby
Austero, Felix Avenido, Amado Badasan, Edmundo Bayos, Eduardo Bella, Jr.,
Mariano Caete, Carmelo Cea, Ernie Chavez, Randy Dechaves, Frederick De
Guzman, Renato De Ocampo, Ademar Estuita, Leonilo Galapin, Raymund
Gaudicos, Retchel Hautea, Larry Javier, Nelson Logrinio, Alberto Magtibay,
Frederick Magallano, Rogelio Malinis, Rodolfo Melgar, Silverio Mindajao,
Leonardo Mondina, Ruben Navales, Rey Pangilinan, Christopher Peralta,
Jimmy Reyes, Herminio Roflo, Michael Rubia, Noel Rubia, Roberto Tumomba,
Oliver Villaflor, and Joselito Villanueva, this Court finds the execution of the
same to be in order. During the pendency of the appeal with the Court of
Appeals, these thirty-six (36) complainants individually executed voluntarily

a release, waiver and quitclaim and received from petitioner company the
amount of fifteen thousand (P15,000.00) pesos each. The amount accords
with the disposition of the case by the voluntary arbitrator thusly:
WHEREFORE, above premises considered, the herein complaint is hereby
DISMISSED for lack of merit.
However, we cannot completely negate the fact that complainants did and
do actually render services to the Company. It is with this in mind and
considering the difficulty the complainants may face in looking for another
job in case they are no longer re-engaged that we direct the company to pay
complainants Fifteen Thousand Pesos each (P15,000.00) as financial
assistance. It is however understood that the financial assistance previously
extended by the Company to some of the complainants shall be deducted
from the financial assistance herein awarded.[7]
The receipt of the amount awarded by the voluntary arbitrator, as well as the
execution of a release, waiver and quitclaim, is, in effect, an acceptance of
said decision. There is nothing on record which could indicate that the
execution thereof by thirty-six (36) of the respondent workers has been
attended by fraud or deceit. While quitclaims executed by employees are
commonly frowned upon as being contrary to public policy and are
ineffective to bar claims for the full measure of their legal rights, there are,
however, legitimate waivers that represent a voluntary and reasonable
settlement of laborers claims which should be so respected by the Court as
the law between the parties.[8] Where the person making the waiver has done
so voluntarily, with a full understanding thereof, and the consideration for
the quitclaim is credible and reasonable, the transaction must be recognized
as being a valid and binding undertaking.Dire necessity is not an acceptable
ground for annulling the release, when it is not shown that the employee has
been forced to execute it.[9]
WHEREFORE, the questioned decision of the Court of Appeals, in CA-G.R. SP
No. 47872 is hereby AFFIRMED with MODIFICATION in that the Release,
Waiver and Quitclaim executed by the thirty-six (36) individual respondents
are hereby declared VALID and LEGAL.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION

G.R. No. 109114 September 14, 1993

HOLIDAY
INN
MANILA
and/or
HUBERT
LINER
and
BABY
DISQUITADO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Second Division) and
ELENA HONASAN, respondents.
Inocentes, De Leon, Leogardo, Atienza, Manaye & Azucena Law Office for
petitioners.
Florante M. Yambot for private respondent.

CRUZ, J.:
The employer has absolute discretion in hiring his employees in accordance
with his standards of competence and probity. This is his prerogative. Once
hired, however, the employees are entitled to the protection of the law even
during the probation period and more so after they have become members
of the regular force. The employer does not have the same freedom in the
hiring of his employees as in their dismissal.
Elena Honasan applied for employment with the Holiday Inn and was on April
15, 1991, accepted for "on-the-job training" as a telephone operator for a
period of three weeks. 1 For her services, she received food and
transportation allowance. 2 On May 13, 1992, after completing her training,
she was employed on a "probationary basis" for a period of six months
ending
November
12,
3
1991.

