[G.R. No. 120969. January 22, 1998.] salary in accordance with the minimum wage law.
ance with the minimum wage law. In June 1992, Mrs. Cesario
ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, Petitioners, v.
NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION)
composed of Presiding Commissioner RAUL T. AQUINO, Commissioner
ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY
(Ponente), VIC DEL ROSARIO and VIVA FILMS, Respondents.
DECISION
DAVIDE, JR., J.:
By way of this special civil action for certiorari under Rule 65 of the Rules of
Court, petitioners seek to annul the 10 February 1995 Decision 1 of the National
Labor Relations Commission (hereafter NLRC), and its 6 April 1995 Resolution 2
denying the motion to reconsider the former in NLRC-NCR-CA No. 006195-94.
The decision reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-
03994-92.
The parties present conflicting sets of facts.chanroblesvirtuallawlibrary:red
Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private
respondents on 18 July 1989 as part of the filming crew with a salary of P375.00
per week. About four months later, he was designated Assistant Electrician with a
weekly salary of P400.00, which was increased to P450.00 in May 1990. In June
1991, he was promoted to the rank of Electrician with a weekly salary of
P475.00, which was increased to P593.00 in September 1991.
Petitioner Paulino Enero, on his part, claims that private respondents employed
him in June 1990 as a member of the shooting crew with a weekly salary of
P375.00, which was increased to P425.00 in May 1991, then to P475.00 on 21
December 1991. 3
Petitioners’ tasks consisted of loading, unloading and arranging movie equipment
in the shooting area as instructed by the cameraman, returning the equipment to
Viva Films’ warehouse, assisting in the "fixing" of the lighting system, and
performing other tasks that the cameraman and/or director may assign. 4
Sometime in May 1992, petitioners sought the assistance of their supervisor, Mrs.
Alejandria Cesario, to facilitate their request that private respondents adjust their
informed petitioners that Mr. Vic del Rosario would agree to increase their salary
only if they signed a blank employment contract. As petitioners refused to sign,
private respondents forced Enero to go on leave in June 1992, then refused to
take him back when he reported for work on 20 July 1992. Meanwhile,
Maraguinot was dropped from the company payroll from 8 to 21 June 1992, but
was returned on 22 June 1992. He was again asked to sign a blank employment
contract, and when he still refused, private respondents terminated his services
on 20 July 1992. 5 Petitioners thus sued for illegal dismissal 6 before the Labor
Arbiter.
On the other hand, private respondents claim that Viva Films (hereafter VIVA) is
the trade name of Viva Productions, Inc., and that it is primarily engaged in the
distribution and exhibition of movies — but not in the business of making movies;
in the same vein, private respondent Vic del Rosario is merely an executive
producer, i.e., the financier who invests a certain sum of money for the
production of movies distributed and exhibited by VIVA. 7
Private respondents assert that they contract persons called "producers" — also
referred to as "associate producers" 8 to "produce" or make movies for private
respondents; and contend that petitioners are project employees of the associate
producers who, in turn, act as independent contractors. As such, there is no
employer-employee relationship between petitioners and private respondents.
Private respondents further contend that it was the associate producer of the film
"Mahirap Maging Pogi," who hired petitioner Maraguinot. The movie shot from 2
July up to 22 July 1992, and it was only then that Maraguinot was released upon
payment of his last salary, as his services were no longer needed. Anent
petitioner Enero, he was hired for the movie entitled "Sigaw ng Puso," later re-
titled "Narito ang Puso." He went on vacation on 8 June 1992, and by the time he
reported for work on 20 July 1992, shooting for the movie had already been
completed. 9
After considering both versions of the facts, the Labor Arbiter found as
follows:jgc:chanrobles.com.ph
"On the first issue, this Office rules that complainants are the employees of the
respondents. The producer cannot be considered as an independent contractor
but should be considered only as a labor-only contractor and as such, acts as a
mere agent of the real employer, the herein respondents. Respondents even
failed to name and specify who are the producers. Also, it is an admitted fact that
the complainants received their salaries from the respondents. The case cited by
the respondents Rosario Brothers, Inc. v. Ople, 131 SCRA 72 does not apply in
this case.

It is very clear also that complainants are doing activities which are necessary
and essential to the business of the respondents, that of movie-making.
Complainant Maraguinot worked as an electrician while complainant Enero
worked as a crew [member]. 10
Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as
follows:chanrob1es virtual 1aw library
WHEREFORE, judgment is hereby rendered declaring that complainants were
illegally dismissed.
Respondents are hereby ordered to reinstate complainants to their former
positions without loss [of] seniority rights and pay their backwages starting July
21, 1999 to December 31, 1993 temporarily computed in the amount of
P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant
Alejandro Maraguinot, Jr. and thereafter until actually reinstated.
Respondents are ordered to pay also attorney’s fees equivalent to ten (10%)
and/or P8,400.00 on top of the award. 11
Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No.
006195-94). In its decision 12 of 10 February 1995, the NLRC found the following
circumstances of petitioners’ work "clearly established:"
1. Complainants [petitioners herein] were hired for specific movie projects and
their employment was co-terminus with each movie project the
completion/termination of which are pre-determined, such fact being made
known to complainants at the time of their engagement.
x       x       x
2. Each shooting unit works on one movie project at a time. And the work of the
shooting units, which work independently from each other, are not continuous in
nature but depends on the availability of movie projects.
3. As a consequence of the non-continuous work of the shooting units, the total
working hours logged by complainants in a month show extreme variations. . .
For instance, complainant Maraguinot worked for only 1.45 hours in June 1991
but logged a total of 183.25 hours in January 1992. Complainant Enero logged a
total of only 31.57 hours in September 1991 but worked for 183.35 hours the
next month, October 1991.
4. Further shown by respondents is the irregular work schedule of complainant on
a daily basis. Complainant Maraguinot was supposed to report on 05 August 1991
but reported only on 30 August 1991, or a gap of 25 days. Complainant Enero
worked on 10 September 1991 and his next scheduled working day was 28
September 1991, a gap of 18 days.
5. The extremely irregular working days and hours of complainants’ work explain
the lump sum payment for complainants’ services for each movie project. Hence,
complainants were paid a standard weekly salary regardless of the number of
working days and hours they logged in. Otherwise, if the principle of "no work no
pay" was strictly applied, complainants’ earnings for certain weeks would be very
negligible.
6. Respondents also alleged that complainants were not prohibited from working
with such movie companies like Regal, Seiko and FPJ Productions whenever they
are not working for the independent movie producers engaged by
respondents. . . This allegation was never rebutted by complainants and should
be deemed admitted.
The NLRC, in reversing the Labor Arbiter, then concluded that these
circumstances, taken together, indicated that complainants (herein petitioners)
were "project employees."cralaw virtua1aw library
After their motion for reconsideration was denied by the NLRC in its Resolution 13
of 6 April 1995, petitioners filed the instant petition, claiming that the NLRC
committed grave abuse of discretion amounting to lack or excess of jurisdiction
in: (1) finding that petitioners were project employees; (2) ruling that petitioners
were not illegally dismissed; and (3) reversing the decision of the Labor Arbiter.
To support their claim that they were regular (and not project) employees of
private respondents, petitioners cited their performance of activities that were
necessary or desirable in the usual trade or business of private respondents and
added that their work was continuous, i.e., after one project was completed they
were assigned to another project. Petitioners thus considered themselves part of
a work pool from which private respondents drew workers for assignment to
different projects. Petitioners lamented that there was no basis for the NLRC’s
conclusion that they were project employees, while the associate producers were
independent contractors; and thus reasoned that as regular employees, their
dismissal was illegal since the same was premised on a "false cause," namely, the
completion of a project, which was not among the causes for dismissal allowed by
the Labor Code.
Private respondents reiterate their version of the facts and stress that their
evidence supports the view that petitioners are project employees; point to
petitioners’ irregular work load and work schedule; emphasize the NLRC’s finding
that petitioners never controverted the allegation that they were not prohibited
from working with other movie companies; and ask that the facts be viewed in
the context of the peculiar characteristics of the movie industry.
The Office of the Solicitor General (OSG) is convinced that this petition is
improper since petitioners raise questions of fact, particularly, the NLRC’s finding
that petitioners were project employees, a finding supported by substantial
evidence; and submits that petitioners’ reliance on Article 280 of the Labor Code
to support their contention that they should be deemed regular employees is
misplaced, as said section "merely distinguishes between two types of
employees, i.e., regular employees and casual employees, for purposes of
determining the right of an employee to certain benefits."cralaw virtua1aw library
The OSG likewise rejects petitioners’ contention that since they were hired not for
one project, but for a series of projects, they should be deemed regular
employees. Citing Mamansag v. NLRC, 14 the OSG asserts that what matters is
that there was a time-frame for each movie project made known to petitioners at
the time of their hiring. In closing, the OSG disagrees with petitioners’ claim that
the NLRC’s classification of the movie producers as independent contractors had
no basis in fact and in law, since, on the contrary, the NLRC "took pains in
explaining its basis" for its decision.
As regards the propriety of this action, which the Office of the Solicitor General
takes issue with, we rule that a special civil action for certiorari under Rule 65 of
the Rules of Court is the proper remedy for one who complains that the NLRC
acted in total disregard of evidence material to or decisive of the controversy. 15
In the instant case, petitioners allege that the NLRC’s conclusions have no basis
in fact and in law, hence the petition may not be dismissed on procedural or
jurisdictional grounds.
The judicious resolution of this case hinges upon, first, the determination of
whether an employer-employee relationship existed between petitioners and
private respondents or any one of private respondents. If there was none, then
this petition has no merit; conversely, if the relationship existed, then petitioners
could have been unjustly dismissed.
A related question is whether private respondents are engaged in the business of
making motion pictures. Del Rosario is necessarily engaged in such business as
he finances the production of movies. VIVA, on the other hand, alleges that it
does not "make" movies, but merely distributes and exhibits motion pictures.
There being no further proof to this effect, we cannot rely on this self-serving
denial. At any rate, and as will be discussed below, private respondents’ evidence
even supports the view that VIVA is engaged in the business of making movies.
We now turn to the critical issues. Private respondents insist that petitioners are
project employees of associate producers who, in turn, act as independent
contractors. It is settled that the contracting out of labor is allowed only in case
of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules
Implementing the Labor Code describes permissible job contracting in this
wise:chanrob1es virtual 1aw library
Sec. 8. Job contracting. — There is job contracting permissible under the Code if
the following conditions are met:chanrob1es virtual 1aw library
(1) The contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his
own manner and method, free from the control and direction of his employer or
principal in all matters connected with the performance of the work except as to
the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools,
equipment, machineries, work premises, and other materials which are necessary
in the conduct of his business.
Assuming that the associate producers are job contractors, they must then be
engaged in the business of making motion pictures. As such, and to be a job
contractor under the preceding description, associate producers must have tools,
equipment, machinery, work premises, and other materials necessary to make
motion pictures. However, the associate producers here have none of these.
Private respondents’ evidence reveals that the movie-making equipment are
supplied to the producers and owned by VIVA. These include generators, 16
cables and wooden platforms, 17 cameras and "shooting equipment;" 18 in fact,
VIVA likewise owns the trucks used to transport the equipment. 19 It is thus
clear that the associate producer merely leases the equipment from VIVA. 20
Indeed, private respondents’ Formal Offer of Documentary Evidence stated one of
the purposes of Exhibit "148" as:chanrob1es virtual 1aw library
To prove further that the independent Producers rented Shooting Unit No. 2 from
Viva to finish their films. 21
While the purpose of Exhibits "149," "149-A" and "149-B" was:chanrob1es virtual
1aw library
[T]o prove that the movies of Viva Films were contracted out to the different
independent Producers who rented Shooting Unit No. 3 with a fixed budget and
time-frame of at least 30 shooting days or 45 days whichever comes first. 22
Private respondents further narrated that VIVA’s generators broke down during
petitioners’ last movie project, which forced the associate producer concerned to
rent generators, equipment and crew from another company. 23 This only shows
that the associate producer did not have substantial capital nor investment in the
form of tools, equipment and other materials necessary for making a movie.
Private respondents in effect admit that their producers, especially petitioners’
last producer, are not engaged in permissible job contracting.
If private respondents insist that their associate producers are labor contractors,
then these producers can only be "labor-only" contractors, defined by the Labor
Code as follows:chanrob1es virtual 1aw library
Art. 106. Contractor or subcontractor. — . . .
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.chanrobles virtual lawlibrary
A more detailed description is provided by Section 9, Rule VIII, Book III of the
Omnibus Rules Implementing the Labor Code:chanrob1es virtual 1aw library
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:chanrob1es virtual 1aw library
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the employer
in which workers are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person
acting as contractor shall be considered merely as an agent or intermediary of
the employer who shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.
(c) For cases not falling under this Article, the Secretary of Labor shall determine
through appropriate orders whether or not the contracting out of labor is
permissible in the light of the circumstances of each case and after considering
the operating needs of the employer and the rights of the workers involved. In
such case, he may prescribe conditions and restrictions to insure the protection
and welfare of the workers.
As labor-only contracting is prohibited, the law considers the person or entity
engaged in the same a mere agent or intermediary of the direct employer. But
even by the preceding standards, the associate producers of VIVA cannot be
considered labor-only contractors as they did not supply, recruit nor hire the
workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and
an employee of VIVA., who recruited crew members from an "available group of
free-lance workers which includes the complainants Maraguinot and Enero." 24
And in their Memorandum, private respondents declared that the associate
producer "hires the services of . . . 6) camera crew which includes (a)
cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and
electrician; (e) clapper; etc. . ." 25 This clearly showed that the associate
producers did not supply the workers required by the movie project.
The relationship between VIVA and its producers or associate producers seems to
be that of agency, 26 as the latter make movies on behalf of VIVA, whose
business is to "make" movies. As such, the employment relationship between
petitioners and producers is actually one between petitioners and VIVA, with the
latter being the direct employer.
The employer-employee relationship between petitioners and VIVA can further be
established by the "control test." While four elements are usually considered in
determining the existence of an employment relationship, namely: (a) the
selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer’s power to control the employee’s
conduct, the most important element is the employer’s control of the employee’s
conduct, not only as to the result of the work to be done but also as to the means
and methods to accomplish the same. 27 These four elements are present here.
In their position paper submitted to the Labor Arbiter, private respondents
narrated the following circumstances:chanrob1es virtual 1aw library
[T]he PRODUCER has to work within the limits of the budget he is given by the
company, for as long as the ultimate finish[ed] product is acceptable to the
company. . .
To ensure that quality films are produced by the PRODUCER who is an
independent contractor, the company likewise employs a Supervising PRODUCER,
a Project accountant and a Shooting unit supervisor. The Company’s Supervising
PRODUCER is Mr. Eric Cuatico, the Project accountant varies from time to time,
and the Shooting Unit Supervisor is Ms. Alejandria Cesario.
 in the instant case and exercised by VIVA. A sample appointment Slip offered by
The Supervising PRODUCER acts as the eyes and ears of the company and of the private respondents "to prove that members of the shooting crew except the
Executive Producer to monitor the progress of the PRODUCER’s work driver are project employees of the Independent Producers" 29 reads as
accomplishment. He is there usually in the field doing the rounds of inspection to follows:chanrob1es virtual 1aw library
see if there is any problem that the PRODUCER is encountering and to assist in
threshing out the same so that the film project will be finished on schedule. He VIVA PRODUCTIONS, INC.
supervises about 3 to 7 movie projects simultaneously [at] any given time by
coordinating with each film "PRODUCER." The Project Accountant on the other 16 Sct. Albano St.
hand assists the PRODUCER in monitoring the actual expenses incurred because
the company wants to insure that any additional budget requested by the Diliman, Quezon City
PRODUCER is really justified and warranted especially when there is a change of
original plans to suit the tast[e] of the company on how a certain scene must be PEDRO NICOLAS Date: June 15, 1992
presented to make the film more interesting and more commercially viable.
(Emphasis ours) ————————

VIVA’s control is evident in its mandate that the end result must be a "quality film
acceptable to the company." The means and methods to accomplish the result
are likewise controlled by VIVA, viz., the movie project must be finished within
schedule without exceeding the budget, and additional expenses must be
justified; certain scenes are subject to change to suit the taste of the company;
and the Supervising Producer, the "eyes and ears" of VIVA and del Rosario,
intervenes in the movie-making process by assisting the associate producer in
solving problems encountered in making the film.
It may not be validly argued then that petitioners are actually subject to the
movie director’s control, and not VIVA’s direction. The director merely instructs
petitioners on how to better comply with VIVA’s requirements to ensure that a
quality film is completed within schedule and without exceeding the budget. At
bottom, the director is akin to a supervisor who merely oversees the activities of
rank-and-file employees with control ultimately resting on the employer.
Moreover, appointment slips 28 issued to all crew members state:chanrob1es
virtual 1aw library
————————
APPOINTMENT SLIP
You are hereby appointed as SOUNDMAN for the film project entitled
"MANAMBIT." This appointment shall be effective upon the commencement of the
said project and shall continue to be effective until the completion of the same.
For your services you shall receive the daily/weekly/monthly compensation of
P812.50.
During the term of this appointment you shall comply with the duties and
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management.
Very truly yours,
(an illegible signature)

During the term of this appointment you shall comply with the duties and CONFORME:chanrob1es virtual 1aw library
responsibilities of your position as well as observe the rules and regulations
promulgated by your superiors and by Top Management. ____________________

The words "superiors" and "Top Management" can only refer to the "superiors" Name of appointee
and "Top Management" of VIVA. By commanding crew members to observe the
rules and regulations promulgated by VIVA, the appointment slips only Signed in the presence of:chanrob1es virtual 1aw library
emphasize VIVA’s control over petitioners.
——————————
Aside from control, the element of selection and engagement is likewise present
Notably, nowhere in the appointment slip does it appear that it was the producer
or associate producer who hired the crew members; moreover, it is VIVA’s
corporate name which appears on the heading of the appointment slip. What
likewise tells against VIVA is that it paid petitioners’ salaries as evidenced by
vouchers, containing VIVA’s letterhead, for that purpose. 30
All the circumstances indicate an employment relationship between petitioners
and VIVA alone, thus the inevitable conclusion is that petitioners are employees
only of VIVA.
The next issue is whether petitioners were illegally dismissed. Private
respondents contend that petitioners were project employees whose employment
was automatically terminated with the completion of their respective projects.
Petitioners assert that they were regular employees who were illegally dismissed.
It may not be ignored, however, that private respondents expressly admitted that
petitioners were part of a work pool; 31 and, while petitioners were initially hired
possibly as project employees, they had attained the status of regular employees
in view of VIVA’s conduct.
A project employee or a member of a work pool may acquire the status of a
regular employee when the following concur:chanrob1es virtual 1aw library
1) There is a continuous rehiring of project employees even after cessation of a
project; 32 and
2) The tasks performed by the alleged "project employee" are vital, necessary
and indispensable to the usual business or trade of the employer. 33
However, the length of time during which the employee was continuously re-
hired is not controlling, but merely serves as a badge of regular employment. 34
In the instant case, the evidence on record shows that petitioner Enero was
employed for a total of two (2) years and engaged in at least eighteen (18)
projects, while petitioner Maraguinot was employed for some three (3) years and
worked on at least twenty-three (23) projects. 35 35a Moreover, as petitioners’
tasks involved, among other chores, the loading, unloading and arranging of
movie equipment in the shooting area as instructed by the cameramen, returning
the equipment to the Viva Films’ warehouse, and assisting in the "fixing" of the
lighting system, it may not be gainsaid that these tasks were vital, necessary and
indispensable to the usual business or trade of the employer. As regards the
underscored phrase, it has been held that this is ascertained by considering the
nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. 36
A recent pronouncement of this Court anent project or work pool employees who
had attained the status of regular employees proves most instructive:chanrob1es
virtual 1aw library
The denial by petitioners of the existence of a work pool in the company because
their projects were not continuous is amply belied by petitioners themselves who
admit that: . . .
A work pool may exist although the workers in the pool do not receive salaries
and are free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a project.
Although primarily applicable to regular seasonal workers, this set-up can
likewise be applied to project workers insofar as the effect of temporary cessation
of work is concerned. This is beneficial to both the employer and employee for it
prevents the unjust situation of "coddling labor at the expense of capital" and at
the same time enables the workers to attain the status of regular employees.
Clearly, the continuous rehiring of the same set of employees within the
framework of the Lao Group of Companies is strongly indicative that private
respondents were an integral part of a work pool from which petitioners drew its
workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed
project employees, petitioners point out that the workers were not regularly
maintained in the payroll and were free to offer their services to other companies
when there were no on-going projects. This argument however cannot defeat the
workers’ status of regularity. We apply by analogy the case of Industrial-
Commercial-Agricultural Workers Organization v. CIR [16 SCRA 562, 567-68
(1966)] which deals with regular seasonal employees. There we held: . . .
Truly, the cessation of construction activities at the end of every project is a
foreseeable suspension of work. Of course, no compensation can be demanded
from the employer because the stoppage of operations at the end of a project
and before the start of a new one is regular and expected by both parties to the
labor relations. Similar to the case of regular seasonal employees, the
employment relation is not severed by merely being suspended. [citing Manila
Hotel Co. v CIR, 9 SCRA 186 (1963)] The employees are, strictly speaking, not
separated from services but merely on leave of absence without pay until they
are reemployed. Thus we cannot affirm the argument that non-payment of salary
or non-inclusion in the payroll and the opportunity to seek other employment
denote project employment. 37 (Emphasis supplied)
While Lao admittedly involved the construction industry, to which Policy
Instruction No. 20/Department Order No. 19 38 regarding work pools specifically
applies, there seems to be no impediment to applying the underlying principles to
industries other than the construction industry. 39 Neither may it be argued that
a substantial distinction exists between the projects undertaken in the
construction industry and the motion picture industry. On the contrary, the raison
d’ etre of both industries concern projects with a foreseeable suspension of
work.chanroblesvirtualawlibrary
At this time, we wish to allay any fears that this decision unduly burdens an
employer by imposing a duty to re-hire a project employee even after completion
of the project for which he was hired. The import of this decision is not to impose
a positive and sweeping obligation upon the employer to re-hire project
employees. What this decision merely accomplishes is a judicial recognition of the
employment status of a project or work pool employee in accordance with what is
fait accompli, i.e., the continuous re-hiring by the employer of project or work
pool employees who perform tasks necessary or desirable to the employer’s usual
business or trade. Let it not be said that this decision "coddles" labor, for as Lao
has ruled, project or work pool employees who have gained the status of regular
employees are subject to the "no work-no pay" principle, to repeat:chanrob1es
virtual 1aw library
A work pool may exist although the workers in the pool do not receive salaries
and are free to seek other employment during temporary breaks in the business,
provided that the worker shall be available when called to report for a project.
Although primarily applicable to regular seasonal workers, this set-up can
likewise be applied to project workers insofar as the effect of temporary cessation
of work is concerned. This is beneficial to both the employer and employee for it
prevents the unjust situation of "coddling labor at the expense of capital" and at
the same time enables the workers to attain the status of regular employees.
The Court’s ruling here is meant precisely to give life to the constitutional policy
of strengthening the labor sector, 40 but, we stress not at the expense of
management. Lest it be misunderstood, this ruling does not mean that simply
because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that we
hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer for the
same tasks or nature of tasks; and (2) these tasks are vital, necessary and
indispensable to the usual business or trade of the employer, then the employee
must be deemed a regular employee, pursuant to Article 280 of the Labor Code
and jurisprudence. To rule otherwise would allow circumvention of labor laws in
industries not falling within the ambit of Policy Instruction No. 20/Department
Order No. 19, hence allowing the prevention of acquisition of tenurial security by
project or work pool employees who have already gained the status of regular
employees by the employer’s conduct.
In closing then, as petitioners had already gained the status of regular
employees, their dismissal was unwarranted, for the cause invoked by private
respondents for petitioners’ dismissal, viz., completion of project, was not, as to
them, a valid cause for dismissal under Article 282 of the Labor Code. As such,
petitioners are now entitled to back wages and reinstatement, without loss of
seniority rights and other benefits that may have accrued. 41 Nevertheless,
following the principles of "suspension of work" and "no pay" between the end of
one project and the start of a new one, in computing petitioners’ back wages, the
amounts corresponding to what could have been earned during the periods from
the date petitioners were dismissed until their reinstatement when petitioners’
respective Shooting Units were not undertaking any movie projects, should be
deducted.
Petitioners were dismissed on 20 July 1992, at a time when Republic Act No.
6715 was already in effect. Pursuant to Section 34 thereof which amended
Section 279 of the Labor Code of the Philippines and Bustamante v. NLRC, 42
petitioners are entitled to receive full back wages from the date of their dismissal
up to the time of their reinstatement, without deducting whatever earnings
derived elsewhere during the period of illegal dismissal, subject, however, to the
above observations.
WHEREFORE, the instant petition is GRANTED. The assailed decision of the
National Labor Relations Commission in NLRC NCR CA No. 006195-94 dated 10
February 1995, as well as its Resolution dated 6 April 1995, are hereby
ANNULLED and SET ASIDE for having been rendered with grave abuse of
discretion, and the decision of the Labor Arbiter in NLRC NCR Case No. 00-07-
03994-92 is REINSTATED, subject, however, to the modification above
mentioned in the computation of back wages.
No pronouncement as to costs.
SO ORDERED

