Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186965               December 23, 2009
TEMIC AUTOMOTIVE PHILIPPINES, INC., Petitioner,
vs.
TEMIC AUTOMOTIVE PHILIPPINES, INC. EMPLOYEES UNION-FFW, Respondent.

DECISION
BRION, J.:

We resolve the present petition for review on certiorari[1] filed by Temic Automotive Philippines Inc. (petitioner) to challenge the decision 2 and
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 99029. 4

The Antecedents
The petitioner is a corporation engaged in the manufacture of electronic brake systems and comfort body electronics for automotive vehicles.
Respondent Temic Automotive Philippines, Inc. Employees Union-FFW (union) is the exclusive bargaining agent of the petitioner's rank-and-file
employees. On May 6, 2005, the petitioner and the union executed a collective bargaining agreement (CBA) for the period January 1, 2005 to December
31, 2009.
The petitioner is composed of several departments, one of which is the warehouse department consisting of two warehouses - the electronic braking
system and the comfort body electronics. These warehouses are further divided into four sections - receiving section, raw materials warehouse section,
indirect warehouse section and finished goods section. The union members are regular rank-and-file employees working in these sections as clerks,
material handlers, system encoders and general clerks. Their functions are interrelated and include: receiving and recording of incoming deliveries, raw
materials and spare parts; checking and booking-in deliveries, raw materials and spare parts with the use of the petitioner's system application
processing; generating bar codes and sticking these on boxes and automotive parts; and issuing or releasing spare parts and materials as may be
needed at the production area, and piling them up by means of the company's equipment (forklift or jacklift).
By practice established since 1998, the petitioner contracts out some of the work in the warehouse department, specifically those in the receiving and
finished goods sections, to three independent service providers or forwarders (forwarders), namely: Diversified Cargo Services, Inc. (Diversified),
Airfreight 2100 (Airfreight) and Kuehne & Nagel, Inc. (KNI). These forwarders also have their own employees who hold the positions of clerk, material
handler, system encoder and general clerk. The regular employees of the petitioner and those of the forwarders share the same work area and use the
same equipment, tools and computers all belonging to the petitioner.
This outsourcing arrangement gave rise to a union grievance on the issue of the scope and coverage of the collective bargaining unit, specifically to the
question of "whether or not the functions of the forwarders’ employees are functions being performed by the regular rank-and-file employees covered
by the bargaining unit."5 The union thus demanded that the forwarders' employees be absorbed into the petitioner's regular employee force and be
given positions within the bargaining unit. The petitioner, on the other hand, on the premise that the contracting arrangement with the forwarders is a
valid exercise of its management prerogative, posited that the union's position is a violation of its management prerogative to determine who to hire
and what to contract out, and that the regular rank-and-file employees and their forwarders’ employees serving as its clerks, material handlers, system
encoders and general clerks do not have the same functions as regular company employees.
The union and the petitioner failed to resolve the dispute at the grievance machinery level, thus necessitating recourse to voluntary arbitration. The
parties chose Atty. Roberto A. Padilla as their voluntary arbitrator. Their voluntary arbitration submission agreement delineated the issues to be
resolved as follows:
1. Whether or not the company validly contracted out or outsourced the services involving forwarding, packing, loading and clerical activities
related thereto; and
2. Whether or not the functions of the forwarders' employees are functions being performed by regular rank-and-file employees covered by
the bargaining unit.6
To support its position, the union submitted in evidence a copy of the complete manpower complement of the petitioner's warehouse department as
of January 3, 20077 showing that there were at the time 19 regular company employees and 26 forwarder employees. It also presented the
affidavits8 of Edgardo P. Usog, Antonio A. Muzones, Endrico B. Dumolong, Salvador R. Vargas and Harley J. Noval, regular employees of the petitioner,
who deposed that they and the forwarders’ employees assigned at the warehouse department were performing the same functions. The union also
presented the affidavits of Ramil V. Barit 9 (Barit), Jonathan G. Prevendido10 (Prevendido) and Eduardo H. Enano11 (Enano), employees of forwarder KNI,
who described their work at the warehouse department.
In its submission,12 the petitioner invoked the exercise of its management prerogative and its authority under this prerogative to contract out to
independent service providers the forwarding, packing, loading of raw materials and/or finished goods and all support and ancillary services (such as
clerical activities) for greater economy and efficiency in its operations. It argued that in Meralco v. Quisumbing13 this Court explicitly recognized that the
contracting out of work is an employer proprietary right in the exercise of its inherent management prerogative.
The forwarders, the petitioners alleged, are all highly reputable freight forwarding companies providing total logistics services such as customs
brokerage that includes the preparation and processing of import and export documentation, cargo handling, transport (air, land or sea), delivery and
trucking; and they have substantial capital and are fully equipped with the technical knowledge, facilities, equipment, materials, tools and manpower to
service the company's forwarding, packing and loading requirements. Additionally, the petitioner argued that the union is not in a position to question
its business judgment, for even their CBA expressly recognizes its prerogative to have exclusive control of the management of all functions and facilities
in the company, including the exclusive right to plan or control operations and introduce new or improved systems, procedures and methods.
The petitioner maintained that the services rendered by the forwarders’ employees are not the same as the functions undertaken by regular rank-and-
file employees covered by the bargaining unit; therefore, the union’s demand that the forwarders’ employees be assimilated as regular company
employees and absorbed by the collective bargaining unit has no basis; what the union asks constitutes an unlawful interference in the company's
prerogative to choose who to hire as employees. It pointed out that the union could not, and never did, assert that the contracting-out of work to the
service providers was in violation of the CBA or prohibited by law.
The petitioner explained that its regular employees' clerical and material handling tasks are not identical with those done by the service providers; the
clerical work rendered by the contractors are recording and documentation tasks ancillary to or supportive of the contracted services of forwarding,
packing and loading; on the other hand, the company employees assigned as general clerks prepare inventory reports relating to its shipments in
general to ensure that the recording of inventory is consistent with the company's general system; company employees assigned as material handlers
essentially assist in counter-checking and reporting activities to ensure that the contractors' services comply with company standards.
The petitioner submitted in evidence the affidavits of Antonio Gregorio 14 (Gregorio), its warehouse manager, and Ma. Maja Bawar15 (Bawar), its section
head.
The Voluntary Arbitration Decision
In his decision of May 1, 2007,16 the voluntary arbitrator defined forwarding as a universally accepted and normal business practice or activity, and
ruled that the company validly contracted out its forwarding services. The voluntary arbitrator observed that exporters, in utilizing forwarders as travel
agents of cargo, mitigate the confusion and delays associated with international trade logistics; the company need not deal with many of the details
involved in the export of goods; and given the years of experience and constant attention to detail provided by the forwarders, it may be a good
investment for the company. He found that the outsourcing of forwarding work is expressly allowed by the rules implementing the Labor Code. 17
At the same time, however, the voluntary arbitrator found that the petitioner went beyond the limits of the legally allowable contracting out because
the forwarders' employees encroached upon the functions of the petitioner's regular rank-and-file workers. He opined that the forwarders' personnel
serving as clerks, material handlers, system encoders and general clerks perform "functions [that] are being performed by regular rank-and-file
employees covered by the bargaining unit." He also noted that the forwarders' employees perform their jobs in the company warehouse together with
the petitioner's employees, use the same company tools and equipment and work under the same company supervisors – indicators that the petitioner
exercises supervision and control over all the employees in the warehouse department. For these reasons, he declared the forwarders’ employees
serving as clerks, material handlers, system encoders and general clerks to be "employees of the company who are entitled to all the rights and
privileges of regular employees of the company including security of tenure."18
The petitioner sought relief from the CA through a petition for review under Rule 43 of the Rules of Court invoking questions of facts and law. 19 It
specifically questioned the ruling that the company did not validly contract out the services performed by the forwarders’ clerks, material handlers,
system encoders and general clerks, and claimed that the voluntary arbitrator acted in excess of his authority when he ruled that they should be
considered regular employees of the company.
The CA Decision
In its decision of October 28, 2008,20 the CA fully affirmed the voluntary arbitrator’s decision and dismissed the petition for lack of merit. The discussion
essentially focused on three points. First, that decisions of voluntary arbitrators on matters of fact and law, acting within the scope of their authority,
are conclusive and constitute res adjudicata on the theory that the parties agreed that the voluntary arbitrator’s decision shall be final. Second, that the
petitioner has the right to enter into the forwarding agreements, but these agreements should be limited to forwarding services; the petitioner failed to
present clear and convincing proof of the delineation of functions and duties between company and forwarder employees engaged as clerks, material
handlers, system encoders and general clerks; thus, they should be considered regular company employees. Third, on the extent of the voluntary
arbitrator's authority, the CA acknowledged that the arbitrator can only decide questions agreed upon and submitted by the parties, but maintained
that the arbitrator also has the power to rule on consequential issues that would finally settle the dispute. On this basis, the CA justified the ruling on
the employment status of the forwarders' clerks, material handlers, system encoders and general clerks as a necessary consequence that ties up the
loose ends of the submitted issues for a final settlement of the dispute.
The CA denied the petitioner’s motion for reconsideration, giving way to the present petition.
The Petition
The petition questions as a preliminary issue the CA ruling that decisions of voluntary arbitrators are conclusive and constitute res adjudicata on the
facts and law ruled upon.
Expectedly, it cites as error the voluntary arbitrator’s and the CA’s rulings that: (a) the forwarders’ employees undertaking the functions of clerks,
material handlers, system encoders and general clerks exercise the functions of regular company employees and are subject to the company’s control;
and (b) the functions of the forwarders’ employees are beyond the limits of what the law allows for a forwarding agreement.
The petitioner reiterates that there are distinctions between the work of the forwarders’ employees and that of the regular company employees. The
receiving, unloading, recording or documenting of materials the forwarders’ employees undertake form part of the contracted forwarding services. The
similarity of these activities to those performed by the company's regular employees does not necessarily lead to the conclusion that the forwarders’
employees should be absorbed by the company as its regular employees. No proof was ever presented by the union that the company exercised
supervision and control over the forwarders' employees. The contracted services and even the work performed by the regular employees in the
warehouse department are also not usually necessary and desirable in the manufacture of automotive electronics which is the company’s main
business. It adds that as held in Philippine Global Communications, Inc. v. De Vera,[21] management can contract out even services that are usually
necessary or desirable in the employer's business.
On the issue of jurisdiction, the petitioner argues that the voluntary arbitrator neither had jurisdiction nor basis to declare the forwarders' personnel as
regular employees of the company because the matter was not among the issues submitted by the parties for arbitration; in voluntary arbitration, it is
the parties’ submission of the issues that confers jurisdiction on the voluntary arbitrator. The petitioner finally argues that the forwarders and their
employees were not parties to the voluntary arbitration case and thus cannot be bound by the voluntary arbitrator’s decision.
The Case for the Union
In its comment,22 the union takes exception to the petitioner's position that the contracting out of services involving forwarding and ancillary activities
is a valid exercise of management prerogative. It posits that the exercise of management prerogative is not an absolute right, but is subject to the
limitation provided for by law, contract, existing practice, as well as the general principles of justice and fair play. It submits that both the law and the
parties' CBA prohibit the petitioner from contracting out to forwarders the functions of regular employees, especially when the contracting out will
amount to a violation of the employees' security of tenure, of the CBA provision on the coverage of the bargaining unit, or of the law on regular
employment.
The union disputes the petitioner's claim that there is a distinction between the work being performed by the regular employees and that of the
forwarders' employees. It insists that the functions being assigned, delegated to and performed by employees of the forwarders are also those
assigned, delegated to and being performed by the regular rank-and-file employees covered by the bargaining unit.
On the jurisdictional issue, the union submits that while the submitted issue is "whether or not the functions of the forwarders' employees are functions
being performed by the regular rank-and-file employees covered by the bargaining unit," the ruling of the voluntary arbitrator was a necessary
consequence of his finding that the forwarders' employees were performing functions similar to those being performed by the regular employees of
the petitioner. It maintains that it is within the power of the voluntary arbitrator to rule on the issue since it is inherently connected to, or a
consequence of, the main issues resolved in the case.
The Court's Ruling
We find the petition meritorious.
Underlying Jurisdictional Issues
As submitted by the parties, the first issue is "whether or not the company validly contracted out or outsourced the services involving forwarding,
packing, loading and clerical activities related thereto." However, the forwarders, with whom the petitioner had written contracts for these services,
were never made parties (and could not have been parties to the voluntary arbitration except with their consent) so that the various forwarders’
agreements could not have been validly impugned through voluntary arbitration and declared invalid as against the forwarders.
The second submitted issue is "whether or not the functions of the forwarders’ employees are functions being performed by regular rank-and-file
employees covered by the bargaining unit." While this submission is couched in general terms, the issue as discussed by the parties is limited to the
forwarders’ employees undertaking services as clerks, material handlers, system encoders and general clerks, which functions are allegedly the same
functions undertaken by regular rank-and-file company employees covered by the bargaining unit. Either way, however, the issue poses jurisdictional
problems as the forwarders’ employees are not parties to the case and the union has no authority to speak for them.
From this perspective, the voluntary arbitration submission covers matters affecting third parties who are not parties to the voluntary arbitration and
over whom the voluntary arbitrator has no jurisdiction; thus, the voluntary arbitration ruling cannot bind them. 23 While they may voluntarily join the
voluntary arbitration process as parties, no such voluntary submission appears in the record and we cannot presume that one exists. Thus, the
voluntary arbitration process and ruling can only be recognized as valid between its immediate parties as a case arising from their collective bargaining
agreement. This limited scope, of course, poses no problem as the forwarders and their employees are not indispensable parties and the case is not
mooted by their absence. Our ruling will fully bind the immediate parties and shall fully apply to, and clarify the terms of, their relationship, particularly
the interpretation and enforcement of the CBA provisions pertinent to the arbitrated issues.
Validity of the Contracting Out
The voluntary arbitration decision itself established, without objection from the parties, the description of the work of forwarding as a basic premise for
its ruling. We similarly find the description acceptable and thus adopt it as our own starting point in considering the nature of the service contracted
out when the petitioner entered into its forwarding agreements with Diversified, Airfreight and KNI. To quote the voluntary arbitration decision:
As forwarders they act as travel agents for cargo. They specialize in arranging transport and completing required shipping documentation of
respondent's company's finished products. They provide custom crating and packing designed for specific needs of respondent company. These freight
forwarders are actually acting as agents for the company in moving cargo to an overseas destination. These agents are familiar with the import rules
and regulations, the methods of shipping, and the documents related to foreign trade. They recommend the packing methods that will protect the
merchandise during transit. Freight forwarders can also reserve for the company the necessary space on a vessel, aircraft, train or truck.
They also prepare the bill of lading and any special required documentation. Freight forwarders can also make arrangement with customs brokers
overseas that the goods comply with customs export documentation regulations. They have the expertise that allows them to prepare and process the
documentation and perform related activities pertaining to international shipments. As an analogy, freight forwarders have been called travel agents
for freight.24
Significantly, both the voluntary arbitrator and the CA recognized that the petitioner was within its right in entering the forwarding agreements with
the forwarders as an exercise of its management prerogative. The petitioner's declared objective for the arrangement is to achieve greater economy
and efficiency in its operations – a universally accepted business objective and standard that the union has never questioned. In Meralco v.
Quisumbing,25 we joined this universal recognition of outsourcing as a legitimate activity when we held that a company can determine in its best
judgment whether it should contract out a part of its work for as long as the employer is motivated by good faith; the contracting is not for purposes
of circumventing the law; and does not involve or be the result of malicious or arbitrary action.
While the voluntary arbitrator and the CA saw nothing irregular in the contracting out as a whole, they held otherwise for the ancillary or support
services involving clerical work, materials handling and documentation. They held these to be the same as the workplace activities undertaken by
regular company rank-and-file employees covered by the bargaining unit who work under company control; hence, they concluded that the forwarders’
employees should be considered as regular company employees.
Our own examination of the agreement shows that the forwarding arrangement complies with the requirements of Article 106 26 of the Labor Code and
its implementing rules.27 To reiterate, no evidence or argument questions the company’s basic objective of achieving "greater economy and efficiency
of operations." This, to our mind, goes a long way to negate the presence of bad faith. The forwarding arrangement has been in place since 1998 and no
evidence has been presented showing that any regular employee has been dismissed or displaced by the forwarders’ employees since then. No
evidence likewise stands before us showing that the outsourcing has resulted in a reduction of work hours or the splitting of the bargaining unit –
effects that under the implementing rules of Article 106 of the Labor Code can make a contracting arrangement illegal. The other requirements of
Article 106, on the other hand, are simply not material to the present petition. Thus, on the whole, we see no evidence or argument effectively showing
that the outsourcing of the forwarding activities violate our labor laws, regulations, and the parties’ CBA, specifically that it interfered with, restrained
or coerced employees in the exercise of their rights to self-organization as provided in Section 6, par. (f) of the implementing rules. The only exception,
of course, is what the union now submits as a voluntary arbitration issue – i.e., the failure to recognize certain forwarder employees as regular
company employees and the effect of this failure on the CBA’s scope of coverage – which issue we fully discuss below.
The job of forwarding, as we earlier described, consists not only of a single activity but of several services that complement one another and can best
be viewed as one whole process involving a package of services. These services include packing, loading, materials handling and support clerical
activities, all of which are directed at the transport of company goods, usually to foreign destinations.
It is in the appreciation of these forwarder services as one whole package of inter-related services that we discern a basic misunderstanding that results
in the error of equating the functions of the forwarders’ employees with those of regular rank-and-file employees of the company. A clerical job, for
example, may similarly involve typing and paper pushing activities and may be done on the same company products that the forwarders’ employees
and company employees may work on, but these similarities do not necessarily mean that all these employees work for the company. The regular
company employees, to be sure, work for the company under its supervision and control, but forwarder employees work for the forwarder in the
forwarder’s own operation that is itself a contracted work from the company. The company controls its employees in the means, method and results of
their work, in the same manner that the forwarder controls its own employees in the means, manner and results of their work. Complications and
confusion result because the company at the same time controls the forwarder in the results of the latter’s work, without controlling however the
means and manner of the forwarder employees’ work. This interaction is best exemplified by the adduced evidence, particularly the affidavits of
petitioner’s warehouse manager Gregorio28 and Section Head Bawar29 discussed below.
From the perspective of the union in the present case, we note that the forwarding agreements were already in place when the current CBA was
signed.30 In this sense, the union accepted the forwarding arrangement, albeit implicitly, when it signed the CBA with the company. Thereby, the union
agreed, again implicitly by its silence and acceptance, that jobs related to the contracted forwarding activities are not regular company activities and
are not to be undertaken by regular employees falling within the scope of the bargaining unit but by the forwarders’ employees. Thus, the skills
requirements and job content between forwarders’ jobs and bargaining unit jobs may be the same, and they may even work on the same company
products, but their work for different purposes and for different entities completely distinguish and separate forwarder and company employees from
one another. A clerical job, therefore, if undertaken by a forwarders’ employee in support of forwarding activities, is not a CBA-covered undertaking or
a regular company activity.
The best evidence supporting this conclusion can be found in the CBA itself, Article 1, Sections 1, 2, 3 and 4 (VII) of which provide:
Section 1. Recognition and Bargaining Unit. – Upon the union’s representation and showing of continued majority status among the employees covered
by the bargaining unit as already appropriately constituted, the company recognizes the union as the sole and exclusive collective bargaining
representative of all its regular rank-and-file employees, except those excluded from the bargaining unit as hereinafter enumerated in Sections 2 and 3
of this Article, for purposes of collective bargaining in respect to their rates of pay and other terms and condition of employment for the duration of
this Agreement.
Section 2. Exclusions. The following employment categories are expressly excluded from the bargaining unit and from the scope of this Agreement:
executives, managers, supervisors and those employees exercising any of the attributes of a managerial employee; Accounting Department, Controlling
Department, Human Resources Department and IT Department employees, department secretaries, the drivers and personnel assigned to the Office of
the General Manager and the Office of the Commercial Affairs and Treasury, probationary, temporary and casual employees, security guards, and other
categories of employees declared by law to be eligible for union membership.
Section 3. Additional Exclusions. Employees within the bargaining unit heretofore defined, who are promoted or transferred to an excluded
employment category as herein before enumerated, shall automatically be considered as resigned and/or disqualified from membership in the UNION
and automatically removed from the bargaining unit.
Section 4. Definitions – x x x
VII. A regular employee is one who having satisfactorily undergone the probationary period of employment and passed the company’s full requirement
for regular employees, such as, but not limited to physical fitness, proficiency, acceptable conduct and good moral character, received an appointment
as a regular employee duly signed by the authorized official of the COMPANY.
[Emphasis supplied.]
When these CBA provisions were put in place, the forwarding agreements had been in place so that the forwarders’ employees were never considered
as company employees who would be part of the bargaining unit. To be precise, the forwarders’ employees and their positions were not part of the
appropriate bargaining unit "as already constituted." In fact, even now, the union implicitly recognizes forwarding as a whole as a legitimate non-
company activity by simply claiming as part of their unit the forwarders’ employees undertaking allied support activities.
At this point, the union cannot simply turn around and claim through voluntary arbitration the contrary position that some forwarder employees
should be regular employees and should be part of its bargaining unit because they undertake regular company functions. What the union wants is a
function of negotiations, or perhaps an appropriate action before the National Labor Relations Commission impleading the proper parties, but not a
voluntary arbitration that does not implead the affected parties. The union must not forget, too, that before the inclusion of the forwarders’ employees
in the bargaining unit can be considered, these employees must first be proven to be regular company employees. As already mentioned, the union
does not even have the personality to make this claim for these forwarders’ employees. This is the impenetrable wall that the union cannot, for now,
pass through using the voluntary arbitration proceedings now before us on appeal.
Significantly, the evidence presented does not also prove the union’s point that forwarder employees undertake company rather than the forwarders'
activities. We say this mindful that forwarding includes a whole range of activities that may duplicate company activities in terms of the exact character
and content of the job done and even of the skills required, but cannot be legitimately labeled as company activities because they properly pertain to
forwarding that the company has contracted out.
The union’s own evidence, in fact, speaks against the point the union wishes to prove. Specifically, the affidavits of forwarder KNI employees Barit,
Prevendido, and Enano, submitted in evidence by the union, confirm that the work they were doing was predominantly related to forwarding or the
shipment or transport of the petitioner’s finished goods to overseas destinations, particularly to Germany and the United States of America
(USA).lavvphil
Barit31 deposed that on August 2, 2004 he started working at the petitioner's CBE finished goods area as an employee of forwarder Emery Transnational
Air Cargo Group; on the same date, he was absorbed by KNI and was assigned the same task of a loader; his actual work involved: making of inventories
of CBE finished products in the warehouse; double checking of the finished products he inventoried and those received by the other personnel of KNI;
securing from his superior the delivery note and print-out indicating the model and the quantity of products to be exported to Germany; and preparing
the loading form and then referring it to his co-workers from the forwarders who gather the goods to be transported to Germany based on the model
and quantity needed; with the use of the computer, printing the airway bill which serves as cargo ticket for the airline and posted on every box of
finished products before loading on the van of goods bound for Germany; preparing the gate pass for the van. He explained that other products to be
shipped to the USA, via sea transport, are picked up by the other forwarders and brought to their warehouse in Parañaque.
Prevendido,32 also a loader, stated that his actual work involved loading into the container van finished CBE products bound for Germany; when there is
a build up for the E.K. Express (Emirates Airlines), he is sent by the petitioner to the airlines to load the finished products and check if they are in good
condition; although the inspection and checking of loaded finished products should be done by a company supervisor or clerk, he is asked to do them
because he is already there in the area; he also conducts an inventory of finished goods in the finished goods area, prepares loading form schedule and
generates the airway bill and is asked by his supervisor to call up KNI for the airway bill number.
Enano,33 for his part, stated that on November 11, 1998, he was absorbed by KNI after initially working in 1996 for a janitorial service agency which had
a contract with the petitioner, he was also a loader and assigned at the finished goods section in the warehouse department; his actual work involved
preparing the gate pass for finished products of the petitioner to be released; loading the finished products on the truck and calling up KNI (Air Freight
Department) to check on the volume of the petitioner's products for export; making inventories of the remaining finished products and doing other
tasks related to the export of the petitioner's products, which he claimed are supposed to be done by the company's finished goods supervisor; and
monitoring of KNI's trucking sub-contractor who handled the transport component of KNI's arrangement with the petitioner.
The essential nature of the outsourced services is not substantially altered by the claim of the three KNI employees that they occasionally do work that
pertains to the company’s finished goods supervisor or a company employee such as the inspection of goods to be shipped and inventory of finished
goods. This was clarified by petitioner’s warehouse manager Gregorio 34 and Section Head Bawar35 in their respective affidavits. They explained that the
three KNI employees do not conduct inventory of finished goods; rather, as part of the contract, KNI personnel have to count the boxes of finished
products they load into the trucks to ensure that the quantity corresponds with the entries made in the loading form; included in the contracted service
is the preparation of transport documents like the airway bill; the airway bill is prepared in the office and a KNI employee calls for the airway bill
number, a sticker label is then printed; and that the use of the company forklift is necessary for the loading of the finished goods into the truck.
Thus, even on the evidentiary side, the union’s case must fail.
In light of these conclusions, we see no need to dwell on the issue of the voluntary arbitrator’s authority to rule on issues not expressly submitted but
which arise as a consequence of the voluntary arbitrator’s findings on the submitted issues.
WHEREFORE, premises considered, we hereby NULLIFY and SET ASIDE the assailed Court of Appeals Decision in CA-G.R. SP No. 99029 dated October
28, 2008, together with the Voluntary Arbitrator’s Decision of May 1, 2007 declaring the employees of forwarders Diversified Cargo Services, Inc.,
Airfreight 2100 and Kuehne & Nagel, Inc., presently designated and functioning as clerks, material handlers, system or data encoders and general
clerks, to be regular company employees. No costs.
SO ORDERED.
ARTURO D. BRION
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 148132             January 28, 2008
SMART COMMUNICATIONS, INC., petitioner,
vs.
REGINA M. ASTORGA, respondent.
x---------------------------------------------------x
G.R. No. 151079             January 28, 2008
SMART COMMUNICATIONS, INC., petitioner,
vs.
REGINA M. ASTORGA, respondent.
x---------------------------------------------------x
G.R. No. 151372             January 28, 2008
REGINA M. ASTORGA, petitioner,
vs.
SMART COMMUNICATIONS, INC. and ANN MARGARET V. SANTIAGO, respondents.
DECISION
NACHURA, J.:
For the resolution of the Court are three consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. G.R. No. 148132 assails the
February 28, 2000 Decision1 and the May 7, 2001 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP. No. 53831. G.R. Nos. 151079 and 151372
question the June 11, 2001 Decision3 and the December 18, 2001 Resolution 4 in CA-G.R. SP. No. 57065.
Regina M. Astorga (Astorga) was employed by respondent Smart Communications, Incorporated (SMART) on May 8, 1997 as District Sales Manager of
the Corporate Sales Marketing Group/ Fixed Services Division (CSMG/FSD). She was receiving a monthly salary of P33,650.00. As District Sales Manager,
Astorga enjoyed additional benefits, namely, annual performance incentive equivalent to 30% of her annual gross salary, a group life and
hospitalization insurance coverage, and a car plan in the amount of P455,000.00.5
In February 1998, SMART launched an organizational realignment to achieve more efficient operations. This was made known to the employees on
February 27, 1998.6 Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into a joint venture
agreement with NTT of Japan, and formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work,
SMART abolished the CSMG/FSD, Astorga’s division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be recommended by SMART. SMART then conducted a
performance evaluation of CSMG personnel and those who garnered the highest ratings were favorably recommended to SNMI. Astorga landed last in
the performance evaluation, thus, she was not recommended by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position carried lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998, SMART issued a memorandum advising Astorga of
the termination of her employment on ground of redundancy, effective April 3, 1998. Astorga received it on March 16, 1998. 7
The termination of her employment prompted Astorga to file a Complaint 8 for illegal dismissal, non-payment of salaries and other benefits with prayer
for moral and exemplary damages against SMART and Ann Margaret V. Santiago (Santiago). She claimed that abolishing CSMG and, consequently,
terminating her employment was illegal for it violated her right to security of tenure. She also posited that it was illegal for an employer, like SMART, to
contract out services which will displace the employees, especially if the contractor is an in-house agency. 9
SMART responded that there was valid termination. It argued that Astorga was dismissed by reason of redundancy, which is an authorized cause for
termination of employment, and the dismissal was effected in accordance with the requirements of the Labor Code. The redundancy of Astorga’s
position was the result of the abolition of CSMG and the creation of a specialized and more technically equipped SNMI, which is a valid and legitimate
exercise of management prerogative. 10
In the meantime, on May 18, 1998, SMART sent a letter to Astorga demanding that she pay the current market value of the Honda Civic Sedan which
was given to her under the company’s car plan program, or to surrender the same to the company for proper disposition. 11 Astorga, however, failed
and refused to do either, thus prompting SMART to file a suit for replevin with the Regional Trial Court of Makati (RTC) on August 10, 1998. The case
was docketed as Civil Case No. 98-1936 and was raffled to Branch 57. 12
Astorga moved to dismiss the complaint on grounds of (i) lack of jurisdiction; (ii) failure to state a cause of action; (iii) litis pendentia; and (iv) forum-
shopping. Astorga posited that the regular courts have no jurisdiction over the complaint because the subject thereof pertains to a benefit arising from
an employment contract; hence, jurisdiction over the same is vested in the labor tribunal and not in regular courts. 13
Pending resolution of Astorga’s motion to dismiss the replevin case, the Labor Arbiter rendered a Decision 14 dated August 20, 1998, declaring Astorga’s
dismissal from employment illegal. While recognizing SMART’s right to abolish any of its departments, the Labor Arbiter held that such right should be
exercised in good faith and for causes beyond its control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes beyond the
control of SMART, but a ploy to terminate Astorga’s employment. The Arbiter also ruled that contracting out the functions performed by Astorga to an
in-house agency like SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
WHEREFORE, judgment is hereby rendered declaring the dismissal of [Astorga] to be illegal and unjust. [SMART and Santiago] are hereby
ordered to:
1. Reinstate [Astorga] to [her] former position or to a substantially equivalent position, without loss of seniority rights and other privileges,
with full backwages, inclusive of allowances and other benefits from the time of [her] dismissal to the date of reinstatement, which computed
as of this date, are as follows:
(a) Astorga
BACKWAGES; (P33,650.00 x 4 months) = P134,600.00
UNPAID SALARIES (February 15, 1998-April 3, 1998
February 15-28, 1998 = P 16,823.00
March 1-31, [1998] = P 33,650.00
April 1-3, 1998 = P 3,882.69
CAR MAINTENANCE ALLOWANCE = P 8,000.00
(P2,000.00 x 4)
FUEL ALLOWANCE = P 14,457.83
(300 liters/mo. x 4 mos. at P12.04/liter)
 TOTAL = P211,415.52
xxxx
3. Jointly and severally pay moral damages in the amount of P500,000.00 x x x and exemplary damages in the amount of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as attorney’s fees.
SO ORDERED.15
Subsequently, on March 29, 1999, the RTC issued an Order 16 denying Astorga’s motion to dismiss the replevin case. In so ruling, the RTC ratiocinated
that:
Assessing the [submission] of the parties, the Court finds no merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of possession over a company car assigned to the defendant under a car plan privilege
arrangement. The car is registered in the name of the plaintiff. Recovery thereof via replevin suit is allowed by Rule 60 of the 1997 Rules of
Civil Procedure, which is undoubtedly within the jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the company car and despite demand, defendant refused to return said car. This is clearly
sufficient statement of plaintiff’s cause of action.
Neither is there forum shopping. The element of litis penden[t]ia does not appear to exist because the judgment in the labor dispute will not
constitute res judicata to bar the filing of this case.
WHEREFORE, the Motion to Dismiss is hereby denied for lack of merit.
SO ORDERED.17
Astorga filed a motion for reconsideration, but the RTC denied it on June 18, 1999. 18
Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision, 19 reversed the RTC ruling. Granting the
petition and, consequently, dismissing the replevin case, the CA held that the case is intertwined with Astorga’s complaint for illegal dismissal; thus, it is
the labor tribunal that has rightful jurisdiction over the complaint. SMART’s motion for reconsideration having been denied, 20 it elevated the case to this
Court, now docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the National Labor Relations Commission
(NLRC). In its September 27, 1999 Decision, 21 the NLRC sustained Astorga’s dismissal. Reversing the Labor Arbiter, the NLRC declared the abolition of
CSMG and the creation of SNMI to do the sales and marketing services for SMART a valid organizational action. It overruled the Labor Arbiter’s ruling
that SNMI is an in-house agency, holding that it lacked legal basis. It also declared that contracting, subcontracting and streamlining of operations for
the purpose of increasing efficiency are allowed under the law. The NLRC further found erroneous the Labor Arbiter’s disquisition that redundancy to
be valid must be impelled by economic reasons, and upheld the redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is hereby reversed and set aside. [Astorga] is further ordered to immediately return the
company vehicle assigned to her. [Smart and Santiago] are hereby ordered to pay the final wages of [Astorga] after [she] had submitted the
required supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied it on December 21, 1999. 23
Astorga then went to the CA via certiorari. On June 11, 2001, the CA rendered a Decision 24 affirming with modification the resolutions of the NLRC. In
gist, the CA agreed with the NLRC that the reorganization undertaken by SMART resulting in the abolition of CSMG was a legitimate exercise of
management prerogative. It rejected Astorga’s posturing that her non-absorption into SNMI was tainted with bad faith. However, the CA found that
SMART failed to comply with the mandatory one-month notice prior to the intended termination. Accordingly, the CA imposed a penalty equivalent to
Astorga’s one-month salary for this non-compliance. The CA also set aside the NLRC’s order for the return of the company vehicle holding that this issue
is not essentially a labor concern, but is civil in nature, and thus, within the competence of the regular court to decide. It added that the matter had not
been fully ventilated before the NLRC, but in the regular court.
Astorga filed a motion for reconsideration, while SMART sought partial reconsideration, of the Decision. On December 18, 2001, the CA resolved the
motions, viz.:
WHEREFORE, [Astorga’s] motion for reconsideration is hereby PARTIALLY GRANTED. [Smart] is hereby ordered to pay [Astorga] her
backwages from 15 February 1998 to 06 November 1998. [Smart’s] motion for reconsideration is outrightly DENIED.
SO ORDERED.25
Astorga and SMART came to us with their respective petitions for review assailing the CA ruling, docketed as G.R Nos. 151079 and 151372. On February
27, 2002, this Court ordered the consolidation of these petitions with G.R. No. 148132. 26
In her Memorandum, Astorga argues:
I
THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF ASTORGA’S DISMISSAL DESPITE THE FACT THAT HER DISMISSAL WAS
EFFECTED IN CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT TO SECURITY OF TENURE, CONSIDERING THAT THERE WAS NO GENUINE
GROUND FOR HER DISMISSAL.
II
SMART’S REFUSAL TO REINSTATE ASTORGA DURING THE PENDENCY OF THE APPEAL AS REQUIRED BY ARTICLE 223 OF THE LABOR CODE,
ENTITLES ASTORGA TO HER SALARIES DURING THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN HOLDING THAT THE REGIONAL TRIAL COURT HAS NO JURISDICTION OVER THE COMPLAINT FOR
RECOVERY OF A CAR WHICH ASTORGA ACQUIRED AS PART OF HER EMPLOYEE (sic) BENEFIT. 27
On the other hand, Smart in its Memoranda raises the following issues:
I
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW
OR WITH APPLICABLE DECISION OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT SMART DID NOT
COMPLY WITH THE NOTICE REQUIREMENTS PRIOR TO TERMINATING ASTORGA ON THE GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO ASTORGA AND THE DEPARTMENT OF LABOR AND EMPLOYMENT ARE SUBSTANTIAL
COMPLIANCE WITH THE NOTICE REQUIREMENTS BEFORE TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO VS. NATIONAL LABOR RELATIONS COMMISSION FINDS APPLICATION IN THE CASE AT BAR
CONSIDERING THAT IN THE SERRANO CASE THERE WAS ABSOLUTELY NO NOTICE AT ALL. 28
IV
WHETHER THE HONORABLE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE IN A WAY PROBABLY NOT IN ACCORD WITH LAW
OR WITH APPLICABLE DECISION[S] OF THE HONORABLE SUPREME COURT AND HAS SO FAR DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION WHEN IT RULED THAT THE REGIONAL
TRIAL COURT DOES NOT HAVE JURISDICTION OVER THE COMPLAINT FOR REPLEVIN FILED BY SMART TO RECOVER ITS OWN COMPANY
VEHICLE FROM A FORMER EMPLOYEE WHO WAS LEGALLY DISMISSED.
V
 WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT THE SUBJECT OF THE REPLEVIN CASE IS NOT THE
ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT SIMPLY THE RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS HAS FAILED TO APPRECIATE THAT ASTORGA CAN NO LONGER BE CONSIDERED AS AN
EMPLOYEE OF SMART UNDER THE LABOR CODE.29
The Court shall first deal with the propriety of dismissing the replevin case filed with the RTC of Makati City allegedly for lack of jurisdiction, which is the
issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those goods or chattels from one who has
wrongfully distrained or taken, or who wrongfully detains such goods or chattels. It is designed to permit one having right to possession to recover
property in specie from one who has wrongfully taken or detained the property. 30 The term may refer either to the action itself, for the recovery of
personalty, or to the provisional remedy traditionally associated with it, by which possession of the property may be obtained by the plaintiff and
retained during the pendency of the action. 31
That the action commenced by SMART against Astorga in the RTC of Makati City was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case for lack of jurisdiction, the CA made the following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga] by [Smart] as part of the employment package. We doubt that [SMART] would
extend [to Astorga] the same car plan privilege were it not for her employment as district sales manager of the company. Furthermore, there
is no civil contract for a loan between [Astorga] and [Smart]. Consequently, We find that the car plan privilege is a benefit arising out of
employer-employee relationship. Thus, the claim for such falls squarely within the original and exclusive jurisdiction of the labor arbiters and
the NLRC.32
We do not agree. Contrary to the CA’s ratiocination, the RTC rightfully assumed jurisdiction over the suit and acted well within its discretion in denying
Astorga’s motion to dismiss. SMART’s demand for payment of the market value of the car or, in the alternative, the surrender of the car, is not a labor,
but a civil, dispute. It involves the relationship of debtor and creditor rather than employee-employer relations. 33 As such, the dispute falls within the
jurisdiction of the regular courts.
In Basaya, Jr. v. Militante,34 this Court, in upholding the jurisdiction of the RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the right of possession in the plaintiff. The primary relief sought therein is the return of the
property in specie wrongfully detained by another person. It is an ordinary statutory proceeding to adjudicate rights to the title or possession
of personal property. The question of whether or not a party has the right of possession over the property involved and if so, whether or not
the adverse party has wrongfully taken and detained said property as to require its return to plaintiff, is outside the pale of competence of a
labor tribunal and beyond the field of specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the issue in the Replevin Case. The respective issues raised in each forum can be resolved
independently on the other. In fact in 18 November 1986, the NLRC in the case before it had issued an Injunctive Writ enjoining the
petitioners from blocking the free ingress and egress to the Vessel and ordering the petitioners to disembark and vacate. That aspect of the
controversy is properly settled under the Labor Code. So also with petitioners’ right to picket. But the determination of the question of who
has the better right to take possession of the Vessel and whether petitioners can deprive the Charterer, as the legal possessor of the Vessel,
of that right to possess in addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split jurisdiction but defining avenues of jurisdiction as laid down by pertinent laws.
The CA, therefore, committed reversible error when it overturned the RTC ruling and ordered the dismissal of the replevin case for lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee. The nature of redundancy as an
authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National Labor Relations Commission,35 viz:
x x x redundancy in an employer’s personnel force necessarily or even ordinarily refers to duplication of work. That no other person was
holding the same position that private respondent held prior to termination of his services does not show that his position had not become
redundant. Indeed, in any well organized business enterprise, it would be surprising to find duplication of work and two (2) or more people
doing the work of one person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.
The characterization of an employee’s services as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of business
judgment on the part of the employer. The wisdom and soundness of such characterization or decision is not subject to discretionary review provided,
of course, that a violation of law or arbitrary or malicious action is not shown. 36
Astorga claims that the termination of her employment was illegal and tainted with bad faith. She asserts that the reorganization was done in order to
get rid of her. But except for her barefaced allegation, no convincing evidence was offered to prove it. This Court finds it extremely difficult to believe
that SMART would enter into a joint venture agreement with NTT, form SNMI and abolish CSMG/FSD simply for the sole purpose of easing out a
particular employee, such as Astorga. Moreover, Astorga never denied that SMART offered her a supervisory position in the Customer Care
Department, but she refused the offer because the position carried a lower salary rank and rate. If indeed SMART simply wanted to get rid of her, it
would not have offered her a position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is not true because there was no compelling economic reason for redundancy. But
contrary to her claim, an employer is not precluded from adopting a new policy conducive to a more economical and effective management even if it is
not experiencing economic reverses. Neither does the law require that the employer should suffer financial losses before he can terminate the services
of the employee on the ground of redundancy. 37
We agree with the CA that the organizational realignment introduced by SMART, which culminated in the abolition of CSMG/FSD and termination of
Astorga’s employment was an honest effort to make SMART’s sales and marketing departments more efficient and competitive. As the CA had taken
pains to elucidate:
x x x a careful and assiduous review of the records will yield no other conclusion than that the reorganization undertaken by SMART is for no
purpose other than its declared objective – as a labor and cost savings device. Indeed, this Court finds no fault in SMART’s decision to
outsource the corporate sales market to SNMI in order to attain greater productivity. [Astorga] belonged to the Sales Marketing Group under
the Fixed Services Division (CSMG/FSD), a distinct sales force of SMART in charge of selling SMART’s telecommunications services to the
corporate market. SMART, to ensure it can respond quickly, efficiently and flexibly to its customer’s requirement, abolished CSMG/FSD and
shortly thereafter assigned its functions to newly-created SNMI Multimedia Incorporated, a joint venture company of SMART and NTT of
Japan, for the reason that CSMG/FSD does not have the necessary technical expertise required for the value added services. By transferring
the duties of CSMG/FSD to SNMI, SMART has created a more competent and specialized organization to perform the work required for
corporate accounts. It is also relieved SMART of all administrative costs – management, time and money-needed in maintaining the
CSMG/FSD. The determination to outsource the duties of the CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on
relevant criteria and is therefore a legitimate exercise of management prerogative.
Indeed, out of our concern for those lesser circumstanced in life, this Court has inclined towards the worker and upheld his cause in most of his
conflicts with his employer. This favored treatment is consonant with the social justice policy of the Constitution. But while tilting the scales of justice in
favor of workers, the fundamental law also guarantees the right of the employer to reasonable returns for his investment. 38 In this light, we must
acknowledge the prerogative of the employer to adopt such measures as will promote greater efficiency, reduce overhead costs and enhance prospects
of economic gains, albeit always within the framework of existing laws. Accordingly, we sustain the reorganization and redundancy program
undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with the mandated one (1) month notice prior to termination. The record is clear that
Astorga received the notice of termination only on March 16, 1998 39 or less than a month prior to its effectivity on April 3, 1998. Likewise, the
Department of Labor and Employment was notified of the redundancy program only on March 6, 1998. 40
Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to
the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on
the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof x x x.
SMART’s assertion that Astorga cannot complain of lack of notice because the organizational realignment was made known to all the employees as
early as February 1998 fails to persuade. Astorga’s actual knowledge of the reorganization cannot replace the formal and written notice required by the
law. In the written notice, the employees are informed of the specific date of the termination, at least a month prior to the effectivity of such
termination, to give them sufficient time to find other suitable employment or to make whatever arrangements are needed to cushion the impact of
termination. In this case, notwithstanding Astorga’s knowledge of the reorganization, she remained uncertain about the status of her employment until
SMART gave her formal notice of termination. But such notice was received by Astorga barely two (2) weeks before the effective date of termination, a
period very much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the termination of Astorga’s employment illegal. The validity of termination can exist
independently of the procedural infirmity of the dismissal. 41 In DAP Corporation v. CA,42 we found the dismissal of the employees therein valid and for
authorized cause even if the employer failed to comply with the notice requirement under Article 283 of the Labor Code. This Court upheld the
dismissal, but held the employer liable for non-compliance with the procedural requirements.
The CA, therefore, committed no reversible error in sustaining Astorga’s dismissal and at the same time, awarding indemnity for violation of Astorga's
statutory rights.
However, we find the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on SMART for non-compliance with the
one-month mandatory notice requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot,43 viz.:
[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be
imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee, and (2) if
the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction
should be stiffer because the dismissal process was initiated by the employer’s exercise of his management prerogative.
We deem it proper to increase the amount of the penalty on SMART to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise, entitled to separation pay equivalent to at least one (1) month salary or to at least one
(1) month’s pay for every year of service, whichever is higher. The records show that Astorga’s length of service is less than a year. She is, therefore,
also entitled to separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from February 15, 1998. This assertion was never rebutted by SMART in the proceedings a
quo. No proof of payment was presented by SMART to disprove the allegation. It is settled that in labor cases, the burden of proving payment of
monetary claims rests on the employer.44 SMART failed to discharge the onus probandi. Accordingly, it must be held liable for Astorga’s salary from
February 15, 1998 until the effective date of her termination, on April 3, 1998.
However, the award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief given to an illegally dismissed
employee. Thus, before backwages may be granted, there must be a finding of unjust or illegal dismissal from work. 45 The Labor Arbiter ruled that
Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiter’s ruling and categorically declared Astorga’s dismissal valid. This
ruling was affirmed by the CA in its assailed Decision. Since Astorga’s dismissal is for an authorized cause, she is not entitled to backwages. The CA’s
award of backwages is totally inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No. 148132 is GRANTED. The February 28, 2000 Decision and the May 7, 2001 Resolution of the
Court of Appeals in CA-G.R. SP. No. 53831 are SET ASIDE. The Regional Trial Court of Makati City, Branch 57 is DIRECTED to proceed with the trial of
Civil Case No. 98-1936 and render its Decision with reasonable dispatch.
On the other hand, the petitions of SMART and Astorga docketed as G.R. Nos. 151079 and 151372 are DENIED. The June 11, 2001 Decision and the
December 18, 2001 Resolution in CA-G.R. SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga is declared validly dismissed. However, SMART is
ordered to pay Astorga P50,000.00 as indemnity for its non-compliance with procedural due process, her separation pay equivalent to one (1) month
pay, and her salary from February 15, 1998 until the effective date of her termination on April 3, 1998. The award of backwages is DELETED for lack of
basis.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179546               February 13, 2009
COCA-COLA BOTTLERS PHILS., INC., Petitioner,
vs.
ALAN M. AGITO, REGOLO S. OCA III, ERNESTO G. ALARIAO, JR., ALFONSO PAA, JR., DEMPSTER P. ONG, URRIQUIA T. ARVIN, GIL H. FRANCISCO, and
EDWIN M. GOLEZ, Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision 1 dated 19 February 2007, promulgated by the
Court of Appeals in CA-G.R. SP No. 85320, reversing the Resolution 2 rendered on 30 October 2003 by the National Labor Relations Commission (NLRC)
in NLRC NCR CA No. 036494-03. The Court of Appeals, in its assailed Decision, declared that respondents Alan M. Agito, Regolo S. Oca III, Ernesto G.
Alariao, Jr., Alfonso Paa, Jr., Dempster P. Ong, Urriquia T. Arvin, Gil H. Francisco, and Edwin M. Golez were regular employees of petitioner Coca-Cola
Bottlers Phils., Inc; and that Interserve Management & Manpower Resources, Inc. (Interserve) was a labor-only contractor, whose presence was
intended merely to preclude respondents from acquiring tenurial security.
Petitioner is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) and engaged in manufacturing, bottling and
distributing soft drink beverages and other allied products.
On 15 April 2002, respondents filed before the NLRC two complaints against petitioner, Interserve, Peerless Integrated Services, Inc., Better Builders,
Inc., and Excellent Partners, Inc. for reinstatement with backwages, regularization, nonpayment of 13th month pay, and damages. The two cases,
docketed as NLRC NCR Case No. 04-02345-2002 and NLRC NCR Case No. 05-03137-02, were consolidated.
Respondents alleged in their Position Paper that they were salesmen assigned at the Lagro Sales Office of petitioner. They had been in the employ of
petitioner for years, but were not regularized. Their employment was terminated on 8 April 2002 without just cause and due process. However, they
failed to state the reason/s for filing a complaint against Interserve; Peerless Integrated Services, Inc.; Better Builders, Inc.; and Excellent Partners, Inc. 3
Petitioner filed its Position Paper (with Motion to Dismiss), 4 where it averred that respondents were employees of Interserve who were tasked to
perform contracted services in accordance with the provisions of the Contract of Services 5 executed between petitioner and Interserve on 23 March
2002. Said Contract between petitioner and Interserve, covering the period of 1 April 2002 to 30 September 2002, constituted legitimate job
contracting, given that the latter was a bona fide independent contractor with substantial capital or investment in the form of tools, equipment, and
machinery necessary in the conduct of its business.
To prove the status of Interserve as an independent contractor, petitioner presented the following pieces of evidence: (1) the Articles of Incorporation
of Interserve;6 (2) the Certificate of Registration of Interserve with the Bureau of Internal Revenue; 7 (3) the Income Tax Return, with Audited Financial
Statements, of Interserve for 2001;8 and (4) the Certificate of Registration of Interserve as an independent job contractor, issued by the Department of
Labor and Employment (DOLE).9
As a result, petitioner asserted that respondents were employees of Interserve, since it was the latter which hired them, paid their wages, and
supervised their work, as proven by: (1) respondents’ Personal Data Files in the records of Interserve; 10 (2) respondents’ Contract of Temporary
Employment with Interserve;11 and (3) the payroll records of Interserve.12
Petitioner, thus, sought the dismissal of respondents’ complaint against it on the ground that the Labor Arbiter did not acquire jurisdiction over the
same in the absence of an employer-employee relationship between petitioner and the respondents. 13
In a Decision dated 28 May 2003, the Labor Arbiter found that respondents were employees of Interserve and not of petitioner. She reasoned that the
standard put forth in Article 280 of the Labor Code for determining regular employment (i.e., that the employee is performing activities that are
necessary and desirable in the usual business of the employer) was not determinative of the issue of whether an employer-employee relationship
existed between petitioner and respondents. While respondents performed activities that were necessary and desirable in the usual business or trade
of petitioner, the Labor Arbiter underscored that respondents’ functions were not indispensable to the principal business of petitioner, which was
manufacturing and bottling soft drink beverages and similar products.
The Labor Arbiter placed considerable weight on the fact that Interserve was registered with the DOLE as an independent job contractor, with total
assets amounting to ₱1,439,785.00 as of 31 December 2001. It was Interserve that kept and maintained respondents’ employee records, including their
Personal Data Sheets; Contracts of Employment; and remittances to the Social Securities System (SSS), Medicare and Pag-ibig Fund, thus, further
supporting the Labor Arbiter’s finding that respondents were employees of Interserve. She ruled that the circulars, rules and regulations which
petitioner issued from time to time to respondents were not indicative of control as to make the latter its employees.
Nevertheless, the Labor Arbiter directed Interserve to pay respondents their pro-rated 13th month benefits for the period of January 2002 until April
2002.14
In the end, the Labor Arbiter decreed:
WHEREFORE, judgment is hereby rendered finding that [herein respondents] are employees of [herein petitioner] INTERSERVE MANAGEMENT &
MANPOWER RESOURCES, INC. Concomitantly, respondent Interserve is further ordered to pay [respondents] their pro-rated 13th month pay.
The complaints against COCA-COLA BOTTLERS PHILS., INC. is DISMISMMED for lack of merit.
In like manner the complaints against PEERLESS INTEGRATED SERVICES, INC., BETTER BUILDING INC. and EXCELLENT PARTNERS COOPERATIVE are
DISMISSED for failure of complainants to pursue against them.
Other claims are dismissed for lack of merit.
The computation of the Computation and Examination Unit, this Commission if (sic) made part of this Decision. 15
Unsatisfied with the foregoing Decision of the Labor Arbiter, respondents filed an appeal with the NLRC, docketed as NLRC NCR CA No. 036494-03.
In their Memorandum of Appeal,16 respondents maintained that contrary to the finding of the Labor Arbiter, their work was indispensable to the
principal business of petitioner. Respondents supported their claim with copies of the Delivery Agreement 17 between petitioner and TRMD
Incorporated, stating that petitioner was "engaged in the manufacture, distribution and sale of soft drinks and other related products with various
plants and sales offices and warehouses located all over the Philippines." Moreover, petitioner supplied the tools and equipment used by respondents
in their jobs such as forklifts, pallet, etc. Respondents were also required to work in the warehouses, sales offices, and plants of petitioner. Respondents
pointed out that, in contrast, Interserve did not own trucks, pallets cartillas, or any other equipment necessary in the sale of Coca-Cola products.
Respondents further averred in their Memorandum of Appeal that petitioner exercised control over workers supplied by various contractors.
Respondents cited as an example the case of Raul Arenajo (Arenajo), who, just like them, worked for petitioner, but was made to appear as an
employee of the contractor Peerless Integrated Services, Inc. As proof of control by petitioner, respondents submitted copies of: (1) a
Memorandum18 dated 11 August 1998 issued by Vicente Dy (Dy), a supervisor of petitioner, addressed to Arenajo, suspending the latter from work until
he explained his disrespectful acts toward the supervisor who caught him sleeping during work hours; (2) a Memorandum 19 dated 12 August 1998 again
issued by Dy to Arenajo, informing the latter that the company had taken a more lenient and tolerant position regarding his offense despite having
found cause for his dismissal; (3) Memorandum 20 issued by Dy to the personnel of Peerless Integrated Services, Inc., requiring the latter to present their
timely request for leave or medical certificates for their absences; (4) Personnel Workers Schedules, 21 prepared by RB Chua, another supervisor of
petitioner; (5) Daily Sales Monitoring Report prepared by petitioner; 22 and (6) the Conventional Route System Proposed Set-up of petitioner. 23
The NLRC, in a Resolution dated 30 October 2003, affirmed the Labor Arbiter’s Decision dated 28 May 2003 and pronounced that no employer-
employee relationship existed between petitioner and respondents. It reiterated the findings of the Labor Arbiter that Interserve was an independent
contractor as evidenced by its substantial assets and registration with the DOLE. In addition, it was Interserve which hired and paid respondents’ wages,
as well as paid and remitted their SSS, Medicare, and Pag-ibig contributions. Respondents likewise failed to convince the NLRC that the instructions
issued and trainings conducted by petitioner proved that petitioner exercised control over respondents as their employer. 24 The dispositive part of the
NLRC Resolution states:25
WHEREFORE, the instant appeal is hereby DISMISSED for lack of merit. However, respondent Interserve Management & Manpower Resources, Inc., is
hereby ordered to pay the [herein respondents] their pro-rated 13th month pay.
Aggrieved once more, respondents sought recourse with the Court of Appeals by filing a Petition for Certiorari under Rule 65, docketed as CA-G.R. SP
No. 85320.
The Court of Appeals promulgated its Decision on 9 February 2007, reversing the NLRC Resolution dated 30 October 2003. The appellate court ruled
that Interserve was a labor-only contractor, with insufficient capital and investments for the services which it was contracted to perform. With only
₱510,000.00 invested in its service vehicles and ₱200,000.00 in its machineries and equipment, Interserve would be hard-pressed to meet the demands
of daily soft drink deliveries of petitioner in the Lagro area. The Court Appeals concluded that the respondents used the equipment, tools, and facilities
of petitioner in the day-to-day sales operations.
Additionally, the Court of Appeals determined that petitioner had effective control over the means and method of respondents’ work as evidenced by
the Daily Sales Monitoring Report, the Conventional Route System Proposed Set-up, and the memoranda issued by the supervisor of petitioner
addressed to workers, who, like respondents, were supposedly supplied by contractors. The appellate court deemed that the respondents, who were
tasked to deliver, distribute, and sell Coca-Cola products, carried out functions directly related and necessary to the main business of petitioner. The
appellate court finally noted that certain provisions of the Contract of Service between petitioner and Interserve suggested that the latter’s undertaking
did not involve a specific job, but rather the supply of manpower.
The decretal portion of the Decision of the Court of Appeals reads: 26
WHEREFORE, the petition is GRANTED. The assailed Resolutions of public respondent NLRC are REVERSED and SET ASIDE. The case is remanded to the
NLRC for further proceedings.
Petitioner filed a Motion for Reconsideration, which the Court of Appeals denied in a Resolution, dated 31 August 2007. 27
Hence, the present Petition, in which the following issues are raised 28:
I
WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH EVIDENCE ON RECORD, APPLICABLE LAWS AND ESTABLISHED
JURISPRUDENCE WHEN IT RULED THAT INTERSERVE IS A LABOR-ONLY CONTRACTOR;
II
WHETHER OR NOT THE COURT OF APPEALS ACTED IN ACCORDANCE WITH APPLICABLE LAWS AND ESTABLISHED JURISPRUDENCE WHEN IT CONCLUDED
THAT RESPONDENTS PERFORMED WORK NECESSARY AND DESIRABLE TO THE BUSINESS OF [PETITIONER];
III
WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT DECLARED THAT RESPONDENTS WERE EMPLOYEES OF
[PETITIONER], EVEN ABSENT THE FOUR ELEMENTS INDICATIVE OF AN EMPLOYMENT RELATIONSHIP; AND
IV
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT CONCLUDED THAT INTERSERVE WAS ENGAGED BY [PETITIONER] TO SUPPLY
MANPOWER ONLY.
The Court ascertains that the fundamental issue in this case is whether Interserve is a legitimate job contractor. Only by resolving such issue will the
Court be able to determine whether an employer-employee relationship exists between petitioner and the respondents. To settle the same issue,
however, the Court must necessarily review the factual findings of the Court of Appeals and look into the evidence presented by the parties on record.
As a general rule, factual findings of the Court of Appeals are binding upon the Supreme Court. One exception to this rule is when the factual findings of
the former are contrary to those of the trial court, or the lower administrative body, as the case may be. This Court is obliged to resolve an issue of fact
herein due to the incongruent findings of the Labor Arbiter and the NLRC and those of the Court of Appeals. 29
The relations which may arise in a situation, where there is an employer, a contractor, and employees of the contractor, are identified and
distinguished under Article 106 of the Labor Code:
Article 106. Contractor or subcontractor. - Whenever an employer enters into a contract with another person for the performance of the former’s
work, the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of workers established
under this Code. In so prohibiting or restriction, 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 employee 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.
The afore-quoted provision recognizes two possible relations among the parties: (1) the permitted legitimate job contract, or (2) the prohibited labor-
only contracting.
A legitimate job contract, wherein an employer enters into a contract with a job contractor for the performance of the former’s work, is permitted by
law. Thus, the employer-employee relationship between the job contractor and his employees is maintained. In legitimate job contracting, the law
creates an employer-employee relationship between the employer and the contractor’s employees only for a limited purpose, i.e., to ensure that the
employees are paid their wages. The employer becomes jointly and severally liable with the job contractor only for the payment of the employees’
wages whenever the contractor fails to pay the same. Other than that, the employer is not responsible for any claim made by the contractor’s
employees.30
On the other hand, labor-only contracting is an arrangement wherein the contractor merely acts as an agent in recruiting and supplying the principal
employer with workers for the purpose of circumventing labor law provisions setting down the rights of employees. It is not condoned by law. A finding
by the appropriate authorities that a contractor is a "labor-only" contractor establishes an employer-employee relationship between the principal
employer and the contractor’s employees and the former becomes solidarily liable for all the rightful claims of the employees. 31
Section 5 of the Rules Implementing Articles 106-109 of the Labor Code, as amended, provides the guidelines in determining whether labor-only
contracting exists:
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting shall
refer to an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to perform a job, work or service for a
principal, and any of the following elements are [is] present:
i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work, or service to be performed
and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to
the main business of the principal; or
ii) The contractor does not exercise the right to control the performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248(C) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements,
machineries and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work, or
service contracted out.
The "right to control" shall refer to the right reversed to the person for whom the services of the contractual workers are performed, to determine not
only the end to be achieved, but also the manner and means to be used in reaching that end. (Emphasis supplied.)
When there is labor-only contracting, Section 7 of the same implementing rules, describes the consequences thereof:
Section 7. Existence of an employer-employee relationship.—The contractor or subcontractor shall be considered the employer of the contractual
employee for purposes of enforcing the provisions of the Labor Code and other social legislation. The principal, however, shall be solidarily liable with
the contractor in the event of any violation of any provision of the Labor Code, including the failure to pay wages.
The principal shall be deemed the employer of the contractual employee in any of the following case, as declared by a competent authority:
a. where there is labor-only contracting; or
b. where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof.
According to the foregoing provision, labor-only contracting would give rise to: (1) the creation of an employer-employee relationship between the
principal and the employees of the contractor or sub-contractor; and (2) the solidary liability of the principal and the contractor to the employees in the
event of any violation of the Labor Code.
Petitioner argues that there could not have been labor-only contracting, since respondents did not perform activities that were indispensable to
petitioner’s principal business. And, even assuming that they did, such fact alone does not establish an employer-employee relationship between
petitioner and the respondents, since respondents were unable to show that petitioner exercised the power to select and hire them, pay their wages,
dismiss them, and control their conduct.
The argument of petitioner is untenable.
The law clearly establishes an employer-employee relationship between the principal employer and the contractor’s employee upon a finding that the
contractor is engaged in "labor-only" contracting. Article 106 of the Labor Code categorically states: "There is ‘labor-only’ contracting where the person
supplying workers to an employee 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." Thus, performing activities directly related to the principal business of the employer is only one of the two indicators that "labor-only"
contracting exists; the other is lack of substantial capital or investment. The Court finds that both indicators exist in the case at bar.
Respondents worked for petitioner as salesmen, with the exception of respondent Gil Francisco whose job was designated as leadman. In the Delivery
Agreement32 between petitioner and TRMD Incorporated, it is stated that petitioner is engaged in the manufacture, distribution and sale of softdrinks
and other related products. The work of respondents, constituting distribution and sale of Coca-Cola products, is clearly indispensable to the principal
business of petitioner. The repeated re-hiring of some of the respondents supports this finding. 33 Petitioner also does not contradict respondents’
allegations that the former has Sales Departments and Sales Offices in its various offices, plants, and warehouses; and that petitioner hires Regional
Sales Supervisors and District Sales Supervisors who supervise and control the salesmen and sales route helpers. 34
As to the supposed substantial capital and investment required of an independent job contractor, petitioner calls the attention of the Court to the
authorized capital stock of Interserve amounting to ₱2,000,000.00. 35 It cites as authority Filipinas Synthetic Fiber Corp. v. National Labor Relations
Commission36 and Frondozo v. National Labor Relations Commission, 37 where the contractors’ authorized capital stock of ₱1,600,000.00 and
₱2,000,000.00, respectively, were considered substantial for the purpose of concluding that they were legitimate job contractors. Petitioner also refers
to Neri v. National Labor Relations Commission38 where it was held that a contractor ceases to be a labor-only contractor by having substantial capital
alone, without investment in tools and equipment.
This Court is unconvinced.
At the outset, the Court clarifies that although Interserve has an authorized capital stock amounting to ₱2,000,000.00, only ₱625,000.00 thereof was
paid up as of 31 December 2001. The Court does not set an absolute figure for what it considers substantial capital for an independent job contractor,
but it measures the same against the type of work which the contractor is obligated to perform for the principal. However, this is rendered impossible
in this case since the Contract between petitioner and Interserve does not even specify the work or the project that needs to be performed or
completed by the latter’s employees, and uses the dubious phrase "tasks and activities that are considered contractible under existing laws and
regulations." Even in its pleadings, petitioner carefully sidesteps identifying or describing the exact nature of the services that Interserve was obligated
to render to petitioner. The importance of identifying with particularity the work or task which Interserve was supposed to accomplish for petitioner
becomes even more evident, considering that the Articles of Incorporation of Interserve states that its primary purpose is to operate, conduct, and
maintain the business of janitorial and allied services. 39 But respondents were hired as salesmen and leadman for petitioner. The Court cannot, under
such ambiguous circumstances, make a reasonable determination if Interserve had substantial capital or investment to undertake the job it was
contracting with petitioner.
Petitioner cannot seek refuge in Neri v. National Labor Relations Commission. Unlike in Neri, petitioner was unable to prove in the instant case that
Interserve had substantial capitalization to be an independent job contractor. In San Miguel Corporation v. MAERC Integrated Services, Inc., 40 therein
petitioner San Miguel Corporation similarly invoked Neri, but was rebuffed by the Court based on the following ratiocination 41 :
Petitioner also ascribes as error the failure of the Court of Appeals to apply the ruling in Neri v. NLRC. In that case, it was held that the law did not
require one to possess both substantial capital and investment in the form of tools, equipment, machinery, work premises, among others, to be
considered a job contractor. The second condition to establish permissible job contracting was sufficiently met if one possessed either attribute.
Accordingly, petitioner alleged that the appellate court and the NLRC erred when they declared MAERC a labor-only contractor despite the finding that
MAERC had investments amounting to ₱4,608,080.00 consisting of buildings, machinery and equipment.
However, in Vinoya v. NLRC, we clarified that it was not enough to show substantial capitalization or investment in the form of tools, equipment,
machinery and work premises, etc., to be considered an independent contractor. In fact, jurisprudential holdings were to the effect that in determining
the existence of an independent contractor relationship, several factors may be considered, such as, but not necessarily confined to, whether the
contractor was carrying on an independent business; the nature and extent of the work; the skill required; the term and duration of the relationship;
the right to assign the performance of specified pieces of work; the control and supervision of the workers; the power of the employer with respect to
the hiring, firing and payment of the workers of the contractor; the control of the premises; the duty to supply premises, tools, appliances, materials
and labor; and the mode, manner and terms of payment.
In Neri, the Court considered not only the fact that respondent Building Care Corporation (BCC) had substantial capitalization but noted that BBC
carried on an independent business and performed its contract according to its own manner and method, free from the control and supervision of its
principal in all matters except as to the results thereof. The Court likewise mentioned that the employees of BCC were engaged to perform specific
special services for their principal. The status of BCC had also been passed upon by the Court in a previous case where it was found to be a qualified job
contractor because it was a "big firm which services among others, a university, an international bank, a big local bank, a hospital center, government
agencies, etc." Furthermore, there were only two (2) complainants in that case who were not only selected and hired by the contractor before being
assigned to work in the Cagayan de Oro branch of FEBTC but the Court also found that the contractor maintained effective supervision and control over
them.
Thus, in San Miguel Corporation, the investment of MAERC, the contractor therein, in the form of buildings, tools, and equipment of more than
₱4,000,000.00 did not impress the Court, which still declared MAERC to be a labor-only contractor. In another case, Dole Philippines, Inc. v.
Esteva,42 the Court did not recognize the contractor therein as a legitimate job contractor, despite its paid-up capital of over ₱4,000,000.00, in the
absence of substantial investment in tools and equipment used in the services it was rendering.
Insisting that Interserve had substantial investment, petitioner assails, for being purely speculative, the finding of the Court of Appeals that the service
vehicles and equipment of Interserve, with the values of ₱510,000.00 and ₱200,000.00, respectively, could not have met the demands of the Coca-Cola
deliveries in the Lagro area.
Yet again, petitioner fails to persuade.
The contractor, not the employee, has the burden of proof that it has the substantial capital, investment, and tool to engage in job
contracting.43 Although not the contractor itself (since Interserve no longer appealed the judgment against it by the Labor Arbiter), said burden of proof
herein falls upon petitioner who is invoking the supposed status of Interserve as an independent job contractor. Noticeably, petitioner failed to submit
evidence to establish that the service vehicles and equipment of Interserve, valued at ₱510,000.00 and ₱200,000.00, respectively, were sufficient to
carry out its service contract with petitioner. Certainly, petitioner could have simply provided the courts with records showing the deliveries that were
undertaken by Interserve for the Lagro area, the type and number of equipment necessary for such task, and the valuation of such equipment. Absent
evidence which a legally compliant company could have easily provided, the Court will not presume that Interserve had sufficient investment in service
vehicles and equipment, especially since respondents’ allegation – that they were using equipment, such as forklifts and pallets belonging to petitioner,
to carry out their jobs – was uncontroverted.
In sum, Interserve did not have substantial capital or investment in the form of tools, equipment, machineries, and work premises; and respondents, its
supposed employees, performed work which was directly related to the principal business of petitioner. It is, thus, evident that Interserve falls under
the definition of a "labor-only" contractor, under Article 106 of the Labor Code; as well as Section 5(i) of the Rules Implementing Articles 106-109 of the
Labor Code, as amended.
The Court, however, does not stop at this finding. It is also apparent that Interserve is a labor-only contractor under Section 5(ii) 44 of the Rules
Implementing Articles 106-109 of the Labor Code, as amended, since it did not exercise the right to control the performance of the work of
respondents.
The lack of control of Interserve over the respondents can be gleaned from the Contract of Services between Interserve (as the CONTRACTOR) and
petitioner (as the CLIENT), pertinent portions of which are reproduced below:
WHEREAS, the CONTRACTOR is engaged in the business, among others, of performing and/or undertaking, managing for consideration, varied projects,
jobs and other related management-oriented services;
WHEREAS, the CONTRACTOR warrants that it has the necessary capital, expertise, technical know-how and a team of professional management group
and personnel to undertake and assume the responsibility to carry out the above mentioned project and services;
WHEREAS, the CLIENT is desirous of utilizing the services and facilities of the CONTRACTOR for emergency needs, rush jobs, peak product loads,
temporary, seasonal and other special project requirements the extent that the available work of the CLIENT can properly be done by an independent
CONTRACTOR permissible under existing laws and regulations;
WHEREAS, the CONTRACTOR has offered to perform specific jobs/works at the CLIENT as stated heretofore, under the terms and conditions herein
stated, and the CLIENT has accepted the offer.
NOW THEREFORE, for and in consideration of the foregoing premises and of the mutual covenants and stipulations hereinafter set forth, the parties
have hereto have stated and the CLIENT has accepted the offer:
1. The CONTRACTOR agrees and undertakes to perform and/or provide for the CLIENT, on a non-exclusive basis for tasks or activities that are
considered contractible under existing laws and regulations, as may be needed by the CLIENT from time to time.
2. To carry out the undertakings specified in the immediately preceding paragraph, the CONTRACTOR shall employ the necessary personnel
like Route Helpers, Salesmen, Drivers, Clericals, Encoders & PD who are at least Technical/Vocational courses graduates provided with
adequate uniforms and appropriate identification cards, who are warranted by the CONTRACTOR to be so trained as to efficiently, fully and
speedily accomplish the work and services undertaken herein by the CONTRACTOR. The CONTRACTOR represents that its personnel shall be
in such number as will be sufficient to cope with the requirements of the services and work herein undertaken and that such personnel shall
be physically fit, of good moral character and has not been convicted of any crime. The CLIENT, however, may request for the replacement of
the CONTRACTOR’S personnel if from its judgment, the jobs or the projects being done could not be completed within the time specified or
that the quality of the desired result is not being achieved.
3. It is agreed and understood that the CONTRACTOR’S personnel will comply with CLIENT, CLIENT’S policies, rules and regulations and will be
subjected on-the-spot search by CLIENT, CLIENT’S duly authorized guards or security men on duty every time the assigned personnel enter
and leave the premises during the entire duration of this agreement.
4. The CONTRACTOR further warrants to make available at times relievers and/or replacements to ensure continuous and uninterrupted
service as in the case of absences of any personnel above mentioned, and to exercise the necessary and due supervision over the work of its
personnel.45
Paragraph 3 of the Contract specified that the personnel of contractor Interserve, which included the respondents, would comply with "CLIENT" as well
as "CLIENT’s policies, rules and regulations." It even required Interserve personnel to subject themselves to on-the-spot searches by petitioner or its
duly authorized guards or security men on duty every time the said personnel entered and left the premises of petitioner. Said paragraph explicitly
established the control of petitioner over the conduct of respondents. Although under paragraph 4 of the same Contract, Interserve warranted that it
would exercise the necessary and due supervision of the work of its personnel, there is a dearth of evidence to demonstrate the extent or degree of
supervision exercised by Interserve over respondents or the manner in which it was actually exercised. There is even no showing that Interserve had
representatives who supervised respondents’ work while they were in the premises of petitioner.
Also significant was the right of petitioner under paragraph 2 of the Contract to "request the replacement of the CONTRACTOR’S personnel." True, this
right was conveniently qualified by the phrase "if from its judgment, the jobs or the projects being done could not be completed within the time
specified or that the quality of the desired result is not being achieved," but such qualification was rendered meaningless by the fact that the Contract
did not stipulate what work or job the personnel needed to complete, the time for its completion, or the results desired. The said provision left a gap
which could enable petitioner to demand the removal or replacement of any employee in the guise of his or her inability to complete a project in time
or to deliver the desired result. The power to recommend penalties or dismiss workers is the strongest indication of a company’s right of control as
direct employer.461avvphil.zw+
Paragraph 4 of the same Contract, in which Interserve warranted to petitioner that the former would provide relievers and replacements in case of
absences of its personnel, raises another red flag. An independent job contractor, who is answerable to the principal only for the results of a certain
work, job, or service need not guarantee to said principal the daily attendance of the workers assigned to the latter. An independent job contractor
would surely have the discretion over the pace at which the work is performed, the number of employees required to complete the same, and the work
schedule which its employees need to follow.
As the Court previously observed, the Contract of Services between Interserve and petitioner did not identify the work needed to be performed and the
final result required to be accomplished. Instead, the Contract specified the type of workers Interserve must provide petitioner ("Route Helpers,
Salesmen, Drivers, Clericals, Encoders & PD") and their qualifications (technical/vocational course graduates, physically fit, of good moral character, and
have not been convicted of any crime). The Contract also states that, "to carry out the undertakings specified in the immediately preceding paragraph,
the CONTRACTOR shall employ the necessary personnel," thus, acknowledging that Interserve did not yet have in its employ the personnel needed by
petitioner and would still pick out such personnel based on the criteria provided by petitioner. In other words, Interserve did not obligate itself to
perform an identifiable job, work, or service for petitioner, but merely bound itself to provide the latter with specific types of employees. These
contractual provisions strongly indicated that Interserve was merely a recruiting and manpower agency providing petitioner with workers performing
tasks directly related to the latter’s principal business.
The certification issued by the DOLE stating that Interserve is an independent job contractor does not sway this Court to take it at face value, since the
primary purpose stated in the Articles of Incorporation 47 of Interserve is misleading. According to its Articles of Incorporation, the principal business of
Interserve is to provide janitorial and allied services. The delivery and distribution of Coca-Cola products, the work for which respondents were
employed and assigned to petitioner, were in no way allied to janitorial services. While the DOLE may have found that the capital and/or investments in
tools and equipment of Interserve were sufficient for an independent contractor for janitorial services, this does not mean that such capital and/or
investments were likewise sufficient to maintain an independent contracting business for the delivery and distribution of Coca-Cola products.
With the finding that Interserve was engaged in prohibited labor-only contracting, petitioner shall be deemed the true employer of respondents. As
regular employees of petitioner, respondents cannot be dismissed except for just or authorized causes, none of which were alleged or proven to exist
in this case, the only defense of petitioner against the charge of illegal dismissal being that respondents were not its employees. Records also failed to
show that petitioner afforded respondents the twin requirements of procedural due process, i.e., notice and hearing, prior to their dismissal.
Respondents were not served notices informing them of the particular acts for which their dismissal was sought. Nor were they required to give their
side regarding the charges made against them. Certainly, the respondents’ dismissal was not carried out in accordance with law and, therefore, illegal. 48
Given that respondents were illegally dismissed by petitioner, they are entitled to reinstatement, full backwages, inclusive of allowances, and to their
other benefits or the monetary equivalents thereof computed from the time their compensations were withheld from them up to the time of their
actual reinstatement, as mandated under Article 279 of the Labor Code,.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The Court AFFIRMS WITH MODIFICATION the Decision dated 19 February 2007 of the
Court of Appeals in CA-G.R. SP No. 85320. The Court DECLARES that respondents were illegally dismissed and, accordingly, ORDERS petitioner to
reinstate them without loss of seniority rights, and to pay them full back wages computed from the time their compensation was withheld up to their
actual reinstatement. Costs against the petitioner.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 175501               October 4, 2010
MANILA WATER COMPANY, INC., Petitioner,
vs.
JOSE J. DALUMPINES, EMMANUEL CAPIT, ROMEO B. CASTOLONE, MELITANTE CASTRO, NONITO FERNANDEZ, ARNULFO JAMISON, ARTHUR LAVISTE,
ESTEBAN LEGARTO, SUSANO MIRANDA, RAMON C. REYES, JOSE SIERRA, BENJAMIN TALAVERA, MOISES ZAPATERO, EDGAR PAMORAGA, BERNARDO
S. MEDINA, MELENCIO M. BAONGUIS, JR., JOSE AGUILAR, ANGEL C. GARCIA, JOSE TEODY P. VELASCO, AUGUSTUS J. TANDOC, ROBERTO DAGDAG,
MIGUEL LOPEZ, GEORGE CABRERA, ARMAN BORROMEO, RONITO R. FRIAS, ANTONIO VERGARA, RANDY CORTIGUERRA, and FIRST CLASSIC COURIER
SERVICES, INC., Respondents.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision 1 dated September 12, 2006 and the
Resolution2 dated November 17, 2006 of the Court of Appeals (CA) in CA-G.R. SP No. 94909.
The facts of the case are as follows:
By virtue of Republic Act No. 8041, otherwise known as the "National Water Crisis Act of 1995," the Metropolitan Waterworks and Sewerage System
(MWSS) was given the authority to enter into concession agreements allowing the private sector in its operations. Petitioner Manila Water Company,
Inc. (Manila Water) was one of two private concessionaires contracted by the MWSS to manage the water distribution system in the east zone of Metro
Manila. The east service area included the following towns and cities: Mandaluyong, Marikina, Pasig, Pateros, San Juan, Taguig, Makati, parts of Quezon
City and Manila, Angono, Antipolo, Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong, Pililla, Rodriguez, Tanay, Taytay, Teresa, and San Mateo. 3
Under the concession agreement, Manila Water undertook to absorb the regular employees of MWSS listed by the latter effective August 1, 1997.
Individual respondents, with the exception of Moises Zapatero (Zapatero) and Edgar Pamoraga (Pamoraga), were among the one hundred twenty-one
(121) employees not included in the list of employees to be absorbed by Manila Water. Nevertheless, Manila Water engaged their services without
written contract from August 1, 1997 to August 31, 1997.4
On September 1, 1997, individual respondents signed a three (3)-month contract to perform collection services on commission basis for Manila Water’s
branches in the east zone.5
On November 21, 1997, before the expiration of the contract of services, the 121 bill collectors formed a corporation duly registered with the Securities
and Exchange Commission (SEC) as the "Association Collector’s Group, Inc." (ACGI). ACGI was one of the entities engaged by Manila Water for its
courier service. However, Manila Water contracted ACGI for collection services only in its Balara Branch. 6
In December 1997, Manila Water entered into a service agreement with respondent First Classic Courier Services, Inc. (FCCSI) also for its courier needs.
The service agreements between Manila Water and FCCSI covered the periods 1997 to 1999 and 2000 to 2002. 7 Earlier, in a memorandum dated
November 28, 1997, FCCSI gave a deadline for the bill collectors who were members of ACGI to submit applications and letters of intent to transfer to
FCCSI. The individual respondents in this case were among the bill collectors who joined FCCSI and were hired effective December 1, 1997. 8
On various dates between May and October 2002, individual respondents were terminated from employment. Manila Water no longer renewed its
contract with FCCSI because it decided to implement a "collectorless" scheme whereby Manila Water customers would instead remit payments
through "Bayad Centers."9 The aggrieved bill collectors individually filed complaints for illegal dismissal, unfair labor practice, damages, and attorney’s
fees, with prayer for reinstatement and backwages against petitioner Manila Water and respondent FCCSI. The complaints were consolidated and
jointly heard.10
Respondent bill collectors alleged that their employment under Manila Water had four (4) stages: (a) from August 1, 1997 to August 31, 1997; (b) from
September 1, 1997 to November 30, 1997; (c) in November 1997 when FCCSI was incorporated; and (d) after November 1977 when FCCSI came in.
While in MWSS, and thereafter in Manila Water and FCCSI, respondent bill collectors were made to perform the following functions: (1) delivery of bills
to customers; (2) collection of payments from customers; and (3) delivery of disconnection notice to customers. They were also allowed to effect
disconnection and were given tools for this purpose. 11
Respondent bill collectors averred that when Manila Water issued their individual contracts of service for three months in September 1997, there was
already an attempt to make it appear that respondent bill collectors were not its employees but independent contractors. Respondent bill collectors
stressed that they could not qualify as independent contractors because they did not have an independent business of their own, tools, equipment, and
capitalization, but were purely dependent on the wages they earned from Manila Water, which was termed as "commission." 12
Respondent bill collectors alleged that Manila Water had complete supervision over their work and their collections, which they had to remit daily to
the former. They also maintained that the incorporation of ACGI did not mean that they were not employees of Manila Water. Furthermore, they
alleged that they suffered injustice when Manila Water imposed upon them the work set-up that caused them to be emotionally depressed because
those who were not assigned to the Balara Branch under Manila Water’s contract with ACGI were forced to join FCCSI to retain their employment. They
argued that the entry of FCCSI did not change the employer-employee relationship of respondent bill collectors with Manila Water. 13
Respondent bill collectors insisted that they remained employees of Manila Water even after the entry of FCCSI. The latter did not qualify as a
legitimate labor contractor since it had no substantial capital. FCCSI only had a paid-up capital of one hundred thousand pesos (₱100,000.00), out of the
four hundred thousand pesos (₱400,000.00) authorized capital. FCCSI relied mainly on what Manila Water would pay, from which it deducted an
agency fee, and it had no other clients on collection. They were forced to transfer to FCCSI when their service contracts with Manila Water was about
to expire on November 30, 1997. FCCSI was engaged in labor-only contracting which is prohibited by law. 14
Respondent bill collectors averred that even under the four-fold test of employer-employee relationship, it appeared that Manila Water was their true
employer based on the following circumstances: (1) it was Manila Water who engaged their services as bill collectors when it took over the operations
of the east zone from MWSS on August 1, 1997; (2) it was Manila Water which paid their wages in the form of commissions every fifteenth (15th) and
thirtieth (30th) day of each month; (3) Manila Water exercised the power of dismissal over them as bill collectors as evidenced by the instances
surrounding their termination as set forth in their respective affidavits, and by the individual clearances issued to them not by FCCSI but by Manila
Water, stating that the same was "issued in connection with his termination of contract as Contract Collector of Manila Water Company"; and (4) their
work as bill collectors was clearly related to the principal business of Manila Water. 15
Respondent FCCSI, on the other hand, claimed that it is an independent contractor engaged in the business of providing messengerial or courier
services, and it fulfills the criteria set forth under Department Order No. 10, Series of 1997. 16 It was issued a certificate of registration by the
Department of Labor and Employment (DOLE) as an independent contractor. It was incorporated and registered with the SEC in November 1995. It was
duly registered with the Department of Transportation and Communication (DOTC) and the Office of the Mayor of Makati City for authority to operate.
It has sufficient capital in the form of tools, equipment, and machinery as attested to by the Postal Regulation Committee of the DOTC after conducting
an ocular inspection. It provides similar services to Philippine Long Distance Telephone Company, Smart Telecommunications, Inc., and Home Cable,
Inc. Under the terms and conditions of its service agreement with Manila Water, FCCSI has the power to hire, assign, discipline, or dismiss its own
employees, as well as control the means and methods of accomplishing the assigned tasks, and it pays the wages of the employees. 17
The termination of employment of respondent bill collectors upon the expiration of FCCSI’s contract with Manila Water did not mean the automatic
termination or suspension of the employer-employee relationship between FCCSI and respondent bill collectors. Their termination after their six (6)
month floating status, which was allowed by law, was due to the non-renewal of FCCSI’s agreement with Manila Water and its inability to enter into a
similar contract requiring the skills of respondent bill collectors. 18
Petitioner Manila Water, for its part, denied that there was an employer-employee relationship between its company and respondent bill collectors.
Based on the agreement between FCCSI and Manila Water, respondent bill collectors are the employees of the former, as it is the former that has the
right to select/hire, discipline, supervise, and control. FCCSI has a separate and distinct legal personality from Manila Water, and it was duly registered
as an independent contractor before the DOLE.19
Petitioner further claimed that individual service contracts signed by respondent bill collectors for a 3-month period with Manila Water were valid and
legal. The fact that the duration of the engagement was stated on the face of the contract dispels any bad faith on the part of the company. Fixed term
contracts are allowed by law. Furthermore, respondent bill collectors’ allegation that the incorporation of ACGI was made as a condition of their
continued employment was unfounded. They transferred to FCCSI on their own volition. 20
Petitioner Manila Water also averred that, under its organizational structure, there was no regular plantilla position of bill collector, which was the main
reason why respondent bill collectors were not included in the list of MWSS employees absorbed by the company. The company’s out-sourcing of
courier needs to an independent contractor was valid and legal.
On September 27, 2004, the Labor Arbiter (LA) rendered a decision, 21 the dispositive portion of which reads:
WHEREFORE, premises considered, the complaints against respondent Manila Water Company, Inc. is dismissed for lack of jurisdiction due to want of
employer-employee relationship. Respondent First Classic Courier Services is hereby ordered to pay complainants separation pay equivalent to one (1)
month pay for every year of service, to wit:
1. JOSE P. DALUMPINES - - - - - - - - ₱36,400.00

