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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 of the Court of


[1]

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. One was [2]

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, but was extended for two months
[3]

when she garnered a performance rating of 3.15. Her contract was again
[4]

renewed for two months or up to December 16, 1992, when she received
[5]

a performance rating of 3.8. After the expiration of her third contract, it was
[6]

extended anew, for three months, that is, from January 4, 1993 to April 4,
[7]

1993.
After garnering a performance rating of 3.4, the respondents contract
[8]

was extended for another three months, that is, from April 5, 1993 to June
4, 1993. She, however, incurred five absences in the month of April, three
[9]
absences in the month of May and four absences in the month of
June. Line supervisor Shirley F. Velayo asked the respondent why she
[10]

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, in accordance with the Company
[11]

Rules and Regulations. Thus, the respondents contract of employment


[12]

was no longer renewed.

The Complaint of the Respondent

The respondent filed a complaint before the National Capital Region


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

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

The Ruling of the Labor Arbiter and the NLRC

On June 26, 1997, the Labor Arbiter rendered a decision dismissing the
complaint for lack of merit, thus:

IN THE LIGHT OF ALL THE FOREGOING, the complaint is hereby dismissed


for lack of merit. The respondent is, however, ordered to extend to the complainant
a send off award or financial assistance in the amount equivalent to one-month
salary on ground of equity.
[15]

The Labor Arbiter declared that the respondent, who had rendered less
than seventeen months of service to the petitioner, cannot be said to have
acquired regular status. The petitioner and the Philips Semiconductor
Phils., Inc., Workers Union had agreed in their Collective Bargaining
Agreement (CBA) that a contractual employee would acquire a regular
employment status only upon completion of seventeen months of
service. This was also reflected in the minutes of the meeting of April 6,
1993 between the petitioner and the union.Further, a contractual employee
was required to receive a performance rating of at least 3.0, based on
output, quality of work, attendance and work attitude, to qualify for contract
renewal.In the 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 said
requirement, the petitioner was justified in not renewing her contract.
The respondent filed a motion for reconsideration of the resolution, but
on January 12, 1999, the NLRC resolved to deny the same.
The Case Before the Court of Appeals

Dissatisfied, the respondent filed a petition for certiorari under Rule 65


before the Court of Appeals, docketed as CA-G.R. SP No. 52149, for the
reversal of the resolutions of the NLRC.
On October 11, 1999, the appellate court rendered a decision reversing
the decisions of the NLRC and the Labor Arbiter and granting the
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 of December 31,
1992.
The petitioner stresses that the operation of its business as a
semiconductor company requires the use of highly technical equipment
which, in turn, calls for certain special skills for their use. Consequently, the
petitioner, in the exercise of its best technical and business judgment, has
set a standard of performance for workers as well as the level of skill,
efficiency, competence and production which the workers must pass to
qualify as a regular employee. In rating the performance of the worker, the
following appraisal factors are considered by the respondent company as
essential: (1) output (40%), (2) quality (30%), (3) attendance (15%), and (4)
work attitude (15%). The rate of 3.0 was set as the passing grade. As
testified to by the 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. In tandem with Article 281 of the Labor Code,
[18]

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. The primary
[20]

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. If [21]

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. The law does not
[22]

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. She [24]

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. By operation of law, then, the respondent had attained the
[25]

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 and reaffirmed in subsequent rulings is misplaced, precisely in
[29]

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, we sustained the private respondents averments
[31]

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 being t
he rule, the aforementioned CBA should be binding only upon private respondent a
nd its regular employees who were duly represented by the bargaining union. The
agreement embodied in the Minutes of Meeting between the representative union
and private respondent, providing that contractual employees shall become regular
employees only after seventeen months of employment, cannot bind
petitioner. Such a provision runs contrary to law not only because contractual
employees do not form part of the collective bargaining unit which entered into the
CBA with private respondent but also because of the Labor Code provision on
regularization. The law explicitly states that an employee who had rendered at least
one year of service, whether such service is continuous or broken, shall be
considered a regular employee. The period set by law is one year. The seventeen
months provided by the Minutes of Meeting is obviously much
longer.The principle is well settled that the law forms part of and is read into every
contract without the need for the parties expressly making reference to it. [35]

On the second and third issues, we agree with the appellate court that
the respondent was dismissed by the petitioner without the requisite notice
and without any formal investigation.Given the factual milieu in this case,
the 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 that:
[36]

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.
G.R. No. 176419 November 27, 2013

GMA NETWORK, INC., Petitioner,


vs.
CARLOS P. PABRIGA, GEOFFREY F. ARIAS, KIRBY N. CAMPO, ARNOLD L. LAGAHIT, and
ARMANDO A. CATUBIG, Respondents.

DECISION

LEONARDO-DE CASTRO, J.:

This is a Petition for Review on Certiorari filed by petitioner GMA Network Inc. assailing the Decision1 of the
Court of Appeals dated September 8, 2006 and the subsequent Resolution2 dated January 22 2007
denying reconsideration in CA-G.R. SP No. 73652.

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

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

NAME DATE HIRED POSITION


Carlos Pabriga 2 May 1997 Television Technicians
Geoffrey Arias 2 May 1997 Television Technicians
Kirby Campo 1 Dec. 1993 Television Technicians
Arnold Laganit 11 Feb. 1996 Television Technicians
Armand Catubig 2 March 1997 Television Technicians

Private respondents were engaged by petitioner to perform the following activities, to wit:

1) Manning of Technical Operations Center:

(a) Responsible for the airing of local commercials; and

(b) Logging/monitoring of national commercials (satellite)

2) Acting as Transmitter/VTR men:

(a) Prepare tapes for local airing;

(b) Actual airing of commercials;

(c) Plugging of station promo;

(d) Logging of transmitter reading; and

(e) In case of power failure, start up generator set to resume program;

3) Acting as Maintenance staff;

(a) Checking of equipment;

(b) Warming up of generator;


(c) Filling of oil, fuel, and water in radiator; and

4) Acting as Cameramen

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

On 9 August 1999, private respondents were summoned to the office of petitioner’s Area Manager, Mrs.
Susan Aliño, and they were made to explain why they filed the complaint. The next day, private
respondents were barred from entering and reporting for work without any notice stating the reasons
therefor.

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

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

On 15 September 1999, private respondents sent another letter to Mr. Bustria reiterating their request to
work but the same was totally ignored. On 8 October 1999, private respondents filed an amended
complaint raising the following additional issues: 1) Unfair Labor Practice; 2) Illegal dismissal; and 3)
Damages and Attorney’s fees.

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

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

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

WHEREFORE, the foregoing premises considered, judgment is hereby rendered dismissing the complaints
for illegal dismissal and unfair labor practice.

Respondents are, however, directed to pay the following complainants their proportionate 13th month pay,
to wit:

1. Kirby Campo P 7,716.04

2. Arnold Lagahit 7,925.98

3. Armand Catubig 4,233.68

4. Carlos Pabriga 4,388.19

5. Geoffrey Arias 4,562.01

₱28,826.14

10% Attorney’s fees 2,882.61

GRAND TOTAL ₱31,708.75

All other claims are, hereby, dismissed for failure to substantiate the same.4
Respondents appealed to the National Labor Relations Commission (NLRC). The NLRC reversed the
Decision of the Labor Arbiter, and held thus:

WHEREFORE, we make the following findings:

a) All complainants are regular employees with respect to the particular activity to which they were
assigned, until it ceased to exist. As such, they are entitled to payment of separation pay computed at one
(1) month salary for every year of service;

b) They are not entitled to overtime pay and holiday pay; and

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

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

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

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari. On September 8, 2006, the
appellate court rendered its Decision denying the petition for lack of merit.

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

I.

THE COURT OF APPEALS GRAVELY ERRED FINDING RESPONDENTS ARE REGULAR


EMPLOYEES OF THE PETITIONER AND ARE NOT PROJECT EMPLOYEES.

II.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING SEPARATION PAY TO


RESPONDENTS ABSENT A FINDING THAT RESPONDENTS WERE ILLEGALLY DISMISSED.

III.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING NIGHT SHIFT DIFFERENTIAL


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

IV.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING ATTORNEY’S FEES TO


RESPONDENTS.6

The parties having extensively elaborated on their positions in their respective memoranda, we proceed to
dispose of the issues raised.

Five Classifications of Employment

At the outset, we should note that the nature of the employment is determined by law, regardless of any
contract expressing otherwise. The supremacy of the law over the nomenclature of the contract and the
stipulations contained therein is to bring to life the policy enshrined in the Constitution to afford full
protection to labor. Labor contracts, being imbued with public interest, are placed on a higher plane than
ordinary contracts and are subject to the police power of the State.7
Respondents claim that they are regular employees of petitioner GMA Network, Inc. The latter, on the other
hand, interchangeably characterize respondents’ employment as project and fixed period/fixed term
employment. There is thus the need to clarify the foregoing terms.

The terms regular employment and project employment are taken from Article 280 of the Labor Code,
which also speaks of casual and seasonal employment:

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

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided,
That, any employee who has rendered at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the activity in which he is employed and his
employment shall continue while such activity actually exist.

