B) Independent Contractors & Labor-Only Contractors

1)
PAL v. Ligan (G.R. No. 146408)
Date: December 10, 2016Author: jaicdn
Facts:

Petitioner Philippine Airlines and Synergy Services Corporation as

Contractor, entered into an Agreement whereby Synergy undertook to
provide loading and delivery services by furnishing all the necessary
capital, workers, materials, supplies and equipment for the performance
and execution of said work. Herein respondents who appear to have been
assigned to work for petitioner filed complaints before the NLRC for the
payment of their labor standard benefits and regularization of employment
status claiming that they are performing duties directly connected with
petitioner’s business. The Labor Arbiter’s decision found Synergy an
independent contractor but was vacated on appeal. The NLRC tribunal
declared Synergy to be a labor-only contractor and was affirmed by the CA.
Petitioner moved for reconsideration but was denied.

Issue:

Whether or not there is labor-only contracting.

Ruling: YES.

For labor-only contracting to exist, Section 5 of D.O. No. 18-02 which

requires any of two elements to be present is, for convenience, re-quoted:
(i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and
the employees recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal, OR

(ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.

Even if only one of the two elements is present then, there is labor-only
contracting.

From the records of the case, it is gathered that the work performed by
almost all of the respondents – loading and unloading of baggage and
cargo of passengers – is directly related to the main business of petitioner.
And the equipment used by respondents as station loaders, such as trailers
and conveyors, are owned by petitioner.

Petitioner PAL, and not Synergy, exercises control and supervision over
the respondent workers’ methods of doing the work, as reflected in their
Agreement: (1) Contractor (Synergy) shall require all its workers,
employees, suppliers and visitors to comply with OWNER’S (PAL) rules,
regulations, procedures and directives relative to the safety and security of
OWNER’S premises, properties and operations (2) xxx shall furnish its
employees and workers identification cards to be countersigned by
OWNER and uniforms to be approved by OWNER. (3) OWNER may
require CONTRACTOR to dismiss immediately and prohibit entry into
OWNER’S premises of any person employed therein by CONTRACTOR
who in OWNER’S opinion is incompetent or misconducts himself or does
not comply with OWNER’S reasonable instructions xxx
Petitioner in fact admitted that it fixes the work schedule of respondents as
their work was dependent on the frequency of plane arrivals. And as the
NLRC found, petitioner’s managers and supervisors approved respondents’
weekly work assignments and respondents and other regular PAL
employees were all referred to as “station attendants” of the cargo
operation and airfreight services of petitioner.

Respondents having performed tasks which are usually necessary and

desirable in the air transportation business of petitioner, they should be
deemed its regular employees and Synergy as a labor-only contractor.

2)

SAN MIGUEL CORPORATION

VS

PROSPERO A. ABALLA
461 SCRA 392 (2005)

The language of a contract disavowing the existence of an employer-

employee relationship is not determinative of the parties’ relationship. It is
the totality of the facts and surrounding circumstances of the case.

Petitioner San Miguel Corporation (SMC) and Sunflower Multi-

Purpose Cooperative (Sunflower) entered into a one-year Contract of
Service and such contract is renewed on a monthly basis until terminated.
Pursuant to this, respondent Prospero Aballa et al. rendered services to
SMC.

After one year of rendering service, Aballa et al., filed a complaint before
National Labor Relations Commission (NLRC) praying that they be declared
as regular employees of SMC. On the other hand, SMC filed before
the Department of Labor and Employment (DOLE) a Notice of Closure due
to serious business losses. Hence, the labor arbiter dismissed
the complaint and ruled in favor of SMC. Aballa et al. then appealed before
the NLRC. The NLRC dismissed the appeal finding that Sunflower is an
independent contractor.
On appeal, the Court of Appeals reversed NLRC’s decision on the ground
that the agreement between SMC and Sunflower showed a clear intent to
abstain from establishing an employer-employee relationship.

ISSUE:
Whether or not Aballa et al. are employees of SMC

HELD:
The test to determine the existence of independent contractorship is whether
one claiming to be an independent contractor has contracted to do the work
according to his own methods and without being subject to the control of the
employer, except only as to the results of the work.

In legitimate labor contracting, the law creates an employer-employee

relationship for a limited purpose, i.e., to ensure that the employees are paid
their wages. The principal employer becomes jointly and severally liable with
the job contractor, only for the payment of the employees’ wages whenever
the contractor fails to pay the same. Other than that, the principal employer
is not responsible for any claim made by the employees.

In labor-only contracting, the statute creates an employer-employee

relationship for a comprehensive purpose: to prevent a circumvention of
labor laws. The contractor is considered merely an agent of the principal
employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal
employer.

The Contract of Services between SMC and Sunflower shows that the
parties clearly disavowed the existence of an employer-employee
relationship between SMC and private respondents. The language of a
contract is not, however, determinative of the parties’ relationship; rather it is
the totality of the facts and surrounding circumstances of the case. A party
cannot dictate, by the mere expedient of a unilateral declaration in a contract,
the character of its business, i.e., whether as labor-only contractor or job
contractor, it being crucial that its character be measured in terms of
and determined by the criteria set by statute.

What appears is that Sunflower does not have substantial capitalization or

investment in the form of tools, equipment, machineries, work premises and
other materials to qualify it as an independent contractor. On the other hand,
it is gathered that the lot, building, machineries and all other working tools
utilized by Aballa et al. in carrying out their tasks were owned and provided
by SMC.

And from the job description provided by SMC itself, the work assigned to
Aballa et al. was directly related to the aquaculture operations of SMC. As
for janitorial and messengerial services, that they are considered directly
related to the principal business of the employer has been jurisprudentially
recognized.

Furthermore, Sunflower did not carry on an independent business or

undertake the performance of its service contract according to its own
manner and method, free from the control and supervision of its principal,
SMC, its apparent role having been merely to recruit persons to work for
SMC.

All the foregoing considerations affirm by more than substantial evidence the
existence of an employer-employee relationship between SMC and Aballa
et al. Since Aballa et al. who were engaged in shrimp processing performed
tasks usually necessary or desirable in the aquaculture business of SMC,
they should be deemed regular employees of the latter and as such are
entitled to all the benefits and rights appurtenant to regular employment.
They should thus be awarded differential pay corresponding to the difference
between the wages and benefits given them and those accorded SMC’s
other regular employees.

3)
Meralco Industrial Engineering Services vs NLRC 2008
Meralco Industrial Engineering Services, Co., vs. NLRCFacts:Meralco
and the private respondent executed a contract where the latter would
supply the petitioner janitorial services, which include labor, materials,
tools and equipment, as well as supervision of its assigned employees,
at Meralco’s Rockwell Thermal Plant in Makati City.The 49
employees lodged a Complaint for illegal deduction, underpayment, non-
payment of overtime pay, legal holiday pay, premium pay for
holiday and rest day and night differentials against the private respondent
before the LA.By virtue of RA 6727, the contract between Meralco and
the private respondent was amended to increase the minimum daily
wage per employee. 2 months after the amendment of the contract,
Meralcosent a letter to private respondent informing them that at the end
of business hours of Jan. 31, 1990, it would be terminating contract
entered into with the private respondents. On the said date, the
complainants were pulled out from their work. The complainants
amended their complaint to include the charge of illegal dismissal
and to implead Meralco as a party respondent.The LA dismissed the
complaint. On appeal, the NLRC affirmed the decision of the LA
with the modification that Meralco was solidarily liable with the private
respondents. The CA on the other hand, modified the Decision of the
NLRC and held Meralco to be solidarily liable with the private
respondent for the satisfaction of the laborer’s separation
pay.Issue:Whether Meralco should beliable for the payment of the
dismissed laborer’s separation pay.Decision:Petition GRANTED,
Judgment and Resolution Reversed and SET ASIDE.The CA used
Art. 109 of the Labor Code to hold Meralco solidarily liable with
the private respondent as regardto the payment of separation pay.
However, the SC ruled that Art. 109 should be read in relation to Art.
106 and 107 of the LC. Thus, an indirect employer can only be held
liable with the independent contractor or subcontractor in the event that the
latter fails to pay the wages of its employees. While it is true that the
petitioner was the indirect employer of the complainants, it cannot be held
liable in the same way as the employer in every respect. Meralco may be
considered an indirect employer only for purposes of unpaid wages.
The only instance when the principal can also be held liable with the
independent contractor or subcontractor for the backwages and
separation pay of the latter’s employees is when there is proof that the
principal conspired with the independent contractor or subcontractor in the
illegal dismissal of the employees. In the present case, there is no
allegation, much less proof presented, that the petitioner conspired
with private respondents in the illegal dismissal of the latter’s
employees; hence, it cannot be held liable for the same.Neither can
the liability for the separation pay of the complainants be extended to
the petitioner based on contract.Contract Order No. 166-84
executed between the petitioner and the private respondents contains no
provision for separation pay in the event that the petitioner terminates the
same.It is basic that a contract is the law between the parties and the
stipulations therein, provided that they are not contrary to law,
morals, good customs, public order or public policy, shall be binding
as between the parties.Hence, if the contract does not provide for such a
liability, this Court cannot just read the
Wages DigestPage 2of 7same into the contract without possibly
violating the intention of the parties.Although petitioner is not liable for
complainants’ separation pay, the Court conforms to the
consistent findings in the proceedings below that the petitioner is
solidarily liable with the private respondents for the judgment awards
for underpayment of wages and non-payment of overtime pay.In this
case, however, private respondents had already posted a surety
bond in an amount sufficient to cover all the judgment awards due
the complainants, including those for underpayment of wages and
non-payment of overtime pay.The joint and several liability of the
principal with the contractor and subcontractor were enacted to
ensure compliance with the provisions of the Labor Code, principally
those on statutory minimum wage.This liability facilitates, if not
guarantees, payment of the workers’ compensation, thus, giving the
workers ample protection as mandated by the 1987 Constitution.With
private respondents’ surety bond, it can therefore be said that the purpose
of the Labor Code provision on the solidary liability of the indirect
employer is already accomplished since the interest of the
complainants are already adequately protected.Consequently, it will
be futile to continuously hold the petitioner jointly and solidarily
liable with the private respondentsfor the judgment awards for
underpayment of wages and non-payment of overtime pay.But
while this Court had previously ruled that the indirect employer can
recover whatever amount it had paid to the employees in
accordance with the terms of the service contract between itself and the
contractor, the said ruling cannot be applied in reverse to this
case as to allow the private respondents (the independent
contractor), who paid for the judgment awards in full, to recover from
the petitioner (the indirect employer).

4)
Manila Electric Company vs Benamira 2005
Facts:The individual respondents are licensed security guards formerly
employed by People‘s Security, Inc. and deployed as such at MERALCO‘s
head office in Ortigas Avenue, Pasig, Metro Manila.On Nov. 30, 1990,
the security service agreement between PSI and MERALCO was
terminated.Immediately thereafter, 56 of PSI‘s security guards, including
herein eight individual respondents, filed a complaint for unpaid monetary
benefits against PSI and MERALCO.Meanwhile, the security service
agreement between respondent Armed Security & Detective Agency, Inc.,
(ASDAI) and MERALCO took effect on Dec. 1, 1990. Subsequently, the
individual respondents were absorbed by ASDAI and retained at
MERALCO‘s head office.On June 29, 1992, the labor arbiter rendered
a decision in favor of the former PSI security guards, including the
individual respondents.Less than a month later, the individual respondents
filed another complaint for unpaid monetary benefits, this time against
ASDAI and MERALCO.On July 25, 1992, the security service
agreement between respondent Advance Forces Security &
Investigation Services, Inc. (AFSISI) and MERALCO took effect,
terminating the previous security service agreement with
ASDAI.Except as to the number of security guards, the amount to be
paid the agency, and the effectivity of the agreement, the terms and
conditions were substantially identical with the security service
agreement with ASDAI. The individual respondents amended their
complaint to implead AFSISI as party respondent.They then again
amended their complaint to allege that AFSISI terminated their
services on August 6, 1992 without notice and just cause and
therefore guilty of illegal dismissal.The individual respondents alleged
that: MERALCO and ASDAI never paid their overtime pay, service
incentive leave pay, premium pay for Sundays and Holidays, P50.00
monthly uniform allowance and underpaid their 13thmonth pay; on
July 24, 1992, when the security service agreement of ASDAI was
terminated and AFSISI took over the security functions of the former
on July 25, 1992, respondent security guard Benamira was no longer
given any work assignment when AFSISI learned that the former has
a pending case against PSI, ineffect, dismissing him from the service
without just cause; and, the rest of the individual respondents were
absorbed by AFSISI but were not given any assignments, thereby
dismissing them from the service without just cause. ASDAI denied
in general terms any liability for theclaims of the individual
respondents, claiming that there is nothing due them in connection with
their services.On the other hand, MERALCO denied liability on the ground
of lack of employer-employee relationship with individual respondents.It
averred that the individual respondents are the employees of the security
agencies it contracted for security services; and that it has no existing
liability for the individual respondents‘ claims since said security agencies
have been fully paid for their services per their respective security service
agreement.For its part, AFSISI asserted that: it is not liable for illegal
dismissal since it did not absorb or hire the individual respondents,
the latter were merely hold-over guards from ASDAI; it is not obliged to
employ or absorb the security guards of the agency it replaced since there
is no provision in its security service agreement with MERALCO or in law
requiring it to absorb and hire the guards of ASDAI as it has its own guards
duly trained to service its various clients.SC Ruling:At the outset, we
note that the individual respondents never alleged in their complaint
in the Labor Arbiter, in their appealin the NLRC and even in their
petition for certiorariin the CA that MERALCO was their
employer.They have always advanced the theory that AFSISI is their
employer.A perusal of the records shows it was only in their
Memorandum in the CA that this thesis was presented and discussed
for the first time.We cannot ignore the fact that this position of individual
respondents runs contrary to their earlier submission in their pleadings
filed in the Labor Arbiter, NLRC and even in the petition for
certiorariin the CA that AFSISI is their employer and liable for their
termination.As the object of the pleadings is to draw the lines of battle, so
to speak, between the litigants and to indicate fairly the nature of the claims
or defenses of both parties, a party cannot subsequently take a position
contrary to, or inconsistent, with his pleadings.Moreover, it is a
fundamental rule of procedure that higher courts are precluded from
entertaining matters neither alleged in the pleadings nor raised during
the proceedings below, but ventilated for the first time only in a
motion for reconsideration or on appeal.The individual respondents are
bound by their submissions that AFSISI is their employer and they
should not be permitted to change their theory.Such a change of
theory cannot be tolerated on appeal, not due to the strict application of
procedural rules but as a matter of fairness.A change of theory on appeal
is objectionable because it is contrary to the rules of fair play,
justice and due process. Thus, the CA should not have considered the
new theory offered by the individual respondents in their memorandum.In
this case, the termsand conditions embodied in the security service
agreement between MERALCO and ASDAI expressly recognized
ASDAI as the employer of individual respondents.Under the security
service agreement, it was ASDAI which (a) selected, engaged or
hired and discharged the security guards; (b) assigned them to
MERALCO according to the number agreed upon; (c) provided the uniform,
firearms and ammunition, nightsticks,flashlights, raincoats and other
paraphernalia of the security guards; (d) paid them salaries or wages; and,
(e) disciplined and supervised them or principally controlled their
conduct.The agreement even explicitly provided that ―[n]othing herein
contained shall be understood to make the security guards under this
Agreement, employees of the COMPANY, it being clearly understood that
such security guards shall be considered as they are, employees of the
AGENCY alone.‖Clearly, the individual respondents are the employees of
ASDAI.As to the provision in the agreement that MERALCO reserved the
right to seek replacement of any guard whose behavior, conduct or
appearance is not satisfactory, such merely confirms that the power
to discipline lies with the agency.It is a standard stipulation in
security service agreements that the client may request the replacement of
the guards to it.Service-oriented enterprises, such as the business of
providing security services, generally adhere to the business adage that
―the customer or client is always right‖ and, thus, must satisfy the
interests, conform to the needs, and cater to the reasonable impositions of
its clients.Neither is the stipulation that the agency cannot pull out
any security guard from MERALCO without its consent an indication
of control.It is simply a security clause designed to prevent the agency from
unilaterally removing its security guards from their assigned posts at
MERALCO‘s premises to the latter‘s detriment.
12The clause that MERALCO has the right at all times to inspect
the guards of the agency detailed in its premises is likewise not
indicative of control as it is not a unilateral right.The agreement provides
that the agency is principally mandated to conduct inspections, without
prejudice to MERALCO‘s right to conduct its own inspections.Needless to
stress, for the power of control to be present, the person for whom the
services are rendered must reserve the right to direct not only the end to be
achieved but also the means for reaching such end.Not all rules imposed
by the hiring party on the hired party indicate that the latter is an
employee of the former.Rules which serve as general
guidelinestowards the achievement of the mutually desired result are
not indicative of the power of control.The security service agreements in
the present case provided that all specific instructions by MERALCO
relating to the discharge by the security guards of their duties shall be
directed to the agency and not directly to the individual respondents.The
individual respondents failed to show that the rules of MERALCO controlled
their performance. Moreover, ASDAI and AFSISI are not ―labor-only‖
contractors.There is ―labor only‖ contract when the person acting as
contractor is considered merely as an agent or intermediary of the principal
who is responsible to the workers in the same manner and to the same
extent as if they had been directly employed by him.On the other hand,
―job (independent) contracting‖ is present if the following conditions are
met: (a) the contractor carries on an independent business and undertakes
the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with
theperformance of the work except to the result thereof; and (b)
thecontractor has substantial capital or investments in the form of tools,
equipment, machineries, work premises and other materials which are
necessary in the conduct of his business. Given the above distinction
and the provisions of the security service agreements entered into by
petitioner with ASDAI and AFSISI, we are convinced that ASDAI and
AFSISI were engaged in job contracting.The individual respondents
can not be considered as regular employees of the MERALCO for,
although security services are necessary and desirable to the business of
MERALCO, it is not directly related to its principal business and may even
be considered unnecessary in the conduct of MERALCO‘s principal
business, which is the distribution of electricity.Furthermore, the fact that
the individual respondents filed their claim for unpaid monetary benefits
against ASDAI is a clear indication that the individual respondents
acknowledge that ASDAI is their employer.We cannot give credence to
individual respondents‘ insistence that they were absorbed by AFSISI when
MERALCO‘s security service agreement with ASDAI was terminated.The
individual respondents failed to present any evidence to confirm that
AFSISI absorbed them into its workforce.Thus, respondent Benamira
was not retained in his post at MERALCO since July 25, 1992 due
to the termination of the security service agreement of MERALCO with
ASDAI.As for the rest of the individual respondents, they retained their post
only as ―hold-over‖ guards until the security guards of AFSISI took over
their post on August 6, 1992. In the present case, respondent Benamira
has been ―off-detail‖ for seventeen days while the rest of the individual
respondents have only been ―off-detail‖ for five days when they amended
their complaint on August 11, 1992 to include the charge of illegal
dismissal.The inclusion of the charge of illegal dismissal then was
premature.Nonetheless, bearing in mind that ASDAI simply stopped giving
the individual respondents any assignment and their inactivity clearly
persisted beyond the six-month period allowed by Article 286 of the
Labor Code, the individual respondents were, in effect, constructively
dismissed by ASDAI from employment, hence, they should be
reinstated.The fact that there is no actual and direct employer-employee
relationship between MERALCO and the individual respondents does not
exonerate MERALCO from liability as to the monetary claims of the
individual respondents.When MERALCO contracted for security
services with ASDAI as the securityagency that hired individual
respondents to work as guards for it, MERALCO became an indirect
employer of individual respondents pursuant to Article 107 of the Labor
Code, which reads:ART.107. Indirect employer -The provisions of the
immediately preceding Article shall likewise apply to any person,
partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work,
task, job or project.When ASDAI as contractor failed to pay the
individual respondents, MERALCO as principal becomes jointly and
severally liable for the individual respondents‘ wages, under Articles 106
and 109 of the Labor Code, which provide: ART.106. Contractor or
subcontractor. -Whenever an employer enters into a contract with another
person for the performance of the former[ s̳ ] work, the employees of the
contractor and of the latter[ s̳ ] subcontractor, if any, shall be paid in
accordancewith the provisions of this Code.In the event that the contractor
or subcontractor fails to pay the wages of his employees in accordance
with this Code, the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that he is
liable to employees directly employed by him. xxxART.109. Solidary liability
-The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any provision of this
Code.For purpose of determining the extent of their civil liability under this
Chapter, they shall be considered as direct employers.ASDAI is held liable
by virtue of its status as direct employer, while MERALCO is deemed the
indirect employer of the individual respondents for the purpose of paying
their wages in the event of failure of ASDAI to pay
them.Thisstatutoryschemegivestheworkers theample protection consonant
with labor and social justice provisions of the 1987 Constitution.However,
as held in Mariveles Shipyard Corp. vs. Court of Appeals, the solidary
liability of MERALCO with that of ASDAI does not preclude the application
of Article 1217 of the Civil Code on the right of reimbursement from his co-
debtor by the one who paid, which provides: ART. 1217.Payment made by
one of the solidary debtors extinguishes the obligation.If two or more
solidary debtors offer to pay, the creditor may choose which offer to
accept.He who made the payment may claim from his co-debtors only the
share which corresponds to each, with the interest for the payment already
made.If the payment is made before the debt is due, no interest for the
intervening period may be demanded.When one of the solidary debtors
cannot, because of his insolvency, reimburse his share to the debtor paying
the obligation, such share shall be borne by all his co-debtors, in proportion
to the debt of each. ASDAI may not seek exculpation by claiming that
MERALCO‘s payments to it were inadequate for the individual respondents‘
lawful compensation.As an employer, ASDAI is charged with knowledge of
labor laws and the adequacy of the compensation that it demands for
contractual services is its principalconcern and not any other‘s.

5)
Dole Phils vs Esteva 2006

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the
revised Rules of Civil Procedure seeking the reversal of the
Decision,1 dated 20 May 2002, and the Amended Decision,2 dated 27
November 2003, both rendered by the Court of Appeals in CA-G.R. SP No.
63405, which declared herein petitioner Dole Philippines, Inc. as the
employer of herein respondents, Medel Esteva and 86 others; found
petitioner guilty of illegal dismissal; and ordered petitioner to reinstate
respondents to their former positions and to pay the latter backwages.

The antecedent facts of the case are recounted as follows:

Petitioner is a corporation duly organized and existing in accordance with

Philippine laws, engaged principally in the production and processing of
pineapple for the export market.3 Its plantation is located in Polomolok,
South Cotabato.4

Respondents are members of the Cannery Multi-Purpose Cooperative

(CAMPCO). CAMPCO was organized in accordance with Republic Act No.
6938, otherwise known as the Cooperative Code of the Philippines, and
duly-registered with the Cooperative Development Authority (CDA) on 6
January 1993.5 Members of CAMPCO live in communities surrounding
petitioner’s plantation and are relatives of petitioner’s employees.

On 17 August 1993, petitioner and CAMPCO entered into a Service

Contract.6 The Service Contract referred to petitioner as "the Company,"
while CAMPCO was "the Contractor." Relevant portions thereof read as
follows –

1. That the amount of this contract shall be or shall not exceed TWO
HUNDRED TWENTY THOUSAND ONLY (₱220,000.00) PESOS, terms
and conditions of payment shall be on a per job basis as specified in the
attached schedule of rates; the CONTRACTOR shall perform the following
services for the COMPANY;

1.1 Assist the COMPANY in its daily operations;

 1.2 Perform odd jobs as may be assigned.

2. That both parties shall observe the following terms and conditions as
stipulated, to wit:

2.1 CONTRACTOR must carry on an independent legitimate

business, and must comply with all the pertinent laws of the
government both local and national;

2.2 CONTRACTOR must provide all hand tools and equipment

necessary in the performance of their work.

However, the COMPANY may allow the use of its fixed equipment as
a casual facility in the performance of the contract;

2.3 CONTRACTOR must comply with the attached scope of work,

specifications, and GMP and safety practices of the company;

2.4 CONTRACTOR must undertake the contract work under the

following manner:

a. on his own account;

b. under his own responsibility;

c. according to his manner and method, free from the control

and direction of the company in all matters connected with the
performance of the work except as to the result thereof;

3. CONTRACTOR must pay the prescribed minimum wage, remit

SSS/MEDICARE premiums to proper government agencies, and submit
copies of payroll and proof of SSS/MEDICARE remittances to the
COMPANY;

4. This contract shall be for a specific period of Six (6) months from July 1
to December 31, 1993; x x x.

Pursuant to the foregoing Service Contract, CAMPCO members rendered

services to petitioner. The number of CAMPCO members that report for
work and the type of service they performed depended on the needs of
petitioner at any given time. Although the Service Contract specifically
stated that it shall only be for a period of six months, i.e., from 1 July to 31
December 1993, the parties had apparently extended or renewed the same
for the succeeding years without executing another written contract. It was
under these circumstances that respondents came to work for petitioner.

Investigation by DOLE

Concomitantly, the Sangguniang Bayan of Polomolok, South Cotabato,

passed Resolution No. 64, on 5 May 1993, addressed to then Secretary
Ma. Nieves R. Confessor of the Department of Labor and Employment
(DOLE), calling her attention to the worsening working conditions of the
petitioner’s workers and the organization of contractual workers into several
cooperatives to replace the individual labor-only contractors that used to
supply workers to the petitioner. Acting on the said Resolution, the DOLE
Regional Office No. XI in Davao City organized a Task Force that
conducted an investigation into the alleged labor-only contracting activities
of the cooperatives in Polomolok.7

On 24 May 1993, the Senior Legal Officer of petitioner wrote a letter

addressed to Director Henry M. Parel of DOLE Regional Office No. XI,
supposedly to correct the misinformation that petitioner was involved in
labor-only contracting, whether with a cooperative or any private contractor.
He further stated in the letter that petitioner was not hiring cooperative
members to replace the regular workers who were separated from service
due to redundancy; that the cooperatives were formed by the immediate
dependents and relatives of the permanent workers of petitioner; that these
cooperatives were registered with the CDA; and that these cooperatives
were authorized by their respective constitutions and by-laws to engage in
the job contracting business.8

The Task Force submitted a report on 3 June 1993 identifying six

cooperatives that were engaged in labor-only contracting, one of which was
CAMPCO. The DOLE Regional Office No. XI held a conference on 18
August 1993 wherein the representatives of the cooperatives named by the
Task Force were given the opportunity to explain the nature of their
activities in relation to petitioner. Subsequently, the cooperatives were
required to submit their position papers and other supporting documents,
which they did on 30 August 1993. Petitioner likewise submitted its position
paper on 15 September 1993.9
On 19 October 1993, Director Parel of DOLE Regional Office No. XI issued
an Order10 in which he made the following findings –

Records submitted to this Office show that the six (6) aforementioned
cooperatives are all duly registered with the Cooperative Development
Authority (CDA). These cooperatives were also found engaging in different
activities with DOLE PHILIPPINES, INC. a company engaged in the
production of pineapple and export of pineapple products. Incidentally,
some of these cooperatives were also found engaging in activities which
are directly related to the principal business or operations of the company.
This is true in the case of the THREE (3) Cooperatives, namely;
Adventurer’s Multi Purpose Cooperative, Human Resource Multi Purpose
Cooperative and Cannery Multi Purpose Cooperative.

From the foregoing findings and evaluation of the activities of Adventurer’s

Multi Purpose Cooperative, Human Resource Multi Purpose Cooperative
and Cannery Multi Purpose Cooperative, this Office finds and so holds that
they are engaging in Labor Only Contracting Activities as defined under
Section 9, Rule VIII, Book III of the rules implementing the Labor Code of
the Philippines, as amended which we quote:

"Section 9 Labor Only Contracting – a) Any person who undertakes to

supply workers to an employer shall be deemed to be engaged in labor-
only contracting where such person:

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

tools, equipment, machineries, work premises and other materials;
and

2) The workers recruited and placed by such person are performing

activities which are directly related to the principal business or
operation of the employer to which workers are habitually employed.

b) Labor-only contracting as defined herein is hereby prohibited and

the person acting as contractor shall be considered merely as an
agent or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly
employed by him."

WHEREFORE, premises considered, ADVENTURER’S MULTI PURPOSE

COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE COOPERATIVE
and CANNERY MULTI PURPOSE COOPERATIVE are hereby declared to
be engaged in labor only contracting which is a prohibited activity. The
same cooperatives are therefore ordered to cease and desist from further
engaging in such activities.

The three (3) other cooperatives, namely Polomolok Skilled Workers Multi
Purpose Cooperative, Unified Engineering and Manpower Service Multi
Purpose Cooperative and Tibud sa Katibawasan Multi Purpose
Cooperative whose activities may not be directly related to the principal
business of DOLE Philippines, Inc. are also advised not to engage in labor
only contracting with the company.

All the six cooperatives involved appealed the afore-quoted Order to the
Office of the DOLE Secretary, raising the sole issue that DOLE Regional
Director Director Parel committed serious error of law in directing the
cooperatives to cease and desist from engaging in labor-only contracting.
On 15 September 1994, DOLE Undersecretary Cresencio B. Trajano, by
the authority of the DOLE Secretary, issued an Order11 dismissing the
appeal on the basis of the following ratiocination –

The appeal is devoid of merit.

The Regional Director has jurisdiction to issue a cease and desist order as
provided by Art. 106 of the Labor Code, as amended, to wit:

"Art. 106. Contractor or subcontractor. x x x

xxxx

The Secretary of Labor 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 (Emphasis supplied)

There is "labor-only" contracting where the person supplying workers to an

employer does not have substantial capital or investment in the forms 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 the employer. In such
cases, the person or the 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 relation to Article 128(b) of the Labor Code, as amended by Republic Act

No. 7730, which reads:

"Art. 128. Visitorial and Enforcement Power.

b) Notwithstanding the provisions of Articles 129 and 217 of this Code to

the contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give
effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proof which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of

Labor and Employment under this article may be appealed to the latter. In
case said order involves a monetary award, an appeal by the employer
may be perfected only upon the posting of a cash bond issued by a
reputable bonding company duly accredited by the Secretary of Labor and
Employment in the amount equivalent to the monetary award in the order
appealed from."

The records reveal that in the course of the inspection of the premises of
Dolefil, it was found out that the activities of the members of the
[cooperatives] are necessary and desirable in the principal business of the
former; and that they do not have the necessary investment in the form of
tools and equipments. It is worthy to note that the cooperatives did not
deny that they do not have enough capital in the form of tools and
equipment. Under the circumstances, it could not be denied that the
[cooperatives] are considered as labor-only contractors in relation to the
business operation of DOLEFIL, INC.

Thus, Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code, provides that:

"Sec. 9. Labor-only contracting. – (a) Any person who undertakes to supply

workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:

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

tools, equipment, machineries, work premises and other materials;
and

(2) The workers recruited and placed by such person are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby prohibited and

the person acting as a contractor shall be considered merely as an
agent or intermediary of the employer who shall be responsible to the
workers in the same manner and extent as if the latter were directly
employed by him.

x x x x"

Violation of the afore-quoted provision is considered a labor standards

violation and thus, within the visitorial and enforcement powers of the
Secretary of Labor and Employment (Art. 128).

The Regional Director’s authority to issue a cease and desist order

emanates from Rule I, Section 3 of the Rules on Disposition of Labor
Standard Cases in the Regional Offices, to wit:

"Section 3. Authorized representative of the Secretary of Labor and

Employment. – The Regional Directors shall be the duly authorized
representatives of the Secretary of Labor and Employment in the
administration and enforcement of the labor standards within their
respective territorial jurisdiction."
The power granted under Article 106 of the Labor Code to the Secretary of
Labor and Employment to restrict or prohibit the contracting out of labor to
protect the rights of workers established under the Code is delegated to the
Regional Directors by virtue of the above-quoted provision.

The reason why "labor-only" contracting is prohibited under the Labor Code
is that it encourages circumvention of the provisions of the Labor Code on
the workers’ right to security of tenure and to self-organization.

WHEREFORE, the respondents’ Appeal is hereby DISMISSED for lack of

merit. The Order of the Regional Director, Regional Office No. XI, Davao
City, is AFFIRMED.

After the motion for reconsideration of the foregoing Order was denied, no
further motion was filed by the parties, and the Order, dated 15 September
1994, of DOLE Undersecretary Trajano became final and executory. A Writ
of Execution12 was issued by DOLE Regional Office No. XI only on 27 July
1999, years after the issuance of the order subject of the writ. The DOLE
Regional Office No. XI was informed that CAMPCO and two other
cooperatives "continued to operate at DOLE Philippines, Inc. despite the
cease and desist Order" it had issued. It therefore commanded the Sheriff
to proceed to the premises of CAMPCO and the two other cooperatives
and implement its Order dated 19 October 1993.

Respondent’s Complaint before the NLRC

Respondents started working for petitioner at various times in the years

1993 and 1994, by virtue of the Service Contract executed between
CAMPCO and petitioner. All of the respondents had already rendered more
than one year of service to petitioner. While some of the respondents were
still working for petitioner, others were put on "stay home status" on varying
dates in the years 1994, 1995, and 1996 and were no longer furnished with
work thereafter. Together, respondents filed a Complaint,13 on 19
December 1996, with the National Labor Relations Commission (NLRC),
for illegal dismissal, regularization, wage differentials, damages and
attorney’s fees.

In their Position Paper,14 respondents reiterated and expounded on the

allegations they previously made in their Complaint –
Sometime in 1993 and 1994, [herein petitioner] Dolefil engaged the
services of the [herein respondents] through Cannery Multi-purpose
Cooperative. A cooperative which was organized through the initiative of
Dolefil in order to fill in the vacuum created as a result of the dismissal of
the regular employees of Dolefil sometime in 1990 to 1993.

The [respondents] were assigned at the Industrial Department of

respondent Dolefil. All tools, implements and machineries used in
performing their task such as: can processing attendant, feeder of
canned pineapple at pineapple processing, nata de coco processing
attendant, fruit cocktail processing attendant, and etc. were provided
by Dolefil. The cooperative does not have substantial capital and does not
provide the [respondents] with the necessary tools to effectively perform
their assigned task as the same are being provided by Dolefil.

The training and instructions received by the [respondents] were provided

by Dolefil. Before any of the [respondents] will be allowed to work, he has
to undergo and pass the training prescribed by Dolefil. As a matter of fact,
the trainers are employees of Dolefil.

The [respondents] perform their assigned task inside the premises of

Dolefil. At the job site, they were given specific task and assignment by
Dolefil’s supervisors assigned to supervise the works and efficiency of the
complainants. Just like the regular employees of Dolefil, [respondents]
were subjected to the same rules and regulations observe [sic] inside
company premises and to some extent the rules applied to the
[respondents] by the company through its officers are even stricter.

The functions performed by the [respondents] are the same functions

discharged by the regular employees of Dolefil. In fact, at the job site, the
[respondents] were mixed with the regular workers of Dolefil. There is no
difference in so far as the job performed by the regular workers of Dolefil
and that of the [respondents].

Some of the [respondents] were deprived of their employment under the

scheme of "stay home status" where they were advised to literally stay
home and wait for further instruction to report anew for work. However, they
remained in this condition for more than six months. Hence, they were
constructively or illegally dismissed.
Respondents thus argued that they should be considered regular
employees of petitioner given that: (1) they were performing jobs that were
usually necessary and desirable in the usual business of petitioner; (2)
petitioner exercised control over respondents, not only as to the results, but
also as to the manner by which they performed their assigned tasks; and
(3) CAMPCO, a labor-only contractor, was merely a conduit of petitioner.
As regular employees of petitioner, respondents asserted that they were
entitled to security of tenure and those placed on "stay home status" for
more than six months had been constructively and illegally dismissed.
Respondents further claimed entitlement to wage differential, moral
damages, and attorney’s fees.

In their Supplemental Position Paper,15 respondents presented, in support

of their Complaint, the Orders of DOLE Regional Director Parel, dated 19
October 1993, and DOLE Undersecretary Trajano, dated 15 September
1994, finding that CAMPCO was a labor-only contractor and directing
CAMPCO to cease and desist from any further labor-only contracting
activities.

Petitioner, in its Position Paper16 filed before the NLRC, denied that
respondents were its employees.

Petitioner explained that it found the need to engage external services to

augment its regular workforce, which was affected by peaks in operation,
work backlogs, absenteeism, and excessive leaves. It used to engage the
services of individual workers for definite periods specified in their
employment contracts and never exceeding one year. However, such an
arrangement became the subject of a labor case,17 in which petitioner was
accused of preventing the regularization of such workers. The Labor Arbiter
who heard the case, rendered his Decision18 on 24 June 1994 declaring
that these workers fell squarely within the concept of seasonal workers as
envisaged by Article 280 of the Labor Code, as amended, who were hired
by petitioner in good faith and in consonance with sound business practice;
and consequently, dismissing the complaint against petitioner. The NLRC,
in its Resolution,19 dated 14 March 1995, affirmed in toto the Labor Arbiter’s
Decision and further found that the workers were validly and legally
engaged by petitioner for "term employment," wherein the parties agreed to
a fixed period of employment, knowingly and voluntarily, without any force,
duress or improper pressure being brought to bear upon the employees
and absent any other circumstance vitiating their consent. The said NLRC
Resolution became final and executory on 18 June 1996. Despite the
favorable ruling of both the Labor Arbiter and the NLRC, petitioner decided
to discontinue such employment arrangement. Yet, the problem of
petitioner as to shortage of workforce due to the peaks in operation, work
backlogs, absenteeism, and excessive leaves, persisted. Petitioner then
found a solution in the engagement of cooperatives such as CAMPCO to
provide the necessary additional services.

Petitioner contended that respondents were owners-members of CAMPCO;

that CAMPCO was a duly-organized and registered cooperative which had
already grown into a multi-million enterprise; that CAMPCO was engaged
in legitimate job-contracting with its own owners-members rendering the
contract work; that under the express terms and conditions of the Service
Contract executed between petitioner (the principal) and CAMPCO (the
contractor), the latter shall undertake the contract work on its own account,
under its own responsibility, and according to its own manner and method
free from the control and direction of the petitioner in all matters connected
with the performance of the work, except as to the result thereof; and since
CAMPCO held itself out to petitioner as a legitimate job contractor,
respondents, as owners-members of CAMPCO, were estopped from
denying or refuting the same.

Petitioner further averred that Department Order No. 10, amending the
rules implementing Books III and VI of the Labor Code, as amended,
promulgated by the DOLE on 30 May 1997, explicitly recognized the
arrangement between petitioner and CAMPCO as permissible contracting
and subcontracting, to wit –

Section 6. Permissible contracting and subcontracting. – Subject to the

conditions set forth in Section 3(d) and (e) and Section 5 hereof, the
principal may engage the services of a contractor or subcontractor for the
performance of any of the following;

(a) Works or services temporarily or occasionally needed to meet

abnormal increase in the demand of products or services, provided
that the normal production capacity or regular workforce of the
principal cannot reasonably cope with such demands;
 (b) Works or services temporarily or occasionally needed by the
principal for undertakings requiring expert or highly technical
personnel to improve the management or operations of an enterprise;

(c) Services temporarily needed for the introduction or promotion of

new products, only for the duration of the introductory or promotional
period;

(d) Works or services not directly related or not integral to the main
business or operation of the principal, including casual work,
janitorial, security, landscaping, and messengerial services, and work
not related to manufacturing processes in manufacturing
establishments;

(e) Services involving the public display of manufacturer’s products

which does not involve the act of selling or issuance of receipts or
invoices;

(f) Specialized works involving the use of some particular, unusual, or

peculiar skills, expertise, tools or equipment the performance of which
is beyond the competence of the regular workforce or production
capacity of the principal; and

(g) Unless a reliever system is in place among the regular workforce,

substitute services for absent regular employees, provided that the
period of service shall be coextensive with the period of absence and
the same is made clear to the substitute employee at the time of
engagement. The phrase "absent regular employees" includes those
who are serving suspensions or other disciplinary measures not
amounting to termination of employment meted out by the principal,
but excludes those on strike where all the formal requisites for the
legality of the strike have been prima facie complied with based on
the records filed with the National Conciliation and Mediation Board.

According to petitioner, the services rendered by CAMPCO constituted

permissible job contracting under the afore-quoted paragraphs (a), (c), and
(g), Section 6 of DOLE Department Order No. 10, series of 1997.

After the parties had submitted their respective Position Papers, the Labor
Arbiter promulgated its Decision20 on 11 June 1999, ruling entirely in favor
of petitioner, ratiocinating thus –
After judicious review of the facts, narrated and supporting documents
adduced by both parties, the undersigned finds [and] holds that CAMPCO
is not engaged in labor-only contracting.

Had it not been for the issuance of Department Order No. 10 that took
effect on June 22, 1997 which in the contemplation of Law is much later
compared to the Order promulgated by the Undersecretary Cresencio
Trajano of Department of [L]abor and Employment, the undersigned could
safely declared [sic] otherwise. However, owing to the principle observed
and followed in legal practice that the later law or jurisprudence controls,
the reliance to Secretary Trajano’s order is overturned.

Labor-only contracting as amended by Department [O]rder No. 10 is

defined in this wise:

"Labor-only contracting is prohibited under this Rule is an arrangement

where the contractor or subcontractor merely recruits, supplied [sic] or
places workers to perform a job, work or service for a principal, and the
following elements are present:

i) The contractor or sub-contractor does not have substantial capital

or investment to actually perform the job, work, or service under its
own account & responsibility, and

ii) The employees recruited, supplied or placed by such contractor or

subcontractor are performing activities which are directly related to
the main business of the principal."

Verification of the records reveals that per Annexes "J" and "K" of [herein
petitioner DolePhil’s] position paper, which are the yearly audited Financial
Statement and Balance Sheet of CAMPCO shows [sic] that it has more
than substantial capital or investment in order to qualify as a legitimate job
contractor.

We likewise recognize the validity of the contract entered into and between
CAMPCO and [petitioner] for the former to assists [sic] the latter in its
operations and in the performance of odd jobs – such as the augmentation
of regular manning particularly during peaks in operation, work back logs,
absenteeism and excessive leave availment of respondent’s regular
employees. The rule is well-settled that labor laws discourage interference
with an employer’s judgment in the conduct of his business. Even as the
law is solicitors [sic] of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management
prerogatives. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied (Yuco Chemical Industries
vs. Ministry of [L]abor, GR No. 75656, May 28, 1990).

CAMPCO being engaged in legitimate contracting, cannot therefore

declared [sic] as guilty of labor-only contracting which [herein respondents]
want us to believe.

The second issue is likewise answered in the negative. The reason is plain
and simple[,] section 12 of Department [O]rder No. 10 states:

"Section 12. Employee-employer relationship. Except in cases provided for

in Section 13, 14, 15 & 17, the contractor or subcontractor shall be
considered the employer of the contractual employee for purposes of
enforcing the provisions of the Code."

The Resolution of NLRC 5th division, promulgated on March 14, 1 1995

[sic] categorically declares:

"Judging from the very nature of the terms and conditions of their hiring, the
Commission finds the complainants to have been engaged to perform
work, although necessary or desirable to the business of respondent
company, for a definite period or what is community called TERM
EMPLOYMENT. It is clear from the evidence and record that the nature of
the business and operation of respondent company has its peaks and
valleys and therefore, it is not difficult to discern, inclement weather, or high
availment by regular workers of earned leave credits, additional workers
categorized as casuals, or temporary, are needed to meet the exigencies."
(Underlining in the original)

The validity of fixed-period employment has been consistently upheld by

the Supreme [C]ourt in a long line of cases, the leading case of which is
Brent School, Inc. vs. Zamora & Alegre, GR No. 48494, February 5, 1990.
Thus at the end of the contract the employer-employee relationship is
terminated. It behooves upon us to rule that herein complainants cannot be
declared regular rank and file employees of the [petitioner] company.

Anent the third issue, [respondents] dismally failed to provide us the exact
figures needed for the computation of their wage differentials. To simply
alleged [sic] that one is underpaid of his wages is not enough. No bill of
particulars was submitted. Moreover, the Order of RTWPB Region XI,
Davao City dated February 21, 1996 exempts [petitioner] company from
complying Wage Order No. 04 [sic] in so far as such exemption applies
only to workers who are not covered by the Collective Bargaining
Agreement, for the period January 1 to December 31, 1995,. [sic] In so far
as [respondents] were not privies to the CBA, they were the workers
referred to by RTWPB’s Order. [H]ence, [respondents’] claims for wage
differentials are hereby dismissed for lack of factual basis.

We find no further necessity in delving into the issues raised by

[respondents] regarding moral damages and attorney’s fees for being moot
and academic because of the findings that CAMPCO does not engaged
[sic] in labor-only contracting and that [respondents] cannot be declared as
regular employees of [petitioner].

WHEREFORE, premises considered, judgment is hereby rendered in the

above-entitled case, dismissing the complaint for lack of merit.

Respondents appealed the Labor Arbiter’s Decision to the NLRC,

reiterating their position that they should be recognized as regular
employees of the petitioner since CAMPCO was a mere labor-only
contractor, as already declared in the previous Orders of DOLE Regional
Director Parel, dated 19 October 1993, and DOLE Undersecretary Trajano,
dated 15 September 1994, which already became final and executory. The
NLRC, in its Resolution,21 dated 29 February 2000, dismissed the appeal
and affirmed the Labor Arbiter’s Decision, reasoning as follows –

We find no merit in the appeal.

The concept of conclusiveness of judgment under the principle of "res

judicata" means that where between the first case wherein judgment is
rendered and the second case wherein such judgment is invoked, there is
identity of parties, but there is no identity of cause of action, the judgment is
conclusive in the second case, only as to those matters actually and
directly controverted and determined and not as to matters merely involved
therein (Viray, etc. vs. Marinas, et al., 49 SCRA 44). There is no denying
that the order of the Department of Labor and Employment, Regional Office
No. XI in case No. RI100-9310-RI-355, which the complainants perceive to
have sealed the status of CAMPCO as labor-only contractor, proceeded
from the visitorial and enforcement power of the Department Secretary
under Article 128 of the Labor Code. Acting on reports that the
cooperatives, including CAMPCO, that operated and offered services at
[herein petitioner] company were engaging in labor-only contracting
activities, that Office conducted a routinary inspection over the records of
said cooperatives and consequently, found the latter to be engaging in
labor-only contracting activities. This being so, [petitioner] company was
not a real party-in-interest in said case, but the cooperatives concerned.
Therefore, there is no identity of parties between said case and the present
case which means that the afore-said ruling of the DOLE is not binding and
conclusive upon [petitioner] company.

It is not correct, however, to say, as the Labor Arbiter did, that the afore-
said ruling of the Department of Labor and Employment has been
overturned by Department Order No. 10. It is a basic principle that "once a
judgment becomes final it cannot be disturbed, except for clerical errors or
when supervening events render its execution impossible or unjust"
(Sampaguita Garmens [sic] Corp. vs. NLRC, G. R. No. 102406, June 7,
1994). Verily, the subsequent issuance of Department Order No. 10 cannot
be construed as supervening event that would render the execution of said
judgment impossible or unjust. Department Order No. 10 refers to the
ramification of some provisions of the Rules Implementing Articles 106 and
109 of the Labor Code, without substantially changing the definition of
"labor-only" or "job’ contracting.

Well-settled is the rule that to qualify as an independent job contractor, one

has either substantial capital "or" investment in the form of tools, equipment
and machineries necessary to carry out his business (see Virginia Neri, et
al. vs. NLRC, et al., G.R. Nos. 97008-89, July 23, 1993). CAMPCO has
admittedly a paid-up capital of P4,562,470.25 and this is more than enough
to qualify it as an independent job contractor, as aptly held by the Labor
Arbiter.