2. SUSANO MIRANDA - - - - - - - - - ₱36,400.00

3. EDGAR PAMORAGA - - - - - - - - - ₱29,120.00

4. ARTHUR G. LAVISTI - - - - - - - - - ₱36,400.00

5. BENJAMIN TALAVERA, JR. - - - - ₱36,400.00

6. JOSE S.A. SIERRA - - - - - - - - - - - ₱36,400.00

7. MELITANTE D. CASTRO - - - - - - ₱36,400.00

8. BERNARDO S. MEDINA - - - - - - - ₱36,400.00

9. MELENCIO BAONGUIS - - - - - - - ₱36,400.00

10. NONITO V. FERNANDEZ - - - - - - ₱36,400.00

11. LEGARTO ESTEBAN - - - - - - - - - ₱36,400.00

12. ROMEO B. CASTALONE - - - - - - ₱36,400.00

13. RAMON C. REYES - - - - - - - - - - - ₱36,400.00

14. MOISES L. ZAPATERO - - - - - - - - ₱29,120.00

15. JOSE T. AGUILAR - - - - - - - - - - - ₱36,400.00

16. ARNULFO T. JAMISON - - - - - - - ₱36,400.00

17. ANGEL C. GARCIA - - - - - - - - - - - ₱36,400.00

18. JOSE TEODY P. VELASCO - - - - - ₱36,400.00

19. AUGUSTUS J. TANDOC - - - - - - - ₱36,400.00

20. EMMANUEL L. CAPIT - - - - - - - - ₱36,400.00

21. WILLIAM AGANON - - - - - - - - - - ₱87,360.00

22. ROBERTO S. DAGDAG - - - - - - - - ₱36,400.00

23 MIGUEL J. LOPEZ - - - - - - - - - - - - ₱36,400.00

24. GEORGE CABRERA - - - - - - - - - - ₱36,400.00

25. BORROMEO ARMAN - - - - - - - - - ₱36,400.00

26. RONITO R. FRIAS - - - - - - - - - - - - ₱36,400.00

27. ANTONIO A. VERGARA - - - - - - - ₱36,400.00

28. RANDY T. CORTIGUERRA - - - - - ₱36,400.00

TOTAL - - - - - - - ₱1,055,600.00
22
SO ORDERED.
Respondent bill collectors and FCCSI filed their separate appeals with the National Labor Relations Commission (NLRC). On March 15, 2006, the NLRC
rendered a decision23 affirming in toto the decision of the LA. Respondent bill collectors filed a motion for reconsideration, but the same was denied in
a resolution24 dated April 28, 2006.
Disgruntled, respondent bill collectors filed a petition for certiorari under Rule 65 of the Rules of Court before the CA. On September 12, 2006, the CA
rendered a Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the present petition is hereby GIVEN DUE COURSE and the writ prayed for accordingly GRANTED. Consequently, the
assailed Decision dated March 15, 2006 and Resolution dated April 28, 2006 of the National Labor Relations Commission are hereby ANNULED and SET
ASIDE. A new judgment is hereby entered (a) declaring the petitioners as employees of private respondent Manila Water Company, Inc., and their
termination as bill collectors as illegal; and (b) ordering private respondent Manila Water Company, Inc. to pay the petitioners separation pay
equivalent to one (1) month for every year of service. In addition, private respondent Manila Water Company, Inc. is liable to pay ten percent (10%) of
the total amount awarded as attorney’s fees.
No pronouncement as to costs.
SO ORDERED.25
Petitioner Manila Water and respondent bill collectors filed a motion for reconsideration. However, the CA denied their respective motions for
reconsideration in a Resolution dated November 17, 2006.
Hence, this petition.
Petitioner Manila Water presented the following issues for resolution, whether the CA erred (1) in ruling that an employment relationship exists
between respondent bill collectors and petitioner Manila Water; (2) in its application of Manila Water Company, Inc. v. Peña 26 to the instant case; and
(3) in ruling that respondent FCCSI is not a bona fide independent contractor. 27
The petition is bereft of merit.
In this case, the LA, the NLRC, and the CA reached different conclusions of law albeit agreeing on the same set of facts. It was in their interpretation and
appreciation of the evidence that they differed. The CA ruled that respondent FCCSI was a labor-only contractor and that respondent bill collectors are
employees of petitioner Manila Water, while the LA and the NLRC ruled otherwise.
"Contracting" or  "subcontracting" refers to an arrangement whereby a principal agrees to put out or farm out with a contractor or subcontractor the
performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of whether such job, work, or
service is to be performed or completed within or outside the premises of the principal. 28
Contracting and subcontracting arrangements are expressly allowed by law but are subject to regulation for the promotion of employment and the
observance of the rights of workers to just and humane conditions of work, security of tenure, self-organization, and collective bargaining. 29 In
legitimate contracting, the trilateral relationship between the parties in these arrangements involves the principal which decides to farm out a job or
service to a contractor or subcontractor, which has the capacity to independently undertake the performance of the job, work, or service, and the
contractual workers engaged by the contractor or subcontractor to accomplish the job, work, or service. 30
Job contracting is permissible only if the following conditions are met: 1) the contractor carries on an independent business and undertakes the
contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his
employer or principal in all matters connected with the performance of the work except as to the results thereof; and 2) the contractor has substantial
capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of the
business.31
On the other hand, the Labor Code expressly prohibits "labor-only" contracting. Article 106 of the Code provides that there is labor-only contracting
where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing activities which are directly related to the principal
business of the employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to
the workers in the same manner and to the same extent as if the latter were directly employed by him. 32
Department Order No. 18-02, Series of 2002, enunciates that labor-only contracting refers to an arrangement where the contractor or subcontractor
merely recruits, supplies, or places workers to perform a job, work, or service for a principal, and any of the following elements are present: (i) the
contractor or subcontractor does not have substantial capital or investment which relates to the job, work, or service to be performed and the
employees recruited, supplied, or placed by such contractor or subcontractor are performing activities which are directly related to the main business
of the principal; or (ii) the contractor does not exercise the right to control the performance of the work of the contractual employee. 33
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case of corporations, tools, equipment, implements,
machineries, and work premises, actually and directly used by the contractor or subcontractor in the performance or completion of the job, work, or
service contracted out. The "right to control" refers to the right reserved to the person for whom the services of the contractual workers are
performed, to determine not only the end to be achieved, but also the manner and means to be used in reaching that end. 34
In the instant case, the CA found that FCCSI is a labor-only contractor. Based on the factual findings of the CA, FCCSI does not have substantial capital or
investment to qualify as an independent contractor, viz.:
FCCSI was incorporated on November 14, 1995, with an authorized capital stock of ₱400,000.00, of which only ₱100,000.00 is actually paid-in. Going by
the pronouncement in Peña, such capitalization can hardly be considered substantial. FCCSI and Manila Water make much of the 17 April 1997 letter of
Postal Regulation Committee Chairman Francisco V. Ontalan, Jr. to DOTC Secretary Arturo T. Enrile recommending the renewal and/or extension of
authority to FCCSI to operate private messengerial delivery services, which states in part:
"Ocular inspection conducted on its office premises and evaluation of the documents submitted, the firm during the six (6) months operation has
generated employment to thirty six (36) messengers, and four (4) office personnel.
"The office equipt [sic] with modern facilities such as computers, printers, electric typewriter, working table, telephone lines, airconditioning unit,
pigeon holes, working tables and delivery vehicles such as a Suzuki van and three (3) motorcycles. The firm’s audited financial statement for the period
ending 31 December 1996 [shows] that it earned a net income of ₱253,000.00. x x x."
The above document only proves that FCCSI has no sufficient investment in the form of tools, equipment and machinery to undertake contract services
for Manila Water involving a fleet of around 100 collectors assigned to several branches and covering the service area of Manila Water customers
spread out in several cities/towns of the East Zone. The only rational conclusion is that it is Manila Water that provides most if not all the logistics and
equipment including service vehicles in the performance of the contracted service, notwithstanding that the contract between FCCSI and Manila Water
states that it is the Contractor which shall furnish at its own expense all materials, tools and equipment needed to perform the tasks of collectors.
Moreover, it must be emphasized that petitioners who are "trained collectors" performed tasks that cannot be simply categorized as "messengerial." In
fact, these are the very functions they were already discharging even before they joined FCCSI which "invited" or "solicited" their placement just about
the expiration of their three (3)-month contract with Manila Water on November 28, 1997. The Agreement between FCCSI and Manila Water provides
that FCCSI shall "field the required number of trained collectors to the following Customer Relations Branch Office": Cubao, España, San Juan-
Mandaluyong, Marikina, Pasig, Taguig-Pateros and Makati.351avvphi1
As correctly ruled by the CA, FCCSI’s capitalization may not be considered substantial considering that it had close to a hundred collectors covering the
east zone service area of Manila Water customers. The allegation in the position paper of FCCSI that it serves other companies’ courier needs does not
"cure" the fact that it has insufficient capitalization to qualify as independent contractor. Neither did FCCSI prove its allegation by substantial evidence
other than by their self-serving declarations. What is evident is that it was Manila Water that provided the equipment and service vehicles needed in
the performance of the contracted service, even if the contract between FCCSI and Manila Water stated that it was the Contractor which shall furnish
at its own expense all materials, tools, and equipment needed to perform the tasks of collectors.
Based on the four-fold test of employer-employee relationship, Manila Water emerges as the employer of respondent collectors. The elements to
determine the existence of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer's power to control the employee's conduct. The most important of these elements is the employer's control
of the employee's conduct, not only as to the result of the work to be done, but also as to the means and methods to accomplish it. 36
The factual circumstances in the instant case are essentially the same as those cited in Manila Water Company, Inc. v. Hermiño Peña. 37 In that case, 121
bill collectors, headed by Peña, filed a complaint for illegal dismissal against Manila Water. The bill collectors formed ACGI which was registered with
the SEC. Manila Water, in opposing the claim of the bill collectors, claimed that there was no employer-employee relationship with the latter. It averred
that the bill collectors were employees of ACGI, a separate entity engaged in collection services, an independent contractor which entered into a
service contract for the collection of Manila Water’s accounts. The Court ruled that ACGI was not an independent contractor but was engaged in labor-
only contracting, and as such, is considered merely an agent of Manila Water. 38
The Court ratiocinated that: First, ACGI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work
premises, and other materials to qualify as an independent contractor. Second, the work of the bill collectors was directly related to the principal
business or operation of Manila Water. Being in the business of providing water to the consumers in the east zone, the collection of the charges by the
bill collectors for the company can only be categorized as related to, and in the pursuit of, the latter's business. Lastly, ACGI did not carry on an
independent business or undertake the performance of its service contract in its own manner and using its own methods, free from the control and
supervision of its principal, Manila Water. Since ACGI is obviously a labor-only contractor, the workers it supplied are considered employees of the
principal. Furthermore, the activities performed by the bill collectors were necessary or desirable to Manila Water's principal trade or business; thus,
they are regular employees of the latter. Since Manila Water failed to comply with the requirements of termination under the Labor Code, the dismissal
of the bill collectors was tainted with illegality. 39
The similarity between the instant case and Peña is very evident. First, the work set-up between the respondent contractor FCCSI and respondent bill
collectors is the same as in Peña. Respondent bill collectors were individually hired by the contractor, but were under the direct control and supervision
of the concessionaire. Second, they performed the same function of courier and bill collection services. Third, the element of control exercised by
Manila Water over respondent bill collectors is essentially the same as in Peña, manifested in the following circumstances, viz.: (a) respondent bill
collectors reported daily to the branch offices of Manila Water to remit their collections with the specified monthly targets and comply with the
collection reporting procedures prescribed by the latter; (b) respondent bill collectors, except for Pamoraga and Zapatero, were among the 121
collectors who incorporated ACGI; (c) Manila Water continued to pay their wages in the form of commissions even after the employees alleged transfer
to FCCSI. Manila Water paid the respondent bill collectors their individual commissions, and the lump sum paid by Manila Water to FCCSI merely
represented the agency fee; and (d) the certification or individual clearances issued by Manila Water to respondent bill collectors upon the termination
of the service contract with FCCSI. The certification stated that respondents were contract collectors of Manila Water and not of FCCSI. Thus, this Court
agrees with the findings of the CA that if, indeed, FCCSI was the true employer of the bill collectors, it should have been the one to issue the
certification or individual clearances.
It should be remembered that the control test merely calls for the existence of the right to control, and not necessarily the exercise thereof. It is not
essential that the employer actually supervises the performance of duties of the employee. It is enough that the former has a right to wield the
power.40
Respondent bill collectors are, therefore, employees of petitioner Manila Water. It cannot be denied that the tasks performed by respondent bill
collectors are directly related to the principal business or trade of Manila Water. Payments made by the subscribers are the lifeblood of the company,
and the respondent bill collectors are the ones who collect these payments.
The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. In this case, the connection is obvious when we consider the nature of the work performed and
its relation to the scheme of the particular business or trade in its entirety. Finally, the repeated and continuing need for the performance of the job is
sufficient evidence of the necessity, if not indispensability of the activity to the business. 41
WHEREFORE, in view of the foregoing, the Decision dated September 12, 2006 and the Resolution dated November 17, 2006 of the Court of Appeals in
CA-G.R. SP No. 94909 are hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA**
Associate Justice
Acting Chairperson
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186091               December 15, 2010
EMMANUEL BABAS, DANILO T. BANAG, ARTURO V. VILLARIN, SR., EDWIN JAVIER, SANDI BERMEO, REX ALLESA, MAXIMO SORIANO, JR., ARSENIO
ESTORQUE, and FELIXBERTO ANAJAO, Petitioners,
vs.
LORENZO SHIPPING CORPORATION, Respondent.
DECISION
NACHURA, J.:
Petitioners Emmanuel Babas, Danilo T. Banag, Arturo V. Villarin, Sr., Edwin Javier, Sandi Bermeo, Rex Allesa, Maximo Soriano, Jr., Arsenio Estorque, and
Felixberto Anajao appeal by certiorari under Rule 45 of the Rules of Court the October 10, 2008 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP. No.
103804, and the January 21, 2009 Resolution,2 denying its reconsideration.
Respondent Lorenzo Shipping Corporation (LSC) is a duly organized domestic corporation engaged in the shipping industry; it owns several equipment
necessary for its business. On September 29, 1997, LSC entered into a General Equipment Maintenance Repair and Management Services
Agreement3 (Agreement) with Best Manpower Services, Inc. (BMSI). Under the Agreement, BMSI undertook to provide maintenance and repair services
to LSC’s container vans, heavy equipment, trailer chassis, and generator sets. BMSI further undertook to provide checkers to inspect all containers
received for loading to and/or unloading from its vessels.
Simultaneous with the execution of the Agreement, LSC leased its equipment, tools, and tractors to BMSI. 4 The period of lease was coterminous with
the Agreement.
BMSI then hired petitioners on various dates to work at LSC as checkers, welders, utility men, clerks, forklift operators, motor pool and machine shop
workers, technicians, trailer drivers, and mechanics. Six years later, or on May 1, 2003, LSC entered into another contract with BMSI, this time, a service
contract.5
In September 2003, petitioners filed with the Labor Arbiter (LA) a complaint for regularization against LSC and BMSI. On October 1, 2003, LSC
terminated the Agreement, effective October 31, 2003. Consequently, petitioners lost their employment.
BMSI asserted that it is an independent contractor. It averred that it was willing to regularize petitioners; however, some of them lacked the requisite
qualifications for the job. BMSI was willing to reassign petitioners who were willing to accept reassignment. BMSI denied petitioners’ claim for
underpayment of wages and non-payment of 13th month pay and other benefits.
LSC, on the other hand, averred that petitioners were employees of BMSI and were assigned to LSC by virtue of the Agreement. BMSI is an independent
job contractor with substantial capital or investment in the form of tools, equipment, and machinery necessary in the conduct of its business. The
Agreement between LSC and BMSI constituted legitimate job contracting. Thus, petitioners were employees of BMSI and not of LSC.
After due proceedings, the LA rendered a decision 6 dismissing petitioners’ complaint. The LA found that petitioners were employees of BMSI. It was
BMSI which hired petitioners, paid their wages, and exercised control over them.
Petitioners appealed to the National Labor Relations Commission (NLRC), arguing that BMSI was engaged in labor-only contracting. They insisted that
their employer was LSC.
On January 16, 2008, the NLRC promulgated its decision. 7 Reversing the LA, the NLRC held:
We find from the records of this case that respondent BMSI is not engaged in legitimate job contracting.
First, respondent BMSI has no equipment, no office premises, no capital and no investments as shown in the Agreement itself which states:
xxxx
VI. RENTAL OF EQUIPMENT
[6.01.] That the CLIENT has several forklifts and truck tractor, and has offered to the CONTRACTOR the use of the same by way of lease, the monthly
rental of which shall be deducted from the total monthly billings of the CONTRACTOR for the services covered by this Agreement.
6.02. That the CONTRACTOR has agreed to rent the CLIENT’s forklifts and truck tractor.
6.03. The parties herein have agreed to execute a Contract of Lease for the forklifts and truck tractor that will be rented by the CONTRACTOR. (p. 389,
Records)
True enough, parties signed a Lease Contract (p. 392, Records) wherein respondent BMSI leased several excess equipment of LSC to enable it to
discharge its obligation under the Agreement. So without the equipment which respondent BMSI leased from respondent LSC, the former would not be
able to perform its commitments in the Agreement.
In Phil. Fuji Xerox Corp. v. NLRC (254 SCRA 294) the Supreme Court held:
x x x. The phrase "substantial capital and investment in the form of tools, equipment, machineries, work premises, and other materials which are
necessary in the conduct of his business," in the Implementing Rules clearly contemplates tools, equipment, etc., which are directly related to the
service it is being contracted to render. One who does not have an independent business for undertaking the job contracted for is just an agent of the
employer. (underscoring ours)
Second, respondent BMSI has no independent business or activity or job to perform in respondent LSC free from the control of respondent LSC except
as to the results thereof. In view of the absence of such independent business or activity or job to be performed by respondent BMSI in respondent LSC
[petitioners] performed work that was necessary and desirable to the main business of respondent LSC. Respondents were not able to refute the
allegations of [petitioners] that they performed the same work that the regular workers of LSC performed and they stood side by side with regular
employees of respondent LSC performing the same work. Necessarily, the control on the manner and method of doing the work was exercised by
respondent LSC and not by respondent BMSI since the latter had no business of its own to perform in respondent LSC.
Lastly, respondent BMSI has no other client but respondent LSC. If respondent BMSI were a going concern, it would have other clients to which to
assign [petitioners] after its Agreement with LSC expired. Since there is only one client, respondent LSC, it is easy to conclude that respondent BMSI is a
mere supplier of labor.
After concluding that respondent BMSI is engaged in prohibited labor-only contracting, respondent LSC became the employer of [petitioners] pursuant
to DO 18-02.
[Petitioners] therefore should be reinstated to their former positions or equivalent positions in respondent LSC as regular employees with full
backwages and other benefits without loss of seniority rights from October 31, 2003, when they lost their jobs, until actual reinstatement (Vinoya v.
NLRC, 324 SCRA 469). If reinstatement is not feasible, [petitioners] then should be paid separation pay of one month pay for every year of service or a
fraction of six months to be considered as one year, in addition to full backwages.
Concerning [petitioners’] prayer to be paid wage differentials and benefits under the CBA, We have no doubt that [petitioners] would be entitled to
them if they are covered by the said CBA. For this purpose, [petitioners] should first enlist themselves as union members if they so desire, or pay agency
fee. Furthermore, only [petitioners] who signed the appeal memorandum are covered by this Decision. As regards the other complainants who did not
sign the appeal, the Decision of the Labor Arbiter dismissing this case became final and executory. 8
The NLRC disposed thus:
WHEREFORE, the appeal of [petitioners] is GRANTED. The Decision of the Labor Arbiter is hereby REVERSED, and a NEW ONE rendered finding
respondent Best Manpower Services, Inc. is engaged in prohibited labor-only-contracting and finding respondent Lorenzo Shipping Corp. as the
employer of the following [petitioners]:
1. Emmanuel B. Babas
2. Danilo Banag
3. Edwin L. Javier
4. Rex Allesa
5. Arturo Villarin, [Sr.]
6. Felixberto C. Anajao
7. Arsenio Estorque
8. Maximo N. Soriano, Jr.
9. Sandi G. Bermeo
Consequently, respondent Lorenzo Shipping Corp. is ordered to reinstate [petitioners] to their former positions as regular employees and pay their
wage differentials and benefits under the CBA.
If reinstatement is not feasible, both respondents Lorenzo Shipping Corp. and Best Manpower Services are adjudged jointly and solidarily to pay
[petitioners] separation pay of one month for every year of service, a fraction of six months to be considered as one year.
In addition, respondent LSC and BMSI are solidarily liable to pay [petitioners’] full backwages from October 31, 2003 until actual reinstatement or, if
reinstatement is not feasible, until finality of this Decision.
Respondent LSC and respondent BMSI are likewise adjudged to be solidarily liable for attorney’s fees equivalent to ten (10%) of the total monetary
award.
xxxx
SO ORDERED.9
LSC went to the CA via certiorari. On October 10, 2008, the CA rendered the now challenged Decision, 10 reversing the NLRC. In holding that BMSI was an
independent contractor, the CA relied on the provisions of the Agreement, wherein BMSI warranted that it is an independent contractor, with
adequate capital, expertise, knowledge, equipment, and personnel necessary for the services rendered to LSC. According to the CA, the fact that BMSI
entered into a contract of lease with LSC did not ipso facto make BMSI a labor-only contractor; on the contrary, it proved that BMSI had substantial
capital. The CA was of the view that the law only required substantial capital or investment. Since BMSI had substantial capital, as shown by its ability to
pay rents to LSC, then it qualified as an independent contractor. It added that even under the control test, BMSI would be the real employer of
petitioners, since it had assumed the entire charge and control of petitioners’ services. The CA further held that BMSI’s Certificate of Registration as an
independent contractor was sufficient proof that it was an independent contractor. Hence, the CA absolved LSC from liability and instead held BMSI as
employer of petitioners.
The fallo of the CA Decision reads:
WHEREFORE, premises considered, the instant petition is GRANTED and the assailed decision and resolution of public respondent NLRC are REVERSED
and SET ASIDE. Consequently, the decision of the Labor Arbiter dated September 29, 2004 is REINSTATED.
SO ORDERED.11
Petitioners filed a motion for reconsideration, but the CA denied it on January 21, 2009. 12
Hence, this appeal by petitioners, positing that:
THE HONORABLE COURT OF APPEALS ERRED IN IGNORING THE CLEAR EVIDENCE OF RECORD THAT RESPONDENT WAS ENGAGED IN LABOR-ONLY
CONTRACTING TO DEFEAT PETITIONERS’ RIGHT TO SECURITY OF TENURE. 13
Before resolving the petition, we note that only seven (7) of the nine petitioners signed the Verification and Certification. 14 Petitioners Maximo Soriano,
Jr. (Soriano) and Felixberto Anajao (Anajao) did not sign the Verification and Certification, because they could no longer be located by their co-
petitioners.15
In Toyota Motor Phils. Corp. Workers Association (TMPCWA), et al. v. National Labor Relations Commission, 16 citing Loquias v. Office of the
Ombudsman,17 we stated that the petition satisfies the formal requirements only with regard to the petitioner who signed the petition, but not his co-
petitioner who did not sign nor authorize the other petitioner to sign it on his behalf. Thus, the petition can be given due course only as to the parties
who signed it. The other petitioners who did not sign the verification and certificate against forum shopping cannot be recognized as petitioners and
have no legal standing before the Court. The petition should be dismissed outright with respect to the non-conforming petitioners.
Thus, we dismiss the petition insofar as petitioners Soriano and Anajao are concerned.
Petitioners vigorously insist that they were employees of LSC; and that BMSI is not an independent contractor, but a labor-only contractor. LSC, on the
other hand, maintains that BMSI is an independent contractor, with adequate capital and investment. LSC capitalizes on the ratiocination made by the
CA.
In declaring BMSI as an independent contractor, the CA, in the challenged Decision, heavily relied on the provisions of the Agreement, wherein BMSI
declared that it was an independent contractor, with substantial capital and investment.
De Los Santos v. NLRC18 instructed us that the character of the business, i.e., whether as labor-only contractor or as job contractor, should
be measured in terms of, and determined by, the criteria set by statute. The parties cannot dictate by the mere expedience of a unilateral declaration in
a contract the character of their business.
In San Miguel Corporation v. Vicente B. Semillano, Nelson Mondejas, Jovito Remada, Alilgilan Multi-Purpose Coop (AMPCO), and Merlyn N.
Policarpio,19 this Court explained:
Despite the fact that the service contracts contain stipulations which are earmarks of independent contractorship, they do not make it legally so. The
language of a contract is neither determinative nor conclusive of the relationship between the parties. Petitioner SMC and AMPCO cannot dictate, by a
declaration in a contract, the character of AMPCO's business, that is, whether as labor-only contractor, or job contractor. AMPCO's character should be
measured in terms of, and determined by, the criteria set by statute.
Thus, in distinguishing between prohibited labor-only contracting and permissible job contracting, the totality of the facts and the surrounding
circumstances of the case are to be considered.
Labor-only contracting, a prohibited act, is an arrangement where the contractor or subcontractor merely recruits, supplies, or places workers to
perform a job, work, or service for a principal. In labor-only contracting, the following elements are present: (a) the contractor or subcontractor does
not have substantial capital or investment to actually perform the job, work, or service under its own account and responsibility; and (b) the employees
recruited, supplied, or placed by such contractor or subcontractor perform activities which are directly related to the main business of the principal. 20
On the other hand, permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees to put out or farm out with the
contractor or subcontractor the performance or completion of a specific job, work, or service within a definite or predetermined period, regardless of
whether such job, work, or service is to be performed or completed within or outside the premises of the principal. 21
A person is considered engaged in legitimate job contracting or subcontracting if the following conditions concur:
(a) The contractor carries on a distinct and independent business and undertakes the contract work on his account under his own
responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters
connected with the performance of his work except as to the results thereof;
(b) The contractor has substantial capital or investment; and
 (c) The agreement between the principal and the contractor or subcontractor assures the contractual employees' entitlement to all labor and
occupational safety and health standards, free exercise of the right to self-organization, security of tenure, and social welfare benefits. 22
Given the above standards, we sustain the petitioners’ contention that BMSI is engaged in labor-only contracting.
First, petitioners worked at LSC’s premises, and nowhere else. Other than the provisions of the Agreement, there was no showing that it was BMSI
which established petitioners’ working procedure and methods, which supervised petitioners in their work, or which evaluated the same. There was
absolute lack of evidence that BMSI exercised control over them or their work, except for the fact that petitioners were hired by BMSI.
Second, LSC was unable to present proof that BMSI had substantial capital. The record before us is bereft of any proof pertaining to the contractor’s
capitalization, nor to its investment in tools, equipment, or implements actually used in the performance or completion of the job, work, or service that
it was contracted to render. What is clear was that the equipment used by BMSI were owned by, and merely rented from, LSC.
In Mandaue Galleon Trade, Inc. v. Andales,23 we held:
The law casts the burden on the contractor to prove that it has substantial capital, investment, tools, etc. Employees, on the other hand, need not
prove that the contractor does not have substantial capital, investment, and tools to engage in job-contracting.
Third, petitioners performed activities which were directly related to the main business of LSC. The work of petitioners as checkers, welders, utility
men, drivers, and mechanics could only be characterized as part of, or at least clearly related to, and in the pursuit of, LSC’s business. Logically, when
petitioners were assigned by BMSI to LSC, BMSI acted merely as a labor-only contractor.
Lastly, as found by the NLRC, BMSI had no other client except for LSC, and neither BMSI nor LSC refuted this finding, thereby bolstering the NLRC finding
that BMSI is a labor-only contractor.
The CA erred in considering BMSI’s Certificate of Registration as sufficient proof that it is an independent contractor. In San Miguel Corporation v.
Vicente B. Semillano, Nelson Mondejas, Jovito Remada, Alilgilan Multi-Purpose Coop (AMPCO), and Merlyn N. Policarpio, 24 we held that a Certificate of
Registration issued by the Department of Labor and Employment is not conclusive evidence of such status. The fact of registration simply prevents the
legal presumption of being a mere labor-only contractor from arising. 251avvphi1
Indubitably, BMSI can only be classified as a labor-only contractor. The CA, therefore, erred when it ruled otherwise. Consequently, the workers that
BMSI supplied to LSC became regular employees of the latter. 26 Having gained regular status, petitioners were entitled to security of tenure and could
only be dismissed for just or authorized causes and after they had been accorded due process.
Petitioners lost their employment when LSC terminated its Agreement with BMSI. However, the termination of LSC’s Agreement with BMSI cannot be
considered a just or an authorized cause for petitioners’ dismissal. In Almeda v. Asahi Glass Philippines. Inc. v. Asahi Glass Philippines, Inc., 27 this Court
declared:
The sole reason given for the dismissal of petitioners by SSASI was the termination of its service contract with respondent. But since SSASI was a labor-
only contractor, and petitioners were to be deemed the employees of respondent, then the said reason would not constitute a just or authorized cause
for petitioners’ dismissal. It would then appear that petitioners were summarily dismissed based on the aforecited reason, without compliance with the
procedural due process for notice and hearing.
Herein petitioners, having been unjustly dismissed from work, are entitled to reinstatement without loss of seniority rights and other privileges and to
full back wages, inclusive of allowances, and to other benefits or their monetary equivalents computed from the time compensation was withheld up to
the time of actual reinstatement. Their earnings elsewhere during the periods of their illegal dismissal shall not be deducted therefrom.
Accordingly, we hold that the NLRC committed no grave abuse of discretion in its decision. Conversely, the CA committed a reversible error when it set
aside the NLRC ruling.
WHEREFORE, the petition is GRANTED. The Decision and the Resolution of the Court of Appeals in CA-G.R. SP. No. 103804 are REVERSED and SET
ASIDE. Petitioners Emmanuel Babas, Danilo T. Banag, Arturo V. Villarin, Sr., Edwin Javier, Sandi Bermeo, Rex Allesa, and Arsenio Estorque are declared
regular employees of Lorenzo Shipping Corporation. Further, LSC is ordered to reinstate the seven petitioners to their former position without loss of
seniority rights and other privileges, and to pay full backwages, inclusive of allowances, and other benefits or their monetary equivalent, computed
from the time compensation was withheld up to the time of actual reinstatement.
No pronouncement as to costs.
SO ORDERED.
ANTONIO EDUARDO B. NACHURA
Associate Justice
 THIRD DIVISION
January 13, 2016
G.R. Nos. 173254-55 & 173263
DIAMOND FARMS, INC., Petitioner,
vs.
SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL)-WORKERS SOLIDARITY OF DARBMUPCO/DIAMOND-SPFL, DIAMOND FARMS AGRARIAN
REFORM BENEFICIARIES MULTI-PURPOSE COOPERATIVE (DARBMUPCO), VOLTER LOPEZ, RUEL ROMERO, PATRICIO CAPRECHO, REY DIMACALI,
ELESIO EMANEL, VICTOR SINGSON, NILDA DIMACALI, PREMITIVO* DIAZ, RUDY VISTAL, ROGER MONTERO, JOSISIMO GOMEZ and MANUEL
MOSQUERA, Respondents.
DECISION
JARDELEZA, J.:
We resolve in this Petition for Review1 under Rule 45 of the Rules of Court, the issue of who among Diamond Farms, Inc. ("DFI"), Diamond Farms
Agrarian Reform Beneficiaries Multi-Purpose Cooperative ("DARBMUPCO") and the individual contractors 2 ("respondent-contractors") is the employer
of the 400 employees ("respondent-workers").
DFI challenges the March 31, 2006 Decision3 and May 30, 2006 Resolution 4 of the Court Appeals, Special Twenty-Second Division, Cagayan De Oro City
for being contrary to law and jurisprudence. The Decision dismissed DFI’s Petition for Certiorari in C.A.-G.R. SP Nos. 53806 and 61607 and granted
DARBMUPCO’s Petition for Certiorari in C.A.-G.R. SP No. 59958. It declared DFI as the statutory employer of the respondent-workers.
The Facts
DFI owns an 800-hectare banana plantation ("original plantation") in Alejal, Carmen, Davao. 5 Pursuant to Republic Act No. 6657 or the Comprehensive
Agrarian Reform Law of 1988 ("CARL"), commercial farms shall be subject to compulsory acquisition and distribution, 6 thus the original plantation was
covered by the law. However, the Department of Agrarian Reform ("DAR") granted DFI a deferment privilege to continue agricultural operations until
1998.7 Due to adverse marketing problems and observance of the so-called "lay-follow" or the resting of a parcel of land for a certain period of time
after exhaustive utilization, DFI closed some areas of operation in the original plantation and laid off its employees. 8 These employees petitioned the
DAR for the cancellation of DFI’s deferment privilege alleging that DFI already abandoned its area of operations. 9 The DAR Regional Director recalled
DFI’s deferment privilege resulting in the original plantation’s automatic compulsory acquisition and distribution under the CARL. 10 DFI filed a motion
for reconsideration which was denied. It then appealed to the DAR Secretary. 11
In the meantime, to minimize losses, DFI offered to give up its rights and interest over the original plantation in favor of the government by way of a
Voluntary Offer to Sell.12 The DAR accepted DFI’s offer to sell the original plantation. However, out of the total 800 hectares, the DAR only approved the
disposition of 689.88 hectares. Hence, the original plantation was split into two: 689.88 hectares were sold to the government ("awarded plantation")
and the remaining 200 hectares, more or less, were retained by DFI ("managed area"). 13 The managed area is subject to the outcome of the appeal on
the cancellation of the deferment privilege before the DAR Secretary.
On January 1, 1996, the awarded plantation was turned over to qualified agrarian reform beneficiaries ("ARBs") under the CARL. These ARBs are the
same farmers who were working in the original plantation. They subsequently organized themselves into a multi-purpose cooperative named
"DARBMUPCO," which is one of the respondents in this case. 14
On March 27, 1996, DARBMUPCO entered into a Banana Production and Purchase Agreement ("BPPA") 15 with DFI.16 Under the BPPA, DARBMUPCO and
its members as owners of the awarded plantation, agreed to grow and cultivate only high grade quality exportable bananas to be sold exclusively to
DFI.17 The BPPA is effective for 10 years.18
On April 20, 1996, DARBMUPCO and DFI executed a "Supplemental to Memorandum Agreement" ("SMA"). 19 The SMA stated that DFI shall take care of
the labor cost arising from the packaging operation, cable maintenance, irrigation pump and irrigation maintenance that the workers of DARBMUPCO
shall conduct for DFI’s account under the BPPA. 20
From the start, DARBMUPCO was hampered by lack of manpower to undertake the agricultural operation under the BPPA because some of its
members were not willing to work. 21 Hence, to assist DARBMUPCO in meeting its production obligations under the BPPA, DFI engaged the services of
the respondent-contractors, who in turn recruited the respondent-workers. 22
The engagement of the respondent-workers, as will be seen below, started a series of labor disputes among DARBMUPCO, DFI and the respondent-
contractors.
C.A. G.R. SP No. 53806
On February 10, 1997, respondent Southern Philippines Federation of Labor ("SPFL")—a legitimate labor organization with a local chapter in the
awarded plantation—filed a petition for certification election in the Office of the Med-Arbiter in Davao City. 23 SPFL filed the petition on behalf of some
400 workers (the respondent-workers in this petition) "jointly employed by DFI and DARBMUPCO" working in the awarded plantation.
DARBMUPCO and DFI denied that they are the employers of the respondent-workers. They claimed, instead, that the respondent-workers are the
employees of the respondent-contractors. 24
In an Order dated May 14, 1997,25 the Med-Arbiter granted the petition for certification election. It directed the conduct of certification election and
declared that DARBMUPCO was the employer of the respondent-workers. The Order stated that "whether the said workers/employees were hired by
independent contractors is of no moment. What is material is that they were hired purposely to work on the 689.88 hectares banana plantation [the
awarded plantation] now owned and operated by DARBMUPCO."26
DARBMUPCO appealed to the Secretary of Labor and Employment ("SOLE"). In a Resolution dated February 18, 1999, 27 the SOLE modified the decision
of the Med-Arbiter. The SOLE held that DFI, through its manager and personnel, supervised and directed the performance of the work of the
respondentcontractors. The SOLE thus declared DFI as the employer of the respondent-workers. 28
DFI filed a motion for reconsideration which the SOLE denied in a Resolution dated May 4, 1999. 29
On June 11, 1999, DFI elevated the case to the Court of Appeals ("CA") via a Petition for Certiorari30 under Rule 65 of the Rules of Court. The case was
raffled to the CA’s former Twelfth Division and was docketed as C.A.-G.R. SP No. 53806.
C.A.-G.R. SP. No. 59958
Meanwhile, on June 20, 199731 and September 15, 1997,32 SPFL, together with more than 300 workers, filed a case for underpayment of wages, non-
payment of 13th month pay and service incentive leave pay and attorney’s fees against DFI, DARBMUPCO and the respondent-contractors before the
National Labor Relations Commission ("NLRC") in Davao City. DARBMUPCO averred that it is not the employer of respondent-workers; neither is DFI. It
asserted that the money claims should be directed against the true employer—the respondent-contractors. 33
In a Decision dated January 22, 1999,34 the Labor Arbiter ("LA") held that the respondent-contractors are "labor-only contractors." The LA gave
credence to the affidavits of the other contractors 35 of DFI (who are not party-respondents in this petition) asserting that DFI engaged their services,
and supervised and paid their laborers. The affidavits also stated that the contractors had no dealings with DARBMUPCO, except that their work is done
in the awarded plantation.36
The LA held that, under the law, DFI is deemed as the statutory employer of all the respondent-workers. 37 The LA dismissed the case against
DARBMUPCO and the respondent-contractors. 38
DFI appealed to the NLRC. In a Resolution dated May 24, 1999,39 the NLRC Fifth Division modified the Decision of the LA and declared that DARBMUPCO
and DFI are the statutory employers of the workers rendering services in the awarded plantation and the managed area, respectively. 40 It adjudged DFI
and DARBMUPCO as solidarily liable with the respondent-contractors for the monetary claims of the workers, in proportion to their net planted area. 41
DARBMUPCO filed a motion for reconsideration which was denied. 42 It filed a second motion for reconsideration in the NLRC, which was also denied for
lack of merit and for being barred under the NLRC Rules of Procedure. 43 Hence, DARBMUPCO elevated the case to the CA by way of a Petition
for Certiorari.44 The case was docketed as C.A.-G.R. SP. No. 59958.
The former Eleventh Division of the CA consolidated C.A. G.R. SP. No. 59958 and C.A.-G.R. SP No. 53806 in a Resolution dated January 27, 2001. 45
C.A.-G.R. SP No. 61607
Pursuant to the May 4, 1999 Resolution of the SOLE approving the conduct of certification election, the Department of Labor and Employment ("DOLE")
conducted a certification election on October 1, 1999.46 On even date, DFI filed an election protest 47 before the Med-Arbiter arguing that the
certification election was premature due to the pendency of a petition for certiorari before the CA assailing the February 18, 1999 and May 4, 1999
Resolutions of the SOLE (previously discussed in C.A.-G.R. SP No. 53806).
In an Order dated December 15, 1999,48 the Med-Arbiter denied DFI’s election protest, and certified SPFL-Workers Solidarity of
DARBMUPCO/DIAMOND-SPFL ("WSD-SPFL") as the exclusive bargaining representative of the respondent-workers. DFI filed a Motion for
Reconsideration49 which the Med-Arbiter treated as an appeal, and which the latter elevated to the SOLE.
In a Resolution dated July 18, 2000,50 the SOLE dismissed the appeal. The Resolution stated that the May 4, 1999 Resolution directing the conduct of
certification election is already final and executory on June 4, 1999. It pointed out that the filing of the petition for certiorari  before the CA assailing the
February 18, 1999 and May 4, 1999 Resolutions does not stay the conduct of the certification election because the CA did not issue a restraining
order.51 DFI filed a Motion for Reconsideration but the motion was denied. 52
On October 27, 2000, DFI filed a Petition for Certiorari53 before the CA, docketed as C.A.-G.R. SP No. 61607.
In a Resolution dated August 2, 2005,54 the CA Twenty-Third Division consolidated C.A.-G.R. SP No. 61607 with C.A.-G.R. SP. No. 59958 and C.A. G.R. SP
No. 53806.
The Assailed CA Decision and Resolution
The CA was confronted with two issues:55
(1) "Whether DFI or DARBMUPCO is the statutory employer of the [respondent-workers] in these petitions; and
(2) Whether or not a certification election may be conducted pending the resolution of the petition for certiorari  filed before this Court, the
main issue of which is the identity of the employer of the [respondent-workers] in these petitions."
On the first issue, the CA agreed with the ruling of the SOLE 56 that DFI is the statutory employer of the respondent-workers. It noted that the DFI hired
the respondent-contractors, who in turn procured their own men to work in the land owned by DARBMUPCO. Further, DFI admitted that the
respondent-contractors worked under the direction and supervision of DFI’s managers and personnel. DFI also paid for the respondent-contractors’
services.57 The CA said that the fact that the respondent-workers worked in the land owned by DARBMUPCO is immaterial. "Ownership of the land is
not one of the four (4) elements generally considered to establish employer-employee relationship." 58
The CA also ruled that DFI is the true employer of the respondent-workers because the respondent-contractors are not independent contractors. 59 The
CA stressed that in its pleadings before the Med-Arbiter, the SOLE, and the CA, DFI revealed that DARBMUPCO lacks manpower to fulfill the production
requirements under the BPPA. This impelled DFI to hire contractors to supply labor enabling DARBMUPCO to meet its quota. The CA observed that
while the various agencies involved in the consolidated petitions sometimes differ as to who the statutory employer of the respondent-workers is, they
are uniform in finding that the respondent-contractors are labor-only contractors. 60
On the second issue, the CA reiterated the ruling of the SOLE 61 that absent an injunction from the CA, the pendency of a petition for certiorari  does not
stay the holding of the certification election.62 The challenged Resolution of the SOLE is already final and executory as evidenced by an Entry of
Judgment dated July 14, 1999; hence, the merits of the case can no longer be reviewed. 63
The CA thus held in its Decision dated March 31, 2006:
WHEREFORE, premises considered, this Court hereby ORDERS:
(1) the DISMISSAL of the petitions in C.A.-G.R. SP No. 53806 and C.A.-G.R. SP No. 61607; and
(2) the GRANTING of the petition in C.A.-G.R. SP No. 59958 and the SETTING ASIDE of the assailed resolutions of the NLRC dated 24 May 1999,
30 July 1999 and 26 June 2000, respectively.
SO ORDERED.64
DFI filed a Motion for Reconsideration of the CA Decision which was denied in a Resolution dated May 30, 2006. 65
DFI is now before us by way of Petition for Review on Certiorari  praying that DARBMUPCO be declared the true employer of the respondent-workers.
DARBMUPCO filed a Comment66 maintaining that under the control test, DFI is the true employer of the respondent-workers.
Respondent-contractors filed a Verified Explanation and Memorandum 67 asserting that they were labor-only contractors; hence, they are merely agents
of the true employer of the respondent-workers.
SPFL did not file any comment or memorandum on behalf of the respondent-workers. 68
The Issue
The issue before this Court is who among DFI, DARBMUPCO and the respondent-contractors is the employer of the respondent-workers.
Our Ruling
We deny the petition.
This case involves job contracting, a labor arrangement expressly allowed by law. Contracting or subcontracting is an arrangement whereby a principal
(or employer) agrees to put out or farm out with a contractor or subcontractor the performance or completion of a specific job, work or service within a
definite or predetermined period, regardless of whether such job, work or service is to be performed or completed within or outside the premises of
the principal.69 It involves a trilateral relationship among the principal or employer, the contractor or subcontractor, and the workers engaged by the
contractor or subcontractor.70
Article 106 of the Labor Code of the Philippines71 (Labor Code) explains the relations which may arise between an employer, a contractor, and the
contractor’s employees,72 thus:
ART. 106. Contractor or subcontracting. − Whenever an employer enters into a contract with another person for the performance of the formers work,
the employees of the contractor and of the latter’s subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the extent of the work performed under the contract, in the same manner
and extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who among the parties involved shall be considered the
employer for purposes of this Code, to prevent any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the
employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him.
The Omnibus Rules Implementing the Labor Code73 distinguishes between permissible job contracting (or independent contractorship) and labor-only
contracting. Job contracting is permissible under the Code if the following conditions are met:
(a) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the
performance of the work except as to the results thereof; and
(b) 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. 74
In contrast, job contracting shall be deemed as labor-only contracting, an arrangement prohibited by law, if a person who undertakes to supply workers
to an employer:
(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. 75
As a general rule, a contractor is presumed to be a labor-only contractor, unless such contractor overcomes the burden of proving that it has the
substantial capital, investment, tools and the like.76
Based on the conditions for permissible job contracting, we rule that respondent-contractors are labor-only contractors.
There is no evidence showing that respondent-contractors are independent contractors. The respondent-contractors, DFI, and DARBMUPCO did not
offer any proof that respondent-contractors were not engaged in labor-only contracting. In this regard, we cite our ruling in Caro v. Rilloraza,77 thus:
"In regard to the first assignment of error, the defendant company pretends to show through Venancio Nasol's own testimony that he was an
independent contractor who undertook to construct a railway line between Maropadlusan and Mantalisay, but as far as the record shows, Nasol did
not testify that the defendant company had no control over him as to the manner or methods he employed in pursuing his work. On the contrary, he
stated that he was not bonded, and that he only depended upon the Manila Railroad for money to be paid to his laborers. As stated by counsel for the
plaintiffs, the word ‘independent contractor’ means 'one who exercises independent employment and contracts to do a piece of work according to his
own methods and without being subject to control of his employer except as to result of the work.' Furthermore, if the employer claims that the
workmen is an independent contractor, for whose acts he is not responsible, the burden is on him to show his independence.
Tested by these definitions and by the fact that the defendant has presented practically no evidence to determine whether Venancio Nasol was in
reality an independent contractor or not, we are inclined to think that he is nothing but an intermediary between the defendant and certain
laborers. It is indeed difficult to find that Nasol is an independent contractor; a person who possesses no capital or money of his own to pay his
obligations to them, who files no bond  to answer for any fulfillment of his contract with his employer and specially subject to the control and
supervision of his employer, falls short of the requisites or conditions necessary for the common and independent contractor." 78 (Citations omitted;
emphasis supplied.)
To support its argument that respondent-contractors are the employers of respondent-workers, and not merely labor-only contractors, DFI should have
presented proof showing that respondent-contractors carry on an independent business and have sufficient capitalization. The record, however, is
bereft of showing of even an attempt on the part of DFI to substantiate its argument.
DFI cannot cite the May 24, 1999 Resolution of the NLRC as basis that respondent-contractors are independent contractors. Nowhere in the NLRC
Resolution does it say that the respondent-contractors are independent contractors. On the contrary, the NLRC declared that "it was not clearly
established on record that said [respondent-]contractors are independent, xxx." 79
Further, respondent-contractors admit, and even insist that they are engaged in labor-only contracting. As will be seen below, respondent-contractors
made the admissions and declarations on two occasions: first  was in their Formal Appearance of Counsel and Motion for Exclusion of Individual Party-
Respondents filed before the LA; and second was in their Verified Explanation and Memorandum filed before this Court.
Before the LA, respondent-contractors categorically stated that they are "labor-only" contractors who have been engaged by DFI and
DARBMUPCO.80 They admitted that they do not have substantial capital or investment in the form of tools, equipment, machineries, work premises and
other materials, and they recruited workers to perform activities directly related to the principal operations of their employer. 81
Before this Court, respondents-contractors again admitted that they are labor-only contractors. They narrated that:
1. Herein respondents, Voltaire Lopez, Jr., et al., were commissioned and contracted by petitioner, Diamond Farms, Inc. (DFI) to recruit
farm workers, who are the complaining [respondent-workers] (as represented by Southern Philippines Federation of Labor (SPFL) in this
appeal by certiorari), in order to perform specific farm activities, such as pruning, deleafing, fertilizer application, bud inject, stem spray,
drainage, bagging, etc., on banana plantation lands awarded to private respondent, Diamond Farms Agrarian Reform Beneficiaries Multi-
Purpose Cooperative (DARBMUPCO) and on banana planted lands owned and managed by petitioner, DFI.
2. All farm tools, implements and equipment necessary to performance of such farm activities were supplied by petitioner DFI to respondents
Voltaire Lopez, Jr., et. al. as well as to respondents-SPFL, et. al. Herein respondents Voltaire Lopez, Jr. et. al. had no adequate capital to
acquire or purchase such tools, implements, equipment, etc.
3. Herein respondents Voltaire Lopez, Jr., et. al. As well as respondents-SPFL, et. al. were being directly supervised, controlled and
managed by petitioner DFI farm managers and supervisors, specifically on work assignments and performance targets. DFI managers and
supervisors, at their sole discretion and prerogative, could directly hire and terminate any or all of the respondents-SPFL, et. al., including any
or all of the herein respondents Voltaire Lopez, Jr., et. al.
4. Attendance/Time sheets of respondents-SPFL, et. al. were being prepared by herein respondents Voltaire Lopez, Jr., et. al., and
correspondingly submitted to petitioner DFI. Payment of wages to respondents-SPFL, et. al. were being paid for by petitioner DFI thru herein
respondents Voltaire Lopez, [Jr.], et. al. The latter were also receiving their wages/salaries from petitioner DFI for
monitoring/leading/recruiting the respondents-SPFL, et. al.
5. No monies were being paid directly by private respondent DARBMUPCO to respondents-SPFL, et al., nor to herein respondents Voltaire
Lopez, [Jr.], et. al. Nor did respondent DARBMUPCO directly intervene much less supervise any or all of [the] respondents-SPFL, et. al.
including herein respondents Voltaire Lopez, Jr., et. al. 82 (Emphasis supplied.)
The foregoing admissions are legally binding on respondent-contractors. 83 Judicial admissions made by parties in the pleadings, or in the course of the
trial or other proceedings in the same case are conclusive and so does not require further evidence to prove them. 84 Here, the respondent-contractors
voluntarily pleaded that they are labor-only contractors; hence, these admissions bind them.
A finding that a contractor is a labor-only contractor is equivalent to a declaration that there is an employer-employee relationship between the
principal, and the workers of the labor-only contractor; the labor-only contractor is deemed only as the agent of the principal. 85 Thus, in this case,
respondent-contractors are the labor-only contractors and either DFI or DARBMUPCO is their principal.
We hold that DFI is the principal.
Under Article 106 of the Labor Code, a principal or employer refers to the person who enters into an agreement with a job contractor, either for the
performance of a specified work or for the supply of manpower. 86 In this regard, we quote with approval the findings of the CA, to wit:
The records show that it is DFI which hired the individual [respondent-contractors] who in turn hired their own men to work in the 689.88 hectares
land of DARBMUPCO as well as in the managed area of the plantation. DFI admits [that] these [respondent-contractors] worked under the direction
and supervision of the DFI managers and personnel. DFI paid the [respondent-contractors] for the services rendered in the plantation and the
[respondent-contractors] in turn pay their workers after they [respondent-contractors] received payment from DFI. xxx DARBMUPCO did not have
anything to do with the hiring, supervision and payment of the wages of the workers-respondents thru the contractors-respondents. xxx 87 (Emphasis
supplied.)
DFI does not deny that it engaged the services of the respondent-contractors. It does not dispute the claims of respondent-contractors that they sent
their billing to DFI for payment; and that DFI’s managers and personnel are in close consultation with the respondent-contractors. 88
DFI cannot argue that DARBMUPCO is the principal of the respondent-contractors because it (DARBMUPCO) owns the awarded plantation where
respondent-contractors and respondent-workers were working; 89 and therefore DARBMUPCO is the ultimate beneficiary of the employment of the
respondent-workers.90
That DARBMUPCO owns the awarded plantation where the respondent-contractors and respondent-workers were working is immaterial. This does not
change the situation of the parties. As correctly found by the CA, DFI, as the principal, hired the respondent-contractors and the latter, in turn, engaged
the services of the respondent-workers. 91 This was also the unanimous finding of the SOLE,92 the LA,93 and the NLRC.94 Factual findings of the NLRC,
when they coincide with the LA and affirmed by the CA are accorded with great weight and respect and even finality by this Court. 95
Alilin v. Petron Corporation96 is applicable. In that case, this Court ruled that the presence of the power of control on the part of the principal over the
workers of the contractor, under the facts, prove the employer-employee relationship between the former and the latter, thus:
[A] finding that a contractor is a ‘labor-only’ contractor is equivalent to declaring that there is an employer-employee relationship between the
principal and the employees of the supposed contractor." In this case, the employer-employee relationship between Petron and petitioners becomes
all the more apparent due to the presence of the power of control on the part of the former over the latter.
It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals  that:
This Court has constantly adhered to the "four-fold test" to determine whether there exists an employer-employee relationship between the
parties.1âwphi1 The four elements of an employment relationship are: (a) the selection and engagement of the employee; (b) the payment of wages;
(c) the power of dismissal; and (d) the power to control the employee’s conduct.
Of these four elements, it is the power to control which is the most crucial and most determinative factor, so important, in fact, that, the other
elements may even be disregarded.
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid by them do not detract from the conclusion that
there exists an employer-employee relationship between the parties due to Petron’s power of control over the petitioners. One manifestation of the
power of control is the power to transfer employees from one work assignment to another. Here, Petron could order petitioners to do work outside of
their regular "maintenance/utility" job. Also, petitioners were required to report for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00 p.m.
daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety and security measures being implemented within the bulk
plant. All these imply control. In an industry where safety is of paramount concern, control and supervision over sensitive operations, such as those
performed by the petitioners, are inevitable if not at all necessary. Indeed, Petron deals with commodities that are highly volatile and flammable which,
if mishandled or not properly attended to, may cause serious injuries and damage to property and the environment. Naturally, supervision by Petron is
essential in every aspect of its product handling in order not to compromise the integrity, quality and safety of the products that it distributes to the
consuming public.97 (Citations omitted; emphasis supplied)
That DFI is the employer of the respondent-workers is bolstered by the CA’s finding that DFI exercises control over the respondent-workers. 98 DFI,
through its manager and supervisors provides for the work assignments and performance targets of the respondent-workers. The managers and
supervisors also have the power to directly hire and terminate the respondent-workers. 99 Evidently, DFI wields control over the respondent-workers.
Neither can DFI argue that it is only the purchaser of the bananas produced in the awarded plantation under the BPPA, 100 and that under the terms of
the BPPA, no employer-employee relationship exists between DFI and the respondent-workers, 101 to wit:
UNDERTAKING OF THE FIRST PARTY
xxx
3. THE FIRST PARTY [DARBMUPCO] shall be responsible for the proper conduct, safety, benefits and general welfare of its members working in the
plantation and specifically render free and harmless the SECOND PARTY [DFI] of any expense, liability or claims arising therefrom. It is clearly
recognized by the FIRST PARTY that its members and other personnel utilized in the performance of its function under this agreement are not
employees of the SECOND PARTY.102 (Emphasis supplied)
In labor-only contracting, it is the law which creates an employer-employee relationship between the principal and the workers of the labor-only
contractor.103
Inasmuch as it is the law that forms the employment ties, the stipulation in the BPPA that respondent-workers are not employees of DFI is not
controlling, as the proven facts show otherwise. The law prevails over the stipulations of the parties. Thus, in Tabas v. California Manufacturing Co.,
Inc.,104 we held that:
The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement.1âwphi1 Hence,
the fact that the manpower supply agreement between Livi and California had specifically designated the former as the petitioners' employer and had
absolved the latter from any liability as an employer, will not erase either party's obligations as an employer, if an employer-employee relation
otherwise exists between the workers and either firm. xxx 105 (Emphasis supplied.)
Clearly, DFI is the true employer of the respondent-workers; respondent-contractors are only agents of DFI. Under Article 106 of the Labor Code, DFI
shall be solidarily liable with the respondent-contractors for the rightful claims of the respondent-workers, to the same manner and extent as if the
latter are directly employed by DFI.106
WHEREFORE, the petition is DENIED for lack of merit. The March 31, 2006 Decision and the May 30, 2006 Resolution of the Court of Appeals in C.A.-
G.R. SP Nos. 53806, 61607 and 59958 are hereby AFFIRMED.
SO ORDERED.
FRANCIS H. JARDELEZA
Associate Justice
 SECOND DIVISION
G.R. No. 208451, February 03, 2016
MANILA MEMORIAL PARK CEMETERY, INC., Petitioner, v. EZARD D. LLUZ, NORMAN CORRAL, ERWIN FUGABAN, VALDIMAR BALISI, EMILIO FABON,
JOHN MARK APLICADOR, MICHAEL CURIOSO, JUNLIN ESPARES, GAVINO FARINAS, AND WARD TRADING AND SERVICES, Respondents.
DECISION
CARPIO, J.:
The Case

This is a petition for review on certiorari 1 assailing the Decision2 dated 21 January 2013 and the Resolution3 dated 17 July 2013 of the Court of Appeals
(CA) in CA-G.R. SP No. 119237.chanRoblesvirtualLawlibrary
The Facts

On 23 February 2006, petitioner Manila Memorial Park Cemetery, Inc. (Manila Memorial) entered into a Contract of Services with respondent Ward
Trading and Services (Ward Trading). The Contract of Services provided that Ward Trading, as an independent contractor, will render interment and
exhumation services and other related work to Manila Memorial in order to supplement operations at Manila Memorial Park, Paranaque City.

Among those assigned by Ward Trading to perform services at the Manila Memorial Park were respondents Ezard Lluz, Norman Corral, Erwm Fugaban,
Valdimar Balisi, Emilio Fabon, John Mark Aplicador, Michael Curioso, Junlin Espares, and Gavino Farinas (respondents). They worked six days a week for
eight hours daily and were paid P250 per day.

On 26 June 2007, respondents filed a Complaint 4 for regularization and Collective Bargaining Agreement benefits against Manila Memorial; Enrique B.
Lagdameo, Manila Memorial's Executive Vice-President and Director in Charge for Overall Operations, and Ward Trading. On 6 August 2007,
respondents filed an amended complaint to include illegal dismissal, underpayment of 13 th month pay, and payment of attorney's fees.

Respondents alleged that they asked Manila Memorial to consider them as regular workers within the appropriate bargaining unit established in the
collective bargaining agreement by Manila Memorial and its union, the Manila Memorial Park Free Workers Union (MMP Union). Manila Memorial
refused the request since respondents were employed by Ward Trading, an independent labor contractor. Thereafter, respondents joined the MMP
Union. The MMP Union, on behalf of respondents, sought their regularization which Manila Memorial again declined. Respondents then filed the
complaint. Subsequently, respondents were dismissed by Manila Memorial. Thus, respondents amended the complaint to include the prayer for their
reinstatement and payment of back wages.

Meanwhile, Manila Memorial sought the dismissal of the complaint for lack of jurisdiction since there was no employer-employee relationship. Manila
Memorial argued that respondents were the employees of Ward Trading.

In a Decision5 dated 29 March 2010, the Labor Arbiter dismissed the complaint for failing to prove the existence of an employer-employee relationship.
The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, judgment is hereby rendered dismissing the above-entitled case for complainants' lack of employer-employee
relationship with respondent Manila Memorial Park Cemetery, Inc.

SO ORDERED.6chanroblesvirtuallawlibrary
Respondents appealed7 to the NLRC. In a Decision8 dated 30 September 2010, the NLRC reversed the Labor Arbiter's findings. The NLRC ruled that Ward
Trading was a labor-only contractor and an agent of Manila Memorial. The dispositive portion of the Decision states:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, complainants' appeal is GRANTED. The assailed Decision of Labor Arbiter Geobel A. Bartolabac dated March 29,
2010 is MODIFIED. It is hereby declared that complainants were regular employees of respondent Manila Memorial Park Cemetery, Inc. and entitled to
the benefits provided for under the CBA between the latter and the Manila Memorial Park Free Workers Union.

Respondent Manila Memorial Park Cemetery, Inc. is ordered to pay wage differentials to complainants as follows:ChanRoblesVirtualawlibrary
1. Ezard D. Lluz - P43,982.79

2. Norman Corral - P29,765.67

3. Erwin Fugaban - P28,634.67

4. Valdimar Balisi - P20,310.33

5. Emilio Fabon - P43,982.79

6. John Mark Aplicador - P43,982.79

7. Michael Curioso - P43,982.79

8. Ju[n]lin Espares - P43,982.79

9. Gavino Farinas - P43,982.79

9
SO ORDERED. chanroblesvirtuallawlibrary
Manila Memorial filed a Motion for Reconsideration which was denied in a Resolution 10 dated 31 January 2011.

Thereafter, Manila Memorial filed an appeal with the CA. In a Decision dated 21 January 2013, the CA affirmed the ruling of the NLRC. The CA found the
existence of an employer-employee relationship between Manila Memorial and respondents. The dispositive portion of the Decision
states:ChanRoblesVirtualawlibrary
WHEREFORE, in view of the foregoing, the instant Petition for Certiorari is DENIED. The Decision, dated September 30, 2010 and the Resolution, dated
January 31, 2011, rendered by the National Labor Relations Commission (NLRC) in NLRC LAC No. 06-001267-10 are AFFIRMED.

SO ORDERED.11chanroblesvirtuallawlibrary
Manila Memorial then filed a Motion for Reconsideration which was denied by the CA in a Resolution dated 17 July 2013.

Hence, the instant petition.chanRoblesvirtualLawlibrary

The Issue

The main issue for our resolution is whether or not an employer-employee relationship exists between Manila Memorial and respondents for the latter
to be entitled to their claim for wages and other benefits.chanRoblesvirtualLawlibrary
The Court's Ruling

The petition lacks merit.

Manila Memorial contends that Ward Trading has total assets in excess of P1.4 million, according to Ward Trading's financial statements for the year
2006, proving that it has sufficient capitalization to qualify as a legitimate independent contractor. Manila Memorial insists that nowhere is it provided
in the Contract of Services that Manila Memorial controls the manner and means by which respondents accomplish the results of their work. Manila
Memorial states that the company only wants its contractors and the latter's employees to abide by company rules and regulations.

Respondents, on the other hand, assert that they are regular employees of Manila Memorial since Ward Trading cannot qualify as an independent
contractor but should be treated as a mere labor-only contractor. Respondents state that (1) there is enough proof that Ward Trading does not have
substantial capital, investment, tools and the like; (2) the workers recruited and placed by the alleged contractors performed activities that were
related to Manila Memorial's business; and (3) Ward Trading does not exercise the right to control the performance of the work of the contractual
employees.

As a general rule, factual findings of the CA are binding upon this Court. One exception to this rule is when the factual findings of the former are
contrary to those of the trial court, or the lower administrative body, as the case may be. This Court is obliged to resolve an issue of fact due to the
conflicting findings of the Labor Arbiter on one hand, and the NLRC and the CA on the other.

In order to determine whether there exists an employer-employee relationship between Manila Memorial and respondents, relevant provisions of the
labor law and rules must first be reviewed. Article 106 of the Labor Code states:ChanRoblesVirtualawlibrary
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another person for the performance of the former's work, the
employees of the contractor and of the latter's subcontractor, if any, shall be paid in accordance with the provisions of this Code.

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

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

There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such person are performing activities which
are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (Emphasis
supplied)
Sections 3, 5 and 7 of Department Order No. 18-0212 distinguish between legitimate and labor-only contracting and assume the existence of an
employer-employee relationship if found to be engaged in labor-only contracting. The provisions state:ChanRoblesVirtualawlibrary
xxxx

Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists a trilateral relationship under which there is a
contract for a specific job, work or service between the principal and the contractor or subcontractor, and a contract of employment between the
contractor or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the principal which decides to farm out a
job or service to a contractor or subcontractor, the contractor or subcontractor which has the capacity to independently undertake the performance of
the job, work or service, and the contractual workers engaged by the contractor or subcontractor to accomplish the job, work or service.

xxxx

Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared prohibited. For this purpose, labor-only contracting
shall refer to an arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal, and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and the
employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main business of
the principal; or

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

The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor Code, as amended.

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

xxxx

Section 7. Existence of an employer-employee relationship. - The contractor or subcontractor shall be considered the employer of the contractual
employee for purposes of enforcing the provisions of the Labor Code and other social legislation. The principal, however, shall be solidarity liable with
the contractor in the event of any violation of any provision of the Labor Code, including the failure to pay wages.

The principal shall be deemed the employer of the contractual employee in any of the following cases as declared by a competent
authority:ChanRoblesVirtualawlibrary
(a) where there is labor-only contracting; or
(b) where the contracting arrangement falls within the prohibitions provided in Section 6 (Prohibitions) hereof. (Emphasis supplied)
It is clear from these provisions that contracting arrangements for the performance of specific jobs or services under the law and its implementing rules
are allowed. However, contracting must be made to a legitimate and independent job contractor since labor rules expressly prohibit labor-only
contracting.

Labor-only contracting exists when the contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal and any of the following elements are present:
1) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed and
the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to the main
business of the principal; or
2) The contractor does not exercise the right to control the performance of the work of the contractual employee. 13

In the present case, Manila Memorial entered into a Contract of Services with Ward Trading, a single proprietorship owned by Emmanuel Mayor Ward
with business address in Las Piñas City on 23 February 2006. In the Contract of Services, it was provided that Ward Trading, as the contractor, had
adequate workers and substantial capital or investment in the form of tools, equipment, machinery, work premises and other materials which were
necessary in the conduct of its business.

However, a closer look at the Contract of Services reveals that Ward Trading does not have substantial capital or investment in the form of tools,
equipment, machinery, work premises and other materials since it is Manila Memorial which owns the equipment used in the performance of work
needed for interment and exhumation services. The pertinent provision in the Contract of Services which shows that Manila Memorial owns the
equipment states:ChanRoblesVirtualawlibrary
The COMPANY shall [sell] to the contractor the COMPANY owned equipment in the amount of ONE MILLION FOUR HUNDRED THOUSAND PESOS ONLY
(Php 1,400,000.00) payable in two (2) years or a monthly payment of FIFTY EIGHT THOUSAND THREE HUNDRED THIRTY FIVE PESOS ONLY (Php
58,335.00) to be deducted from the CONTRACTOR'S billing. 14chanroblesvirtuallawlibrary
Just by looking at the provision, it seems that the sale was a regular business transaction between two parties. However, Manila Memorial did not
present any evidence to show that the sale actually pushed through or that payments were made by Ward Trading to prove an ordinary arms length
transaction. We agree with the NLRC in its findings:ChanRoblesVirtualawlibrary
While the above-cited provision of the Contract of Service implies that respondent MMPCI would sell subject equipment to Ward at some future time,
the former failed to present any contract of sale as proof that, indeed, it actually sold said equipment to Ward. Likewise, respondent MMPCI failed to
present any "CONTRACTOR'S billing" wherein the purported monthly installment of P58,335.00 had been deducted, to prove that Ward truly paid the
same as they fell due. In a contract to sell, title is retained by the vendor until full payment of the price.

Moreover, the Contract of Service provides that:ChanRoblesVirtualawlibrary

"5. The COMPANY reserves the right to rent all or any of the CONTRACTOR'S equipment in the event the COMPANY requires the use of said equipment,
x x x."
This provision is clear proof that Ward does not have an absolute right to use or enjoy subject equipment, considering that its right to do so is subject to
respondent MMPCI's use thereof at any time the latter requires it. Such provision is contrary to Article 428 of the Civil Code, which provides that "The
owner has the right to enjoy and dispose of a thing, without other limitation than those established by law." It is plain to see that Ward is not the owner
of the equipment worth P1,400,000.00 that is being actually and directly used in the performance of the services contracted out.

Further, the Service Contract states that:ChanRoblesVirtualawlibrary

"For its part, the COMPANY agrees to provide the following:

a) Area to store CONTRACTOR'S equipment and materials

b) Office space for CONTRACTOR'S staff and personnel"
This provision is clear proof that even the work premises actually and directly used by Ward in the performance of the services contracted out is owned
by respondent MMPCI.15chanroblesvirtuallawlibrary
Also, the difference in the value of the equipment in the total amount of P1,400,000.00 can be glaringly seen in Ward Trading's financial statements for
the year 2006 when compared to its 2005 financial statements. It is significant to note that these financial statements were submitted by Manila
Memorial without any certification that these financial statements were actually audited by an independent certified public accountant. Ward Trading's
Balance Sheet16 as of 31 December 2005 showed that it had assets in the amount of P441,178.50 and property and equipment with a net book value of
P86,026.50 totaling P534,705. A year later, Ward Trading's Balance Sheet 17 ending in 31 December 2006 showed that it had assets in the amount of
P57,084.70 and property and equipment with a net book value of Pl,426,468 totaling P1,491,052.70. Ward Trading, in its Income Statements 18 for the
years 2005 and 2006, only earned a net income of P53,800 in the year ending 2005 and P68,141.50 in 2006. Obviously, Ward Trading could not have
raised a substantial capital of P1,400,000.00 from its income alone without the inclusion of the equipment owned and allegedly sold by Manila
Memorial to Ward Trading after they signed the Contract of Services on 23 February 2006.