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

Whether respondents are regular or project employees

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

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

On the other hand, the activities of project employees may or may not be usually necessary or desirable in
the usual business or trade of the employer, as we have discussed in ALU-TUCP v. National Labor
Relations Commission,9and recently reiterated in Leyte Geothermal Power Progressive Employees Union-
ALU-TUCP v. Philippine National Oil Company-Energy Development Corporation.10 In said cases, we
clarified the term "project" in the test for determining whether an employee is a regular or project employee:

It is evidently important to become clear about the meaning and scope of the term "project" in the present
context. The "project" for the carrying out of which "project employees" are hired would ordinarily have
some relationship to the usual business of the employer. Exceptionally, the "project" undertaking might not
have an ordinary or normal relationship to the usual business of the employer. In this latter case, the
determination of the scope and parameters of the "project" becomes fairly easy. It is unusual (but still
conceivable) for a company to undertake a project which has absolutely no relationship to the usual
business of the company; thus, for instance, it would be an unusual steel-making company which would
undertake the breeding and production of fish or the cultivation of vegetables. From the viewpoint,
however, of the legal characterization problem here presented to the Court, there should be no difficulty in
designating the employees who are retained or hired for the purpose of undertaking fish culture or the
production of vegetables as "project employees," as distinguished from ordinary or "regular employees," so
long as the duration and scope of the project were determined or specified at the time of engagement of
the "project employees." For, as is evident from the provisions of Article 280 of the Labor Code, quoted
earlier, the principal test for determining whether particular employees are properly characterized as
"project employees" as distinguished from "regular employees," is whether or not the "project employees"
were assigned to carry out a "specific project or undertaking," the duration (and scope) of which were
specified at the time the employees were engaged for that project.

In the realm of business and industry, we note that "project" could refer to one or the other of at least two
(2) distinguishable types of activities. Firstly, a project could refer to a particular job or undertaking that is
within the regular or usual business of the employer company, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company. Such job or undertaking begins and ends
at determined or determinable times. The typical example of this first type of project is a particular
construction job or project of a construction company. A construction company ordinarily carries out two or
more [distinct] identifiable construction projects: e.g., a twenty-five-storey hotel in Makati; a residential
condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for
the carrying out of one of these separate projects, the scope and duration of which has been determined
and made known to the employees at the time of employment, are properly treated as "project employees,"
and their services may be lawfully terminated at completion of the project.

The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular
business of the corporation. Such a job or undertaking must also be identifiably separate and distinct from
the ordinary or regular business operations of the employer. The job or undertaking also begins and ends
at determined or determinable times. x x x.11 (Emphases supplied, citation omitted.)

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

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

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

1) Manning of Technical Operations Center:

(a) Responsible for the airing of local commercials; and

(b) Logging/monitoring of national commercials (satellite)

2) Acting as Transmitter/VTR men:


(a) Prepare tapes for local airing;

(b) Actual airing of commercials;

(c) Plugging of station promo;

(d) Logging of transmitter reading; and

(e) In case of power failure, start up generator set to resume program;

3) Acting as Maintenance staff;

(a) Checking of equipment;

(b) Warming up of generator;

(c) Filling of oil, fuel, and water in radiator; and

4) Acting as Cameramen14

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

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

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

There is another reason why we should rule in favor of private respondents. Nowhere in the records is
there any showing that petitioner reported the completion of its projects and the dismissal of private
respondents in its finished projects to the nearest Public Employment Office as per Policy Instruction No.
2015 of the Department of Labor and Employment [DOLE]. Jurisprudence abounds with the consistent rule
that the failure of an employer to report to the nearest Public Employment Office the termination of its
workers’ services everytime a project or a phase thereof is completed indicates that said workers are not
project employees.

In the extant case, petitioner should have filed as many reports of termination as there were projects
actually finished if private respondents were indeed project employees, considering that the latter were
hired and again rehired from 1996 up to 1999. Its failure to submit reports of termination cannot but
sufficiently convince us further that private respondents are truly regular employees. Important to note is
the fact that private respondents had rendered more than one (1) year of service at the time of their
dismissal which overturns petitioner’s allegations that private respondents were hired for a specific or fixed
undertaking for a limited period of time.16 (Citations omitted.)
We are not unaware of the decisions of the Court in Philippine Long Distance Telephone Company v.
Ylagan17 and ABS-CBN Broadcasting Corporation v. Nazareno18 which held that the employer’s failure to
report the termination of employees upon project completion to the DOLE Regional Office having
jurisdiction over the workplace within the period prescribed militates against the employer’s claim of project
employment, even outside the construction industry. We have also previously stated in another case that
the Court should not allow circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. 20/Department Order No. 19, thereby allowing the prevention of acquisition of tenurial
security by project employees who have already gained the status of regular employees by the employer’s
conduct.19

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

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

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

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

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

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

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

Whether the requisites of a valid fixed term employment are met

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

Cognizant of the possibility of abuse in the utilization of fixed-term employment contracts, we emphasized
in Brent that where from the circumstances it is apparent that the periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down as contrary to public policy or
morals.27 We thus laid down indications or criteria under which "term employment" cannot be said to be in
circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties
without any force, duress, or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent; or

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

These indications, which must be read together, make the Brent doctrine applicable only in a few special
cases wherein the employer and employee are on more or less in equal footing in entering into the
contract. The reason for this is evident: when a prospective employee, on account of special skills or
market forces, is in a position to make demands upon the prospective employer, such prospective
employee needs less protection than the ordinary worker. Lesser limitations on the parties’ freedom of
contract are thus required for the protection of the employee. These indications were applied in Pure Foods
Corporation v. National Labor Relations Commission,29 where we discussed the patent inequality between
the employer and employees therein:

[I]t could not be supposed that private respondents and all other so-called "casual" workers of [the
petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract. Cannery
workers are never on equal terms with their employers. Almost always, they agree to any terms of an
employment contract just to get employed considering that it is difficult to find work given their ordinary
qualifications. Their freedom to contract is empty and hollow because theirs is the freedom to starve if they
refuse to work as casual or contractual workers. Indeed, to the unemployed, security of tenure has no
value. It could not then be said that petitioner and private respondents "dealt with each other on more or
less equal terms with no moral dominance whatever being exercised by the former over the latter.

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

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

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

In sum, we affirm the findings of the NLRC and the Court of Appeals that respondents are regular
employees of petitioner. As regular employees, they are entitled to security of tenure and therefore their
1âw phi 1

services may be terminated only for just or authorized causes. Since petitioner failed to prove any just or
authorized cause for their termination, we are constrained to affirm the findings of the NLRC and the Court
of Appeals that they were illegally dismissed.

Separation Pay, Night Shift Differential and Attorney’s Fees

Petitioner admits that respondents were not given separation pay and night shift differential. Petitioner,
however, claims that respondents were not illegally dismissed and were therefore not entitled to separation
pay. As regards night shift differential, petitioner claims that its admission in its August 23, 1999 letter as to
the nonpayment thereof is qualified by its allegation that respondents are not entitled thereto. Petitioner
points out that respondents failed to specify the period when such benefits are due, and did not present
additional evidence before the NLRC and the Court of Appeals.32
In light, however, of our ruling that respondents were illegally dismissed, we affirm the findings of the NLRC
and the Court of Appeals that respondents are entitled to separation pay in lieu of reinstatement. We quote
with approval the discussion of the Court of Appeals:

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

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

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

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

Petitioner, however, is correct that the award of attorney's fees is contrary to jurisprudence. In De las
Santos v. Jebsen Maritime Inc.,36 we held:

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

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

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

SO ORDERED.
[G.R. No. 118475. November 29, 2000]

ELVIRA ABASOLO, 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 by-products. 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 of Mercado, 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 re-drying 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 does not specifically define one year of service for
[31]

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.
G.R. No. 204944-45, December 03, 2014

FUJI TELEVISION NETWORK, INC., Petitioner, v. ARLENE S. ESPIRITU, Respondent.

DECISION

LEONEN, J.:

It is the burden of the employer to prove that a person whose services it pays for is an independent contractor rather
than a regular employee with or without a fixed term. That a person has a disease does not per se entitle the
employer to terminate his or her services. Termination is the last resort. At the very least, a competent public health
authority must certify that the disease cannot be cured within six (6) months, even with appropriate treatment.

We decide this petition for review1 on certiorari filed by Fuji Television Network, Inc., seeking the reversal of the Court
of Appeals’ decision2 dated June 25, 2012, affirming with modification the decision3 of the National Labor Relations
Commission.

In 2005, Arlene S. Espiritu (“Arlene”) was engaged by Fuji Television Network, Inc. (“Fuji”) as a news
correspondent/producer4 “tasked to report Philippine news to Fuji through its Manila Bureau field office.” 5Arlene’s
employment contract initially provided for a term of one (1) year but was successively renewed on a yearly basis with
salary adjustment upon every renewal.6 chanRoblesvirtual Lawlib ra ry

Sometime in January 2009, Arlene was diagnosed with lung cancer.7 She informed Fuji about her condition. In turn,
the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene “that the company will have a problem renewing her
contract”8 since it would be difficult for her to perform her job.9 She “insisted that she was still fit to work as certified
by her attending physician.”10 chanRoblesvirtual Lawlibra ry

After several verbal and written communications,11 Arlene and Fuji signed a non-renewal contract on May 5, 2009
where it was stipulated that her contract would no longer be renewed after its expiration on May 31, 2009. The
contract also provided that the parties release each other from liabilities and responsibilities under the employment
contract.12 chanRoblesvirt ual Lawlib rary

In consideration of the non-renewal contract, Arlene “acknowledged receipt of the total amount of US$18,050.00
representing her monthly salary from March 2009 to May 2009, year-end bonus, mid-year bonus, and separation
pay.”13 However, Arlene affixed her signature on the non-renewal contract with the initials “U.P.” for “under
protest.”14chanRoblesvirtual Lawlib ra ry

On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a complaint for illegal dismissal and
attorney’s fees with the National Capital Region Arbitration Branch of the National Labor Relations Commission. She
alleged that she was forced to sign the non-renewal contract when Fuji came to know of her illness and that Fuji
withheld her salaries and other benefits for March and April 2009 when she refused to sign.15 chanRoblesvirtual Lawli brary

Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it was only upon
signing that she was given her salaries and bonuses, in addition to separation pay equivalent to four (4) years. 16 chanRoblesvi rtual Lawl ibra ry

In the decision17 dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed Arlene’s
complaint.18 Citing Sonza v. ABS-CBN19 and applying the four-fold test, the Labor Arbiter held that Arlene was not
Fuji’s employee but an independent contractor.20 chanRoblesvirt ual Lawlib rary

Arlene appealed before the National Labor Relations Commission. In its decision dated March 5, 2010, the National
Labor Relations Commission reversed the Labor Arbiter’s decision.21 It held that Arlene was a regular employee with
respect to the activities for which she was employed since she continuously rendered services that were deemed
necessary and desirable to Fuji’s business.22 The National Labor Relations Commission ordered Fuji to pay Arlene
backwages, computed from the date of her illegal dismissal.23 The dispositive portion of the decision reads: chanroblesvi rtua llawlib ra ry

WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal. The Decision of the
Labor Arbiter dated 19 September 2009 is hereby REVERSED and SET ASIDE, and a new one is issued ordering
respondents-appellees to pay complainant-appellant backwages computed from the date of her illegal dismissal until
finality of this Decision.