[G.R. No. 116781. September 5, 1997.]
TOMAS LAO CONSTRUCTION, LVM CONSTRUCTION CORPORATION,
THOMAS and JAMES DEVELOPERS (PHIL.), INC., Petitioners, v.
NATIONAL LABOR RELATIONS COMMISSION, MARIO O. LABENDIA,
SR., ROBERTO LABENDIA, NARCISO ADAN, FLORENCIO GOMEZ,
ERNESTO BAGATSOLON, SALVADOR BABON, PATERNO BISNAR,
CIPRIANO BERNALES, ANGEL MABULAY, SR., LEO SURIGAO, and
ROQUE MORILLO, Respondents.
DECISION
BELLOSILLO, J.:
From October to December 1990 private respondents individually filed
complaints for illegal dismissal against petitioners with the National Labor
Relations Commission Regional Arbitration Branch No. VIII (NLRC-RAB VIII),
Tacloban City. Alleging that they were hired for various periods as
construction workers in different capacities they described their contractual
terms as follows: (a) Roberto Labendia, general construction foreman, from
1971 to 17 October 1990 at P3,700/month; (b) Narciso Adan, tireman, from
October 1981 to November 1990 at P75.00/day; (c) Florencio Gomez, welder,
from July 1983 to July 1990 at P60.00/day; (d) Ernesto Bagatsolon,
leadman/checker, from June 1982 to October 1990 at P2,800/month; (e)
Salvador Babon, clerk/timekeeper/paymaster, from June 1982 to October
1990 at P3,200/month; (f) Paterno Bisnar, road grader operator, from
January 1979 to October 1990 at P105/day; (g) Cipriano Bernales,
instrument man, from February 1980 to November 1990 at P3,200/month;
(h) Angel Mabulay, Sr., dump truck driver, from August 1974 to October
1990 at P90/day; (i) Leo Surigao, payloader operator, from March 1975 to
January 1978 at P100/day; (j) Mario Labendia, Sr. surveyor/foreman, from
August 1971 to July 1990 at P2,900/month; and, (k) Roque Morillo, company
watchman, from August 1983 to October 1990 at P3,200/month. 1
Within the periods of their respective employment, they alternately worked
for petitioners Tomas Lao Corporation (TLC), Thomas and James Developers
(T&J) and LVM Construction Corporation (LVM), altogether informally referred
to as the "Lao Group of Companies," the three (3) entities comprising a
business conglomerate exclusively controlled and managed by members of
the Lao family.
chanrobles virtual lawlibrary
TLC, T&J and LVM are engaged in the construction of public roads and
bridges. Under joint venture agreements they entered into among each other,
they would undertake their projects either simultaneously or successively so
that, whenever necessary, they would lease tools and equipment to one
another. Each one would also allow the utilization of their employees by the
other two (2). With this arrangement, workers were transferred whenever
necessary to on-going projects of the same company or of the others, or
were rehired after the completion of the project or project phase to which
they were assigned. Soon after, however, TLC ceased its operations 2 while
T&J and LVM stayed on.
Sometime in 1989 Andres Lao, Managing Director of LVM and President of
T&J, 3 issued a memorandum 4 requiring all workers and company personnel
to sign employment contract forms and clearances which were issued on 1
July 1989 but antedated 10 January 1989. These were to be used allegedly
for audit purposes pursuant to a joint venture agreement between LVM and
T&J. To ensure compliance with the directive, the company ordered the
withholding of the salary of any employee who refused to sign. Quite notably,
the contracts expressly described the construction workers as project
employees whose employments were for a definite period, i.e., upon the
expiration of the contract period or the completion of the project for which
the workers was hired.
Except for Florencio Gomez 5 all private respondents refused to sign
contending that this scheme was designed by their employer to downgrade
their status from regular employees to mere project employees. Resultantly,
their salaries were withheld. They were also required to explain why their
services should not be terminated for violating company rules and warned
that failure to satisfactorily explain would be construed as "disinterest" in
continued employment with the company. Since the workers stood firm in
their refusal to comply with the directives their services were terminated.
NLRC RAB VIII dismissed the complaints lodged before it, finding that private
respondents were project employees whose employments could be
terminated upon completion of the projects or project phase for which they
were hired. It upheld petitioners’ contention that the execution of their
employment contracts was to forestall the eventuality of being compelled to
pay the workers their salaries even if there was no more work to be done due
to the completion of the projects or project phases. The labor court however
granted each employee a separation pay of P6,435.00 computed at one-half
(1/2) month salary for every year of service, uniformly rounded at five (5)
years. 6
The decision of Labor Arbiter Gabino A. Velasquez, Jr., was reversed on
appeal by the Fourth Division of the National Labor Relations Commission
(NLRC) of Cebu City which found that private respondents were regular
employees who were dismissed without just cause and denied due process.
The NLRC also overruled the fixing by the Labor Arbiter of the term of
employment of complainants uniformly at five (5) years since the periods of
employment of the construction workers as alleged in their complaints were
never refuted by petitioners. In granting monetary awards to complainants,
NLRC disregarded the veil of corporate fiction and treated the three (3)
corporations as forming only one entity on the basis of the admission of
petitioners that "the three (3) operated as one (1), intermingling and
commingling all its resources, including manpower facility." 7
Petitioners now lay their cause before us and assign the following errors: (a)
NLRC erred in classifying the employees as regular instead of project
employees; (b) assuming that the workers were regular employees, NLRC
failed to consider that they were terminated for cause; (c) assuming further
that the employees were illegally dismissed, NLRC erred in awarding back
wages in excess of three (3) years; and, (d) assuming finally that the
decision is correct, NLRC erred when it pierced the veil of corporate
personality of petitioner-corporations.
The main thrust of petitioners’ expostulation is that respondents have no
valid cause to complain about their employment contracts since these
documents merely formalized their status as project employees. They cite
Policy Instruction No. 20 of the Department of Labor which defines project
employees as those employed in connection with a particular construction
project, adding that the ruling in Sandoval Shipyards, Inc. v. NLRC 8 applies
squarely to the instant case because there the Court declared that the
employment of project employees is co-terminous with the completion of the
project regardless of the number of projects in which they have worked. And
as their employment is one for a definite period, they are not entitled to
separation pay nor is their employer required to obtain clearance from the
Secretary of Labor in connection with their termination. Petitioners thus argue
that their dismissal from the service of private respondents was legal since
the projects for which they were hired had already been completed. As
additional ground, they claim that Mario Labendia and Roberto Labendia had
absented themselves without leave giving management no choice but to
sever their employment.
We are not convinced. The principal test in determining whether particular
employees are "project employees" distinguished from "regular employees" is
whether the "project employees" are assigned to carry out "specific project or
undertaking," the duration (and scope) of which are specified at the time the
employees are engaged for the project. "Project" in the realm of business and
industry refers to a particular job or undertaking that is within the regular or
usual business of employer, but which is distinct and separate and identifiable
as such from the undertakings of the company. Such job or undertaking
begins and ends at determined or determinable times. 9
While it may be allowed that in the instant case the workers were initially
hired for specific projects or undertakings of the company and hence can be
classified as project employees. the repeated re-hiring and the continuing
need for their services over a long span of time (the shortest, at seven [7]
years) have undeniably made them regular employees. Thus, we held that
where the employment of project employees is extended long after the
supposed project has been finished, the employees are removed from the
scope of project employees and considered regular employees. 10
While length of time may not be a controlling test for project employment, it
can be a strong factor in determining whether the employee was hired for a
specific undertaking or in fact tasked to perform functions which are vital,
necessary and indispensable to the usual business or trade of the employer.
In the case at bar, private respondents had already gone through the status
of project employees. But their employments became non-coterminous with
specific projects when they started to be continuously re-hired due to the
demands of petitioners’ business and were re-engaged for many more
projects without interruption. We note petitioners’ own admission —
[t]hese construction projects have been prosecuted by either of the three
petitioners, either individually or in a joint venture with one another.
Likewise, these construction projects have been prosecuted by either of the
three petitioners, either simultaneously, one construction project overlapping
another and/or one project commencing immediately after another project
has been completed or terminated. Perhaps because of their capacity to
prosecute government projects and their good record and performance, at
least one of the three petitioners had an on-going construction project and/or
one of the three petitioners’ construction project overlapped that of another.
11

The denial by petitioners of the existence of a work pool in the company
because their projects were not continuous is amply belied by petitioners
themselves who admit that —
All the employees of either of the three petitioners were actually assigned to
a particular project to remain in said project until the completion or
termination of that project. However, after the completion of that particular
project or when their services are no longer needed in the project or
particular phase of the project where they were assigned, they were
transferred and rehired in another on-going project. 12
A work pool may exist although the workers in the pool do not receive
salaries and are free to seek other employment during temporary breaks in
the business, provided that the worker shall be available when called to
report for a project. Although primarily applicable to regular seasonal
workers, this set-up can likewise be applied to project workers insofar as the
effect of temporary cessation of work is concerned. This is beneficial to both
the employer and employee for it prevents the unjust situation of "coddling
labor at the expense of capital" and at the same time enables the workers to
attain the status of regular employees. Clearly, the continuous rehiring of the
same set of employees within the framework of the Lao Group of Companies
is strongly indicative that private respondents were an integral part of a work
pool from which petitioners drew its workers for its various projects.
In a final attempt to convince the Court that private respondents were indeed
project employees, petitioners point out that the workers were not regularly
maintained in the payroll and were free to offer their services to other
companies when there were no on-going projects. This argument however
cannot defeat the workers’ status of regularity. We apply by analogy the case
of Industrial-Commercial-Agricultural Workers Organization v. CIR 13 which
deals with regular seasonal employees. There we held —
That during the temporary layoff the laborers are free to seek other
employment is natural, since the laborers are not being paid, yet must find
means of support. A period during which the Central is forced to suspend or
cease operation for a time . . . should not mean starvation for employees and
their families (Emphasis supplied).
Truly, the cessation of construction activities at the end of every project is a
foreseeable suspension of work. Of course, no compensation can be
demanded from the employer because the stoppage of operations at the end
of a project and before the start of a new one is regular and expected by both
parties to the labor relations. Similar to the case of regular seasonal
employees, the employment relation is not severed by merely being
suspended. 14 The employees are, strictly speaking, not separated from
services but merely on leave of absence without pay until they are
reemployed. 15 Thus we cannot affirm the argument that non-payment of
salary or non-inclusion in the payroll and the opportunity to seek other
employment denote project employment.
Contrary to petitioners’ assertion, our ruling in Sandoval Shipyards is
inapplicable considering the special circumstances attendant to the present
case. In Sandoval, the hiring of construction workers, unlike in the instant
case, was intermittent and not continuous for the "shipyard merely accepts
contracts for shipbuilding or for repair of vessels from third parties and, only
on occasions when it has work contract of this nature that it hires workers to
do the job which, needless to say, lasts only for less than a year or longer."
16
Moreover, if private respondents were indeed employed as "project
employees," petitioners should have submitted a report of termination to the
nearest public employment office every time their employment was
terminated due to completion of each construction project. 17 The records
show that they did not. Policy Instruction No. 20 is explicit that employers of
project employees are exempted from the clearance requirement but not
from the submission of termination report. We have consistently held that
failure of the employer to file termination reports after every project
completion proves that the employees are not project employees. 18
Nowhere in the New Labor Code is it provided that the reportorial
requirement is dispensed with. The fact is that Department Order No. 19
superseding Policy Instruction No. 20 expressly provides that the report of
termination is one of the indicators of project employment. 19
We agree with the NLRC that the execution of the project employment
contracts was "farcical." 20 Obviously, the contracts were a scheme of
petitioners to prevent respondents from being considered as regular
employees. It imposed time frames into an otherwise flexible employment
period of private respondents some of whom were employed as far back as
1969. Clearly, here was an attempt to circumvent labor laws on tenurial
security. Settled is the rule that when periods have been imposed to preclude
the acquisition of tenurial security by the employee, they should be struck
down as contrary to public morals, good customs or public order. 21 Worth
noting is that petitioners had engaged in various joint venture agreements in
the past without having to draft project employment contracts. That they
would require execution of employment contracts and waivers at this point,
ostensibly to be used for audit purposes, is a suspect excuse, considering that
petitioners enforced the directive by withholding the salary of any employee
who spurned the order.
We likewise reject petitioners’ justification in re-hiring private respondents
i.e., that it is much cheaper and economical to re-hire or re-employ the same
workers than to train a new set of employees. It is precisely because of this
cost-saving benefit to the employer that the law deems it fair that the
employees be given a regular status. We need not belabor this point.
The NLRC was correct in finding that the workers were illegally dismissed.
The rule is that in effecting a valid dismissal, the mandatory requirements of
substantive and procedural due process must be strictly complied with. These
were wanting in the present case. Private respondents were dismissed
allegedly because of insubordination or blatant refusal to comply with a lawful
directive of their employer. But willful disobedience of the employer’s lawful
orders as a just cause for the dismissal of the employees envisages the
concurrence of at least two (2) requisites: (a) the employee’s assailed
conduct must have been willful or intentional, the willfulness being
characterized by a wrongful and perverse attitude; and, (b) the order violated
must have been reasonable, lawful, made known to the employee and must
pertain to the duties which he has been engaged to discharge. 22 The refusal
of private respondents was willful but not in the sense of plain and perverse
insubordination. It was dictated by necessity and justifiable reasons — for
what appeared to be an innocent memorandum was actually a veiled attempt
to deny them their rightful status as regular employees. The workers
therefore had no option but to disobey the directive which they deemed
unreasonable and unlawful because it would result in their being downsized to
mere project workers. This act of self-preservation should not merit them the
extreme penalty of dismissal.
The allegation of petitioners that private respondents are guilty of
abandonment of duty is without merit. The elements of abandonment are: (a)
failure to report for work or absence without valid or justifiable reason, and,
(b) a clear intention to sever the employer-employee relationship, with the
second element as the more determinative factor manifested by some overt
acts. 23 In this case, private respondents Roberto Labendia and Mario
Labendia were forced to leave their respective duties because their salaries
were withheld. They could not simply sit idly and allow their families to
starve. They had to seek employment elsewhere, albeit temporarily, in order
to survive. On the other hand, it would be the height of injustice to validate
abandonment in this particular case as a ground for dismissal of respondents
thereby making petitioners benefit from a gross and unjust situation which
they themselves created. 24 Private respondents did not intend to sever ties
with petitioner and permanently abandon their jobs; otherwise, they would
not have filed this complaint for illegal dismissal.25
cralaw:red
Petitioners submit that since private respondents were only project
employees, they are not entitled to security of tenure. This is incorrect. In
Archbuild Masters and Construction, Inc. v. NLRC 26 we held —
. . . a project employee hired for a specific task also enjoys security of
tenure. A termination of his employment must be for a lawful cause and must
be done in a manner which affords him the proper notice and hearing . . . To
allow employers to exercise their prerogative to terminate a project worker’s
employment based on gratuitous assertions of project completion would
destroy the constitutionally protected right of labor to security of tenure
(Emphasis supplied).
The burden of proving that an employee has been lawfully dismissed
therefore lies with the employer. In the case at bar, the assertions of
petitioners were self-serving and insufficient to substantiate their claim of
proximate project completion. The services of the employees were terminated
not because of contract expiration but as sanction for their refusal to sign the
project employment forms and quitclaims.
Finding that the dismissal was without just cause, we find it unnecessary to
dwell on the non-observance of procedural due process. Suffice it to state
that private respondents were not priorly notified of their impending dismissal
and that they were not provided ample opportunity to defend themselves.
Petitioners charge as erroneous the grant to private respondents by NLRC of
back wages in excess of three (3) years or, in the alternative, to an award of
separation pay if reinstatement is no longer feasible.
We disagree. Since the illegal dismissal was made in 1990 or after the
effectivity of the amendatory provision of RA No. 6715 on 21 March 1989,
private respondents’ back wages should be computed on the basis of Art. 279
of the Labor Code which states that" (a)n employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full back wages, 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."
Conformably with our ruling in Bustamante v. NLRC 27 the illegally dismissed
employees are entitled to full back wages, undiminished by earnings derived
elsewhere during the period of their illegal dismissal. In the event that
reinstatement is no longer feasible, back wages shall be computed from the
time of illegal termination until the time of the finality of the decision. 28 The
award shall be based on the documents submitted by private respondents,
i.e. affidavits, SSS and Medicare documents, since petitioners failed to
adduce competent evidence to the contrary. The separation pay shall be
equivalent to "at least one (1) month salary or to one (1) month salary for
every year of service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year." 29
Finally, public respondent NLRC did not err in disregarding the veil of
separate corporate personality and holding petitioners jointly and severally
borne in mind that the fiction of law that a corporation as a juridical entity
has a distinct and separate personality was envisaged for convenience and to
serve justice; therefore it should not be used as a subterfuge to commit
injustice and circumvent labor laws.
WHEREFORE, the petition is DENIED and the decision of the National Labor
Relations Commission dated 05 August 1994 is AFFIRMED. Petitioners are
ordered to reinstate private respondents to their former positions without loss
of seniority rights and other privileges with full back wages, inclusive of
allowances, computed from the time compensation was withheld up to the
time of actual reinstatement. In the event that reinstatement is no longer
feasible, petitioners are directed to pay private respondents separation pay
equivalent to one month salary for every year of service, a fraction of at least
six (6) months being considered one (1) year in the computation thereof, and
full back wages computed from the time compensation was withheld until the
finality of this decision. All other claims of the parties are DISMISSED for lack
of merit. Costs against petitioners.chanrobles lawlibrary : rednad

liable for private respondents’ back wages and separation pay. The records
disclose that the three (3) corporations were in fact substantially owned and SO ORDERED
controlled by members of the Lao family composed of Lao Hian Beng alias
Tomas Lao, Chiu Siok Lian (wife of Tomas Lao), Andrew C. Lao, Lao Y. Heng,
Vicente Lao Chua, Lao E. Tin, Emmanuel Lao and Ismaelita Maluto. A majority
of the outstanding shares of stock in LVM and T&J is owned by the Lao family.
T&J is 100% owned by the Laos as reflected in its Articles of Incorporation.
The Lao Group of Companies therefore is a closed corporation where the
incorporators and directors belong to a single family. Lao Hian Beng is the
same Tomas Lao who owns Tomas Lao Corporation and is the majority
stockholder of T&J. Andrew C. Lao is the Managing Director of LVM
Construction, and President and Managing Director of the Lao Group of
Companies. Petitioners are engaged in the same line of business under one
management and use the same equipment including manpower services.
Where it appears that [three] business enterprises are owned, conducted and
controlled by the same parties, both law and equity will, when necessary to
protect the rights of third persons, disregard the legal fiction that the [three]
corporations are distinct entities, and treat them as identical. 30