Further, the records show that Manila Memorial and Enrique B. Lagdameo admitted that respondents performed various interment services at its
Sucat, Paranaque branch which were directly related to Manila Memorial's business of developing, selling and maintaining memorial parks and
interment functions. Manila Memorial even retained the right to control the performance of the work of the employees concerned. As correctly
observed by the CA:ChanRoblesVirtualawlibrary
A perusal of the Service Contract would reveal that respondent Ward is still subject to petitioner's control as it specifically provides that although Ward
shall be in charge of the supervision over individual respondents, the exercise of its supervisory function is heavily dependent upon the needs of
petitioner Memorial Park, particularly:ChanRoblesVirtualawlibrary
"It is also agreed that:

a) The CONTRACTOR'S supervisor will conduct a regular inspection of grave sites/areas being dug to ensure compliance with the COMPANY'S interment
schedules and other related ceremonies.
b) The CONTRACTOR will provide enough manpower during peak interment days including Sundays and Holidays.
c) The CONTRACTOR shall schedule off-days for its workers in coordination with the COMPANY'S schedule of interment operation.
d) The CONTRACTOR shall be responsible for any damage done to lawn/s and/or structure/s resulting from its operation, which must be restored to
its/their original condition without delay and at the expense of CONTRACTOR."
The contract further provides that petitioner has the option to take over the functions of Ward's personnel if it finds any part or aspect of the work or
service provided to be unsatisfactory, thus:ChanRoblesVirtualawlibrary
"6.1 It is hereby expressly agreed and understood that, at any time during the effectivity of this CONTRACT and its sole determination, the COMPANY
may take over the performance of any of the functions mentioned in Paragraph I above, in any of the following cases:chanRoblesvirtualLawlibrary
xxx

c. If the COMPANY finds the performance of the CONTRACTOR in any part or aspect of the grave digging works or other services provided by it to be
unsatisfactory."
It is obvious that the aforementioned provision leaves respondent Ward at the mercy of petitioner Memorial Park as the contract states that the latter
may take over if it finds any part of the services to be below its expectations, including the manner of its performance. x x
x.19chanroblesvirtuallawlibrary

The NLRC also found that Ward Trading's business documents fell short of sound business practices. The relevant portion in the NLRC's Decision
states:ChanRoblesVirtualawlibrary
It is also worth noting that while Ward has a Certificate of Business Name Registration issued by the Department of Trade and Industry on October 24,
2003 and valid up to October 24, 2008, the same expressly states that it is not a license to engage in any kind of business, and that it is valid only at the
place indicated therein, which is Las Piñas City. Hence, the same is not valid in Paranaque City, where Ward assigned complainants to perform
interment services it contracted with respondent MMPCI. It is also noted that the Permit, which was issued to Ward by the Office of the Mayor of Las
Piñas City on October 28, 2003, was valid only up to December 31, 2003. Likewise, the Sanitary Permit to Operate, which was issued to Ward by the
Office of the City Health Officer of the Las Piñas City Health Office on October 28, 2003, expired on December 31, 2003. While respondents MMPCI and
Lagdameo were able to present copies of the above-mentioned documents, they failed to present any proof that Ward is duly registered as [a]
contractor with the Department of Labor and Employment. 20chanroblesvirtuallawlibrary
Section 11 of Department Order No. 18-02, which mandates registration of contractors or subcontractors with the DOLE,
states:ChanRoblesVirtualawlibrary
Section 11. Registration of Contractors or Subcontractors. - Consistent with authority of the Secretary of Labor and Employment to restrict or prohibit
the contracting out of labor through appropriate regulations, a registration system to govern contracting arrangements and to be implemented by the
Regional Office is hereby established.

The Registration of contractors and subcontractors shall be necessary for purposes of establishing an effective labor market information and
monitoring.

Failure to register shall give rise to the presumption that the contractor is engaged in labor-only contracting.
For failing to register as a contractor, a presumption arises that one is engaged in labor-only contracting unless the contractor overcomes the burden of
proving that it has substantial capital, investment, tools and the like. 21chanroblesvirtuallawlibrary

In this case, however, Manila Memorial failed to adduce evidence to prove that Ward Trading had any substantial capital, investment or assets to
perform the work contracted for. Thus, the presumption that Ward Trading is a labor-only contractor stands. Consequently, Manila Memorial is
deemed the employer of respondents. As regular employees of Manila Memorial, respondents are entitled to their claims for wages and other benefits
as awarded by the NLRC and affirmed by the CA.

WHEREFORE, we DENY the petition. We AFFIRM the Decision dated 21 January 2013 and the Resolution dated 17 July 2013 of the Court of Appeals in
CA-G.R. SP No. 119237.

SO ORDERED.

Velasco, Jr.,*Del Castillo, and Mendoza, JJ., concur.

Leonen, J., on leave.
 FIRST DIVISION
G.R. No. 100388               December 14, 2000
SOCIAL SECURITY SYSTEM, petitioner,
vs.
THE COURT OF APPEALS and CONCHITA AYALDE, respondents.
DECISION
YNARES-SANTIAGO, J.:
In a petition before the Social Security Commission, Margarita Tana, widow of the late Ignacio Tana, Sr., alleged that her husband was, before his
demise, an employee of Conchita Ayalde as a farmhand in the two (2) sugarcane plantations she owned (known as Hda. No. Audit B-70 located in
Pontevedra, La Carlota City) and leased from the University of the Philippines (known as Hda. Audit B-15-M situated in La Granja, La Carlota City). She
further alleged that Tana worked continuously six (6) days a week, four (4) weeks a month, and for twelve (12) months every year between January
1961 to April 1979. For his labor, Tana allegedly received a regular salary according to the minimum wage prevailing at the time. She further alleged
that throughout the given period, social security contributions, as well as medicare and employees compensation premiums were deducted from
Tana’s wages. It was only after his death that Margarita discovered that Tana was never reported for coverage, nor were his contributions/premiums
remitted to the Social Security System (SSS). Consequently, she was deprived of the burial grant and pension benefits accruing to the heirs of Tana had
he been reported for coverage.
Hence, she prayed that the Commission issue an order directing:
1. respondents Conchita Ayalde and Antero Maghari as her administrator to pay the premium contributions of the deceased Ignacio Tana, Sr. and
report his name for SSS coverage; and
2. the SSS to grant petitioner Margarita Tana the funeral and pension benefits due her. 1
The SSS, in a petition-in-intervention, revealed that neither Hda. B-70 nor respondents Ayalde and Maghari were registered members-employers of the
SSS, and consequently, Ignacio Tana, Sr. was never registered as a member-employee. Likewise, SSS records reflected that there was no way of
verifying whether the alleged premium contributions were remitted since the respondents were not registered members-employers. Being the agency
charged with the implementation and enforcement of the provisions of the Social Security Law, as amended, the SSS asked the Commission’s leave to
intervene in the case.2
In his answer, respondent Antero Maghari raised the defense that he was a mere employee who was hired as an overseer of Hda. B-70 sometime
during crop years 1964-65 to 1971-72, and as such, his job was limited to those defined for him by the employer which never involved matters relating
to the SSS. Hence, he prayed that the case against him be dismissed for lack of cause of action. 3
For her part, respondent Ayalde belied the allegation that Ignacio Tana, Sr. was her employee, admitting only that he was hired intermittently as an
independent contractor to plow, harrow, or burrow Hda. No. Audit B-15-M. Tana used his own carabao and other implements, and he followed his own
schedule of work hours. Ayalde further alleged that she never exercised control over the manner by which Tana performed his work as an independent
contractor. Moreover, Ayalde averred that way back in 1971, the University of the Philippines had already terminated the lease over Hda. B-15-M and
she had since surrendered possession thereof to the University of the Philippines. Consequently, Ignacio Tana, Sr. was no longer hired to work thereon
starting in crop year 1971-72, while he was never contracted to work in Hda. No. Audit B-70. She also prayed for the dismissal of the case considering
that Ignacio Tana, Sr. was never her employee.4
After hearing both parties, the Social Security Commission issued a Resolution on January 28, 1988, the dispositive portion of which reads:
After a careful evaluation of the testimonies of the petitioner and her witnesses, as well as the testimony of the respondent together with her
documentary evidences, this Commission finds that the late Ignacio Tana was employed by respondent Conchita Ayalde from January 1961 to March
1979. The testimony of the petitioner which was corroborated by Agaton Libawas and Aurelio Tana, co-workers of the deceased Ignacio Tana,
sufficienty established the latter’s employment with the respondent.
As regards respondent Antero Maghari, he is absolved from liability because he is a mere employee of Conchita Ayalde.
PREMISES CONSIDERED, this Commission finds and so holds that the late Ignacio Tana had been employed continuously from January 1961 to March
1979 in Hda. B-70 and Hda. B-15-M which are owned and leased, respectively, by respondent Conchita (Concepcion) Ayalde with a salary based on the
Minimum Wage prevailing during his employment.
Not having reported the petitioner’s husband for coverage with the SSS, respondent Conchita (Concepcion) Ayalde is, therefore, liable for the payment
of damages equivalent to the death benefits in the amount of P7,067.40 plus the amount of P750.00 representing funeral benefit or a total of
P7,817.40.
Further, the SSS is ordered to pay to the petitioner her accrued pension covering the period after the 5-year guaranteed period corresponding to the
employer’s liability.
SO ORDERED."5
Respondent Ayalde filed a motion for reconsideration 6 which the Commission denied for lack of merit in an Order dated November 3, 1988. 7
Not satisfied with the Commission’s ruling, Ayalde appealed to the Court of Appeals, docketed as CA-G.R. SP No. 16427, raising the following
assignment of errors:
I
The Social Security Commission erred in not finding that there is sufficient evidence to show that:
(a) The deceased Ignacio Tana, Sr. never worked in the farmland of respondent-appellant situated in Pontevedra, La Carlota City,
otherwise known as Hacienda No. Audit B-70, (Pontevedra B-70 Farm for short), in any capacity, whether as a daily or monthly
laborer or as independent contractor;
(b) During the time that respondent-appellant was leasing a portion of the land of the University of the Philippines, otherwise
known as Hacienda Audit No. B-15-M, (La Granja B-15 Farm for short), the deceased Ignacio Tana, Sr. was hired thereat on a
‘pakyaw’ basis, or as an independent contractor, performing the services of an ‘arador’ (Plower), for which he was proficient, using
his own carabao and farming implements on his own time and discretion within the period demanded by the nature of the job
contracted.
II
The Social Security Commission erred in holding that there is no evidence whatsoever to show that respondent-appellant was no longer
leasing La Granja B-15 Farm.
III
 The Social Security Commission erred in not holding that the deceased Ignacio Tana, having been hired as an independent contractor on
‘pakyaw’ basis, did not fall within the coverage of the Social Security Law. 8
The Court of Appeals rendered judgment in favor of respondent-appellant Conchita Ayalde and dismissed the claim of petitioner Margarita Tan.
The SSS, as intervenor-appellee, filed a Motion for Reconsideration, which was denied on the ground that the arguments advanced are "mere
reiterations of issues and arguments already considered and passed upon in the decision in question which are utterly insufficient to justify a
modification or reversal of said decision." 9
Hence, this petition for review on certiorari on the following assigned errors:
1) The Court of Appeals was in error in ruling that an employee working under the "pakyaw" system is considered under the law to be an
independent contractor.
2) The Court of Appeals was in error in not giving due consideration to the fundamental tenet that doubts in the interpretation and
implementation of labor and social welfare laws should be resolved in favor of labor.
3) The Court of Appeals was in error in disregarding the settled rule that the factual findings of administrative bodies on matters within their
competence shall not be disturbed by the courts.
4) The Court of Appeals was in error in ruling that even granting arguendo that Ignacio Tana was employed by Conchita Ayalde, such
employment did not entitle him to compulsory coverage since he was not paid any regular daily wage or basic pay and he did not work for an
uninterrupted period of at least six months in a year in accordance with Section 8(j) (1) of the SS Law.
The pivotal issue to be resolved in this petition is whether or not an agricultural laborer who was hired on "pakyaw" basis can be considered an
employee entitled to compulsory coverage and corresponding benefits under the Social Security Law.
Petitioner, Social Security System (or SSS), argues that the deceased Ignacio Tana, Sr., who was hired by Conchita Ayalde on "pakyaw" basis to perform
specific tasks in her sugarcane plantations, should be considered an employee; and as such, his heirs are entitled to pension and burial benefits.
The Court of Appeals, however, ruled otherwise, reversing the ruling of the Social Security Commission and declaring that the late Ignacio Tana, Sr. was
an independent contractor, and in the absence of an employer-employee relationship between Tana and Ayalde, the latter cannot be compelled to pay
to his heirs the burial and pension benefits under the SS Law.
At the outset, we reiterate the well-settled doctrine that the existence of an employer-employee relationship is ultimately a question of fact. 10 And
while it is the general rule that factual issues are not within the province of the Supreme Court, said rule is not without exception. In cases, such as this
one, where there are conflicting and contradictory findings of fact, this Court has not hesitated to scrutinize the records to determine the facts for
itself.11 Our disquisition of the facts shall be our guide as to whose findings are supported by substantial evidence.
The mandatory coverage under the SSS Law (Republic Act No. 1161, as amended by PD 1202 and PD 1636) is premised on the existence of an employer-
employee relationship, and Section 8(d) defines an "employee" as "any person who performs services for an employer in which either or both mental
and physical efforts are used and who receives compensation for such services where there is an employer-employee relationship." The essential
elements of an employer-employee relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of
dismissal; and (d) the power of control with regard to the means and methods by which the work is to be accomplished, with the power of control
being the most determinative factor. 12
There is no question that Tana was selected and his services engaged by either Ayalde herself, or by Antero Maghari, her overseer. Corollarily, they also
held the prerogative of dismissing or terminating Tana’s employment. The dispute is in the question of payment of wages. Claimant Margarita Tana and
her corroborating witnesses testified that her husband was paid daily wages "per quincena" as well as on "pakyaw" basis. Ayalde, on the other hand,
insists that Tana was paid solely on "pakyaw" basis. To support her claim, she presented payrolls covering the period January of 1974 to January of
1976;13 and November of 1978 to May of 1979.14
A careful perusal of the records readily show that the exhibits offered are not complete, and are but a mere sampling of payrolls. While the names of
the supposed laborers appear therein, their signatures are nowhere to be found. And while they cover the years 1975, 1976 and portions of 1978 and
1979, they do not cover the 18-year period during which Tana was supposed to have worked in Ayalde’s plantations. Also an admitted fact is that these
exhibits only cover Hda. B70, Ayalde having averred that all her records and payrolls for the other plantation (Hda. B-15-M) were either destroyed or
lost.15
To our mind, these documents are not only sadly lacking, they are also unworthy of credence. The fact that Tana’s name does not appear in the payrolls
for the years 1975, 1976 and part of 1978 and 1979, is no proof that he did not work in Hda. B70 in the years 1961 to 1974, and the rest of 1978 and
1979. The veracity of the alleged documents as payrolls are doubtful considering that the laborers named therein never affixed their signatures to show
that they actually received the amounts indicated corresponding to their names. Moreover, no record was shown pertaining to Hda. B-15-M, where
Tana was supposed to have worked. Even Ayalde admitted that she hired Tana as "arador" and sometimes as laborer during milling in Hda. B-15-M. 16 In
light of her incomplete documentary evidence, Ayalde’s denial that Tana was her employee in Hda. B-70 or Hda. B-15-M must fail.
In contrast to Ayalde’s evidence, or lack thereof, is Margarita Tana’s positive testimony, corroborated by two (2) other witnesses. On the matter of
wages, they testified as follows:
Margarita Tana:
Q. During the employment of your late husband, was he paid any wages?
A. Yes, he was paid.
Q. What was the manner of payment of his salary, was it on "pakyaw" or daily basis?
A. Daily basis.
Q. How many times did he receive his salary in a month’s time?
A. 2 times.
Q. You mean, payday in Hda. B-70 is every 15 days?
A. Yes, sir.
x x x           x x x          x x x
ATTY. GALVAN:
To prove that it is material to the main question because if ever the hacienda maintains complete payrolls of their employees, then the burden of proof
lies in the petitioner…..
HEARING OFFICER:
Let the witness answer, if she knows.
WITNESS:
There was no payroll, only pad paper.
ATTY. GALVAN: (continuing)
Q. Were the names of workers of the hacienda all listed in that pad paper every payday?
A. Yes, we just sign on pad paper because we have no payroll to be signed.
x x x           x x x          x x x
Q. What do you understand by payroll?
A. Payroll is the list where the whole laborers are listed and receive their salaries.
Q. And how did that differ from the pad paper which you said you signed?
A. There is a difference.
Q. What is the difference?
A. In the payroll, at the end there is a column for signature but in the pad paper, we only sign directly.
Q. Did it contain the amount that you receive?
A. Yes, sir.
Q. And the date corresponding to the payroll pad?
A. I am not sure but it only enumerates our names and then we were given our salaries.
Q. Now, did you have a copy of that?
ATTY. GALVAN:
Objection, Your Honor, it is not the petitioner who had a copy, it is usually the owner because the preparation of the payrolls is done by the employer
who…..
ATTY. UNGCO:
That is why I’m asking …..
HEARING OFFICER:
Let the witness answer. Objection overruled.
WITNESS:
I don’t have.
x x x           x x x          x x x
Q. When you are receiving daily wage of P4.00 how much was your quincenal together with your husband?
A. The highest salary I received for my own was P30.00 in one quincena.
Q. What about the salary of your husband, how much?
A. The same.
Q. Was this P30.00 per quincena later on increased?
A. There was an increase because formerly it was P4.00 now it is P8.00.
Q. In 1979 how much was your husband’s salary per quincena?
A. In one quincena my husband receives P60.00 while I only receive P30.00. 17
AGATON LIBAWAS:
Q. During your employment, do you sign payrolls everytime you draw your salary?
A. We sign on intermediate pad.
Q. You mean, the practice of the hacienda is to have the names of the laborers receiving that salaries listed on that intermediate pad?
A. Yes, sir.18
AURELIO TANA:
Q. By the way, how many times did you receive your salaries in a month?
A. We receive our wages twice a month that is, every 15 days.
Q. Did you sign payrolls everytime you received your salaries?
A. In the pad paper as substitute payroll.
Q. Do you know if all the workers of the hacienda were listed in that payrolls?
A. Yes, sir.
Q. Who was in charge in giving your salaries?
A. Antero Maghari.19
These witnesses did not waver in their assertion that while Tana was hired by Ayalde as an "arador" on "pakyaw" basis, he was also paid a daily wage
which Ayalde’s overseer disbursed every fifteen (15) days. It is also undisputed that they were made to acknowledge receipt of their wages by signing
on sheets of ruled paper, which are different from those presented by Ayalde as documentary evidence. In fine, we find that the testimonies of
Margarita Tana, Agaton Libawas and Aurelio Tana prevail over the incomplete and inconsistent documentary evidence of Ayalde.
In the parallel case of Opulencia Ice Plant and Storage v. NLRC, the petitioners argued that since Manuel P. Esita’s name does not appear in the payrolls
of the company it necessarily means that he was not an employee. This Court held:
"Petitioners further argue that ‘complainant miserably failed to present any documentary evidence to prove his employment. There was no timesheet,
pay slip and/or payroll/cash voucher to speak of. Absence of these material documents are necessarily fatal to complainant’s cause.’
We do not agree. No particular form of evidence is required to prove the existence of an employer-employee relationship. Any competent and relevant
evidence to prove the relationship may be admitted. For, if only documentary evidence would be required to show that relationship, no scheming
employer would ever be brought before the bar of justice, as no employer would wish to come out with any trace of the illegality he has authored
considering that it should take much weightier proof to invalidate a written instrument. Thus, as in this case where the employer-employee relationship
between petitioners and Esita was sufficiently proved by testimonial evidence, the absence of time sheet, time record or payroll has become
inconsequential."20 (Underscoring ours)
Clearly, then, the testimonial evidence of the claimant and her witnesses constitute positive and credible evidence of the existence of an employer-
employee relationship between Tana and Ayalde. As the employer, the latter is duty-bound to keep faithful and complete records of her business
affairs, not the least of which would be the salaries of the workers. And yet, the documents presented have been selective, few and incomplete in
substance and content. Consequently, Ayalde has failed to convince us that, indeed, Tana was not her employee.
The argument is raised that Tana is an independenent contractor because he was hired and paid wages on "pakyaw" basis. We find this assertion to be
specious for several reasons.
First, while Tana was sometimes hired as an "arador" or plower for intermittent periods, he was hired to do other tasks in Ayalde’s plantations. Ayalde
herself admitted as much, although she minimized the extent of Tana’s labors. On the other hand, the claimant and her witnesses were direct and firm
in their testimonies, to wit:
MARGARITA TANA:
Q. Was your late husband’s work continuous or not?
A. His work was continuous except on Sundays.
Q. Mrs. Witness, in January 1961, how many days in a week did your late husband work?
A. 4 weeks in January 1961.
Q. And how many months for that year did he work?
A. 12 months.
Q. Is this working pattern of your husband, considering that you testified that he worked continuously, the same all throughout his employment from
1961 to 1978?
A. Yes, he worked continuously from 1961 to 1978 for 6 days a week, 4 weeks a month and 12 months each year.
Q. Mrs. Witness, how many months did your husband work in 1979 considering that he died in 1979?
A. 3 months.
Q. What was the nature of the work of your late husband from 1961 until his death in 1979?
A. Cutting canes, hauling canes with the use of canecarts, plowing, hauling fertilizers, weeding and stubble cleaning.
x x x           x x x          x x x
Q. Now, the other co-workers of yours, you said they were Agaton Libawas, Narciso Dueñas, Juan Dueñas, and Aurelio Tana, what were their jobs?
A. Hauling canes by the use of bull carts and cutting canes. Their works are the same with that of my husband’s.
Q. But you mentioned among the duties of your husband as "arador" meaning – plowing the fields?
A. Yes, he was also plowing because that is one of his duties. 21
AGATON LIBAWAS:
Q. How about petitioner Margarita Tana and the late Ignacio Tana, were they regular workers, or extra workers?
A. They were regular workers.
Q. In your case, Mr. Witness, considering that according to you, you are only a relief worker, please inform the Commission how many months each
year from 1961 to 1984 did you work in Hda. B-70 and Hda. B-15M with Conchita Ayalde?
A. During milling season, I worked 2 months, during cultivation if they are short of plowers then they would call me to work for at least 3 months as a
plower.
Q. So, all in all, each year, from 1961 to 1984 your average working months in Hda. B-70 and B-15M are 5 months each year?
A. Yes, sir.
Q. Mr. Witness, to prove that you have worked there, will you please inform at least 5 laborers of Hda. B-70 and B-15M of Conchita Ayalde?
A. Juan Dueñas, Narciso Dueñas, Aurelio Tana, Ignacio and Margarita Tana.
x x x           x x x          x x x
Q. Will you please inform the Commission if the deceased Ignacio Tana which is according to you, was a regular worker of the 2 haciendas, if how many
months did he work during lifetime from 1961 until he died in 1979?
A. His work was continuous.
Q. And by continuous you mean he worked straight 12 months each year except in 1979?
A. He worked only for 10 months because the 2 months are already preparation for cultivation.
x x x           x x x          x x x
Q. And according to you, in a year’s time, you worked only for at least 5 months in Hda. B-70 and B-15M, is that correct?
A. Yes.
Q. And during this time that you are working in your riceland you will agree with me that you do not know whether the laborers of this Hda. B-70 and
Had B-15M are really working because you are devoting your time in your riceland, is that correct?
A. I knew because the place of their work is just near my house, it is along the way.
Q. How about when the canes are already tall, can you actually see the workers in Hda. B-70 and B-15M when you are busy at your riceland?
A. Yes, because they have to pass in my house.
Q. Is there no other passage in that hacienda except that road in front of your house?
A. Yes.
Q. Are you sure about that?
A. Yes, I am sure.22
AURELIO TANA:
Q. Do you know what is the work of the petitioner during the time when you were together working in the field?
A. We were working together, like cutting and loading canes, hoeing, weeding, applying fertilizers, digging canals and plowing.
Q. During your employment in the said hacienda where were you residing?
A. There inside the hacienda.
Q. What about the petitioner?
A. The same.
Q. How far is your house from the house of the petitioner?
A. About 20 arms-length.
Q. How far is Hda. B-70 from Hda. B-15.
A. It is very near it is divided by the road.
Q. What road are you referring to?
A. Highway road from Barangay Buenavista to La Granja.
Q. During your employment will you please inform the Commission the frequency of work of the late Ignacio Tana?
A. 4 weeks a month, 6 days a week, 12 months a year.
Q. Why is it that you are in a position to inform the Commission about the period of employment of Ignacio Tana?
A. Because we were together working. 23
It is indubitable, therefore, that Tana worked continuously for Ayalde, not only as "arador" on "pakyaw" basis, but as a regular farmhand, doing
backbreaking jobs for Ayalde’s business. There is no shred of evidence to show that Tana was only a seasonal worker, much less a migrant worker. All
witnesses, including Ayalde herself, testified that Tana and his family resided in the plantation. If he was a mere "pakyaw" worker or independent
contractor, then there would be no reason for Ayalde to allow them to live inside her property for free. The only logical explanation is that he was
working for most part of the year exclusively for Ayalde, in return for which the latter gratuitously allowed Tana and his family to reside in her property.
The Court of Appeals, in finding for Ayalde, relied on the claimant’s and her witnesses’ admission that her husband was hired as an "arador" on
"pakyaw" basis, but it failed to appreciate the rest of their testimonies. Just because he was, for short periods of time, hired on "pakyaw" basis does
not necessarily mean that he was not employed to do other tasks for the remainder of the year. Even Ayalde admitted that Tana did other jobs when
he was not hired to plow. Consequently, the conclusion culled from their testimonies to the effect that Tana was mainly and solely an "arador" was at
best a selective appreciation of portions of the entire evidence. It was the Social Security Commission that took into consideration all the documentary
and testimonial evidence on record.
Secondly, Ayalde made much ado of her claim that Tana could not be her employee because she exercised no control over his work hours and method
of performing his task as "arador." It is also an admitted fact that Tana, Jr. used his own carabao and tools. Thus, she contends that, applying the
"control test," Tana was not an employee but an independent contractor.
A closer scrutiny of the records, however, reveals that while Ayalde herself may not have directly imposed on Tana the manner and methods to follow
in performing his tasks, she did exercise control through her overseer.
Be that as it may, the power of control refers merely to the existence of the power. It is not essential for the employer to actually supervise the
performance of duties of the employee; it is sufficient that the former has a right to wield the power. 24 Certainly, Ayalde, on her own or through her
overseer, wielded the power to hire or dismiss, to check on the work, be it in progress or quality, of the laborers. As the owner/lessee of the
plantations, she possessed the power to control everyone working therein and everything taking place therein.
Jurisprudence provides other equally important considerations which support the conclusion that Tana was not an independent contractor. First, Tana
cannot be said to be engaged in a distinct occupation or business. His carabao and plow may be useful in his livelihood, but he is not independently
engaged in the business of farming or plowing. Second, he had been working exclusively for Ayalde for eighteen (18) years prior to his demise. Third,
there is no dispute that Ayalde was in the business of growing sugarcane in the two plantations for commercial purposes. There is also no question that
plowing or preparing the soil for planting is a major part of the regular business of Ayalde.
Under the circumstances, the relationship between Ayalde and Tana has more of the attributes of employer-employee than that of an independent
contractor hired to perform a specific project. In the case of Dy Keh Beng v. International Labor,25 we cited our long-standing ruling in Sunripe Coconut
Products Co. v. Court of Industrial Relations, to wit:
"When a worker possesses some attributes of an employee and others of an independent contractor, which make him fall within an intermediate area,
he may be classified under the category of an employee when the economic facts of the relations make it more nearly one of employment than one of
independent business enterprise with respect to the ends sought to be accomplished." (Underscoring Ours)26
We find the above-quoted ruling to be applicable in the case of Tana. There is preponderance of evidence to support the conclusion that he was an
employee rather than an independent contractor.
The Court of Appeals also erred when it ruled, on the alternative, that if ever Tana was an employee, he was still ineligible for compulsory coverage
because he was not paid any regular daily wage and he did not work for an uninterrupted period of at least six months in a year in accordance with
Section 8(j) (I) of the Social Security Law. There is substantial testimonial evidence to prove that Tana was paid a daily wage, and he worked
continuously for most part of the year, even while he was also occasionally called on to plow the soil on a "pakyaw" basis. As a farm laborer who has
worked exclusively for Ayalde for eighteen (18) years, Tana should be entitled to compulsory coverage under the Social Security Law, whether his
service was continuous or broken.
Margarita Tana alleged that SSS premiums were deducted from Tana’s salary, testifying, thus:
Q. Were there deductions from the salaries of your husband while he was employed with the respondent from 1961 to 1979?
A. Yes, there were deductions but I do not know because they were the ones deducting it.1âwphi1
Q. Why do you know that his salaries were deducted for SSS premiums?
A. Because Antero Maghari asked me and my husband to sign SSS papers and he told us that they will take care of everything.
Q. How much were the deductions every payday?
A. I do not know how much because our daily wage was only P4.00. 27
Agaton Libawas, also testified:
Q. Mr. Witness, in your 15-day wages do you notice any deductions from it?
A. There were deductions and we were informed that it was for SSS.
Q. Mr. Witness, since when were there deductions from your salaries?
A. Since 1961.
Q. Up to when?
A. Up to 1979.
Q. Mr. Witness, are you a member of the SSS?
A. No.
Q. How about petitioner, if you know?
A. No, also.
Q. What happened to the deductions did you not ask your employer?
A. We asked but we were answered that we were being remitted for our SSS.
Q. Did you not verify?
A. No, because I just relied on their statement.28
Ayalde failed to counter these positive assertions. Even on the assumption that there were no deductions, the fact remains that Tana was and should
have been covered under the Social Security Law. The circumstances of his employment place him outside the ambit of the exception provided in
Section 8(j) of Republic Act No. 1611, as amended by Section 4 of R.A. 2658.
WHEREFORE, in view of all the foregoing, the Decision of the Court of Appeals in C.A.-G.R. SP No. 16427 and the Resolution dated June 14, 1991 are
hereby REVERSED and SET ASIDE. The Resolution of the Social Security Commission in SSC Case No. 8851 is REINSTATED.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Pardo, JJ., concur.
 FIRST DIVISION
G.R. No. 158255             July 8, 2004
MANILA WATER COMPANY, INC., petitioner,
vs.
HERMINIO D. PENA, ESTEBAN B. BALDOZA, JORGE D. CANONIGO, JR., IKE S. DELFIN, RIZALINO M. INTAL, REY T. MANLEGRO, JOHN L. MARTEJA,
MARLON B. MORADA, ALLAN D. ESPINA, EDUARDO ONG, AGNESIO D. QUEBRAL, EDMUNDO B. VICTA, VICTOR C. ZAFARALLA, EDILBERTO C. PINGUL
and FEDERICO M. RIVERA, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition assails the decision1 of the Court of Appeals dated November 29, 2002, in CA-G.R. SP No. 67134, which reversed the decision of the
National Labor Relations Commission and reinstated the decision of the Labor Arbiter with modification.
Petitioner Manila Water Company, Inc. is one of the two private concessionaires contracted by the Metropolitan Waterworks and Sewerage System
(MWSS) to manage the water distribution system in the East Zone of Metro Manila, pursuant to Republic Act No. 8041, otherwise known as
the National Water Crisis Act of 1995. Under the Concession Agreement, petitioner undertook to absorb former employees of the MWSS whose names
and positions were in the list furnished by the latter, while the employment of those not in the list was terminated on the day petitioner took over the
operation of the East Zone, which was on August 1, 1997. Private respondents, being contractual collectors of the MWSS, were among the 121
employees not included in the list; nevertheless, petitioner engaged their services without written contract from August 1, 1997 to August 31, 1997.
Thereafter, on September 1, 1997, they signed a three-month contract to perform collection services for eight branches of petitioner in the East Zone. 2
Before the end of the three-month contract, the 121 collectors incorporated the Association Collectors Group, Inc. (ACGI), 3 which was contracted by
petitioner to collect charges for the Balara Branch. Subsequently, most of the 121 collectors were asked by the petitioner to transfer to the First Classic
Courier Services, a newly registered corporation. Only private respondents herein remained with ACGI. Petitioner continued to transact with ACGI to do
its collection needs until February 8, 1999, when petitioner terminated its contract with ACGI. 4
Private respondents filed a complaint for illegal dismissal and money claims against petitioner, contending that they were petitioner’s employees as all
the methods and procedures of their collections were controlled by the latter.
On the other hand, petitioner asserts that private respondents were employees of ACGI, an independent contractor. It maintained that it had no
control and supervision over private respondents’ manner of performing their work except as to the results. Thus, petitioner did not have an employer-
employee relationship with the private respondents, but only a service contractor-client relationship with ACGI.
On May 31, 2000, Labor Arbiter Eduardo J. Carpio rendered a decision finding the dismissal of private respondents illegal. He held that private
respondents were regular employees of petitioner not only because the tasks performed by them were controlled by it but, also, the tasks were
obviously necessary and desirable to petitioner’s principal business. The dispositive portion of the decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, finding that complainants were employees of respondent [petitioner
herein], that they were illegally dismissed, and respondent [petitioner herein] is hereby ordered to pay their separation pay based on the
following computed amounts:
HERMINIO D. PENA P15,000.00

ESTEBAN BALDOZA P12,000.00

JORGE D. CANONIGO, JR. P16,000.00

IKE S. DELFIN P12,000.00

RIZALINO M. INTAL P16,000.00

REY T. MANLEGRO P16,000.00

JOHN L. MARTEJA P12,000.00

MARLON B. MORADA P16,000.00

ALLAN D. ESPINA P14,000.00

EDUARDO ONG P15,000.00

AGNESIO D. QUEBRAL P16,000.00

EDMUNDO B. VICTA P13,000.00

VICTOR P. ZAFARALLA P15,000.00

EDILBERTO C. PINGUL P19,500.00

 FEDERICO M. RIVERA   P15,000.00

      TOTAL P222,500.00
Respondent [petitioner herein] is further directed to pay ten (10%) percent of the total award as attorney’s fee or the sum of P22,250.00.
SO ORDERED.5
Both parties appealed to the NLRC, which reversed the decision of the Labor Arbiter and ruled that the documentary evidence, e.g., letters and
memoranda by the petitioner to ACGI regarding the poor performance of the collectors, did not constitute proof of control since these documents
merely identified the erring collectors; the appropriate disciplinary actions were left to the corporation to impose. 6 Further, there was no evidence
showing that the incorporation of ACGI was irregular.
Private respondents filed a petition for certiorari with the Court of Appeals, contending that the NLRC acted with grave abuse of discretion amounting
to lack or excess of jurisdiction when it reversed the decision of the Labor Arbiter.
The Court of Appeals reversed the decision of the NLRC and reinstated with modification the decision of the Labor Arbiter. 7 It held that petitioner
deliberately prevented the creation of an employment relationship with the private respondents; and that ACGI was not an independent contractor. It
likewise denied petitioner’s motion for reconsideration. 8
Hence, this petition for review raising the following errors:
THE HONORABLE COURT OF APPEALS IN RENDERING THE ASSAILED DECISION AND RESOLUTION COMMITTED GRAVE REVERSIBLE ERRORS:
A. IN GOING BEYOND ITS JURISDICTION AND PROCEEDING TO GIVE DUE COURSE TO RESPONDENTS’ PETITION FOR CERTIORARI UNDER RULE
65 OF THE RULES OF COURT, NOTWITHSTANDING THE ABSENCE OF ANY PROOF OF GRAVE ABUSE OF DISCRETION ON THE PART OF THE
NATIONAL LABOR RELATIONS COMMISSION WHEN IT RENDERED THE DECISION ASSAILED BY HEREIN RESPONDENTS.
B. WHEN IT MANIFESTLY OVERLOOKED THE EVIDENCE PRESENTED BY THE PETITIONER COMPANY AND RULING THAT THE PETITIONER’S
DEFENSE OF LACK OF EMPLOYER-EMPLOYEE RELATIONS IS WITHOUT MERIT.
C. IN CONCLUDING THAT PETITIONER COMPANY REQUIRED RESPONDENTS TO INCORPORATE THE ASSOCIATED COLLECTORS GROUP, INC.
["ACGI"] NOTWITHSTANDING ABSENCE OF ANY SPECIFIC EVIDENCE IN SUPPORT OF THE SAME.
D. IN FINDING PETITIONER COMPANY GUILTY OF BAD FAITH NOTWITHSTANDING ABSENCE OF ANY SPECIFIC EVIDENCE IN SUPPORT OF THE
SAME, AND AWARDING MORAL AND EXEMPLARY DAMAGES TO HEREIN RESPONDENTS. 9
The pivotal issue to be resolved in this petition is whether or not there exists an employer-employee relationship between petitioner and private
respondents. Corollary thereto is the issue of whether or not private respondents were illegally dismissed by petitioner.
The issue of whether or not an employer-employee relationship exists in a given case is essentially a question of fact. 10 As a rule, the Supreme Court is
not a trier of facts, and this applies with greater force in labor cases. Hence, factual findings of quasi-judicial bodies like the NLRC, particularly when
they coincide with those of the Labor Arbiter and if supported by substantial evidence, are accorded respect and even finality by this Court. 11 However,
a disharmony between the factual findings of the Labor Arbiter and the National Labor Relations Commission opens the door to a review thereof by this
Court. Factual findings of administrative agencies are not infallible and will be set aside when they fail the test of arbitrariness. Moreover, when the
findings of the National Labor Relations Commission contradict with those of the labor arbiter, this Court, in the exercise of its equity jurisdiction, may
look into the records of the case and reexamine the questioned findings. 12
The resolution of the foregoing issues initially boils down to a determination of the true status of ACGI, i.e., whether it is an independent contractor or
a labor-only contractor.
Petitioner asserts that ACGI, a duly organized corporation primarily engaged in collection services, is an independent contractor which entered into a
service contract for the collection of petitioner’s accounts starting November 30, 1997 until the early part of February 1999. Thus, it has no
employment relationship with private respondents, being employees of ACGI.
The existence of an employment relationship between petitioner and private respondents cannot be negated by simply alleging that the latter are
employees of ACGI as an independent contractor, it being crucial that ACGI’s status, whether as "labor-only contractor" or "independent contractor",
be measured in terms of and determined by the criteria set by statute.
The case of De los Santos v. NLRC13 succinctly enunciates this statutory criteria –
Job contracting is permissible only if the following conditions are met: 1) the contractor carries on an independent business and undertakes
the contract work on his own account under his own responsibility according to his own manner and method, free from the control and
direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and 2) the
contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are
necessary in the conduct of the business.
"Labor-only contracting" as defined in Section 5, Department Order No. 18-02, Rules Implementing Articles 106-109 of the Labor Code 14 refers to an
arrangement where the contractor or subcontractor merely recruits, supplies or places workers to perform job, work or service for a principal, and any
of the following elements is present:
(i) The contractor or subcontractor does not have substantial capital or investment which relates to the job, work or service to be performed
and the employees recruited, supplied or placed by such contractor or subcontractor are performing activities which are directly related to
the main business of the principal; or
(ii) The contractor does not exercise the right to control over the performance of the work of the contractual employee.
Given the above criteria, we agree with the Labor Arbiter that ACGI was not an independent contractor.
First, ACGI does not have substantial capitalization or investment in the form of tools, equipment, machineries, work premises, and other materials, to
qualify as an independent contractor. While it has an authorized capital stock of P1,000,000.00, only P62,500.00 is actually paid-in, which cannot be
considered substantial capitalization. The 121 collectors subscribed to four shares each and paid only the amount of P625.00 in order to comply with
the incorporation requirements.15 Further, private respondents reported daily to the branch office of the petitioner because ACGI has no office or work
premises. In fact, the corporate address of ACGI was the residence of its president, Mr. Herminio D. Peña. 16 Moreover, in dealing with the consumers,
private respondents used the receipts and identification cards issued by petitioner. 17
Second, the work of the private respondents was directly related to the principal business or operation of the petitioner. Being in the business of
providing water to the consumers in the East Zone, the collection of the charges therefor by private respondents for the petitioner can only be
categorized as clearly related to, and in the pursuit of the latter’s business.
Lastly, ACGI did not carry on an independent business or undertake the performance of its service contract according to its own manner and method,
free from the control and supervision of its principal, petitioner. Prior to private respondents’ alleged employment with ACGI, they were already
working for petitioner, subject to its rules and regulations in regard to the manner and method of performing their tasks. This form of control and
supervision never changed although they were already under the seeming employ of ACGI. Petitioner issued memoranda regarding the billing methods
and distribution of books to the collectors; 18 it required private respondents to report daily and to remit their collections on the same day to the branch
office or to deposit them with Bank of the Philippine Islands; it monitored strictly their attendance as when a collector cannot perform his daily
collection, he must notify petitioner or the branch office in the morning of the day that he will be absent; and although it was ACGI which ultimately
disciplined private respondents, the penalty to be imposed was dictated by petitioner as shown in the letters it sent to ACGI specifying the penalties to
be meted on the erring private respondents. 19 These are indications that ACGI was not left alone in the supervision and control of its alleged employees.
Consequently, it can be concluded that ACGI was not an independent contractor since it did not carry a distinct business free from the control and
supervision of petitioner.
Under this factual milieu, there is no doubt that ACGI was engaged in labor-only contracting, and as such, is considered merely an agent of the
petitioner. In labor-only contracting, the statute creates an employer-employee relationship for a comprehensive purpose: to prevent a circumvention
of labor laws. The contractor is considered merely an agent of the principal employer and the latter is responsible to the employees of the labor-only
contractor as if such employees had been directly employed by the principal employer. 20 Since ACGI is only a labor-only contractor, the workers it
supplied should be considered as employees of the petitioner.
Even the "four-fold test" will show that petitioner is the employer of private respondents. The elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s
power to control the employee’s conduct. The most important 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 it. 21
We agree with the Labor Arbiter that in the three stages of private respondents’ services with the petitioner, i.e., (1) from August 1, 1997 to August 31,
1997; (2) from September 1, 1997 to November 30, 1997; and (3) from December 1, 1997 to February 8, 1999, the latter exercised control and
supervision over the formers’ conduct.
Petitioner contends that the employment of private respondents from August 1, 1997 to August 30, 1997 was only temporary and done to
accommodate their request to be absorbed since petitioner was still undergoing a transition period. It was only when its business became settled that
petitioner employed private respondents for a fixed term of three months.
Although petitioner was not obliged to absorb the private respondents, by engaging their services, paying their wages in the form of commission,
subjecting them to its rules and imposing punishment in case of breach thereof, and controlling not only the end result but the manner of achieving the
same as well, an employment relationship existed between them.
Notably, private respondents performed activities which were necessary or desirable to its principal trade or business. Thus, they were regular
employees of petitioner, regardless of whether the engagement was merely an accommodation of their request, pursuant to Article 280 of the Labor
Code which reads:
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.
As such regular employees, private respondents are entitled to security of tenure which may not be circumvented by mere stipulation in a subsequent
contract that their employment is one with a fixed period. While this Court has upheld the legality of fixed-term employment, 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. 22
In the case at bar, we find that the term fixed in the subsequent contract was used to defeat the tenurial security which private respondents already
enjoy. Thus, we concur with the Labor Arbiter, as affirmed by the Court of Appeals, when it held that:
The next question if whether, with respect to the period, the individual contracts are valid. Not all contracts of employment fixing a period
are invalid. Under Article 280, the evil sought to be prevented is singled out: agreements entered into precisely to circumvent security of
tenure. It has no application where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any
force, duress or improper pressure being brought upon the employee and absent any circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each other on more or less terms with no moral dominance whatever being
exercised by the former over the latter. That is the doctrine in Brent School, Inc. v. Zamora, 181 SCRA 702. The individual contracts in question
were prepared by MWC in the form of the letter addressed to complainants. The letter-contract is dated September 1, 1997, when
complainants were already working for MWC as collectors. With their employment as their means of survival, there was no room then for
complainants to disagree with the presented letter-contracts. Their choice then was not to negotiate for the terms of the contract but to lose
or not to lose their employment – employment which they already had at that time. The choice is obvious, as what they did, to sign the ready
made letter-contract to retain their employment, and survive. It is a defiance of the teaching in Brent School, Inc. v. Zamora if this Office rules
that the individual contracts in question are valid, so, in deference to Brent School ruling, this Office rules they are null and void. 23
In view of the foregoing, we hold that an employment relationship exists between petitioner and private respondents. We now proceed to ascertain
whether private respondents were dismissed in accordance with law.
As private respondents’ employer, petitioner has the burden of proving that the dismissal was for a cause allowed under the law and that they were
afforded procedural due process. 24 Petitioner failed to discharge this burden by substantial evidence as it maintained the defense that it was not the
employer of private respondents. Having established that the schemes employed by petitioner were devious attempts to defeat the tenurial rights of
private respondents and that it failed to comply with the requirements of termination under the Labor Code, the dismissal of the private respondent is
tainted with illegality.
Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work is 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. However, if reinstatement is no longer possible, the employer has the
alternative of paying the employee his separation pay in lieu of reinstatement. 25
This Court however cannot sustain the award of moral and exemplary damages in favor of private respondents. Such an award cannot be justified
solely upon the premise that the employer dismissed his employee without just cause or due process. Additional facts must be pleaded and proved to
warrant the grant of moral damages under the Civil Code. The act of dismissal must be attended with bad faith, or fraud, or was oppressive to labor or
done in a manner contrary to morals, good customs or public policy and, of course, that social humiliation, wounded feelings, or grave anxiety resulted
therefrom. Similarly, exemplary damages are recoverable only when the dismissal was effected in a wanton, oppressive or malevolent manner. 26 Those
circumstances have not been adequately established.
However, private respondents are entitled to attorney’s fees as they were compelled to litigate with petitioners and incur expenses to enforce and
protect their interests.27 The award by the Labor Arbiter of P22,250.00 as attorney’s fees to private respondents, being reasonable, is sustained.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated November 29, 2002, in CA-G.R. SP No. 67134, reversing the decision
of the National Labor Relations Commission and reinstating the decision of the Labor Arbiter is AFFIRMED with the MODIFICATION that the awards of
P10,000.00 as moral damages and P5,000.00 as exemplary damages are DELETED for lack of evidentiary basis.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
 
G.R. Nos. 97008-09 July 23, 1993
VIRGINIA G. NERI and JOSE CABELIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION FAR EAST BANK & TRUST COMPANY (FEBTC) and BUILDING CARE CORPORATION, respondents.
R.L. Salcedo & Improso Law Office for petitioners.
Bengzon, Zarnaga, Narciso, Cudala, Pecson, Bengzon & Jimenez for Bldg. Care Corp.
Bautista, Picaso, Buyco, Tan & Fider for respondent FEBTC.

BELLOSILLO, J.:
Respondents are sued by two employees of Building Care Corporation, which provides janitorial and other specific services to various firms, to compel
Far Bast Bank and Trust Company to recognize them as its regular employees and be paid the same wages which its employees receive.
Building Care Corporation (BCC, for brevity), in the proceedings below, established that it had substantial capitalization of P1 Million or a stockholders
equity of P1.5 Million. Thus the Labor Arbiter ruled that BCC was only job contracting and that consequently its employees were not employees of Far
East Bank and Trust Company (FEBTC, for brevity). on appeal, this factual finding was affirmed by respondent National Labor Relations Commission
(NLRC, for brevity). Nevertheless, petitioners insist before us that BCC is engaged in "labor-only" contracting hence, they conclude, they are employees
of respondent FEBTC.
Petitioners Virginia G. Neri and Jose Cabelin applied for positions with, and were hired by, respondent BCC, a corporation engaged in providing
technical, maintenance, engineering, housekeeping, security and other specific services to its clientele. They were assigned to work in the Cagayan de
Oro City Branch of respondent FEBTC on 1 May 1979 and 1 August 1980, respectively, Neri an radio/telex operator and Cabelin as janitor, before being
promoted to messenger on 1 April 1989.
On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration Branch No. 10 of the Department of Labor and
Employment to compel the bank to accept them as regular employees and for it to pay the differential between the wages being paid them by BCC and
those received by FEBTC employees with similar length of service.
On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit. 1 Respondent BCC was considered an independent contractor
because it proved it had substantial capital. Thus, petitioners were held to be regular employees of BCC, not FEBTC. The dismissal was appealed to NLRC
which on 28 September 1990 affirmed the decision on appeal. 2 On 22 October 1990, NLRC denied reconsideration of its affirmance, 3 prompting
petitioners to seek redress from this Court.
Petitioners vehemently contend that BCC in engaged in "labor-only" contracting because it failed to adduce evidence purporting to show that it
invested in the form of tools, equipment, machineries, work premises and other materials which are necessary in the conduct of its business.
Moreover, petitioners argue that they perform duties which are directly related to the principal business or operation of FEBTC. If the definition of
"labor-only" contracting4 is to be read in conjunction with job contracting,5 then the only logical conclusion is that BCC is a "labor only" contractor.
Consequently, they must be deemed employees of respondent bank by operation of law since BCC is merely an agent of FEBTC following the doctrine
laid down in Philippine Bank of Communications v. National Labor Relations Commission6 where we ruled that where "labor-only" contracting exists, the
Labor Code itself establishes an employer-employee relationship between the employer and the employees of the "labor-only" contractor; hence,
FEBTC should be considered the employer of petitioners who are deemed its employees through its agent, "labor-only" contractor BCC.
We cannot sustain the petition.
Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries, work premises, among others, because it has
established that it has sufficient capitalization. The Labor Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully
subscribed and paid for.7 BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only" contracting.
It is well-settled that there is "labor-only" contracting where: (a) 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, (b) the workers recruited and placed by such person are
performing activities which are directly related to the principal business of the employer. 8
Article 106 of the Labor Code defines "labor-only" contracting thus —
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 by such persons are performing activities which are directly related to the principal business of such employer
. . . . (emphasis supplied).
Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial capital. While there may be no evidence that it
has investment in the form of tools, equipment, machineries, work premises, among others, it is enough that it has substantial capital, as was
established before the Labor Arbiter as well as the NLRC. In other words, the law does not require both substantial capital and investment in the form
of tools, equipment, machineries, etc. This is clear from the use of the conjunction "or". If the intention was to require the contractor to prove that he
has both capital and the requisite investment, then the conjunction "and" should have been used. But, having established that it has substantial capital,
it was no longer necessary for BCC to further adduce evidence to prove that it does not fall within the purview of "labor-only" contracting. There is even
no need for it to refute petitioners' contention that the activities they perform are directly related to the principal business of respondent bank.
Be that as it may, the Court has already taken judicial notice of the general practice adopted in several government and private institutions and
industries of hiring independent contractors to perform special services. 9 These services range from janitorial, 10 security 11 and even technical or other
specific services such as those performed by petitioners Neri and Cabelin. While these services may be considered directly related to the principal
business of the employer, 12 nevertheless, they are not necessary in the conduct of the principal business of the employer.
In fact, the status of BCC as an independent contractor was previously confirmed by this Court in Associated Labor Unions-TUCP v. National Labor
Relations Commission, 13 where we held thus —
 The public respondent ruled that the complainants are not employees of the bank but of the company contracted to serve the
bank. Building Care Corporation is a big firm which services, among others, a university, an international bank, a big local bank, a
hospital center, government agencies, etc. It is a qualified independent contractor. The public respondent correctly ruled against
petitioner's contentions . . . . (Emphasis supplied).
Even assuming ex argumenti that petitioners were performing activities directly related to the principal business of the bank, under the "right of
control" test they must still be considered employees of BCC. In the case of petitioner Neri, it is admitted that FEBTC issued a job description which
detailed her functions as a radio/telex operator. However, a cursory reading of the job description shows that what was sought to be controlled by
FEBTC was actually the end-result of the task, e.g., that the daily incoming and outgoing telegraphic transfer of funds received and relayed by her,
respectively, tallies with that of the register. The guidelines were laid down merely to ensure that the desired end-result was achieved. It did not,
however, tell Neri how the radio/telex machine should be operated. In the Shipside case, 14 we ruled —
. . . . If in the course of private respondents' work (referring to the workers), SHIPSIDE occasionally issued instructions to them, that
alone does not in the least detract from the fact that only STEVEDORES is the employer of the private respondents, for in legal
contemplation, such instructions carry no more weight than mere requests, the privity of contract being between SHIPSIDE and
STEVEDORES . . . .
Besides, petitioners do not deny that they were selected and hired by BCC before being assigned to work in the Cagayan de Oro Branch of FFBTC. BCC
likewise acknowledges that petitioners are its employees. The record is replete with evidence disclosing that BCC maintained supervision and control
over petitioners through its Housekeeping and Special Services Division: petitioners reported for work wearing the prescribed uniform of BCC; leaves
of absence were filed directly with BCC; and, salaries were drawn only from BCC. 15
As a matter of fact, Neri even secured a certification from BCC on 16 May 1986 that she was employed by the latter. On the other hand, on 24 May
1988, Cabelin filed a complaint for underpayment of wages, non-integration of salary adjustments mandated by Wage Orders Nos. 5 & 6 and R.A. 6640
as well as for illegal deduction 16 against BCC alone which was provisionally dismissed on 19 August 1988 upon Cabelin's manifestation that his money
claim was negligible. 17
More importantly, under the terms and conditions of the contract, it was BCC alone which had the power to reassign petitioners. Their deployment to
FEBTC was not subject to the bank's acceptance. Cabelin was promoted to messenger because the FEBTC branch manager promised BCC that two (2)
additional janitors would be hired from the company if the promotion was to be effected. 18 Furthermore, BCC was to be paid in lump sum unlike in the
situation in Philippine Bank of Communications  19 where the contractor, CESI, was to be paid at a daily rate on a per person basis. And, the contract
therein stipulated that the CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and Cabelin were to
perform specific special services. Consequently, petitioners cannot be held to be employees of FEBTC as BCC "carries an independent business" and
undertaken the performance of its contract with various clients according to its "own manner and method, free from the control and supervision" of its
principals in all matters "except as to the results thereof." 20
Indeed, the facts in Philippine Bank of Communications do not square with those of the instant case. Therein, the Court ruled that CESI was a "labor-
only" contractor because upholding the contract between the contractor and the bank would in effect permit employers to avoid the necessity of hiring
regular or permanent employees and would enable them to keep their employees indefinitely on a temporary or casual basis, thus denying them
security of tenure in their jobs. This of course violates the Labor Code. BCC has not committed any violation. Also, the former case was for illegal
dismissal; this case, on the other hand, is for conversion of employment status so that petitioners can receive the same salary being given to regular
employees of FEBTC. But, as herein determined, petitioners are not regular employees of FEBTC but of BCC. At any rate, the finding that BCC in a
qualified independent contractor precludes us from applying the Philippine Bank of Communications  doctrine to the instant petition.
The determination of employer-employee relationship involves factual findings. 21 Absent any grave abuse of discretion, and we find none in the case
before us, we are bound by the findings of the Labor Arbiter as affirmed by respondent NLRC.
IN VIEW OF THE FOREGOING, the Petition for Certiorari is DISMISSED.
SO ORDERED.
Cruz, Griño-Aquino, Davide, Jr. and Quiason, JJ., concur.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
 
G.R. No. 111501 March 5, 1996
PHILIPPINE FUJI XEROX CORPORATION, JENNIFER A. BERNARDO, and ATTY. VICTORINO LUIS, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division), PAMBANSANG KILUSAN NG PAG-GAWA, (KILUSAN)-TUCP, PHILIPPINE XEROX
EMPLOYEES UNION-KILUSAN and PEDRO GARADO, respondents.
 
MENDOZA, J.:p
This is a petition for certiorari to set aside the decision of the NLRC, finding petitioner Philippine Fuji Xerox Corporation (Fuji Xerox) guilty of illegally
dismissing private respondent Pedro Garado and ordering him reinstated. The NLRC decision reverses on appeal a decision of the Labor Arbiter finding
private respondent to be an employee of another firm, the Skillpower, Inc., and not of petitioner Fuji Xerox.
The question raised in this case is whether private respondent is an employee of Fuji Xerox (as the NLRC found) or of Skillpower, Inc. (as the Labor
Arbiter found). For reasons to be hereafter explained, we hold that private respondent is an employee of Fuji Xerox and accordingly dismiss the petition
for review of Fuji Xerox.
The following are the facts.
On May 6, 1977, petitioner Fuji Xerox entered into an agreement under which Skillpower, Inc. supplied workers to operate copier machines of Fuji
Xerox as part of the latter's "Xerox Copier Project" in its sales offices. Private respondent Pedro Garado was assigned as key operator at Fuji Xerox's
branch. at Buendia, Makati, Metro Manila, in February of 1980.
In February of 1983, Garado went on leave and his place was taken over by a substitute. Upon his return in March, he discovered that there was a
spoilage of over 600 copies. Afraid that he might be blamed for the spoilage, he tried to talk a service technician of Fuji Xerox into stopping the meter of
the machine.
The technician refused Garado's request, but this incident came to the knowledge of Fuji Xerox which, on May 31, 1983, reported the matter to
Skillpower, Inc. The next day, Skillpower, Inc. wrote Garado, ordering him to explain. In the meantime, it suspended him from work. Garado filed a
complaint for illegal dismissal.
The Labor Arbiter found that Garado applied for work to Skillpower, Inc.; that in 1980 he was employed and made to sign a contract; that although he
received his salaries regularly from Fuji Xerox, it was Skillpower, Inc. which exercised control and supervision over his work; that Skillpower, Inc. had
substantial capital and investments in machinery, equipment, and service vehicles, and assets totalling P5,008,812.43. On the basis of these findings the
Labor Arbiter held in a decision rendered on October 30, 1986 that Garado was an employee of Skillpower, Inc., and that he had merely been assigned
by Skillpower, Inc. to Fuji Xerox. Hence, the Labor Arbiter dismissed Garado's complaint.
On the other hand, the NLRC found Garado to be infact an employee of petitioner Fuji Xerox and by it to have been illegally dismissed. The NLRC found
that although Garado's request was wrongful, dismissal would be a disproportionate penalty. The NLRC held that although Skillpower, Inc. had
substantial capital assets, the fact was that the copier machines, which Garado operated, belonged to petitioner Fuji Xerox, and that although it was
Skillpower, Inc. which had suspended Garado, the latter merely acted at the behest of Fuji Xerox. The NLRC found that Garado worked under the
control and supervision of Fuji Xerox, which paid his salaries, and that Skillpower, Inc. merely acted as paymaster-agent of Fuji Xerox. The NLRC held
that Skillpower, Inc. was a labor-only contractor and Garado should be deemed to have been directly employed by Fuji Xerox, regardless of the
agreement between it and Skillpower, Inc. Accordingly, the NLRC ordered:
WHEREFORE, premises considered, the respondents are hereby ordered to immediately reinstate complainant Pedro Garado to his
former position as key operator with three (3) years backwages, without qualification or reduction whatsoever . . . . Except as herein
above MODIFIED, the appealed decision is hereby Affirmed.
Hence the present petition. Fuji Xerox argues that Skillpower, Inc. is an independent contractor and that Garado is its employee for the following
reasons:
(1) Garado was recruited by Skillpower, Inc.;
(2) The work done by Garado was not necessary to the conduct of the business of Fuji Xerox;
(3) Garado's salaries and benefits were paid directly by Skillpower, Inc.;
(4) Garado worked under the control of Skillpower, Inc.; and
(5) Skillpower, Inc. is a highly-capitalized business venture.
The contentions are without merit.
Fuji Xerox contends that Garado was actually recruited by Skillpower, Inc. as part of its personnel pool and later merely assigned to it (petitioner) . It is
undisputed, however, that since 1980, 1 when Garado was first assigned to work at Fuji Xerox, he had never been assigned to any other company so
much so that by 1984, he was already a member of the union which petitioned the company for his regularization. 2 From 1980 to 1984 he worked
exclusively for petitioner. Indeed, he was recruited by Skillpower, Inc. solely for assignment to Fuji Xerox to work in the latter's Xerox Copier Project. 3
Petitioners claim that Skillpower, Inc. has other clients to whom it provided "temporary" services. That, however, is irrelevant. What is important is that
once employed, Garado was never assigned to any other client of Skillpower, Inc. In fact, although under the agreement Skillpower, Inc. was supposed
to provide only "temporary" services, Skillpower, Inc. actually supplied Fuji Xerox the labor which the latter needed for its Xerox Copier Project for
seven (7) years, from 1977 to 1984.
On January 1, 1983, private respondent signed a contract entitled "Appointment as Contract Worker," in which it was stated that private respondent's
status was that of a contract worker for a definite period from January 1, 1983 to June 30, 1983. As such, private respondent's employment was
considered temporary, to terminate automatically six (6) months afterwards, without necessity of any notice and without entitling private respondent
to separation or termination pay. Private respondent was made to understand that he was an employee of Skillpower, Inc., and not of the client to
which he was assigned. Therefore, the termination of the contract or any renewal or extension thereof did not entitle him to become an employee of
the client and the latter was not under any obligation to appoint him as such, "notwithstanding the total duration of the contract or any extension or
renewal thereof."
This is nothing but a crude attempt to circumvent the law and undermine the security of tenure of private respondent by employing workers under six-
month contracts which are later extended indefinitely through renewals. As this Court held in the Philippine Bank of Communications v. NLRC: 4
It is not difficult to see that to uphold the contractual arrangement between the bank and CESI would in effect be to permit
employers to avoid the necessity of hiring regular or permanent employees and to enable them to keep their employees indefinitely
on a temporary or casual status, thus to deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely
designed to prevent such a result.
Second. Petitioner contends that the service provided by Skillpower, Inc., namely, operating petitioners' xerox machine, is not directly related nor
necessary to the business of selling and leasing copier machines of petitioner. Petitioners claim that their Xerox Copier Project is just for public service
and is purely incidental to its business. What petitioners earn from the project is not even sufficient to defray their expenses, let alone bring profits to
them. As such, the project is no different from other services which can legally be contracted out, such as security and janitorial services. Petitioners
contend that the copier service can be considered as part of their "housekeeping" tasks which can be let to independent contractors. 5
We disagree. As correctly held by the NLRC, at the very least, the Xerox Copier Project of petitioners promotes goodwill for the company . It may not
generate income for the company but there are activities which a company may find necessary to engage in because they ultimately redound to its
benefit. Operating the company's copiers at its branches advertises the quality of their products and promotes the company's reputation and public
image. It also advertises the utility and convenience of having a copier machine. It is noteworthy that while not operated for profit the copying service
is not intended either to be "promotional," as, indeed, petitioner charged a fee for the copies made.
It is wrong to say that if a task is not directly related to the employer's business, or it falls under what may be considered "housekeeping activities," the
one performing the task is a job contractor. The determination of the existence of an employer-employee relationship is defined by law according to
the facts of each case, regardless of the nature of the activities involved.
Third. Petitioners contend that it never exercised control over the conduct of private respondent. Petitioners allege that the salaries paid to Garado, as
well as his employment records, vouchers and loanchecks from the SSS were coursed through Skillpower, Inc. In addition private respondent applied
for vacation leaves to Skillpower, Inc.
It is also contended that it was Skillpower, Inc. which twice required private respondent to explain why he should not be dismissed for the spoilage in
Fuji Xerox's Buendia branch and suspended him pending the result of the investigation. According to petitioners, although they conducted an
administrative investigation, the purpose was only to determine the complicity of their own employees in the incident, if any, and any criminal liability
of private respondent.
This claim is belied by two letters written by Atty. Victorino H. Luis, Legal and Industrial Relations Officer of the company, to the union president, Nick
Macaraig. The first letter, dated July 6, 1983, stated:
This has reference to your various letters dated today on administrative case concerning Messrs. Crisostomo Cruz, Pedro Garado
and Ms. Evelyn Abenes.
In connection with the above and in the case likewise of Mr. Dionisio Guyala,  please be advised that the proceedings against them
are being carried out under the terms, and in accordance with the provisions of our Policy and Procedure on Employment
Termination as well as Policy on Disciplinary Actions dated October 1, 1982, and not under the Grievance Machinery under our CBA.
Your action apparently is premised on the assumption that we are now in the Grievance Stage, which is premature. If we have
allowed the Union to participate in our Investigation and Administrative panels, it is only a concession on management's part in
accordance with No. IV, Section B, Paragraph 3 of the abovecited policy on the investigation, the Personnel/Administrative
Department may consult the Union whenever necessary.
We shall entertain grievances under our CBA Machinery only after decisions have been made on the foregoing cases and should you
find the penalties imposed, if any, as unjust, unduly harsh, discriminating otherwise fit subject for grievance by the Union itself
under the terms of our CBA.
Accordingly, we are proceeding with our investigations on the administrative charges with or without your presence or that of the
respondents if it is the latter's preference, as in the case of Crisostomo Cruz, to ignore the same. (Emphasis ours)
The second letter, dated July 13, 1983, 6 read:
You obviously persist in pursuing the misconception that our allowing your presence in the administrative proceedings against
Messrs. Guyala, Cruz, et al. has set the Grievance Machinery under our CBA into play. We can only reiterate our statement in our
letter of July 6 that we were implementing Policy and Procedures on Termination dated October 1, 1982 and that your presence in
helping bolster the defense for the respondents was only with our forbearance in the spirit of cooperation in order to better ferret
out the truth.
The power or authority to impose discipline and disciplinary measures upon employees is a basic prerogative of Management,
something that cannot be abdicated, much less ceded to a CBA Grievance Committee which is limited to settling disputes and
misunderstanding as to interpretation, application, or violation of any provisions of the CBA agreement . . . As likewise pointed out
in our letter of July 6 recourse to Grievance may possibly be resorted to if in the Union's opinion a penalty imposed upon a
respondent Union member is discriminating to the member or otherwise illegal, unduly harsh, and the like. Ultimately, the remedy
lies in appeal to the NLRC, as in similar cases in the past. (Emphasis ours)
These letters reveal the role which Fuji Xerox played in the dismissal of the private respondent. They dispel any doubt that Fuji Xerox exercised
disciplinary authority over Garado and that Skillpower, Inc. issued the order of dismissal merely in obedience to the decision of petitioner.
Fourth. Petitioner avers that Skillpower, Inc. is a highly-capitalized business venture, registered as an "independent employer" with the Securities and
Exchange Commission as well as the Department of Labor and Employment. Skillpower, Inc. is a member of the Social Security System. In 1984 it had
assets exceeding P5 million pesos and at least 20 typewriters, office equipment and service vehicles. It had employees of its own and a pool of 25 clerks
assigned to clients on a temporary basis.
Petitioners cite the case of Neri v. NLRC, 7 in which it was held that the Building Care Corporation (BCC) was an independent contractor on the basis of
finding that it had substantial capital, although there was no evidence that it had investments in the form of tools, equipment, machineries and work
premises. But the Court in that case considered not only the capitalization of the BCC but also the fact that BCC was providing specific special services
(radio/telex operator and janitor) to the employer; that in another case 8 the Court had already found that the BCC was an independent contractor; that
BCC retained control over the employees and the employer was actually just concerned with the end-result; that BCC had the power to reassign the
employees and their deployment was not subject to the approval of the employer; and that BCC was paid in lump sum for the services it rendered.
These features of that case make it distinguishable from the present one.
Here, the service being rendered by private respondent was not a specific or special skill that Skillpower, Inc. was in the business of providing. Although
in the Neri case the telex machine operated by the employee belonged to the employer, the service was deemed permissible because it was specific
and technical. This cannot be said of the service rendered by private respondent Garado.
The Rules to Implement of the Labor Code, Book III, Rule VIII, §8, provide that there is job contracting when the following conditions are fulfilled:
(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.
Otherwise, according to Art. 106 of the Labor code,
There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by
 such persons are performing activities which are directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
Petitioner Fuji Xerox argues that Skillpower, Inc. had typewriters and service vehicles for the conduct of its business independently of the petitioner.
But typewriters and vehicles bear no direct relationship to the job for which Skillpower, Inc. contracted its service of operating copier machines and
offering copying services to the public. The fact is that Skillpower, Inc. did not have copying machines of its own. What it did was simply to supply
manpower to Fuji Xerox. The phrase "substantial capital and investment in the form of tools, equipment, machineries, work premises, and other
materials which are necessary in the conduct of his business," in the Implementing Rules clearly contemplates tools, equipment, etc., which are directly
related to the service it is being contracted to render. One who does not have an independent business for undertaking the job contracted for is just an
agent of the employer.
Fifth. The Agreement between petitioner Fuji Xerox and Skillpower, Inc. provides that Skillpower, Inc. is an independent contractor and that the
workers hired by it "shall not, in any manner and under any circumstances, be considered employees of [the] Company, and that the Company has no
control or supervision whatsoever over the conduct of the Contractor or any of its workers in respect to how they accomplish their work or perform the
Contractor's obligations under this AGREEMENT."
In Tabas v. California Manufacturing Company, Inc., 9 this Court held on facts similar to those in case at bar:
There is no doubt that in the case at bar, Livi performs "manpower services," meaning to say, it contracts out labor in favor of
clients. We hold that it is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the
contract that it is "an independent contractor." The nature of one's business is not determined by self-serving appellations one
attaches thereto but by the tests provided by statute and prevailing case law. The bare fact that Livi maintains a separate line of
business does not extinguish the equal fact that it has provided California with workers to pursue the latter's own business. In this
connection, we do not agree that the petitioners had been made to perform activities "which are not directly related to the general
business of manufacturing," California's purported "principal operation activity." The petitioners had been charged with
"merchandising [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task
and occasional [sic] price tagging," an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if
Livi had served as its (California's promotions or sales arm or agents, or otherwise, rendered a piece of work it (California) could not
have itself done; Livi as a placement agency, had simply supplied it with the manpower necessary to carry out its (California's)
merchandising activities, using its (California's) premises and equipment.
xxx xxx xxx
The fact that the petitioners have allegedly admitted being Livi's "direct employees" in their complaints is nothing conclusive. For
one thing, the fact that the petitioners were (are), will not absolve California since liability has been imposed by legal operation. For
another, and as we indicated, the relations of parties must be judged from case to case and the decree of law, and not by
declaration of parties.
Skillpower, Inc. is, therefore, a "labor-only" contractor and Garado is not its employee. No grave abuse of discretion can thus be imputed to the NLRC
for declaring petitioner Fuji Xerox guilty of illegal dismissal of private respondent.
ACCORDINGLY, the petition for certiorari  is DISMISSED for lack of merit.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
 
G.R. No. 113347 June 14, 1996
FILIPINAS SYNTHETIC FIBER CORPORATION (FILSYN), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER VOLTAIRE A. BALITAAN, FELIPE LOTERTE and DE LIMA TRADING & GENERAL
SERVICES, respondents.
 
BELLOSILLO, J.:p
Filipinas Synthetic Fiber Corporation (FILSYN) assails the decision of the National Labor Relations Commission (NLRC) of 16 September 1993 1 upholding
the ruling of the Labor Arbiter that there exists an employer-employee relationship between FILSYN and private respondent Felipe Loterte. 2
On 4 April 1991 FILSYN, a domestic corporation engaged in the manufacture of polyester fiber, contracted with De Lima Trading and General Services
(DE LIMA) for the performance of specific janitorial services at the former's plant in Brgy. Don Jose, Sta. Rosa, Laguna. 3 Pursuant to the agreement
Felipe Loterte, among others, was deployed at FILSYN to take care of the plants and maintain general cleanliness around the premises.
On 24 February 1992 Loterte sued FILSYN and DE LIMA as alternative defendants 4 for illegal dismissal, underpayment of wages, non-payment of legal
holiday pay, service incentive leave pay and 13th month pay alleging that he was first assigned to perform janitorial work at FILSYN in 1981 by the La
Saga General Services; that the La Saga was changed to DE LIMA on August 1991; that when a movement to demand increased wages and 13th month
pay arose among the workers on December 1991 he was accused by a certain Dodie La Flores of having posted in the bulletin board at FILSYN an article
attributing to management a secret understanding to block the demand; and, for denying responsibility, his gate pass was unceremoniously cancelled
on 6 February 1992 and he was subsequently dismissed.5
The Labor Arbiter ruled in favor of Loterte. He was classified as a regular employee on the ground that he performed tasks usually necessary or
desirable in the main business of FILSYN for more than ten (10) years or since 1981 under the ruling in Guarin v.  NLRC.6 FILSYN was declared to be the
real employer of Loterte and DE LIMA as a mere labor contractor. 7 Hence, FILSYN was adjudged liable for Loterte's reinstatement, payment of salary
differentials and back wages from 6 February 1992 up to the date of judgment, in addition to his unpaid legal holiday pay, service incentive leave pay
and 13th month pay in the total amount of P56,394.90.
FILSYN appealed to the NLRC contending that the application of the Guarin ruling was misplaced since the contractor in said case was not able to prove
that it had substantial capital, hence the reason for its being declared as a labor-only contractor. In the case of DE LIMA, however, sufficient evidence
existed consisting of its Certificate of Registration issued by the Securities & Exchange Commission (SEC) and Articles of Incorporation and By-Laws to
prove that it had substantial capitalization, hence, could not be considered as a mere labor contractor.
The NLRC debunked the claim of FILSYN and affirmed the Labor Arbiter in finding DE LIMA as a labor-only contractor. When a motion for
reconsideration proved futile, FILSYN filed the instant petition.
On 23 February 1994 a temporary restraining order to stay the execution of the NLRC decision was issued by the Court upon approval of a bond in the
amount of P56,000.00 to be effective during the pendency of this petition. 8
Petitioner contends that the NLRC committed grave abuse of discretion in holding DE LIMA as a labor-only contractor with no substantial capital or
investment. Petitioner insists that the evidence 9 it presented shows DE LIMA to be a corporation duly registered with the SEC with substantial
capitalization of P1,600,000.00, P400,000.00 of which is actually subscribed. Hence, DE LIMA cannot possibly be considered as without substantial
capital. But, assuming arguendo that DE LIMA is without substantial capital or investment, petitioner contends that it cannot still be consider as the real
employer of Loterte since his work is not necessary in the principal business of FILSYN which is the manufacture of polyester, and that present
jurisprudence holds that the performance of janitorial services, although directly related to the principal business of the alleged employer, is
nonetheless unnecessary since non-performance thereof will not cause production and company sales to suffer. 10
In his Comment the Solicitor General agrees with petitioner that DE LIMA is not a labor-only contractor. However, while he concedes that no employer-
employee relationship exists between FILSYN and Loterte, the Solicitor General opines that the former is still liable solidarily with DE LIMA, its
contractor, for the satisfaction of the Labor Arbiter's awards in favor of Loterte as an indirect employer under Art. 106 of the Labor Code. 11
In its Consolidated Reply FILSYN contends that Art. 106 of the Labor Code cited by the Solicitor General applies only in cases where there is failure to
pay wages, not in cases where the employee was illegally dismissed, as in the case of Loterte.
We agree that there is sufficient evidence to show that private respondent DE LIMA is an independent job contractor, not a mere labor-only contractor.
Under the Labor Code, two (2) elements must exist for a finding of labor-only contracting: (a) 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 (b) the workers recruited and
placed by such persons are performing activities directly related to the principal business of such employer. 12
These two (2) elements do not exist in the instant case. As pointed out by petitioner, private respondent DE LIMA is a going concern duly registered
with the Securities and Exchange Commission with substantial capitalization of P1,600,000.00, P400,000.00 of which is actually subscribed. 13 Hence, it
cannot be considered as engaged in labor-only contracting being a highly capitalized venture. 14 Moreover, while the janitorial services performed by
Felipe Loterte pursuant to the agreement between FILSYN and DE LIMA may be considered directly related to the principal business of FILSYN which is
the manufacture of polyester fiber, nevertheless, they are not necessary in its operation. 15 On the contrary, they are merely incidental thereto, as
opposed to being integral, without which production and company sales will not suffer. 16 Judicial notice has already been taken of the general practice
in private as well as in government institutions and industries of hiring janitorial services on an independent contractor basis. 17 Consequently, DE LIMA
being an independent job contractor, no direct employer-employee relationship exists between petitioner FILSYN and private respondent Felipe
Loterte. 18
With respect to its liability, however, petitioner cannot totally exculpate itself from the fact that respondent DE LIMA is an independent job contractor.
We agree with the Solicitor General that notwithstanding the lack of a direct employer-employee relationship between FILSYN and Felipe Loterte, the
former is still jointly and severally liable with respondent DE LIMA for Loterte's monetary claims under Art. 109 of the Labor Code 19 which explicitly
provides --
 The provisions of existing laws to the contrary notwithstanding, every employer or indirect employer shall be held responsible with
his contractor or subcontractor for any violation of any provision of this Code. For purposes of determining the extent of their civil
liability under this Chapter, they shall be considered as direct employers (emphasis supplied).
However, a reduction of the Labor Arbiter's awards is in order. In his decision of 31 May 1993, the Labor Arbiter in computing the 13th month pay and
service incentive leave pay due Loterte erroneously included the period starting June 1989 to the date of his decision. From the admission of Loterte
himself, 20 he started working for DE LIMA only in August 1991 and that the Agreement between FILSYN and DE LIMA is dated 4 April
1991. 21 Consequently, the joint and several liablity of FILSYN and DE LIMA could not have covered the period before said date. Thus, without prejudice
to the right of petitioner to seek reimbursement from DE LIMA for whatever amount it will have to pay Loterte, we determine their joint and several
liability on the basis of the computation of the Labor Arbiter, affirmed by the NLRC (which is not disputed by petitioner except only as to the awards for
the period prior to August 1991), as follows --
A. Underpayment:
From August 1991 to 5 Feb. 1992
(P113.00 x 314 = P35,482.00)
(P35,482.00 ÷ 12 = P2,956.83)
P2,956.83 x 6 mos. & 5 days = P18,233.78
Less: Amount received
(P104 x 314 = P32,656.00)
(P32,656.00 ÷ 12 = P2,721.33)
P2,721.33 x 6 mos. & 5 days = 16,781.54
Total underpayment due = 1,452.24
B. 13th Month Pay:
From Aug. to Dec. 1991
(P113.00 x 314 = P35,482.00)
(P35,482.00 ÷ 12 = P2,956.83)
(P2,956.83 x 5 mos. = P14,784.15)
P14,784.15 ÷ 12 = P1,232.01
C. Service Incentive Leave Pay:
1991 (P113.00 x 5 days) = P565.00
D. Back wages:
From 6 Feb. 1992 to 31 May 1993
(P113.00 x 314 = P35,482.00)
(P35,482.00 ÷12 = P2,956.83)
(P2,956.83 x 15 mos. & 25 days = P46,816.47
1992 13th month pay = 2,956.83
1992 service incentive leave pay = P565.00
Total back wages due = P50,338.30
WHEREFORE, the questioned decision of respondent National Labor Relations Commission affirming that of the Labor Arbiter as well as its resolution
denying petitioner's motion for reconsideration is REVERSED and SET ASIDE and a new one entered:
1. Declaring the relationship between petitioner Filipinas Synthetic Fiber Corporation (FILSYN) and private respondent De Lima Trading and General
Services (DE LIMA) as one of job contractorship;
2. Ordering private respondent De Lima Trading and General Services (DE LIMA) to reinstate private respondent FELIPE LOTERTE to his former position
or its equivalent without loss of seniority rights; and
3. Ordering private respondent De Lima Trading and General Services (DE LIMA) jointly and severally with petitioner Filipinas Synthetic Fiber
Corporation (FILSYN) to pay private respondent FELIPE LOTERTE the following amounts: P1,452.24 for salary differentials, P1,232.01 for 13th month
pay, P565.00 for service incentive leave pay, and P50,338.30 for backwages, or a total of P53,587.55 due and payable, without prejudice to FILSYN
seeking reimbursement from DE LIMA for whatever amount the former may pay or have paid the latter by virtue hereof.
SO ORDERED.
Padilla, Kapunan and Hermosisima, Jr., JJ., concur.
Vitug, J., concurs in the result.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-80680 January 26, 1989
DANILO B. TABAS, EDUARDO BONDOC, RAMON M. BRIONES, EDUARDO R. ERISPE, JOEL MADRIAGA, ARTHUR M. ESPINO, AMARO BONA,
FERDINAND CRUZ, FEDERICO A. BELITA, ROBERTO P. ISLES, ELMER ARMADA, EDUARDO UDOG, PETER TIANSING, MIGUELITA QUIAMBOA, NOMER
MATAGA, VIOLY ESTEBAN and LYDIA ORTEGA, petitioners,
vs.
CALIFORNIA MANUFACTURING COMPANY, INC., LILY-VICTORIA A. AZARCON, NATIONAL LABOR RELATIONS COMMISSION, and HON. EMERSON C.
TUMANON, respondents.
V.E. Del Rosario & Associates for respondent CMC.
The Solicitor General for public respondent.
Banzuela, Flores, Miralles, Raneses, Sy, Taquio and Associates for petitioners.
Mildred A. Ramos for respondent Lily Victoria A. Azarcon.

