PRICE v. INNODATA PHILS. INC.
1 employees since there employment was not coterminous with any
September 30, 2008| CHICO-NAZARIO
By: Justin
SUMMARY: Price were hired as formatters by Innodata. Under their employment
contract they were hired only for a fixed period. When last day of said period came,
innodata informed them of the termination of their services. Employees filed a complaint
for illegal dismissal. They argued that they are regular employees due to the fact that
their work was necessary and desirable for the business of Innodata. SC held that the
fixed-term contract was invalid. An employee may be considered a regular employee if
his work was necessary and desirable to the usual business of the employer or if s/he
already worked for more than a year. In this case the court found that their job as
formatters was necessary for the data encoding business of Innodata. Court also found
that the fixed term in the contract was a way for Innodata to deprive the employees of
security of tenure. SC held that they are regular employees, entitled to security of tenure
and could not be removed except for just or authorized cause. Entitled to backwages and
separation pay, instead of reinstatement since Innodata ceased its operations already.
DOCTRINE:
 Regular employees:
o (1) those who are engaged to perform activities which are
necessary or desirable in the usual business or trade of the
employer regardless of length of their employment
o (2) those who were initially hired as casual employees, but
have rendered at least 1 year service, whether continuous or
broken, with respect to the activity in which they are employed.
 test to determine whether an employment should be considered
regular or non-regular is the reasonable connection between the
particular activity performed by the employee in relation to the usual
business or trade of the employer
 1. NO. They were regular employees of Innodata who could not be
FACTS:
 Innodata, a company that deals with data encoding and data conversion
hired the Price and the others as formatters.
 Under the employment contract they were hired for a fixed period (one
year) which would end on Feb 16, 2000
 On Feb 16, 2000 the HR Manager informed them of their last day of
work due to the end of their contract
 Price et al filed a complaint for illegal dismissal and damages against
Innodata. That they should be considered regular employees since their
positions as formatters were necessary and desirable to the usual
business of Innodata. That they could not be considered project
1
CHERRY J. PRICE, STEPHANIE G. DOMINGO AND LOLITA ARBILERA, v. INNODATA
PHILS. INC.,/ INNODATA CORPORATION, LEO RABANG AND JANE NAVARETTE
project or undertaking.
 Innodata argued that almost half of the employees was engaged in data
encoding. Due to the wide range of services rendered to its clients, it
was constrained to hire new employees for a fixed period of not more
than one year (started on Sept 1999 and ended on feb 16 2000). That
Price and the others were not illegally dismissed for their employment
was merely terminated. That Price et al are estopped from a position
contrary to the contracts which they signed knowingly, voluntarily and
willfully.
 LA ruled in favor of Price. That their jobs were necessary, desirable, and
indispensable to the data processing and encoding business of
INNODATA. They were entitled to security of tenure and thus should
only be terminated for just or authorized cause.
 NLRC reversed. They were not regular employees but fixed-term
employees. The determining factor of such contracts(fixed term
contracts) is not the duty of the employee but the day certain agreed
upon by the parties for the commencement and termination of the
employment relationship. Price entered into the contract freely hence
there was no illegal dismissal.
 CA sustained NLRC ruling. Only employed for a year and for a project
called earthweb. That there was no showing that they entered into the
contracts unknowingly and involuntarily or that innodata forced them
into it.
ISSUES/HELD:
1. Whether petitioners were hired by INNODATA under valid fixed-term
employment contracts. NO
RATIO:
dismissed except for just or authorized cause.
 employment status of a person is defined and prescribed by law and
not by what the parties say it should be. A contract of employment is
impressed with public interest such that labor contracts must yield to
the common good.
 Regular employment has been defined by Article 280 of the Labor Code
o Art. 280. Regular and Casual Employment. The provisions of
written agreement to the contrary notwithstanding and regardless of
the oral agreement of the parties, an employment shall be deemed to
be regular where the employee has been engaged to perform activities
which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a
specific project or undertaking the completion or termination of
which has been determined at the time of engagement of the
 employee or where the work or services to be performed is seasonal
in nature and employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph. Provided, That, any employee who has rendered
at least one year of service, whether such service is continuous or