Consonant with our earlier ruling, 31 we hold that the liability of petitioners
extends to the responsible officers acting in the interest of the corporations.
In view of the peculiar circumstances of this case, we disregard the separate
personalities of the three (3) corporations and at the same time declare the
members of the corporations jointly and severally liable with the corporations
for the monetary awards due to private respondents. It should always be
G.R. No. L-48494 February 5, 1990
BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners,
vs.
RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the
President, and DOROTEO R. ALEGRE, respondents.
Quasha, Asperilla, Ancheta, Peña & Nolasco for petitioners.
Mauricio G. Domogon for respondent Alegre.
NARVASA, J.:
The question presented by the proceedings at bar   is whether or not the provisions of
1
the Labor Code,   as amended,  have anathematized "fixed period employment" or
2 3
employment for a term.
The root of the controversy at bar is an employment contract in virtue of which Doroteo
R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly
compensation of P20,000.00.   The contract fixed a specific term for its existence, five (5)
4
years, i.e., from July 18, 1971, the date of execution of the agreement, to July 17, 1976.
Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973, and
September 14, 1974 reiterated the same terms and conditions, including the expiry date,
as those contained in the original contract of July 18, 1971. 
5
Some three months before the expiration of the stipulated period, or more precisely on
April 20,1976, Alegre was given a copy of the report filed by Brent School with the
Department of Labor advising of the termination of his services effective on July 16,
1976. The stated ground for the termination was "completion of contract, expiration of the
definite period of employment." And a month or so later, on May 26, 1976, Alegre
accepted the amount of P3,177.71, and signed a receipt therefor containing the phrase,
"in full payment of services for the period May 16, to July 17, 1976 as full payment of
contract."
However, at the investigation conducted by a Labor Conciliator of said report of
termination of his services, Alegre protested the announced termination of his
employment. He argued that although his contract did stipulate that the same would
terminate on July 17, 1976, since his services were necessary and desirable in the usual
business of his employer, and his employment had lasted for five years, he had acquired
the status of a regular employee and could not be removed except for valid cause.   The
6
Regional Director considered Brent School's report as an application for clearance to
terminate employment (not a report of termination), and accepting the recommendation
of the Labor Conciliator, refused to give such clearance and instead required the
reinstatement of Alegre, as a "permanent employee," to his former position without loss
of seniority rights and with full back wages. The Director pronounced "the ground relied
upon by the respondent (Brent) in terminating the services of the complainant
(Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly, as prohibited by Circular
No. 8, series of 1969, of the Bureau of Private Schools.  7
Brent School filed a motion for reconsideration. The Regional Director denied the motion
and forwarded the case to the Secretary of Labor for review.   The latter sustained the
8
Regional Director.   Brent appealed to the Office of the President. Again it was rebuffed.
9
That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's
decision, ruling that Alegre was a permanent employee who could not be dismissed
except for just cause, and expiration of the employment contract was not one of the just
causes provided in the Labor Code for termination of services.  10
The School is now before this Court in a last attempt at vindication. That it will get here.
The employment contract between Brent School and Alegre was executed on July 18,
1971, at a time when the Labor Code of the Philippines (P.D. 442) had not yet been
promulgated. Indeed, the Code did not come into effect until November 1, 1974, some
three years after the perfection of the employment contract, and rights and obligations
thereunder had arisen and been mutually observed and enforced.
At that time, i.e., before the advent of the Labor Code, there was no doubt whatever
about the validity of term employment. It was impliedly but nonetheless clearly
recognized by the Termination Pay Law, R.A. 1052,   as amended by R.A.
11
1787.   Basically, this statute provided that—
12
In cases of employment, without a definite period, in a commercial,
industrial, or agricultural establishment or enterprise, the employer or the
employee may terminate at any time the employment with just cause; or
without just cause in the case of an employee by serving written notice on
the employer at least one month in advance, or in the case of an
employer, by serving such notice to the employee at least one month in
advance or one-half month for every year of service of the employee,
whichever is longer, a fraction of at least six months being considered as
one whole year.
 The employer, upon whom no such notice was served in case of
termination of employment without just cause, may hold the employee
liable for damages.
The employee, upon whom no such notice was served in case of
termination of employment without just cause, shall be entitled to
compensation from the date of termination of his employment in an
amount equivalent to his salaries or wages corresponding to the required
period of notice.
There was, to repeat, clear albeit implied recognition of the licitness of term employment.
RA 1787 also enumerated what it considered to be just causes for terminating an
employment without a definite period, either by the employer or by the employee without
incurring any liability therefor.
Prior, thereto, it was the Code of Commerce which governed employment without a fixed
period, and also implicitly acknowledged the propriety of employment with a fixed period.
Its Article 302 provided that —
In cases in which the contract of employment does not have a fixed
period, any of the parties may terminate it, notifying the other thereof one
month in advance.
The factor or shop clerk shall have a right, in this case, to the salary
corresponding to said month.
The salary for the month directed to be given by the said Article 302 of the Code
of Commerce to the factor or shop clerk, was known as the mesada (from mes,
Spanish for "month"). When Article 302 (together with many other provisions of
the Code of Commerce) was repealed by the Civil Code of the Philippines,
Republic Act No. 1052 was enacted avowedly for the precise purpose of
reinstating the mesada.
Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and
became effective on August 30,1950, itself deals with obligations with a period in section
2, Chapter 3, Title I, Book IV; and with contracts of labor and for a piece of work, in
Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No prohibition against
term-or fixed-period employment is contained in any of its articles or is otherwise
deducible therefrom.
It is plain then that when the employment contract was signed between Brent School and
Alegre on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation
fixing the duration thereof Stipulations for a term were explicitly recognized as valid by
this Court, for instance, in Biboso v. Victorias Milling Co., Inc., promulgated on March 31,
1977,   and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on December 29,
13
1983.   The Thompson case involved an executive who had been engaged for a fixed
14
period of three (3) years. Biboso involved teachers in a private school as regards whom,
the following pronouncement was made:
What is decisive is that petitioners (teachers) were well aware an the time
that their tenure was for a limited duration. Upon its termination, both
parties to the employment relationship were free to renew it or to let it
lapse. (p. 254)
Under American law   the principle is the same. "Where a contract specifies the period of
15
its duration, it terminates on the expiration of such period."   "A contract of employment
16
for a definite period terminates by its own terms at the end of such period." 
17
The status of legitimacy continued to be enjoyed by fixed-period employment contracts
under the Labor Code (Presidential Decree No. 442), which went into effect on
November 1, 1974. The Code contained explicit references to fixed period
employment, or employment with a fixed or definite period. Nevertheless, obscuration of
the principle of licitness of term employment began to take place at about this time
Article 320, entitled "Probationary and fixed period employment," originally stated that the
"termination of employment of probationary employees and those employed WITH A
FIXED PERIOD shall be subject to such regulations as the Secretary of Labor may
prescribe." The asserted objective to was "prevent the circumvention of the right of the
employee to be secured in their employment as provided . . . (in the Code)."
Article 321 prescribed the just causes for which an employer could terminate
"an employment without a definite period."
And Article 319 undertook to define "employment without a fixed period" in the following
manner:  18
An employment shall be deemed to be without a definite period for
purposes of this Chapter where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual
business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or
termination of which has been determined at the time of the engagement
of the employee or where the work or service to be performed is seasonal
in nature and the employment is for the duration of the season.
The question immediately provoked by a reading of Article 319 is whether or not a
voluntary agreement on a fixed term or period would be valid where the employee "has
been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer." The definition seems a non sequitur. From the
premise — that the duties of an employee entail "activities which are usually necessary
or desirable in the usual business or trade of the employer the" — conclusion does not
necessarily follow that the employer and employee should be forbidden to stipulate any
period of time for the performance of those activities. There is nothing essentially
contradictory between a definite period of an employment contract and the nature of the
employee's duties set down in that contract as being "usually necessary or desirable in
the usual business or trade of the employer." The concept of the employee's duties as
being "usually necessary or desirable in the usual business or trade of the employer" is
not synonymous with or identical to employment with a fixed term. Logically, the decisive
determinant in term employment should not be the activities that the employee is called
upon to perform, but the day certain agreed upon by the parties for the commencement
and termination of their employment relationship, a day certain being understood to be
"that which must necessarily come, although it may not be known
when."   Seasonal employment, and employment for a particular project are merely
19
instances employment in which a period, where not expressly set down, necessarily
implied.
Of course, the term — period has a definite and settled signification. It means, "Length
of existence; duration. A point of time marking a termination as of a cause or an activity;
an end, a limit, a bound; conclusion; termination. A series of years, months or days in
which something is completed. A time of definite length. . . . the period from one fixed
date to another fixed date . . ."   It connotes a "space of time which has an influence on
20
an obligation as a result of a juridical act, and either suspends its demandableness or
produces its extinguishment."   It should be apparent that this settled and familiar notion
21
of a period, in the context of a contract of employment, takes no account at all of the
nature of the duties of the employee; it has absolutely no relevance to the character of
his duties as being "usually necessary or desirable to the usual business of the
employer," or not.
Subsequently, the foregoing articles regarding employment with "a definite period" and
"regular" employment were amended by Presidential Decree No. 850, effective
December 16, 1975.
Article 320, dealing with "Probationary and fixed period employment," was altered
by eliminating the reference to persons "employed with a fixed period," and was
renumbered (becoming Article 271). The article   now reads:
22
. . . Probationary employment.—Probationary employment shall not
exceed six months from the date the employee started working, unless it
is covered by an apprenticeship agreement stipulating a longer period.
The services of an employee who has been engaged in a probationary
basis may be terminated for a just cause or when he fails to qualify as a
regular employee in accordance with reasonable standards made known
by the employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall be
considered a regular employee.
Also amended by PD 850 was Article 319 (entitled "Employment with a fixed
period," supra) by (a) deleting mention of employment with a fixed or definite period, (b)
adding a general exclusion clause declaring irrelevant written or oral agreements "to the
contrary," and (c) making the provision treat exclusively of "regular" and "casual"
employment. As revised, said article, renumbered 270,   now reads:
23
. . . Regular and Casual Employment.—The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or service to be employed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to he casual if it is not covered by the
preceding paragraph: provided, that, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while such
actually exists.
The first paragraph is identical to Article 319 except that, as just mentioned, a
clause has been added, to wit: "The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreements of the
parties . . ." The clause would appear to be addressed inter alia to agreements
fixing a definite period for employment. There is withal no clear indication of the
intent to deny validity to employment for a definite period. Indeed, not only is the
concept of regular employment not essentially inconsistent with employment for a
fixed term, as above pointed out, Article 272 of the Labor Code, as amended by
said PD 850, still impliedly acknowledged the propriety of term employment: it
listed the "just causes" for which "an employer may terminate employment
without a definite period," thus giving rise to the inference that if the employment
be with a definite period, there need be no just cause for termination thereof if the
 ground be precisely the expiration of the term agreed upon by the parties for the
duration of such employment.
Still later, however, said Article 272 (formerly Article 321) was further amended by Batas
Pambansa Bilang 130,   to eliminate altogether reference to employment without a
24
definite period. As lastly amended, the opening lines of the article (renumbered 283),
now pertinently read: "An employer may terminate an employment for any of the
following just causes: . . . " BP 130 thus completed the elimination of every reference in
the Labor Code, express or implied, to employment with a fixed or definite period or term.
It is in the light of the foregoing description of the development of the provisions of the
Labor Code bearing on term or fixed-period employment that the question posed in the
opening paragraph of this opinion should now be addressed. Is it then the legislative
intention to outlaw stipulations in employment contracts laying down a definite period
therefor? Are such stipulations in essence contrary to public policy and should not on this
account be accorded legitimacy?
On the one hand, there is the gradual and progressive elimination of references to term
or fixed-period employment in the Labor Code, and the specific statement of the
rule   that—
25
. . . Regular and Casual Employment.— The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or service to be employed is seasonal in nature and the
employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: provided, that, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while such
actually exists.
There is, on the other hand, the Civil Code, which has always recognized, and continues
to recognize, the validity and propriety of contracts and obligations with a fixed or definite
period, and imposes no restraints on the freedom of the parties to fix the duration of a
contract, whatever its object, be it specie, goods or services, except the general
admonition against stipulations contrary to law, morals, good customs, public order or
public policy.   Under the Civil Code, therefore, and as a general proposition, fixed-term
26
employment contracts are not limited, as they are under the present Labor Code, to
those by nature seasonal or for specific projects with pre-determined dates of
completion; they also include those to which the parties by free choice have assigned a
specific date of termination.
Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and
natural appurtenance: overseas employment contracts, for one, to which, whatever the
nature of the engagement, the concept of regular employment will all that it implies does
not appear ever to have been applied, Article 280 of the Labor Code not withstanding;
also appointments to the positions of dean, assistant dean, college secretary, principal,
and other administrative offices in educational institutions, which are by practice or
tradition rotated among the faculty members, and where fixed terms are a necessity,
without which no reasonable rotation would be possible. Similarly, despite the provisions
of Article 280, Policy, Instructions No. 8 of the Minister of Labor   implicitly recognize that
27
certain company officials may be elected for what would amount to fixed periods, at the
expiration of which they would have to stand down, in providing that these officials," . . .
may lose their jobs as president, executive vice-president or vice-president, etc. because
the stockholders or the board of directors for one reason or another did not re-elect
them."
There can of course be no quarrel with the proposition that where from the
circumstances it is apparent that periods have been imposed to preclude acquisition of
tenurial security by the employee, they should be struck down or disregarded as contrary
to public policy, morals, etc. But where no such intent to circumvent the law is shown, or
stated otherwise, where the reason for the law does not exist, e.g., where it is indeed the
employee himself who insists upon a period or where the nature of the engagement is
such that, without being seasonal or for a specific project, a definite date of termination is
a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore
anathema? Would such an agreement come within the scope of Article 280 which
admittedly was enacted "to prevent the circumvention of the right of the employee to be
secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article 280 of the
Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut
of employment contracts to which the lack of a fixed period would be an anomaly, but
would also appear to restrict, without reasonable distinctions, the right of an employee to
freely stipulate with his employer the duration of his engagement, it logically follows that
such a literal interpretation should be eschewed or avoided. The law must be given a
reasonable interpretation, to preclude absurdity in its application. Outlawing the whole
concept of term employment and subverting to boot the principle of freedom of contract
to remedy the evil of employer's using it as a means to prevent their employees from
obtaining security of tenure is like cutting off the nose to spite the face or, more
relevantly, curing a headache by lopping off the head.
It is a salutary principle in statutory construction that there exists a valid
presumption that undesirable consequences were never intended by a
legislative measure, and that a construction of which the statute is fairly
susceptible is favored, which will avoid all objecionable mischievous,
undefensible, wrongful, evil and injurious consequences.  28
Nothing is better settled than that courts are not to give words a meaning
which would lead to absurd or unreasonable consequences. That s a
principle that does back to In re Allen decided oil October 27, 1903,
where it was held that a literal interpretation is to be rejected if it would be
unjust or lead to absurd results. That is a strong argument against its
adoption. The words of Justice Laurel are particularly apt. Thus: "The fact
that the construction placed upon the statute by the appellants would lead
to an absurdity is another argument for rejecting it. . . ." 
29
. . . We have, here, then a case where the true intent of the law is clear
that calls for the application of the cardinal rule of statutory construction
that such intent of spirit must prevail over the letter thereof, for whatever
is within the spirit of a statute is within the statute, since adherence to the
letter would result in absurdity, injustice and contradictions and would
defeat the plain and vital purpose of the statute.  30
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have been, as
already observed, to prevent circumvention of the employee's right to be secure in his
tenure, the clause in said article indiscriminately and completely ruling out all written or
oral agreements conflicting with the concept of regular employment as defined therein
should be construed to refer to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances vitiating his
consent, or where it satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. Unless thus limited in its purview, the law would
be made to apply to purposes other than those explicitly stated by its framers; it thus
becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and
unintended consequences.
Such interpretation puts the seal on Bibiso   upon the effect of the expiry of an agreed
31
period of employment as still good rule—a rule reaffirmed in the recent case of Escudero
vs. Office of the President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous
case of a teacher being served by her school a notice of termination following the
expiration of the last of three successive fixed-term employment contracts, the Court
held:
Reyes (the teacher's) argument is not persuasive. It loses sight of the fact
that her employment was probationary, contractual in nature, and one
with a definitive period. At the expiration of the period stipulated in the
contract, her appointment was deemed terminated and the letter
informing her of the non-renewal of her contract is not a condition
sine qua non before Reyes may be deemed to have ceased in the
employ of petitioner UST. The notice is a mere reminder that Reyes'
contract of employment was due to expire and that the contract would no
longer be renewed. It is not a letter of termination. The interpretation that
the notice is only a reminder is consistent with the court's finding
in Labajo supra. ...
32
Paraphrasing Escudero, respondent Alegre's employment was terminated upon the
expiration of his last contract with Brent School on July 16, 1976 without the necessity of
any notice. The advance written advice given the Department of Labor with copy to said
petitioner was a mere reminder of the impending expiration of his contract, not a letter of
termination, nor an application for clearance to terminate which needed the approval of
the Department of Labor to make the termination of his services effective. In any case,
such clearance should properly have been given, not denied.
WHEREFORE, the public respondent's Decision complained of is REVERSED and SET
ASIDE. Respondent Alegre's contract of employment with Brent School having lawfully
terminated with and by reason of the expiration of the agreed term of period thereof, he
is declared not entitled to reinstatement and the other relief awarded and confirmed on
appeal in the proceedings below. No pronouncement as to costs.
SO ORDERED.
 THIRD DIVISION "Contract of Employment for a Fixed Period," stipulating that the contract shall be for a period
of one year,3 to wit:
CHERRY J. PRICE, STEPHANIE G.   G.R. No. 178505
DOMINGO AND LOLITA CONTRACT OF EMPLOYMENT FOR A FIXED PERIOD
ARBILERA, Petitioners, Present:
xxxx
- versus - YNARES-SANTIAGO, J.,
Chairperson, WITNESSETH: That
INNODATA PHILS. INC.,/ INNODATA
CORPORATION, LEO RABANG AND JANE AUSTRIA-MARTINEZ, WHEREAS, the EMPLOYEE has applied for the position of FORMATTER and in the course
NAVARETTE, Respondents. CHICO-NAZARIO, thereof and represented himself/herself to be fully qualified and skilled for the said position;
NACHURA, and
REYES, JJ. WHEREAS, the EMPLOYER, by reason of the aforesaid representations, is desirous of
engaging that the (sic) services of the EMPLOYEE for a fixed period;
Promulgated:
September 30, 2008 NOW, THEREFORE, for and in consideration of the foregoing premises, the parties have
mutually agreed as follows:
x------------------------------------------------x
TERM/DURATION
DECISION
The EMPLOYER hereby employs, engages and hires the EMPLOYEE and the EMPLOYEE
CHICO-NAZARIO, J.: hereby accepts such appointment as FORMATTER effective FEB. 16, 1999 to FEB. 16, 2000
a period of ONE YEAR.
This Petition for Review on Certiorari under Rule 45 of the Rules of Court assails the
Decision1 dated 25 September 2006 and Resolution2 dated 15 June 2007 of the Court of xxxx
Appeals in CA-G.R. SP No. 72795, which affirmed the Decision dated 14 December 2001 of
the National Labor Relations Commission (NLRC) in NLRC NCR Case No. 30-03-01274- TERMINATION
2000 finding that petitioners were not illegally dismissed by respondents.
6.1 In the event that EMPLOYER shall discontinue operating its business, this CONTRACT
The factual antecedents of the case are as follows: shall also ipso facto terminate on the last day of the month on which the EMPLOYER ceases
operations with the same force and effect as is such last day of the month were originally set
Respondent Innodata Philippines, Inc./Innodata Corporation (INNODATA) was a domestic as the termination date of this Contract. Further should the Company have no more need for
corporation engaged in the data encoding and data conversion business. It employed the EMPLOYEE’s services on account of completion of the project, lack of work (sic)
encoders, indexers, formatters, programmers, quality/quantity staff, and others, to maintain its business losses, introduction of new production processes and techniques, which will negate
business and accomplish the job orders of its clients. Respondent Leo Rabang was its the need for personnel, and/or overstaffing, this contract maybe pre-terminated by the
Human Resources and Development (HRAD) Manager, while respondent Jane Navarette EMPLOYER upon giving of three (3) days notice to the employee.
was its Project Manager. INNODATA had since ceased operations due to business losses in
June 2002. 6.2 In the event period stipulated in item 1.2 occurs first vis-à-vis the completion of the
project, this contract shall automatically terminate.
Petitioners Cherry J. Price, Stephanie G. Domingo, and Lolita Arbilera were employed as
formatters by INNODATA. The parties executed an employment contract denominated as a 6.3 COMPANY’s Policy on monthly productivity shall also apply to the EMPLOYEE.
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without
cause, by giving at least Fifteen – (15) notice to that effect. Provided, that such pre-
termination shall be effective only upon issuance of the appropriate clearance in favor of the
said EMPLOYEE.
6.5 Either of the parties may terminate this Contract by reason of the breach or violation of
the terms and conditions hereof by giving at least Fifteen (15) days written notice.
Termination with cause under this paragraph shall be effective without need of judicial action
or approval.4
During their employment as formatters, petitioners were assigned to handle jobs for various
clients of INNODATA, among which were CAS, Retro, Meridian, Adobe, Netlib, PSM, and
Earthweb. Once they finished the job for one client, they were immediately assigned to do a
new job for another client.
On 16 February 2000, the HRAD Manager of INNODATA wrote petitioners informing them of
their last day of work. The letter reads:
RE: End of Contract
Date: February 16, 2000
Please be informed that your employment ceases effective at the end of the close of business
hours on February 16, 2000.5
According to INNODATA, petitioners’ employment already ceased due to the end of their
contract.
On 22 May 2000, petitioners filed a Complaint6 for illegal dismissal and damages against
respondents. Petitioners claimed that they should be considered regular employees since
their positions as formatters were necessary and desirable to the usual business of
INNODATA as an encoding, conversion and data processing company. Petitioners also
averred that the decisions in Villanueva v. National Labor Relations Commission 7 and
Servidad v. National Labor Relations Commission,8 in which the Court already purportedly
ruled "that the nature of employment at Innodata Phils., Inc. is regular," 9 constituted stare
decisis to the present case. Petitioners finally argued that they could not be considered
project employees considering that their employment was not coterminous with any project or
undertaking, the termination of which was predetermined.
On the other hand, respondents explained that INNODATA was engaged in the business of
data processing, typesetting, indexing, and abstracting for its foreign clients. The bulk of the
work was data processing, which involved data encoding. Data encoding, or the typing of
data into the computer, included pre-encoding, encoding 1 and 2, editing, proofreading, and
scanning. Almost half of the employees of INNODATA did data encoding work, while the
other half monitored quality control. Due to the wide range of services rendered to its clients,
INNODATA was constrained to hire new employees for a fixed period of not more than one
year. Respondents asserted that petitioners were not illegally dismissed, for their employment
was terminated due to the expiration of their terms of employment. Petitioners’ contracts of
employment with INNODATA were for a limited period only, commencing on 6 September
1999 and ending on 16 February 2000.10 Respondents further argued that petitioners were
estopped from asserting a position contrary to the contracts which they had knowingly,
voluntarily, and willfully agreed to or entered into. There being no illegal dismissal,
respondents likewise maintained that petitioners were not entitled to reinstatement and
backwages.
On 17 October 2000, the Labor Arbiter11 issued its Decision12 finding petitioners’ complaint for
illegal dismissal and damages meritorious. The Labor Arbiter held that as formatters,
petitioners occupied jobs that were necessary, desirable, and indispensable to the data
processing and encoding business of INNODATA. By the very nature of their work as
formatters, petitioners should be considered regular employees of INNODATA, who were
entitled to security of tenure. Thus, their termination for no just or authorized cause was
illegal. In the end, the Labor Arbiter decreed:
FOREGOING PREMISES CONSIDERED, judgment is hereby rendered declaring
complainants’ dismissal illegal and ordering respondent INNODATA PHILS. INC./INNODATA
CORPORATION to reinstate them to their former or equivalent position without loss of
seniority rights and benefits. Respondent company is further ordered to pay complainants
their full backwages plus ten percent (10%) of the totality thereof as attorney’s fees. The
monetary awards due the complainants as of the date of this decision are as follows:
A. Backwages
1. Cherry J. Price
2/17/2000 – 10/17/2000 at 223.50/day
P5,811.00/mo/ x 8 mos. P46,488.00
2. Stephanie Domingo 46,488.00
(same computation)
3. Lolita Arbilera 46,488.00
(same computation)
Total Backwages P139,464.00
B. Attorney’s fees (10% of total award) 13,946.40
 Total Award P153,410.40
Respondent INNODATA appealed the Labor Arbiter’s Decision to the NLRC. The NLRC, in
its Decision dated 14 December 2001, reversed the Labor Arbiter’s Decision dated 17
October 2000, and absolved INNODATA of the charge of illegal dismissal.
The NLRC found that petitioners were not regular employees, but were fixed-term employees
as stipulated in their respective contracts of employment. The NLRC applied Brent School,
Inc. v. Zamora13 and St. Theresa’s School of Novaliches Foundation v. National Labor
Relations Commission,14 in which this Court upheld the validity of fixed-term contracts. The
determining factor of such 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. The NLRC observed that the petitioners freely and voluntarily entered into the
fixed-term employment contracts with INNODATA. Hence, INNODATA was not guilty of
illegal dismissal when it terminated petitioners’ employment upon the expiration of their
contracts on 16 February 2000.
The dispositive portion of the NLRC Decision thus reads:
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and
SET ASIDE and a new one entered DISMISSING the instant complaint for lack of merit. 15
The NLRC denied petitioners’ Motion for Reconsideration in a Resolution dated 28 June
2002.16
In a Petition for Certiorari under Rule 65 of the Rules of Court filed before the Court of
Appeals, petitioners prayed for the annulment, reversal, modification, or setting aside of the
Decision dated 14 December 2001 and Resolution dated 28 June 2002 of the
NLRC.lawphil.net
On 25 September 2006, the Court of Appeals promulgated its Decision sustaining the ruling
of the NLRC that petitioners were not illegally dismissed.
The Court of Appeals ratiocinated that although this Court declared in Villanueva and
Servidad that the employees of INNODATA working as data encoders and abstractors were
regular, and not contractual, petitioners admitted entering into contracts of employment with
INNODATA for a term of only one year and for a project called Earthweb. According to the
Court of Appeals, there was no showing that petitioners entered into the fixed-term contracts
unknowingly and involuntarily, or because INNODATA applied force, duress or improper
pressure on them. The appellate court also observed that INNODATA and petitioners dealt
with each other on more or less equal terms, with no moral dominance exercised by the
former on latter. Petitioners were therefore bound by the stipulations in their contracts
terminating their employment after the lapse of the fixed term.
The Court of Appeals further expounded that in fixed-term contracts, the stipulated period of
employment is governing and not the nature thereof. Consequently, even though petitioners
were performing functions that are necessary or desirable in the usual business or trade of
the employer, petitioners did not become regular employees because their employment was
for a fixed term, which began on 16 February 1999 and was predetermined to end on 16
February 2000.
The appellate court concluded that the periods in petitioners’ contracts of employment were
not imposed to preclude petitioners from acquiring security of tenure; and, applying the ruling
of this Court in Brent, declared that petitioners’ fixed-term employment contracts were valid.
INNODATA did not commit illegal dismissal for terminating petitioners’ employment upon the
expiration of their contracts.
The Court of Appeals adjudged:
WHEREFORE, the instant petition is hereby DENIED and the Resolution dated December
14, 2001 of the National Labor Relations Commission declaring petitioners were not illegally
dismissed is AFFIRMED.17
The petitioners filed a Motion for Reconsideration of the afore-mentioned Decision of the
Court of Appeals, which was denied by the same court in a Resolution dated 15 June 2007.
Petitioners are now before this Court via the present Petition for Review on Certiorari, based
on the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF
LAW AND GRAVE ABUSE OF DISCRETION WHEN IT DID NOT APPLY THE
SUPREME COURT RULING IN THE CASE OF NATIVIDAD & QUEJADA THAT THE
NATURE OF EMPLOYMENT OF RESPONDENTS IS REGULAR NOT FIXED, AND
AS SO RULED IN AT LEAST TWO OTHER CASES AGAINST INNODATA PHILS.
INC.
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR OF
LAW IN RULING THAT THE STIPULATION OF CONTRACT IS GOVERNING AND
NOT THE NATURE OF EMPLOYMENT AS DEFINED BY LAW.
III.
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION WHEN IT DID NOT
 CONSIDER THE EVIDENCE ON RECORD SHOWING THAT THERE IS CLEAR
CIRCUMVENTION OF THE LAW ON SECURITY OF TENURE THROUGH
CONTRACT MANIPULATION.18
The issue of whether petitioners were illegally dismissed by respondents is ultimately
dependent on the question of whether petitioners were hired by INNODATA under valid fixed-
term employment contracts.
After a painstaking review of the arguments and evidences of the parties, the Court finds
merit in the present Petition. There were no valid fixed-term contracts and petitioners were
regular employees of the INNODATA who could not be dismissed except for just or
authorized cause.
The employment status of a person is defined and prescribed by law and not by what the
parties say it should be.19 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.20 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. 21
Regular employment has been defined by Article 280 of the Labor Code, as amended, which
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 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.
(Underscoring ours).
Based on the afore-quoted provision, the following employees are accorded regular status:
(1) those who are engaged to perform activities which are necessary or desirable in the usual
business or trade of the employer, regardless of the length of their employment; and (2) those
who were initially hired as casual employees, but have rendered at least one year of service,
whether continuous or broken, with respect to the activity in which they are employed.
Undoubtedly, petitioners belong to the first type of regular employees.
Under Article 280 of the Labor Code, the applicable test to determine whether an employment
should be considered regular or non-regular is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the
employer.22
In the case at bar, petitioners were employed by INNODATA on 17 February 1999 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.
Formatting organizes the data encoded, making it easier to understand for the clients and/or
the intended end users thereof. Undeniably, the work performed by petitioners was necessary
or desirable in the business or trade of INNODATA.
However, it is also true that while certain forms of employment require the performance of
usual or desirable functions and exceed one year, these do not necessarily result in regular
employment under Article 280 of the Labor Code.23 Under the Civil Code, fixed-term
employment contracts are not limited, as they are under the present Labor Code, to those by
nature seasonal or for specific projects with predetermined dates of completion; they also
include those to which the parties by free choice have assigned a specific date of
termination.24
The decisive determinant in term employment is 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.
Seasonal employment and employment for a particular project are instances of employment
in which a period, where not expressly set down, is necessarily implied. 25
Respondents maintain that the contracts of employment entered into by petitioners with
INNDOATA were valid fixed-term employment contracts which were automatically terminated
at the expiry of the period stipulated therein, i.e., 16 February 2000.
The Court disagrees.
While this Court has recognized the validity of fixed-term employment contracts, it has
consistently held that this is the exception rather than the general rule. More importantly, a
fixed-term employment is valid only under certain circumstances. In Brent, the very same
case invoked by respondents, the Court identified several circumstances wherein a fixed-
term is an essential and natural appurtenance, to wit:
Some familiar examples may be cited of employment contracts which may be neither for
seasonal work nor for specific projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to which, whatever the nature of the
engagement, the concept of regular employment with all that it implies does not appear ever
to have been applied, Article 280 of the Labor Code notwithstanding; also appointments to
the positions of dean, assistant dean, college secretary, principal, and other administrative
offices in educational institutions, which are by practice or tradition rotated among the faculty
members, and where fixed terms are a necessity without which no reasonable rotation would
be possible. Similarly, despite the provisions of Article 280, Policy Instructions No. 8 of the
Minister of Labor implicitly recognize that certain company officials may be elected for what
would amount to fixed periods, at the expiration of which they would have to stand down, in
providing that these officials, "x x may lose their jobs as president, executive vice-president or
vice president, etc. because the stockholders or the board of directors for one reason or
another did not reelect them."26
As a matter of fact, the Court, in its oft-quoted decision in Brent, also issued a stern
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. 27
After considering petitioners’ contracts in their entirety, as well as the circumstances
surrounding petitioners’ employment at INNODATA, the Court is convinced that the terms
fixed therein were meant only to circumvent petitioners’ right to security of tenure and are,
therefore, invalid.
The contracts of employment submitted by respondents are highly suspect for not only being
ambiguous, but also for appearing to be tampered with.
Petitioners alleged that their employment contracts with INNODATA became effective 16
February 1999, and the first day they reported for work was on 17 February 1999. The
Certificate of Employment issued by the HRAD Manager of INNODATA also indicated that
petitioners Price and Domingo were employed by INNODATA on 17 February 1999.
However, respondents asserted before the Labor Arbiter that petitioners’ employment
contracts were effective only on 6 September 1999. They later on admitted in their
Memorandum filed with this Court that petitioners were originally hired on 16 February 1999
but the project for which they were employed was completed before the expiration of one
year. Petitioners were merely rehired on 6 September 1999 for a new project. While
respondents submitted employment contracts with 6 September 1999 as beginning date of
effectivity, it is obvious that in one of them, the original beginning date of effectivity, 16
February 1999, was merely crossed out and replaced with 6 September 1999. The copies of
the employment contracts submitted by petitioners bore similar alterations.
The Court notes that the attempt to change the beginning date of effectivity of petitioners’
contracts was very crudely done. The alterations are very obvious, and they have not been
initialed by the petitioners to indicate their assent to the same. If the contracts were truly
fixed-term contracts, then a change in the term or period agreed upon is material and would
already constitute a novation of the original contract.
Such modification and denial by respondents as to the real beginning date of petitioners’
employment contracts render the said contracts ambiguous. The contracts themselves state
that they would be effective until 16 February 2000 for a period of one year. If the contracts
took effect only on 6 September 1999, then its period of effectivity would obviously be less
than one year, or for a period of only about five months.
Obviously, respondents wanted to make it appear that petitioners worked for INNODATA for
a period of less than one year. The only reason the Court can discern from such a move on
respondents’ part is so that they can preclude petitioners from acquiring regular status based
on their employment for one year. Nonetheless, the Court emphasizes that it has already
found that petitioners should be considered regular employees of INNODATA by the nature of
the work they performed as formatters, which was necessary in the business or trade of
INNODATA. Hence, the total period of their employment becomes irrelevant.
Even assuming that petitioners’ length of employment is material, given respondents’
muddled assertions, this Court adheres to its pronouncement in Villanueva v. National Labor
Relations Commission,28 to the effect that where a contract of employment, being a contract
of adhesion, is ambiguous, any ambiguity therein should be construed strictly against the
party who prepared it. The Court is, thus, compelled to conclude that petitioners’ contracts of
employment became effective on 16 February 1999, and that they were already working
continuously for INNODATA for a year.
Further attempting to exonerate itself from any liability for illegal dismissal, INNODATA
contends that petitioners were project employees whose employment ceased at the end of a
specific project or undertaking. This contention is specious and devoid of merit.
In Philex Mining Corp. v. National Labor Relations Commission, 29 the Court defined "project
employees" as 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.
Scrutinizing petitioners’ employment contracts with INNODATA, however, failed to reveal any
mention therein of what specific project or undertaking petitioners were hired for. Although the
contracts made general references to a "project," such project was neither named nor
described at all therein. The conclusion by the Court of Appeals that petitioners were hired for
the Earthweb project is not supported by any evidence on record. The one-year period for
which petitioners were hired was simply fixed in the employment contracts without reference
or connection to the period required for the completion of a project. More importantly, there is
also a dearth of evidence that such project or undertaking had already been completed or
terminated to justify the dismissal of petitioners. In fact, petitioners alleged - and respondents
failed to dispute that petitioners did not work on just one project, but continuously worked for
a series of projects for various clients of INNODATA.
In Magcalas v. National Labor Relations Commission,30 the Court struck down a similar claim
by the employer therein that the dismissed employees were fixed-term and project
employees. The Court here reiterates the rule that all doubts, uncertainties, ambiguities and
insufficiencies should be resolved in favor of labor. It is a well-entrenched doctrine that in
illegal dismissal cases, the employer has the burden of proof. This burden was not
discharged in the present case.
As a final observation, the Court also takes note of several other provisions in petitioners’
employment contracts that display utter disregard for their security of tenure. Despite fixing a
period or term of employment, i.e., one year, INNODATA reserved the right to pre-terminate
petitioners’ employment under the following circumstances:
6.1 x x x Further should the Company have no more need for the EMPLOYEE’s services on
account of completion of the project, lack of work (sic) business losses, introduction of new
production processes and techniques, which will negate the need for personnel, and/or
overstaffing, this contract maybe pre-terminated by the EMPLOYER upon giving of three (3)
days notice to the employee.
xxxx
6.4 The EMPLOYEE or the EMPLOYER may pre-terminate this CONTRACT, with or without
cause, by giving at least Fifteen – (15) [day] notice to that effect. Provided, that such pre-
termination shall be effective only upon issuance of the appropriate clearance in favor of the
said EMPLOYEE. (Emphasis ours.)
Pursuant to the afore-quoted provisions, 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.
Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the
workers of security of tenure and free them from the bondage of uncertainty of tenure woven
by some employers into their contracts of employment. This was exactly the purpose of the
legislators in drafting Article 280 of the Labor Code – to prevent the circumvention by
unscrupulous employers of the employee’s right to be secure in his tenure by indiscriminately
and completely ruling out all written and oral agreements inconsistent with the concept of
regular employment.
In all, respondents’ insistence that it can legally dismiss petitioners on the ground that their
term of employment has expired is untenable. To reiterate, petitioners, being regular
employees of INNODATA, are entitled to security of tenure. In the words of Article 279 of the
Labor Code:
ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement.
By virtue of the foregoing, an illegally dismissed employee is entitled to reinstatement without
loss of seniority rights and other privileges, with full back wages computed from the time of
dismissal up to the time of actual reinstatement.
Considering that reinstatement is no longer possible on the ground that INNODATA had
ceased its operations in June 2002 due to business losses, the proper award is separation
pay equivalent to one month pay31 for every year of service, to be computed from the
commencement of their employment up to the closure of INNODATA.
The amount of back wages awarded to petitioners must be computed from the time
petitioners were illegally dismissed until the time INNODATA ceased its operations in June
2002.32
Petitioners are further entitled to attorney’s fees equivalent to 10% of the total monetary
award herein, for having been forced to litigate and incur expenses to protect their rights and
interests herein.
Finally, unless they have exceeded their authority, corporate officers are, as a general rule,
not personally liable for their official acts, because a corporation, by legal fiction, has a
personality separate and distinct from its officers, stockholders and members. Although as an
exception, corporate directors and officers are solidarily held liable with the corporation,
where terminations of employment are done with malice or in bad faith, 33 in the absence of
evidence that they acted with malice or bad faith herein, the Court exempts the individual
respondents, Leo Rabang and Jane Navarette, from any personal liability for the illegal
dismissal of petitioners.
WHEREFORE, the Petition for Review on Certiorari is GRANTED. The Decision dated 25
September 2006 and Resolution dated 15 June 2007 of the Court of Appeals in CA-G.R. SP
No. 72795are hereby REVERSED and SET ASIDE. RespondentInnodata Philippines,
Inc./Innodata Corporation is ORDERED to pay petitioners Cherry J. Price, Stephanie G.
Domingo, and Lolita Arbilera: (a) separation pay, in lieu of reinstatement, equivalent to one
month pay for every year of service, to be computed from the commencement of their
employment up to the date respondent Innodata Philippines, Inc./Innodata Corporation
ceased operations; (b) full backwages, computed from the time petitioners’ compensation
was withheld from them up to the time respondent Innodata Philippines, Inc./Innodata
Corporation ceased operations; and (3) 10% of the total monetary award as attorney’s fees.
Costs against respondent Innodata Philippines, Inc./Innodata Corporation.
SO ORDERED
G.R. No. 181974               February 1, 2012
LYNVIL FISHING ENTERPRISES, INC. and/or ROSENDO S. DE BORJA, Petitioners,
vs.
ANDRES G. ARIOLA, JESSIE D. ALCOVENDAS, JIMMY B. CALINAO AND
LEOPOLDO G. SEBULLEN, Respondents.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari of the Decision of the Fourteenth
1  2  7. On 12 November 1998, First Assistant City Prosecutor Rosauro Silverio found
Division of the Court of Appeals in CA-G.R. SP No. 95094 dated 10 September 2007,
granting the Writ of Certiorari prayed for under Rule 65 of the 1997 Revised Rules of
Civil Procedure by herein respondents Andres G. Ariola, Jessie D. Alcovendas, Jimmy B.
Calinao and Leopoldo Sebullen thereby reversing the Resolution of the National Labor
Relations Commission (NLRC). The dispositive portion of the assailed decision reads:
WHEREFORE, premises considered, the Decision dated March 31, 2004 rendered by
the National Labor Relations Commission is hereby REVERSED and SET ASIDE. In lieu
thereof, the Decision of the Labor Arbiter is hereby REINSTATED, except as to the
award of attorney’s fees, which is ordered DELETED. 3
The version of the petitioners follows:
1. Lynvil Fishing Enterprises, Inc. (Lynvil) is a company engaged in deep-sea
fishing, operating along the shores of Palawan and other outlying islands of the
Philippines. It is operated and managed by Rosendo S. de Borja.
4 
2. On 1 August 1998, Lynvil received a report from Romanito Clarido, one of its
employees, that on 31 July 1998, he witnessed that while on board the company
vessel Analyn VIII, Lynvil employees, namely: Andres G. Ariola (Ariola), the
captain; Jessie D. Alcovendas (Alcovendas), Chief Mate; Jimmy B. Calinao
(Calinao), Chief Engineer; Ismael G. Nubla (Nubla), cook; Elorde Bañez (Bañez),
oiler; and Leopoldo D. Sebullen (Sebullen), bodegero, conspired with one
another and stole eight (8) tubs of "pampano" and "tangigue" fish and delivered
them to another vessel, to the prejudice of Lynvil.5
3. The said employees were engaged on a per trip basis or "por viaje" which
terminates at the end of each trip. Ariola, Alcovendas and Calinao were
managerial field personnel while the rest of the crew were field personnel.
6
4. By reason of the report and after initial investigation, Lynvil’s General Manager
Rosendo S. De Borja (De Borja) summoned respondents to explain within five (5)
days why they should not be dismissed from service. However, except for
Alcovendas and Bañez, the respondents refused to sign the receipt of the notice.
7 
5. Failing to explain as required, respondents’ employment was terminated.
6. Lynvil, through De Borja, filed a criminal complaint against the dismissed
employees for violation of P.D. 532, or the Anti-Piracy and Anti-Highway Robbery
Law of 1974 before the Office of the City Prosecutor of Malabon City. 8
probable cause for the indictment of the dismissed employees for the crime of
qualified theft under the Revised Penal Code.
9 
On the other hand, the story of the defense is:
1. The private respondents were crew members of Lynvil’s vessel named Analyn
VIII.
10
2. On 31 July 1998, they arrived at the Navotas Fishport on board Analyn VIII
loaded with 1,241 bañeras of different kinds of fishes. These bañeras were
delivered to a consignee named SAS and Royale. 11
The following day, the private respondents reported back to Lynvil office to
inquire about their new job assignment but were told to wait for further advice.
They were not allowed to board any vessel. 12
3. On 5 August 1998, only Alcovendas and Bañez received a memorandum from
De Borja ordering them to explain the incident that happened on 31 July 1998.
Upon being informed about this, Ariola, Calinao, Nubla and Sebullen went to the
Lynvil office. However, they were told that their employments were already
terminated.13
Aggrieved, the employees filed with the Arbitration Branch of the National Labor
Relations Commission-National Capital Region on 25 August 1998 a complaint for illegal
dismissal with claims for backwages, salary differential reinstatement, service incentive
leave, holiday pay and its premium and 13th month pay from 1996 to1998. They also
claimed for moral, exemplary damages and attorney’s fees for their dismissal with bad
faith.
14
They added that the unwarranted accusation of theft stemmed from their oral demand of Separation Pay – P44,073.00
increase of salaries three months earlier and their request that they should not be
required to sign a blank payroll and vouchers. 15 13th Month Pay – 2,473.12
Salary Differential – 4,472.00
On 5 June 2002, Labor Arbiter Ramon Valentin C. Reyes found merit in complainants’
charge of illegal dismissal. The dispositive portion reads:
16 
P208,455.12
"5) Ismael Nubla
WHEREFORE, premises considered, judgment is hereby rendered finding that Backwages P199,640.12
complainants were illegally dismissed, ordering respondents to jointly and severally pay
complainants (a) separation pay at one half month pay for every year of service; (b) Separation Pay – P58,149.00
backwages; (c) salary differential; (d) 13th month pay; and (e) attorney’s fees, as follows: 13th Month Pay – 2,473.12
Salary Differential – P5,538.00
"1) Andres Ariola
Backwages P234,000.00 P265, 28.12
(P6,500.00 x 36 = P234,000.00)
Separation Pay – P74,650.00 TOTAL P 1, 341, 650.76
13th Month Pay – P6,500.00
All other claims are dismissed for lack of merit." 17