WHEREFORE, the appeal is DISMISSED for lack of merit and the

appealed decision is AFFIRMED.

Petition for Certiorari with the Court of Appeals

Refusing to concede defeat, respondents filed with the Court of Appeals a

Petition for Certiorari under Rule 65 of the revised Rules of Civil Procedure,
asserting that the NLRC acted without or in excess of its jurisdiction and
with grave abuse of discretion amounting to lack of jurisdiction when, in its
Resolution, dated 29 February 2000, it (1) ruled that CAMPCO was a bona
fide independent job contractor with substantial capital, notwithstanding the
fact that at the time of its organization and registration with CDA, it only had
a paid-up capital of ₱6,600.00; and (2) refused to apply the doctrine of res
judicata against petitioner. The Court of Appeals, in its Decision,22 dated 20
May 2002, granted due course to respondents’ Petition, and set aside the
assailed NLRC Decision. Pertinent portions of the Court of Appeals
Decision are reproduced below –

In the case at bench, it was established during the proceedings before the
[NLRC] that CAMPCO has a substantial capital. However, having a
substantial capital does not per se qualify CAMPCO as a job contractor. In
order to be considered an independent contractor it is not enough to show
substantial capitalization or investment in the form of tools, equipment,
machinery and work premises. The conjunction "and," in defining what a
job contractor is, means that aside from having a substantial capital or
investment in the form of tools, equipment, machineries, work premise, and
other materials which are necessary in the conduct of his business, the
contractor must be able to prove that it also carries on an independent
business and undertakes the contract work on his own account under his
own responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters connected
with the performance of the work except as to the results thereof. [Herein
petitioner DolePhil] has failed to prove, except for the substantial capital
requirement, that CAMPCO has met the other requirements. It was not
established that CAMPCO is engaged or carries on an independent
business. In the performance of the respective tasks of workers deployed
by CAMPCO with [petitioner], it was not established that CAMPCO
undertook the contract of work it entered with [petitioner] under its own
account and its own responsibility. It is [petitioner] who provides the
procedures to be followed by the workers in the performance of their
assigned work. The workers deployed by CAMPCO to [petitioner]
performed activities which are directly related to the principal business or
operations of the employer in which workers are habitually employed since
[petitioner] admitted that these workers were engaged to perform the job of
other regular employees who cannot report for work.
Moreover, [NLRC] likewise gravely erred in not giving weight to the Order
dated 19 October 1993 issued by the Office of the Secretary of the
Department of Labor and Employment, through Undersecretary Cresencio
Trajano, which affirmed the findings of the Department of Labor and
Employment Regional Office, Region XI, Davao City that Cannery Multi-
Purpose Cooperative is one of the cooperatives engaged in labor-only
contracting activities.

In the exercise of the visitorial and enforcement power of the Department of

Labor and Employment, an investigation was conducted among the
cooperatives organized and existing in Polomolok, South Cotabato, relative
to labor-only contracting activities. One of the cooperatives investigated
was Cannery Multi-Purpose Cooperative. After the investigation, the
Department of Labor and Employment, Regional Office No. XI, Davao City,
through its Regional Director, issued the Order dated 19 October 1993,
stating:

"WHEREFORE, premises considered, ADVENTURER’S MULTI PURPOSE

COOPERATIVE, HUMAN RESOURCE MULTI PURPOSE SKILLED
COOPERATIVE and CANNERY MULTI PURPOSE COOPERATIVE are
hereby declared to be engaged in labor only contracting which is a
prohibited activity. The same cooperatives are therefore ordered to cease
and desist from further engaging in such activities.

xxxx

SO ORDERED."

Cannery Multi Purpose Cooperative, together with the other cooperatives

declared as engaged in labor-only contracting activity, appeal the above-
findings to the Secretary of the Department of Labor and Employment.
Their appeal was dismissed for lack of merit as follows:: [sic]

xxxx

[NLRC] held that CAMPCO, being not a real party-in interest in the above-
case, the said ruling is not binding and conclusive upon [petitioner]. This
Court, however, finds the contrary.

CAMPCO was one of the cooperatives investigated by the Department of

Labor and Employment, Regional Office No. XI, Davao City, pursuant to
Article 128 of the Labor Code. It was one of the appellants before the
Secretary of the Department of Labor questioning the decision of the
Regional Director of DOLE, Regional Office No. XI, Davao City. This Court
noted that in the proceedings therein, and as mentioned in the decision
rendered by Undersecretary Cresencio B. Trajano of the Department of
Labor and Employment, Manila, regarding the cooperatives’ appeal thereto,
the parties therein, including Cannery Multi-Purpose Cooperative,
submitted to the said office their position papers and Articles of
Cooperatives and Certification of Registrations [sic] on 30 August 1993.
This is a clear indicia that CAMPCO participated in the proceedings therein.
[NLRC], therefore, committed grave abuse of discretion amounting to lack
or excess of jurisdiction when it held that CAMPCO was never a party to
the said case.

[Petitioner] invokes Section 6 of Department Order No. 10, series of 1997,

issued by the Department of Labor and Employment which took effect on
22 June 1997. The said section identified the circumstances which are
permissible job contracting, to wit:

xxxx

[Petitioner’s] main contention is based on the decisions rendered by the

labor arbiter and [NLRC] which are both anchored on Department Order
No. 10 issued by the Department of Labor and Employment. The said
department order provided for several flexible working relations between a
principal, a contractor or subcontractor and the workers recruited by the
latter and deployed to the former. In the case at bench, [petitioner] posits
that the engagement of [petitioner] of the workers deployed by CAMPCO
was pursuant to D.O. No. 10, Series of 1997.

However, on 8 May 2001, the Department of Labor and Employment

issued Department Order No. 3, series of 2001, revoking Department Order
No. 10, series of 1997. The said department order took effect on 29 May
2001.

xxxx

Under Department Order No. 3, series of 2001, some contracting and

outsourcing arrangements are no longer legitimate modes of employment
relation. Having revoked Department Order No. 10, series of 1997,
[petitioner] can no longer support its argument by relying on the revoked
department order.

Considering that [CAMPCO] is not a job contractor, but one engaged in

labor-only contracting, CAMPCO serves only as an agent of [petitioner]
pursuant to par. (b) of Sec. 9, Rule VIII, Book III of the Implementing Rules
and Regulations of the Labor Code, stating,

xxxx

However, the Court cannot declare that [herein respondents] are regular
employees of [petitioner]. x x x

xxxx

In the case at bench, although [respondents] were engaged to perform

activities which are usually necessary or desirable in the usual business or
trade of private respondent, it is apparent, however, that their services were
engaged by [petitioner] only for a definite period. [Petitioner’s] nature of
business and operation has its peaks. In order to meet the demands during
peak seasons they necessarily have to engage the services of workers to
work only for a particular season. In the case of [respondents], when they
were deployed by CAMPCO with [petitioner] and were assigned by the
latter at its cannery department, they were aware that they will be working
only for a certain duration, and this was made known to them at the time
they were employed, and they agreed to the same.

xxxx

The non-rehiring of some of the petitioners who were allegedly put on a

"floating status’ is an indication that their services were no longer needed.
They attained their "floating status" only after they have finished their
contract of employment, or after the duration of the season that they were
employed. The decision of [petitioner] in not rehiring them means that their
services were no longer needed due to the end of the season for which
they were hired. And this Court reiterates that at the time they were
deployed to [petitioner’s] cannery division, they knew that the services they
have to render or the work they will perform are seasonal in nature and
consequently their employment is only for the duration of the season.
ACCORDINGLY, in view of the foregoing, the instant petition for certiorari
is hereby GRANTED DUE COURSE. The decision dated 29 February 2000
and Resolution dated 19 December 2000 rendered by [NLRC] are
hereby SET ASIDE. In place thereof, it is hereby rendered that:

1. Cannery Multi-Purpose Cooperative is a labor-only contractor as

defined under the Labor Code of the Philippines and its implementing
rules and regulations; and that

2. DOLE Philippines Incorporated is merely an agent or intermediary

of Cannery Multi-Purpose Cooperative.

All other claims of [respondents] are hereby DENIED for lack of basis.

Both petitioner and respondents filed their respective Motions for

Reconsideration of the foregoing Decision, dated 20 May 2002, prompting
the Court of Appeals to promulgate an Amended Decision on 27 November
2003, in which it ruled in this wise:

This court examined again the documentary evidence submitted by the

[herein petitioner] and we rule not to disturb our findings in our Decision
dated May 20, 2002. It is our opinion that there was no competent evidence
submitted that would show that CAMPCO is engaged to perform a specific
and special job or service which is one of the strong indicators that an
entity is an independent contractor. The articles of cooperation and by-laws
of CAMPCO do not show that it is engaged in performing a specific and
special job or service. What is clear is that it is a multi-purpose cooperative
organized under RA No. 6938, nothing more, nothing less.

As can be gleaned from the contract that CAMPCO entered into with the
[petitioner], the undertaking of CAMPCO is to provide [petitioner] with
workforce by assisting the company in its daily operations and perform odd
jobs as may be assigned. It is our opinion that CAMPCO merely acted as
recruitment agency for [petitioner]. CAMPCO by supplying manpower only,
clearly conducted itself as ‘labor-only" contractor. As can be gleaned from
the service contract, the work performed by the [herein respondents] are
directly related to the main business of the [petitioner]. Clearly, the
requisites of "labor-only" contracting are present in the case at bench.

In view of the above ruling, we find it unnecessary to discuss whether the

Order of Undersecretary Trajano finding that CAMPCO is a "labor-only"
contractor is a determining factor or constitutes res judicata in the case at
bench. Our findings that CAMPCO is a "labor-only" contractor is based on
the evidence presented vis-à-vis the rulings of the Supreme Court on the
matter.

Since, the argument that the [petitioner] is the real employer of the
[respondents], the next question that must be answered is – what is the
nature of the employment of the petitioners?

xxxx

The afore-quoted [Article 280 of the Labor Code, as amended] provides for
two kinds of employment, namely: (1) regular (2) casual. In our Decision,
we ruled that the [respondents] while performing work necessary and
desirable to the business of the [petitioner] are seasonal employees as
their services were engaged by the [petitioner] for a definite period or only
during peak season.

In the most recent case of Hacienda Fatima v. National Federation of

Sugarcane Workers Food and General Trade, the Supreme Court ruled
that for employees to be excluded from those classified as regular
employees, it is not enough that they perform work or services that are
seasonal in nature. They must have also been employed only for the
duration of one season. It is undisputed that the [respondents’] services
were engaged by the [petitioner] since 1993 and 1994. The instant
complaint was filed in 1996 when the [respondents] were placed on floating
status. Evidently, [petitioner] employed the [respondents] for more than one
season. Therefore, the general rule on regular employment is applicable.
The herein petitioners who performed their jobs in the workplace of the
[petitioner] every season for several years, are considered the latter’s
regular employees for having performed works necessary and desirable to
the business of the [petitioner]. The [petitioner’s] eventual refusal to use
their services—even if they were ready, able and willing to perform their
usual duties whenever these were available—and hiring other workers to
perform the tasks originally assigned to [respondents] amounted to illegal
dismissal of the latter. We thus, correct our earlier ruling that the herein
petitioners are seasonal workers. They are regular employees within the
contemplation of Article 280 of the Labor Code and thus cannot be
dismissed except for just or authorized cause. The Labor Code provides
that when there is a finding of illegal dismissal, the effect is that the
employee dismissed shall be reinstated to his former position without loss
of seniority rights with backwages from the date of his dismissal up to his
actual reinstatement.

This court however, finds no basis for the award of damages and attorney’s
fees in favor of the petitioners.

WHEREFORE, the Decision dated May 20, 2002 rendered by this Court is
hereby AMENDED as follows:

1) [Petitioner] DOLE PHILIPPINES is hereby declared the employer

of the [respondents].

2) [Petitioner] DOLE PHILIPPINES is hereby declared guilty of illegal

dismissal and ordered to immediately reinstate the [respondents] to
their former position without loss of seniority rights and other benefits,
and to pay each of the [respondents] backwages from the date of the
filing of illegal dismissal on December 19, 1996 up to actual
reinstatement, the same to be computed by the labor arbiter.

3) The claims for damages and attorney’s fees are hereby denied for
lack of merit.

No costs.23

The Petition at Bar

Aggrieved by the Decision, dated 20 May 2002, and the Amended

Decision, dated 27 November 2003, of the Court of Appeals, petitioner filed
the instant Petition for Review on Certiorari under Rule 45 of the revised
Rules of Civil Procedure, in which it made the following assignment of
errors –

I.

THE COURT OF APPEALS HAS DEPARTED FROM THE USUAL

COURSE OF JUDCIAL PROCEEDINGS WHEN IT MADE ITS OWN
FACTUAL FINDINGS AND DISREGARDED THE UNIFORM AND
CONSISTENT FACTUAL FINDINGS OF THE LABOR ARBITER
AND THE NLRC, WHICH MUST BE ACCORDED GREAT WEIGHT,
RESPECT AND EVEN FINALITY. IN SO DOING, THE COURT OF
APPEALS EXCEEDED ITS AUTHORITY ON CERTIORARI
UNDER RULE 65 OF THE RULES OF COURT.

II.

THE COURT OF APPEALS HAS DECIDED A QUESTION OF

SUBSTANCE IN A WAY NOT IN ACCORD WITH THE
CONSTITUTION, LAW, APPLICABLE RULES AND REGULATIONS
AND DECISIONS OF THE SUPREME COURT IN NOT HOLDING
THAT DEPARTMENT ORDER NO. 10, SERIES OF 1997 IS THE
APPLICABLE REGULATION IN THIS CASE. IN GIVING
RETROACTIVE APPLICATION TO DEPARTMENT ORDER NO. 3,
SERIES OF 2001, THE COURT OF APPEALS VIOLATED THE
CONSTITUTIONAL PROVISION AGAINST IMPAIRMENT OF
CONTRACTS AND DEPRIVED PETITIONER OF THE DUE
PROCESS OF THE LAW.

III.

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN GIVING WEIGHT TO THE ORDER DATED 19 OCTOBER 1993
ISSUED BY THE OFFICE OF SECRETARY OF LABOR, WHICH
AFFIRMED THE FINDINGS OF THE DOLE REGIONAL OFFICE
(REGION XI, DAVAO CITY) THAT CAMPCO IS ONE OF THE
COOPERATIVES ENGAGED IN LABOR-ONLY CONTRACTING
ACTIVITIES.

IV.

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN NOT RULING THAT RESPONDENTS, BY ACTIVELY
REPRESENTING THEMSELVES AND WARRANTING THAT THEY
ARE ENGAGED IN LEGITIMATE JOB CONTRACTING, ARE
BARRED BY THE EQUITABLE PRINCIPLE OF ESTOPPEL FROM
ASSERTING THAT THEY ARE REGULAR EMPLOYEES OF
PETITIONER.

V.
 THE COURT OF APPEALS HAS DETERMINED A QUESTION OF
SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN RULING THAT CAMPCO IS ENGAGED IN THE PROHIBITED
ACT OF "LABOR-ONLY CONTRACTING" DESPITE THERE BEING
SUBSTANTIAL EVIDENCE TO THE CONTRARY.

VI.

THE COURT OF APPEALS HAS DETERMINED A QUESTION OF

SUBSTANCE NOT IN ACCORD WITH LAW AND JURISPRUDENCE
IN RULING THAT PETITIONER IS THE EMPLOYER OF
RESPONDENTS AND THAT PETITIONER IS GUILTY OF ILLEGAL
DISMISSAL.24

This Court’s Ruling

Anent the first assignment of error, petitioner argues that judicial review
under Rule 65 of the revised Rules of Civil Procedure is limited only to
issues concerning want or excess or jurisdiction or grave abuse of
discretion. The special civil action for certiorari is a remedy designed to
correct errors of jurisdiction and not mere errors of judgment. It is the
contention of petitioner that the NLRC properly assumed jurisdiction over
the parties and subject matter of the instant case. The errors assigned by
the respondents in their Petition for Certiorari before the Court of Appeals
do not pertain to the jurisdiction of the NLRC; they are rather errors of
judgment supposedly committed by the the NLRC, in its Resolution, dated
29 February 2000, and are thus not the proper subject of a petition
for certiorari. Petitioner also posits that the Petition for Certiorari filed by
respondents with the Court of Appeals raised questions of fact that would
necessitate a review by the appellate court of the evidence presented by
the parties before the Labor Arbiter and the NLRC, and that questions of
fact are not a fit subject for a special civil action for certiorari.

It has long been settled in the landmark case of St. Martin Funeral Home v.
NLRC,25 that the mode for judicial review over decisions of the NLRC is by
a petition for certiorari under Rule 65 of the revised Rules of Civil
Procedure. The different modes of appeal, namely, writ of error (Rule 41),
petition for review (Rules 42 and 43), and petition for review
on certiorari (Rule 45), cannot be availed of because there is no provision
on appellate review of NLRC decisions in the Labor Code, as
amended.26 Although the same case recognizes that both the Court of
Appeals and the Supreme Court have original jurisdiction over such
petitions, it has chosen to impose the strict observance of the hierarchy of
courts. Hence, a petition for certiorari of a decision or resolution of the
NLRC should first be filed with the Court of Appeals; direct resort to the
Supreme Court shall not be allowed unless the redress desired cannot be
obtained in the appropriate courts or where exceptional and compelling
circumstances justify an availment of a remedy within and calling for the
exercise by the Supreme Court of its primary jurisdiction.

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

NLRC, as exercised previously by the Supreme Court and, now, by the
Court of Appeals, is described in Zarate v. Olegario,27 thus –

The rule is settled that the original and exclusive jurisdiction of this Court to
review a decision of respondent NLRC (or Executive Labor Arbiter as in
this case) in a petition for certiorari under Rule 65 does not normally
include an inquiry into the correctness of its evaluation of the evidence.
Errors of judgment, as distinguished from errors of jurisdiction, are not
within the province of a special civil action for certiorari, which is merely
confined to issues of jurisdiction or grave abuse of discretion. It is thus
incumbent upon petitioner to satisfactorily establish that respondent
Commission or executive labor arbiter acted capriciously and whimsically in
total disregard of evidence material to or even decisive of the controversy,
in order that the extraordinary writ of certiorari will lie. By grave abuse of
discretion is meant such capricious and whimsical exercise of judgment as
is equivalent to lack of jurisdiction, and it must be shown that the discretion
was exercised arbitrarily or despotically. For certiorari to lie, there must be
capricious, arbitrary and whimsical exercise of power, the very antithesis of
the judicial prerogative in accordance with centuries of both civil law and
common law traditions.

The Court of Appeals, therefore, can grant the Petition for Certiorari if it
finds that the NLRC, in its assailed decision or resolution, committed grave
abuse of discretion by capriciously, whimsically, or arbitrarily disregarding
evidence which is material or decisive of the controversy; and the Court of
Appeals can not make this determination without looking into the evidence
presented by the parties. Necessarily, the appellate court can only evaluate
the materiality or significance of the evidence, which is alleged to have
been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in
relation to all other evidence on record.

As this Court elucidated in Garcia v. National Labor Relations

Commission28 --

[I]n Ong v. People, we ruled that certiorari can be properly resorted to

where the factual findings complained of are not supported by the evidence
on record. Earlier, in Gutib v. Court of Appeals, we emphasized thus:

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

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

In the review of an NLRC decision through a special civil action for

certiorari, resolution is confined only to issues of jurisdiction and grave
abuse of discretion on the part of the labor tribunal. Hence, the Court
refrains from reviewing factual assessments of lower courts and agencies
exercising adjudicative functions, such as the NLRC. Occasionally,
however, the Court is constrained to delve into factual matters where, as in
the instant case, the findings of the NLRC contradict those of the Labor
Arbiter.

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

II

The second assignment of error delves into the significance and application
to the case at bar of the two department orders issued by DOLE.
Department Order No. 10, series of 1997, amended the implementing rules
of Books III and VI of the Labor Code, as amended. Under this particular
DOLE department order, the arrangement between petitioner and
CAMPCO would qualify as permissible contracting. Department Order No.
3, series of 2001, revoked Department Order No. 10, series of 1997, and
reiterated the prohibition on labor-only contracting.

Attention is called to the fact that the acts complained of by the

respondents occurred well before the issuance of the two DOLE
department orders in 1997 and 2001. The Service Contract between DOLE
and CAMPCO was executed on 17 August 1993. Respondents started
working for petitioner sometime in 1993 and 1994. While some of them
continued to work for petitioner, at least until the filing of the Complaint,
others were put on "stay home status" at various times in 1994, 1995, and
1996. Respondents filed their Complaint with the NLRC on 19 December
1996.

A basic rule observed in this jurisdiction is that no statute, decree,

ordinance, rule or regulation shall be given retrospective effect unless
explicitly stated.29 Since there is no provision at all in the DOLE department
orders that expressly allowed their retroactive application, then the general
rule should be followed, and the said orders should be applied only
prospectively.

Which now brings this Court to the question as to what was the prevailing
rule on labor-only contracting from 1993 to 1996, the period when the
occurrences subject of the Complaint before the NLRC took place.

Article 106 of the Labor Code, as amended, permits legitimate job

contracting, but prohibits labor-only contracting. The said provision reads –

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.

In the event that the contractor or subcontractor fails to pay the wages of
his employees in accordance with this Code, the employer shall be jointly
and severally liable with his contractor or subcontractor to such employees
to the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.

The Secretary of Labor 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 persons are performing activities
which are directly related to the principal business of such employer. In
such cases, the person or intermediary shall be considered merely as an
agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.

To implement the foregoing provision of the Labor Code, as amended,

Sections 8 and 9, Rule VIII, Book III of the implementing rules, in force
since 1976 and prior to their amendment by DOLE Department Order No.
10, series of 1997, provided as follows –

Sec. 8. Job contracting. – There is job contracting permissible under the

Code if the following conditions are met;

(1) The contractor carries on an independent business and

undertakes the contract work on his own account under his own
responsibility according to his own manner and method, free from the
control and direction of his employer or principal in all matters
connected with the performance of the work except as to the results
thereof; and
 (2) The contractor has substantial capital or investment in the form of
tools, equipment, machineries, work premises, and other materials
which are necessary in the conduct of his business.

Sec. 9. Labor-only contracting. – (a) Any person who undertakes to supply

workers to an employer shall be deemed to be engaged in labor-only
contracting where such person:

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

tools, equipment, machineries, work premises and other materials;
and

(2) The workers recruited and placed by such persons are performing
activities which are directly related to the principal business or
operations of the employer in which workers are habitually employed.

(b) Labor-only contracting as defined herein is hereby

prohibited and the person acting as contractor shall be
considered merely as an agent or intermediary of the employer
who shall be responsible to the workers in the same manner
and extent as if the latter were directly employed by him.

(c) For cases not falling under this Article, the Secretary of
Labor shall determine through appropriate orders whether or
not the contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating
needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to
insure the protection and welfare of the workers.

Since these statutory and regulatory provisions were the ones in force
during the years in question, then it was in consideration of the same that
DOLE Regional Director Parel and DOLE Undesrsecretary Trajano issued
their Orders on 19 September 1993 and 15 September 1994, respectively,
both finding that CAMPCO was engaged in labor-only contracting.
Petitioner, in its third assignment of error, questions the weight that the
Court of Appeals gave these orders in its Decision, dated 20 May 2002,
and Amended Decision, dated 27 November 2003.

III
The Orders of DOLE Regional Director Parel, dated 19 September 1993,
and of DOLE Undersecretary Trajano, dated 15 September 1994, were
issued pursuant to the visitorial and enforcement power conferred by the
Labor Code, as amended, on the DOLE Secretary and his duly authorized
representatives, to wit –

ART. 128. Visitorial and enforcement power. – (a) The Secretary of Labor
or his duly authorized representatives, including labor regulation officers,
shall have access to employer’s records and premises at any time of the
day or night whenever work is being undertaken therein, and the right to
copy therefrom, to question any employee and investigate any fact,
condition or matter which may be necessary to determine violations or
which may aid in the enforcement of this Code and of any labor law, wage
order or rules and regulations pursuant thereto.

(b) Notwithstanding the provisions of Articles 129 and 217 of this Code to
the contrary, and in cases where the relationship of employer-employee still
exists, the Secretary of Labor and Employment or his duly authorized
representatives shall have the power to issue compliance orders to give
effect to the labor standards provisions of this Code and other labor
legislation based on the findings of labor employment and enforcement
officers or industrial safety engineers made in the course of inspection. The
Secretary or his duly authorized representatives shall issue writs of
execution to the appropriate authority for the enforcement of their orders,
except in cases where the employer contests the findings of the labor
employment and enforcement officer and raises issues supported by
documentary proofs which were not considered in the course of inspection.

An order issued by the duly authorized representative of the Secretary of

Labor and Employment under this article may be appealed to the latter. In
case said order involves a monetary award, an appeal by the employer
may be perfected only upon the posting of a cash or surety bond issued by
a reputable bonding company duly accredited by the Secretary of Labor
and Employment in the amount equivalent to the monetary award in the
order appealed from. (Emphasis supplied.)

Before Regional Director Parel issued his Order, dated 19 September

1993, a Task Force investigated the operations of cooperatives in
Polomolok, South Cotabato, and submitted a report identifying six
cooperatives that were engaged in labor-only contracting, one of which was
CAMPCO. In a conference before the DOLE Regional Office, the
cooperatives named by the Task Force were given the opportunity to
explain the nature of their activities in relation to petitioner; and, the
cooperatives, as well as petitioner, submitted to the DOLE Regional Office
their position papers and other supporting documents to refute the findings
of the Task Force. It was only after these procedural steps did Regional
Director Parel issued his Order finding that three cooperatives, including
CAMPCO, were indeed engaged in labor-only contracting and were
directed to cease and desist from further engaging in such activities. On
appeal, DOLE Undersecretary Trajano, by authority of the DOLE Secretary,
affirmed Regional Director Parel’s Order. Upon denial of the Motion for
Reconsideration filed by the cooperatives, and no further appeal taken
therefrom, the Order of DOLE Undersecretary Trajano, dated 15
September 1994, became final and executory.

Petitioner avers that the foregoing Orders of the authorized representatives

of the DOLE Secretary do not constitute res judicata in the case filed before
the NLRC. This Court, however, believes otherwise and finds that the final
and executory Orders of the DOLE Secretary or his authorized
representatives should bind the NLRC.

It is obvious that the visitorial and enforcement power granted to the DOLE
Secretary is in the nature of a quasi-judicial power. Quasi-judicial power
has been described by this Court in the following manner –

Quasi-judicial or administrative adjudicatory power on the other hand is the

power of the administrative agency to adjudicate the rights of persons
before it. It is the power to hear and determine questions of fact to
which the legislative policy is to apply and to decide in accordance
with the standards laid down by the law itself in enforcing and
administering the same law. The administrative body exercises its quasi-
judicial power when it performs in a judicial manner an act which is
essentially of an executive or administrative nature, where the power to
act in such manner is incidental to or reasonably necessary for the
performance of the executive or administrative duty entrusted to it. In
carrying out their quasi-judicial functions the administrative officers or
bodies are required to investigate facts or ascertain the existence of
facts, hold hearings, weigh evidence, and draw conclusions from
them as basis for their official action and exercise of discretion in a
judicial nature. Since rights of specific persons are affected it is
elementary that in the proper exercise of quasi-judicial power due process
must be observed in the conduct of the proceedings.30 (Emphasis
supplied.)

The DOLE Secretary, under Article 106 of the Labor Code, as amended,
exercise quasi-judicial power, at least, to the extent necessary to determine
violations of labor standards provisions of the Code and other labor
legislation. He can issue compliance orders and writs of execution for the
enforcement of his orders. As evidence of the importance and binding
effect of the compliance orders of the DOLE Secretary, Article 128 of the
Labor Code, as amended, further provides –

ART. 128. Visitorial and enforcement power. –

xxxx

(d) It shall be unlawful for any person or entity to obstruct, impede, delay or
otherwise render ineffective the orders of the Secretary of Labor or his duly
authorized representatives issued pursuant to the authority granted under
this article, and no inferior court or entity shall issue temporary or
permanent injunction or restraining order or otherwise assume jurisdiction
over any case involving the enforcement orders issued in accordance with
this article.

The Orders of DOLE Regional Director Parel, dated 19 September 1993,

and of DOLE Undersecretary Trajano, dated 15 September 1994,
consistently found that CAMPCO was engaging in labor-only contracting.
Such finding constitutes res judicata in the case filed by the respondents
with the NLRC.

It is well-established in this jurisdiction that the decisions and orders of

administrative agencies, rendered pursuant to their quasi-judicial authority,
have upon their finality, the force and binding effect of a final judgment
within the purview of the doctrine of res judicata. The rule of res judicata,
which forbids the reopening of a matter once judicially determined by
competent authority, applies as well to the judicial and quasi-judicial acts of
public, executive or administrative officers and boards acting within their
jurisdiction as to the judgments of courts having general judicial powers.
The orderly administration of justice requires that the judgments or
resolutions of a court or quasi-judicial body must reach a point of finality set
by the law, rules and regulations, so as to write finis to disputes once and
for all. This is a fundamental principle in the Philippine justice system,
without which there would be no end to litigations.31

Res judicata has dual aspects, "bar by prior judgment" and "conclusiveness
of judgment." This Court has previously clarified the difference between the
two –

Section 49, Rule 39 of the Revised Rules of Court lays down the dual
aspects of res judicata in actions in personam. to wit:

"Effect of judgment. - The effect of a judgment or final order rendered by a

court or judge of the Philippines, having jurisdiction to pronounce the
judgment or order, may be as follows:

xxxx

(b) In other cases the judgment or order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in
interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the
same capacity;

(c) In any other litigation between the same parties or their successors in
interest, that only is deemed to have been adjudged in a former judgment
which appears upon its face to have been so adjudged, or which was
actually and necessarily included therein or necessary thereto."

Section 49(b) enunciates the first concept of res judicata known as "bar by
prior judgment," whereas, Section 49(c) is referred to as "conclusiveness of
judgment."

There is "bar by former judgment" when, between the first case where the
judgment was rendered, and the second case where such judgment is
invoked, there is identity of parties, subject matter and cause of action.
When the three identities are present, the judgment on the merits rendered
in the first constitutes an absolute bar to the subsequent action. But where
between the first case wherein Judgment is rendered and the second case
wherein such judgment is invoked, there is only identity of parties but there
is no identity of cause of action, the judgment is conclusive in the second
case, only as to those matters actually and directly controverted and
determined, and not as to matters merely involved therein. This is what is
termed "conclusiveness of judgment."

The second concept of res judicata, conclusiveness of judgment, is the one

applicable to the case at bar.

The same parties who participated in the proceedings before the DOLE
Regional Office are the same parties involved in the case filed before the
NLRC. CAMPCO, on behalf of its members, attended the conference
before the DOLE Regional Office; submitted its position paper; filed an
appeal with the DOLE Secretary of the Order of DOLE Regional Director
Parel; and moved for reconsideration of the subsequent Order of DOLE
Undersecretary Trajano. Petitioner, although not expressly named as a
respondent in the DOLE investigation, was a necessary party thereto,
considering that CAMPCO was rendering services to petitioner solely.
Moreover, petitioner participated in the proceedings before the DOLE
Regional Office, intervening in the matter through a letter sent by its Senior
Legal Officer, dated 24 May 1993, and submitting its own position paper.

While the causes of action in the proceedings before the DOLE and the
NLRC differ, they are, in fact, very closely related. The DOLE Regional
Office conducted an investigation to determine whether CAMPCO was
violating labor laws, particularly, those on labor-only contracting.
Subsequently, it ruled that CAMPCO was indeed engaging in labor-only
contracting activities, and thereafter ordered to cease and desist from doing
so. Respondents came before the NLRC alleging illegal dismissal by the
petitioner of those respondents who were put on "stay home status," and
seeking regularization of respondents who were still working for petitioner.
The basis of their claims against petitioner rests on the argument that
CAMPCO was a labor-only contractor and, thus, merely an agent or
intermediary of petitioner, who should be considered as respondents’ real
employer. The matter of whether CAMPCO was a labor-only contractor
was already settled and determined in the DOLE proceedings, which
should be conclusive and binding upon the NLRC. What were left for the
determination of the NLRC were the issues on whether there was illegal
dismissal and whether respondents should be regularized.

This Court also notes that CAMPCO and DOLE still continued with their
Service Contract despite the explicit cease and desist orders rendered by
authorized DOLE officials. There is no other way to look at it except that
CAMPCO and DOLE acted in complete defiance and disregard of the
visitorial and enforcement power of the DOLE Secretary and his authorized
representatives under Article 128 of the Labor Code, as amended. For the
NLRC to ignore the findings of DOLE Regional Director Parel and DOLE
Undersecretary Trajano is an unmistakable and serious undermining of the
DOLE officials’ authority.

IV

In petitioner’s fourth assignment of error, it points out that the Court of

Appeals erred in not holding respondents estopped from asserting that they
were regular employees of petitioner since respondents, as owners-
members of CAMPCO, actively represented themselves and warranted that
they were engaged in legitimate job contracting.

This Court cannot sustain petitioner’s argument.

It is true that CAMPCO is a cooperative composed of its members,

including respondents. Nonetheless, it cannot be denied that a cooperative,
as soon as it is registered with the CDA, attains a juridical personality of its
own,32separate and distinct from its members; much in the same way that a
corporation has a juridical personality separate and distinct from its
stockholders, known as the doctrine of corporate fiction. The protection
afforded by this doctrine is not absolute, but the exception thereto which
necessitates the piercing of the corporate veil can only be made under
specified circumstances. In Traders Royal Bank v. Court of Appeals,33 this
Court ruled that –

Petitioner cannot put up the excuse of piercing the veil of corporate entity,
as this is merely an equitable remedy, and maybe awarded only in cases
when the corporate fiction is used to defeat public convenience, justify
wrong, protect fraud or defend crime or where a corporation is a mere alter
ego or business conduit of a person.

Piercing the veil of corporate entity requires the court to see through the
protective shroud which exempts its stockholders from liabilities that
ordinarily, they could be subject to, or distinguishes one corporation from a
seemingly separate one, were it not for the existing corporate fiction. But to
do this, the court must be sure that the corporate fiction was misused, to
such an extent that injustice, fraud, or crime was committed upon another,
disregarding, thus, his, her, or its rights. It is the corporate entity which the
law aims to protect by this doctrine.

Using the above-mentioned guidelines, is petitioner entitled to a piercing of

the "cooperative identity" of CAMPCO? This Court thinks not.

It bears to emphasize that the piercing of the corporate veil is an equitable

remedy, and among the maxims of equity are: (1) he who seeks equity
must do equity, and (2) he who comes into equity must come with clean
hands. Hence, a litigant may be denied relief by a court of equity on the
ground that his conduct has been inequitable, unfair, dishonest, fraudulent,
or deceitful as to the controversy in issue.34

Petitioner does not come before this Court with clean hands. It is not an
innocent party in this controversy.

Petitioner itself admitted that it encouraged and even helped the

establishment of CAMPCO and the other cooperatives in Polomolok, South
Cotabato. These cooperatives were established precisely to render
services to petitioner. It is highly implausible that the petitioner was lured
into entering into the Service Contract with CAMPCO in 1993 on the latter’s
misrepresentation and false warranty that it was an independent job
contractor. Even if it is conceded that petitioner was indeed defrauded into
believing that CAMPCO was an independent contractor, then the DOLE
proceedings should have placed it on guard. Remember that petitioner
participated in the proceedings before the DOLE Regional Office, it cannot
now claim ignorance thereof. Furthermore, even after the issuance of the
cease and desist order on CAMPCO, petitioner still continued with its
prohibited service arrangement with the said cooperative. If petitioner was
truly defrauded by CAMPCO and its members into believing that the
cooperative was an independent job contractor, the more logical recourse
of petitioner was to have the Service Contract voided in the light of the
explicit findings of the DOLE officials that CAMPCO was engaging in labor-
only contracting. Instead, petitioner still carried on its Service Contract with
CAMPCO for several more years thereafter.

As previously discussed, the finding of the duly authorized representatives

of the DOLE Secretary that CAMPCO was a labor-only contractor is
already conclusive. This Court cannot deviate from said finding.
This Court, though, still notes that even an independent review of the
evidence on record, in consideration of the proper labor statutes and
regulations, would result in the same conclusion: that CAMPCO was
engaged in prohibited activities of labor-only contracting.

The existence of an independent and permissible contractor relationship is

generally established by the following criteria: whether or not the contractor
is carrying on an independent business; the nature and extent of the work;
the skill required; the term and duration of the relationship; the right to
assign the performance of a specified piece of work; the control and
supervision of the work to another; the employer's power with respect to
the hiring, firing and payment of the contractor's workers; the control of the
premises; the duty to supply the premises tools, appliances, materials and
labor; and the mode, manner and terms of payment.35

While there is present in the relationship of petitioner and CAMPCO some

factors suggestive of an independent contractor relationship (i.e., CAMPCO
chose who among its members should be sent to work for petitioner;
petitioner paid CAMPCO the wages of the members, plus a percentage
thereof as administrative charge; CAMPCO paid the wages of the members
who rendered service to petitioner), many other factors are present which
would indicate a labor-only contracting arrangement between petitioner and
CAMPCO.36

First, although petitioner touts the multi-million pesos assets of

CAMPCO, it does well to remember that such were amassed in the
years following its establishment. In 1993, when CAMPCO was
established and the Service Contract between petitioner and
CAMPCO was entered into, CAMPCO only had ₱6,600.00 paid-up
capital, which could hardly be considered substantial.37 It only
managed to increase its capitalization and assets in the succeeding
years by continually and defiantly engaging in what had been
declared by authorized DOLE officials as labor-only contracting.

Second, CAMPCO did not carry out an independent business from

petitioner. It was precisely established to render services to petitioner
to augment its workforce during peak seasons. Petitioner was its only
client. Even as CAMPCO had its own office and office equipment,
these were mainly used for administrative purposes; the tools,
machineries, and equipment actually used by CAMPCO members
when rendering services to the petitioner belonged to the latter.

Third, petitioner exercised control over the CAMPCO members,

including respondents. Petitioner attempts to refute control by
alleging the presence of a CAMPCO supervisor in the work premises.
Yet, the mere presence within the premises of a supervisor from the
cooperative did not necessarily mean that CAMPCO had control over
its members. Section 8(1), Rule VIII, Book III of the implementing
rules of the Labor Code, as amended, required for permissible job
contracting that the contractor undertakes the contract work on his
account, under his own responsibility, according to his own manner
and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work
except as to the results thereof. As alleged by the respondents, and
unrebutted by petitioner, CAMPCO members, before working for the
petitioner, had to undergo instructions and pass the training provided
by petitioner’s personnel. It was petitioner who determined and
prepared the work assignments of the CAMPCO members. CAMPCO
members worked within petitioner’s plantation and processing plants
alongside regular employees performing identical jobs, a
circumstance recognized as an indicium of a labor-only
contractorship.38

Fourth, CAMPCO was not engaged to perform a specific and special

job or service. In the Service Contract of 1993, CAMPCO agreed to
assist petitioner in its daily operations, and perform odd jobs as may
be assigned. CAMPCO complied with this venture by assigning
members to petitioner. Apart from that, no other particular job, work
or service was required from CAMPCO, and it is apparent, with such
an arrangement, that CAMPCO merely acted as a recruitment
agency for petitioner. Since the undertaking of CAMPCO did not
involve the performance of a specific job, but rather the supply of
manpower only, CAMPCO clearly conducted itself as a labor-only
contractor.39

Lastly, CAMPCO members, including respondents, performed

activities directly related to the principal business of petitioner. They
worked as can processing attendant, feeder of canned pineapple and
pineapple processing, nata de coco processing attendant, fruit
 cocktail processing attendant, and etc., functions which were, not
only directly related, but were very vital to petitioner’s business of
production and processing of pineapple products for export.

The findings enumerated in the preceding paragraphs only support what

DOLE Regional Director Parel and DOLE Undersecretary Trajano had long
before conclusively established, that CAMPCO was a mere labor-only
contractor.

VI

The declaration that CAMPCO is indeed engaged in the prohibited

activities of labor-only contracting, then consequently, an employer-
employee relationship is deemed to exist between petitioner and
respondents, since CAMPCO shall be considered as a mere agent or
intermediary of petitioner.

Since respondents are now recognized as employees of petitioner, this

Court is tasked to determine the nature of their employment. In
consideration of all the attendant circumstances in this case, this Court
concludes that respondents are regular employees of petitioner.

Article 280 of the Labor Code, as amended, reads –

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 and desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of engagement of the employee or where the work
or services to be performed is seasonal in nature and the employment is for
the duration of the season.

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

preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such activity
exists.
This Court expounded on the afore-quoted provision, thus –

The primary standard, therefore, of determining a regular employment is

the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The
test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by
considering the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Also, if the employee has
been performing the job for at least one year, even if her 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 the activity to the business. Hence, the
employment is also considered regular, but only with respect to such
activity and while such activity exists.40

In the instant Petition, petitioner is engaged in the manufacture and

production of pineapple products for export.1âwphi1Respondents rendered
services as processing attendant, feeder of canned pineapple and
pineapple processing, nata de coco processing attendant, fruit cocktail
processing attendant, and etc., functions they performed alongside regular
employees of the petitioner. There is no doubt that the activities performed
by respondents are necessary or desirable to the usual business of
petitioner.

Petitioner likewise want this Court to believe that respondents’ employment

was dependent on the peaks in operation, work backlogs, absenteeism,
and excessive leaves. However, bearing in mind that respondents all
claimed to have worked for petitioner for over a year, a claim which
petitioner failed to rebut, then respondent’s continued employment clearly
demonstrates the continuing necessity and indispensability of respondents’
employment to the business of petitioner.

Neither can this Court apply herein the ruling of the NLRC in the previous
case involving petitioner and the individual workers they used to hire before
the advent of the cooperatives, to the effect that the employment of these
individual workers were not regular, but rather, were valid "term
employments," wherein the employer and employee knowingly and
voluntarily agreed to employment for only a limited or specified period of
time. The difference between that case and the one presently before this
Court is that the members of CAMPCO, including respondents, were not
informed, at the time of their engagement, that their employment shall only
be for a limited or specified period of time. There is absence of proof that
the respondents were aware and had knowingly and voluntarily agreed to
such term employment. Petitioner did not enter into individual contracts
with the CAMPCO members, but executed a Service Contract with
CAMPCO alone. Although the Service Contract of 1993 stated that it shall
be for a specific period, from 1 July to 31 December 1993, petitioner and
CAMPCO continued the service arrangement beyond 1993. Since there
was no written renewal of the Service Contract,41 there was no further
indication that the engagement by petitioner of the services of CAMPCO
members was for another definite or specified period only.

Respondents, as regular employees of petitioner, are entitled to security of

tenure. They could only be removed based on just and authorized causes
as provided for in the Labor Code, as amended, and after they are
accorded procedural due process. Therefore, petitioner’s acts of placing
some of the respondents on "stay home status" and not giving them work
assignments for more than six months were already tantamount to
constructive and illegal dismissal.42

In summary, this Court finds that CAMPCO was a labor-only contractor

and, thus, petitioner is the real employer of the respondents, with CAMPCO
acting only as the agent or intermediary of petitioner. Due to the nature of
their work and length of their service, respondents should be considered as
regular employees of petitioner. Petitioner constructively dismissed a
number of the respondents by placing them on "stay home status" for over
six months, and was therefore guilty of illegal dismissal. Petitioner must
accord respondents the status of regular employees, and reinstate the
respondents who it constructively and illegally dismissed, to their previous
positions, without loss of seniority rights and other benefits, and pay these
respondents’ backwages from the date of filing of the Complaint with the
NLRC on 19 December 1996 up to actual reinstatement.

WHEREFORE, in view of the foregoing, the instant Petition is DENIED and

the Amended Decision, dated 27 November 2003, rendered by the Court of
Appeals in CA-G.R. SP No. 63405 is AFFIRMED.

Costs against the petitioner.

SO ORDERED.

6)

Aliviado vs. Procter and Gamble DIGEST

DECEMBER 19, 2016 ~ VBDIAZ

Aliviado vs. Procter and Gamble

G.R. No. 160506 June 6, 2011

Facts:

Petitioners worked as merchandisers of P&G. They all individually signed

employment contracts with either Promm-Gem or SAPS. They were
assigned at different outlets, supermarkets and stores where they handled
all the products of P&G. They received their wages from Promm-Gem or
SAPS.
SAPS and Promm-Gem imposed disciplinary measures on erring
merchandisers for reasons such as habitual absenteeism, dishonesty or
changing day-off without prior notice.
To enhance consumer awareness and acceptance of the products, P&G
entered into contracts with Promm-Gem and SAPS for the promotion and
merchandising of its products.
In December 1991, petitioners filed a complaint against P&G for
regularization, service incentive leave pay and other benefits with
damages.
Issue: WON P&G is the employer of petitioners.
Held:
In order to resolve the issue of whether P&G is the employer of petitioners,
it is necessary to first determine whether Promm-Gem and SAPS are labor-
only contractors or legitimate job contractors
.Clearly, the law and its implementing rules allow contracting arrangements
for the performance of specific jobs, works or services. However, in order
for such outsourcing to be valid, it must be made to an independent
contractor because the current labor rules expressly prohibit labor-only
contracting.
To emphasize, there is labor-only contracting when the contractor or sub-
contractor merely recruits, supplies or places workers to perform a job,
work or service for a principal and any of the following elements are
present:
1. i) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be
performed andthe employees recruited, supplied or placed by such
contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or
1. ii) The contractor does not exercise the right to control over the
performance of the work of the contractual
Under the circumstances, Promm-Gem cannot be considered as a labor-
only contractor. We find that it is a legitimate independent contractor.
Considering that SAPS has no substantial capital or investment and the
workers it recruited are performing activities which are directly related to
the principal business of P&G, we find that the former is engaged in “labor-
only contracting”.
Where labor-only contracting exists, the Labor Code itself establishes an
employer-employee relationship between the employer and the employees
of the labor-only contractor. The statute establishes this relationship for a
comprehensive purpose: to prevent a circumvention of labor laws. The
contractor is considered merely an agent of the principal employer and the
latter is responsible to the employees of the labor-only contractor as if such
employees had been directly employed by the principal employer.
Petition Granted
NOTE:

1. Respondent filed MR, which was denied.

2. In its resolution, the Court upheld its decision declaring SAPS has no
substantial capital, therefore, labor-only contractor.

7)

Temic Automotic Philippines vs.

Temic Automotive Philipppines Employees Union-FFW

G.R. No. 186965, December 23, 2009

Facts:

By practice, the petitioner contracts out some of the work in the warehouse
department, to three independent service providers or forwarders. These
forwarders also have their own employees who hold the positions of clerk,
material handler, system encoder and general clerk. The regular
employees of the petitioner and those of the forwarders share the same
work area and use the same equipment, tools and computers all belonging
to the petitioner.

This outsourcing arrangement gave rise to a union grievance on the issue

of the scope and coverage of the collective bargaining unit, specifically to
the question of "whether or not the functions of the forwarders’ employees
are functions being performed by the regular rank-and-file employees
covered by the bargaining unit." The union thus demanded that the
forwarders' employees be absorbed into the petitioner's regular employee
force and be given positions within the bargaining unit. The petitioner, on
the other hand, on the premise that the contracting arrangement with the
forwarders is a valid exercise of its management prerogative, posited that
the union's position is a violation of its management prerogative to
determine who to hire and what to contract out, and that the regular rank-
and-file employees and their forwarders’ employees serving as its clerks,
material handlers, system encoders and general clerks do not have the
same functions as regular company employees.