Her employment contract stipulated that the Hotel could terminate her
probationary employment at any time prior to the expiration of the six-month
period in the event of her failure (a) to learn or progress in her job; (b) to
faithfully observe and comply with the hotel rules and the instructions and
orders of her superiors; or (c) to perform her duties according to hotel
standards.
On November 8, 1991, four days before the expiration of the stipulated
deadline, Holiday Inn notified her of her dismissal, on the ground that her
performance had not come up to the standards of the Hotel. 4
Through counsel, Honasan filed a complaint for illegal dismissal, claiming
that she was already a regular employee at the time of her separation and so
was entitled to full security of tenure. 5 The complaint was dismissed on April
22, 1992 by the Labor Arbiter, 6 who held that her separation was justified
under Article 281 of the Labor Code providing as follows:
Probationary employment shall not exceed six (6) months from the date the
employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has
been engaged on a probationary basis may be terminated for a just cause or
when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee.
On appeal, this decision was reversed by the NLRC, which held that Honasan
had become a regular employee and so could not be dismissed as a
probationer. 7 In its own decision dated November 27, 1992, the NLRC
ordered the petitioners to reinstate Honasan "to her former position without
loss of seniority rights and other privileges with backwages without
deduction and qualification." Reconsideration was denied in a resolution
dated January 26, 1993. 8
The petitioners now fault the NLRC for having entertained Honasan's appeal
although it was filed out of time and for holding that Honasan was already a
regular employee at the time of her dismissal, which was made 4 days days
before the expiration of the probation period.
The petition has no merit.
On the timeliness of the appeal, it is well-settled that all notices which a
party is entitled to receive must be coursed through his counsel of record.
Consequently, the running of the reglementary period is reckoned from the
date of receipt of the judgment by the counsel of the appellant. 9 Notice to
the appellant himself is not sufficient notice. 10 Honasan's counsel received
the decision of the Labor Arbiter on May 18, 1992. 11 Before that, however,
the appeal had already been filed by Honasan herself, on May 8, 1992. 12 The
petitioners claim that she filed it on the thirteenth but this is irrelevant. Even
if the latter date was accepted, the appeal was nevertheless still filed on
time, in fact even before the start of the reglementary period.
On the issue of illegal dismissal, we find that Honasan was placed by the
petitioner on probation twice, first during her on-the-job training for three
weeks, and next during another period of six months, ostensibly in
accordance with Article 281. Her probation clearly exceeded the period of six
months prescribed by this article.
Probation is the period during which the employer may determine if the
employee is qualified for possible inclusion in the regular force. In the case at
bar, the period was for three weeks, during Honasan's on-the-job training.

When her services were continued after this training, the petitioners in effect
recognized that she had passed probation and was qualified to be a regular
employee.
Honasan was certainly under observation during her three-week on-the-job
training. If her services proved unsatisfactory then, she could have been
dropped as early as during that period. But she was not. On the contrary, her
services were continued, presumably because they were acceptable,
although she was formally placed this time on probation.
Even if it be supposed that the probation did not end with the three-week
period of on-the-job training, there is still no reason why that period should
not be included in the stipulated six-month period of probation. Honasan was
accepted for on-the-job training on April 15, 1991. Assuming that her
probation could be extended beyond that date, it nevertheless could
continue only up to October 15, 1991, after the end of six months from the
earlier date. Under this more lenient approach, she had become a regular
employee of Holiday Inn and acquired full security of tenure as of October
15, 1991.
The consequence is that she could no longer be summarily separated on the
ground invoked by the petitioners. As a regular employee, she had acquired
the protection of Article 279 of the Labor Code stating as follows:
Art. 279. Security of Tenure In cases of regular employment, the employer
shall not terminate the services of an employee except for a just cause or
when authorized by this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.
The grounds for the removal of a regular employee are enumerated in
Articles 282, 283 and 284 of the Labor Code. The procedure for such removal
is prescribed in Rule XIV, Book V of the Omnibus Rules Implementing the
Labor Code. These rules were not observed in the case at bar as Honasan
was simply told that her services were being terminated because they were
found to be unsatisfactory. No administrative investigation of any kind was
undertaken to justify this ground. She was not even accorded prior notice, let
alone a chance to be heard.
We find in the Hotel's system of double probation a transparent scheme to
circumvent the plain mandate of the law and make it easier for it to dismiss
its employees even after they shall have already passed probation. The
petitioners had ample time to summarily terminate Honasan's services
during her period of probation if they were deemed unsatisfactory. Not
having done so, they may dismiss her now only upon proof of any of the
legal grounds for the separation of regular employees, to be established
according to the prescribed procedure.
The policy of the Constitution is to give the utmost protection to the working
class when subjected to such maneuvers as the one attempted by the
petitioners. This Court is fully committed to that policy and has always been
quick to rise in defense of the rights of labor, as in this case.
WHEREFORE, the petition is DISMISSED, with costs against petitioners. It is
so ordered.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC

G.R. No. 96779 November 10, 1993

PINE CITY EDUCATIONAL CENTER and EUGENIO BALTAO, petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION)
and DANGWA BENTREZ, ROLAND PICART, APOLLO RIBAYA, SR.,
RUPERTA RIBAYA, VIRGINIA BOADO, CECILIA EMOCLING, JANE
BENTREZ, LEILA DOMINGUEZ, ROSE ANN BERMUDEZ and LUCIA
CHAN, respondents.

Tenefrancia, Agranzamendez, Liceralde & Associates for petitioners.

Reynaldo B. Cajucom for private respondents.

NOCON, J.:
The is a petition for certiorari seeking the reversal of the resolution of public
respondent National Labor Relations Commission dated November 29, 1990,
in NLRC Case No. 01-04-0056-89, which affirmed in toto the decision of the
Labor Arbiter dated February 28,1990.
The antecedent facts are, a follows:
Private respondents Dangwa Bentrez, Roland Picart, Apollo Ribaya, Sr.,
Ruperta Ribaya, Virginia Boado, Cecilia Emocling, Jane Bentrez, Leila
Dominguez, Rose Ann Bermudez and Lucia Chan were all employed as
teachers on probationary basis by petitioner Pines City Educational Center,
represented in this proceedings by its President, Eugenio Baltao. With the
exception of Jane Bentrez who was hired as a grade school teacher, the
remaining private respondents were hired as college instructors. All the
private respondents, except Roland Picart and Lucia Chan, signed contracts
of employment with petitioner for a fixed duration. On March 31, 1989, due
to the expiration of private respondents' contracts and their poor
performance as teachers, they were notified of petitioners' decision not to
renew their contracts anymore.
On April 10, 1989, private respondents filed a complaint for illegal dismissal
before the Labor Arbiter, alleging that their dismissals were without cause
and in violation of due process. Except for private respondent Leila
Dominguez who worked with petitioners for one semester, all other private
respondents were employed for one to two years. They were never informed
in writing by petitioners regarding the standards or criteria of evaluation so
as to enable them to meet the requirements for appointment as regular
employees. They were merely notified in writing by petitioners, through its
chancellor, Dra. Nimia R. Concepcion, of the termination of their respective
services as on March 31, 1989, on account of their below-par performance as
teachers.
For their part, petitioners contended that private respondents' separation
from employment, apart from their poor performance, was due to the
expiration of the periods stipulated in their respective contracts. In the case
of private respondent Dangwa Bentrez, the duration of his employment
contract was for one year, or beginning June, 1988 to March 1989 whereas in
the case of the other private respondents, the duration of their employment
contracts was for one semester, or beginning November, 1988 to March
1989. These stipulations were the laws that governed their relationships, and
there was nothing in said contracts which was contrary to law, morals, good
customs and public policy. They argued further that they cannot be
compelled o enter into new contracts with private respondents. they
concluded that the separation of private respondents from the service was
justified.
On February 28, 1990, the Labor Arbiter rendered judgment in favor of
private respondents, the dispositive portion of which reads:
WHEREFORE, in the light of the foregoing considerations, judgment is hereby
rendered ORDERING the respondents to reinstate the complainants
immediately to their former positions and to pay their full backwages and

other benefits and privileges without qualification and deduction from the
time they were dismissed up to their actual reinstatement.
Thus respondents should pay complainants the following:
BACKWAGES
NOTE: Computation covers only the period complainants were terminated up
to January 31, 1990 or 10 months and does not include backwages from
January 31, 1990 up to their actual reinstatement.
1) ROLAND PICART
a)
Latest
salary
per
b)
Multiplied
by
(March
31,
1989
to
January
31,