broken, shall be considered a regular employee with respect to the
activity in which he is employed and his employment shall continue
while such activity exists
 ‘Regular employees:
o (1) those who are engaged to perform activities which are
necessary or desirable in the usual business or trade of the
employer regardless of length of their employment
o (2) those who were initially hired as casual employees, but
have rendered at least 1 year service, whether continuous or
broken, with respect to the activity in which they are employed.
 Price et al belong to the first type.
 test to determine whether an employment should be considered
regular or non-regular is the reasonable connection between the
particular activity performed by the employee in relation to the usual
business or trade of the employer
 they were hired as formatters. The primary business of Innodata is data
encoding, and the formatting of the data entered into the computers is
an essential part of the process of data encoding. They make it easier
for clients to understand the data. The work performed by petitioners
was necessary or desirable.
 But there are also forms of employment which although necessary and
desirable, and exceed one year would still not result in regular
employment. Fixed-term employment contracts: seasonal or for specific
projects with predetermined dates of completion AND wherein parties
by free choice have assigned a specific date of termination
 The decisive determinant in term employment is the day certain
agreed upon by the parties for the commencement and termination of
their employment relationship, day certain: that which must necessarily
come, although it may not be known when (ex. Seasonal employment
and employment for a particular project)
 Fixed-term contracts: exception rather than the general rule.
 Some examples wherein a fixed-term is essential and natural: overseas
employment contracts; dean, assistant dean, college secretary,
principal, and other administrative offices in educational institutions;
certain company officials may be elected for what would amount to
fixed periods, they may lose their jobs as president, executive vice-
president or vice president, etc. because the stockholders or the board
of directors for one reason or another did not re-elect them
 In Brent School v. Zamora: the court issued an admonition that where,
from the circumstances, it is apparent that the period was imposed to
preclude the acquisition of tenurial security by the employee, then it
should be struck down as being contrary to law, morals, good customs,
public order and public policy
 In this case, the court is convinced that the term was meant only to
circumvent the rights of Price et al to security of tenure and is therefore
invalid. The contracts of employment were ambiguous and tampered
with
o The date of their employment was originally Feb 17, 1999 but
was crossed out and replaced with sept. 6 1999. Innodata
alleged that the original project for which they were hired in
Feb, was completed earlier than expected and that the sept
employment was for a new project.
o SC: if these were truly fixed term contracts then a change in the
term or period would already constitute a novation of the
original contract.
 Innodata wanted to make it appear that petitioners worked for less
than a year to preclude them from gaining regular status. But the SC
already ruled that they are regular employees under the first type of
regular employees. Even if we assume otherwise, the fact that the
contract of employment was ambiguous it would be construed strictly
against the party who prepared it. \
 Innodata also argued that they are project employees
o Project employees: those workers hired (1)for a specific
project or undertaking and wherein (2) the completion or
termination of such project has been determined at the time of
the engagement of the employee.
 o SC; Innodata failed to name nor describe the project. Also there
was no evidence to prove that such project has already been
completed or terminated to justify dismissal.

 SC also noted the provisions in the contract wherein petitioners have no

right at all to expect security of tenure, even for the supposedly one-
year period of employment provided in their contracts, because they
can still be pre-terminated (1) upon the completion of an unspecified
project; or (2) with or without cause, for as long as they are given a
three-day notice. Such contract provisions are repugnant to the basic
tenet in labor law that no employee may be terminated except for just
or authorized cause

o This would be against the state policy to assure workers of

security of tenure and free them from the bondage of
uncertainty of tenure woven by some employers into their
contracts of employment. This was the purpose of Art. 280 of
the Labor Code

 Petitioners have security of tenure. Illegally dismissed employees are

entitled to reinstatement without loss of seniority rights and other
privileges with full backwages. In this case since Innodata ceased its
operations, separation pay equivalent to 1 month pay for every year of
service instead.

The Petition for Review on Certiorari is GRANTED