Issue:

Was the company validly outsourcing the services involving forwarding,

packing, loading and clerical activities related thereto?

Ruling:

Yes. The employer was within its right in entering the forwarding
agreements with the forwarders as an exercise of its management
prerogative. The employer’s declared objective for the arrangement is to
achieve greater economy and efficiency in its operations – a universally
accepted business objective and standard that the union has never
questioned. In Meralco v. Quisumbing,[G.R. No. 127598, January 27, 1999]
the Court joined this universal recognition of outsourcing as a legitimate
activity when it held that a company can determine in its best judgment
whether it should contract out a part of its work for as long as the employer
is motivated by good faith; the contracting is not for purposes of
circumventing the law; and does not involve or be the result of malicious or
arbitrary action.

ALIEN EMPLOYMENT PERMIT

8)
SMART COMMUNICATIONS, INC. vs. ASTORGA G.R. No. 148132
January 28, 2008 Redundancy, authorised causes for dismissal, Article
283, One month Notice, Backwages
JULY 5, 2018
FACTS:
Astorga was employed by Smart as District Sales Manager of the
Corporate Sales Marketing Group/ Fixed Services Division. SMART
launched an organizational realignment to achieve more efficient
operations. Part of the reorganization was the outsourcing of the marketing
and sales force. Thus, SMART formed SMART-NTT Multimedia,
Incorporated (SNMI). Since SNMI was formed to do the sales and
marketing work, SMART abolished the CSMG/FSD, Astorga’s division.
SNMI agreed to absorb the CSMG personnel who would be recommended
by SMART. Astorga landed last in the performance evaluation, thus, she
was not recommended by SMART. SMART, nonetheless, offered her a
supervisory position in the Customer Care Department, but she refused the
offer because the position carried lower salary rank and rate.

Astorga continued reporting for work. SMART issued a memorandum

advising Astorga of the termination of her employment on ground of
redundancy,

Astorga filed a Complaint for illegal dismissal, non-payment of salaries and

other benefits with prayer for moral and exemplary damages against
SMART.

In the meantime, SMART sent a letter to Astorga demanding that she pay
the current market value of the Honda Civic Sedan which was given to her
under the company’s car plan program, or to surrender the same to the
company for proper disposition.

Astorga, however, failed and refused to do either, thus prompting SMART

to file a suit for replevin before the RTC which was subsequently denied.
Astorga elevated the denial of her motion via certiorari to the CA, which, in
its February 28, 2000 Decision,19 reversed the RTC ruling. Granting the
petition and, consequently, dismissing the replevin case, the CA held that
the case is intertwined with Astorga’s complaint for illegal dismissal; thus, it
is the labor tribunal that has rightful jurisdiction over the complaint.
SMART’s motion for reconsideration having been denied.

On the other hand, the labor arbiter held that Astorga’s dismissal from
employment illegal. While recognizing SMART’s right to abolish any of its
departments, the Labor Arbiter held that such right should be exercised in
good faith and for causes beyond its control. The Arbiter found the abolition
of CSMG done neither in good faith nor for causes beyond the control of
SMART, but a ploy to terminate Astorga’s employment. The Arbiter also
ruled that contracting out the functions performed by Astorga to an in-
house agency like SNMI was illegal.

SMART also appealed the unfavorable ruling of the Labor Arbiter in the
illegal dismissal case to the NLRC which declared the abolition of CSMG
and the creation of SNMI to do the sales and marketing services for
SMART a valid organizational action.
ISSUE:
Whether or not Astorga’s dismissal was valid.
RULING:
Astorga was terminated due to redundancy, which is one of the authorized
causes for the dismissal of an employee. The nature of redundancy as an
authorized cause for dismissal is explained in the leading case of Wiltshire
File Co., Inc. v. National Labor Relations Commission, viz:

x x x redundancy in an employer’s personnel force necessarily or even

ordinarily refers to duplication of work. That no other person was holding
the same position that private respondent held prior to termination of his
services does not show that his position had not become redundant.
Indeed, in any well organized business enterprise, it would be surprising to
find duplication of work and two (2) or more people doing the work of one
person.

We believe that redundancy, for purposes of the Labor Code, exists where
the services of an employee are in excess of what is reasonably demanded
by the actual requirements of the enterprise. Succinctly put, a position is
redundant where it is superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the enterprise.

However, as aptly found by the CA, SMART failed to comply with the
mandated one month notice prior to termination.

Article 283 of the Labor Code clearly provides:

Art. 283. Closure of establishment and reduction of personnel. — The
employer may also terminate the employment of any employee due to the
installation of labor saving devices, redundancy, retrenchment to prevent
losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before the
intended date thereof x x x.

SMART’s assertion that Astorga cannot complain of lack of notice because

the organizational realignment was made known to all the employees as
early as February 1998 fails to persuade.

Astorga’s actual knowledge of the reorganization cannot replace the formal

and written notice required by the law. In the written notice, the employees
are informed of the specific date of the termination, at least a month prior to
the effectivity of such termination, to give them sufficient time to find other
suitable employment or to make whatever arrangements are needed to
cushion the impact of termination.

Smart gave her a formal notice of termination barely two (2) weeks before
the effective date of termination, a period very much shorter than that
required by law.

This procedural infirmity, however, would not render the termination of

Astorga’s employment illegal. The validity of termination can exist
independently of the procedural infirmity of the dismissal.

In DAP Corporation v. CA, the dismissal of the employees therein valid and
for authorized cause even if the employer failed to comply with the notice
requirement under Article 283 of the Labor Code.

The Court found the need to modify, by increasing, the indemnity awarded
by the CA to Astorga, as a sanction on SMART for non-compliance with the
one-month mandatory notice requirement, in light of our ruling in Jaka Food
Processing Corporation v. Pacot, viz.:

[I]f the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to be
imposed upon him should be tempered because the dismissal process
was, in effect, initiated by an act imputable to the employee, and (2) if the
dismissal is based on an authorized cause under Article 283 but the
employer failed to comply with the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by the employer’s
exercise of his management prerogative.
The award of backwages to Astorga by the CA should be deleted for lack of
basis. Backwages is a relief given to an illegally dismissed employee. Thus,
before backwages may be granted, there must be a finding of unjust or
illegal dismissal from work.The Labor Arbiter ruled that Astorga was
illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiter’s
ruling and categorically declared Astorga’s dismissal valid. This ruling was
affirmed by the CA in its assailed Decision. Since Astorga’s dismissal is for
an authorized cause, she is not entitled to backwages.

9)
Manila Water vs Dalumpines 2010

DECISION

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court, assailing the Decision1dated September 12, 2006 and the
Resolution2 dated November 17, 2006 of the Court of Appeals (CA) in CA-
G.R. SP No. 94909.

The facts of the case are as follows:

By virtue of Republic Act No. 8041, otherwise known as the "National

Water Crisis Act of 1995," the Metropolitan Waterworks and Sewerage
System (MWSS) was given the authority to enter into concession
agreements allowing the private sector in its operations. Petitioner Manila
Water Company, Inc. (Manila Water) was one of two private
concessionaires contracted by the MWSS to manage the water distribution
system in the east zone of Metro Manila. The east service area included
the following towns and cities: Mandaluyong, Marikina, Pasig, Pateros, San
Juan, Taguig, Makati, parts of Quezon City and Manila, Angono, Antipolo,
Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong, Pililla, Rodriguez,
Tanay, Taytay, Teresa, and San Mateo.3

Under the concession agreement, Manila Water undertook to absorb the

regular employees of MWSS listed by the latter effective August 1, 1997.
Individual respondents, with the exception of Moises Zapatero (Zapatero)
and Edgar Pamoraga (Pamoraga), were among the one hundred twenty-
one (121) employees not included in the list of employees to be absorbed
by Manila Water. Nevertheless, Manila Water engaged their services
without written contract from August 1, 1997 to August 31, 1997.4

On September 1, 1997, individual respondents signed a three (3)-month

contract to perform collection services on commission basis for Manila
Water’s branches in the east zone.5

On November 21, 1997, before the expiration of the contract of services,

the 121 bill collectors formed a corporation duly registered with the
Securities and Exchange Commission (SEC) as the "Association
Collector’s Group, Inc." (ACGI). ACGI was one of the entities engaged by
Manila Water for its courier service. However, Manila Water contracted
ACGI for collection services only in its Balara Branch.6

In December 1997, Manila Water entered into a service agreement with

respondent First Classic Courier Services, Inc. (FCCSI) also for its courier
needs. The service agreements between Manila Water and FCCSI covered
the periods 1997 to 1999 and 2000 to 2002.7 Earlier, in a memorandum
dated November 28, 1997, FCCSI gave a deadline for the bill collectors
who were members of ACGI to submit applications and letters of intent to
transfer to FCCSI. The individual respondents in this case were among the
bill collectors who joined FCCSI and were hired effective December 1,
1997.8

On various dates between May and October 2002, individual respondents

were terminated from employment. Manila Water no longer renewed its
contract with FCCSI because it decided to implement a "collectorless"
scheme whereby Manila Water customers would instead remit payments
through "Bayad Centers."9 The aggrieved bill collectors individually filed
complaints for illegal dismissal, unfair labor practice, damages, and
attorney’s fees, with prayer for reinstatement and backwages against
petitioner Manila Water and respondent FCCSI. The complaints were
consolidated and jointly heard.10

Respondent bill collectors alleged that their employment under Manila

Water had four (4) stages: (a) from August 1, 1997 to August 31, 1997; (b)
from September 1, 1997 to November 30, 1997; (c) in November 1997
when FCCSI was incorporated; and (d) after November 1977 when FCCSI
came in. While in MWSS, and thereafter in Manila Water and FCCSI,
respondent bill collectors were made to perform the following functions: (1)
delivery of bills to customers; (2) collection of payments from customers;
and (3) delivery of disconnection notice to customers. They were also
allowed to effect disconnection and were given tools for this purpose.11

Respondent bill collectors averred that when Manila Water issued their
individual contracts of service for three months in September 1997, there
was already an attempt to make it appear that respondent bill collectors
were not its employees but independent contractors. Respondent bill
collectors stressed that they could not qualify as independent contractors
because they did not have an independent business of their own, tools,
equipment, and capitalization, but were purely dependent on the wages
they earned from Manila Water, which was termed as "commission."12

Respondent bill collectors alleged that Manila Water had complete

supervision over their work and their collections, which they had to remit
daily to the former. They also maintained that the incorporation of ACGI did
not mean that they were not employees of Manila Water. Furthermore, they
alleged that they suffered injustice when Manila Water imposed upon them
the work set-up that caused them to be emotionally depressed because
those who were not assigned to the Balara Branch under Manila Water’s
contract with ACGI were forced to join FCCSI to retain their employment.
They argued that the entry of FCCSI did not change the employer-
employee relationship of respondent bill collectors with Manila Water.13

Respondent bill collectors insisted that they remained employees of Manila

Water even after the entry of FCCSI. The latter did not qualify as a
legitimate labor contractor since it had no substantial capital. FCCSI only
had a paid-up capital of one hundred thousand pesos (₱100,000.00), out of
the four hundred thousand pesos (₱400,000.00) authorized capital. FCCSI
relied mainly on what Manila Water would pay, from which it deducted an
agency fee, and it had no other clients on collection. They were forced to
transfer to FCCSI when their service contracts with Manila Water was
about to expire on November 30, 1997. FCCSI was engaged in labor-only
contracting which is prohibited by law.14

Respondent bill collectors averred that even under the four-fold test of
employer-employee relationship, it appeared that Manila Water was their
true employer based on the following circumstances: (1) it was Manila
Water who engaged their services as bill collectors when it took over the
operations of the east zone from MWSS on August 1, 1997; (2) it was
Manila Water which paid their wages in the form of commissions every
fifteenth (15th) and thirtieth (30th) day of each month; (3) Manila Water
exercised the power of dismissal over them as bill collectors as evidenced
by the instances surrounding their termination as set forth in their
respective affidavits, and by the individual clearances issued to them not by
FCCSI but by Manila Water, stating that the same was "issued in
connection with his termination of contract as Contract Collector of Manila
Water Company"; and (4) their work as bill collectors was clearly related to
the principal business of Manila Water.15

Respondent FCCSI, on the other hand, claimed that it is an independent

contractor engaged in the business of providing messengerial or courier
services, and it fulfills the criteria set forth under Department Order No. 10,
Series of 1997.16 It was issued a certificate of registration by the
Department of Labor and Employment (DOLE) as an independent
contractor. It was incorporated and registered with the SEC in November
1995. It was duly registered with the Department of Transportation and
Communication (DOTC) and the Office of the Mayor of Makati City for
authority to operate. It has sufficient capital in the form of tools, equipment,
and machinery as attested to by the Postal Regulation Committee of the
DOTC after conducting an ocular inspection. It provides similar services to
Philippine Long Distance Telephone Company, Smart
Telecommunications, Inc., and Home Cable, Inc. Under the terms and
conditions of its service agreement with Manila Water, FCCSI has the
power to hire, assign, discipline, or dismiss its own employees, as well as
control the means and methods of accomplishing the assigned tasks, and it
pays the wages of the employees.17

The termination of employment of respondent bill collectors upon the

expiration of FCCSI’s contract with Manila Water did not mean the
automatic termination or suspension of the employer-employee relationship
between FCCSI and respondent bill collectors. Their termination after their
six (6) month floating status, which was allowed by law, was due to the
non-renewal of FCCSI’s agreement with Manila Water and its inability to
enter into a similar contract requiring the skills of respondent bill
collectors.18
Petitioner Manila Water, for its part, denied that there was an employer-
employee relationship between its company and respondent bill collectors.
Based on the agreement between FCCSI and Manila Water, respondent
bill collectors are the employees of the former, as it is the former that has
the right to select/hire, discipline, supervise, and control. FCCSI has a
separate and distinct legal personality from Manila Water, and it was duly
registered as an independent contractor before the DOLE.19

Petitioner further claimed that individual service contracts signed by

respondent bill collectors for a 3-month period with Manila Water were valid
and legal. The fact that the duration of the engagement was stated on the
face of the contract dispels any bad faith on the part of the company. Fixed
term contracts are allowed by law. Furthermore, respondent bill collectors’
allegation that the incorporation of ACGI was made as a condition of their
continued employment was unfounded. They transferred to FCCSI on their
own volition.20

Petitioner Manila Water also averred that, under its organizational

structure, there was no regular plantilla position of bill collector, which was
the main reason why respondent bill collectors were not included in the list
of MWSS employees absorbed by the company. The company’s out-
sourcing of courier needs to an independent contractor was valid and legal.

On September 27, 2004, the Labor Arbiter (LA) rendered a decision,21 the
dispositive portion of which reads:

WHEREFORE, premises considered, the complaints against respondent

Manila Water Company, Inc. is dismissed for lack of jurisdiction due to want
of employer-employee relationship. Respondent First Classic Courier
Services is hereby ordered to pay complainants separation pay equivalent
to one (1) month pay for every year of service, to wit:

1. JOSE P. DALUMPINES - - - - - - - - ₱36,400.00

2. SUSANO MIRANDA - - - - - - - - - ₱36,400.00
3. EDGAR PAMORAGA - - - - - - - - - ₱29,120.00
4. ARTHUR G. LAVISTI - - - - - - - - - ₱36,400.00
5. BENJAMIN TALAVERA, JR. - - - - ₱36,400.00
6. JOSE S.A. SIERRA - - - - - - - - - - - ₱36,400.00
 7. MELITANTE D. CASTRO - - - - - - ₱36,400.00
8. BERNARDO S. MEDINA - - - - - - - ₱36,400.00
9. MELENCIO BAONGUIS - - - - - - - ₱36,400.00
10. NONITO V. FERNANDEZ - - - - - - ₱36,400.00
11. LEGARTO ESTEBAN - - - - - - - - - ₱36,400.00
12. ROMEO B. CASTALONE - - - - - - ₱36,400.00
13. RAMON C. REYES - - - - - - - - - - - ₱36,400.00
14. MOISES L. ZAPATERO - - - - - - - - ₱29,120.00
15. JOSE T. AGUILAR - - - - - - - - - - - ₱36,400.00
16. ARNULFO T. JAMISON - - - - - - - ₱36,400.00
17. ANGEL C. GARCIA - - - - - - - - - - - ₱36,400.00
18. JOSE TEODY P. VELASCO - - - - - ₱36,400.00
19. AUGUSTUS J. TANDOC - - - - - - - ₱36,400.00
20. EMMANUEL L. CAPIT - - - - - - - - ₱36,400.00
21. WILLIAM AGANON - - - - - - - - - - ₱87,360.00
22. ROBERTO S. DAGDAG - - - - - - - - ₱36,400.00
23 MIGUEL J. LOPEZ - - - - - - - - - - - - ₱36,400.00
24. GEORGE CABRERA - - - - - - - - - - ₱36,400.00
25. BORROMEO ARMAN - - - - - - - - - ₱36,400.00
26. RONITO R. FRIAS - - - - - - - - - - - - ₱36,400.00
27. ANTONIO A. VERGARA - - - - - - - ₱36,400.00
28. RANDY T. CORTIGUERRA - - - - - ₱36,400.00

TOTAL - - - - - - - ₱1,055,600.00

SO ORDERED.22

Respondent bill collectors and FCCSI filed their separate appeals with the
National Labor Relations Commission (NLRC). On March 15, 2006, the
NLRC rendered a decision23 affirming in toto the decision of the LA.
Respondent bill collectors filed a motion for reconsideration, but the same
was denied in a resolution24 dated April 28, 2006.

Disgruntled, respondent bill collectors filed a petition for certiorari under

Rule 65 of the Rules of Court before the CA. On September 12, 2006, the
CA rendered a Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the present petition is hereby GIVEN

DUE COURSE and the writ prayed for accordingly GRANTED.
Consequently, the assailed Decision dated March 15, 2006 and Resolution
dated April 28, 2006 of the National Labor Relations Commission are
hereby ANNULED and SET ASIDE. A new judgment is hereby entered (a)
declaring the petitioners as employees of private respondent Manila Water
Company, Inc., and their termination as bill collectors as illegal; and (b)
ordering private respondent Manila Water Company, Inc. to pay the
petitioners separation pay equivalent to one (1) month for every year of
service. In addition, private respondent Manila Water Company, Inc. is
liable to pay ten percent (10%) of the total amount awarded as attorney’s
fees.

No pronouncement as to costs.

SO ORDERED.25

Petitioner Manila Water and respondent bill collectors filed a motion for
reconsideration. However, the CA denied their respective motions for
reconsideration in a Resolution dated November 17, 2006.

Hence, this petition.

Petitioner Manila Water presented the following issues for resolution,

whether the CA erred (1) in ruling that an employment relationship exists
between respondent bill collectors and petitioner Manila Water; (2) in its
application of Manila Water Company, Inc. v. Peña26 to the instant case;
and (3) in ruling that respondent FCCSI is not a bona fide independent
contractor.27

The petition is bereft of merit.

In this case, the LA, the NLRC, and the CA reached different conclusions of
law albeit agreeing on the same set of facts. It was in their interpretation
and appreciation of the evidence that they differed. The CA ruled that
respondent FCCSI was a labor-only contractor and that respondent bill
collectors are employees of petitioner Manila Water, while the LA and the
NLRC ruled otherwise.

"Contracting" or "subcontracting" refers to an arrangement whereby a

principal agrees to put out or farm out with a contractor or subcontractor 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.28

Contracting and subcontracting arrangements are expressly allowed by law

but are subject to regulation for the promotion of employment and the
observance of the rights of workers to just and humane conditions of work,
security of tenure, self-organization, and collective bargaining.29 In
legitimate contracting, the trilateral relationship between the parties in these
arrangements involves the principal which decides to farm out a job or
service to a contractor or subcontractor, which has the capacity to
independently undertake the performance of the job, work, or service, and
the contractual workers engaged by the contractor or subcontractor to
accomplish the job, work, or service.30

Job contracting is permissible only if the following conditions are met: 1) the
contractor carries on an independent business and undertakes the contract
work on his own account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except
as to the results thereof; and 2) the contractor has substantial capital or
investment in the form of tools, equipment, machineries, work premises,
and other materials which are necessary in the conduct of the business.31

On the other hand, the Labor Code expressly prohibits "labor-only"

contracting. Article 106 of the Code provides that 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 the 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 to the same
extent as if the latter were directly employed by him.32

Department Order No. 18-02, Series of 2002, enunciates that labor-only

contracting refers to an arrangement where the contractor or subcontractor
merely recruits, supplies, or places workers to perform a job, work, or
service for a principal, and any of the following elements are present: (i) the
contractor or subcontractor does not have substantial capital or investment
which relates to the job, work, or service to be performed and the
employees recruited, supplied, or placed by such contractor or
subcontractor are performing activities which are directly related to the
main business of the principal; or (ii) the contractor does not exercise the
right to control the performance of the work of the contractual employee.33

"Substantial capital or investment" refers to capital stocks and subscribed

capitalization in the case of corporations, tools, equipment, implements,
machineries, and work premises, actually and directly used by the
contractor or subcontractor in the performance or completion of the job,
work, or service contracted out. The "right to control"refers to the right
reserved to the person for whom the services of the contractual workers
are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.34

In the instant case, the CA found that FCCSI is a labor-only contractor.

Based on the factual findings of the CA, FCCSI does not have substantial
capital or investment to qualify as an independent contractor, viz.:

FCCSI was incorporated on November 14, 1995, with an authorized capital

stock of ₱400,000.00, of which only ₱100,000.00 is actually paid-in. Going
by the pronouncement in Peña, such capitalization can hardly be
considered substantial. FCCSI and Manila Water make much of the 17
April 1997 letter of Postal Regulation Committee Chairman Francisco V.
Ontalan, Jr. to DOTC Secretary Arturo T. Enrile recommending the renewal
and/or extension of authority to FCCSI to operate private messengerial
delivery services, which states in part:

"Ocular inspection conducted on its office premises and evaluation of the

documents submitted, the firm during the six (6) months operation has
generated employment to thirty six (36) messengers, and four (4) office
personnel.

"The office equipt [sic] with modern facilities such as computers, printers,
electric typewriter, working table, telephone lines, airconditioning unit,
pigeon holes, working tables and delivery vehicles such as a Suzuki van
and three (3) motorcycles. The firm’s audited financial statement for the
period ending 31 December 1996 [shows] that it earned a net income of
₱253,000.00. x x x."

The above document only proves that FCCSI has no sufficient investment
in the form of tools, equipment and machinery to undertake contract
services for Manila Water involving a fleet of around 100 collectors
assigned to several branches and covering the service area of Manila
Water customers spread out in several cities/towns of the East Zone. The
only rational conclusion is that it is Manila Water that provides most if not
all the logistics and equipment including service vehicles in the
performance of the contracted service, notwithstanding that the contract
between FCCSI and Manila Water states that it is the Contractor which
shall furnish at its own expense all materials, tools and equipment needed
to perform the tasks of collectors. Moreover, it must be emphasized that
petitioners who are "trained collectors" performed tasks that cannot be
simply categorized as "messengerial." In fact, these are the very functions
they were already discharging even before they joined FCCSI which
"invited" or "solicited" their placement just about the expiration of their three
(3)-month contract with Manila Water on November 28, 1997. The
Agreement between FCCSI and Manila Water provides that FCCSI shall
"field the required number of trained collectors to the following Customer
Relations Branch Office": Cubao, España, San Juan-Mandaluyong,
Marikina, Pasig, Taguig-Pateros and Makati.351avvphi1

As correctly ruled by the CA, FCCSI’s capitalization may not be considered

substantial considering that it had close to a hundred collectors covering
the east zone service area of Manila Water customers. The allegation in
the position paper of FCCSI that it serves other companies’ courier needs
does not "cure" the fact that it has insufficient capitalization to qualify as
independent contractor. Neither did FCCSI prove its allegation by
substantial evidence other than by their self-serving declarations. What is
evident is that it was Manila Water that provided the equipment and service
vehicles needed in the performance of the contracted service, even if the
contract between FCCSI and Manila Water stated that it was the Contractor
which shall furnish at its own expense all materials, tools, and equipment
needed to perform the tasks of collectors.

Based on the four-fold test of employer-employee relationship, Manila

Water emerges as the employer of respondent collectors. The elements to
determine the existence of an employment relationship are: (a) the
selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the employer's power to control the
employee's conduct. The most important of these elements is the
employer's control of the employee's conduct, not only as to the result of
the work to be done, but also as to the means and methods to accomplish
it.36

The factual circumstances in the instant case are essentially the same as
those cited in Manila Water Company, Inc. v. Hermiño Peña.37 In that case,
121 bill collectors, headed by Peña, filed a complaint for illegal dismissal
against Manila Water. The bill collectors formed ACGI which was registered
with the SEC. Manila Water, in opposing the claim of the bill collectors,
claimed that there was no employer-employee relationship with the latter. It
averred that the bill collectors were employees of ACGI, a separate entity
engaged in collection services, an independent contractor which entered
into a service contract for the collection of Manila Water’s accounts. The
Court ruled that ACGI was not an independent contractor but was engaged
in labor-only contracting, and as such, is considered merely an agent of
Manila Water.38

The Court ratiocinated that: First, ACGI does not have substantial
capitalization or investment in the form of tools, equipment, machineries,
work premises, and other materials to qualify as an independent contractor.
Second, the work of the bill collectors was directly related to the principal
business or operation of Manila Water. Being in the business of providing
water to the consumers in the east zone, the collection of the charges by
the bill collectors for the company can only be categorized as related to,
and in the pursuit of, the latter's business. Lastly, ACGI did not carry on an
independent business or undertake the performance of its service contract
in its own manner and using its own methods, free from the control and
supervision of its principal, Manila Water. Since ACGI is obviously a labor-
only contractor, the workers it supplied are considered employees of the
principal. Furthermore, the activities performed by the bill collectors were
necessary or desirable to Manila Water's principal trade or business; thus,
they are regular employees of the latter. Since Manila Water failed to
comply with the requirements of termination under the Labor Code, the
dismissal of the bill collectors was tainted with illegality.39

The similarity between the instant case and Peña is very evident. First, the
work set-up between the respondent contractor FCCSI and respondent bill
collectors is the same as in Peña. Respondent bill collectors were
individually hired by the contractor, but were under the direct control and
supervision of the concessionaire. Second, they performed the same
function of courier and bill collection services. Third, the element of control
exercised by Manila Water over respondent bill collectors is essentially the
same as in Peña, manifested in the following circumstances, viz.: (a)
respondent bill collectors reported daily to the branch offices of Manila
Water to remit their collections with the specified monthly targets and
comply with the collection reporting procedures prescribed by the latter; (b)
respondent bill collectors, except for Pamoraga and Zapatero, were among
the 121 collectors who incorporated ACGI; (c) Manila Water continued to
pay their wages in the form of commissions even after the employees
alleged transfer to FCCSI. Manila Water paid the respondent bill collectors
their individual commissions, and the lump sum paid by Manila Water to
FCCSI merely represented the agency fee; and (d) the certification or
individual clearances issued by Manila Water to respondent bill collectors
upon the termination of the service contract with FCCSI. The certification
stated that respondents were contract collectors of Manila Water and not of
FCCSI. Thus, this Court agrees with the findings of the CA that if, indeed,
FCCSI was the true employer of the bill collectors, it should have been the
one to issue the certification or individual clearances.

It should be remembered that the control test merely calls for the existence
of the right to control, and not necessarily the exercise thereof. It is not
essential that the employer actually supervises the performance of duties of
the employee. It is enough that the former has a right to wield the power.40

Respondent bill collectors are, therefore, employees of petitioner Manila

Water. It cannot be denied that the tasks performed by respondent bill
collectors are directly related to the principal business or trade of Manila
Water. Payments made by the subscribers are the lifeblood of the
company, and the respondent bill collectors are the ones who collect these
payments.
The primary standard of determining regular employment is the reasonable
connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. In this case, the
connection is obvious when we consider the nature of the work performed
and its relation to the scheme of the particular business or trade in its
entirety. Finally, the repeated and continuing need for the performance of
the job is sufficient evidence of the necessity, if not indispensability of the
activity to the business.41

WHEREFORE, in view of the foregoing, the Decision dated September 12,

2006 and the Resolution dated November 17, 2006 of the Court of Appeals
in CA-G.R. SP No. 94909 are hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

10)
G.R. No. 186091
EMMANUEL BABAS, DANILO T. BANAG, ARTURO V. VILLARIN, SR.,
EDWIN JAVIER, SANDI BERMEO, REX ALLESA, MAXIMO SORIANO,
JR., ARSENIO ESTORQUE, and FELIXBERTO ANAJAO vs. LORENZO
SHIPPING CORPORATION,
G.R. No. 186091
December 15, 2010

DECISION
NACHURA, J.:

x x x.
Petitioners vigorously insist that they were employees of LSC; and that
BMSI is not an independent contractor, but a labor-only contractor. LSC, on
the other hand, maintains that BMSI is an independent contractor, with
adequate capital and investment. LSC capitalizes on the ratiocination made
by the CA.

In declaring BMSI as an independent contractor, the CA, in the challenged

Decision, heavily relied on the provisions of the Agreement, wherein BMSI
declared that it was an independent contractor, with substantial capital and
investment.

De Los Santos v. NLRC[18] instructed us that the character of the

business, i.e., whether as labor-only contractor or as job contractor, should

be measured in terms of, and determined by, the criteria set by statute. The
parties cannot dictate by the mere expedience of a unilateral declaration in
a contract the character of their business.

In San Miguel Corporation v. Vicente B. Semillano, Nelson Mondejas,

Jovito Remada, Alilgilan Multi-Purpose Coop (AMPCO), and Merlyn N.
Policarpio,[19] this Court explained:

Despite the fact that the service contracts contain stipulations which are
earmarks of independent contractorship, they do not make it legally so. The
language of a contract is neither determinative nor conclusive of the
relationship between the parties. Petitioner SMC and AMPCO cannot
dictate, by a declaration in a contract, the character of AMPCO's business,
that is, whether as labor-only contractor, or job contractor. AMPCO's
character should be measured in terms of, and determined by, the criteria
set by statute.
Thus, in distinguishing between prohibited labor-only contracting and
permissible job contracting, the totality of the facts and the surrounding
circumstances of the case are to be considered.

Labor-only contracting, a prohibited act, is an arrangement where the

contractor or subcontractor merely recruits, supplies, or places workers to
perform a job, work, or service for a principal. In labor-only contracting, the
following elements are present: (a) the contractor or subcontractor does not
have substantial capital or investment to actually perform the job, work, or
service under its own account and responsibility; and (b) the employees
recruited, supplied, or placed by such contractor or subcontractor perform
activities which are directly related to the main business of the principal.[20]

On the other hand, permissible job contracting or subcontracting refers to

an arrangement whereby a principal agrees to put out or farm out with the
contractor or subcontractor 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. [21]

A person is considered engaged in legitimate job contracting or

subcontracting if the following conditions concur:

(a) The contractor carries on a distinct and independent business and

undertakes the contract work on his account under his own responsibility
according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the
performance of his work except as to the results thereof;
(b) The contractor has substantial capital or investment; and

(c) The agreement between the principal and the contractor or

subcontractor assures the contractual employees' entitlement to all labor
and occupational safety and health standards, free exercise of the right to
self-organization, security of tenure, and social welfare benefits.[22]

Given the above standards, we sustain the petitioners’ contention that

BMSI is engaged in labor-only contracting.

First, petitioners worked at LSC’s premises, and nowhere else. Other than
the provisions of the Agreement, there was no showing that it was BMSI
which established petitioners’ working procedure and methods, which
supervised petitioners in their work, or which evaluated the same. There
was absolute lack of evidence that BMSI exercised control over them or
their work, except for the fact that petitioners were hired by BMSI.

Second, LSC was unable to present proof that BMSI had substantial
capital. The record before us is bereft of any proof pertaining to the
contractor’s capitalization, nor to its investment in tools, equipment, or
implements actually used in the performance or completion of the job,
work, or service that it was contracted to render. What is clear was that the
equipment used by BMSI were owned by, and merely rented from, LSC.

In Mandaue Galleon Trade, Inc. v. Andales,[23] we held:

The law casts the burden on the contractor to prove that it has substantial
capital, investment, tools, etc. Employees, on the other hand, need not
prove that the contractor does not have substantial capital, investment, and
tools to engage in job-contracting.
Third, petitioners performed activities which were directly related to the
main business of LSC. The work of petitioners as checkers, welders, utility
men, drivers, and mechanics could only be characterized as part of, or at
least clearly related to, and in the pursuit of, LSC’s business. Logically,
when petitioners were assigned by BMSI to LSC, BMSI acted merely as a
labor-only contractor.

Lastly, as found by the NLRC, BMSI had no other client except for LSC,
and neither BMSI nor LSC refuted this finding, thereby bolstering the NLRC
finding that BMSI is a labor-only contractor.

The CA erred in considering BMSI’s Certificate of Registration as sufficient

proof that it is an independent contractor. In San Miguel Corporation v.
Vicente B. Semillano, Nelson Mondejas, Jovito Remada, Alilgilan Multi-
Purpose Coop (AMPCO), and Merlyn N. Policarpio,[24] we held that a
Certificate of Registration issued by the Department of Labor and
Employment is not conclusive evidence of such status. The fact of
registration simply prevents the legal presumption of being a mere labor-
only contractor from arising.[25]

Indubitably, BMSI can only be classified as a labor-only contractor. The CA,

therefore, erred when it ruled otherwise. Consequently, the workers that
BMSI supplied to LSC became regular employees of the latter.[26] Having
gained regular status, petitioners were entitled to security of tenure and
could only be dismissed for just or authorized causes and after they had
been accorded due process.

Petitioners lost their employment when LSC terminated its Agreement with
BMSI. However, the termination of LSC’s Agreement with BMSI cannot be
considered a just or an authorized cause for petitioners’ dismissal. In
Almeda v. Asahi Glass Philippines. Inc. v. Asahi Glass Philippines, Inc.,[27]
this Court declared:

The sole reason given for the dismissal of petitioners by SSASI was the
termination of its service contract with respondent. But since SSASI was a
labor-only contractor, and petitioners were to be deemed the employees of
respondent, then the said reason would not constitute a just or authorized
cause for petitioners’ dismissal. It would then appear that petitioners were
summarily dismissed based on the aforecited reason, without compliance
with the procedural due process for notice and hearing.

Herein petitioners, having been unjustly dismissed from work, are entitled
to reinstatement without loss of seniority rights and other privileges and to
full back wages, inclusive of allowances, and to other benefits or their
monetary equivalents computed from the time compensation was withheld
up to the time of actual reinstatement. Their earnings elsewhere during the
periods of their illegal dismissal shall not be deducted therefrom.

Accordingly, we hold that the NLRC committed no grave abuse of

discretion in its decision. Conversely, the CA committed a reversible error
when it set aside the NLRC ruling.

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

of the Court of Appeals in CA-G.R. SP. No. 103804 are REVERSED and
SET ASIDE. Petitioners Emmanuel Babas, Danilo T. Banag, Arturo V.
Villarin, Sr., Edwin Javier, Sandi Bermeo, Rex Allesa, and Arsenio
Estorque are declared regular employees of Lorenzo Shipping Corporation.
Further, LSC is ordered to reinstate the seven petitioners to their former
position without loss of seniority rights and other privileges, and to pay full
backwages, inclusive of allowances, and other benefits or their monetary
equivalent, computed from the time compensation was withheld up to the
time of actual reinstatement.
No pronouncement as to costs.

SO ORDERED.

11)
Teng vs. Pahagac [GR No. 169704, November 17, 2010]Facts:Albert Teng
Fish Trading is engaged in deep sea fishing and, for this purpose,
owns boats (basnig), equipment,and other fishing paraphernalia. As
owner of the business, Teng claims that he customarily enters into joint
venture agreements with master fishermen (maestros) who are skilled
and are experts in deep sea fishing; they take charge of the
management of each fishing venture, including the hiring of the
members of its complement. He avers that themaestroshired the
respondent workers as checkers to determine the volume of the fish
caught in every fishing voyage.On February 20, 2003, the respondent
workers filed a complaint for illegal dismissal against Albert Teng Fish
Trading, Teng, and Chua before the NCMB, Region Branch No. IX,
Zamboanga City.The VA rendered a decisionin Teng's favor and
declared that no employer-employee relationship existed between Teng
and the respondent workers.The CA reversed the VA's decision after
finding sufficient evidence showing the existence of employer-employee
relationshipIssues:1.Whether or not the VA‘s decision is subject to a motion
for reconsideration2.Whether or not there exists an employer-employee
relationship between Teng and the respondent workers.Ruling:Article 262-
A of the Labor Code does not prohibit the filing of a motion for
reconsideration.On March 21, 1989, Republic Act No. 6715took effect,
amending, among others, Article 263 of the Labor Code which was
originally worded as:Art. 263 . . . Voluntary arbitration awards or
decisionsshall be final, unappealable, and executory.As amended, Article
263 is now Article 262-A, which states:Art. 262-A. . . . [T]he award or
decision . . . shall contain the facts and the law on which it is based.It shall
be final and executory after ten (10) calendar days from receipt of the copy
of the award or decision by the parties.Notably, Article 262-A deleted the
word"unappealable"from Article 263. The deliberate selection of the
language in the amendatory act differing from that of the original act
indicates that the legislature intended a change in the law, and the court
should endeavor to give effect to such intent.There exists an employer-
employee relationship between Teng and the respondent workers.We
agree with the CA's finding that sufficient evidence exists indicating the
existence of an employer-employee relationship between Teng and the
respondentworkers.While Teng alleged that it was themaestroswho
hired the respondent workers, it was his company that issued to the
respondent workers identification cards (IDs) bearing their names as
employees and Teng's signature as the employer. Generally, ina business
establishment, IDs are issued to identify the holder as abona fideemployee
of the issuing entity.For the 13 years that the respondent workers
worked for Teng, they received wages on a regular basis, in addition
to their shares in the fish caught. The worksheet showed that the
respondent workers received uniform amounts within a given year,
which amounts annuallyincreased until the termination of their
employment in 2002.Teng's claim that the amounts received by the
respondent workers aremere commissions is incredulous, as it would mean
that the fish caught throughout the year is uniform and increases in number
each year.More importantly, the element of control —which we have ruled
in a number of cases to be a strong indicator of the existence of an
employer-employee relationship —is present in this case. Teng not only
owned the tools and equipment, he directed how the respondent workers
were to perform their job as checkers; they, in fact, acted as Teng's eyes
and ears in every fishing expedition

12)
Diamond Farms vs. FARMS AGRARIAN REFORM BENEFICIARIES
MULTI-PURPOSE COOPERATIVE (DARBMUPCO) G.R. Nos. 173254-55
& 173263, January 13, 2016 Facts: Diamond Farms, Inc. (DFI) and
Diamond Farms Agrarian Reform Beneficiaries MultiPurpose Cooperative
(DARBMUPCO) entered into a Banana Production and Purchase
Agreement (“BPPA”) to grow and cultivate only high grade quality
exportable bananas to be sold exclusively to DFI. The BPPA is effective for
10 years. DARBMUPCO and DFI executed a “Supplemental to
Memorandum Agreement” (“SMA”). The SMA stated that DFI shall take
care of the labor cost arising from the packaging operation, cable
maintenance, irrigation pump and irrigation maintenance that the workers
of DARBMUPCO shall conduct for DFI’s account under the BPPA.
DARBMUPCO was hampered by lack of manpower to undertake the
agricultural operation under the BPPA because some of its members were
not willing to work. Hence, to assist DARBMUPCO in meeting its
production obligations under the BPPA, DFI engaged the services of the
respondent-contractors, who in turn recruited the respondent-workers.
Respondent Southern Philippines Federation of Labor (“SPFL”)—a
legitimate labor organization with a local chapter in the awarded
plantation—filed a petition for certification election in the Office of the Med-
Arbiter in Davao City. SPFL filed the petition on behalf of some 400
workers (the respondent-workers in this petition) “jointly employed by DFI
and DARBMUPCO” working in the awarded plantation. DARBMUPCO and
DFI denied that they are the employers of the respondent-workers. They
claimed, instead, that the respondent-workers are the employees of the
respondent-contractors
Med Arbiter Ruling: The Med-Arbiter granted the petition for certification
election. It directed the conduct of certification election and declared that
DARBMUPCO was the employer of the respondent-workers. SOLE Ruling:
DARBMUPCO appealed to the Secretary of Labor and Employment
(“SOLE”). The SOLE modified the decision of the Med-Arbiter. The SOLE
held that DFI, through its manager and personnel, supervised and directed
the performance of the work of the respondent-contractors. The SOLE thus
declared DFI as the employer of the respondent-workers. DFI filed a motion
for reconsideration which the SOLE. DFI elevated the case to the Court of
Appeals (“CA”) via a Petition for Certiorari. CA Ruling: The CA agreed with
the ruling of the SOLE that DFI is the statutory employer of the respondent-
workers. It noted that the DFI hired the respondent-contractors, who in turn
procured their own men to work in the land owned by DARBMUPCO.
Further, DFI admitted that the respondent-contractors worked under the
direction and supervision of DFI’s managers and personnel. DFI also paid
for the respondentcontractors’ services. The CA said that the fact that the
respondent-workers worked in the land owned by DARBMUPCO is
immaterial. “Ownership of the land is not one of the four (4) elements
generally considered to establish employeremployee relationship. The CA
also ruled that DFI is the true employer of the respondent-workers because
the respondent-contractors are not independent contractors. DFI filed a
Motion for Reconsideration of the CA Decision which was denied. Hence,
the Petition. Issue/s: Whether or not DFI is the employer of the
respondents. SC Ruling: The SC denied the petition holding that the case
involves job contracting, a labor arrangement expressly allowed by law. As
a general rule, a contractor is presumed to be a labor-only contractor,
unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like. Based on the conditions
for permissible job contracting, the SC ruled that respondent-contractors
are labor-only contractors. There is no evidence showing that respondent-
contractors are independent contractors. The respondentcontractors, DFI,
and DARBMUPCO did not offer any proof that respondentcontractors were
not engaged in labor-only contracting. DFI should have presented proof
showing that respondent-contractors carry on an independent business and
have sufficient capitalization. DFI does not deny that it engaged the
services of the respondent-contractors. It does not dispute the claims of
respondent-contractors that they sent their billing to DFI for payment; and
that DFI’s managers and personnel are in close consultation with the
respondent-contractors. That DARBMUPCO owns the awarded plantation
where the respondent-contractors and respondent-workers were working is
immaterial. This does not change the situation of the parties. As correctly
found by the CA, DFI, as the principal, hired the respondent-contractors
and the latter, in turn, engaged the services of the respondent-workers.

13)
Case Digest: MANILA MEMORIAL PARK CEMETERY, INC. v. Lluz et al.
November 3, 2017
|

Nathalie Pattugalan

G.R. No. 208451

February 03, 2016
CARPIO, J.:
Facts:
Petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered
into a Contract of Services with respondent Ward Trading and Services
(Ward Trading). The Contract of Services provided that Ward Trading, as an
independent contractor, will render interment and exhumation services and
other related work to Manila Memorial in order to supplement operations at
Manila Memorial Park, Paranaque City.

Among those assigned by Ward Trading to perform services at the Manila

Memorial Park were respondents Ezard Lluz, Norman Corral, Erwm
Fugaban, Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael
Curioso, Junlin Espares, and Gavino Farinas (respondents).

Respondents alleged that soon after the management declined their request
for regularization and to be recognized as legitimate members of the existing
labor union,the latter dismissed them. Hence, this case for illegal dismissal.

By way of defense, Manila Memorial argued that there was no employer-

employee relationship between the company and respondents. Instead, It
argued that respondents were the employees of Ward Trading.

Issue:
Whether or not an employer-employee relationship exists between Manila
Memorial and respondents for the latter to be entitled to their claim for wages
and other benefits.

Ruling:
Contracting arrangements for the performance of specific jobs or services
under the law and its implementing rules are allowed. However, contracting
must be made to a legitimate and independent job contractor since labor
rules expressly prohibit labor-only contracting.

Labor-only contracting exists when the contractor or subcontractor merely

recruits, supplies or places workers to perform a job, work or service for a
principal and any of the following elements are present:
1) The contractor or subcontractor does not have substantial capital or
investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor
are performing activities which are directly related to the main business of
the principal; or
2) The contractor does not exercise the right to control the performance of
the work of the contractual employee.

In the present case, The Contract of Services proved the existence of labor-
only conrtacting between Manila Memorial and Ward Trading. The Contract
of Services provided that Ward Trading, as an independent contractor, will
render interment and exhumation services and other related work to Manila
Memoria.However,a closer reading of the Contract of Services reveals that
Ward Trading does not have substantial capital or investment in the form of
tools, equipment, machinery, work premises and other materials since it is
Manila Memorial which owns the equipment used in the performance of work
needed for interment and exhumation services. Furthermore, although Ward
shall be in charge of the supervision over individual respondents, the
exercise of its supervisory function is heavily dependent upon the needs of
petitioner Memorial Park. The contract further provides that petitioner has
the option to take over the functions of Ward's personnel if it finds any part
or aspect of the work or service provided to be unsatisfactory

Manila Memorial failed to adduce evidence to prove that Ward Trading had
any substantial capital, investment or assets to perform the work contracted
for. Thus, the presumption that Ward Trading is a labor-only contractor
stands. Consequently, Manila Memorial is deemed the employer of
respondents.

14)
EMMANUEL D. QUINTANAR v. COCA-COLA BOTTLERS, GR No.
210565, 2016-06-28
Facts:
Complainants allege that they are former employees directly hired by
respondent Coca-Cola... assigned as regular Route Helpers under the
direct supervision of the Route Sales Supervisors.
After working for quite sometime as directly-hired employees of Coca-Cola,
complainants were allegedly... transferred successively as agency workers
to the following manpower agencies, namely, Lipercon Services, Inc.,
People's Services, Inc., ROMAC, and the latest being respondent
Interserve Management and Manpower Resources, Inc.
complainants allege that the Department of Labor and Employment (DOLE)
conducted an inspection of Coca-Cola to determine whether it is complying
with the various mandated labor standards, and relative thereto, they were
declared to be regular employees of Coca-Cola
As soon as respondents learned of the filing of the claims with DOLE, they
were dismissed... they filed their complaint for illegal dismissal.
Issues:
whether the petitioners were illegally dismissed from their employment with
Coca-Cola
Ruling:
The Court finds for the petitioners.
it cannot be said that route-helpers, such as the petitioners no longer enjoy
the employee-employer relationship they had with Coca-Cola since they
became employees of Interserve.
The argument of petitioner that its usual business or trade is softdrink
manufacturing and that the work assigned to respondent workers as sales
route helpers so involves merely "postproduction activities," one which is
not indispensable in the manufacture of its products,... scarcely can be
persuasive.
The repeated rehiring of respondent workers and the continuing need for
their services clearly attest to the necessity or desirability of their services
in the regular conduct of the business or trade of petitioner company.
Interserve did not have substantial capital or investment in the form of
tools, equipment, machineries, and work premises; and respondents, its
supposed employees, performed work which was directly related to the
principal business of petitioner.
the petitioners were made to suffer under the prohibited practice of labor-
only contracting.
even if the Court would indulge Coca-Cola and admit that Interserve had
more... than sufficient capital or investment in the form of tools, equipment,
machineries, work premises, still, it cannot be denied that the petitioners
were performing activities which were directly related to the principal
business of such employer.
even if Interserve were to be considered as a legitimate job contractor,
Coca-Cola failed to rebut the allegation that petitioners were transferred
from being its employees to become the employees of ISI, Lipercon, PSI,
and ROMAC, which were labor-only... contractors. Well-settled is the rule
that "[t]he contractor, not the employee, has the burden of proof that it has
the substantial capital, investment, and tool to engage in job contracting."
In this case, the said burden of proof lies with Coca-Cola... although it was
not the contractor itself, but it was the one invoking the supposed status of
these entities as independent job contractors.
Principles:

15)
NESTLE v. PUEDAN
NESTLE PHILIPPINES INC., Petitioner VS. BENNY A. PUEDAN, et. al.,
Respondent
G.R. No. 220617
January 30, 2017
FACTS:

On July 6, 2012, the respondents filed a complaint against the

petitioner for illegal dismissal and demanding for separation pay, nominal
damages and attorney’s fees. The respondents alleged that Ocho de
Setiembre Inc. (ODSI) and Nestle Philippines Inc. (NPI) hired them to sell
various products of NPI in the assigned covered area. After sometime, the
respondents demanded that they be considered regular employees of NPI
but they were directed to sign contracts of employment with ODSI instead.
However, the respondents refused to comply with such directives resulting
from their dismissal from their position. The contention of the respondents
is that ODSI is a labor-only contractor and, thus, they should be deemed
regular employees of NPI and there was no just or authorized cause for
their dismissal. The ODSI averred that it is a company engaged in the
business of buying, selling, distributing, and marketing of goods and
commodities of every kind and it enters into all kinds of contracts for the
acquisition thereof. According to ODSI the respondents were hired as its
employees to execute the Distributorship Agreement with the NPI.
Unfortunately, the business relationship between the NPI and ODSI turned
sour and eventually NPI downsized its marketing and promotional support
from ODSI and termination of the Distributorship Agreement. Meanwhile,
ODSI argues with the respondents that they were not dismissed but merely
on floating status. However, the NPI did not file any position paper or
appear in the scheduled conferences.