c) Equals backwages due P21,360.00

month
period
1990)
x

P2,136.00
covered
10
months

2) LUCIA CHAN
a)
Latest
salary
b)
Multiplied
by
period

c) Equals backwages due P16,000.00

per
covered

month
x

10

P1,600.00
months

per
covered

month
x

10

P1,648.24
months

per
covered

month
x

10

P1,856.00
months

per
covered

month
x

10

P1,648.00
months

per
covered

month
x

10

P2,600.00
months

per
covered

month
x

10

P1,700.00
months

per
covered

month
x

10

P1,315.44
months

3) LEILA DOMINGUEZ
a)
Latest
salary
b)
Multiplied
by
period

c) Equals backwages due P16,482.40

4) RUPERTA RIBAYA
a)
Latest
salary
b)
Multiplied
by
period

c) Equals backwages due P18,560.00

5) CECILIA EMOCLING
a)
Latest
salary
b)
Multiplied
by
period

c) Equals backwages due P16,480.00

6) ROSE ANN BERMUDEZ
a)
Latest
salary
b)
Multiplied
by
period

c) Equals backwages due P26,000.00

7) DANGWA BENTREZ
a)
Latest
salary
b)
Multiplied
by
period

c) Equals backwages due P17,000.00

8) JANE BENTREZ
a)
b)

Latest
ultiplied

salary
by
period


c) Equals backwages due P13,154.40
9) APOLLO RIBAYA
a)
Latest
salary
per
b)
Multiplied
by
period
covered

c) Equals backwages due P18,7500.00

month
x

10

P1,875.00
months

month
x

10

P1,648.24
months

10) VIRGINIA BOADO

a)
Latest
salary
b)
Multiplied
by
period

c) Equals backwages due P16,482.40

per
covered

SUMMARY
1)
Roland
Picart
2)
Lucia
Chan
3)
Leila
Dominguez
4)
Ruperta
Ribaya
5)
Cecilia
Emocling
6)
Rose
Ann
Bermudez
7)
Dangwa
Bentrez
8)
Jane
Bentrez
9)
Apollo
Ribaya
10)
Virginia
Boado

GRAND TOTAL (Backwages) P180,269.20

21,360.00
16,000.00
16,482.40
18,560.00
16,480.00
26,000.00
17,000.00
13,154.40
18,750.00
16,482.40

Complainants claims for indemnity pay, premium pay for holidays and rest
days, illegal deduction, 13th month pay and underpayment are hereby
DENIED for lack of merit.
SO ORDERED. 1
In support of this decision, the Labor Arbiter rationalized that the teacher's
contracts 2 are vague and do not include the specific description of duties
and assignments of private respondents. They do not categorically state that
there will be no renewal because their appointments automatically terminate
at the end of the semester. Petitioners did not present any written evidence
to substantiate their allegation that the Academic Committee has evaluated
private respondents' performance during their one semester employment.
On the contrary, they were hastily dismissed.
On appeal to the National Labor Relations Commission, the decision was
affirmed in toto in its resolution dated November 29, 1990, with the
additional reasoning that "the stipulation in the contract providing for a
definite period in the employment of complainant is obviously null and void,
as such stipulation directly assails the safeguards laid down in Article 280 (of
the Labor Code), 3 which explicitly abhors the consideration of written or oral
agreements pertaining to definite period in regular employments. 4 Hence,
the present petition for certiorari with prayer for the issuance of a temporary
restraining order.
As prayed for, this Court issued a temporary restraining order on March 11,
1991, enjoining respondents from enforcing the questioned resolution. 5
Petitioners raise this sole issue: "THAT THERE IS PRIMA FACIE EVIDENCE OF
GRAVE ABUSE OF DISCRETION ON THE PART OF THE LABOR ARBITER BY