SARMIENTO, J.:
On July 21, 1986, July 23, 1986, and July 28, 1986, the petitioners petitioned the National Labor Relations Commission for reinstatement and payment
of various benefits, including minimum wage, overtime pay, holiday pay, thirteen-month pay, and emergency cost of living allowance pay, against the
respondent, the California Manufacturing Company. 1
On October 7, 1986, after the cases had been consolidated, the California Manufacturing Company (California) filed a motion to dismiss as well as a
position paper denying the existence of an employer-employee relation between the petitioners and the company and, consequently, any liability for
payment of money claims. 2 On motion of the petitioners, Livi Manpower Services, Inc. was impleaded as a party-respondent.
It appears that the petitioners were, prior to their stint with California, employees of Livi Manpower Services, Inc. (Livi), which subsequently assigned
them to work as "promotional merchandisers" 3 for the former firm pursuant to a manpower supply agreement. Among other things, the agreement
provided that California "has no control or supervisions whatsoever over [Livi's] workers with respect to how they accomplish their work or perform
[Californias] obligation"; 4 the Livi "is an independent contractor and nothing herein contained shall be construed as creating between [California] and
[Livi] . . . the relationship of principal[-]agent or employer[-]employee'; 5 that "it is hereby agreed that it is the sole responsibility of [Livi] to comply with
all existing as well as future laws, rules and regulations pertinent to employment of labor" 6 and that "[California] is free and harmless from any liability
arising from such laws or from any accident that may befall workers and employees of [Livi] while in the performance of their duties for [California]. 7
It was further expressly stipulated that the assignment of workers to California shall be on a "seasonal and contractual basis"; that "[c]ost of living
allowance and the 10 legal holidays will be charged directly to [California] at cost "; and that "[p]ayroll for the preceeding [sic] week [shall] be delivered
by [Livi] at [California's] premises." 8
The petitioners were then made to sign employment contracts with durations of six months, upon the expiration of which they signed new agreements
with the same period, and so on. Unlike regular California employees, who received not less than P2,823.00 a month in addition to a host of fringe
benefits and bonuses, they received P38.56 plus P15.00 in allowance daily.
The petitioners now allege that they had become regular California employees and demand, as a consequence whereof, similar benefits. They likewise
claim that pending further proceedings below, they were notified by California that they would not be rehired. As a result, they filed an amended
complaint charging California with illegal dismissal.
California admits having refused to accept the petitioners back to work but deny liability therefor for the reason that it is not, to begin with, the
petitioners' employer and that the "retrenchment" had been forced by business losses as well as expiration of contracts. 9 It appears that thereafter, Livi
re-absorbed them into its labor pool on a "wait-in or standby" status. 10
Amid these factual antecedents, the Court finds the single most important issue to be: Whether the petitioners are California's or Livi's employees.
The labor arbiter's decision, 11 a decision affirmed on appeal, 12 ruled against the existence of any employer-employee relation between the petitioners
and California ostensibly in the light of the manpower supply contract, supra, and consequently, against the latter's liability as and for the money claims
demanded. In the same breath, however, the labor arbiter absolved Livi from any obligation because the "retrenchment" in question was allegedly
"beyond its control ." 13 He assessed against the firm, nevertheless, separation pay and attorney's fees.
We reverse.
The existence of an employer-employees relation is a question of law and being such, it cannot be made the subject of agreement. Hence, the fact that
the manpower supply agreement between Livi and California had specifically designated the former as the petitioners' employer and had absolved the
latter from any liability as an employer, will not erase either party's obligations as an employer, if an employer-employee relation otherwise exists
between the workers and either firm. At any rate, since the agreement was between Livi and California, they alone are bound by it, and the petitioners
cannot be made to suffer from its adverse consequences.
This Court has consistently ruled that the determination of whether or not there is an employer-employee relation depends upon four standards: (1)
the manner of selection and engagement of the putative employee; (2) the mode of payment of wages; (3) the presence or absence of a power of
dismissal; and (4) the presence or absence of a power to control the putative employee's conduct. 14 Of the four, the right-of-control test has been held
to be the decisive factor. 15
On the other hand, we have likewise held, based on Article 106 of the Labor Code, hereinbelow reproduced:
ART. 106. Contractor or sub-contractor.  — Whenever an employee 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 sub-contractor, if any, shall be paid in accordance with the
provisions of this Code.
In the event that the contractor or sub-contractor fails to pay wages of his employees in accordance with this Code, the employer
shall be jointly and severally liable with his contractor or sub-contractor to such employees to the extent of the work performed
under the contract, in the same manner and extent that he is liable to employees directly employed by him.
 The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of labor to protect the rights of
workers established under this Code. In so prohibiting or restricting, he may make appropriate distinctions between labor-only
contracting and job contracting as well as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or circumvention of any provisions of
this Code.
There is 'labor-only' contracting where the person supplying workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to the principal business of such employer. In such cases, the person
or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
that notwithstanding the absence of a direct employer-employee relationship between the employer in whose favor work had been contracted out by
a "labor-only" contractor, and the employees, the former has the responsibility, together with the "labor-only" contractor, for any valid labor
claims, 16 by operation of law. The reason, so we held, is that the "labor-only" contractor is considered "merely an agent of the employer," 17 and liability
must be shouldered by either one or shared by both. 18
There is no doubt that in the case at bar, Livi performs "manpower services", 19 meaning to say, it contracts out labor in favor of clients. We hold that it
is one notwithstanding its vehement claims to the contrary, and notwithstanding the provision of the contract that it is "an independent
contractor." 20 The nature of one's business is not determined by self-serving appellations one attaches thereto but by the tests provided by statute and
prevailing case law. 21 The bare fact that Livi maintains a separate line of business does not extinguish the equal fact that it has provided California with
workers to pursue the latter's own business. In this connection, we do not agree that the petitioners had been made to perform activities 'which are
not directly related to the general business of manufacturing," 22 California's purported "principal operation activity. " 23 The petitioner's had been
charged with "merchandizing [sic] promotion or sale of the products of [California] in the different sales outlets in Metro Manila including task and
occational [sic] price tagging," 24 an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if Livi had served as its
(California's) promotions or sales arm or agent, or otherwise, rendered a piece of work it (California) could not have itself done; Livi, as a placement
agency, had simply supplied it with the manpower necessary to carry out its (California's) merchandising activities, using its (California's) premises and
equipment. 25
Neither Livi nor California can therefore escape liability, that is, assuming one exists.
The fact that the petitioners have allegedly admitted being Livi's "direct employees" 26 in their complaints is nothing conclusive. For one thing, the fact
that the petitioners were (are), will not absolve California since liability has been imposed by legal operation. For another, and as we indicated, the
relations of parties must be judged from case to case and the decree of law, and not by declarations of parties.
The fact that the petitioners have been hired on a "temporary or seasonal" basis merely is no argument either. As we held in Philippine Bank of
Communications v. NLRC,  27 a temporary or casual employee, under Article 218 of the Labor Code, becomes regular after service of one year, unless he
has been contracted for a specific project. And we cannot say that merchandising is a specific project for the obvious reason that it is an activity related
to the day-to-day operations of California.
It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to perform the latter's
merchandising activities. For then, Livi would have been truly the employer of its employees, and California, its client. The client, in that case, would
have been a mere patron, and not an employer. The employees would not in that event be unlike waiters, who, although at the service of customers,
are not the latter's employees, but of the restaurant. As we pointed out in the Philippine Bank of Communications case:
xxx xxx xxx
... The undertaking given by CESI in favor of the bank was not the performance of a specific job for instance, the carriage and
delivery of documents and parcels to the addresses thereof. There appear to be many companies today which perform this discrete
service, companies with their own personnel who pick up documents and packages from the offices of a client or customer, and
who deliver such materials utilizing their own delivery vans or motorcycles to the addressees. In the present case, the undertaking
of CESI was to provide its client the bank with a certain number of persons able to carry out the work of messengers. Such
undertaking of CESI was complied with when the requisite number of persons were assigned or seconded to the petitioner bank.
Orpiada utilized the premises and office equipment of the bank and not those of CESI. Messengerial work the delivery of documents
to designated persons whether within or without the bank premises-is of course directly related to the day-to-day operations of the
bank. Section 9(2) quoted above does not require for its applicability that the petitioner must be engaged in the delivery of items as
a distinct and separate line of business.
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and placement corporation placing
bodies, as it were, in different client companies for longer or shorter periods of time, ... 28
In the case at bar, Livi is admittedly an "independent contractor providing temporary services of manpower to its client. " 29 When it thus provided
California with manpower, it supplied California with personnel, as if such personnel had been directly hired by California. Hence, Article 106 of the
Code applies.
The Court need not therefore consider whether it is Livi or California which exercises control over the petitioner vis-a-vis the four barometers referred
to earlier, since by fiction of law, either or both shoulder responsibility.
It is not that by dismissing the terms and conditions of the manpower supply agreement, we have, hence, considered it illegal. Under the Labor Code,
genuine job contracts are permissible, provided they are genuine job contracts. But, as we held in Philippine Bank of Communications, supra, when such
arrangements are resorted to "in anticipation of, and for the very purpose of making possible, the secondment" 30 of the employees from the true
employer, the Court will be justified in expressing its concern. For then that would compromise the rights of the workers, especially their right to
security of tenure.
This brings us to the question: What is the liability of either Livi or California?
The records show that the petitioners bad been given an initial six-month contract, renewed for another six months. Accordingly, under Article 281 of
the Code, they had become regular employees-of-California-and had acquired a secure tenure. Hence, they cannot be separated without due process
of law.
California resists reinstatement on the ground, first, and as we Id, that the petitioners are not its employees, and second, by reason of financial distress
brought about by "unfavorable political and economic atmosphere" 31 "coupled by the February Revolution." 32 As to the first objection, we reiterate
that the petitioners are its employees and who, by virtue of the required one-year length-of-service, have acquired a regular status. As to the second,
we are not convinced that California has shown enough evidence, other than its bare say so, that it had in fact suffered serious business reverses as a
result alone of the prevailing political and economic climate. We further find the attribution to the February Revolution as a cause for its alleged losses
to be gratuitous and without basis in fact.
California should be warned that retrenchment of workers, unless clearly warranted, has serious consequences not only on the State's initiatives to
maintain a stable employment record for the country, but more so, on the workingman himself, amid an environment that is desperately scarce in jobs.
And, the National Labor Relations Commission should have known better than to fall for such unwarranted excuses and nebulous claims.
WHEREFORE, the petition is GRANTED. Judgment is hereby RENDERED: (1): SETTING ASIDE the decision, dated March 20, 1987, and the resolution,
dated August 19, 1987; (2) ORDERING the respondent, the California Manufacturing Company, to REINSTATE the petitioners with full status and rights
of regular employees; and (3) ORDERING the respondent, the California Manufacturing Company, and the respondents, Livi Manpower Service, Inc.
and/or Lily-Victoria Azarcon, to PAY, jointly and severally, unto the petitioners: (a) backwages and differential pays effective as and from the time they
had acquired a regular status under the second paragraph, of Section 281, of the Labor Code, but not to exceed three (3) years, and (b) all such other
and further benefits as may be provided by existing collective bargaining agreement(s) or other relations, or by law, beginning such time; and (4)
ORDERING the private respondents to PAY unto the petitioners attorney's fees equivalent to ten (10%) percent of all money claims hereby awarded, in
addition to those money claims. The private respondents are likewise ORDERED to PAY the costs of this suit.
IT IS SO ORDERED.
Melencio-Herrera, (Chairperson), Paras, Padilla and Regalado, JJ., concur.

FIRST DIVISION
G.R. No. 124055. June 8, 2000
ROLANDO E. ESCARIO, NESTOR ANDRES, CESAR AMPER, LORETO BALDEMOR, EDUARDO BOLONIA, ROMEO E. BOLONIA, ANICETO CADESIM, JOEL
CATAPANG, NESTOR DELA CRUZ, EDUARDO DUNGO ESCARIO REY, ELIZALDE ESTASIO, CAROLINO M. FABIAN, RENATO JANER, EMER B. LIQUIGAN,
ALEJANDRO MABAWAD, FERNANDO M. MAGTIBAY, DOMINADOR B. MALLILLIN, NOEL B. MANILA, VIRGILIO A. MANIO, ROMEO M. MENDOZA,
TIMOTEO NOTARION, FREDERICK RAMOS, JOSEPH REYES, JESSIE SEVILLA, NOEL STO. DOMINGO, DODJIE TAJONERA, JOSELITO TIONLOC, ARNEL
UMALI, MAURLIE C. VIBAR, ROLANDO ZALDUA, RODOLFO TUAZON, TEODORO LUGADA, MAURING MANUEL, MARCIANO VERGARA, JR., ARMANDO
IBASCO, CAYETANO IBASCO, LEONILO MEDINA, JOSELITO ODO, MELCHOR BUELA, GOMER GOMEZ, HENRY PONCE, RAMON ORTIZ, JR., ANTONIO
MIJARES, JR., MARIO DIZER, REYNANTE PEJO, ARNALDO RAFAEL, NELSON BERUELA, AUGUSTO RAMOS, RODOLFO VALENTIN, ANTONIO CACAM,
VERNON VELASQUEZ, NORMAN VALLO, ALEJANDRO ORTIZ, ROSANO VALLO, ANDREW ESPINOSA, EDGAR CABARDO, FIDELES REYES, EDGARDO
FRANCISCO, FERNANDO VILLARUEL, LEOPOLDO OLEGARIO, OSCAR SORIANO, GARY RELOS, DANTE IRANZO, RONALDO BACOLOR, RONALD ESGUERA,
VICTOR ALVAREZ, JOSE MARCELO, DANTE ESTRELLADO, MELQUIADES ANGELES, GREGORIO TALABONG, ALBERT BALAO, ALBERT CANLAS, CAMILO
VELASCO, PONTINO CHRISTOPHER, WELFREDO RAMOS, REYNALDO RODRIGUEZ, RAZ GARIZALDE, MIGUEL TUAZON, ROBERTO SANTOS, AND
RICARDO MORTEL, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION, CALIFORNIA MANUFACTURING CO. INC. AND DONNA LOUISE
ADVERTISING AND MARKETING ASSOCIATES INCORPORATED, Respondents.
DECISION
KAPUNAN, J.:
Before this Court is a petition for certiorari under Rule 65, which seeks to annul and set aside the decision, promulgated on 10 May 1995, of the
National Labor Relations Commission (NLRC). The assailed decision reversed the decision of the Labor Arbiter, and ruled that the petitioners are
employees of Donna Louise Advertising and Marketing Associates, Inc. and ordered the reinstatement of petitioners and the payment of backwages.
Private respondent California Marketing Co. Inc. (CMC) is a domestic corporation principally engaged in the manufacturing of food products and
distribution of such products to wholesalers and retailers. Private respondent Donna Louise Advertising and Marketing Associates, Inc. (D.L. Admark) is
a duly registered promotional firm.
Petitioners worked as merchandisers for the products of CMC. Their services were terminated on 16 March 1992.
The parties presented conflicting versions of the facts.
Petitioners allege that they were employed by CMC as merchandisers. Among the tasks assigned to them were the withdrawing of stocks from the
warehouse, the fixing of prices, price-tagging, displaying of merchandise, and the inventory of stocks. These were done under the control, management
and supervision of CMC. The materials and equipment necessary in the performance of their job, such as price markers, gun taggers, toys, pentel pen,
streamers and posters were provided by CMC. Their salaries were being paid by CMC. According to petitioners, the hiring, control and supervision of
the workers and the payment of salaries, were all coursed by CMC through its agent D.L. Admark in order for CMC to avoid its liability under the law.
On 7 February 1992, petitioners filed a case against CMC before the Labor Arbiter for the regularization of their employment status. During the
pendency of the case before the Labor Arbiter, D.L. Admark sent to petitioners notice of termination of their employment effective 16 March 1992.
Hence, their complaint was amended so as to include illegal dismissal as cause of action. Thereafter, twenty-seven more persons joined as
complainants. CMC filed a motion to implead as party-defendant D. L. Admark and at the same time the latter filed a motion to intervene. Both motions
were granted.
CMC, on the other hand, denied the existence of an employer-employee relationship between petitioner and itself. Rather, CMC contended that it is
D.L. Admark who is the employer of the petitioners. While CMC is engaged in the manufacturing of food products and distribution of such to
wholesalers and retailers, it is not allowed by law to engage in retail or direct sales to end consumers. It, however, hired independent job contractors
such as D.L. Admark, to provide the necessary promotional activities for its product lines.
For its part, D.L. Admark asserted that it is the employer of the petitioners. Its primary purpose is to carry on the business of advertising, promotion and
publicity, the sales and merchandising of goods and services and conduct survey and opinion polls. As an independent contractor it serves several
clients among which include Purefoods, Corona Supply, Firstbrand, Splash Cosmetics and herein private respondent California Marketing.
On 29 July 1994, the Labor Arbiter rendered a decision finding that petitioners are the employees of CMC as they were engaged in activities that are
necessary and desirable in the usual business or trade of CMC. 1 In justifying its ruling, the Labor Arbiter cited the case of Tabas vs. CMC which, likewise,
involved private respondent CMC. In the Tabas case, this Court ruled that therein petitioner merchandisers were employees of CMC, to wit:
There is no doubt that in the case at bar, Livi performs "manpower services," meaning to say, it contracts out labor in favor of clients. We hold that it is
one not withstanding its vehement claims to the contrary and not- withstanding its vehement claims to the contrary, and notwithstanding the provision
of the contract that it is "an independent contractor." The nature of ones business is not determined by self-serving appellations one attaches thereto
but by the tests provided by statute and prevailing case law. The bare fact that Livi maintains a separate line of business does not extinguish the equal
fact that it has provided California with workers to pursue the latters own business. In this connection, we do not agree that the petitioner has been
made to perform activities "which are not directly related to the general business of manufacturing," Californias purported "principal operation activity.
The petitioners had been charged with merchandising [sic] promotion or sale of the products of [California] in the different sales outlets in Metro
Manila including task and occational [sic] price tagging," an activity that is doubtless, an integral part of the manufacturing business. It is not, then, as if
Livi had served as its (Californias) promotions or sales arm or agent, or otherwise rendered a piece of work it (California) could not itself have done; Livi
as a placement agency, had simply supplied it with manpower necessary to carry out its (Californias) merchandising activities, using its (Californias)
premises and equipment.2cräläwvirtualibräry
On appeal, the NLRC set aside the decision of the Labor Arbiter. It ruled that no employer-employee relationship existed between the petitioners and
CMC. It, likewise, held that D.L. Admark is a legitimate independent contractor, hence, the employer of the petitioners. Finding no valid grounds existed
for the dismissal of the petitioners by D.L. Admark, it ordered their reinstatement. The dispositive portion of the decision reads:
WHEREFORE, premises considered, the appealed judgment is modified. Intervenor DL ADMARK is ordered to reinstate the eighty one (81) complainants
mentioned in the appealed decision to their former positions with backwages from March 16, 1992 until they are actually reinstated. The award of
attorneys fees equivalent to ten (10%) of the award is deleted for lack of basis. 3cräläwvirtualibräry
Petitioners filed a motion for reconsideration but the same was denied by the NLRC for lack of merit. 4cräläwvirtualibräry
Hence, this petition.
In the main, the issue brought to fore is whether petitioners are employees of CMC or D.L. Admark. In resolving this, it is necessary to determine
whether D.L. Admark is a labor-only contractor or an independent contractor.
Petitioners are of the position that D.L. Admark is a labor-only contractor and cites this Courts ruling in the case of Tabas, which they claim is applicable
to the case at bar for the following reasons:
1. The petitioners are merchandisers and the petitioners in the Tabas case are also merchandisers who have the same nature of work.
2. The respondent in this case is California Manufacturing Co. Inc. while respondent in the Tabas case is the same California Manufacturing Co. Inc.
3. The agency in the Tabas case is Livi Manpower Services. In this case, there are at least, three (3) agencies namely: the same Livi Manpower Services;
the Rank Manpower Services and D.L. Admark whose participation is to give and pay the salaries of the petitioners and that the money came from the
respondent CMC as in the Tabas case.
4. The supervision, management and/or control rest upon respondent California Manufacturing Co. Inc. as found by the Honorable Labor Arbiter which
is also, true in the Tabas Case.5cräläwvirtualibräry
We cannot sustain the petition.
Petitioners reliance on the Tabas case is misplaced. In said case, we ruled that therein contractor Livi Manpower Services was a mere placement agency
and had simply supplied herein petitioner with the manpower necessary to carry out the companys merchandising activity. We, however, further
stated that :
It would have been different, we believe, had Livi been discretely a promotions firm, and that California had hired it to perform the latters
merchandising activities. For then, Livi would have been truly the employer of its employees and California, its client. x x x. 6cräläwvirtualibräry
In other words, CMC can validly farm out its merchandising activities to a legitimate independent contractor.
There is labor-only contracting when the contractor or sub-contractor merely recruits, supplies or places workers to perform a job, work or service for a
principal. In labor-only contracting, the following elements are present:
(a) 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
(b) The workers recruited and placed by such person are performing activities which are directly related to the principal business of the
employer. 7cräläwvirtualibräry
In contrast, there is permissible job contracting when a principal agrees to put out or farm out with a contractor or a subcontractor the performance or
completion of a specific job, work or service within a definite or predetermined period, regardless of whether such job or work or service is to be
performed or completed within or outside the premises of the principal. In this arrangement, the following conditions must concur:
(a).... The contractor carries on a distinct and independent business and undertakes the contract work on his account under his own responsibility
according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the
performance of his work except as to the results thereof; and
(b).... The contractor has substantial capital or investment in the form of tools, equipment, machineries (sic), work premises, and other materials which
are necessary in the conduct of his business.8cräläwvirtualibräry
In the recent case of Alexander Vinoya vs. NLRC et al.,9 this Court ruled that in order to be considered an independent contractor it is not enough to
show substantial capitalization or investment in the form of tools, equipment, machinery and work premises. In addition, the following factors need be
considered: (a) whether the contractor is carrying on an independent business; (b) the nature and extent of the work; (c) the skill required; (d) the term
and duration of the relationship; (e) the right to assign the performance of specified pieces of work; (f) the control and supervision of the workers; (g)
the power of the employer with respect to the hiring, firing and payment of workers of the contractor; (h) the control of the premises; (i) the duty to
supply premises, tools, appliances, materials, and labor; and (j) the mode, manner and terms of payment. 10cräläwvirtualibräry
Based on the foregoing criterion, we find that D.L. Admark is a legitimate independent contractor.
Among the circumstances that tend to establish the status of D.L. Admark as a legitimate job contractor are:
1) The SEC registration certificate of D.L. Admark states that it is a firm engaged in promotional, advertising, marketing and merchandising activities.
2) The service contract between CMC and D.L. Admark clearly provides that the agreement is for the supply of sales promoting merchandising services
rather than one of manpower placement.11cräläwvirtualibräry
3) D.L. Admark was actually engaged in several activities, such as advertising, publication, promotions, marketing and merchandising. It had several
merchandising contracts with companies like Purefoods, Corona Supply, Nabisco Biscuits, and Licron. It was likewise engaged in the publication
business as evidenced by it magazine the "Phenomenon." 12cräläwvirtualibräry
4) It had its own capital assets to carry out its promotion business. It then had current assets amounting to P6 million and is therefore a highly
capitalized venture.13 It had an authorized capital stock of P500,000.00. It owned several motor vehicles and other tools, materials and equipment to
service its clients. It paid rentals of P30,020 for the office space it occupied.
Moreover, by applying the four-fold test used in determining employer-employee relationship, the status of D.L. Admark as the true employer of
petitioners is further established. The elements of this test are (1) the selection and engagement of employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control the employees conduct. 14cräläwvirtualibräry
As regards the first element, petitioners themselves admitted that they were selected and hired by D.L. Admark. 15cräläwvirtualibräry
As to the second element, the NLRC noted that D.L. Admark was able to present in evidence the payroll of petitioners, sample SSS contribution forms
filed and submitted by D.L. Admark to the SSS, and the application for employment by R. de los Reyes, all tending to show that D.L. Admark was paying
for the petitioners salaries. In contrast, petitioners did not submit an iota of evidence that it was CMC who paid for their salaries. The fact that the
agreement between CMC and D.L. Admark contains the billing rate and cost breakdown of payment for core merchandisers and coordinators does not
in any way establish that it was CMC who was paying for their salaries. As correctly pointed out by both CMC 16 and the Office of the Solicitor
General,17 such cost breakdown is a standard content of service contracts designed to insure that under the contract, employees of the job contractor
will receive benefits mandated by law.
Neither did the petitioners prove the existence of the third element. Again petitioners admitted that it was D.L. Admark who terminated their
employment.18cräläwvirtualibräry
To prove the fourth and most important element of control, petitioners presented the memoranda of CMCs sales and promotions manager. The Labor
Arbiter found that these memos "indubitably show that the complainants were under the supervision and control of the CMC people." 19 However, as
correctly pointed out by the NLRC, a careful scrutiny of the documents adverted to, will reveal that nothing therein would remotely suggest that CMC
was supervising and controlling the work of the petitioners:
x x x The memorandums (Exhibit "B") were addressed to the store or grocery owners telling them about the forthcoming sales promotions of CMC
products. While in one of the memorandums a statement is made that "our merchandisers and demonstrators will be assigned to pack the premium
with your stocks in the shelves x x x, yet it does not necessarily mean to refer to the complainants, as they claim, since CMC has also regular
merchandisers and demonstrators. It would be different if in the memorandums were sent or given to the complainants and their duties or roles in the
said sales campaign are therein defined. It is also noted that in one of the memorandums it was addressed to: "All regular
merchandisers/demonstrators." x x x we are not convinced that the documents sufficiently prove employer-employee relationship between
complainants and respondents CMC.20cräläwvirtualibräry
The Office of the Solicitor General, likewise, notes that the documents fail to show anything that would remotely suggest control and supervision
exercised by CMC over petitioners on the matter on how they should perform their work. The memoranda were addressed either to the store owners
or "regular" merchandisers and demonstrators of CMC. Thus, petitioners, who filed a complaint for regularization against respondent CMC, thereby,
conceding that they are not regular employees of the latter, cannot validly claim to be the ones referred to in said memos. 21cräläwvirtualibräry
Having proven the existence of an employer-employee relationship between D.L. Admark and petitioners, it is no longer relevant to determine whether
the activities performed by the latter are necessary or desirable to the usual business or trade of CMC.
On the issue of illegal dismissal, we agree with the findings of the NLRC that D.L. Admark "admits having dismissed the petitioners for allegedly
disowning and rejecting them as their employer." Undoubtedly, the reason given is not just cause to terminate petitioners. 22 D.L. Admarks belated claim
that the petitioners were not terminated but simply did not report to work 23 is not supported by the evidence on record. Moreover, there is no showing
that due process was afforded the petitioners.
IN VIEW OF THE FOREGOING, finding no grave abuse of discretion on the part of the National Labor Relations Commission, the assailed decision is
AFFIRMEDin toto.
SO ORDERED.
Puno, Pardo,  and Ynares-Santiago, JJ., concur.
Davide, Jr., C.J., (Chairman), on official leave abroad.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 178835               February 13, 2009
MAGIS YOUNG ACHIEVERS' LEARNING CENTER and MRS. VIOLETA T. CARIÑO, Petitioners,
vs.
ADELAIDA P. MANALO, Respondent.
DECISION
NACHURA, J.:
This is a petition for review on certiorari of the Decision dated January 31, 2007 and of the Resolution dated June 29, 2007 of the Court of Appeals (CA)
in CA-G.R. SP No. 93917 entitled Magis Young Achievers’ Learning Center and Violeta T. Cariño v. National Labor Relations Commission, 3 rd Division,
Quezon City, and Adelaida P. Manalo.
The pertinent facts are as follows:
On April 18, 2002, respondent Adelaida P. Manalo was hired as a teacher and acting principal of petitioner Magis Young Achievers’ Learning Center with
a monthly salary of ₱15,000.00.
It appears on record that respondent, on March 29, 2003, wrote a letter of resignation addressed to Violeta T. Cariño, directress of petitioner, which
reads:
Dear Madame:
I am tendering my irrevocable resignation effective April 1, 2003 due to personal and family reasons.
I would like to express my thanks and gratitude for the opportunity, trust and confidence given to me as an Acting Principal in your prestigious school.
God bless and more power to you.
Sincerely yours,
(Signed)
Mrs. ADELAIDA P. MANALO1
On March 31, 2003, respondent received a letter of termination from petitioner, viz.:
Dear Mrs. Manalo:
Greetings of Peace!
The Board of Trustees of the Cariño Group of Companies, particularly that of Magis Young Achievers’ Learning Center convened, deliberated and came
up with a Board Resolution that will strictly impose all means possible to come up with a cost-cutting scheme. Part of that scheme is a systematic
reorganization which will entail streamlining of human resources.
As agreed upon by the Board of Directors, the position of PRINCIPAL will be abolished next school year. Therefore, we regret to inform you that we can
no longer renew your contract, which will expire on March 31, 2003. Thus, thank you for the input you have given to Magis during your term of office as
Acting Principal. The function of the said position shall be delegated to other staff members in the organization.
Hoping for your understanding on this matter and we pray for your future endeavors.
Very truly yours,
(Signed)
Mrs. Violeta T. Cariño
School Directress
Noted by:
(Signed)
Mr. Severo Cariño
President2
On April 4, 2003, respondent instituted against petitioner a Complaint 3 for illegal dismissal and non-payment of 13th month pay, with a prayer for
reinstatement, award of full backwages and moral and exemplary damages.
In her position paper,4 respondent claimed that her termination violated the provisions of her employment contract, and that the alleged abolition of
the position of Principal was not among the grounds for termination by an employer under Article 282 5 of the Labor Code. She further asserted that
petitioner infringed Article 2836 of the Labor Code, as the required 30-day notice to the Department of Labor and Employment (DOLE) and to her as the
employee, and the payment of her separation pay were not complied with. She also claimed that she was terminated from service for the alleged
expiration of her employment, but that her contract did not provide for a fixed term or period. She likewise prayed for the payment of her 13th month
pay under Presidential Decree (PD) No. 851.
Petitioner, in its position paper,7 countered that respondent was legally terminated because the one-year probationary period, from April 1, 2002 to
March 3, 2003, had already lapsed and she failed to meet the criteria set by the school pursuant to the Manual of Regulation for Private Schools,
adopted by the then Department of Education, Culture and Sports (DECS), paragraph 75 of which provides that:
(75) Full-time teachers who have rendered three years of satisfactory service shall be considered permanent.
On December 3, 2003, Labor Arbiter (LA) Renell Joseph R. dela Cruz rendered a Decision 8 dismissing the complaint for illegal dismissal, including the
other claims of respondent, for lack of merit, except that it ordered the payment of her 13th month pay in the amount of ₱3,750.00. The LA
ratiocinated in this wise:
It is our considered opinion [that] complainant was not dismissed, much less, illegally. On the contrary, she resigned. It is hard for us to imagine
complainant would accede to sign a resignation letter as a precondition to her hiring considering her educational background. Thus, in the absence of
any circumstance tending to show she was probably coerced her resignation must be upheld. x x x
x x x The agreement (Annex "1" to Respondent’s [petitioner’s] Position Paper; Annex "A" to Complainant’s Position Paper) by its very nature and terms
is a contract of employment with a period (from 01 April 2002 to 31 March 2003, Annex ‘1’ to Respondent’s Position Paper). Complainant’s observation
that the space reserved for the duration and effectivity of the contract was left blank (Annex ‘A’ to Complainant’s [respondent’s] Position Paper) to our
mind is plain oversight. Read in its entirety, it is a standard contract which by its very terms and conditions speaks of a definite period of employment.
The parties could have not thought otherwise. The notification requirement in the contract in case of "termination before the expiration of the period"
confirms it. x x x
On appeal, on October 28, 2005, the National Labor Relations Commission (NLRC), Third Division, 9 in its Decision10 dated October 28, 2005, reversed the
Arbiter’s judgment. Petitioner was ordered to reinstate respondent as a teacher, who shall be credited with one-year service of probationary
employment, and to pay her the amounts of ₱3,750.00 and ₱325,000.00 representing her 13th month pay and backwages, respectively. Petitioner’s
motion for reconsideration was denied in the NLRC’s Resolution 11 dated January 31, 2006.
Imputing grave abuse of discretion on the part of the NLRC, petitioner went up to the CA via a petition for certiorari. The CA, in its Decision dated
January 31, 2007, affirmed the NLRC decision and dismissed the petition. It likewise denied petitioner’s motion for reconsideration in the Resolution
dated June 29, 2007. Hence, this petition anchored on the following grounds—
I. THE COURT OF APPEALS ERRED WHEN IT CONCLUDED THAT THE RESIGNATION OF RESPONDENT MANALO DID NOT BECOME EFFECTIVE DUE TO
ALLEGED LACK OF ACCEPTANCE;
II. THE COURT OF APPEALS ERRED WHEN IT RULED THAT RESPONDENT MANALO IS A PERMANENT EMPLOYEE;
III. THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE CONTRACT OF EMPLOYMENT BETWEEN PETITIONER AND RESPONDENT DID NOT
STIPULATE A PERIOD.12
Before going to the core issues of the controversy, we would like to restate basic legal principles governing employment of secondary school teachers
in private schools, specifically, on the matter of probationary employment.
A probationary employee or probationer is one who is on trial for an employer, during which the latter determines whether or not he is qualified for
permanent employment. The probationary employment is intended to afford the employer an opportunity to observe the fitness of a probationary
employee while at work, and to ascertain whether he will become an efficient and productive employee. While the employer observes the fitness,
propriety and efficiency of a probationer to ascertain whether he is qualified for permanent employment, the probationer, on the other hand, seeks to
prove to the employer that he has the qualifications to meet the reasonable standards for permanent employment. Thus, the word probationary, as
used to describe the period of employment, implies the purpose of the term or period, not its length. 13
Indeed, the employer has the right, or is at liberty, to choose who will be hired and who will be declined. As a component of this right to select his
employees, the employer may set or fix a probationary period within which the latter may test and observe the conduct of the former before hiring him
permanently.14
But the law regulates the exercise of this prerogative to fix the period of probationary employment. While there is no statutory cap on the minimum
term of probation, the law sets a maximum "trial period" during which the employer may test the fitness and efficiency of the employee.
The general rule on the maximum allowable period of probationary employment is found in Article 281 of the Labor Code, which states:
Art. 281. Probationary Employment. – Probationary employment shall not exceed six (6) months from the date the employee started working, unless it
is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may
be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer
at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee.1avvphi1.zw+
This upper limit on the term of probationary employment, however, does not apply to all classes of occupations.
For "academic personnel" in private schools, colleges and universities, probationary employment is governed by Section 92 of the 1992 Manual of
Regulations for Private Schools15 (Manual), which reads:
Section 92. Probationary Period. – Subject in all instances to compliance with the Department and school requirements, the probationary period for
academic personnel shall not be more than three (3) consecutive years of satisfactory service for those in the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for those
in the tertiary level where collegiate courses are offered on a trimester basis. 16
This was supplemented by DOLE-DECS-CHED-TESDA Order No. 1 dated February 7, 1996, which provides that the probationary period for academic
personnel shall not be more than three (3) consecutive school years of satisfactory service for those in the elementary and secondary levels. 17 By this
supplement, it is made clear that the period of probation for academic personnel shall be counted in terms of "school years," and not "calendar
years."18 Then, Section 4.m(4)[c] of the Manual delineates the coverage of Section 92, by defining the term "academic personnel" to include:
(A)ll school personnel who are formally engaged in actual teaching service or in research assignments, either on full-time or part-time basis; as well as
those who possess certain prescribed academic functions directly supportive of teaching, such as registrars, librarians, guidance counselors,
researchers, and other similar persons. They include school officials responsible for academic matters, and may include other school officials. 19
The reason for this disparate treatment was explained many years ago in Escudero v. Office of the President of the Philippines, 20 where the Court
declared:
However, the six-month probationary period prescribed by the Secretary of Labor is merely the general rule. x x x
It is, thus, clear that the Labor Code authorizes different probationary periods, according to the requirements of the particular job. For private school
teachers, the period of probation is governed by the 1970 Manual of Regulations for Private Schools x x x. 21
The probationary period of three years for private school teachers was, in fact, confirmed earlier in Labajo v. Alejandro, 22 viz.:
The three (3)-year period of service mentioned in paragraph 75 (of the Manual of Regulations for Private Schools) is of course the maximum period or
upper limit, so to speak, of probationary employment allowed in the case of private school teachers. This necessarily implies that a regular or
permanent employment status may, under certain conditions, be attained in less than three (3) years. By and large, however, whether or not one has
indeed attained permanent status in one’s employment, before the passage of three (3) years, is a matter of proof.
Over the years, even with the enactment of a new Labor Code and the revision of the Manual, the rule has not changed.
Thus, for academic personnel in private elementary and secondary schools, it is only after one has satisfactorily completed the probationary period of
three (3) school years and is rehired that he acquires full tenure as a regular or permanent employee. In this regard, Section 93 of the Manual
pertinently provides:
Sec. 93. Regular or Permanent Status. - Those who have served the probationary period shall be made regular or permanent. Full-time teachers who
have satisfactorily completed their probationary period shall be considered regular or permanent.
Accordingly, as held in Escudero, no vested right to a permanent appointment shall accrue until the employee has completed the prerequisite three-
year period necessary for the acquisition of a permanent status. Of course, the mere rendition of service for three consecutive years does not
automatically ripen into a permanent appointment. It is also necessary that the employee be a full-time teacher, and that the services he rendered are
satisfactory.23
The common practice is for the employer and the teacher to enter into a contract, effective for one school year. At the end of the school year, the
employer has the option not to renew the contract, particularly considering the teacher’s performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another school year, the probationary employment continues. Again, at the end of that
period, the parties may opt to renew or not to renew the contract. If renewed, this second renewal of the contract for another school year would then
be the last year – since it would be the third school year – of probationary employment. At the end of this third year, the employer may now decide
whether to extend a permanent appointment to the employee, primarily on the basis of the employee having met the reasonable standards of
competence and efficiency set by the employer. For the entire duration of this three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on probation, he cannot automatically claim security of tenure and compel the employer to
renew his employment contract. 24 It is when the yearly contract is renewed for the third time that Section 93 of the Manual becomes operative, and
the teacher then is entitled to regular or permanent employment status.
It is important that the contract of probationary employment specify the period or term of its effectivity. The failure to stipulate its precise duration
could lead to the inference that the contract is binding for the full three-year probationary period. 25
All this does not mean that academic personnel cannot acquire permanent employment status earlier than after the lapse of three years. The period of
probation may be reduced if the employer, convinced of the fitness and efficiency of a probationary employee, voluntarily extends a permanent
appointment even before the three-year period ends. Conversely, if the purpose sought by the employer is neither attained nor attainable within the
said period, the law does not preclude the employer from terminating the probationary employment on justifiable ground; 26 or, a shorter probationary
period may be incorporated in a collective bargaining agreement. 27 But absent any circumstances which unmistakably show that an abbreviated
probationary period has been agreed upon, the three-year probationary term governs.
Be that as it may, teachers on probationary employment enjoy security of tenure. In Biboso v. Victorias Milling Co., Inc., 28 we made the following
pronouncement:
This is, by no means, to assert that the security of tenure protection of the Constitution does not apply to probationary employees. x x x During such
period, they could remain in their positions and any circumvention of their rights, in accordance with the statutory scheme, is subject to inquiry and
thereafter correction by the Department of Labor.
The ruling in Biboso simply signifies that probationary employees enjoy security of tenure during the term of their probationary employment. As such,
they cannot be removed except for cause as provided by law, or if at the end of every yearly contract during the three-year period, the employee does
not meet the reasonable standards set by the employer at the time of engagement. But this guarantee of security of tenure applies only during the
period of probation. Once that period expires, the constitutional protection can no longer be invoked. 29
All these principles notwithstanding, we do not discount the validity of fixed-term employment where –
the fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and
employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. 30
It does not necessarily follow that where the duties of the employees consist of activities usually necessary or desirable in the usual business of the
employer, the parties are forbidden from agreeing on a period of time for the performance of such activities. 31 Thus, in St. Theresa’s School of
Novaliches Foundation v. NLRC,32 we held that a contractual stipulation providing for a fixed term of nine (9) months, not being contrary to law, morals,
good customs, public order and public policy, is valid, binding and must be respected, as it is the contract of employment that governs the relationship
of the parties.
Now, to the issues in the case at bench.
There should be no question that the employment of the respondent, as teacher, in petitioner school on April 18, 2002 is probationary in character,
consistent with standard practice in private schools. In light of our disquisition above, we cannot subscribe to the proposition that the respondent has
acquired regular or permanent tenure as teacher. She had rendered service as such only from April 18, 2002 until March 31, 2003. She has not
completed the requisite three-year period of probationary employment, as provided in the Manual. She cannot, by right, claim permanent
status.lawphil.net
There should also be no doubt that respondent’s appointment as Acting Principal is merely temporary, or one that is good until another appointment is
made to take its place.33 An "acting" appointment is essentially a temporary appointment, revocable at will. The undisturbed unanimity of cases shows
that one who holds a temporary appointment has no fixed tenure of office; his employment can be terminated any time at the pleasure of the
appointing power without need to show that it is for cause.34 Further, in La Salette of Santiago v. NLRC,35 we acknowledged the customary arrangement
in private schools to rotate administrative positions, e.g., Dean or Principal, among employees, without the employee so appointed attaining security of
tenure with respect to these positions.
We are also inclined to agree with the CA that the resignation of the respondent 36 is not valid, not only because there was no express acceptance
thereof by the employer, but because there is a cloud of doubt as to the voluntariness of respondent’s resignation.
Resignation is the voluntary act of an employee who finds himself in a situation where he believes that personal reasons cannot be sacrificed in favor of
the exigency of the service, and that he has no other choice but to dissociate himself from employment. 37 Voluntary resignation is made with the
intention of relinquishing an office, accompanied by the act of abandonment. 38 It is the acceptance of an employee’s resignation that renders it
operative.39
Furthermore, well-entrenched is the rule that resignation is inconsistent with the filing of a complaint for illegal dismissal. 40 To be valid, the resignation
must be unconditional, with the intent to operate as such; there must be a clear intention to relinquish the position. 41 In this case, respondent actively
pursued her illegal dismissal case against petitioner, such that she cannot be said to have voluntarily resigned from her job.
What is truly contentious is whether the probationary appointment of the respondent on April 18, 2002 was for a fixed period of one (1) year, or
without a fixed term, inasmuch as the parties presented different versions of the employment agreement. As articulated by the CA:
In plain language, We are confronted with two (2) copies of an agreement, one with a negative period and one provided for a one (1) year period for its
effectivity. Ironically, none among the parties offered corroborative evidence as to which of the two (2) discrepancies is the correct one that must be
given effect. x x x.42
The CA resolved the impassé in this wise:
Under this circumstance, We can only apply Article 1702 of the Civil Code which provides that, in case of doubt, all labor contracts shall be construed in
favor of the laborer. Then, too, settled is the rule that any ambiguity in a contract whose terms are susceptible of different interpretations must be read
against the party who drafted it. In the case at bar, the drafter of the contract is herein petitioners and must, therefore, be read against their
contention.43
We agree with the CA.
In this case, there truly existed a doubt as to which version of the employment agreement should be given weight. In respondent’s copy, the period of
effectivity of the agreement remained blank. On the other hand, petitioner’s copy provided for a one-year period, surprisingly from April 1, 2002 to
March 31, 2003, even though the pleadings submitted by both parties indicated that respondent was hired on April 18, 2002. What is noticeable even
more is that the handwriting indicating the one-year period in petitioner’s copy is different from the handwriting that filled up the other needed
information in the same agreement. 44
Thus, following Article 1702 of the Civil Code that all doubts regarding labor contracts should be construed in favor of labor, then it should be
respondent’s copy which did not provide for an express period which should be upheld, especially when there are circumstances that render the
version of petitioner suspect. This is in line with the State policy of affording protection to labor, such that the lowly laborer, who is usually at the mercy
of the employer, must look up to the law to place him on equal footing with his employer. 45
In addition, the employment agreement may be likened into a contract of adhesion considering that it is petitioner who insists that there existed an
express period of one year from April 1, 2002 to March 31, 2003, using as proof its own copy of the agreement. While contracts of adhesion are valid
and binding, in cases of doubt which will cause a great imbalance of rights against one of the parties, the contract shall be construed against the party
who drafted the same. Hence, in this case, where the very employment of respondent is at stake, the doubt as to the period of employment must be
construed in her favor.
The other issue to resolve is whether respondent, even as a probationary employee, was illegally dismissed. We rule in the affirmative.
As above discussed, probationary employees enjoy security of tenure during the term of their probationary employment such that they may only be
terminated for cause as provided for by law, or if at the end of the probationary period, the employee failed to meet the reasonable standards set by
the employer at the time of the employee’s engagement. Undeniably, respondent was hired as a probationary teacher and, as such, it was incumbent
upon petitioner to show by competent evidence that she did not meet the standards set by the school. This requirement, petitioner failed to discharge.
To note, the termination of respondent was effected by that letter stating that she was being relieved from employment because the school authorities
allegedly decided, as a cost-cutting measure, that the position of "Principal" was to be abolished. Nowhere in that letter was respondent informed that
her performance as a school teacher was less than satisfactory.
Thus, in light of our ruling of Espiritu Santo Parochial School v. NLRC 46 that, in the absence of an express period of probation for private school teachers,
the three-year probationary period provided by the Manual of Regulations for Private Schools must apply likewise to the case of respondent. In other
words, absent any concrete and competent proof that her performance as a teacher was unsatisfactory from her hiring on April 18, 2002 up to March
31, 2003, respondent is entitled to continue her three-year period of probationary period, such that from March 31, 2003, her probationary
employment is deemed renewed for the following two school years. 47
Finally, we rule on the propriety of the monetary awards. Petitioner, as employer, is entitled to decide whether to extend respondent a permanent
status by renewing her contract beyond the three-year period. Given the acrimony between the parties which must have been generated by this
controversy, it can be said unequivocally that petitioner had opted not to extend respondent’s employment beyond this period. Therefore, the award
of backwages as a consequence of the finding of illegal dismissal in favor of respondent should be confined to the three-year probationary period.
Computing her monthly salary of ₱15,000.00 for the next two school years (₱15,000.00 x 10 months x 2), respondent already having received her full
salaries for the year 2002-2003, she is entitled to a total amount of ₱300,000.00. 48 Moreover, respondent is also entitled to receive her 13th month pay
correspondent to the said two school years, computed as yearly salary, divided by 12 months in a year, multiplied by 2, corresponding to the school
years 2003-2004 and 2004-2005, or ₱150,000.00 / 12 months x 2 = ₱25,000.00. Thus, the NLRC was correct in awarding respondent the amount of
₱325,000.00 as backwages, inclusive of 13th month pay for the school years 2003-2004 and 2004-2005, and the amount of ₱3,750.00 as pro-rated 13th
month pay.
WHEREFORE, the petition is DENIED. The assailed Decision dated January 31, 2007 and the Resolution dated June 29, 2007 of the Court of Appeals are
AFFIRMED.
THIRD DIVISION
[G.R. NO. 173849 : September 28, 2007]
PIER 8 ARRASTRE & STEVEDORING SERVICES, INC. and/ or ELIODORO C. CRUZ, Petitioners, v. JEFF B. BOCLOT, Respondent.
DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, petitioners pray that this Court annul and set aside the (a)
Decision1 dated 18 November 2005 of the Court of Appeals in CA-G.R. SP No. 88929 affirming the twin Resolutions 2 dated 29 October 20043 and 29
December 20044 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 038683-04; and (b) Resolution dated 21 July 2006 of the
appellate court in the same case, denying petitioners' Motion for Reconsideration of the aforementioned Decision.
The factual antecedents of the present petition are as follows:
Petitioner Pier 8 Arrastre and Stevedoring Services, Inc. (PASSI) is a domestic corporation engaged in the business of providing arrastre and stevedoring
services5 at Pier 8 in the Manila North Harbor. PASSI has been rendering arrastre and stevedoring services at the port area since 1974 and employs
stevedores who assist in the loading and unloading of cargoes to and from the vessels. Petitioner Eliodoro C. Cruz is its Vice-President and General
Manager.
Respondent Jeff B. Boclot was hired by PASSI to perform the functions of a stevedore starting 20 September 1999.
The facts show that respondent rendered actual services to PASSI during the following periods:
Period Duration
September - December 1999 (4 months) 21 days
January - April 2000 (4 months) 20 days
March - December 2001 (10 months) 85 days
January - December 2002 (12 months) 70.5 days
January - June 2003 (6 months) 32 days
Total 36 months 228.5 days6
On 15 April 2000, the Philippine Ports Authority (PPA) seized the facilities and took over the operations of PASSI through its Special Takeover Unit,
absorbing PASSI workers as well as their relievers. By virtue of a Decision dated 9 January 2001 of the Court of Appeals, petitioners were able to regain
control of their arrastre and stevedoring operations at Pier 8 on 12 March 2001. 7
On 9 May 2003, respondent filed a Complaint with the Labor Arbiter of the NLRC, claiming regularization; payment of service incentive leave and 13th
month pays; moral, exemplary and actual damages; and attorney's fees. Respondent alleged that he was hired by PASSI in October 1999 and was issued
company ID No. 304,8 a PPA Pass and SSS documents. In fact, respondent contended that he became a regular employee by April 2000, since it was his
sixth continuous month in service in PASSI's regular course of business. He argued on the basis of Articles 280 9 and 28110 of the Labor Code. He
maintains that under paragraph 2 of Article 280, he should be deemed a regular employee having rendered at least one year of service with the
company.
According to respondent, he remained a casual employee from the time he was first hired to perform the services of a stevedore. Thus, respondent
claimed he was denied the rights and privileges of a regular employee, including those granted under the Collective Bargaining Agreement (CBA) such
as wage increase; medical, dental and hospitalization benefits; vacation and sick leaves; uniforms, Christmas gifts, productivity bonus, accident
insurance, special separation pays, and others. 11
Respondent relied on Article XXV of the company's existing CBA, effective 4 March 1998 to 3 March 2003, which states the following:
The Company agrees to convert to regular status all incumbent probationary or casual employees and workers in the Company who have served the
Company for an accumulated service term of employment of not less than six (6) months from his original date of hiring
The probationary period for all future workers or employees shall be the following:
A. All skilled workers such as crane operator, mechanic, carpenter, winchman, signalman and checkers shall become regular after three (3) months
continuous employment;
b. All semi-skilled personnel shall become regular after four (4) months of continuous employment;
c. All non-skilled personnel shall be regular after six (6) months continuous employment. 12
In opposition thereto, petitioners alleged that respondent was hired as a mere "reliever" stevedore and could thus not become a regular employee.
On 24 November 2003, NLRC Labor Arbiter Felipe P. Pati ruled for petitioners and dismissed respondent's complaint. In finding no factual or legal basis
for the regularization of respondent, the Labor Arbiter came to the conclusion that respondent was "nothing more than an extra worker who is called
upon to work at the pier in the absence of regular stevedores at a certain shift." 13 He deemed that Articles 280 and 281 of the Labor Code were
inapplicable, on the contention that the aforementioned articles speak of probationary employees and casual employees while respondent, as a
reliever, is neither a probationary employee nor a casual employee. Neither was respondent qualified to avail himself of Service Incentive Leave
benefits, even assuming he was a regular employee, because the number of days of service he had rendered reached a total of 228.5 days only - - short
of 365 days, the one-year requirement to qualify for this benefit. Finally, respondent's prayer for the grant of attorney's fees, and for moral and
exemplary damages, was also denied.
Respondent appealed the Labor Arbiter's dismissal of his complaint to the NLRC. Thereafter, the NLRC issued a Resolution on 29 October 2004
modifying the Labor Arbiter's Decision, ruling:
WHEREFORE, premises considered, complainant's appeal is partly GRANTED. The Labor Arbiter's assailed Decision in the above-entitled case is hereby
MODIFIED. Complainant is hereby declared a regular employee of Respondents. The dismissal of Complainant's claim for benefits under the CBA and
other monetary claims are AFFIRMED for lack of jurisdiction and lack of merit, respectively. 14 (Italics ours.)
The NLRC gave credence to respondent's allegations that the Labor Arbiter committed grave abuse of discretion in dismissing respondent's claim for
regularization. The NLRC ruled that petitioners' failure, without reasonable explanation, to present proof of absences of "regular" stevedores leads to
the conclusion that the stevedores, termed by petitioners as "relievers," work on rotation basis, just like the "regular" stevedores. The NLRC predicated
its findings that respondent is a regular employee of petitioners on the reasonable connection between the activity performed by the employee in
relation to the usual business or trade of the employer. According to the NLRC, although respondent rendered an average of 6.34 days of work a
month, the activities performed were usually necessary and desirable in the business of petitioners.
Petitioners filed a Motion for Reconsideration of the foregoing NLRC Resolution dated 29 October 2004 but this was subsequently denied in another
NLRC Resolution issued on 29 December 2004.
Upon a denial of their motion for reconsideration by the NLRC, petitioners elevated their case to the Court of Appeals via a Petition for Certiorari with
prayer for the issuance of a Temporary Restraining Order (TRO) and/or writ of preliminary injunction.
On 18 November 2005, the Court of Appeals dismissed the Petition for Certiorari and affirmed the Resolutions of the NLRC finding respondent to be a
regular employee. The Court of Appeals grounded its Decision on this Court's previous rulings that what determines regularity or casualness is not the
employment contract, written or otherwise, but the nature of the job. Citing De Leon v. National Labor Relations Commission, 15 which enumerated the
standards for determining regular employment, the Court of Appeals ruled that even assuming that respondent was able to render services for only
228.5 days in a period of 36 months, the fact remains that his services were continuously utilized by petitioners in their business. Where the job is
usually necessary or desirable to the main business of the employer, then the employment is regular. 16 The pertinent portions of the assailed Decision
of the Court of Appeals are herein reproduced:
Applying the above-mentioned principles, private respondent's task of loading and unloading cargoes to and from the vessels is undoubtedly necessary
and desirable to the business of petitioners' arrastre and stevedoring services. Equally unavailing is the petitioners' contention that being a reliever or
an extra worker, private respondent cannot be deemed as a regular employee. This cannot be accorded with merit as the same does not change the
nature of the latter's employment. Whether private respondent was hired only in the absence of regular stevedores, as petitioners maintain, let it be
emphasized that the determination of whether the employment is casual or regular does not depend on the will or word of the employer, and the
procedure of hiring and manner of paying, but on the nature of the activities performed by an employee, and to some extent, the length of
performance, and its continued existence. Petitioners' admission that it has been an industry practice to hire relievers whenever the need arises to
ensure that operations at the pier continue for 24 hours only proves that private respondent's services are necessary or desirable in its usual business,
otherwise, private respondent should not have been at the employ of petitioners for a period [of] 36 months. Even assuming that private respondent
was able to render only 228.5 days out of 36 months, the undisputed fact remains that private respondent's services was continuously utilized by
petitioners in the operation of its business. Whether one's employment is regular is not determined by the number of the hours one works, but by the
nature of the work and by the length of time one has been in that particular job. To uphold petitioners' argument would preclude and deprive workers,
like private respondent herein, to acquire regular status favorably mandated by the Labor Code.
xxx
WHEREFORE, the instant petition is DISMISSED for lack of merit and the assailed resolutions of public respondent National Labor Relations Commission
dated October 29, 2004 and December 29, 2004 are hereby AFFIRMED. 17
On 14 December 2005, petitioners filed a Motion for Reconsideration, which was denied by the Court of Appeals in a Resolution dated 21 July 2006.
Hence, through this Petition for Review on Certiorari, petitioners assail the Decision of the Court of Appeals, raising the sole argument that:
THE COURT OF APPEALS ERRED IN RULING THAT PRIVATE RESPONDENT JEFF BOCLOT IS A REGULAR EMPLOYEE OF PETITIONER PIER 8 ARRASTRE &
STEVEDORING SERVICES, INC. BECAUSE HE PERFORMED TASKS WHICH ARE USUALLY NECESSARY AND DESIRABLE TO THE MAIN BUSINESS OF
PETITIONER CORPORATION
Evidently, the only issue subject to the resolution of this Court is whether or not respondent has attained regular status as PASSI's employee.
In the instant petition, petitioners are vehemently denying that respondent has become PASSI's regular employee. Petitioners insist that respondent
was hired as a mere "reliever" stevedore and, thus, could not become a regular stevedore. Petitioners presented a list of the days when respondent's
services as stevedore were engaged, to support its claim that respondent is a reliever. Petitioners aver that the employment of the stevedores is
governed by a system of rotation. Based on this system of rotation, the work available to reliever stevedores is dependent on the actual stevedoring
and arrastre requirements at a current given time. Petitioners posit that respondent, as a reliever stevedore, is a mere extra worker whose work is
dependent on the absence of regular stevedores during any given shift. During "rotation proper," as petitioners term it, all regular employees are first
called and given work before any reliever is assigned. Petitioners assert that while the regular stevedores work an average of 4 days a week (or 16 days
a month), respondent performed services for a total of 228.5 days (or only for an average of 6.34 days a month) from September 1999 to June 2003. In
defense of the Court of Appeals' ruling grounded on Articles 280 and 281 of the Labor Code, petitioners maintain that the foregoing provisions are
inapplicable on the postulation that respondent is neither a probationary nor a casual employee. For the same reasons, petitioners argue that Article
XXV of the CBA cannot be used to support respondent's contention that he is a regular employee since the CBA provision he invokes refers to "all
incumbent probationary or casual employees and workers in the company" and not to respondent who is neither a casual nor a probationary
employee.
After a deliberate study of Labor Law provisions and jurisprudence, and in light of the particular circumstances of this case, this Court has arrived at the
same conclusion as those of the NLRC and the Court of Appeals that respondent is a regular employee, but on a different basis.
Under the 1987 Philippine Constitution, the State affords full protection to labor, local and overseas, organized and unorganized; and the promotion of
full employment and equality of employment opportunities for all. The State affirms labor as a primary social economic force and guarantees that it
shall protect the rights of workers and promote their welfare. 18
The Labor Code, which implements the foregoing Constitutional mandate, draws a fine line between regular and casual employees to protect the
interests of labor.19 "Its language evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and
benefits due a regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee
on a casual status for as long as convenient."20 Thus, the standards for determining whether an employee is a regular employee or a casual or project
employee have been delineated in Article 280 of the Labor Code, to wit:
Article 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exist.
Under the foregoing provision, a regular employee is (1) one who is either engaged to perform activities that are necessary or desirable in the usual
trade or business of the employer except for project 21 or seasonal employees; or (2) a casual employee who has rendered at least one year of service,
whether continuous or broken, with respect to the activity in which he is employed. 22 Additionally, Article 281 of the Labor Code further considers a
regular employee as one who is allowed to work after a probationary period. Based on the aforementioned, although performing activities that are
necessary or desirable in the usual trade or business of the employer, an employee such as a project or seasonal employee is not necessarily a regular
employee. The situation of respondent is similar to that of a project or seasonal employee, albeit on a daily basis.
Under the second paragraph of the same provision, all other employees who do not fall under the definition of the preceding paragraph are casual
employees. However, the second paragraph also provides that it deems as regular employees those casual employees who have rendered at least one
year of service regardless of the fact that such service may be continuous or broken.
De Leon v. National Labor Relations Commission23 succinctly explains the delineation of the foregoing employee classification, to wit:
The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such
activity exists. (Emphasis supplied.)
PASSI is engaged in providing stevedoring and arrastre services in the port area in Manila. Stevedoring, dock and arrastre operations include, but are
not limited to, the opening and closing of a vessel's hatches; discharging of cargoes from ship to truck or dock, lighters and barges, and vice-versa;
movement of cargoes inside vessels, warehouses, terminals and docks; and other related work. In line with this, petitioners hire stevedores who assist
in the loading and unloading of cargoes to and from the vessels.
Petitioners concede that whenever respondent worked as a reliever stevedore due to the absence of a regular stevedore, he performed tasks that are
usually necessary and desirable to their business. Petitioners, however, contend that this in itself does not make him a regular stevedore, postulating
that the hiring of respondent as a reliever is akin to a situation in which a worker goes on vacation leave, sick leave, maternity leave or paternity leave;
and the employer is constrained to hire another worker from outside the establishment to ensure the smooth flow of its operations.
Based on the circumstances of the instant case, this Court agrees. It takes judicial notice 24 that it is an industry practice in port services to hire "reliever"
stevedores in order to ensure smooth-flowing 24-hour stevedoring and arrastre operations in the port area. No doubt, serving as a stevedore,
respondent performs tasks necessary or desirable to the usual business of petitioners. However, it should be deemed part of the nature of his work
that he can only work as a stevedore in the absence of the employee regularly employed for the very same function. Bearing in mind that respondent
performed services from September 1999 until June 2003 for a period of only 228.5 days in 36 months, or roughly an average of 6.34 days a month;
while a regular stevedore working for petitioners, on the other hand, renders service for an average of 16 days a month, demonstrates that
respondent's employment is subject to the availability of work, depending on the absences of the regular stevedores. Moreover, respondent does not
contest that he was well aware that he would only be given work when there are absent or unavailable employees. Respondent also does not allege,
nor is there any showing, that he was disallowed or prevented from offering his services to other cargo handlers in the other piers at the North Harbor
other than petitioners. As aforestated, the situation of respondent is akin to that of a seasonal or project or term employee, albeit on a daily basis.
Anent petitioners' contention that respondent is neither a probationary nor a casual employee, this Court again refers to Article 280 of the Labor Code.
The second paragraph thereof stipulates in unequivocal terms that all other employees who do not fall under the definitions in the first paragraph of
regular, project and seasonal employees, are deemed casual employees. 25 Not qualifying under any of the kinds of employees covered by the first
paragraph of Article 280 of the Labor Code, then respondent is a casual employee under the second paragraph of the same provision.
The same provision, however, provides that a casual employee can be considered as regular employee if said casual employee has rendered at least
one year of service regardless of the fact that such service may be continuous or broken. Section 3, Rule V, Book II of the Implementing Rules and
Regulations of the Labor Code clearly defines the term "at least one year of service" to mean service within 12 months, whether continuous or broken,
reckoned from the date the employee started working, including authorized absences and paid regular holidays, unless the working days in the
establishment as a matter of practice or policy, or that provided in the employment contract, is less than 12 months, in which case said period shall be
considered one year.26 If the employee has been performing the job for at least one year, even if the performance is not continuous or merely
intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity, if not indispensability, of that
activity to the business of the employer.27 Applying the foregoing, respondent, who has performed actual stevedoring services for petitioners only for
an accumulated period of 228.5 days does not fall under the classification of a casual turned regular employee after rendering at least one year of
service, whether continuous or intermittent.28
Both the Constitution and the Labor Code mandate the protection of labor. Hence, as a matter of judicial policy, this Court has, in a number of
instances, leaned backwards to protect labor and the working class against the machinations and incursions of their more financially entrenched
employers.29 Where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by an employee,
such imposition should be struck down or disregarded as contrary to public policy and morals. 30 However, we take this occasion to emphasize that the
law, while protecting the rights of the employees, authorizes neither the oppression nor the destruction of the employer. When the law tilts the scale
of justice in favor of labor, the scale should never be so tilted if the result would be an injustice to the employer. 31 Thus, this Court cannot be compelled
to declare respondent as a regular employee when by the nature of respondent's work as a reliever stevedore and his accumulated length of service of
only eight months do not qualify him to be declared as such under the provisions of the Labor Code alone. 32
NONETHELESS, this Court still finds respondent to be a regular employee on the basis of pertinent provisions under the CBA between PASSI and its
Workers' union, which was effective from 4 March 1998 to 3 March 2003:
The Company agrees to convert to regular status all incumbent probationary or casual employees and workers in the Company who have served the
Company for an accumulated service term of employment of not less than six (6) months from his original date of hiring.
The probationary period for all future workers or employees shall be the following:
(a) All skilled workers such as crane operator, mechanic, carpenter, winchman, signalman and checkers shall become regular after three (3) months
continuous employment;
(b) All semi-skilled personnel shall become regular after four (4) months of continuous employment;
(c) All non-skilled personnel shall be regular after six (6) months continuous employment. 33 (Italics ours.)
Petitioners were crucified on this argument raised by respondent. The union which negotiated the existing CBA is the sole and exclusive bargaining
representative of all the stevedores, dock workers, gang bosses, rank and file employees working at Pier 8, and its offices. The NLRC ruled that
respondent's reliance on the CBA to show that he has become a regular employee is misplaced for the reason that the CBA applies only to regular
workers of the company.34 Respondent assents that he is not a member of the union, as he was not recognized by PASSI as its regular employee, but
this Court notes that PASSI adopts a union-shop agreement, culling from Article II of the CBA which stipulates:
The Union and the Company (PASSI) hereby agree to adopt the "Union Shop" as a condition of employment to the position (sic) covered by this
Agreement.35
Under a union-shop agreement, although nonmembers may be hired, an employee is required to become a union member after a certain period, in
order to retain employment. This requirement applies to present and future employees. 36 The same article of the CBA stipulates that employment in
PASSI cannot be obtained without prior membership in the union.ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ
Apropos, applying the foregoing provisions of the CBA, respondent should be considered a regular employee after six months of accumulated service. It
is clearly stipulated therein that petitioners shall agree to convert to regular status all incumbent probationary or casual employees and workers in
PASSI who have served PASSI for an accumulated service term of employment of not less than six months from the original date of hiring. Having
rendered 228.5 days, or eight months of service to petitioners since 1999, then respondent is entitled to regularization by virtue of the said CBA
provisions.
In light of the foregoing, petitioners must accord respondent the status of a regular employee.
Additionally, respondent is not yet entitled to avail himself of service incentive leave benefits for his failure to render at least one year of service. As to
the 13th month pay, petitioners have shown that respondent has been paid the same. Respondent is also not entitled to moral and exemplary damages
and attorney's fees for the reason that an employer may only be held liable for damages if the attendant facts show that it was oppressive to labor or
done in a manner contrary to morals, good customs and public policy. None of the aforementioned circumstances are present. Neither was there any
appeal raised by respondent pertaining to the non-award of the foregoing claims.
WHEREFORE, in view of the foregoing, the instant Petition is DENIED and the Decision of the Court of Appeals dated 18 November 2005 and its
Resolution dated 21 January 2006, in CA-G.R. SP No. 88929 are AFFIRMED in the manner herein discussed. Costs against petitioners.
SO ORDERED.