The Labor Arbiter concluded that all the impleaded respondents

therein (i.e. including NPI) should be held liable for the payment of nominal
damages plus attorney’s fees.

The aggrieved respondents appealed to National Labor Relation

Commission (NLRC) and the NLRC reversed and set aside the Labor
Arbiter ruling. The NLRC ordered ODSI and NPI to pay each of the
respondents and entitled to separation pay and to nominal damages. The
respondents moved for a partial reconsideration arguing since it was ODSI
that closed down operations and not the NPI, therefore NPI should
reinstate them. However, the NLRC denied the motion.
Moreover, the NPI was dissatisfied hence filed a petition for certiorari
before the Court of Appeals (CA) which the CA affirmed the NLRC ruling.
ISSUE:

Whether or not Nestle Philippines Inc. (NPI) and Ocho de Setiembre

Inc. (ODSI) are deemed jointly and severely liable for the respondent’s
monetary claims.
HELD:

No. The Distributorship Agreement between the Nestle Philippines

inc. (NPI) and Ocho de Setiembre Inc. (ODSI) is not that of a principal and
a contractor, but that of a seller and a buyer/re-seller. Based on the
stipulated in the Distributorship Agreement NPI agreed to sell its products
to ODSI at discounted prices. According to NPI the goods it manufactures
are distributed to the market through various distributor including ODSI,
that in turn, re-sell the same to the designated outlets through its own
employees as the respondents. Therefore, the reselling activities allegedly
performed by the respondents properly pertain to ODSI only.

In effect, ODSI was not a labor-only contractor of NPI hence the NPI
cannot be deemed the true employer of the respondents. Therefore, NPI
cannot be held jointly and severely liable to ODSI’s monetary obligation
towards the respondents.

C) Classes of Employees
Probationary Employees
1)
CASE DIGEST: Abbott Laboratories Phil. et.al. v. Pearlie Ann F.
Alcaraz [G.R. No. 192571, July 23, 2013]
Subject: Labor Law – Probationary employees – Standards to qualify
as a regular employee
Decision (Perlas-Bernarbe, J.)
Dissent (Brion, J.)
FACTS:
On June 27, 2004, Abbott Laboratories, Philippines (Abbott) caused the
publication in a major broadsheet newspaper of its need for a Medical
and Regulatory Affairs Manager who would: (a) be responsible for drug
safety surveillance operations, staffing, and budget; (b) lead the
development and implementation of standard operating procedures/policies
for drug safety surveillance and vigilance; and (c) act as the primary interface
with internal and external customers regarding safety operations and
queries.
Alcaraz – who was then a Regulatory Affairs and Information Manager
at Aventis Pasteur Philippines, Incorporated (another pharmaceutical
company like Abbott) – showed interest and submitted her application on
October 4, 2004.
On December 7, 2004, Abbott formally offered Alcaraz the above-mentioned
position which was an item under the company’s Hospira Affiliate Local
Surveillance Unit (ALSU) department.

In Abbott’s offer sheet, it was stated that Alcaraz was to be employed

on a probationary basis.
Later that day, she accepted the said offer and received an electronic mail
(e-mail) from Abbott’s Recruitment Officer, Teresita C. Bernardo (Bernardo),
confirming the same. Attached to Bernardo’s e-mail were Abbott’s
organizational chart and a job description of Alcaraz’s work.
On February 12, 2005, Alcaraz signed an employment contract which
stated that she was to be placed on probation for a period of six (6)
months beginning February 15, 2005 to August 14, 2005.
During Alcaraz’s pre-employment orientation, Allan G. Almazar,
Hospira’s Country Transition Manager, briefed her on her duties and
responsibilities as Regulatory Affairs Manager:
(a) she will handle the staff of Hospira ALSU and will directly report to
Almazar on matters regarding Hopira’s local operations, operational budget,
and performance evaluation of the Hospira ALSU Staff who are on
probationary status;

(b) she must implement Abbott’s Code of Good Corporate Conduct (Code of
Conduct), office policies on human resources and finance, and ensure that
Abbott will hire people who are fit in the organizational discipline;

(c) Kelly Walsh, Manager of the Literature Drug Surveillance Drug Safety of
Hospira, will be her immediate supervisor;

(d) she should always coordinate with Abbott’s human resource officers in
the management and discipline of the staff;

(e) Hospira ALSU will spin off from Abbott in early 2006 and will be officially
incorporated and known as Hospira, Philippines; and

(f) the processing of information and/or raw material data subject of Hospira
ALSU operations will be strictly confined and controlled under the computer
system and network being maintained and operated from the United States.
For this purpose, all those involved in Hospira ALSU are required to use two
identification cards: one, to identify them as Abbott’s employees and another,
to identify them as Hospira employees.

On March 3, 2005, Maria Olivia T. Yabut-Misa, Abbott’s Human

Resources (HR) Director, sent Alcaraz an e-mail which contained an
explanation of the procedure for evaluating the performance of
probationary employees and further indicated that Abbott had only one
evaluation system for all of its employees. Alcaraz was also given copies
of Abbott’s Code of Conduct and Probationary Performance Standards
and Evaluation (PPSE) and Performance Excellence Orientation
Modules (Performance Modules) which she had to apply in line with her
task of evaluating the Hospira ALSU staff.
Abbott’s PPSE procedure mandates that the job performance of a
probationary employee should be formally reviewed and discussed
with the employee at least twice: first on the third month and second on
the fifth month from the date of employment. The necessary Performance
Improvement Plan should also be made during the third-month
review in case of a gap between the employee’s performance and the
standards set. These performance standards should be discussed in
detail with the employee within the first two (2) weeks on the job. It was
equally required that a signed copy of the PPSE form must be submitted
to Abbott’s Human Resources Department (HRD) and shall serve as
documentation of the employee’s performance during his/her
probationary period. This shall form the basis for recommending the
confirmation or termination of the probationary employment.
On April 20, 2005, Alcaraz had a meeting with Cecille Terrible, Abbott’s
former HR Director, to discuss certain issues regarding staff
performance standards. In the course thereof, Alcaraz accidentally saw
a printed copy of an e-mail sent by Walsh to some staff members which
essentially contained queries regarding the former’s job performance.
Alcaraz asked if Walsh’s action was the normal process of evaluation.
Terrible said that it was not.
On May 16, 2005, Alcaraz was called to a meeting with Walsh and
Terrible where she was informed that she failed to meet the
regularization standards for the position of Regulatory Affairs
Manager. Thereafter, Walsh and Terrible requested Alcaraz to tender
her resignation, else they be forced to terminate her services. She was
also told that, regardless of her choice, she should no longer report for
work and was asked to surrender her office identification cards. She
requested to be given one week to decide on the same, but to no avail.
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales
(Gonzales), that she would be on leave for that day. However, Gonzales
told her that Walsh and Terrible already announced to the whole
Hospira ALSU staff that Alcaraz already resigned due to health
reasons.
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to
Alcaraz a letter stating that her services had been terminated effective
May 19, 2005. The letter detailed the reasons for Alcaraz’s termination –
particularly, that Alcaraz:
(a) did not manage her time effectively;

(b) failed to gain the trust of her staff and to build an effective rapport with
them;

(c) failed to train her staff effectively; and

(d) was not able to obtain the knowledge and ability to make sound
judgments on case processing and article review which were necessary for
the proper performance of her duties.

Alcaraz felt that she was unjustly terminated from her employment and thus,
filed a complaint for illegal dismissal and damages against Abbott and its
officers, namely, Misa, Bernardo, Almazar, Walsh, Terrible, and Feist. She
claimed that she should have already been considered as a regular and
not a probationary employee given Abbott’s failure to inform her of the
reasonable standards for her regularization upon her engagement as
required under Article 295 of the Labor Code. In this relation, she
contended that while her employment contract stated that she was to be
engaged on a probationary status, the same did not indicate the
standards on which her regularization would be based. She further
averred that the individual petitioners maliciously connived to illegally
dismiss her when:
(a) they threatened her with termination;

(b) she was ordered not to enter company premises even if she was still an
employee thereof; and

(c) they publicly announced that she already resigned in order to humiliate
her.
Abbott maintained that Alcaraz was validly terminated from her probationary
employment given her failure to satisfy the prescribed standards for her
regularization which were made known to her at the time of her engagement.

The Labor Arbiter ruled in Abbott’s favor. The NLRC reversed, upholding
Alcaraz’s allegations. The CA affirmed the NLRC decision.

ISSUES:
1) WON Alcaraz was sufficiently informed of the reasonable standards
to qualify her as a regular employee
MAJORITY: YES. Abbott clearly conveyed to Alcaraz her duties and
responsibilities as Regulatory Affairs Manager prior to, during the time of her
engagement, and the incipient stages of her employment. On this score, the
Court finds it apt to detail not only the incidents which point out to the efforts
made by Abbott but also those circumstances which would show
that Alcaraz was well-apprised of her employer’s expectations that
would, in turn, determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet
newspaper of its need for a Regulatory Affairs Manager, indicating therein
the job description for as well as the duties and responsibilities attendant to
the aforesaid position; this prompted Alcaraz to submit her application to
Abbott on October 4, 2004;

(b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was
to be employed on a probationary status;

(c) On February 12, 2005, Alcaraz signed an employment contract which

specifically stated, inter alia, that she was to be placed on probation for a
period of six (6) months beginning February 15, 2005 to August 14, 2005;

(d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent
her (d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo
sent her copies of Abbott’s organizational structure and her job description
through e-mail;

(e) Alcaraz was made to undergo a pre-employment orientation where

Almazar informed her that she had to implement Abbott’s Code of Conduct
and office policies on human resources and finance and that she would be
reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her
orientation;

(g) Alcaraz received copies of Abbott’s Code of Conduct and Performance

Modules from Misa who explained to her the procedure for evaluating the
performance of probationary employees; she was further notified that Abbott
had only one evaluation system for all of its employees; and

(h) Moreover, Alcaraz had previously worked for another pharmaceutical

company and had admitted to have an “extensive training and background”
to acquire the necessary skills for her job.

Considering the totality of the above-stated circumstances, Alcaraz was well-

aware that her regularization would depend on her ability and capacity to
fulfill the requirements of her position as Regulatory Affairs Manager and that
her failure to perform such would give Abbott a valid cause to terminate her
probationary employment. Verily, basic knowledge and common
sense dictate that the adequate performance of one’s duties is, by and
of itself, an inherent and implied standard for a probationary employee
to be regularized; such is a regularization standard which need not be
literally spelled out or mapped into technical indicators in every case.
DISSENT (Brion, J.): NO. The Offer Sheet was designed to inform
Alcaraz of the compensation and benefits package offered to her by
Abbott and can in no way be read as a statement of the applicable
probationary employment standard. It was communicated even prior to
engagement when the parties were negotiating, not at the point of
engagement as the law requires.
The pre-employment orientation on Alcaraz’s duty to implement
Abbott’s Code of Conduct, office policies and training
program likewise cannot be characterized as performance standards;
they simply related to activities aimed at acquainting and training
Alcaraz on her duties and not for the purpose of informing her of the
performance standards applicable to her. What stands out is that they do
not pertain specifically to Alcaraz and the required performance
standard applicable for her qualification for regular employment; they
related to the staff Alcaraz managed and supervised. Additionally, these
were all relayed prior to or after Alcaraz was engaged by Abbott.
An important distinction to remember at this point is that Alcaraz’s
knowledge of the duties that her work entailed, and her knowledge of
the employer’s performance standard, are two distinct matters
separately requiring the presentation of independent proof.
MAJORITY: Keeping with [the Omnibus Rules Implementing the Labor
Code], an employer is deemed to have made known the standards that
would qualify a probationary employee to be a regular employee when
it has exerted reasonable efforts to apprise the employee of what he is
expected to do to accomplish during the trial of probation.This goes
without saying that the employee is sufficiently made aware of his
probationary status as well as the length of time of the probation.
The exception to the foregoing is when the job is self-descriptive in
nature, for instance, in the case of maids, cooks, drivers, or
messengers. Also in Aberdeen Court, Inc v. Agustin, it has been held
that the rule on notifying a probationary employee of the standards of
regularization should not be used to exculpate an employee in a
manner contrary to basic knowledge and common sense in regard to
which there is no need to spell out a policy or standard to be met. In the
same light, an employee’s failure to perform the duties and
responsibilities which have been clearly made known to him
constitutes a justifiable basis for a probationary employee’s non-
regularization.
DISSENT (Brion, J.): Based on these premises, the ponencia then deftly
argues that because the duties and responsibilities of the position have
been explained to Alcaraz, an experienced human resource specialist,
she should have known what was expected for her to attain regular
status. The ponencia’s reasoning, however, is badly flawed.
1st. The ponencia impliedly admits that no performance standards were
expressly given but argues that because Alcaraz had been informed of her
duties and responsibilities (a fact that was and is not disputed), she should
be deemed to know what was expected of her for purposes of
regularization. This is a major flaw that the ponencia satisfies only via
an assumption. The ponencia apparently forgets that knowledge of
duties and responsibilities is different from the measure of how these
duties and responsibilities should be delivered. They are separate
elements and the latter element is missing in the present case.
2nd. The ponencia glosses over the communication aspect. Not only must
there be express performance standards; there must be effective
communication. If no standards were provided, what would be
communicated?
3rd. The ponencia badly contradicts itself in claiming that actual
communication of specific standards might not be necessary “when the job
is self-descriptive in nature, for instance, in the case of maids, cooks, drivers,
or messengers.” Alcaraz, in the first place, was never a maid, cook,
driver or a messenger and cannot be placed under this classification;
she was hired and employed as a human resources manager, in short, a
managerial employee. Plain and common sense reasoning by one who ever
had been in an employment situation dictates that the job of a manager
cannot be self-explanatory, in the way the ponencia implied; the
complexity of a managerial job must necessarily require that the level of
performance to be delivered must be specified and cannot simply be
assumed based on the communication of the manager’s duties and
responsibilities.
4th. The ponencia also forgets that what these “performance standards”
or measures cannot simply be assumed because they are critically
important in this case, or for that matter, in any case involving jobs
whose duties and responsibilities are not simple or self-descriptive. If
Alcaraz had been evaluated or assessed in the manner that the company’s
internal rules require, these standards would have been the basis for her
performance or lack of it. Last but not the least, Alcaraz’s services were
terminated on the basis of the performance standards that, by law, the
employer set or prescribed at the time of the employee’s engagement. If
none had been prescribed in the first place, under what basis could the
employee then be assessed for purposes of termination or
regularization?
2) WON Alcaraz was validly terminated from her employment
MAJORITY: NO. Abbott failed to follow the above-stated procedure in
evaluating Alcaraz. For one, there lies a hiatus of evidence that a signed
copy of Alcaraz’s PPSE form was submitted to the HRD. It was not even
shown that a PPSE form was completed to formally assess her performance.
Neither was the performance evaluation discussed with her during the third
and fifth months of her employment. Nor did Abbott come up with the
necessary Performance Improvement Plan to properly gauge Alcaraz’s
performance with the set company standards.
The Court modified Agabon v. NLRC in the case of Jaka Food Processing
Corporation v. Pacot where it created a distinction between procedurally
defective dismissals due to a just cause, on one hand, and those due to an
authorized cause, on the other.
If the dismissal is based on a just cause under Article 296 of the Labor
Code but the employer failed to comply with the notice requirement, the
sanction to be imposed upon him should be tempered because the
dismissal process was, in effect, initiated by an act imputable to the
employee
If the dismissal is based on an authorized cause under Article 297 but the
employer failed to comply with the notice requirement, the sanction
should be stiffer because the dismissal process was initiated by the
employer’s exercise of his management prerogative.
Alcaraz’s dismissal proceeded from her failure to comply with the
standards required for her regularization. As such, it is undeniable that
the dismissal process was, in effect, initiated by an act imputable to the
employee, akin to dismissals due to just causesunder Article 296 of the
Labor Code. Therefore, the Court deems it appropriate to fix the amount of
nominal damages at the amount of P30,000.00, consistent with its rulings in
both Agabon and Jaka.
DISSENT (Brion, J.): YES. Alcaraz was dismissed as she “failed to qualify
as regular employee in accordance with the prescribed standards set by the
Company.” Even granting for the sake of argument that Abbott had apprised
Alcaraz of an applicable performance standard, the evidence failed to
show that Alcaraz did not meet this standard in a manner and to the
extent equivalent to the “just cause” that the law requires.
In defense of Abbott’s failure to observe the two-notice requirement, the
ponencia argues that a different procedure applies when terminating a
probationary employee; the usual two-notice requirement does not govern,
citing for this purpose Section 2, Rule I, Book VI of the Implementing Rules
of the Labor Code. The ponencia, however, forgets that the single notice
rule applies only if the employee is validly on probationary basis; it
does not apply where the employee is deemed a regular employee for
the company’s failure to provide and to communicate a prescribed
performance standard applicable to the probationary employee.
3) WON the individual petitioners herein are liable
MAJORITY: NO. Other than her unfounded assertions on the matter, there
is no evidence to support the fact that the individual petitioners herein, in
their capacity as Abbott’s officers and employees, acted in bad faith or were
motivated by ill will in terminating Alcaraz’s services. The fact that Alcaraz
was made to resign and not allowed to enter the workplace does not
necessarily indicate bad faith on Abbott’s part since a sufficient ground
existed for the latter to actually proceed with her termination. On the alleged
loss of her personal belongings, records are bereft of any showing that the
same could be attributed to Abbott or any of its officers.
DISSENT (Brion, J.): YES. The NLRC exhaustively discussed Abbott’s bad
faith, as demonstrated by the actions of the individual petitioners:
First, Alcaraz was pressured to resign:

(1) she was threatened with termination, which will surely damage her
reputation in the pharmaceutical industry;

(2) she was asked to evacuate her Commission and ordered not to enter the
Company’s premises even if she was still an Abbott employee; and

(3) Terrible and Walsh made a public announcement to the staff that
Alcaraz already resigned even if in reality she did not.

The CA also described in detail the abrupt and oppressive manner in which
Alcaraz’s employment was dismissed by Abbott:

On May 23, 2005, Alcaraz still reported for work since Abbott had not yet
handed the termination notice to her. However, the security guard did not
allow her to enter the Hospira ALSU office pursuant to Walsh[’s]
instruction. She requested Walsh that she be allowed to enter the company
premises to retrieve her last remaining things in her office which are mostly
her personal belongings. She was allowed to enter. However, she was
surprised to see her drawers already unlocked and, when she opened
the same, she discovered that her small brown envelope x x x, white
pouch containing the duplicate keys, and the staff’s final evaluation
sheets were missing.Alcaraz informed Bernardo about the incident. The
latter responded by saying she was no longer an employee of the
company since May 19, 2005.
Alcaraz reported the matter to the Pasig Police Station and asked for help
regarding the theft of her properties. The Pasig Police incident
report stated as follows:
x x x x When confronted by the suspect, in the presence of one SOCO officer
and staff, named Christian Perez, Kelly Walsh allegedly admitted that she
was the one who opened the drawer and got the green folders containing
the staff evaluations. The Reportee was told by Kelly Walsh that her Rolex
wristwatch will be returned to her provided that she will immediately vacate
her office.

On the same date, Alcaraz’s termination letter dated May 19, 2005 was
handed to her by Walsh, Almazar and Bernardo.
2)
Philippine National Oil Company-Energy Development Corporation vs.
Buenviaje G.R. Nos. 183200-01/G.R. Nos. 183253 & 183257. June 29,
2016 Facts: Philippine National Oil Company-Energy Development
Corporation (PNOC-EDC) hired Amelyn Buenviaje (Buenviaje) as Assistant
to the then Chairman/President and Chief Executive Officer Sergio A.F.
Apostol (Apostol), her father. Buenviaje’s employment contract provided
that she will serve until June 30, 2004 or coterminous with the tenure of
Apostol, whichever comes first. On August 4, 2003, Apostol approved the
creation of PNOC-EDC’s new Marketing Division composed of thirty (30)
positions. Seven (7) of these thirty (30) positions were also newly created,
one of which was that of a Marketing Division Manager. Buenviaje
assumed this position as early as the time of the creation of the Marketing
Division. On January 5, 2004, Apostol filed his Certificate of Candidacy as
Governor for the province of Leyte, yet continued to discharge his functions
as President in PNOCEDC. Buenviaje also continued to perform her duties
as Assistant to the Chairman/President and Marketing Division Manager in
PNOC-EDC. Subsequently, Paul Aquino (Aquino), the new President of
PNOC-EDC, appointed Buenviaje to the position of Senior Manager for
Marketing Division. In line with PNOC-EDCs policies, Buenviaje was
subjected to a performance appraisal. She received a satisfactory grade of
three (3). In her subsequent performance appraisal, she received an
unsatisfactory grade of four (4). Thus, Ester Guerzon (Guerzon), Vice
President for Corporate Affairs of PNOC-EDC, informed Buenviaje that she
did not qualify for regular employment. PNOC-EDC, through Guerzon,
communicated in writing to Buenviaje her non-confirmation of appointment
as well as her separation from the company effective July 31, 2004. On
July 2, 2004, Buenviaje gave her written comments on the results of her
second performance appraisal. In reply, PNOC-EDC sent her two (2) more
letters reiterating her non-confirmation and separation from the company.
Aquino also issued a Memorandum to Buenviaje instructing her to prepare
a turnover report before her physical move-out. Buenviaje responded by
filing a complaint before the Labor Arbiter for illegal dismissal with money
claims. LA Ruling: The Labor Arbiter held that Buenviaje was a regular
employee because her appointment letter clearly says so. Any doubt
caused by the statement in the appointment letter that Buenviaje’s
appointment was subject to confirmation must be resolved against PNOC-
EDC. In addition, PNOC-EDC failed to prove that reasonable standards
were explained to Buenviaje at the time of her engagement, thusly negating
PNOC-EDC’s claim that she was merely a probationary employee. The
Labor Arbiter noted that PNOC-EDC even admitted that the alleged
standards were only set and discussed with Buenviaje more than a month
after her actual appointment. The Labor Arbiter further ruled that PNOC-
EDC also failed to explain why Buenviaje was allowed to enjoy benefits that
were supposed to be exclusive for regular employees. As a regular
employee, therefore, Buenviaje could only be dismissed for any of the just
or authorized causes under Articles 282 and 283 of the Labor Code. Since
the cause for Buenviaje’s dismissal was not included in any of the grounds
enumerated in either Article, she was considered illegally dismissed. Both
parties appealed to the NLRC. NLRC Ruling: The NLRC partly granted the
appeal. The NLRC agreed with the Labor Arbiter that Buenviaje was a
regular employee of PNOC-EDC, noting that the terms of her appointment
expressly grants a regular status of employment. The NLRC also found that
PNOC-EDC admitted that Buenviaje has been performing the functions of a
Marketing Division Manager for more than six (6) months before she was
formally appointed to the said position. Nevertheless, the NLRC ruled that
she was not illegally dismissed because she did not enjoy security of
tenure. The NLRC noted that the condition in Buenviaje’s appointment
letter, which provided that her appointment is subject to confirmation by her
immediate superior based on her performance during the next six (6)
months, was clear and understood by her when she affixed her signature to
the appointment letter. The NLRC concluded that only upon confirmation of
her appointment will Buenviaje enjoy the right to security of tenure. As it
was, PNOCEDC found her performance unsatisfactory and Buenviaje
failed to disprove these findings. Therefore, Buenviaje failed to complete
her appointment as a regular employee and her non-confirmation cannot
be considered as an illegal dismissal. CA Ruling: The CA partially modified
the Resolution of the NLRC. The CA found no reason to disturb the findings
of both the Labor Arbiter and the NLRC that Buenviaje was a regular
employee of PNOC-EDC. However, it disagreed with the NLRC’s ruling that
Buenviaje failed to acquire security of tenure. The CA stated that where an
employee has been engaged to perform activities which are usually
necessary or desirable in the usual business of the employer, such
employee is deemed a regular employee and is entitled to security of
tenure notwithstanding the contrary provisions of his contract of
employment. As a regular employee, Buenviaje may only be dismissed if
there are just or authorized causes. Thus, PNOC-EDC’s reasoning that she
failed to qualify for the position cannot be countenanced as a valid basis for
her dismissal. Both parties filed their respective motions for
reconsideration, which the CA denied. Hence, the consolidated petitions.
Issue/s: Whether or not Buenviaje was a regular employee SC Ruling:
Buenviaje was a permanent employee. If the clause in the appointment
letter did cause an ambiguity in the employment status of Buenviaje, the
ambiguity should be resolved in her favor. This is in line with the policy
under our Labor Code to afford protection to labor and to construe doubts
in favor of labor. We upheld this policy in De Castro vs. Liberty
Broadcasting Network, Inc., ruling that between a laborer and his employer,
doubts reasonably arising from the evidence or interpretation of
agreements and writing should be resolved in the former’s favor. Hence,
what would be more favorable to Buenviaje would be to accord her a
permanent status. What was significant in the case of Abbott Laboratories,
Philippines vs. Alcaraz, was that both the offer sheet and the employment
contract specifically stated that respondent was being employed on a
probationary status. Thus, the intention of Abbott was to hire Alcaraz as a
probationary employee. This circumstance is not obtaining in this case and
the opposite, as we have already discussed, is true. By the very nature of a
probationary employment, the employee needs to know from the very start
that he will be under close observation and his performance of his assigned
duties and functions would be under continuous scrutiny by his superiors. It
is in apprising him of the standards against which his performance shall be
continuously assessed where due process lies. Likewise, probationary
employees are entitled to know the reason for their failure to qualify as
regular employees. An unsatisfactory rating can be a just cause for
dismissal only if it amounts to gross and habitual neglect of duties.
Analogous to this ground, an unsatisfactory performance may also mean
gross inefficiency. “Gross inefficiency” is closely related to “gross neglect,”
for both involve specific acts of omission on the part of the employee
resulting in damage to the employer or to his business. Failure to observe
prescribed standards of work or to fulfill reasonable work assignments due
to inefficiency may constitute just cause for dismissal. Such inefficiency is
understood to mean failure to attain work goals or work quotas, either by
failing to complete the same within the allotted reasonable period, or by
producing unsatisfactory results. This management prerogative of requiring
standards may be availed of so long as they are exercised in good faith for
the advancement of the employer’s. The fact that an employee’s
performance is found to be poor or unsatisfactory does not necessarily
mean that the employee is grossly and habitually negligent of or inefficient
in his duties. Awarded moral damages due to termination as probationary
despite the fact she was treated as regular with the use of performance
appraisal form for regular employee.

Regular & Casual Employees

1)
563 Phil. 662

NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the June 27, 2002 Decision[1] of the appellate court
in CA-G.R. SP No. 62257, and the January 8, 2003 Resolution[2] denying
the motion for reconsideration thereof.

On the recommendation of the Division Clerk of Court and in the interest of

orderly administration of justice, the Court initially consolidated this case
with G.R. Nos. 149158-59 entitled Kimberly Independent Labor Union for
Solidarity Activism and Nationalism (KILUSAN)-Organized Labor
Associations in Line Industries and Agriculture (OLALIA), et al. v. Court of
Appeals, et al. We, however, already disposed of the issue in G.R. Nos.
149158-59 in the Court's Resolution promulgated on July 24, 2007.[3] Left
for the Court to resolve then are the matters raised in the instant petition.

We pertinently quote from the said July 24, 2007 Resolution the facts, thus:
On June 30, 1986, the Collective Bargaining Agreement (CBA) executed by
and between Kimberly-Clark (Phils.), Inc., (Kimberly), a Philippine-
registered corporation engaged in the manufacture, distribution, sale and
exportation of paper products, and United Kimberly-Clark Employees
Union-Philippine Transport and General Workers' Organization (UKCEO-
PTGWO) expired. Within the freedom period, on April 21, 1986, KILUSAN-
OLALIA, then a newly-formed labor organization, challenged the
incumbency of UKCEO-PTGWO, by filing a petition for certification election
with the Ministry (now Department) of Labor and Employment (MOLE),
Regional Office No. IV, Quezon City.

A certification election was subsequently conducted on July 1, 1986 with

UKCEO-PTGWO winning by a margin of 20 votes over KILUSAN-OLALIA.
Remaining as uncounted were 64 challenged ballots cast by 64 casual
workers whose regularization was in question. KILUSAN-OLALIA filed a
protest.

On November 13, 1986, MOLE issued an Order stating, among others, that
the casual workers not performing janitorial and yard maintenance services
had attained regular status on even date. UKCEO-PTGWO was then
declared as the exclusive bargaining representative of Kimberly's
employees, having garnered the highest number of votes in the certification
election.

On March 16, 1987, KILUSAN-OLALIA filed with this Court a petition

for certiorari which was docketed as G.R. No. 77629 assailing the Order of
the MOLE with prayer for a temporary restraining order (TRO).

During the pendency of G.R. No. 77629, Kimberly dismissed from service
several employees and refused to heed the workers' grievances, impelling
KILUSAN-OLALIA to stage a strike on May 17, 1987. Kimberly filed an
injunction case with the National Labor Relations Commission (NLRC),
which prompted the latter to issue temporary restraining orders (TRO's).
The propriety of the issuance of the TRO's was again brought by
KILUSAN-OLALIA to this Court via a petition for certiorari and prohibition
which was docketed as G.R. No. 78791.

G.R. Nos. 77629 and 78791 were eventually consolidated by this Court and
decided on May 9, 1990. The dispositive portion of the decision reads as
follows:

WHEREFORE, judgment is hereby rendered in G.R. No. 77629:

1. Ordering the med-arbiter in Case No. R04-OD-M-4-15-86 to open

and count the 64 challenged votes, and that the union with the
highest number of votes be thereafter declared as the duly elected
certified bargaining representative of the regular employees of
KIMBERLY;

2. Ordering KIMBERLY to pay the workers who have been regularized

their differential pay with respect to minimum wage, cost of living
allowance, 13th month pay, and benefits provided for under the
applicable collective bargaining agreement from the time they
became regular employees.

All other aspects of the decision appealed from, which are not so
modified or affected thereby, are hereby AFFIRMED. The temporary
restraining order issued in G.R. No. 77629 is hereby made
permanent.

The petition filed in G.R. No. 78791 is hereby DISMISSED.

SO ORDERED.
xxxx

On the Decision of the Court dated May 9, 1990, KILUSAN-OLALIA and 76

individual complainants filed a motion for execution with the DOLE
(formerly MOLE). In an Order issued on June 29, 2000, the DOLE
considered as physically impossible, and moot and academic the opening
and counting of the 64 challenged ballots because they could no longer be
located despite diligent efforts, and KILUSAN-OLALIA no longer actively
participated when the company went through another CBA cycle. However,
the DOLE ordered the payment of the differential wages and other benefits
of the regularized workers, to wit:

ACCORDINGLY, let a partial writ of execution issue to enforce payment of

the sum of (sic) P576,510.57 to the 22 individual workers listed in ANNEX
A of Kimberly's Comment/Reply dated 31 October 1991 representing their
differential pay with respect to the minimum wage, cost of living allowance,
13th month pay and benefits provided under the applicable collective
bargaining agreement from the time they became regular employees as
above-indicated.

Further, the Bureau of Working Conditions is hereby directed to submit,

within twenty (20) days from receipt of this Order, a list of workers who
have been regularized and the corresponding benefits owing to them from
the time they became regular employees.

SO ORDERED.
Pursuant thereto, on August 1, 2000, the Bureau of Working Conditions
(BWC) submitted its report finding 47 out of the 76 complainants as entitled
to be regularized.

Kimberly filed a motion for reconsideration of the DOLE Order as well as

the BWC Report, arguing in the main that the decision in G.R. Nos. 77629
and 78791 only pertained to casuals who had rendered one year of service
as of April 21, 1986, the filing date of KILUSAN-OLALIA's petition for
certification election. On December 6, 2000, however, the DOLE denied the
motion, disposing of it as follows:

WHEREFORE, the motion for reconsideration filed by the COMPANY is

hereby DENIED for lack of merit. No further motion of the same nature
shall be entertained. Further, the Report of computation submitted by the
Bureau of Working Conditions is hereby APPROVED and made an integral
part of this Order.

Let a writ of execution be issued immediately.

SO ORDERED.
Kimberly, steadfast in its stand, filed a petition for certiorari before the
appellate court, which was docketed as CA-G.R. SP No. 62257 alleging
that the employees who were dismissed due to the illegal strike staged on
May 17, 1987 (the subject of G.R. Nos. 149158-59) should not be awarded
regularization differentials.

On June 27, 2002, the CA dismissed Kimberly's petition, and disposed of

the case as follows:

WHEREFORE, the instant petition is DISMISSED for failure to show grave

abuse of discretion. The questioned orders dated June 29, 2000 and
December 6, 2000 of the Secretary of Labor are AFFIRMED. Costs against
petitioners.

SO ORDERED.
With the denial of its motion for reconsideration, Kimberly elevated the case
before this Court, on the following grounds:

1. The Court of Appeals committed serious error in affirming the ruling

of the Secretary of Labor that even casual employees who had not
rendered one year of service were considered regular employees,
thereby nullifying and disregarding the Honorable Court's Decision
dated May 9, 1990 that only casual employees who had rendered at
least one (1) year of service were considered regular employees.

2. The Court of Appeals also gravely erred in upholding the ruling of

Labor Secretary that persons not party to the petition in G.R. No.
77629 were entitled to regularization differentials, thereby amending
the Honorable Court's decision.[4]

Kimberly, in this case, contends that the reckoning point in determining who
among its casual employees are entitled to regularization should be April
21, 1986, the date KILUSAN-OLALIA filed a petition for certification election
to challenge the incumbency of UKCEO-PTGWO. It posits that in the
implementation of the May 9, 1990 Decision in G.R. No. 77629,[5] the DOLE
should then exclude the employees who had not rendered at least one (1)
year of service from the said date.[6]

Kimberly also argues that the employees who are not parties in G.R. No.
77629 should not be included in the implementation orders. For DOLE to
declare this group of employees as regular and to order the payment of
differential pay to them is to amend a final and executory decision of this
Court.[7]

We do not agree. In G.R. No. 77629, we ruled as follows:

The law [thus] provides for two kinds of regular employees, namely: (1)
those who are engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer; and (2) those who
have rendered at least one year of service, whether continuous or broken,
with respect to the activity in which they are employed. The individual
petitioners herein who have been adjudged to be regular employees fall
under the second category. These are the mechanics, electricians,
machinists, machine shop helpers, warehouse helpers, painters,
carpenters, pipefitters and masons. It is not disputed that these workers
have been in the employ of KIMBERLY for more than one year at the time
of the filing of the petition for certification election by KILUSAN-OLALIA.

Owing to their length of service with the company, these workers became
regular employees, by operation of law, one year after they were employed
by KIMBERLY through RANK. While the actual regularization of these
employees entails the mechanical act of issuing regular appointment
papers and compliance with such other operating procedures as may be
adopted by the employer, it is more in keeping with the intent and spirit of
the law to rule that the status of regular employment attaches to the casual
worker on the day immediately after the end of his first year of service. To
rule otherwise, and to instead make their regularization dependent on the
happening of some contingency or the fulfillment of certain requirements, is
to impose a burden on the employee which is not sanctioned by law.

That the first stated position is the situation contemplated and sanctioned
by law is further enhanced by the absence of a statutory limitation before
regular status can be acquired by a casual employee. The law is explicit.
As long as the employee has rendered at least one year of service, he
becomes a regular employee with respect to the activity in which he is
employed. The law does not provide the qualification that the employee
must first be issued a regular appointment or must first be formally declared
as such before he can acquire a regular status. Obviously, where the law
does not distinguish, no distinction should be drawn.[8]
Considering that an employee becomes regular with respect to the activity
in which he is employed one year after he is employed, the reckoning date
for determining his regularization is his hiring date. Therefore, it is error for
petitioner Kimberly to claim that it is from April 21, 1986 that the one-year
period should be counted. While it is a fact that the issue of regularization
came about only when KILUSAN-OLALIA filed a petition for certification
election, the concerned employees attained regular status by operation of
law.[9]

Further, the grant of the benefit of regularization should not be limited to the
employees who questioned their status before the labor tribunal/court and
asserted their rights; it should also extend to those similarly
situated.[10] There is, thus, no merit in petitioner's contention that only those
who presented their circumstances of employment to the courts are entitled
to regularization.[11]

As to Kimberly's assertions that some of the employees were already

recalled, reassigned or replaced by the RANK Manpower Services, and
that some did not return to work, the Court notes that these are questions
of fact. Basic is the rule that, in petitions for review on certiorari under Rule
45 of the Rules of Court, only questions of law may be raised,[12] except, if
the factual findings of the appellate court are mistaken, absurd, speculative,
conjectural, conflicting, tainted with grave abuse of discretion, or contrary to
the findings culled by the court of origin,[13]which is not so in the instant
case. The DOLE and the appellate court herein are uniform in their
findings.

Finally, oft-repeated is the rule that appellate courts accord the factual
findings of the labor tribunal not only respect but also finality when
supported by substantial evidence,[14] unless there is showing that the labor
tribunal arbitrarily disregarded evidence before it or misapprehended
evidence of such nature as to compel a contrary conclusion if properly
appreciated.[15] Likewise, the appellate court cannot substitute its own
judgment or criterion for that of the labor tribunal in determining wherein
lies the weight of evidence or what evidence is entitled to belief.[16]

WHEREFORE, premises considered, the petition for review on certiorari

is DENIED DUE COURSE.

SO ORDERED.

2)
Rowell Industrial Corporation vs CA
(EXCEPTION TO THE RULE ON REGULAR EMPLOYMENT)

Facts:
Rowell Industrial is engaged in manufacturing tin cans for use in packaging
of consumer products, e.g., foods, paints, among other things. Taripe was
employed by petitioner on November 8, 1999 as a “rectangular power
press machine operator” Taripe alleged that upon employment, he was
made to sign a document, which was not explained to him but which was
made a condition for him to be taken in and for which he was not furnished
a copy.

Issue:
Whether respondent was a regular employee

Held:
Under Art 280 regular employees are classified into:
(1) regular employees by nature of work - those employees who perform
a particular activity which is necessary or desirable in the usual business or
trade of the employer, regardless of their length of service;
(2) regular employees by years of service - those employees who have
been performing the job, regardless of the nature thereof, for at least a
year.

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

In the case at bar, Taripe signed a contract of employment good only for a
period of five months unless the said contract is renewed by mutual
consent. Along with other contractual employees, he was hired only to
meet the increase in demand for packaging materials for the Christmas
season and to build up stock levels for the early part of the year.
Standards for valid fixed term employment:
(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 employee dealt with each
other on more or less equal terms with no moral dominance whatever being
exercised by the former on the latter.

Application of these standards to this case:

1) The employment contract signed by respondent Taripe did not mention
that he was hired only for a specific undertaking, the completion of which
had been determined at the time of his engagement. The said employment
contract neither mentioned that respondent Taripe’s services were
seasonal in nature and that his employment was only for the duration of the
Christmas season as purposely claimed by petitioner RIC. What was
stipulated in the said contract was that Taripe’s employment was
contractual for the period of five months.
2) Also RIC failed to controvert the claim that Taripe was made to sign the
contract of employment, prepared by RIC, as a condition for his hiring.
Such contract in which the terms are prepared by only one party and the
other party merely affixes his signature signifying his adhesion thereto is
called contract of adhesion.It is an agreement in which the parties
bargaining are not on equal footing, the weaker party’s participation being
reduced to the alternative “to take it or leave it.” In the present case,
respondent Taripe, in need of a job, was compelled to agree to the
contract, including the five-month period of employment, just so he could
be hired.
3) 2) As a power press operator, a rank and file employee, he can hardly
be on equal terms with petitioner RIC. As the Court of Appeals said,
“almost always, employees agree to any terms of an employment contract
just to get employed considering that it is difficult to find work given their
ordinary qualifications.” He was a regular employee As a rectangular power
press machine operator, in charge of manufacturing covers for “four liters
rectangular tin cans,” was holding a position which is necessary and
desirable in the usual business or trade of petitioner RIC, which was the
manufacture of tin cans.Thus, he was a regular employee.

3)

PHILIPPINE LONG DISTANCE TELEPHONE COMPANY v. LAURO

LEVISTE, et al.

477 SCRA 634 (2005)

Once a notice of lis pendens has been duly registered, any cancellation or
issuance of title over the land involved as well as any subsequent
transaction affecting the same would have to be subject to the outcome of
the suit.

El Dorado Plantation sold a parcel of land with an area

of approximately1,825 hectares in Occidental Mindoro to Fernando O.
Carrascoso, Jr. within a period of three (3) years. In the meantime,
Carrascoso and the Philippine Long Distance Telephone Company (PLDT),
executed an Agreement to Buy and Sell whereby the former agreed to sell
1,000 hectares of the property to the latter.

In view of Carrascoso‘s failure to pay the balance of the purchase price,

Lauro Leviste, a stockholder and member of the Board wants a rescission of
the sale. Thus, Jose P. Leviste, as President, sent a letter to Carrascoso
informing him that, El Dorado was seeking the rescission
with damagesbefore the Court of First Instance (CFI). Lauro and El Dorado
also caused to be annotated a Notice of Lis Pendens.

Carrascoso alleged that he was given an extension to pay the balance and
El Dorado committed a gross misrepresentation when it warranted that the
property was not being cultivated by any tenant to take it out of
the coverage of the Land Reform Code. Two years after their agreement to
Buy and Sell, Carrascoso and PLDT forged a Deed of Absolute Sale over
the 1,000 hectare portion of the property. PLDT alleged that it is a purchaser
in good faith and for value.
The CFI dismissed the complaint on the ground of prematurity. The Court of
Appeals (CA) reversed the decision of the CFI granting the rescission of El
Dorado. Hence, this petition for review.

ISSUES:

Whether or not the Court of Appeals erred in holding that PLDT took the right,
interest and title to the farm subject to the notice of lis pendens

HELD:

Once a notice of lis pendens has been duly registered, any cancellation or
issuance of title over the land involved as well as any subsequent transaction
affecting the same would have to be subject to the outcome of the suit. In
other words, a purchaser who buys registered land with full notice of the fact
that it is in litigation between the vendor and a third party stands in the shoes
of his vendor and his title is subject to the incidents and result of the pending
litigation.

Notice of lis pendens has been conceived and, more often than not, availed
of, to protect the real rights of the registrant while the case involving such
rights is pending resolution or decision. With the notice of lis pendens duly
recorded, and while it remains uncancelled, the registrant could rest secure
that he would not lose the property or any part of it during the litigation.

The filing of a notice of lis pendens in effect (1) keeps the subject matter of
litigation within the power of the court until the entry of the final judgment so
as to prevent the defeat of the latter by successive alienations; and
(2) binds a purchaser of the land subject of the litigation to the judgment or
decree that will be promulgated thereon whether such a purchaser is a bona
fide purchaser or not; but (3) does not create a non-existent right or lien.

The doctrine of lis pendens is founded upon reason of public policy and
necessity, the purpose of which is to keep the subject matter of the litigation
within the power of the court until the judgment or decree shall have been
entered; otherwise by successive alienations pending the litigation, its
judgment or decree shall be rendered abortive and impossible of execution.
The doctrine of lis pendens is based on considerations of public policy
and convenience, which forbid a litigant to give rights to others, pending the
litigation, so as to affect the proceedings of the court then progressing to
enforce those rights, the rule being necessary to the administration of justice
in order that decisions in pending suits may be binding and may be given full
effect, by keeping the subject matter in controversy within the power of the
court until final adjudication, that there may be an end to litigation, and to
preserve the property that the purpose of the pending suit may not be
defeated by successive alienations and transfers of title.

PLDT cannot shield itself from the notice of lis pendens because all that it
had at the time of its inscription was an Agreement to Buy and Sell with
Carrascoso, which in effect is a mere contract to sell that did not pass to it
the ownership of the property. PLDT’s possession at the time the notice of
lis pendens was registered not being a legal possession based on ownership
but a mere possession in fact and the Agreement to Buy and Sell under
which it supposedly took possession not being registered, it is not protected
from an adverse judgment that may be rendered in the case subject of the
notice of lis pendens.

4)
ABS-CBN vs NAZARENO Case Digest
ABS-CBN BROADCASTING CORPORATION vs. MARLYN NAZARENO
et al.
G.R. No. 164156
September 26, 2006

Facts: Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is

engaged in the broadcasting business and owns a network of television and
radio stations, whose operations revolve around the broadcast,
transmission, and relay of telecommunication signals. It sells and deals in or
otherwise utilizes the airtime it generates from its radio and television
operations. It has a franchise as a broadcasting company, and was likewise
issued a license and authority to operate by the National
Telecommunications Commission.

Petitioner employed respondents Nazareno, Gerzon, Deiparine, and

Lerasan as production assistants (PAs) on different dates. They were
assigned at the news and public affairs, for various radio programs in the
Cebu Broadcasting Station. On December 19, 1996, petitioner and the ABS-
CBN Rank-and-File Employees executed a Collective Bargaining Agreement
(CBA) to be effective during the period from December 11, 1996 to
December 11, 1999. However, since petitioner refused to recognize PAs as
part of the bargaining unit, respondents were not included to the CBA.

On October 12, 2000, respondents filed a Complaint for Recognition of

Regular Employment Status, Underpayment of Overtime Pay, Holiday Pay,
Premium Pay, Service Incentive Pay, Sick Leave Pay, and 13th Month Pay
with Damages against the petitioner before the NLRC. The Labor Arbiter
rendered judgment in favor of the respondents, and declared that they were
regular employees of petitioner as such, they were awarded monetary
benefits. NLRC affirmed the decision of the Labor Arbiter. Petitioner filed a
motion for reconsideration but CA dismissed it.

Issue: Whether or not the respondents were considered regular employees

of ABS-CBN.