WANTONLY, CAPRICIOUSLY AND MALICIOUSLY DISREGARDING PROVISIONS OF

THE LAW AND JURISPRUDENCE LAID DOWN IN DECISIONS OF THE
HONORABLE SUPREME COURT." 6
Petitioners reiterate their previous arguments, relying heavily in the case
of Brent School, Inc. et al., v. Zamora, et al. 7
It is quite easy to resolve the present controversy because the Brent case,
which is a product of extensive research, already provides the answer. We
were categorical therein that:
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 and 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 prevent 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 brought to bear upon the employee and absent
any other circumstances vitiating his consent, or where it satisfactorily
appears that the employer or 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 expressly stated by its framers;
it thus becomes pointless and arbitrary, unjust in its effects and apt to lead
to absurd and unintended consequences. (Emphasis supplied.)
The ruling was reiterated in Pakistan International Airlines Corporation v.
Ople, etc., et al. 8 and La Sallete of Santiago, Inc. v. NLRC, et al. 9
In the present case, however, We have to make a distinction.
Insofar as the private respondents who knowingly and voluntarily agreed
upon fixed periods of employment are concerned, their services were
lawfully terminated by reason of the expiration of the periods of their
respective contracts. These are Dangwa Bentrez, Apollo Ribaya, Sr., Ruperta
Ribaya, Virginia Boado, Cecilia Emocling, Jose Bentrez, Leila Dominguez and
Rose Ann Bermudez. Thus, public respondent committed grave abuse of
discretion in affirming the decision of the Labor Arbiter ordering the
reinstatement and payment of full backwages and other benefits and
privileges.
With respect to private respondents Roland Picart and Lucia Chan, both of
whom did not sign any contract fixing the periods of their employment nor to
have knowingly and voluntarily agreed upon fixed periods of employment,
petitioners had the burden of proving that the termination of their services
was legal. As probationary employees, they are likewise protected by the
security of tenure provision of the Constitution. Consequently, they cannot
be removed from their positions unless for cause. 10 On the other hand,
petitioner contended that base don the evaluation of the Academic
Committee their performance as teachers was poor. The Labor Arbiter,
however, was not convinced. Thus he found as follows:
Respondents likewise aver that the Academic Committee has evaluated their
performance during their one semester employment (see Annexes "M" to "X"
of complainants' position paper). However, they did not present any written
proofs or evidence to support their allegation. 11

xxx xxx xxx

There is absolutely nothing in the record which will show that the
complainants were afforded even an iota of chance to refute respondents'
allegations that the complainants did not meet the reasonable standards and
criteria set by the school. . . . 12
We concur with these factual findings, there being no showing that they were
resolved arbitrarily. 13 Thus, the order for their reinstatement and payment of
full backwages and other benefits and privileges from the time they were
dismissed up to their actual reinstatement is proper, conformably with Article
279 of the Labor Code, as amended by Section 34 of Republic Act No.
6715, 14 which took effect on March 21, 1989. 15 It should be noted that
private respondents Roland Picart and Lucia Chan were dismissed illegally on
March 31, 1989, or after the effectivity of said amendatory law. However, in
ascertaining the total amount of backwages payable to them, we go back to
the rule prior to the mercury drug rule 16 that the total amount derived from
employment elsewhere by the employee from the date of dismissal up to the
date of reinstatement, if any, should be deducted therefrom. 17 We restate
the underlying reason that employees should not be permitted to enrich
themselves at the expense of their employer. 18 In addition, the law abhors
double compensation. 19 to this extent, our ruling in Alex Ferrer, et al., v.
NLRC, et al., G.R. No. 100898, promulgated on July 5, 1993, is hereby
modified.
Public respondent cannot claim not knowing the ruling in the Brent case
because in its questioned resolution, it is stated that one of the cases
invoked by petitioners in their appeal is said case. 20 This notwithstanding, it
disregarded Our ruling therein without any reason at all and expressed the
erroneous view that:
The agreement of the parties fixing a definite date for the termination of the
employment relations is contrary to the specific provision of Article 280.
being contrary to law, the agreement cannot be legitimized. . . . 21
Stare decisis et no quieta movere. Once a case ha been decided one way,
then another case, involving exactly the same point at issue, should be
decided in the same manner. Public respondent had no choice on the matter.
It could not have ruled in any other way. This Tribunal having spoken in
the Brent case, its duty was to obey. 22Let it be warned that to defy its
decisions is to court contempt. 23
WHEREFORE, the resolution of public respondent National Labor Relations
Commission dated November 29, 1990 is hereby MODIFIED. private
respondents Roland Picart and Lucia Chan are ordered reinstated without loss
of seniority rights and other privileges and their backwages paid in full
inclusive of allowances, and to their other benefits or their monetary
equivalent pursuant to Article 279 of the Labor Code, as amended by Section
34 of Republic Act No. 6715, subject to deduction of income earned
elsewhere during the period of dismissal, if any, to be computed from the
time they were dismissed up to the time of their actual reinstatement. the
rest of the Labor Arbiter's decision dated February 28, 1990, as affirmed by
the NLRC is set aside. The temporary restraining order issued on March 11,
1991 is made permanent.
SO ORDERED.