SECOND DIVISION
[G.R. NO. 167310 : June 17, 2008]
THE PENINSULA MANILA, ROLF PFISTERER AND BENILDA QUEVEDO-SANTOS, Petitioners, v. ELAINE M. ALIPIO, Respondent.
DECISION

QUISUMBING, J.:

For review on certiorari are the Decision1 dated August 23, 2004 and Resolution 2 dated March 11, 2005 of the Court of Appeals in CA-G.R. SP No. 67007,
which reversed the Decision3 dated December 29, 2000 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 023890-00. The NLRC
had earlier affirmed with modification the Labor Arbiter's Decision, 4 dismissing the complaint for illegal dismissal against herein petitioners, but
awarding respondent herein separation pay amounting to P20,000.
The pertinent facts are as follows:
Petitioner, The Peninsula Manila, is a corporation engaged in the hotel business. Co-petitioners Rolf Pfisterer and Benilda Quevedo-Santos were the
general manager and human resources manager, respectively, of the hotel at the time of the controversy.
The hotel operates a clinic 24 hours a day and employs three regular nurses who work eight hours each day on three separate shifts. The hotel also
engages the services of reliever nurses who substitute for the regular nurses who are either off-duty or absent.
Respondent Elaine M. Alipio was hired merely as a reliever nurse. However, she had been performing the usual tasks and functions of a regular nurse
since the start of her employment on December 11, 1993. Hence, after about four years of employment in the hotel, she inquired why she was not
receiving her 13th month pay.
In response, petitioners required her to submit a summary of her tour of duty for 1997. After she had submitted the said summary, Alipio was
paid P8,000 as her 13th month pay for 1997. Alipio likewise requested for the payment of her 13 th month pay for 1993 to 1996, but her request was
denied.
On December 18, 1998, Alipio was informed by a fellow nurse that she can only report for work after meeting up with petitioner Santos. When Alipio
met with Santos on December 21, 1998, Alipio was asked regarding her payslip vouchers. She told Santos that she made copies of her payslip vouchers
because Peninsula does not give her copies of the same. Santos was peeved with Alipio's response because the latter was allegedly not entitled to get
copies of her payslip vouchers. Santos likewise directed Alipio not to report for work anymore.
Aggrieved, Alipio filed a complaint for illegal dismissal against the petitioners.
After due proceedings, the Labor Arbiter dismissed the complaint for lack of merit, but directed that Peninsula pay Alipio separation pay amounting
to P20,000. The Labor Arbiter held,
WHEREFORE, in view of the foregoing, judgment is hereby rendered DISMISSING the instant complaint for lack of merit. However, considering that
complainant had served as reliever for respondent hotel for a long period, the respondent hotel is ordered to give her separation pay equivalent to
one-half month pay for every year of complainant's reliever service, in the total amount of P20,000.00 based on an average monthly pay of P8,000.00.
SO ORDERED.5
On appeal, the NLRC affirmed with modification the Labor Arbiter's decision, to wit:
WHEREFORE, the appeal of the complainant is dismissed for lack of merit. Accordingly, the decision appealed from is affirmed with the modification
that the award of separation pay is hereby deleted.
SO ORDERED.6
Upon further review, the Court of Appeals reversed the decision of the NLRC after ascertaining that the findings of the Labor Arbiter and the NLRC that
Alipio is not an employee of Peninsula and that she was validly dismissed is not supported by the evidence on record. 7 The dispositive portion of the
Decision dated August 23, 2004 of the Court of Appeals reads:
WHEREFORE, the petition is GRANTED and the Decision dated December 29, 2000 and the Order dated June 29, 2001 of the National Labor Relations
Commission are REVERSED and SET ASIDE.
Private respondents The Peninsula Manila and Benilda Quevedo-Santos are ordered to reinstate petitioner Elaine M. Alipio as regular staff nurse
without loss of seniority rights; to pay petitioner, jointly and severally, full backwages and all the benefits to which she is entitled under the Labor Code
from December 12, 1994 up to the time of her actual reinstatement; moral damages in the amount of P30,000.00, exemplary damages in the amount
of P20,000[.]00, and attorney's fees equivalent to ten (10%) percent of the total monetary award.
Let this case be remanded to the Labor Arbitration Branch, National Labor Relations Commission for the computation of the monetary claims of
petitioner.
SO ORDERED.8 (Emphasis supplied.)
Petitioners moved for reconsideration but their motion was denied. Hence, the instant Petition for Review on Certiorari contending that the Court of
Appeals seriously erred:
I.
IN GIVING DUE COURSE TO THE RESPONDENT'S PETITION FOR CERTIORARI WHICH WAS MAINLY BASED ON ALLEGATIONS OF SUPPOSED FACTUAL
ERRORS COMMITTED BY THE NATIONAL LABOR RELATIONS COMMISSION AND IN REVERSING THE LATTER'S FINDINGS OF FACT WHICH WERE
SUPPORTED BY SUBSTANTIAL EVIDENCE IN THE RECORD; AND
II.
IN DECLARING THE RESPONDENT'S DISMISSAL TO BE ILLEGAL AND ORDERING HER REINSTATEMENT WITH FULL BACK WAGES, TOGETHER WITH
PAYMENT OF MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES. 9
Petitioners contend that the Court of Appeals should have accorded the unanimous findings of the Labor Arbiter and the NLRC due respect and finality
as the conclusion reached by the two bodies is supported by substantial evidence on record. Petitioners insist Alipio was terminated for a just cause
and with due process. Petitioners likewise argue that Alipio cannot be reinstated as a regular staff nurse because (1) she never served in that capacity;
and (2) there is no vacancy for the said position or any equivalent position to which she may be reinstated.
Alipio, for her part, counters that the NLRC decision, affirming that of the Labor Arbiter, is not beyond the scope of judicial review because palpable
mistake was committed in disregarding evidence showing (1) her status as a regular employee of Peninsula; and (2) petitioners' failure to observe
substantive and procedural due process. She points out that a Certification dated April 22, 1997 issued by the hotel proves she was a regular staff nurse
until her illegal dismissal. She stresses that her supposed employment at the Quezon City Medical Center does not negate the fact that she also worked
as a regular nurse of the hotel. Additionally, she contends that obtaining copies of her own payslips does not indicate a perverse attitude justifying
dismissal for serious misconduct or willful disobedience. She adds, there is no showing that her refusal to return copies of her payslips caused material
damage to petitioners. She further claims that bad faith attended her dismissal.
After carefully weighing the parties' arguments, we resolve to deny the petition.
It is doctrinal that the factual findings of quasi-judicial agencies like the NLRC are generally accorded respect and finality if such are supported by
substantial evidence. In some instances, however, the Court may be compelled to deviate from this general rule if the Labor Arbiter and the NLRC
misappreciated the facts, thereby resulting in the impairment of the worker's constitutional and statutory right to security of tenure. 10
The conclusions reached by the NLRC and the Labor Arbiter, that Alipio was not a regular employee of the hotel and that she was validly dismissed, are
not supported by law and evidence on record.
Article 280 of the Labor Code provides:
ART. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists. (Emphasis supplied.)
Thus, an employment is deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business of the
employer. However, any employee who has rendered at least one year of service, even though intermittent, is deemed regular with respect to the
activity performed and while such activity actually exists. 11
In this case, records show that Alipio's services were engaged by the hotel intermittently from 1993 up to 1998. Her services as a reliever nurse were
undoubtedly necessary and desirable in the hotel's business of providing comfortable accommodation to its guests. In any case, since she had rendered
more than one year of intermittent service as a reliever nurse at the hotel, she had become a regular employee as early as December 12, 1994. Lastly,
per the hotel's own Certification dated April 22, 1997, she was already a "regular staff nurse" until her dismissal.
Being a regular employee, Alipio enjoys security of tenure. Her services may be terminated only upon compliance with the substantive and procedural
requisites for a valid dismissal: (1) the dismissal must be for any of the causes provided in Article 282 12 of the Labor Code; and (2) the employee must be
given an opportunity to be heard and to defend himself. 13
Did Alipio commit serious misconduct when she obtained copies of her payslips?cralawred
We have defined misconduct as any forbidden act or dereliction of duty. It is willful in character and implies a wrongful intent, not a mere error in
judgment. The misconduct, to be serious, must be grave and not merely trivial. 14
In this case, Alipio's act of obtaining copies of her payslips cannot be characterized as a misconduct, much less a grave misconduct. On the contrary, we
find it absurd that she had to resort to her own resourcefulness to get hold of these documents since it was incumbent upon Peninsula, as her
employer, to give her copies of her payslips as a matter of course. We are thus convinced that Alipio's dismissal was not based on a just cause.
Was Alipio afforded an opportunity to be heard and to defend herself?cralawred
When Santos had a meeting with Alipio on December 21, 1998, she was not informed that the hotel was contemplating her dismissal. Neither was she
informed of the ground for which her dismissal was sought. She was simply told right there and then that she was already dismissed, thereby affording
no opportunity for her to be heard and defend herself. Thus, Alipio was likewise deprived of procedural due process.
Clearly, Alipio was illegally dismissed because petitioners failed on both counts to comply with the twin requisites for a valid termination. She is thus
entitled to reinstatement without loss of seniority rights and other privileges and to full backwages, inclusive of allowances, and to other benefits, or
their monetary equivalent computed from the time compensation was withheld up to the time of actual reinstatement. 15 Should reinstatement be no
longer feasible, Alipio is entitled to separation pay equivalent to one month pay for her every year of service in lieu of reinstatement. 16
Furthermore, as a rule, moral damages are recoverable where the dismissal of the employee was attended with bad faith or was done in a manner
contrary to good customs.17 Exemplary damages may also be awarded if the dismissal is effected in a wanton, oppressive or malevolent manner. 18
In this case, while the petitioners issued a Certification dated April 22, 1997 and recognized Alipio as a regular employee, they deprived her of copies of
her own payslips. Moreover, her dismissal was effected in a manner whereby she was deprived of due process. Under these circumstances, she is also
entitled to moral damages in the amount of P15,000 and exemplary damages in the amount of P10,000.
Lastly, the award of attorney's fees equivalent to ten percent (10%) of the total monetary award is consistent with prevailing jurisprudence 19 and thus
ought to be affirmed.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated August 23, 2004 and Resolution dated March 11, 2005 of the Court of
Appeals in CA-G.R. SP No. 67007 are hereby AFFIRMED as MODIFIED, such that the amount of moral damages is reduced to only P15,000 and the
exemplary damages to only P10,000.
No pronouncement as to costs.
SO ORDERED.
 THIRD DIVISION
[G.R. NO. 167714 : March 7, 2007]
ROWELL INDUSTRIAL CORPORATION, Petitioner, v. HON. COURT OF APPEALS and JOEL TARIPE, Respondents.
DECISION

CHICO-NAZARIO,  J.:

This case is a Petition for Review under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to set aside the Decision 1 and Resolution2 of the
Court of Appeals in CA-G.R. SP No. 74104, entitled, Rowell Industrial Corp., and/or Edwin Tang v. National Labor Relations Commission and Joel Taripe,
dated 30 September 2004 and 1 April 2005, respectively, which affirmed the Resolutions 3 of the National Labor Relations Commission (NLRC) dated 7
June 2002 and 20 August 2002, finding herein respondent Joel Taripe (Taripe) as a regular employee who had been illegally dismissed from
employment by herein petitioner Rowell Industrial Corp. (RIC), thereby ordering petitioner RIC to reinstate respondent Taripe with full backwages,
subject to the modification of exonerating Edwin Tang, the RIC General Manager and Vice President, from liability and computing the backwages of
herein respondent Taripe based on the prevailing salary rate at the time of his dismissal. The NLRC Resolutions reversed the Decision 4 of the Labor
Arbiter dated 29 September 2000, which dismissed respondent Taripe's complaint.
Petitioner RIC is a corporation engaged in manufacturing tin cans for use in packaging of consumer products, e.g., foods, paints, among other things.
Respondent Taripe was employed by petitioner RIC on 8 November 1999 as a "rectangular power press machine operator" with a salary of P223.50 per
day, until he was allegedly dismissed from his employment by the petitioner on 6 April 2000.
The controversy of the present case arose from the following facts, as summarized by the NLRC and the Court of Appeals:
On [17 February 2000], [herein respondent Taripe] filed a [C]omplaint against [herein petitioner RIC] for regularization and payment of holiday pay, as
well as indemnity for severed finger, which was amended on [7 April 2000] to include illegal dismissal. [Respondent Taripe] alleges that [petitioner RIC]
employed him starting [8 November 1999] as power press machine operator, such position of which was occupied by [petitioner RIC's] regular
employees and the functions of which were necessary to the latter's business. [Respondent Taripe] adds that upon employment, he was made to sign a
document, which was not explained to him but which was made a condition for him to be taken in and for which he was not furnished a copy.
[Respondent Taripe] states that he was not extended full benefits granted under the law and the [Collective Bargaining Agreement] and that on [6 April
2000], while the case for regularization was pending, he was summarily dismissed from his job although he never violated any of the [petitioner RIC's]
company rules and regulations.
[Petitioner RIC], for [its] part, claim[s] that [respondent Taripe] was a contractual employee, whose services were required due to the increase in the
demand in packaging requirement of [its] clients for Christmas season and to build up stock levels during the early part of the following year; that on [6
March 2000], [respondent Taripe's] employment contract expired. [Petitioner RIC] avers that the information update for union members, which was
allegedly filled up by [respondent Taripe] and submitted by the Union to [petitioner] company, it is stated therein that in the six (6) companies where
[respondent Taripe] purportedly worked, the latter's reason for leaving was "finished contract," hence, [respondent Taripe] has knowledge about being
employed by contract contrary to his allegation that the document he was signing was not explained to him. [Petitioner RIC] manifest[s] that all
benefits, including those under the [Social Security System], were given to him on [12 May 2000]. 5
On 29 September 2000, the Labor Arbiter rendered a Decision dismissing respondent Taripe's Complaint based on a finding that he was a contractual
employee whose contract merely expired. The dispositive portion of the said Decision reads, thus:
WHEREFORE, premises considered, judgment is hereby rendered declaring this complaint of [herein respondent Taripe] against [herein petitioner RIC]
and Mr. Edwin Tang for illegal dismissal DISMISSED for lack of merit. However, on ground of compassionate justice, [petitioner RIC and Mr. Edwin Tang]
are hereby ordered to pay [respondent Taripe] the sum of PHP5,811.00 or one month's salary as financial assistance and holiday pay in the sum of
PHP894.00, as well as attorney's fees of 10% based on holiday pay (Article 110, Labor Code). 6
Aggrieved, respondent Taripe appealed before the NLRC. In a Resolution dated 7 June 2002, the NLRC granted the appeal filed by respondent Taripe
and declared that his employment with the petitioner was regular in status; hence, his dismissal was illegal. The decretal portion of the said Resolution
reads as follows:
WHEREFORE, premises considered, [herein respondent Taripe's] appeal is GRANTED. The Labor Arbiter's [D]ecision in the above-entitled case is hereby
REVERSED. It is hereby declared that [respondent Taripe's] employment with [herein petitioner RIC and Mr. Edwin Tang] is regular in status and that he
was illegally dismissed therefrom.
[Petitioner RIC and Mr. Edwin Tang] are hereby ordered to reinstate [respondent Taripe] and to jointly and severally pay him full backwages from the
time he was illegally dismissed up to the date of his actual reinstatement, less the amount of P1,427.67. The award of P894.00 for holiday pay is
AFFIRMED but the award of P5,811.00 for financial assistance is deleted. The award for attorney's fees is hereby adjusted to ten percent (10%) of
[respondent Taripe's] total monetary award. 7
Dissatisfied, petitioner RIC moved for the reconsideration of the aforesaid Resolution but it was denied in the Resolution of the NLRC dated 20 August
2002.
Consequently, petitioner filed a Petition for Certiorari under Rule 65 of the 1997 Revised Rules of Civil Procedure before the Court of Appeals with the
following assignment of errors:
I. THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS IN EXCESS OF ITS JURISDICTION WHEN IT MISINTERPRETED ARTICLE 280 OF THE LABOR CODE
AND IGNORED JURISPRUDENCE WHEN IT DECIDED THAT [RESPONDENT TARIPE] IS A REGULAR EMPLOYEE AND THUS, ILLEGALLY DISMISSED.
II. THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS IN EXCESS OF ITS JURISDICTION WHEN IT ORDERED [EDWIN TANG] TO (sic) JOINTLY AND
SEVERALLY LIABLE FOR MONETARY CLAIMS OF [RESPONDEN TARIPE].
III. THE [NLRC] GRAVELY ABUSED ITS DISCRETION AND IS IN EXCESS OF ITS JURISDICTION WHEN IT ORDERED PAYMENT OF MONETARY CLAIMS
COMPUTED ON AN ERRONEOUS WAGE RATE.8
The Court of Appeals rendered the assailed Decision on 30 September 2004, affirming the Resolution of the NLRC dated 7 June 2002, with
modifications. Thus, it disposed -
WHEREFORE, the Resolutions dated [7 June 2002] and [20 August 2002] of [the NLRC] are affirmed, subject to the modification that [Edwin Tang] is
exonerated from liability and the computation of backwages of [respondent Taripe] shall be based on P223.50, the last salary he received. 9
A Motion for Reconsideration of the aforesaid Decision was filed by petitioner RIC, but the same was denied for lack of merit in a Resolution 10 of the
Court of Appeals dated 1 April 2005.
Hence, this Petition.
Petitioner RIC comes before this Court with the lone issue of whether the Court of Appeals misinterpreted Article 280 of the Labor Code, as
amended, and ignored jurisprudence when it affirmed that respondent Taripe was a regular employee and was illegally dismissed.
Petitioner RIC, in its Memorandum,11 argues that the Court of Appeals had narrowly interpreted Article 280 of the Labor Code, as amended, and
disregarded a contract voluntarily entered into by the parties.
Petitioner RIC emphasizes that while an employee's status of employment is vested by law pursuant to Article 280 of the Labor Code, as amended, said
provision of law admits of two exceptions, to wit: (1) those employments which have 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 employment; and (2) when the work or services to be performed are
seasonal; hence, the employment is for the duration of the season. Thus, there are certain forms of employment which entail the performance of usual
and desirable functions and which exceed one year but do not necessarily qualify as regular employment under Article 280 of the Labor Code, as
amended.
The Petition is unmeritorious.
A closer examination of Article 280 of the Labor Code, as amended, is imperative to resolve the issue raised in the present case.
In declaring that respondent Taripe was a regular employee of the petitioner and, thus, his dismissal was illegal, the Court of Appeals ratiocinated in
this manner:
In determining the employment status of [herein respondent Taripe], reference must be made to Article 280 of the Labor Code, which provides:
x   x   x
Thus, there are two kinds of regular employees, namely: (1) those who are engaged to perform activities which are usually necessary or desirable in the
usual business or trade of the employer; and (2) those who have rendered at least one year of service, whether continuous or broken, with respect to
the activity in which they are employed. [Respondent Taripe] belonged to the first category of regular employees.
The purported contract of employment providing that [respondent Taripe] was hired as contractual employee for five (5) months only, cannot prevail
over the undisputed fact that [respondent Taripe] was hired to perform the function of power press operator, a function necessary or desirable in
[petitioner's] business of manufacturing tin cans. [Herein petitioner RIC's] contention that the four (4) months length of service of [respondent Taripe]
did not grant him a regular status is inconsequential, considering that length of service assumes importance only when the activity in which the
employee has been engaged to perform is not necessary or desirable to the usual business or trade of the employer.
As aptly ruled by [the NLRC]:
"In the instant case, there is no doubt that [respondent Taripe], as power press operator, has been engaged to perform activities which are usually
necessary or desirable in [petitioner RIC's] usual business or trade of manufacturing of tin cans for use in packaging of food, paint and others. We also
find that [respondent Taripe] does not fall under any of the abovementioned exceptions. Other that (sic) [petitioner RIC's] bare allegation thereof, [it]
failed to present any evidence to prove that he was employed for a fixed or specific project or undertaking the completion of which has been
determined at the time of his engagement or that [respondent Taripe's] services are seasonal in nature and that his employment was for the duration
of the season."12
Article 280 of the Labor Code, as amended, provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such activity exists. [Emphasis supplied]
The aforesaid Article 280 of the Labor Code, as amended, classifies employees into three categories, namely: (1) regular employees or those whose
work is necessary or desirable to the usual business of the employer; (2) project employees or those whose employment has been fixed for a specific
project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment is for the duration of the season; and (3) casual employees or those who
are neither regular nor project employees.13
Regular employees are further classified into: (1) regular employees by nature of work; and (2) regular employees by years of service. 14 The former
refers to those employees who perform a particular activity which is necessary or desirable in the usual business or trade of the employer, regardless of
their length of service; while the latter refers to those employees who have been performing the job, regardless of the nature thereof, for at least a
year.15
The aforesaid Article 280 of the Labor Code, as amended, however, does not proscribe or prohibit an employment contract with a fixed period. It does
not necessarily follow that where the duties of the employee consist of activities usually necessary or desirable in the usual business of the employer,
the parties are forbidden from agreeing on a period of time for the performance of such activities. There is nothing essentially contradictory between a
definite period of employment and the nature of the employee's duties. 16 What Article 280 of the Labor Code, as amended, seeks to prevent is the
practice of some unscrupulous and covetous employers who wish to circumvent the law that protects lowly workers from capricious dismissal from
their employment. The aforesaid provision, however, should not be interpreted in such a way as to deprive employers of the right and prerogative to
choose their own workers if they have sufficient basis to refuse an employee a regular status. Management has rights which should also be protected. 17
In the case at bar, respondent Taripe signed a contract of employment prior to his admission into the petitioner's company. Said contract of
employment provides, among other things:
4. That my employment shall be contractual for the period of five (5) months which means that the end of the said period, I can (sic) discharged unless
this contract is renewed by mutual consent or terminated for cause. 18
Based on the said contract, respondent Taripe's employment with the petitioner is good only for a period of five months unless the said contract is
renewed by mutual consent. And as claimed by petitioner RIC, respondent Taripe, along with its other contractual employees, was hired only to meet
the increase in demand for packaging materials during the Christmas season and also to build up stock levels during the early part of the year.
Although Article 280 of the Labor Code, as amended, does not forbid fixed term employment, it must, nevertheless, meet any of the following
guidelines in order that it cannot be said to circumvent security of tenure: (1) that the fixed period of employment was knowingly and voluntarily
agreed upon by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other
circumstances vitiating his consent; or (2) it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms
with no moral dominance whatever being exercised by the former on the latter. 19
In the present case, it cannot be denied that the employment contract signed by respondent Taripe did not mention that he was hired only for a
specific undertaking, the completion of which had been determined at the time of his engagement. The said employment contract neither mentioned
that respondent Taripe's services were seasonal in nature and that his employment was only for the duration of the Christmas season as purposely
claimed by petitioner RIC. What was stipulated in the said contract was that respondent Taripe's employment was contractual for the period of five
months.
Likewise, as the NLRC mentioned in its Resolution, to which the Court of Appeals agreed, other than the bare allegations of petitioner RIC that
respondent Taripe was hired only because of the increase in the demand for packaging materials during the Christmas season, petitioner RIC failed to
substantiate such claim with any other evidence. Petitioner RIC did not present any evidence which might prove that respondent Taripe was employed
for a fixed or specific project or that his services were seasonal in nature.
Also, petitioner RIC failed to controvert the claim of respondent Taripe that he was made to sign the contract of employment, prepared by petitioner
RIC, as a condition for his hiring. Such contract in which the terms are prepared by only one party and the other party merely affixes his signature
signifying his adhesion thereto is called contract of adhesion. 20 It is an agreement in which the parties bargaining are not on equal footing, the weaker
party's participation being reduced to the alternative "to take it or leave it." 21 In the present case, respondent Taripe, in need of a job, was compelled to
agree to the contract, including the five-month period of employment, just so he could be hired. Hence, it cannot be argued that respondent Taripe
signed the employment contract with a fixed term of five months willingly and with full knowledge of the impact thereof.
With regard to the second guideline, this Court agrees with the Court of Appeals that petitioner RIC and respondent Taripe cannot be said to have dealt
with each other on more or less equal terms with no moral dominance exercised by the former over the latter. As a power press operator, a rank and
file employee, he can hardly be on equal terms with petitioner RIC. As the Court of Appeals said, "almost always, employees agree to any terms of an
employment contract just to get employed considering that it is difficult to find work given their ordinary qualifications." 22
Therefore, for failure of petitioner RIC to comply with the necessary guidelines for a valid fixed term employment contract, it can be safely stated that
the aforesaid contract signed by respondent Taripe for a period of five months was a mere subterfuge to deny to the latter a regular status of
employment.
Settled is the rule that the primary standard of determining regular employment is the reasonable connection between the particular activity
performed by the employee in relation to the casual business or trade of the employer. The connection can be determined by considering the nature of
the work performed and its relation to the scheme of the particular business or trade in its entirety. 23
Given the foregoing, this Court agrees in the findings of the Court of Appeals and the NLRC that, indeed, respondent Taripe, as a rectangular power
press machine operator, in charge of manufacturing covers for "four liters rectangular tin cans," was holding a position which is necessary and desirable
in the usual business or trade of petitioner RIC, which was the manufacture of tin cans. Therefore, respondent Taripe was a regular employee of
petitioner RIC by the nature of work he performed in the company.
Respondent Taripe does not fall under the exceptions mentioned in Article 280 of the Labor Code, as amended, because it was not proven by petitioner
RIC that he was employed only for a specific project or undertaking or his employment was merely seasonal. Similarly, the position and function of
power press operator cannot be said to be merely seasonal. Such position cannot be considered as only needed for a specific project or undertaking
because of the very nature of the business of petitioner RIC. Indeed, respondent Taripe is a regular employee of petitioner RIC and as such, he cannot
be dismissed from his employment unless there is just or authorized cause for his dismissal.
Well-established is the rule that regular employees enjoy security of tenure and they can only be dismissed for just cause and with due process, notice
and hearing.24 And in case of employees' dismissal, the burden is on the employer to prove that the dismissal was legal. Thus, respondent Taripe's
summary dismissal, not being based on any of the just or authorized causes enumerated under Articles 282, 25 283,26 and 28427 of the Labor Code, as
amended, is illegal.
Before concluding, we once more underscore the settled precept that factual findings of the NLRC, having deemed to acquire expertise in matters
within its jurisdiction, are generally accorded not only respect but finality especially when such factual findings are affirmed by the Court of
Appeals;28 hence, such factual findings are binding on this Court.
WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and Resolution of the Court of Appeals dated 30 September
2004 and 1 April 2005, respectively, which affirmed with modification the Resolutions of the NLRC dated 7 June 2002 and 20 August 2002, respectively,
finding herein respondent Taripe as a regular employee who had been illegally dismissed from employment by petitioner RIC, are hereby AFFIRMED.
Costs against petitioner RIC.
SO ORDERED.
 SECOND DIVISION
[G.R. NO. 151827. April 29, 2005]
JOSEFINA BENARES, Petitioners, v. Jaime Pancho, Rodolfo Pancho, Jr., Joselito Medalla, Paquito Magallanes, Alicia Magallanes, Evelyn Magallanes,
Violeta Villacampa, Maritess Pancho, Rogelio Pancho and Arnolfo Pancho, Respondents.

DECISION

TINGA, J.:

Assailed in this Petition for Review on Certiorari1 is the Decision2 of the Court of Appeals which affirmed the National Labor Relations Commission's
(NLRC) decision3 holding that respondents were illegally dismissed and ordering petitioner to pay respondents separation pay, backwages, 13th month
pay, Cost of Living Allowance (COLA), emergency relief allowance (ERA), salary differentials and attorney's fees. The NLRC reversed the Labor Arbiter's
finding that respondents failed to lay down the facts and circumstances surrounding their dismissal and to prove their entitlement to monetary
awards.4
The antecedents, as narrated by the NLRC, follow.
Complainants alleged to have started working as sugar farm workers on various dates, to wit:
1. Jaime Pancho November 15, 1964
2. Rodolfo Pancho, Jr. February 1, 1975
3. Joselito Medalla November 15, 1964
4. Paquito Magallanes March 10, 1973
5. Felomino Magallanes November 15, 1964
6. Alicia Magallanes January 15, 1964
7. Evelyn Magallanes January 1, 1974
8. Violeta Villacampa December 1, 1979
9. Maritess Pancho December 15, 1985
10. Rogelio Pancho December 1, 1979
11. Arnolfo Pancho February 1, 1975
Respondent Hda. Maasin II is a sugar cane plantation located in Murcia, Negros Occidental with an area of 12-24 has. planted, owned and managed by
Josefina Benares, individual co-respondent.
On July 24, 1991, complainants thru counsel wrote the Regional Director of the Department of Labor and Employment, Bacolod City for intercession
particularly in the matter of wages and other benefits mandated by law.
On September 24, 1991, a routine inspection was conducted by personnel of the Bacolod District Office of the Department of Labor and Employment.
Accordingly, a report and recommendation was made, hence, the endorsement by the Regional Director of the instant case to the Regional Arbitration
Branch, NLRC, Bacolod City for proper hearing and disposition.
On October 15, 1991, complainants alleged to have been terminated without being paid termination benefits by respondent in retaliation to what they
have done in reporting to the Department of Labor and Employment their working conditions viz-a-viz (sic) wages and other mandatory benefits.
On July 14, 1992, notification and summons were served to the parties wherein complainants were directed to file a formal complaint.
On July 28, 1992, a formal complaint was filed for illegal dismissal with money claims.
From the records, summons and notices of hearing were served to the parties and apparently no amicable settlement was arrived, hence, the parties
were directed to file their respective position papers.
On January 22, 1993, complainant submitted their position paper, while respondent filed its position paper on June 21, 1993.
On March 17, 1994, complainants filed their reply position paper and affidavit. Correspondingly, a rejoinder was filed by respondent on May 16, 1994.
On August 17, 1994, from the Minutes of the scheduled hearing, respondent failed to appear, and that the Office will evaluate the records of the case
whether to conduct a formal trial on the merits or not, and that the corresponding order will be issued.
On January 16, 1996, the Labor Arbiter issued an order to the effect that the case is now deemed submitted for resolution.
On April 30, 1998, the Labor Arbiter a quo issued the assailed decision dismissing the complaint for lack of merit.
On June 26, 1998, complainants not satisfied with the aforecited ruling interposed the instant appeal anchored on the ground that:
THE HONORABLE LABOR ARBITER GRAVELY ABUSED ITS DISCRETION AND SERIOUSLY ERRED IN HOLDING THAT THE COMPLAINANTS FAILED TO DISCUSS
THE FACTS AND CIRCUMSTANCES SURROUNDING THEIR DISMISSAL, HENCE, THERE IS NO DISMISSAL TO SPEAK OF AND THAT COMPLAINANTS FAILED
TO ALLEGE AND PROVE THAT THEIR CLAIMS ARE VALID, HENCE THE DISMISSAL OF THEIR COMPLAINT WOULD CAUSE GRAVE AND IRREPARABLE
DAMAGE TO HEREIN COMPLAINANTS.5
The NLRC held that respondents attained the status of regular seasonal workers of Hda. Maasin II having worked therein from 1964-1985. It found that
petitioner failed to discharge the burden of proving that the termination of respondents was for a just or authorized cause. Hence, respondents were
illegally dismissed and should be awarded their money claims.
Petitioner's motion for reconsideration6 dated May 12, 1999 was denied in the resolution 7 dated October 29, 1999.
The Court of Appeals affirmed the NLRC's ruling, with the modification that the backwages and other monetary benefits shall be computed from the
time compensation was withheld in accordance with Article 279 of the Labor Code, as amended by Republic Act No. 6715.
In its Resolution8 dated November 28, 2001, the appellate court denied petitioner's motion for reconsideration for lack of merit.
Petitioner is now before this Court averring that the Court of Appeals erred in affirming the decision of the NLRC. While petitioner concedes that the
factual findings of the NLRC are generally binding on the appellate court, petitioner insists that the findings of the NLRC are vague and contradictory,
thereby necessitating review.
According to petitioner, the fact that she was able to present sufficient proof to rebut the claim of illegal dismissal should be considered in light of the
NLRC's admission that there are gray areas in the case which require clarification. Petitioner avers that the NLRC should have at least remanded the
case to the labor arbiter to thresh out these gray areas. She further claims that the NLRC was overly zealous in awarding COLA and ERA despite the fact
that respondents did not even pray for these awards in their complaint. She also questions the NLRC's general statement to the effect that the payroll
she submitted is not convincing asserting that she submitted 235 sets of payroll, not just one, and that the NLRC did not even bother to explain why it
found the payroll unconvincing.
Respondents filed a Comment9 dated May 10, 2002 alleging that petitioner failed to submit certified true copies of the assailed decisions and
resolutions, and that the petition lacks proof of service and raises questions of fact.
In her Reply to Comment10 dated September 17, 2002, petitioner points out that the Rules of Court do not require that all copies of the petition contain
certified true copies of the questioned decisions and resolutions. Further, all copies of the petition filed with the Court contain an affidavit of service.
Respondents' copy does not have an affidavit of service because the sworn declaration can not be executed before service of the petition is actually
made. Petitioner also maintains that the rule on review of findings of fact by the Supreme Court admits of certain exceptions such as when the
conclusions arrived at are grounded entirely on speculation, surmises and conjectures as in this case.
The petition was given due course and the parties were required to submit their respective memoranda in the Resolution11 dated March 3, 2003.
Petitioner filed a Manifestation and Compliance12 dated April 22, 2003 adopting the allegations in her Petition for Review on Certiorari and Reply to
Comment as her memorandum. For their part, respondents filed a Memoranda For Private Respondents13 dated May 7, 2003 alleging that the Court of
Appeals correctly relied upon the factual findings of the NLRC after having found the same to be supported by substantial evidence. They insist that
they are regular seasonal employees of the sugar plantation. As such, petitioner has the burden of proving that their dismissal was for a just or
authorized cause.
As regards the contention that the NLRC erroneously awarded COLA and ERA, respondents cite Osias Academy v. DOLE,14 which provides that the NLRC
can extend monetary awards even if these are not prayed for if the monetary benefits are statutory grants intended to alleviate the laborer's plight like
the COLA and ERA.
The main question raised by the present petition is whether respondents are regular employees of Hacienda Maasin and thus entitled to their
monetary claims. Related to this is the issue of whether respondents were illegally terminated.
This case presents a good opportunity to reiterate the Court's rulings on the subject of seasonal employment. The Labor Code defines regular and
casual employment, viz:
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.
The law provides for three kinds of employees: (1) regular employees or those who have been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer; (2) project employees or those whose employment has been fixed for a specific
project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the
work or service to be performed is seasonal in nature and the employment is for the duration of the season; and (3) casual employees or those who are
neither regular nor project employees.15
In Mercado v. NLRC,16 the Court ruled that seasonal workers do not become regular employees by the mere fact that they have rendered at least one
year of service, whether continuous or broken, because the proviso in the second paragraph of Article 280 demarcates as "casual" employees, all other
employees who do not fall under the definition of the preceding paragraph. It deems as regular employees those "casual" employees who have
rendered at least one year of service regardless of the fact that such service may be continuous or broken.
The factual circumstances obtaining in the Mercado case, however, are peculiar. In that case, the workers were engaged to do a particular phase of
agricultural work necessary for rice and/or sugarcane production, after which they would be free to render services to other farm workers who need
their services.
In contrast, in the case of Hacienda Fatima v. National Federation of Sugarcane Workers-Food and General Trade,17 respondents performed the same
tasks for petitioners every season for several years. Thus, they were considered the latter's regular employees for their respective tasks. The fact that
they do not work continuously for one whole year but only for the duration of the season does not detract from considering them in regular
employment since in a litany of cases this Court has already settled that seasonal workers who are called to work from time to time and are temporarily
laid off during off-season are not separated from service in that period, but merely considered on leave until re-employed. 18
Citing jurisprudence, the Court, in Hacienda Fatima, condensed the rule that the primary standard for determining regular employment is the
reasonable connection between the particular activity performed by the employee vis - à-vis the usual trade or business of the employer. This
connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its
entirety. If the employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law
deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business.
Hence, the employment is considered regular, but only with respect to such activity and while such activity exists. 19
In this case, petitioner argues that respondents were not her regular employees as they were merely "pakiao" workers who did not work continuously
in the sugar plantation. They performed such tasks as weeding, cutting and loading canes, planting cane points, fertilizing, cleaning the drainage, etc.
These functions allegedly do not require respondents' daily presence in the sugarcane field as it is not everyday that one weeds, cuts canes or applies
fertilizer. In support of her allegations, petitioner submitted "cultivo" and milling payrolls.
The probative value of petitioner's evidence, however, has been passed upon by the labor arbiter, the NLRC and the Court of Appeals. Although the
labor arbiter dismissed respondents' complaint because their "position paper is completely devoid of any discussion about their alleged dismissal, much
less of the probative facts thereof,"20 the ground for the dismissal of the complaint implies a finding that respondents are regular employees.
The NLRC was more unequivocal when it pronounced that respondents have acquired the status of regular seasonal employees having worked for
more than one year, whether continuous or broken in petitioner's hacienda.
According to petitioner, however, the NLRC's conclusion is highly suspect considering its own admission that there are "gray areas which requires (sic)
clarification." She alleges that despite these gray areas, the NLRC "chose not to remand the case to the Labor Arbiter' .as this would unduly prolong the
agony of the complainants in particular." 21
Petitioner perhaps wittingly omitted mention that the NLRC "opted to appreciate the merits of the instant case based on available
documents/pleadings."22 That the NLRC chose not to remand the case to the labor arbiter for clarificatory proceedings and instead decided the case on
the basis of the evidence then available to it is a judgment call this Court shall not interfere with in the absence of any showing that the NLRC abused its
discretion in so doing.
The Court of Appeals, in fact, found no such grave abuse of discretion on the part of the NLRC. Accordingly, it dismissed the petition for certiorari and
affirmed with modification the findings of the NLRC. It is well to note at this point that in quasi-judicial proceedings, the quantum of evidence required
to support the findings of the NLRC is only substantial evidence or that amount of relevant evidence which a reasonable mind might accept as adequate
to justify a conclusion.23
The issue, therefore, of whether respondents were regular employees of petitioner has been adequately dealt with. The labor arbiter, the NLRC and the
Court of Appeals have similarly held that respondents were regular employees of petitioner. Since it is a settled rule that the factual findings of quasi-
judicial agencies which have acquired expertise in the matters entrusted to their jurisdiction are accorded by this Court not only respect but even
finality,24 we shall no longer disturb this finding.
Petitioner next underscores the NLRC decision's mention of the "payroll" she presented despite the fact that she allegedly presented 235 sets of
payroll, not just one payroll. This circumstance does not in itself evince any grave abuse of discretion on the part of the NLRC as it could well have been
just an innocuous typographical error.
Verily, the NLRC's decision, affirmed as it was by the Court of Appeals, appears to have been arrived at after due consideration of the evidence
presented by both parties.
We also find no reason to disturb the finding that respondents were illegally terminated. When there is no showing of clear, valid and legal cause for
the termination of employment, the law considers the matter a case of illegal dismissal and the burden is on the employer to prove that the
termination was for a just or authorized cause.25 In this case, as found both by the NLRC and the Court of Appeals, petitioner failed to prove any such
cause for the dismissal of respondents.
WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of the Court of Appeals respectively dated June 29, 2001 and
November 28, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

SECOND DIVISION
[G.R. NO. 150478. April 15, 2005]
HACIENDA BINO/HORTENCIA STARKE, INC./HORTENCIA L. STARKE, Petitioners, v. CANDIDO CUENCA, FRANCISCO ACULIT, ANGELINA ALMONIA,
DONALD ALPUERTO, NIDA BANGALISAN, ROGELIO CHAVEZ, ELMO DULINGGIS, MERCEDES EMPERADO, TORIBIO EMPERADO, JULIANA ENCARNADO,
REYNALDO ENCARNADO, GENE FERNANDO, JOVEN FERNANDO, HERNANI FERNANDO, TERESITA FERNANDO, BONIFACIO GADON, JOSE GALLADA,
RAMONITO KILAYKO, ROLANDO KILAYKO, ALFREDO LASTIMOSO, ANTONIO LOMBO, ELIAS LOMBO, EMMA LOMBO, LAURENCIA LOMBO, LUCIA
LOMBO, JOEL MALACAPAY, ADELA MOJELLO, ERNESTO MOJELLO, FRUCTOSO MOJELLO, JESSICA MOJELLO, JOSE MOJELLO, MARITESS MOJELLO,
MERLITA MOJELLO, ROMEO MOJELLO, RONALDO MOJELLO, VALERIANA MOJELLO, JAIME NEMENZO, RODOLFO NAPABLE, SEGUNDIA OCDEN,
JARDIOLINA PABALINAS, LAURO PABALINAS, NOLI PABALINAS, RUBEN PABALINAS, ZALDY PABALINAS, ALFREDO PANOLINO, JOAQUIN PEDUHAN,
JOHN PEDUHAN, REYNALDO PEDUHAN, ROGELIO PEDUHAN, JOSEPHINE PEDUHAN, ANTONIO PORRAS, JR., LORNA PORRAS, JIMMY REYES, ALICIA
ROBERTO, MARCOS ROBERTO, JR., MARIA SANGGA, RODRIGO SANGGA, ARGENE SERON, SAMUEL SERON, SR., ANGELINO SENELONG, ARMANDO
SENELONG, DIOLITO SENELONG, REYNALDO SENELONG, VICENTE SENELONG, FEDERICO STA. ANA, ROGELIO SUASIM, EDNA TADLAS, ARTURO
TITONG, JR., JOSE TITONG, JR., NANCY VINGNO, ALMA YANSON, JIMMY YANSON, MYRNA VILLANUEVA BELENARIO, SALVADOR MALACAPAY, and
RAMELO TIONGCO, Respondents.

DECISION
CALLEJO, SR., J.:

Before us is a Petition for Review of the Decision1 of the Court of Appeals (CA), dated July 31, 2001, and the Resolution dated September 24, 2001
denying the petitioners' motion for reconsideration. The assailed decision modified the decision of the National Labor Relations Commission (NLRC) in
NLRC Case No. V-000099-98.
Hacienda Bino is a 236-hectare sugar plantation located at Barangay Orong, Kabankalan City, Negros Occidental, and represented in this case by
Hortencia L. Starke, owner and operator of the said hacienda.
The 76 individual respondents were part of the workforce of Hacienda Bino consisting of 220 workers, performing various works, such as cultivation,
planting of cane points, fertilization, watering, weeding, harvesting, and loading of harvested sugarcanes to cargo trucks. 2
On July 18, 1996, during the off-milling season, petitioner Starke issued an Order or Notice which stated, thus:
To all Hacienda Employees:
Please bear in mind that all those who signed in favor of CARP are expressing their desire to get out of employment on their own volition.
Wherefore, beginning today, July 18, only those who did not sign for CARP will be given employment by Hda. Bino.
(Sgd.) Hortencia Starke3
The respondents regarded such notice as a termination of their employment. As a consequence, they filed a complaint for illegal dismissal, wage
differentials, 13th month pay, holiday pay and premium pay for holiday, service incentive leave pay, and moral and exemplary damages with the NLRC,
Regional Arbitration Branch No. VI, Bacolod City, on September 17, 1996. 4
In their Joint Sworn Statement, the respondents as complainants alleged inter alia that they are regular and permanent workers of the hacienda and
that they were dismissed without just and lawful cause. They further alleged that they were dismissed because they applied as beneficiaries under the
Comprehensive Agrarian Reform Program (CARP) over the land owned by petitioner Starke. 5
For her part, petitioner Starke recounted that the company's Board of Directors petitioned the Sangguniang Bayan of Kabankalan for authority to re-
classify, from agricultural to industrial, commercial and residential, the whole of Hacienda Bino, except the portion earmarked for the CARP. She
asserted that half of the workers supported the re-classification but the others, which included the herein respondents, opted to become beneficiaries
of the land under the CARP. Petitioner Starke alleged that in July 1996, there was little work in the plantation as it was off-season; and so, on account of
the seasonal nature of the work, she issued the order giving preference to those who supported the re-classification. She pointed out that when the
milling season began in October 1996, the work was plentiful again and she issued notices to all workers, including the respondents, informing them of
the availability of work. However, the respondents refused to report back to work. With respect to the respondents' money claims, petitioner Starke
submitted payrolls evidencing payment thereof.
On October 6, 1997, Labor Arbiter Ray Allan T. Drilon rendered a Decision, 6 finding that petitioner Starke's notice dated July 18, 1996 was tantamount
to a termination of the respondents' services, and holding that the petitioner company was guilty of illegal dismissal. The dispositive portion of the
decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of the complainants illegal and ordering respondent Hortencia
L. Starke, Inc. represented by Hortencia L. Starke, as President, to:
1. Reinstate the complainants to their former position without loss of seniority rights immediately upon receipt of this decision;
2. PAY the backwages and wage differentials of the complainants, to wit:
in the total amount of Four Hundred Ninety-Five Thousand Eight Hundred Fifty-Two and 72/100 (P495,852.72) Pesos; andcralawlibrary
3. TO PAY the complainants attorney's fee in the amount of Forty-Nine Thousand Five Hundred Eighty-Five and 27/100 (P49,585.27) Pesos.
Respondents are further directed to deposit to this Office the total judgment award of FIVE HUNDRED FORTY-FIVE THOUSAND AND FOUR HUNDRED
THIRTY-SEVEN AND 99/100 (P545,437.99) PESOS within ten (10) days from receipt of this decision.
All other claims are hereby DISMISSED for lack of merit.
SO ORDERED.7
Both the petitioners and the respondents appealed the case to the NLRC. On July 24, 1998, the NLRC affirmed with modification the decision of the
Labor Arbiter. The dispositive part of its decision reads:
WHEREFORE, premises considered, the Decision of the Labor Arbiter is AFFIRMED WITH MODIFICATIONS. Respondent is further ordered to pay the
complainants listed in the Holiday Pay Payroll the amounts due them.
SO ORDERED.8
A motion for reconsideration of the said decision was denied by the NLRC. 9 Dissatisfied, the respondents appealed the case to the CA where the
following issues were raised:
A. THE HONORABLE COMMISSION GRAVELY ABUSED ITS DISCRETION AND POWER BY VIOLATING THE DOCTRINE OF "STARE DECISIS" LAID DOWN BY
THE SUPREME COURT AND THE APPLICABLE LAWS AS TO THE STATUS OF THE SUGAR WORKERS.
B. THE HONORABLE COMMISSION COMMITTED SERIOUS ERRORS BY ADMITTING THE MOTION TO DISMISS AND/OR ANSWER TO PETITIONERS' APPEAL
MEMORANDUM DATED MARCH 26, 1998 FILED BY COUNSEL FOR THE HEREIN RESPONDENTS INSPITE OF THE FACT THAT IT WAS FILED WAY BEYOND
THE REGLEMENTARY PERIOD.
C. THE HONORABLE COMMISSION COMMITTED GRAVE ERROR IN GIVING CREDENCE TO THE SWEEPING ALLEGATIONS OF THE COMPLAINANTS AS TO
THE AWARD OF BACKWAGES AND HOLIDAY PAY WITHOUT ANY BASIS.10
On July 31, 2001, the CA rendered a Decision, 11 the dispositive portion of which reads:
WHEREFORE, the decision of the National Labor Relations Commission is hereby MODIFIED by deleting the award for holiday pay and premium pay for
holidays. The rest of the Decision is hereby AFFIRMED.
SO ORDERED.12
The CA ruled that the concept of stare decisis is not relevant to the present case. It held that the ruling in Mercado, Sr. v. NLRC13 does not operate to
abandon the settled doctrine that sugar workers are considered regular and permanent farm workers of a sugar plantation owner, considering that
there are facts peculiar in that case which are not present in the case at bar. In the Mercado case, the farm laborers worked only for a definite period
for a farm owner since the area of the land was comparatively small, after which they offer their services to other farm owners. In this case, the area of
the hacienda, which is 236 hectares, simply does not allow for the respondents to work for a definite period only.
The CA also held that the petitioners' reliance on Bacolod-Murcia Milling Co. Inc. v. NLRC14 was misplaced, as it in fact, bolstered the respondents'
posture that they are regular employees. In that case, the Court held that a sugar worker may be considered as in regular employment even during
those years when he is merely a seasonal worker where the issues concern the determination of an employer-employee relationship and security of
tenure.
Further, the CA held that the respondents' appeal to the NLRC was not perfected since they failed to accompany their notice of appeal with a
memorandum of appeal, or to timely file a memorandum of appeal. Thus, as to them, the decision of the Labor Arbiter became final and executory. The
NLRC, therefore, gravely abused its discretion when it modified the decision of the Labor Arbiter and awarded to the respondents holiday pay and
premium for holiday pay. Finally, the CA affirmed the award of backwages, finding no circumstance that would warrant a reversal of the findings of the
Labor Arbiter and NLRC on this point. 15
On September 24, 2001, the CA denied the motion for reconsideration filed by the petitioners due to their failure to indicate the date of the receipt of
the decision to determine the timeliness of the motion. 16
Hence, this Petition for Review .
The petitioners submit the following issues:
A. WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND POWER BY VIOLATING THE DOCTRINE OF
"STARE DECISIS" LAID DOWN BY THE SUPREME COURT AND THE APPLICABLE LAWS AS TO THE STATUS OF THE SUGAR WORKERS.
B. WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DISMISSING THE MOTION FOR RECONSIDERATION FOR FAILURE TO
STATE THE DATE OF THE RECEIPT OF THE DECISION IN THE MOTION FOR RECONSIDERATION. 17
Petitioner Starke contends that the established doctrine that seasonal employees are regular employees had been overturned and abandoned
by Mercado, Sr. v. NLRC.18 She stresses that in that case, the Court held that petitioners therein who were sugar workers, are seasonal employees and
their employment legally ends upon completion of the project or the season. Petitioner Starke argues that the CA violated the doctrine of stare
decisis in not applying the said ruling. She asserts that the respondents, who are also sugar workers, are seasonal employees; hence, their employment
can be terminated at the end of the season and such termination cannot be considered an illegal dismissal. Petitioner Starke maintains that the
determination of whether the workers are regular or seasonal employees is not dependent on the number of hectares operated upon by them, or the
number of workers, or the capitalization involved, but rather, in the nature of the work. She asserts that the respondents also made their services
available to the neighboring haciendas. To buttress her contention that the respondents are seasonal employees, petitioner Starke cites Rep. Act 6982,
An Act Strengthening the Social Amelioration Program in the Sugar Industry, Providing the Mechanics for its Implementation, and for other Purposes,
which recognizes the seasonal nature of the work in the sugar industry. 19
Petitioner Starke also takes exception to the denial of her motion for reconsideration due to failure to state the date of the receipt of the decision. She
asserts that a denial of a motion for reconsideration due to such cause is merely directory and not mandatory on the part of the CA. Considering that
the amount involved in this case and the fact that the motion was filed within the reglementary period, the CA should have considered the motion for
reconsideration despite such procedural lapse.20
On the other hand, the respondents aver that the petitioners erroneously invoke the doctrine of stare decisis since the factual backdrop of this case and
the Mercado case is not similar. The respondents posit that the Mercado case ruled on the status of employment of farm laborers who work only for a
definite period of time for a farm owner, after which they offer their services to other farm owners. Contrarily, the respondents contend that they do
not work for a definite period but throughout the whole year, and do not make their services available to other farm owners. Moreover, the land
involved in the Mercado case is comparatively smaller than the sugar land involved in this case. The respondents insist that the vastness of the land
involved in this case requires the workers to work on a year-round basis, and not on an "on-and-off" basis like the farm workers in the Mercado case.
Finally, the respondents maintain that the requirement that the date of receipt of the decision should be indicated in the motion for reconsideration is
mandatory and jurisdictional and, if not complied with, the court must deny the motion outright. 21
The petition is without merit.
On the substantial issue of whether the respondents are regular or seasonal employees, the petitioners contend that the CA violated the doctrine
of stare decisis by not applying the ruling in the Mercado case that sugar workers are seasonal employees. We hold otherwise. Under the doctrine
of stare decisis, when a court has laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all
future cases in which the facts are substantially the same.22 Where the facts are essentially different, however, stare decisis does not apply, for a
perfectly sound principle as applied to one set of facts might be entirely inappropriate when a factual variance is introduced. 23
The CA correctly found that the facts involved in this case are different from the Mercado case; therefore, the ruling in that case cannot be applied to
the case at bar, thus:
We do not find the concept of stare decisis relevant in the case at bench. For although in the Mercado case, the Supreme Court held the petitioners
who were sugar workers not to be regular but seasonal workers, nevertheless, the same does not operate to abandon the settled doctrine of the High
Court that sugar workers are considered regular and permanent farm workers of a sugar plantation owner, the reason being that there are facts
present that are peculiar to the Mercado case. The disparity in facts between the Mercado case and the instant case is best exemplified by the fact that
the former decision ruled on the status of employment of farm laborers, who, as found by the labor arbiter, work only for a definite period for a farm
worker, after which they offer their services to other farm owners, considering the area in question being comparatively small, comprising of seventeen
and a half (17') hectares of land, such that the planting of rice and sugar cane thereon could not possibly entail a whole year operation. The herein case
presents a different factual condition as the enormity of the size of the sugar hacienda of petitioner, with an area of two hundred thirty-six (236)
hectares, simply do not allow for private respondents to render work only for a definite period.
Indeed, in a number of cases, the Court has recognized the peculiar facts attendant in the Mercado case. In Abasolo v. NLRC,24 and earlier, in Philippine
Tobacco Flue-Curing & Redrying Corporation v. NLRC,25 the Court made the following observations:
'In Mercado, although respondent constantly availed herself of the petitioners' services from year to year, it was clear from the facts therein that they
were not in her regular employ. Petitioners therein performed different phases of agricultural work in a given year. However, during that period, they
were free to work for other farm owners, and in fact they did. In other words, they worked for respondent, but were nevertheless free to contract their
services with other farm owners. The Court was thus emphatic when it ruled that petitioners were mere project employees, who could be hired by
other farm owners'.26
Recently, the Court reiterated the same observations in Hacienda Fatima v. National Federation of Sugarcane Workers-Food and General Trade 27 and
added that the petitioners in the Mercado case were "not hired regularly and repeatedly for the same phase/s of agricultural work, but on and off for
any single phase thereof."
In this case, there is no evidence on record that the same particulars are present. The petitioners did not present any evidence that the respondents
were required to perform certain phases of agricultural work for a definite period of time. Although the petitioners assert that the respondents made
their services available to the neighboring haciendas, the records do not, however, support such assertion.
The primary standard for determining regular employment is the reasonable connection between the particular activity performed by the employee in
relation to the usual trade or business of the employer. 28 There is no doubt that the respondents were performing work necessary and desirable in the
usual trade or business of an employer. Hence, they can properly be classified as regular employees.
For respondents to be excluded from those classified as regular employees, it is not enough that they perform work or services that are seasonal in
nature. They must have been employed only for the duration of one season.29 While the records sufficiently show that the respondents' work in
the hacienda was seasonal in nature, there was, however, no proof that they were hired for the duration of one season only. In fact, the
payrolls,30 submitted in evidence by the petitioners, show that they availed the services of the respondents since 1991. Absent any proof to the
contrary, the general rule of regular employment should, therefore, stand. It bears stressing that the employer has the burden of proving the
lawfulness of his employee's dismissal.31
On the procedural issue, petitioner Starke avers that the CA should not have denied outright her motion for reconsideration, considering its timely filing
and the huge amount involved. This contention is already moot. Petitioner Starke has already aired in this petition the arguments in her motion for
reconsideration of the CA decision, which have been adequately addressed by this Court. Assuming arguendo that the CA indeed failed to consider the
motion for reconsideration, petitioner Starke was not left without any other recourse. 32
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals, dated July 31, 2001, and its Resolution dated
September 24, 2001 are hereby AFFIRMED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Tinga, and Chico-Nazario, JJ., concur.
 Republic of the Philippines
SUPREME COURT
THIRD DIVISION
G.R. No. 153832. March 18, 2005
FILIPINAS PRE-FABRICATED BUILDING SYSTEMS (FILSYSTEMS), INC., and FELIPE A. CRUZ JR., Petitioners,
vs.
ROGER D. PUENTE,1 Respondent.
DECISION
PANGANIBAN, J.:
Without a valid cause, the employment of project employees cannot be terminated prior to expiration. Otherwise, they shall be entitled to
reinstatement with full back wages. However, if the project or work is completed during the pendency of the ensuing suit for illegal dismissal, the
employees shall be entitled only to full back wages from the date of the termination of their employment until the actual completion of the project or
work.
The Case
Before us is a Petition for Review2 under Rule 45 of the Rules of Court, seeking to annul and reverse the April 16, 2002 Decision 3 and the May 30, 2002
Resolution4 of the Court of Appeals (CA) in CA-GR SP No. 66756. The assailed Decision disposed as follows:
"WHEREFORE, premises considered, the petition is GRANTED and the decision dated May 18, 2001 and resolution dated June 29, 2001 of the NLRC are
hereby annulled and set aside. [Petitioner] Filsystems, Inc. is hereby ordered to reinstate [respondent] immediately to his former position without loss
of seniority and privileges with full back wages from the date of his dismissal until his actual reinstatement, plus 10% of the total monetary award as
attorney’s fees."5
The assailed Resolution denied petitioners’ Motion for Reconsideration.
The Facts
The factual antecedents are summarized by the CA as follows:
"[Respondent] avers that he started working with [Petitioner] Filsystems, Inc., a corporation engaged in construction business, on June 12, 1989; that
he was initially hired by [petitioner] company as an ‘installer’; that he was later promoted to mobile crane operator and was stationed at the company
premises at No. 69 Industria Road, Bagumbayan, Quezon City; that his work was not dependent on the completion or termination of any project; that
since his work was not dependent on any project, his employment with the [petitioner-]company was continuous and without interruption for the past
ten (10) years; that on October 1, 1999, he was dismissed from his employment allegedly because he was a project employee. He filed a pro forma
complaint for illegal dismissal against the [petitioner] company on November 18, 1999.
"The [petitioner-]company however claims that complainant was hired as a project employee in the company’s various projects; that his employment
contracts showed that he was a project worker with specific project assignments; that after completion of each project assignment, his employment
was likewise terminated and the same was correspondingly reported to the DOLE.
"Labor Arbiter Veneranda C. Guerrero dismissed the complaint for lack of merit, ruling thus:
‘WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for illegal dismissal for lack of merit.
‘[Petitioner] Filsystems, Inc. is hereby ordered to pay complainant Roger D. [F]uente the amount of FOUR THOUSAND TWO HUNDRED TWELVE
PHILIPPINE PESOS (₱4,212.00) representing his pro-rata 13th month pay for 1999, plus ten percent (10%) thereof as and for attorney’s fees.
‘SO ORDERED.’
"[Respondent] appealed. However, [the] National Labor Relations Commission (NLRC) dismissed the same and the subsequent motion for
reconsideration."6
Ruling of the Court of Appeals
The Court of Appeals reversed the NLRC and the labor arbiter thus:
"The employment contracts signed by petitioner Puente do not have the specified duration for each project contrary to the provision of Article 280 of
the Labor Code, nor did petitioner work in the project sites, but had always been assigned at the company plant attending to the maintenance of all
mobile cranes of the company, performing tasks vital and desirable in the employer’s usual business for ten (10) continuous years." 7
The CA concluded that respondent was a regular employee of petitioners.
Hence, this Petition.8
The Issues
In its Memorandum, petitioners raise the following issues for our consideration:
"1. Whether or not the Court of Appeals erred and committed grave abuse of discretion in finding that:
‘The employment contracts signed by private respondent Puente do not have the specified duration for each project contrary to the provision of Art.
280 of the Labor Code, nor did petitioner work in the project sites, but had always been assigned at the company plant attending to the maintenance of
all mobile cranes of the company, performing tasks vital and desirable in the company’s usual business for ten (10) continuous years.’
"2. Whether or not the Court a quo erred and committed grave abuse of discretion in finding that the private respondent is a regular employee and not
a project employee?
"3. Whether or not the Court a quo erred and committed grave abuse of discretion in giving due course to the private respondent’s petition for
certiorari under Rule 65 of the 1997 Rules on Civil Procedure; and in annulling and setting aside the Decision dated May 18, 2001 and the Resolution
dated June 29, 2001 of the NLRC?
"4. Whether or not the Court a quo erred and committed grave abuse of discretion in ruling that the evidence submitted by the petitioners proving that
there was retrenchment program implemented by the petitioner company, as a defense that the private respondent’s services was terminated due to
absence if not lack of construction project contract, where he may be redeployed or reinstated?
"5. Whether or not the Court a quo erred and committed grave abuse of discretion in ordering the reinstatement of the private respondent, with full
back wages plus payment of 10% attorney’s fees?"9
In the main, the issues boil down to (1) whether Roger Puente is a project employee, and (2) whether he is entitled to reinstatement with full back
wages.
This Court’s Ruling
The Petition is partly meritorious.
First Issue:
Project Employee
In general, the factual findings of the Court of Appeals are binding on the Supreme Court. One exception to this rule, however, is when the factual
findings of the former are contrary to those of the trial court (or the lower administrative body, as the case may be). 10 The question of whether
respondent is a regular or a project employee is essentially factual in nature; nonetheless, the Court is constrained to resolve it due to the incongruent
findings of the NLRC and the CA.
The Labor Code defines regular, project and casual employees as follows:
ART. 280. Regular and Casual Employment. - The provision of written agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
With particular reference to the construction industry, to which Petitioner Filsystems belongs, Department (of Labor and Employment) Order No.
19,11 Series of 1993, states:
2.1 Classification of employees. – The employees in the construction industry are generally categorized as a) project employees and b) non-project
employees. Project employees are those employed in connection with a particular construction project or phase thereof and whose employment is co-
terminous with each project or phase of the project to which they are assigned.
xxxxxxxxx
2.2 Indicators of project employment. – Either one or more of the following circumstances, among other, may be considered as indicators that an
employee is a project employee.
(a) The duration of the specific/identified undertaking for which the worker is engaged is reasonably determinable.
(b) Such duration, as well as the specific work/service to be performed, is defined in an employment agreement and is made clear to the employee at
the time of hiring.
(c) The work/service performed by the employee is in connection with the particular project/undertaking for which he is engaged.
(d) The employee, while not employed and awaiting engagement, is free to offer his services to any other employer.
(e) The termination of his employment in the particular project/undertaking is reported to the Department of Labor and Employment (DOLE) Regional
Office having jurisdiction over the workplace within 30 days following the date of his separation from work, using the prescribed form on employees’
terminations/dismissals/suspensions.
(f) An undertaking in the employment contract by the employer to pay completion bonus to the project employee as practiced by most construction
companies.
The above-quoted provisions make it clear that a project employee is one whose "employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season." In D.M. Consunji, Inc. v. NLRC,12 this Court has ruled that "the
length of service of a project employee is not the controlling test of employment tenure but whether or not ‘the employment has been fixed for a
specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee.’"
In the present case, the contracts of employment13 of Puente attest to the fact that he was hired for specific projects. His employment was coterminous
with the completion of the projects for which he had been hired. Those contracts expressly provided that his tenure of employment depended on the
duration of any phase of the project or on the completion of the construction projects. Furthermore, petitioners regularly submitted to the labor
department reports of the termination of services of project workers. Such compliance with the reportorial requirement confirms that respondent was
a project employee.14
With regard specifically to the last employment contract executed by the parties, a contract that respondent accepted on August 26, 1996, we find that
he worked at the site of the World Finance Plaza project. That he did is amply proven by the Affidavit of Eduardo Briagas, 15 another employee who was
also stationed at the World Finance Plaza project, as well as by respondent’s Travel Trip Reports. 16
Furthermore, respondent’s Complaint17 specified the address of Filsystems, as "69 INDUSTRIA ROAD, B.BAYAN Q.C.," but specified his place of work as
"PROJECT TO PROJECT." These statements, coupled with the other pieces of evidence presented by petitioners, convinces the Court that -- contrary to
the subsequent claims of respondent -- he performed his work at the project site, not at the company’s premises.
That his employment contract does not mention particular dates that establish the specific duration of the project does not preclude his classification
as a project employee. This fact is clear from the provisions of Clause 3.3(a) of Department Order No. 19, which states:
a) Project employees whose aggregate period of continuous employment in a construction company is at least one year shall be considered regular
employees, in the absence of a "day certain" agreed upon by the parties for the termination of their relationship. Project employees who have become
regular shall be entitled to separation pay.
A "day" as used herein, is understood to be that which must necessarily come, although is may not be known exactly when. This means that where the
final completion of a project or phase thereof is in fact determinable and the expected completion is made known to the employee, such project
employee may not be considered regular, notwithstanding the one-year duration of employment in the project or phase thereof or the one-year
duration of two or more employments in the same project or phase of the object. (Italicization and emphasis supplied)
Respondent’s employment contract provides as follows:
"x x x employment, under this contract is good only for the duration of the project unless employee’s services is terminated due to completion of the
phase of work/section of the project or piece of work to which employee is assigned:
"We agree clearly that employment is on a Project to Project Basis and that upon termination of services there is no separation pay:
POSITION : Mobil Crane Operator
PROJECT NAME : World Finance Plaza
LOCATION : Meralco Ave., Ortigas Center, Pasig City
ASSIGNMENT : Lifting & Hauling of Materials
(Phase of Work/Piece of Work)"18
Evidently, although the employment contract did not state a particular date, it did specify that the termination of the parties’ employment relationship
was to be on a "day certain" -- the day when the phase of work termed "Lifting & Hauling of Materials" for the "World Finance Plaza" project would be
completed. Thus, respondent cannot be considered to have been a regular employee. He was a project employee.
That he was employed with Petitioner Filsystems for ten years in various  projects did not ipso facto make him a regular employee, considering that the
definition of regular employment in Article 280 of the Labor Code makes a specific exception with respect to project employment. The mere rehiring of
respondent on a project-to-project basis did not confer upon him regular employment status. 19 "The practice was dictated by the practical
consideration that experienced construction workers are more preferred." 20 It did not change his status as a project employee.
Second Issue:
Reinstatement
In termination cases, the burden of proving that an employee has been lawfully dismissed lies with the employer. 21 Thus, employers who hire project
employees are mandated to state and, once its veracity is challenged, to prove the actual basis for the latter’s dismissal. 22
In the present case, petitioners claim that respondent’s services were terminated due to the completion of the project. 23 There is no allegation or proof,
however, that the World Finance Plaza project -- or the phase of work therein to which respondent had been assigned -- was already completed by
October 1, 1999, the date when he was dismissed. The inescapable presumption is that his services were terminated for no valid cause prior to the
expiration of the period of his employment; hence, the termination was illegal. Reinstatement with full back wages, inclusive of allowances and other
benefits or their monetary equivalents -- computed from the date of his dismissal until his reinstatement -- is thus in order. 24
However, if indeed the World Finance Plaza project has already been completed during the pendency of this suit, then respondent -- being a project
employee -- can no longer be reinstated. 25 Instead, he shall entitled to the payment of his salary and other benefits corresponding to the unexpired
portion of his employment,26 specifically from the time of the termination of his employment on October 1, 1999, until the date of the completion of
the World Finance Plaza project.
WHEREFORE, the Petition is PARTLY GRANTED. Respondent Roger D. Puente is DECLARED to be a project employee, whose employment was
terminated without any valid cause prior to its expiration and is thus entitled to reinstatement with full back wages. However, if reinstatement is no
longer possible due to the completion of the World Finance Plaza project during the pendency of this case, Petitioner Filipinas Pre-Fabricated Building
Systems (Filsystems), Inc. is ORDERED to PAY respondent the equivalent of his salaries and other employment benefits, computed from October 1,
1999, until the date of the project’s actual completion. No costs.
SO ORDERED.
Sandoval-Gutierrez, Corona, Carpio-Morales, and Garcia, JJ., concur.

FIRST DIVISION
[G.R. NO. 157788. March 08, 2005]
SAINT MARY'S UNIVERSITY, represented by its President REV. JESSIE M. HECHANOVA, CICM, Petitioners, v. COURT OF APPEALS (Former Special
Twelfth Division), NATIONAL LABOR RELATIONS COMMISSION (Second Division) and MARCELO A. DONELO, Respondents.
DECISION
QUISUMBING, J.:
For review on certiorari are the Decision1 dated May 21, 2002 and the Resolution2 dated February 12, 2003 of the Court of Appeals in CA-G.R. SP No.
63240 which dismissed the Petition for Certiorari of St. Mary's University and its motion for reconsideration, respectively.
Respondent Marcelo Donelo started teaching on a contractual basis at St. Mary's University in 1992. In 1995, he was issued an appointment as an
Assistant Professor I. Later on, he was promoted to Assistant Professor III. He taught until the first semester of school year 1999-2000 when the school
discontinued giving him teaching assignments. For this, respondent filed a complaint for illegal dismissal against the university.
In its defense, petitioner St. Mary's University showed that respondent was merely a part-time instructor and, except for three semesters, carried a
load of less than eighteen units. Petitioner argued that respondent never attained permanent or regular status for he was not a full-time teacher.
Further, petitioner showed that respondent was under investigation by the university for giving grades to students who did not attend classes.
Petitioner alleged that respondent did not respond to inquiries relative to the investigation. Instead, respondent filed the instant case against the
university.
The Labor Arbiter ruled that respondent was lawfully dismissed because he had not attained permanent or regular status pursuant to the Manual of
Regulations for Private Schools. The Labor Arbiter held that only full-time teachers with regular loads of at least 18 units, who have satisfactorily
completed three consecutive years of service qualify as permanent or regular employees. 3
On appeal by respondent, the National Labor Relations Commission (NLRC) reversed the Decision of the Labor Arbiter and ordered the reinstatement of
respondent without loss of seniority rights and privileges with full backwages from the time his salaries were withheld until actual reinstatement. 4 It
held that respondent was a full-time teacher as he did not appear to have other regular remunerative employment and was paid on a regular monthly
basis regardless of the number of teaching hours. As a full-time teacher and having taught for more than 3 years, respondent qualified as a permanent
or regular employee of the university.
Petitioner sought for reconsideration and pointed out that respondent was also working for the Provincial Government of Nueva Vizcaya from 1993 to
1996. Nevertheless, the NLRC denied petitioner's Motion for Reconsideration. Aggrieved, petitioner elevated the matter to the Court of Appeals, which
affirmed the Decision of the NLRC.
Hence, this petition with a motion for temporary restraining order, alleging that the Court of Appeals erred in:
'FINDING THAT THE RESPONDENT DONELO ATTAINED A PERMANENT STATUS, THE SAID FINDING BEING CLEARLY CONTRARY TO THE EVIDENCE AT
HAND AND DEVOID OF BASIS IN LAW.
'HOLDING THAT THE TWIN-NOTICE REQUIREMENT IMPOSED BY LAW BEFORE TERMINATION OF EMPLOYMENT CAN BE LEGALLY EFFECTED MUST BE
COMPLIED WITH BY THE PETITIONER.
'AFFIRMING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION IN ORDERING THE PETITIONER TO REINSTATE RESPONDENT DONELO TO
HIS FORMER POSITION WITHOUT LOSS OF SENIORITY RIGHTS AND PRIVILEGES WITH FULL BACKWAGES FROM THE TIME OF HIS DISMISSAL UNTIL
ACTUALLY REINSTATED.5
Plainly, the ultimate questions before us are:
1. Was respondent a full-time teacher?cralawlibrary
2. Had he attained permanent status?cralawlibrary
3. Was he illegally dismissed?
Petitioner contends that respondent did not attain permanent status since he did not carry a load of at least 18 units for three consecutive years; and
that only full-time teachers can attain permanent status. Further, since respondent was not a permanent employee, the twin-notice requirement in the
termination of the latter's employment did not apply.
Respondent argues that, as early as 1995, he had a permanent appointment as Assistant Professor, and he was a permanent employee regardless of
the provisions of the Manual of Regulations for Private Schools. He asserts that he should not be faulted for not carrying a load of at least 18 units since
the university unilaterally controls his load assignment in the same manner that the university has the prerogative to shorten his probationary period.
He points out also that the present Manual allows full-time teachers to hold other remunerative positions as long as these do not conflict with the
regular school day. Since he is a permanent employee, respondent insists that petitioner's failure to give him the required notices constitutes illegal
dismissal.
Section 93 of the 1992 Manual of Regulations for Private Schools, provides that full-time teachers who have satisfactorily completed their probationary
period shall be considered regular or permanent. 6 Furthermore, the probationary period shall not be more than six consecutive regular semesters of
satisfactory service for those in the tertiary level.7 Thus, the following requisites must concur before a private school teacher acquires permanent
status: (1) the teacher is a full-time teacher; (2) the teacher must have rendered three consecutive years of service; and (3) such service must have
been satisfactory.8
In the present case, petitioner claims that private respondent lacked the requisite years of service with the university and also the appropriate quality
of his service, i.e., it is less than satisfactory. The basic question, however, is whether respondent is a full-time teacher.
Section 45 of the 1992 Manual of Regulations for Private Schools provides that full-time academic personnel are those meeting all the following
requirements:
a. Who possess at least the minimum academic qualifications prescribed by the Department under this Manual for all academic personnel;
b. Who are paid monthly or hourly, based on the regular teaching loads as provided for in the policies, rules and standards of the Department and the
school;
c. Whose total working day of not more than eight hours a day is devoted to the school;
d. Who have no other remunerative occupation elsewhere requiring regular hours of work that will conflict with the working hours in the school;
andcralawlibrary
e. Who are not teaching full-time in any other educational institution.
All teaching personnel who do not meet the foregoing qualifications are considered part-time.
A perusal of the various orders of the then Department of Education, Culture and Sports prescribing teaching loads shows that the regular full-time load
of a faculty member is in the range of 15 units to 24 units a semester or term, depending on the courses taught. Part-time instructors carry a load of not
more than 12 units.9
The evidence on record reveals that, except for four non-consecutive terms, respondent generally carried a load of twelve units or less from 1992 to
1999. There is also no evidence that he performed other functions for the school when not teaching. These give the impression that he was merely a
part-time teacher.10 Although this is not conclusive since there are full-time teachers who are allowed by the university to take fewer load, in this case,
respondent did not show that he belonged to the latter group, even after the university presented his teaching record. With a teaching load of twelve
units or less, he could not claim he worked for the number of hours daily as prescribed by Section 45 of the Manual. Furthermore, the records also
indubitably show he was employed elsewhere from 1993 to 1996.
Since there is no showing that respondent worked on a full-time basis for at least three years, he could not have acquired a permanent status. 11 A part-
time employee does not attain permanent status no matter how long he has served the school. 12 And as a part-timer, his services could be terminated
by the school without being held liable for illegal dismissal. Moreover, the requirement of twin-notice applicable only to regular or permanent
employees could not be invoked by respondent.
Yet, this is not to say that part-time teachers may not have security of tenure. The school could not lawfully terminate a part-timer before the end of
the agreed period without just cause. But once the period, semester, or term ends, there is no obligation on the part of the school to renew the
contract of employment for the next period, semester, or term.
In this case, the contract of employment of the respondent was not presented. However, judicial notice may be taken that contracts of employment of
part-time teachers are generally on a per semester or term basis. In the absence of a specific agreement on the period of the contract of employment,
it is presumed to be for a term or semester. After the end of each term or semester, the school does not have any obligation to give teaching load to
each and every part-time teacher. That petitioner did not give any teaching assignment to the respondent during a given term or semester, even if
factually true, did not amount to an actionable violation of respondent's rights. It did not amount to illegal dismissal of the part-time teacher.
The law, while protecting the rights of the employees, authorizes neither the oppression nor destruction of the employer. 13 And when the law tilts the
scale of justice in favor of labor, the scale should never be so tilted if the result would be an injustice to the employer. 14
WHEREFORE, the petition is GRANTED. The Decision dated May 21, 2002 and the Resolution dated February 12, 2003 of the Court of Appeals in CA-G.R.
SP No. 63240, which sustained those of the NLRC, are NULLIFIED and SET ASIDE. The Decision of the Executive Labor Arbiter of the Regional Arbitration
Branch II, Tuguegarao City, Cagayan, is hereby REINSTATED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
 FIRST DIVISION
[G.R. NO. 168052 : February 20, 2006]
POSEIDON FISHING/TERRY DE JESUS, Petitioners, v. NATIONAL LABOR RELATIONS COMMISSION and JIMMY S. ESTOQUIA, Respondents.
DECISION
CHICO-NAZARIO, J.:
Article 280 of the Labor Code, in its truest sense, distinguishes between regular and casual employees to protect the interests of labor. Its language
evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular employee by
virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual status for as long as
convenient.1
This petition assails the Decision2 of the Court of Appeals dated 14 March 2005 in CA-G.R. SP No. 81140 entitled, "Poseidon Fishing/Terry De Jesus v.
National Labor Relations Commission and Jimmy S. Estoquia" which affirmed that of the National Labor Relations Commission (NLRC). The NLRC had
affirmed with modification the Decision dated 5 December 2000 of Labor Arbiter Melquiades Sol D. Del Rosario in NLRC-NCR Case No. 00-07-03625-00,
declaring private respondent to have been illegally dismissed and entitled to backwages and separation pay.
As thoroughly told by the Court of Appeals and the Labor Arbiter, the particulars are beyond dispute:
Petitioner Poseidon Fishing is a fishing company engaged in the deep-sea fishing industry. Its various vessels catch fish in the outlying islands of the
Philippines, which are traded and sold at the Navotas Fish Port. One of its boat crew was private respondent Jimmy S. Estoquia. 3 Petitioner Terry de
Jesus is the manager of petitioner company.
Private respondent was employed by Poseidon Fishing in January 1988 as Chief Mate. After five years, he was promoted to Boat Captain. In 1999,
petitioners, without reason, demoted respondent from Boat Captain to Radio Operator of petitioner Poseidon. 4 As a Radio Operator, he monitored the
daily activities in their office and recorded in the duty logbook the names of the callers and time of their calls. 5
On 3 July 2000, private respondent failed to record a 7:25 a.m. call in one of the logbooks. However, he was able to record the same in the other
logbook. Consequently, when he reviewed the two logbooks, he noticed that he was not able to record the said call in one of the logbooks so he
immediately recorded the 7:25 a.m. call after the 7:30 a.m. entry. 6
Around 9:00 o'clock in the morning of 4 July 2000, petitioner Terry de Jesus detected the error in the entry in the logbook. Subsequently, she asked
private respondent to prepare an incident report to explain the reason for the said oversight. 7
At around 2:00 o'clock in the afternoon of that same day, petitioner Poseidon's secretary, namely Nenita Laderas, summoned private respondent to get
his separation pay amounting to Fifty-Five Thousand Pesos (P55,000.00). However, he refused to accept the amount as he believed that he did nothing
illegal to warrant his immediate discharge from work. 8
Rising to the occasion, private respondent filed a complaint for illegal dismissal on 11 July 2000 with the Labor Arbiter, alleging nonpayment of wages
with prayer for back wages, damages, attorney's fees, and other monetary benefits.
In private respondent's position paper, he averred that petitioner Poseidon employed him as a Chief Mate sometime in January 1988. He claimed that
he was promoted to the position of Boat Captain five years after. However, in 1999, he was demoted from Boat Captain to Radio Operator without any
reason and shortly, he was terminated without just cause and without due process of law.
Conversely, petitioners Poseidon and Terry de Jesus strongly asserted that private respondent was a contractual or a casual employee whose services
could be terminated at the end of the contract even without a just or authorized cause in view of Article 280 of the Labor Code, which provides:
Art. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exists. (Emphasis supplied.)
Petitioners further posited that when the private respondent was engaged, it was made clear to him that he was being employed only on a "por
viaje" or per trip basis and that his employment would be terminated at the end of the trip for which he was being hired. As such, the private
respondent could not be entitled to separation pay and other monetary claims.
On 5 December 2000, following the termination of the hearing of the case, the Labor Arbiter decided in favor of private respondent. The Labor Arbiter
held that even if the private respondent was a casual employee, he became a regular employee after a period of one year and, thereafter, had attained
tenurial security which could only be lost due to a legal cause after observing due process. The dispositive portion of the Decision reads:
CONFORMABLY WITH THE FOREGOING, judgment is hereby rendered finding complainant to have been illegally dismissed and so must immediately be
reinstated to his former position as radio operator and paid by respondent[s] in solidum his backwages which as of December 3, 2000 had already
accumulated in the sum of P35,880.00 plus his unpaid one (1) week salary in the sum of P1,794.00.
Respondents are further ordered to pay attorney's fees in a sum equivalent to 10% of the awarded claims. 9
Consequently, the petitioners filed their Memorandum of Appeal with the NLRC for the reversal of the aforesaid decision. On 24 September 2002, the
NLRC affirmed the decision of the Labor Arbiter with the modification, inter alia, that: (a) the private respondent would be paid his separation pay
equivalent to one-half of his monthly pay for every year of service that he has rendered in lieu of reinstatement; and (b) an amount equivalent to six
months salary should be deducted from his full backwages because it was his negligence in the performance of his work that brought about his
termination. It held:
WHEREFORE, the decision is modified as follows:
1. The amount equivalent to six (6) months salary is to be deducted from the total award of backwages;
2. The respondent is ordered to pay complainant separation pay equivalent to one-half (1/2) month pay for every year of service counted from 1998; x
xx
3. The respondent is ordered to pay complainant's unpaid wages in the amount of P1,794.00; andcralawlibrary
4. Respondent is ordered to pay attorney's fees in a sum equivalent to ten percent (10%) of the awarded claims. 10
Petitioners moved for the reconsideration of the NLRC decision, but were denied in a Resolution dated 29 August 2003.
Petitioners filed a Petition for Certiorari with the Court of Appeals, imputing grave abuse of discretion, but the Court of Appeals found none. The
following is the fallo of the decision:
WHEREFORE, the foregoing premises considered, the instant petition is hereby DENIED. 11
In a last attempt at vindication, petitioners filed the present Petition for Review http://elibrary.supremecourt.gov.ph/dtSearch/ - _ftn with the following
assignment of errors:
I.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENT WAS A REGULAR EMPLOYEE WHEN IN TRUTH HE WAS A
CONTRACTUAL/PROJECT/SEASONAL EMPLOYEE.
II.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENT WAS ILLEGALLY DISMISSED FROM EMPLOYMENT.
III.
THE HONORABLE COURT OF APPEALS ERRED IN NOT CONSIDERING THE RESPONDENT A SEASONAL EMPLOYEE AND APPLYING THE RULING IN RJL
MARTINEZ FISHING CORPORATION v. NLRC THAT "the activity of fishing is a continuous process and could hardly be considered as seasonal in nature."
IV.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENT IS ENTITLED TO BACKWAGES, SEPARATION PAY, ATTORNEY'S FEES
AND OTHER MONETARY BENEFITS.
V.
THE HONORABLE COURT OF APPEALS ERRED IN NOT RESOLVING THE PRAYER FOR THE ISsuance of preliminary injunction and/or temporary restraining
order.12
The fundamental issue entails the determination of the nature of the contractual relationship between petitioners and private respondent, i.e., was
private respondent a regular employee at the time his employment was terminated on 04 July 2000?cralawlibrary
Asserting their right to terminate the contract with private respondent per the "Kasunduan" with him, petitioners pointed to the provision thereof
stating that he was being employed only on a por viaje  basis and that his employment would be terminated at the end of the trip for which he was
being hired, to wit:
NA, kami ay sumasang-ayon na MAGLINGKOD at GUMAWA ng mga gawaing magmula sa pag-alis ng lantsa sa pondohan sa Navotas patungo sa
palakayahan; pabalik sa pondohan ng lantsa sa Navotas hanggang sa paghango ng mga kargang isda. 13
Petitioners lament that fixed-term employment contracts are recognized as valid under the law notwithstanding the provision of Article 280 of the
Labor Code. Petitioners theorize that the Civil Code has always recognized the validity of contracts with a fixed and definite period, and imposes no
restraints on the freedom of the parties to fix the duration of the contract, whatever its object, be it species, goods or services, except the general
admonition against stipulations contrary to law, morals, good customs, public order and public policy. Quoting Brent School Inc. v. Zamora, 14 petitioners
are hamstrung on their reasoning that under the Civil Code, fixed-term employment contracts are not limited, as they are under the present Labor
Code, to those that by their nature are seasonal or for specific projects with pre-determined dates of completion as they also include those to which
the parties by free choice have assigned a specific date of termination. Hence, persons may enter into such contracts as long as they are capacitated to
act, petitioners bemoan.
We are far from persuaded by petitioners' ratiocination.
Petitioners' construal of Brent School, Inc. v. Zamora, has certainly gone astray. The subject of scrutiny in the Brent case was the employment contract
inked between the school and one engaged as its Athletic Director. The contract fixed a specific term of five years from the date of execution of the
agreement. This Court upheld the validity of the contract between therein petitioner and private respondent, fixing the latter's period of employment.
This Court laid down the following criteria for judging the validity of such fixed-term contracts, to wit:
Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly
appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should
be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It
should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any
force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly
stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. 15 (Emphasis
supplied.)
Brent cited some familiar examples of employment contracts which may neither be for seasonal work nor for specific projects, but to which a fixed
term is an essential and natural appurtenance, i.e., overseas employment contracts, 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. 16 Thus, in Brent, the acid test in considering fixed-term
contracts as valid is: if from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the
employee, they should be disregarded for being contrary to public policy.
On the same tack as Brent, the Court in Pakistan International Airlines Corporation v. Ople,17 ruled in this wise:
It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication that the period specified in an
employment agreement was designed to circumvent the security of tenure of regular employees which is provided for in Articles 280 and 281 of the
Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the mere specification of a fixed term of the
employment agreement, or upon evidence aliunde of the intent to evade.
Consistent with the pronouncements in these two earlier cases, the Court, in Cielo v. National Labor Relations Commission,18 did not hesitate to nullify
employment contracts stipulating a fixed term after finding that "the purpose behind these individual contracts was to evade the application of the
labor laws."
In the case under consideration, the agreement has such an objective - to frustrate the security of tenure of private respondent - and fittingly, must be
nullified. In this case, petitioners' intent to evade the application of Article 280 of the Labor Code is unmistakable. In a span of 12 years, private
respondent worked for petitioner company first as a Chief Mate, then Boat Captain, and later as Radio Operator. His job was directly related to the
deep-sea fishing business of petitioner Poseidon. His work was, therefore, necessary and important to the business of his employer. Such being the
scenario involved, private respondent is considered a regular employee of petitioner under Article 280 of the Labor Code, the law in point, which
provides:
Art. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exists. (Emphasis supplied.)
Moreover, unlike in the Brent case where the period of the contract was fixed and clearly stated, note that in the case at bar, the terms of employment
of private respondent as provided in the Kasunduan was not only vague, it also failed to provide an actual or specific date or period for the contract. As
adroitly observed by the Labor Arbiter:
There is nothing in the contract that says complainant, who happened to be the captain of said vessel, is a casual, seasonal or a project worker. The
date July 1 to 31, 1998 under the heading "Pagdating" had been placed there merely to indicate the possible date of arrival of the vessel and is not an
indication of the status of employment of the crew of the vessel.
Actually, the exception under Article 280 of the Labor Code in which the respondents have taken refuge to justify its position does not apply in the
instant case. The proviso, "Except where the employment has been fixed for a specific project or undertaking the completion or determination 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." (Article 280 Labor Code), is inapplicable because the very contract adduced by respondents is unclear
and uncertain. The kasunduan does not specify the duration that complainant had been hired x x x. 19 (Emphasis supplied.)
Furthermore, as petitioners themselves admitted in their petition before this Court, private respondent was repeatedly hired as part of the boat's crew
and he acted in various capacities onboard the vessel. In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission, 20 we
held that the test to determine whether employment is regular or not is the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. And, if the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of
the necessity, if not indispensability of that activity to the business. 21
In Bustamante v. National Labor Relations Commission,22 the Court expounded on what are regular employees under Article 280 of the Labor Code, viz:
It is undisputed that petitioners were illegally dismissed from employment. Article 280 of the Labor Code, states:
ART. 280. Regular and Casual Employment. - The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary
or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in 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.
This provision draws a line between regular and casual employment, a distinction however often abused by employers. The provision enumerates two
(2) kinds of employees, the regular employees and the casual employees. The regular employees consist of the following:
1) those engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer; andcralawlibrary
2) those who have rendered at least one year of service whether such service is continuous or broken. 23
Ostensibly, in the case at bar, at different times, private respondent occupied the position of Chief Mate, Boat Captain, and Radio Operator. In
petitioners' interpretation, however, this act of hiring and re-hiring actually highlight private respondent's contractual status saying that for every
engagement, a fresh contract was entered into by the parties at the outset as the conditions of employment changed when the private respondent
filled in a different position. But to this Court, the act of hiring and re-hiring in various capacities is a mere gambit employed by petitioner to thwart the
tenurial protection of private respondent. Such pattern of re-hiring and the recurring need for his services are testament to the necessity and
indispensability of such services to petitioners' business or trade. 24
Petitioners would brush off private respondent's length of service by stating that he had worked for the company merely for several years 25 and that in
those times, his services were not exclusive to petitioners. On the other hand, to prove his claim that he had continuously worked for petitioners from
1988 to 2000, private respondent submitted a copy of his payroll 26 from 30 May 1988 to October 1988 and a copy of his SSS Employees
Contributions27 as of the year 2000. These documents were submitted by private respondent in order to benchmark his claim of 12 years of service.
Petitioners, however, failed to submit the pertinent employee files, payrolls, records, remittances and other similar documents which would show that
private respondent's work was not continuous and for less than 12 years. Inasmuch as these documents are not in private respondent's possession but
in the custody and absolute control of petitioners, their failure to refute private respondent's evidence or even categorically deny private respondent's
allegations lead us to no other conclusion than that private respondent was hired in 1988 and had been continuously in its employ since then. Indeed,
petitioners' failure to submit the necessary documents, which as employers are in their possession, gives rise to the presumption that their
presentation is prejudicial to its cause.28
To recapitulate, it was after 12 long years of having private respondent under its wings when petitioners, possibly sensing a brewing brush with the law
as far as private respondent's employment is concerned, finally found a loophole to kick private respondent out when the latter failed to properly
record a 7:25 a.m. call. Capitalizing on this faux pas, petitioner summarily dismissed private respondent. On this note, we disagree with the finding of
the NLRC that private respondent was negligent on account of his failure to properly record a call in the log book. A review of the records would
ineluctably show that there is no basis to deduct six months' worth of salary from the total separation pay that private respondent is entitled to. We
note further that the NLRC's finding clashes with that of the Labor Arbiter which found no such negligence and that such inadvertence on the part of
private respondent, at best, constitutes simple negligence punishable only with admonition or suspension for a day or two.
As the records bear out, private respondent himself seasonably realized his oversight and in no time recorded the 7:25 a.m. call after the 7:30 a.m. call.
Gross negligence under Article 282 of the Labor Code, 29 as amended, connotes want of care in the performance of one's duties, while habitual neglect
implies repeated failure to perform one's duties for a period of time, depending upon the circumstances. 30 Here, it is not disputed that private
respondent corrected straight away the recording of the call and petitioners failed to prove the damage or injury that such inadvertence caused the
company. We find, as the Labor Arbiter31 had found, that there is no sufficient evidence on record to prove private respondent's negligence, gross or
simple for that matter, in the performance of his duties to warrant a reduction of six months salary from private respondent's separation pay.
Moreover, respondent missed to properly record, not two or three calls, but just a single call. It was also a first infraction on the part of private
respondent, not to mention that the gaffe, if at all, proved to be innocuous. Thus, we find such slip to be within tolerable range. After all, is it not a
rule32 that in carrying out and interpreting the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be
primordial?cralawlibrary
Petitioners next assert that deep-sea fishing is a seasonal industry because catching of fish could only be undertaken for a limited duration or seasonal
within a given year. Thus, according to petitioners, private respondent was a seasonal or project employee.
We are not won over.
As correctly pointed out by the Court of Appeals, the "activity of catching fish is a continuous process and could hardly be considered as seasonal in
nature."33 In Philex Mining Corp. v. National Labor Relations Commission, 34 we defined project employees as those workers hired (1) for a specific
project or undertaking, and (2) the completion or termination of such project has been determined at the time of the engagement of the employee.
The principal test for determining whether particular employees are "project employees" as distinguished from "regular employees," is whether or not
the "project employees" were assigned to carry out a "specific project or undertaking," the duration and scope of which were specified at the time the
employees were engaged for that project. In this case, petitioners have not shown that private respondent was informed that he will be assigned to a
"specific project or undertaking." As earlier noted, neither has it been established that he was informed of the duration and scope of such project or
undertaking at the time of their engagement.
More to the point, in Maraguinot, Jr. v. National Labor Relations Commission,35 we ruled 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.
In fine, inasmuch as private respondent's functions as described above are no doubt "usually necessary or desirable in the usual business or trade" of
petitioner fishing company and he was hired continuously for 12 years for the same nature of tasks, we are constrained to say that he belongs to the ilk
of regular employee. Being one, private respondent's dismissal without valid cause was illegal. And, where illegal dismissal is proven, the worker is
entitled to back wages and other similar benefits without deductions or conditions. 36
Indeed, it behooves this Court to be ever vigilant in checking the unscrupulous efforts of some of our entrepreneurs, primarily aimed at maximizing
their return on investments at the expense of the lowly workingman. 37
WHEREFORE, the present petition is hereby DENIED. The Decision of the Court of Appeals dated 14 March 2005 in CA-G.R. SP No. 81140 is hereby
AFFIRMED WITH MODIFICATION by deleting the reduction of an amount equivalent to six months of pay from private respondent's separation pay. The
case is remanded to the Labor Arbiter for further proceedings solely for the purpose of determining the monetary liabilities of petitioners in accordance
with the decision. The Labor Arbiter is ORDERED to submit his compliance thereon within thirty (30) days from notice of this decision, with copies
furnished to the parties. Costs against petitioners.
SO ORDERED.