P325,250.00
The Labor Arbiter found that there was no evidence showing that the private respondents
"2) Jessie Alcovendas
received the 41 bañeras of "pampano" as alleged by De Borja in his reply-affidavit; and
Backwages P195,328.00
that no proof was presented that the 8 bañeras of pampano [and tangigue] were missing
(P5,148.00 x 36 = P195,328.00) at the place of destination.
18

Separation Pay – P44,304.00

The Labor Arbiter disregarded the Resolution of Assistant City Prosecutor Rosauro
13th Month Pay – 5,538.00 Silverio on the theft case. He reasoned out that the Labor Office is governed by different
Salary Differential – 1,547.52 rules for the determination of the validity of the dismissal of employees.
19

P246,717.52 The Labor Arbiter also ruled that the contractual provision that the employment
"3) Jimmy Calinao terminates upon the end of each trip does not make the respondents’ dismissal legal. He
Backwages P234,000.00 pointed out that respondents and Lynvil did not negotiate on equal terms because of the
moral dominance of the employer. 20

(P6,500.00 x 36 = P234,000.00)
Separation Pay – 55,250.00 The Labor Arbiter found that the procedural due process was not complied with and that
the mere notice given to the private respondents fell short of the requirement of "ample
13th Month Pay – P6,500.00
opportunity" to present the employees’ side. 21

P295,700.00
On appeal before the National Labor Relations Commission, petitioners asserted that
"4) Leopoldo Sebullen private respondents were only contractual employees; that they were not illegally
Backwages P154,440.00 dismissed but were accorded procedural due process and that De Borja did not commit
bad faith in dismissing the employees so as to warrant his joint liability with Lynvil.
22

(P4, 290.00 x 36 = P154,440.00)

On 31 March 2004, the NLRC reversed and set aside the Decision of the Labor Arbiter.
The dispositive portion reads:
WHEREFORE, judgment is hereby rendered REVERSING AND SETTING ASIDE the
Decision of the Labor Arbiter a quo and a new one entered DISMISSING the present
complaints for utter lack of merit;
However as above discussed, an administrative fine of PhP5,000.00 for each
complainant, Andres Ariola, Jessie Alcovendas, Jimmy Canilao, Leopoldo Sebullen and
Ismael Nobla or a total of PhP25,000.00 is hereby awarded. 23
The private respondents except Elorde Bañez filed a Petition for Certiorari before the
24 
Court of Appeals alleging grave abuse of discretion on the part of NLRC.
The Court of Appeals found merit in the petition and reinstated the Decision of the Labor
Arbiter except as to the award of attorney’s fees. The appellate court held that the
allegation of theft did not warrant the dismissal of the employees since there was no
evidence to prove the actual quantities of the missing kinds of fish loaded to Analyn
VIII. It also reversed the finding of the NLRC that the dismissed employees were merely
25 
contractual employees and added that they were regular ones performing activities which
are usually necessary or desirable in the business and trade of Lynvil. Finally, it ruled
that the two-notice rule provided by law and jurisprudence is mandatory and non-
compliance therewith rendered the dismissal of the employees illegal.
The following are the assignment of errors presented before this Court by Lynvil:
I The Supreme Court is not a trier of facts. Under Rule 45, parties may raise only
THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER
THE ESTABLISHED DOCTRINE LAID DOWN IN NASIPIT LUMBER COMPANY
V. NLRC HOLDING THAT THE FILING OF A CRIMINAL CASE BEFORE THE
PROSECUTOR’S OFFICE CONSTITUTES SUFFICIENT BASIS FOR A VALID
TERMINATION OF EMPLOYMENT ON THE GROUNDS OF SERIOUS
MISCONDUCT AND/OR LOSS OF TRUST AND CONFIDENCE.
II
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
TERMINATION OF RESPONDENTS’ EMPLOYMENT WAS NOT SUPPORTED
BY SUBSTANTIAL EVIDENCE.
III
THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER
THAT THE RESPONDENTS’ EMPLOYMENT, IN ANY EVENT, WERE
CONTRACTUAL IN NATURE BEING ON A PER VOYAGE BASIS. THUS,
THEIR RESPECTIVE EMPLOYMENT TERMINATED AFTER THE END OF
EACH VOYAGE
IV
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
RESPONDENTS WERE NOT ACCORDED PROCEDURAL DUE PROCESS.
V
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE
RESPONDENTS ARE ENTITLED TO THE PAYMENT OF THEIR MONEY
CLAIMS.
VI
THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER
THAT PETITIONER ROSENDO S. DE BORJA IS NOT JOINTLY AND
SEVERALLY LIABLE FOR THE JUDGMENT WHEN THERE WAS NO FINDING
OF BAD FAITH. 26
The Court’s Ruling
27 
questions of law. We are not duty-bound to analyze again and weigh the evidence
introduced in and considered by the tribunals below. Generally when supported by
substantial evidence, the findings of fact of the CA are conclusive and binding on the
parties and are not reviewable by this Court, unless the case falls under any of the
following recognized exceptions:
(1) When the conclusion is a finding grounded entirely on speculation, surmises
and conjectures;
(2) When the inference made is manifestly mistaken, absurd or impossible;
(3) Where there is a grave abuse of discretion;
(4) When the judgment is based on a misapprehension of facts;
 (5) When the findings of fact are conflicting;
(6) When the Court of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellant and
appellee;
(7) When the findings are contrary to those of the trial court;
(8) When the findings of fact are conclusions without citation of specific evidence
on which they are based;
(9) When the facts set forth in the petition as well as in the petitioners' main and
reply briefs are not disputed by the respondents; and
(10) When the findings of fact of the Court of Appeals are premised on the
supposed absence of evidence and contradicted by the evidence on record.
(Emphasis supplied) 28
The contrariety of the findings of the Labor Arbiter and the NLRC prevents reliance on
the principle of special administrative expertise and provides the reason for judicial
review, at first instance by the appellate court, and on final study through the present
petition.
In the first assignment of error, Lynvil contends that the filing of a criminal case before
the Office of the Prosecutor is sufficient basis for a valid termination of employment
based on serious misconduct and/or loss of trust and confidence relying on Nasipit
Lumber Company v. NLRC. 29
Nasipit is about a security guard who was charged with qualified theft which charge was
dismissed by the Office of the Prosecutor. However, despite the dismissal of the
complaint, he was still terminated from his employment on the ground of loss of
confidence. We ruled that proof beyond reasonable doubt of an employee's misconduct
is not required when loss of confidence is the ground for dismissal. It is sufficient if the
employer has "some basis" to lose confidence or that the employer has reasonable
ground to believe or to entertain the moral conviction that the employee concerned is
responsible for the misconduct and that the nature of his participation therein rendered
him absolutely unworthy of the trust and confidence demanded by his position. It added
30 
that the dropping of the qualified theft charges against the respondent is not binding
upon a labor tribunal.31
In Nicolas v. National Labor Relations Commission, we held that a criminal conviction is
32 
not necessary to find just cause for employment termination. Otherwise stated, an
employee’s acquittal in a criminal case, especially one that is grounded on the existence
of reasonable doubt, will not preclude a determination in a labor case that he is guilty of
acts inimical to the employer’s interests. In the reverse, the finding of probable cause is
33 
not followed by automatic adoption of such finding by the labor tribunals.
In other words, whichever way the public prosecutor disposes of a complaint, the finding
does not bind the labor tribunal.
Thus, Lynvil cannot argue that since the Office of the Prosecutor found probable cause
for theft the Labor Arbiter must follow the finding as a valid reason for the termination of
respondents’ employment. The proof required for purposes that differ from one and the
other are likewise different.
Nonetheless, even without reliance on the prosecutor’s finding, we find that there was
valid cause for respondents’ dismissal.
In illegal dismissal cases, the employer bears the burden of proving that the termination
was for a valid or authorized cause. 34
Just cause is required for a valid dismissal. The Labor Code provides that an employer
35 
may terminate an employment based on fraud or willful breach of the trust reposed on
the employee. Such breach is considered willful if it is done intentionally, knowingly, and
purposely, without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently. It must also be based on substantial evidence
and not on the employer’s whims or caprices or suspicions otherwise, the employee
would eternally remain at the mercy of the employer. Loss of confidence must not be
indiscriminately used as a shield by the employer against a claim that the dismissal of an
employee was arbitrary. And, in order to constitute a just cause for dismissal, the act
complained of must be work-related and shows that the employee concerned is unfit to
continue working for the employer. In addition, loss of confidence as a just cause for
termination of employment is premised on the fact that the employee concerned holds a
position of responsibility, trust and confidence or that the employee concerned is
entrusted with confidence with respect to delicate matters, such as the handling or care
and protection of the property and assets of the employer. The betrayal of this trust is the
essence of the offense for which an employee is penalized. 36
Breach of trust is present in this case.
We agree with the ruling of the Labor Arbiter and Court of Appeals that the quantity of
tubs expected to be received was the same as that which was loaded. However, what is
material is the kind of fish loaded and then unloaded. Sameness is likewise needed.
We cannot close our eyes to the positive and clear narration of facts of the three
witnesses to the commission of qualified theft. Jonathan Distajo, a crew member of the
Analyn VIII, stated in his letter addressed to De Borja dated 8 August 1998, that while
37 
the vessel was traversing San Nicolas, Cavite, he saw a small boat approach them.
When the boat was next to their vessel, Alcovendas went inside the stockroom while
Sebullen pushed an estimated four tubs of fish away from it. Ariola, on the other hand,
served as the lookout and negotiator of the transaction. Finally, Bañez and Calinao
helped in putting the tubs in the small boat. He further added that he received ₱800.00
as his share for the transaction. Romanito Clarido, who was also on board the vessel,
corroborated the narration of Distajo on all accounts in his 25 August 1998 affidavit. He
38 
added that Alcovendas told him to keep silent about what happened on that day. Sealing
tight the credibility of the narration of theft is the affidavit executed by Elorde Bañez
39 
dated 3 May 1999. Bañez was one of the dismissed employees who actively participated
in the taking of the tubs. He clarified in the affidavit that the four tubs taken out of the
stockroom in fact contained fish taken from the eight tubs. He further stated that Ariola
told everyone in the vessel not to say anything and instead file a labor case against the
management. Clearly, we cannot fault Lynvil and De Borja when it dismissed the
employees.
The second to the fifth assignment of errors interconnect.
The nature of employment is defined in the Labor Code, thus:
Art. 280. Regular and casual employment. The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade
of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or service to be performed is
seasonal in nature and the employment is for the duration of the season.
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.
Lynvil contends that it cannot be guilty of illegal dismissal because the private
respondents were employed under a fixed-term contract which expired at the end of the
voyage. The pertinent provisions of the contract are:
xxxx
1. NA ako ay sumasang-ayon na maglingkod at gumawa ng mga gawain sang-ayon sa
patakarang "por viaje" na magmumula sa pagalis sa Navotas papunta sa pangisdaan at
pagbabalik sa pondohan ng lantsa sa Navotas, Metro Manila;
xxxx
1. NA ako ay nakipagkasundo na babayaran ang aking paglilingkod sa paraang "por
viaje" sa halagang P__________ isang biyahe ng kabuuang araw xxxx. 40
Lynvil insists on the applicability of the case of Brent School, to wit:
41 
Accordingly, and since the entire purpose behind the development of legislation
culminating in the present Article 280 of the Labor Code clearly appears to have been, as
already observed, to prevent circumvention of the employee's right to be secure in his
tenure, the clause in said article indiscriminately and completely ruling out all written or
oral agreements conflicting with the concept of regular employment as defined therein
should be construed to refer to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed upon knowingly
and voluntarily by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances vitiating his
consent, or where it satisfactorily appears that the employer and employee dealt with
each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. Unless thus limited in its purview, the law would
be made to apply to purposes other than those explicitly stated by its framers; it thus
becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and
unintended consequences.
Contrarily, the private respondents contend that they became regular employees by
reason of their continuous hiring and performance of tasks necessary and desirable in
the usual trade and business of Lynvil.
Jurisprudence, laid two conditions for the validity of a fixed-contract agreement between
42 
the employer and employee:
First, 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
Second, 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.
43
Textually, the provision that: "NA ako ay sumasang-ayon na maglingkod at gumawa ng
mga gawain sang-ayon sa patakarang "por viaje" na magmumula sa pagalis sa Navotas
papunta sa pangisdaan at pagbabalik sa pondohan ng lantsa sa Navotas, Metro Manila"
is for a fixed period of employment. In the context, however, of the facts that: (1) the
respondents were doing tasks necessarily to Lynvil’s fishing business with positions
ranging from captain of the vessel to bodegero; (2) after the end of a trip, they will again
be hired for another trip with new contracts; and (3) this arrangement continued for more
than ten years, the clear intention is to go around the security of tenure of the
respondents as regular employees. And respondents are so by the express provisions of
the second paragraph of Article 280, thus:
xxx Provided, That any employee who has rendered at least one year of service, whether
such service is continuous or broken, shall be considered a regular employee with
respect to the activity in which he is employed and his employment shall continue while
such activity exists.
The same set of circumstances indicate clearly enough that it was the need for a
continued source of income that forced the employees’ acceptance of the "por viaje"
provision.
Having found that respondents are regular employees who may be, however, dismissed
for cause as we have so found in this case, there is a need to look into the procedural
requirement of due process in Section 2, Rule XXIII, Book V of the Rules Implementing
the Labor Code. It is required that the employer furnish the employee with two written
notices: (1) a written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain
his side; and (2) a written notice of termination served on the employee indicating that
upon due consideration of all the circumstances, grounds have been established to
justify his termination.
From the records, there was only one written notice which required respondents to
explain within five (5) days why they should not be dismissed from the service.
Alcovendas was the only one who signed the receipt of the notice. The others, as
claimed by Lynvil, refused to sign. The other employees argue that no notice was given
to them. Despite the inconsistencies, what is clear is that no final written notice or notices
of termination were sent to the employees.
The twin requirements of notice and hearing constitute the elements of [due] process in
cases of employee's dismissal. The requirement of notice is intended to inform the
employee concerned of the employer's intent to dismiss and the reason for the proposed
dismissal. Upon the other hand, the requirement of hearing affords the employee an
opportunity to answer his employer's charges against him and accordingly, to defend
himself therefrom before dismissal is effected. Obviously, the second written notice, as
44 
indispensable as the first, is intended to ensure the observance of due process.
Applying the rule to the facts at hand, we grant a monetary award of ₱50,000.00 as
nominal damages, this, pursuant to the fresh ruling of this Court in Culili v. Eastern
Communication Philippines, Inc. Due to the failure of Lynvil to follow the procedural
45 
requirement of two-notice rule, nominal damages are due to respondents despite their
dismissal for just cause.
Given the fact that their dismissal was for just cause, we cannot grant backwages and
separation pay to respondents. However, following the findings of the Labor Arbiter who
with the expertise presided over the proceedings below, which findings were affirmed by
the Court of Appeals, we grant the 13th month pay and salary differential of the
dismissed employees.
Whether De Borja is jointly and severally liable with Lynvil
As to the last issue, this Court has ruled that in labor cases, the corporate directors and
officers are solidarily liable with the corporation for the termination of employment of
employees done with malice or in bad faith. Indeed, moral damages are recoverable
46 
when the dismissal of an employee is attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary to good morals, good customs or
public policy.
It has also been discussed in MAM Realty Development Corporation v. NLRC that: 47 
x x x A corporation being a juridical entity, may act only through its directors, officers and
employees. Obligations incurred by them, acting as such corporate agents, are not theirs
but the direct accountabilities of the corporation they represent. True, solidary liabilities
may at times be incurred but only when exceptional circumstances warrant such as,
generally, in the following cases:
1. When directors and trustees or, in appropriate cases, the officers of a corporation:
xxx
(b) act in bad faith or with gross negligence in directing the corporate affairs;
x x x 48
The term "bad faith" contemplates a "state of mind affirmatively operating with furtive
design or with some motive of self-interest or will or for ulterior purpose."49 
1âwphi1
We agree with the ruling of both the NLRC and the Court of Appeals when they
pronounced that there was no evidence on record that indicates commission of bad faith
on the part of De Borja. He is the general manager of Lynvil, the one tasked with the
supervision by the employees and the operation of the business. However, there is no
proof that he imposed on the respondents the "por viaje" provision for purpose of
effecting their summary dismissal.