Ruling: The respondents are regular employees of ABS-CBN. It was held

that where a person has rendered at least one year of service, regardless of
the nature of the activity performed, or where the work is continuous or
intermittent, the employment is considered regular as long as the activity
exists, the reason being that a customary appointment is not indispensable
before one may be formally declared as having attained regular status.

In Universal Robina Corporation v. Catapang, the Court states that 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 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.

Additionally, respondents cannot be considered as project or program

employees because no evidence was presented to show that the duration
and scope of the project were determined or specified at the time of their
engagement. In the case at bar, however, the employer-employee
relationship between petitioner and respondents has been proven. In the
selection and engagement of respondents, no peculiar or unique skill, talent
or celebrity status was required from them because they were merely hired
through petitioner’s personnel department just like any ordinary employee.
Respondents did not have the power to bargain for huge talent fees, a
circumstance negating independent contractual relationship. Respondents
are highly dependent on the petitioner for continued work. The degree of
control and supervision exercised by petitioner over respondents through its
supervisors negates the allegation that respondents are independent
contractors.

The presumption is that when the work done is an integral part of the regular
business of the employer and when the worker, relative to the employer,
does not furnish an independent business or professional service, such work
is a regular employment of such employee and not an independent
contractor. As regular employees, respondents are entitled to the benefits
granted to all other regular employees of petitioner under the CBA . Besides,
only talent-artists were excluded from the CBA and not production assistants
who are regular employees of the respondents. Moreover, under Article 1702
of the New Civil Code: “In case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the
laborer.”
5)
FULACHE vs ABS-CBN BROADCASTING CORPORATION Case Digest
FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO, JEFFREY
LAGUNZAD, MAGDALENA MALIG-ON BIGNO, FRANCISCO CABAS, JR.,
HARVEY PONCE and ALAN C. ALMENDRAS, Petitioners, vs ABS-CBN
BROADCASTING CORPORATION, Respondent

G.R. No. 183810 January 21, 2010

FACTS:

The petitioners in this case are questioning the CBA executed between ABS-
CBN and the ABS-CBN Rank-and-File Employees Union (Union) because
under such agreement, they are only considered as temporary and not
regular employees. The petitioners claimed that they should be recognized
as regular employees of ABS-CBN because they had already rendered more
than a year of service in the company and, therefore, entitled to the benefits
of a regular employee.

Instead of salaries, ABS-CBN pointed out that talents are paid a pre-
arranged consideration called “talent fee” taken from the budget of a
particular program and subject to a ten percent (10%) withholding
tax. Talents do not undergo probation. Their services are engaged for a
specific program or production, or a segment thereof. Their contracts are
terminated once the program, production or segment is completed.

ABS-CBN alleged that the petitioners’ services were contracted on various

dates by its Cebu station as independent contractors/off camera talents, and
they were not entitled to regularization in these capacities.
Labor Arbiter Rendoque rendered his decision holding that the petitioners
were regular employees of ABS-CBN, not independent contractors, and are
entitled to the benefits and privileges of regular employees

ABS-CBN appealed the ruling to the National Labor Relations Commission

(NLRC) Fourth Division, mainly contending that the petitioners were
independent contractors, not regular employees.

While the appeal of the regularization case was pending, ABS-CBN

dismissed Fulache, Jabonero, Castillo, Lagunzad and Atinen (all drivers) for
their refusal to sign up contracts of employment with service contractor Able
Services. The four drivers and Atinen responded by filing a complaint
for illegal dismissal.

The Labor Arbiter Rendoque upheld the validity of ABS-CBN's contracting

out of certain work or services in its operations. The labor arbiter found that
petitioners Fulache, Jabonero, Castillo, Lagunzad and Atinen had been
dismissed due to redundancy, an authorized cause under the law.

The NLRC reversed the labor arbiter’s ruling in the illegal dismissal case; it
found that petitioners Fulache, Jabonero, Castillo, Lagunzad and Atinen had
been illegally dismissed and awarded them backwages and separation pay
in lieu of reinstatement. Under both cases, the petitioners were awarded CBA
benefits and privileges from the time they became regular employees up to
the time of their dismissal.

The NLRC resolved the motions for reconsideration on by both parties, thus,
on the regularization issue, the NLRC stood by the ruling that the petitioners
were regular employees entitled to the benefits and privileges of regular
employees. On the illegal dismissal case, the petitioners, while recognized
as regular employees, were declared dismissed due to redundancy. The
NLRC denied the petitioners’ second motion for reconsideration in its order
of May 31, 2006 for being a prohibited pleading.

ISSUE:
WON the petitioners are correct that they should be considered already as
regular employees
WON Fulache and the other petitioners were dismissed illegally

RULING:
1. As regular employees, the petitioners fall within the coverage of the
bargaining unit and are therefore entitled to CBA benefits as a matter of law
and contract.

Section 1. APPROPRIATE BARGAINING UNIT. – The parties agree

that the appropriate bargaining unit shall be regular rank-and-file
employees of ABS-CBN BROADCASTING CORPORATION but shall not
include:

a) Personnel classified as Supervisor and Confidential employees;

b) Personnel who are on “casual” or “probationary” status as defined in
Section 2 hereof;
c) Personnel who are on “contract” status or who are paid for specified units
of work such as writer-producers, talent-artists, and singers.

The inclusion or exclusion of new job classifications into the bargaining unit
shall be subject of discussion between the COMPANY and the UNION.

Under these terms, the petitioners are members of the appropriate

bargaining unit because they are regular rank-and-file employees and do not
belong to any of the excluded categories. Specifically, nothing in the records
shows that they are supervisory or confidential employees; neither are they
casual nor probationary employees. Most importantly, the labor arbiter’s
decision of January 17, 2002 – affirmed all the way up to the CA level – ruled
against ABS-CBN’s submission that they are independent contractors. Thus,
as regular rank-and-file employees, they fall within CBA coverage under the
CBA’s express terms and are entitled to its benefits.

2. Their dismissal was not only unjust and in bad faith as the above
discussions abundantly show. The bad faith in ABS-CBN’s move toward its
illegitimate goal was not even hidden; it dismissed the petitioners – already
recognized as regular employees – for refusing to sign up with its service
contractor. Thus, from every perspective, the petitioners were illegally
dismissed.

By law, illegally dismissed employees are entitled to reinstatement without

loss of seniority rights and other privileges and to full backwages, inclusive
of allowances, and to other benefits or their monetary equivalent from the
time their compensation was withheld from them

6)
FUJI TELEVISION NETWORK v. ARLENE S. ESPIRITU, GR No. 204944-
45, 2014-12-03
Facts:
Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc.
("Fuji") as a news correspondent/producer[4] "tasked to report Philippine
news to Fuji through its Manila Bureau field office."[5] Arlene'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]
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.
Arlene and Fuji signed a non-renewal contract... the day after Arlene
signed the non-renewal contract, she filed a complaint for illegal dismissal
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
Labor Arbiter Corazon C. Borbolla dismissed Arlene's complaint... rlene
appealed before the National Labor Relations Commission.
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.
n 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,
Issues:
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
Whether the Court of Appeals properly modified the National Labor
Relations Commission's decision by awarding reinstatement, damages,
and attorney's fees
Ruling:
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.
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.
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]
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 fac... tors. On the other hand, independent
contractors do not have employer-employee relationships with their
principals.
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.
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.[235] The 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.
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.
ell-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 period[247] to bar... reinstatement.
Principles:
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.
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.
Another classification of employees, i.e., employees with fixed-term
contracts, was recognized in Brent School, Inc. v. Zamora[150] where this
court discussed that:
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)
GMA Network, Inc. v. Pabriga[154] expounded the doctrine on fixed-term
contracts laid down in Brent in the following manner:
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:
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.
On the other hand, an independent contractor is defined as:
. . . 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.[
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]
Semblante v. Court of Appeals[166] involved a masiador[167] 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 Association[171] 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]
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.
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.
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.
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:
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.
s stated in Price, et al. v. Innodata Corp., et al.:[228]
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

7)
Pier 8 Arrastre and Stevedoring Services Inc. vs. Boclot [G.R. No. 173849.
Sept. 28, 2007] Facts: Boclot was hired by PASSI to perform the functions
of a stevedore. Later on, Boclot filed Complaint with the Labor Arbiter
claiming regularization; payment of service incentive leave and 13th month
pays; moral, exemplary and actual damages; and attorney’s fees. He
alleged that he was hired by PASSI in October 1999 and was issued
company ID No. 304, a PPA Pass and SSS documents. In fact, respondent
contended that he became a regular employee by April 2000, since it was
his sixth continuous month in service in PASSI’s regular course of
business. He argued on the basis of Articles 280 and 281 of the Labor
Code. He maintains that under paragraph 2 of Article 280, he should be
deemed a regular employee having rendered at least one year of service
with the company. Issue: Whether or not hehas attained regular status
Held: Yes. Though usual and necessary, his employment is dependent on
availability of work SC took judicial notice that it is an industry practice in
port services to hire “reliever” stevedores in order to ensure smooth-flowing
24-hour stevedoring and arrastre operations in the port area. No doubt,
serving as a stevedore, respondent performs tasks necessary or desirable
to the usual business of petitioners. However, it should be deemed part of
the nature of his work that he can only work as a stevedore in the absence
of the employee regularly employed for the very same function. Moreover,
respondent does not contest that he was well aware that he would only be
given work when there are absent or unavailable employees. Respondent
also does not allege, nor is there any showing, that he was disallowed or
prevented from offering his services to other cargo handlers in the other
piers at the North Harbor other than petitioners. As aforestated, the
situation of respondent is akin to that of a seasonal or project or term
employee, albeit on a daily basis. Under the CBA, he qualifies as a regular
employee The Supreme Court still finds respondent to be a regular
employee on the basis of pertinent provisions under the CBA between
PASSI and its Workers’ union, wherein it was stated that it agrees to
convert to regular status all incumbent probationary or casual employees
and workers in the Company who have served the Company for an
accumulated service term of employment of not less than six (6) months
from his original date of hiring. Respondent assents that he is not a
member of the union, as he was not recognized by PASSI as its regular
employee, but this Court notes that PASSI adopts a union-shop agreement,
culling from © 2010 www.pinoylegal.com Page 2 Article II of its CBA. Under
a union-shop agreement, although nonmembers may be hired, an
employee is required to become a union member after a certain period, in
order to retain employment. This requirement applies to present and future
employees. The same article of the CBA stipulates that employment in
PASSI cannot be obtained without prior membership in the union. Hence,
applying the foregoing provisions of the CBA, respondent should be
considered a regular employee after six months of accumulated service.
Having rendered 228.5 days, or eight months of service to petitioners since
1999, then respondent is entitled to regularization by virtue of the said CBA
provisions.

8)

G.R. No. 167310 June 17, 2008

THE PENINSULA MANILA, ROLF PFISTERER AND BENILDA
QUEVEDO-SANTOS, petitioners,
vs.
ELAINE M. ALIPIO, respondent.

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision1 dated August 23, 2004 and
Resolution2 dated March 11, 2005 of the Court of Appeals in CA-G.R. SP
No. 67007, which reversed the Decision3 dated December 29, 2000 of the
National Labor Relations Commission (NLRC) in NLRC NCR CA No.
023890-00. The NLRC had earlier affirmed with modification the Labor
Arbiter's Decision,4 dismissing the complaint for illegal dismissal against
herein petitioners, but awarding respondent herein separation pay
amounting to P20,000.

The pertinent facts are as follows:

Petitioner, The Peninsula Manila, is a corporation engaged in the hotel

business. Co-petitioners Rolf Pfisterer and Benilda Quevedo-Santos were
the general manager and human resources manager, respectively, of the
hotel at the time of the controversy.

The hotel operates a clinic 24 hours a day and employs three regular
nurses who work eight hours each day on three separate shifts. The hotel
also engages the services of reliever nurses who substitute for the regular
nurses who are either off-duty or absent.

Respondent Elaine M. Alipio was hired merely as a reliever nurse.

However, she had been performing the usual tasks and functions of a
regular nurse since the start of her employment on December 11, 1993.
Hence, after about four years of employment in the hotel, she inquired why
she was not receiving her 13th month pay.

In response, petitioners required her to submit a summary of her tour of

duty for 1997. After she had submitted the said summary, Alipio was
paid P8,000 as her 13th month pay for 1997. Alipio likewise requested for
the payment of her 13th month pay for 1993 to 1996, but her request was
denied.
On December 18, 1998, Alipio was informed by a fellow nurse that she can
only report for work after meeting up with petitioner Santos. When Alipio
met with Santos on December 21, 1998, Alipio was asked regarding her
payslip vouchers. She told Santos that she made copies of her payslip
vouchers because Peninsula does not give her copies of the same. Santos
was peeved with Alipio's response because the latter was allegedly not
entitled to get copies of her payslip vouchers. Santos likewise directed
Alipio not to report for work anymore.

Aggrieved, Alipio filed a complaint for illegal dismissal against the

petitioners.

After due proceedings, the Labor Arbiter dismissed the complaint for lack of
merit, but directed that Peninsula pay Alipio separation pay amounting
to P20,000. The Labor Arbiter held,

WHEREFORE, in view of the foregoing, judgment is hereby

rendered DISMISSING the instant complaint for lack of merit.
However, considering that complainant had served as reliever for
respondent hotel for a long period, the respondent hotel is ordered to
give her separation pay equivalent to one-half month pay for every
year of complainant's reliever service, in the total amount of
P20,000.00 based on an average monthly pay of P8,000.00.

SO ORDERED.5

On appeal, the NLRC affirmed with modification the Labor Arbiter's

decision, to wit:

WHEREFORE, the appeal of the complainant is dismissed for lack of

merit. Accordingly, the decision appealed from is affirmed with the
modification that the award of separation pay is hereby deleted.

SO ORDERED.6

Upon further review, the Court of Appeals reversed the decision of the
NLRC after ascertaining that the findings of the Labor Arbiter and the
NLRC that Alipio is not an employee of Peninsula and that she was validly
dismissed is not supported by the evidence on record.7 The dispositive
portion of the Decision dated August 23, 2004 of the Court of Appeals
reads:
 WHEREFORE, the petition is GRANTED and the Decision dated
December 29, 2000 and the Order dated June 29, 2001 of the
National Labor Relations Commission are REVERSED and SET
ASIDE.

Private respondents The Peninsula Manila and Benilda Quevedo-

Santos are ordered to reinstate petitioner Elaine M. Alipio as regular
staff nurse without loss of seniority rights; to pay petitioner, jointly and
severally, full backwages and all the benefits to which she is entitled
under the Labor Code from December 12, 1994 up to the time of her
actual reinstatement; moral damages in the amount of P30,000.00,
exemplary damages in the amount of P20,000[.]00, and attorney's
fees equivalent to ten (10%) percent of the total monetary award.

Let this case be remanded to the Labor Arbitration Branch, National

Labor Relations Commission for the computation of the monetary
claims of petitioner.

SO ORDERED.8 (Emphasis supplied.)

Petitioners moved for reconsideration but their motion was denied. Hence,
the instant petition for review on certiorari contending that the Court of
Appeals seriously erred:

I.

IN GIVING DUE COURSE TO THE RESPONDENT'S PETITION

FOR CERTIORARI WHICH WAS MAINLY BASED ON
ALLEGATIONS OF SUPPOSED FACTUAL ERRORS COMMITTED
BY THE NATIONAL LABOR RELATIONS COMMISSION AND IN
REVERSING THE LATTER'S FINDINGS OF FACT WHICH WERE
SUPPORTED BY SUBSTANTIAL EVIDENCE IN THE RECORD;
AND

II.

IN DECLARING THE RESPONDENT'S DISMISSAL TO BE ILLEGAL

AND ORDERING HER REINSTATEMENT WITH FULL BACK
WAGES, TOGETHER WITH PAYMENT OF MORAL AND
EXEMPLARY DAMAGES AND ATTORNEY'S FEES.9
Petitioners contend that the Court of Appeals should have accorded the
unanimous findings of the Labor Arbiter and the NLRC due respect and
finality as the conclusion reached by the two bodies is supported by
substantial evidence on record. Petitioners insist Alipio was terminated for
a just cause and with due process. Petitioners likewise argue that Alipio
cannot be reinstated as a regular staff nurse because (1) she never served
in that capacity; and (2) there is no vacancy for the said position or any
equivalent position to which she may be reinstated.

Alipio, for her part, counters that the NLRC decision, affirming that of the
Labor Arbiter, is not beyond the scope of judicial review because palpable
mistake was committed in disregarding evidence showing (1) her status as
a regular employee of Peninsula; and (2) petitioners' failure to observe
substantive and procedural due process. She points out that a Certification
dated April 22, 1997 issued by the hotel proves she was a regular staff
nurse until her illegal dismissal. She stresses that her supposed
employment at the Quezon City Medical Center does not negate the fact
that she also worked as a regular nurse of the hotel. Additionally, she
contends that obtaining copies of her own payslips does not indicate a
perverse attitude justifying dismissal for serious misconduct or willful
disobedience. She adds, there is no showing that her refusal to return
copies of her payslips caused material damage to petitioners. She further
claims that bad faith attended her dismissal.

After carefully weighing the parties' arguments, we resolve to deny the

petition.

It is doctrinal that the factual findings of quasi-judicial agencies like the

NLRC are generally accorded respect and finality if such are supported by
substantial evidence. In some instances, however, the Court may be
compelled to deviate from this general rule if the Labor Arbiter and the
NLRC misappreciated the facts, thereby resulting in the impairment of the
worker's constitutional and statutory right to security of tenure.10

The conclusions reached by the NLRC and the Labor Arbiter, that Alipio
was not a regular employee of the hotel and that she was validly dismissed,
are not supported by law and evidence on record.

Article 280 of the Labor Code provides:

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

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

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

Thus, an employment is deemed regular when the activities performed by

the employee are usually necessary or desirable in the usual business of
the employer. However, any employee who has rendered at least one year
of service, even though intermittent, is deemed regular with respect to the
activity performed and while such activity actually exists. 11

In this case, records show that Alipio's services were engaged by the hotel
intermittently from 1993 up to 1998. Her services as a reliever nurse were
undoubtedly necessary and desirable in the hotel's business of providing
comfortable accommodation to its guests. In any case, since she had
rendered more than one year of intermittent service as a reliever nurse at
the hotel, she had become a regular employee as early as December 12,
1994. Lastly, per the hotel's own Certification dated April 22, 1997, she was
already a "regular staff nurse" until her dismissal.

Being a regular employee, Alipio enjoys security of tenure. Her services

may be terminated only upon compliance with the substantive and
procedural requisites for a valid dismissal: (1) the dismissal must be for any
of the causes provided in Article 28212 of the Labor Code; and (2) the
employee must be given an opportunity to be heard and to defend
himself.13

Did Alipio commit serious misconduct when she obtained copies of her
payslips?

We have defined misconduct as any forbidden act or dereliction of duty. It

is willful in character and implies a wrongful intent, not a mere error in
judgment. The misconduct, to be serious, must be grave and not merely
trivial.14

In this case, Alipio's act of obtaining copies of her payslips cannot be

characterized as a misconduct, much less a grave misconduct. On the
contrary, we find it absurd that she had to resort to her own
resourcefulness to get hold of these documents since it was incumbent
upon Peninsula, as her employer, to give her copies of her payslips as a
matter of course. We are thus convinced that Alipio's dismissal was not
based on a just cause.

Was Alipio afforded an opportunity to be heard and to defend herself?

When Santos had a meeting with Alipio on December 21, 1998, she was
not informed that the hotel was contemplating her dismissal. Neither was
she informed of the ground for which her dismissal was sought. She was
simply told right there and then that she was already dismissed, thereby
affording no opportunity for her to be heard and defend herself. Thus, Alipio
was likewise deprived of procedural due process.

Clearly, Alipio was illegally dismissed because petitioners failed on both

counts to comply with the twin requisites for a valid termination. She is thus
entitled to reinstatement without loss of seniority rights and other privileges
and to full backwages, inclusive of allowances, and to other benefits, or
their monetary equivalent computed from the time compensation was
withheld up to the time of actual reinstatement.15 Should reinstatement be
no longer feasible, Alipio is entitled to separation pay equivalent to one
month pay for her every year of service in lieu of reinstatement.16

Furthermore, as a rule, moral damages are recoverable where the

dismissal of the employee was attended with bad faith or was done in a
manner contrary to good customs.17 Exemplary damages may also be
awarded if the dismissal is effected in a wanton, oppressive or malevolent
manner.18

In this case, while the petitioners issued a Certification dated April 22, 1997
and recognized Alipio as a regular employee, they deprived her of copies of
her own payslips. Moreover, her dismissal was effected in a manner
whereby she was deprived of due process. Under these circumstances,
she is also entitled to moral damages in the amount of P15,000 and
exemplary damages in the amount of P10,000.

Lastly, the award of attorney's fees equivalent to ten percent (10%) of the
total monetary award is consistent with prevailing jurisprudence19 and thus
ought to be affirmed.

WHEREFORE, the petition is DENIED for lack of merit. The assailed

Decision dated August 23, 2004 and Resolution dated March 11, 2005 of
the Court of Appeals in CA-G.R. SP No. 67007 are hereby AFFIRMED as
MODIFIED, such that the amount of moral damages is reduced to
only P15,000 and the exemplary damages to only P10,000.

No pronouncement as to costs.

SO ORDERED.

9)
Case Digest: Samonte et al. v. La Salle Greenhills, Inc. November 3, 2017 |
Nathalie Pattugalan G.R. No. 199683 February 10, 2016 PEREZ, J.: Facts:
Petitioners are medical professional hired by LSGI under a uniform one-
page Contract of Retainer for the period of a specific academic calendar
beginning in June of 1989 and the succeeding 15 years and terminating in
March of the following year when the school year ends. The contract
specifically provides that the retainer is only temporary in character and
exclusively limited to the undertaking and/or to the job/task assigned to the
retainer within the said undertaking. Furthermore, at any time prior to the
expiration or completion date/s, LSGI may upon written notice to the
retainers, terminate the contract should the retainer fail in anyway to
perform his assigned job or task to the satisfaction of the school of for any
just cause. Accordingly, after 15 consecutive years of renewal each
academic year, on the last day of the 15th year in 2004, the school (LSGI)
informed the petitioner that their contracts will no longer be renewed for the
following school year. When petitioners’ requests for payment of their
separation pay were denied, they filed a complaint for illegal dismissal with
prayer for separation pay, damages and attorneys’ fees. They alleged that
they were regular employees because received regular benefits, bonuses &
more, that they were subjected to the school’s administrative and
disciplinary rules and regulations. On the other hand, LSGI posited that
petitioners were independent contractors retained by LSGI by reason of
their medical skills and expertise to provide ancillary medical and dental
services to both students and faculty. More importantly, petitioners were
paid retainer fees and not regular salaries and whose performance is not
subject to the control of the school. The Labor Arbiter dismissed the
complaint and ruled that the petitioners were independent contractors but
on the ground of compassionate social justice, awarded separation pay.
Both parties appealed the decision to the NLRC. The NLRC disagreed with
the appealed decision, finding petitioners as fixed term employees
according to the Contract of Retainer signed by the parties. In a petition for
certiorari, the court of appeals affirmed the NLRC decision. Issue: Whether
or not petitioners were regular employees who may only be dismissed for
just and authorized causes. Ruling: The petitioners attained retained
regular employment. each other on equal terms not one exercising moral
dominance over the other. Further, a fixed-term contract is an employment
contract, the repeated renewals of which make for a regular
employment. In Fuji Network Television v. Espiritu, the court noted that
Fuji's argument that Espiritu was an independent contractor under a fixed-
term contract is contradictory where employees under fixed-term contracts
cannot be independent contractors because in fixed-term contracts, an
employeremployee relationship exists. The uniform one-page Contracts of
Retainer signed by petitioners were prepared by LSGI alone. Petitioners,
medical professionals as they were, were still not on equal footing with
LSGI as they obviously did not want to lose their jobs that they had stayed
in for fifteen (15) years. There is no specificity in the contracts regarding
terms and conditions of employment that would indicate that petitioners and
LSGI were on equal footing in negotiating it. Notably, without specifying
what are the tasks assigned to petitioners, LSGI "may upon prior written
notice to the retainer, terminate [the] contract should the retainer fail in any
way to perform his assigned job/task to the satisfaction of La Salle
Greenhills, Inc. or for any other just cause." In all, given the following: (1)
repeated renewal of petitioners' contract for fifteen years, interrupted only
by the close of the school year; (2) the necessity of the work performed by
petitioners as school physicians and dentists; and (3) the existence of
LSGI's power of control over the means and method pursued by petitioners
in the performance of their job, we rule that petitioners attained regular
employment, entitled to security of tenure who could only be dismissed for
just and authorized causes. Consequently, petitioners were illegally
dismissed and are entitled to the twin remedies of payment of separation
pay and full back wages.

Conditional Employment Contract

1)

PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Decision[2] dated
May 25, 2015 and the Resolution[3]dated August 27, 2015 of the Court of
Appeals (CA) in CA-G.R. SP No. 127777, which affirmed the
Decision[4]dated July 31, 2012 and the Resolution[5] dated September 28,
2012 of the National Labor Relations Commission RC) in NLRC LAC No.
07-001962-12, dismissing petitioner Enrique Y. Sagun's (petitioner)
complaint for illegal dismissal for lack of merit.

The Facts

Petitioner was employed at Hongkong and Shanghai Banking Corporation

Electronic Data Processing (Philippines), Inc. (HSBC-EDPI) when he
applied online for the position of Payments and Cash Processing Lead at
respondent ANZ Global Services and Operations (Manila), Inc. (ANZ), a
domestic corporation whose businesses involve a full range of banking
products and services.[6]
After passing the interview and online examination, ANZ, through its Senior
Vice President for Operations, Gay Cruzada (Cruzada), offered petitioner
the position of Customer Service Officer, Payments and Cash
Resolution,[7]which the latter accepted on June 8, 2011.[8]

In the letter of confirmation of the offer[9] which constituted petitioner's

employment agreement with ANZ, the terms and conditions of his
employment required, among others, a satisfactory result of his pre-
employment screening.[10] The pertinent portions of which read as follows:

13. Pre-employment screening & ongoing screening

In accordance with its legal and regulatory obligations, and in accordance

with ANZ policy, you may be required to undergo a police record check
prior to commencing work with ANZ, or at other times during your
employment.

You may also be required to undergo other checks (e.g. bankruptcy

checks, sanctions screening, reference checks, etc.). ANZ may engage the
services of an external provider to conduct these checks.

Your initial and ongoing employment is conditional on ANZ being

satisfied that the results of:

 a police record check are compatible with the inherent requirements

of your position; and
 any other required background or other checks are to the
satisfaction of ANZ (keeping in mind your position and ANZ's role
as a financial institution).

ANZ may use any information you provide to conduct reference

checks and any other background checks.

Your employment is also conditional upon you holding all necessary

visas and meeting all immigration requirements necessary for you to
work in Philippines in this position.

If, in the opinion of ANZ, any of your background checks,

 reference checks or visas are not satisfactory, ANZ may choose
not to commence your employment, or where you have already
started, to end your employment immediately, with no liability to
pay compensation to you.[11] (Emphases supplied)

In addition, the Schedules,[12] which likewise formed part of the employment

agreement, provided that petitioner was to be placed on a probationary
status for a period of six (6) months[13] and that his appointment would take
effect from the date of reporting, which was to be not later than July 11,
2011.[14]

Accordingly, on June 11, 2011, petitioner tendered his resignation[15] at

HSBC-EDPI and the acknowledged copy thereof was transmitted to ANZ
together with his other pre-employment documentary requirements.[16]

On July 11, 2011, petitioner was instructed to report to ANZ[17] and was
handed a letter of retraction[18] signed by ANZ's Human Resources
Business Partner, Paula Alcaraz (Alcaraz), informing him that the job offer
had been withdrawn on the ground that the company found material
inconsistencies in his declared information and documents provided after
conducting a background check with his previous employer, particularly at
Siemens.[19]

Asserting that his employment contract had already been perfected upon
his acceptance of the offer on June 8, 2011, and as such, was already
deemed an employee of ANZ who can only be dismissed for cause,
petitioner filed a complaint for illegal dismissal with money claims against
ANZ, Cruzada, and Alcaraz (respondents) before the NLRC, National
Capital Region, docketed as NLRC NCR Case No. 08-11752-11.

For their part, respondents countered that the NLRC had no jurisdiction
over the complaint as they have no employer-employee relationship with
petitioner. They contended that their offer was conditional and the
effectivity of petitioner's employment contract was subject to a term or
period.[20] They claimed that petitioner made material misrepresentations in
his job application and interview that prompted them to withdraw the offer.
They pointed out that the discrepancies in his declarations, namely: (a) that
he only held the position of a Level 1 and not a Level 2 Technical Support
Representative at Siemens; and (b) that he was terminated for cause due
to his absence without official leave (AWOL) and not because of his
resignation, were not satisfactorily explained despite the opportunity
accorded to him. They added that petitioner likewise failed to report for
work on or before July 11, 2011; hence, his employment never took effect
and no employer-employee relationship was created. Thus, they asserted
that petitioner was never dismissed, more so, illegally. Finally, they denied
his money claims for lack of basis and further averred that the impleaded
officers cannot be held personally liable under the circumstances.[21]

The LA Ruling

In a Decision[22] dated April 23, 2012, the Labor Arbiter (LA) dismissed the
complaint, holding that there was no perfected employment contract
between petitioner and respondents since there was a valid cause for the
withdrawal of the offer that was made prior to the commencement of
petitioner's service with the company. The LA held that the material
misrepresentation committed by petitioner was a reasonable ground to
withdraw the employment offer and as such, no employer-employee
relationship was created between them.[23]

Aggrieved, petitioner appealed to the NLRC.[24]

The NLRC Ruling

In a Decision[25] dated July 31, 2012, the NLRC affirmed the findings of the
LA, ruling that no employer-employee relationship existed between
petitioner and respondents. It held that petitioner's employment with ANZ
never took effect since its effectivity was dependent on his reporting for
work on or before July 11, 2011, which he admittedly failed to comply. The
NLRC added that the withdrawal of job offer was valid and reasonable,
there being substantial evidence to show that petitioner committed
misrepresentations in his job application.[26]

Petitioner filed a motion for reconsideration,[27] which was, however, denied

in a Resolution[28] dated September 28, 2012, prompting him to elevate his
case to the CA via a petition for certiorari,[29] docketed as CA G.R. SP. No.
127777.
 The CA Ruling

In a Decision[30] dated May 25, 2015, the CA found no grave abuse of

discretion to have been committed by the NLRC in upholding the dismissal
of the complaint. The CA distinguished between the perfection of an
employment contract and the commencement of the employer-employee
relationship, citing the case of Santiago v. CF Sharp Crew Management,
Inc. (Santiago).[31] It held that the contract was perfected on June 8, 2011
when it was signed by the parties. However, it ruled that the employment
contract did not commence since respondents did not allow petitioner to
begin work due to the misrepresentations he made in his application form.
The CA also pointed out that since the employment offer was conditioned
on the satisfactory completion of his background check, his failure to
comply with the same rendered the withdrawal of the offer justified. Hence,
no employeremployee relationship was created between the
parties.[32] Lastly, relying on the Santiago case, it clarified that even if there
was no employer-employee relationship, the NLRC still had jurisdiction
over the complaint since the LA's jurisdiction was not limited to claims
arising from employer-employee relationship.

Dissatisfied, petitioner moved for reconsideration,[33] but was denied in a

Resolution[34] dated August 27, 2015; hence, this petition.

The Issue Before the Court

The core issue for the Court's resolution is whether or not the CA erred in
not finding grave abuse of discretion on the part of the NLRC in holding that
no employer-employee relationship existed between petitioner and
respondent.

The Court's Ruling

The petition lacks merit.

A contract is a meeting of minds between two persons whereby one binds

himself, with respect to the other, to give something or to render some
service.[35] There is no contract unless the following essential requisites
concur: (a) consent of the contracting parties; (b) object certain which is the
subject matter of the contract; and (c) cause of the obligation which is
established.[36]

In general, contracts undergo three distinct stages. These are negotiation,

perfection or birth, and consummation. Negotiation begins from the time the
prospective contracting parties manifest their interest in the contract and
ends at the moment of their agreement. Thereafter, perfection or birth of
the contract takes place when the parties agree upon the essential
elements of the contract. Finally, consummation occurs when the parties
fulfill or perform the terms agreed upon in the contract, culminating in the
extinguishment thereof.[37]

An employment contract, like any other contract, is perfected at the

moment the parties come to agree upon its terms and conditions, and
thereafter, concur in the essential elements thereof.[38] In this relation, the
contracting parties may establish such stipulations, clauses, terms, and
conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order or public policy.[39]

In this case, the Court agrees with the finding of the CA that there was
already a perfected contract of employment when petitioner signed ANZ's
employment offer and agreed to the terms and conditions that were
embodied therein. Nonetheless, the offer of employment extended to
petitioner contained several conditions before he may be deemed an
employee of ANZ. Among those conditions for employment was the
"satisfactory completion of any checks (e.g. background, bankruptcy,
sanctions and reference checks) that may be required by ANZ."[40]

Accordingly, petitioner's employment with ANZ depended on the outcome

of his background check, which partakes of the nature of a suspensive
condition, and hence, renders the obligation of the would-be employer, i.e.,
ANZ in this case, conditional. Article 1181 of the Civil Code provides:

Art. 1181. In conditional obligations, the acquisition of rights, as well as the

extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition.
In the realm of civil law, a condition is defined as "every future and
uncertain event upon which an obligation or provision is made to depend. It
is a future and uncertain event upon which the acquisition or resolution of
rights is made to depend by those who execute the juridical
act."[41] Jurisprudence states that when a contract is subject to a
suspensive condition, its effectivity shall take place only if and when the
event which constitutes the condition happens or is fulfilled.[42] A contract is
one of the five (5) sources of obligations as stated in the Civil Code.[43]An
obligation is defined as the juridical necessity to give, to do or not to
do.[44] While a contract may be perfected in the manner of operation
described above, the efficacy of the obligations created thereby may be
held in suspense pending the fulfillment of particular conditions agreed
upon. In other words, a perfected contract may exist, although the
obligations arising therefrom if premised upon a suspensive condition
would yet to be put into effect.

Here, the subject employment contract required a satisfactory completion

of petitioner's background check before he may be deemed an employee of
ANZ. Considering, however, that petitioner failed to explain the
discrepancies in his declared information and documents that were
required from him relative to his work experience at Siemens, namely: (a)
that he was only a Level 1 and not a Level 2 Technical Support
Representative that conducts troubleshooting for both computer hardware
and software problems; and (b) that he was found to have been terminated
for cause and not merely resigned from his post, that rendered his
background check unsatisfactory, ANZ's obligations as a would-be
employer were held in suspense and thus, had yet to acquire any
obligatory force.[45] To reiterate, in a contract with a suspensive condition, if
the condition does not happen, the obligation does not come into effect.
Thus, until and unless petitioner complied with the satisfactory background
check, there exists no obligation on the part of ANZ to recognize and fully
accord him the rights under the employment contract. In fact, records also
show that petitioner failed to report for work on or before July 11, 2011,
which was also a suspensive condition mandated under sub-paragraph 4 of
Schedule 1 of the contract.

Consequently, no employer-employee relationship was said to have been

created between petitioner and ANZ under the circumstances, and the
dismissal of the former's complaint for illegal termination from work, as held
by the NLRC, was correctly sustained by the CA.

WHEREFORE, the petition is DENIED. The Decision dated May 25, 2015
and the Resolution dated August 27, 2015 of the Court of Appeals in CA-
G.R. SP No. 127777 are hereby AFFIRMED.

SO ORDERED.

Project Employees
1)
POSEIDON FISHING vs NLRC Case Digest
[G.R. No. 168052 February 20, 2006]

POSEIDON FISHING/TERRY DE JESUS, petitioners,- versus -

NATIONAL LABOR RELATIONS COMMISSION and JIMMY S.
ESTOQUIA, Respondents.

FACTS: Private respondent was employed by Poseidon Fishing in January

1988 as Chief Mate. After five years, he was promoted to Boat Captain. In
1999, petitioners, without reason, demoted respondent from Boat Captain to
Radio Operator of petitioner Poseidon. As a Radio Operator, he monitored
the daily activities in their office and recorded in the duty logbook the names
of the callers and time of their calls.

On 3 July 2000, private respondent failed to record a 7:25 a.m. call in one of
the logbooks. However, he was able to record the same in the other logbook.
Consequently, when he reviewed the two logbooks, he noticed that he was
not able to record the said call in one of the logbooks so he immediately
recorded the 7:25 a.m. call after the 7:30 a.m. entry. Around 9:00 o’clock in
the morning of 4 July 2000, petitioner Jesus, the manager, detected the error
in the entry in the logbook. Subsequently, she asked private respondent to
prepare an incident report to explain the reason for the said oversight.

At around 2:00 o’clock in the afternoon of that same day, petitioner

Poseidon’s secretary, summoned private respondent to get his separation
pay amounting to Fifty-Five Thousand Pesos (P55,000.00). However, he
refused to accept the amount as he believed that he did nothing illegal to
warrant his immediate discharge from work.

Private respondent then filed a complaint for illegal dismissal with the Labor
Arbiter. He averred that petitioner Poseidon employed him as a Chief Mate
sometime in January 1988. He claimed that he was promoted to the position
of Boat Captain five years after. However, in 1999, he was demoted from
Boat Captain to Radio Operator without any reason and shortly, he was
terminated without just cause and without due process of law.

Conversely, petitioners Poseidon and Terry de Jesus strongly asserted that

private respondent was a contractual or a casual employee whose services
could be terminated at the end of the contract even without a just or
authorized cause in view of Article 280 of the Labor Code. Petitioners further
posited that when the private respondent was engaged, it was made clear to
him that he was being employed only on a “por viaje” or per trip basis and
that his employment would be terminated at the end of the trip for which he
was being hired. As such, the private respondent could not be entitled to
separation pay and other monetary claims.

ISSUE: Whether or not respondent Estoquia is a regular employee of

petitioner.

HELD: The SC held that the ruling in the Brent case could not apply in the
case at bar. The acid test in considering fixed-term contracts as valid is: if
from the circumstances it is apparent that periods have been imposed to
preclude acquisition of tenurial security by the employee, they should be
disregarded for being contrary to public policy. The SC will not hesitate to
nullify employment contracts stipulating a fixed term after finding that the
purpose behind these contracts was to evade the application of the labor
laws, since this is contrary to public policy.
Moreover, unlike in the Brent case where the period of the contract was fixed
and clearly stated, note that in the case at bar, the terms of employment of
private respondent as provided in the Kasunduan was not only vague, it also
failed to provide an actual or specific date or period for the contract. There is
nothing in the contract that says complainant, who happened to be the
captain of said vessel, is a casual, seasonal or a project worker. The date
July 1 to 31, 1998 under the heading “Pagdating” had been placed there
merely to indicate the possible date of arrival of the vessel and is not an
indication of the status of employment of the crew of the vessel.

Furthermore, as petitioners themselves admitted in their petition before this

Court, private respondent was repeatedly hired as part of the boat’s crew
and he acted in various capacities onboard the vessel. The test to determine
whether employment is regular or not is the reasonable connection between
the particular activity performed by the employee in relation to the usual
business or trade of the employer. And, if the employee has been performing
the job for at least one year, even if the performance is not continuous or
merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not indispensability of
that activity to the business. Ostensibly, in the case at bar, at different times,
private respondent occupied the position of Chief Mate, Boat Captain, and
Radio Operator. The act of hiring and re-hiring in various capacities is a mere
gambit employed by petitioner to thwart the tenurial protection of private
respondent. Such pattern of re-hiring and the recurring need for his services
are testament to the necessity and indispensability of such services to
petitioners’ business or trade.

Even if petitioners’ contention that its industry is seasonal in nature, once a

project or work pool employee has been: (1) continuously, as opposed to
intermittently, re-hired by the same employer for the same tasks or nature of
tasks; and (2) these tasks are vital, necessary and indispensable to the usual
business or trade of the employer, then the employee must be deemed a
regular employee.
In fine, inasmuch as private respondent’s functions as described above are
no doubt “usually necessary or desirable in the usual business or trade” of
petitioner fishing company and he was hired continuously for 12 years for
the same nature of tasks, we are constrained to say that he belongs to the
ilk of regular employee. Being one, private respondent’s dismissal without
valid cause was illegal.

Petition is denied.

2)

G.R. No. 153832. March 18, 2005

FILIPINAS PRE-FABRICATED BUILDING SYSTEMS (FILSYSTEMS),

INC., and FELIPE A. CRUZ JR.,Petitioners,
vs.
ROGER D. PUENTE,1 Respondent.

DECISION

PANGANIBAN, J.:

Without a valid cause, the employment of project employees cannot be

terminated prior to expiration. Otherwise, they shall be entitled to
reinstatement with full back wages. However, if the project or work is
completed during the pendency of the ensuing suit for illegal dismissal, the
employees shall be entitled only to full back wages from the date of the
termination of their employment until the actual completion of the project or
work.

The Case

Before us is a Petition for Review2 under Rule 45 of the Rules of Court,

seeking to annul and reverse the April 16, 2002 Decision3 and the May 30,
2002 Resolution4 of the Court of Appeals (CA) in CA-GR SP No. 66756.
The assailed Decision disposed as follows:
"WHEREFORE, premises considered, the petition is GRANTED and the
decision dated May 18, 2001 and resolution dated June 29, 2001 of the
NLRC are hereby annulled and set aside. [Petitioner] Filsystems, Inc. is
hereby ordered to reinstate [respondent] immediately to his former position
without loss of seniority and privileges with full back wages from the date of
his dismissal until his actual reinstatement, plus 10% of the total monetary
award as attorney’s fees."5

The assailed Resolution denied petitioners’ Motion for Reconsideration.

The Facts

The factual antecedents are summarized by the CA as follows:

"[Respondent] avers that he started working with [Petitioner] Filsystems,

Inc., a corporation engaged in construction business, on June 12, 1989;
that he was initially hired by [petitioner] company as an ‘installer’; that he
was later promoted to mobile crane operator and was stationed at the
company premises at No. 69 Industria Road, Bagumbayan, Quezon City;
that his work was not dependent on the completion or termination of any
project; that since his work was not dependent on any project, his
employment with the [petitioner-]company was continuous and without
interruption for the past ten (10) years; that on October 1, 1999, he was
dismissed from his employment allegedly because he was a project
employee. He filed a pro forma complaint for illegal dismissal against the
[petitioner] company on November 18, 1999.

"The [petitioner-]company however claims that complainant was hired as a

project employee in the company’s various projects; that his employment
contracts showed that he was a project worker with specific project
assignments; that after completion of each project assignment, his
employment was likewise terminated and the same was correspondingly
reported to the DOLE.

"Labor Arbiter Veneranda C. Guerrero dismissed the complaint for lack of

merit, ruling thus:

‘WHEREFORE, premises considered, judgment is hereby rendered

dismissing the complaint for illegal dismissal for lack of merit.
‘[Petitioner] Filsystems, Inc. is hereby ordered to pay complainant Roger D.
[F]uente the amount of FOUR THOUSAND TWO HUNDRED TWELVE
PHILIPPINE PESOS (₱4,212.00) representing his pro-rata 13th month pay
for 1999, plus ten percent (10%) thereof as and for attorney’s fees.

‘SO ORDERED.’

"[Respondent] appealed. However, [the] National Labor Relations

Commission (NLRC) dismissed the same and the subsequent motion for
reconsideration."6

Ruling of the Court of Appeals

The Court of Appeals reversed the NLRC and the labor arbiter thus:

"The employment contracts signed by petitioner Puente do not have the

specified duration for each project contrary to the provision of Article 280 of
the Labor Code, nor did petitioner work in the project sites, but had always
been assigned at the company plant attending to the maintenance of all
mobile cranes of the company, performing tasks vital and desirable in the
employer’s usual business for ten (10) continuous years."7

The CA concluded that respondent was a regular employee of petitioners.

Hence, this Petition.8

The Issues

In its Memorandum, petitioners raise the following issues for our

consideration:

"1. Whether or not the Court of Appeals erred and committed grave abuse
of discretion in finding that:

‘The employment contracts signed by private respondent Puente do not

have the specified duration for each project contrary to the provision of Art.
280 of the Labor Code, nor did petitioner work in the project sites, but had
always been assigned at the company plant attending to the maintenance
of all mobile cranes of the company, performing tasks vital and desirable in
the company’s usual business for ten (10) continuous years.’
"2. Whether or not the Court a quo erred and committed grave abuse of
discretion in finding that the private respondent is a regular employee and
not a project employee?

"3. Whether or not the Court a quo erred and committed grave abuse of
discretion in giving due course to the private respondent’s petition for
certiorari under Rule 65 of the 1997 Rules on Civil Procedure; and in
annulling and setting aside the Decision dated May 18, 2001 and the
Resolution dated June 29, 2001 of the NLRC?

"4. Whether or not the Court a quo erred and committed grave abuse of
discretion in ruling that the evidence submitted by the petitioners proving
that there was retrenchment program implemented by the petitioner
company, as a defense that the private respondent’s services was
terminated due to absence if not lack of construction project contract,
where he may be redeployed or reinstated?

"5. Whether or not the Court a quo erred and committed grave abuse of
discretion in ordering the reinstatement of the private respondent, with full
back wages plus payment of 10% attorney’s fees?"9

In the main, the issues boil down to (1) whether Roger Puente is a project
employee, and (2) whether he is entitled to reinstatement with full back
wages.

This Court’s Ruling

The Petition is partly meritorious.

First Issue:

Project Employee

In general, the factual findings of the Court of Appeals are binding on the
Supreme Court. One exception to this rule, however, is when the factual
findings of the former are contrary to those of the trial court (or the lower
administrative body, as the case may be).10 The question of whether
respondent is a regular or a project employee is essentially factual in
nature; nonetheless, the Court is constrained to resolve it due to the
incongruent findings of the NLRC and the CA.
The Labor Code defines regular, project and casual employees as follows:

ART. 280. Regular and Casual Employment. - The provision of written

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

With particular reference to the construction industry, to which Petitioner

Filsystems belongs, Department (of Labor and Employment) Order No.
19,11 Series of 1993, states:

2.1 Classification of employees. – The employees in the construction

industry are generally categorized as a) project employees and b) non-
project employees. Project employees are those employed in connection
with a particular construction project or phase thereof and whose
employment is co-terminous with each project or phase of the project to
which they are assigned.

xxxxxxxxx

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

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

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

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

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

(c) The work/service performed by the employee is in connection with the

particular project/undertaking for which he is engaged.
(d) The employee, while not employed and awaiting engagement, is free to
offer his services to any other employer.

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

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

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

completion bonus to the project employee as practiced by most
construction companies.

The above-quoted provisions make it clear that a project employee is one

whose "employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of
the season." In D.M. Consunji, Inc. v. NLRC,12 this Court has ruled that "the
length of service of a project employee is not the controlling test of
employment tenure but whether or not ‘the employment has been fixed for
a specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee.’"