SO ORDERED.24

Arlene and Fuji filed separate motions for reconsideration.25 Both motions were denied by the National Labor Relations
Commission for lack of merit in the resolution dated April 26, 2010.26 chanRoblesvi rtual Lawli bra ry

From the decision of the National Labor Relations Commission, both parties filed separate petitions for
certiorari27 before the Court of Appeals. The Court of Appeals consolidated the petitions and considered the following
issues for resolution: chanroblesvi rt uallawl ibra ry

1) Whether or not Espiritu is a regular employee or a fixed-term contractual employee;

2) Whether or not Espiritu was illegally dismissed; and


3) Whether or not Espiritu is entitled to damages and attorney’s fees.28

In the assailed decision, the Court of Appeals affirmed the National Labor Relations Commission with the modification
that Fuji immediately reinstate Arlene to her position as News Producer without loss of seniority rights, and pay her
backwages, 13th-month pay, mid-year and year-end bonuses, sick leave and vacation leave with pay until reinstated,
moral damages, exemplary damages, attorney’s fees, and legal interest of 12% per annum of the total monetary
awards.29chanRoblesvirtual Lawli bra ry

The Court of Appeals ruled that: chanrob lesvi rtua llawlib ra ry

WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki is DENIED and the
petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated March 5, 2010 of the National Labor
Relations Commission, 6th Division in NLRC NCR Case No. 05-06811-09 and its subsequent Resolution dated April 26,
2010 are hereby AFFIRMED with MODIFICATIONS, as follows:

Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her position as News
Producer without loss of seniority rights and privileges and to pay her the following: chanroblesv irt uallawl ibra ry

1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of dismissal), until reinstated;

2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until reinstated;

3. One and a half (1½) months pay or $2,850.00 as midyear bonus per year from the date of dismissal, until
reinstated;

4. One and a half (1½) months pay or $2,850.00 as year-end bonus per year from the date of dismissal, until
reinstated;

5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until reinstated; and

6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of dismissal, until reinstated.

7. The amount of P100,000.00 as moral damages;

8. The amount of P50,000.00 as exemplary damages;

9. Attorney’s fees equivalent to 10% of the total monetary awards herein stated; and

10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed from May 5, 2009, until
their full satisfaction.

The Labor Arbiter is hereby DIRECTED to make another re-computation of the above monetary awards consistent
with the above directives.

SO ORDERED.30

In arriving at the decision, the Court of Appeals held that Arlene was a regular employee because she was engaged to
perform work that was necessary or desirable in the business of Fuji,31 and the successive renewals of her fixed-term
contract resulted in regular employment.32 chanRoblesvirtual Lawlib ra ry

According to the Court of Appeals, Sonza does not apply in order to establish that Arlene was an independent
contractor because she was not contracted on account of any peculiar ability, special talent, or skill.33 The fact that
everything used by Arlene in her work was owned by Fuji negated the idea of job contracting.34 chanRoblesvi rtua lLawl ibra ry

The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to comply with the requirements
of substantive and procedural due process necessary for her dismissal since she was a regular employee. 35 chanRoblesvirtual Lawlib ra ry

The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily and that the contract was a
mere subterfuge by Fuji to secure its position that it was her choice not to renew her contract. She was left with no
choice since Fuji was decided on severing her employment.36 chanRoblesvirt ual Lawlib rary

Fuji filed a motion for reconsideration that was denied in the resolution37 dated December 7, 2012 for failure to raise
new matters.38 chanRoblesvirt ual Lawlib rary

Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in affirming with modification
the National Labor Relations Commission’s decision, holding that Arlene was a regular employee and that she was
illegally dismissed. Fuji also questioned the award of monetary claims, benefits, and damages.39 chanRoblesvi rtua lLawl ibra ry

Fuji points out that Arlene was hired as a stringer, and it informed her that she would remain one. 40 She was hired as
an independent contractor as defined in Sonza.41 Fuji had no control over her work.42 The employment contracts were
executed and renewed annually upon Arlene’s insistence to which Fuji relented because she had skills that
distinguished her from ordinary employees.43 Arlene and Fuji dealt on equal terms when they negotiated and entered
into the employment contracts.44 There was no illegal dismissal because she freely agreed not to renew her fixed-term
contract as evidenced by her e-mail correspondences with Yoshiki Aoki.45 In fact, the signing of the non-renewal
contract was not necessary to terminate her employment since “such employment terminated upon expiration of her
contract.”46Finally, Fuji had dealt with Arlene in good faith, thus, she should not have been awarded damages. 47 chanRoblesvi rtua lLawl ibra ry

Fuji alleges that it did not need a permanent reporter since the news reported by Arlene could easily be secured from
other entities or from the internet.48 Fuji “never controlled the manner by which she performed her functions.”49 It was
Arlene who insisted that Fuji execute yearly fixed-term contracts so that she could negotiate for annual increases in
her pay.50 chanRoblesvirtu alLaw lib rary

Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in March 2009,
and one (1) day in April 2009.51 Despite the provision in her employment contract that sick leaves in excess of 30
days shall not be paid, Fuji paid Arlene her entire salary for the months of March, April, and May; four (4) months of
separation pay; and a bonus for two and a half months for a total of US$18,050.00.52 Despite having received the
amount of US$18,050.00, Arlene still filed a case for illegal dismissal.53 chanRoblesvi rtua lLawl ibra ry

Fuji further argues that the circumstances would show that Arlene was not illegally dismissed. The decision to not
renew her contract was mutually agreed upon by the parties as indicated in Arlene’s e-mail54 dated March 11, 2009
where she consented to the non-renewal of her contract but refused to sign anything.55 Aoki informed Arlene in an e-
mail56 dated March 12, 2009 that she did not need to sign a resignation letter and that Fuji would pay Arlene’s salary
and bonus until May 2009 as well as separation pay.57 chanRoblesvi rtual Lawli bra ry

Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal agreement that she agreed to sign
this time.58 This attached version contained a provision that Fuji shall re-hire her if she was still interested to work for
Fuji.59 For Fuji, Arlene’s e-mail showed that she had the power to bargain.60 chanRoblesvirtual Lawlib rary

Fuji then posits that the Court of Appeals erred when it held that the elements of an employer-employee relationship
are present, particularly that of control;61 that Arlene’s separation from employment upon the expiration of her
contract constitutes illegal dismissal;62 that Arlene is entitled to reinstatement;63and that Fuji is liable to Arlene for
damages and attorney’s fees.64 chanRoblesvirt ual Lawlib rary

This petition for review on certiorari under Rule 45 was filed on February 8, 2013.65 On February 27, 2013, Arlene filed
a manifestation66 stating that this court may not take jurisdiction over the case since Fuji failed to authorize Corazon
E. Acerden to sign the verification.67 Fuji filed a comment on the manifestation68 on March 9, 2013.

Based on the arguments of the parties, there are procedural and substantive issues for resolution:

I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory of the verification
and certification of non-forum shopping of the petition, had no authority to sign the verification and
certification on behalf of Fuji;

II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was committed by the
National Labor Relations Commission when it ruled that Arlene was a regular employee, not an independent
contractor, and that she was illegally dismissed; and

III. Whether the Court of Appeals properly modified the National Labor Relations Commission’s decision by
awarding reinstatement, damages, and attorney’s fees.

The petition should be dismissed.

I
Validity of the verification and certification against forum shopping

In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized to sign the verification and
certification of non-forum shopping because Mr. Shuji Yano was empowered under the secretary’s certificate to
delegate his authority to sign the necessary pleadings, including the verification and certification against forum
shopping.69 chanRoblesvi rtual Lawl ibra ry

On the other hand, Arlene points out that the authority given to Mr. Shuji Yano and Mr. Jin Eto in the secretary’s
certificate is only for the petition for certiorari before the Court of Appeals.70 Fuji did not attach any board resolution
authorizing Corazon or any other person to file a petition for review on certiorari with this court.71 Shuji Yano and Jin
Eto could not re-delegate the power that was delegated to them.72 In addition, the special power of attorney executed
by Shuji Yano in favor of Corazon indicated that she was empowered to sign on behalf of Shuji Yano, and not on behalf
of Fuji.73
chanRoblesvirt ual Lawlib rary

The Rules of Court requires the


submission of verification and
certification against forum shopping

Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while Section 5 of the
same rule provides the requirement of certification against forum shopping. These sections state: chanroblesvi rtua llawli bra ry

SEC. 4. Verification. — Except when otherwise specifically required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and
correct of his knowledge and belief.

A pleading required to be verified which contains a verification based on “information and belief,” or upon “knowledge,
information and belief,” or lacks a proper verification, shall be treated as an unsigned pleading.

SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall certify under oath in the
complaint or other initiatory pleading asserting a claim for relief or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the
same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status
thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he
shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading
has been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon
motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings
therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal
actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall
be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for
administrative sanctions.

Section 4(e) of Rule 4574 requires that petitions for review should “contain a sworn certification against forum
shopping as provided in the last paragraph of section 2, Rule 42.” Section 5 of the same rule provides that failure to
comply with any requirement in Section 4 is sufficient ground to dismiss the petition.

Effects of non-compliance

Uy v. Landbank75 discussed the effect of non-compliance with regard to verification and stated that: chanroblesv irt uallawl ibra ry

[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is simply a
condition affecting the form of pleading, the non-compliance of which does not necessarily render the pleading fatally
defective. Verification is simply intended to secure an assurance that the allegations in the pleading are true and
correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith.
The court may order the correction of the pleading if the verification is lacking or act on the pleading although it is not
verified, if the attending circumstances are such that strict compliance with the rules may be dispensed with in order
that the ends of justice may thereby be served.76 (Citations omitted)

Shipside Incorporated v. Court of Appeals77 cited the discussion in Uy and differentiated its effect from non-compliance
with the requirement of certification against forum shopping: chanroblesv irt uallawl ibra ry

On the other hand, the lack of certification against forum shopping is generally not curable by the submission thereof
after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the failure of the
petitioner to submit the required documents that should accompany the petition, including the certification against
forum shopping, shall be sufficient ground for the dismissal thereof. The same rule applies to certifications against
forum shopping signed by a person on behalf of a corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation.78 (Emphasis supplied)

Effects of substantial compliance


with the requirement of verification
and certification against forum shopping

Although the general rule is that failure to attach a verification and certification against forum shopping is a ground for
dismissal, there are cases where this court allowed substantial compliance.

In Loyola v. Court of Appeals,79 petitioner Alan Loyola submitted the required certification one day after filing his
electoral protest.80 This court considered the subsequent filing as substantial compliance since the purpose of filing the
certification is to curtail forum shopping.81
chanRoblesvirt ual Lawlib rary

In LDP Marketing, Inc. v. Monter,82 Ma. Lourdes Dela Peña signed the verification and certification against forum
shopping but failed to attach the board resolution indicating her authority to sign.83 In a motion for reconsideration,
LDP Marketing attached the secretary’s certificate quoting the board resolution that authorized Dela Peña.84 Citing
Shipside, this court deemed the belated submission as substantial compliance since LDP Marketing complied with the
requirement; what it failed to do was to attach proof of Dela Peña’s authority to sign.85 chanRoblesvirtua lLawl ibra ry

Havtor Management Phils., Inc. v. National Labor Relations Commission86 and General Milling Corporation v. National
Labor Relations Commission87 involved petitions that were dismissed for failure to attach any document showing that
the signatory on the verification and certification against forum-shopping was authorized.88 In both cases, the
secretary’s certificate was attached to the motion for reconsideration.89 This court considered the subsequent
submission of proof indicating authority to sign as substantial compliance.90 chanRoblesvirtua lLaw lib rary

Altres v. Empleo91 summarized the rules on verification and certification against forum shopping in this manner: chanroble svirtuall awlib rary
For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential pronouncements . . .
respecting non-compliance with the requirement on, or submission of defective, verification and certification against
forum shopping:

1) A distinction must be made between non-compliance with the


requirement on or submission of defective verification, and non-
compliance with the requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does
not necessarily render the pleading fatally defective. The court may
order its submission or correction or act on the pleading if the
attending circumstances are such that strict compliance with the Rule
may be dispensed with in order that the ends of justice may be
served thereby.
3) Verification is deemed substantially complied with when one who has
ample knowledge to swear to the truth of the allegations in the
complaint or petition signs the verifcation, and when matters alleged
in the petition have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith
or a defect therein, unlike in verification, is generally not curable by
its subsequent submission or correction thereof, unless there is a
need to relax the Rule on the ground of “substantial compliance” or
presence of “special circumstances or compelling reasons.”
5) The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case; otherwise, those who did not sign
will be dropped as parties to the case. Under reasonable or justifiable
circumstances, however, as when all the plaintiffs or petitioners share
a common interest and invoke a common cause of action or defense,
the signature of only one of them in the certification against forum
shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by
the party-pleader, not by his counsel. If, however, for reasonable or
justifiable reasons, the party-pleader is unable to sign, he must
execute a Special Power of Attorney designating his counsel of record
to sign on his behalf.92
There was substantial compliance
by Fuji Television Network, Inc.

Being a corporation, Fuji exercises its power to sue and be sued through its board of directors or duly authorized
officers and agents. Thus, the physical act of signing the verification and certification against forum shopping can only
be done by natural persons duly authorized either by the corporate by-laws or a board resolution.93 chanRoblesvi rtual Lawli bra ry

In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s certificate,94 authorizing Shuji Yano and
Jin Eto to represent and sign for and on behalf of Fuji.95 The secretary’s certificate was duly authenticated96 by Sulpicio
Confiado, Consul-General of the Philippines in Japan. Likewise attached to the petition is the special power of attorney
executed by Shuji Yano, authorizing Corazon to sign on his behalf.97 The verification and certification against forum
shopping was signed by Corazon.98 chanRoblesvi rtual Lawli bra ry

Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review should be dismissed
because Corazon was not duly authorized to sign the verification and certification against forum shopping.

Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly authorized to sign. On the basis of
the secretary’s certificate, Shuji Yano was empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states: chanroblesv irtuallaw lib rary

(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against Philippines’ National Labor
Relations Commission (“NLRC”) and Arlene S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB
No. 05-06811-00 and entitled “Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki”, and
participate in any other subsequent proceeding that may necessarily arise therefrom, including but not limited to the
filing of appeals in the appropriate venue;

(b) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are hereby authorized, to verify and execute the
certification against non-forum shopping which may be necessary or required to be attached to any pleading to [sic]
submitted to the Court of Appeals; and the authority to so verify and certify for the Corporation in favor of the said
persons shall subsist and remain effective until the termination of the said case;

....

(d) Mr. Shuji Yano and Mr. Jin Eto be authorized, as they are hereby authorized, to represent and appear on behalf
the [sic] Corporation in all stages of the [sic] this case and in any other proceeding that may necessarily arise
thereform [sic], and to act in the Corporation’s name, place and stead to determine, propose, agree, decide, do, and
perform any and all of the following:

1. The possibility of amicable settlement or of submission to alternative mode of dispute resolution;


2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and documents; and
5. Such other matters as may aid in the prompt disposition of the action.99 (Emphasis in the original; Italics
omitted)

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rollera as
his attorneys-in-fact.100 The special power of attorney states: chanroblesvi rt uallawli b rary

That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku, Tokyo, 137-8088
Japan, and being the representative of Fuji TV, INc., [sic] (evidenced by the attached Secretary’s Certificate) one of
the respondents in NLRC-NCR Case No. 05-06811-00 entitled “Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki”, and subsequently docketed before the Court of Appeals as C.A. G.R. S.P. No. 114867
(Consolidated with SP No. 114889) do hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden and
Mr. Moises A. Rollera as my true and lawful attorneys-in-fact for me and my name, place and stead to act and
represent me in the above-mentioned case, with special power to make admission/s and stipulations and/or to make
and submit as well as to accept and approve compromise proposals upon such terms and conditions and under such
covenants as my attorney-in-fact may deem fit, and to engage the services of Villa Judan and Cruz Law Offices as
the legal counsel to represent the Company in the Supreme Court;

The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and deliver such papers or documents
as may be necessary in furtherance of the power thus granted, particularly to sign and execute the verification and
certification of non-forum shopping needed to be filed.101 (Emphasis in the original)

In its comment102 on Arlene’s manifestation, Fuji argues that Shuji Yano could further delegate his authority because
the board resolution empowered him to “act in the Corporation’s name, place and stead to determine, propose, agree,
decided [sic], do and perform any and all of the following: . . . such other matters as may aid in the prompt
disposition of the action.”103 chanRoblesvirtual Lawlib ra ry

To clarify, Fuji attached a verification and certification against forum shopping, but Arlene questions Corazon’s
authority to sign. Arlene argues that the secretary’s certificate empowered Shuji Yano to file a petition for certiorari
before the Court of Appeals, and not a petition for review before this court, and that since Shuji Yano’s authority was
delegated to him, he could not further delegate such power. Moreover, Corazon was representing Shuji Yano in his
personal capacity, and not in his capacity as representative of Fuji.

A review of the board resolution quoted in the secretary’s certificate shows that Fuji shall “file a Petition for Certiorari
with the Court of Appeals”104 and “participate in any other subsequent proceeding that may necessarily arise
therefrom, including but not limited to the filing of appeals in the appropriate venue,”105and that Shuji Yano and Jin
Eto are authorized to represent Fuji “in any other proceeding that may necessarily arise thereform [sic].”106 As pointed
out by Fuji, Shuji Yano and Jin Eto were also authorized to “act in the Corporation’s name, place and stead to
determine, propose, agree, decide, do, and perform any and all of the following: . . . 5. Such other matters as may aid
in the prompt disposition of the action.”107 chanRoblesvi rtual Lawli bra ry

Considering that the subsequent proceeding that may arise from the petition for certiorari with the Court of Appeals is
the filing of a petition for review with this court, Fuji substantially complied with the procedural requirement.

On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892 of the Civil Code of the
Philippines states:
chanroblesvi rtua llawlib ra ry

ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;

(2) When he was given such power, but without designating the person, and the person appointed was notoriously
incompetent or insolvent.

All acts of the substitute appointed against the prohibition of the principal shall be void.

The secretary’s certificate does not state that Shuji Yano is prohibited from appointing a substitute. In fact, he is
empowered to do acts that will aid in the resolution of this case.