SECOND DIVISION
[G.R. NO. 149985 : May 5, 2006]
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, INC., Petitioner, v. ROSALINA C. ARCEO,* Respondent.
RESOLUTION

CORONA, J.:

This is a Petition for Review under Rule 45 of the 1997 Rules of Civil Procedure assailing the decision 1 of the Court of Appeals (CA) dismissing the
petition for certiorari filed by petitioner.
In May 1990, respondent Rosalina Arceo (Arceo) applied for the position of telephone operator with petitioner Philippine Long Distance Telephone
Company, Inc. - Tarlac Exchange (PLDT). She, however, failed the pre-employment qualifying examination. Having failed the test, Arceo requested PLDT
to allow her to work at the latter's office even without pay. PLDT agreed and assigned her to its commercial section where she was made to perform
various tasks like photocopying documents, sorting out telephone bills and notices of disconnection, and other minor assignments and activities. After
two weeks, PLDT decided to pay her the minimum wage.
On February 15, 1991, PLDT saw no further need for Arceo's services and decided to fire her but, through the intervention of PLDT's commercial section
supervisor, Mrs. Beatriz Mataguihan, she was recommended for an on-the-job training on minor traffic work. When she failed to assimilate traffic
procedures, the company transferred her to auxiliary services, a minor facility.
Subsequently, Arceo took the pre-qualifying exams for the position of telephone operator two more times but again failed in both attempts.
Finally, on October 13, 1991, PLDT discharged Arceo from employment. She then filed a case for illegal dismissal before the labor arbiter. 2 On May 11,
1993, the arbiter ruled in her favor. PLDT was ordered to reinstate Arceo to her "former position or to an equivalent position." This decision became
final and executory.
On June 9, 1993, Arceo was reinstated as casual employee with a minimum wage of P106 per day. She was assigned to photocopy documents and sort
out telephone bills.
On September 3, 1996 or more than three years after her reinstatement, Arceo filed a complaint for unfair labor practice, underpayment of salary,
underpayment of overtime pay, holiday pay, rest day pay and other monetary claims. She alleged in her complaint that, since her reinstatement, she
had yet to be regularized and had yet to receive the benefits due to a regular employee.
On August 18, 1997, labor arbiter Dominador B. Saludares ruled that Arceo was already qualified to become a regular employee. He also found that
petitioner denied her all the benefits and privileges of a regular employee. The dispositive portion of his decision read:
WHEREFORE, premises considered, judgment is hereby rendered declaring respondent guilty of wanton disregard of the right of herein complainant
to become a regular employee. Concomitantly, respondent is hereby ordered to pay complainant the following accrued benefits and privileges from
May 11, 1993 up to the present:
ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
1. Underpayment -------- P181,395.00

2. Overtime pay -------- 2,598.00

3. Premium pay -------- 753.00

4. Allowance for Uniform -------- 20,000.00

5. Cash gift -------- 9,000.00

6. 13th month pay -------- 45,946.17

7. Mid-year bonus -------- 14,884.57

 8. Longevity pay -------- 5, 314.50

9. Sick leave -------- 6,354.30

10. Rice Subsidy -------- 27,250.00

11. Zero backlog -------- 2,000.00

  Total P316,496.24
Likewise, respondent is hereby ordered to pay attorney's fees in the sum of P31,649.62 which is equivalent to ten [percent] (10%) of the amount
awarded to complainant.
The claim for damages is dismissed for lack of merit. 3 (emphasis supplied)
The National Labor Relations Commission (NLRC) took cognizance of the case on appeal. On November 28, 1997, it affirmed the decision of the labor
arbiter only insofar as it found Arceo eligible to become a regular employee. With respect to her monetary claims, the NLRC remanded the case to the
arbiter for reception of evidence.4 It held:
It is evidently a facetious averment emanating from the respondent that the complainant should forever remain a casual employee. Not only is such
argument wanting in merit, it clearly goes against the principle that the conferment of regular status to an employee is by operation of law. xxx
With respect to the money claims, it is our opinion that the complainant is not entitled thereto insofar as her claims for 1993 is concerned for having
been filed beyond the three year prescriptive period. However, as it concerns the claims for the period 1994 to 1996, it is Our view that the
complainant is entitled, not only because it is within the prescriptive period but also on account of the continuous and unabated violation of the
respondent in regard to the deprivation to the complainant not only of her rightful status as a regular employee but more particularly to the grant of
the appropriate salaries and benefits.5
PLDT sought a reconsideration of the decision but the NLRC rejected it for lack of merit.
Rebuffed, PLDT went to the CA via a petition for certiorari 6 and ascribed grave abuse of discretion on the part of the NLRC for considering Arceo a
regular employee by operation of law.
On June 29, 2001, the CA affirmed the contested decision of the NLRC. It held:
xxx It is doctrinaire that in determining what constitutes regular employment, what is considered [as] the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer, i.e. if the work is usually necessary or
desirable in the usual business or trade of the employer. xxx And even granting the argument of petitioner that the nature of Arceo's work is casual
or temporary, still she had been converted into a regular employee by virtue of the proviso in the second paragraph of Article 280 for having worked
with PLDT for more than one (1) year.7 (emphasis supplied)
The CA likewise denied PLDT's motion for reconsideration. Hence, this petition.
PLDT argues that while Article 280 of the Labor Code "regularizes" a casual employee who has rendered at least one year of service (whether
continuous or broken) the proviso is subject to the condition that the employment subsists or the position still exists. Even if Arceo had rendered more
than one year of service as a casual employee, PLDT insisted that this fact alone would not automatically make her a regular employee since her
position had long been abolished. PLDT also argues that it would be an even greater error if Arceo were to be "regularized" as a telephone operator
since she repeatedly failed the qualifying exams for that position.
Thus, the main issue in this case: is Arceo eligible to become a regular employee of PLDT? Yes.
Article 280 of the Labor Code, as amended, provides:
Art. 280. Regular and Casual Employment. ─ The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement
of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of 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. (emphasis ours)
Under the foregoing provision, a regular employee is (1) one who is either engaged to perform activities that are necessary or desirable in the usual
trade or business of the employer or (2) a casual employee who has rendered at least one year of service, whether continuous or broken, with respect
to the activity in which he is employed.
Under the first criterion, respondent is qualified to be a regular employee. Her work, consisting mainly of photocopying documents, sorting out
telephone bills and disconnection notices, was certainly "necessary or desirable" to the business of PLDT. But even if the contrary were true, the
uncontested fact is that she rendered service for more than one year as a casual employee. Hence, under the second criterion, she is still eligible to
become a regular employee.
Petitioner's argument that respondent's position has been abolished, if indeed true, does not preclude Arceo's becoming a regular employee. The order
to reinstate her also included the alternative to reinstate her to "a position equivalent thereto." Thus, PLDT can still "regularize" her in an equivalent
position.
Moreover, PLDT's argument does not hold water in the absence of proof that the activity in which Arceo was engaged (like photocopying of documents
and sorting of telephone bills) no longer subsists. Under Article 280, any employee who has rendered at least one year of service "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." For PLDT's failure to
show that the activity undertaken by Arceo has been discontinued, we are constrained to confirm her "regularization" in that position.
From what date will she be entitled to the benefits of a regular employee? Considering that she has already worked in PLDT for more than one year at
the time she was reinstated, she should be entitled to all the benefits of a regular employee from June 9, 1993 ― the day of her actual reinstatement.
PLDT's other contention that the "regularization" of respondent as telephone operator was not possible since she failed in three qualifying exams for
that position is also untenable. It is understood that she will be regularized in the position she held prior to the filing of her complaint with the labor
arbiter, or, if that position was already abolished, to an equivalent position. The position of telephone operator was never even considered in any of the
assailed decisions of the labor arbiter, the NLRC or the CA.
WHEREFORE, this petition is DENIED.
Costs against petitioner.
SO ORDERED.
 SECOND DIVISION
[G.R. No. 170351, March 30 : 2011]
LEYTE GEOTHERMAL POWER PROGRESSIVE EMPLOYEES UNION - ALU - TUCP, PETITIONER, VS. PHILIPPINE NATIONAL OIL COMPANY - ENERGY
DEVELOPMENT CORPORATION, RESPONDENT.

DECISION
NACHURA, J.:

Under review is the Decision[1] dated June 30, 2005 of the Court of Appeals (CA) in CA-G.R. SP No. 65760, which dismissed the petition for certiorari filed
by petitioner Leyte Geothermal Power Progressive Employees Union - ALU?TUCP (petitioner Union) to annul and set aside the decision [2] dated
December 10, 1999 of the National Labor Relations Commission (NLRC) in ÂÂÂÂÂNLRC Certified Case No. V-02-99.

The facts, fairly summarized by the CA, follow.

blockquote>[Respondent Philippine National Oil Corporation]-Energy Development Corporation [PNOC-EDC] is a government-owned and controlled
corporation engaged in exploration, development, utilization, generation and distribution of energy resources like geothermal energy.

Petitioner is a legitimate labor organization, duly registered with the Department of Labor and Employment (DOLE) Regional Office No. VIII, Tacloban
City.

Among [respondent's] geothermal projects is the Leyte Geothermal Power Project located at the Greater Tongonan Geothermal Reservation in Leyte.
The said Project is composed of the Tongonan 1 Geothermal Project (T1GP) and the Leyte Geothermal Production Field Project (LGPF) which provide
the power and electricity needed not only in the provinces and cities of Central and Eastern Visayas (Region VII and VIII), but also in the island of Luzon
as well. Thus, the [respondent] hired and employed hundreds of employees on a contractual basis, whereby, their employment was only good up to the
completion or termination of the project and would automatically expire upon the completion of such project.

Majority of the employees hired by [respondent] in its Leyte Geothermal Power Projects had become members of petitioner. In view of that
circumstance, the petitioner demands from the [respondent] for recognition of it as the collective bargaining agent of said employees and for a CBA
negotiation with it. However, the [respondent] did not heed such demands of the petitioner. Sometime in 1998 when the project was about to be
completed, the [respondent] proceeded to serve Notices of Termination of Employment upon the employees who are members of the petitioner.

On December 28, 1998, the petitioner filed a Notice of Strike with DOLE against the [respondent] on the ground of purported commission by the latter
of unfair labor practice for "refusal to bargain collectively, union busting and mass termination." On the same day, the petitioner declared a strike and
staged such strike.

To avert any work stoppage, then Secretary of Labor Bienvenido E. Laguesma intervened and issued the Order, dated January 4, 1999, certifying the
labor dispute to the NLRC for compulsory arbitration. Accordingly, all the striking workers were directed to return to work within twelve (12) hours
from receipt of the Order and for the [respondent] to accept them back under the same terms and conditions of employment prior to the strike.
Further, the parties were directed to cease and desist from committing any act that would exacerbate the situation.

However, despite earnest efforts on the part of the Secretary of Labor and Employment to settle the dispute amicably, the petitioner remained
adamant and unreasonable in its position, causing the failure of the negotiation towards a peaceful compromise. In effect, the petitioner did not abide
by [the] assumption order issued by the Secretary of Labor.

Consequently, on January 15, 1999, the [respondent] filed a Complaint for Strike Illegality, Declaration of Loss of Employment and Damages at the
NLRC-RAB VIII in Tacloban City and at the same time, filed a Petition for Cancellation of Petitioner's Certificate of Registration with DOLE, Regional
Office No. VIII. The two cases were later on consolidated pursuant to the New NLRC Rules of Procedure. The consolidated case was docketed as NLRC
Certified Case No. V-02-99 (NCMB-RAB VIII-NS-12-0190-98; RAB Case No. VIII-1-0019-99). The said certified case was indorsed to the NLRC 4 th Division
in Cebu City on June 21, 1999 for the proper disposition thereof. [3]

In due course, the NLRC 4th Division rendered a decision in favor of respondent, to wit:
WHEREFORE, based on the foregoing premises, judgment is hereby rendered as follows:
1. Declaring the officers and members of [petitioner] Union as project employees;
2. Declaring the termination of their employment by reason of the completion of the project, or a phase or portion thereof, to which
they were assigned, as valid and legal;
3. Declaring the strike staged and conducted by [petitioner] Union through its officers and members on December 28, 1998 to January
6, 1999 as illegal for failure to comply with the mandatory requirements of the law on strike[;]
4. Declaring all the officers and members of the board of [petitioner] Union who instigated and spearheaded the illegal strike to have
lost their employment[;]
5. Dismissing the claim of [petitioner] Union against PNOC-EDC for unfair labor practice for lack of merit[;]
6. Dismissing both parties' claims against each other for violation of the Assumption Order dated January 4, 1999 for lack of factual
basis[;]
7. Dismissing all other claims for lack of merit.[4]

Petitioner Union filed a motion for reconsideration of the NLRC decision, which was subsequently denied. Posthaste, petitioner Union filed a petition
for certiorari before the CA, alleging grave abuse of discretion in the decision of the NLRC. As previously adverted to, the CA dismissed the petition
for certiorari, thus:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us DISMISSING the Petition. The assailed Decision dated December
10, 1999 of the NLRC 4th Division in NLRC Certified Case No. V-02-99 (NCMB-RAB VIII-NS-12-0190-98; RAB Case No. VIII-1-0019-99) and its Order dated
March 30, 2001 are hereby AFFIRMED.

Costs against the Petitioner.[5]

Hence, this appeal by certiorari filed by petitioner Union, positing the following questions of law:
1. MAY THE HONORABLE COURT OF APPEALS SUSTAIN THE "PROJECT CONTRACTS" THAT ARE DESIGNED TO DENY AND DEPRIVE THE EMPLOYEES' THEIR
RIGHT TO SECURITY OF TENURE BY MAKING IT APPEAR THAT THEY ARE MERE  PROJECT EMPLOYEES?

2. WHEN THERE ARE NO INTERVALS IN THE EMPLOYEES' CONTRACT, SUCH THAT THE SO-CALLED UNDERTAKING WAS CONTINUOUS, ARE THE
EMPLOYEES PROPERLY TREATED AS PROJECT EMPLOYEES?

3. MAY THE HONORABLE COURT OF APPEALS IGNORE THE FIRM'S OWN ESTIMATE OF JOB COMPLETION, PROVING THAT THERE IS STILL 56.25%
CIVIL/STRUCTURAL WORK TO BE ACCOMPLISHED, AND RULE THAT THE EMPLOYEES WERE DISMISSED FOR COMPLETION [OF] THE "PROJECT?"

4. MAY A FIRM HIDE UNDER THE SPURIOUS  CLOAK OF "PROJECT COMPLETION" TO DISMISS EN MASSE  THE EMPLOYEES WHO HAVE ORGANIZED
AMONG THEMSELVES A LEGITIMATE LABOR ORGANIZATION TO PROTECT THEIR RIGHTS?

5. WHEN THERE IS NO  STOPPAGE OF WORK, MAY A PROTEST ACTIVITY BE CONSIDERED AS A STRIKE CONTRARY TO ITS CONCEPTUAL DEFINITION
UNDER ARTICLE 212 (O) OF THE LABOR CODE OF THE PHILIPPINES?

6. WHEN THE DISMISSAL IS AIMED AT RIDDING THE COMPANY OF MEMBERS OF THE UNION, IS THIS UNION BUSTING? [6]

Stripped of rhetoric, the issues for our resolution are:

1. Whether the officers and members of petitioner Union are project employees of respondent; and
2. Whether the officers and members of petitioner Union engaged in an illegal strike.

On the first issue, petitioner Union contends that its officers and members performed activities that were usually necessary and desirable to
respondent's usual business. In fact, petitioner Union reiterates that its officers and members were assigned to the Construction Department of
respondent as carpenters and masons, and to other jobs pursuant to civil works, which are usually necessary and desirable to the department.
Petitioner Union likewise points out that there was no interval in the employment contract of its officers and members, who were all employees of
respondent, which lack of interval, for petitioner Union, "manifests that the `undertaking' is usually necessary and desirable to the usual trade or
business of the employer."

We cannot subscribe to the view taken by petitioner Union.

The distinction between a regular and a project employment is provided in Article 280, paragraph 1, of the Labor Code:
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 actually exists. [7]

The foregoing contemplates four (4) kinds of employees: (a) regular employees or those who have been "engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the employer"; (b) project employees or those "whose employment has been fixed for a
specific project or undertaking[,] the completion or termination of which has been determined at the time of the engagement of the employee"; 
(c) seasonal employees or those who work or perform services which are seasonal in nature, and the employment is for the duration of the season;
[8]
 and (d) casual  employees or those who are not regular, project, or seasonal employees. Jurisprudence has added a fifth kind-- a fixed-term
employee.[9]

Article 280 of the Labor Code, as worded, establishes that the nature of the employment is determined by law, regardless of any contract expressing
otherwise. The supremacy of the law over the nomenclature of the contract and the stipulations contained therein is to bring to life the policy
enshrined in the Constitution to "afford full protection to labor." [10] Thus, labor contracts are placed on a higher plane than ordinary contracts; these are
imbued with public interest and therefore subject to the police power of the State. [11]

However, notwithstanding the foregoing iterations, project employment contracts which fix the employment for a specific project or undertaking
remain valid under the law:
x x x By entering into such a contract, an employee is deemed to understand that his employment is coterminous with the project. He may not expect
to be employed continuously beyond the completion of the project. It is of judicial notice that project employees engaged for manual services or those
for special skills like those of carpenters or masons, are, as a rule, unschooled. However, this fact alone is not a valid reason for bestowing special
treatment on them or for invalidating a contract of employment. Project employment contracts are not lopsided agreements in favor of only one party
thereto. The employer's interest is equally important as that of the employee[s'] for theirs is the interest that propels economic activity. While it may
be true that it is the employer who drafts project employment contracts with its business interest as overriding consideration, such contracts do not, of
necessity, prejudice the employee. Neither is the employee left helpless by a prejudicial employment contract. After all, under the law, the interest of
the worker is paramount.[12]

In the case at bar, the records reveal that the officers and the members of petitioner Union signed employment contracts indicating the specific project
or phase of work for which they were hired, with a fixed period of employment. The NLRC correctly disposed of this issue:
A deeper examination also shows that [the individual members of petitioner Union] indeed signed and accepted the [employment contracts] freely and
voluntarily. No evidence was presented by [petitioner] Union to prove improper pressure or undue influence when they entered, perfected and
consummated [the employment] contracts. In fact, it was clearly established in the course of the trial of this case, as explained by no less than the
President of [petitioner] Union, that the contracts of employment were read, comprehended, and voluntarily accepted by them. x x x.

xxxx

As clearly shown by [petitioner] Union's own admission, both parties had executed the contracts freely and voluntarily without force, duress or acts
tending to vitiate the worker[s'] consent. Thus, we see no reason not to honor and give effect to the terms and conditions stipulated therein. x x x. [13]

Thus, we are hard pressed to find cause to disturb the findings of the NLRC which are supported by substantial evidence.

It is well-settled in jurisprudence that factual findings of administrative or quasi-judicial bodies, which are deemed to have acquired expertise in matters
within their respective jurisdictions, are generally accorded not only respect but even finality, and bind the Court when supported by substantial
evidence.[14] Rule 133, Section 5 defines substantial evidence as "that amount of relevant evidence which a reasonable mind might accept as adequate
to justify a conclusion."

Consistent therewith is the doctrine that this Court is not a trier of facts, and this is strictly adhered to in labor cases. [15] We may take cognizance of and
resolve factual issues, only when the findings of fact and conclusions of law of the Labor Arbiter or the NLRC are inconsistent with those of the CA. [16]

In the case at bar, both the NLRC and the CA were one in the conclusion that the officers and the members of petitioner Union were project employees.
Nonetheless, petitioner Union insists that they were regular employees since they performed work which was usually necessary or desirable to the
usual business or trade of the Construction Department  of respondent.

The landmark case of ALU-TUCP v. NLRC[17] instructs on the two (2) categories of project employees:
It is evidently important to become clear about the meaning and scope of the term "project" in the present context. The "project" for the carrying out
of which "project employees" are hired would ordinarily have some relationship to the usual business of the employer. Exceptionally, the "project"
undertaking might not have an ordinary or normal relationship to the usual business of the employer. In this latter case, the determination of the scope
and parameters of the "project" becomes fairly easy. x x x. From the viewpoint, however, of the legal characterization problem here presented to the
Court, there should be no difficulty in designating the employees who are retained or hired for the purpose of undertaking fish culture or the
production of vegetables as "project employees," as distinguished from ordinary or "regular employees," so long as the duration and scope of the
project were determined or specified at the time of engagement of the "project employees." For, as is evident from the provisions of Article 280 of the
Labor Code, quoted earlier, the principal test for determining whether particular employees are properly characterized as "project employees" as
distinguished from "regular employees," is whether or not the "project employees" were assigned to carry out a "specific project or undertaking,"
the duration (and scope) of which were specified at the time the employees were engaged for that project.

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

The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business of the corporation. Such a job or
undertaking must also be identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking
also begins and ends at determined or determinable times. [18]

Plainly, the litmus test to determine whether an individual is a project employee lies in setting a fixed period of employment involving a specific
undertaking which completion or termination has been determined at the time of the particular employee's engagement.

In this case, as previously adverted to, the officers and the members of petitioner Union were specifically hired as project employees for respondent's
Leyte Geothermal Power Project located at the Greater Tongonan Geothermal Reservation in Leyte. Consequently, upon the completion of the project
or substantial phase thereof, the officers and the members of petitioner Union could be validly terminated.

Petitioner Union is adamant, however, that the lack of interval in the employment  contracts  of  its officer and members negates the latter's status

as mere project employees. For petitioner Union, the lack of interval further drives home its point that its officers and members are regular employees
who performed work which was usually necessary or desirable to the usual business or trade of respondent.

We are not persuaded.

Petitioner Union's members' employment for more than a year does equate to their regular employment with respondent. In this regard, Mercado, Sr.
v. NLRC[19] illuminates:
The first paragraph [of Article 280 of the Labor Code] answers the question of who are regular employees. It states that, regardless of any written or
oral agreement to the contrary, an employee is deemed regular where he is engaged in necessary or desirable activities in the usual business or trade
of the employer, except for project employees.

A project employee has been defined to be one whose employment has been fixed for a specific project or undertaking, the completion or termination
of which has been determined at the time of the engagement of the employee, or where the work or service to be performed is seasonal in nature and
the employment is for the duration of the season, as in the present case.

The second paragraph of Art. 280 demarcates as "casual" employees, all other employees who do not fall under the definition of the preceding
paragraph. The proviso, in said second paragraph, deems as regular employees those "casual" employees who have rendered at least one year of
service regardless of the fact that such service may be continuous or broken.

Petitioners, in effect, contend that the proviso in the second paragraph of Art. 280 is applicable to their case and that the Labor Arbiter should have
considered them regular by virtue of said proviso. The contention is without merit.

The general rule is that the office of a proviso is to qualify or modify only the phrase immediately preceding it or restrain or limit the generality of the
clause that it immediately follows. Thus, it has been held that a proviso is to be construed with reference to the immediately preceding part of the
provision to which it is attached, and not to the statute itself or to other sections thereof. The only exception to this rule is where the clear legislative
intent is to restrain or qualify not only the phrase immediately preceding it (the proviso) but also earlier provisions of the statute or even the statute
itself as a whole.

Policy Instruction No. 12 of the Department of Labor and Employment discloses that the concept of regular and casual employees was designed to put
an end to casual employment in regular jobs, which has been abused by many employers to prevent so - called casuals from enjoying the benefits of
regular employees or to prevent casuals from joining unions. The same instructions show that the proviso in the second paragraph of Art. 280 was not
designed to stifle small-scale businesses nor to oppress agricultural land owners to further the interests of laborers, whether agricultural or industrial.
What it seeks to eliminate are abuses of employers against their employees and not, as petitioners would have us believe, to prevent small-scale
businesses from engaging in legitimate methods to realize profit. Hence, the proviso is applicable only to the employees who are deemed "casuals" but
not to the "project" employees nor the regular employees treated in paragraph one of Art. 280.

Clearly, therefore, petitioners being project employees, or, to use the correct term, seasonal employees, their employment legally ends upon
completion of the project or the [end of the] season. The termination of their employment cannot and should not constitute an illegal dismissal.

Considering our holding that the officers and the members of petitioner Union were project employees, its claim of union busting is likewise dismissed.

On the second issue, petitioner Union contends that there was no stoppage of work; hence, they did not strike. Euphemistically, petitioner Union avers
that it "only engaged in picketing,"[20] and maintains that "without any work stoppage, [its officers and members] only engaged in xxx protest activity."

We are not convinced.  Petitioner Union splits hairs.

To begin with, quite evident from the records is the undisputed fact that petitioner Union filed a Notice of Strike on December 28, 1998 with the
Department of Labor and Employment, grounded on respondent's purported unfair labor practices, i.e., "refusal to bargain collectively, union busting
and mass termination." On even date, petitioner Union declared and staged a strike.

Second, then Secretary of Labor, Bienvenido E. Laguesma, intervened and issued a Return-to-Work Order [21] dated January 4, 1999, certifying the labor
dispute to the NLRC for compulsory arbitration. The Order narrates the facts leading to the labor dispute, to wit:
On 28 December 1998, [petitioner Union] filed a Notice of Strike against [respondent] citing unfair labor practices, specifically: refusal to bargain
collectively, union busting and mass termination as the grounds [therefor].  On the same day, [petitioner] Union went on strike and took control over
[respondent's] facilities of its Leyte Geothermal Project.

Attempts by the National Conciliation and Mediation Board -RBVIII to forge a mutually acceptable solution proved futile.

In the meantime, the strike continues with no settlement in sight placing in jeopardy the supply of much needed power supply in the Luzon and Visayas
grids.

xxxx

The on-going strike threatens the availability of continuous electricity to these areas which is critical to day-to-day life, industry, commerce and trade.
Without doubt, [respondent's] operations [are] indispensable to the national interest and falls (sic) within the purview of Article 263 (g) of the Labor
Code, as amended, which warrants (sic) the intervention of this Office.

Third, petitioner Union itself, in its pleadings, used the word "strike."

Ultimately, petitioner Union's asseverations are belied by the factual findings of the NLRC, as affirmed by the CA:
The failure to comply with the mandatory requisites for the conduct of strike is both admitted and clearly shown on record. Hence, it is undisputed that
no strike vote was conducted; likewise, the cooling-off period was not observed and that the 7-day strike ban after the submission of the strike vote
was not complied with since there was no strike vote taken.

xxxx

The factual issue of whether a notice of strike was timely filed by [petitioner] Union was resolved by the evidence on record. The evidence revealed that
[petitioner] Union struck even before it could file the required notice of strike. Once again, this relied on [petitioner] Union's proof. [Petitioner]
Union['s] witness said:
Atty. Sinsuat: You stated that you struck on 28 December 1998 is that correct?

Witness : Early in the morning of December 1998.

xxxx
Atty. Sinsuat: And you went there to conduct the strike did you not?

Witness : Our plan then was to strike at noon of December 28 and the strikers will be positioned at their respective areas. [22]

Article 263 of the Labor Code enumerates the requisites for holding a strike:
Art. 263. Strikes, picketing, and lockouts. - (a) x x x.

x x x x.

(c) In cases of bargaining deadlocks, the duly certified or recognized bargaining agent may file a notice of strike or the employer may file a notice of
lockout with the Department at least 30 days before the intended date thereof. In cases of unfair labor practice, the period of notice shall be 15 days
and in the absence of a duly certified bargaining agent, the notice of strike may be filed by any legitimate labor organization in behalf of its members.
However, in case of dismissal from employment of union officers duly elected in accordance with the union constitution and by-laws, which may
constitute union busting, where the existence of the union is threatened, the 15-day cooling-off period shall not apply and the union may take action
immediately.

(d)  The notice must be in accordance with such implementing rules and regulations as the Department of Labor and Employment may promulgate.

(e)During the cooling-off period, it shall be the duty of the Department to exert all efforts at mediation and conciliation to effect a voluntary settlement.
Should the dispute remain unsettled until the lapse of the requisite number of days from the mandatory filing of the notice, the labor union may strike
or the employer may declare a lockout.

(f) A decision to declare a strike must be approved by a majority of the total union membership in the bargaining unit concerned, obtained by secret
ballot in meetings or referenda called for that purpose. A decision to declare a lockout must be approved by a majority of the board of directors of the
corporation or association or of the partners in a partnership, obtained by secret ballot in a meeting called for that purpose. The decision shall be valid
for the duration of the dispute based on substantially the same grounds considered when the strike or lockout vote was taken. The Department may, at
its own initiative or upon the request of any affected party, supervise the conduct of the secret balloting. In every case, the union or the employer shall
furnish the Department the results of the voting at least seven days before the intended strike or lockout, subject to the cooling-off period herein
provided.

In fine, petitioner Union's bare contention that it did not hold a strike cannot trump the factual findings of the NLRC that petitioner Union indeed struck
against respondent. In fact, and more importantly, petitioner Union failed to comply with the requirements set by law prior to holding a strike.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 65760 is AFFIRMED. Costs against petitioner Union.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 192394               July 3, 2013
ROY D. P ASOS, Petitioner,
vs.
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the March 26, 2010
Decision1 and May 26, 2010 Resolution 2 of the Court of Appeals (CA) in CA-G.R. SP No. 107805. The appellate court had affirmed the Decision 3 of the
National Labor Relations Commission (NLRC) dismissing the illegal dismissal complaint filed by petitioner Roy D. Pasos against respondent Philippine
National Construction Corporation (PNCC).
The antecedent facts follow:
Petitioner Roy D. Pasos started working for respondent PNCC on April 26, 1996. Based on the PNCC's "Personnel Action Form Appointment for Project
Employment" dated April 30, 1996,4 petitioner was designated as "Clerk II (Accounting)" and was assigned to the "NAIA – II Project." It was likewise
stated therein:
PARTICULARS: Project employment starting on April 26, 1996 to July 25, 1996. This contract maybe terminated at anytime for cause as provided for by
law and/or existing Company Policy. This maybe terminated if services are unsatisfactory, or when it shall no longer needed, as determined by the
Company. If services are still needed beyond the validity of this contract, the Company shall extend your services. After services are terminated, the
employee shall be under no obligation to re-employ with the Company nor shall the Company be obliged to re-employ the employee. 5 (Emphasis
supplied.)
Petitioner’s employment, however, did not end on July 25, 1996 but was extended until August 4, 1998, or more than two years later, based on the
"Personnel Action Form – Project Employment" dated July 7, 1998. 6
Based on PNCC’s "Appointment for Project Employment" dated November 11, 1998, 7 petitioner was rehired on even date as "Accounting Clerk
(Reliever)" and assigned to the "PCSO – Q.I. Project." It was stated therein that his employment shall end on February 11, 1999 and may be terminated
for cause or in accordance with the provisions of Article 282 of the Labor Code, as amended. However, said employment did not actually end on
February 11, 1999 but was extended until February 19, 1999 based on the "Personnel Action Form-Project Employment" dated February 17, 1999. 8
On February 23, 1999, petitioner was again hired by PNCC as "Accounting Clerk" and was assigned to the "SM-Project" based on the "Appointment for
Project Employment" dated February 18, 1999.9 It did not specify the date when his employment will end but it was stated therein that it will be "co-
terminus with the completion of the project." Said employment supposedly ended on August 19, 1999 per "Personnel Action Form – Project
Employment" dated August 18, 1999,10 where it was stated, "termination of petitioner’s project employment due to completion of assigned
phase/stage of work or project effective at the close of office hours on 19 August 1999." However, it appears that said employment was extended per
"Appointment for Project employment" dated August 20, 199911 as petitioner was again appointed as "Accounting Clerk" for "SM Project (Package II)."
It did not state a specific date up to when his extended employment will be, but it provided that it will be "co-terminus with the x x x project." In
"Personnel Action Form – Project Employment" dated October 17, 2000, 12 it appears that such extension would eventually end on October 19, 2000.
Despite the termination of his employment on October 19, 2000, petitioner claims that his superior instructed him to report for work the following day,
intimating to him that he will again be employed for the succeeding SM projects. For purposes of reemployment, he then underwent a medical
examination which allegedly revealed that he had pneumonitis. Petitioner was advised by PNCC’s physician, Dr. Arthur C. Obena, to take a 14-day sick
leave.
On November 27, 2000, after serving his sick leave, petitioner claims that he was again referred for medical examination where it was revealed that he
contracted Koch’s disease. He was then required to take a 60-day leave of absence. 13 The following day, he submitted his application for sick leave but
PNCC’s Project Personnel Officer, Mr. R.S. Sanchez, told him that he was not entitled to sick leave because he was not a regular employee.
Petitioner still served a 60-day sick leave and underwent another medical examination on February 16, 2001. He was then given a clean bill of health
and was given a medical clearance by Dr. Obena that he was fit to work.
Petitioner claims that after he presented his medical clearance to the Project Personnel Officer on even date, he was informed that his services were
already terminated on October 19, 2000 and he was already replaced due to expiration of his contract. This prompted petitioner on February 18, 2003
to file a complaint14 for illegal dismissal against PNCC with a prayer for reinstatement and back wages. He argued that he is deemed a regular employee
of PNCC due to his prolonged employment as a project employee as well as the failure on the part of PNCC to report his termination every time a
project is completed. He further contended that his termination without the benefit of an administrative investigation was tantamount to an illegal
dismissal.
PNCC countered that petitioner was hired as a project employee in several projects with specific dates of engagement and termination and had full
knowledge and consent that his appointment was only for the duration of each project. It further contended that it had sufficiently complied with the
reportorial requirements to the Department of Labor and Employment (DOLE). It submitted photocopies of three Establishment Termination Reports it
purportedly filed with the DOLE. They were for: (1) the "PCSOQ.I. Project" for February 1999; 15 (2) "SM Project" for August 1999;16 and (3) "SM Project"
for October 2000,17 all of which included petitioner as among the affected employees. The submission of termination reports by PNCC was however
disputed by petitioner based on the verifications 18 issued by the DOLE NCR office that he was not among the affected employees listed in the reports
filed by PNCC in August 1998, February 1999, August 1999 and October 2000.
On March 28, 2006, the Labor Arbiter rendered a Decision 19 in favor of petitioner. The fallo reads:
WHEREFORE, premises considered, the complainant had attained regular employment thereby making his termination from employment illegal since it
was not for any valid or authorized causes. Consequently, Respondent is ordered to pay complainant his full backwages less six (6) months computed as
follows:
Backwages:
Feb. 18, 2000 – March 28, 2006 = 73.33 mos.

₱6,277.00 x 73.33 = ₱460,292.41

Less:
₱6,277.00 X 6 mos. = 37,662.00

₱422,630.41
The reinstatement could not as well be ordered due to the strained relations between the parties, that in lieu thereof, separation pay is ordered paid to
complainant in the amount of ₱37,662.00 [₱6,277.00 x 6].
SO ORDERED.20
The Labor Arbiter ruled that petitioner attained regular employment status with the repeated hiring and rehiring of his services more so when the
services he was made to render were usual and necessary to PNCC’s business. The Labor Arbiter likewise found that from the time petitioner was hired
in 1996 until he was terminated, he was hired and rehired by PNCC and made to work not only in the project he had signed to work on but on other
projects as well, indicating that he is in fact a regular employee. He also noted petitioner’s subsequent contracts did not anymore indicate the date of
completion of the contract and the fact that his first contract was extended way beyond the supposed completion date. According to the Labor Arbiter,
these circumstances indicate that the employment is no longer a project employment but has graduated into a regular one. Having attained regular
status, the Labor Arbiter ruled that petitioner should have been accorded his right to security of tenure.
Both PNCC and petitioner appealed the Labor Arbiter’s decision. PNCC insisted that petitioner was just a project employee and his termination was
brought about by the completion of the contract and therefore he was not illegally dismissed. Petitioner, on the other hand, argued that his
reinstatement should have been ordered by the Labor Arbiter since there was no proof that there were strained relations between the parties. He also
questioned the deduction of six months pay from the back wages awarded to him and the failure of the Labor Arbiter to award him damages and
attorney’s fees. Petitioner likewise moved to dismiss PNCC’s appeal contending that the supersedeas bond in the amount of ₱422,630.41 filed by the
latter was insufficient considering that the Labor Arbiter’s monetary award is ₱460,292.41. He also argued that the person who verified the appeal,
Felix M. Erece, Jr., Personnel Services Department Head of PNCC, has no authority to file the same for and in behalf of PNCC.
On October 31, 2008, the NLRC rendered its Decision granting PNCC’s appeal but dismissing that of petitioner. The dispositive portion reads:
WHEREFORE, premises considered, the appeal of respondent is GRANTED and the Decision dated 28 March 2006 is REVERSED and SET ASIDE.
A new Decision is hereby issued ordering respondent Philippine National Construction Corporation to pay completion bonus to complainant Roy
Domingo Pasos in the amount of ₱25,000.
Complainant’s appeal is DISMISSED for lack of merit.
SO ORDERED.21
As to the procedural issues raised by petitioner, the NLRC ruled that there was substantial compliance with the requirement of an appeal bond and that
Mr. Erece, Jr., as head of the Personnel Services Department, is the proper person to represent PNCC. As to the substantive issues, the NLRC found that
petitioner was employed in connection with certain construction projects and his employment was co-terminus with each project as evidenced by the
Personnel Action Forms and the Termination Report submitted to the DOLE. It likewise noted the presence of the following project employment
indicators in the instant case, namely, the duration of the project for which petitioner was engaged was determinable and expected completion was
known to petitioner; the specific service that petitioner rendered in the projects was that of an accounting clerk and that was made clear to him and
the service was connected with the projects; and PNCC submitted termination reports to the DOLE and petitioner’s name was included in the list of
affected employees.
Petitioner elevated the case to the CA via a petition for certiorari but the appellate court dismissed the same for lack of merit.
Hence this petition. Petitioner argues that the CA erred when it:
I.
SUSTAINED THAT THE AMOUNT OF THE BOND POSTED BY THE RESPONDENTS FOR PURPOSES OF APPEAL WAS SUFFICIENT NOTWITHSTANDING THAT
THE SAME IS LESS THAN THE ADJUDGED AMOUNT.
II.
SUSTAINED THAT FELIX M. ERECE, JR., HEAD OF RESPONDENT PNCC’S PERSONNEL SERVICE DEPARTMENT, IS DULY AUTHORIZED TO REPRESENT
RESPONDENT IN THIS CASE NOTWITHSTANDING THE ABSENCE OF ANY BOARD RESOLUTION OR SECRETARY’S CERTIFICATE OF THE RESPONDENT
STATING THAT INDEED HE WAS DULY AUTHORIZED TO INSTITUTE THESE PROCEEDINGS.
III.
SUSTAINED THAT PETITIONER WAS A PROJECT EMPLOYEE DESPITE THE FACT THAT RESPONDENT PNCC HAD NOT SUBMITTED THE REQUISITE
TERMINATION REPORTS IN ALL OF THE ALLEGED PROJECTS WHERE THE PETITIONER WAS ASSIGNED.
IV.
SUSTAINED THAT THE PETITIONER IS A PROJECT EMPLOYEE DESPITE THE CIRCUMSTANCE THAT THE ACTUAL WORK UNDERTAKEN BY THE PETITIONER
WAS NOT LIMITED TO THE WORK DESCRIBED IN HIS ALLEGED APPOINTMENT AS A PROJECT EMPLOYEE.
V.
FAILED TO FIND THAT AT SOME TIME, THE EMPLOYMENT OF THE PETITIONER WAS UNREASONABLY EXTENDED BEYOND THE DATE OF ITS COMPLETION
AND AT OTHER TIMES THE SAME DID NOT BEAR A DATE OF COMPLETION OR THAT THE SAME WAS READILY DETERMINABLE AT THE TIME OF
PETITIONER’S ENGAGEMENT THEREBY INDICATING THAT HE WAS NOT HIRED AS A PROJECT EMPLOYEE.
VI.
FAILED TO ORDER THE REINSTATEMENT OF THE PETITIONER BY FINDING THAT THERE WAS STRAINED RELATIONS BETWEEN THE PARTIES
NOTWITHSTANDING THAT THE RESPONDENT NEVER EVEN ALLEGED NOR PROVED IN ITS PLEADINGS THE CIRCUMSTANCE OF STRAINED RELATIONS.
VII.
SUSTAINED THE FAILURE OF THE NATIONAL LABOR RELATIONS COMMISSION TO RECTIFY THE ERROR COMMITTED BY LABOR ARBITER LIBO-ON IN
DEDUCTING THE EQUIVALENT OF SIX MONTHS PAY OF BACKWAGES DESPITE THE MANDATE OF THE LABOR CODE THAT WHEN THERE IS A FINDING OF
ILLEGAL DISMISSAL, THE PAYMENT OF FULL BACKWAGES FROM DATE OF DIMISSAL UP TO ACTUAL REINSTATEMENT SHOULD BE AWARDED.
VIII.
SUSTAINED THE FAILURE OF THE NATIONAL LABOR RELATIONS COMMISSION TO RECTIFY THE ERROR COMMITTED BY LABOR ARBITER LIBO-ON IN
FAILING TO AWARD DAMAGES AND ATTORNEY’S FEES TO THE PETITIONER. 22
Petitioner contends that PNCC’s appeal from the Labor Arbiter’s decision should not have been allowed since the appeal bond filed was insufficient. He
likewise argues that the appellate court erred in heavily relying in the case of Cagayan Valley Drug Corporation v. Commissioner of Internal
Revenue23 which enumerated the officials and employees who can sign the verification and certification without need of a board resolution. He
contends that in said case, there was substantial compliance with the requirement since a board resolution was submitted albeit belatedly unlike in the
instant case where no board resolution was ever submitted even belatedly.
As to the substantive issue, petitioner submits that the CA erroneously concluded that he was a project employee when there are indicators which
point otherwise. He contends that even if he was just hired for the NAIA 2 Project from April 26, 1996 to July 25, 1996, he was made to work until
August 4, 1998. He also avers the DOLE had certified that he was not among the employees listed in the termination reports submitted by PNCC which
belies the photocopies of termination reports attached by PNCC to its pleadings listing petitioner as one of the affected employees. Petitioner points
out that said termination reports attached to PNCC’s pleadings are mere photocopies and were not even certified by the DOLE-NCR as true copies of
the originals on file with said office. Further, he argues that in violation of the requirement of Department Order No. 19 that the duration of the project
employment is reasonably determinable, his contracts for the SM projects did not specify the date of completion of the project nor was the completion
determinable at the time that petitioner was hired.
PNCC counters that documentary evidence would show that petitioner was clearly a project employee and remained as such until his last engagement.
It argues that the repeated rehiring of petitioner as accounting clerk in different projects did not make him a regular employee. It also insists that it
complied with the reportorial requirements and that it filed and reported the termination of petitioner upon every completion of project to which he
was employed.
In sum, three main issues are presented before this Court for resolution: (1) Should an appeal be dismissed outright if the appeal bond filed is less than
the adjudged amount? (2) Can the head of the personnel department sign the verification and certification on behalf of the corporation sans any board
resolution or secretary’s certificate authorizing such officer to do the same? and (3) Is petitioner a regular employee and not a mere project employee
and thus can only be dismissed for cause?
Substantial compliance with appeal
bond requirement
The perfection of an appeal within the reglementary period and in the manner prescribed by law is jurisdictional, and noncompliance with such legal
requirement is fatal and effectively renders the judgment final and executory. As provided in Article 223 of the Labor Code, as amended, in case of a
judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a
reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from.
However, not only in one case has this Court relaxed this requirement in order to bring about the immediate and appropriate resolution of cases on the
merits.24 In Quiambao v. National Labor Relations Commission,25 this Court allowed the relaxation of the requirement when there is substantial
compliance with the rule. Likewise, in Ong v. Court of Appeals, 26 the Court held that the bond requirement on appeals may be relaxed when there is
substantial compliance with the Rules of Procedure of the NLRC or when the appellant shows willingness to post a partial bond. The Court held that
"while the bond requirement on appeals involving monetary awards has been relaxed in certain cases, this can only be done where there was
substantial compliance of the Rules or where the appellants, at the very least, exhibited willingness to pay by posting a partial bond."
In the instant case, the Labor Arbiter in his decision ordered PNCC to pay petitioner back wages amounting to ₱422,630.41 and separation pay of
₱37,662 or a total of ₱460,292.41. When PNCC filed an appeal bond amounting to ₱422,630.41 or at least 90% of the adjudged amount, there is no
question that this is substantial compliance with the requirement that allows relaxation of the rules.
Validity of the verification and
certification signed by a corporate
officer on behalf of the corporation
without the requisite board
resolution or secretary’s certificate
It has been the constant holding of this Court in cases instituted by corporations that an individual corporate officer cannot exercise any corporate
power pertaining to the corporation without authority from the board of directors pursuant to Section 23, in relation to Section 25 of the Corporation
Code which clearly enunciates that all corporate powers are exercised, all business conducted, and all properties controlled by the board of directors.
However, we have in many cases recognized the authority of some corporate officers to sign the verification and certification against forum-shopping.
Some of these cases were enumerated in Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue 27 which was cited by the appellate
court:
In Mactan-Cebu International Airport Authority v. CA, we recognized the authority of a general manager or acting general manager to sign the
verification and certificate against forum shopping; in Pfizer v. Galan, we upheld the validity of a verification signed by an "employment specialist" who
had not even presented any proof of her authority to represent the company; in Novelty Philippines, Inc. v. CA, we ruled that a personnel officer who
signed the petition but did not attach the authority from the company is authorized to sign the verification and non-forum shopping certificate; and in
Lepanto Consolidated Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), we ruled that the Chairperson of the Board and President
of the Company can sign the verification and certificate against non-forum shopping even without the submission of the board’s authorization.
In sum, we have held that the following officials or employees of the company can sign the verification and certification without need of a board
resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager, (4)
Personnel Officer, and (5) an Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories to the verification and certification required by the rules, the
determination of the sufficiency of the authority was done on a case to case basis. The rationale applied in the foregoing cases is to justify the authority
of corporate officers or representatives of the corporation to sign the verification or certificate against forum shopping, being "in a position to verify the
truthfulness and correctness of the allegations in the petition." 28 (Citations omitted.)
While we agree with petitioner that in Cagayan Valley, the requisite board resolution was submitted though belatedly unlike in the instant case, this
Court still recognizes the authority of Mr. Erece, Jr. to sign the verification and certification on behalf of PNCC sans a board resolution or secretary’s
certificate as we have allowed in Pfizer, Inc. v. Galan, 29 one of the cases cited in Cagayan Valley. In Pfizer, the Court ruled as valid the verification signed
by an employment specialist as she was in a position to verify the truthfulness and correctness of the allegations in the petition 30 despite the fact that
no board resolution authorizing her was ever submitted by Pfizer, Inc. even belatedly. We believe that like the employment specialist in Pfizer, Mr.
Erece, Jr. too, as head of the Personnel Services Department of PNCC, was in a position to assure that the allegations in the pleading have been
prepared in good faith and are true and correct.
Even assuming that the verification in the appeal filed by PNCC is defective, it is well settled that rules of procedure in labor cases maybe relaxed. As
provided in Article 221 of the Labor Code, as amended, "rules of evidence prevailing in courts of law or equity shall not be controlling and it is the spirit
and intention of this Code that the Commission and its members and the Labor Arbiters shall use every and all reasonable means to ascertain the facts
in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process." Moreover, the
requirement of verification is merely formal and not jurisdictional. As held in Pacquing v. Coca-Cola Philippines, Inc. 31:
As to the defective verification in the appeal memorandum before the NLRC, the same liberality applies. After all, the requirement regarding
verification of a pleading is formal, not jurisdictional. Such requirement is simply a condition affecting the form of pleading, the noncompliance 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 or tribunal may
order the correction of the pleading if verification is lacking or act on the pleading although it is not verified, if the attending circumstances are such
that strict compliance with the rules may be dispensed with in order that the ends of justice may thereby be served. 32
Duration of project employment
should be determined at the time of
hiring
In the instant case, the appointments issued to petitioner indicated that he was hired for specific projects. This Court is convinced however that
although he started as a project employee, he eventually became a regular employee of PNCC.
Under Article 280 of the Labor Code, as amended, a project employee is one whose "employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season." Thus, the principal test used to determine whether employees
are project employees is whether or not the employees were assigned to carry out a specific project or undertaking, the duration or scope of which was
specified at the time the employees were engaged for that project. 33
In the case at bar, petitioner worked continuously for more than two years after the supposed three-month duration of his project employment for the
NAIA II Project. While his appointment for said project allowed such extension since it specifically provided that in case his "services are still needed
beyond the validity of the contract, the Company shall extend his services," there was no subsequent contract or appointment that specified a
particular duration for the extension. His services were just extended indefinitely until "Personnel Action Form – Project Employment" dated July 7,
1998 was issued to him which provided that his employment will end a few weeks later or on August 4, 1998. While for first three months, petitioner
can be considered a project employee of PNCC, his employment thereafter, when his services were extended without any specification of as to the
duration, made him a regular employee of PNCC. And his status as a regular employee was not affected by the fact that he was assigned to several
other projects and there were intervals in between said projects since he enjoys security of tenure.
Failure of an employer to file
termination reports after every
project completion proves that an
employee is not a project employee
As a rule, the findings of fact of the CA are final and conclusive and this Court will not review them on appeal. 34 The rule, however, is subject to the
following exceptions:
The jurisdiction of the Court in cases brought before it from the appellate court is limited to reviewing errors of law, and findings of fact of the Court of
Appeals are conclusive upon the Court since it is not the Court’s function to analyze and weigh the evidence all over again. Nevertheless, in several
cases, the Court enumerated the exceptions to the rule that factual findings of the Court of Appeals are binding on the Court: (1) when the findings are
grounded entirely on speculations, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there
is 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 in
making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the
appellee; (7) when the findings are contrary to that of the trial court; (8) when the findings 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 petitioner’s main and reply briefs are not disputed by the respondent;
(10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; or (11) when the Court
of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. 35
In this case, records clearly show that PNCC did not report the termination of petitioner’s supposed project employment for the NAIA II Project to the
DOLE. Department Order No. 19, or the "Guidelines Governing the Employment of Workers in the Construction Industry," requires employers to submit
a report of an employee’s termination to the nearest public employment office every time an employee’s employment is terminated due to a
completion of a project. PNCC submitted as evidence of its compliance with the requirement supposed photocopies of its termination reports, each
listing petitioner as among the employees affected. Unfortunately, none of the reports submitted pertain to the NAIA II Project. Moreover, DOLE NCR
verified that petitioner is not included in the list of affected workers based on the termination reports filed by PNCC on August 11, 17, 20 and 24, 1998
for petitioner’s supposed dismissal from the NAIA II Project effective August 4, 1998. This certification from DOLE was not refuted by PNCC. In Tomas
Lao Construction v. NLRC,36 we emphasized the indispensability of the reportorial requirement:
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. 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. 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.37
A regular employee dismissed for a
cause other than the just or
authorized causes provided by law is
illegally dismissed
Petitioner’s regular employment was terminated by PNCC due to contract expiration or project completion, which are both not among the just or
authorized causes provided in the Labor Code, as amended, for dismissing a regular employee. Thus, petitioner was illegally dismissed.
Article 279 of the Labor Code, as amended, provides that an illegally dismissed employee is entitled to reinstatement, full back wages, inclusive of
allowances, and to his other benefits or their monetary equivalent from the time his compensation was withheld from him up to the time of his actual
reinstatement.
We agree with petitioner that there was no basis for the Labor Arbiter’s finding of strained relations and order of separation pay in lieu of
reinstatement. This was neither alleged nor proved. Moreover, it has long been settled that the doctrine of strained relations should be strictly applied
so as not to deprive an illegally dismissed employee of his right to reinstatement. As held in Globe-Mackay Cable and Radio Corporation v. NLRC: 38
Obviously, the principle of "strained relations" cannot be applied indiscriminately. Otherwise, reinstatement can never be possible simply because
some hostility is invariably engendered between the parties as a result of litigation. That is human nature.
Besides, no strained relations should arise from a valid and legal act of asserting one’s right; otherwise an employee who shall assert his right could be
easily separated from the service, by merely paying his separation pay on the pretext that his relationship with his employer had already become
strained.39
As to the back wages due petitioner, there is likewise no basis in deducting therefrom back wages equivalent to six months "representing the maximum
period of confinement PNCC can require him to undergo medical treatment." Besides, petitioner was not dismissed on the ground of disease but
expiration of term of project employment.
Regarding moral and exemplary damages, this Court rules that petitioner is not entitled to them.1âwphi1 Worth reiterating is the rule that moral
damages are recoverable where the dismissal of the employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was
done in a manner contrary to morals, good customs, or public policy. Likewise, exemplary damages may be awarded if the dismissal was effected in a
wanton, oppressive or malevolent manner.40 Apart from his allegations, petitioner did not present any evidence to prove that his dismissal was
attended with bad faith or was done oppressively.
Petitioner is also entitled to attorney's fees m the amount of ten percent (10%) of his total monetary award, having been forced to litigate in order to
seek redress of his grievances, as provided in Article 111 of the Labor Code, as amended, and following this Court's pronouncement in Exodus
International Construction Corporation v. Biscocho. 41
In line with current jurisprudence, the award of back wages shall earn legal interest at the rate of six percent ( 6%) per annum from the date of
petitioner's dismissal until the finality of this decision. 42 Thereafter, it shall earn 12% legal interest until fully paid43 in accordance with the guidelines in
Eastern Shipping Lines, Inc. v. Court of Appeals.44
WHEREFORE, the petition is GRANTED. The assailed March 26, 2010 Decision and May 26, 2010 Resolution of the Court of Appeals in CAG.R. SP No.
107805 are hereby REVERSED. The decision of the Labor Arbiter is hereby REINSTATED with the following MODIFICATIONS:
1) respondent PNCC is DIRECTED to pay petitioner Roy D. Pasos full back wages from the time of his illegal dismissal on October 19, 2000 up
to the finality of this Decision, with interest at 6% per annum, and 12% legal interest thereafter until fully paid;
2) respondent PNCC is ORDERED to reinstate petitioner Pasos to his former position or to a substantially equivalent one, without loss of
seniority rights and other benefits attendant to the position; and
3) respondent PNCC is DIRECTED to pay petitioner Pasos attorney's fees equivalent to 10% of his total monetary award.
No pronouncement as to costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 204406               February 26, 2014
MACARTHUR MALICDEM and HERMENIGILDO FLORES, Petitioners,
vs.
MARULAS INDUSTRIAL CORPORATION and MIKE MANCILLA, Respondents.
DECISION
MENDOZA, J.:
This petition for review on certiorari 1 under Rule 45 of the Rules of Court filed by Macarthur Malicdem (Malicdem) and Hermenigildo Flores (Flores)
assails the July 18, 2012 Decision2 and the November 12, 2012 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 1244 70, dismissing their
petition for certiorari under Rule 65 in an action for illegal dismissal.
The Facts:
A complaint4 for illegal dismissal, separation pay, money claims, moral and exemplary damages, and attorney's fees was filed by petitioners Malicdem
and Flores against respondents Marulas Industrial Corporation (Marulas) and Mike Mancilla (Mancilla), who were engaged in the business of
manufacturing sacks intended for local and export markets.
Malicdem and Flores were first hired by Marulas as extruder operators in 2006, as shown by their employment contracts. They were responsible for the
bagging of filament yarn, the quality of pp yarn package and the cleanliness of the work place area. Their employment contracts were for a period of
one (1) year. Every year thereafter, they would sign a Resignation/Quitclaim in favor of Marulas a day after their contracts ended, and then sign another
contract for one (1) year. Until one day, on December 16, 2010, Flores was told not to report for work anymore after being asked to sign a paper by
Marulas' HR Head to the effect that he acknowledged the completion of his contractual status. On February 1, 2011, Malicdem was also terminated
after signing a similar document. Thus, both claimed to have been illegally dismissed.
Marulas countered that their contracts showed that they were fixed-term employees for a specific undertaking which was to work on a particular order
of a customer for a specific period. Their severance from employment was due to the expiration of their contracts.
On February 7, 2011, Malicdem and Flores lodged a complaint against Marulas and Mancilla for illegal dismissal.
On July 13, 2011, the Labor Arbiter (LA) rendered a decision 5 in favor of the respondents, finding no illegal dismissal. He ruled that Malicdem and Flores
were not terminated and that their employment naturally ceased when their contracts expired. The LA, however, ordered Marulas to pay Malicdem
and Flores their respective wage differentials, to wit:
WHEREFORE, the complaints for illegal dismissal are dismissed for lack of merit. Respondent Marulas Industrial Corporation is, however, ordered to pay
complainants wage differential in the following amounts:
1. Macarthur Malicdem ₱20,111.26

2/2/07 – 6/13/08 = None

6/14/08 – 8/27/08 = 2.47 mos.

 ₱377 – 362 = ₱15

x 26 days x 2.47 mos. = 963.30

8/28/08 – 6/30/10 = 22.06 mos.

₱382 – ₱362 = ₱20

x 26 days x 22.06 mos. = 11,471.20

7/1/10 – 2/2/11 = 7.03 mos.

₱404 – ₱362 = ₱42

x 26 days x 7.03 mos. = 7,676.76

20,111.26

; and

2. Herminigildo Flores ₱18,440.50

2/2/08 – 6/13/08 = 4.36 mos. None

6/14/08 – 8/27/08 = 963.30

8/28/08 – 6/30/10 = 11,471.20

7/1/10 – 12/16/10 = 5.50 mos.

₱404 x ₱362 = ₱42

x 26 days x 5.50 mos. = 6,006.00

18,440.50
All other claims are dismissed for lack of merit.
SO ORDERED.6
Malicdem and Flores appealed to the NLRC which partially granted their appeal with the award of payment of 13th month pay, service incentive leave
and holiday pay for three (3) years. The dispositive portion of its December 19, 2011 Decision 7 reads:
WHEREFORE, the appeal is GRANTED IN PART. The Decision of Labor Arbiter Raymund M. Celino, dated July 13, 2011, is MODIFIED. In addition to the
award of salary differentials, complainants should also be awarded 13th month pay, service incentive leave and holiday pay for three years.
SO ORDERED.8
Still, petitioners filed a motion for reconsideration, but it was denied by the NLRC on February 29, 2011.
Aggrieved, Malicdem and Flores filed a petition for certiorari under Rule 65 with the CA.
On July 18, 2012, the CA denied the petition, 9 finding no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC. It
ruled that the issue of whether or not the petitioners were project employees or regular employees was factual in nature and, thus, not within the
ambit of a petition for certiorari. Moreover, it accorded respect and due consideration to the factual findings of the NLRC, affirming those of the LA, as
they were supported by substantial evidence.
On the substantive issue, the CA explained that "the repeated and successive rehiring of project employees do not qualify them as regular employees,
as length of service is not the controlling determinant of the employment tenure of a project employee, but whether the employment has been fixed
for a specific project or undertaking, its completion has been determined at the time of the engagement of the employee." 10
Corollarily, considering that there was no illegal dismissal, the CA ruled that payment of backwages, separation pay, damages, and attorney's fees had
no factual and legal bases. Hence, they could not be awarded to the petitioners.
Aggrieved, Malicdem and Flores filed a motion for reconsideration, but their pleas were denied in the CA Resolution, dated November 12, 2012.
The Petition
Malicdem and Flores now come before this Court by way of a petition for review on certiorari under Rule 45 of the Rules of Court praying for the
reversal of the CA decision anchored on the principal argument that the appellate court erred in affirming the NLRC decision that there was no illegal
dismissal because the petitioners’ contracts of employment with the respondents simply expired. They claim that their continuous rehiring paved the
way for their regularization and, for said reason, they could not be terminated from their jobs without just cause.
In their Comment,11 the respondents averred that the petitioners failed to show that the CA erred in affirming the NLRC decision. They posit that the
petitioners were contractual employees and their rehiring did not amount to regularization. The CA cited William Uy Construction Corp. v.
Trinidad,12 where it was held that the repeated and successive rehiring of project employees did not qualify them as regular employees, as length of
service was not the controlling determinant of the employment tenure of a project employee, but whether the employment had been fixed for a
specific project or undertaking, its completion had been determined at the time of the engagement of the employee. The respondents add that for said
reason, the petitioners were not entitled to full backwages, separation pay, moral and exemplary damages, and attorney’s fees.
Now, the question is whether or not the CA erred in not finding any grave abuse of discretion amounting to lack or excess of jurisdiction on the part of
the NLRC.
The Court’s Ruling:
The Court grants the petition.
The petitioners have convincingly shown that they should be considered regular employees and, as such, entitled to full backwages and other
entitlements.
A reading of the 2008 employment contracts,13 denominated as "Project Employment Agreement," reveals that there was a stipulated probationary
period of six (6) months from its commencement. It was provided therein that in the event that they would be able to comply with the company’s
standards and criteria within such period, they shall be reclassified as project employees with respect to the remaining period of the effectivity of the
contract. Specifically, paragraph 3(b) of the agreement reads:
The SECOND PARTY hereby acknowledges, agrees and understands that the nature of his/her employment is probationary and on a project-basis. The
SECOND PARTY further acknowledges, agrees and understands that within the effectivity of this Contract, his/her job performance will be evaluated in
accordance with the standards and criteria explained and disclosed to him/her prior to signing of this Contract. In the event that the SECOND PARTY is
able to comply with the said standards and criteria within the probationary period of six month/s from commencement of this Contract, he/she shall be
reclassified as a project employee of (o)f the FIRST PARTY with respect to the remaining period of the effectivity of this Contract.
Under Article 281 of the Labor Code, however, "an employee who is allowed to work after a probationary period shall be considered a regular
employee." When an employer renews a contract of employment after the lapse of the six-month probationary period, the employee thereby becomes
a regular employee. No employer is allowed to determine indefinitely the fitness of its employees. 14 While length of time is not the controlling test for
project employment, it is vital in determining if the employee was hired for a specific undertaking or tasked to perform functions vital, necessary and
indispensable to the usual business of trade of the employer. 15 Thus, in the earlier case of Maraguinot, Jr. v. NLRC, 16 it was ruled that a project or work
pool employee, who has been: (1) continuously, as opposed to intermittently, rehired by the same employer for the same tasks or nature of tasks; and
(2) those tasks are vital, necessary and indispensable to the usual business or trade of the employer, must be deemed a regular employee. Thus:
x x x. Lest it be misunderstood, this ruling does not mean that simply because an employee is a project or work pool employee even outside the
construction industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a project or work pool employee has been: (1)
continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary
and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee, pursuant to Article 280 of
the Labor Code and jurisprudence. To rule otherwise would allow circumvention of labor laws in industries not falling within the ambit of Policy
Instruction No. 20/Department Order No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees who
have already gained the status of regular employees by the employer's conduct.1âwphi1
The test to determine whether employment is regular or not is the reasonable connection between the particular activity performed by the employee
in relation to the usual business or trade of the employer. If the employee has been performing the job for at least one year, even if the performance is
not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity, if
not indispensability of that activity to the business.17
Guided by the foregoing, the Court is of the considered view that there was clearly a deliberate intent to prevent the regularization of the petitioners.
To begin with, there is no actual project. The only stipulations in the contracts were the dates of their effectivity, the duties and responsibilities of the
petitioners as extruder operators, the rights and obligations of the parties, and the petitioners’ compensation and allowances. As there was no specific
project or undertaking to speak of, the respondents cannot invoke the exception in Article 280 of the Labor Code. 18 This is a clear attempt to frustrate
the regularization of the petitioners and to circumvent the law.
Next, granting that they were project employees, the petitioners could only be considered as regular employees as the two factors enumerated in
Maraguinot, Jr., are present in this case. It is undisputed that the petitioners were continuously rehired by the same employer for the same position as
extruder operators. As such, they were responsible for the operation of machines that produced the sacks. Hence, their work was vital, necessary and
indispensable to the usual business or trade of the employer.
In D.M. Consunji, Inc. v. Estelito Jamin19 and Liganza v. RBL Shipyard Corporation, 20 the Court reiterated the ruling that an employment ceases to be
coterminous with specific projects when the employee is continuously rehired due to the demands of the employer’s business and re-engaged for
many more projects without interruption.
The respondents cannot use the alleged expiration of the employment contracts of the petitioners as a shield of their illegal acts. The project
employment contracts that the petitioners were made to sign every year since the start of their employment were only a stratagem to violate their
security of tenure in the company. As restated in Poseidon Fishing v. NLRC, 21 "if from the circumstances it is apparent that periods have been imposed
to preclude acquisition of tenurial security by the employee, they should be disregarded for being contrary to public policy."
The respondents’ invocation of William Uy Construction Corp. v. Trinidad 22 is misplaced because it is applicable only in cases involving the tenure of
project employees in the construction industry. It is widely known that in the construction industry, a project employee's work depends on the
availability of projects, necessarily the duration of his employment. 23 It is not permanent but coterminous with the work to which he is assigned. 24 It
would be extremely burdensome for the employer, who depends on the availability of projects, to carry him as a permanent employee and pay him
wages even if there are no projects for him to work on. 25 The rationale behind this is that once the project is completed it would be unjust to require
the employer to maintain these employees in their payroll. To do so would make the employee a privileged retainer who collects payment from his
employer for work not done. This is extremely unfair to the employers and amounts to labor coddling at the expense of management. 26"
Now that it has been clearly established that the petitioners were regular employees, their termination is considered illegal for lack of just or
authorized causes. Under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the time of his actual reinstatement. The law intends the award of backwages
and similar benefits to accumulate past the date of the LA decision until the dismissed employee is actually reinstated.
WHEREFORE, the petition is GRANTED. The assailed July 18, 2012 decision of the Court of Appeals and its November 12, 2012 Resolution in CA-G.R. SP
No. 1244 70, are hereby ANNULLED and SET ASIDE.
Accordingly, respondent Marulas Industrial Corporation is hereby ordered to reinstate petitioners Macarthur Malicdem and Hermenigildo Flores to
their former positions without loss of seniority rights and other privileges and to pay their full backwages, inclusive of allowances and their other
benefits or their monetary equivalent computed from the time their compensations were withheld from them up to the time of their actual
reinstatement plus the wage differentials stated in the July 13, 2011 decision of the Labor Arbiter, as modified by the December 19, 2011 NLRC
decision.
SO ORDERED.
JOSE CATRAL MENDOZA
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 166109               February 23, 2011
EXODUS INTERNATIONAL CONSTRUCTION CORPORATION and ANTONIO P. JAVALERA, Petitioners,
vs.
GUILLERMO BISCOCHO, FERNANDO PEREDA, FERDINAND MARIANO, GREGORIO BELLITA and MIGUEL BOBILLO, Respondents.
DEL CASTILLO, J.:
In illegal dismissal cases, it is incumbent upon the employees to first establish the fact of their dismissal before the burden is shifted to the employer to
prove that the dismissal was legal.
This Petition for Review on Certiorari 1 assails the Decision2 dated August 10, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 79800, which dismissed
the petition for certiorari challenging the Resolutions dated January 17, 20033 and July 31, 20034 of the National Labor Relations Commission (NLRC) in
NLRC NCR CASE Nos. 30-11-04656-005 and 30-12-04714-00.
Factual Antecedents
Petitioner Exodus International Construction Corporation (Exodus) is a duly licensed labor contractor for the painting of residential houses,
condominium units and commercial buildings. Petitioner Antonio P. Javalera is the President and General Manager of Exodus.
On February 1, 1999, Exodus obtained from Dutch Boy Philippines, Inc. (Dutch Boy) a contract 6 for the painting of the Imperial Sky Garden located at
Ongpin Street, Binondo, Manila. On July 28, 1999, Dutch Boy awarded another contract 7 to Exodus for the painting of Pacific Plaza Towers in Fort
Bonifacio, Taguig City.
In the furtherance of its business, Exodus hired respondents as painters on different dates with the corresponding wages appearing opposite their
names as hereunder listed:
NAME DATE EMPLOYED DAILY SALARY

1. Guillermo B. Biscocho Feb. 8, 1999 ₱ 222.00

2. Fernando S. Pereda Feb. 8, 1999 235.00

3. Ferdinand M. April 12, 1999 235.00

Mariano
 4. Gregorio S. Bellita May 20, 1999 225.00

5. Miguel B. Bobillo March 10, 2000 220.00

Guillermo Biscocho (Guillermo) was assigned at the Imperial Sky Garden from February 8, 1999 to February 8, 2000. Fernando Pereda (Fernando)
worked in the same project from February 8, 1999 to June 17, 2000. Likewise, Ferdinand Mariano (Ferdinand) worked there from April 12, 1999 to
February 17, 2000. All of them were then transferred to Pacific Plaza Towers.
Gregorio S. Bellita (Gregorio) was assigned to work at the house of Mr. Teofilo Yap in Ayala Alabang, Muntinlupa City from May 20, 1999 to December
4, 1999. Afterwards he was transferred to Pacific Plaza Towers.
Miguel B. Bobillo (Miguel) was hired and assigned at Pacific Plaza Towers on March 10, 2000.
On November 27, 2000, Guillermo, Fernando, Ferdinand, and Miguel filed a complaint 8 for illegal dismissal and non-payment of holiday pay, service
incentive leave pay, 13th month pay and night-shift differential pay. This was docketed as NLRC NCR CASE No. 30-11-04656-00.
On December 1, 2000, Gregorio also filed a complaint 9 which was docketed as NLRC NCR CASE No. 30-12-04714-00. He claimed that he was dismissed
from the service on September 12, 2000 while Guillermo, Fernando, Ferdinand, and Miguel were orally notified of their dismissal from the service on
November 25, 2000.
Petitioners denied respondents’ allegations. As regards Gregorio, petitioners averred that on September 15, 2000, he absented himself from work and
applied as a painter with SAEI-EEI which is the general building contractor of Pacific Plaza Towers. Since then, he never reported back to work.
Guillermo absented himself from work without leave on November 27, 2000. When he reported for work the following day, he was reprimanded for
being Absent Without Official Leave (AWOL). Because of the reprimand, he worked only half-day and thereafter was unheard of until the filing of the
instant complaint.
Fernando, Ferdinand, and Miguel were caught eating during working hours on November 25, 2000 for which they were reprimanded by their foreman.
Since then they no longer reported for work.
Ruling of the Labor Arbiter
On March 21, 2002, the Labor Arbiter rendered a Decision 10 exonerating petitioners from the charge of illegal dismissal as respondents chose not to
report for work. The Labor Arbiter ruled that since there is neither illegal dismissal nor abandonment of job, respondents should be reinstated but
without any backwages. She disallowed the claims for premium pay for holidays and rest days and nightshift differential pay as respondents failed to
prove that actual service was rendered on such non-working days. However, she allowed the claims for holiday pay, service incentive leave pay and
13th month pay. The dispositive portion of the Labor Arbiter’s Decision reads:
WHEREFORE, premises considered, respondents Exodus International Construction Corporation and/or Antonio Javalera are hereby ordered to
reinstate complainants to their former positions as painters without loss of seniority rights and other benefits appurtenant thereto without any
backwages.
Respondents are likewise hereby ordered to pay complainants the following:
1. Guillermo Biscocho
₱ 1,968.75 - Service Incentive Leave Pay

10,237.50 - 13th Month Pay

3,600.00 - Holiday Pay

₱ 15,806.25 - Sub-Total

+ 1,580.87 - 10% Attorney’s Fees

P 17,386.86 Total
2. Fernando Pereda
₱ 2,056.25 - Service Incentive Leave Pay

10,692.50 - 13th Month Pay

3,525.00 - Holiday Pay

₱ 16,273.75 - Sub-Total

+ 1,627.37 - 10% Attorney’s Fees

₱ 17,901.12 Total
3. Miguel Bobillo
₱ 3,813.34 - 13th Month Pay

1,320.00 - Holiday Pay

₱ 5,133.34 - Sub-Total

+ 513.33 - 10% Attorney’s Fees

P 5,646.67 Total
4. Ferdinand Mariano
₱ 1,860.42 - Service Incentive Leave Pay - 13th Month Pay
9,674.19

3,055.00 - Holiday Pay

₱ 14,589.61 - Sub-Total
 + 1,458.96 - 10% Attorney’s Fees Total
₱ 16,048.57
5. Gregorio Bellita
₱ 1,500.00 - Service Incentive Leave Pay - 13th Month Pay
7,800.00