WHEREFORE, the petition is partially GRANTED. The 10 September 2007 Decision of

the Court of Appeals in CA-G.R. SP No. 95094 reversing the Resolution dated 31 March
2004 of the National Labor Relations Commission is hereby MODIFIED. The Court
hereby rules that the employees were dismissed for just cause by Lynvil Fishing
Enterprises, Inc. and Rosendo S. De Borja, hence, the reversal of the award for
backwages and separation pay. However, we affirm the award for 13th month pay, salary
differential and grant an additional ₱50,000.00 in favor of the employees representing
nominal damages for petitioners’ non-compliance with statutory due process. No cost.

SO ORDERED
Purefoods Corp
DECISION
DAVIDE, JR., J.:
The crux of this petition for certiorari is the issue of whether employees hired
for a definite period and whose services are necessary and desirable in the
usual business or trade of the employer are regular employees.
The private respondents (numbering 906) were hired by petitioner Pure
Foods Corporation to work for a fixed period of five months at its tuna
cannery plant in Tambler, General Santos City. After the expiration of their
respective contracts of employment in June and July 1991, their services
were terminated. They forthwith executed a "Release and Quitclaim" stating
that they had no claim whatsoever against the petitioner.
On 29 July 1991, the private respondents filed before the National Labor
Relations Commission (NLRC) Sub-Regional Arbitration Branch No. XI,
General Santos City, a complaint for illegal dismissal against the petitioner
and its plant manager, Marciano Aganon. 1 This case was docketed as RAB-
11-08-50284-91.
On 23 December 1992, Labor Arbiter Arturo P. Aponesto handed down a
decision 2 dismissing the complaint on the ground that the private
respondents were mere contractual workers, and not regular employees;
hence, they could not avail of the law on security of tenure. The termination
of their services by reason of the expiration of their contracts of employment
was, therefore, justified. He pointed out that earlier he had dismissed a case
entitled "Lakas ng Anak-Pawis-NOWM v. Pure Foods Corp." (Case No. RAB-
11 -02-00088-88) because the complainants therein were not regular
employees of Pure Foods, as their contracts of employment were for a fixed
period of five months. Moreover, in another case involving the same
contractual workers of Pure Foods (Case No. R-196-ROXI- MED-UR-55-89),
then Secretary of Labor Ruben Torres held, in a Resolution dated 30 April
1990, that the said contractual workers were not regular employees.
The Labor Arbiter also observed that an order for private respondents’
reinstatement would result in the reemployment of more than 10,000 former
contractual employees of the petitioner. Besides, by executing a "Release and
Quitclaim," the private respondents had waived and relinquished whatever
right they might have against the petitioner.
chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph
The private respondents appealed from the decision to the National Labor
Relations Commission (NLRC); Fifth Division, in Cagayan de Oro City, which
docketed the case as NLRC CA No. M-001323-93.
On 28 October 1994, the NLRC affirmed the Labor Arbiter’s decision. 3
However, on private respondents’ motion for reconsideration, the NLRC
rendered another decision on 30 January 1995 4 vacating and setting aside
its decision of 28 October 1994 and holding that the private respondents and
their co-complainants were regular employees. It declared that the contract
of employment for five months was a "clandestine scheme employed by [the
petitioner] to stifle [private respondents’] right to security of tenure" and
should therefore be struck down and disregarded for being contrary to law,
public policy, and morals. Hence, their dismissal on account of the expiration
of their respective contracts was illegal.
Accordingly, the NLRC ordered the petitioner to reinstate the private
respondents to their former position without loss of seniority rights and other
privileges, with full back wages; and in case their reinstatement would no
longer be feasible, the petitioner should pay them separation pay equivalent
to one-month pay or one-half-month pay for every year of service, whichever
is higher, with back wages and 10% of the monetary award as attorney’s
fees.
Its motion for reconsideration having been denied, 5 the petitioner came to
this Court contending that respondent NLRC committed grave abuse of
discretion amounting to lack of jurisdiction in reversing the decision of the
Labor Arbiter.
The petitioner submits that the private respondents are now estopped from
questioning their separation from petitioner’s employ in view of their express
conformity with the five-month duration of their employment contracts.
Besides, they fell within the exception provided in Article 280 of the Labor
Code which reads:" [E]xcept where the employment has been fixed for a
specific project or undertaking the completion or termination of which has
been determined at the time of the engagement of the employee." Moreover,
the first paragraph of the said article must be read and interpreted in
conjunction with the proviso in the second paragraph, which reads: "Provided
that any employee who has rendered at least one year of service, whether
such service is continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed . . ." In the instant case,
the private respondents were employed for a period of five months only. In
any event, private respondents’ prayer for reinstatement is well within the
purview of the "Release and Quitclaim" they had executed wherein they
unconditionally released the petitioner from any and all other claims which
might have arisen from their past employment with the petitioner.
In its Comment, the Office of the Solicitor General (OSG) advances the
argument that the private respondents were regular employees, since they
performed activities necessary and desirable in the business or trade of the
petitioner. The period of employment stipulated in the contracts of
employment was null and void for being contrary to law and public policy, as
its purpose was to circumvent the law on security of tenure. The expiration of
the contract did not, therefore, justify the termination of their employment.
The OSG further maintains that the ruling of the then Secretary of Labor and
Employment in LAP-NOWM v. Pure Foods Corporation is not binding on this
Court; neither is that ruling controlling, as the said case involved certification
election and not the issue of the nature of private respondents’ employment.
It also considers private respondents’ quitclaim as ineffective to bar the
enforcement for the full measure of their legal rights.
The private respondents, on the other hand, argue that contracts with a
specific period of employment may be given legal effect provided, however,
that they are not intended to circumvent the constitutional guarantee on
security of tenure. They submit that the practice of the petitioner in hiring
workers to work for a fixed duration of five months only to replace them with
other workers of the same employment duration was apparently to prevent
the regularization of these so-called "casuals," which is a clear circumvention
of the law on security of tenure.
We find the petition devoid of merit.
Article 280 of the Labor Code defines regular and casual employment as
follows:chanrob1es virtual 1aw library
ART. 280. Regular and Casual Employment. — The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
argument of the parties, an employment shall be deemed to be regular where
the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of
the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph; Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken, shall
be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists.
Thus, the two kinds of regular employees are (1) those who are engaged to
perform activities which are necessary or desirable in the usual business or
trade of the employer; and (2) those casual employees who have rendered at
least one year of service, whether continuous or broken, with respect to the
activity in which they are employed. 6
In the instant case, the private respondents’ activities consisted in the
receiving, skinning, loining, packing, and casing-up of tuna fish which were
then exported by the petitioner. Indisputably, they were performing activities
which were necessary and desirable in petitioner’s business or trade.chanrobles virtual lawlibrary
Contrary to petitioner’s submission, the private respondents could not be
regarded as having been hired for a specific project or undertaking. The term
"specific project or undertaking" under Article 280 of the Labor Code
contemplates an activity which is not commonly or habitually performed or
such type of work which is not done on a daily basis but only for a specific
duration of time or until completion; the services employed are then
necessary and desirable in the employer’s usual business only for the period
of time it takes to complete the project. 7
The fact that the petitioner repeatedly and continuously hired workers to do
the same kind of work as that performed by those whose contracts had
expired negates petitioner’s contention that those workers were hired for a
specific project or undertaking only.
Now on the validity of private respondents’ five-month contracts of
employment. In the leading case of Brent School, Inc. v. Zamora, 8 which
was reaffirmed in numerous subsequent cases, 9 this Court has upheld the
legality of fixed-term employment. It ruled that the decisive determinant in
term employment should not be the activities that the employee is called
upon to perform but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship. But, this
Court went on to say that where from the circumstances it is apparent that
the periods have been imposed to preclude acquisition of tenurial security by
the employee, they should be struck down or disregarded as contrary to
public policy and morals.
Brent also laid down the criteria under which term employment cannot be
said to be in circumvention of the law on security of tenure:
chanrob1es virtual 1aw library
1) The fixed period of employment was knowingly and voluntarily agreed
upon by the parties without any force, duress, or improper pressure being
brought to bear upon the employee and absent any other circumstances
vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with
each other on more or less equal terms with no moral dominance exercised
by the former or the latter.
None of these criteria had been met in the present case. As pointed out by
the private respondents:chanrob1es virtual 1aw library
[I]t could not be supposed that private respondents and all other so-called
casual workers of [the petitioner] KNOWINGLY and VOLUNTARILY agreed to
the 5-month employment contract. Cannery workers are never on equal
terms with their employers. Almost always, they agree to any terms of an
employment contract just to get employed considering that it is difficult to
find work given their ordinary qualifications. Their freedom to contract is
empty and hollow because theirs is the freedom to starve if they refuse to
work as casual or contractual workers. Indeed, to the unemployed, security
of tenure has no value. It could not then be said that petitioner and private
respondents "dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter. 10
The petitioner does not deny or rebut private respondents’ averments (1)
that the main bulk of its workforce consisted of its so-called "casual"
employees; (2) that as of July 1991, "casual" workers numbered 1,835; and
regular employees, 263; (3) that the company hired "casual" every month for
the duration of five months, after which their services were terminated and
they were replaced by other "casual" employees on the same five-month
duration; and (4) that these "casual" employees were actually doing work
that were necessary and desirable in petitioner’s usual business.
As a matter of fact, the petitioner even stated in its position paper submitted
to the Labor Arbiter that, according to its records, the previous employees of
the company hired on a five-month basis numbered about 10,000 as of July
1990. This confirms private respondents’ allegation that it was really the
practice of the company to hire workers on a uniformly fixed contract basis
and replace them upon the expiration of their contracts with other workers on
the same employment duration. chanrobles.com.ph : virtual law library
This scheme of the petitioner was apparently designed to prevent the private
respondents and the other "casual" employees from attaining the status of a
regular employee. It was a clear circumvention of the employees’ right to
security of tenure and to other benefits like minimum wage, cost-of-living
allowance, sick leave, holiday pay, and 13th month pay. 11 Indeed, the
petitioner succeeded in evading the application of labor laws. Also, it saved
itself from the trouble or burden of establishing a just cause for terminating
employees by the simple expedient of refusing to renew the employment
contracts.
The five-month period specified in private respondents’ employment contracts
having been imposed precisely to circumvent the constitutional guarantee on
security of tenure should, therefore, be struck down or disregarded as
contrary to public policy or morals . 12 To uphold the contractual
arrangement between the petitioner and the private respondents would, in
effect, permit the former to avoid hiring permanent or regular employees by
simply hiring them on a temporary or casual basis, thereby violating the
employees’ security of tenure in their jobs. 13
The execution by the private respondents of a "Release and Quitclaim" did
not preclude them from questioning the termination of their services.
Generally, quitclaims by laborers are frowned upon as contrary to public
policy and are held to be ineffective to bar recovery for the full measure of
the workers’ rights. 14 The reason for the rule is that the employer and the
employee do not stand on the same footing. 15
Notably, the private respondents lost no time in filing a complaint for illegal
dismissal. This act is hardly expected from employees who voluntarily and
freely consented to their dismissal. 16
The NLRC was, thus, correct in finding that the private respondents were
regular employees and that they were illegally dismissed from their jobs.
Under Article 279 of the Labor Code and the recent jurisprudence, 17 the
legal consequence of illegal dismissal is reinstatement without loss of
seniority rights and other privileges, with full back wages computed from the
time of dismissal up to the time of actual reinstatement, without deducting
the earnings derived elsewhere pending the resolution of the case.

However, since reinstatement is no longer possible because the petitioner’s

tuna cannery plant had, admittedly, been closed in November 1994, 18 the
proper award is separation pay equivalent to one month pay or one-half
month pay for every year of service, whichever is higher, to be computed
from the commencement of their employment up to the closure of the tuna
cannery plant. The amount of back wages must be computed from the time
the private respondents were dismissed until the time petitioner’s cannery
plant ceased operation. 19

WHEREFORE, for lack of merit, the instant petition is DISMISSED and the
challenged decision of 30 January 1995 of the National Labor Relations
Commission in NLRC CA No. M-001323-93 is hereby AFFIRMED subject to the
above modification on the computation of the separation pay and back
wages.

SO ORDERED.
G.R. No. 186439               January 15, 2014
UNIVERSAL ROBINA SUGAR MILLING CORPORATION and RENE
CABATI, Petitioners,
vs.
FERDINAND ACIBO, ROBERTO AGUILAR, EDDIE BALDOZA, RENE ABELLAR,
DIOMEDES ALICOS, MIGUEL ALICOS, ROGELIO AMAHIT, LARRY AMASCO,
FELIPE BALANSAG, ROMEO BALANSAG, MANUEL BANGOT, ANDY BANJAO,
DIONISIO BENDIJO, JR., JOVENTINO BROCE, ENRICO LITERAL, RODGER
RAMIREZ, BIENVENIDO RODRIGUEZ, DIOCITO PALAGTIW, ERNIE SABLAN,
RICHARD PANCHO, RODRIGO ESTRABELA, DANNY KADUSALE and ALLYROBYL
OLPUS, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari  the challenge to the November 29,
1 Dionisio Bendijo, Jr., Rodger Ramirez, Diocito Palagtiw, Danny Kadusale and Allyrobyl
2007 decision  and the January 22, 2009 resolution  of the Court of Appeals (CA) in CA-
2 3
G.R. CEB-SP No. 02028. This CA decision affirmed with modification the July 22, 2005
decision  and the April 28, 2006 resolution  of the National Labor Relations Commission
4 5
(NLRC) in NLRC Case No. V-00006-03 which, in turn, reversed the October 9, 2002
decision  of the Labor Arbiter (LA). The LA’s decision dismissed the complaint filed by
6
complainants Ferdinand Acibo, et al.  against petitioners Universal Robina Sugar Milling
7
Corporation (URSUMCO) and Rene Cabati.
The Factual Antecedents
URSUMCO is a domestic corporation engaged in the sugar cane milling business;
Cabati is URSUMCO’s Business Unit General Manager.
The complainants were employees of URSUMCO. They were hired on various dates
(between February 1988 and April 1996) and on different capacities,  i.e., drivers, crane
8 28, 2006 resolution.  The petitioners elevated the case to the CA via a petition for
operators, bucket hookers, welders, mechanics, laboratory attendants and aides, steel
workers, laborers, carpenters and masons, among others. At the start of their respective
engagements, the complainants signed contracts of employment for a period of one (1)
month or for a given season. URSUMCO repeatedly hired the complainants to perform
the same duties and, for every engagement, required the latter to sign new employment
contracts for the same duration of one month or a given season.
On August 23, 2002,  the complainants filed before the LA complaints for regularization,
9
entitlement to the benefits under the existing Collective Bargaining Agreement (CBA),and
attorney’s fees.
In the decision  dated October 9, 2002, the LA dismissed the complaint for lack of merit.
10
The LA held that the complainants were seasonal or project workers and not regular
employees of URSUMCO. The LA pointed out that the complainants were required to
perform, for a definite period, phases of URSUMCO’s several projects that were not at all
directly related to the latter’s main operations. As the complainants were project
employees, they could not be regularized since their respective employments were
coterminous with the phase of the work or special project to which they were assigned
and which employments end upon the completion of each project. Accordingly, the
complainants were not entitled to the benefits granted under the CBA that, as provided,
covered only the regular employees of URSUMCO.
Of the twenty-two original complainants before the LA, seven appealed the LA’s ruling
before the NLRC, namely: respondents Ferdinand Acibo, Eddie Baldoza, Andy Banjao,
Olpus.
The Ruling of the NLRC
In its decision  of July 22, 2005, the NLRC reversed the LA’s ruling; it declared the
11
complainants as regular URSUMCO employees and granted their monetary claims under
the CBA. The NLRC pointed out that the complainants performed activities which were
usually necessary and desirable in the usual trade or business of URSUMCO, and had
been repeatedly hired for the same undertaking every season. Thus, pursuant to Article
280 of the Labor Code, the NLRC declared that the complainants were regular
employees. As regular employees, the NLRC held that the complainants were entitled to
the benefits granted, under the CBA, to the regular URSUMCO employees.
The petitioners moved to reconsider this NLRC ruling which the NLRC denied in its April
12
certiorari.
13
The Ruling of the CA
In its November 29, 2007 decision,  the CA granted in part the petition; it affirmed the
14
NLRC’s ruling finding the complainants to be regular employees of URSUMCO, but
deleted the grant of monetary benefits under the CBA.
The CA pointed out that the primary standard for determining regular employment is the
reasonable connection between a particular activity performed by the employee vis-à-vis
the usual trade or business of the employer. This connection, in turn, can be determined
by considering the nature of the work performed and the relation of this work to the
business or trade of the employer in its entirety.
In this regard, the CA held that the various activities that the complainants were tasked to
do were necessary, if not indispensable, to the nature of URSUMCO’s business. As the
complainants had been performing their respective tasks for at least one year, the CA
held that this repeated and continuing need for the complainants’ performance of these
same tasks, regardless of whether the performance was continuous or intermittent,
constitutes sufficient evidence of the necessity, if not indispensability, of the activity to
URSUMCO’s business.
Further, the CA noted that the petitioners failed to prove that they gave the complainants
opportunity to work elsewhere during the off-season, which opportunity could have
qualified the latter as seasonal workers. Still, the CA pointed out that even during this off-
season period, seasonal workers are not separated from the service but are simply
considered on leave until they are re-employed. Thus, the CA concluded that the
complainants were regular employees with respect to the activity that they had been
performing and while the activity continued.
On the claim for CBA benefits, the CA, however, ruled that the complainants were not
entitled to receive them. The CA pointed out that while the complainants were
considered regular, albeit seasonal, workers, the CBA-covered regular employees of
URSUMCO were performing tasks needed by the latter for the entire year with no regard
to the changing sugar milling season. Hence, the complainants did not belong to and
could not be grouped together with the regular employees of URSUMCO, for collective
bargaining purposes; they constitute a bargaining unit separate and distinct from the
regular employees. Consequently, the CA declared that the complainants could not be
covered by the CBA.
The petitioners filed the present petition after the CA denied their motion for partial
reconsideration  in the CA’s January 22, 2009 resolution.
15 16
The Issues
The petition essentially presents the following issues for the Court’s resolution: (1)
whether the respondents are regular employees of URSUMCO; and (2) whether
affirmative relief can be given to the fifteen (15) of the complainants who did not appeal
the LA’s decision. 17
The Court’s Ruling
We resolve to partially GRANT the petition.
On the issue of the status of the respondents’ employment
The petitioners maintain that the respondents are contractual or project/seasonal
workers and not regular employees of URSUMCO. They thus argue that the CA erred in
applying the legal parameters and guidelines for regular employment to the respondents’
case. They contend that the legal standards – length of the employee’s engagement and
the desirability or necessity of the employee’s work in the usual trade or business of the
employer – apply only to regular employees under paragraph 1, Article 280 of the Labor
Code, and, under paragraph 2 of the same article, to casual employees who are deemed
regular by their length of service.
The respondents, the petitioners point out, were specifically engaged for a fixed and
predetermined duration of, on the average, one (1) month at a time that coincides with a
particular phase of the company’s business operations or sugar milling season. By the
nature of their engagement, the respondents’ employment legally ends upon the end of
the predetermined period; thus, URSUMCO was under no legal obligation to rehire the
respondents.
In their comment,  the respondents maintain that they are regular employees of
18
URSUMCO. Relying on the NLRC and the CA rulings, they point out that they have been
continuously working for URSUMCO for more than one year, performing tasks which
were necessary and desirable to URSUMCO’s business. Hence, under the above-stated
legal parameters, they are regular employees.
We disagree with the petitioners’ position.  We find the respondents to be regular
1âwphi1
seasonal employees of URSUMCO.
As the CA has explained in its challenged decision, Article 280 of the Labor Code
provides for three kinds of employment arrangements, namely: regular, project/seasonal
and casual. Regular employment refers to that arrangement whereby the employee "has
been engaged to perform activities which are usually necessary or desirable in the usual
business or trade of the employer[.]"  Under the definition, the primary standard that
19
determines regular employment is the reasonable connection between the particular
activity performed by the employee and the usual business or trade of the employer;  the
20
emphasis is on the necessity or desirability of the employee’s activity. Thus, when the
employee performs activities considered necessary and desirable to the overall business
scheme of the employer, the law regards the employee as regular.
By way of an exception, paragraph 2, Article 280 of the Labor Code also considers
regular a casual employment arrangement when the casual employee’s engagement has
lasted for at least one year, regardless of the engagement’s continuity. The controlling
test in this arrangement is the length of time during which the employee is engaged.
A project employment, on the other hand, contemplates on arrangement whereby "the
employment has been fixed for a specific project or undertaking whose completion or
termination has been determined at the time of the engagement of the employee[.]"  Two21
requirements, therefore, clearly need to be satisfied to remove the engagement from the
presumption of regularity of employment, namely: (1) designation of a specific project or
undertaking for which the employee is hired; and (2) clear determination of the
completion or termination of the project at the time of the employee’s engagement.  The
22
services of the project employees are legally and automatically terminated upon the end
or completion of the project as the employee’s services are coterminous with the project.
Unlike in a regular employment under Article 280 of the Labor Code, however, the length
of time of the asserted "project" employee’s engagement is not controlling as the
employment may, in fact, last for more than a year, depending on the needs or
circumstances of the project. Nevertheless, this length of time (or the continuous rehiring
of the employee even after the cessation of the project) may serve as a badge of regular
employment when the activities performed by the purported "project" employee are
necessary and indispensable to the usual business or trade of the employer.  In this
23
latter case, the law will regard the arrangement as regular employment. 24
Seasonal employment operates much in the same way as project employment, albeit it
involves work or service that is seasonal in nature or lasting for the duration of the
season.  As with project employment, although the seasonal employment arrangement
25
involves work that is seasonal or periodic in nature, the employment itself is not
automatically considered seasonal so as to prevent the employee from attaining regular
status. To exclude the asserted "seasonal" employee from those classified as regular
employees, the employer must show that: (1) the employee must be performing work or
services that are seasonal in nature; and (2) he had been employed for the duration of
the season.  Hence, when the "seasonal" workers are continuously and repeatedly hired
26
to perform the same tasks or activities for several seasons or even after the cessation of
the season, this length of time may likewise serve as badge of regular employment.  In27
fact, even though denominated as "seasonal workers," if these workers are called to
work from time to time and are only temporarily laid off during the off-season, the law
does not consider them separated from the service during the off-season period. The law
simply considers these seasonal workers on leave until re-employed. 28
Casual employment, the third kind of employment arrangement, refers to any other
employment arrangement that does not fall under any of the first two categories, i.e.,
regular or project/seasonal.
Interestingly, the Labor Code does not mention another employment arrangement –
contractual or fixed term employment (or employment for a term) – which, if not for the
fixed term, should fall under the category of regular employment in view of the nature of
the employee’s engagement, which is to perform an activity usually necessary or
desirable in the employer’s business.
In Brent School, Inc. v. Zamora,  the Court, for the first time, recognized and resolved the
29
anomaly created by a narrow and literal interpretation of Article 280 of the Labor Code
that appears to restrict the employee’s right to freely stipulate with his employer on the
duration of his engagement. In this case, the Court upheld the validity of the fixed-term
employment agreed upon by the employer, Brent School, Inc., and the employee,
Dorotio Alegre, declaring that the restrictive clause in Article 280 "should be construed to
refer to the substantive evil that the Code itself x x x singled out: agreements entered into
precisely to circumvent security of tenure. It should have no application to instances
where [the] fixed period of employment was agreed upon knowingly and voluntarily by
the parties x x x absent any x x x circumstances vitiating [the employee’s] consent, or
where [the facts satisfactorily show] that the employer and [the] employee dealt with
each other on more or less equal terms[.]"  The indispensability or desirability of the
30
activity performed by the employee will not preclude the parties from entering into an
otherwise valid fixed term employment agreement; a definite period of employment does
not essentially contradict the nature of the employees duties  as necessary and
31
desirable to the usual business or trade of the employer.
Nevertheless, "where the circumstances evidently show that the employer imposed the
period precisely to preclude the employee from acquiring tenurial security, the law and
this Court will not hesitate to strike down or disregard the period as contrary to public
policy, morals, etc."  In such a case, the general restrictive rule under Article 280 of the
32
Labor Code will apply and the employee shall be deemed regular.
Clearly, therefore, the nature of the employment does not depend solely on the will or
word of the employer or on the procedure for hiring and the manner of designating the
employee. Rather, the nature of the employment depends on the nature of the activities
to be performed by the employee, considering the nature of the employer’s business, the
duration and scope to be done,  and, in some cases, even the length of time of the
33
performance and its continued existence.
In light of the above legal parameters laid down by the law and applicable jurisprudence,
the respondents are neither project, seasonal nor fixed-term employees, but regular
seasonal workers of URSUMCO. The following factual considerations from the records
support this conclusion:
First, the respondents were made to perform various tasks that did not at all pertain to
any specific phase of URSUMCO’s strict milling operations that would ultimately cease
upon completion of a particular phase in the milling of sugar; rather, they were tasked to
perform duties regularly and habitually needed in URSUMCO’s operations during the
milling season. The respondents’ duties as loader operators, hookers, crane operators
and drivers were necessary to haul and transport the sugarcane from the plantation to
the mill; laboratory attendants, workers and laborers to mill the sugar; and welders,
carpenters and utility workers to ensure the smooth and continuous operation of the mill
for the duration of the milling season, as distinguished from the production of the
sugarcane which involves the planting and raising of the sugarcane until it ripens for
milling. The production of sugarcane, it must be emphasized, requires a different set of
workers who are experienced in farm or agricultural work. Needless to say, they perform
the activities that are necessary and desirable in sugarcane production. As in the milling
of sugarcane, the plantation workers perform their duties only during the planting season.
Second, the respondents were regularly and repeatedly hired to perform the same tasks
year after year. This regular and repeated hiring of the same workers (two different sets)
for two separate seasons has put in place, principally through jurisprudence, the system
of regular seasonal employment in the sugar industry and other industries with a similar
nature of operations.
Under the system, the plantation workers or the mill employees do not work continuously
for one whole year but only for the duration of the growing of the sugarcane or the milling
season. Their seasonal work, however, does not detract from considering them in regular
employment since in a litany of cases, this Court has already settled that seasonal
workers who are called to work from time to time and are temporarily laid off during the
off-season are not separated from the service in said period, but are merely considered
on leave until re-employment.  Be this as it may, regular seasonal employees, like the
34
respondents in this case, should not be confused with the regular employees of the
sugar mill such as the administrative or office personnel who perform their tasks for the
entire year regardless of the season. The NLRC, therefore, gravely erred when it
declared the respondents regular employees of URSUMCO without qualification and that
they were entitled to the benefits granted, under the CBA, to URSUMCO’S regular
employees.
Third, while the petitioners assert that the respondents were free to work elsewhere
during the off-season, the records do not support this assertion. There is no evidence on
record showing that after the completion of their tasks at URSUMCO, the respondents
sought and obtained employment elsewhere.
Contrary to the petitioners’ position, Mercado, Sr. v. NLRC, 3rd Div.  is not applicable to
35
the respondents as this case was resolved based on different factual considerations. In
Mercado, the workers were hired to perform phases of the agricultural work in their
employer’s farm for a definite period of time; afterwards, they were free to offer their
services to any other farm owner. The workers were not hired regularly and repeatedly
for the same phase(s) of agricultural work, but only intermittently for any single phase.
And, more importantly, the employer in Mercado sufficiently proved these factual
circumstances. The Court reiterated these same observations in Hda. Fatima v. Nat’l
Fed. of Sugarcane Workers-Food and Gen. Trade  and Hacienda Bino/Hortencia Starke,
36
Inc. v. Cuenca. 37
At this point, we reiterate the settled rule that in this jurisdiction, only questions of law are
allowed in a petition for review on certiorari.  This Court’s power of review in a Rule 45
38
petition is limited to resolving matters pertaining to any perceived legal errors, which the
CA may have committed in issuing the assailed decision.  In reviewing the legal
39
correctness of the CA’s Rule 65 decision in a labor case, we examine the CA decision in
the context that it determined, i.e., the presence or absence of grave abuse of discretion
in the NLRC decision before it and not on the basis of whether the NLRC decision on the
merits of the case was correct.40 In other words, we have to be keenly aware that the
CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. 41
Viewed in this light, we find the need to place the CA’s affirmation, albeit with
modification, of the NLRC decision of July 22, 2005 in perspective. To recall, the NLRC
declared the respondents as regular employees of URSUMCO.  With such a declaration,
42
the NLRC in effect granted the respondents’ prayer for regularization and, concomitantly,
their prayer for the grant of monetary benefits under the CBA for URSUMCO’s regular
employees. In its challenged ruling, the CA concurred with the NLRC finding, but with the
respondents characterized as regular seasonal employees of URSUMCO.
The CA misappreciated the real import of the NLRC ruling. The labor agency did not
declare the respondents as regular seasonal employees, but as regular employees. This
is the only conclusion that can be drawn from the NLRC decision’s dispositive portion,
thus:
WHEREFORE, premises considered, the appeal is hereby GRANTED. Complainants are
declared regular employees of respondent.  As such, they are entitled to the monetary
1âwphi1
benefits granted to regular employees of respondent company based on the CBA,
reckoned three (3) years back from the filing of the above-entitled case on 23 August
2002 up to the present or to their entire service with respondent after the date of filing of
the said complaint if they are no longer connected with respondent company. 43
It is, therefore, clear that the issue brought to the CA for resolution is whether the NLRC
gravely abused its discretion in declaring the respondents regular employees of
URSUMCO and, as such, entitled to the benefits under the CBA for the regular
employees.
Based on the established facts, we find that the CA grossly misread the NLRC ruling and
missed the implications of the respondents’ regularization. To reiterate, the respondents
are regular seasonal employees, as the CA itself opined when it declared that "private
respondents who are regular workers with respect to their seasonal tasks or activities
and while such activities exist, cannot automatically be governed by the CBA between
petitioner URSUMCO and the authorized bargaining representative of the regular and
permanent employees."  Citing jurisprudential standards,  it then proceeded to explain
44 45