This court has recognized that there are instances when officials or employees of a corporation can sign the
verification and certification against forum shopping without a board resolution. In Cagayan Valley Drug Corporation v.
CIR,108 it was held that: chanroblesv irtuallawl ib rary

In sum, we have held that the following officials or employees of the company can sign the verification and
certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a
corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment
Specialist in a labor case.

While the above cases109 do not provide a complete listing of authorized signatories to the verification and certification
required by the rules, the determination of the sufficiency of the authority was done on a case to case basis. The
rationale applied in the foregoing cases is to justify the authority of corporate officers or representatives of the
corporation to sign the verification or certificate against forum shopping, being ‘in a position to verify the truthfulness
and correctness of the allegations in the petition.’110

Corazon’s affidavit111 states that she is the “office manager and resident interpreter of the Manila Bureau of Fuji
Television Network, Inc.”112 and that she has “held the position for the last twenty-three years.”113 chanRoblesvi rtua lLawl ibra ry

As the office manager for 23 years, Corazon can be considered as having knowledge of all matters in Fuji’s Manila
Bureau Office and is in a position to verify “the truthfulness and the correctness of the allegations in the
Petition.”114
chanRoblesvirt ual Lawlib rary

Thus, Fuji substantially complied with the requirements of verification and certification against forum shopping.

Before resolving the substantive issues in this case, this court will discuss the procedural parameters of a Rule 45
petition for review in labor cases.

II
Procedural parameters of petitions for review in labor cases

Article 223 of the Labor Code115 does not provide any mode of appeal for decisions of the National Labor Relations
Commission. It merely states that “[t]he decision of the Commission shall be final and executory after ten (10)
calendar days from receipt thereof by the parties.” Being final, it is no longer appealable. However, the finality of the
National Labor Relations Commission’s decisions does not mean that there is no more recourse for the parties.

In St. Martin Funeral Home v. National Labor Relations Commission,116 this court cited several cases117and rejected
the notion that this court had no jurisdiction to review decisions of the National Labor Relations Commission. It stated
that this court had the power to review the acts of the National Labor Relations Commission to see if it kept within its
jurisdiction in deciding cases and also as a form of check and balance.118 This court then clarified that judicial review of
National Labor Relations Commission decisions shall be by way of a petition for certiorari under Rule 65. Citing the
doctrine of hierarchy of courts, it further ruled that such petitions shall be filed before the Court of Appeals. From the
Court of Appeals, an aggrieved party may file a petition for review on certiorari under Rule 45.

A petition for certiorari under Rule 65 is an original action where the issue is limited to grave abuse of discretion. As
an original action, it cannot be considered as a continuation of the proceedings of the labor tribunals.

On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal where the issue is limited to
questions of law. In labor cases, a Rule 45 petition is limited to reviewing whether the Court of Appeals correctly
determined the presence or absence of grave abuse of discretion and deciding other jurisdictional errors of the
National Labor Relations Commission.119 chanRoblesvirtual Lawlib rary

In Odango v. National Labor Relations Commission,120 this court explained that a petition for certiorari is an
extraordinary remedy that is “available only and restrictively in truly exceptional cases” 121 and that its sole office “is
the correction of errors of jurisdiction including commission of grave abuse of discretion amounting to lack or excess of
jurisdiction.”122 A petition for certiorari does not include a review of findings of fact since the findings of the National
Labor Relations Commission are accorded finality.123 In cases where the aggrieved party assails the National Labor
Relations Commission’s findings, he or she must be able to show that the Commission “acted capriciously and
whimsically or in total disregard of evidence material to the controversy.” 124 chanRoblesvirtua lLaw lib rary

When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by way of a petition for
review under Rule 45, only questions of law may be decided upon. As held in Meralco Industrial v. National Labor
Relations Commission:125 chanRoblesvi rtual Lawli bra ry
This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court in a petition for review on
certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law, not of fact, unless the
factual findings complained of are completely devoid of support from the evidence on record, or the assailed judgment
is based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial agencies like the NLRC, when
affirmed by the Court of Appeals, are conclusive upon the parties and binding on this Court.126

Career Philippines v. Serna,127 citing Montoya v. Transmed,128 is instructive on the parameters of judicial review under
Rule 45:chanroble svirtuallaw lib rary

As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the particular
parameters of a Rule 45 appeal from the CA’s Rule 65 decision on a labor case, as follows: ChanRoblesVi rtua lawlib rary

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 for certiorari 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.129 (Emphasis in the original)

Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v. AIcaraz130 discussed that in petitions for review
under Rule 45, “the Court simply determines whether the legal correctness of the CA’s finding that the NLRC ruling . . .
had basis in fact and in Iaw.”131 In this kind of petition, the proper question to be raised is, “Did the CA correctly
determine whether the NLRC committed grave abuse of discretion in ruling on the case?”132 chanRoblesvi rtual Lawli bra ry

Justice Brion’s dissenting opinion also laid down the following guidelines: chanroblesvi rt uallawl ibra ry

If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence, then no grave abuse of
discretion exists and the CA should so declare and, accordingly, dismissthe petition. If grave abuse of discretion
exists, then the CA must grant the petition and nullify the NLRC ruling, entering at the same time the ruling that is
justified under the evidence and the governing law, rules and jurisprudence. In our Rule 45 review, this Court
must deny the petition if it finds that the CA correctly acted.133 (Emphasis in the original)

These parameters shall be used in resolving the substantive issues in this petition. cralawred

III
Determination of employment status; burden of proof

In this case, there is no question that Arlene rendered services to Fuji. However, Fuji alleges that Arlene was an
independent contractor, while Arlene alleges that she was a regular employee. To resolve this issue, we ascertain
whether an employer-employee relationship existed between Fuji and Arlene.

This court has often used the four-fold test to determine the existence of an employer-employee relationship. Under
the four-fold test, the “control test” is the most important.134 As to how the elements in the four-fold test are proven,
this court has discussed that: chanroblesvi rtua llawli brary

[t]here is no hard and fast rule designed to establish the aforesaid elements. Any competent and relevant evidence to
prove the relationship may be admitted. Identification cards, cash vouchers, social security registration, appointment
letters or employment contracts, payrolls, organization charts, and personnel lists, serve as evidence of employee
status.135

If the facts of this case vis-à-vis the four-fold test show that an employer-employee relationship existed, we then
determine the status of Arlene’s employment, i.e., whether she was a regular employee. Relative to this, we shall
analyze Arlene’s fixed-term contract and determine whether it supports her argument that she was a regular
employee, or the argument of Fuji that she was an independent contractor. We shall scrutinize whether the nature of
Arlene’s work was necessary and desirable to Fuji’s business or whether Fuji only needed the output of her work. If
the circumstances show that Arlene’s work was necessary and desirable to Fuji, then she is presumed to be a regular
employee. The burden of proving that she was an independent contractor lies with Fuji.

In labor cases, the quantum of proof required is substantial evidence.136 “Substantial evidence” has been defined as
“such amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.” 137 chanRoblesvirtual Lawlib rary

If Arlene was a regular employee, we then determine whether she was illegally dismissed. In complaints for illegal
dismissal, the burden of proof is on the employee to prove the fact of dismissal.138 Once the employee establishes the
fact of dismissal, supported by substantial evidence, the burden of proof shifts to the employer to show that there was
a just or authorized cause for the dismissal and that due process was observed.139 chanRoblesvirtua lLawl ibra ry

IV
Whether the Court of Appeals correctly affirmed the National Labor Relations Commission’s finding that
Arlene was a regular employee

Fuji alleges that Arlene was an independent contractor, citing Sonza v. ABS-CBN and relying on the following facts: (1)
she was hired because of her skills; (2) her salary was US$1,900.00, which is higher than the normal rate; (3) she
had the power to bargain with her employer; and (4) her contract was for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forced to sign the non-renewal agreement, considering that she sent an
email with another version of the non-renewal agreement.140 Further, she is not entitled to moral damages and
attorney’s fees because she acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits.141 chanRoblesvirtual Lawlib rary

Arlene argues that she was a regular employee because Fuji had control and supervision over her work. The news
events that she covered were all based on the instructions of Fuji.142 She maintains that the successive renewal of her
employment contracts for four (4) years indicates that her work was necessary and desirable.143 In addition, Fuji’s
payment of separation pay equivalent to one (1) month’s pay per year of service indicates that she was a regular
employee.144 To further support her argument that she was not an independent contractor, she states that Fuji owns
the laptop computer and mini-camera that she used for work.145 chanRoblesvi rtua lLawl ibra ry

Arlene also argues that Sonza is not applicable because she was a plain reporter for Fuji, unlike Jay Sonza who was a
news anchor, talk show host, and who enjoyed a celebrity status.146 chanRoblesvirt ual Lawlib rary

On her illness, Arlene points out that it was not a ground for her dismissal because her attending physician certified
that she was fit to work.147 chanRoblesvirtual Lawli bra ry

Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to its terms, but
because she was not in a position to reject the non-renewal agreement. Further, she badly needed the salary withheld
for her sustenance and medication.148 She posits that her acceptance of separation pay does not bar filing of a
complaint for illegal dismissal.149 chanRoblesvi rtua lLawl ibra ry

Article 280 of the Labor Code provides that: chanroblesvi rtual lawlib rary

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 exist.

This provision classifies employees into regular, project, seasonal, and casual. It further classifies regular employees
into two kinds: (1) those “engaged to perform activities which are usually necessary or desirable in the usual business
or trade of the employer”; and (2) casual employees who have “rendered at least one year of service, whether such
service is continuous or broken.”