2,700.00 - Holiday Pay

₱ 12,000.00 - Sub-Total

+ 1,200.00 - 10% Attorney’s Fees

₱ 13,200.00 Total
or the total aggregate sum of Seventy Thousand, One Hundred Eighty Three and 23/100 (₱70,183.23) Pesos, inclusive of the ten (10%)
percent of the award herein by way of attorney’s fees, all within ten (10) days from receipt hereof;
The rest of complainants’ claims for lack of merit are hereby Dismissed.
SO ORDERED.11
Ruling of the National Labor Relations Commission
Petitioners sought recourse to the NLRC limiting their appeal to the award of service incentive leave pay, 13th month pay, holiday pay and 10%
attorney’s fees in the sum of ₱70,183.23.
On January 17, 2003, the NLRC dismissed the appeal. It ruled that petitioners, who have complete control over the records of the company, could have
easily rebutted the monetary claims against it. All that it had to do was to present the vouchers showing payment of the same. However, they opted
not to lift a finger, giving an impression that they never paid said benefits.
As to the award of attorney’s fees, the NLRC found the same to be proper because respondents were forced to litigate in order to validate their claim.
The NLRC thus affirmed the Decision of the Labor Arbiter, viz:
Accordingly, premises considered, the decision appealed from is hereby AFFIRMED and the appeal DISMISSED for lack of merit.
SO ORDERED.12
Petitioners filed a Motion for Reconsideration 13 which was denied by the NLRC in a Resolution 14 dated July 31, 2003.
Ruling of the Court of Appeals
Aggrieved, petitioners filed with the CA a petition for certiorari. The CA through a Resolution15 dated October 22, 2003, directed the respondents to file
their comment. On December 4, 2003, respondents filed their comment. 16 On January 12, 2004, petitioners filed their reply.17
On August 10, 2004, the CA dismissed the petition and affirmed the findings of the Labor Arbiter and the NLRC. It opined that in a situation where the
employer has complete control over the records and could thus easily rebut any monetary claims against it but opted not to lift any finger, the burden
is on the employer and not on the complainants. This is so because the latter are definitely not in a position to adduce any documentary evidence, the
control of which being not with them.
However, in addition to the reliefs awarded to respondents in the March 21, 2002 Decision of the Labor Arbiter which was affirmed by the NLRC in a
Resolution dated January 17, 2003, the petitioners were directed by the CA to solidarily pay full backwages, inclusive of all benefits the respondents
should have received had they not been dismissed.
The dispositive portion of the CA Decision reads:
WHEREFORE, the instant petition for certiorari is dismissed. However, in addition to the reliefs awarded to private respondents in the decision dated
March 21, 2002 of Labor Arbiter Aldas and resolution of the NLRC dated January 17, 2003, the petitioners are directed to solidarily pay private
respondents full backwages, inclusive of all benefits they should have received had they not been dismissed, computed from the time their wages were
withheld until the time they are actually reinstated. Such award of full backwages shall be included in the computation of public respondents’ award of
ten percent (10%) attorney’s fees.
SO ORDERED.18
Petitioners moved for reconsideration, 19 but to no avail. Hence, this appeal anchored on the following grounds:
Issues
I.
The Honorable Court of Appeals erred and committed grave abuse of discretion in ordering the reinstatement of respondents to their former
positions which were no longer existing because its findings of facts are premised on misappreciation of facts.
II.
The Honorable Court of Appeals also seriously erred and committed grave abuse of discretion in affirming the award of service incentive leave
pay, 13th month pay, and holiday pay in the absence of evidentiary and legal basis therefor.
III.
The Honorable Court of Appeals likewise seriously erred and committed grave abuse of discretion in affirming the award of attorney's fees
even in the absence of counsel on record to handle and prosecute the case.
IV.
The Honorable Court of Appeals also seriously erred and gravely abused its discretion in holding individual petitioner solidarily liable with
petitioner company without specific evidence on which the same was based. 20
Petitioners’ Arguments
Petitioners contend that, contrary to their allegations, respondents were never dismissed from the service. If respondents find themselves no longer in
the service of petitioners, it is simply because of their refusal to report for work. Further, granting that they were dismissed, respondents’ prolonged
absences is tantamount to abandonment which is a valid ground for the termination of their employment. As to respondents monetary claims, it is
incumbent upon them to prove the same because the burden of proof rests on their shoulders. But since respondents failed to prove the same, their
claims should be denied.
Respondents’ Arguments
Respondents, in support of their claim that they were illegally dismissed, argue that as painters, they performed activities which were necessary and
desirable in the usual business of petitioners, who are engaged in the business of contracting painting jobs. Hence, they are regular employees who,
under the law, cannot just be dismissed from the service without prior notice and without any just or valid cause. According to the respondents, they
did not abandon their job. For abandonment to serve as basis for a valid termination of their employment, it must first be established that there was a
deliberate and unjustified refusal on their part to resume work. Mere absences are not sufficient for these must be accompanied by overt acts pointing
to the fact that they simply do not want to work anymore. Petitioners failed to prove this. Furthermore, the filing of a complaint for illegal dismissal
ably defeats the theory of abandonment of the job.
Our Ruling
The petition is partly meritorious.
"[T]his Court is not unmindful of the rule that in cases of illegal dismissal, the employer bears the burden of proof to prove that the termination was for
a valid or authorized cause."21 But "[b]efore the [petitioners] must bear the burden of proving that the dismissal was legal, [the respondents] must first
establish by substantial evidence" that indeed they were dismissed. "[I]f there is no dismissal, then there can be no question as to the legality or
illegality thereof."22
There was no dismissal in this case, hence, there is no question that can be entertained regarding its legality or illegality.
As found by the Labor Arbiter, there was no evidence that respondents were dismissed nor were they prevented from returning to their work. It was
only respondents’ unsubstantiated conclusion that they were dismissed. As a matter of fact, respondents could not name the particular person who
effected their dismissal and under what particular circumstances.
In Machica v. Roosevelt Services Center, Inc.,23 this Court sustained the employer's denial as against the employees' categorical assertion of illegal
dismissal. In so ruling, this Court held that:
The rule is that one who alleges a fact has the burden of proving it; thus, petitioners were burdened to prove their allegation that respondents
dismissed them from their employment. It must be stressed that the evidence to prove this fact must be clear, positive and convincing. The rule that
the employer bears the burden of proof in illegal dismissal cases finds no application here because the respondents deny having dismissed the
petitioners.
In this case, petitioners were able to show that they never dismissed respondents. As to the case of Fernando, Miguel and Ferdinand, it was shown that
on November 25, 2000, at around 7:30 a.m., the petitioners’ foreman, Wenifredo Lalap (Wenifredo) caught the three still eating when they were
supposed to be working already. Wenifredo reprimanded them and, apparently, they resented it so they no longer reported for work. In the case of
Gregorio, he absented himself from work on September 15, 2000 to apply as a painter with SAEI-EEI, the general contractor of Pacific Plaza Towers.
Since then he never reported back to work. Lastly, in the case of Guillermo, he absented himself without leave on November 27, 2000, and so he was
reprimanded when he reported for work the following day. Because of the reprimand, he did not report for work anymore.
Hence, as between respondents’ general allegation of having been orally dismissed from the service vis-a-vis those of petitioners which were found to
be substantiated by the sworn statement of foreman Wenifredo, we are persuaded by the latter. Absent any showing of an overt or positive act proving
that petitioners had dismissed respondents, the latters’ claim of illegal dismissal cannot be sustained. Indeed, a cursory examination of the records
reveal no illegal dismissal to speak of.
There was also no abandonment of work on the part of the respondents.
The Labor Arbiter is also correct in ruling that there was no abandonment on the part of respondents that would justify their dismissal from their
employment.
It is a settled rule that "[m]ere absence or failure to report for work x x x is not enough to amount to abandonment of work." 24 "Abandonment is the
deliberate and unjustified refusal of an employee to resume his employment." 25
In Northwest Tourism Corporation v. Former Special 3rd Division of the Court of Appeals 26 this Court held that "[t]o constitute abandonment of work,
two elements must concur, [namely]:
(1) the employee must have failed to report for work or must have been absent without valid or justifiable reason; and
(2) there must have been a clear intention on the part of the employee to sever the employer-employee relationship manifested by some
overt act."
"It is the employer who has the burden of proof to show a deliberate and unjustified refusal of the employee to resume his employment without any
intention of returning." 27 It is therefore incumbent upon petitioners to ascertain the respondents’ interest or non-interest in the continuance of their
employment. However, petitioners failed to do so.
Respondents must be reinstated and paid their holiday pay, service incentive leave pay, and 13th month pay.
Clearly therefore, there was no dismissal, much less illegal, and there was also no abandonment of job to speak of. The Labor Arbiter is therefore
correct in ordering that respondents be reinstated but without any backwages.
However, petitioners are of the position that the reinstatement of respondents to their former positions, which were no longer existing, is impossible,
highly unfair and unjust. The project was already completed by petitioners on September 28, 2001. Thus the completion of the project left them with
no more work to do. Having completed their tasks, their positions automatically ceased to exist. Consequently, there were no more positions where
they can be reinstated as painters.
Petitioners are misguided. They forgot that there are two types of employees in the construction industry. The first is referred to as project employees
or those employed in connection with a particular construction project or phase thereof and such employment is coterminous with each project or
phase of the project to which they are assigned. The second is known as non-project employees or those employed without reference to any particular
construction project or phase of a project.
The second category is where respondents are classified. As such they are regular employees of petitioners. It is clear from the records of the case that
when one project is completed, respondents were automatically transferred to the next project awarded to petitioners. There was no employment
agreement given to respondents which clearly spelled out the duration of their employment, the specific work to be performed and that such is made
clear to them at the time of hiring. It is now too late for petitioners to claim that respondents are project employees whose employment is coterminous
with each project or phase of the project to which they are assigned.
Nonetheless, assuming that respondents were initially hired as project employees, petitioners must be reminded of our ruling in Maraguinot, Jr. v.
National Labor Relations Commission28 that "[a] project employee x x x may acquire the status of a regular employee when the following [factors]
concur:
1. There is a continuous rehiring of project employees even after cessation of a project; and
2. The tasks performed by the alleged "project employee" are vital, necessary and indespensable to the usual business or trade of the
employer."
In this case, the evidence on record shows that respondents were employed and assigned continuously to the various projects of petitioners. As
painters, they performed activities which were necessary and desirable in the usual business of petitioners, who are engaged in subcontracting jobs for
painting of residential units, condominium and commercial buildings. As regular employees, respondents are entitled to be reinstated without loss of
seniority rights.
Respondents are also entitled to their money claims such as the payment of holiday pay, service incentive leave pay, and 13th month pay. Petitioners
as the employer of respondents and having complete control over the records of the company could have easily rebutted the monetary claims against
it. All that they had to do was to present the vouchers or payrolls showing payment of the same. However, they decided not to provide the said
documentary evidence. Our conclusion therefore is that they never paid said benefits and therefore they must be ordered to settle their obligation with
the respondents.1avvphi1
Respondents are also entitled to the payment of attorney’s fees.
Even though respondents were not represented by counsel in most of the stages of the proceedings of this case, the award of attorney’s fees as ruled
by the Labor Arbiter, the NLRC and the CA to the respondents is still proper. In Rutaquio v. National Labor Relations Commission,29 this Court held that:
It is settled that in actions for recovery of wages or where an employee was forced to litigate and, thus, incur expenses to protect his rights and
interest, the award of attorney’s fees is legally and morally justifiable.
In Producers Bank of the Philippines v. Court of Appeals30 this Court ruled that:
Attorney’s fees may be awarded when a party is compelled to litigate or to incur expenses to protect his interest by reason of an unjustified act of the
other party.
In this case, respondents filed a complaint for illegal dismissal with claim for payment of their holiday pay, service incentive leave pay, and 13th month
pay. The Labor Arbiter, the NLRC and the CA were one in ruling that petitioners did not pay the respondents their holiday pay, service incentive leave
pay, and 13th month pay as mandated by law. For sure, this unjustified act of petitioners had compelled the respondents to institute an action primarily
to protect their rights and interests.
The CA erred when it ordered reinstatement of respondents with payment of full backwages.
It must be noted that the Labor Arbiter’s disposition directed petitioners to reinstate respondents without any backwages and awarded the payment of
service incentive leave pay, holiday pay, 13th month pay, and 10% attorney’s fees in the sum of ₱70,183.23.
On appeal to the NLRC, petitioners limited their appeal to the award of service incentive leave pay, holiday pay, 13th month pay, and 10% attorney’s
fees. No appeal was made on the order of reinstatement.
In the proceedings before the CA, it is only the award of service incentive leave pay, holiday pay, 13th month pay, and 10% attorney’s fees that were
raised by the petitioners. The CA in fact dismissed the petition. However, the CA further concluded in its Decision that since there is no abandonment to
speak about, it is therefore indisputable that respondents were illegally dismissed. Therefore, they deserve not only reinstatement but also the
payment of full backwages.
We do not agree with this ruling of the CA.
In cases where there is no evidence of dismissal, the remedy is
reinstatement but without backwages. In this case, both the Labor Arbiter and the NLRC made a finding that there was no dismissal much less an illegal
one. "It is settled that factual findings of quasi-judicial agencies are generally accorded respect and finality so long as these are supported by substantial
evidence."31
In Leonardo v. National Labor Relations Commission,32 this Court held that:
In a case where the employee’s failure to work was occasioned neither by his abandonment nor by a termination, the burden of economic loss is not
rightfully shifted to the employer; each party must bear his own loss.
Thus, inasmuch as no finding of illegal dismissal had been made, and considering that the absence of such finding is supported by the records of the
case, this Court is bound by such conclusion and cannot allow an award of the payment of backwages.
Lastly, since there was no need to award backwages to respondents, the ruling of the CA that Javalera is solidarily liable with Exodus International
Construction Corporation in paying full backwages need not be discussed.
WHEREFORE, the instant petition for review on certiorari is PARTLY GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 79800 dated
August 10, 2004, is AFFIRMED with MODIFICATION that the award of full backwages is DELETED for lack of legal basis.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice

SECOND DIVISION
[G.R. No. 169170 : August 08, 2010]
D.M. CONSUNJI, INC., PETITIONER, VS. ANTONIO GOBRES, MAGELLAN DALISAY, GODOFREDO PARAGSA, EMILIO ALETA AND GENEROSO MELO,
RESPONDENTS.

DECISION
PERALTA, J.:

This is a petition for review on certiorari[1] of the Decision of the Court of Appeals in CA-G.R. SP No. 70708, dated March 9, 2005, and its Resolution,
dated August 2, 2005, denying petitioner's motion for reconsideration.

The facts are as follows:

Respondents Antonio Gobres, Magellan Dalisay, Godofredo Paragsa, Emilio Aleta and Generoso Melo worked as carpenters in the construction projects
of  petitioner  D.M. Consunji, Inc., a construction company,  on several occasions and/or at various times. Their termination from employment for each
project was reported to the Department of Labor and Employment (DOLE), in accordance with Policy Instruction No. 20, which was later superseded by
Department Order No. 19, series of 1993.  Respondents' last assignment was at Quad 4-Project in Glorietta, Ayala, Makati, where they started working
on September 1, 1998.  On October 14, 1998,  respondents saw their names  included in the Notice of Termination posted on the bulletin board at the
project premises.

Respondents filed a Complaint with the Arbitration Branch of the National Labor Relations Commission (NLRC) against petitioner D.M. Consunji, Inc.
and David M. Consunji for illegal dismissal, and non-payment of 13 th month pay, five (5) days service incentive leave pay, damages and attorney's fees.

Petitioner D.M. Consunji, Inc. and David M. Consunji countered that respondents, being project employees, are covered by Policy Instruction No. 20, as
superseded by Department Order No. 19, series of 1993 with respect to their separation or dismissal. Respondents were employed per project
undertaken by petitioner company and within varying estimated periods indicated in their respective project employment contracts.  Citing the
employment record of each respondent, petitioner and David M. Consuji averred that respondents' services were terminated when their phases of
work for which their services were engaged were completed or when the projects themselves were completed. Respondents' notices of termination
were filed with the DOLE, in compliance with Policy Instruction No. 20, [2]  superseded by  Department Order No.19, series of 1993.[3] With respect to
respondent Generoso G. Melo, petitioner and David M. Consuji maintained the same positions they had against the case of Melo's co-complainants.
[4]
 Petitioner contended that since respondents were terminated by reason of the completion of their respective phases of work in the construction
project, their termination was warranted and legal.[5]

Moreover,  petitioner  claimed  that respondents have been duly paid their service incentive leave pay and 13 th month pay through their respective
bank accounts, as evidenced by bank remittances.[6]

Respondents replied that the Quad 4-Project at Glorietta, Ayala, Makati City was estimated to take two years to finish, but they were dismissed within
the two-year period.  They had no prior notice of their termination.  Hence, granting that they were project employees, they were still illegally
dismissed for non-observance of procedural due process. [7]

On October 4, 1999, the Labor Arbiter rendered a Decision[8]  dismissing respondents' complaint. The Labor Arbiter found that respondents were
project employees, that they were dismissed from the last project they were assigned to when their respective phases of work were completed, and
that petitioner D.M. Consunji, Inc. and David M. Consunji reported their termination of services to the DOLE in accordance with the requirements of
law.

Respondents appealed the Labor Arbiter's Decision to the NLRC

In a Resolution[9] dated July 31, 2001, the NLRC affirmed the decision of the Labor Arbiter, and dismissed the appeal for lack of merit.

Respondents' motion for reconsideration was denied by the NLRC for lack of merit in its Order [10] dated February 21, 2002.

Respondents filed a petition for certiorari with the Court of Appeals, seeking the annulment of the NLRC Resolution dated July 31, 2001 and Order
dated February 21, 2002.  Respondents prayed that their dismissal be declared as illegal, and that they be ordered reinstated to their former position
with full backwages until actual reinstatement, and  awarded moral, exemplary and nominal damages.

On March 9, 2005, the Court of Appeals rendered a Decision, the dispositive portion of which reads:
WHEREFORE, the Decision and Resolution of the NLRC in finding petitioners' dismissal as valid are AFFIRMED with MODIFICATION that private
respondents are ordered to pay each of the petitioners the sum of P20,000.00 as nominal damages for non-compliance with the statutory due process.
Costs against petitioners.[11]

The Court of Appeals sustained the findings of the NLRC that respondents are project employees.  It held:
The Labor Arbiter and [the] NLRC correctly applied Article 280 of the Labor Code when it ruled that petitioners' employment, which is fixed for [a]
specific project and the completion of which has been determined at the time that their services were engaged, makes them project employees.  As
could be gleaned from the last portion of Article 280 of the Labor Code, the nature of employment of petitioners, which is fixed for a specific project
and the completion of which has been determined when they were hired, is excepted therefrom.

This is the reason why under Policy Instruction No. 20 and Department Order No. 19, series of 1993, employers of project employees are required to
report their termination to DOLE upon completion of the project for which they were engaged. [12]

The CA stated that although respondents were project employees, they were entitled to know the reason for their dismissal and to be heard on
whatever claims they might have. It held that respondents' right to statutory due process was violated for lack of advance notice of their termination,
even if they were validly terminated for having completed the phases of work for which they were hired. The appellate court stated that had
respondents been given prior notice, they would not have reported for work on October 14, 1998.  It cited Agabon v. NLRC,[13]  which  held that where
the dismissal is for a just cause, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual, but the employer
should indemnify the employee for the violation of his statutory rights by paying nominal damages. Hence, the Court of Appeals ordered petitioner and
David M. Consunji to pay respondents P20,000.00 each as nominal damages for lack of advance notice of their termination.

Petitioner and David M. Consunji filed a partial motion for reconsideration and prayed that the Decision of the Court of Appeals be partially
reconsidered by deleting the award of nominal damages to each respondent. It pointed out that under Department Order No. 19, series of 1993, which
is the construction industry's governing law, there is no provision  requiring administrative hearing/investigation before a project employee may be
terminated on account of completion of phase of work or the project itself.  Petitioner also argued that prior notice of termination is not required in
this case, and that  Agabon is not applicable  here,  because the termination in Agabon was  for cause, while herein respondents were terminated due
to the completion of the phases of work for which their  services were engaged.

In a Resolution[14] dated August 2, 2005, the Court of Appeals denied  the  partial motion for reconsideration. It held that the case of Agabon v. NLRC is
the one controlling and in point.  The appellate court stated that in Agabon,  the Court ruled that even if the dismissal is legal, the employer should still
indemnify the employee for the violation of his statutory rights. It added that no distinction was made in Agabon  whether the employee is engaged in a
construction project or not.

Petitioner D.M. Consunji, Inc. filed this petition raising this question of law:
WHETHER OR NOT THERE IS BASIS FOR THE COURT OF APPEALS IN ORDERING HEREIN PETITIONER TO PAY RESPONDENTS EACH THE SUM OF
P20,000.00 AS NOMINAL DAMAGES FOR "ALLEGED" NON-COMPLIANCE WITH THE STATUTORY DUE PROCESS. [15]

Petitioner contends that the  award of nominal damages in the amount of P20,000.00 to each respondent is unwarranted under Section 2 (III), Rule
XXIII, Book V of the Omnibus Rules Implementing the Labor Code, which states, "If the termination is brought about by the completion of the contract
or phase thereof,  no prior notice is required."[16]

Petitioner also contends that  Agabon v. NLRC is not applicable to this case. The termination therein was for just cause due to abandonment of work,
while in this case, respondents were terminated due to the completion of the phases of work.

In support of its argument, petitioner cited Cioco, Jr. v. C.E. Construction Corporation,[17] which held:
x x x More importantly, Section 2 (III), Rule XXIII, Book V of  the Omnibus Rules Implementing the Labor Code provides that  no prior notice of
termination is required if the termination is brought about by completion of the contract or phase thereof for which the worker has been engaged. This
is because completion of the work or project automatically terminates the employment, in which case, the employer is, under the law, only obliged to
render a report to the DOLE on the termination of the employment. [18]

The petition is meritorious.

Respondents were found to be project employees by the Labor Arbiter, the NLRC and the Court of Appeals. Their unanimous finding that respondents
are project employees is binding on the Court. It must also be pointed out that respondents have not appealed from such finding by the Court of
Appeals.  It is only the petitioner that appealed from the decision of the Court of Appeals.

The main  issue  is  whether or not respondents, as project employees, are entitled to nominal damages for lack of advance notice of their dismissal.

A project employee is defined under Article 280 of the Labor Code as one whose "employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season." [19]

In this case, the Labor Arbiter, the NLRC and the Court of Appeals all found that respondents, as project employees, were validly terminated due to the 
completion  of  the  phases of work for which their services were engaged.  However, the Court of Appeals held that respondents were entitled to
nominal damages, because petitioner failed to give them advance notice of their termination. The appellate court cited the case of Agabon v. NLRC  as
basis for the award of nominal damages.

The Court holds that Agabon v. NLRC is not applicable to this case, because it involved the dismissal of regular employees for abandonment of work,
which is a just cause for dismissal under Article 282 of the Labor Code. [20] Although the dismissal was for a cause, the employer therein was required to
observe the standard of due process for termination of employment based on just causes under Article 282 of the Labor Code, which procedural due
process requirements  are enumerated in  Section 2, Rule 1, Book VI[21] of the Omnibus Rules Implementing the Labor Code. [22]  Since the employer
therein failed to comply with the twin requirements of notice and hearing,  the Court ordered the employer to pay the  employees involved nominal
damages in the amount of P30,000.00 for failure to observe procedural  due process.

Unlike in Agabon,  respondents,  in this case, were not terminated for just cause under Article 282 of the Labor Code. Dismissal based on just causes
contemplate acts or omissions attributable to the employee. [23]  Instead, respondents were terminated due to the completion of the phases of work for
which their services were engaged.

As project employees, respondents' termination is governed by Section 1 (c) and Section 2 (III), Rule XXIII (Termination of Employment), Book V of the
Omnibus Rules Implementing  the Labor Code.

Section 1 (c), Rule XXIII, Book V of the  Omnibus Rules Implementing  the Labor Code states:
Section 1.  Security of tenure. -- (a) In cases of regular employment, the employer shall not terminate the services of an employee except for just or
authorized causes as provided by law, and subject to the requirements of due process.

xxxx

(c) In cases of project employment or employment covered by legitimate contracting or sub-contracting arrangements, no employee shall be
dismissed prior to the completion of the project or phase thereof for which the employee was engaged , or prior to the expiration of the contract
between the principal and contractor, unless the dismissal is for just or authorized cause subject to the requirements of due process or prior notice,
or is brought about by the completion of the phase of the project or contract for which the employee was engaged.[24]

Records show that respondents were dismissed after the expiration of their respective project employment contracts, and due to the completion of the
phases of work respondents were engaged for. Hence, the cited provision's requirements of due process or prior notice when an employee is 
dismissed for just or authorized cause (under Articles 282 and 283 of the Labor Code)  prior  to the completion of the project or phase thereof for which
the employee was engaged do not apply to  this case.

Further, Section 2 (III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code provides:
Section 2. Standard of due process: requirements of notice. -- In all cases of termination of employment, the following standards of due process shall be
substantially observed.

1. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) 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;

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to
respond to the charge, present his evidence or rebut the evidence presented against him; and

(c) A written notice [of] termination served on the employee indicating that upon due consideration of all the circumstance, grounds have been
established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee's last known address.

II. For termination of employment as based on authorized causes defined in Article 283 of the Code, the requirements of due process shall be deemed
complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department at least thirty (30) days before
the effectivity of the termination, specifying the ground or grounds for termination.

III. If the termination is brought about by the completion of the contract or phase thereof, no prior notice is required.  If the termination is brought
about by the failure of an employee to meet the standards of the employer in the case of probationary employment, it shall be sufficient that a written
notice is served the employee within a reasonable time from the effective date of termination. [25]

In this case, the Labor Arbiter, the NLRC and the Court of Appeals all found that respondents were validly terminated due to the completion of the
phases of work for which  respondents' services  were engaged.  The  above rule clearly states, "If the termination is brought about by the completion
of the contract or phase thereof, no prior notice is required."  Cioco, Jr. v. C.E. Construction Corporation [26] explained that this is because completion of
the work or project automatically terminates the employment, in which case, the employer is, under the law, only obliged to render a report to the
DOLE on the termination of the employment.

 Hence, prior or advance notice of termination is not part of procedural due process if the termination is brought about by the completion of the
contract or phase thereof for which the employee was engaged.  Petitioner, therefore, did not violate any requirement of procedural due process by
failing to give respondents advance notice of their termination; thus, there is no basis for the payment of nominal damages.
In sum, absent the requirement of prior notice of termination when  the termination is brought about by the completion of the contract or phase
thereof for which the worker was hired,  respondents are not entitled to nominal damages for lack of advance notice of their termination.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 70708, dated March 9, 2005, insofar as it upholds the
validity of the dismissal of respondents is AFFIRMED, but the award of nominal damages to respondents is DELETED. The  Resolution  of the Court of
Appeals, dated August 2, 2005, is SET ASIDE.

No costs.

SO ORDERED.

Carpio, (Chairperson), Nachura, Abad, and Mendoza, JJ. concur.

Republic of the Philippines

SUPREME COURT
Baguio City
SECOND DIVISION
G.R. No. 183572 : April 13, 2010
YOLANDA M. MERCADO, CHARITO S. DE LEON, DIANA R. LACHICA, MARGARITO M. ALBA, JR., and FELIX A. TONOG, Petitioners, v. AMA COMPUTER
COLLEGE-PARAÑAQUE CITY, INC. , Respondent.
DECISION
BRION, J.:

The petitioners - Yolanda M. Mercado (Mercado), Charito S. De Leon (De Leon), Diana R. Lachica (Lachica), Margarito M. Alba, Jr. (Alba, Jr.,), and Felix A.
Tonog (Tonog), all former faculty members of AMA Computer College-Parañaque City, Inc. (AMACC) - assail in this petition for review
on certiorari1cЃa the Court of Appeals' (CA) decision of November 29,
20072cЃa and its resolution of June 20, 20083cЃa that set aside the National Labor Relations Commission's (NLRC) resolution dated July 18, 2005. 4cЃa
THE FACTUAL ANTECEDENTS
The background facts are not disputed and are summarized below.
AMACC is an educational institution engaged in computer-based education in the country. One of AMACC's biggest schools in the country is its branch
at Parañaque City. The petitioners were faculty members who started teaching at AMACC on May 25, 1998. The petitioner Mercado was engaged as a
Professor 3, while petitioner Tonog was engaged as an Assistant Professor 2. On the other hand, petitioners De Leon, Lachica and Alba, Jr., were all
engaged as Instructor 1.5cЃa The petitioners executed individual Teacher's Contracts for each of the trimesters that they were engaged to teach, with
the following common stipulation:6
1. POSITION. The TEACHER has agreed to accept a non-tenured appointment to work in the College of xxx effective xxx to xxx or for the duration of the
last term that the TEACHER is given a teaching load based on the assignment duly approved by the DEAN/SAVP-COO. [Emphasis supplied]
For the school year 2000-2001, AMACC implemented new faculty screening guidelines, set forth in its Guidelines on the Implementation of AMACC
Faculty Plantilla.7cЃa Under the new screening guidelines, teachers were to be hired or maintained based on extensive teaching experience, capability,
potential, high academic qualifications and research background. The performance standards under the new screening guidelines were also used to
determine the present faculty members' entitlement to salary increases. The petitioners failed to obtain a passing rating based on the performance
standards; hence AMACC did not give them any salary increase.8cräläwvirtualibräry
Because of AMACC's action on the salary increases, the petitioners filed a complaint with the Arbitration Branch of the NLRC on July 25, 2000, for
underpayment of wages, non-payment of overtime and overload compensation, 13th month pay, and for discriminatory practices. 9cЃa
On September 7, 2000, the petitioners individually received a memorandum from AMACC, through Human Resources Supervisor Mary Grace Beronia,
informing them that with the expiration of their contract to teach, their contract would no longer be renewed. 10cЃa The memorandum11cЃa entitled
"Notice of Non-Renewal of Contract" states in full:
In view of the expiration of your contract to teach with AMACC-Paranaque, We wish to inform you that your contract shall no longer be renewed
effective Thirty (30) days upon receipt of this notice. We therefore would like to thank you for your service and wish you good luck as you pursue your
career.
You are hereby instructed to report to the HRD for further instruction. Please bear in mind that as per company policy, you are required to accomplish
your clearance and turn-over all documents and accountabilities to your immediate superior.
For your information and guidance
The petitioners amended their labor arbitration complaint to include the charge of illegal dismissal against AMACC. In their Position Paper, the
petitioners claimed that their dismissal was illegal because it was made in retaliation for their complaint for monetary benefits and discriminatory
practices against AMACC. The petitioners also contended that AMACC failed to give them adequate notice; hence, their dismissal was ineffectual. 12cЃa
AMACC contended in response that the petitioners worked under a contracted term under a non-tenured appointment and were still within the three-
year probationary period for teachers. Their contracts were not renewed for the following term because they failed to pass the Performance Appraisal
System for Teachers (PAST) while others failed to comply with the other requirements for regularization, promotion, or increase in salary. This move,
according to AMACC, was justified since the school has to maintain its high academic standards. 13
The Labor Arbiter Ruling
On March 15, 2002, Labor Arbiter (LA) Florentino R. Darlucio declared in his decision 14cЃa that the petitioners had been illegally dismissed, and ordered
AMACC to reinstate them to their former positions without loss of seniority rights and to pay them full backwages, attorney's fees and 13th month pay.
The LA ruled that Article 281 of the Labor Code on probationary employment applied to the case; that AMACC allowed the petitioners to teach for the
first semester of school year 2000-200; that AMACC did not specify who among the petitioners failed to pass the PAST and who among them did not
comply with the other requirements of regularization, promotions or increase in salary; and that the petitioners' dismissal could not be sustained on
the basis of AMACC's "vague and general allegations" without substantial factual basis. 15cЃa Significantly, the LA found no "discrimination in the
adjustments for the salary rate of the faculty members based on the performance and other qualification which is an exercise of management
prerogative."16cЃa On this basis, the LA paid no heed to the claims for salary increases.
The NLRC Ruling
On appeal, the NLRC in a Resolution dated July 18, 2005 17cЃa denied AMACC's appeal for lack of merit and affirmed in toto the LA's ruling. The NLRC,
however, observed that the applicable law is Section 92 of the Manual of Regulations for Private Schools (which mandates a probationary period of
nine consecutive trimesters of satisfactory service for academic personnel in the tertiary level where collegiate courses are offered on a trimester
basis), not Article 281 of the Labor Code (which prescribes a probationary period of six months) as the LA ruled. Despite this observation, the NLRC
affirmed the LA's finding of illegal dismissal since the petitioners were terminated on the basis of standards that were only introduced near the end of
their probationary period.
The NLRC ruled that the new screening guidelines for the school year 2000-20001 cannot be imposed on the petitioners and their employment
contracts since the new guidelines were not imposed when the petitioners were first employed in 1998. According to the NLRC, the imposition of the
new guidelines violates Section 6(d) of Rule I, Book VI of the Implementing Rules of the Labor Code, which provides that "in all cases of probationary
employment, the employer shall make known to the employee the standards under which he will qualify as a regular employee at the time of his
engagement." Citing our ruling in Orient Express Placement Philippines v. NLRC, 18cЃa the NLRC stressed that the rudiments of due process demand that
employees should be informed beforehand of the conditions of their employment as well as the basis for their advancement.
AMACC elevated the case to the CA via a petition for certiorari under Rule 65 of the Rules of Court. It charged that the NLRC committed grave abuse of
discretion in: (1) ruling that the petitioners were illegally dismissed; (2) refusing to recognize and give effect to the petitioner's valid term of
employment; (3) ruling that AMACC cannot apply the performance standards generally applicable to all faculty members; and (4) ordering the
petitioners' reinstatement and awarding them backwages and attorney's fees.
The CA Ruling
In a decision issued on November 29, 2007,19cЃa the CA granted AMACC's petition for certiorari and dismissed the petitioners' complaint for illegal
dismissal.
The CA ruled that under the Manual for Regulations for Private Schools, a teaching personnel in a private educational institution (1) must be a full time
teacher; (2) must have rendered three consecutive years of service; and (3) such service must be satisfactory before he or she can acquire permanent
status.
The CA noted that the petitioners had not completed three (3) consecutive years of service (i.e. six regular semesters or nine consecutive trimesters of
satisfactory service) and were still within their probationary period; their teaching stints only covered a period of two (2) years and three (3) months
when AMACC decided not to renew their contracts on September 7, 2000.
The CA effectively found reasonable basis for AMACC not to renew the petitioners' contracts. To the CA, the petitioners were not actually dismissed;
their respective contracts merely expired and were no longer renewed by AMACC because they failed to satisfy the school's standards for the school
year 2000-2001 that measured their fitness and aptitude to teach as regular faculty members. The CA emphasized that in the absence of any evidence
of bad faith on AMACC's part, the court would not disturb or nullify its discretion to set standards and to select for regularization only the teachers who
qualify, based on reasonable and non-discriminatory guidelines.
The CA disagreed with the NLRC's ruling that the new guidelines for the school year 2000-20001 could not be imposed on the petitioners and their
employment contracts. The appellate court opined that AMACC has the inherent right to upgrade the quality of computer education it offers to the
public; part of this pursuit is the implementation of continuing evaluation and screening of its faculty members for academic excellence. The CA noted
that the nature of education AMACC offers demands that the school constantly adopt progressive performance standards for its faculty to ensure that
they keep pace with the rapid developments in the field of information technology.
Finally, the CA found that the petitioners were hired on a non-tenured basis and for a fixed and predetermined term based on the Teaching Contract
exemplified by the contract between the petitioner Lachica and AMACC. The CA ruled that the non-renewal of the petitioners' teaching contracts is
sanctioned by the doctrine laid down in Brent School, Inc. v. Zamora 20cЃa where the Court recognized the validity of contracts providing for fixed-period
employment.
THE PETITION
The petitioners cite the following errors in the CA decision: 21
1) The CA gravely erred in reversing the LA and NLRC illegal dismissal rulings; and
2) The CA gravely erred in not ordering their reinstatement with full, backwages.
The petitioners submit that the CA should not have disturbed the findings of the LA and the NLRC that they were illegally dismissed; instead, the CA
should have accorded great respect, if not finality, to the findings of these specialized bodies as these findings were supported by evidence on record.
Citing our ruling in Soriano v. National Labor Relations Commission, 22cЃa the petitioners contend that in certiorari proceedings under Rule 65 of the
Rules of Court, the CA does not assess and weigh the sufficiency of evidence upon which the Labor Arbiter and the NLRC based their conclusions. They
submit that the CA erred when it substituted its judgment for that of the Labor Arbiter and the NLRC who were the "triers of facts" who had the
opportunity to review the evidence extensively.
On the merits, the petitioners argue that the applicable law on probationary employment, as explained by the LA, is Article 281 of the Labor Code which
mandates a period of six (6) months as the maximum duration of the probationary period unless there is a stipulation to the contrary; that the CA
should not have disturbed the LA's conclusion that the AMACC failed to support its allegation that they did not qualify under the new guidelines
adopted for the school year 2000-2001; and that they were illegally dismissed; their employment was terminated based on standards that were not
made known to them at the time of their engagement. On the whole, the petitioners argue that the LA and the NLRC committed no grave abuse of
discretion that the CA can validly cite.
THE CASE FOR THE RESPONDENT
In their Comment,23cЃa AMACC notes that the petitioners raised no substantial argument in support of their petition and that the CA correctly found
that the petitioners were hired on a non-tenured basis and for a fixed or predetermined term. AMACC stresses that the CA was correct in concluding
that no actual dismissal transpired; it simply did not renew the petitioners' respective employment contracts because of their poor performance and
failure to satisfy the school's standards.
AMACC also asserts that the petitioners knew very well that the applicable standards would be revised and updated from time to time given the nature
of the teaching profession. The petitioners also knew at the time of their engagement that they must comply with the school's regularization policies as
stated in the Faculty Manual. Specifically, they must obtain a passing rating on the Performance Appraisal for Teachers (PAST) - the primary instrument
to measure the performance of faculty members.
Since the petitioners were not actually dismissed, AMACC submits that the CA correctly ruled that they are not entitled to reinstatement, full
backwages and attorney's fees.
THE COURT'S RULING
We find the petition meritorious.
The CA's Review of Factual Findings under Rule 65
We agree with the petitioners that, as a rule in certiorari proceedings under Rule 65 of the Rules of Court, the CA does not assess and weigh each piece
of evidence introduced in the case. The CA only examines the factual findings of the NLRC to determine whether or not the conclusions are supported
by substantial evidence whose absence points to grave abuse of discretion amounting to lack or excess of jurisdiction. 24cЃa In the recent case of
Protacio v. Laya Mananghaya & Co.,25cЃa we emphasized that:
As a general rule, in certiorari proceedings under Rule 65 of the Rules of Court, the appellate court does not assess and weigh the sufficiency of
evidence upon which the Labor Arbiter and the NLRC based their conclusion. The query in this proceeding is limited to the determination of whether or
not the NLRC acted without or in excess of its jurisdiction or with grave abuse of discretion in rendering its decision. However, as an exception, the
appellate court may examine and measure the factual findings of the NLRC if the same are not supported by substantial evidence. The Court has not
hesitated to affirm the appellate court's reversals of the decisions of labor tribunals if they are not supported by substantial evidence. [Emphasis
supplied]
As discussed below, our review of the records and of the CA decision shows that the CA erred in recognizing that grave abuse of discretion attended the
NLRC's conclusion that the petitioners were illegally dismissed. Consistent with this conclusion, the evidence on record show that AMACC failed to
discharge its burden of proving by substantial evidence the just cause for the non-renewal of the petitioners' contracts.
In Montoya v. Transmed Manila Corporation, 26cЃa we laid down our basic approach in the review of Rule 65 decisions of the CA in labor cases, as
follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the review for jurisdictional error that we undertake under
Rule 65. Furthermore, Rule 45 limits us to the review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we have
to view the CA decision in the same context that the petition for certiorari it ruled upon was presented to it; we have to examine the CA decision from
the prism of whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not on the basis of
whether the NLRC decision on the merits of the case was correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review,
not a review on appeal, of the NLRC decision challenged before it. This is the approach that should be basic in a Rule 45 review of a CA ruling in a labor
case. In question form, the question to ask is: Did the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the
case?
Following this approach, our task is to determine whether the CA correctly found that the NLRC committed grave abuse of discretion in ruling that the
petitioners were illegally dismissed.
Legal Environment in the Employment of Teachers
a. Rule on Employment on Probationary Status
A reality we have to face in the consideration of employment on probationary status of teaching personnel is that they are not governed purely by the
Labor Code. The Labor Code is supplemented with respect to the period of probation by special rules found in the Manual of Regulations for Private
Schools.27cЃa On the matter of probationary period, Section 92 of these regulations provides:
Section 92. Probationary Period. Subject in all instances to compliance with the Department and school requirements, the probationary period for
academic personnel shall not be more than three (3) consecutive years of satisfactory service for those in the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for those
in the tertiary level where collegiate courses are offered on a trimester basis. [Emphasis supplied]
The CA pointed this out in its decision (as the NLRC also did), and we confirm the correctness of this conclusion. Other than on the period, the following
quoted portion of Article 281 of the Labor Code still fully applies:
x x x The services of an employee who has been engaged on a probationary basis may be terminated for a just cause when he fails to qualify as a
regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee
who is allowed to work after a probationary period shall be considered a regular employee. [Emphasis supplied]
b. Fixed-period Employment
The use of employment for fixed periods during the teachers' probationary period is likewise an accepted practice in the teaching profession. We
mentioned this in passing in Magis Young Achievers' Learning Center v. Adelaida P. Manalo, 28cЃa albeit a case that involved elementary, not tertiary,
education, and hence spoke of a school year rather than a semester or a trimester. We noted in this case:
The common practice is for the employer and the teacher to enter into a contract, effective for one school year. At the end of the school year, the
employer has the option not to renew the contract, particularly considering the teacher's performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another school year, the probationary employment continues. Again, at the end of that
period, the parties may opt to renew or not to renew the contract. If renewed, this second renewal of the contract for another school year would then
be the last year - since it would be the third school year - of probationary employment. At the end of this third year, the employer may now decide
whether to extend a permanent appointment to the employee, primarily on the basis of the employee having met the reasonable standards of
competence and efficiency set by the employer. For the entire duration of this three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on probation, he cannot automatically claim security of tenure and compel the employer to
renew his employment contract. It is when the yearly contract is renewed for the third time that Section 93 of the Manual becomes operative, and the
teacher then is entitled to regular or permanent employment status.
It is important that the contract of probationary employment specify the period or term of its effectivity. The failure to stipulate its precise duration
could lead to the inference that the contract is binding for the full three-year probationary period.
We have long settled the validity of a fixed-term contract in the case Brent School, Inc. v. Zamora 29cЃa that AMACC cited. Significantly, Brent happened
in a school setting. Care should be taken, however, in reading Brent in the context of this case as Brent did not involve any probationary employment
issue; it dealt purely and simply with the validity of a fixed-term employment under the terms of the Labor Code, then newly issued and which does not
expressly contain a provision on fixed-term employment.
c. Academic and Management Prerogative
Last but not the least factor in the academic world, is that a school enjoys academic freedom - a guarantee that enjoys protection from the Constitution
no less. Section 5(2) Article XIV of the Constitution guarantees all institutions of higher learning academic freedom. 30cЃa
The institutional academic freedom includes the right of the school or college to decide and adopt its aims and objectives, and to determine how these
objections can best be attained, free from outside coercion or interference, save possibly when the overriding public welfare calls for some restraint.
The essential freedoms subsumed in the term "academic freedom" encompass the freedom of the school or college to determine for itself: (1) who
may teach; (2) who may be taught; (3) how lessons shall be taught; and (4) who may be admitted to study. 31cЃa
AMACC's right to academic freedom is particularly important in the present case, because of the new screening guidelines for AMACC faculty put in
place for the school year 2000-2001. We agree with the CA that AMACC has the inherent right to establish high standards of competency and efficiency
for its faculty members in order to achieve and maintain academic excellence. The school's prerogative to provide standards for its teachers and to
determine whether or not these standards have been met is in accordance with academic freedom that gives the educational institution the right to
choose who should teach.32cЃa In Peña v. National Labor Relations Commission,33cЃa we emphasized:
It is the prerogative of the school to set high standards of efficiency for its teachers since quality education is a mandate of the Constitution.  As long as
the standards fixed are reasonable and not arbitrary, courts are not at liberty to set them aside. Schools cannot be required to adopt standards which
barely satisfy criteria set for government recognition.
The same academic freedom grants the school the autonomy to decide for itself the terms and conditions for hiring its teacher, subject of course to the
overarching limitations under the Labor Code. Academic freedom, too, is not the only legal basis for AMACC's issuance of screening guidelines. The
authority to hire is likewise covered and protected by its management prerogative - the right of an employer to regulate all aspects of employment,
such as hiring, the freedom to prescribe work assignments, working methods, process to be followed, regulation regarding transfer of employees,
supervision of their work, lay-off and discipline, and dismissal and recall of workers. 34cЃa Thus, AMACC has every right to determine for itself that it shall
use fixed-term employment contracts as its medium for hiring its teachers. It also acted within the terms of the Manual of Regulations for Private
Schools when it recognized the petitioners to be merely on probationary status up to a maximum of nine trimesters.
The Conflict: Probationary Status
and Fixed-term Employment
The existence of the term-to-term contracts covering the petitioners' employment is not disputed, nor is it disputed that they were on probationary
status - not permanent or regular status - from the time they were employed on May 25, 1998 and until the expiration of their Teaching Contracts on
September 7, 2000. As the CA correctly found, their teaching stints only covered a period of at least seven (7) consecutive trimesters or two (2) years
and three (3) months of service. This case, however, brings to the fore the essential question of which, between the two factors affecting employment,
should prevail given AMACC's position that the teachers contracts expired and it had the right not to renew them. In other words, should the teachers'
probationary status be disregarded simply because the contracts were fixed-term?
The provision on employment on probationary status under the Labor Code 35cЃa is a primary example of the fine balancing of interests between labor
and management that the Code has institutionalized pursuant to the underlying intent of the Constitution. 36cЃa
On the one hand, employment on probationary status affords management the chance to fully scrutinize the true worth of hired personnel before the
full force of the security of tenure guarantee of the Constitution comes into play. 37cЃa Based on the standards set at the start of the probationary
period, management is given the widest opportunity during the probationary period to reject hirees who fail to meet its own adopted but reasonable
standards.38cЃa These standards, together with the just39cЃa and authorized causes40cЃa for termination of employment the Labor Code expressly
provides, are the grounds available to terminate the employment of a teacher on probationary status. For example, the school may impose reasonably
stricter attendance or report compliance records on teachers on probation, and reject a probationary teacher for failing in this regard, although the
same attendance or compliance record may not be required for a teacher already on permanent status. At the same time, the same just and authorizes
causes for dismissal under the Labor Code apply to probationary teachers, so that they may be the first to be laid-off if the school does not have enough
students for a given semester or trimester. Termination of employment on this basis is an authorized cause under the Labor Code. 41cЃa
Labor, for its part, is given the protection during the probationary period of knowing the company standards the new hires have to meet during the
probationary period, and to be judged on the basis of these standards, aside from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards should be made known to the teachers on probationary status at the start of
their probationary period, or at the very least under the circumstances of the present case, at the start of the semester or the trimester during which
the probationary standards are to be applied. Of critical importance in invoking a failure to meet the probationary standards, is that the school should
show - as a matter of due process - how these standards have been applied. This is effectively the second notice in a dismissal situation that the law
requires as a due process guarantee supporting the security of tenure provision, 42cЃa and is in furtherance, too, of the basic rule in employee dismissal
that the employer carries the burden of justifying a dismissal. 43cЃa These rules ensure compliance with the limited security of tenure guarantee the law
extends to probationary employees.44cЃa
When fixed-term employment is brought into play under the above probationary period rules, the situation - as in the present case - may at first blush
look muddled as fixed-term employment is in itself a valid employment mode under Philippine law and jurisprudence. 45cЃa The conflict, however, is
more apparent than real when the respective nature of fixed-term employment and of employment on probationary status are closely examined.
The fixed-term character of employment essentially refers to the period agreed upon between the employer and the employee; employment exists
only for the duration of the term and ends on its own when the term expires. In a sense, employment on probationary status also refers to a period
because of the technical meaning "probation" carries in Philippine labor law - a maximum period of six months, or in the academe, a period of three
years for those engaged in teaching jobs. Their similarity ends there, however, because of the overriding meaning that being "on probation" connotes,
i.e., a process of testing and observing the character or abilities of a person who is new to a role or job. 46cЃa
Understood in the above sense, the essentially protective character of probationary status for management can readily be appreciated. But this same
protective character gives rise to the countervailing but equally protective rule that the probationary period can only last for a specific maximum period
and under reasonable, well-laid and properly communicated standards. Otherwise stated, within the period of the probation, any employer move
based on the probationary standards and affecting the continuity of the employment must strictly conform to the probationary rules.
Under the given facts where the school year is divided into trimesters, the school apparently utilizes its fixed-term contracts as a convenient
arrangement dictated by the trimestral system and not because the workplace parties really intended to limit the period of their relationship to any
fixed term and to finish this relationship at the end of that term. If we pierce the veil, so to speak, of the parties' so-called fixed-term employment
contracts, what undeniably comes out at the core is a fixed-term contract conveniently used by the school to define and regulate its relations with its
teachers during their probationary period.
To be sure, nothing is illegitimate in defining the school-teacher relationship in this manner. The school, however, cannot forget that its system of fixed-
term contract is a system that operates during the probationary period and for this reason is subject to the terms of Article 281 of the Labor Code.
Unless this reconciliation is made, the requirements of this Article on probationary status would be fully negated as the school may freely choose not to
renew contracts simply because their terms have expired. The inevitable effect of course is to wreck the scheme that the Constitution and the Labor
Code established to balance relationships between labor and management.
Given the clear constitutional and statutory intents, we cannot but conclude that in a situation where the probationary status overlaps with a fixed-
term contract not specifically used for the fixed term it offers, Article 281 should assume primacy and the fixed-period character of the contract must
give way. This conclusion is immeasurably strengthened by the petitioners' and the AMACC's hardly concealed expectation that the employment on
probation could lead to permanent status, and that the contracts are renewable unless the petitioners fail to pass the school's standards.
To highlight what we mean by a fixed-term contract specifically used for the fixed term it offers, a replacement teacher, for example, may be
contracted for a period of one year to temporarily take the place of a permanent teacher on a one-year study leave. The expiration of the replacement
teacher's contracted term, under the circumstances, leads to no probationary status implications as she was never employed on probationary basis; her
employment is for a specific purpose with particular focus on the term and with every intent to end her teaching relationship with the school upon
expiration of this term.
If the school were to apply the probationary standards (as in fact it says it did in the present case), these standards must not only be reasonable but
must have also been communicated to the teachers at the start of the probationary period, or at the very least, at the start of the period when they
were to be applied. These terms, in addition to those expressly provided by the Labor Code, would serve as the just cause for the termination of the
probationary contract. As explained above, the details of this finding of just cause must be communicated to the affected teachers as a matter of due
process.
AMACC, by its submissions, admits that it did not renew the petitioners' contracts because they failed to pass the Performance Appraisal System for
Teachers (PAST) and other requirements for regularization that the school undertakes to maintain its high academic standards. 47cЃa The evidence is
unclear on the exact terms of the standards, although the school also admits that these were standards under the Guidelines on the Implementation of
AMACC Faculty Plantilla put in place at the start of school year 2000-2001.
While we can grant that the standards were duly communicated to the petitioners and could be applied beginning the 1st trimester of the school year
2000-2001, glaring and very basic gaps in the school's evidence still exist. The exact terms of the standards were never introduced as evidence; neither
does the evidence show how these standards were applied to the petitioners. 48cЃa Without these pieces of evidence (effectively, the finding of just
cause for the non-renewal of the petitioners' contracts), we have nothing to consider and pass upon as valid or invalid for each of the petitioners.
Inevitably, the non-renewal (or effectively, the termination of employment of employees on probationary status) lacks the supporting finding of just
cause that the law requires and, hence, is illegal.
In this light, the CA decision should be reversed. Thus, the LA's decision, affirmed as to the results by the NLRC, should stand as the decision to be
enforced, appropriately re-computed to consider the period of appeal and review of the case up to our level.
Given the period that has lapsed and the inevitable change of circumstances that must have taken place in the interim in the academic world and at
AMACC, which changes inevitably affect current school operations, we hold that - in lieu of reinstatement - the petitioners should be paid separation
pay computed on a trimestral basis from the time of separation from service up to the end of the complete trimester preceding the finality of this
Decision.49cЃa The separation pay shall be in addition to the other awards, properly recomputed, that the LA originally decreed.
WHEREFORE, premises considered, we hereby GRANT the petition, and, consequently, REVERSE and SET ASIDE the Decision of the Court of Appeals
dated November 29, 2007 and its Resolution dated June 20, 2008 in CA-G.R. SP No. 96599. The Labor Arbiter's decision of March 15, 2002,
subsequently affirmed as to the results by the National Labor Relations Commission, stands and should be enforced with appropriate re-computation to
take into account the date of the finality of this Decision.
In lieu of reinstatement, AMA Computer College-Parañaque City, Inc. is hereby DIRECTED to pay separation pay computed on a trimestral basis from
the time of separation from service up to the end of the complete trimester preceding the finality of this Decision. For greater certainty, the petitioners
are entitled to:
(a) backwages and 13th month pay computed from September 7, 2000 (the date AMA Computer College-Parañaque City, Inc. illegally dismissed the
petitioners) up to the finality of this Decision;
(b) monthly honoraria (if applicable) computed from September 7, 2000 (the time of separation from service) up to the finality of this Decision; and
(c) separation pay on a trimestral basis from September 7, 2000 (the time of separation from service) up to the end of the complete trimester
preceding the finality of this Decision.
The labor arbiter is hereby ORDERED to make another re-computation according to the above directives. No costs.
SO ORDERED.

SECOND DIVISION
G.R. No. 170388, September 04, 2013
COLEGIO DEL SANTISIMO ROSARIO AND SR. ZENAIDA S. MOFADA, OP, Petitioners, v. EMMANUEL ROJO,* Respondent.
DECISION
DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the August 31, 2005 Decision2 and the November 10, 2005 Resolution 3 of the Court of Appeals (CA) in CA-
G.R. SP No. 85188, which affirmed the July 31, 2003 Decision 4 of the National Labor Relations Commission (NLRC). Said NLRC Decision affirmed with
modification the October 7, 2002 Decision5 of the Labor Arbiter (LA) which, in turn, granted respondent Emmanuel Rojo’s (respondent) Complaint 6 for
illegal dismissal.
Factual Antecedents

Petitioner Colegio del Santisimo Rosario (CSR) hired respondent as a high school teacher on probationary basis for the school years 1992-1993, 1993-
19947 and 1994-1995.8cralaw virtualaw library

On April 5, 1995, CSR, through petitioner Sr. Zenaida S. Mofada, OP (Mofada), decided not to renew respondent’s services. 9cralaw virtualaw library

Thus, on July 13, 1995, respondent filed a Complaint10 for illegal dismissal. He alleged that since he had served three consecutive school years which is
the maximum number of terms allowed for probationary employment, he should be extended permanent employment. Citing paragraph 75 of the
1970 Manual of Regulations for Private Schools (1970 Manual), respondent asserted that “full- time teachers who have rendered three (3) consecutive
years of satisfactory services shall be considered permanent.” 11cralaw virtualaw library

On the other hand, petitioners argued that respondent knew that his Teacher’s Contract for school year 1994-1995 with CSR would expire on March 31,
1995.12 Accordingly, respondent was not dismissed but his probationary contract merely expired and was not renewed. 13 Petitioners also claimed that
the “three years” mentioned in paragraph 75 of the 1970 Manual refer to “36 months,” not three school years. 14 And since respondent served for only
three school years of 10 months each or 30 months, then he had not yet served the “three years” or 36 months mentioned in paragraph 75 of the 1970
Manual.15cralaw virtualaw library

Ruling of the Labor Arbiter

The LA ruled that “three school years” means three years of 10 months, not 12 months. 16 Considering that respondent had already served for three
consecutive school years, then he has already attained regular employment status. Thus, the non-renewal of his contract for school year 1995-1996
constitutes illegal dismissal.17cralaw virtualaw library

The LA also found petitioners guilty of bad faith when they treated respondent’s termination merely as the expiration of the third employment contract
and when they insisted that the school board actually deliberated on the non-renewal of respondent’s employment without submitting admissible
proof of his alleged regular performance evaluation. 18cralaw virtualaw library

The dispositive portion of the LA’s Decision19 reads:chanrobles virtua1aw 1ibrary

WHEREFORE, premises considered, judgment is hereby rendered ordering the [petitioners]:

1. To pay [respondent] the total amount of P39,252.00 corresponding to his severance compensation and 13 th month pay, moral and exemplary
damages.

2. To pay 10% of the total amount due to [respondent] as attorney’s fees.

All other claims are dismissed for lack of merit.

SO ORDERED.20
Ruling of the National Labor Relations Commission 

On appeal, the NLRC affirmed the LA’s Decision with modification. It held that after serving three school years, respondent had attained the status of
regular employment21 especially because CSR did not make known to respondent the reasonable standards he should meet. 22 The NLRC also agreed
with the LA that respondent’s termination was done in bad faith. It held that respondent is entitled to reinstatement, if viable; or separation pay, if
reinstatement was no longer feasible, and backwages, viz:chanrobles virtua1aw 1ibrary
WHEREFORE, premises considered, the appealed Decision is hereby, AFFIRMED with MODIFICATION only insofar as the award of separation pay is
concerned. Since [respondent] had been illegally dismissed, [petitioner] Colegio Del Santisimo Rosario is hereby ordered to reinstate him to his former
position without loss of seniority rights with full backwages until he is actually reinstated. However, if reinstatement is no longer feasible, the
respondent shall pay separation pay, in [addition] to the payment of his full backwages.

The Computation Division is hereby directed to compute [respondent’s] full backwages to be attached and to form part of this Decision.

The rest of the appealed Decision stands.

SO ORDERED.23
Petitioners moved for reconsideration which the NLRC denied in its April 28, 2004 Resolution 24 for lack of merit.

Ruling of the Court of Appeals

Petitioners filed a Petition for Certiorari25 before the CA alleging grave abuse of discretion on the part of the NLRC in finding that respondent had
attained the status of a regular employee and was illegally dismissed from employment.

In a Decision26 dated August 31, 2005, the CA denied the Petition for lack of merit. Citing Cagayan Capitol College v. National Labor Relations
Commission,27 it held that respondent has satisfied all the requirements necessary to acquire permanent employment and security of
tenure viz:chanrobles virtua1aw 1ibrary
1. The teacher is a full-time teacher;

2. The teacher must have rendered three (3) consecutive years of service; and

3. Such service must be satisfactory.28

According to the CA, respondent has attained the status of a regular employee after he was employed for three consecutive school years as a full-time
teacher and had served CSR satisfactorily. Aside from being a high school teacher, he was also the Prefect of Discipline, a task entailing much
responsibility. The only reason given by Mofada for not renewing respondent’s contract was the alleged expiration of the contract, not any
unsatisfactory service. Also, there was no showing that CSR set performance standards for the employment of respondent, which could be the basis of
his satisfactory or unsatisfactory performance. Hence, there being no reasonable standards made known to him at the time of his engagement,
respondent was deemed a regular employee and was, thus, declared illegally dismissed when his contract was not renewed.

Petitioners moved for reconsideration. However, the CA denied the motion for lack of merit in its November 10, 2005 Resolution. 29cralaw virtualaw
library

Hence, the instant Petition. Incidentally, on May 23, 2007, we issued a Resolution 30 directing the parties to maintain the status quo pending the
resolution of the present Petition.
Issue

WHETHER THE COURT OF APPEALS [AS WELL AS THE NATIONAL LABOR RELATIONS COMMISSION] COMMITTED GRIEVOUS AND REVERSIBLE ERROR
WHEN IT RULED THAT A BASIC EDUCATION (ELEMENTARY) TEACHER HIRED FOR THREE (3) CONSECUTIVE SCHOOL YEARS AS A PROBATIONARY
EMPLOYEE AUTOMATICALLY AND/OR BY LAW BECOMES A PERMANENT EMPLOYEE UPON COMPLETION OF HIS THIRD YEAR OF PROBATION
NOTWITHSTANDING [A] THE PRONOUNCEMENT OF THIS HONORABLE COURT IN COLEGIO SAN AGUSTIN V. NLRC, 201 SCRA 398 [1991] THAT A
PROBATIONARY TEACHER ACQUIRES PERMANENT STATUS “ONLY WHEN HE IS ALLOWED TO WORK AFTER THE PROBATIONARY PERIOD” AND [B] DOLE-
DECS-CHED-TESDA ORDER NO. 01, S. 1996 WHICH PROVIDE THAT TEACHERS WHO HAVE SERVED THE PROBATIONARY PERIOD “SHALL BE MADE
REGULAR OR PERMANENT IF ALLOWED TO WORK AFTER SUCH PROBATIONARY PERIOD.” 31
Petitioners maintain that upon the expiration of the probationary period, both the school and the respondent were free to renew the contract or let it
lapse. Petitioners insist that a teacher hired for three consecutive years as a probationary employee does not automatically become a regular employee
upon completion of his third year of probation. It is the positive act of the school – the hiring of the teacher who has just completed three consecutive
years of employment on probation for the next school year – that makes the teacher a regular employee of the school.
Our Ruling

We deny the Petition.

In Mercado v. AMA Computer College-Parañaque City, Inc.,32 we had occasion to rule that cases dealing with employment on probationary status of
teaching personnel are not governed solely by the Labor Code as the law is supplemented, with respect to the period of probation, by special rules
found in the Manual of Regulations for Private Schools (the Manual). With regard to the probationary period, Section 92 of the 1992
Manual33 provides:chanrobles virtua1aw 1ibrary
Section 92. Probationary Period. – Subject in all instances to compliance with the Department and school requirements, the probationary period for
academic personnel shall not be more than three (3) consecutive years of satisfactory service for those in the elementary and secondary levels, six
(6) consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for
those in the tertiary level where collegiate courses are offered on a trimester basis. (Emphasis supplied)
In this case, petitioners’ teachers who were on probationary employment were made to enter into a contract effective for one school year. Thereafter,
it may be renewed for another school year, and the probationary employment continues. At the end of the second fixed period of probationary
employment, the contract may again be renewed for the last time.

Such employment for fixed terms during the teachers’ probationary period is an accepted practice in the teaching profession. In Magis Young
Achievers’ Learning Center v. Manalo,34 we noted that:chanrobles virtua1aw 1ibrary
The common practice is for the employer and the teacher to enter into a contract, effective for one school year. At the end of the school year, the
employer has the option not to renew the contract, particularly considering the teacher’s performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another school year, the probationary employment continues. Again, at the end of that
period, the parties may opt to renew or not to renew the contract. If renewed, this second renewal of the contract for another school year would then
be the last year – since it would be the third school year – of probationary employment. At the end of this third year, the employer may now decide
whether to extend a permanent appointment to the employee, primarily on the basis of the employee having met the reasonable standards of
competence and efficiency set by the employer. For the entire duration of this three-year period, the teacher remains under probation. Upon the
expiration of his contract of employment, being simply on probation, he cannot automatically claim security of tenure and compel the employer to
renew his employment contract. It is when the yearly contract is renewed for the third time that Section 93 of the Manual becomes operative, and the
teacher then is entitled to regular or permanent employment status. (Emphases supplied)
However, this scheme “of fixed-term contract is a system that operates during the probationary period and for this reason is subject to Article 281 of
the Labor Code,”35 which provides:chanrobles virtua1aw 1ibrary
x x x The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a
regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An
employee who is allowed to work after a probationary period shall be considered a regular employee. [Emphasis supplied]
In Mercado, we held that “[u]nless this reconciliation is made, the requirements of [Article 281] on probationary status would be fully negated as the
school may freely choose not to renew contracts simply because their terms have expired.” 36 This will have an unsettling effect in the equilibrium vis-a-
vis the relations between labor and management that the Constitution and Labor Code have worked hard to establish.

That teachers on probationary employment also enjoy the protection afforded by Article 281 of the Labor Code is supported by Section 93 of the 1992
Manual which provides:chanrobles virtua1aw 1ibrary
Sec. 93. Regular or Permanent Status. - Those who have served the probationary period shall be made regular or permanent. Full-time teachers who
have satisfactorily completed their probationary period shall be considered regular or permanent. (Emphasis supplied)
The above provision clearly provides that full-time teachers become regular or permanent employees once they have satisfactorily completed the
probationary period of three school years.37 The use of the term satisfactorily necessarily connotes the requirement for schools to set reasonable
standards to be followed by teachers on probationary employment. For how else can one determine if probationary teachers have satisfactorily
completed the probationary period if standards therefor are not provided?

As such, “no vested right to a permanent appointment shall accrue until the employee has completed the prerequisite three-year period necessary for
the acquisition of a permanent status. [However, it must be emphasized that] mere rendition of service for three consecutive years does not
automatically ripen into a permanent appointment. It is also necessary that the employee be a full-time teacher, and that the services he rendered are
satisfactory.”38cralaw virtualaw library

In Mercado, this Court, speaking through J. Brion, held that:chanrobles virtua1aw 1ibrary
The provision on employment on probationary status under the Labor Code is a primary example of the fine balancing of interests between labor and
management that the Code has institutionalized pursuant to the underlying intent of the Constitution.

On the one hand, employment on probationary status affords management the chance to fully scrutinize the true worth of hired personnel before the
full force of the security of tenure guarantee of the Constitution comes into play. Based on the standards set at the start of the probationary period,
management is given the widest opportunity during the probationary period to reject hirees who fail to meet its own adopted but reasonable
standards. These standards, together with the just and authorized causes for termination of employment [which] the Labor Code expressly provides, are
the grounds available to terminate the employment of a teacher on probationary status. x x x

Labor, for its part, is given the protection during the probationary period of knowing the company standards the new hires have to meet during the
probationary period, and to be judged on the basis of these standards, aside from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards should be made known to the teachers on probationary status at the start of
their probationary period, or at the very least under the circumstances of the present case, at the start of the semester or the trimester during which
the probationary standards are to be applied. Of critical importance in invoking a failure to meet the probationary standards, is that the school should
show – as a matter of due process – how these standards have been applied. This is effectively the second notice in a dismissal situation that the law
requires as a due process guarantee supporting the security of tenure provision, and is in furtherance, too, of the basic rule in employee dismissal that
the employer carries the burden of justifying a dismissal. These rules ensure compliance with the limited security of tenure guarantee the law extends
to probationary employees.

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

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

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

x x x If we pierce the veil, so to speak, of the parties’ so-called fixed-term employment contracts, what undeniably comes out at the core is a fixed-
term contract conveniently used by the school to define and regulate its relations with its teachers during their probationary period.39 (Emphasis
supplied; italics in the original)
In the same case, this Court has definitively pronounced that “in a situation where the probationary status overlaps with a fixed-term
contract not  specifically used for the fixed term it offers, Article 281 should assume primacy and the fixed-period character of the contract must give
way.”40cralaw virtualaw library

An example given of a fixed-term contract specifically used for the fixed term it offers is a replacement teacher or a reliever contracted for a period of
one year to temporarily take the place of a permanent teacher who is on leave. The expiration of the reliever’s fixed-term contract does not have
probationary status implications as he or she was never employed on probationary basis. This is because his or her employment is for a specific purpose
with particular focus on the term. There exists an intent to end his or her employment with the school upon expiration of this term. 41cralaw virtualaw
library

However, for teachers on probationary employment, in which case a fixed term contract is not specifically used for the fixed term it offers, it is
incumbent upon the school to have not only set reasonable standards to be followed by said teachers in determining qualification for regular
employment, the same must have also been communicated to the teachers at the start of the probationary period, or at the very least, at the start
of the period when they were to be applied. These terms, in addition to those expressly provided by the Labor Code, would serve as the just cause for
the termination of the probationary contract. The specific details of this finding of just cause must be communicated to the affected teachers as a
matter of due process.42 Corollarily, should the teachers not have been apprised of such reasonable standards at the time specified above, they shall
be deemed regular employees.

In Tamson’s Enterprises, Inc. v. Court of Appeals,43 we held that “[t]he law is clear that in all cases of probationary employment, the employer shall
[convey] to the employee the standards under which he will qualify as a regular employee at the time of his engagement. Where no standards are
made known to the employee at that time, he shall be deemed a regular employee.

In this case, glaringly absent from petitioners’ evidence are the reasonable standards that respondent was expected to meet that could have served as
proper guidelines for purposes of evaluating his performance. Nowhere in the Teacher’s Contract 44 could such standards be found.45 Neither was it
mentioned that the same were ever conveyed to respondent. Even assuming that respondent failed to meet the standards set forth by CSR and made
known to the former at the time he was engaged as a teacher on probationary status, still, the termination was flawed for failure to give the required
notice to respondent.46 This is because Book VI, Rule I, Section 2 of the IRR of the Labor Code provides:chanrobles virtua1aw 1ibrary
Section 2. Security of Tenure. – (a) In cases of regular employment, the employer shall not terminate the services of an employee except for just or
authorized causes as provided by law, and subject to the requirements of due process.

(b) The foregoing shall also apply in cases of probationary employment; provided, however, that in such cases, termination of employment due to
failure of the employee to qualify in accordance with the standards of the employer made known to the former at the time of engagement may also be
a ground for termination of employment.

xxxx

(d) In all cases of termination of employment, the following standards of due process shall be substantially observed:

xxxx

If the termination is brought about by the completion of a contract or phase thereof, or by failure of an employee to meet the standards of the
employer in the case of probationary employment, it shall be sufficient that a written notice is served the employee, within a reasonable time from
the effective date of termination. (Emphasis supplied)
Curiously, despite the absence of standards, Mofada mentioned the existence of alleged performance evaluations 47 in respondent’s case. We are,
however, in a quandary as to what could have been the basis of such evaluation, as no evidence were adduced to show the reasonable standards with
which respondent’s performance was to be assessed or that he was informed thereof. Notably too, none of the supposed performance evaluations
were presented. These flaws violated respondent’s right to due process. As such, his dismissal is, for all intents and purposes, illegal.

As a matter of due process, teachers on probationary employment, just like all probationary employees, have the right to know whether they have met
the standards against which their performance was evaluated. Should they fail, they also have the right to know the reasons therefor.

It should be pointed out that absent any showing of unsatisfactory performance on the part of respondent, it can be presumed that his performance
was satisfactory, especially taking into consideration the fact that even while he was still more than a year into his probationary employment, he was
already designated Prefect of Discipline. In such capacity, he was able to uncover the existence of a drug syndicate within the school and lessen the
incidence of drug use therein. Yet despite respondent’s substantial contribution to the school, petitioners chose to disregard the same and instead
terminated his services; while most of those who were involved in drug activities within the school were punished with a slap on the wrist as they were
merely made to write letters promising that the incident will not happen again. 48cralaw virtualaw library

Mofada would also have us believe that respondent chose to resign as he feared for his life, thus, the school’s decision not to renew his contract.
However, no resignation letter was presented. Besides, this is contrary to respondent’s act of immediately filing the instant case against petitioners.