that the respondents cannot be lumped with the regular employees due to the
differences in the nature of their duties and the duration of their work vis-a-vis the
operations of the company.

The NLRC was well aware of these distinctions as it acknowledged that the respondents
worked only during the milling season, yet it ignored the distinctions and declared them
regular employees, a marked departure from existing jurisprudence. This, to us, is grave
abuse of discretion, as it gave no reason for disturbing the system of regular seasonal
employment already in place in the sugar industry and other industries with similar
seasonal operations. For upholding the NLRC’s flawed decision on the respondents’
employment status, the CA committed a reversible error of judgment.

In sum, we find the complaint to be devoid of merit. The issue of granting affirmative
relief to the complainants who did not appeal the CA ruling has become academic.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. Except for

the denial of the respondents' claim for CBA benefits, the November 29, 2007 decision
and the January 22, 2009 resolution of the Court of Appeals are SET ASIDE. The
complaint is DISMISSED for lack of merit.

SO ORDERED
G.R. No. 204944-45               December 3, 2014 On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a
complaint for illegal dismissal and attorney’s fees with the National Capital Region
FUJI TELEVISION NETWORK, INC., Petitioner, Arbitration Branch of the National Labor Relations Commission. She alleged that she
vs. was forced to sign the nonrenewal contract when Fuji came to know of her illness and
ARLENE S. ESPIRITU, Respondent. that Fuji withheld her salaries and other benefits for March and April 2009 when she
refused to sign. 15

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

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 In the decision  dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed
17

a person has a disease does not per se entitle the employer to terminate his or her Arlene’s complaint.  Citing Sonza v. ABS-CBN  and applying the four-fold test, the Labor
18 19

services. Termination is the last resort. At the very least, a competent public health Arbiter held that Arlene was not Fuji’s employee but an independent contractor. 20

authority must certify that the disease cannot be cured within six ( 6) months, even with
appropriate treatment. Arlene appealed before the National Labor Relations Commission. In its decision dated
March 5, 2010, the National Labor Relations Commission reversed the Labor Arbiter’s
We decide this petition for review  on certiorari filed by Fuji Television Network, Inc.,
1 decision.  It held that Arlene was a regular employee with respect to the activities for
21

seeking the reversal of the Court of Appeals’ Decision  dated June 25, 2012, affirming
2 which she was employed since she continuously rendered services that were
with modification the decision  of the National Labor Relations Commission.
3 deemednecessary and desirable to Fuji’s business.  The National Labor Relations
22

Commission ordered Fuji to pay Arlene backwages, computed from the date of her illegal
dismissal.  The dispositive portion of the decision reads:
23

In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc.
("Fuji") asa news correspondent/producer  "tasked to report Philippine news to Fuji
4

through its Manila Bureau field office."  Arlene’s employment contract initially provided for
5 WHEREFORE, premises considered, judgment is hereby rendered GRANTING the
a term of one (1) year but was successively renewed on a yearly basis with salary instant appeal. The Decision of the Labor Arbiter dated 19 September 2009 is hereby
adjustment upon every renewal.  Sometime in January 2009, Arlenewas diagnosed with
6 REVERSED and SET ASIDE, and a new one is issued ordering respondents-appellees
lung cancer.  She informed Fuji about her condition. In turn, the Chief of News Agency of
7 to pay complainant-appellant backwages computed from the date of her illegal dismissal
Fuji, Yoshiki Aoki, informed Arlene "that the company will have a problem renewing her until finality of this Decision.
contract"  since it would be difficult for her to perform her job.  She "insisted that she was
8 9

still fit to work as certified by her attending physician."

10 SO ORDERED. 24

After several verbal and written communications,  Arlene and Fuji signed a non-renewal
11 Arlene and Fuji filed separat emotions for reconsideration.  Both motions were denied by
25

contract on May 5, 2009 where it was stipulated that her contract would no longer be the National Labor Relations Commission for lack of merit in the resolution dated April
renewed after its expiration on May 31, 2009. The contract also provided that the parties 26, 2010.  From the decision of the National Labor Relations Commission, both parties
26

release each other from liabilities and responsibilities under the employment contract. 12 filed separate petitions for certiorari  before the Court of Appeals. The Court of Appeals
27

consolidated the petitions and considered the following issues for resolution:
In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total
amount of US$18,050.00 representing her monthly salary from March 2009 to May 2009, 1) Whether or not Espirituis a regular employee or a fixed-term contractual
year-end bonus, mid-year bonus, and separation pay."  However, Arlene affixed her
13 employee;
signature on the nonrenewal contract with the initials "U.P." for "under protest." 14

2) Whether or not Espiritu was illegally dismissed; and

 3) Whether or not Espirituis entitled to damages and attorney’s fees. 28
In the assailed decision, the Court of Appeals affirmed the National Labor
Relations Commission with the modification that Fuji immediately reinstate Arlene
to her position as News Producer without loss of seniority rights, and pay her
backwages, 13th-month pay, mid-year and year-end bonuses, sick leave and
vacation leave with pay until reinstated, moral damages, exemplary damages,
attorney’sfees, and legal interest of 12% per annum of the total monetary
awards.  The Court of Appeals ruled that:
29
WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki
Aoki is DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the
Decision dated March 5, 2010 of the National Labor Relations Commission, 6th Division
in NLRC NCR Case No. 05-06811-09 and its subsequent Resolution dated April 26,
2010 are hereby AFFIRMED with MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu
to her position as News Producer without loss of seniority rights and privileges and to
pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009
(the date of dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal,
until reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year
from the date of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year
from the date of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of
dismissal, until reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from
date of dismissal, until reinstated.
7. The amount of ₱100,000.00 as moral damages;
8. The amount of ₱50,000.00 as exemplary damages;
9. Attorney’s fees equivalent to 10% of the total monetary awards herein stated;
and
10. Legal interest of twelve percent (12%) per annum of the total monetary
awards computed from May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the above
monetary awards consistent with the above directives.
SO ORDERED. 30
In arriving at the decision, the Court of Appeals held that Arlene was a regular employee
because she was engaged to perform work that was necessary or desirable in the
business of Fuji,  and the successive renewals of her fixed-term contract resulted in
31
regular employment. 32
According to the Court of Appeals, Sonzadoes not apply in order to establish that Arlene
was an independent contractor because she was not contracted on account of any
peculiar ability, special talent, or skill.  The fact that everything used by Arlene in her
33
work was owned by Fuji negated the idea of job contracting. 34
The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to
comply with the requirements of substantive and procedural due process necessary for
her dismissal since she was a regular employee. 35
The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily
and that the contract was a mere subterfuge by Fuji to secure its position that it was her
choice not to renew her contract. She was left with no choice since Fuji was decided on
severing her employment. 36
Fuji filed a motion for reconsideration that was denied in the resolution  dated December
37
7, 2012 for failure to raise new matters. 38
Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in
affirming with modification the National Labor Relations Commission’s decision, holding
that Arlene was a regular employee and that she was illegally dismissed. Fuji also
questioned the award of monetary claims, benefits, and damages. 39
Fuji points out that Arlene was hired as a stringer, and it informed her that she would
remain one.  She was hired as an independent contractor as defined in Sonza.  Fuji had
40 41
no control over her work.  The employment contracts were executed and renewed
42
annually upon Arlene’s insistence to which Fuji relented because she had skills that
distinguished her from ordinary employees.  Arlene and Fuji dealt on equal terms when
43
they negotiated and entered into the employment contracts.  There was no illegal
44
Based on the arguments of the parties, there are procedural and substantive issues for
dismissal because she freely agreed not to renew her fixed-term contract as evidenced resolution:
by her e-mail correspondences with Yoshiki Aoki.  In fact, the signing of the non-renewal
45

contract was not necessary to terminate her employment since "such employment I. Whether the petition for review should be dismissed as Corazon E. Acerden,
terminated upon expiration of her contract."  Finally, Fuji had dealt with Arlene in good
46
the signatory of the verification and certification of non forum shopping of the
faith, thus, she should not have been awarded damages. 47
petition, had no authority to sign the verification and certification on behalf of Fuji;

Fuji alleges that it did not need a permanent reporter since the news reported by Arlene II. Whether the Court of Appeals correctly determined that no grave abuse of
could easily be secured from other entities or from the internet.  Fuji "never controlled
48
discretion was committed by the National Labor Relations Commission when it
the manner by which she performed her functions."  It was Arlene who insisted that Fuji
49
ruled that Arlene was a regular employee, not an independent contractor, and
execute yearly fixed-term contracts so that she could negotiate for annual increases in that she was illegally dismissed; and
her pay. 50

III. Whether the Court of Appeals properly modified the National Labor Relations
Fuji points out that Arlene reported for work for only five (5) days in February 2009, three Commission’s decision by awarding reinstatement, damages, and attorney’s
(3) days in March 2009, and one (1) day in April 2009.  Despite the provision in her
51
fees.
employment contract that sick leaves in excess of 30 days shall not be paid, Fuji paid
Arlene her entire salary for the months of March, April, and May; four(4) months of The petition should be dismissed.
separation pay; and a bonus for two and a half months for a total of
US$18,050.00.  Despite having received the amount of US$18,050.00, Arlene still filed a
52

I
case for illegal dismissal. 53

Validity of the verification and certification against forum shopping

Fuji further argues that the circumstances would show that Arlene was not illegally
dismissed. The decision tonot renew her contract was mutually agreed upon by the
parties as indicated in Arlene’s e-mail  dated March 11, 2009 where she consented to
54 In its comment on Arlene’s manifestation, Fuji alleges that Corazon was authorized to
the non-renewal of her contract but refused to sign anything.  Aoki informed Arlene in an
55 sign the verification and certification of non-forum shopping because Mr. Shuji Yano was
e-mail  dated March 12, 2009 that she did not need to sign a resignation letter and that
56 empowered under the secretary’s certificate to delegate his authority to sign the
Fuji would pay Arlene’s salary and bonus until May 2009 as well as separation pay. 57 necessary pleadings, including the verification and certification against forum shopping. 69

Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal
agreement that she agreed to sign this time.  This attached version contained a provision
58
that Fuji shall re-hire her if she was still interested to work for Fuji.  For Fuji, Arlene’s e-
59
On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and Mr. Jin
Eto in the secretary’s certificate is only for the petition for certiorari before the Court of
Appeals.  Fuji did not attach any board resolution authorizing Corazon orany other
70

mail showed that she had the power to bargain. 60 person tofile a petition for review on certiorari with this court.  Shuji Yano and Jin Eto
71

could not re-delegate the power thatwas delegated to them.  In addition, the special
72

power of attorney executed by Shuji Yano in favor of Corazon indicated that she was
Fuji then posits that the Court of Appeals erred when it held that the elements of an
empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji. 73

employer-employee relationship are present, particularly that of control;  that Arlene’s 61

separation from employment upon the expiration of her contract constitutes illegal
dismissal;  that Arlene is entitled to reinstatement;  and that Fuji is liable to Arlene for
62 63 The Rules of Court requires the
damages and attorney’s fees. 64 submission of verification and
certification against forum shopping
This petition for review on certiorari under Rule 45 was filed on February 8, 2013.  On 65

February 27, 2013, Arlene filed a manifestation  stating that this court may not take
66 Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of
jurisdiction over the case since Fuji failed to authorize Corazon E. Acerden to sign the verification, while Section 5 of the same rule provides the requirement of certification
verification.  Fuji filed a comment on the manifestation  on March 9, 2013.
67 68 against forum shopping. These sections state:
SEC. 4. Ver if ica tio n. — Except when otherwise specifically required by law or rule,
pleadings need not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the
allegations therein are true and correct of his knowledge and belief.
A pleading required to be verifiedwhich containsa verification based on "information and
belief," or upon "knowledge, information and belief," or lacks a proper verification, shall
be treated as an unsigned pleading.
SEC. 5. Certification against forum shopping.— The plaintiff or principal party shall certify
under oath in the complaint orother initiatory pleading asserting a claim for relief or in a
sworn certification annexed thereto and simultaneously filed therewith: (a) that he has
not theretofore commenced any action or filed any claim involving the same issues in
any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such
other action or claim is pending therein; (b) if there is such other pending action or claim,
a complete statement of the present status thereof; and (c) if he should thereafter learn
that the same or similar action or claim has been filed or is pending, he shall report that
fact within five (5) days therefrom to the court wherein his aforesaid complaint or
initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere
amendment of the complaint or other initiatory pleading but shall be cause for the
dismissal of the case without prejudice, unless otherwise provided, upon motion and
after hearing. The submission of a false certification or non-compliance with any of the
undertakings therein shall constitute indirect contempt ofcourt, without prejudice to the
corresponding administrative and criminalactions. If the acts of the party or his counsel
clearly constitute willful and deliberate forum shopping, the same shall be ground for
summary dismissal with prejudice and shall constitute direct contempt, as well as a
cause for administrative sanctions.
Section 4(e) of Rule 45  requires that petitions for review should "contain a sworn
74
certification against forum shopping as provided in the last paragraph of section 2, Rule
42." Section 5 of the same rule provides that failure to comply with any requirement in
Section 4 is sufficient ground to dismiss the petition.
Effects of non-compliance
Uy v. Landbank  discussed the effect of non-compliance with regard to verification and
75
stated that:
[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such
requirement is simply a condition affecting the form of pleading, the non-compliance of
which does not necessarily render the pleading fatally defective. Verification is simply
intended to secure an assurance that the allegations in the pleading are true and correct
and not the product of the imagination or a matter of speculation, and that the pleading is
filed in good faith. The court may order the correction of the pleading if the verification is
lacking or act on the pleading although it is not verified, if the attending circumstances
are such that strict compliance with the rules may be dispensed with inorder that the
ends of justice may thereby be served.  (Citations omitted)
76
Shipside Incorporated v. Court of Appeals  cited the discussion in Uy and differentiated
77
its effect from non-compliance with the requirement of certification against forum
shopping:
On the other hand, the lack of certification against forum shopping is generally not
curable by the submission thereof after the filing of the petition. Section 5, Rule 45 of the
1997 Rules of Civil Procedure provides that the failure of the petitioner tosubmit the
required documents that should accompany the petition, including the certification
against forum shopping, shall be sufficient ground for the dismissal thereof. The same
rule applies to certifications against forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said signatory is authorized to file a
petition on behalf of the corporation.  (Emphasis supplied) Effects of substantial
78
compliance with the requirement of verification and certification against forum shopping
Although the general rule is that failure to attach a verification and certification against
forum shopping isa ground for dismissal, there are cases where this court allowed
substantial compliance.
In Loyola v. Court of Appeals,  petitioner Alan Loyola submitted the required certification
79
one day after filing his electoral protest.  This court considered the subsequent filing as
80
substantial compliance since the purpose of filing the certification is to curtail forum
shopping. 81
In LDP Marketing, Inc. v. Monter,  Ma. Lourdes Dela Peña signed the verification and
82
certification against forum shopping but failed to attach the board resolution indicating
her authority to sign.  In a motion for reconsideration, LDP Marketing attached the
83
secretary’s certificate quoting the board resolution that authorized Dela Peña.  Citing
84
Shipside, this court deemed the belated submission as substantial compliance since LDP
Marketing complied with the requirement; what it failed to do was to attach proof of Dela
Peña’s authority to sign.  Havtor Management Phils., Inc. v. National Labor Relations
85
Commission  and General Milling Corporation v. National Labor Relations
86
Commission  involved petitions that were dismissed for failure to attach any document
87
showing that the signatory on the verification and certification against forum-shopping
was authorized.  In both cases, the secretary’s certificate was attached to the motion for
88
reconsideration.  This court considered the subsequent submission of proof indicating
89
authority to sign as substantial compliance.  Altres v. Empleo  summarized the rules on
90 91
verification and certification against forum shopping in this manner:
For the guidance of the bench and bar, the Court restates in capsule form the
jurisprudential pronouncements . . . respecting non-compliance with the requirement on,
or submission of defective, verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on
or submission of defective verification, and noncompliance with the requirement
on or submission of defective certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not
necessarily render the pleading fatally defective. The court may order its
submission or correction or act on the pleading if the attending circumstances are
such that strict compliance with the Rule may be dispensed with in order that the
ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has ample
knowledge to swear to the truth of the allegations in the complaint or petition
signs the verification, and when matters alleged in the petition have been made
in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a
defect therein, unlike in verification, is generally not curable by its subsequent
submission or correction thereof, unless there is a need to relax the Rule on the
ground of "substantial compliance" or presence of "special circumstances or
compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs or
petitioners in a case; otherwise, those who did not sign will be dropped as parties
to the case. Under reasonable or justifiable circumstances, however, as when all
the plaintiffs or petitioners share a common interest and invoke a common cause
of action or defense, the signature of only one of them inthe certification against
forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the party-
pleader, not by his counsel. If, however, for reasonable or justifiable reasons, the
party-pleader is unable to sign, he must execute a Special Power of Attorney
designating his counsel of record to sign on his behalf. 92
There was substantial compliance
by Fuji Television Network, Inc.
Being a corporation, Fuji exercises its power to sue and be sued through its board of
directors or duly authorized officers and agents. Thus, the physical act of signing the
verification and certification against forum shopping can only be done by natural persons
duly authorized either by the corporate by-laws or a board resolution. 93
In its petition for review on certiorari, Fuji attached Hideaki Ota’s secretary’s
certificate,  authorizing Shuji Yano and Jin Eto to represent and sign for and on behalf of
94
Fuji.  The secretary’s certificate was duly authenticated  by Sulpicio Confiado, Consul-
95 96
General of the Philippines in Japan. Likewise attached to the petition is the special power
of attorney executed by Shuji Yano, authorizing Corazon to sign on his behalf.  The 97
verification and certification against forum shopping was signed by Corazon. 98
Arlene filed the manifestation dated February 27, 2013, arguing that the petition for
review should be dismissed because Corazon was not duly authorized to sign the
verification and certification against forum shopping.
Fuji filed a comment on Arlene’s manifestation, stating that Corazon was properly
authorized to sign. On the basis of the secretary’s certificate, Shuji Yano was
empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals,
against Philippines’ National Labor Relations Commission ("NLRC") and Arlene
S. Espiritu, pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB No. 05-
06811-00 and entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki
Aoki", and participate in any other subsequent proceeding that may necessarily
arise therefrom, including but not limited to the filing of appeals in the appropriate
venue;
(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized,
to verify and execute the certification against nonforum shopping which may be
necessary or required to be attached to any pleading to [sic] submitted to the
Court of Appeals; and the authority to so verify and certify for the Corporation in
favor of the said persons shall subsist and remain effective until the termination
of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized,
to represent and appear on behalf the [sic] Corporation in all stages of the [sic]
this case and in any other proceeding that may necessarily arise thereform [sic],
 and to act in the Corporation’s name, place and stead to determine, propose,
agree, decide, do, and perform any and all of the following:
1. The possibility of amicable settlement or of submission to alternative
mode of dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and
documents; and
5. Such other matters as may aid in the prompt disposition of the
action.  (Emphasis in the original; Italics omitted)
99
Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden
and Mr. Moises A. Rollera as his attorneys-in-fact.  The special power of attorney states:
100
That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba,
Minato-Ku, Tokyo, 137-8088 Japan, and being the representative of Fuji TV, INc., [sic]
(evidenced by the attached Secretary’s Certificate) one of the respondents in NLRC-
NCR Case No. 05-06811-00 entitled "Arlene S. Espiritu v. Fuji Television Network,
Inc./Yoshiki Aoki", and subsequently docketed before the Court of Appeals asC.A. G.R.
S.P. No. 114867 (Consolidated with SP No. 114889) do hereby make, constitute and
appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my true and lawful
attorneys-infact for me and my name, place and stead to act and represent me in the
above-mentioned case, with special power to make admission/s and stipulations and/or
to make and submit as well as to accept and approve compromise proposals upon such
terms and conditions and under such covenants as my attorney-in-fact may deem fit, and
to engage the services of Villa Judan and Cruz Law Officesas the legal counsel to
represent the Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and
deliver such papers ordocuments as may be necessary in furtherance of the power thus
granted, particularly to sign and execute the verification and certification of non-forum
shopping needed to be filed.  (Emphasis in the original)
101
In its comment  on Arlene’s manifestation, Fuji argues that Shuji Yano could further
102
delegate his authority because the board resolution empowered him to "act in the
Corporation’s name, place and stead to determine, propose, agree, decided [sic], do and
perform any and all of the following: . . . such other matters as may aid in the prompt
disposition of the action."  To clarify, Fuji attached a verification and certification against
103
forum shopping, but Arlene questions Corazon’s authority to sign. Arlene argues that the
secretary’s certificate empowered Shuji Yano to file a petition for certiorari before the
Court of Appeals, and not a petition for review before this court, and that since Shuji
Yano’s authority was delegated to him, he could not further delegate such power.
Moreover, Corazon was representing Shuji Yano in his personal capacity, and not in his
capacity as representative of Fuji.
A review of the board resolution quoted in the secretary’s certificate shows that Fuji shall
"file a Petition for Certiorari with the Court of Appeals"  and "participate in any other
104
subsequent proceeding that may necessarily arise therefrom, including but not limited to
the filing of appeals in the appropriate venue,"  and that Shuji Yano and Jin Eto are
105
authorized to represent Fuji "in any other proceeding that may necessarily arise
thereform [sic]."  As pointed out by Fuji, Shuji Yano and Jin Eto were also authorized to
106
"act in the Corporation’s name, place and stead to determine, propose, agree, decide,
do, and perform anyand all of the following: . . . 5. Such other matters as may aid in the
prompt disposition of the action."107
Considering that the subsequent proceeding that may arise from the petition for certiorari
with the Court of Appeals is the filing of a petition for review with this court, Fuji
substantially complied with the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article
1892 of the Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him
from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the
person appointed was notoriously incompetent or insolvent. All acts of the
substitute appointed against the prohibition of the principal shall be void.
The secretary’s certificate does not state that Shuji Yano is prohibited from appointing a
substitute. In fact, heis empowered to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials or employees of a
corporation can sign the verification and certification against forum shopping without a
board resolution. In Cagayan Valley Drug Corporation v. CIR,  it was held that:
108
In sum, we have held that the following officials or employees of the company can sign
the verification and certification without need of a board resolution: (1) the Chairperson of
the Board of Directors, (2) the President of a corporation, (3) the General Manager or
Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a From the Court of Appeals, an aggrieved party may file a petition for review on certiorari
labor case. under Rule 45.