Another classification of employees, i.e., employees with fixed-term contracts, was recognized in Brent School, Inc. v.
Zamora150 where this court discussed that: chanroblesvi rtual lawlib rary

Logically, the decisive determinant in the 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.”151 (Emphasis in the original)

This court further discussed that there are employment contracts where “a fixed term is an essential and natural
appurtenance”152 such as overseas employment contracts and officers in educational institutions.153 chanRoblesvi rtual Lawl ibra ry

Distinctions among fixed-term


employees, independent contractors,
and regular employees

GMA Network, Inc. v. Pabriga154 expounded the doctrine on fixed-term contracts laid down in Brent in the following
manner: chanroblesvi rtua llawli bra ry

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

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.
These indications, which must be read together, make the Brent doctrine applicable only in a few special cases
wherein the employer and employee are on more or less in equal footing in entering into the contract. The reason for
this is evident: when a prospective employee, on account of special skills or market forces, is in a position to make
demands upon the prospective employer, such prospective employee needs less protection than the ordinary worker.
Lesser limitations on the parties’ freedom of contract are thus required for the protection of the
employee.155 (Citations omitted)

For as long as the guidelines laid down in Brent are satisfied, this court will recognize the validity of the fixed-term
contract.

In Labayog v. M.Y. San Biscuits, Inc.,156 this court upheld the fixed-term employment of petitioners because from the
time they were hired, they were informed that their engagement was for a specific period. This court stated that: chanroblesvi rtua llawlib ra ry

[s]imply put, petitioners were not regular employees. While their employment as mixers, packers and machine
operators was necessary and desirable in the usual business of respondent company, they were employed temporarily
only, during periods when there was heightened demand for production. Consequently, there could have been no
illegal dismissal when their services were terminated on expiration of their contracts. There was even no need for
notice of termination because they knew exactly when their contracts would end. Contracts of employment for a fixed
period terminate on their own at the end of such period.

Contracts of employment for a fixed period are not unlawful. What is objectionable is the practice of some scrupulous
employers who try to circumvent the law protecting workers from the capricious termination of
employment.157 (Citation omitted)

Caparoso v. Court of Appeals158 upheld the validity of the fixed-term contract of employment. Caparoso and Quindipan
were hired as delivery men for three (3) months. At the end of the third month, they were hired on a monthly basis.
In total, they were hired for five (5) months. They filed a complaint for illegal dismissal.159 This court ruled that there
was no evidence indicating that they were pressured into signing the fixed-term contracts. There was likewise no proof
that their employer was engaged in hiring workers for five (5) months only to prevent regularization. In the absence of
these facts, the fixed-term contracts were upheld as valid.160 chanRoblesvirt ualLaw li brary

On the other hand, an independent contractor is defined as: chanroble svirtuallaw lib rary

. . . one who carries on a distinct and independent business and undertakes to perform the job, work, or service on its
own account and under one’s own responsibility according to one’s own manner and method, free from the control and
direction of the principal in all matters connected with the performance of the work except as to the results thereof.161

In view of the “distinct and independent business” of independent contractors, no employer-employee relationship
exists between independent contractors and their principals.

Independent contractors are recognized under Article 106 of the Labor Code: chanroblesvi rt uallawl ibra ry

Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the
performance of the former’s work, the employees of the contractor and of the latter’s subcontractor, if any, shall be
paid in accordance with the provisions of this Code.

....

The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he may make
appropriate distinctions between labor-only contracting and job contracting as well as differentiations within these
types of contracting and determine who among the parties involved shall be considered the employer for purposes of
this Code, to prevent any violation or circumvention of any provision of this Code.

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 person 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.

In Department Order No. 18-A, Series of 2011, of the Department of Labor and Employment, a contractor is defined
as having:chanroblesv irtuallaw lib rary

Section 3. . . .

....

(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor the performance or
completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job,
work or service is to be performed or completed within or outside the premises of the principal.

This department order also states that there is a trilateral relationship in legitimate job contracting and subcontracting
arrangements among the principal, contractor, and employees of the contractor. There is no employer-employee
relationship between the contractor and principal who engages the contractor’s services, but there is an employer-
employee relationship between the contractor and workers hired to accomplish the work for the principal. 162 chanRoblesvirt ual Lawlib rary

Jurisprudence has recognized another kind of independent contractor: individuals with unique skills and talents that
set them apart from ordinary employees. There is no trilateral relationship in this case because the independent
contractor himself or herself performs the work for the principal. In other words, the relationship is bilateral.

In Orozco v. Court of Appeals,163 Wilhelmina Orozco was a columnist for the Philippine Daily Inquirer. This court ruled
that she was an independent contractor because of her “talent, skill, experience, and her unique viewpoint as a
feminist advocate.”164 In addition, the Philippine Daily Inquirer did not have the power of control over Orozco, and she
worked at her own pleasure.165 chanRoblesvirt ual Lawlib rary

Semblante v. Court of Appeals166 involved a masiador167 and a sentenciador.168 This court ruled that “petitioners
performed their functions as masiador and sentenciador free from the direction and control of respondents”169 and that
the masiador and sentenciador “relied mainly on their ‘expertise that is characteristic of the cockfight
gambling.’”170 Hence, no employer-employee relationship existed.

Bernarte v. Philippine Basketball Association171 involved a basketball referee. This court ruled that “a referee is an
independent contractor, whose special skills and independent judgment are required specifically for such position and
cannot possibly be controlled by the hiring party.”172 chanRoblesvirtual Lawlib ra ry

In these cases, the workers were found to be independent contractors because of their unique skills and talents and
the lack of control over the means and methods in the performance of their work.

In other words, there are different kinds of independent contractors: those engaged in legitimate job contracting and
those who have unique skills and talents that set them apart from ordinary employees.

Since no employer-employee relationship exists between independent contractors and their principals, their contracts
are governed by the Civil Code provisions on contracts and other applicable laws.173 chanRoblesvirt ualLaw lib rary

A contract is defined as “a meeting of minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service.”174 Parties are free to stipulate on terms and conditions in
contracts as long as these “are not contrary to law, morals, good customs, public order, or public policy.”175 This
presupposes that the parties to a contract are on equal footing. They can bargain on terms and conditions until they
are able to reach an agreement.

On the other hand, contracts of employment are different and have a higher level of regulation because they are
impressed with public interest. Article XIII, Section 3 of the 1987 Constitution provides full protection to labor: chanroblesvi rtua llawli bra ry

Article XIII. Social Justice and Human Rights

....

Labor

Section 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure,
humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.

The State shall promote the principle of shared responsibility between workers and employers and the preferential use
of voluntary modes in settling disputes, including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share
in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and
growth.

Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil Code states: chanroblesv irtuallaw lib rary

ART. 1700. The relations between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws
on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and
similar subjects.

In contracts of employment, the employer and the employee are not on equal footing. Thus, it is subject to regulatory
review by the labor tribunals and courts of law. The law serves to equalize the unequal. The labor force is a special
class that is constitutionally protected because of the inequality between capital and labor.176 This presupposes that
the labor force is weak.

However, the level of protection to labor should vary from case to case; otherwise, the state might appear to be too
paternalistic in affording protection to labor. As stated in GMA Network, Inc. v. Pabriga,the ruling in Brent applies in
cases where it appears that the employer and employee are on equal footing.177 This recognizes the fact that not all
workers are weak. To reiterate the discussion in GMA Network v. Pabriga: chanroble svi rtual lawlib rary

The reason for this is evident: when a prospective employee, on account of special skills or market forces, is in a
position to make demands upon the prospective employer, such prospective employee needs less protection than the
ordinary worker. Lesser limitations on the parties’ freedom of contract are thus required for the protection of the
employee.178

The level of protection to labor must be determined on the basis of the nature of the work, qualifications of the
employee, and other relevant circumstances.

For example, a prospective employee with a bachelor’s degree cannot be said to be on equal footing with a grocery
bagger with a high school diploma. Employees who qualify for jobs requiring special qualifications such as “[having] a
Master’s degree” or “[having] passed the licensure exam” are different from employees who qualify for jobs that
require “[being a] high school graduate; with pleasing personality.” In these situations, it is clear that those with
special qualifications can bargain with the employer on equal footing. Thus, the level of protection afforded to these
employees should be different.

Fuji’s argument that Arlene was an independent contractor under a fixed-term contract is contradictory. Employees
under fixed-term contracts cannot be independent contractors because in fixed-term contracts, an employer-employee
relationship exists. The test in this kind of contract is not the necessity and desirability of the employee’s activities,
“but the day certain agreed upon by the parties for the commencement and termination of the employment
relationship.”179 For regular employees, the necessity and desirability of their work in the usual course of the
employer’s business are the determining factors. On the other hand, independent contractors do not have employer-
employee relationships with their principals.

Hence, before the status of employment can be determined, the existence of an employer-employee relationship must
be established.

The four-fold test180 can be used in determining whether an employer-employee relationship exists. The elements of
the four-fold test are the following: (1) the selection and engagement of the employee; (2) the payment of wages; (3)
the power of dismissal; and (4) the power of control, which is the most important element.181 chanRoblesvirtual Lawlib rary

The “power of control” was explained by this court in Corporal, Sr. v. National Labor Relations Commission:182 chanRoblesvirtual Lawlib ra ry

The power to control refers to the existence of the power and not necessarily to the actual exercise thereof, nor is it
essential for the employer to actually supervise the performance of duties of the employee. It is enough that the
employer has the right to wield that power.183 (Citation omitted)

Orozco v. Court of Appeals further elucidated the meaning of “power of control” and stated the following: chanroble svirtual lawlib rary

Logically, the line should be drawn between rules that merely serve as guidelines towards the achievement of the
mutually desired result without dictating the means or methods to be employed in attaining it, and those that control
or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which address both the result and
the means used to achieve it. . . .184 (Citation omitted)

In Locsin, et al. v. Philippine Long Distance Telephone Company,185 the “power of control” was defined as “[the] right
to control not only the end to be achieved but also the means to be used in reaching such end.” 186 chanRoblesvi rtua lLawl ibra ry

Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit-Murillo v. Court of Appeals187 in determining
whether Arlene was an independent contractor or a regular employee.