WHEREFORE, the Petition is hereby DENIED. The August 31, 2005 Decision and the November 10, 2005 Resolution of the Court of Appeals in CA-G.R. SP
No. 85188 are AFFIRMED. The status quo order of this Court is LIFTED.chanroblesvirtualawlibrary

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 193493               June 13, 2013
JAIME N. GAPAYAO, Petitioner,
vs.
ROSARIO FULO, SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, Respondents.
DECISION
SERENO, CJ.:
This is a Rule 45 Petition1 assailing the Decision2 and Resolution3 of the Court of Appeals (CA) in CA-G.R. SP. No. 101688, affirming the Resolution 4 of the
Social Security Commission (SSC). The SSC held petitioner Jaime N. Gapayao liable to pay the unpaid social security contributions due to the deceased
Jaime Fulo, and the Social Security System (SSS) to pay private respondent Rosario L. Fulo, the widow of the deceased, the appropriate death benefits
pursuant to the Social Security Law.
The antecedent facts are as follows:
On 4 November 1997, Jaime Fulo (deceased) died of "acute renal failure secondary to 1st degree burn 70% secondary electrocution" 5 while doing
repairs at the residence and business establishment of petitioner located at San Julian, Irosin, Sorsogon.
Allegedly moved by his Christian faith, petitioner extended some financial assistance to private respondent. On 16 November 1997, the latter executed
an Affidavit of Desistance6 stating that she was not holding them liable for the death of her late husband, Jaime Fulo, and was thereby waiving her right
and desisting from filing any criminal or civil action against petitioner.
On 14 January 1998, both parties executed a Compromise Agreement, 7 the relevant portion of which is quoted below:
We, the undersigned unto this Honorable Regional Office/District Office/Provincial Agency Office respectfully state:
1. The undersigned employer, hereby agrees to pay the sum of FORTY THOUSAND PESOS (₱40,000.00) to the surviving spouse of JAIME POLO,
an employee who died of an accident, as a complete and full payment for all claims due the victim.
2. On the other hand, the undersigned surviving spouse of the victim having received the said amount do [sic] hereby release and discharge
the employer from any and all claims that maybe due the victim in connection with the victim’s employment thereat.
Thereafter, private respondent filed a claim for social security benefits with the Social Security System (SSS)–Sorosogon Branch. 8 However, upon
verification and evaluation, it was discovered that the deceased was not a registered member of the SSS. 9
Upon the insistence of private respondent that her late husband had been employed by petitioner from January 1983 up to his untimely death on 4
November 1997, the SSS conducted a field investigation to clarify his status of employment. In its field investigation report, 10 it enumerated its findings
as follows:
In connection with the complaint filed by Mrs. Rosario Fulo, hereunder are the findings per interview with Mr. Leonor Delgra, Santiago Bolanos and
Amado Gacelo:
1. That Mr. Jaime Fulo was an employee of Jaime Gapayao as farm laborer from 1983 to 1997.
2. Mr. Leonor Delgra and Santiago Bolanos are co-employees of Jaime Fulo.
3. Mr. Jaime Fulo receives compensation on a daily basis ranging from ₱5.00 to ₱60.00 from 1983 to 1997.
Per interview from Mrs. Estela Gapayao, please be informed that:
1. Jaime Fulo is an employee of Mr. & Mrs. Jaime Gapayao on an extra basis.
2. Sometimes Jaime Fulo is allowed to work in the farm as abaca harvester and earn 1/3 share of its harvest as his income.
3. Mr. & Mrs. Gapayao hired the services of Jaime Fulo not only in the farm as well as in doing house repairs whenever it is available. Mr. Fulo
receives his remuneration usually in the afternoon after doing his job.
4. Mr. & Mrs. Gapayao hires 50-100 persons when necessary to work in their farm as laborer and Jaime Fulo is one of them. Jaime Fulo
receives more or less ₱50.00 a day. (Emphases in the original)
Consequently, the SSS demanded that petitioner remit the social security contributions of the deceased. When petitioner denied that the deceased was
his employee, the SSS required private respondent to present documentary and testimonial evidence to refute petitioner’s allegations. 11
Instead of presenting evidence, private respondent filed a Petition 12 before the SSC on 17 February 2003. In her Petition, she sought social security
coverage and payment of contributions in order to avail herself of the benefits accruing from the death of her husband.
On 6 May 2003, petitioner filed an Answer13 disclaiming any liability on the premise that the deceased was not the former’s employee, but was rather
an independent contractor whose tasks were not subject to petitioner’s control and supervision. 14 Assuming arguendo that the deceased was
petitioner’s employee, he was still not entitled to be paid his SSS premiums for the intervening period when he was not at work, as he was an
"intermittent worker who was only summoned every now and then as the need arose." 15 Hence, petitioner insisted that he was under no obligation to
report the former’s demise to the SSS for social security coverage.
Subsequently, on 30 June 2003, the SSS filed a Petition-in-Intervention 16 before the SSC, outlining the factual circumstances of the case and praying that
judgment be rendered based on the evidence adduced by the parties.
On 14 March 2007, the SSC rendered a Resolution, 17 the dispositive portion of which provides:
WHEREFORE, PREMISES CONSIDERED, this Commission finds, and so holds, that Jaime Fulo, the late husband of petitioner, was employed by
respondent Jaime N. Gapayao from January 1983 to November 4, 1997, working for nine (9) months a year receiving the minimum wage then
prevailing.
Accordingly, the respondent is hereby ordered to pay ₱45,315.95 representing the unpaid SS contributions due on behalf of deceased Jaime Fulo, the
amount of ₱217,710.33 as 3% per month penalty for late remittance thereof, computed as of March 30, 2006, without prejudice to the collection of
additional penalty accruing thereafter, and the sum of ₱230,542.20 (SSS) and ₱166,000.00 (EC) as damages for the failure of the respondent to report
the deceased Jaime Fulo for SS coverage prior to his death pursuant to Section 24(a) of the SS Law, as amended.
The SSS is hereby directed to pay petitioner Rosario Fulo the appropriate death benefit, pursuant to Section 13 of the SS Law, as amended, as well as its
prevailing rules and regulations, and to inform this Commission of its compliance herewith.
SO ORDERED.
On 18 May 2007, petitioner filed a Motion for Reconsideration, 18 which was denied in an Order19 dated 16 August 2007.
Aggrieved, petitioner appealed to the CA on 19 December 2007. 20 On 17 March 2010, the CA rendered a Decision 21 in favor of private respondent, as
follows:
In fine, public respondent SSC had sufficient basis in concluding that private respondent’s husband was an employee of petitioner and should,
therefore, be entitled to compulsory coverage under the Social Security Law.
Having ruled in favor of the existence of employer-employee relationship between petitioner and the late Jaime Fulo, it is no longer necessary to dwell
on the other issues raised.
Resultantly, for his failure to report Jaime Fulo for compulsory social security coverage, petitioner should bear the consequences thereof. Under the
law, an employer who fails to report his employee for social security coverage is liable to [1] pay the benefits of those who die, become disabled, get
sick or reach retirement age; [2] pay all unpaid contributions plus a penalty of three percent per month; and [3] be held liable for a criminal offense
punishable by fine and/or imprisonment. But an employee is still entitled to social security benefits even is (sic) his employer fails or refuses to remit his
contribution to the SSS.
WHEREFORE, premises considered, the Resolution appealed from is AFFIRMED in toto.
SO ORDERED.
In holding thus, the CA gave credence to the findings of the SSC. The appellate court held that it "does not follow that a person who does not observe
normal hours of work cannot be deemed an employee." 22 For one, it is not essential for the employer to actually supervise the performance of duties of
the employee; it is sufficient that the former has a right to wield the power. In this case, petitioner exercised his control through an overseer in the
person of Amado Gacelo, the tenant on petitioner’s land.23 Most important, petitioner entered into a Compromise Agreement with private respondent
and expressly admitted therein that he was the employer of the deceased. 24 The CA interpreted this admission as a declaration against interest,
pursuant to Section 26, Rule 130 of the Rules of Court. 25
Hence, this petition.
Public respondents SSS26 and SSC27 filed their Comments on 31 January 2011 and 28 February 2011, respectively, while private respondent filed her
Comment on 14 March 2011.28 On 6 March 2012, petitioner filed a "Consolidated Reply to the Comments of the Public Respondents SSS and SSC and
Private Respondent Rosario Fulo."29
ISSUE
The sole issue presented before us is whether or not there exists between the deceased Jaime Fulo and petitioner an employer-employee relationship
that would merit an award of benefits in favor of private respondent under social security laws.
THE COURT’S RULING
In asserting the existence of an employer-employee relationship, private respondent alleges that her late husband had been in the employ of petitioner
for 14 years, from 1983 to 1997.30 During that period, he was made to work as a laborer in the agricultural landholdings, a harvester in the abaca
plantation, and a repairman/utility worker in several business establishments owned by petitioner. 31 To private respondent, the "considerable length of
time during which [the deceased] was given diverse tasks by petitioner was a clear indication of the necessity and indispensability of her late husband’s
services to petitioner’s business."32 This view is bolstered by the admission of petitioner himself in the Compromise Agreement that he was the
deceased’s employer.33
Private respondent’s position is similarly espoused by the SSC, which contends that its findings are duly supported by evidence on record. 34 It insists
that pakyaw workers are considered employees, as long as the employer exercises control over them. In this case, the exercise of control by the
employer was delegated to the caretaker of his farm, Amado Gacelo. The SSC further asserts that the deceased rendered services essential for the
petitioner’s harvest. While these services were not rendered continuously (in the sense that they were not rendered every day throughout the year),
still, the deceased had never stopped working for petitioner from year to year until the day the former died. 35 In fact, the deceased was required to
work in the other business ventures of petitioner, such as the latter’s bakery and grocery store. 36 The Compromise Agreement entered into by
petitioner with private respondent should not be a bar to an employee demanding what is legally due the latter. 37
The SSS, while clarifying that it is "neither adversarial nor favoring any of the private parties x x x as it is only tasked to carry out the purposes of the
Social Security Law,"38 agrees with both private respondent and SSC. It stresses that factual findings of the lower courts, when affirmed by the appellate
court, are generally conclusive and binding upon the Court. 39
Petitioner, on the other hand, insists that the deceased was not his employee. Supposedly, the latter, during the performance of his function, was not
under petitioner’s control. Control is not necessarily present even if the worker works inside the premises of the person who has engaged his
services.40 Granting without admitting that petitioner gave rules or guidelines to the deceased in the process of the latter’s performing his work, the
situation cannot be interpreted as control, because it was only intended to promote mutually desired results. 41
Alternatively, petitioner insists that the deceased was hired by Adolfo Gamba, the contractor whom he had hired to construct their building; 42 and by
Amado Gacelo, the tenant whom petitioner instructed to manage the latter’s farm. 43 For this reason, petitioner believes that a tenant is not beholden
to the landlord and is not under the latter’s control and supervision. So if a worker is hired to work on the land of a tenant – such as petitioner – the
former cannot be the worker of the landlord, but of the tenant’s. 44
Anent the Compromise Agreement, petitioner clarifies that it was executed to buy peace, because "respondent kept on pestering them by asking for
money."45 Petitioner allegedly received threats that if the matter was not settled, private respondent would refer the matter to the New Peoples’
Army.46 Allegedly, the Compromise Agreement was "extortion camouflaged as an agreement." 47 Likewise, petitioner maintains that he shouldered the
hospitalization and burial expenses of the deceased to express his "compassion and sympathy to a distressed person and his family," and not to admit
liability.48
Lastly, petitioner alleges that the deceased is a freelance worker. Since he was engaged on a pakyaw basis and worked for a short period of time, in the
nature of a farm worker every season, he was not precluded from working with other persons and in fact worked for them. Under Article 280 of the
Labor Code,49 seasonal employees are not covered by the definitions of regular and casual employees. 50 Petitioner cites Mercado, Sr. v. NLRC,51 in which
the Court held that seasonal workers do not become regular employees by the mere fact that they have rendered at least one year of service, whether
continuous or broken.52
We see no cogent reason to reverse the CA.
I
Findings of fact of the SSC are given weight and credence.
At the outset, it is settled that the Court is not a trier of facts and will not weigh evidence all over again. Findings of fact of administrative agencies and
quasi-judicial bodies, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect
but finality when affirmed by the CA.53 For as long as these findings are supported by substantial evidence, they must be upheld. 54
II
Farm workers may be considered regular seasonal employees.
Article 280 of the Labor Code states:
Article 280. Regular and Casual Employment. — The provisions of written agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or
services to be performed is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least
one year of service whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actually exists.
Jurisprudence has identified the three types of employees mentioned in the provision: (1) regular employees or those who have been engaged to
perform activities that are usually necessary or desirable in the usual business or trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of their
engagement, or those whose work or service is seasonal in nature and is performed for the duration of the season; and (3) casual employees or those
who are neither regular nor project employees.55
Farm workers generally fall under the definition of seasonal employees. We have consistently held that seasonal employees may be considered as
regular employees.56 Regular seasonal employees are those called to work from time to time. The nature of their relationship with the employer is such
that during the off season, they are temporarily laid off; but reemployed during the summer season or when their services may be needed. 57 They are in
regular employment because of the nature of their job,and not because of the length of time they have worked. 58
The rule, however, is not absolute. In Hacienda Fatima v. National Federation of Sugarcane Workers-Food & General Trade, 59 the Court held that
seasonal workers who have worked for one season only may not be considered regular employees. Similarly, in Mercado, Sr. v. NLRC, 60 it was held that
when seasonal employees are free to contract their services with other farm owners, then the former are not regular employees.
For regular employees to be considered as such, the primary standard used is the reasonable connection between the particular activity they perform
and the usual trade or business of the employer.61 This test has been explained thoroughly in De Leon v. NLRC,62 viz:
The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the
employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Also if the employee has been performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not
indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such
activity exists.
A reading of the records reveals that the deceased was indeed a farm worker who was in the regular employ of petitioner. From year to year, starting
January 1983 up until his death, the deceased had been working on petitioner’s land by harvesting abaca and coconut, processing copra, and clearing
weeds. His employment was continuous in the sense that it was done for more than one harvesting season. Moreover, no amount of reasoning could
detract from the fact that these tasks were necessary or desirable in the usual business of petitioner.
The other tasks allegedly done by the deceased outside his usual farm work only bolster the existence of an employer-employee relationship. As found
by the SSC, the deceased was a construction worker in the building and a helper in the bakery, grocery, hardware, and piggery – all owned by
petitioner.63 This fact only proves that even during the off season, the deceased was still in the employ of petitioner.
The most telling indicia of this relationship is the Compromise Agreement executed by petitioner and private respondent. It is a valid agreement as long
as the consideration is reasonable and the employee signed the waiver voluntarily, with a full understanding of what he or she was entering into. 64 All
that is required for the compromise to be deemed voluntarily entered into is personal and specific individual consent. 65 Once executed by the workers
or employees and their employers to settle their differences, and done in good faith, a Compromise Agreement is deemed valid and binding among the
parties.66
Petitioner entered into the agreement with full knowledge that he was described as the employer of the deceased. 67 This knowledge cannot simply be
denied by a statement that petitioner was merely forced or threatened into such an agreement.1âwphi1 His belated attempt to circumvent the
agreement should not be given any consideration or weight by this Court.
III
Pakyaw workers are regular employees,
provided they are subject to the control of petitioner.
Pakyaw workers are considered employees for as long as their employers exercise control over them. In Legend Hotel Manila v. Realuyo, 68 the Court
held that "the power of the employer to control the work of the employee is considered the most significant determinant of the existence of an
employer-employee relationship. This is the so-called control test and is premised on whether the person for whom the services are performed
reserves the right to control both the end achieved and the manner and means used to achieve that end." It should be remembered that the control
test merely calls for the existence of the right to control, and not necessarily the exercise thereof. 69 It is not essential that the employer actually
supervises the performance of duties by the employee. It is enough that the former has a right to wield the power. 70
In this case, we agree with the CA that petitioner wielded control over the deceased in the discharge of his functions. Being the owner of the farm on
which the latter worked, petitioner – on his own or through his overseer – necessarily had the right to review the quality of work produced by his
laborers. It matters not whether the deceased conducted his work inside petitioner’s farm or not because petitioner retained the right to control him in
his work, and in fact exercised it through his farm manager Amado Gacelo. The latter himself testified that petitioner had hired the deceased as one of
the pakyaw workers whose salaries were derived from the gross proceeds of the harvest. 71
We do not give credence to the allegation that the deceased was an independent contractor hired by a certain Adolfo Gamba, the contractor whom
petitioner himself had hired to build a building. The allegation was based on the self-serving testimony of Joyce Gapay Demate, 72 the daughter of
petitioner. The latter has not offered any other proof apart from her testimony to prove the contention.
The right of an employee to be covered by the Social Security Act is premised on the existence of an employer-employee relationship. 73 That having
been established, the Court hereby rules in h1vor of private respondent.
WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The assailed Decision and resolution of the Court of Appeals in CA-G.R. SP. No.
101688 dated 17 March 2010 and 13 August 2010, respectively, are hereby AFFIRMED.
SO ORDERED.
MARIA LOURDES P. A. SERENO
Chief Justice, Chairperson

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
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 1 the challenge to the November 29, 2007 decision 2 and the January 22, 2009 resolution3 of the Court
of Appeals (CA) in CA-G.R. CEB-SP No. 02028. This CA decision affirmed with modification the July 22, 2005 decision 4 and the April 28, 2006
resolution5 of the National Labor Relations Commission (NLRC) in NLRC Case No. V-00006-03 which, in turn, reversed the October 9, 2002 decision 6 of
the Labor Arbiter (LA). The LA’s decision dismissed the complaint filed by complainants Ferdinand Acibo, et al. 7 against petitioners Universal Robina
Sugar Milling 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,8 i.e., drivers, crane 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, 2002,9 the complainants filed before the LA complaints for regularization, entitlement to the benefits under the existing Collective
Bargaining Agreement (CBA),and attorney’s fees.
In the decision10 dated October 9, 2002, the LA dismissed the complaint for lack of merit. 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, Dionisio Bendijo, Jr., Rodger Ramirez, Diocito Palagtiw, Danny Kadusale and Allyrobyl Olpus.
The Ruling of the NLRC
In its decision11 of July 22, 2005, the NLRC reversed the LA’s ruling; it declared the 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 28, 2006 resolution. 12 The petitioners elevated the case to the
CA via a petition for certiorari.13
The Ruling of the CA
In its November 29, 2007 decision,14 the CA granted in part the petition; it affirmed the 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 15 in the CA’s January 22, 2009 resolution. 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,18 the respondents maintain that they are regular employees of 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.1âwphi1 We find the respondents to be regular 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[.]" 19 Under the definition, the primary standard that determines
regular employment is the reasonable connection between the particular activity performed by the employee and the usual business or trade of the
employer;20 the 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[.]" 21 Two 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.22 The 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. 23 In this
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.25 As with project employment, although the seasonal employment arrangement 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. 26 Hence, when the "seasonal" workers are
continuously and repeatedly hired 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.27 In 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,29 the Court, for the first time, recognized and resolved the 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[.]" 30 The indispensability or desirability of
the 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 31 as necessary and 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." 32 In such a
case, the general restrictive rule under Article 280 of the 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, 33 and, in some cases, even the length of time of the 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. 34 Be this as it may, regular seasonal
employees, like the 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. 35 is not applicable to 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 36 and
Hacienda Bino/Hortencia Starke, 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. 38 This Court’s
power of review in a Rule 45 petition is limited to resolving matters pertaining to any perceived legal errors, which the CA may have committed in
issuing the assailed decision.39 In reviewing the legal 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. 42 With such a declaration, 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.1âwphi1 As such, they
are entitled to the monetary 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." 44 Citing jurisprudential standards,45 it then
proceeded to explain 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.
ARTURO D. BRION
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. 192571               July 23, 2013
ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST, MARIA OLIVIA T. YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G.
ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari 1 are the Decision2 dated December 10,2009 and Resolution3 dated June 9, 2010 of the Court of Appeals
(CA) in CA-G.R. SP No. 101045 which pronounced that the National Labor Relations Commission (NLRC) did not gravely abuse its discretion when it
ruled that respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally dismissed from her employment.
The Facts
On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott) caused the publication in a major broadsheet newspaper of its need for a
Medical and Regulatory Affairs Manager (Regulatory Affairs Manager) who would: (a) be responsible for drug safety surveillance operations, staffing,
and budget; (b) lead the development and implementation of standard operating procedures/policies for drug safety surveillance and vigilance; and (c)
act as the primary interface with internal and external customers regarding safety operations and queries. 4 Alcaraz - who was then a Regulatory Affairs
and Information Manager at Aventis Pasteur Philippines, Incorporated (another pharmaceutical company like Abbott) – showed interest and submitted
her application on October 4, 2004.5
On December 7, 2004, Abbott formally offered Alcaraz the abovementioned position which was an item under the company’s Hospira Affiliate Local
Surveillance Unit (ALSU) department.6 In Abbott’s offer sheet.7 it was stated that Alcaraz was to be employed on a probationary basis. 8 Later that day,
she accepted the said offer and received an electronic mail (e-mail) from Abbott’s Recruitment Officer, petitioner Teresita C. Bernardo (Bernardo),
confirming the same. Attached to Bernardo’s e-mail were Abbott’s organizational chart and a job description of Alcaraz’s work. 9
On February 12, 2005, Alcaraz signed an employment contract which stated, inter alia, that she was to be placed on probation for a period of six (6)
months beginning February 15, 2005 to August 14, 2005. The said contract was also signed by Abbott’s General Manager, petitioner Edwin Feist
(Feist):10
PROBATIONARY EMPLOYMENT
Dear Pearl,
After having successfully passed the pre-employment requirements, you are hereby appointed as follows:
Position Title : Regulatory Affairs Manager
Department : Hospira
The terms of your employment are:
Nature of Employment : Probationary
Effectivity : February 15, 2005 to August 14, 2005
Basic Salary : ₱110,000.00/ month
It is understood that you agree to abide by all existing policies, rules and regulations of the company, as well as those, which may be hereinafter
promulgated.
Unless renewed, probationary appointment expires on the date indicated subject to earlier termination by the Company for any justifiable reason.
If you agree to the terms and conditions of your employment, please signify your conformity below and return a copy to HRD.
Welcome to Abbott!
Very truly yours,
Sgd.
EDWIN D. FEIST
General Manager
CONFORME:
Sgd.
PEARLIE ANN FERRER-ALCARAZ
During Alcaraz’s pre-employment orientation, petitioner Allan G. Almazar (Almazar), Hospira’s Country Transition Manager, briefed her on her duties
and responsibilities as Regulatory Affairs Manager, stating that: (a) she will handle the staff of Hospira ALSU and will directly report to Almazar on
matters regarding Hopira’s local operations, operational budget, and performance evaluation of the Hospira ALSU Staff who are on probationary status;
(b) she must implement Abbott’s Code of Good Corporate Conduct (Code of Conduct), office policies on human resources and finance, and ensure that
Abbott will hire people who are fit in the organizational discipline; (c) petitioner Kelly Walsh (Walsh), Manager of the Literature Drug Surveillance Drug
Safety of Hospira, will be her immediate supervisor; (d) she should always coordinate with Abbott’s human resource officers in the management and
discipline of the staff; (e) Hospira ALSU will spin off from Abbott in early 2006 and will be officially incorporated and known as Hospira, Philippines. In
the interim, Hospira ALSU operations will still be under Abbott’s management, excluding the technical aspects of the operations which is under the
control and supervision of Walsh; and (f) the processing of information and/or raw material data subject of Hospira ALSU operations will be strictly
confined and controlled under the computer system and network being maintained and operated from the United States. For this purpose, all those
involved in Hospira ALSU are required to use two identification cards: one, to identify them as Abbott’s employees and another, to identify them as
Hospira employees.11
On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbott’s Human Resources (HR) Director, sent Alcaraz an e-mail which contained an
explanation of the procedure for evaluating the performance of probationary employees and further indicated that Abbott had only one evaluation
system for all of its employees. Alcaraz was also given copies of Abbott’s Code of Conduct and Probationary Performance Standards and Evaluation
(PPSE) and Performance Excellence Orientation Modules (Performance Modules) which she had to apply in line with her task of evaluating the Hospira
ALSU staff.12
Abbott’s PPSE procedure mandates that the job performance of a probationary employee should be formally reviewed and discussed with the
employee at least twice: first on the third month and second on the fifth month from the date of employment. The necessary Performance
Improvement Plan should also be made during the third-month review in case of a gap between the employee’s performance and the standards set.
These performance standards should be discussed in detail with the employee within the first two (2) weeks on the job. It was equally required that a
signed copy of the PPSE form must be submitted to Abbott’s Human Resources Department (HRD) and shall serve as documentation of the employee’s
performance during his/her probationary period. This shall form the basis for recommending the confirmation or termination of the probationary
employment.13
During the course of her employment, Alcaraz noticed that some of the staff had disciplinary problems. Thus, she would reprimand them for their
unprofessional behavior such as non-observance of the dress code, moonlighting, and disrespect of Abbott officers. However, Alcaraz’s method of
management was considered by Walsh to be "too strict."14 Alcaraz approached Misa to discuss these concerns and was told to "lie low" and let Walsh
handle the matter. Misa even assured her that Abbott’s HRD would support her in all her management decisions. 15
On April 12, 2005, Alcaraz received an e-mail from Misa requesting immediate action on the staff’s performance evaluation as their probationary
periods were about to end. This Alcaraz eventually submitted. 16
On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible (Terrible), Abbott’s former HR Director, to discuss certain issues regarding staff
performance standards. In the course thereof, Alcaraz accidentally saw a printed copy of an e-mail sent by Walsh to some staff members which
essentially contained queries regarding the former’s job performance. Alcaraz asked if Walsh’s action was the normal process of evaluation. Terrible
said that it was not.17
On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible where she was informed that she failed to meet the regularization standards
for the position of Regulatory Affairs Manager.18 Thereafter, Walsh and Terrible requested Alcaraz to tender her resignation, else they be forced to
terminate her services. She was also told that, regardless of her choice, she should no longer report for work and was asked to surrender her office
identification cards. She requested to be given one week to decide on the same, but to no avail. 19
On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales (Gonzales), that she would be on leave for that day. However, Gonzales
told her that Walsh and Terrible already announced to the whole Hospira ALSU staff that Alcaraz already resigned due to health reasons. 20
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter stating that her services had been terminated effective May 19,
2005.21 The letter detailed the reasons for Alcaraz’s termination – particularly, that Alcaraz: (a) did not manage her time effectively; (b) failed to gain the
trust of her staff and to build an effective rapport with them; (c) failed to train her staff effectively; and (d) was not able to obtain the knowledge and
ability to make sound judgments on case processing and article review which were necessary for the proper performance of her duties. 22 On May 27,
2005, Alcaraz received another copy of the said termination letter via registered mail. 23
Alcaraz felt that she was unjustly terminated from her employment and thus, filed a complaint for illegal dismissal and damages against Abbott and its
officers, namely, Misa, Bernardo, Almazar, Walsh, Terrible, and Feist. 24 She claimed that she should have already been considered as a regular and not a
probationary employee given Abbott’s failure to inform her of the reasonable standards for her regularization upon her engagement as required under
Article 29525 of the Labor Code. In this relation, she contended that while her employment contract stated that she was to be engaged on a
probationary status, the same did not indicate the standards on which her regularization would be based. 26 She further averred that the individual
petitioners maliciously connived to illegally dismiss her when: (a) they threatened her with termination; (b) she was ordered not to enter company
premises even if she was still an employee thereof; and (c) they publicly announced that she already resigned in order to humiliate her. 27
On the contrary, petitioners maintained that Alcaraz was validly terminated from her probationary employment given her failure to satisfy the
prescribed standards for her regularization which were made known to her at the time of her engagement. 28
The LA Ruling
In a Decision dated March 30, 2006,29 the LA dismissed Alcaraz’s complaint for lack of merit.
The LA rejected Alcaraz’s argument that she was not informed of the reasonable standards to qualify as a regular employee considering her admissions
that she was briefed by Almazar on her work during her pre-employment orientation meeting 30 and that she received copies of Abbott’s Code of
Conduct and Performance Modules which were used for evaluating all types of Abbott employees. 31 As Alcaraz was unable to meet the standards set by
Abbott as per her performance evaluation, the LA ruled that the termination of her probationary employment was justified. 32 Lastly, the LA found that
there was no evidence to conclude that Abbott’s officers and employees acted in bad faith in terminating Alcaraz’s employment. 33
Displeased with the LA’s ruling, Alcaraz filed an appeal with the National Labor Relations Commission (NLRC).
The NLRC Ruling
On September 15, 2006, the NLRC rendered a Decision, 34 annulling and setting aside the LA’s ruling, the dispositive portion of which reads:
WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is hereby reversed, annulled and set aside and judgment is hereby rendered:
1. Finding respondents Abbot [sic] and individual respondents to have committed illegal dismissal;
2. Respondents are ordered to immediately reinstate complainant to her former position without loss of seniority rights immediately upon
receipt hereof;
3. To jointly and severally pay complainant backwages computed from 16 May 2005 until finality of this decision. As of the date hereof the
backwages is computed at
a. Backwages for 15 months - PhP 1,650,000.00

b. 13th month pay - 110,000.00

TOTAL PhP 1,760,000.00

4. Respondents are ordered to pay complainant moral damages of ₱50,000.00 and exemplary damages of ₱50,000.00.
5. Respondents are also ordered to pay attorney’s fees of 10% of the total award.
6. All other claims are dismissed for lack of merit.
SO ORDERED.35
The NLRC reversed the findings of the LA and ruled that there was no evidence showing that Alcaraz had been apprised of her probationary status and
the requirements which she should have complied with in order to be a regular employee. 36 It held that Alcaraz’s receipt of her job description and
Abbott’s Code of Conduct and Performance Modules was not equivalent to her being actually informed of the performance standards upon which she
should have been evaluated on.37 It further observed that Abbott did not comply with its own standard operating procedure in evaluating probationary
employees.38 The NLRC was also not convinced that Alcaraz was terminated for a valid cause given that petitioners’ allegation of Alcaraz’s "poor
performance" remained unsubstantiated. 39
Petitioners filed a motion for reconsideration which was denied by the NLRC in a Resolution dated July 31, 2007. 40
Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for Issuance of a Temporary Restraining Order and/or Writ of Preliminary
Injunction, docketed as CA G.R. SP No. 101045 (First CA Petition), alleging grave abuse of discretion on the part of NLRC when it ruled that Alcaraz was
illegally dismissed.41
Pending resolution of the First CA Petition, Alcaraz moved for the execution of the NLRC’s Decision before the LA, which petitioners strongly opposed.
The LA denied the said motion in an Order dated July 8, 2008 which was, however, eventually reversed on appeal by the NLRC. 42 Due to the foregoing,
petitioners filed another Petition for Certiorari with the CA, docketed as CA G.R. SP No. 111318 (Second CA Petition), assailing the propriety of the
execution of the NLRC decision. 43
The CA Ruling
With regard to the First CA Petition, the CA, in a Decision44 dated December 10, 2009, affirmed the ruling of the NLRC and held that the latter did not
commit any grave abuse of discretion in finding that Alcaraz was illegally dismissed.
It observed that Alcaraz was not apprised at the start of her employment of the reasonable standards under which she could qualify as a regular
employee.45 This was based on its examination of the employment contract which showed that the same did not contain any standard of performance
or any stipulation that Alcaraz shall undergo a performance evaluation before she could qualify as a regular employee. 46 It also found that Abbott was
unable to prove that there was any reasonable ground to terminate Alcaraz’s employment. 47 Abbott moved for the reconsideration of the
aforementioned ruling which was, however, denied by the CA in a Resolution 48 dated June 9, 2010.
The CA likewise denied the Second CA Petition in a Resolution dated May 18, 2010 (May 18, 2010 Resolution) and ruled that the NLRC was correct in
upholding the execution of the NLRC Decision.49 Thus, petitioners filed a motion for reconsideration.
While the petitioners’ motion for reconsideration of the CA’s May 18, 2010 Resolution was pending, Alcaraz again moved for the issuance of a writ of
execution before the LA. On June 7, 2010, petitioners received the LA’s order granting Alcaraz’s motion for execution which they in turn appealed to the
NLRC – through a Memorandum of Appeal dated June 16, 2010 (June 16, 2010 Memorandum of Appeal ) – on the ground that the implementation of
the LA’s order would render its motion for reconsideration moot and academic. 50
Meanwhile, petitioners’ motion for reconsideration of the CA’s May 18, 2010 Resolution in the Second CA Petition was denied via a Resolution dated
October 4, 2010.51 This attained finality on January 10, 2011 for petitioners’ failure to timely appeal the same. 52 Hence, as it stands, only the issues in
the First CA petition are left to be resolved.
Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges that petitioners were guilty of forum shopping when they filed the Second
CA Petition pending the resolution of their motion for reconsideration of the CA’s December 10, 2009 Decision i.e., the decision in the First CA
Petition.53 She also contends that petitioners have not complied with the certification requirement under Section 5, Rule 7 of the Rules of Court when
they failed to disclose in the instant petition the filing of the June 16, 2010 Memorandum of Appeal filed before the NLRC. 54
The Issues Before the Court
The following issues have been raised for the Court’s resolution: (a) whether or not petitioners are guilty of forum shopping and have violated the
certification requirement under Section 5, Rule 7 of the Rules of Court; (b) whether or not Alcaraz was sufficiently informed of the reasonable standards
to qualify her as a regular employee; (c) whether or not Alcaraz was validly terminated from her employment; and (d) whether or not the individual
petitioners herein are liable.
The Court’s Ruling
A. Forum Shopping and
Violation of Section 5, Rule 7
of the Rules of Court.
At the outset, it is noteworthy to mention that the prohibition against forum shopping is different from a violation of the certification requirement
under Section 5, Rule 7 of the Rules of Court. In Sps. Ong v. CA, 55 the Court explained that:
x x x The distinction between the prohibition against forum shopping and the certification requirement should by now be too elementary to be
misunderstood. To reiterate, compliance with the certification against forum shopping is separate from and independent of the avoidance of the act of
forum shopping itself. There is a difference in the treatment between failure to comply with the certification requirement and violation of the
prohibition against forum shopping not only in terms of imposable sanctions but also in the manner of enforcing them. The former constitutes sufficient
cause for the dismissal without prejudice to the filing of the complaint or initiatory pleading upon motion and after hearing, while the latter is a ground
for summary dismissal thereof and for direct contempt. x x x. 56
As to the first, forum shopping takes place when a litigant files multiple suits involving the same parties, either simultaneously or successively, to secure
a favorable judgment. It exists where the elements of litis pendentia are present, namely: (a) identity of parties, or at least such parties who represent
the same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity
with respect to the two preceding particulars in the two (2) cases is such that any judgment that may be rendered in the pending case, regardless of
which party is successful, would amount to res judicata in the other case. 57
In this case, records show that, except for the element of identity of parties, the elements of forum shopping do not exist. Evidently, the First CA
Petition was instituted to question the ruling of the NLRC that Alcaraz was illegally dismissed. On the other hand, the Second CA Petition pertains to the
propriety of the enforcement of the judgment award pending the resolution of the First CA Petition and the finality of the decision in the labor dispute
between Alcaraz and the petitioners. Based on the foregoing, a judgment in the Second CA Petition will not constitute res judicata insofar as the First
CA Petition is concerned. Thus, considering that the two petitions clearly cover different subject matters and causes of action, there exists no forum
shopping.
As to the second, Alcaraz further imputes that the petitioners violated the certification requirement under Section 5, Rule 7 of the Rules of Court 58 by
not disclosing the fact that it filed the June 16, 2010 Memorandum of Appeal before the NLRC in the instant petition.
In this regard, Section 5(b), Rule 7 of the Rules of Court requires that a plaintiff who files a case should provide a complete statement of the present
status of any pending case if the latter involves the same issues as the one that was filed. If there is no such similar pending case, Section 5(a) of the
same rule provides that the plaintiff is obliged to declare under oath that to the best of his knowledge, no such other action or claim is pending.
Records show that the issues raised in the instant petition and those in the June 16, 2010 Memorandum of Appeal filed with the NLRC likewise cover
different subject matters and causes of action. In this case, the validity of Alcaraz’s dismissal is at issue whereas in the said Memorandum of Appeal, the
propriety of the issuance of a writ of execution was in question.
Thus, given the dissimilar issues, petitioners did not have to disclose in the present petition the filing of their June 16, 2010 Memorandum of Appeal
with the NLRC. In any event, considering that the issue on the propriety of the issuance of a writ of execution had been resolved in the Second CA
Petition – which in fact had already attained finality – the matter of disclosing the June 16, 2010 Memorandum of Appeal is now moot and academic.
Having settled the foregoing procedural matter, the Court now proceeds to resolve the substantive issues.
B. Probationary employment;
grounds for termination.
A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of probationary employment, aside from just or
authorized causes of termination, an additional ground is provided under Article 295 of the Labor Code, i.e., the probationary employee may also be
terminated for failure to qualify as a regular employee in accordance with the reasonable standards made known by the employer to the employee at
the time of the engagement.59 Thus, the services of an employee who has been engaged on probationary basis may be terminated for any of the
following: (a) a just or (b) an authorized cause; and (c) when he fails to qualify as a regular employee in accordance with reasonable standards
prescribed by the employer.60
Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code provides that if the employer fails to inform the
probationary employee of the reasonable standards upon which the regularization would be based on at the time of the engagement, then the said
employee shall be deemed a regular employee, viz.:
(d) In all cases of probationary employment, the employer shall make known to the employee the standards under which he will qualify as a regular
employee at the time of his engagement. Where no standards are made known to the employee at that time, he shall be deemed a regular employee.
In other words, the employer is made to comply with two (2) requirements when dealing with a probationary employee: first, the employer must
communicate the regularization standards to the probationary employee; and second, the employer must make such communication at the time of the
probationary employee’s engagement. If the employer fails to comply with either, the employee is deemed as a regular and not a probationary
employee.
Keeping with these rules, an employer is deemed to have made known the standards that would qualify a probationary employee to be a regular
employee when it has exerted reasonable efforts to apprise the employee of what he is expected to do or accomplish during the trial period of
probation. This goes without saying that the employee is sufficiently made aware of his probationary status as well as the length of time of the
probation.
The exception to the foregoing is when the job is self-descriptive in nature, for instance, in the case of maids, cooks, drivers, or messengers. 61 Also, in
Aberdeen Court, Inc. v. Agustin,62 it has been held that the rule on notifying a probationary employee of the standards of regularization should not be
used to exculpate an employee who acts in a manner contrary to basic knowledge and common sense in regard to which there is no need to spell out a
policy or standard to be met. In the same light, an employee’s failure to perform the duties and responsibilities which have been clearly made known to
him constitutes a justifiable basis for a probationary employee’s non-regularization.
In this case, petitioners contend that Alcaraz was terminated because she failed to qualify as a regular employee according to Abbott’s standards which
were made known to her at the time of her engagement. Contrarily, Alcaraz claims that Abbott never apprised her of these standards and thus,
maintains that she is a regular and not a mere probationary employee.
The Court finds petitioners’ assertions to be well-taken.
A punctilious examination of the records reveals that Abbott had indeed complied with the above-stated requirements. This conclusion is largely
impelled by the fact that Abbott clearly conveyed to Alcaraz her duties and responsibilities as Regulatory Affairs Manager prior to, during the time of
her engagement, and the incipient stages of her employment. On this score, the Court finds it apt to detail not only the incidents which point out to the
efforts made by Abbott but also those circumstances which would show that Alcaraz was well-apprised of her employer’s expectations that would, in
turn, determine her regularization:
(a) On June 27, 2004, Abbott caused the publication in a major broadsheet newspaper of its need for a Regulatory Affairs Manager, indicating
therein the job description for as well as the duties and responsibilities attendant to the aforesaid position; this prompted Alcaraz to submit
her application to Abbott on October 4, 2004;
(b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was to be employed on a probationary status;
(c) On February 12, 2005, Alcaraz signed an employment contract which specifically stated, inter alia, that she was to be placed on probation
for a period of six (6) months beginning February 15, 2005 to August 14, 2005;
(d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent her copies of Abbott’s organizational structure and her job
description through e-mail;
(e) Alcaraz was made to undergo a pre-employment orientation where Almazar informed her that she had to implement Abbott’s Code of
Conduct and office policies on human resources and finance and that she would be reporting directly to Walsh;
(f) Alcaraz was also required to undergo a training program as part of her orientation;
(g) Alcaraz received copies of Abbott’s Code of Conduct and Performance Modules from Misa who explained to her the procedure for
evaluating the performance of probationary employees; she was further notified that Abbott had only one evaluation system for all of its
employees; and
(h) Moreover, Alcaraz had previously worked for another pharmaceutical company and had admitted to have an "extensive training and
background" to acquire the necessary skills for her job. 63
Considering the totality of the above-stated circumstances, it cannot, therefore, be doubted that Alcaraz was well-aware that her regularization would
depend on her ability and capacity to fulfill the requirements of her position as Regulatory Affairs Manager and that her failure to perform such would
give Abbott a valid cause to terminate her probationary employment.
Verily, basic knowledge and common sense dictate that the adequate performance of one’s duties is, by and of itself, an inherent and implied standard
for a probationary employee to be regularized; such is a regularization standard which need not be literally spelled out or mapped into technical
indicators in every case. In this regard, it must be observed that the assessment of adequate duty performance is in the nature of a management
prerogative which when reasonably exercised – as Abbott did in this case – should be respected. This is especially true of a managerial employee like
Alcaraz who was tasked with the vital responsibility of handling the personnel and important matters of her department.
In fine, the Court rules that Alcaraz’s status as a probationary employee and her consequent dismissal must stand. Consequently, in holding that Alcaraz
was illegally dismissed due to her status as a regular and not a probationary employee, the Court finds that the NLRC committed a grave abuse of
discretion.
To elucidate, records show that the NLRC based its decision on the premise that Alcaraz’s receipt of her job description and Abbott’s Code of Conduct
and Performance Modules was not equivalent to being actually informed of the performance standards upon which she should have been evaluated
on.64 It, however, overlooked the legal implication of the other attendant circumstances as detailed herein which should have warranted a contrary
finding that Alcaraz was indeed a probationary and not a regular employee – more particularly the fact that she was well-aware of her duties and
responsibilities and that her failure to adequately perform the same would lead to her non-regularization and eventually, her termination.
Accordingly, by affirming the NLRC’s pronouncement which is tainted with grave abuse of discretion, the CA committed a reversible error which,
perforce, necessitates the reversal of its decision.
C. Probationary employment;
termination procedure.
A different procedure is applied when terminating a probationary employee; the usual two-notice rule does not govern. 65 Section 2, Rule I, Book VI of
the Implementing Rules of the Labor Code states that "if the termination is brought about by the x x x failure of an employee to meet the standards of
the employer in case of probationary employment, it shall be sufficient that a written notice is served the employee, within a reasonable time from the
effective date of termination."
As the records show, Alcaraz's dismissal was effected through a letter dated May 19, 2005 which she received on May 23, 2005 and again on May 27,
2005. Stated therein were the reasons for her termination, i.e., that after proper evaluation, Abbott determined that she failed to meet the reasonable
standards for her regularization considering her lack of time and people management and decision-making skills, which are necessary in the
performance of her functions as Regulatory Affairs Manager.66 Undeniably, this written notice sufficiently meets the criteria set forth above, thereby
legitimizing the cause and manner of Alcaraz’s dismissal as a probationary employee under the parameters set by the Labor Code. 67
D. Employer’s violation of
company policy and
procedure.
Nonetheless, despite the existence of a sufficient ground to terminate Alcaraz’s employment and Abbott’s compliance with the Labor Code termination
procedure, it is readily apparent that Abbott breached its contractual obligation to Alcaraz when it failed to abide by its own procedure in evaluating
the performance of a probationary employee.
Veritably, a company policy partakes of the nature of an implied contract between the employer and employee. In Parts Depot, Inc. v. Beiswenger, 68 it
has been held that:
Employer statements of policy . . . can give rise to contractual rights in employees without evidence that the parties mutually agreed that the policy
statements would create contractual rights in the employee, and, hence, although the statement of policy is signed by neither party, can be unilaterally
amended by the employer without notice to the employee, and contains no reference to a specific employee, his job description or compensation, and
although no reference was made to the policy statement in pre-employment interviews and the employee does not learn of its existence until after his
hiring. Toussaint, 292 N.W .2d at 892. The principle is akin to estoppel. Once an employer establishes an express personnel policy and the employee
continues to work while the policy remains in effect, the policy is deemed an implied contract for so long as it remains in effect. If the employer
unilaterally changes the policy, the terms of the implied contract are also thereby changed.1âwphi1 (Emphasis and underscoring supplied.)
Hence, given such nature, company personnel policies create an obligation on the part of both the employee and the employer to abide by the same.
Records show that Abbott’s PPSE procedure mandates, inter alia, that the job performance of a probationary employee should be formally reviewed
and discussed with the employee at least twice: first on the third month and second on the fifth month from the date of employment. Abbott is also
required to come up with a Performance Improvement Plan during the third month review to bridge the gap between the employee’s performance and
the standards set, if any.69 In addition, a signed copy of the PPSE form should be submitted to Abbott’s HRD as the same would serve as basis for
recommending the confirmation or termination of the probationary employment. 70
In this case, it is apparent that Abbott failed to follow the above-stated procedure in evaluating Alcaraz. For one, there lies a hiatus of evidence that a
signed copy of Alcaraz’s PPSE form was submitted to the HRD. It was not even shown that a PPSE form was completed to formally assess her
performance. Neither was the performance evaluation discussed with her during the third and fifth months of her employment. Nor did Abbott come
up with the necessary Performance Improvement Plan to properly gauge Alcaraz’s performance with the set company standards.
While it is Abbott’s management prerogative to promulgate its own company rules and even subsequently amend them, this right equally demands
that when it does create its own policies and thereafter notify its employee of the same, it accords upon itself the obligation to faithfully implement
them. Indeed, a contrary interpretation would entail a disharmonious relationship in the work place for the laborer should never be mired by the
uncertainty of flimsy rules in which the latter’s labor rights and duties would, to some extent, depend.
In this light, while there lies due cause to terminate Alcaraz’s probationary employment for her failure to meet the standards required for her
regularization, and while it must be further pointed out that Abbott had satisfied its statutory duty to serve a written notice of termination, the fact that
it violated its own company procedure renders the termination of Alcaraz’s employment procedurally infirm, warranting the payment of nominal
damages. A further exposition is apropos.
Case law has settled that an employer who terminates an employee for a valid cause but does so through invalid procedure is liable to pay the latter
nominal damages.
In Agabon v. NLRC (Agabon),71 the Court pronounced that where the dismissal is for a just cause, the lack of statutory due process should not nullify the
dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights. 72 Thus, in
Agabon, the employer was ordered to pay the employee nominal damages in the amount of ₱30,000.00. 73
Proceeding from the same ratio, the Court modified Agabon in the case of Jaka Food Processing Corporation v. Pacot (Jaka) 74 where it created a
distinction between procedurally defective dismissals due to a just cause, on one hand, and those due to an authorized cause, on the other.
It was explained that if the dismissal is based on a just cause under Article 282 of the Labor Code (now Article 296) but the employer failed to comply
with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act
imputable to the employee; if the dismissal is based on an authorized cause under Article 283 (now Article 297) but the employer failed to comply with
the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employer’s exercise of his management
prerogative.75 Hence, in Jaka, where the employee was dismissed for an authorized cause of retrenchment 76 – as contradistinguished from the
employee in Agabon who was dismissed for a just cause of neglect of duty 77 – the Court ordered the employer to pay the employee nominal damages
at the higher amount of ₱50,000.00.
Evidently, the sanctions imposed in both Agabon and Jaka proceed from the necessity to deter employers from future violations of the statutory due
process rights of employees.78 In similar regard, the Court deems it proper to apply the same principle to the case at bar for the reason that an
employer’s contractual breach of its own company procedure – albeit not statutory in source – has the parallel effect of violating the laborer’s rights.
Suffice it to state, the contract is the law between the parties and thus, breaches of the same impel recompense to vindicate a right that has been
violated. Consequently, while the Court is wont to uphold the dismissal of Alcaraz because a valid cause exists, the payment of nominal damages on
account of Abbott’s contractual breach is warranted in accordance with Article 2221 of the Civil Code. 79
Anent the proper amount of damages to be awarded, the Court observes that Alcaraz’s dismissal proceeded from her failure to comply with the
standards required for her regularization. As such, it is undeniable that the dismissal process was, in effect, initiated by an act imputable to the
employee, akin to dismissals due to just causes under Article 296 of the Labor Code. Therefore, the Court deems it appropriate to fix the amount of
nominal damages at the amount of ₱30,000.00, consistent with its rulings in both Agabon and Jaka.
E. Liability of individual
petitioners as corporate
officers.
It is hornbook principle that personal liability of corporate directors, trustees or officers attaches only when: (a) they assent to a patently unlawful act
of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in
damages to the corporation, its stockholders or other persons; (b) they consent to the issuance of watered down stocks or when, having knowledge of
such issuance, do not forthwith file with the corporate secretary their written objection; (c) they agree to hold themselves personally and solidarily
liable with the corporation; or (d) they are made by specific provision of law personally answerable for their corporate action. 80
In this case, Alcaraz alleges that the individual petitioners acted in bad faith with regard to the supposed crude manner by which her probationary
employment was terminated and thus, should be held liable together with Abbott. In the same vein, she further attributes the loss of some of her
remaining belongings to them.81
Alcaraz’s contention fails to persuade.
A judicious perusal of the records show that other than her unfounded assertions on the matter, there is no evidence to support the fact that the
individual petitioners herein, in their capacity as Abbott’s officers and employees, acted in bad faith or were motivated by ill will in terminating
Alcaraz’s services. The fact that Alcaraz was made to resign and not allowed to enter the workplace does not necessarily indicate bad faith on Abbott’s
part since a sufficient ground existed for the latter to actually proceed with her termination. On the alleged loss of her personal belongings, records are
bereft of any showing that the same could be attributed to Abbott or any of its officers. It is a well-settled rule that bad faith cannot be presumed and
he who alleges bad faith has the onus of proving it. All told, since Alcaraz failed to prove any malicious act on the part of Abbott or any of its officers,
the Court finds the award of moral or exemplary damages unwarranted.
WHEREFORE, the petition is GRANTED. The Decision dated December 10, 2009 and Resolution dated June 9, 2010 of the Court of Appeals in CA-G.R. SP
No. 101045 are hereby REVERSED and SET ASIDE. Accordingly, the Decision dated March 30, 2006 of the Labor Arbiter is REINSTATED with the
MODIFICATION that petitioner Abbott Laboratories, Philippines be ORDERED to pay respondent Pearlie Ann F. Alcaraz nominal damages in the amount
of ₱30,000.00 on account of its breach of its own company procedure.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice

THIRD DIVISION
G.R. No. 199683, February 10, 2016
ARLENE T. SAMONTE, VLADIMIR P. SAMONTE, MA. AUREA S. ELEPANO, Petitioners, v. LA SALLE GREENHILLS, INC., BRO. BERNARD S.
OCA, Respondents.
DECISION

PEREZ, J.:

As each and all of the various and varied classes of employees in the gamut of the labor force, from non-professionals to professionals, are afforded full
protection of law and security of tenure as enshrined in the Constitution, the entitlement is determined on the basis of the nature of the work,
qualifications of the employee, and other relevant circumstances.

Assailed in this petition for review on certiorari is the Decision1 of the Court of Appeals in C.A. G.R. SP No. 110391. affirming the Decision of the National
Labor Relations Commission (NLRC) in NLRC CA No. 044835-052 finding that petitioners Arlene T. Samonte, Vladimir P. Samonte and Ma. Aurea S.
Elepano were fixed-term employees of respondent La Salle Greenhills, Inc. (LSGI). The NLRC (First Division) ruling is a modification of the ruling of the
Labor Arbiter that petitioners were independent contractors of respondent LSGI. 3
The facts are not in dispute.

From 1989, and for fifteen (15) years thereafter, LSGI contracted the services of medical professionals, specifically pediatricians, dentists and a
physician, to comprise its Health Service Team (HST).

Petitioners, along with other members of the HST signed uniform one-page Contracts of Retainer for the period of a specific academic calendar
beginning in June of a certain year (1989 and the succeeding 15 years) and terminating in March of the following year when the school year ends. The
Contracts of Retainer succinctly read, to wit:
CONTRACTOFRETAINER

Name of Retainer _________________________________________

Address_________________________________________________
Community Tax Cert. No.__________________________________
 Issued at_______________ on ____________________________
Taxpayer Identification No. (TIN)_________________
Department Assigned to________ HRD-CENTRO Operation___________
Project/Undertaking (Description and Duration)
____________ Health Services__________________
Job Task (Description and Duration)
School [physician] from June 1, [x x x] to March 31, [x x x]
Rate__________________

Conditions:

1. This retainer is only temporary in character and, as above specified, shall be solely and exclusively limited to the project/undertaking and/ or to the
job/task assigned to the retainer within the said project/undertaking;

2. This retainer shall, without need of any notice to the retainer, automatically cease on the aforespecified expiration date/s of the said
project/undertaking and/or the said job/task; provided, that this retainer shall likewise be deemed terminated if the said project/undertaking and/or
fob/task shall be completed on a date/s priot to their aforespecified expiration date/s;

3. The foregoing notwithstanding, at any time prior to said expiration or completion date/s, La Salle Greenhills, Inc. may upon prior written notice to the
retainer, terminate this contract should the retainer fail in any way to perform his assigned job/task to the satisfaction of La Salle Greenhills, Inc. or for
any other just cause.

HERMAN G. ROCHESTER                              _____________________

Head Administrator                                                       Retainer

BELEN T. MASILUNGAN                                  _____________________

Personnel Officer                                                      Date Signed
Signed in the Presence of:

DANTE M. FERRER                                               BRO. BERNARD S. OCA

FRD Head Administrator                                             President4

After fifteen consecutive years of renewal each academic year, where the last Contract of Retainer was for the school year of 2003-2004 i.e., June 1,
2003 to March 31, 2004, LSGI Head Administrator, Herman Rochester, on that last day of the school year, informed the Medical Service Team, including
herein petitioners, that their contracts will no longer be renewed for the following school year by reason of LSGI's decision to hire two (2) full-time
doctors and dentists. One of the physicians from the same Health Service Team was hired by LSGI as a full-time doctor.

When petitioners', along with their medical colleagues', requests for

payment of their separation pay were denied, they filed a complaint for illegal dismissal with prayer for separation pay, damages and attorney's fees
before the NLRC. They included the President of LSGI, Bro. Bernard S. Oca, as respondent.

In their Position Paper, petitioners alleged that they were regular employees who could only be dismissed for just and authorized causes, who, up to
the time of their termination, regularly received the following amounts:

1. Monthly salary for the ten-month period of a given school year:

Name Monthly Salary

a) Jennifer A. Ramirez Php 20,682.73

b) Brandon D. Ericta 28,603.62

c) [Petitioner] Arlene T. Samonte 20,682.73

d) [Petitioner] Vladimir P. Samonte 20,682.73

e) Alma S. Resurrecion 12,700.83

f) Ma. Socorro A. Salazar 21,117.00

g) [Petitioner] Ma. Aurea S. Elepano 8,429.43

2. Annual 13th Month Pay equivalent to their one month salary;

3. Automatic yearly increase to their monthly salary, the rate of which is discretionary to LSGFs Executive Administrator based on a comparative rate to
the across the board increase of the regular school employees which increase was subsequently reflected in their [HST'S] monthly salaries for the
following school year;
4. Since 1996, as a result of the HST's request for a performance bonus, the team was likewise evaluated for a year-end performance rating by HRD-
CENTRO Head Administrator, the Assistant Principal, the Health Services Team Leader and the designated Physician's Coordinator, complainant Jennifer
Ramirez.

To further bolster their claim of regular employment, complainants pointed out the following in their Position Paper:
In the course of their employment, each of the complainants served an average of nine hours a week. But beyond their duty hours, they were on call
for any medical exigencies of the La Sallian community. Furthermore, over the years, additional tasks were assigned to the complainants and were
required to suffer the following services/activites:

a) To attend staff meetings and to participate in the formulation/adoption of policies and programs designed to enhance the School services to its
constituents and to upgrade the School's standards. Complainants' involvement in Staff Meetings of the Health Services Unit of respondent school was
a regular activity associated with personnel who are regular employees of an institution;

b) To participate in various gatherings and activities sponsored by the respondent school such as the Kabihasnan (the bi-annual school fair),
symposiums, seminars, orientation programs, workshops, lectures, etc., including purely political activities such as the NAMFREL quick count, of which
the respondent school is a staunch supporter;

c) Participation of the complainants in Medical/Dental Missions in the name of respondent school;

d) Formulation of the Health Services Unit Manual;

e) Participation in the collation of evaluation of services rendered by the Health Services Unit, as required for the continuing PAASCU (Philippine
Association of Accredited Schools Colleges & Universities) accreditation of the School;

f) Participation in the yearly evaluation of complainants, which is a

function of regular employees in the HRD-CENTRO Operations, of the HRD-CENTRO Head Administrator;

g) Designation of certain complainants, particularly Dr. Jennifer A. Ramirez, as member of panel of investigation to inquire into an alleged misdemeanor
of a regular employee of respondent school; and

h) Regular inspection of the canteen concessionaire and the toilet facilities of the school premises to insure its high standards of sanitation.

Complainants were likewise included among so-called members of the "LA SALLIAN FAMILY: Builder of a Culture of Peace," under the heading "Health
Services Team" of the La Salle Green Hills High School Student Handbook 2003-2004. Such public presentation of the complainants as members of the
"LA SALLIAN FAMILY" leaves no doubt about the intent of respondent school to project complainants as part of its professional
staff.5ChanRoblesVirtualawlibrary

On the other hand, in their Position Paper, 6 LSGI denied that complainants were regular employees, asserting that complainants were independent
contractors who were retained by LSGI by reason of their medical skills and expertise to provide ancillary medical and dental services to both its
students and faculty, consistent with the following circumstances:

1. Complainants were professional physicians and dentists on retainer basis, paid on monthly retainer fees, not regular salaries;

2. LSGI had no power to impose disciplinary measures upon complainants including dismissal from employment;

3. LSGI had no power of control over how complainants actually performed their professional services.

In the main, LSGI invoked the case of Sonza v. ABS-CBN7 to justify its stance that complainants were independent contractors and not regular
employees citing, thus:
SONZA contends that ABS-CBN exercised control over the means and methods of his work.

SONZA's argument is misplaced. ABS-CBN engaged SONZA's services specifically to co-host the "Mel & Jay" programs. ABS-CBN did not assign any other
work to SONZA. To perform his work, SONZA only needed his skills and talent. How SONZA delivered his lines, appeared on television, and sounded on
radio were outside ABS-CBN's control. SONZA did not have to render 8 hours of work per day. The Agreement required SONZA to attend only rehearsals
and tapings of the shows, as well as pre and post-production staff meetings. ABS-CBN could not dictate the contents of SONZA's script. However, the
Agreement prohibited SONZA from criticising in his shows ABS-CBN or its interests. The clear implication is that SONZA had a free hand on what to say
or discuss in his shows provided he did not attack ABS-CBN or its interests.

As previously adverted, the Labor Arbiter dismissed petitioners' (and their colleagues') complaint and ruled that complainants, as propounded by LSGI,
were independent contractors under retainership contracts and never became regular employees of LSGI. The Labor Arbiter based its over-all finding of
the absence of control by LSGI over complainants on the following points:

1. The professional services provided by complainants, including herein petitioners, cannot be considered as necessary to LSGI's business of providing
primary and secondary education to its students.

2. The pay slips of complainants are not salaries but professional fees less taxes withheld for the medical services they provided;

3. Issuance of identification cards to, and the requirement to log the time-in and time-out of, complainants are not indicia of LSGI's power of control
over them but were only imposed for security reasons and in compliance with the agreed clinic schedules of complainants at LSGI premises.

4. In contrast to regular employees of LSGI, complainants: (a) were not required to attend or participate in school-sponsored activities and (b) did not
enjoy benefits such as educational subsidy for their dependents.

5. On this score alone, complainants' respective clinic schedule at LSGI for two (2) to three (3) days a week for three (3) hours a day, for a maximum of
nine (9) hours a week, was not commensurate to the required number of hours work rendered by a regular employee in a given week of at least 40
hours a week or 8 hours a day for five (5) days. In addition, the appointed clinic schedule was based on the preference of complainants.
Curiously, despite the finding that complainants were independent contractors and not regular employees, the Labor Arbiter, on the ground of
compassionate social justice, awarded complainants separation pay at the rate of one-half month salary for every year of service:

Separately, both parties, complainants, including herein petitioners, and respondents appealed to the NLRC.

At the outset, the NLRC disagreed with the Labor Arbiter's ruling that complainants were independent contractors based on the latter's opinion that the
services rendered by complainants are not considered necessary to LSGI's operation as an educational institution. The NLRC noted that Presidential
Decree No. 856, otherwise known as the Sanitation Code of the Philippines, requires that private educational institutions comply with the sanitary laws.
Nonetheless, the NLRC found that complainants were fixed-period employees whose terms of employment were subject to agreement for a specific
duration. In all, the NLRC ruled that the Contracts of Retainer between complainants and LSGI are valid fixed-term employment contracts where
complainants as medical professionals understood the terms thereof when they agreed to such continuously for more than ten (10) years.
Consequently, the valid termination of their retainership contracts at the end of the period stated therein, did not entitle complainants to
reinstatement, nor, to payment of separation pay.

At this point, only herein petitioners, filed a petition for certiorari under Rule 65 of the Rules of Court before the Court of Appeals alleging that grave
abuse of discretion attended the ruling of the NLRC that they were not regular employees and thus not entitled to the twin remedies of reinstatement
to work with payment of full backwages or separation pay with backwages.

In dismissing the petition for certiorari, the appellate court ruled that the NLRC did not commit an error of jurisdiction which is correctible by a writ
of certiorari. The Court of Appeals found that the NLRC's ruling was based on the Contracts of Retainer signed by petitioners who, as professionals,
supposedly ought to have known the import of the contracts they voluntarily signed, i.e. (a) temporary in character; (b) automatically ceasing on the
specified expiration date, or (c) likewise deemed terminated if job/task shall be completed on a date prior to specified expiration date.

The Court of Appeals ruled against petitioners' claim of regular employment, thus:
Moreover, this Court is not persuaded by petitioners' averments that they are regular employees simply because they received benefits such as
overtime pay, allowances, Christmas bonuses and the like; or because they were subjected to administrative rules such as those that regulate their time
and hours of work, or subjected to LSGFs disciplinary rules and regulations; or simply because they were treated as part of LSGFs professional staff. It
must be emphasised that LSGI, being the employer, has the inherent right to regulate all aspects of employment of every employee whether regular,
probationary, contractual or fixed-term. Besides, petitioners were hired for specific tasks and under fixed terms and conditions and it is LSGI's
prerogative to monitor their performance to see if they are doing their tasks according to the terms and conditions of their contract and to give them
incentives for good performance.8

Hence, this petition for review on certiorari raising the following issues for resolution of the Court:
I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT PETITIONERS WERE FIXED-PERIOD EMPLOYEES AND NOT
REGULAR EMPLOYEES OF LSGI.
II. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HAVING RULED THAT PETITIONERS WERE ILLEGALLY DISMISSED FROM
WORK.
III. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HAVING RULED THAT PETITIONERS ARE ENTITLED TO REINSTATEMENT,
BACKWA'GES AND OTHER MONETARY BENEFITS PROVIDED BY LAW, MORAL AND EXEMPLARY DAMAGES, AS WELL AS ATTORNEY'S
FEES.
IV. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT HAVING RULED THAT RESPONDENTS ARE SOLIDARILY LIABLE AS THEY
ACTED IN BAD FAITH AND WITH MALICE IN DEALING WITH THE PETITIONERS. 9

The pivotal issue for resolution is whether the Court of Appeals correctly ruled that the NLRC did not commit grave abuse of discretion in ruling that
petitioners were not regular employees who may only be dismissed for just and authorized causes.

Our inquiry and disposition will delve into the kind of employment relationship between the parties, such employment relationship having been as
much as admitted by LSGI and then ruled upon categorically by the NLRC and the appellate court which both held that petitioners were fixed-term
employees and not independent contractors.

Article 280 of the Labor Code classifies employees into regular, project, seasonal, and casual:
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.

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

The NLRC correctly identified the existence of an employer-employee relationship between petitioners and LSGI and not a bilateral independent
contractor relationship. On more than one occasion, we recognised certain workers to be independent contractors: individuals with unique skills and
talents that set them apart from ordinary employees.10 We found them to be independent contractors because of these unique skills and talents and
the lack of control over the means and methods in the performance of their work. In some instances, doctors and other medical professional may fall
into this independent contractor category, legitimately providing medical professional services. However, as has been declared by the-NLRC and the
appellate court, petitioners herein are not independent contractors.

We need to examine next the ruling of the NLRC and the Court of Appeals that petitioners were fixed-term employees.

To factually support such conclusion, the NLRC solely relied on the case of Brent v. Zamor11 and perfunctorily noted that petitioners, professional
doctors and dentists, continuously signed the contracts for more than ten (10) years. Such was heedless of our prescription that the ruling in Brent be
strictly construed, applying only to cases where it appears that the employer and employee are on equal footing. Observably, nowhere in the two and
half page ratiocination of the NLRC was there reference to the standard that "it [should] satisfactorily appear that the employer and employee dealt
with each other on more or less equal terms with no moral dominance whatever being exercised by the former on the latter."

From Brent, which remains as the exception rather than the rule in the determination of the nature of employment, we are schooled that there are
employment contracts where a "fixed term is an essential and natural appurtenance" such as overseas employment contracts and officers in
educational institutions. We learned thus:
[T]he decisive determinant in the term employment contract 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.

xxx

Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly
appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article
indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should
be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It
should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any
force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being
exercised by the former over the latter.

Tersely put, a fixed-term employment is allowable under the Labor Code only if the term was voluntarily and knowingly entered into by the parties who
must have dealt with each other on equal terms not one exercising moral dominance over the other.

Indeed, Price, et. al. v. Innodata Corp., teaches us, from the wording of Article 280 of the Labor Code, that the nomenclature of contracts, especially
employment contracts, does not define the employment status of a person: Such is defined and prescribed by law and not by what the parties say it
should be. Equally important to consider is that a contract of employment is impressed with public interest such that labor contracts must yield to the
common good. Thus, provisions of applicable statutes are deemed written into the contract, and the parties are not at liberty to insulate themselves
and their relationships from the impact of labor laws and regulations by simply contracting with each other.

Further, a fixed-term contract is an employment contract, the repeated renewals of which make for a regular employment. In Fuji Network Television v.
Espiritu,12 wenoted that Fuji's argument that Espiritu was an independent contractor under a fixed-term contract is contradictory where employees
under fixed-term contracts cannot be independent contractors because in fixed-term contracts, an employer-employee relationship exists. Significantly,
we ruled therein that Espiritu's contract indicating a fixed term did not automatically mean that she could never be a regular employee which is
precisely what Article 280 of the Labor Code sought to avoid. The repeated renewal of Espiritu's contract coupled with the nature of work performed
pointed to the regular nature of her employment despite contrary claims of Fuji and the nomenclature of the contract. Citing Dumpit-Murillo v. Court of
Appeals13 and Philips Semiconductors, Inc. v. Fadriquela, 14 we declared in Fuji that the repeated engagement under contract of hire is indicative of the
necessity and desirability of the [employee's] work in respondent's business and where employee's contract has been continuously extended or
renewed to the same position, with the same duties and remained in the employ without any interruption, then such employee is a regular employee.

In the case at bar, the Court of Appeals disregarded the repeated renewals of the Contracts of Retainer of petitioners spanning a decade and a half. The
Court of Appeals ruled that petitioners never became regular employees:
[T]his Court is not persuaded by petitioners' averments that they are regular employees simply because they received benefits such as overtime pay,
allowances, Christmas bonuses and the like; or because they were subjected to administrative rules such as those that regulate their time and hours of
work, or subjected to LSGl's disciplinary rules and regulations; or simply because they were treated as part of LSGLs professional staff. It must be
emphasised that LSG1, as the employer, has the inherent right to regulate all aspects of employment of every employee whether regular, probationary,
contractual or fixed-term. Besides, petitioners were hired for specific tasks and under fixed terms and conditions and it is LSGl's prerogative to monitor
their performance to see if they are doing their tasks according to the terms and conditions of their contract and to give them incentives for good
performance.15ChanRoblesVirtualawlibrary

We completely disagree with the Court of Appeals.

The uniform one-page Contracts of Retainer signed by petitioners were prepared by LSGI alone. Petitioners, medical professionals as they were, were
still not on equal footing with LSGI as they obviously did not want to lose their jobs that they had stayed in for fifteen (15) years. There is no specificity
in the contracts regarding terms and conditions of employment that would indicate that petitioners and LSGI were on equal footing in negotiating it.
Notably, without specifying what are the tasks assigned to petitioners, LSGI "may upon prior written notice to the retainer, terminate [the] contract
should the retainer fail in any way to perform his assigned job/task to the satisfaction of La Salle Greenhills, Inc. or for any other just cause." 16

While vague in its sparseness, the Contract of Retainer very clearly spelled out that LSGI had the power of control over petitioners.

Time and again we have held that the power of 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. 17 It is enough that the employer has the right to wield that
power.

In all, given the following: (1) repeated renewal of petitioners' contract for fifteen years, interrupted only by the close of the school year; (2) the
necessity of the work performed by petitioners as school physicians and dentists; and (3) the existence of LSGI's power of control over the means and
method pursued by petitioners in the performance of their job, we rule that petitioners attained regular employment, entitled to security of tenure
who could only be dismissed for just and authorized causes. Consequently, petitioners were illegally dismissed and are entitled to the twin remedies of
payment of separation pay and full back wages. We order separation pay in lieu of reinstatement given the time that has lapsed, twelve years, in the
litigation of this case.

We clarify, however, that our ruling herein is only confined to the three (3) petitioners who had filed this appeal by certiorari under Rule 45 of theRules
of Court, and prior thereto, the petition for certiorari  under Rule 65 thereof before the Court of Appeals. The Decision of the NLRC covering other
complainants in NLRC CA No. 044835-05 has already become final and executory as to them.

Not being trier of facts, we remand this case to the NLRC for the determination of separation pay and full back wages from the time petitioners were
precluded from returning to work the school year 2004 and compensation for work performed in that period.chanrobleslaw

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA G.R. SP No. 110391 is REVERSED AND SET ASIDE. The Decisions of
the NLRC in NLRC CA No. 044835-05 and NLRC CASE No. 00-0607081-04 are ANNULLED AND SET ASIDE.  The Complaint of petitioners Arlene T.
Samonte, Vladimir P. Samonte, Ma. Carmen Aurea S. Elepano against La Salle Greenhills, Inc. for illegal dismissal is GRANTED. We REMAND this case to
the NLRC for the computation of the three (3) petitioners' separation pay and full back wages.

No pronouncement as to costs.

SO ORDERED.cralawlawlibrary

Velasco, (Chairperson), Peralta, Reyes  and Jardeleza, JJ., concur.chanroblesvirtuallawlibrary

FIRST DIVISION
G.R. No. 159350, March 09, 2016
ALUMAMAY O. JAMIAS, JENNIFER C. MATUGUINAS AND JENNIFER F. CRUZ, *Petitioners, v.  NATIONAL LABOR RELATIONS COMMISSION (SECOND
DIVISION), HON. COMMISSIONERS: RAUL T. AQUINO, VICTORIANO R. CALAYCAY AND ANGELITA A. GACUTAN; HON. LABOR ARBITER VICENTE R.
LAYAWEN; INNODATA PHILIPPINES, INC., INNODATA PROCESSING CORPORATION, (INNODATA CORPORATION), AND TODD SOLOMON, Respondents.
DECISION
BERSAMIN, J.:

The petitioners appeal the adverse judgment promulgated on July 31, 2002, 1 whereby the Court of Appeals (CA) upheld the ruling of the National Labor
Relations Commission (NLRC) declaring them as project employees hired for a fixed period.
Antecedents

Respondent Innodata Philippines, Inc. (Innodata), a domestic corporation engaged in the business of data processing and conversion for foreign
clients,2 hired the following individuals on various dates and under the following terms, to wit:
chanRoblesvirtualLawlibrary
Name Position Duration of Contract

Alumamay Jamias Manual Editor August 7, 1995 to August 7, 19963

 Marietha V. Delos Santos Manual Editor August 7, 1995 to August 7, 19964

Lilian R. Guamil Manual Editor August 16, 1995 to August 16, 19965

Rina C. Duque Manual Editor August 7, 1995 to August 7, 19966

Marilen Agabayani Manual Editor August 23, 1995 to August 23, 19967

Alvin V. Patnon Production Personnel September 1, 1995 to September 1, 19968

Analyn I. Beter Type Reader September 18, 1995 to September 18, 19969

Jerry O. Soldevilla Production Personnel September 18, 1995 to September 18, 199610

Ma. Concepcion A. Dela Cruz Production Personnel September 18, 1995 to September 18, 199611

Jennifer Cruz Data Encoder November 20, 1995 to November 20, 199612

Jennifer Matuguinas Data Encoder November 20, 1995 to November 20, 199613
After their respective contracts expired, the aforenamed individuals filed a complaint for illegal dismissal claiming that Innodata had made it appear
that they had been hired as project employees in order to prevent them from becoming regular employees. 14
Decision of the Labor Arbiter

On September 8, 1998, Labor Arbiter (LA) Vicente Layawen rendered his decision dismissing the complaint for lack of merit. 15 He found and held that
the petitioners had knowingly signed their respective contracts in which the durations of their engagements were clearly stated; and that their fixed
term contracts, being exceptions to Article 280 of the Labor Code, precluded their claiming regularization.
Ruling of the National Labor Relations Commission

On appeal, the NLRC affirmed the decision of LA Layawen, 16 opining that Article 280 of the Labor Code did not prohibit employment contracts with fixed
periods provided the contracts had been voluntarily entered into by the parties, viz.:
chanRoblesvirtualLawlibrary
[I]t is distinctly provided that complainants were hired for a definite period of one year incidental upon the needs of the respondent by reason of the
seasonal increase in the volume of its business. Consequently, following the rulings in Pantranco North Express, Inc. vs. NLRC, et al., G.R. No. 106654,
December 16, 1994, the decisive determinant in term of employment should not be the activities that the employee is called upon to perform, but the
day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be
"that which must necessarily come, although it may not be known when." Further, Article 280 of the Labor Code does not prescribe or prohibit an
employment contract with a fixed period provided, the same is entered into by the parties, without any force, duress or improper pressure being
brought to bear upon the employee and absent any other circumstance vitiating consent. It does not necessarily follow that where the duties of the
employee consist of activities usually necessary or desirable in the usual business of the employer, the parties are forbidden from agreeing on a period
of time for the performance of such activities. There is thus nothing essentially contradictory between a definite period of employment and the nature
of the employee's duties. x x x17ChanRoblesVirtualawlibrary
Judgment of the CA

As earlier mentioned, the CA upheld the NLRC. It observed that the desirability and necessity of the functions being discharged by the petitioners did
not make them regular employees; that Innodata and the employees could still validly enter into their contracts of employment for a fixed period
provided they had agreed upon the same at the time of the employees' engagement; 18 that Innodata's operations were contingent on job orders or
undertakings for its foreign clients; and that the availability of contracts from foreign clients, and the duration of the employments could not be treated
as permanent, but coterminous with the projects. 19

The petitioners moved for reconsideration, 20 but the CA denied their motion on August 8, 2003.21

Hence, this appeal by only three of the original complainants, namely petitioners Alumamay Jamias, Jennifer Matuguinas and Jennifer Cruz.
Issues

The petitioners anchor their appeal on the following:

chanRoblesvirtualLawlibrary
I

THE HON. COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION OR IN EXCESS OF JURISDICTION AS
IT CANNOT REVERSE OR ALTER THE SUPREME COURT DECISION

THE SUPREME COURT HAS RULED THAT THE NATURE OF EMPLOYMENT AT RESPONDENTS IS REGULAR NOT FIXED OR CONTRACTUAL IN AT LEAST TWO
(2) CASES AGAINST INNODATA PHILS., INC.
II

THE HON. COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT DID NOT STICK TO PRECENDENT AS IT HAS ALREADY RULED IN AN
EARLIER CASE THAT THE NATURE OF EMPLOYMENT AT INNODATA PHILS., INC. IS REGULAR AND NOT CONTRACTUAL
III

THE HON. COURT OF APPEALS PATENTLY ERRED IN LAW AND COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
RULING THAT PETITIONERS' EMPLOYMENT IS FOR A FIXED PERIOD CO-TERMINOUS WITH A PROJECT WHEN THERE IS NO PROJECT TO SPEAK OF
IV

THE HON. COURT OF APPEALS PALPABLY ERRED IN LAW IN RULING THAT THE STIPULATION IN CONTRACT IS GOVERNING AND NOT THE NATURE OF
EMPLOYMENT AS DEFINED BY LAW.22ChanRoblesVirtualawlibrary
The petitioners maintain that the nature of employment in Innodata had been settled in Villanueva v. National Labor Relations Commission (Second
Division)23 and Servidad v. National Labor Relations Commission,24 whereby the Court accorded regular status to the employees because the work they
performed were necessary and desirable to the business of data encoding, processing and conversion. 25 They insist that the CA consequently
committed serious error in not applying the pronouncement in said rulings, thereby ignoring the principle of stare decisis in declaring their employment
as governed by the contract of employment; that the CA also erroneously found that the engagement of the petitioners was coterminous with the
project that was nonexistent; that Innodata engaged in "semantic interplay of words" by introducing the concept of "fixed term employment" or
"project employment" that were not founded in law; 26 and that Article 280 of the Labor Code guarantees the right of workers to security of tenure,
which rendered the contracts between the petitioners and Innodata meaningless. 27cralawred

In refutation, Innodata insists that the contracts dealt with in Villanueva and Servidad were different from those entered into by the petitioners
herein,28 in that the former contained stipulations that violated the provisions of the Labor Code on probationary employment and security of
tenure,29 while the latter contained terms known and explained to the petitioners who then willingly signed the same; 30 that as a mere service provider,
it did not create jobs because its operations depended on the availability of job orders or undertakings from its client; 31 that Article 280 of the Labor
Code allowed "term employment" as an exception to security of tenure; and that the decisive determinant was the day certain agreed upon by the
parties, not the activities that the employees were called upon to perform. 32

Were the petitioners regular or project employees of Innodata?

Ruling of the Court

We deny the petition for review on certiorari.

I

Stare decisis does not apply where the facts are essentially different

Contrary to the petitioners' insistence, the doctrine of stare decisis, by which the pronouncements in Villanueva and Servidad would control the
resolution of this case, had no application herein.

The doctrine of stare decisis enjoins adherence to judicial precedents.33 When a court has laid down a principle of law as applicable to a certain state of
facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same; but when the facts are essentially
different, stare decisis does not apply because a perfectly sound principle as applied to one set of facts might be entirely inappropriate when a factual
variance is introduced. 34

Servidad and Villanueva involved contracts that contained stipulations not found in the contracts entered by the petitioners. The cogent observations in
this regard by the CA are worth reiterating:
chanRoblesvirtualLawlibrary
A cursory examination of the facts would reveal that while all the cases abovementioned involved employment contracts with a fixed term, the
employment contract subject of contention in the Servidad and Villanueva cases provided for double probation, meaning, that the employees
concerned, by virtue of a clause incorporated in their contracts, were made to remain as probationary employees even if they continue to work beyond
the six month probation period set by law. Indeed, such stipulation militates against Constitutional policy of guaranteeing the tenurial security of the
workingman. To Our mind, the provision alluded to is what prodded the Supreme Court to disregard and nullify altogether the terms of the written
entente. Nonetheless, it does not appear to be the intendment of the High Tribunal to sweepingly invalidate or declare as unlawful all employment
contracts with a fixed period. To phrase it differently, the said agreements providing for a one year term would have been declared valid and,
consequently, the separation from work of the employees concerned would have been sustained had their contracts not included any unlawful and
circumventive condition.

It ought to be underscored that unlike in the Servidad and Villanueva cases, the written contracts governing the relations of the respondent company
and the petitioners herein do not embody such illicit stipulation. 35ChanRoblesVirtualawlibrary
We also disagree with the petitioners' manifestation 36 that the Court struck down in Innodata Philippines, Inc. v. Quejada-Lopez37 a contract of
employment that was similarly worded as their contracts with Innodata. What the Court invalidated in Innodata Philippines, Inc. v. Quejada-Lopez was
the purported fixed-term contract that provided for two periods - a fixed term of one year under paragraph 1 of the contract, and a three-month period
under paragraph 7.4 of the contract - that in reality placed the employees under probation. In contrast, the petitioners' contracts did not contain
similar stipulations, but stipulations to the effect that their engagement was for the fixed period of 12 months, to wit:
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1. The EMPLOYER shall employ the EMPLOYEE and the EMPLOYEE shall serve the EMPLOYER in the EMPLOYER'S business as a MANUAL EDITOR on a
fixed term only and for a fixed and definite period of twelve months, commencing on August 7, 1995 and terminating on August 7, 1996, x x
x.38ChanRoblesVirtualawlibrary
In other words, the terms of the petitioners' contracts did not subject them to a probationary period similar to that indicated in the contracts struck
down in Innodata, Villanueva and Servidad.
II

A fixed period in a contract of employment does not by itself signify an intention to circumvent Article 280 of the Labor Code

The petitioners argue that Innodata circumvented the security of tenure protected under Article 280 of the Labor Code by providing a fixed term; and
that they were regular employees because the work they performed were necessary and desirable to the business of Innodata.

The arguments of the petitioners lack merit and substance.

Article 280 of the Labor Code provides:

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

An employment shall be deemed casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one
year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is
employed and his employment shall continue while such actuallv exists.
The provision contemplates three kinds of employees, namely: (a) regular employees; (b) project employees; and (c) casuals who are neither regular
nor project employees. The nature of employment of a worker is determined by the factors provided in Article 280 of the Labor Code, regardless of any
stipulation in the contract to the contrary. 39 Thus, in Brent School, Inc. v. Zamora,40 we explained that the clause referring to written contracts should be
construed to refer to agreements entered into for the purpose of circumventing the security of tenure. Obviously, Article 280 does not preclude an
agreement providing for a fixed term of employment knowingly and voluntarily executed by the parties. 41

A fixed term agreement, to be valid, must strictly conform with the requirements and conditions provided in Article 280 of the Labor Code. The test to
determine whether a particular employee is engaged as a project or regular employee is whether or not the employee is assigned to carry out a specific
project or undertaking, the duration or scope of which was specified at the time of his engagement. 42 There must be a determination of, or a clear
agreement on, the completion or termination of the project at the time the employee is engaged. 43 Otherwise put, the fixed period of employment
must be knowingly and voluntarily agreed upon by the parties, without any force, duress or improper pressure being brought to bear upon the
employee and absent any other circumstances vitiating his consent, or it must satisfactorily appear that the employer and employee dealt with each
other on more or less equal terms with no moral dominance whatsoever being exercised by the former on the latter. 44

The contracts of the petitioners indicated the one-year duration of their engagement as well as their respective project assignments (i.e., Jamias being
assigned to the CD-ROM project; Cruz and Matuguinas to the TSET project). 45 There is no indication that the petitioners were made to sign the contracts
against their will. Neither did they refute Innodata's assertion that it did not employ force, intimidate or fraudulently manipulate the petitioners into
signing their contracts, and that the terms thereof had been explained and made known to them. 46 Hence, the petitioners knowingly agreed to the
terms of and voluntarily signed their respective contracts.

That Innodata drafted the contracts with its business interest as the overriding consideration did not necessarily warrant the holding that the contracts
were prejudicial against the petitioners. 47 The fixing by Innodata of the period specified in the contracts of employment did not also indicate its ill-
motive to circumvent the petitioners' security of tenure. Indeed, the petitioners could not presume that the fixing of the one-year term was intended to
evade or avoid the protection to tenure under Article 280 of the Labor Code in the absence of other evidence establishing such intention. This
presumption must ordinarily be based on some aspect of the agreement other than the mere specification of the fixed term of the employment
agreement, or on evidence aliunde of the intent to evade. 48

Lastly, the petitioners posit that they should be accorded regular status because their work as editors and proofreaders were usually necessary to
Innodata's business of data processing.

We reject this position. For one, it would be unusual for a company like Innodata to undertake a project that had no relationship to its usual
business.49 Also, the necessity and desirability of the work performed by the employees are not the determinants in term employment, but rather the
"day certain" voluntarily agreed upon by the parties.50 As the CA cogently observed in this respect:
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There is proof to establish that Innodata's operations indeed rests upon job orders or undertakings coming from its foreign clients. Apparently, its
employees are assigned to projects - one batch may be given a fixed period of one year, others, a slightly shorter duration, depending on the estimated
time of completion of the particular job or undertaking farmed out by the client to the company. 51ChanRoblesVirtualawlibrary
In fine, the employment of the petitioners who were engaged as project employees for a fixed term legally ended upon the expiration of their contract.
Their complaint for illegal dismissal was plainly lacking in merit.chanrobleslaw

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on July 31, 2002; and ORDER the petitioners to pay the
costs of suit

SO ORDERED.

Sereno, C.J., Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur.chanroblesvirtuallawlibrary