In the present case, the contracts of employment13 of Puente attest to the

fact that he was hired for specific projects. His employment was
coterminous with the completion of the projects for which he had been
hired. Those contracts expressly provided that his tenure of employment
depended on the duration of any phase of the project or on the completion
of the construction projects. Furthermore, petitioners regularly submitted to
the labor department reports of the termination of services of project
workers. Such compliance with the reportorial requirement confirms that
respondent was a project employee.14

With regard specifically to the last employment contract executed by the

parties, a contract that respondent accepted on August 26, 1996, we find
that he worked at the site of the World Finance Plaza project. That he did is
amply proven by the Affidavit of Eduardo Briagas,15 another employee who
was also stationed at the World Finance Plaza project, as well as by
respondent’s Travel Trip Reports.16
Furthermore, respondent’s Complaint17 specified the address of Filsystems,
as "69 INDUSTRIA ROAD, B.BAYAN Q.C.," but specified his place of work
as "PROJECT TO PROJECT." These statements, coupled with the other
pieces of evidence presented by petitioners, convinces the Court that --
contrary to the subsequent claims of respondent -- he performed his work
at the project site, not at the company’s premises.

That his employment contract does not mention particular dates that
establish the specific duration of the project does not preclude his
classification as a project employee. This fact is clear from the provisions of
Clause 3.3(a) of Department Order No. 19, which states:

a) Project employees whose aggregate period of continuous employment in

a construction company is at least one year shall be considered regular
employees, in the absence of a "day certain" agreed upon by the parties for
the termination of their relationship. Project employees who have become
regular shall be entitled to separation pay.

A "day" as used herein, is understood to be that which must necessarily

come, although is may not be known exactly when. This means that where
the final completion of a project or phase thereof is in fact determinable and
the expected completion is made known to the employee, such project
employee may not be considered regular, notwithstanding the one-year
duration of employment in the project or phase thereof or the one-year
duration of two or more employments in the same project or phase of the
object. (Italicization and emphasis supplied)

Respondent’s employment contract provides as follows:

"x x x employment, under this contract is good only for the duration of the
project unless employee’s services is terminated due to completion of the
phase of work/section of the project or piece of work to which employee is
assigned:

"We agree clearly that employment is on a Project to Project Basis and that
upon termination of services there is no separation pay:

POSITION : Mobil Crane Operator

PROJECT NAME : World Finance Plaza

LOCATION : Meralco Ave., Ortigas Center, Pasig City

ASSIGNMENT : Lifting & Hauling of Materials

(Phase of Work/Piece of Work)"18

Evidently, although the employment contract did not state a particular date,
it did specify that the termination of the parties’ employment relationship
was to be on a "day certain" -- the day when the phase of work termed
"Lifting & Hauling of Materials" for the "World Finance Plaza" project would
be completed. Thus, respondent cannot be considered to have been a
regular employee. He was a project employee.

That he was employed with Petitioner Filsystems for ten years

in various projects did not ipso facto make him a regular employee,
considering that the definition of regular employment in Article 280 of the
Labor Code makes a specific exception with respect to project
employment. The mere rehiring of respondent on a project-to-project basis
did not confer upon him regular employment status.19 "The practice was
dictated by the practical consideration that experienced construction
workers are more preferred."20 It did not change his status as a project
employee.

Second Issue:

Reinstatement

In termination cases, the burden of proving that an employee has been

lawfully dismissed lies with the employer.21Thus, employers who hire
project employees are mandated to state and, once its veracity is
challenged, to prove the actual basis for the latter’s dismissal.22

In the present case, petitioners claim that respondent’s services were

terminated due to the completion of the project.23 There is no allegation or
proof, however, that the World Finance Plaza project -- or the phase of
work therein to which respondent had been assigned -- was already
completed by October 1, 1999, the date when he was dismissed. The
inescapable presumption is that his services were terminated for no valid
cause prior to the expiration of the period of his employment; hence, the
termination was illegal. Reinstatement with full back wages, inclusive of
allowances and other benefits or their monetary equivalents -- computed
from the date of his dismissal until his reinstatement -- is thus in order.24

However, if indeed the World Finance Plaza project has already been
completed during the pendency of this suit, then respondent -- being a
project employee -- can no longer be reinstated.25 Instead, he shall entitled
to the payment of his salary and other benefits corresponding to the
unexpired portion of his employment,26 specifically from the time of the
termination of his employment on October 1, 1999, until the date of the
completion of the World Finance Plaza project.

WHEREFORE, the Petition is PARTLY GRANTED. Respondent Roger D.

Puente is DECLARED to be a project employee, whose employment was
terminated without any valid cause prior to its expiration and is thus entitled
to reinstatement with full back wages. However, if reinstatement is no
longer possible due to the completion of the World Finance Plaza project
during the pendency of this case, Petitioner Filipinas Pre-Fabricated
Building Systems (Filsystems), Inc. is ORDERED to PAY respondent the
equivalent of his salaries and other employment benefits, computed from
October 1, 1999, until the date of the project’s actual completion. No costs.

SO ORDERED.

3)
LEYTE GEOTHERMAL VS. PNOC

NOVEMBER 17, 2013 ~ VBDIAZ

G.R. No. 170351, March 30, 2011

LEYTE GEOTHERMAL POWER PROGRESSIVE EMPLOYEES UNION –
ALU – TUCP, Petitioner,
vs.
PHILIPPINE NATIONAL OIL COMPANY – ENERGY DEVELOPMENT
CORPORATION, Respondent.
FACTS: Respondent is a GOCC while petitioner is a legitimate labor
organization. Among [respondent’s] geothermal projects is the Leyte
Geothermal Power Project located at the Greater Tongonan Geothermal
Reservation in Leyte. Thus, the [respondent] hired and employed hundreds
of employees on a contractual basis, whereby, their employment was only
good up to the completion or termination of the project and would
automatically expire upon the completion of such project.
Majority of the employees hired by [respondent] in its Leyte Geothermal
Power Projects had become members of petitioner. In view of that
circumstance, the petitioner demands from the [respondent] for recognition
of it as the collective bargaining agent of said employees and for a CBA
negotiation with it. However, the [respondent] did not heed such demands
of the petitioner. Sometime in 1998 when the project was about to be
completed, the [respondent] proceeded to serve Notices of Termination of
Employment upon the employees who are members of the petitioner.

On December 28, 1998, the petitioner filed a Notice of Strike with DOLE
against the [respondent] on the ground of purported commission by the
latter of unfair labor practice for “refusal to bargain collectively, union
busting and mass termination.” On the same day, the petitioner declared a
strike and staged such strike.
Secretary of Labor intervened and ordered all workers to return to work.
However, petitioner did not abide.
NLRC: ruled that the employees are PROJECT EMPLOYEES, and the
strike as ILLEGAL
Petitioner Union contends that its officers and members performed
activities that were usually necessary and desirable to respondent’s usual
business.

ISSUE: WON they are project employees

HELD: They are PROJECT EMPLOYEES
Article 280 of the Labor Code contemplates four (4) kinds of employees:
(a) regular employees or those who have been “engaged to perform
activities which are usually necessary or desirable in the usual business or
trade of the employer”;

(b) project employees or those “whose employment has been fixed for a
specific project or undertaking[,] the completion or termination of which has
been determined at the time of the engagement of the employee”;

(c) seasonal employees or those who work or perform services which are
seasonal in nature, and the employment is for the duration of the season;
and

(d) casual employees or those who are not regular, project, or seasonal
employees.
Jurisprudence has added a fifth kind— a fixed-term employee.

By entering into such a contract, an employee is deemed to understand

that his employment is coterminous with the project. He may not expect to
be employed continuously beyond the completion of the project. It is of
judicial notice that project employees engaged for manual services or those
for special skills like those of carpenters or masons, are, as a rule,
unschooled. However, this fact alone is not a valid reason for bestowing
special treatment on them or for invalidating a contract of employment.
Project employment contracts are not lopsided agreements in favor of only
one party thereto. The employer’s interest is equally important as that of
the employee[s’] for theirs is the interest that propels economic activity.
While it may be true that it is the employer who drafts project employment
contracts with its business interest as overriding consideration, such
contracts do not, of necessity, prejudice the employee. Neither is the
employee left helpless by a prejudicial employment contract. After all,
under the law, the interest of the worker is paramount.
Union’s own admission, both parties had executed the contracts freely and
voluntarily without force, duress or acts tending to vitiate the worker[s’]
consent. Thus, we see no reason not to honor and give effect to the terms
and conditions stipulated therein.

The litmus test to determine whether an individual is a project employee

lies in setting a fixed period of employment involving a specific undertaking
which completion or termination has been determined at the time of the
particular employee’s engagement.

NOTES:

WHAT IS A 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.

4)
ROY D. PASOS vs. PHILIPPINE NATIONAL CONSTRUCTION CORPOR
ATION G.R. No. 192394, 3 July 2013

FACTS:

Based on the PNCC’s “Personnel Action Form Appointment for Project Em

ployment”, petitioner was designated as “Clerk II (Accounting)” and was as
signed to the “NAIA – II Project.” However, his employment did not end on t
he expiration but was extended until for more than two years. He was rehir
ed, his employment was extended, rehired, and finally, his project employm
ent was terminated. However, his superior required him still to report. Upon
the medical examination, he was required by the doctor to take sick leave
which he did. Upon his return after 74 days, he was informed that he was al
ready dismissed.

ISSUE:

Whether or not employer’s failure to file termination reports after every proj
ect completion constitutes the regularity of the project employee.

RULING: Yes. Duration of project employment should be determined at the

time of hiring. While for first three months, petitioner can be considered a p
roject employee of PNCC, his employment thereafter, when his services we
re extended without any specification of as to the duration, made him a reg
ular employee of PNCC. And his status as a regular employee was not affe
cted by the fact that he was assigned to several other projects and there w
ere intervals in between said projects since he enjoys security of tenure.

Moreover, failure of an employer to file termination reports after every proje

ct completion proves that an employee is not a project employee. Records
clearly showed that PNCC did not report the termination of petitioner’s supp
osed project employment for the NAIA II Project to the DOLE. Department
Order No. 19, or the “Guidelines Governing the Employment of Workers in t
he Construction Industry,” requires employers to submit a report of an empl
oyee’s termination to the nearest public employment office every time an e
mployee’s employment is terminated due to a completion of a project. PNC
C submitted as evidence of its compliance with the requirement supposed
photocopies of its termination reports, each listing petitioner as among the
employees affected. Unfortunately, none of the reports submitted pertain to
the NAIA II Project. Moreover, DOLE NCR verified that petitioner is not incl
uded in the list of affected workers based on the termination reports filed by
PNCC. This certification from DOLE was not refuted by PNCC.

With regard his dismissal, a regular employee dismissed for a cause other t
han the just or authorized causes provided by law is illegally dismissed. Pet
itioner’s regular employment was terminated by PNCC due to contract expir
ation or project completion, which are both not among the just or authorized
causes provided in the Labor Code, as amended, for dismissing a regular
employee. Thus, petitioner was illegally dismissed and according to Article
279 of the Labor Code, he is entitled to reinstatement, full back wages, incl
usive of allowances, and to his other benefits or their monetary equivalent f
rom the time his compensation was withheld from him up to the time of his
actual reinstatement.

5)

G.R. No. 166109 February 23, 2011

EXODUS INTERNATIONAL CONSTRUCTION CORPORATION and

ANTONIO P. JAVALERA, Petitioners,
vs.
GUILLERMO BISCOCHO, FERNANDO PEREDA, FERDINAND
MARIANO, GREGORIO BELLITA and MIGUEL BOBILLO, Respondents.

DEL CASTILLO, J.:

In illegal dismissal cases, it is incumbent upon the employees to first

establish the fact of their dismissal before the burden is shifted to the
employer to prove that the dismissal was legal.

This Petition for Review on Certiorari1 assails the Decision2 dated August
10, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 79800, which
dismissed the petition for certiorari challenging the Resolutions dated
January 17, 20033 and July 31, 20034 of the National Labor Relations
Commission (NLRC) in NLRC NCR CASE Nos. 30-11-04656-005 and 30-
12-04714-00.

Factual Antecedents

Petitioner Exodus International Construction Corporation (Exodus) is a duly

licensed labor contractor for the painting of residential houses,
condominium units and commercial buildings. Petitioner Antonio P.
Javalera is the President and General Manager of Exodus.

On February 1, 1999, Exodus obtained from Dutch Boy Philippines, Inc.

(Dutch Boy) a contract6 for the painting of the Imperial Sky Garden located
at Ongpin Street, Binondo, Manila. On July 28, 1999, Dutch Boy awarded
another contract7 to Exodus for the painting of Pacific Plaza Towers in Fort
Bonifacio, Taguig City.

In the furtherance of its business, Exodus hired respondents as painters on

different dates with the corresponding wages appearing opposite their
names as hereunder listed:

NAME DATE EMPLOYED DAILY SALARY

1. Guillermo B. Biscocho Feb. 8, 1999 ₱ 222.00
2. Fernando S. Pereda Feb. 8, 1999 235.00
3. Ferdinand M. Mariano April 12, 1999 235.00
4. Gregorio S. Bellita May 20, 1999 225.00
5. Miguel B. Bobillo March 10, 2000 220.00
Guillermo Biscocho (Guillermo) was assigned at the Imperial Sky Garden
from February 8, 1999 to February 8, 2000. Fernando Pereda (Fernando)
worked in the same project from February 8, 1999 to June 17, 2000.
Likewise, Ferdinand Mariano (Ferdinand) worked there from April 12, 1999
to February 17, 2000. All of them were then transferred to Pacific Plaza
Towers.

Gregorio S. Bellita (Gregorio) was assigned to work at the house of Mr.

Teofilo Yap in Ayala Alabang, Muntinlupa City from May 20, 1999 to
December 4, 1999. Afterwards he was transferred to Pacific Plaza Towers.

Miguel B. Bobillo (Miguel) was hired and assigned at Pacific Plaza Towers
on March 10, 2000.

On November 27, 2000, Guillermo, Fernando, Ferdinand, and Miguel filed

a complaint8 for illegal dismissal and non-payment of holiday pay, service
incentive leave pay, 13th month pay and night-shift differential pay. This
was docketed as NLRC NCR CASE No. 30-11-04656-00.

On December 1, 2000, Gregorio also filed a complaint9 which was

docketed as NLRC NCR CASE No. 30-12-04714-00. He claimed that he
was dismissed from the service on September 12, 2000 while Guillermo,
Fernando, Ferdinand, and Miguel were orally notified of their dismissal from
the service on November 25, 2000.

Petitioners denied respondents’ allegations. As regards Gregorio,

petitioners averred that on September 15, 2000, he absented himself from
work and applied as a painter with SAEI-EEI which is the general building
contractor of Pacific Plaza Towers. Since then, he never reported back to
work.

Guillermo absented himself from work without leave on November 27,

2000. When he reported for work the following day, he was reprimanded for
being Absent Without Official Leave (AWOL). Because of the reprimand, he
worked only half-day and thereafter was unheard of until the filing of the
instant complaint.

Fernando, Ferdinand, and Miguel were caught eating during working hours
on November 25, 2000 for which they were reprimanded by their foreman.
Since then they no longer reported for work.
Ruling of the Labor Arbiter

On March 21, 2002, the Labor Arbiter rendered a Decision10 exonerating

petitioners from the charge of illegal dismissal as respondents chose not to
report for work. The Labor Arbiter ruled that since there is neither illegal
dismissal nor abandonment of job, respondents should be reinstated but
without any backwages. She disallowed the claims for premium pay for
holidays and rest days and nightshift differential pay as respondents failed
to prove that actual service was rendered on such non-working days.
However, she allowed the claims for holiday pay, service incentive leave
pay and 13th month pay. The dispositive portion of the Labor Arbiter’s
Decision reads:

WHEREFORE, premises considered, respondents Exodus International

Construction Corporation and/or Antonio Javalera are hereby ordered to
reinstate complainants to their former positions as painters without loss of
seniority rights and other benefits appurtenant thereto without any
backwages.

Respondents are likewise hereby ordered to pay complainants the

following:

1. Guillermo Biscocho

₱ 1,968.75 - Service Incentive Leave Pay

10,237.50 - 13th Month Pay
3,600.00 - Holiday Pay

₱ 15,806.25 - Sub-Total
+ 1,580.87 - 10% Attorney’s Fees

P 17,386.86 Total

2. Fernando Pereda

₱ 2,056.25 - Service Incentive Leave Pay

10,692.50 - 13th Month Pay
 3,525.00 - Holiday Pay

₱ 16,273.75 - Sub-Total
+ 1,627.37 - 10% Attorney’s Fees

₱ 17,901.12 Total

3. Miguel Bobillo

₱ 3,813.34 - 13th Month Pay

1,320.00 - Holiday Pay

₱ 5,133.34 - Sub-Total
+ 513.33 - 10% Attorney’s Fees

P 5,646.67 Total

4. Ferdinand Mariano

₱ 1,860.42 - Service Incentive Leave Pay - 13th Month Pay

9,674.19
3,055.00 - Holiday Pay

₱ 14,589.61 - Sub-Total
+ 1,458.96 - 10% Attorney’s Fees Total
₱ 16,048.57

5. Gregorio Bellita

₱ 1,500.00 - Service Incentive Leave Pay - 13th Month Pay

7,800.00
2,700.00 - Holiday Pay
 ₱ 12,000.00 - Sub-Total
+ 1,200.00 - 10% Attorney’s Fees

₱ 13,200.00 Total

or the total aggregate sum of Seventy Thousand, One Hundred

Eighty Three and 23/100 (₱70,183.23) Pesos, inclusive of the ten
(10%) percent of the award herein by way of attorney’s fees, all within
ten (10) days from receipt hereof;

The rest of complainants’ claims for lack of merit are hereby Dismissed.

SO ORDERED.11

Ruling of the National Labor Relations Commission

Petitioners sought recourse to the NLRC limiting their appeal to the award
of service incentive leave pay, 13th month pay, holiday pay and 10%
attorney’s fees in the sum of ₱70,183.23.

On January 17, 2003, the NLRC dismissed the appeal. It ruled that
petitioners, who have complete control over the records of the company,
could have easily rebutted the monetary claims against it. All that it had to
do was to present the vouchers showing payment of the same. However,
they opted not to lift a finger, giving an impression that they never paid said
benefits.

As to the award of attorney’s fees, the NLRC found the same to be proper
because respondents were forced to litigate in order to validate their claim.

The NLRC thus affirmed the Decision of the Labor Arbiter, viz:

Accordingly, premises considered, the decision appealed from is hereby

AFFIRMED and the appeal DISMISSED for lack of merit.

SO ORDERED.12
Petitioners filed a Motion for Reconsideration13 which was denied by the
NLRC in a Resolution14 dated July 31, 2003.

Ruling of the Court of Appeals

Aggrieved, petitioners filed with the CA a petition for certiorari. The CA

through a Resolution15 dated October 22, 2003, directed the respondents to
file their comment. On December 4, 2003, respondents filed their
comment.16 On January 12, 2004, petitioners filed their reply.17

On August 10, 2004, the CA dismissed the petition and affirmed the
findings of the Labor Arbiter and the NLRC. It opined that in a situation
where the employer has complete control over the records and could thus
easily rebut any monetary claims against it but opted not to lift any finger,
the burden is on the employer and not on the complainants. This is so
because the latter are definitely not in a position to adduce any
documentary evidence, the control of which being not with them.

However, in addition to the reliefs awarded to respondents in the March 21,

2002 Decision of the Labor Arbiter which was affirmed by the NLRC in a
Resolution dated January 17, 2003, the petitioners were directed by the CA
to solidarily pay full backwages, inclusive of all benefits the respondents
should have received had they not been dismissed.

The dispositive portion of the CA Decision reads:

WHEREFORE, the instant petition for certiorari is dismissed. However, in

addition to the reliefs awarded to private respondents in the decision dated
March 21, 2002 of Labor Arbiter Aldas and resolution of the NLRC dated
January 17, 2003, the petitioners are directed to solidarily pay private
respondents full backwages, inclusive of all benefits they should have
received had they not been dismissed, computed from the time their wages
were withheld until the time they are actually reinstated. Such award of full
backwages shall be included in the computation of public respondents’
award of ten percent (10%) attorney’s fees.

SO ORDERED.18

Petitioners moved for reconsideration,19 but to no avail. Hence, this appeal

anchored on the following grounds:
 Issues

I.

The Honorable Court of Appeals erred and committed grave abuse of

discretion in ordering the reinstatement of respondents to their former
positions which were no longer existing because its findings of facts
are premised on misappreciation of facts.

II.

The Honorable Court of Appeals also seriously erred and committed

grave abuse of discretion in affirming the award of service incentive
leave pay, 13th month pay, and holiday pay in the absence of
evidentiary and legal basis therefor.

III.

The Honorable Court of Appeals likewise seriously erred and

committed grave abuse of discretion in affirming the award of
attorney's fees even in the absence of counsel on record to handle
and prosecute the case.

IV.

The Honorable Court of Appeals also seriously erred and gravely

abused its discretion in holding individual petitioner solidarily liable
with petitioner company without specific evidence on which the same
was based.20

Petitioners’ Arguments

Petitioners contend that, contrary to their allegations, respondents were

never dismissed from the service. If respondents find themselves no longer
in the service of petitioners, it is simply because of their refusal to report for
work. Further, granting that they were dismissed, respondents’ prolonged
absences is tantamount to abandonment which is a valid ground for the
termination of their employment. As to respondents monetary claims, it is
incumbent upon them to prove the same because the burden of proof rests
on their shoulders. But since respondents failed to prove the same, their
claims should be denied.
Respondents’ Arguments

Respondents, in support of their claim that they were illegally dismissed,

argue that as painters, they performed activities which were necessary and
desirable in the usual business of petitioners, who are engaged in the
business of contracting painting jobs. Hence, they are regular employees
who, under the law, cannot just be dismissed from the service without prior
notice and without any just or valid cause. According to the respondents,
they did not abandon their job. For abandonment to serve as basis for a
valid termination of their employment, it must first be established that there
was a deliberate and unjustified refusal on their part to resume work. Mere
absences are not sufficient for these must be accompanied by overt acts
pointing to the fact that they simply do not want to work anymore.
Petitioners failed to prove this. Furthermore, the filing of a complaint for
illegal dismissal ably defeats the theory of abandonment of the job.

Our Ruling

The petition is partly meritorious.

"[T]his Court is not unmindful of the rule that in cases of illegal dismissal,
the employer bears the burden of proof to prove that the termination was
for a valid or authorized cause."21 But "[b]efore the [petitioners] must bear
the burden of proving that the dismissal was legal, [the respondents] must
first establish by substantial evidence" that indeed they were dismissed.
"[I]f there is no dismissal, then there can be no question as to the legality or
illegality thereof."22

There was no dismissal in this case, hence, there is no question that can
be entertained regarding its legality or illegality.

As found by the Labor Arbiter, there was no evidence that respondents

were dismissed nor were they prevented from returning to their work. It was
only respondents’ unsubstantiated conclusion that they were dismissed. As
a matter of fact, respondents could not name the particular person who
effected their dismissal and under what particular circumstances.

In Machica v. Roosevelt Services Center, Inc.,23 this Court sustained the

employer's denial as against the employees' categorical assertion of illegal
dismissal. In so ruling, this Court held that:
The rule is that one who alleges a fact has the burden of proving it; thus,
petitioners were burdened to prove their allegation that respondents
dismissed them from their employment. It must be stressed that the
evidence to prove this fact must be clear, positive and convincing. The rule
that the employer bears the burden of proof in illegal dismissal cases finds
no application here because the respondents deny having dismissed the
petitioners.

In this case, petitioners were able to show that they never dismissed
respondents. As to the case of Fernando, Miguel and Ferdinand, it was
shown that on November 25, 2000, at around 7:30 a.m., the petitioners’
foreman, Wenifredo Lalap (Wenifredo) caught the three still eating when
they were supposed to be working already. Wenifredo reprimanded them
and, apparently, they resented it so they no longer reported for work. In the
case of Gregorio, he absented himself from work on September 15, 2000 to
apply as a painter with SAEI-EEI, the general contractor of Pacific Plaza
Towers. Since then he never reported back to work. Lastly, in the case of
Guillermo, he absented himself without leave on November 27, 2000, and
so he was reprimanded when he reported for work the following day.
Because of the reprimand, he did not report for work anymore.

Hence, as between respondents’ general allegation of having been orally

dismissed from the service vis-a-vis those of petitioners which were found
to be substantiated by the sworn statement of foreman Wenifredo, we are
persuaded by the latter. Absent any showing of an overt or positive act
proving that petitioners had dismissed respondents, the latters’ claim of
illegal dismissal cannot be sustained. Indeed, a cursory examination of the
records reveal no illegal dismissal to speak of.

There was also no abandonment of work on the part of the respondents.

The Labor Arbiter is also correct in ruling that there was no abandonment
on the part of respondents that would justify their dismissal from their
employment.

It is a settled rule that "[m]ere absence or failure to report for work x x x is

not enough to amount to abandonment of work."24 "Abandonment is the
deliberate and unjustified refusal of an employee to resume his
employment."25
In Northwest Tourism Corporation v. Former Special 3rd Division of the
Court of Appeals26 this Court held that "[t]o constitute abandonment of
work, two elements must concur, [namely]:

(1) the employee must have failed to report for work or must have
been absent without valid or justifiable reason; and

(2) there must have been a clear intention on the part of the
employee to sever the employer-employee relationship manifested by
some overt act."

"It is the employer who has the burden of proof to show a deliberate and
unjustified refusal of the employee to resume his employment without any
intention of returning."27 It is therefore incumbent upon petitioners to
ascertain the respondents’ interest or non-interest in the continuance of
their employment. However, petitioners failed to do so.

Respondents must be reinstated and paid their holiday pay, service

incentive leave pay, and 13th month pay.

Clearly therefore, there was no dismissal, much less illegal, and there was
also no abandonment of job to speak of. The Labor Arbiter is therefore
correct in ordering that respondents be reinstated but without any
backwages.

However, petitioners are of the position that the reinstatement of

respondents to their former positions, which were no longer existing, is
impossible, highly unfair and unjust. The project was already completed by
petitioners on September 28, 2001. Thus the completion of the project left
them with no more work to do. Having completed their tasks, their positions
automatically ceased to exist. Consequently, there were no more positions
where they can be reinstated as painters.

Petitioners are misguided. They forgot that there are two types of
employees in the construction industry. The first is referred to as project
employees or those employed in connection with a particular construction
project or phase thereof and such employment is coterminous with each
project or phase of the project to which they are assigned. The second is
known as non-project employees or those employed without reference to
any particular construction project or phase of a project.
The second category is where respondents are classified. As such they are
regular employees of petitioners. It is clear from the records of the case
that when one project is completed, respondents were automatically
transferred to the next project awarded to petitioners. There was no
employment agreement given to respondents which clearly spelled out the
duration of their employment, the specific work to be performed and that
such is made clear to them at the time of hiring. It is now too late for
petitioners to claim that respondents are project employees whose
employment is coterminous with each project or phase of the project to
which they are assigned.

Nonetheless, assuming that respondents were initially hired as project

employees, petitioners must be reminded of our ruling in Maraguinot, Jr. v.
National Labor Relations Commission28 that "[a] project employee x x x
may acquire the status of a regular employee when the following [factors]
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 indespensable to the usual business or trade of the
employer."

In this case, the evidence on record shows that respondents were

employed and assigned continuously to the various projects of petitioners.
As painters, they performed activities which were necessary and desirable
in the usual business of petitioners, who are engaged in subcontracting
jobs for painting of residential units, condominium and commercial
buildings. As regular employees, respondents are entitled to be reinstated
without loss of seniority rights.

Respondents are also entitled to their money claims such as the payment
of holiday pay, service incentive leave pay, and 13th month pay. Petitioners
as the employer of respondents and having complete control over the
records of the company could have easily rebutted the monetary claims
against it. All that they had to do was to present the vouchers or payrolls
showing payment of the same. However, they decided not to provide the
said documentary evidence. Our conclusion therefore is that they never
paid said benefits and therefore they must be ordered to settle their
obligation with the respondents.1avvphi1

Respondents are also entitled to the payment of attorney’s fees.

Even though respondents were not represented by counsel in most of the

stages of the proceedings of this case, the award of attorney’s fees as
ruled by the Labor Arbiter, the NLRC and the CA to the respondents is still
proper. In Rutaquio v. National Labor Relations Commission,29 this Court
held that:

It is settled that in actions for recovery of wages or where an employee was

forced to litigate and, thus, incur expenses to protect his rights and interest,
the award of attorney’s fees is legally and morally justifiable.

In Producers Bank of the Philippines v. Court of Appeals30 this Court ruled

that:

Attorney’s fees may be awarded when a party is compelled to litigate or to

incur expenses to protect his interest by reason of an unjustified act of the
other party.

In this case, respondents filed a complaint for illegal dismissal with claim for
payment of their holiday pay, service incentive leave pay, and 13th month
pay. The Labor Arbiter, the NLRC and the CA were one in ruling that
petitioners did not pay the respondents their holiday pay, service incentive
leave pay, and 13th month pay as mandated by law. For sure, this
unjustified act of petitioners had compelled the respondents to institute an
action primarily to protect their rights and interests.

The CA erred when it ordered reinstatement of respondents with payment

of full backwages.

It must be noted that the Labor Arbiter’s disposition directed petitioners to

reinstate respondents without any backwages and awarded the payment of
service incentive leave pay, holiday pay, 13th month pay, and 10%
attorney’s fees in the sum of ₱70,183.23.

On appeal to the NLRC, petitioners limited their appeal to the award of

service incentive leave pay, holiday pay, 13th month pay, and 10%
attorney’s fees. No appeal was made on the order of reinstatement.
In the proceedings before the CA, it is only the award of service incentive
leave pay, holiday pay, 13th month pay, and 10% attorney’s fees that were
raised by the petitioners. The CA in fact dismissed the petition. However,
the CA further concluded in its Decision that since there is no abandonment
to speak about, it is therefore indisputable that respondents were illegally
dismissed. Therefore, they deserve not only reinstatement but also the
payment of full backwages.

We do not agree with this ruling of the CA.

In cases where there is no evidence of dismissal, the remedy is

reinstatement but without backwages. In this case, both the Labor Arbiter
and the NLRC made a finding that there was no dismissal much less an
illegal one. "It is settled that factual findings of quasi-judicial agencies are
generally accorded respect and finality so long as these are supported by
substantial evidence."31

In Leonardo v. National Labor Relations Commission,32 this Court held that:

In a case where the employee’s failure to work was occasioned neither by

his abandonment nor by a termination, the burden of economic loss is not
rightfully shifted to the employer; each party must bear his own loss.

Thus, inasmuch as no finding of illegal dismissal had been made, and

considering that the absence of such finding is supported by the records of
the case, this Court is bound by such conclusion and cannot allow an
award of the payment of backwages.

Lastly, since there was no need to award backwages to respondents, the

ruling of the CA that Javalera is solidarily liable with Exodus International
Construction Corporation in paying full backwages need not be discussed.

WHEREFORE, the instant petition for review on certiorari is PARTLY

GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No.
79800 dated August 10, 2004, is AFFIRMED with MODIFICATION that the
award of full backwages is DELETED for lack of legal basis.

SO ORDERED.
6)
Civil Case: D.M. CONSUNJI vs. COURT OF APPEALS GR No. 137873
April 20, 2001
D.M. CONSUNJI vs. COURT OF APPEALS
GR No. 137873
April 20, 2001

FACTS:

On November 2, 1990, Jose Juego, a construction worker of D.M.

Consunji, Inc., fell 14 floors from the Renaissance Tower, Pasig City to his
death. On May 9, 1991, Jose Juego´s widow, filed in the RTC of Pasig a
complaint for damages against the deceased´s employer, D.M. Consunji,
Inc. The employer raised, among other defenses, the widow´s prior
availment of the benefits from the State Insurance Fund. The RTC
rendered a decision in favor of the widow Maria Juego, ordering the
defendant to pay plaintiff. On appeal by D.M. Consunji, the CA affirmed the
decision of the RTC in toto. Hence, this petition.

Issue:

Whether or not the petitioner (Consunji) is negligent and should be liable.

Held:

The decision of the CA is affirmed.

The claims for damages sustained by workers in the course of their
employment could be filed only under the Workmen´s Compensation Law,
to the exclusion of all further claims under other laws. The CA held that the
case at bar came under exception because private respondent was
unaware of petitioner´s negligence when she filed her claim for death
benefits from the State Insurance Fund.

7)
G.R. No. 204406 February 26, 2014

MACARTHUR MALICDEM and HERMENIGILDO FLORES, Petitioners,

vs.
MARULAS INDUSTRIAL CORPORATION and MIKE
MANCILLA, Respondents.

DECISION

MENDOZA, J.:

This petition for review on certiorari1 under Rule 45 of the Rules of Court
filed by Macarthur Malicdem (Malicdem) and Hermenigildo Flores (Flores)
assails the July 18, 2012 Decision2 and the November 12, 2012
Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 1244 70,
dismissing their petition for certiorari under Rule 65 in an action for illegal
dismissal.

The Facts:

A complaint4 for illegal dismissal, separation pay, money claims, moral and
exemplary damages, and attorney's fees was filed by petitioners Malicdem
and Flores against respondents Marulas Industrial Corporation (Marulas)
and Mike Mancilla (Mancilla), who were engaged in the business of
manufacturing sacks intended for local and export markets.

Malicdem and Flores were first hired by Marulas as extruder operators in

2006, as shown by their employment contracts. They were responsible for
the bagging of filament yarn, the quality of pp yarn package and the
cleanliness of the work place area. Their employment contracts were for a
period of one (1) year. Every year thereafter, they would sign a
Resignation/Quitclaim in favor of Marulas a day after their contracts ended,
and then sign another contract for one (1) year. Until one day, on
December 16, 2010, Flores was told not to report for work anymore after
being asked to sign a paper by Marulas' HR Head to the effect that he
acknowledged the completion of his contractual status. On February 1,
2011, Malicdem was also terminated after signing a similar document.
Thus, both claimed to have been illegally dismissed.

Marulas countered that their contracts showed that they were fixed-term
employees for a specific undertaking which was to work on a particular
order of a customer for a specific period. Their severance from employment
was due to the expiration of their contracts.

On February 7, 2011, Malicdem and Flores lodged a complaint against

Marulas and Mancilla for illegal dismissal.

On July 13, 2011, the Labor Arbiter (LA) rendered a decision5 in favor of
the respondents, finding no illegal dismissal. He ruled that Malicdem and
Flores were not terminated and that their employment naturally ceased
when their contracts expired. The LA, however, ordered Marulas to pay
Malicdem and Flores their respective wage differentials, to wit:

WHEREFORE, the complaints for illegal dismissal are dismissed for lack of
merit. Respondent Marulas Industrial Corporation is, however, ordered to
pay complainants wage differential in the following amounts:

1. Macarthur Malicdem ₱20,111.2

6
2/2/07 – 6/13/08 = None
6/14/08 – 8/27/08 = 2.47 mos.
₱377 – 362 = ₱15
x 26 days x 2.47 mos. = 963.30
8/28/08 – 6/30/10 = 22.06 mos.
₱382 – ₱362 = ₱20
x 26 days x 22.06 mos. = 11,471.20
7/1/10 – 2/2/11 = 7.03 mos.
₱404 – ₱362 = ₱42
x 26 days x 7.03 mos. = 7,676.76

20,111.26
; and
2. Herminigildo Flores ₱18,440.50
2/2/08 – 6/13/08 = 4.36 mos. None
 6/14/08 – 8/27/08 = 963.30
8/28/08 – 6/30/10 = 11,471.20
7/1/10 – 12/16/10 = 5.50 mos.
₱404 x ₱362 = ₱42
x 26 days x 5.50 mos. = 6,006.00

18,440.50

All other claims are dismissed for lack of merit.

SO ORDERED.6

Malicdem and Flores appealed to the NLRC which partially granted their
appeal with the award of payment of 13th month pay, service incentive
leave and holiday pay for three (3) years. The dispositive portion of its
December 19, 2011 Decision7 reads:

WHEREFORE, the appeal is GRANTED IN PART. The Decision of Labor

Arbiter Raymund M. Celino, dated July 13, 2011, is MODIFIED. In addition
to the award of salary differentials, complainants should also be awarded
13th month pay, service incentive leave and holiday pay for three years.

SO ORDERED.8

Still, petitioners filed a motion for reconsideration, but it was denied by the
NLRC on February 29, 2011.

Aggrieved, Malicdem and Flores filed a petition for certiorari under Rule 65
with the CA.

On July 18, 2012, the CA denied the petition,9 finding no grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the
NLRC. It ruled that the issue of whether or not the petitioners were project
employees or regular employees was factual in nature and, thus, not within
the ambit of a petition for certiorari. Moreover, it accorded respect and due
consideration to the factual findings of the NLRC, affirming those of the LA,
as they were supported by substantial evidence.
On the substantive issue, the CA explained that "the repeated and
successive rehiring of project employees do not qualify them as regular
employees, as length of service is not the controlling determinant of the
employment tenure of a project employee, but whether the employment
has been fixed for a specific project or undertaking, its completion has been
determined at the time of the engagement of the employee."10

Corollarily, considering that there was no illegal dismissal, the CA ruled that
payment of backwages, separation pay, damages, and attorney's fees had
no factual and legal bases. Hence, they could not be awarded to the
petitioners.

Aggrieved, Malicdem and Flores filed a motion for reconsideration, but their
pleas were denied in the CA Resolution, dated November 12, 2012.

The Petition

Malicdem and Flores now come before this Court by way of a petition for
review on certiorari under Rule 45 of the Rules of Court praying for the
reversal of the CA decision anchored on the principal argument that the
appellate court erred in affirming the NLRC decision that there was no
illegal dismissal because the petitioners’ contracts of employment with the
respondents simply expired. They claim that their continuous rehiring
paved the way for their regularization and, for said reason, they could not
be terminated from their jobs without just cause.

In their Comment,11 the respondents averred that the petitioners failed to

show that the CA erred in affirming the NLRC decision. They posit that the
petitioners were contractual employees and their rehiring did not amount to
regularization. The CA cited William Uy Construction Corp. v.
Trinidad,12 where it was held that the repeated and successive rehiring of
project employees did not qualify them as regular employees, as length of
service was not the controlling determinant of the employment tenure of a
project employee, but whether the employment had been fixed for a
specific project or undertaking, its completion had been determined at the
time of the engagement of the employee. The respondents add that for said
reason, the petitioners were not entitled to full backwages, separation pay,
moral and exemplary damages, and attorney’s fees.
Now, the question is whether or not the CA erred in not finding any grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of
the NLRC.

The Court’s Ruling:

The Court grants the petition.

The petitioners have convincingly shown that they should be considered

regular employees and, as such, entitled to full backwages and other
entitlements.

A reading of the 2008 employment contracts,13 denominated as "Project

Employment Agreement," reveals that there was a stipulated probationary
period of six (6) months from its commencement. It was provided therein
that in the event that they would be able to comply with the company’s
standards and criteria within such period, they shall be reclassified as
project employees with respect to the remaining period of the effectivity of
the contract. Specifically, paragraph 3(b) of the agreement reads:

The SECOND PARTY hereby acknowledges, agrees and understands that

the nature of his/her employment is probationary and on a project-basis.
The SECOND PARTY further acknowledges, agrees and understands that
within the effectivity of this Contract, his/her job performance will be
evaluated in accordance with the standards and criteria explained and
disclosed to him/her prior to signing of this Contract. In the event that the
SECOND PARTY is able to comply with the said standards and criteria
within the probationary period of six month/s from commencement of this
Contract, he/she shall be reclassified as a project employee of (o)f the
FIRST PARTY with respect to the remaining period of the effectivity of this
Contract.

Under Article 281 of the Labor Code, however, "an employee who is
allowed to work after a probationary period shall be considered a regular
employee." When an employer renews a contract of employment after the
lapse of the six-month probationary period, the employee thereby becomes
a regular employee. No employer is allowed to determine indefinitely the
fitness of its employees.14 While length of time is not the controlling test for
project employment, it is vital in determining if the employee was hired for a
specific undertaking or tasked to perform functions vital, necessary and
indispensable to the usual business of trade of the employer.15 Thus, in the
earlier case of Maraguinot, Jr. v. NLRC,16 it was ruled that a project or work
pool employee, who has been: (1) continuously, as opposed to
intermittently, rehired by the same employer for the same tasks or nature of
tasks; and (2) those tasks are vital, necessary and indispensable to the
usual business or trade of the employer, must be deemed a regular
employee. Thus:

x x x. Lest it be misunderstood, this ruling does not mean that simply

because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that
we hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer
for the same tasks or nature of tasks; and (2) these tasks are vital,
necessary and indispensable to the usual business or trade of the
employer, then the employee must be deemed a regular employee,
pursuant to Article 280 of the Labor Code and jurisprudence. To rule
otherwise would allow circumvention of labor laws in industries not falling
within the ambit of Policy Instruction No. 20/Department Order No. 19,
hence allowing the prevention of acquisition of tenurial security by project
or work pool employees who have already gained the status of regular
employees by the employer's conduct.1âwphi1

The test to determine whether employment is regular or not is the

reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. If the
employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the
repeated and continuing need for its performance as sufficient evidence of
the necessity, if not indispensability of that activity to the business. 17

Guided by the foregoing, the Court is of the considered view that there was
clearly a deliberate intent to prevent the regularization of the petitioners.

To begin with, there is no actual project. The only stipulations in the

contracts were the dates of their effectivity, the duties and responsibilities
of the petitioners as extruder operators, the rights and obligations of the
parties, and the petitioners’ compensation and allowances. As there was no
specific project or undertaking to speak of, the respondents cannot invoke
the exception in Article 280 of the Labor Code.18 This is a clear attempt to
frustrate the regularization of the petitioners and to circumvent the law.
Next, granting that they were project employees, the petitioners could only
be considered as regular employees as the two factors enumerated in
Maraguinot, Jr., are present in this case. It is undisputed that the petitioners
were continuously rehired by the same employer for the same position as
extruder operators. As such, they were responsible for the operation of
machines that produced the sacks. Hence, their work was vital, necessary
and indispensable to the usual business or trade of the employer.

In D.M. Consunji, Inc. v. Estelito Jamin19 and Liganza v. RBL Shipyard

Corporation,20 the Court reiterated the ruling that an employment ceases to
be coterminous with specific projects when the employee is continuously
rehired due to the demands of the employer’s business and re-engaged for
many more projects without interruption.

The respondents cannot use the alleged expiration of the employment

contracts of the petitioners as a shield of their illegal acts. The project
employment contracts that the petitioners were made to sign every year
since the start of their employment were only a stratagem to violate their
security of tenure in the company. As restated in Poseidon Fishing v.
NLRC,21 "if from the circumstances it is apparent that periods have been
imposed to preclude acquisition of tenurial security by the employee, they
should be disregarded for being contrary to public policy."

The respondents’ invocation of William Uy Construction Corp. v.

Trinidad22 is misplaced because it is applicable only in cases involving the
tenure of project employees in the construction industry. It is widely known
that in the construction industry, a project employee's work depends on the
availability of projects, necessarily the duration of his employment.23 It is
not permanent but coterminous with the work to which he is assigned.24 It
would be extremely burdensome for the employer, who depends on the
availability of projects, to carry him as a permanent employee and pay him
wages even if there are no projects for him to work on.25 The rationale
behind this is that once the project is completed it would be unjust to
require the employer to maintain these employees in their payroll. To do so
would make the employee a privileged retainer who collects payment from
his employer for work not done. This is extremely unfair to the employers
and amounts to labor coddling at the expense of management.26"

Now that it has been clearly established that the petitioners were regular
employees, their termination is considered illegal for lack of just or
authorized causes. Under Article 279 of the Labor Code, 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 law intends the award of
backwages and similar benefits to accumulate past the date of the LA
decision until the dismissed employee is actually reinstated.

WHEREFORE, the petition is GRANTED. The assailed July 18, 2012

decision of the Court of Appeals and its November 12, 2012 Resolution in
CA-G.R. SP No. 1244 70, are hereby ANNULLED and SET ASIDE.

Accordingly, respondent Marulas Industrial Corporation is hereby ordered

to reinstate petitioners Macarthur Malicdem and Hermenigildo Flores to
their former positions without loss of seniority rights and other privileges
and to pay their full backwages, inclusive of allowances and their other
benefits or their monetary equivalent computed from the time their
compensations were withheld from them up to the time of their actual
reinstatement plus the wage differentials stated in the July 13, 2011
decision of the Labor Arbiter, as modified by the December 19, 2011 NLRC
decision.

SO ORDERED.

8)

G.R. No. 159350, March 09, 2016

ALUMAMAY O. JAMIAS, JENNIFER C. MATUGUINAS AND JENNIFER

F. CRUZ,*Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION
(SECOND DIVISION), HON. COMMISSIONERS: RAUL T. AQUINO,
VICTORIANO R. CALAYCAY AND ANGELITA A. GACUTAN; HON.
LABOR ARBITER VICENTE R. LAYAWEN; INNODATA PHILIPPINES,
INC., INNODATA PROCESSING CORPORATION, (INNODATA
CORPORATION), AND TODD SOLOMON, Respondents.

DECISION
 BERSAMIN, J.:

The petitioners appeal the adverse judgment promulgated on July 31,

2002,1 whereby the Court of Appeals (CA) upheld the ruling of the National
Labor Relations Commission (NLRC) declaring them as project employees
hired for a fixed period.
Antecedents

Respondent Innodata Philippines, Inc. (Innodata), a domestic corporation

engaged in the business of data processing and conversion for foreign
clients,2 hired the following individuals on various dates and under the
following terms, to wit:
chanRoblesvirtualLawlibrary
Name Position Duration of Contract
August 7, 1995 to August 7,
Alumamay Jamias Manual Editor
19963
Marietha V. Delos August 7, 1995 to August 7,
Manual Editor
Santos 19964
August 16, 1995 to August 16,
Lilian R. Guamil Manual Editor
19965
August 7, 1995 to August 7,
Rina C. Duque Manual Editor
19966
August 23, 1995 to August 23,
Marilen Agabayani Manual Editor
19967
Production September 1, 1995 to
Alvin V. Patnon
Personnel September 1, 19968
September 18, 1995 to
Analyn I. Beter Type Reader
September 18, 19969
Production September 18, 1995 to
Jerry O. Soldevilla
Personnel September 18, 199610
Ma. Concepcion A. Production September 18, 1995 to
Dela Cruz Personnel September 18, 199611
 November 20, 1995 to
Jennifer Cruz Data Encoder
November 20, 199612
November 20, 1995 to
Jennifer Matuguinas Data Encoder
November 20, 199613
After their respective contracts expired, the aforenamed individuals filed a
complaint for illegal dismissal claiming that Innodata had made it appear
that they had been hired as project employees in order to prevent them
from becoming regular employees.14

Decision of the Labor Arbiter

On September 8, 1998, Labor Arbiter (LA) Vicente Layawen rendered his

decision dismissing the complaint for lack of merit.15 He found and held that
the petitioners had knowingly signed their respective contracts in which the
durations of their engagements were clearly stated; and that their fixed
term contracts, being exceptions to Article 280 of the Labor Code,
precluded their claiming regularization.
Ruling of the National Labor Relations Commission

On appeal, the NLRC affirmed the decision of LA Layawen,16 opining that

Article 280 of the Labor Codedid not prohibit employment contracts with
fixed periods provided the contracts had been voluntarily entered into by
the parties, viz.:
chanRoblesvirtualLawlibrary
[I]t is distinctly provided that complainants were hired for a definite period of
one year incidental upon the needs of the respondent by reason of the
seasonal increase in the volume of its business. Consequently, following
the rulings in Pantranco North Express, Inc. vs. NLRC, et al., G.R. No.
106654, December 16, 1994, the decisive determinant in term of
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." Further, Article 280 of the Labor Code
does not prescribe or prohibit an employment contract with a fixed period
provided, the same is entered into by the parties, without any force, duress
or improper pressure being brought to bear upon the employee and absent
any other circumstance vitiating consent. It does not necessarily follow that
where the duties of the employee consist of activities usually necessary or
desirable in the usual business of the employer, the parties are forbidden
from agreeing on a period of time for the performance of such activities.
There is thus nothing essentially contradictory between a definite period of
employment and the nature of the employee's duties. x x
x17ChanRoblesVirtualawlibrary
Judgment of the CA

As earlier mentioned, the CA upheld the NLRC. It observed that the

desirability and necessity of the functions being discharged by the
petitioners did not make them regular employees; that Innodata and the
employees could still validly enter into their contracts of employment for a
fixed period provided they had agreed upon the same at the time of the
employees' engagement;18 that Innodata's operations were contingent on
job orders or undertakings for its foreign clients; and that the availability of
contracts from foreign clients, and the duration of the employments could
not be treated as permanent, but coterminous with the projects.19

The petitioners moved for reconsideration,20 but the CA denied their motion
on August 8, 2003.21

Hence, this appeal by only three of the original complainants, namely

petitioners Alumamay Jamias, Jennifer Matuguinas and Jennifer Cruz.