While the above cases  do not provide a complete listing of authorized signatories to the
109
A petition for certiorari under Rule 65 is an original action where the issue is limited to
verification and certification required by the rules, the determination of the sufficiency of grave abuse of discretion. As an original action, it cannot be considered as a
the authority was done on a case to case basis. The rationale applied in the foregoing continuation of the proceedings of the labor tribunals.
cases is to justify the authority of corporate officers or representatives of the corporation
to sign the verification or certificate against forum shopping, being ‘in a position to verify On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal
the truthfulness and correctness of the allegations in the petition.’
110
where the issue is limited to questions of law. In labor cases, a Rule 45 petition is limited
toreviewing whether the Court of Appeals correctly determined the presence or absence
Corazon’s affidavit  states that she is the "office manager and resident interpreter of the
111
of grave abuse of discretion and deciding other jurisdictional errors of the National Labor
Manila Bureau of Fuji Television Network, Inc."  and that she has "held the position for
112
Relations Commission. 119

the last twenty-three years." 113

In Odango v. National Labor Relations Commission,  this court explained that a petition
120

As the office manager for 23 years,Corazon can be considered as having knowledge of for certiorari is an extraordinary remedy that is "available only and restrictively in truly
all matters in Fuji’s Manila Bureau Office and is in a position to verify "the truthfulness exceptional cases"  and that its sole office "is the correction of errors of jurisdiction
121

and the correctness of the allegations in the Petition." 114

including commission of grave abuse of discretion amounting to lack or excess of
jurisdiction."  A petition for certiorari does not include a review of findings of fact since
122

Thus, Fuji substantially complied with the requirements of verification and certification the findings of the National Labor Relations Commission are accorded finality.  In cases123

against forum shopping. where the aggrieved party assails the National Labor Relations Commission’s findings,
he or she must be able to show that the Commission "acted capriciously and whimsically
Before resolving the substantive issues in this case, this court will discuss the procedural or in total disregard of evidence material to the controversy." 124

parameters of a Rule 45 petition for review in labor cases.

When a decision of the Court of Appeals under a Rule 65 petition is brought to this court
II by way of a petition for review under Rule 45, only questions of law may be decided
upon. As held in Meralco Industrial v. National Labor Relations Commission: 125

Procedural parameters of petitions for review in labor cases

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court
ina petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited
Article 223 of the Labor Code  does not provide any mode of appeal for decisions of the
115

to reviewing only errors of law, not of fact, unless the factual findings complained of are
National Labor Relations Commission. It merely states that "[t]he decision of the
completely devoid of support from the evidence on record, or the assailed judgment is
Commission shall be final and executory after ten (10) calendar days from receipt thereof
based on a gross misapprehension of facts. Besides, factual findings of quasi-judicial
by the parties." Being final, it is no longer appealable. However, the finality of the
agencies like the NLRC, when affirmed by the Court of Appeals, are conclusive upon the
National Labor Relations Commission’s decisions does not mean that there is no more
parties and binding on this Court. 126

recourse for the parties.

Career Philippines v. Serna,  citing Montoya v. Transmed,  is instructive on the
127 128

In St. Martin Funeral Home v. National Labor Relations Commission,  this court cited
116

parameters of judicial review under Rule 45:

several cases  and rejected the notion that this court had no jurisdiction to review
117

decisions of the National Labor Relations Commission. It stated that this court had the
power to review the acts of the National Labor Relations Commission to see if it kept As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we
within its jurisdiction in deciding cases and alsoas a form of check and balance.  This
118 discussed the particular parameters of a Rule 45 appeal from the CA’s Rule 65 decision
court then clarified that judicial review of National Labor Relations Commission decisions on a labor case, as follows:
shall be by way of a petition for certiorari under Rule 65. Citing the doctrine of hierarchy
of courts, it further ruled that such petitions shall be filed before the Court of Appeals.
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.  (Emphasis in the original)
129
Justice Brion’s dissenting opinion in Abott Laboratories, PhiIippines v.
Aicaraz  discussed that in petitions for review under Rule 45, "the Court simply
130
determines whether the legal correctness of the CA’s finding that the NLRC ruling . . .
had basis in fact and in Iaw."  In this kind of petition, the proper question to be raised is,
131
"Did the CA correctly determine whether the NLRC committed grave abuse of discretion
in ruling on the case?"132
Justice Brion’s dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence,
then no grave abuse of discretion exists and the CA should so declare and, accordingly,
dismiss the petition. If grave abuse of discretion exists, then the CA must grant the
petition and nullify the NLRC ruling, entering at the same time the ruling that isjustified
under the evidence and the governing law, rules and jurisprudence. In our Rule 45
review, this Court must denythe petition if it finds that the CA correctly acted.  (Emphasis
133
in the original)
These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered services to Fuji. However, Fuji
alleges that Arlene was an independent contractor, while Arlene alleges that she was a
regular employee. To resolve this issue, we ascertain whether an employer-employee
relationship existed between Fuji and Arlene.
This court has often used the four-fold test to determine the existence of an employer-
employee relationship. Under the four-fold test, the "control test" is the most
important.  As to how the elements in the four-fold test are proven, this court has
134
discussed that:
[t]here is no hard and fast rule designed to establish the aforesaid elements. Any
competent and relevant evidence to prove the relationship may be admitted.
Identification cards, cash vouchers, social security registration, appointment letters or
employment contracts, payrolls, organization charts, and personnel lists, serve as
evidence of employee status. 135
If the facts of this case vis-à-vis the four-fold test show that an employer-employee
relationship existed, we then determine the status of Arlene’s employment, i.e., whether
she was a regular employee. Relative to this, we shall analyze Arlene’s fixed-term
contract and determine whether it supports her argument that she was a regular
employee, or the argument of Fuji that she was an independent contractor. We shall
scrutinize whether the nature of Arlene’s work was necessary and desirable to Fuji’s
business or whether Fuji only needed the output of her work. If the circumstances show
that Arlene’s work was necessary and desirable to Fuji, then she is presumed to be a
regular employee. The burden of proving that she was an independent contractor lies
with Fuji.
In labor cases, the quantum of proof required is substantial evidence.  "Substantial
136
evidence" has been defined as "such amount of relevant evidence which a reasonable
mind might accept as adequate to justify a conclusion." 137
If Arlene was a regular employee, we then determine whether she was illegally
dismissed. In complaints for illegal dismissal, the burden of proof is on the employee to
prove the fact of dismissal.  Once the employee establishes the fact of dismissal,
138
supported by substantial evidence, the burden of proof shifts tothe employer to show that
there was a just or authorized cause for the dismissal and that due process was
observed. 139
IV
Whether the Court of Appeals correctly affirmed the National Labor
Relations Commission’s finding that Arlene was a regular employee
Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN and
relying on the following facts: (1) she was hired because of her skills; (2) her salary was
US$1,900.00, which is higher than the normal rate; (3) she had the power to bargain with
her employer; and (4) her contract was for a fixed term. According to Fuji, the Court of
Appeals erred when it ruled that Arlene was forcedto sign the non-renewal agreement,
considering that she sent an email with another version of the non-renewal
agreement.  Further, she is not entitled tomoral damages and attorney’s fees because
140
she acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits.  Arlene argues that she was a
141
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.  She maintains that
142
Logically, the decisive determinant in the term employment should not be the activities
the successive renewal of her employment contracts for four (4) years indicates that her that the employee is called upon to perform, but the day certain agreed upon by the
work was necessary and desirable.  In addition, Fuji’s payment of separation pay
143
parties for the commencement and termination of their employment relationship, a day
equivalent to one (1) month’s pay per year of service indicates that she was a regular certainbeing understood to be "that which must necessarily come, although it may not be
employee.  To further support her argument that she was not an independent contractor,
144
known when."  (Emphasis in the original)
151

she states that Fuji owns the laptop computer and mini-camera that she used for
work.  Arlene also argues that Sonza is not applicable because she was a plain reporter
145
This court further discussed that there are employment contracts where "a fixed term is
for Fuji, unlike Jay Sonza who was a news anchor, talk show host, and who enjoyed a an essential and natural appurtenance"  such as overseas employment contracts and
152

celebrity status.  On her illness, Arlene points outthat it was not a ground for her
146
officers in educational institutions.153

dismissal because her attending physician certified that she was fit to work.
147

Distinctions among fixed-term

Arlene admits that she signed the non-renewal agreement with quitclaim, not because employees, independent contractors,
she agreed to itsterms, but because she was not in a position to reject the non-renewal and regular employees
agreement. Further, she badly needed the salary withheld for her sustenance and
medication.  She posits that her acceptance of separation pay does not bar filing of a
148
GMA Network, Inc. v. Pabriga  expounded the doctrine on fixed term contracts laid down
154

complaint for illegal dismissal.

149
in Brentin the following manner:

Article 280 of the Labor Code provides that:
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.
Cognizant of the possibility of abuse in the utilization of fixed term employment contracts,
we emphasized in Brentthat 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

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 heis employed and his employment shall continue
while such activity exist.
This provision classifies employees into regular, project, seasonal, and casual. It further
classifies regular employees into two kinds: (1) those "engaged to perform activities
which are usually necessary or desirable in the usual business or trade of the employer";
and (2) casual employees who have "rendered at least one year of service, whether such
2) It satisfactorily appears that the employer and the employee dealt with each other on
more or less equal terms with no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only
in a few special cases wherein the employer and employee are on more or less in equal
footing in entering into the contract. The reason for this is evident: whena prospective
employee, on account of special skills or market forces, is in a position to make demands
upon the prospective employer, such prospective employee needs less protection than
the ordinary worker. Lesser limitations on the parties’ freedom of contract are thus
required for the protection of the employee.  (Citations omitted)
155

service is continuous or broken."

For as long as the guidelines laid down in Brentare satisfied, this court will recognize the
Another classification of employees, i.e., employees with fixed-term contracts, was validity of the fixed-term contract.
recognized in Brent School, Inc. v. Zamora  where this court discussed that:
150
In Labayog v. M.Y. San Biscuits, Inc.,  this court upheld the fixedterm employment of
156
petitioners because from the time they were hired, they were informed that their
engagement was for a specific period. This court stated that:
[s]imply put, petitioners were notregular employees. While their employment as mixers,
packers and machine operators was necessary and desirable in the usual business
ofrespondent company, they were employed temporarily only, during periods when there
was heightened demand for production. Consequently, there could have been no illegal
dismissal when their services were terminated on expiration of their contracts. There was
even no need for notice of termination because they knew exactly when their contracts
would end. Contracts of employment for a fixed period terminate on their own at the end
of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is the
practice of some scrupulous employers who try to circumvent the law protecting workers
from the capricious termination of employment.  (Citation omitted)
157
Caparoso v. Court of Appeals  upheld the validity of the fixed-term contract of
158
employment. Caparoso and Quindipan were hired as delivery men for three (3) months.
At the end of the third month, they were hired on a monthly basis. In total, they were
hired for five (5) months. They filed a complaint for illegal dismissal.  This court ruled
159
that there was no evidence indicating that they were pressured into signing the fixed-
term contracts. There was likewise no proof that their employer was engaged in hiring
workers for five (5) months onlyto prevent regularization. In the absence of these facts,
the fixed-term contracts were upheld as valid.  On the other hand, an independent
160
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.
In view of the "distinct and independent business" of independent contractors, no
employer-employee relationship exists between independent contractors and their
principals. Independent contractors are recognized under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with
another person for the performance of the former’s work, the employees of the contractor
and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of
this Code.
....
The Secretary of Labor and Employment may, by appropriate regulations, restrict or
prohibit the contracting-out of labor to protect the rights of workers established under this
Code. In so prohibiting or restricting, he may make appropriate distinctions between
labor-only contracting and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any
provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer
does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary shall be considered merely
as an agent of the employer who shall be responsible to the workers in the same manner
and extent as if the latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and
Employment, a contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a
contractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to be
performed or completed within oroutside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job
contracting and subcontracting arrangements among the principal, contractor, and
161
employees of the contractor. There is no employer-employee relationship between the
contractor and principal who engages the contractor’s services, but there is an employer-
employee relationship between the contractor and workers hired to accomplish the work
for the principal. 162
Jurisprudence has recognized another kind of independent contractor: individuals with
unique skills and talents that set them apart from ordinary employees. There is no
trilateral relationship in this case because the independent contractor himself or herself
performs the work for the principal. In other words, the relationship is bilateral.
In Orozco v. Court of Appeals,  Wilhelmina Orozco was a columnist for the Philippine
163
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."  In addition,
164
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  involved a masiador  and a sentenciador.  This court
166 167 168
ruled that "petitioners performed their functions as masiadorand sentenciador free from
the direction and control of respondents"  and that the masiador and sentenciador
169
"relied mainly on their ‘expertise that is characteristic of the cockfight
gambling.’"  Hence, no employer-employee relationship existed.
170
Bernarte v. Philippine Basketball Association  involved a basketball referee. This court
171
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.
In other words, there are different kinds of independent contractors: those engaged in
legitimate job contracting and those who have unique skills and talents that set them
apart from ordinary employees.
Since no employer-employee relationship exists between independent contractors and
their principals, their contracts are governed by the Civil Code provisions on contracts
and other applicable laws. 173
A contract is defined as "a meeting of minds between two persons whereby one binds
himself, with respect to the other, to give something or to render some service."  Parties
174
are free to stipulate on terms and conditions in contracts as long as these "are not
contrary to law, morals, good customs, public order, or public policy."  This presupposes
175
that the parties to a contract are on equal footing. Theycan bargain on terms and
conditions until they are able to reach an agreement.
On the other hand, contracts of employment are different and have a higher level of
regulation because they are impressed with public interest. Article XIII, Section 3 of the
1987 Constitution provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment opportunities
for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes, including
conciliation, and shall enforce their mutual compliance therewith to foster industrial
peace.
The State shall regulate the relations between workers and employers, recognizing the
right of labor to its just share in the fruits of production and the right of enterprises to
reasonable returns on investments, and to expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil
Code states:
ART. 1700. The relations between capital and labor are not merely contractual. They are
so impressed with public interest that labor contracts must yield to the common good.
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.
In contracts of employment, the employer and the employee are not on equal footing.
Thus, it is subject to regulatory review by the labor tribunals and courts of law. The law
serves to equalize the unequal. The labor force is a special class that is constitutionally
protected because of the inequality between capital and labor.  This presupposes that
176
the labor force is weak. However, the level of protection to labor should vary from case to
case; otherwise, the state might appear to be too paternalistic in affording protection to
labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in Brent applies in cases
where it appears that the employer and employee are on equal footing.  This recognizes
177
the fact that not all workers are weak. To reiterate the discussion in GMA Network v.
Pabriga:
The reason for this is evident: when a prospective employee, on account of special skills
or market forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser limitations
on the parties’ freedom of contract are thus required for the protection of the employee. 178
The level of protection to labor mustbe determined on the basis of the nature of the work,
qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelor’s degree cannot be said to be on
equal footing witha grocery bagger with a high school diploma. Employees who qualify
for jobs requiring special qualifications such as "[having] a Master’s degree" or "[having]
passed the licensure exam" are different from employees who qualify for jobs that require
"[being a] high school graduate; withpleasing personality." In these situations, it is clear
that those with special qualifications can bargain with the employer on equal footing.
Thus, the level of protection afforded to these employees should be different.
Fuji’s argument that Arlene was an independent contractor under a fixed-term contract is
contradictory. Employees under fixed-term contracts cannot be independent contractors
because in fixed-term contracts, an employer-employee relationship exists. The test in
this kind of contract is not the necessity and desirability of the employee’s activities, "but
the day certain agreed upon by the parties for the commencement and termination of the
employment relationship."  For regular employees, the necessity and desirability of their
179
work in the usual course of the employer’s business are the determining factors. On the
other hand, independent contractors do not have employer-employee relationships with
their principals. Hence, before the status of employment can be determined, the
existence of an employer-employee relationship must be established.
The four-fold test  can be used in determining whether an employeremployee
180
relationship exists. The elements of the four-fold test are the following: (1) the selection
and engagement of the employee; (2) the payment of wages; (3) the power of dismissal;
and (4) the power of control, which is the most important element. 181
The "power of control" was explained by this court in Corporal, Sr. v. National Labor
Relations Commission: 182
The power to control refers to the existence of the power and not necessarily to the
actual exercise thereof, nor is it essential for the employer to actually supervise the
performance of duties of the employee. It is enough that the employer has the right to
wield that power.  (Citation omitted)
183
Orozco v. Court of Appeals further elucidated the meaning of "power of control" and
stated the following:
Logically, the line should be drawn between rules that merely serve as guidelines
towards the achievement of the mutually desired result without dictating the means or
methods to be employed in attaining it, and those that control or fix the methodology and
bind or restrict the party hired to the use of such means. The first, which aim only to
promote the result, create no employer-employee relationship unlike the second, which
address both the result and the means used to achieve it. . . .  (Citation omitted)
184
In Locsin, et al. v. Philippine Long Distance Telephone Company,  the "power of control"
185
was defined as "[the] right to control not only the end to be achieved but also the means
to be used in reaching such end." 186
Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of
Appeals  in determining whether Arlene was an independent contractor or a regular
187
employee.
In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases
involved newscasters and anchors. However, Sonza was held to be an independent
contractor, while Dumpit-Murillo was held to be a regular employee.
Comparison of the Sonza and
Dumpit-Murillo cases using
the four-fold test
Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status
not possessed by ordinary employees."  His work was for radio and television
188
programs.  On the other hand, Dumpit-Murillo was hired by ABC as a newscaster and
189
co-anchor.  Sonza’s talent fee amounted to ₱317,000.00 per month, which this court
190
found to be a substantial amount that indicatedhe was an independent contractor rather
than a regular employee.  Meanwhile, Dumpit-Murillo’s monthly salary was ₱28,000.00,
191
a very low amount compared to what Sonza received. 192
Sonza was unable to prove that ABS-CBN could terminate his services apart from
breach of contract. There was no indication that he could be terminated based on just or
authorized causes under the Labor Code. In addition, ABS-CBN continued to pay his
talent fee under their agreement, even though his programs were no longer
broadcasted.  Dumpit-Murillo was found to have beenillegally dismissed by her
193
employer when they did not renew her contract on her fourth year with ABC. 194
In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines,
how he appeared on television, or how he sounded on radio.  All that Sonza needed
195
was his talent.  Further, "ABS-CBN could not terminate or discipline SONZA even if the
196
means and methods of performance of his work . . . did not meet ABS-CBN’s
approval."  In Dumpit-Murillo, the duties and responsibilities enumerated in her contract
197
was a clear indication that ABC had control over her work. 198
Application of the four-fold test
The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and
affirmed the ruling of the National Labor Relations Commission finding that Arlene was a
regular employee. Arlene was hired by Fuji as a news producer, but there was no
showing that she was hired because of unique skills that would distinguish her from
ordinary employees. Neither was there any showing that she had a celebrity status. Her
monthly salary amounting to US$1,900.00 appears tobe a substantial sum, especially if
compared to her salary whenshe was still connected with GMA.  Indeed, wages may
199
indicate whether oneis 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.  Her contract also indicated that Fuji had control over her work
200
because she was required to work for eight (8) hours from Monday to Friday, although on
flexible time.  Sonza was not required to work for eight (8) hours, while Dumpit-Murillo
201
had to be in ABC to do both on-air and off-air tasks.
On the power to control, Arlene alleged that Fuji gave her instructions on what to
report.  Even the mode of transportation in carrying out her functions was controlled by
202
Fuji. Paragraph 6 of her contract states:
6. During the travel to carry out work, if there is change of place or change of place of
work, the train, bus, or public transport shall be used for the trip. If the Employee uses
the private car during the work and there is an accident the Employer shall not be
responsible for the damage, which may be caused to the Employee. 203
Thus, the Court of Appeals did not err when it upheld the findings of the National Labor
Relations Commission that Arlene was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji and
Arlene, the next questions for resolution are the following: Did the Court of Appeals
correctly affirm the National Labor Relations Commission that Arlene had become a
regular employee? Was the nature of Arlene’s work necessary and desirable for Fuji’s
usual course of business?
Arlene was a regular employee
with a fixed-term contract
The test for determining regular employment is whether there is a reasonable connection
between the employee’s activities and the usual business of the employer. Article 280
provides that the nature of work must be "necessary or desirable in the usual business or
trade of the employer" as the test for determining regular employment. As stated in ABS-
CBN Broadcasting Corporation v. Nazareno: 204
In determining whether an employment should be considered regular or non-regular, the
applicable test is the reasonable connection between the particular activity performed by
the employee in relation to the usual business or trade of the employer. The standard,
supplied by the law itself, is whether the work undertaken is necessary or desirable in the
usual business or trade of the employer, a fact that can be assessed by looking into the
nature of the services rendered and its relation to the general scheme under which the
business or trade is pursued in the usual course. It is distinguished from a specific
undertaking that is divorced from the normal activities required incarrying on the
particular business or trade.205
However, there may be a situation where an employee’s work is necessary but is not
always desirable inthe usual course of business of the employer. In this situation, there is
no regular employment.
In San Miguel Corporation v. National Labor Relations Commission,  Francisco de
206
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.  In ruling that de Guzman did
207
not attain the status of a regular employee, this court explained:
Note that the plant where private respondent was employed for only seven months is
engaged in the manufacture of glass, an integral component of the packaging and
manufacturing business of petitioner. The process of manufacturing glass requires a
furnace, which has a limited operating life. Petitioner resorted to hiring project or fixed
term employees in having said furnaces repaired since said activity is not regularly
performed. Said furnaces are to be repaired or overhauled only in case of need and after
being used continuously for a varying period of five (5) to ten (10) years. In 1990, one of
the furnaces of petitioner required repair and upgrading. This was an undertaking distinct
and separate from petitioner's business of manufacturing glass. For this purpose,
petitioner must hire workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the regular
business of the corporation. For petitioner is not engaged in the business of repairing
furnaces. Although the activity was necessary to enable petitioner to continue
manufacturing glass, the necessity therefor arose only when a particular furnace reached
the end of its life or operating cycle. Or, as in the second undertaking, when a particular
furnace required an emergency repair. In other words, the undertakings where private
respondent was hired primarily as helper/bricklayer have specified goals and purposes
which are fulfilled once the designated work was completed. Moreover, such The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts
undertakings were also identifiably separate and distinct from the usual, ordinary or that were successively renewed for four (4) years.  This court held that "[t]his repeated
224

regular business operations of petitioner, which is glass manufacturing. These engagement under contract of hire is indicative of the necessity and desirability of the
undertakings, the duration and scope of which had been determined and made known to petitioner’s work in private respondent ABC’s business." 225

private respondent at the time of his employment, clearly indicated the nature of his
employment as a project employee. 208
With regard to Fuji’s argument that Arlene’s contract was for a fixed term, the Court of
Appeals cited Philips Semiconductors, Inc. v. Fadriquela  and held that where an
226