In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved newscasters and anchors.
However, Sonza was held to be an independent contractor, while Dumpit-Murillo was held to be a regular employee.

Comparison of the Sonza and


Dumpit-Murillo cases using
the four-fold test

Sonza was engaged by ABS-CBN in view of his “unique skills, talent and celebrity status not possessed by ordinary
employees.”188 His work was for radio and television programs.189 On the other hand, Dumpit-Murillo was hired by ABC
as a newscaster and co-anchor.190 chanRoblesvi rtua lLawl ibra ry

Sonza’s talent fee amounted to P317,000.00 per month, which this court found to be a substantial amount that
indicated he was an independent contractor rather than a regular employee.191 Meanwhile, Dumpit-Murillo’s monthly
salary was P28,000.00, a very low amount compared to what Sonza received.192 chanRoblesvirtual Lawlib ra ry

Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of contract. There was no
indication that he could be terminated based on just or authorized causes under the Labor Code. In addition, ABS-CBN
continued to pay his talent fee under their agreement, even though his programs were no longer
broadcasted.193 Dumpit-Murillo was found to have been illegally dismissed by her employer when they did not renew
her contract on her fourth year with ABC.194 chanRoblesvirt ual Lawlib rary

In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how he appeared on television,
or how he sounded on radio.195 All that Sonza needed was his talent.196 Further, “ABS-CBN could not terminate or
discipline SONZA even if the means and methods of performance of his work . . . did not meet ABS-CBN’s
approval.”197 In Dumpit-Murillo, the duties and responsibilities enumerated in her contract was a clear indication that
ABC had control over her work.198 chanRoblesvirtual Lawlib rary
Application of the four-fold test

The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling of the National
Labor Relations Commission finding that Arlene was a regular employee. Arlene was hired by Fuji as a news producer,
but there was no showing that she was hired because of unique skills that would distinguish her from ordinary
employees. Neither was there any showing that she had a celebrity status. Her monthly salary amounting to
US$1,900.00 appears to be a substantial sum, especially if compared to her salary when she was still connected with
GMA.199 Indeed, wages may indicate whether one is an independent contractor. Wages may also indicate that an
employee is able to bargain with the employer for better pay. However, wages should not be the conclusive factor in
determining whether one is an employee or an independent contractor.

Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment contract. 200 Her
contract also indicated that Fuji had control over her work because she was required to work for eight (8) hours from
Monday to Friday, although on flexible time.201 Sonza was not required to work for eight (8) hours, while Dumpit-
Murillo had to be in ABC to do both on-air and off-air tasks.

On the power to control, Arlene alleged that Fuji gave her instructions on what to report.202 Even the mode of
transportation in carrying out her functions was controlled by Fuji. Paragraph 6 of her contract states: chanroblesvi rtual lawlib rary

6. During the travel to carry out work, if there is change of place or change of place of work, the train, bus, or
public transport shall be used for the trip. If the Employee uses the private car during the work and there is
an accident the Employer shall not be responsible for the damage, which may be caused to the Employee.203

Thus, the Court of Appeals did not err when it upheld the findings of the National Labor Relations Commission that
Arlene was not an independent contractor.

Having established that an employer-employee relationship existed between Fuji and Arlene, the next questions for
resolution are the following: Did the Court of Appeals correctly affirm the National Labor Relations Commission that
Arlene had become a regular employee? Was the nature of Arlene’s work necessary and desirable for Fuji’s usual
course of business?

Arlene was a regular employee


with a fixed-term contract

The test for determining regular employment is whether there is a reasonable connection between the employee’s
activities and the usual business of the employer. Article 280 provides that the nature of work must be “necessary or
desirable in the usual business or trade of the employer” as the test for determining regular employment. As stated
in ABS-CBN Broadcasting Corporation v. Nazareno:204 chanRoblesvirtual Lawlib ra ry

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.205

However, there may be a situation where an employee’s work is necessary but is not always desirable in the usual
course of business of the employer. In this situation, there is no regular employment.

In San Miguel Corporation v. National Labor Relations Commission,206 Francisco de Guzman was hired to repair
furnaces at San Miguel Corporation’s Manila glass plant. He had a separate contract for every furnace that he repaired.
He filed a complaint for illegal dismissal three (3) years after the end of his last contract.207 In ruling that de Guzman
did not attain the status of a regular employee, this court explained: chanroble svirtuallaw lib rary

Note that the plant where private respondent was employed for only seven months is engaged in the manufacture of
glass, an integral component of the packaging and manufacturing business of petitioner. The process of manufacturing
glass requires a furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed term
employees in having said furnaces repaired since said activity is not regularly performed. Said furnaces are to be
repaired or overhauled only in case of need and after being used continuously for a varying period of five (5) to ten
(10) years.

In 1990, one of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and
separate from petitioner's business of manufacturing glass. For this purpose, petitioner must hire workers to
undertake the said repair and upgrading. . . .

....

Clearly, private respondent was hired for a specific project that was not within the regular business of the corporation.
For petitioner is not engaged in the business of repairing furnaces. Although the activity was necessary to enable
petitioner to continue manufacturing glass, the necessity therefor arose only when a particular furnace reached the
end of its life or operating cycle. Or, as in the second undertaking, when a particular furnace required an emergency
repair. In other words, the undertakings where private respondent was hired primarily as helper/bricklayer have
specified goals and purposes which are fulfilled once the designated work was completed. Moreover, such undertakings
were also identifiably separate and distinct from the usual, ordinary or regular business operations of petitioner, which
is glass manufacturing. These undertakings, the duration and scope of which had been determined and made known
to private respondent at the time of his employment, clearly indicated the nature of his employment as a project
employee.208

Fuji is engaged in the business of broadcasting,209 including news programming.210 It is based in Japan211 and has
overseas offices to cover international news.212 chanRoblesvi rtual Lawli bra ry

Based on the record, Fuji’s Manila Bureau Office is a small unit213 and has a few employees.214 As such, Arlene had to
do all activities related to news gathering. Although Fuji insists that Arlene was a stringer, it alleges that her
designation was “News Talent/Reporter/Producer.”215 chanRoblesvirt ual Lawlib rary

A news producer “plans and supervises newscast . . . [and] work[s] with reporters in the field planning and gathering
information. . . .”216 Arlene’s tasks included “[m]onitoring and [g]etting [n]ews [s]tories, [r]eporting interviewing
subjects in front of a video camera,”217 “the timely submission of news and current events reports pertaining to the
Philippines[,] and traveling [sic] to [Fuji’s] regional office in Thailand.”218 She also had to report for work in Fuji’s
office in Manila from Mondays to Fridays, eight (8) hours per day.219 She had no equipment and had to use the
facilities of Fuji to accomplish her tasks.

The Court of Appeals affirmed the finding of the National Labor Relations Commission that the successive renewals of
Arlene’s contract indicated the necessity and desirability of her work in the usual course of Fuji’s business. Because of
this, Arlene had become a regular employee with the right to security of tenure.220 The Court of Appeals ruled that: chanroble svirtual lawlib rary

Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She was hired for the
primary purpose of news gathering and reporting to the television network’s headquarters. Espiritu was not contracted
on account of any peculiar ability or special talent and skill that she may possess which the network desires to make
use of. Parenthetically, if it were true that Espiritu is an independent contractor, as claimed by Fuji, the fact that
everything that she uses to perform her job is owned by the company including the laptop computer and mini camera
discounts the idea of job contracting.221

Moreover, the Court of Appeals explained that Fuji’s argument that no employer-employee relationship existed in view
of the fixed-term contract does not persuade because fixed-term contracts of employment are strictly
construed.222 Further, the pieces of equipment Arlene used were all owned by Fuji, showing that she was a regular
employee and not an independent contractor.223 chanRoblesvirtual Lawlib ra ry

The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts that were successively
renewed for four (4) years.224 This court held that “[t]his repeated engagement under contract of hire is indicative of
the necessity and desirability of the petitioner’s work in private respondent ABC’s business.”225 chanRoblesvirtua lLawli bra ry

With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the Court of Appeals cited Philips
Semiconductors, Inc. v. Fadriquela226 and held that where an employee’s contract “had been continuously extended or
renewed to the same position, with the same duties and remained in the employ without any interruption,”227 then
such employee is a regular employee. The continuous renewal is a scheme to prevent regularization. On this basis, the
Court of Appeals ruled in favor of Arlene.

As stated in Price, et al. v. Innodata Corp., et al.:228 chanRoblesvi rtua lLawl ibra ry

The employment status of a person is defined and prescribed by law and not by what the parties say it should be.
Equally important to consider is that a contract of employment is impressed with public interest such that labor
contracts must yield to the common good. Thus, 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.229 (Citations omitted)

Arlene’s contract indicating a fixed term did not automatically mean that she could never be a regular employee. This
is precisely what Article 280 seeks to avoid. The ruling in Brent remains as the exception rather than the general rule.

Further, an employee can be a regular employee with a fixed-term contract. The law does not preclude the possibility
that a regular employee may opt to have a fixed-term contract for valid reasons. This was recognized in Brent: For as
long as it was the employee who requested, or bargained, that the contract have a “definite date of termination,” or
that the fixed-term contract be freely entered into by the employer and the employee, then the validity of the fixed-
term contract will be upheld.230 chanRoblesvirtual Lawlib ra ry

V
Whether the Court of Appeals correctly affirmed
the National Labor Relations Commission’s finding of illegal dismissal

Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view of the non-renewal
contract voluntarily executed by the parties. Fuji also argues that Arlene’s contract merely expired; hence, she was
not illegally dismissed.231chanRoblesvirt ualLaw lib rary

Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji withheld her salary and
benefits.