Issues

The petitioners anchor their appeal on the following:

chanRoblesvirtualLawlibrary
I

THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION OR IN
EXCESS OF JURISDICTION AS IT CANNOT REVERSE OR ALTER THE
SUPREME COURT DECISION

THE SUPREME COURT HAS RULED THAT THE NATURE OF

EMPLOYMENT AT RESPONDENTS IS REGULAR NOT FIXED OR
CONTRACTUAL IN AT LEAST TWO (2) CASES AGAINST INNODATA
PHILS., INC.
 II

THE HON. COURT OF APPEALS COMMITTED SERIOUS ERROR OF

LAW WHEN IT DID NOT STICK TO PRECENDENT AS IT HAS ALREADY
RULED IN AN EARLIER CASE THAT THE NATURE OF EMPLOYMENT
AT INNODATA PHILS., INC. IS REGULAR AND NOT CONTRACTUAL

III

THE HON. COURT OF APPEALS PATENTLY ERRED IN LAW AND

COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OF JURISDICTION IN RULING THAT PETITIONERS' EMPLOYMENT IS
FOR A FIXED PERIOD CO-TERMINOUS WITH A PROJECT WHEN
THERE IS NO PROJECT TO SPEAK OF
IV

THE HON. COURT OF APPEALS PALPABLY ERRED IN LAW IN RULING

THAT THE STIPULATION IN CONTRACT IS GOVERNING AND NOT
THE NATURE OF EMPLOYMENT AS DEFINED BY
LAW.22ChanRoblesVirtualawlibrary
The petitioners maintain that the nature of employment in Innodata had
been settled in Villanueva v. National Labor Relations Commission
(Second Division)23 and Servidad v. National Labor Relations
Commission,24 whereby the Court accorded regular status to the
employees because the work they performed were necessary and
desirable to the business of data encoding, processing and
conversion.25They insist that the CA consequently committed serious error
in not applying the pronouncement in said rulings, thereby ignoring the
principle of stare decisis in declaring their employment as governed by the
contract of employment; that the CA also erroneously found that the
engagement of the petitioners was coterminous with the project that was
nonexistent; that Innodata engaged in "semantic interplay of words" by
introducing the concept of "fixed term employment" or "project
employment" that were not founded in law;26 and that Article 280 of
the Labor Code guarantees the right of workers to security of tenure, which
rendered the contracts between the petitioners and Innodata
meaningless.27cralawred

In refutation, Innodata insists that the contracts dealt with

in Villanueva and Servidad were different from those entered into by the
petitioners herein,28 in that the former contained stipulations that violated
the provisions of the Labor Code on probationary employment and security
of tenure,29 while the latter contained terms known and explained to the
petitioners who then willingly signed the same;30 that as a mere service
provider, it did not create jobs because its operations depended on the
availability of job orders or undertakings from its client;31 that Article 280 of
the Labor Code allowed "term employment" as an exception to security of
tenure; and that the decisive determinant was the day certain agreed upon
by the parties, not the activities that the employees were called upon to
perform.32

Were the petitioners regular or project employees of Innodata?

Ruling of the Court

We deny the petition for review on certiorari.

Stare decisis does not apply where the facts are essentially different

Contrary to the petitioners' insistence, the doctrine of stare decisis, by

which the pronouncements in Villanueva and Servidad would control the
resolution of this case, had no application herein.

The doctrine of stare decisis enjoins adherence to judicial

precedents.33 When a court has laid down a principle of law as applicable
to a certain state of facts, it will adhere to that principle and apply it to all
future cases in which the facts are substantially the same; but when the
facts are essentially different, stare decisis does not apply because a
perfectly sound principle as applied to one set of facts might be entirely
inappropriate when a factual variance is introduced.34

Servidad and Villanueva involved contracts that contained stipulations not

found in the contracts entered by the petitioners. The cogent observations
in this regard by the CA are worth reiterating:
chanRoblesvirtualLawlibrary
A cursory examination of the facts would reveal that while all the cases
abovementioned involved employment contracts with a fixed term, the
employment contract subject of contention in
the Servidad and Villanueva cases provided for double probation, meaning,
that the employees concerned, by virtue of a clause incorporated in their
contracts, were made to remain as probationary employees even if they
continue to work beyond the six month probation period set by law. Indeed,
such stipulation militates against Constitutional policy of guaranteeing the
tenurial security of the workingman. To Our mind, the provision alluded to is
what prodded the Supreme Court to disregard and nullify altogether the
terms of the written entente. Nonetheless, it does not appear to be the
intendment of the High Tribunal to sweepingly invalidate or declare as
unlawful all employment contracts with a fixed period. To phrase it
differently, the said agreements providing for a one year term would have
been declared valid and, consequently, the separation from work of the
employees concerned would have been sustained had their contracts not
included any unlawful and circumventive condition.

It ought to be underscored that unlike in

the Servidad and Villanueva cases, the written contracts governing the
relations of the respondent company and the petitioners herein do not
embody such illicit stipulation.35ChanRoblesVirtualawlibrary
We also disagree with the petitioners' manifestation36 that the Court struck
down in Innodata Philippines, Inc. v. Quejada-Lopez37 a contract of
employment that was similarly worded as their contracts with Innodata.
What the Court invalidated in Innodata Philippines, Inc. v. Quejada-
Lopez was the purported fixed-term contract that provided for two periods -
a fixed term of one year under paragraph 1 of the contract, and a three-
month period under paragraph 7.4 of the contract - that in reality placed the
employees under probation. In contrast, the petitioners' contracts did not
contain similar stipulations, but stipulations to the effect that their
engagement was for the fixed period of 12 months, to wit:
chanRoblesvirtualLawlibrary
1. The EMPLOYER shall employ the EMPLOYEE and the EMPLOYEE
shall serve the EMPLOYER in the EMPLOYER'S business as a MANUAL
EDITOR on a fixed term only and for a fixed and definite period of twelve
months, commencing on August 7, 1995 and terminating on August 7,
1996, x x x.38ChanRoblesVirtualawlibrary
In other words, the terms of the petitioners' contracts did not subject them
to a probationary period similar to that indicated in the contracts struck
down in Innodata, Villanueva and Servidad.
 II

A fixed period in a contract of employment does not by itself signify

an intention to circumvent Article 280 of the Labor Code

The petitioners argue that Innodata circumvented the security of tenure

protected under Article 280 of the Labor Code by providing a fixed term;
and that they were regular employees because the work they performed
were necessary and desirable to the business of Innodata.

The arguments of the petitioners lack merit and substance.

Article 280 of the Labor Code provides:

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

An employment shall be deemed 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 actuallv
exists.
The provision contemplates three kinds of employees, namely: (a) regular
employees; (b) project employees; and (c) casuals who are neither regular
nor project employees. The nature of employment of a worker is
determined by the factors provided in Article 280 of the Labor Code,
regardless of any stipulation in the contract to the contrary.39 Thus, in Brent
School, Inc. v. Zamora,40 we explained that the clause referring to written
contracts should be construed to refer to agreements entered into for the
purpose of circumventing the security of tenure. Obviously, Article 280
does not preclude an agreement providing for a fixed term of employment
knowingly and voluntarily executed by the parties.41

A fixed term agreement, to be valid, must strictly conform with the

requirements and conditions provided in Article 280 of the Labor Code. The
test to determine whether a particular employee is engaged as a project or
regular employee is whether or not the employee is assigned to carry out a
specific project or undertaking, the duration or scope of which was
specified at the time of his engagement.42 There must be a determination
of, or a clear agreement on, the completion or termination of the project at
the time the employee is engaged.43 Otherwise put, the fixed period of
employment must be 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
it must satisfactorily appear that the employer and employee dealt with
each other on more or less equal terms with no moral dominance
whatsoever being exercised by the former on the latter.44

The contracts of the petitioners indicated the one-year duration of their

engagement as well as their respective project assignments (i.e., Jamias
being assigned to the CD-ROM project; Cruz and Matuguinas to the TSET
project).45 There is no indication that the petitioners were made to sign the
contracts against their will. Neither did they refute Innodata's assertion that
it did not employ force, intimidate or fraudulently manipulate the petitioners
into signing their contracts, and that the terms thereof had been explained
and made known to them.46 Hence, the petitioners knowingly agreed to the
terms of and voluntarily signed their respective contracts.

That Innodata drafted the contracts with its business interest as the
overriding consideration did not necessarily warrant the holding that the
contracts were prejudicial against the petitioners.47 The fixing by Innodata
of the period specified in the contracts of employment did not also indicate
its ill-motive to circumvent the petitioners' security of tenure. Indeed, the
petitioners could not presume that the fixing of the one-year term was
intended to evade or avoid the protection to tenure under Article 280 of
the Labor Code in the absence of other evidence establishing such
intention. This presumption must ordinarily be based on some aspect of the
agreement other than the mere specification of the fixed term of the
employment agreement, or on evidence aliunde of the intent to evade.48
Lastly, the petitioners posit that they should be accorded regular status
because their work as editors and proofreaders were usually necessary to
Innodata's business of data processing.

We reject this position. For one, it would be unusual for a company like
Innodata to undertake a project that had no relationship to its usual
business.49 Also, the necessity and desirability of the work performed by
the employees are not the determinants in term employment, but rather the
"day certain" voluntarily agreed upon by the parties.50 As the CA cogently
observed in this respect:
chanRoblesvirtualLawlibrary
There is proof to establish that Innodata's operations indeed rests upon job
orders or undertakings coming from its foreign clients. Apparently, its
employees are assigned to projects - one batch may be given a fixed
period of one year, others, a slightly shorter duration, depending on the
estimated time of completion of the particular job or undertaking farmed out
by the client to the company.51ChanRoblesVirtualawlibrary
In fine, the employment of the petitioners who were engaged as project
employees for a fixed term legally ended upon the expiration of their
contract. Their complaint for illegal dismissal was plainly lacking in
merit.chanrobleslaw

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the

decision promulgated on July 31, 2002; and ORDER the petitioners to pay
the costs of suit

SO ORDERED.

9)
EGI v. ANDO, JR.
E. GANZON, INC. (EGI) and EULALIO GANZON, Petitioners vs.
FORTUNATO B. ANDO, JR., Respondent
G.R. No. 214183
February 20, 2017
Facts:

On May 16, 2011, respondent Fortunato B. Ando, Jr. (Ando) filed a

complaint against petitioner E. Ganzon, Inc. (EGI) and its President, Eulalio
Ganzon, for illegal dismissal and money claims for: underpayment of
salary, overtime pay, and 13th month pay; non-payment of holiday pay and
service incentive leave; illegal deduction; and attorneys fees. He alleged
that he was a regular employee working as a finishing carpenter in the
construction business of EGI; he was repeatedly hired from January 21,
2010 until April 30, 2011 when he was terminated without prior notice and
hearing; his daily salary of ₱292.00 was below the amount required by law;
and wage deductions were made without his consent, such as rent for the
barracks located in the job site and payment for insurance premium.

On the other hand, EGI countered his contention that, as proven by the
three (3) project employment contract, Ando was engaged as a project
worker (Formworker-2) in Bahay Pamulinawen Project in Laoag, Ilocos
Norte from June 1, 2010 to September 30, 20107and from January 3, 2011
to February 28, 20118 as well as in EGI-West Insula Project in Quezon
City, Metro Manila from February 22, 2011 to March 31, 2011; he was paid
the correct salary based on the Wage Order applicable in the region; he
already received the 13th month pay for 2010 but the claim for 2011 was
not yet processed at the time the complaint was filed; and he voluntarily
agreed to pay ₱500.00 monthly for the cost of the barracks, beds, water,
electricity, and other expenses of his stay at the job site.

The Labor Arbiter declared Ando a project employee of EGI but granted
some of his money claims. Both parties elevated the case to the NLRC,
which dismissed the appeals filed and affirmed in toto the Decision of the
Labor Arbiter. Ando filed a motion for reconsideration, but it was denied. He
then filed a Rule 65 petition before the CA, which granted the same
annuling the assailed NLRC resolutions dated May 25, 2012 and July 17,
2012, . EGI's motion for reconsideration was denied.
Issue:

Whether or not respondent Fortunato B. Ando, Jr., is a regular or a project

worker of E. GANZON, INC., (EIG).

Ruling:

Yes, respondent Fortunato B. Ando, Jr., is a project worker of E. GANZON,

INC., (EIG). In the case at bar, The Court held that the CA erred in ruling
that the NLRC gravely abused its discretion when it sustained the Labor
Arbiter's finding that Ando is not a regular employee but a project employee
of EGI.

The terms regular, project, seasonal and casual employment are taken
from Article 280 of the Labor Code, as amended. Under Art. 280, project
employment is one which "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." To be considered as project-
based, the employer has the burden of proof to show that: (a) the employee
was assigned to carry out a specific project or undertaking and (b) the
duration and scope of which were specified at the time the employee was
engaged for such project or undertaking. It must be proved that the
particular work/service to be performed as well as its duration are defined
in the employment agreement and made clear to the employee who was
informed thereof at the time of hiring.

As the assigned project or phase begins and ends at determined or

determinable times, the services of the project employee may be lawfully
terminated at its completion. In this case, the three project employment
contracts signed by Ando explicitly stipulated the agreement "to engage
[his] services as a Project Worker" and that:
5. [His] services with the Project will end upon completion of the phase of
work for which [he was] hired for and is tentatively set on (written date).
However, this could be extended or shortened depending on the work
phasing.

Further, Ando was adequately notified of his employment status at the time
his services were engaged by EGI for its projects.. The contracts he signed
consistently stipulated that his services as a project worker were being
sought. There was an informed consent to be engaged as such. His
consent was not vitiated. As a matter of fact, Ando did not even allege that
force, duress or improper pressure were used against him in order to
agree. His being a carpenter does not suffice.

There was no attempt to frustrate Ando's security of tenure. His

employment was for a specific project or undertaking because the nature of
EGI's business is one which will not allow it to employ workers for an
indefinite period. As a corporation engaged in construction and residential
projects, EGI depends for its business on the contracts it is able to obtain.
Since work depends on the availability of such contracts, necessarily the
duration of the employment of its work force is not permanent but
coterminous with the projects to which they are assigned and from whose
payrolls they are paid. It would be extremely burdensome for EGI as an
employer if it would have to carry them as permanent employees and pay
them wages even if there are no projects for them to work on.

The foregoing considered, EGI did not violate any requirement of

procedural due process by failing to give Ando advance notice of his
termination. Prior notice of termination is not part of procedural due process
if the termination is brought about by the completion of the contract or
phase thereof for which the project employee was engaged.Such
completion automatically terminates the employment and the employer is,
under the law, only required to render a report to the Department of Labor
and Employment (DOLE) on the termination of employment.

Therefore, the petition is granted and the February 28, 2014 Decision and
September 4, 2014 Resolution of the Court of Appeals are reversed and
set aside. The decision of the labor arbiter is reinstated.

Seasonal Employees
1)
BENARES vs. PACHO
Posted: May 1, 2015 in case digests, labor relations
Tags: BENARES vs. PACHO, case digests, LABOR RELATIONS 0
JOSEFINA BENARES vs. JAIME PACHO, RODOLFO PANCHO JR,

JOSELITO MEDALLA, ET. AL

FACTS:
On July 24, 1991, complainants thru counsel wrote the Regional Director of
the Department of Labor and Employment, Bacolod City for intercession
particularly in the matter of wages and other benefits mandated by law.

On September 24, 1991, a routine inspection was conducted by personnel

of the Bacolod District Office of the Department of Labor and Employment.
Accordingly, a report and recommendation was made, hence, the
endorsement by the Regional Director of the instant case to the Regional
Arbitration Branch, NLRC, Bacolod City for proper hearing and disposition.

On October 15, 1991, complainants alleged to have been terminated

without being paid termination benefits by respondent in retaliation to what
they have done in reporting to the Department of Labor and Employment
their working conditions viz-a-viz (sic) wages and other mandatory benefits.

On July 14, 1992, notification and summons were served to the parties
wherein complainants were directed to file a formal complaint.

On July 28, 1992, a formal complaint was filed for illegal dismissal with
money claims.

From the records, summons and notices of hearing were served to the
parties and apparently no amicable settlement was arrived, hence, the
parties were directed to file their respective position papers.

On January 22, 1993, complainant submitted their position paper, while

respondent filed its position paper on June 21, 1993.

On March 17, 1994, complainants filed their reply position paper and
affidavit. Correspondingly, a rejoinder was filed by respondent on May 16,
1994.

On August 17, 1994, from the Minutes of the scheduled hearing,

respondent failed to appear, and that the Office will evaluate the records of
the case whether to conduct a formal trial on the merits or not, and that the
corresponding order will be issued.

On January 16, 1996, the Labor Arbiter issued an order to the effect that
the case is now deemed submitted for resolution.

On April 30, 1998, the Labor Arbiter a quo issued the assailed decision
dismissing the complaint for lack of merit.
On June 26, 1998, complainants not satisfied with the aforecited ruling
interposed the instant appeal before the NLRC. The NLRC held that
respondents attained the status of regular seasonal workers of Hda.
Maasin II having worked therein from 1964-1985. It found that petitioner
failed to discharge the burden of proving that the termination of
respondents was for a just or authorized cause. Hence, respondents were
illegally dismissed and should be awarded their money claims.

The Court of Appeals affirmed the NLRC’s ruling, with the modification that
the backwages and other monetary benefits shall be computed from the
time compensation was withheld in accordance with Article 279 of the
Labor Code, as amended by Republic Act No. 6715.

ISSUE: W/N the petitioner is guilty of illegal dismissal with money claims.

HELD: YES, the Supreme Court dismissed the instant petition and affirmed
the Decision of the Court of Appeals base on the following premise:

Petitioner underscores the NLRC decision’s mention of the “payroll” she

presented despite the fact that she allegedly presented 235 sets of payroll,
not just one payroll. This circumstance does not in itself evince any grave
abuse of discretion on the part of the NLRC as it could well have been just
an innocuous typographical error.

Verily, the NLRC’s decision, affirmed as it was by the Court of Appeals,

appears to have been arrived at after due consideration of the evidence
presented by both parties.

The SC finds no reason to disturb the finding that respondents were

illegally terminated. When there is no showing of clear, valid and legal
cause for the termination of employment, the law considers the matter a
case of illegal dismissal and the burden is on the employer to prove that the
termination was for a just or authorized cause.25 In this case, as found
both by the NLRC and the Court of Appeals, petitioner failed to prove any
such cause for the dismissal of respondents.

2)
HACIENDA BINO/HORTENCIA STARKE, INC. vs CUENCA et.al. Case
Digest
[G.R. No. 150478. April 15, 2005]

HACIENDA BINO/HORTENCIA STARKE, INC./HORTENCIA L. STARKE,

petitioners, vs. CANDIDO CUENCA, FRANCISCO ACULIT, ANGELINA
ALMONIA, DONALD ALPUERTO, NIDA BANGALISAN, ROGELIO
CHAVEZ, ELMO DULINGGIS, MERCEDES EMPERADO, TORIBIO
EMPERADO, JULIANA ENCARNADO, REYNALDO ENCARNADO,
GENE FERNANDO, JOVEN FERNANDO, HERNANI FERNANDO,
TERESITA FERNANDO, BONIFACIO GADON, JOSE GALLADA,
RAMONITO KILAYKO, ROLANDO KILAYKO, ALFREDO LASTIMOSO,
ANTONIO LOMBO, ELIAS LOMBO, EMMA LOMBO, LAURENCIA
LOMBO, LUCIA LOMBO, JOEL MALACAPAY, ADELA MOJELLO,
ERNESTO MOJELLO, FRUCTOSO MOJELLO, JESSICA MOJELLO,
JOSE MOJELLO, MARITESS MOJELLO, MERLITA MOJELLO, ROMEO
MOJELLO, RONALDO MOJELLO, VALERIANA MOJELLO, JAIME
NEMENZO, RODOLFO NAPABLE, SEGUNDIA OCDEN, JARDIOLINA
PABALINAS, LAURO PABALINAS, NOLI PABALINAS, RUBEN
PABALINAS, ZALDY PABALINAS, ALFREDO PANOLINO, JOAQUIN
PEDUHAN, JOHN PEDUHAN, REYNALDO PEDUHAN, ROGELIO
PEDUHAN, JOSEPHINE PEDUHAN, ANTONIO PORRAS, JR., LORNA
PORRAS, JIMMY REYES, ALICIA ROBERTO, MARCOS ROBERTO, JR.,
MARIA SANGGA, RODRIGO SANGGA, ARGENE SERON, SAMUEL
SERON, SR., ANGELINO SENELONG, ARMANDO SENELONG, DIOLITO
SENELONG, REYNALDO SENELONG, VICENTE SENELONG,
FEDERICO STA. ANA, ROGELIO SUASIM, EDNA TADLAS, ARTURO
TITONG, JR., JOSE TITONG, JR., NANCY VINGNO, ALMA YANSON,
JIMMY YANSON, MYRNA VILLANUEVA BELENARIO, SALVADOR
MALACAPAY, and RAMELO TIONGCO, respondents.

FACTS: The 76 individual respondents were part of the workforce of

Hacienda Bino consisting of 220 workers, performing various works, such as
cultivation, planting of cane points, fertilization, watering, weeding,
harvesting, and loading of harvested sugarcanes to cargo trucks.

On July 18, 1996, during the off-milling season, petitioner Starke issued an
Order or Notice which stated, thus:

To all Hacienda Employees:

Please bear in mind that all those who signed in favor of CARP are
expressing their desire to get out of employment on their own volition.

Wherefore, beginning today, July 18, only those who did not sign for CARP
will be given employment by Hda. Bino.

(Sgd.) Hortencia Starke

The respondents regarded such notice as a termination of their employment.

As a consequence, they filed a complaint for illegal dismissal, wage
differentials, 13th month pay, holiday pay and premium pay for holiday,
service incentive leave pay, and moral and exemplary damages with the
NLRC-RAB.

The respondents alleged that they are regular and permanent workers of the
hacienda and that they were dismissed without just and lawful cause. They
further alleged that they were dismissed because they applied as
beneficiaries under the Comprehensive Agrarian Reform Program (CARP)
over the land owned by petitioner Starke.

For her part, petitioner Starke recounted that the company’s Board of
Directors petitioned the Sangguniang Bayan of Kabankalan for authority to
re-classify, from agricultural to industrial, commercial and residential, the
whole of Hacienda Bino, except the portion earmarked for the CARP. She
asserted that half of the workers supported the re-classification but the
others, which included the herein respondents, opted to become
beneficiaries of the land under the CARP. Petitioner Starke alleged that in
July 1996, there was little work in the plantation as it was off-season; and so,
on account of the seasonal nature of the work, she issued the order giving
preference to those who supported the re-classification. She pointed out that
when the milling season began in October 1996, the work was plentiful again
and she issued notices to all workers, including the respondents, informing
them of the availability of work. However, the respondents refused to report
back to work. With respect to the respondents’ money claims, petitioner
Starke submitted payrolls evidencing payment thereof.

ISSUE: Whether or not respondents are seasonal employees.

HELD: The SC held that the primary standard for determining regular
employment is the reasonable connection between the particular activity
performed by the employee in Relation to the usual trade o business of the
employer. There is no doubt that the respondents were performing work
necessary and desirable in the usual trade or business of an employer. For
respondents to be excluded from those classified as regular employees, it is
not enough that they perform work or services that are seasonal in nature.
They must have been employed only for the duration of one (1) season.
While the records sufficiently show that the respondents’ work in the
hacienda was seasonal in nature, there was, however, no proof that they
were hired for the duration of one season. In fact, the payrolls submitted by
the petitioners, show that they availed the services of the respondents since
1991. Absent any proof to the contrary, the general rule of regular
employment should, therefore, stand. It bears stressing that the employer
has the burden of proving the lawfulness of his employees’ dismissal.

Petition is denied.

3)

1
UNIVERSAL ROBINA SUGAR MILLING CORPORATION and RENE
CABATI v.FERDINAND ACIBO, et al.G.R. No. 186439, 15 January 2014,
SECOND DIVISION (Brion, J.)The period denominated in the contract of
employment is not the basis in determining whetheran employee is
seasonal or regular.FERDINAND ACIBO, et al. were employees of
UNIVERSAL ROBINA SUGARMILLING CORPORATION (URSUMCO).
Acibo, et al. signed contracts of employment for agiven period and after its
expiration, URSUMCO repeatedly hired these employees to performthe
same duties and obligations.Acibo, et al. filed a complaint before the Labor
Arbiter for regularization however it was deniedbecause the LA argued that
they were seasonal employees. Seven of the 22 complainants filed
anappeal to the NLRC. The latter reversed the LA’s ruling
claiming that they were regularemployees. The CA affirmed NLRC’s
decision but excluded the Acibo, et al. from monetarybenefits under the
CBA.ISSUE:Whether or not Acibo, et al. are regular employees of
URSUMCO.HELD:Plantation workers or mill employees only work on
seasonal basis. This, however, does notexclude them from the benefits of
regularization. Being in such nature, Acibo, et al. areconsidered to be
regular employees.Regular employment means that there was an
arrangement between the employee and theemployer that the former will
be engaged to perform activities which are necessary or desirableto the
usual business or trade of the latter. On the other hand, a
project employment is anarrangement for a specific project or
undertaking whose termination is determined by thecompletion of
the project.The nature of the employment does not depend solely on the
will or word of the employeror on the procedure for hiring and the manner
of designating the employee. Rather, the nature ofthe employment
depends on the nature of the activities to be performed by the
employee,considering the nature of the employer’s business, the
duration and scope to be done.Accordingly, Acibo, et al. are neither
project nor seasonal employees.Acibo, et al. were made to perform tasks
that does not pertain to milling operations ofURSUMCO. However, their
duties are regularly and habitually needed in URSUMCO’s
operation. Moreover, they were regularly and repeatedly hired to perform
the same tasks. Beingrepeatedly hired for the same purpose makes them
regularized employees.The plantation workers or the mill employees do not
work continuously for 1 whole yearbut only for the duration of the growing
or the sugarcane or the milling season. Their seasonalwork, however, does
not detract from considering them in regular employment.

4)
Jaime Gapayao vs Rosario Fulo et al | Uber Digests

"x x x.

HELD: Yes. Fulo was a regular employee and was thus entitled to receive
SSS benefits, among others. The Supreme Court agreed with the Court of
Appeals in ruling that it “does not follow that a person who does not
observe normal hours of work cannot be deemed an employee.” It is also
not material that Gapayao never supervised Fulo.

In this case, the number of hours worked is not material. Gapayao is

considered a pakyaw worker. Pakyaw workers are considered regular
employees for as long as their employers have control over them. The
power of the employer to control the work of the employee is considered
the most significant determinant of the existence of an employer-employee
relationship. This is the so-called control test and is premised on whether
the person for whom the services are performed reserves the right to
control both the end achieved and the manner and means used to achieve
that end.” It should be remembered that the control test merely calls for the
existence of the right to control, and not necessarily the exercise thereof. It
is not essential that the employer actually supervises the performance of
duties by the employee. It is enough that the former has a right to wield the
power.

Teachers & Professors

1)

G.R. No. 178835 February 13, 2009

MAGIS YOUNG ACHIEVERS' LEARNING CENTER and MRS. VIOLETA

T. CARIÑO, Petitioners,
vs.
ADELAIDA P. MANALO, Respondent.

DECISION

NACHURA, J.:

This is a petition for review on certiorari of the Decision dated January 31,
2007 and of the Resolution dated June 29, 2007 of the Court of Appeals
(CA) in CA-G.R. SP No. 93917 entitled Magis Young Achievers’ Learning
Center and Violeta T. Cariño v. National Labor Relations Commission,
3rd Division, Quezon City, and Adelaida P. Manalo.

The pertinent facts are as follows:

On April 18, 2002, respondent Adelaida P. Manalo was hired as a teacher

and acting principal of petitioner Magis Young Achievers’ Learning Center
with a monthly salary of ₱15,000.00.
It appears on record that respondent, on March 29, 2003, wrote a letter of
resignation addressed to Violeta T. Cariño, directress of petitioner, which
reads:

Dear Madame:

I am tendering my irrevocable resignation effective April 1, 2003 due to

personal and family reasons.

I would like to express my thanks and gratitude for the opportunity, trust
and confidence given to me as an Acting Principal in your prestigious
school.

God bless and more power to you.

Sincerely yours,

(Signed)
Mrs. ADELAIDA P. MANALO1

On March 31, 2003, respondent received a letter of termination from

petitioner, viz.:

Dear Mrs. Manalo:

Greetings of Peace!

The Board of Trustees of the Cariño Group of Companies, particularly that

of Magis Young Achievers’ Learning Center convened, deliberated and
came up with a Board Resolution that will strictly impose all means possible
to come up with a cost-cutting scheme. Part of that scheme is a systematic
reorganization which will entail streamlining of human resources.

As agreed upon by the Board of Directors, the position of PRINCIPAL will

be abolished next school year. Therefore, we regret to inform you that we
can no longer renew your contract, which will expire on March 31, 2003.
Thus, thank you for the input you have given to Magis during your term of
office as Acting Principal. The function of the said position shall be
delegated to other staff members in the organization.
Hoping for your understanding on this matter and we pray for your future
endeavors.

Very truly yours,

(Signed)
Mrs. Violeta T. Cariño
School Directress

Noted by:

(Signed)
Mr. Severo Cariño
President2

On April 4, 2003, respondent instituted against petitioner a Complaint3 for

illegal dismissal and non-payment of 13th month pay, with a prayer for
reinstatement, award of full backwages and moral and exemplary
damages.

In her position paper,4 respondent claimed that her termination violated the
provisions of her employment contract, and that the alleged abolition of the
position of Principal was not among the grounds for termination by an
employer under Article 2825 of the Labor Code. She further asserted that
petitioner infringed Article 2836 of the Labor Code, as the required 30-day
notice to the Department of Labor and Employment (DOLE) and to her as
the employee, and the payment of her separation pay were not complied
with. She also claimed that she was terminated from service for the alleged
expiration of her employment, but that her contract did not provide for a
fixed term or period. She likewise prayed for the payment of her 13th month
pay under Presidential Decree (PD) No. 851.

Petitioner, in its position paper,7 countered that respondent was legally

terminated because the one-year probationary period, from April 1, 2002 to
March 3, 2003, had already lapsed and she failed to meet the criteria set by
the school pursuant to the Manual of Regulation for Private Schools,
adopted by the then Department of Education, Culture and Sports (DECS),
paragraph 75 of which provides that:

(75) Full-time teachers who have rendered three years of satisfactory

service shall be considered permanent.
On December 3, 2003, Labor Arbiter (LA) Renell Joseph R. dela Cruz
rendered a Decision8 dismissing the complaint for illegal dismissal,
including the other claims of respondent, for lack of merit, except that it
ordered the payment of her 13th month pay in the amount of ₱3,750.00.
The LA ratiocinated in this wise:

It is our considered opinion [that] complainant was not dismissed, much

less, illegally. On the contrary, she resigned. It is hard for us to imagine
complainant would accede to sign a resignation letter as a precondition to
her hiring considering her educational background. Thus, in the absence of
any circumstance tending to show she was probably coerced her
resignation must be upheld. x x x

x x x The agreement (Annex "1" to Respondent’s [petitioner’s] Position

Paper; Annex "A" to Complainant’s Position Paper) by its very nature and
terms is a contract of employment with a period (from 01 April 2002 to 31
March 2003, Annex ‘1’ to Respondent’s Position Paper). Complainant’s
observation that the space reserved for the duration and effectivity of the
contract was left blank (Annex ‘A’ to Complainant’s [respondent’s] Position
Paper) to our mind is plain oversight. Read in its entirety, it is a standard
contract which by its very terms and conditions speaks of a definite period
of employment. The parties could have not thought otherwise. The
notification requirement in the contract in case of "termination before the
expiration of the period" confirms it. x x x

On appeal, on October 28, 2005, the National Labor Relations Commission

(NLRC), Third Division,9 in its Decision10 dated October 28, 2005, reversed
the Arbiter’s judgment. Petitioner was ordered to reinstate respondent as a
teacher, who shall be credited with one-year service of probationary
employment, and to pay her the amounts of ₱3,750.00 and ₱325,000.00
representing her 13th month pay and backwages, respectively. Petitioner’s
motion for reconsideration was denied in the NLRC’s Resolution11 dated
January 31, 2006.

Imputing grave abuse of discretion on the part of the NLRC, petitioner went
up to the CA via a petition for certiorari. The CA, in its Decision dated
January 31, 2007, affirmed the NLRC decision and dismissed the petition.
It likewise denied petitioner’s motion for reconsideration in the Resolution
dated June 29, 2007. Hence, this petition anchored on the following
grounds—
I. THE COURT OF APPEALS ERRED WHEN IT CONCLUDED THAT THE
RESIGNATION OF RESPONDENT MANALO DID NOT BECOME
EFFECTIVE DUE TO ALLEGED LACK OF ACCEPTANCE;

II. THE COURT OF APPEALS ERRED WHEN IT RULED THAT

RESPONDENT MANALO IS A PERMANENT EMPLOYEE;

III. THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE

CONTRACT OF EMPLOYMENT BETWEEN PETITIONER AND
RESPONDENT DID NOT STIPULATE A PERIOD.12

Before going to the core issues of the controversy, we would like to restate
basic legal principles governing employment of secondary school teachers
in private schools, specifically, on the matter of probationary employment.

A probationary employee or probationer is one who is on trial for an

employer, during which the latter determines whether or not he is qualified
for permanent employment. The probationary employment is intended to
afford the employer an opportunity to observe the fitness of a probationary
employee while at work, and to ascertain whether he will become an
efficient and productive employee. While the employer observes the
fitness, propriety and efficiency of a probationer to ascertain whether he is
qualified for permanent employment, the probationer, on the other hand,
seeks to prove to the employer that he has the qualifications to meet the
reasonable standards for permanent employment. Thus, the word
probationary, as used to describe the period of employment, implies the
purpose of the term or period, not its length.13

Indeed, the employer has the right, or is at liberty, to choose who will be
hired and who will be declined. As a component of this right to select his
employees, the employer may set or fix a probationary period within which
the latter may test and observe the conduct of the former before hiring him
permanently.14

But the law regulates the exercise of this prerogative to fix the period of
probationary employment. While there is no statutory cap on the minimum
term of probation, the law sets a maximum "trial period" during which the
employer may test the fitness and efficiency of the employee.

The general rule on the maximum allowable period of probationary

employment is found in Article 281 of the Labor Code, which states:
Art. 281. Probationary Employment. – Probationary employment shall not
exceed six (6) months from the date the employee started working, unless
it is covered by an apprenticeship agreement stipulating a longer period.
The services of an employee who has been engaged on a probationary
basis may be terminated for a just cause or when he fails to qualify as a
regular employee in accordance with reasonable standards made known
by the employer at the time of his engagement. An employee who is
allowed to work after a probationary period shall be considered a regular
employee.1avvphi1.zw+

This upper limit on the term of probationary employment, however, does

not apply to all classes of occupations.

For "academic personnel" in private schools, colleges and universities,

probationary employment is governed by Section 92 of the 1992 Manual of
Regulations for Private Schools15 (Manual), which reads:

Section 92. Probationary Period. – Subject in all instances to compliance

with the Department and school requirements, the probationary period for
academic personnel shall not be more than three (3) consecutive years of
satisfactory service for those in the elementary and secondary levels, six
(6) consecutive regular semesters of satisfactory service for those in the
tertiary level, and nine (9) consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses are offered on a
trimester basis.16

This was supplemented by DOLE-DECS-CHED-TESDA Order No. 1 dated

February 7, 1996, which provides that the probationary period for academic
personnel shall not be more than three (3) consecutive school years of
satisfactory service for those in the elementary and secondary levels.17 By
this supplement, it is made clear that the period of probation for academic
personnel shall be counted in terms of "school years," and not "calendar
years."18Then, Section 4.m(4)[c] of the Manual delineates the coverage of
Section 92, by defining the term "academic personnel" to include:

(A)ll school personnel who are formally engaged in actual teaching service
or in research assignments, either on full-time or part-time basis; as well as
those who possess certain prescribed academic functions directly
supportive of teaching, such as registrars, librarians, guidance counselors,
researchers, and other similar persons. They include school officials
responsible for academic matters, and may include other school officials.19

The reason for this disparate treatment was explained many years ago in
Escudero v. Office of the President of the Philippines,20 where the Court
declared:

However, the six-month probationary period prescribed by the Secretary of

Labor is merely the general rule. x x x

It is, thus, clear that the Labor Code authorizes different probationary
periods, according to the requirements of the particular job. For private
school teachers, the period of probation is governed by the 1970 Manual of
Regulations for Private Schools x x x.21

The probationary period of three years for private school teachers was, in
fact, confirmed earlier in Labajo v. Alejandro,22 viz.:

The three (3)-year period of service mentioned in paragraph 75 (of the

Manual of Regulations for Private Schools) is of course the maximum
period or upper limit, so to speak, of probationary employment allowed in
the case of private school teachers. This necessarily implies that a regular
or permanent employment status may, under certain conditions, be
attained in less than three (3) years. By and large, however, whether or not
one has indeed attained permanent status in one’s employment, before the
passage of three (3) years, is a matter of proof.

Over the years, even with the enactment of a new Labor Code and the
revision of the Manual, the rule has not changed.

Thus, for academic personnel in private elementary and secondary

schools, it is only after one has satisfactorily completed the probationary
period of three (3) school years and is rehired that he acquires full tenure
as a regular or permanent employee. In this regard, Section 93 of the
Manual pertinently provides:

Sec. 93. Regular or Permanent Status. - Those who have served the
probationary period shall be made regular or permanent. Full-time teachers
who have satisfactorily completed their probationary period shall be
considered regular or permanent.
Accordingly, as held in Escudero, no vested right to a permanent
appointment shall accrue until the employee has completed the
prerequisite three-year period necessary for the acquisition of a permanent
status. Of course, the mere rendition of service for three consecutive years
does not automatically ripen into a permanent appointment. It is also
necessary that the employee be a full-time teacher, and that the services
he rendered are satisfactory.23

The common practice is for the employer and the teacher to enter into a
contract, effective for one school year. At the end of the school year, the
employer has the option not to renew the contract, particularly considering
the teacher’s performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another
school year, the probationary employment continues. Again, at the end of
that period, the parties may opt to renew or not to renew the contract. If
renewed, this second renewal of the contract for another school year would
then be the last year – since it would be the third school year – of
probationary employment. At the end of this third year, the employer may
now decide whether to extend a permanent appointment to the employee,
primarily on the basis of the employee having met the reasonable
standards of competence and efficiency set by the employer. For the entire
duration of this three-year period, the teacher remains under probation.
Upon the expiration of his contract of employment, being simply on
probation, he cannot automatically claim security of tenure and compel the
employer to renew his employment contract.24 It is when the yearly contract
is renewed for the third time that Section 93 of the Manual becomes
operative, and the teacher then is entitled to regular or permanent
employment status.

It is important that the contract of probationary employment specify the

period or term of its effectivity. The failure to stipulate its precise duration
could lead to the inference that the contract is binding for the full three-year
probationary period.25

All this does not mean that academic personnel cannot acquire permanent
employment status earlier than after the lapse of three years. The period of
probation may be reduced if the employer, convinced of the fitness and
efficiency of a probationary employee, voluntarily extends a permanent
appointment even before the three-year period ends. Conversely, if the
purpose sought by the employer is neither attained nor attainable within the
said period, the law does not preclude the employer from terminating the
probationary employment on justifiable ground;26 or, a shorter probationary
period may be incorporated in a collective bargaining agreement.27 But
absent any circumstances which unmistakably show that an abbreviated
probationary period has been agreed upon, the three-year probationary
term governs.

Be that as it may, teachers on probationary employment enjoy security of

tenure. In Biboso v. Victorias Milling Co., Inc.,28 we made the following
pronouncement:

This is, by no means, to assert that the security of tenure protection of the
Constitution does not apply to probationary employees. x x x During such
period, they could remain in their positions and any circumvention of their
rights, in accordance with the statutory scheme, is subject to inquiry and
thereafter correction by the Department of Labor.

The ruling in Biboso simply signifies that probationary employees enjoy

security of tenure during the term of their probationary employment. As
such, they cannot be removed except for cause as provided by law, or if at
the end of every yearly contract during the three-year period, the employee
does not meet the reasonable standards set by the employer at the time of
engagement. But this guarantee of security of tenure applies only during
the period of probation. Once that period expires, the constitutional
protection can no longer be invoked.29

All these principles notwithstanding, we do not discount the validity of fixed-

term employment where –

the fixed period of employment was agreed upon knowingly and voluntarily
by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances
vitiating his consent, or where it satisfactorily appears that the employer
and employee dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter.30

It does not necessarily follow that where the duties of the employees
consist of activities usually necessary or desirable in the usual business of
the employer, the parties are forbidden from agreeing on a period of time
for the performance of such activities.31 Thus, in St. Theresa’s School of
Novaliches Foundation v. NLRC,32 we held that a contractual stipulation
providing for a fixed term of nine (9) months, not being contrary to law,
morals, good customs, public order and public policy, is valid, binding and
must be respected, as it is the contract of employment that governs the
relationship of the parties.

Now, to the issues in the case at bench.

There should be no question that the employment of the respondent, as

teacher, in petitioner school on April 18, 2002 is probationary in character,
consistent with standard practice in private schools. In light of our
disquisition above, we cannot subscribe to the proposition that the
respondent has acquired regular or permanent tenure as teacher. She had
rendered service as such only from April 18, 2002 until March 31, 2003.
She has not completed the requisite three-year period of probationary
employment, as provided in the Manual. She cannot, by right, claim
permanent status.lawphil.net

There should also be no doubt that respondent’s appointment as Acting

Principal is merely temporary, or one that is good until another appointment
is made to take its place.33 An "acting" appointment is essentially a
temporary appointment, revocable at will. The undisturbed unanimity of
cases shows that one who holds a temporary appointment has no fixed
tenure of office; his employment can be terminated any time at the pleasure
of the appointing power without need to show that it is for cause.34 Further,
in La Salette of Santiago v. NLRC,35 we acknowledged the customary
arrangement in private schools to rotate administrative positions, e.g.,
Dean or Principal, among employees, without the employee so appointed
attaining security of tenure with respect to these positions.

We are also inclined to agree with the CA that the resignation of the
respondent36 is not valid, not only because there was no express
acceptance thereof by the employer, but because there is a cloud of doubt
as to the voluntariness of respondent’s resignation.

Resignation is the voluntary act of an employee who finds himself in a

situation where he believes that personal reasons cannot be sacrificed in
favor of the exigency of the service, and that he has no other choice but to
dissociate himself from employment.37 Voluntary resignation is made with
the intention of relinquishing an office, accompanied by the act of
abandonment.38 It is the acceptance of an employee’s resignation that
renders it operative.39

Furthermore, well-entrenched is the rule that resignation is inconsistent

with the filing of a complaint for illegal dismissal.40 To be valid, the
resignation must be unconditional, with the intent to operate as such; there
must be a clear intention to relinquish the position.41 In this case,
respondent actively pursued her illegal dismissal case against petitioner,
such that she cannot be said to have voluntarily resigned from her job.

What is truly contentious is whether the probationary appointment of the

respondent on April 18, 2002 was for a fixed period of one (1) year, or
without a fixed term, inasmuch as the parties presented different versions
of the employment agreement. As articulated by the CA:

In plain language, We are confronted with two (2) copies of an agreement,

one with a negative period and one provided for a one (1) year period for its
effectivity. Ironically, none among the parties offered corroborative
evidence as to which of the two (2) discrepancies is the correct one that
must be given effect. x x x.42

The CA resolved the impassé in this wise:

Under this circumstance, We can only apply Article 1702 of the Civil Code
which provides that, in case of doubt, all labor contracts shall be construed
in favor of the laborer. Then, too, settled is the rule that any ambiguity in a
contract whose terms are susceptible of different interpretations must be
read against the party who drafted it. In the case at bar, the drafter of the
contract is herein petitioners and must, therefore, be read against their
contention.43

We agree with the CA.

In this case, there truly existed a doubt as to which version of the

employment agreement should be given weight. In respondent’s copy, the
period of effectivity of the agreement remained blank. On the other hand,
petitioner’s copy provided for a one-year period, surprisingly from April 1,
2002 to March 31, 2003, even though the pleadings submitted by both
parties indicated that respondent was hired on April 18, 2002. What is
noticeable even more is that the handwriting indicating the one-year period
in petitioner’s copy is different from the handwriting that filled up the other
needed information in the same agreement.44

Thus, following Article 1702 of the Civil Code that all doubts regarding labor
contracts should be construed in favor of labor, then it should be
respondent’s copy which did not provide for an express period which
should be upheld, especially when there are circumstances that render the
version of petitioner suspect. This is in line with the State policy of affording
protection to labor, such that the lowly laborer, who is usually at the mercy
of the employer, must look up to the law to place him on equal footing with
his employer.45

In addition, the employment agreement may be likened into a contract of

adhesion considering that it is petitioner who insists that there existed an
express period of one year from April 1, 2002 to March 31, 2003, using as
proof its own copy of the agreement. While contracts of adhesion are valid
and binding, in cases of doubt which will cause a great imbalance of rights
against one of the parties, the contract shall be construed against the party
who drafted the same. Hence, in this case, where the very employment of
respondent is at stake, the doubt as to the period of employment must be
construed in her favor.

The other issue to resolve is whether respondent, even as a probationary

employee, was illegally dismissed. We rule in the affirmative.