Fuji is engaged in the business of broadcasting,  including news programming.  It is

209 210
employee’s contract "had been continuously extended or renewed to the same position,
based in Japan  and has overseas offices to cover international news.
211 212
with the same duties and remained in the employ without any interruption,"  then such
227

employee is a regular employee. The continuous renewal is a scheme to prevent

Based on the record, Fuji’s Manila Bureau Office is a small unit  and has a few
213 regularization. On this basis, the Court of Appeals ruled in favor of Arlene.
employees.  As such, Arlene had to do all activities related to news gathering. Although
214

Fuji insists that Arlene was a stringer, it alleges that her designation was "News As stated in Price, et al. v. Innodata Corp., et al.: 228

Talent/Reporter/Producer." 215

The employment status of a person is defined and prescribed by law and not by what the
A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the parties say it should be. Equally important to consider is that a contract of employment is
field planning and gathering information. . . ."  Arlene’s tasks included "[m]onitoring and
216
impressed with public interest such that labor contracts must yield to the common good.
[g]etting [n]ews [s]tories, [r]eporting interviewing subjects in front of a video Thus, provisions of applicable statutes are deemed written into the contract, and the
camera,"  "the timely submission of news and current events reports pertaining to the
217
parties are not at liberty to insulate themselves and their relationships from the impact of
Philippines[,] and traveling [sic] to [Fuji’s] regional office in Thailand."  She also had to
218
labor laws and regulations by simply contracting with each other.  (Citations omitted)
229

report for work in Fuji’s office in Manila from Mondays to Fridays, eight (8) hours per
day.  She had no equipment and had to use the facilities of Fuji to accomplish her tasks.
219
The Court of Appeals affirmed the finding of the National Labor Relations Commission
that the successive renewals of Arlene’s contract indicated the necessity and desirability
of her work in the usual course of Fuji’s business. Because of this, Arlene had become a
regular employee with the right to security of tenure.  The Court of Appeals ruled that:
220
Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila
Bureau. She was hired for the primary purpose of news gathering and reporting to the
television network’s headquarters. Espiritu was not contracted on account of any peculiar
Arlene’s contract indicating a fixed term did not automatically mean that she could never
be a regular employee. This is precisely what Article 280 seeks to avoid. The ruling in
Brent remains as the exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law
does not preclude the possibility that a regular employee may opt to have a fixed-term
contract for valid reasons. This was recognized in Brent: For as long as it was the
employee who requested, or bargained, that the contract have a "definite date of
termination," or that the fixed-term contract be freely entered into by the employer and
the employee, then the validity of the fixed-term contract will be upheld. 230

ability or special talent and skill that she may possess which the network desires to make
use of. Parenthetically, ifit were true that Espiritu is an independent contractor, as V
claimed by Fuji, the factthat everything that she uses to perform her job is owned by the
company including the laptop computer and mini camera discounts the idea of job Whether the Court of Appeals correctly affirmed
contracting. 221

the National Labor Relations Commission’s finding of illegal dismissal

Moreover, the Court of Appeals explained that Fuji’s argument that no employer-
employee relationship existed in view of the fixed-term contract does not persuade
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally
because fixed-term contracts of employment are strictly construed.  Further, the pieces
222

dismissed, in view of the non-renewal contract voluntarily executed by the parties. Fuji
of equipment Arlene used were all owned by Fuji, showing that she was a regular
also argues that Arlene’s contract merely expired; hence, she was not illegally
employee and not an independent contractor. 223

dismissed. 231
Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji
withheldher salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fuji’s assertion that Espiritu’s contract merely expired and that
she voluntarily agreed not to renew the same. Even a cursory perusal of the subject Non-
Renewal Contract readily shows that the same was signed by Espiritu under protest.
What is apparent is that the Non-Renewal Contract was crafted merely as a subterfuge
to secure Fuji’s position that it was Espiritu’s choice not to renew her contract.
232
As a regular employee, Arlene was entitled to security of tenure and could be dismissed
only for just or authorized causes and after the observance of due process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987
Constitution: ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance
with law. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes affecting
their rights and benefits as may be provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure and states
the following:
Art. 279. Security of tenure.In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause of when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there are
just orauthorized causes and only after compliance with procedural and substantive due
process is conducted.
Even probationary employees are entitled to the right to security of tenure. This was
explained in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:
233
Within the limited legal six-month probationary period, probationary employees are still
entitled to security of tenure. It is expressly provided in the afore-quoted Article 281 that
a probationary employee may be terminated only on two grounds: (a) for just cause, or
(b) when he fails to qualify as a regular employee in accordance with reasonable
standards made known by the employer to the employee at the time of his
engagement.  (Citation omitted)
234
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.  The existence of a fixed-term contract
235
should not mean that there can be no illegal dismissal. Due process must still be
observed in the pre-termination of fixed-term contracts of employment.
In addition, the Court of Appeals and the National Labor Relations Commission found
that Arlene was dismissed because of her health condition. In the non-renewal
agreement executed by Fuji and Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from
continuing to effectively perform her functions under the said Contract such as the timely
submission of news and current events reports pertaining to the Philippines and
travelling [sic] to the FIRST PARTY’s regional office in Thailand.  (Emphasis supplied)
236
Disease as a ground for termination is recognized under Article 284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer may terminate the services of
an employee who has been found to be suffering from any disease and whose continued
employment is prohibited by law or is prejudicial to his health as well as to the health of
his co-employees: Provided, That he is paid separation pay equivalent to at least one (1)
month salary or to one-half (1/2) month salary for every year of service, whichever is
greater, a fraction of at least six (6) months being considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal.– Where the employee suffers from a disease
and his continued employment is prohibited by law or prejudicial to his healthor to the
health of his coemployees, the employer shall not terminate his employment unless there
is a certification by a competent public health authority that the disease is of such nature
or at such a stage that it cannot be cured within a period of six (6) months even with
proper medical treatment. If the disease or ailment can be cured within the period, the
employer shall not terminate the employee but shall ask the employee to take a leave.
The employer shall reinstate such employee to his former position immediately upon the
restoration of his normal health.
For dismissal under Article 284 to bevalid, two requirements must be complied with: (1)
the employee’s disease cannot be cured within six (6) months and his "continued
employment is prohibited by law or prejudicial to his health as well as to the health of his
co-employees"; and (2) certification issued by a competent public health authority that
even with proper medical treatment, the disease cannot be cured within six (6)
months.  The burden of proving compliance with these requisites is on the
237
employer.  Noncompliance leads to the conclusion that the dismissal was illegal.
238 239
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 thather contract would no longer be renewed, and when she
did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld the
finding of the National Labor Relations Commission that for failure of Fuji to comply with
due process, Arlene was illegally dismissed. 240
VI
Whether the Court of Appeals properly modified
the National Labor Relations Commission’s decision
when it awarded reinstatement, damages, and attorney’s fees
The National Labor Relations Commission awarded separation pay in lieu of
reinstatement, on the ground that the filing of the complaint for illegal dismissal may have
seriously strained relations between the parties. Backwages were also awarded, to be
computed from date of dismissal until the finality of the National Labor Relations
Commission’s decision. However, only backwages were included in the dispositive
portion because the National Labor Relations Commission recognized that Arlene had
received separation pay in the amount of US$7,600.00. The Court of Appeals affirmed
the National Labor Relations Commission’s decision but modified it by awarding moral
and exemplary damages and attorney’s fees, and all other benefits Arlene was entitled to
under her contract with Fuji. The Court of Appeals also ordered reinstatement, reasoning
that the grounds when separation pay was awarded in lieu of reinstatement were not
proven.241
Article 279 of the Labor Code provides:
Art. 279. Security of tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
(Emphasis supplied)
The Court of Appeals’ modification of the National Labor Relations Commission’s
decision was proper because the law itself provides that illegally dismissed employees
are entitled to reinstatement, backwages including allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered payment of
separation pay in lieu of reinstatement, reasoning "that the filing of the instant suit may
have seriously abraded the relationship of the parties so as to render reinstatement
impractical."  The Court of Appeals reversed this and ordered reinstatement on the
242
ground that separation pay in lieu of reinstatement is allowed only in several instances
such as (1) when the employer has ceased operations; (2) when the employee’s position
is no longer available; (3) strained relations; and (4) a substantial period has lapsed from
date of filing to date of finality.
243
On this matter, Quijano v. Mercury Drug Corp.  is instructive:
244
Well-entrenched is the rule that an illegally dismissed employee is entitled to
reinstatement as a matter of right. . . .
To protect labor’s security of tenure, we emphasize that the doctrine of "strained
relations" should be strictly applied so as not to deprive an illegally dismissed employee
of his right to reinstatement. Every labor dispute almost always results in "strained
relations" and the phrase cannot be given an overarching interpretation, otherwise, an
unjustly dismissed employee can never be reinstated.  (Citations omitted)
245
The Court of Appeals reasoned that strained relations are a question of fact that must be
supported by evidence.  No evidence was presented by Fuji to prove that reinstatement
246
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  to bar
247
reinstatement.
On the award of damages, Fuji argues that Arlene is notentitled to the award of damages
and attorney’s fees because the non-renewal agreement contained a quitclaim, which
Arlene signed. Quitclaims in labor cases do not bar illegally dismissed employees from
filing labor complaints and money claim. As explained by Arlene, she signed the non- employee was forced to litigate and, thus, incur expenses to protect his rights and
renewal agreement out of necessity. In Land and Housing Development Corporation v. interest, the award of attorney’s fees is legallyand morally justifiable."  Due to her illegal
255

Esquillo,  this court explained: We have heretofore explained that the reason why
248
dismissal, Arlene was forced to litigate.
quitclaims are commonly frowned upon as contrary to public policy, and why they are
held to be ineffective to bar claims for the full measure of the workers’ legal rights, is the In the dispositive portion of its decision, the Court of Appeals awarded legal interest at
fact that the employer and the employee obviously do not stand on the same footing. The the rate of 12% per annum.  In view of this court’s ruling in Nacar v. Gallery
256

employer drove the employee to the wall. The latter must have to get holdof money. Frames,  the legal interest shall be reducd to a rate of 6% per annum from July 1, 2013
257

Because, out of a job, he had to face the harsh necessities of life. He thus found himself until full satisfaction.
in no position to resist money proffered. His, then, is a case of adherence, not of
choice.249
WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated
June 25, 2012 is AFFIRMED with the modification that backwages shall be computed
With regard to the Court of Appeals’ award of moral and exemplary damages and from June 2009. Legal interest shall be computed at the rate of 6% per annum of the
attorney’s fees, this court has recognized in several cases that moral damages are total monetary award from date of finality of this decision until full satisfaction.
awarded "when the dismissal is attended by bad faith or fraud or constitutes an act
oppressive to labor, or is done in a manner contrary to good morals, good customs or SO ORDERED
public policy."  On the other hand, exemplary damages may be awarded when the
250

dismissal was effected "in a wanton, oppressive or malevolent manner." 251

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

I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very
weak, you suddenly came to deliver to me the NEWS that you will no longer renew my
contract.  I knew this will come but I never thought that you will be so ‘heartless’ and
1awp++i1

insensitive to deliver that news just a month after I informed you that I am sick. I was
asking for patience and understanding and your response was not to RENEW my
contract. 252

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

However, Arlene receivedher salary for May 2009.  Considering that the date of her
253

illegal dismissal was May 5, 2009,  this amount may be subtracted from the total
254

monetary award. With regard to the award of attorney’s fees, Article 111 of the Labor
Code states that "[i]n cases of unlawful withholding of wages, the culpable party may be
assessed attorney’s fees equivalent to ten percent of the amount of wages recovered."
Likewise, this court has recognized that "in actions for recovery of wages or where an
 G.R. No. 205300, March 18, 2015
FONTERRA BRANDS PHILS., INC., Petitioner, v. LEONARDO1 LARGADO
AND TEOTIMO ESTRELLADO, Respondents.
DECISION
VELASCO JR., J.:
The Case
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking the reversal and setting aside of the Decision of the Court of Appeals
(CA) dated September 6, 2012, as well as its January 11, 2013 Resolution
denying reconsideration thereof, in CA-G.R. SP No. 114227,
entitled Leonardo Largado and Teotimo P. Estrellado v. National Labor
Relations Commission (NLRC), Fonterra Brands Phils., Inc./Carlo Mendoza,
Zytron Marketing & Promotions Corp./Francisco Valencia, A.C. Sicat
Marketing & Promotional Services/Arturo Sicat.
The Facts
Petitioner Fonterra Brands Phils., Inc. (Fonterra) contracted the services of
Zytron Marketing and Promotions Corp. (Zytron) for the marketing and
promotion of its milk and dairy products. Pursuant to the contract, Zytron
provided Fonterra with trade merchandising representatives (TMRs), including
respondents Leonardo Largado (Largado) and Teotimo Estrellado (Estrellado).
The engagement of their services began on September 15, 2003 and May 27,
2002, respectively, and ended on June 6, 2006.
On May 3, 2006, Fonterra sent Zytron a letter terminating its promotions
contract, effective June 5, 2006. Fonterra then entered into an agreement for
manpower supply with A.C. Sicat Marketing and Promotional Services (A.C.
Sicat). Desirous of continuing their work as TMRs, respondents submitted
their job applications with A.C. Sicat, which hired them for a term of five (5)
months, beginning June 7, 2006 up to November 6, 2006.
When respondents’ 5-month contracts with A.C. Sicat were about to expire,
they allegedly sought renewal thereof, but wereallegedly refused. This
prompted respondents to file complaints for illegal dismissal, regularization,
non-payment of service incentive leave and 13th month pay, and actual and
moral damages, against petitioner, Zytron, and A.C. Sicat.
The Labor Arbiter dismissed the complaint and ruled that: (1) respondents
were not illegally dismissed. As a matter of fact, they were the ones who
refused to renew their contract and that they voluntarily complied with the
requirements for them to claim their corresponding monetary benefits in
relation thereto; and (2) they were consecutively employed by Zytron and
A.C. Sicat, not by Fonterra. The dispositive portion of the Decision 2 reads: chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing, judgment is hereby rendered
DISMISSING the instant case for utter lack of merit.
SO ORDERED. cralawred
The NLRC affirmed the Labor Arbiter, finding that respondents’ separation
from Zytron was brought about by the execution of the contract between
Fonterra and A.C. Sicat where the parties agreed to absorb Zytron’s
personnel, including respondents. Too, respondents failed to present any
evidence that they protested this set-up. Furthermore, respondents failed to
refute the allegation that they voluntarily refused to renew their contract with
A.C. Sicat. Also, respondents did not assert any claim against Zytron and A.C.
Sicat. The NLRC disposed of the case in this wise: chanRoblesvirtualLawlibrary
WHEREFORE, premises considered, the appeals are hereby
ordered DISMISSED and the Decision of the Labor Arbiter is AFFIRMED
[in]toto.
SO ORDERED.3
The NLRC decision was assailed in a petition under Rule 65 before the CA.
Ruling on the petition, the CA, in the questioned Decision, 4 found that A.C.
Sicat satisfies the requirements of legitimate job contracting, but Zytron does
not. According to the CA: (1) Zytron’s paid-in capital of P250,000 cannot be
considered as substantial capital; (2) its Certificate of Registration was issued
by the DOLE months after respondents’ supposed employment ended; and
(3) its claim that it has the necessary tools and equipment for its business is
unsubstantiated. Therefore, according to the CA, respondents were Fonterra’s
employees.
Additionally, the CA held that respondents were illegally dismissed since
Fonterra itself failed to prove that their dismissal is lawful. However, the
illegal dismissal should be reckoned from the termination of their supposed
employment with Zytron on June 6, 2006. Furthermore, respondents’ transfer before it signed a merchandising agreement with
to A.C. Sicat is tantamount to a completely new engagement by another petitioner Fonterra;
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employer. Lastly, the termination of their contract with A.C. Sicat arose from
the expiration of their respective contracts with the latter. The CA, thus, ruled c. Very importantly, petitioner Fonterra never exercised the
that Fonterra is liable to respondents and ordered the reinstatement of right to control respondents and other employees of
respondents without loss of seniority rights, with full backwages, and other Zytron. Indeed, respondents neither alleged that
benefits from the time of their illegal dismissal up to the time of their actual petitioner exercised control over them nor presented
reinstatement. The fallo of the Decision reads: chanRoblesvirtualLawlibrary
proof in support thereof in any of their previous
WHEREFORE, premises considered, the petition is hereby GRANTED. The pleadings.
assailed Decision dated 20 November 2009 and Resolution dated 5 March
2010 of the National Labor Relations Commission (NLRC), Seventh Division,
are hereby ANULLED and SET ASIDE. Private respondent Fonterra Brand,
Inc. is hereby ordered to REINSTATE [respondents] without loss of seniority II. Respondents never claimed nor adduced evidence that they
rights. Private respondents Fonterra Brand, Inc. and Zytron Marketing and were dismissed from employment by Zytron. In fact, Zytron
Promotional Corp. are hereby further ORDERED to jointly and severally pay denies terminating them from work. The CA, thus, erred in
petitioners their full backwages and other benefits from the time of their finding that respondents were “illegally dismissed.”
illegal dismissal up to the time of their actual reinstatement; and attorney’s
fees. Succinctly, the issues in the case at bar are: (1) whether or not Zytron and
A.C. Sicat are labor-only contractors, making Fonterra the employer of herein
SO ORDERED. respondents; and (2) whether or not respondents were illegally dismissed.
Zytron and Fonterra moved for reconsideration, but to no avail. Hence, this
petition. Our Ruling

The Issues We find merit in the petition.

Petitioner presents the following issues for Our resolution: chanRoblesvirtualLawlibrary

As regards the CA’s conclusion that Zytron is not a legitimate job contractor,
We are of the view that such is immaterial to the resolution of the illegal
I. The CA erred in ruling that Zytron was a mere labor-only dismissal issue for one reason: We find that respondents voluntarily
contractor to petitioner Fonterra, in that: terminated their employment with Zytron, contrary to their allegation that
their employment with Zytron was illegally terminated.
chanRoblesvirtualLawlibrary

a. As held by the Court, there is no absolute figure that

constitutes “substantial” capital for an independent
contractor, and the same should instead be measured We do not agree with the CA that respondents’ employment with Zytron was
against the type of work it is obligated to do for the illegally terminated.
principal. It is most respectfully submitted that, here, the
merchandising work undertaken by Zytron’s paid-in As correctly held by the Labor Arbiter and the NLRC, the termination of
capital of P250,000 was as of 1990, the year it was respondents’ employment with Zytron was brought about by the cessation of
incorporated; their contracts with the latter. We give credence to the Labor Arbiter’s
conclusion that respondents were the ones who refused to renew their
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b. As shown in its Articles of Incorporation, Zytron  had contracts with Zytron, and the NLRC’s finding that they themselves
been in business since 1990, or more than a decade acquiesced to their transfer to A.C. Sicat.

By refusing to renew their contracts with Zytron, respondents effectively

resigned from the latter. Resignation is the voluntary act of employees who
are compelled by personal reasons to dissociate themselves from their
employment, done with the intention of relinquishing an office, accompanied
by the act of abandonment.5 chanroblesvirtuallawlibrary
Here, it is obvious that respondents were no longer interested in continuing
their employment with Zytron. Their voluntary refusal to renew their
contracts was brought about by their desire to continue their assignment in
Fonterra which could not happen in view of the conclusion of Zytron’s
contract with Fonterra. Hence, to be able to continue with their assignment,
they applied for work with A.C. Sicat with the hope that they will be able to
continue rendering services as TMRs at Fonterra since A.C. Sicat is Fonterra’s
new manpower supplier. This fact is even acknowledged by the CA in the
assailed Decision where it recognized the reason why respondents applied for
work at A.C. Sicat. The CA stated that “[t]o continuously work as
merchandisers of Fonterra products, [respondents] submitted their job
applications to A.C. Sicat xxx.”6 This is further bolstered by the fact that
respondents voluntarily complied with the requirements for them to claim
their corresponding monetary benefits in relation to the cessation of their
employment contract with Zytron.
In short, respondents voluntarily terminated their employment with Zytron by
refusing to renew their employment contracts with the latter, applying with
A.C. Sicat, and working as the latter’s employees, thereby abandoning their
previous employment with Zytron. Too, it is well to mention that for obvious
reasons, resignation is inconsistent with illegal dismissal. This being the case,
Zytron cannot be said to have illegally dismissed respondents, contrary to the
findings of the CA.
As regards respondents’ employment with A.C. Sicat and its termination via
non-renewal of their contracts, considering that in labor-only contracting, the
law creates an employer-employee relationship between the principal and the
labor-only contractor’s employee as if such employees are directly employed
by the principal employer, and considers the contractor as merely the agent
of the principal,7 it is proper to dispose of the issue on A.C. Sicat’s status as a
job contractor first before resolving the issue on the legality of the cessation
of respondents’ employment.
In this regard, We defer to the findings of the CA anent A.C. Sicat’s status as
a legitimate job contractor, seeing that it is consistent with the rules on job
contracting and is sufficiently supported by the evidence on record.
A person is considered engaged in legitimate job contracting or
subcontracting if the following conditions concur: chanRoblesvirtualLawlibrary
1. The contractor or subcontractor carries on a distinct and independent
business and undertakes to perform the job, work or service on its
own account and under its own responsibility according to its own
manner and method, and 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; chanrobleslaw
2. The contractor or subcontractor has substantial capital or investment;
and
3. The agreement between the principal and 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 and welfare benefits. 8
On the other hand, contracting is prohibited when the contractor or
subcontractor merely recruits, supplies or places workers to perform a job,
work or service for a principal and if any of the following elements are
present, thus: chanRoblesvirtualLawlibrary
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 over the
performance of the work of the contractual employee.9
The CA correctly found that A.C. Sicat is engaged in legitimate job
contracting. It duly noted that A.C. Sicat was able to prove its status as a
legitimate job contractor for having presented the following evidence, to
wit:
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1. Certificate of Business Registration;
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2. Certificate of Registration with the Bureau of Internal Revenue;
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3. Mayor’s Permit; chanrobleslaw
 4. Certificate of Membership with the Social Security System; chanrobleslaw
5. Certificate of Registration with the Department of Labor and
Employment; chanrobleslaw
6. Company Profile; and
7. Certifications issued by its clients. 10
Furthermore, A.C. Sicat has substantial capital, having assets totaling
P5,926,155.76 as of December 31, 2006. Too, its Agreement with Fonterra
clearly sets forth that A.C. Sicat shall be liable for the wages and salaries of
its employees or workers, including benefits, premiums, and protection due
them, as well as remittance to the proper government entities of all
withholding taxes, Social Security Service, and Medicare premiums, in
accordance with relevant laws.
The appellate court further correctly held that Fonterra’s issuance of
Merchandising Guidelines, stock monitoring and inventory forms, and promo
mechanics, for compliance and use of A.C. Sicat’s employees assigned to
them, does not establish that Fonterra exercises control over A.C. Sicat. We
agree with the CA’s conclusion that these were imposed only to ensure the
effectiveness of the promotion services to be rendered by the merchandisers
as it would be risky, if not imprudent, for any company to completely entrust
the performance of the operations it has contracted out.
These sufficiently show that A.C. Sicat carries out its merchandising and
promotions business, independent of Fonterra’s business. Thus, having
settled that A.C. Sicat is a legitimate job contractor, We now determine
whether the termination of respondents’ employment with the former is valid.
We agree with the findings of the CA that the termination of respondents’
employment with the latter was simply brought about by the expiration of
their employment contracts.
Foremost, respondents were fixed-term employees. As previously held by this
Court, fixed-term employment contracts are not limited, as they are under
the present Labor Code, to those by nature seasonal or for specific
projects with predetermined dates of completion; they also include those to
which the parties by free choice have assigned a specific date of
termination.11 The determining factor of such 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.12 chanroblesvirtuallawlibrary
In the case at bar, it is clear that respondents were employed by A.C. Sicat
as project employees. In their employment contract with the latter, it is
clearly stated that “[A.C. Sicat is] temporarily employing [respondents] as
TMR[s] effective June 6[, 2006] under the following terms and conditions:
The need for your service being only for a specific project, your temporary
employment will be for the duration only of said project of our client, namely
to promote FONTERRA BRANDS products xxx which is expected to be finished
on or before Nov. 06, 2006.”13chanroblesvirtuallawlibrary
Respondents, by accepting the conditions of the contract with A.C. Sicat,
were well aware of and even acceded to the condition that their employment
thereat will end on said pre-determined date of termination. They cannot now
argue that they were illegally dismissed by the latter when it refused to
renew their contracts after its expiration. This is so since the non-renewal of
their contracts by A.C. Sicat is a management prerogative, and failure of
respondents to prove that such was done in bad faith militates against their
contention that they were illegally dismissed. The expiration of their contract
with A.C. Sicat simply caused the natural cessation of their fixed-term
employment there at. We, thus, see no reason to disturb the ruling of the CA
in this respect.
With these, We need not belabor the other assigned errors.
IN VIEW OF THE FOREGOING, the instant Petition for Review
is GRANTED. The assailed Decision of the Court of Appeals dated September
6, 2012 and its January 11, 2013 Resolution denying reconsideration thereof,
in CA-G.R. SP No. 114227, are hereby REVERSED and SET ASIDE. The
Decision of the National Labor Relations Commission dated November 20,
2009 and its Resolution dated March 5, 2010 in NLRC Case No. RAB IV 12-
23927-06-Q are hereby REINSTATED.
SO ORDERED