With regard to this issue, the Court of Appeals held: chanroblesv irt uallawl ibra ry
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and that she voluntarily agreed not to
renew the same. Even a cursory perusal of the subject Non-Renewal Contract readily shows that the same was signed
by Espiritu under protest. What is apparent is that the Non-Renewal Contract was crafted merely as a subterfuge to
secure Fuji’s position that it was Espiritu’s choice not to renew her contract.232

As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just or authorized
causes and after the observance of due process.

The right to security of tenure is guaranteed under Article XIII, Section 3 of the 1987 Constitution: chanroblesvi rt uallawli bra ry

Article XIII. Social Justice and Human Rights

....

Labor

....

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful
concerted activities, including the right to strike in accordance with law. They shall be entitled to security of
tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.

Article 279 of the Labor Code also provides for the right to security of tenure and states the following: chanroblesv irt uallawl ibra ry

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 of 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.

Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just or authorized causes
and only after compliance with procedural and substantive due process is conducted.

Even probationary employees are entitled to the right to security of tenure. This was explained in Philippine Daily
Inquirer, Inc. v. Magtibay, Jr.:233
chanRoblesvi rtua lLawl ibra ry

Within the limited legal six-month probationary period, probationary employees are still entitled to security of tenure.
It is expressly provided in the afore-quoted Article 281 that a probationary employee may be terminated only on two
grounds: (a) for just cause, or (b) 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. 234 (Citation omitted)

The expiration of Arlene’s contract does not negate the finding of illegal dismissal by Fuji. The manner by which Fuji
informed Arlene that her contract would no longer be renewed is tantamount to constructive dismissal. To make
matters worse, Arlene was asked to sign a letter of resignation prepared by Fuji.235The existence of a fixed-term
contract should not mean that there can be no illegal dismissal. Due process must still be observed in the pre-
termination of fixed-term contracts of employment.

In addition, the Court of Appeals and the National Labor Relations Commission found that Arlene was dismissed
because of her health condition. In the non-renewal agreement executed by Fuji and Arlene, it is stated that: chanroblesvi rtua llawli bra ry

WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing to effectively perform
her functions under the said Contract such as the timely submission of news and current events reports pertaining to
the Philippines and travelling [sic] to the FIRST PARTY’s regional office in Thailand.236 (Emphasis supplied)

Disease as a ground for termination is recognized under Article 284 of the Labor Code: chanroble svi rtual lawlib rary

Art. 284. Disease as ground for termination. An employer may terminate the services of an employee who has
been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to
his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least
one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at
least six (6) months being considered as one (1) whole year.

Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides: chanroblesvi rtua llawli bra ry

Sec. 8. Disease as a ground for dismissal. – Where the employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall
not terminate his employment unless there is a certification by a competent public health authority that the disease is
of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical
treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but
shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately
upon the restoration of his normal health.

For dismissal under Article 284 to be valid, two requirements must be complied with: (1) the employee’s disease
cannot be cured within six (6) months and his “continued employment is prohibited by law or prejudicial to his health
as well as to the health of his co-employees”; and (2) certification issued by a competent public health authority that
even with proper medical treatment, the disease cannot be cured within six (6) months. 237 The burden of proving
compliance with these requisites is on the employer.238Non-compliance leads to the conclusion that the dismissal was
illegal.239
chanRoblesvirtua lLawl ibra ry

There is no evidence showing that Arlene was accorded due process. After informing her employer of her lung cancer,
she was not given the chance to present medical certificates. Fuji immediately concluded that Arlene could no longer
perform her duties because of chemotherapy. It did not ask her how her condition would affect her work. Neither did it
suggest for her to take a leave, even though she was entitled to sick leaves. Worse, it did not present any certificate
from a competent public health authority. What Fuji did was to inform her that her contract would no longer be
renewed, and when she did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld the finding
of the National Labor Relations Commission that for failure of Fuji to comply with due process, Arlene was illegally
dismissed.240 chanRoblesvirtual Lawli bra ry

VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees

The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the ground that the
filing of the complaint for illegal dismissal may have seriously strained relations between the parties. Backwages were
also awarded, to be computed from date of dismissal until the finality of the National Labor Relations Commission’s
decision. However, only backwages were included in the dispositive portion because the National Labor Relations
Commission recognized that Arlene had received separation pay in the amount of US$7,600.00.

The Court of Appeals affirmed the National Labor Relations Commission’s decision but modified it by awarding moral
and exemplary damages and attorney’s fees, and all other benefits Arlene was entitled to under her contract with Fuji.
The Court of Appeals also ordered reinstatement, reasoning that the grounds when separation pay was awarded in lieu
of reinstatement were not proven.241 chanRoblesvirt ual Lawlib rary

Article 279 of the Labor Code provides: chanroble svirtuallaw lib rary

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.(Emphasis supplied)

The Court of Appeals’ modification of the National Labor Relations Commission’s decision was proper because the law
itself provides that illegally dismissed employees are entitled to reinstatement, backwages including allowances, and
all other benefits.

On reinstatement, the National Labor Relations Commission ordered payment of separation pay in lieu of
reinstatement, reasoning “that the filing of the instant suit may have seriously abraded the relationship of the parties
so as to render reinstatement impractical.”242 The Court of Appeals reversed this and ordered reinstatement on the
ground that separation pay in lieu of reinstatement is allowed only in several instances such as (1) when the employer
has ceased operations; (2) when the employee’s position is no longer available; (3) strained relations; and (4) a
substantial period has lapsed from date of filing to date of finality.243 chanRoblesvirt ual Lawlib rary

On this matter, Quijano v. Mercury Drug Corp.244 is instructive: chanroblesv irt uallawl ibra ry

Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a matter of right. . . .

To protect labor’s security of tenure, we emphasize that the doctrine of “strained relations” should be strictly applied
so as not to deprive an illegally dismissed employee of his right to reinstatement. Every labor dispute almost always
results in “strained relations” and the phrase cannot be given an overarching interpretation, otherwise, an unjustly
dismissed employee can never be reinstated.245 (Citations omitted)

The Court of Appeals reasoned that strained relations are a question of fact that must be supported by evidence.246 No
evidence was presented by Fuji to prove that reinstatement was no longer feasible. Fuji did not allege that it ceased
operations or that Arlene’s position was no longer available. Nothing in the records shows that Arlene’s reinstatement
would cause an atmosphere of antagonism in the workplace. Arlene filed her complaint in 2009. Five (5) years are not
yet a substantial period247 to bar reinstatement.

On the award of damages, Fuji argues that Arlene is not entitled to the award of damages and attorney’s fees because
the non-renewal agreement contained a quitclaim, which Arlene signed.

Quitclaims in labor cases do not bar illegally dismissed employees from filing labor complaints and money claim. As
explained by Arlene, she signed the non-renewal agreement out of necessity. In Land and Housing Development
Corporation v. Esquillo,248 this court explained: chanroblesvi rt uallawl ibra ry

We have heretofore explained that the reason why quitclaims are commonly frowned upon as contrary to public policy,
and why they are held to be ineffective to bar claims for the full measure of the workers’ legal rights, is the fact that
the employer and the employee obviously do not stand on the same footing. The employer drove the employee to the
wall. The latter must have to get hold of money. Because, out of a job, he had to face the harsh necessities of life. He
thus found himself in no position to resist money proffered. His, then, is a case of adherence, not of choice.249

With regard to the Court of Appeals’ award of moral and exemplary damages and attorney’s fees, this court has
recognized in several cases that moral damages are awarded “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.”250 On the other hand, exemplary damages may be awarded when the dismissal was effected “in a wanton,
oppressive or malevolent manner.”251 chanRoblesvirt ual Lawlib rary

The Court of Appeals and National Labor Relations Commission found that after Arlene had informed Fuji of her
cancer, she was informed that there would be problems in renewing her contract on account of her condition. This
information caused Arlene mental anguish, serious anxiety, and wounded feelings that can be gleaned from the tenor
of her email dated March 11, 2009. A portion of her email reads: chanroble svirtual lawlib rary

I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you suddenly came to
deliver to me the NEWS that you will no longer renew my contract. I knew this will come but I never thought that you
will be so ‘heartless’ and insensitive to deliver that news just a month after I informed you that I am sick. I was asking
for patience and understanding and your response was not to RENEW my contract.252

Apart from Arlene’s illegal dismissal, the manner of her dismissal was effected in an oppressive approach with her
salary and other benefits being withheld until May 5, 2009, when she had no other choice but to sign the non-renewal
contract. Thus, there was legal basis for the Court of Appeals to modify the National Labor Relations Commission’s
decision.

However, Arlene received her salary for May 2009.253 Considering that the date of her illegal dismissal was May 5,
2009,254 this amount may be subtracted from the total monetary award.

With regard to the award of attorney’s fees, Article 111 of the Labor Code states that “[i]n cases of unlawful
withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of
wages recovered.” Likewise, this court has recognized that “in actions for recovery of wages or where an employee
was forced to litigate and, thus, incur expenses to protect his rights and interest, the award of attorney’s fees is legally
and morally justifiable.”255 Due to her illegal dismissal, Arlene was forced to litigate.

In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of 12% per
annum.256 In view of this court’s ruling in Nacar v. Gallery Frames,257 the legal interest shall be reducd to a rate of 6%
per annum from July 1, 2013 until full satisfaction. chanroble slaw

WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012 is AFFIRMED with
the modification that backwages shall be computed from June 2009. Legal interest shall be computed at the rate of
6% per annum of the total monetary awards from May 5, 2009 until full satisfaction.

SO ORDERED. cralawlawlibra ry

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