As above discussed, probationary employees enjoy security of tenure

during the term of their probationary employment such that they may only
be terminated for cause as provided for by law, or if at the end of the
probationary period, the employee failed to meet the reasonable standards
set by the employer at the time of the employee’s engagement.
Undeniably, respondent was hired as a probationary teacher and, as such,
it was incumbent upon petitioner to show by competent evidence that she
did not meet the standards set by the school. This requirement, petitioner
failed to discharge. To note, the termination of respondent was effected by
that letter stating that she was being relieved from employment because
the school authorities allegedly decided, as a cost-cutting measure, that the
position of "Principal" was to be abolished. Nowhere in that letter was
respondent informed that her performance as a school teacher was less
than satisfactory.
Thus, in light of our ruling of Espiritu Santo Parochial School v.
NLRC46 that, in the absence of an express period of probation for private
school teachers, the three-year probationary period provided by the Manual
of Regulations for Private Schools must apply likewise to the case of
respondent. In other words, absent any concrete and competent proof that
her performance as a teacher was unsatisfactory from her hiring on April
18, 2002 up to March 31, 2003, respondent is entitled to continue her
three-year period of probationary period, such that from March 31, 2003,
her probationary employment is deemed renewed for the following two
school years.47

Finally, we rule on the propriety of the monetary awards. Petitioner, as

employer, is entitled to decide whether to extend respondent a permanent
status by renewing her contract beyond the three-year period. Given the
acrimony between the parties which must have been generated by this
controversy, it can be said unequivocally that petitioner had opted not to
extend respondent’s employment beyond this period. Therefore, the award
of backwages as a consequence of the finding of illegal dismissal in favor
of respondent should be confined to the three-year probationary period.
Computing her monthly salary of ₱15,000.00 for the next two school years
(₱15,000.00 x 10 months x 2), respondent already having received her full
salaries for the year 2002-2003, she is entitled to a total amount of
₱300,000.00.48 Moreover, respondent is also entitled to receive her 13th
month pay correspondent to the said two school years, computed as yearly
salary, divided by 12 months in a year, multiplied by 2, corresponding to the
school years 2003-2004 and 2004-2005, or ₱150,000.00 / 12 months x 2 =
₱25,000.00. Thus, the NLRC was correct in awarding respondent the
amount of ₱325,000.00 as backwages, inclusive of 13th month pay for the
school years 2003-2004 and 2004-2005, and the amount of ₱3,750.00 as
pro-rated 13th month pay.

WHEREFORE, the petition is DENIED. The assailed Decision dated

January 31, 2007 and the Resolution dated June 29, 2007 of the Court of
Appeals are AFFIRMED.

SO ORDERED.

2)
G.R. No. 157788. March 08, 2005

SAINT MARY’S UNIVERSITY, represented by its President REV.

JESSIE M. HECHANOVA, CICM, Petitioners,
vs.
COURT OF APPEALS (Former Special Twelfth Division), NATIONAL
LABOR RELATIONS COMMISSION (Second Division) and MARCELO
A. DONELO, Respondents.

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision1 dated May 21, 2002 and
the Resolution2 dated February 12, 2003 of the Court of Appeals in CA-
G.R. SP No. 63240 which dismissed the petition for certiorari of St. Mary’s
University and its motion for reconsideration, respectively.

Respondent Marcelo Donelo started teaching on a contractual basis at St.

Mary’s University in 1992. In 1995, he was issued an appointment as an
Assistant Professor I. Later on, he was promoted to Assistant Professor III.
He taught until the first semester of school year 1999-2000 when the
school discontinued giving him teaching assignments. For this, respondent
filed a complaint for illegal dismissal against the university.

In its defense, petitioner St. Mary’s University showed that respondent was
merely a part-time instructor and, except for three semesters, carried a load
of less than eighteen units. Petitioner argued that respondent never
attained permanent or regular status for he was not a full-time teacher.
Further, petitioner showed that respondent was under investigation by the
university for giving grades to students who did not attend classes.
Petitioner alleged that respondent did not respond to inquiries relative to
the investigation. Instead, respondent filed the instant case against the
university.

The Labor Arbiter ruled that respondent was lawfully dismissed because he
had not attained permanent or regular status pursuant to the Manual of
Regulations for Private Schools. The Labor Arbiter held that only full-time
teachers with regular loads of at least 18 units, who have satisfactorily
completed three consecutive years of service qualify as permanent or
regular employees. 3
On appeal by respondent, the National Labor Relations Commission
(NLRC) reversed the Decision of the Labor Arbiter and ordered the
reinstatement of respondent without loss of seniority rights and privileges
with full backwages from the time his salaries were withheld until actual
reinstatement.4 It held that respondent was a full-time teacher as he did not
appear to have other regular remunerative employment and was paid on a
regular monthly basis regardless of the number of teaching hours. As a full-
time teacher and having taught for more than 3 years, respondent qualified
as a permanent or regular employee of the university.

Petitioner sought for reconsideration and pointed out that respondent was
also working for the Provincial Government of Nueva Vizcaya from 1993 to
1996. Nevertheless, the NLRC denied petitioner’s Motion for
Reconsideration. Aggrieved, petitioner elevated the matter to the Court of
Appeals, which affirmed the Decision of the NLRC.

Hence, this petition with a motion for temporary restraining order, alleging
that the Court of Appeals erred in:

…FINDING THAT THE RESPONDENT DONELO ATTAINED A

PERMANENT STATUS, THE SAID FINDING BEING CLEARLY
CONTRARY TO THE EVIDENCE AT HAND AND DEVOID OF BASIS IN
LAW.

…HOLDING THAT THE TWIN-NOTICE REQUIREMENT IMPOSED BY

LAW BEFORE TERMINATION OF EMPLOYMENT CAN BE LEGALLY
EFFECTED MUST BE COMPLIED WITH BY THE PETITIONER.

…AFFIRMING THE DECISION OF THE NATIONAL LABOR RELATIONS

COMMISSION IN ORDERING THE PETITIONER TO REINSTATE
RESPONDENT DONELO TO HIS FORMER POSITION WITHOUT LOSS
OF SENIORITY RIGHTS AND PRIVILEGES WITH FULL BACKWAGES
FROM THE TIME OF HIS DISMISSAL UNTIL ACTUALLY REINSTATED.5

Plainly, the ultimate questions before us are:

1. Was respondent a full-time teacher?

2. Had he attained permanent status?

3. Was he illegally dismissed?

Petitioner contends that respondent did not attain permanent status since
he did not carry a load of at least 18 units for three consecutive years; and
that only full-time teachers can attain permanent status. Further, since
respondent was not a permanent employee, the twin-notice requirement in
the termination of the latter’s employment did not apply.

Respondent argues that, as early as 1995, he had a permanent

appointment as Assistant Professor, and he was a permanent employee
regardless of the provisions of the Manual of Regulations for Private
Schools. He asserts that he should not be faulted for not carrying a load of
at least 18 units since the university unilaterally controls his load
assignment in the same manner that the university has the prerogative to
shorten his probationary period. He points out also that the present Manual
allows full-time teachers to hold other remunerative positions as long as
these do not conflict with the regular school day. Since he is a permanent
employee, respondent insists that petitioner’s failure to give him the
required notices constitutes illegal dismissal.

Section 93 of the 1992 Manual of Regulations for Private Schools, provides

that full-time teachers who have satisfactorily completed their probationary
period shall be considered regular or permanent.6 Furthermore, the
probationary period shall not be more than six consecutive regular
semesters of satisfactory service for those in the tertiary level. 7 Thus, the
following requisites must concur before a private school teacher acquires
permanent status: (1) the teacher is a full-time teacher; (2) the teacher
must have rendered three consecutive years of service; and (3) such
service must have been satisfactory.8

In the present case, petitioner claims that private respondent lacked the
requisite years of service with the university and also the appropriate
quality of his service, i.e., it is less than satisfactory. The basic question,
however, is whether respondent is a full-time teacher.

Section 45 of the 1992 Manual of Regulations for Private Schools provides

that full-time academic personnel are those meeting all the following
requirements:

a. Who possess at least the minimum academic qualifications prescribed

by the Department under this Manual for all academic personnel;
b. Who are paid monthly or hourly, based on the regular teaching loads as
provided for in the policies, rules and standards of the Department and the
school;

c. Whose total working day of not more than eight hours a day is devoted to
the school;

d. Who have no other remunerative occupation elsewhere requiring regular

hours of work that will conflict with the working hours in the school; and

e. Who are not teaching full-time in any other educational institution.

All teaching personnel who do not meet the foregoing qualifications are
considered part-time.

A perusal of the various orders of the then Department of Education,

Culture and Sports prescribing teaching loads shows that the regular full-
time load of a faculty member is in the range of 15 units to 24 units a
semester or term, depending on the courses taught. Part-time instructors
carry a load of not more than 12 units.9

The evidence on record reveals that, except for four non-consecutive

terms, respondent generally carried a load of twelve units or less from 1992
to 1999. There is also no evidence that he performed other functions for the
school when not teaching. These give the impression that he was merely a
part-time teacher.10 Although this is not conclusive since there are full-time
teachers who are allowed by the university to take fewer load, in this case,
respondent did not show that he belonged to the latter group, even after the
university presented his teaching record. With a teaching load of twelve
units or less, he could not claim he worked for the number of hours daily as
prescribed by Section 45 of the Manual. Furthermore, the records also
indubitably show he was employed elsewhere from 1993 to 1996.

Since there is no showing that respondent worked on a full-time basis for at

least three years, he could not have acquired a permanent status.11 A part-
time employee does not attain permanent status no matter how long he has
served the school.12 And as a part-timer, his services could be terminated
by the school without being held liable for illegal dismissal. Moreover, the
requirement of twin-notice applicable only to regular or permanent
employees could not be invoked by respondent.
Yet, this is not to say that part-time teachers may not have security of
tenure. The school could not lawfully terminate a part-timer before the end
of the agreed period without just cause. But once the period, semester, or
term ends, there is no obligation on the part of the school to renew the
contract of employment for the next period, semester, or term.

In this case, the contract of employment of the respondent was not

presented. However, judicial notice may be taken that contracts of
employment of part-time teachers are generally on a per semester or term
basis. In the absence of a specific agreement on the period of the contract
of employment, it is presumed to be for a term or semester. After the end of
each term or semester, the school does not have any obligation to give
teaching load to each and every part-time teacher. That petitioner did not
give any teaching assignment to the respondent during a given term or
semester, even if factually true, did not amount to an actionable violation of
respondent’s rights. It did not amount to illegal dismissal of the part-time
teacher.

The law, while protecting the rights of the employees, authorizes neither
the oppression nor destruction of the employer.13 And when the law tilts the
scale of justice in favor of labor, the scale should never be so tilted if the
result would be an injustice to the employer.14

WHEREFORE, the petition is GRANTED. The Decision dated May 21,

2002 and the Resolution dated February 12, 2003 of the Court of Appeals
in CA-G.R. SP No. 63240, which sustained those of the NLRC, are
NULLIFIED and SET ASIDE. The Decision of the Executive Labor Arbiter
of the Regional Arbitration Branch II, Tuguegarao City, Cagayan, is hereby
REINSTATED.

SO ORDERED.

3)

G.R. No. 183572 : April 13, 2010

YOLANDA M. MERCADO, CHARITO S. DE LEON, DIANA R. LACHICA,

MARGARITO M. ALBA, JR., and FELIX A. TONOG, Petitioners, v. AMA
COMPUTER COLLEGE-PARAÑAQUE CITY, INC. , Respondent.
 DECISION

BRION, J.:

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

Leon), Diana R. Lachica (Lachica), Margarito M. Alba, Jr. (Alba, Jr.,), and
Felix A. Tonog (Tonog), all former faculty members of AMA Computer
College-Parañaque City, Inc. (AMACC) - assail in this petition for review
on certiorari1cЃa the Court of Appeals' (CA) decision of November 29,

20072cЃa and its resolution of June 20, 20083cЃa that set aside the
National Labor Relations Commission's (NLRC) resolution dated July 18,
2005.4cЃa

THE FACTUAL ANTECEDENTS

The background facts are not disputed and are summarized below.

AMACC is an educational institution engaged in computer-based education

in the country. One of AMACC's biggest schools in the country is its branch
at Parañaque City. The petitioners were faculty members who started
teaching at AMACC on May 25, 1998. The petitioner Mercado was
engaged as a Professor 3, while petitioner Tonog was engaged as an
Assistant Professor 2. On the other hand, petitioners De Leon, Lachica and
Alba, Jr., were all engaged as Instructor 1.5cЃa The petitioners executed
individual Teacher's Contracts for each of the trimesters that they were
engaged to teach, with the following common stipulation:6

1. POSITION. The TEACHER has agreed to accept a non-tenured

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

For the school year 2000-2001, AMACC implemented new faculty

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

Because of AMACC's action on the salary increases, the petitioners filed a

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

On September 7, 2000, the petitioners individually received a

memorandum from AMACC, through Human Resources Supervisor Mary
Grace Beronia, informing them that with the expiration of their contract to
teach, their contract would no longer be renewed.10cЃa The
memorandum11cЃa entitled "Notice of Non-Renewal of Contract" states in
full:

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

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

You are hereby instructed to report to the HRD for further instruction.
Please bear in mind that as per company policy, you are required to
accomplish your clearance and turn-over all documents and
accountabilities to your immediate superior.

For your information and guidance

The petitioners amended their labor arbitration complaint to include the

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

AMACC contended in response that the petitioners worked under a

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

The Labor Arbiter Ruling

On March 15, 2002, Labor Arbiter (LA) Florentino R. Darlucio declared in

his decision14cЃa that the petitioners had been illegally dismissed, and
ordered AMACC to reinstate them to their former positions without loss of
seniority rights and to pay them full backwages, attorney's fees and 13th
month pay. The LA ruled that Article 281 of the Labor Code on probationary
employment applied to the case; that AMACC allowed the petitioners to
teach for the first semester of school year 2000-200; that AMACC did not
specify who among the petitioners failed to pass the PAST and who among
them did not comply with the other requirements of regularization,
promotions or increase in salary; and that the petitioners' dismissal could
not be sustained on the basis of AMACC's "vague and general allegations"
without substantial factual basis.15cЃa Significantly, the LA found no
"discrimination in the adjustments for the salary rate of the faculty members
based on the performance and other qualification which is an exercise of
management prerogative."16cЃa On this basis, the LA paid no heed to the
claims for salary increases.

The NLRC Ruling

On appeal, the NLRC in a Resolution dated July 18, 200517cЃa denied

AMACC's appeal for lack of merit and affirmed in toto the LA's ruling. The
NLRC, however, observed that the applicable law is Section 92 of the
Manual of Regulations for Private Schools (which mandates a probationary
period of nine consecutive trimesters of satisfactory service for academic
personnel in the tertiary level where collegiate courses are offered on a
trimester basis), not Article 281 of the Labor Code (which prescribes a
probationary period of six months) as the LA ruled. Despite this
observation, the NLRC affirmed the LA's finding of illegal dismissal since
the petitioners were terminated on the basis of standards that were only
introduced near the end of their probationary period.

The NLRC ruled that the new screening guidelines for the school year
2000-20001 cannot be imposed on the petitioners and their employment
contracts since the new guidelines were not imposed when the petitioners
were first employed in 1998. According to the NLRC, the imposition of the
new guidelines violates Section 6(d) of Rule I, Book VI of the Implementing
Rules of the Labor Code, which provides that "in all cases of probationary
employment, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at the time of
his engagement." Citing our ruling in Orient Express Placement Philippines
v. NLRC,18cЃa the NLRC stressed that the rudiments of due process
demand that employees should be informed beforehand of the conditions
of their employment as well as the basis for their advancement.

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

The CA Ruling

In a decision issued on November 29, 2007,19cЃa the CA granted AMACC's

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

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

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

The CA effectively found reasonable basis for AMACC not to renew the
petitioners' contracts. To the CA, the petitioners were not actually
dismissed; their respective contracts merely expired and were no longer
renewed by AMACC because they failed to satisfy the school's standards
for the school year 2000-2001 that measured their fitness and aptitude to
teach as regular faculty members. The CA emphasized that in the absence
of any evidence of bad faith on AMACC's part, the court would not disturb
or nullify its discretion to set standards and to select for regularization only
the teachers who qualify, based on reasonable and non-discriminatory
guidelines.

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

Finally, the CA found that the petitioners were hired on a non-tenured basis
and for a fixed and predetermined term based on the Teaching Contract
exemplified by the contract between the petitioner Lachica and AMACC.
The CA ruled that the non-renewal of the petitioners' teaching contracts is
sanctioned by the doctrine laid down in Brent School, Inc. v.
Zamora20cЃa where the Court recognized the validity of contracts providing
for fixed-period employment.

THE PETITION

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

1) The CA gravely erred in reversing the LA and NLRC illegal dismissal

rulings; and

2) The CA gravely erred in not ordering their reinstatement with full,

backwages.

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

On the merits, the petitioners argue that the applicable law on probationary
employment, as explained by the LA, is Article 281 of the Labor Code
which mandates a period of six (6) months as the maximum duration of the
probationary period unless there is a stipulation to the contrary; that the CA
should not have disturbed the LA's conclusion that the AMACC failed to
support its allegation that they did not qualify under the new guidelines
adopted for the school year 2000-2001; and that they were illegally
dismissed; their employment was terminated based on standards that were
not made known to them at the time of their engagement. On the whole,
the petitioners argue that the LA and the NLRC committed no grave abuse
of discretion that the CA can validly cite.

THE CASE FOR THE RESPONDENT

In their Comment,23cЃa AMACC notes that the petitioners raised no

substantial argument in support of their petition and that the CA correctly
found that the petitioners were hired on a non-tenured basis and for a fixed
or predetermined term. AMACC stresses that the CA was correct in
concluding that no actual dismissal transpired; it simply did not renew the
petitioners' respective employment contracts because of their poor
performance and failure to satisfy the school's standards.

AMACC also asserts that the petitioners knew very well that the applicable
standards would be revised and updated from time to time given the nature
of the teaching profession. The petitioners also knew at the time of their
engagement that they must comply with the school's regularization policies
as stated in the Faculty Manual. Specifically, they must obtain a passing
rating on the Performance Appraisal for Teachers (PAST) - the primary
instrument to measure the performance of faculty members.
Since the petitioners were not actually dismissed, AMACC submits that the
CA correctly ruled that they are not entitled to reinstatement, full
backwages and attorney's fees.

THE COURT'S RULING

We find the petition meritorious.

The CA's Review of Factual Findings under Rule 65

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

Rule 65 of the Rules of Court, the CA does not assess and weigh each
piece of evidence introduced in the case. The CA only examines the factual
findings of the NLRC to determine whether or not the conclusions are
supported by substantial evidence whose absence points to grave abuse of
discretion amounting to lack or excess of jurisdiction.24cЃa In the recent
case of Protacio v. Laya Mananghaya & Co.,25cЃa we emphasized that:

As a general rule, in certiorari proceedings under Rule 65 of the Rules of

Court, the appellate court does not assess and weigh the sufficiency of
evidence upon which the Labor Arbiter and the NLRC based their
conclusion. The query in this proceeding is limited to the determination of
whether or not the NLRC acted without or in excess of its jurisdiction or
with grave abuse of discretion in rendering its decision. However, as an
exception, the appellate court may examine and measure the factual
findings of the NLRC if the same are not supported by substantial
evidence. The Court has not hesitated to affirm the appellate court's
reversals of the decisions of labor tribunals if they are not supported by
substantial evidence. [Emphasis supplied]

As discussed below, our review of the records and of the CA decision

shows that the CA erred in recognizing that grave abuse of discretion
attended the NLRC's conclusion that the petitioners were illegally
dismissed. Consistent with this conclusion, the evidence on record show
that AMACC failed to discharge its burden of proving by substantial
evidence the just cause for the non-renewal of the petitioners' contracts.

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

approach in the review of Rule 65 decisions of the CA in labor cases, as
follows:
In a Rule 45 review, we consider the correctness of the assailed CA
decision, in contrast with the review for jurisdictional error that we
undertake under Rule 65. Furthermore, Rule 45 limits us to the review of
questions of law raised against the assailed CA decision. In ruling for legal
correctness, we have to view the CA decision in the same context that the
petition 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. This is the approach that should be basic in a
Rule 45 review of a CA ruling in a labor case. In question form, the
question to ask is: Did the CA correctly determine whether the NLRC
committed grave abuse of discretion in ruling on the case?

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

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

Legal Environment in the Employment of Teachers

a. Rule on Employment on Probationary Status

A reality we have to face in the consideration of employment on

probationary status of teaching personnel is that they are not governed
purely by the Labor Code. The Labor Code is supplemented with respect to
the period of probation by special rules found in the Manual of Regulations
for Private Schools.27cЃa On the matter of probationary period, Section 92
of these regulations provides:

Section 92. Probationary Period. Subject in all instances to compliance with

the Department and school requirements, the probationary period for
academic personnel shall not be more than three (3) consecutive years of
satisfactory service for those in the elementary and secondary levels, six
(6) consecutive regular semesters of satisfactory service for those in the
tertiary level, and nine (9) consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses are offered on a
trimester basis. [Emphasis supplied]
The CA pointed this out in its decision (as the NLRC also did), and we
confirm the correctness of this conclusion. Other than on the period, the
following quoted portion of Article 281 of the Labor Code still fully applies:

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

probationary basis may be terminated for a just cause when he fails to
qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee. [Emphasis supplied]

b. Fixed-period Employment

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

The common practice is for the employer and the teacher to enter into a
contract, effective for one school year. At the end of the school year, the
employer has the option not to renew the contract, particularly considering
the teacher's performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another
school year, the probationary employment continues. Again, at the end of
that period, the parties may opt to renew or not to renew the contract. If
renewed, this second renewal of the contract for another school year would
then be the last year - since it would be the third school year - of
probationary employment. At the end of this third year, the employer may
now decide whether to extend a permanent appointment to the employee,
primarily on the basis of the employee having met the reasonable
standards of competence and efficiency set by the employer. For the entire
duration of this three-year period, the teacher remains under probation.
Upon the expiration of his contract of employment, being simply on
probation, he cannot automatically claim security of tenure and compel the
employer to renew his employment contract. It is when the yearly contract
is renewed for the third time that Section 93 of the Manual becomes
operative, and the teacher then is entitled to regular or permanent
employment status.
It is important that the contract of probationary employment specify the
period or term of its effectivity. The failure to stipulate its precise duration
could lead to the inference that the contract is binding for the full three-year
probationary period.

We have long settled the validity of a fixed-term contract in the case Brent
School, Inc. v. Zamora29cЃa that AMACC cited. Significantly, Brent
happened in a school setting. Care should be taken, however, in reading
Brent in the context of this case as Brent did not involve any probationary
employment issue; it dealt purely and simply with the validity of a fixed-term
employment under the terms of the Labor Code, then newly issued and
which does not expressly contain a provision on fixed-term employment.

c. Academic and Management Prerogative

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

The institutional academic freedom includes the right of the school or

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

AMACC's right to academic freedom is particularly important in the present

case, because of the new screening guidelines for AMACC faculty put in
place for the school year 2000-2001. We agree with the CA that AMACC
has the inherent right to establish high standards of competency and
efficiency for its faculty members in order to achieve and maintain
academic excellence. The school's prerogative to provide standards for its
teachers and to determine whether or not these standards have been met
is in accordance with academic freedom that gives the educational
institution the right to choose who should teach.32cЃa In Peña v. National
Labor Relations Commission,33cЃa we emphasized:
It is the prerogative of the school to set high standards of efficiency for its
teachers since quality education is a mandate of the Constitution. As long
as the standards fixed are reasonable and not arbitrary, courts are not at
liberty to set them aside. Schools cannot be required to adopt standards
which barely satisfy criteria set for government recognition.

The same academic freedom grants the school the autonomy to decide for
itself the terms and conditions for hiring its teacher, subject of course to the
overarching limitations under the Labor Code. Academic freedom, too, is
not the only legal basis for AMACC's issuance of screening guidelines. The
authority to hire is likewise covered and protected by its management
prerogative - the right of an employer to regulate all aspects of
employment, such as hiring, the freedom to prescribe work assignments,
working methods, process to be followed, regulation regarding transfer of
employees, supervision of their work, lay-off and discipline, and dismissal
and recall of workers.34cЃa Thus, AMACC has every right to determine for
itself that it shall use fixed-term employment contracts as its medium for
hiring its teachers. It also acted within the terms of the Manual of
Regulations for Private Schools when it recognized the petitioners to be
merely on probationary status up to a maximum of nine trimesters.

The Conflict: Probationary Status

and Fixed-term Employment

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

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

The provision on employment on probationary status under the Labor

Code35cЃa is a primary example of the fine balancing of interests between
labor and management that the Code has institutionalized pursuant to the
underlying intent of the Constitution.36cЃa

On the one hand, employment on probationary status affords management

the chance to fully scrutinize the true worth of hired personnel before the
full force of the security of tenure guarantee of the Constitution comes into
play.37cЃa Based on the standards set at the start of the probationary
period, management is given the widest opportunity during the probationary
period to reject hirees who fail to meet its own adopted but reasonable
standards.38cЃa These standards, together with the just39cЃa and
authorized causes40cЃa for termination of employment the Labor Code
expressly provides, are the grounds available to terminate the employment
of a teacher on probationary status. For example, the school may impose
reasonably stricter attendance or report compliance records on teachers on
probation, and reject a probationary teacher for failing in this regard,
although the same attendance or compliance record may not be required
for a teacher already on permanent status. At the same time, the same just
and authorizes causes for dismissal under the Labor Code apply to
probationary teachers, so that they may be the first to be laid-off if the
school does not have enough students for a given semester or trimester.
Termination of employment on this basis is an authorized cause under the
Labor Code.41cЃa

Labor, for its part, is given the protection during the probationary period of
knowing the company standards the new hires have to meet during the
probationary period, and to be judged on the basis of these standards,
aside from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards
should be made known to the teachers on probationary status at the start
of their probationary period, or at the very least under the circumstances of
the present case, at the start of the semester or the trimester during which
the probationary standards are to be applied. Of critical importance in
invoking a failure to meet the probationary standards, is that the school
should show - as a matter of due process - how these standards have been
applied. This is effectively the second notice in a dismissal situation that the
law requires as a due process guarantee supporting the security of tenure
provision,42cЃa and is in furtherance, too, of the basic rule in employee
dismissal that the employer carries the burden of justifying a
dismissal.43cЃa These rules ensure compliance with the limited security of
tenure guarantee the law extends to probationary employees.44cЃa
When fixed-term employment is brought into play under the above
probationary period rules, the situation - as in the present case - may at
first blush look muddled as fixed-term employment is in itself a valid
employment mode under Philippine law and jurisprudence.45cЃa The
conflict, however, is more apparent than real when the respective nature of
fixed-term employment and of employment on probationary status are
closely examined.

The fixed-term character of employment essentially refers to the period

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

Understood in the above sense, the essentially protective character of

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

Under the given facts where the school year is divided into trimesters, the
school apparently utilizes its fixed-term contracts as a convenient
arrangement dictated by the trimestral system and not because the
workplace parties really intended to limit the period of their relationship to
any fixed term and to finish this relationship at the end of that term. If we
pierce the veil, so to speak, of the parties' so-called fixed-term employment
contracts, what undeniably comes out at the core is a fixed-term contract
conveniently used by the school to define and regulate its relations with its
teachers during their probationary period.
To be sure, nothing is illegitimate in defining the school-teacher relationship
in this manner. The school, however, cannot forget that its system of fixed-
term contract is a system that operates during the probationary period and
for this reason is subject to the terms of Article 281 of the Labor Code.
Unless this reconciliation is made, the requirements of this Article on
probationary status would be fully negated as the school may freely choose
not to renew contracts simply because their terms have expired. The
inevitable effect of course is to wreck the scheme that the Constitution and
the Labor Code established to balance relationships between labor and
management.

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

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

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

If the school were to apply the probationary standards (as in fact it says it
did in the present case), these standards must not only be reasonable but
must have also been communicated to the teachers at the start of the
probationary period, or at the very least, at the start of the period when they
were to be applied. These terms, in addition to those expressly provided by
the Labor Code, would serve as the just cause for the termination of the
probationary contract. As explained above, the details of this finding of just
cause must be communicated to the affected teachers as a matter of due
process.
AMACC, by its submissions, admits that it did not renew the petitioners'
contracts because they failed to pass the Performance Appraisal System
for Teachers (PAST) and other requirements for regularization that the
school undertakes to maintain its high academic standards.47cЃa The
evidence is unclear on the exact terms of the standards, although the
school also admits that these were standards under the Guidelines on the
Implementation of AMACC Faculty Plantilla put in place at the start of
school year 2000-2001.

While we can grant that the standards were duly communicated to the
petitioners and could be applied beginning the 1st trimester of the school
year 2000-2001, glaring and very basic gaps in the school's evidence still
exist. The exact terms of the standards were never introduced as evidence;
neither does the evidence show how these standards were applied to the
petitioners.48cЃaWithout these pieces of evidence (effectively, the finding of
just cause for the non-renewal of the petitioners' contracts), we have
nothing to consider and pass upon as valid or invalid for each of the
petitioners. Inevitably, the non-renewal (or effectively, the termination of
employment of employees on probationary status) lacks the supporting
finding of just cause that the law requires and, hence, is illegal.

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

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

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

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

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

hereby DIRECTED to pay separation pay computed on a trimestral basis
from the time of separation from service up to the end of the complete
trimester preceding the finality of this Decision. For greater certainty, the
petitioners are entitled to:

(a) backwages and 13th month pay computed from September 7, 2000 (the
date AMA Computer College-Parañaque City, Inc. illegally dismissed the
petitioners) up to the finality of this Decision;

(b) monthly honoraria (if applicable) computed from September 7, 2000

(the time of separation from service) up to the finality of this Decision; and

(c) separation pay on a trimestral basis from September 7, 2000 (the time
of separation from service) up to the end of the complete trimester
preceding the finality of this Decision.

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

according to the above directives. No costs.

SO ORDERED.

4)

G.R. No. 170388 September 4, 2013

COLEGIO DEL SANTISIMO ROSARIO AND SR. ZENAIDA S. MOFADA,

OP, PETITIONERS,
vs.
EMMANUEL ROJO,* RESPONDENT.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the August 31, 2005
Decision2 and the November 10, 2005 Resolution3 of the Court of Appeals
(CA) in CA-G.R. SP No. 85188, which affirmed the July 31, 2003
Decision4 of the National Labor Relations Commission (NLRC). Said NLRC
Decision affirmed with modification the October 7, 2002 Decision5 of the
Labor Arbiter (LA) which, in turn, granted respondent Emmanuel Rojo’s
(respondent) Complaint6 for illegal dismissal.

Factual Antecedents

Petitioner Colegio del Santisimo Rosario (CSR) hired respondent as a high

school teacher on probationary basis for the school years 1992-1993,
1993-19947 and 1994-1995.8

On April 5, 1995, CSR, through petitioner Sr. Zenaida S. Mofada, OP

(Mofada), decided not to renew respondent’s services.9

Thus, on July 13, 1995, respondent filed a Complaint10 for illegal dismissal.
He alleged that since he had served three consecutive school years which
is the maximum number of terms allowed for probationary employment, he
should be extended permanent employment. Citing paragraph 75 of the
1970 Manual of Regulations for Private Schools (1970 Manual), respondent
asserted that "full- time teachers who have rendered three (3) consecutive
years of satisfactory services shall be considered permanent."11

On the other hand, petitioners argued that respondent knew that his
Teacher’s Contract for school year 1994-1995 with CSR would expire on
March 31, 1995.12 Accordingly, respondent was not dismissed but his
probationary contract merely expired and was not renewed.13 Petitioners
also claimed that the "three years" mentioned in paragraph 75 of the 1970
Manual refer to "36 months," not three school years.14 And since
respondent served for only three school years of 10 months each or 30
months, then he had not yet served the "three years" or 36 months
mentioned in paragraph 75 of the 1970 Manual.15

Ruling of the Labor Arbiter

The LA ruled that "three school years" means three years of 10 months, not
12 months.16 Considering that respondent had already served for three
consecutive school years, then he has already attained regular
employment status. Thus, the non-renewal of his contract for school year
1995-1996 constitutes illegal dismissal.17
The LA also found petitioners guilty of bad faith when they treated
respondent’s termination merely as the expiration of the third employment
contract and when they insisted that the school board actually deliberated
on the non-renewal of respondent’s employment without submitting
admissible proof of his alleged regular performance evaluation.18

The dispositive portion of the LA’s Decision19 reads:

WHEREFORE, premises considered, judgment is hereby rendered

ordering the [petitioners]:

1. To pay [respondent] the total amount of ₱39,252.00 corresponding

to his severance compensation and 13th month pay, moral and
exemplary damages.

2. To pay 10% of the total amount due to [respondent] as attorney’s

fees.

All other claims are dismissed for lack of merit.

SO ORDERED.20

Ruling of the National Labor Relations Commission

On appeal, the NLRC affirmed the LA’s Decision with modification. It held
that after serving three school years, respondent had attained the status of
regular employment21 especially because CSR did not make known to
respondent the reasonable standards he should meet.22 The NLRC also
agreed with the LA that respondent’s termination was done in bad faith. It
held that respondent is entitled to reinstatement, if viable; or separation
pay, if reinstatement was no longer feasible, and backwages, viz:

WHEREFORE, premises considered, the appealed Decision is hereby,

AFFIRMED with MODIFICATION only insofar as the award of separation
pay is concerned. Since [respondent] had been illegally dismissed,
[petitioner] Colegio Del Santisimo Rosario is hereby ordered to reinstate
him to his former position without loss of seniority rights with full backwages
until he is actually reinstated. However, if reinstatement is no longer
feasible, the respondent shall pay separation pay, in [addition] to the
payment of his full backwages.
The Computation Division is hereby directed to compute [respondent’s] full
backwages to be attached and to form part of this Decision.

The rest of the appealed Decision stands.

SO ORDERED.23

Petitioners moved for reconsideration which the NLRC denied in its April
28, 2004 Resolution24 for lack of merit.

Ruling of the Court of Appeals

Petitioners filed a Petition for Certiorari25 before the CA alleging grave

abuse of discretion on the part of the NLRC in finding that respondent had
attained the status of a regular employee and was illegally dismissed from
employment.

In a Decision26 dated August 31, 2005, the CA denied the Petition for lack
of merit. Citing Cagayan Capitol College v. National Labor Relations
Commission,27 it held that respondent has satisfied all the requirements
necessary to acquire permanent employment and security of tenure viz:

1. The teacher is a full-time teacher;

2. The teacher must have rendered three (3) consecutive years of

service; and

3. Such service must be satisfactory.28

According to the CA, respondent has attained the status of a regular

employee after he was employed for three consecutive school years as a
full-time teacher and had served CSR satisfactorily. Aside from being a
high school teacher, he was also the Prefect of Discipline, a task entailing
much responsibility. The only reason given by Mofada for not renewing
respondent’s contract was the alleged expiration of the contract, not any
unsatisfactory service. Also, there was no showing that CSR set
performance standards for the employment of respondent, which could be
the basis of his satisfactory or unsatisfactory performance. Hence, there
being no reasonable standards made known to him at the time of his
engagement, respondent was deemed a regular employee and was, thus,
declared illegally dismissed when his contract was not renewed.
Petitioners moved for reconsideration. However, the CA denied the motion
for lack of merit in its November 10, 2005 Resolution.29

Hence, the instant Petition. Incidentally, on May 23, 2007, we issued a

Resolution30 directing the parties to maintain the status quo pending the
resolution of the present Petition.

Issue

WHETHER THE COURT OF APPEALS [AS WELL AS THE NATIONAL

LABOR RELATIONS COMMISSION] COMMITTED GRIEVOUS AND
REVERSIBLE ERROR WHEN IT RULED THAT A BASIC EDUCATION
(ELEMENTARY) TEACHER HIRED FOR THREE (3) CONSECUTIVE
SCHOOL YEARS AS A PROBATIONARY EMPLOYEE AUTOMATICALLY
AND/OR BY LAW BECOMES A PERMANENT EMPLOYEE UPON
COMPLETION OF HIS THIRD YEAR OF PROBATION
NOTWITHSTANDING [A] THE PRONOUNCEMENT OF THIS
HONORABLE COURT IN COLEGIO SAN AGUSTIN V. NLRC, 201 SCRA
398 1991 THAT A PROBATIONARY TEACHER ACQUIRES PERMANENT
STATUS "ONLY WHEN HE IS ALLOWED TO WORK AFTER THE
PROBATIONARY PERIOD" AND [B] DOLE-DECS-CHED-TESDA ORDER
NO. 01, S. 1996 WHICH PROVIDE THAT TEACHERS WHO HAVE
SERVED THE PROBATIONARY PERIOD "SHALL BE MADE REGULAR
OR PERMANENT IF ALLOWED TO WORK AFTER SUCH
PROBATIONARY PERIOD."31

Petitioners maintain that upon the expiration of the probationary period,

both the school and the respondent were free to renew the contract or let it
lapse. Petitioners insist that a teacher hired for three consecutive years as
a probationary employee does not automatically become a regular
employee upon completion of his third year of probation. It is the positive
act of the school – the hiring of the teacher who has just completed three
consecutive years of employment on probation for the next school year –
that makes the teacher a regular employee of the school.

Our Ruling

We deny the Petition.

In Mercado v. AMA Computer College-Parañaque City, Inc.,32 we had

occasion to rule that cases dealing with employment on probationary status
of teaching personnel are not governed solely by the Labor Code as the
law is supplemented, with respect to the period of probation, by special
rules found in the Manual of Regulations for Private Schools (the Manual).
With regard to the probationary period, Section 92 of the 1992
Manual33 provides:

Section 92. Probationary Period. – Subject in all instances to compliance

with the Department and school requirements, the probationary period for
academic personnel shall not be more than three (3) consecutive years of
satisfactory service for those in the elementary and secondary levels, six
(6) consecutive regular semesters of satisfactory service for those in the
tertiary level, and nine (9) consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses are offered on a
trimester basis. (Emphasis supplied)

In this case, petitioners’ teachers who were on probationary employment

were made to enter into a contract effective for one school year. Thereafter,
it may be renewed for another school year, and the probationary
employment continues. At the end of the second fixed period of
probationary employment, the contract may again be renewed for the last
time.

Such employment for fixed terms during the teachers’ probationary period
is an accepted practice in the teaching profession. In Magis Young
Achievers’ Learning Center v. Manalo,34 we noted that:

The common practice is for the employer and the teacher to enter into a
contract, effective for one school year. At the end of the school year, the
employer has the option not to renew the contract, particularly considering
the teacher’s performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another
school year, the probationary employment continues. Again, at the end of
that period, the parties may opt to renew or not to renew the contract. If
renewed, this second renewal of the contract for another school year would
then be the last year – since it would be the third school year – of
probationary employment. At the end of this third year, the employer may
now decide whether to extend a permanent appointment to the employee,
primarily on the basis of the employee having met the reasonable
standards of competence and efficiency set by the employer. For the entire
duration of this three-year period, the teacher remains under probation.
Upon the expiration of his contract of employment, being simply on
probation, he cannot automatically claim security of tenure and compel the
employer to renew his employment contract. It is when the yearly contract
is renewed for the third time that Section 93 of the Manual becomes
operative, and the teacher then is entitled to regular or permanent
employment status. (Emphases supplied)

However, this scheme "of fixed-term contract is a system that operates

during the probationary period and for this reason is subject to Article 281
of the Labor Code,"35 which provides:

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

probationary basis may be terminated for a just cause or when he fails to
qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of his
engagement. An employee who is allowed to work after a probationary
period shall be considered a regular employee. [Emphasis supplied]

In Mercado, we held that "[u]nless this reconciliation is made, the

requirements of [Article 281 on probationary status would be fully negated
as the school may freely choose not to renew contracts simply because
their terms have expired."36 This will have an unsettling effect in the
equilibrium vis-a-vis the relations between labor and management that the
Constitution and Labor Code have worked hard to establish.

That teachers on probationary employment also enjoy the protection

afforded by Article 281 of the Labor Code is supported by Section 93 of the
1992 Manual which provides:

Sec. 93. Regular or Permanent Status. - Those who have served the
probationary period shall be made regular or permanent. Full-time teachers
who have satisfactorily completed their probationary period shall be
considered regular or permanent. (Emphasis supplied)

The above provision clearly provides that full-time teachers become regular
or permanent employees once they have satisfactorily completed the
probationary period of three school years.37 The use of the term
satisfactorily necessarily connotes the requirement for schools to set
reasonable standards to be followed by teachers on probationary
employment. For how else can one determine if probationary teachers
have satisfactorily completed the probationary period if standards therefor
are not provided?

As such, "no vested right to a permanent appointment shall accrue until the
employee has completed the prerequisite three-year period necessary for
the acquisition of a permanent status. [However, it must be emphasized
that] mere rendition of service for three consecutive years does not
automatically ripen into a permanent appointment. It is also necessary that
the employee be a full-time teacher, and that the services he rendered are
satisfactory."38

In Mercado, this Court, speaking through J. Brion, held that:

The provision on employment on probationary status under the Labor Code

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

On the one hand, employment on probationary status affords management

the chance to fully scrutinize the true worth of hired personnel before the
full force of the security of tenure guarantee of the Constitution comes into
play. Based on the standards set at the start of the probationary period,
management is given the widest opportunity during the probationary period
to reject hirees who fail to meet its own adopted but reasonable standards.
These standards, together with the just and authorized causes for
termination of employment [which] the Labor Code expressly provides, are
the grounds available to terminate the employment of a teacher on
probationary status. x x x

Labor, for its part, is given the protection during the probationary period of
knowing the company standards the new hires have to meet during the
probationary period, and to be judged on the basis of these standards,
aside from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards
should be made known to the teachers on probationary status at the start
of their probationary period, or at the very least under the circumstances of
the present case, at the start of the semester or the trimester during which
the probationary standards are to be applied. Of critical importance in
invoking a failure to meet the probationary standards, is that the school
should show – as a matter of due process – how these standards have
been applied. This is effectively the second notice in a dismissal situation
that the law requires as a due process guarantee supporting the security of
tenure provision, and is in furtherance, too, of the basic rule in employee
dismissal that the employer carries the burden of justifying a dismissal.
These rules ensure compliance with the limited security of tenure
guarantee the law extends to probationary employees.

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

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

The fixed-term character of employment essentially refers to the period

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

Understood in the above sense, the essentially protective character of

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

x x x If we pierce the veil, so to speak, of the parties’ so-called fixed-term

employment contracts, what undeniably comes out at the core is a fixed-
term contract conveniently used by the school to define and regulate its
relations with its teachers during their probationary period.39 (Emphasis
supplied; italics in the original)

In the same case, this Court has definitively pronounced that "in a situation
where the probationary status overlaps with a fixed-term contract not
specifically used for the fixed term it offers, Article 281 should assume
primacy and the fixed-period character of the contract must give way."40

An example given of a fixed-term contract specifically used for the fixed

term it offers is a replacement teacher or a reliever contracted for a period
of one year to temporarily take the place of a permanent teacher who is on
leave. The expiration of the reliever’s fixed-term contract does not have
probationary status implications as he or she was never employed on
probationary basis. This is because his or her employment is for a specific
purpose with particular focus on the term. There exists an intent to end his
or her employment with the school upon expiration of this term.41

However, for teachers on probationary employment, in which case a fixed

term contract is not specifically used for the fixed term it offers, it is
incumbent upon the school to have not only set reasonable standards to be
followed by said teachers in determining qualification for regular
employment, the same must have also been communicated to the teachers
at the start of the probationary period, or at the very least, at the start of the
period when they were to be applied. These terms, in addition to those
expressly provided by the Labor Code, would serve as the just cause for
the termination of the probationary contract.1âwphi1 The specific details of
this finding of just cause must be communicated to the affected teachers as
a matter of due process.42 Corollarily, should the teachers not have been
apprised of such reasonable standards at the time specified above, they
shall be deemed regular employees.

In Tamson’s Enterprises, Inc. v. Court of Appeals,43 we held that "[t]he law

is clear that in all cases of probationary employment, the employer shall
[convey] to the employee the standards under which he will qualify as a
regular employee at the time of his engagement. Where no standards are
made known to the employee at that time, he shall be deemed a regular
employee.

In this case, glaringly absent from petitioners’ evidence are the reasonable
standards that respondent was expected to meet that could have served as
proper guidelines for purposes of evaluating his performance. Nowhere in
the Teacher’s Contract44 could such standards be found.45 Neither was it
mentioned that the same were ever conveyed to respondent. Even
assuming that respondent failed to meet the standards set forth by CSR
and made known to the former at the time he was engaged as a teacher on
probationary status, still, the termination was flawed for failure to give the
required notice to respondent.46 This is because Book VI, Rule I, Section 2
of the IRR of the Labor Code provides:

Section 2. Security of Tenure. – (a) In cases of regular employment, the

employer shall not terminate the services of an employee except for just or
authorized causes as provided by law, and subject to the requirements of
due process.

(b) The foregoing shall also apply in cases of probationary

employment; provided, however, that in such cases, termination of
employment due to failure of the employee to qualify in accordance
with the standards of the employer made known to the former at the
time of engagement may also be a ground for termination of
employment.

xxxx

(d) In all cases of termination of employment, the following standards

of due process shall be substantially observed:

xxxx

If the termination is brought about by the completion of a contract or phase

thereof, or by failure of an employee to meet the standards of the employer
in the case of probationary employment, it shall be sufficient that a written
notice is served the employee, within a reasonable time from the effective
date of termination. (Emphasis supplied)

Curiously, despite the absence of standards, Mofada mentioned the

existence of alleged performance evaluations47in respondent’s case. We
are, however, in a quandary as to what could have been the basis of such
evaluation, as no evidence were adduced to show the reasonable
standards with which respondent’s performance was to be assessed or that
he was informed thereof. Notably too, none of the supposed performance
evaluations were presented. These flaws violated respondent’s right to due
process. As such, his dismissal is, for all intents and purposes, illegal.

As a matter of due process, teachers on probationary employment, just like

all probationary employees, have the right to know whether they have met
the standards against which their performance was evaluated. Should they
fail, they also have the right to know the reasons therefor.

It should be pointed out that absent any showing of unsatisfactory

performance on the part of respondent, it can be presumed that his
performance was satisfactory, especially taking into consideration the fact
that even while he was still more than a year into his probationary
employment, he was already designated Prefect of Discipline. In such
capacity, he was able to uncover the existence of a drug syndicate within
the school and lessen the incidence of drug use therein. Yet despite
respondent’s substantial contribution to the school, petitioners chose to
disregard the same and instead terminated his services; while most of
those who were involved in drug activities within the school were punished
with a slap on the wrist as they were merely made to write letters promising
that the incident will not happen again.48

Mofada would also have us believe that respondent chose to resign as he

feared for his life, thus, the school’s decision not to renew his contract.
However, no resignation letter was presented. Besides, this is contrary to
respondent’s act of immediately filing the instant case against petitioners.

WHEREFORE, the Petition is hereby DENIED. The August 31, 2005

Decision and the November 10, 2005 Resolution of the Court of Appeals in
CA-G.R. SP No. 85188 are AFFIRMED. The status quo order of this Court
is LIFTED.

SO ORDERED.

5)
DLSU - ARANETA v. BERNARDO
De La Salle University - Araneta Vs. Juanito C. Bernardo
G.R. No. 190809
February 13, 2017

Facts:

The case was about the denial of the retirement benefits of an employee by
its employer. Bernardo was a part-time lecturer for DLSU. He has been an
employee of DLSU from 1974 up to 2003. On the year 2003, Bernardo
received a letter from DLSU that his services is no longer required.
Bernardo being a 75 years old teacher, did not protest the decision of
DLSU not to re hire him. Bernardo, later, then asked his employer for his
retirement benefits, which the latter then refused to pay and allege that
Bernardo is only a part time employee and is not allowed to avail the
retirement benefits agreed by the labor union, and that; he’s action has
already prescribe, stating that he should have filed for his claim 3 years
after he turned 65 years old. Aggrieved, Bernardo filed a claim against
DLSU.

Issue:

WON the agreement of their labor union and the employer shall prevail.
WON the prescription shall run against Bernardo when he turned 65.

Held:
No. provisions of the CBA can be respected as long as it is not contrary to
law. Hence, a part time worker is not one of those who are exempted from
receiving a retirement benefit.
No. The prescription should run after his last day at work. Even though the
compulsory retirement age is 65, the mutual consent of each party to work
for and to allow to work the other will still be respected. Hence the
prescription should run after the last day of work.